Document:

exv10w12b

 

Exhibit 10.12B

LOAN MODIFICATION AND CONSENT AGREEMENT

     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 180 Pacific Avenue, San Francisco, California 94111 (“PFG”) and
SONICS, INC., a Delaware corporation with its principal place of business at 1098 Alta Avenue,
Suite 101, Mountain View, CA 94043 (“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

	 	/s/ Grant A. Pierce
 

President or Vice President
	 	 
	 	By

Name:
	 	/s/ Andrew W. Kahn
 

Andrew W. Kahn
	 	 
	 

	 	 	 	 	 	Title:
	 	Manager, Partners for Growth, LLC

Its General Partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ Drew Wingard	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	Secretary or Ass’t Secretary	 	 	 	 	 	 	 	 

4exv10w13

 

			
	
	 	Exhibit 10.13
	 	 	 

May 12, 2003

Mr. Martin Kovacich

Dear Marty:

          Congratulations! On behalf of Sonics, Inc. (“Sonics” or “the Company”), I am pleased to
confirm our offer and your acceptance of a position with the Company. This letter further
clarifies the terms of your employment with the Company, which will begin on or before June 9,
2003.

          Your title will be Chief Financial Officer and you will report to me. In this position, you
will be responsible for Financial Management including financial reporting, treasury and other
financial related activities; Legal including contracts and intellectual property; Human
Resources; and other administrative activities. This is a full-time position and is exempt from
overtime pay.

          You will be paid a base salary of $175,000 per year. Your salary will be payable in accordance
with the Company’s standard payroll policies (subject to normal required withholding taxes). In
addition, you will participate in the Company’s Management-by-Objective (“MBO”) plan on a prorated
basis from the date of your employment. The MBO plan is based on personal performance objectives
along with Company sales and business objectives that will be mutually agreed upon between you and
your management. An annual target cash bonus of $25,000 has been established for you for the MBO
plan and will be prorated over two six month measurement periods ending June 30, 2003 and December
31, 2003. Your actual bonus awards may be higher or lower based upon the achievement level of both
personal and Company goals as determined by Sonics’ management and the Board of Directors. Details
of the MBO plan will be provided to you upon your commencement of employment with the Company.
During the first twenty four pay periods of your employment (payroll payments are made
semi-monthly), you will be permitted, at your option, to draw 1/24* of first annual target cash
bonus ($25,000) as a non-recoverable advance. If you elect to be advanced any of these semi-monthly
amounts, the payment will be made through the regular company payroll process. Any such advances
will be credited against subsequent bonuses earned.

          Additionally, you will be provided with a signing bonus in the gross amount of $15,000,
subject to appropriate tax withholding. If within one year of your hire date you voluntarily
terminate your employment, you agree to repay a pro-rata portion of this bonus based on your date
of termination.

          Sonics takes a long-term approach to its investments, and its employees are its most important
investment. We believe that stock options are an effective compensation tool to align the long-term
interest of Sonics with that of its employees. Therefore, subject to the approval of the Board of
Directors of the Company, you will be granted an
option to purchase 1,000,000 shares of the Company’s Common Stock
under the Sonics, Inc. 1997 Stock Incentive Plan, as amended, at an
exercise price equal to the fair market value of such Common Stock
on the date of grant, as determined by the Company’s Board of
Directors. Such option will vest at the rate of 1/8* of the
original number of shares subject to the option at the end of the
month in which you have completed six full months of employment,
and will continue to vest at the end of each month thereafter at
the rate of 1/48* of the original number of shares subject to the
option (total vesting occurs over 48 months). Vesting will depend
on your continued full-time employment with the Company.

          As Chief Financial Officer, upon commencing employment with
Sonics you will be provided with a Change of Control Agreement,
stating that in the event that the Company is acquired and, as a
result, your employment is terminated without cause or
constructively terminated by the acquiring company during the one
year period following such acquisition, you shall be entitled to
receive continued base salary for a period of three months from the
date of your

2440 W. El Camino Real

Suite 600

Mountain View

California 94040-1499

ph: 650.938.2500

fx: 650.938.2577

www.sonicsinc.com

 

 

termination and immediate vesting of 50% of the then unvested remaining shares of the 1,000,000
share grant provided above.

          In the event that your employment is terminated for reasons other than a change of control and
without cause, you shall be entitled to receive continued base salary for a period of three months
from the date of your termination.

          You will be entitled to receive benefits and vacation leave as generally made available to
similarly-situated employees. Like all Company employees, you will be required to sign the
Company’s Employee Proprietary Information and Inventions Agreement.

          We sincerely hope that you accept this offer of employment and are looking forward to your
joining Sonics. While we anticipate a long and mutually beneficial relationship, our employment
relationship shall be “at-will.” You may terminate your employment with Sonics at any time and
similarly, we may alter, modify, or terminate this employment relationship with you at any time,
with or without cause.

          This offer for employment is contingent upon passing an authorized background check. Your
employment pursuant to this letter is also contingent upon your submitting the legally required
proof of your identity and authorization to work in the United States. On your first day of
employment you must provide the required identification.

          Again, let me indicate how pleased we are to extend this offer and how much we look forward
to working together. This offer will remain valid until May 19, 2003. Please indicate your
acceptance by signing and returning a copy of this letter.

Very truly yours,

	 	 	 	 	 	 	 	 	 
	SONICS, INC.	 	 	 	Agreed to and Accepted by:
	 
	 	 	 	 	 	 	 	 
	/s/ Grant A. Pierce

	 	 	 	Signature:
	 	/s/ Martin Kovacich
 

Martin Kovacich
	 	 
	President & CEO

	 	 	 	Start Date:
	 	June 9, 2003	 	 

440 E1 Camino real • Suite 600 • Mountain View • callfornia 94040 — 1499 • ph 650.938.2577 • www.sonicsinc.com

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