Exhibit 10.A
EXECUTION COPY
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is
entered into as of April 16, 2002, by and among Mentor Graphics Corporation, an
Oregon corporation (the "Company"), the several financial institutions party to
the Credit Agreement referred to below (each a "Bank" and, collectively, the
"Banks"), The Bank of Nova Scotia, as documentation agent, Fleet National Bank,
N.A., as syndication agent, and Bank of America, N.A., as administrative agent
for the Banks (in such capacity, the "Agent").
WHEREAS, the Company, the Banks and the Agent entered into a Credit
Agreement dated as of January 10, 2001, as amended pursuant to that certain
First Amendment to Credit Agreement dated as of January 24, 2002 (as so amended,
and as otherwise amended, modified or supplemented from time to time, the
"Credit Agreement");
WHEREAS, the Company presently intends to acquire all of the
outstanding shares of Innoveda, Inc., a Delaware corporation (the "Innoveda
Acquisition");
WHEREAS, the Company has requested the right to obtain a bridge loan
of up to $125,000,000 (the "Bridge Loan Facility") and to issue subordinated
debt (the "Subordinated Indebtedness");
WHEREAS, the Company has requested that the Majority Banks agree to
certain amendments to the Credit Agreement in contemplation of the Innoveda
Acquisition, the issuance of Subordinated Indebtedness and the execution of the
Bridge Loan Facility and the Majority Banks have agreed to such request, subject
to the terms and conditions of this Amendment;
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions; References; Interpretation.
(a) Unless otherwise specifically defined herein, each term used herein
which is defined in the Credit Agreement shall have the meaning assigned to such
term in the Credit Agreement.
(b) Each reference to "this Amendment", "hereof", "hereunder", "herein" and
"hereby" and each other similar reference contained in the Credit Agreement, and
each reference to "the Credit Agreement" and each other similar reference in the
other Loan Documents, shall from and after the Second Amendment Effective Date
(as defined in Section 4(a) hereof) refer to the Credit Agreement as amended
hereby.
(c) The rules of interpretation set forth in Section 1.02 of the Credit
Agreement shall be applicable to this Amendment.
2. Amendments to Credit Agreement. Subject to the terms and conditions hereof,
the Credit Agreement is amended as follows:
(a) Effective as of the Second Amendment Effective Date:
(1) The following new terms are hereby added to Section 1.01 of the
Credit Agreement in proper alphabetical order:
""ATI" means Accelerated Technology Inc."
""ATI Acquisition" means the Acquisition by the Company or a
Subsidiary of ATI."
""Bridge Loan Facility" means that certain $125,000,000 Bridge
Loan Agreement dated as of April 16, 2002, by and among the Company,
BofA, as administrative agent, and the other lenders party thereto."
""IKOS Acquisition" means the Acquisition by the Company or a
Subsidiary of IKOS."
""Innoveda" means Innoveda, Inc., a Delaware corporation."
""Innoveda Acquisition" means the Acquisition by the Company or
a Subsidiary of Innoveda."
""Innoveda Acquisition Agreement" means the agreement between
the Company and Innoveda pursuant to which the Innoveda Acquisition
takes place."
""Second Amendment Effective Date" has the meaning assigned to
such term in that certain Second Amendment to Credit Agreement dated
as of April 16, 2002 by and among the Company, BofA, as administrative
agent, and the Banks party thereto."
""Subordinated Indebtedness" means Indebtedness incurred from
time to time and subordinated in right of payment to the Obligations
hereunder."
(1) The following defined terms set forth in Section 1.01 of the
Credit Agreement are hereby amended and restated in their entirety to read as
follows:
""Base Rate" means for any day a fluctuating rate per annum
equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and
(b) the rate of interest in effect for such day as publicly announced
from time to time by BofA as its "prime rate." Such rate is a rate set
by BofA based upon various factors including BofA's costs and desired
return, general economic conditions and other factors, and is used as
a reference point for pricing some loans, which may be priced at,
above, or below such announced rate. Any change in such rate announced
by BofA shall
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take effect at the opening of business on the day specified in the
public announcement of such change."
""Federal Funds Rate" means, for any day, the rate per annum
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank on the Business Day next succeeding such day; provided that (a)
if such day is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business
Day as so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day, the
Federal Funds Rate for such day shall be the average rate charged to
BofA on such day on such transactions as determined by the Agent."
""Offshore Rate" means, for any Interest Period, with respect to
Offshore Rate Loans:
(a) the rate per annum equal to the rate determined by the Agent
to be the offered rate that appears on the page of the Telerate screen
(or any successor thereto) that displays an average British Bankers
Association Interest Settlement Rate for deposits in Dollars (for
delivery on the first day of such Interest Period) with a term
equivalent to such Interest Period, determined as of approximately
11:00 a.m. (London time) two Business Days prior to the first day of
such Interest Period, or
(b) if the rate referenced in the preceding subsection (a) does
not appear on such page or service or such page or service shall cease
to be available, the rate per annum equal to the rate determined by
the Agent to be the offered rate on such other page or other service
that displays an average British Bankers Association Interest
Settlement Rate for deposits in Dollars (for delivery on the first day
of such Interest Period) with a term equivalent to such Interest
Period, determined as of approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period, or
(c) if the rates referenced in the preceding subsections (a) and
(b) are not available, the rate per annum determined by the Agent as
the rate of interest at which deposits in Dollars for delivery on the
first day of such Interest Period in same day funds in the approximate
amount of the Offshore Rate Loan being made, continued or converted by
Bank of America and with a term equivalent to such Interest Period
would be offered by Bank of America's London Branch to major banks in
the London interbank offshore market at their request at approximately
4:00 p.m. (London time) two Business Days prior to the first day of
such Interest Period."
(1) Subsection (b) of the defined term "Cash Equivalents" set forth in
Section 1.01 of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:
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"(b) certificates of deposit, time deposits, Eurodollar time
deposits, repurchase agreements, reverse repurchase agreements, or
bankers' acceptances, having in each case a tenor of not more than 12
months, issued by (i) any U.S. commercial bank or any commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (but including,
in any event, Singapore, Israel, India and Egypt), or a political
subdivision of any such country, in each case having combined capital
and surplus of not less than $100,000,000 and whose short-term
securities are rated at least A-1 by Standard & Poor's Corporation
("S&P") or at least P-1 by Moody's Investor Service, Inc. ("Moody's"),
or (ii) any Bank;"
(1) Subsection (b) of the defined term "Permitted Investments" set
forth in Section 1.01 of the Credit Agreement is hereby amended and restated in
its entirety to read as follows:
"(b) certificates of deposit, time deposits, Eurodollar time
deposits, repurchase agreements, reverse repurchase agreements, or
bankers' acceptances, having in each case a tenor of not more than
three years, issued by any U.S. commercial bank or any commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (but including,
in any event, Singapore, Israel, India and Egypt), or a political
subdivision of any such country, in each case having combined capital
and surplus of not less than $100,000,000 and whose short-term
securities are rated at least A-2 by Standard & Poor's Corporation
("S&P") or at least P-2 by Moody's Investor Service, Inc.
("Moody's");"
(1) The defined terms "Eurodollar Reserve Percentage", "Joint
Venture", "Net Cash Consideration" and "Subordination Agreement" set forth in
Section 1.01 of the Credit Agreement are hereby deleted in their entirety.
(2) Subsection 6.02(c) of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
"(c) promptly upon request of the Agent, a certificate of a
Responsible Officer of the Company certifying (i) the aggregate dollar
amount of Returned Accounts for the Company and its Subsidiaries for
the most recently-ended calendar month, measured on a consolidated
basis, (ii) the aggregate dollar amount of accounts receivable (after
reserves have been deducted) of the Company and its Subsidiaries,
measured on a consolidated basis, as of the last day of such calendar
month, (iii) the aggregate dollar amount of accounts receivable (after
reserves have been deducted) of the Company and its Subsidiaries that
are 90 days or more past due, measured on a consolidated basis, as of
the last day of such calendar month, and (iv) the aggregate dollar
amount of accounts receivable (after reserves have been deducted) of
the Company and its Subsidiaries that are 90 days or more past due
expressed as a percentage of the aggregate dollar amount of accounts
receivable (after reserves have been deducted) of the Company and its
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Subsidiaries, in each case, measured on a consolidated basis, as of
the last day of such calendar month; provided, however, that unless
and until a Borrowing has occurred hereunder, the Company shall be
under no obligation to deliver the monthly certificates required under
this subsection 6.02(c); provided, further, however, that it shall be
an additional condition precedent to the initial Borrowing after the
Bridge Termination Effective Date that the Company deliver to the
Agent a certificate of a Responsible Officer of the Company certifying
retroactively the information required under the preceding clauses (i)
through (iv) for each calendar month ended from the Bridge Termination
Effective Date through the first Borrowing thereafter;"
(1) Section 6.13 of the Credit Agreement is hereby amended by deleting
the word "diligently" therefrom.
(2) Section 7.01 of the Credit Agreement is hereby amended by (i)
deleting the word "and" at the end of subsection (q) thereof; (ii) deleting the
period at the end of subsection (r) thereof and inserting "; and" therefor; and
(iii) adding the following as new subsection (s) thereof:
"(s) Liens on Margin Stock of Innoveda."
(1) Section 7.02 of the Credit Agreement is hereby amended by (i)
amending and restating subsections (d) and (f) thereof in their entirety to read
as set forth below; (ii) deleting the word "and" at the end of subsection (h)
thereof; (iii) deleting the period at the end of subsection (i) thereof and
inserting "; and" therefor; and (iv) adding the following as new subsection (j)
thereof:
"(d) dispositions of Permitted Receivables pursuant to Permitted
Receivables Purchase Facilities; provided that (i) for those Permitted
Receivables having a final maturity date which is less than 12 months
after the date such obligations arise, the value of such accounts
receivable so sold by the Company and its Subsidiaries shall not
exceed $50,000,000 at any time outstanding, and (ii) the value of all
Permitted Receivables (whether or not having a final maturity date
which is less than 12 months after the date such obligations arise) so
sold by the Company and its Subsidiaries shall not exceed $50,000,000
at any time outstanding; and provided, further, however, that no
dispositions of any Permitted Receivables shall be permitted at any
time that any of the following circumstances exist: (A) Returned
Accounts for the Company and its Subsidiaries for any calendar month
shall have exceeded $10,000,000 in the aggregate, measured on a
consolidated basis, (B) accounts receivable (after reserves have been
deducted) of the Company and its Subsidiaries that are 90 days or more
past due shall be greater than 10% of accounts receivable (after
reserves have been deducted) of the Company and its Subsidiaries, in
each case, measured on a consolidated basis, (C) the TNW Buffer
measured as of the last day of any full fiscal quarter, commencing
with the second full fiscal quarter following the fiscal quarter in
which the Innoveda Acquisition is consummated, shall be less than 50%
of the
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TNW Buffer measured as of the last day of the fiscal quarter
immediately preceding such fiscal quarter, (D) if after giving effect
to such disposition, the Company would not be in pro forma compliance
with the financial covenants set forth in Subsections 7.14(a) through
(d), measured as of the last day of the fiscal quarter then most
recently ended for which a Compliance Certificate has been delivered
to the Agent and the Banks pursuant to subsection 6.02(b), or (E) any
Event of Default then exists or would result from such disposition;"
"(f) the sale or lease of any property set forth on Schedule
7.02 hereof and any excess facilities acquired at the time of the ATI
Acquisition, the IKOS Acquisition or the Innoveda Acquisition, in each
case for fair market value (as determined in good faith at the time of
such sale by the board of directors of the Company or the applicable
Subsidiary, as the case may be); provided that no Default or Event of
Default then exists or would result from such sale;"
"(j) the sale of Margin Stock of Innoveda for fair market value
(as determined in good faith at the time of such sale by the board of
directors of the Company or the applicable Subsidiary, as the case may
be)."
