Exhibit 10.4
LOAN MODIFICATION AGREEMENT
     This Loan Modification Agreement is entered into as of January 31, 2005, by and between**THERMA-WAVE, INC.**, a Delaware corporation (the “Borrower”) and **SILICON VALLEY BANK**(“Silicon”).
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which may be owing byBorrower to Silicon, Borrower is indebted to Silicon pursuant to, among other documents, a Loan andSecurity Agreement, dated as of June 13, 2003 (as may be amended, restated, supplemented orotherwise modified from time to time, the “Loan Agreement”). Defined terms used but not otherwisedefined herein shall have the same meanings assigned in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Silicon shall be referred to as the“Indebtedness.”
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is secured bythe Collateral as described in the Loan Agreement. Hereinafter, all other documents securingrepayment of the Indebtedness shall be referred to as the “Security Documents”.Hereinafter, the Security Documents, together with all other documents evidencing the Indebtednessshall be referred to as the “Existing Loan Documents”.
3. DESCRIPTION OF CHANGE IN TERMS OF EXISTING LOAN DOCUMENTS.
 3.1 Financial Covenants.
     (a) Sub-section (i) of Section 6.7 of the Loan Agreement is hereby amended andrestated in its entirety to read as follows:
“(i) Quick Ratio (Adjusted). As of the last day of each month beginning with themonth ending December 31, 2004, a ratio of Quick Assets to Current Liabilities plusall outstanding obligations of Borrower to Bank minus any stand-by letters of creditissued to secure pre-paid customer deposit subsequently accounted for under thedefinition of “Current Liabilities” minus current portions of Deferred Revenue minuscurrent portions of foreign tax accruals of at least 1.35 to 1.00. For the purposesof calculation of this ratio for the last day of each month which is also the lastday of a fiscal quarter, Quick Assets shall not include cash in the amount of anyfunded debt which constitutes Obligations on the date of calculation, and CurrentLiabilities shall not include liabilities in the amount of any funded debt whichconstitutes Obligations on the date of calculation.”
 

 

     (b) Sub-section (ii)(d) of Section 6.7 of the Loan Agreement is hereby amendedand restated in its entirety to read as follows:
“(d) <$2,000,000> for the fiscal quarter ending on March 31, 2005; and”
     (c) A new sub-section (e) is added to Section 6.7(ii) to read as follows:
“(e) <$1,000,000> for every fiscal quarter ending after March 31, 2005.”
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessaryto reflect the changes described above.
5. WAIVERS.
 5.1 Bank hereby waives the following (collectively, the “Waived Defaults”): solelywith respect to the period beginning July 1, 2004 through November 20, 2004, the Eventof Default under Section 8.2 arising out of Borrower’s violation of Section 6.7(i).  5.2 The waiver is this Section 5 shall become effective only in accordance withSection 9 hereof and then only in this specific instance and for the specific purposesset forth herein. Such waiver does not allow for any other or further departure fromthe terms and conditions of the Loan Agreement, as amended hereby, or any of the otherExisting Loan Documents, which terms and conditions shall remain in full force andeffect.
6. PAYMENT OF LOAN MODIFICATION EXPENSES. Borrower shall pay Bank its reasonableout-of-pocket expenses incurred for preparation of this Loan Modification Agreement.
7. NO DEFENSES OF BORROWER. Borrower agrees that, as of the date hereof, it has no defensesagainst its obligations to pay all of the Indebtedness.
8. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the ExistingLoan Documents, Silicon is relying upon Borrower’s representations, warranties, and agreements, asset forth in the Existing Loan Documents and as of the date of such Existing Loan Documents.Except as expressly modified pursuant to this Modification, the terms of the Existing LoanDocuments remain unchanged and in full force and effect. Silicon’s agreement to modifications tothe Existing Loan Documents pursuant to this Modification in no way shall obligate Silicon to makeany future modifications to the Existing Loan Documents. Nothing in this Modification shallconstitute a satisfaction of the Indebtedness. It is the intention of Silicon and Borrower toretain as liable parties all makers and endorsers of Existing Loan Documents, unless the party isexpressly released by Silicon in writing, and no maker, endorser, or guarantor will be released byvirtue of this Modification.
 

 

9. CONDITIONS. The effectiveness of this Modification is conditioned upon (i) payment byBorrower of all reasonable Bank Expenses relating to this Modification, and (ii) execution anddelivery to Silicon of a fully executed copy of this Modification.
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     IN WITNESS WHEREOF, each of the parties hereto has caused this Modification to be executed anddelivered by its duly authorized representative as of the date first written above.           **BORROWER:** **SILICON:**           THERMA-WAVE, INC., SILICON VALLEY BANK,a Delaware corporation a California-chartered bank           By: /s/ L. Ray Christie By: /s/ Quentin Falconer                          Name: L. Ray Christie Name: Quentin Falconer           Title: Senior V.P., Chief Financial Officer Title: Senior V.P.and Secretary