LOAN MODIFICATION AND CONSENT AGREEMENT
Exhibit 10.12B
This Loan Modification and Consent Agreement (“Loan Modification”) is entered into as of
December 9, 2005, by and between Partners for Growth, L.P., a Delaware limited partnership with its
principal place of business at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (“PFG”) and
SONICS, INC., a Delaware corporation with its principal place of business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (“Borrower”).
WHEREAS, Borrower has existing credit facilities with PFG, including a term loan (the “Term
Loan”);
WHEREAS, the Term Loan is convertible into the equity securities of Borrower and Borrower
proposes to issue new equity securities into which the Term Loan could be converted;
WHEREAS, PFG and Borrower desire to modify the Term Loan so as to clarify the securities into
which the Term Loan is convertible;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises hereinafter set
forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and PFG hereby agree as follows:
1. DESCRIPTION OF EXISTING TERM LOAN INDEBTEDNESS: In addition to a revolving credit
facility between Borrower and PFG, Borrower is indebted to PFG pursuant to a convertible Term Loan
and Security Agreement dated as of May 26, 2005, as amended from time to time (the “Loan
Agreement”). The Loan Agreement is convertible into the equity securities of Borrower. Defined
terms used but not otherwise defined herein shall have the same meanings as set forth in the Loan
Agreement. The Loan Agreement and the Revolving Loan and Security Agreement, Intellectual Property
Security Agreement and all other documents and instruments executed contemporaneously with the Loan
Agreement are referred to herein as the “Existing Loan Documents”).
2. DESCRIPTION OF CHANGE IN TERMS.
| (a) | Modification(s) to Loan Agreement. Section 1(c) of the Schedule to the Loan Agreement is hereby amended to read in its entirety as follows: |
“ (c) PFG Conversion: At any time prior to the Maturity Date, PFG may at its
option convert: (i) one-half of the principal amount of the Loan (or any part thereof)
into the Borrower’s Series C Preferred Stock at a conversion price of $0.50 per share
(subject to adjustment, as set forth below), and (ii) one-half of the principal amount of
the Loan (or any part thereof) into the Borrower’s Series D Preferred Stock at a
conversion price of $1.00 per share (subject to adjustment, as set forth below). The
conversion price of the Series C Preferred Stock and the Series D Preferred Stock, and the
securities issuable upon conversion, are subject to adjustment for stock splits,
combinations, reclassifications and similar transactions. If (i) the Company completes a public
offering of its Common Stock, and (ii) all of the Preferred
stock of Borrower converts to Common Stock as part of such
public offering, and (iii) PFG does not exercise its conversion
option at such time, then the Loan shall cease to be convertible
into Series C Preferred Stock and Series D Preferred Stock and
instead shall be convertible (at such time as PFG may determine
in its discretion) into the Company’s Common Stock at the same
ratio and upon the same basis that such Loan was previously
convertible into such Series C Preferred Stock and Series D
Preferred Stock, adjusted as necessary in the event that the
Series C Preferred Stock or the Series D Preferred Stock are
convertible into Common Stock at other than a 1 to 1 ratio. PFG
may exercise its right to convert the Loan or part thereof by
telecopying or otherwise delivering an executed and completed
notice specifying the portion of the Loan to be converted into
Borrower’s stock (a “Conversion Notice”). Each date on which a
Conversion Notice is telecopied or delivered to the Company in
accordance with the provisions hereof shall be deemed a
Conversion Date. Pursuant to the terms of the Conversion
Notice, the Company will procure the issue of stock certificates
for the Conversion Stock within five (5) business days of the
delivery of the Conversion Notice.”
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
5. CONSENT TO FINANCING. PFG hereby agrees that the proposed sale of the Borrower’s Series
D Preferred Stock (the “Series D Preferred Stock Financing”) complies with the terms of Section
6.1(m) of the Loan Agreement and shall not be deemed to be an Event of Default thereunder.
6. REPRESENTATION BY BORROWER; WAIVER. Borrower represents and warrants to PFG that
Borrower has not received notice from any of the holders of its Preferred Stock that they intend to
exercise any anti-dilution rights they may have under the Amended and Restated Certificate of
Incorporation of Borrower. Subject to the truth and accuracy of the foregoing representation of
Borrower, PFG hereby waives any noncompliance by the Borrower with Section 4.8 of the Loan
Agreement and Section 5.7 of the Revolving Loan and Security Agreement between PFG and Borrower,
dated May 26, 2005, and acknowledges that the Borrower will satisfy its duties thereunder upon
filing its proposed Sixth Amended and Restated Certificate of Incorporation in connection with the
Series D Preferred Stock Financing.
7. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the Loan
Agreement, PFG is relying upon Borrower’s representations, warranties, and agreements, as set forth
in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification,
the terms of the Existing Loan Documents remain unchanged and in full force and effect. This Loan
Modification shall in no way obligate PFG to make any future consents, waivers or modifications to
the Existing Loan Documents. Nothing in this Loan Modification shall constitute a satisfaction of
the Indebtedness. Except as set forth in Section 6 above, nothing in this Loan Modification shall
constitute a waiver of any default under the Existing Loan Documents. It is the intention of PFG
and Borrower to retain as liable parties all makers and endorsers of Existing
Loan Documents, unless the party is expressly released by PFG in writing. Unless expressly
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released herein, no maker, endorser, or guarantor will be released by virtue of this Loan
Modification.
7. CONDITIONS. The effectiveness of this Loan Modification is conditioned upon (a) the
closing of Borrower’s Series D Preferred Stock Financing, as contemplated in the Series D Preferred
Stock Financing agreements delivered to PFG, (b) receipt by PFG of a fully executed counterpart
hereof, (c) receipt by PFG of two duly-executed warrants replacing the Warrant issued to PFG on May
26, 2005 (the “Original Warrant”) in the form of the Original Warrant but reflecting the parties’
agreement that the Warrant will be exercisable for and convertible into 600,000 shares of
Borrower’s Series C Preferred Stock (on a pre-reverse split basis) at an exercise/conversion price
of $0.50 and 300,000 shares of Borrower’s Series D Preferred Stock at an
exercise/conversion price of $1.00 (each subject to adjustment as set forth in the Warrant), (d)
the surrender by PFG of the Original Warrant in exchange for the replacement warrant(s) described
in subsection (c) above, and (e) Borrower’s compliance with its covenant set forth in Section 5(a)
of the Schedule to the Loan Agreement.
8. MISCELLANEOUS. The quotation marks around modified clauses set forth herein and any
differing font styles in which such clauses are presented herein are for ease of reading only and
shall be ignored for purposes of construing and interpreting this Loan Modification.
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This Loan Modification is executed as of the date first written above.
| Borrower: SONICS, INC. |
PARTNERS FOR GROWTH, L.P. | |||||||||
By
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/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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By Name: |
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
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| Title: | Manager, Partners for Growth, LLC Its General Partner |
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By
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/s/ ▇▇▇▇ ▇▇▇▇▇▇▇ | |||||||||
| Secretary or Ass’t Secretary | ||||||||||
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