(1) Section 7.04 of the Credit Agreement is hereby amended by (i)
amending and restating subsections (d), (e), (h) and (k) thereof in their
entirety to read "reserved", (ii) deleting the word "and" at the end of
subsections (j) and (k) thereof; (iii) deleting the period at the end of
subsection (l) thereof and inserting "; and" therefor, and (iv) adding the
following as new subsections (m) and (n) thereof, respectively:
"(m) the purchase by the Company of the capital stock of
Innoveda and ATI; and"
"(n) other Investments, the value of which as reflected on the
Company's balance sheet does not exceed $10,000,000 in the aggregate
in any fiscal year."
(1) Section 7.05 of the Credit Agreement is hereby amended by (i)
amending and restating subsection (g) thereof in its entirety to read
"reserved", (ii) deleting the period at the end of subsection (i) thereof and
inserting a semicolon therefor, (iii) deleting the word "and" at the end of
subsection (h) thereof, and (iv) adding the following as new subsections (j) and
(k) thereof:
"(j) Subordinated Indebtedness, provided that (i) the maturity
date of such Subordinated Indebtedness shall be at least six months
after the Revolving Termination Date (as defined on the Second
Amendment Effective Date), (ii) such Subordinated Indebtedness shall
not have any scheduled payment of principal, scheduled prepayment,
scheduled mandatory redemption or repurchase or sinking fund payment
prior to at least six months after the Revolving Termination Date (as
defined on the Second Amendment Effective Date), (iii) such
Subordinated Indebtedness shall be subordinated in right of payment to
the Obligations
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hereunder and under the Bridge Loan Facility on terms reasonably
satisfactory to the Agent and the Majority Banks, and (iv) the
proceeds thereof shall be used to prepay outstanding loans under the
Bridge Loan Facility; and"
"(k) during the period prior to October 31, 2002, Indebtedness
incurred pursuant to the Bridge Loan Facility, in an aggregate
principal amount not to exceed $125,000,000."
(1) Section 7.07 of the Credit Agreement is hereby amended by (a)
amending and restating subsection (a) thereof in its entirety to read as set
forth below, and (b) adding the following as new subsection (d) thereof:
"(a) The Company shall not, and shall not suffer or permit any
Subsidiary to, use any portion of the Loan proceeds, directly or
indirectly, otherwise than in connection with the purchase of shares
of its own stock for retirement, (i) to purchase or carry Margin
Stock, (ii) to repay or otherwise refinance indebtedness of the
Company or others incurred to purchase or carry Margin Stock, (iii) to
extend credit for the purpose of purchasing or carrying any Margin
Stock, in the case of each of the preceding clauses (i) (ii) and
(iii), in violation of Regulation T, U or X of the FRB, or (iv) to
acquire any security (other than IKOS Margin Stock and Margin Stock of
Innoveda) in any transaction that is subject to Section 13(d) or 14(d)
of the Exchange Act."
"(d) The Company shall not, and shall not suffer or permit any
Subsidiary to, use any portion of the Loan proceeds, directly or
indirectly, to repay Indebtedness under the Bridge Loan Facility."
(1) Subsection 7.08(c) of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
"(c) Contingent Obligations of the Company and its Subsidiaries
existing as of the Closing Date and set forth on Schedule 7.08 hereof
and any equivalent replacements thereof;"
(1) Section 7.10 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
"7.10 The Company shall not declare or make any dividend payment
or other distribution of assets, properties, cash, rights, obligations
or securities on account of any shares of any class of its capital
stock, or purchase, redeem or otherwise acquire for value any shares
of its capital stock or any warrants, rights or options to acquire
such shares, now or hereafter outstanding; or make any payment or
prepayment of principal of, premium, if any, or interest on, or
redeem, purchase, retire, defease (including in-substance or legal
defeasance), or make any sinking fund or similar payment with respect
to, Subordinated Indebtedness, except that:
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(a) the Company may declare and make dividend payments or other
distributions payable solely in its common stock;
(b) so long as no Default or Event of Default exists or would
result therefrom, the Company may purchase, redeem or otherwise
acquire shares of its common stock or warrants or options to acquire
any such shares pursuant to any employee stock option or purchase
plan; provided that all such purchases, redemptions or other
acquisitions otherwise permitted under this clause (b) do not exceed
$5,000,000 in the aggregate in any fiscal year; and
(c) the Company may make regularly scheduled payments of
interest in respect of Subordinated Indebtedness in accordance with
the terms of, and only to the extent required by, and subject to the
subordination provisions contained in, any agreement or instrument
governing such Subordinated Indebtedness."
(1) Subsection 8.01(m) of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
"(m) Invalidity of Subordination Provisions. The subordination
provisions of any agreement or instrument governing any Subordinated
Indebtedness and subordinating such Subordinated Indebtedness to the
Obligations hereunder is for any reason revoked, invalidated or
otherwise breached by the Company or any Subsidiary, or otherwise
ceases to be in full force and effect as a result of any act or
omission of the Company or any Subsidiary, or the Company or any
Subsidiary otherwise contests in any manner the validity or
enforceability thereof or denies that it has any further liability or
obligation thereunder."
(1) Exhibit G of the Credit Agreement is hereby amended and restated
in its entirety to read "reserved".
(2) Schedules 5.05, 5.07, 5.12, 5.15, 5.16, 5.17, 7.01, 7.02, 7.04,
7.05 and 7.08 attached to the Credit Agreement are hereby amended and restated
in their entirety to read as set forth on Schedules 5.05, 5.07, 5.12, 5.15,
5.16, 5.17, 7.01, 7.02, 7.04, 7.05 and 7.08, respectively, attached hereto.
(b) Effective as of the Bridge Funding Effective Date (as defined in
Section 4(b) hereof):
(1) The following new terms shall be added to Section 1.01 of the
Credit Agreement in proper alphabetical order:
""Attributable Indebtedness" means, on any date, (a) in respect
of any capital lease of any Person, the capitalized amount thereof
that would appear on a balance sheet of such Person prepared as of
such date in accordance with GAAP, and (b) in respect of any Synthetic
Lease Obligation, the capitalized amount of the remaining lease
payments under the relevant lease that would appear on a balance
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sheet of such Person prepared as of such date in accordance with GAAP
if such lease were accounted for as a capital lease."
""Bridge Funding Effective Date" has the meaning assigned to
such term in that certain Second Amendment to Credit Agreement dated
as of April 16, 2002, by and among the Company, BofA, as
administrative agent, and the Banks party thereto."
""Consolidated EBITDA" means, for any period, for the Company
and its Subsidiaries on a consolidated basis, an amount equal to the
sum of (i) Consolidated Net Income, (ii) Consolidated Interest
Charges, (iii) the amount of taxes, based on or measured by income,
used or included in the determination of such Consolidated Net Income,
(iv) the amount of depreciation and amortization expense deducted in
determining such Consolidated Net Income, (v) restructuring charges
taken in the third and fourth fiscal quarters of fiscal year 2001 and
the first fiscal quarter of fiscal year 2002, and (vi) any
Acquisition-related expenses, restructuring charges and write-offs
(relating to in-process research and development, goodwill and other
intangibles associated with the ATI Acquisition, the IKOS Acquisition
or the Innoveda Acquisition) taken in the fiscal quarter in which
consummation of the applicable Acquisition occurs or in the
immediately following fiscal quarter."
""Consolidated Funded Indebtedness" means, as of any date of
determination, for the Company and its Subsidiaries on a consolidated
basis, the sum of (a) the outstanding principal amount of all
obligations, whether current or long-term, for borrowed money
(including Obligations hereunder) and all obligations evidenced by
bonds, debentures, notes, loan agreements or other similar
instruments, (b) Attributable Indebtedness (other than that of ATI,
IKOS and Innoveda) in respect of capital leases and Synthetic Lease
Obligations, and (c) without duplication, all Guaranty Obligations
with respect to Indebtedness of the types specified in subsections (a)
and (b) above of Persons other than the Company or any Subsidiary,
except with respect to automobile leasing programs for employees in
Europe."
""Consolidated Interest Charges" means, for any period, for the
Company and its Subsidiaries on a consolidated basis, the sum of (a)
all interest, premium payments, fees, charges and related expenses of
the Company and its Subsidiaries in connection with borrowed money
(including capitalized interest) or in connection with the deferred
purchase price of assets, in each case to the extent treated as
interest in accordance with GAAP, and (b) the portion of rent expense
of the Company and its Subsidiaries with respect to such period under
capital leases that is treated as interest in accordance with GAAP."
""Consolidated Net Income" means, for any period, for the
Company and its Subsidiaries on a consolidated basis, the net income
of the Company and its Subsidiaries."
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""Consolidated Tangible Net Worth" means, at any time of
determination, in respect of the Company and its Subsidiaries,
determined on a consolidated basis, total assets (exclusive of
goodwill, trademarks, trade names, organization expense, treasury
stock, unamortized debt discount and premium and other like
intangibles) minus total liabilities (including accrued and deferred
income taxes), at such time, all as determined in accordance with
GAAP."
""Synthetic Lease Obligation" means the monetary obligation of a
Person under (a) a so-called synthetic, off-balance sheet or tax
retention lease, or (b) an agreement for the use or possession of
property creating obligations that do not appear on the balance sheet
of such Person but which, upon the insolvency or bankruptcy of such
Person, would be characterized as the indebtedness of such Person
(without regard to accounting treatment)."
(1) The defined term "Applicable Margin" set forth in Section 1.01 of
the Credit Agreement is hereby amended and restated in its entirety to read as
follows:
""Applicable Margin" means (a) with respect to Offshore Rate
Loans (i) 2.50% for the period from and including the Bridge Funding
Effective Date to but excluding August 1, 2002, (ii) 3.25% for the
period from and including August 1, 2002 to but excluding September
15, 2002, and (iii) 4.25% thereafter; and (b) with respect to Base
Rate Loans, (i) 1.25% for the period from and including the Bridge
Funding Effective Date to but excluding August 1, 2002, (ii) 2.00% for
the period from and including August 1, 2002 to but excluding
September 15, 2002, and (iii) 3.00% thereafter."
(1) The defined terms "Consolidated Current Liabilities", "EBITDA",
"FDIC" and "Leverage Ratio" set forth in Section 1.01 of the Credit Agreement
are hereby deleted in their entirety.
(2) Subsection 2.09(b) of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
"(b) Commitment Fees. The Company shall pay to the Agent for the
account of each Bank a commitment fee of 0.50% on the actual daily
unused portion of such Bank's Commitment, computed on a quarterly
basis in arrears on the last Business Day of each calendar quarter
based upon the daily utilization for that quarter calculated by the
Agent. Such commitment fee shall accrue from the Bridge Funding
Effective Date to the Revolving Termination Date and shall be due and
payable quarterly in arrears on the last Business Day of each calendar
quarter commencing on the last day of the first full calendar quarter
following the Bridge Funding Effective Date through the Revolving
Termination Date, with the final payment to be made on the Revolving
Termination Date; provided that, in connection with any reduction or
termination of Commitments under Section 2.05, the accrued commitment
fee calculated for the period ending on such date shall also be paid
on the date of such reduction or termination, with the
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following quarterly payment being calculated on the basis of the
period from such reduction or termination date to such quarterly
payment date. The commitment fees provided in this subsection shall
accrue at all times after the above-mentioned commencement date,
including at any time during which one or more conditions in Article
IV are not met."
(1) Subsection 2.09(c) of the Credit Agreement is hereby deleted in
its entirety.
(2) Section 6 of the Credit Agreement is hereby amended by adding the
following as new Section 6.14 thereof:
"6.14 Innoveda Acquisition. The Company shall cause Innoveda to
become a Wholly-Owned Subsidiary on, or within a reasonable period of
time after, the consummation of the Innoveda Acquisition."
(1) Section 7.14 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
"7.14 Financial Covenants
(a) Minimum Liquidity. The Company shall not permit the ratio
(determined in respect of the Company and its Subsidiaries on a
consolidated basis) of (i) cash plus the value (valued in accordance
with GAAP) of all Cash Equivalents plus net current accounts
receivable (valued in accordance with GAAP), other than cash, Cash
Equivalents and net current accounts receivable subject to a Lien
securing Indebtedness, to (ii) Consolidated Funded Indebtedness, as of
June 30, 2002 to be less than 0.95 to 1.00 and as of the end of each
fiscal quarter thereafter to be less than 1.00 to 1.00.
(b) Minimum Tangible Net Worth. The Company shall not as of the
end of any fiscal quarter permit Consolidated Tangible Net Worth to be
less than the sum of (i) Consolidated Tangible Net Worth as of the
last day of the fiscal quarter in which the consummation of the
Innoveda Acquisition occurs, less (ii) $5,000,000, plus (iii) 75% of
Consolidated Net Income (before write-offs related to or incurred in
respect of the ATI Acquisition, the IKOS Acquisition and the Innoveda
Acquisition relating to goodwill and other intangibles previously
capitalized on the Company's balance sheet associated with any such
Acquisition excluding write-offs for in-process research and
development not previously capitalized on the Company's balance sheet)
for each fiscal quarter commencing after the last day of the fiscal
quarter in which the consummation of the Innoveda Acquisition occurs
(to the extent such Consolidated Net Income for any such fiscal
quarter is positive), plus (iv) 100% of the Net Issuance Proceeds of
any new equity issued by the Company after the last day of the fiscal
quarter in which the consummation of the Innoveda Acquisition occurs
(excluding equity issued under employee stock option or purchase
plans); provided, however, that in no event shall Consolidated
Tangible Net Worth as of the last day of the fiscal quarter in
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which the consummation of the Innoveda Acquisition occurs be less than
$-75,000,000.
(c) Minimum Net Income. The Company shall not as of the end of
any fiscal quarter permit Consolidated Net Income (excluding
amortization of intangibles and restructuring charges and non-cash
expenses and write-offs related to or incurred in respect of the ATI
Acquisition, the IKOS Acquisition and the Innoveda Acquisition taken
in the fiscal quarter in which the consummation of such Acquisition
occurs, or in the immediately following fiscal quarter) to be less
than $0 at any time.
(d) Maximum Consolidated Funded Indebtedness to Consolidated
EBITDA. The Company shall not as of the end of any fiscal quarter
permit the ratio of (i) Consolidated Funded Indebtedness as of such
date to (ii) Consolidated EBITDA for the four fiscal quarter period
ended on such date to be more than (A) 2.35 to 1.00 for the fiscal
quarter ended June 30, 2002, and (B) 2.00 to 1.00 for each fiscal
quarter thereafter.
(e) Maximum Capital Expenditures. The Company shall not, and
shall not suffer or permit any Subsidiary to, make or become legally
obligated to make any expenditure in respect of the purchase or other
acquisition of any fixed or capital asset (excluding normal
replacements and maintenance which are properly charged to current
operations), except for capital expenditures in the ordinary course of
business not exceeding, in the aggregate for the Company and its
Subsidiaries during fiscal year 2002, $35,000,000."
(1) Section 7 of the Credit Agreement is hereby amended by adding the
following as new Section 7.15 thereof:
"7.15 Amendments to Innoveda Acquisition Agreement. The Company
shall not agree to any material amendment to, or waive any of its
material rights under, the terms of the Innoveda Acquisition after the
Bridge Funding Effective Date without obtaining the prior written
consent of the Agent and Majority Banks."
(1) Schedule 2 to Exhibit C of the Credit Agreement is hereby amended
and restated in its entirety as set forth on Schedule 2-2 attached hereto.
(2) Annex I of the Credit Agreement is hereby amended and restated in
its entirety to read "reserved".
(b) Effective as of the Bridge Termination Effective Date (as defined in
Section 4(c) hereof):
(1) The following new defined terms shall be added to Section 1.01 of
the Credit Agreement in proper alphabetical order:
12
""Bridge Termination Effective Date" has the meaning assigned to
such term in that certain Second Amendment to Credit Agreement dated
as of April 16, 2002, by and among the Company, Bank of America, as
administrative agent, and the Banks party thereto."
""Consolidated Current Liabilities" means, at any time of
determination, all amounts which would, in accordance with GAAP, be
included under current liabilities on a consolidated balance sheet of
the Company and its Subsidiaries, but in any event including all
outstanding Loans, at such time."
""Leverage Ratio" means, as of any date of determination, the
ratio of (a) total consolidated liabilities of the Company and its
Subsidiaries on such date, as determined in accordance with GAAP,
minus Subordinated Indebtedness, to (b) the sum of Consolidated
Tangible Net Worth, plus Subordinated Indebtedness, in each case on
such date."
""Net Cash Consideration" means, in respect of any Acquisition,
the cash consideration paid by the Company or any of its Subsidiaries
in respect of such Acquisition less the unencumbered cash and Cash
Equivalents of the target Person (including, without limitation,
unencumbered cash and Cash Equivalents tendered by holders of options
to purchase the target Person's capital stock upon the exercise of
such options), in each case, which are acquired by the Company or any
of its Subsidiaries as a result of such Acquisition."
""Senior Leverage Ratio" means, as of any date of determination,
the ratio of (a) Consolidated Funded Indebtedness minus Subordinated
Indebtedness on such date to (b) the sum of Consolidated Tangible Net
Worth plus Subordinated Indebtedness on such date."
(1) The following defined terms set forth in Section 1.01 of the
Credit Agreement are hereby amended and restated in their entirety to read as
follows:
""Applicable Margin" means, for any day, with respect to any
Base Rate Loan or Offshore Rate Loan, the applicable margin (on a per
annum basis) set forth on the pricing grid attached as Annex I in
accordance with the parameters for calculation and adjustment of such
applicable margin also set forth on Annex I."
""Subordinated Indebtedness" means Indebtedness of the Company
incurred from time to time and subordinated in right of payment to the
Obligations hereunder, including Indebtedness incurred pursuant to
Subsection 7.05(g)."
(1) Subsection 2.09(b) of the Credit Agreement is hereby amended and
restated in it entirety as follows:
"(b) Commitment Fees. The Company shall pay to the Agent for the
account of each Bank a commitment fee on the actual daily unused
portion of
13
such Bank's Commitment, computed on a quarterly basis in arrears on
the last Business Day of each calendar quarter based upon the daily
utilization for that quarter as calculated by the Agent, equal to the
applicable "Commitment Fee" set forth on the pricing grid attached as
Annex I in accordance with the parameters for calculation and
adjustment of such Commitment Fee also set forth on Annex I. Such
commitment fee shall accrue from the Bridge Termination Effective Date
to the Revolving Termination Date and shall be due and payable
quarterly in arrears on the last Business Day of each calendar quarter
commencing on the last day of the first full calendar quarter
following the Bridge Termination Effective Date through the Revolving
Termination Date, with the final payment to be made on the Revolving
Termination Date; provided that, in connection with any reduction or
termination of Commitments under Section 2.05, the accrued commitment
fee calculated for the period ending on such date shall also be paid
on the date of such reduction or termination, with the following
quarterly payment being calculated on the basis of the period from
such reduction or termination date to such quarterly payment date. The
commitment fees provided in this subsection shall accrue at all times
after the above-mentioned commencement date, including at any time
during which one or more conditions in Article IV are not met."
(1) Section 2.09 of the Credit Agreement is hereby amended by adding
the following as new subsection 2.09(c) thereof:
"(c) Utilization Fees. The Company shall pay to the Agent for
the account of each Bank a utilization fee on the actual daily
utilized portion of such Bank's Commitment, computed on a quarterly
basis in arrears on the last Business Day of each calendar quarter
based upon the daily utilization for that quarter, as calculated by
the Agent, at a rate per annum equal to the applicable "Utilization
Fee" set forth on the pricing grid attached as Annex I for each day
during such quarter on which utilization of the combined Commitments
equals or exceeds 33% at the close of the Agent's business on such day
(or the close of the Agent's business on the next preceding Business
Day in the case of a Saturday or Sunday or other day not a Business
Day). For purposes of calculating utilization under this subsection,
the Commitments shall be deemed utilized to the extent of the
aggregate principal amount of Loans then outstanding. Such utilization
fee shall accrue from the Bridge Termination Effective Date and shall
be due and payable quarterly in arrears on the last Business Day of
each calendar quarter commencing on the last day of the first full
calendar quarter following the Bridge Termination Effective Date
through the Revolving Termination Date, with the final payment to be
made on the Revolving Termination Date; provided that, in connection
with any reduction or termination of Commitments under Section 2.05,
the accrued utilization fee calculated for the period ending on such
date shall also be paid on the date of such reduction or termination,
with the following quarterly payment being calculated on the basis of
the period from such reduction or termination date to such quarterly
payment date. The utilization fees provided in this subsection shall
accrue at all times after the above-mentioned commencement date."
14
(1) Subsection 7.02(d) of the Credit Agreement is hereby amended by
deleting the figure "$50,000,000" in clause (ii) thereof and substituting
"$100,000,000" therefor.
(2) Section 7.04 of the Credit Agreement is hereby amended by (i)
amending and restating subsections (d), (e), (h) and (k) thereof in their
entirety to read, respectively, as follows, and (ii) amending and restating
subsection (n) thereof in its entirety to read "reserved":
"(d) Investments incurred in order to consummate Acquisitions
otherwise permitted herein, provided that (i) the Net Cash
Consideration given for any such Acquisition, together with the Net
Cash Consideration given for all prior Acquisitions (other than the
ATI Acquisition, the IKOS Acquisition and the Innoveda Acquisition)
undertaken by the Company and its Subsidiaries shall not exceed (A)
$20,000,000 in fiscal 2002, and (B) $50,000,000 per annum in any other
fiscal year, (ii) such Acquisitions are undertaken in accordance with
all applicable Requirements of Law, and (iii) the prior, effective
written consent or approval to such Acquisition of the board of
directors or equivalent governing body of the acquiree is obtained;"
"(e) Subject to clause (i) in subsection 7.04(d) above,
Investments incurred in order to consummate Acquisitions otherwise
permitted herein for which all or a portion of the consideration given
for any such Acquisition is common stock of the Company or any
Subsidiary, provided that (i) such Acquisitions are undertaken in
accordance with all applicable Requirements of Law and (ii) the prior,
effective written consent or approval to such Acquisition of the board
of directors or equivalent governing body of the acquiree is obtained
(notwithstanding this clause (ii), if all of the consideration given
for any such Acquisition is common stock of the Company or any
Subsidiary, then the prior, effective written consent or approval to
such Acquisition of the board of directors or equivalent governing
body of the acquiree shall not be required hereby);"
"(h) Investments incurred in order to consummate Acquisitions
not otherwise permitted herein subject to the prior written consent of
the Majority Banks;"
"(k) other Investments not exceeding $30,000,000 in any fiscal
year as to all such Investments in the aggregate; provided that if all
such Investments permitted by this subsection (k) exceed $15,000,000
in the aggregate in any fiscal year, then the $50,000,000 limitation
set forth in the preceding subsection (d) shall be reduced for such
fiscal year by the amount of such excess; "
(1) Subsection 7.05(i) of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
"other unsecured Indebtedness in an aggregate principal amount
outstanding not exceeding $20,000,000 at any time;"
15
(1) Section 7.10 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
"7.10 The Company shall not declare or make any dividend payment
or other distribution of assets, properties, cash, rights, obligations
or securities on account of any shares of any class of its capital
stock, or purchase, redeem or otherwise acquire for value any shares
of its capital stock or any warrants, rights or options to acquire
such shares, now or hereafter outstanding; or make any payment or
prepayment of principal of, premium, if any, or interest on, or
redeem, purchase, retire, defease (including in-substance or legal
defeasance), or make any sinking fund or similar payment with respect
to, Subordinated Indebtedness, except that:
(a) the Company may declare and make dividend payments or other
distributions payable solely in its common stock;
(b) so long as no Default or Event of Default exists or would
result therefrom, the Company may purchase, redeem or otherwise
acquire shares of its common stock or warrants or options to acquire
any such shares pursuant to any employee stock option or purchase
plan; provided that all such purchases, redemptions or other
acquisitions otherwise permitted under this clause (b) do not exceed
$15,000,000 in the aggregate in any fiscal year;
(c) so long as no Default or Event of Default exists or would
result therefrom, the Company may otherwise purchase, redeem or
acquire shares of its common stock or warrants or options to acquire
any such shares; provided that all such purchases, redemptions or
other acquisitions otherwise permitted under this clause (c) do not
exceed (i) $180,000,000 in the aggregate and (ii) 20,100,000 shares
(as such number may be adjusted for stock dividends and stock splits
occurring after the Closing Date). For the sake of clarity, the
parties hereto acknowledge and agree that whenever assets or property
other than cash is given for any purchase, redemption or other
acquisition otherwise permitted under this clause (c), the value of
such purchase, redemption or other acquisition shall be equal to the
net book value at such time of such non-cash assets or property for
purposes of determining the Company's compliance with the $180,000,000
limitation set forth in the preceding clause (i). Notwithstanding
anything to the contrary in this subsection 7.10(c), the Company may
not at any time purchase, redeem or acquire shares of its capital
stock or warrants or options to acquire any such shares unless the
Company delivers a duly completed Compliance Certificate pursuant to
subsection 6.02(a) demonstrating all of the following: (A) an adjusted
quick ratio under subsection 7.14(a) of not less than 1.10 to 1.00;
and (B) a ratio of cash and accounts receivable to Loans under
subsection 7.14(e) of not less than 1.25 to 1.00, in each case,
measured as of the last day of the fiscal quarter most recently ended
prior to such purchase, redemption or acquisition; and
16
(d) the Company may make regularly scheduled payments of
interest in respect of Subordinated Indebtedness in accordance with
the terms of, and only to the extent required by, and subject to the
subordination provisions contained in, any agreement or instrument
governing such Subordinated Indebtedness."
(1) Section 7.14 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
"7.14 Financial Covenants
(a) Adjusted Quick Ratio. The Company shall not as of the end of
any fiscal quarter suffer or permit its ratio (determined in respect
of the Company and its Subsidiaries on a consolidated basis) of (i)
cash plus the value (valued in accordance with GAAP) of all Cash
Equivalents plus net current accounts receivable (valued in accordance
with GAAP), other than cash, Cash Equivalents and net current accounts
receivable subject to a Lien securing Indebtedness, to (ii)
Consolidated Current Liabilities (other than liabilities secured by a
Lien on cash, Cash Equivalents or net current accounts receivable), to
be less than the correlative ratio indicated.
----------------------------------------------------------------------
Period Ratio
----------------------------------------------------------------------
Fiscal quarter ended June 30, 2002 0.65:1.00
----------------------------------------------------------------------
Fiscal quarter ended September 30, 2002 and 0.75:1.00
Fiscal quarter ended December 31, 2002
----------------------------------------------------------------------
Fiscal quarter ended March 31, 2003 0.80:1.00
----------------------------------------------------------------------
Fiscal quarter ended June 30, 2003 0.85:1.00
----------------------------------------------------------------------
Fiscal quarter ended September 30, 2003 and 0.90:1.00
thereafter
----------------------------------------------------------------------
(b) Minimum Tangible Net Worth. The Company shall not as of the
end of any fiscal quarter permit Consolidated Tangible Net Worth to be
less than the sum of (i) Consolidated Tangible Net Worth as of the
last day of the fiscal quarter in which the consummation of the
Innoveda Acquisition occurs, less (ii) $5,000,000, plus (iii) 75% of
Consolidated Net Income (before write-offs related to or incurred in
respect of the ATI Acquisition, the IKOS Acquisition and the Innoveda
Acquisition relating to goodwill and other intangibles previously
capitalized on the Company's balance sheet associated with any such
Acquisition excluding write-offs for in-process research and
development not previously capitalized on the Company's balance sheet)
for each fiscal quarter commencing after the last day of the fiscal
quarter in which the consummation of the Innoveda Acquisition occurs
(to the extent such Consolidated Net Income for any such fiscal
quarter is positive), plus (iv) 100% of the Net Issuance Proceeds of
any new equity issued by the Company after the last day of the fiscal
quarter in which the consummation of the Innoveda Acquisition occurs
(excluding equity issued under
17
employee stock option or purchase plans); provided, however, that in
no event shall Consolidated Tangible Net Worth as of the last day of
the fiscal quarter in which the consummation of the Innoveda
Acquisition occurs be less than $-75,000,000.
(c) Leverage Ratio. The Company shall not as of the end of any
fiscal quarter suffer or permit the Leverage Ratio to be greater than
the correlative ratio indicated.
----------------------------------------------------------------------
Period Ratio
----------------------------------------------------------------------
Fiscal quarter ended June 30, 2002 4.75:1.00
----------------------------------------------------------------------
Fiscal quarter ended September 30, 2002 3.75:1.00
----------------------------------------------------------------------
Fiscal quarter ended December 31, 2002 3.25:1.00
----------------------------------------------------------------------
Fiscal quarter ended March 31, 2003 2.75:1.00
----------------------------------------------------------------------
Fiscal quarter ended June 30, 2003 2.50:1.00
----------------------------------------------------------------------
Fiscal quarter ended September 30, 2003 and 2.25:1.00
thereafter
----------------------------------------------------------------------
(d) Senior Leverage Ratio. The Company shall not as of the end
of any fiscal quarter suffer or permit the Senior Leverage Ratio to be
greater than the correlative ratio indicated.
----------------------------------------------------------------------
Period Ratio
----------------------------------------------------------------------
Fiscal quarter ended June 30, 2002 1.35:1.00
----------------------------------------------------------------------
Fiscal quarter ended September 30, 2002 1.10:1.00
----------------------------------------------------------------------
Fiscal quarter ended December 31, 2002 through
June 30, 2003 0.75:1.00
----------------------------------------------------------------------
Fiscal quarter ended September 30, 2003 and 0.60:1.00
thereafter
----------------------------------------------------------------------
(e) Minimum Cash and Accounts Receivable. The Company shall not
as of the end of any fiscal quarter suffer or permit its ratio
(determined on a consolidated basis) of (i) cash plus the value
(valued in accordance with GAAP) of all Cash Equivalents plus 75% of
net current accounts receivable (valued in accordance with GAAP) owing
by account obligors located in the United States, other than cash,
Cash Equivalents and net current accounts receivable subject to a Lien
securing Indebtedness, to (ii) the then outstanding principal amount
of the Loans, to be less than the correlative ratio indicated.
----------------------------------------------------------------------
Period Ratio
----------------------------------------------------------------------
Fiscal quarter ended June 30, 2002 through
December 31, 2002 1.10:1.00
----------------------------------------------------------------------
Fiscal quarter ended March 31, 2003 and thereafter 1.30:1.00
----------------------------------------------------------------------
18
For the avoidance of doubt, (i) Unrestricted Subsidiaries shall
not be included in the calculation of any of the financial measures
set forth in the preceding clauses (a), (c), (d) or (e), and (ii)
Permitted Receivables sold pursuant to any Permitted Receivables
Purchase Facility permitted hereunder shall not be included in the
calculation of any of the financial measures set forth in the
preceding clauses (a) through (e)."
(1) Subsection 8.01(m) of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
"(m) Invalidity of Subordination Provisions. Any Subordination
Agreement or the subordination provisions of any agreement or
instrument governing any Subordinated Indebtedness and subordinating
such Subordinated Indebtedness to the Obligations hereunder is for any
reason revoked, invalidated or otherwise breached by the Company or
any Subsidiary, or otherwise ceases to be in full force and effect as
a result of any act or omission of the Company or any Subsidiary, or
the Company or any Subsidiary otherwise contests in any manner the
validity or enforceability thereof or denies that it has any further
liability or obligation thereunder."
(1) Exhibit G of the Credit Agreement is hereby amended and restated
in its entirety as set forth on Exhibit G attached hereto.
(2) Annex I of the Credit Agreement is hereby amended and restated in
its entirety as set forth on Annex I attached hereto.
(3) Schedule 2 to Exhibit C of the Credit Agreement is hereby amended
and restated in its entirety as set forth on Schedule 2-3 attached hereto.
2. Representations and Warranties. The Company hereby represents and warrants
to the Agent and the Banks as follows:
(a) No Default or Event of Default has occurred and is continuing (or would
result from the amendment of the Credit Agreement contemplated hereby).
(b) The execution, delivery and performance by the Company of this
Amendment and the Credit Agreement (as amended by this Amendment) have been duly
authorized by all necessary corporate action and do not and will not require any
registration with, consent or approval of, or notice to or action by, any
Governmental Authority in order to be effective and enforceable.
(c) This Amendment and the Credit Agreement (as amended by this Amendment)
constitute the legal, valid and binding obligations of the Company, enforceable
against it in accordance with their respective terms, except as enforceability
may be limited by applicable bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' rights generally or by equitable principles
relating to enforceability.
19
(d) All representations and warranties of the Company contained in the
Credit Agreement are true and correct in all material respects (except to the
extent such representations and warranties expressly refer to an earlier date,
in which case they shall be true and correct in all material respects as of such
earlier date and except that this subsection (d) shall be deemed instead to
refer to the last day of the most recent quarter and year for which financial
statements have then been delivered in respect of the representation and
warranty made in subsections 5.11(a) and 5.11(b) of the Credit Agreement).
(e) The Company is entering into this Amendment on the basis of its own
investigation and for its own reasons, without reliance upon the Agent and the
Banks or any other Person.
3. Conditions to Effectiveness
(a) The effectiveness of Section 2(a) of this Amendment shall be subject to
the satisfaction of each of the following conditions precedent (the date of such
satisfaction being referred to as the "Second Amendment Effective Date"):
(1) This Amendment shall have been executed by the Agent and each of
the Majority Banks.
(2) The Bridge Loan Facility shall have been executed by the
Company, the Agent and all lenders party thereto and shall have become effective
in accordance with its terms.
(3) On the Second Amendment Effective Date, (i) after giving effect
to Section 2(a) hereof, the representations and warranties contained in Section
3 hereof shall be true and correct in all material respects as of such date, as
though made on and as of such date (except to the extent such representations
and warranties expressly refer to an earlier date); (ii) after giving effect to
Section 2(a) hereof, no Default or Event of Default shall then exist; and (iii)
the Company shall deliver to the Administrative Agent a certificate signed by a
Responsible Officer of the Company confirming the foregoing.
(4) The terms of the Innoveda Acquisition shall be reasonably
satisfactory in all material respects to the Agent and the Majority Banks.
(5) The Company shall have paid to the Agent a non-refundable
amendment fee for the benefit of each Bank that executes this Amendment by the
close of business on April 16, 2002 in an amount equal to 0.25% of each such
Bank's Commitment, and any other fees referenced in Section 7(g) hereof (to the
extent invoiced) of this Amendment.
(6) For purposes of determining compliance with the conditions
specified in this Section 4(a), each Bank that has executed this Amendment shall
be deemed to have consented to, approved or accepted, or to be satisfied with,
each document or other matter either sent, or made available for inspection, by
the Agent to such Bank for consent, approval, acceptance or satisfaction, or
required thereunder to be consented to or approved by or acceptable or
satisfactory to such Bank.
20
(b) The effectiveness of Section 2(b) of this Amendment shall be subject to
the satisfaction of each of the following conditions precedent (the date of such
satisfaction being referred to as the "Bridge Funding Effective Date"):
(1) The initial Borrowing Date (as defined in the Bridge Loan
Facility) shall have occurred.
(2) The Company shall have acquired and/or have tendered to it
and/or have pledged to it under a binding shareholder agreement more than 50% of
the issued and outstanding capital stock of Innoveda in accordance with the
terms and conditions of the Innoveda Acquisition Agreement.
(3) Any material changes to the terms of the Innoveda Acquisition
since the Second Amendment Effective Date shall be reasonably satisfactory to
the Agent and Majority Banks.
(4) All governmental and third-party approvals necessary in
connection with the Innoveda Acquisition shall have been obtained and be in full
force and effect and all applicable waiting periods shall have expired without
notice of any action being taken or threatened by any competent authority which
would restrain, prevent or otherwise impose material adverse conditions on the
Innoveda Acquisition.
(5) On the Bridge Funding Effective Date, (i) after giving effect to
Section 2(b) hereof, the representations and warranties contained in Section 3
hereof shall be true and correct in all material respects as of such date, as
though made on and as of such date (except to the extent such representations
and warranties expressly refer to an earlier date); (ii) after giving effect to
Section 2(b) hereof, no Default or Event of Default shall then exist; and (iii)
the Company shall deliver to the Administrative Agent a certificate signed by a
Responsible Officer of the Company confirming the foregoing and the matters in
subpart (1) above.
(6) On or prior to the Bridge Funding Effective Date, the Company
shall have paid to the Agent for the pro rata benefit of the Banks an additional
non-refundable fee in an amount equal to $500,000, together with any other fees
to the extent required to be paid pursuant to Section 5 hereof.
(c) The effectiveness of Section 2(c) of this Amendment shall be subject to
the satisfaction of each of the following conditions precedent (the date of such
satisfaction being referred to as the "Bridge Termination Effective Date"):
(1) On the Bridge Termination Effective Date, (i) after giving
effect to Section 2(c) hereof, the representations and warranties contained in
Section 3 hereof shall be true and correct in all material respects as of such
date, as though made on and as of such date (except to the extent such
representations and warranties expressly refer to an earlier date, in which case
they shall be true and correct in all material respects as of such earlier
date); (ii) after giving effect to Section 2(c) hereof, no Default or Event of
Default shall then exist; and (iii) the
21
Company shall deliver to the Administrative Agent a certificate signed by a
Responsible Officer of the Company confirming the foregoing.
(2) All commitments under the Bridge Loan Facility shall have
terminated and all outstanding loans under the Bridge Loan Facility, if any,
shall have been repaid in full.
(3) The Company shall have paid to the Agent any fees to the extent
required to be paid pursuant to Section 6 or 7(g) hereof.
(d) From and after the Second Amendment Effective Date, the Bridge Funding
Effective Date, and the Bridge Termination Effective Date, as applicable, the
Credit Agreement is amended as set forth herein. Except as expressly amended
pursuant hereto, the Credit Agreement shall remain unchanged and in full force
and effect and is hereby ratified and confirmed in all respects.
(e) The Agent will notify the Company and the Banks of the occurrence of
the Second Amendment Effective Date, the Bridge Funding Effective Date, and the
Bridge Termination Effective Date, as applicable.
4. Termination of Amendment. This Amendment (other than Section 2(a)(2) through
2(a)(4), Section 2(a)(6), Section 2(a)(7), Section 2(a)(9)(f), Section
2(a)(10)(n), Section 2(a)(13) and Section 2(a)(17) hereof) shall be void and of
no further force or effect in the event the acquisition by the Company or a
Subsidiary of more than 50% of the issued and outstanding capital stock of
Innoveda shall not have occurred by October 31, 2002.
5. Fees. In the event the Bridge Loan Facility is in full force and effect as
of August 1, 2002, the Company shall pay to the Agent for the pro rata benefit
of the Banks an additional non-refundable fee in an amount equal to $1,000,000
on such date.
6. Miscellaneous.
(a) The Company acknowledges and agrees that the execution and delivery by
the Agent and the Banks of this Amendment shall not be deemed to create a course
of dealing or an obligation to execute similar waivers or amendments under the
same or similar circumstances in the future.
(b) This Amendment shall be binding upon and inure to the benefit of the
Company, the Agent and the Banks and their respective successors and assigns.
(c) This Amendment shall be governed by and construed in accordance with
the law of the State of California, provided that the Agent and the Banks shall
retain all rights arising under Federal law.
(d) This Amendment may be executed in any number of counterparts, each of
which shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this document (and any other document required
herein) may be delivered by any party thereto either in the form of an
22
executed original or an executed original sent by facsimile transmission to be
followed promptly by mailing of a hard copy original, and that receipt by the
Agent of a facsimile transmitted document purportedly bearing the signature of a
Bank or the Company shall bind such Bank or the Company, respectively, with the
same force and effect as the delivery of a hard copy original. Any failure by
the Agent to receive the hard copy executed original of such document shall not
diminish the binding effect of receipt of the facsimile transmitted executed
original of such document of the party whose hard copy page was not received by
the Agent.
(e) This Amendment contains the entire and exclusive agreement of the
parties hereto with reference to the matters discussed herein. This Amendment
supersedes all prior drafts and communications with respect hereto or thereto.
This Amendment may not be amended except in accordance with the provisions of
Section 10.01 of the Credit Agreement.
(f) If any term or provision of this Amendment shall be deemed prohibited
by or invalid under any applicable law, such provision shall be invalidated
without affecting the remaining provisions of this Amendment, the Credit
Agreement or the Loan Documents.
(g) The Company agrees to pay or reimburse BofA (including in its capacity
as Agent), upon demand, for all reasonable costs and expenses (including
reasonable Attorney Costs) incurred by BofA (including in its capacity as Agent)
in connection with the development, preparation, negotiation, execution and
delivery of this Amendment.
[signature pages follow]
23
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
Credit Agreement to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above written.
MENTOR GRAPHICS CORPORATION
By: /s/ Gregory K Hinckley
-------------------------------------------
Name: Gregory K. Hinckley
Title: President
By: /s/ Dennis Weldon
-----------------------------------------
Name: Dennis Weldon
Title: Treasurer
BANK OF AMERICA, N.A., as Agent and as a
Bank
By: /s/ Kevin McMahon
-----------------------------------------
Name: Kevin McMahon
Title: Managing Director
BNP PARIBAS
By: /s/ Jean Plassard
-----------------------------------------
Name: Jean Plassard
Title: Managing Director
By: /s/ James F. McCann
-----------------------------------------
Name: James F. McCann
Title: Director
FLEET NATIONAL BANK, N.A.
By: /s/ John B. Desmond
-----------------------------------------
Name: John B. Desmond
Title: Director
S-1
THE BANK OF NOVA SCOTIA
By: /s/ Chris Osborn
---------------------------------------
Name: Chris Osborn
Title: Managing Director
MIZUHO CORPORATE BANK, LIMITED
By: /s/ Masahito Fukuda
---------------------------------------
Name: Masahito Fukuda
Title: Senior Vice President
S-2
ANNEX I
PRICING GRID
(in basis points)
- ------------------------------------------------------------------------------------------------------------
Consolidated Senior Leverage ***.90 Senior Leverage **.90
EBITDA for
rolling four
quarter
period(x)
------------------------------------------------------------------------------------------
x* $70MM $100MM x**** x* $70MM $100MM x****$125MM
$70MM *** x * *** x * $125MM $70MM *** x * *** x *
$100MM $125MM $100MM $125MM
- ------------------------------------------------------------------------------------------------------------
Commitment Fee 35.0 30.0 25.0 20.0 42.5 35.0 30.0 27.5
- ------------------------------------------------------------------------------------------------------------
Utilization Fee 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5
- ---------------------------------------------------------------------------------------------- -------------
Base Rate 12.5 0.0 0.0 0.0 50.0 25.0 0.0 0.0
LoanSpread
- ------------------------------------------------------------------------------------------------------------
Offshore Rate 137.5 100.0 75.0 50.0 175.0 150.0 112.5 87.5
Loan Spread
(Utilization *
33%)
- ------------------------------------------------------------------------------------------------------------
Offshore Rate 150.0 112.5 87.5 62.5 187.5 162.5 125.0 100.0
Spread
(Utilization ****
33%)
- ------------------------------------------------------------------------------------------------------------
The Senior Leverage Ratio and Consolidated EBITDA used to compute the
Commitment Fee, Utilization Fee and the Applicable Margin shall be the Senior
Leverage Ratio and Consolidated EBITDA set forth in the Compliance Certificate
most recently delivered by the Company to the Agent pursuant to Section 6.02(a)
of the Credit Agreement; changes in the Commitment Fee, the Utilization Fee and
the Applicable Margin resulting from a change in the Senior Leverage Ratio or
Consolidated EBITDA shall become effective on the date of delivery by the
Company to the Agent of a new Compliance Certificate and accompanying financial
statements pursuant to Section 6.02(a). If the Company shall fail to deliver a
Compliance Certificate within the number of days after the end of any fiscal
quarter or fiscal year as required pursuant to Section 6.02(a) (without giving
effect to any grace period), the Commitment Fee, Utilization Fee and the
Applicable Margin from the first day after the date on which such Compliance
Certificate was required to be delivered to the Agent until the day on which the
Company delivers to the Agent a Compliance Certificate and accompanying
financial statements shall conclusively equal the highest Commitment Fee,
Utilization Fee and Applicable Margin set forth above.
For each day on which utilization of the combined Commitments equals
or exceeds 33% at the close of the Agent's business on such day (or the close of
the Agent's business on the next preceding Business Day in the case of a
Saturday or Sunday or other day not a Business Day), the Applicable Margin for
Offshore Rate Loans outstanding on such day shall be increased by 12.5 bps
* denotes less than
** denotes greater than
*** denotes less than equal to
**** denotes greater than or equal to
Annex 1
SCHEDULE 2-2
Schedule 2:
Mentor Graphics Corporation
Financial Covenant Review
[Date]
Covenant 7.14a - Minimum Liquidity
1. Cash $_____________
2. Cash Equivalents $_____________
3. Net current accounts receivable $_____________
4. Cash, Cash Equivalents and net current accounts receivable subject $_____________
to a Lien securing Indebtedness
5. Total (1+2+3-4) $_____________
6. Consolidated Funded Indebtedness $_____________
7. Ratio of (5) to (6) _____________
8. Covenant - must not be less than. _____________
Covenant 7.14b - Minimum Tangible Net Worth
1. Consolidated Tangible Net Worth as of the last day of the fiscal quarter in which $_____________
the consummation of the Innoveda Acquisition occurs
2. $5,000,000 $_____________
3. 75% of Consolidated Net Income (to the extent positive) for each fiscal quarter $_____________
commencing after the last day of the fiscal quarter in which the
consummation of the Innoveda Acquisition occurs (before
(a) write-offs related to or incurred in respect of the ATI Acquisition,
the IKOS Acquisition and the Innoveda Acquisition relating to goodwill and
other intangibles previously capitalized on the Company's balance sheet
associated with any such Acquisition,
(b) excluding write-offs for in-process research and development not
previously capitalized on the Company's balance sheet)
4. 100% of Net Issuance Proceeds of new equity issued $_____________
after the last day of the fiscal quarter in which the consummation of the
Innoveda Acquisition occurs (excluding employee plans)
5. Total (1-2+3+4) $_____________
6. Consolidated Tangible Net Worth _____ $_____________
7. Excess (6-5) $_____________
Covenant 7.14c - Minimum Net Income
1. Consolidated Net Income $_____________
(excluding
(a) amortization of intangibles and
(b) restructuring charges and non-cash expenses and write-offs
related to or incurred in respect of the ATI Acquisition, the IKOS
Acquisition and the Innoveda Acquisition taken in the fiscal quarter in
which the consummation of such Acquisition occurs, or in the immediately
following fiscal quarter)
2. Covenant - must not be less than $0 $_____________
Schedule 2-2-1
Covenant 7.14d - Maximum Consolidated Funded Indebtedness to
Consolidated EBITDA
1. Consolidated Funded Indebtedness $_____________
2. Consolidated EBITDA (rolling four fiscal quarters) $_____________
(a) Consolidated Net Income
(b) Consolidated Interest Charges
(c) the amount of taxes, based on or measured by income, used or included
in the determination of such Consolidated Net Income
(d) the amount of depreciation and amortization expense deducted in
determining such Consolidated Net Income
(e) restructuring charges taken in the third and fourth fiscal quarters
of fiscal year 2001 and the first fiscal quarter of fiscal year 2002
(f) any Acquisition-related expenses, restructuring charges and
write-offs (relating to in-process research and development, goodwill
and other intangibles associated with the ATI Acquisition, the IKOS
Acquisition or the Innoveda Acquisition) taken in the fiscal quarter
in which consummation of the applicable Acquisition occurs or in the
immediately following fiscal quarter
3. Ratio of (1) to (2) $_____________
4. Covenant - must not be more than _________ _____________
Covenant 7.14e - Capital Expenditures $=============
1. Capital Expenditures from January 1, 2002 to date $_____________
2. Covenant - must not be more than $35,000,000 $_____________
Schedule 2-2-2
SCHEDULE 2-3
Schedule 2:
Mentor Graphics Corporation
Financial Covenant Review
[Date]
Covenant 7.14a - Adjusted Quick Ratio
1. Cash $_________________
2. Cash Equivalents $_________________
3. Net current accounts receivable $_________________
4. Cash, Cash Equivalents and net current accounts receivable subject to a Lien
securing Indebtedness $_________________
5. Total (1 + 2 + 3 - 4) $_________________
6. Consolidated Current Liabilities (other than liabilities secured by a Lien on
cash, Cash Equivalents or net current accounts receivable) $_________________
7. Ratio of (5) to (6) _________________
8. Covenant - must not be less than ______
Covenant 7.14b - Minimum Tangible Net Worth
1. Consolidated Tangible Net Worth as of the last day of the fiscal quarter in which $_____________
the consummation of the Innoveda Acquisition occurs
2. $5,000,000 $_____________
3. 75% of Consolidated Net Income (to the extent positive) for each fiscal quarter $_____________
commencing after the last day of the fiscal quarter in which the
consummation of the Innoveda Acquisition occurs (before
(a) write-offs related to or incurred in respect of the ATI Acquisition,
the IKOS Acquisition and the Innoveda Acquisition relating to goodwill and
other intangibles previously capitalized on the Company's balance sheet
associated with any such Acquisition,
(b) excluding write-offs for in-process research and development not
previously capitalized on the Company's balance sheet)
4. 100% of Net Issuance Proceeds of new equity issued $_____________
after the last day of the fiscal quarter in which the consummation of the
Innoveda Acquisition occurs (excluding employee plans)
5. Total (1-2+3+4) $_____________
6. Consolidated Tangible Net Worth _____ $_____________
7. Excess (6-5) $_____________
Covenant 7.14c - Leverage Ratio
1. Total consolidated liabilities $_________________
2. Subordinated Indebtedness $_________________
3. Consolidated Tangible Net Worth $_________________
4. Ratio of ((1) - (2)) to ((3) + (2)) _________________
5. Covenant - must be less than __________ _________________
Covenant 7.14d - Senior Leverage Ratio
1. Consolidated Funded Indebtedness $_________________
2. Subordinated Indebtedness $_________________
3. Consolidated Tangible Net Worth $_________________
4. Ratio of ((1) - (2)) to ((3) + (2))
5. Covenant - must be less than _____________ _________________
Covenant 7.14e - Minimum Cash and Accounts Receivable
Schedule 2-3-1
1. Cash $__________________
2. Cash Equivalents $__________________
3. 75% of net current accounts receivable owing by U.S. obligors
$__________________
4. Cash, Cash Equivalents and net current accounts receivable subject to a Lien
securing Indebtedness $__________________
5. Total (1 + 2 + 3 - 4) $
===================
6. Outstanding Loans $
===================
7. Ratio of (5) to (6) __________________
8. Covenant - must be greater than _______ __________________
EXHIBIT G
FORM OF SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement"), dated as of
__________, 20__, is made among Mentor Graphics Corporation, an Oregon
corporation (the "Borrower"), each of the financial institutions named on the
signature pages hereof under the heading "BANKS" (each a "Bank" and,
collectively, the "Banks"), Bank of America, N.A., as administrative agent for
the Banks (in such capacity, the "Agent") and __________, a __________
corporation (the "Creditor").
The Borrower, the Banks and the Agent are parties to a Credit
Agreement dated as of January 10, 2001 (as amended, modified, renewed, extended
or replaced from time to time, the "Credit Agreement"), pursuant to which the
Banks have agreed to make certain revolving loans to the Borrower. Additionally,
the Borrower intends to become indebted to the Creditor in the principal amount
of $__________, [pursuant to a __________ Agreement, dated [as of] __________,
20__ (as amended, modified, renewed, extended or replaced from time to time, the
"__________ Agreement") and the__________ Note dated __________, 20__ (the
"Subordinated Note") outstanding thereunder] [pursuant to a __________ Note
dated ___________, 20__ (as amended, modified, renewed, extended or replaced
from time to time, the "Subordinated Note")]. It is a requirement under the
Credit Agreement that the Borrower deliver this Agreement to the Agent and the
Banks to provide for the subordination of the Borrower's indebtedness to the
Creditor. The Creditor has agreed to the subordination of such indebtedness to
it, upon the terms and subject to the conditions set forth in this Agreement.
Accordingly, the parties hereto agree as follows:
SECTION 1. Definitions; Interpretation.
(a) Terms Defined in Credit Agreement. All capitalized terms used in
this Agreement and not otherwise defined herein shall have the meanings assigned
to them in the Credit Agreement.
(b) Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
(c) "Creditor Collateral" means any property now existing or hereafter
acquired which may at any time be or become subject to a Lien in favor of the
Creditor pursuant to the [__________ Agreement,] the Subordinated Note or
otherwise, securing payment and performance of the Subordinated Debt.
(d) "Insolvency Event" has the meaning set forth in Section 3.
(e) "Net Cash Flow from Operations" means net cash flow from
operations less capital expenditures less cash dividends, in each case, of the
Subsidiary whose Acquisition is financed in whole or in part by the Subordinated
Debt.
G-1
(f) "Senior Debt" means the indebtedness, liabilities and other
obligations of the Borrower to the Agent and the Banks under or in connection
with the Credit Agreement, the Notes and the other Loan Documents, including all
unpaid principal of the Loans, all interest accrued thereon, all fees due under
the Credit Agreement and all other amounts payable by the Borrower to the Agent
and the Banks thereunder or in connection therewith, whether now existing or
hereafter arising, and whether due or to become due, absolute or contingent,
liquidated or unliquidated, determined or undetermined.
(g) "Subordinated Debt" means all indebtedness, liabilities and other
obligations of the Borrower to the Creditor, whether now existing or hereafter
arising, and whether due or to become due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, including all principal on [the credit
extensions made by the Creditor to the Borrower under the ____________
Agreement] [the Subordinated Note], all interest accrued thereon, all fees and
all other amounts payable by the Borrower to the Creditor under or in connection
with [the _________ Agreement,] the Subordinated Note and any other documents or
instruments related thereto.
(h) "Subordinated Debt Payment" means any payment or distribution by
or on behalf of the Borrower, directly or indirectly, of assets of the Borrower
of any kind or character, whether in cash, property or securities, including on
account of the purchase, redemption or other acquisition of Subordinated Debt,
as a result of any collection, sale or other disposition of collateral, or by
setoff, exchange or in any other manner, for or on account of the Subordinated
Debt.
(i) Interpretation. In this Agreement, except to the extent the
context otherwise requires:
(i) Any reference in this Agreement to an Article, a Section, a Schedule
or an Exhibit is a reference to an article hereof, a section hereof, a
schedule hereto or an exhibit hereto, respectively, and to a subsection
hereof or a clause hereof is, unless otherwise stated, a reference to a
subsection or a clause of the Section or subsection in which the reference
appears.
(ii) The words "hereof," "herein," "hereto," "hereunder" and the like mean
and refer to this Agreement as a whole and not merely to the specific
Article, Section, subsection, paragraph or clause in which the respective
word appears.
(iii) The meaning of defined terms shall be equally applicable to both the
singular and plural forms of the terms defined.
(iv) The words "including," "includes" and "include" shall be deemed to be
followed by the words "without limitation."
(v) References to agreements and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications
thereto.
G-2
(vi) References to statutes or regulations are to be construed as
including all statutory and regulatory provisions consolidating,
amending or replacing the statute or regulation referred to.
(vii) The captions and headings are for convenience of reference only
and shall not affect the construction of this Agreement.
SECTION 2. Agreement of Subordination.
(a) Subordination to Payment of Senior Debt. All payments on
account of the Subordinated Debt shall be subject, subordinate and junior, in
right of payment and exercise of remedies, to the extent and in the manner set
forth herein, to the prior indefeasible payment in full in cash or cash
equivalents of the Senior Debt.
(b) Subordination of Liens. All Liens now or hereafter existing
of the Creditor in any Creditor Collateral shall be subject, subordinate and
junior in all respects and at all times to the Liens now or hereafter existing
of the Banks (or the Agent on behalf of the Banks) therein, regardless of the
time or order of attachment or perfection of such Liens, the time or order of
filing of financing statements, the acquisition of purchase money or other
Liens, the time of giving or failure to give notice of the acquisition or
expected acquisition of any purchase money or other Liens, or any other
circumstances whatsoever.
SECTION 3. Subordination Upon Any Distribution of Assets of the
Borrower. In the event of any payment or distribution of assets of the Borrower
of any kind or character, whether in cash, property or securities, upon the
dissolution, winding up or total or partial liquidation or reorganization,
readjustment, arrangement or similar proceeding relating to the Borrower or its
property, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership, arrangement or similar proceedings or upon an assignment for the
benefit of creditors, or upon any other marshalling or composition of the assets
and liabilities of the Borrower, or otherwise (such events, collectively, the
"Insolvency Events"): (i) all amounts owing on account of the Senior Debt shall
first be indefeasibly paid in full in cash, or payment provided for in cash or
in cash equivalents, before any Subordinated Debt Payment is made; and (ii) to
the extent permitted by applicable law, any Subordinated Debt Payment to which
the Creditor would be entitled except for the provisions hereof, shall be paid
or delivered by the trustee in bankruptcy, receiver, assignee for the benefit of
creditors or other liquidating agent making such payment or distribution
directly to the Agent (on behalf of the Banks) for application to the payment of
the Senior Debt in accordance with clause (i), after giving effect to any
concurrent payment or distribution or provision therefor to the Agent or the
Banks in respect of such Senior Debt.
SECTION 4. Payments on Subordinated Debt.
(a) Permitted Payments. Prior to the occurrence of any Event of
Default, the Borrower may make, and the Creditor shall be entitled to accept and
receive, only regularly scheduled payments on account of principal of and
interest on the Subordinated Debt, in accordance with the terms of [the
_________ Agreement and] the Subordinated Note; provided,
G-3
however, that notwithstanding the foregoing provisions of this Section 4 the
Borrower shall not make, and the Creditor shall not accept or receive, in any
fiscal quarter of the Borrower, any payments on account of the Subordinated Debt
in an aggregate amount in excess of 50% of Net Cash Flow from Operations for
such fiscal quarter.
(b) No Payment Upon Senior Debt Defaults. Upon the occurrence
of any Event of Default, and until such Event of Default is cured or waived, the
Borrower shall not make, and the Creditor shall not accept or receive, any
Subordinated Debt Payment.
SECTION 5. Subordination of Remedies. As long as any Senior
Debt shall remain outstanding and unpaid, the Creditor shall not, without the
prior written consent of the Agent (acting on instructions from the Majority
Banks):
(i) accelerate, make demand or otherwise make due and payable prior
to the original stated maturity thereof any Subordinated Debt or bring
suit or institute any other actions or proceedings to enforce its
rights or interests under or in respect of [the __________ Agreement
and] the Subordinated Note;
(ii) exercise any rights under or with respect to (A) any guaranties
of the Subordinated Debt, or (B) any Creditor Collateral, including
causing or compelling the pledge or delivery of any Creditor
Collateral, any attachment of, levy upon, execution against,
foreclosure upon or the taking of other action against or institution
of other proceedings with respect to any Creditor Collateral,
notifying any account debtors of the Borrower or asserting any claim
or interest in any insurance with respect to the Creditor Collateral,
or attempt to do any of the foregoing;
(iii) exercise any rights to set-offs and counterclaims in respect of
any indebtedness, liabilities or obligations of the Creditor to the
Borrower against any of the Subordinated Debt; or
(iv) commence, or cause to be commenced, or join with any creditor
other than the Banks in commencing, any bankruptcy, insolvency or
receivership proceeding against the Borrower.
SECTION 6. Payment Over to Agent. In the event that,
notwithstanding the provisions of Sections 3, 4 and 5, any Subordinated Debt
Payments shall be received in contravention of such Sections 3, 4 and 5 by the
Creditor before all Senior Debt is indefeasibly paid in full in cash or cash
equivalents, such Subordinated Debt Payments shall be held in trust for the
benefit of the Banks and the Agent and shall be paid over or delivered to the
Agent for application to the payment in full in cash or cash equivalents of all
Senior Debt remaining unpaid to the extent necessary to give effect to such
Sections 3, 4 and 5, after giving effect to any concurrent payments or
distributions to the Agent and the Banks in respect of the Senior Debt.
SECTION 7. Authorization to Agent. If, while any Subordinated
Debt is outstanding, any Insolvency Event shall occur relating to the Borrower
or its property: (i) the Agent, when so instructed by the Majority Banks, is
hereby irrevocably authorized and
G-4
empowered (in the name of the Banks or in the name of the Creditor or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution in respect of the Subordinated Debt and
give acquittance therefor and to file claims and proofs of claim and take such
other action (including voting the Subordinated Debt) as it may deem necessary
or advisable for the exercise or enforcement of any of the rights or interests
of the Agent and the Banks; and (ii) the Creditor shall promptly take such
action as the Agent (on instruction from the Majority Banks) may reasonably
request (A) to collect the Subordinated Debt for the account of the Banks and to
file appropriate claims or proofs of claim in respect of the Subordinated Debt,
(B) to execute and deliver to the Agent such powers of attorney, assignments and
other instruments as it may request to enable it to enforce any and all claims
with respect to the Subordinated Debt, and (C) to collect and receive any and
all Subordinated Debt Payments.
SECTION 8. Representations and Warranties. The Creditor
represents and warrants to each Bank and the Agent that:
(a) Organization and Powers. The Creditor is a corporation duly
organized; validly existing and in good standing under the law of the
jurisdiction of its incorporation and has all requisite power and authority to
own its assets and carry on its business and to execute, deliver and perform its
obligations under this Agreement.
(b) Authorization; No Conflict. The execution, delivery and
performance by the Creditor of this Agreement have been duly authorized by all
necessary corporate action of the Creditor, and do not and will not: (i)
contravene the terms of the certificate or articles, as the case may be, of
incorporation and the bylaws of the Creditor, (ii) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which the Creditor is a party or by
which it or its properties may be bound or affected; or (iii) violate any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree or the like binding on or affecting the Creditor.
(c) Binding Obligation. This Agreement constitutes the legal,
valid and binding obligation of the Creditor, enforceable against the Creditor
in accordance with its terms.
(d) Consents. No authorization, consent, approval, license,
exemption of, or filing or registration with, any Governmental Authority, or
approval or consent of any other Person, is required for the due execution,
delivery or performance by the Creditor of this Agreement.
(e) No Prior Assignment. The Creditor has not previously assigned
any interest in the Subordinated Debt or any Creditor Collateral, no Person
other than the Creditor owns an interest in the Subordinated Debt or Creditor
Collateral (whether as joint holders of the Subordinated Debt, participants or
otherwise), and the entire Subordinated Debt is owing only to the Creditor.
(f) Independent Investigation. The Creditor hereby acknowledges
that it has undertaken its own independent investigation of the financial
condition of the Borrower and all other matters pertaining to this Agreement and
further acknowledges that it is not relying in any
G-5
manner upon any representation or statement of the Agent or the Banks with
respect thereto. The Creditor represents and warrants that it is aware of the
terms of the Loan Documents and that it is in a position to obtain, and it
hereby assumes full responsibility for obtaining, any additional information
concerning the financial condition of the Borrower and any other matters
pertinent hereto that the Creditor may desire. The Creditor is not relying upon
or expecting the Agent or the Banks to furnish to the Creditor any information
now or hereafter in the Agent's or the Banks' possession concerning the
financial condition of the Borrower or any other matter.
SECTION 9. Certain Agreements of the Creditor.
(a) No Benefits. The Creditor understands that there may be various
agreements among the Agent, the Banks and the Borrower evidencing and governing
the Senior Debt, and the Creditor acknowledges and agrees that such agreements
are not intended to confer any benefits on the Creditor and that the Agent and
the Banks shall have no obligation to the Creditor or any other Person to
exercise any rights, enforce any remedies, or take any actions which may be
available to it under such agreements.
(b) No Interference. The Creditor acknowledges that the Borrower has
granted or may hereafter grant the Agent and the Banks a security interest in
all or certain of the Borrower's assets, including the Creditor Collateral, and
agrees not to interfere with or in any manner oppose a disposition of any such
collateral by the Agent or the Banks in accordance with applicable law.
(c) Reliance by Agent and Banks. The Creditor acknowledges and agrees
that the Agent and the Banks will have relied upon and will continue to rely
upon the subordination provisions provided for herein and the other provisions
hereof in entering into the Loan Documents and making the Loans thereunder.
(d) Waivers. The Creditor waives any and all notice of the incurrence
of the Senior Debt or any part thereof and any right to require marshalling of
assets.
(e) Obligations of Creditor Not Affected. The Creditor agrees that at
any time and from time to time, without notice to or the consent of the
Creditor, without incurring responsibility to the Creditor, and without
impairing or releasing the subordination provided for herein or otherwise
impairing the rights of the Agent and the Banks hereunder:
(i) the time for the Borrower's performance of or compliance with any of
its agreements contained in the Loan Documents may be extended or such
performance or compliance may be waived by the Agent and the Banks in
accordance with the Loan Documents;
(ii) the agreements of the Borrower with respect to the Loan Documents may
from time to time be modified by the Borrower, the Banks and the Agent in
accordance with the Loan Documents for the purpose of adding any
requirements thereto or changing in any manner the rights and obligations
of the Borrower, the Banks or the Agent thereunder;
G-6
(iii) the manner, place or terms for payment of Senior Debt or any portion
thereof may be altered or the terms for payment extended, or the Senior
Debt may be renewed in whole or in part;
(iv) the maturity of the Senior Debt may be accelerated in accordance with
the terms of any present or future agreement by the Borrower, the Agent and
the Banks;
(v) any collateral may be sold, exchanged, released or substituted and
any Lien in favor of the Agent or the Banks may be terminated, subordinated
or fail to be perfected or become unperfected;
(vi) any Person liable in any manner for Senior Debt may be discharged,
released or substituted; and
(vii) all other rights against the Borrower, any other Person or with
respect to any collateral may be exercised (or the Agent and the Banks may
waive or refrain from exercising such rights).
(f) Rights of Agent and Banks Not to Be Impaired. No right of the
Agent or the Banks to enforce the subordination provided for herein or to
exercise their other rights hereunder shall at any time in any way be prejudiced
or impaired by any act or failure to act by the Borrower, the Agent or the Banks
hereunder or under or in connection with the other Loan Documents or by any
noncompliance by the Borrower with the terms and provisions and covenants herein
or in any other Loan Document, regardless of any knowledge thereof the Agent or
the Banks may have or otherwise be charged with.
(g) Financial Condition of Borrower. The Creditor shall not have any
right to require the Agent or the Banks to obtain or disclose any information
with respect to: (i) the financial condition or character of the Borrower or the
ability of the Borrower to pay and perform Senior Debt; (ii) the Senior Debt;
(iii) any collateral or other security for any or all of the Senior Debt; (iv)
the existence or nonexistence of any guarantees of, or any other subordination
agreements with respect to, all or any part of the Senior Debt; (v) any action
or inaction on the part of the Agent, the Banks or any other Person; or (vi) any
other matter, fact or occurrence whatsoever.
(h) Acquisition of Liens or Guaranties. The Creditor shall not,
without the prior consent of the Agent and the Majority Banks, acquire any right
or interest in or to any Creditor Collateral or accept any guaranties for the
Subordinated Debt.
SECTION 10. Subrogation.
(a) Subrogation. Until the indefeasible payment and performance in
full of all Senior Debt, the Creditor shall not have, and shall not directly or
indirectly exercise, any rights that it may acquire by way of subrogation under
this Agreement, by any payment or distribution to the Agent or the Banks
hereunder or otherwise. Upon the indefeasible payment and performance in full of
all Senior Debt, the Creditor shall be subrogated to the rights of the Agent and
the Banks to receive payments or distributions applicable to the Senior Debt
until the
G-7
Subordinated Debt shall be paid in full. For the purposes of the foregoing
subrogation, no payments or distributions to the Agent or the Banks of any cash,
property or securities to which the Creditor would be entitled except for the
provisions of Section 3, 4 or 5 shall, as among the Borrower, its creditors
(other than the Banks and the Agent) and the Creditor, be deemed to be a payment
by the Borrower to or on account of the Senior Debt.
(b) Payments Over to Creditor. If any payment or distribution to
which the Creditor would otherwise have been entitled but for the provisions of
Section 3, 4 or 5 shall have been applied pursuant to the provisions of Section
3, 4 or 5 to the payment of all amounts payable under the Senior Debt, the
Creditor shall be entitled to receive from the Agent and the Banks any payments
or distributions received by the Agent and the Banks in excess of the amount
sufficient to pay in full all amounts payable under or in respect of the Senior
Debt. If any such excess payment is made to the Agent and the Banks, the Agent
and the Banks shall promptly remit such excess to the Creditor and until so
remitted shall hold such excess payment for the benefit of the Creditor.
SECTION 11. Continuing Agreement; Reinstatement.
(a) Continuing Agreement. This Agreement is a continuing agreement of
subordination and shall continue in effect and be binding upon the Creditor
until indefeasible payment and performance in full of the Senior Debt and
termination of the Commitments. The subordinations, agreements, and priorities
set forth herein shall remain in full force and effect regardless of whether any
party hereto in the future seeks to rescind, amend, terminate or reform, by
litigation or otherwise, its respective agreements with the Borrower.
(b) Reinstatement. This Agreement shall continue to be effective or
shall be reinstated, as the case may be, if, for any reason, any payment of the
Senior Debt by or on behalf of the Borrower shall be rescinded or must otherwise
be restored by the Agent or any Bank, whether as a result of an Insolvency Event
or otherwise.
SECTION 12. Payments. The Creditor shall make each payment hereunder
unconditionally in full without set-off, counterclaim or other defense, on the
day when due to the Agent in Dollars and in same day or immediately available
funds, to the Agent's Payment Office.
SECTION 13. Transfer of Subordinated Debt. The Creditor may not
assign or transfer its rights and obligations under the [__________ Agreement or
the] Subordinated Note or any interest in the Subordinated Debt or any Creditor
Collateral without the prior written consent of the Majority Banks, and any such
transferee or assignee, as a condition to acquiring the Subordinated Note or
interest in the Subordinated Debt or Creditor Collateral shall agree to be bound
hereby, in form satisfactory to the Agent.
SECTION 14. Amendments of Subordinated Debt. Each of the Borrower and
the Creditor shall not, without the prior written consent of the Majority Banks,
agree to or permit any amendment, modification or waiver of any material
provisions of [the __________Agreement,] the Subordinated Note or any other
agreement relating to any Subordinated Debt (including any amendment,
modification or waiver pursuant to an exchange of other securities or
instruments
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for outstanding Subordinated Debt) if the effect of such amendment, modification
or waiver is to: (i) increase the interest rate on the Subordinated Debt or
change (to earlier dates) the dates upon which principal and interest are due
thereon; (ii) alter the redemption, prepayment or subordination provisions
thereof; (iii) alter the covenants and events of default in a manner which would
make such provisions more onerous or restrictive to the Borrower or any
Subsidiary; or (iv) otherwise increase the obligations of the Borrower in
respect of the Subordinated Debt or confer additional rights upon the Creditor
which individually or in the aggregate would be adverse to the Borrower, its
Subsidiaries or the Banks.
SECTION 15. Obligations of Borrower Not Affected. The provisions of
this Agreement are intended solely for the purpose of defining the relative
rights against the Borrower of the Creditor, on the one hand, and the Agent and
the Banks, on the other hand. Nothing contained in this Agreement shall (i)
impair, as between the Borrower and the Creditor, the obligation of the Borrower
to pay the principal of or interest on the Subordinated Note and its other
obligations with respect to the Subordinated Debt as and when the same shall
become due and payable in accordance with the terms thereof, or (ii) otherwise
affect the relative rights against the Borrower of the Creditor, on the one
hand, and the creditors of the Borrower (other than the Banks and the Agent), on
the other hand.
SECTION 16. Endorsement of Subordinated Notes; Further Assurances and
Additional Acts.
(a) Endorsement of Subordinated Note. At the request of the Agent,
the Subordinated Note and all other documents and instruments evidencing any of
the Subordinated Debt shall be endorsed with a legend noting that the
Subordinated Note and such other documents and instruments are subject to this
Agreement, and the Creditor shall promptly deliver to the Agent evidence of the
same.
(b) Further Assurances and Additional Acts. Each of the Creditor and
the Borrower shall execute, acknowledge, deliver, file, notarize and register at
its own expense all such further agreements, instruments, certificates,
financing statements, documents and assurances, and perform such acts as the
Agent or the Majority Banks shall deem necessary or appropriate to effectuate
the purposes of this Agreement, and promptly provide the Agent with evidence of
the foregoing satisfactory in form and substance to the Agent and the Majority
Banks.
SECTION 17. Notices. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including by
facsimile transmission) and shall be mailed, sent or delivered at or
to the
address or facsimile number of the respective party or parties set forth on the
signature pages hereof, or at or to such other address or facsimile number as
such party or parties shall have designated in a written notice to the other
party or parties. All such notices and communications shall be effective (i) if
delivered by hand, when delivered; (ii) if sent by mail, upon the earlier of the
date of receipt or five Business Days after deposit in the mail, first class (or
air mail, with respect to communications to be sent to or from the United
States), postage prepaid; and (iii) if sent by facsimile transmission, when
sent.
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SECTION 18. No Waiver; Cumulative Remedies. No failure on the part of
the Agent or any Bank to exercise, and no delay in exercising, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, remedy, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights and remedies under this
Agreement are cumulative and not exclusive of any rights, remedies, powers and
privileges that may otherwise be available to the Agent or any Bank.
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SECTION 19. Costs and Expenses.
(a) Payments by Borrower. The Borrower agrees to pay to the Agent on
demand the reasonable out-of-pocket costs and expenses of the Agent, and the
reasonable fees and disbursements of counsel to the Agent (including allocated
costs of internal counsel), in connection with the negotiation, preparation,
execution, delivery and administration of this Agreement, and any amendments,
modifications or waivers of the terms thereof.
(b) Payments by Borrower and Creditor. Each of the Borrower and the
Creditor jointly and severally agrees to pay to the Agent on demand all costs
and expenses of the Agent and the Banks, and the fees and disbursements of
counsel (including allocated costs of internal counsel), in connection with the
enforcement or attempted enforcement of, and preservation of rights or interests
under, this Agreement, including any losses, costs and expenses sustained by the
Agent and any Bank as a result of any failure by the Creditor to perform or
observe its obligations contained in this Agreement.
SECTION 20. Survival. All covenants, agreements, representations and
warranties made in this Agreement shall, except to the extent otherwise provided
herein, survive the execution and delivery of this Agreement, and shall continue
in full force and effect so long as any Senior Debt remains unpaid or the Banks
have any Commitments. Without limiting the generality of the foregoing, the
obligations of the Borrower and the Creditor under Section 19 shall survive the
satisfaction of the Senior Debt and the termination of the Commitments.
SECTION 21. Benefits of Agreement. This Agreement is entered into for
the sole protection and benefit of the parties hereto and their successors and
assigns, and no other Person shall be a direct or indirect beneficiary of, or
shall have any direct or indirect cause of action or claim in connection with,
this Agreement.
SECTION 22. Binding Effect. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by the Borrower, the Creditor, the
Agent and each Bank and their respective successors and assigns.
SECTION 23. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA.
SECTION 24. Submission to Jurisdiction.
(a) Submission to Jurisdiction. The Creditor hereby (i) submits to the
nonexclusive jurisdiction of the courts of the State of California and the
federal courts of the United States sitting in the State of California for the
purpose of any action or proceeding arising out of or relating to this
Agreement, (ii) agrees that all claims in respect of any such action or
proceeding may be heard and determined in such courts, (iii) irrevocably waives
(to the extent permitted by applicable law) any objection which it now or
hereafter may have to the laying of venue of any such action or proceeding
brought in any of the foregoing courts, and any objection on the ground that any
such action or proceeding in any such court has been brought in an
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inconvenient forum, and (iv) agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner permitted by law.
(b) [Appointment of Process Agent. The Creditor hereby irrevocably
appoints __________ (the "Process Agent"), with an office on the date hereof
at__________, as its authorized agent with all powers necessary to receive on
its behalf service of copies of the summons and complaint and any other process
which may be served in any action or proceeding arising out of or relating to
this Agreement in any of the courts in and of the State of California. Such
service may be made by mailing or delivering a copy of such process to the
Creditor in care of the Process Agent at the Process Agent's above address, and
the Creditor hereby irrevocably authorizes and directs the Process Agent to
accept such service on its behalf and agrees that the failure of the Process
Agent to give any notice of any such service to the Creditor shall not impair or
affect the validity of such service or of any judgment rendered in any action or
proceeding based thereon. As an alternative method of service, the Creditor also
irrevocably consents to the service of any and all process in any such action or
proceeding by the mailing of copies of such process to the Creditor at its
address specified in Section 17. If for any reason __________ shall cease to act
as Process Agent, the Creditor shall appoint forthwith, in the manner provided
for herein, a successor Process Agent qualified to act as an agent for service
of process with respect to all courts in and of the State of California and
acceptable to the Agent.]
(c) No Limitation. Nothing in this Section 24 shall limit the right of
the Agent or the Banks to bring any action or proceeding against the Creditor or
its property in the courts of other jurisdictions.
SECTION 25. Entire Agreement; Amendments and Waivers.
(a) Entire Agreement. This Agreement constitutes the entire agreement
of the Borrower, the Banks, the Agent and the Creditor with respect to the
matters set forth herein and supersedes any prior agreements, commitments,
drafts, communications, discussions and understandings, oral or written, with
respect thereto.
(b) Amendments and Waivers. No amendment to any provision of this
Agreement shall in any event be effective unless the same shall be in writing
and signed by the Borrower, the Creditor, the Agent and the Majority Banks (or
the Agent with the written consent of the Majority Banks); and no waiver of any
provision of this Agreement, or consent to any departure by the Borrower or the
Creditor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Agent and the Majority Banks (or the Agent with the
consent of the Majority Banks). Any such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 26. Conflicts. In case of any conflict or inconsistency
between any terms of this Agreement, on the one hand, and [the__________
Agreement,] the Subordinated Note or any other document or instrument relating
to the Subordinated Debt, on the other hand, then the terms of this Agreement
shall control.
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SECTION 27. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
all applicable laws and regulations. If, however, any provision of this
Agreement shall be prohibited by or invalid under any such law or regulation in
any jurisdiction, it shall, as to such jurisdiction, be deemed modified to
conform to the minimum requirements of such law or regulation, or, if for any
reason it is not deemed so modified, it shall be ineffective and invalid only to
the extent of such prohibition or invalidity without affecting the remaining
provisions of this Agreement or the validity or effectiveness of such provision
in any other jurisdiction.
SECTION 28. Interpretation. This Agreement is the result of
negotiations between, and have been reviewed by counsel to, the Agent, the
Creditor, the Borrower and other parties, and is the product of all parties
hereto. Accordingly, this Agreement shall not be construed against any of the
Banks or the Agent merely because of the Agent's or any Bank's involvement in
the preparation thereof.
SECTION 29. Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute but one and the same agreement.
SECTION 30. Termination of Agreement. Upon indefeasible payment and
performance in full in cash or cash equivalents of the Senior Debt and the
termination of the Commitments, this Agreement shall terminate and the Agent and
the Banks shall promptly execute and deliver to the Borrower and the Creditor
such documents and instruments as shall be necessary to evidence such
termination; provided, however, that the obligations of the Borrower and the
Creditor under Section 19 shall survive such termination.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
THE BORROWER
MENTOR GRAPHICS CORPORATION
By:_______________________________________
Title:
Address:
__________________________________________
__________________________________________
__________________________________________
Attn.:____________________________________
Fax No.___________________________________
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THE AGENT
BANK OF AMERICA, N.A., as Agent
By:__________________________________________
Title:
Address:
_____________________________________________
_____________________________________________
_____________________________________________
Attn.:_______________________________________
Fax No.______________________________________
THE BANKS
[BANK]
By:__________________________________________
Title:
Address:
_____________________________________________
_____________________________________________
_____________________________________________
Attn.:_______________________________________
Fax No.______________________________________
[BANK]
By:__________________________________________
Title:
Address:
_____________________________________________
_____________________________________________
_____________________________________________
Attn.:_______________________________________
Fax No.______________________________________
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[BANK]
By:__________________________________________
Title:
Address:
_____________________________________________
_____________________________________________
_____________________________________________
Attn.:_______________________________________
Fax No.______________________________________
THE CREDITOR
[CREDITOR]
By:__________________________________________
Title:
Address:
_____________________________________________
_____________________________________________
_____________________________________________
Attn.:_______________________________________
Fax No.______________________________________
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