LOAN AGREEMENT
BETWEEN
SUMMIT DESIGN, INC.
AND
DASYS, INC.
JULY 16, 1997
TABLE OF CONTENTS
PAGE
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ARTICLE 1. INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 GAAP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Plural Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Calculation of Interest and Fees. . . . . . . . . . . . . . . . . . 2
1.10 Other Interpretive Provisions . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2. LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Terms; Timing . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Interest Payments . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Maturity; Payment of Outstanding Loans; Termination of Obligations. 3
2.4 Proceeds of the Loans . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.6 Other Payment Terms . . . . . . . . . . . . . . . . . . . . . . . . 5
2.7 Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.8 Loan Funding. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.9 Security; Further Assurances. . . . . . . . . . . . . . . . . . . . 5
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BORROWER. . . . . . . . . . . . 6
3.1 Due Incorporation, Qualification, etc.. . . . . . . . . . . . . . . 6
3.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Enforceability. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4 Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 No Violation or Default . . . . . . . . . . . . . . . . . . . . . . 6
3.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.9 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 7
3.10 Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.11 No Agreements to Sell Assets. . . . . . . . . . . . . . . . . . . . 8
3.12 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . 8
3.13 Other Regulations . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.14 Governmental Charges and Other Indebtedness . . . . . . . . . . . . 8
3.15 Subsidiaries, etc.. . . . . . . . . . . . . . . . . . . . . . . . . 8
3.16 Catastrophic Events; Labor Disputes . . . . . . . . . . . . . . . . 9
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TABLE OF CONTENTS
(CONTINUED)
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3.17 No Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . 9
3.18 Accuracy of Information Furnished . . . . . . . . . . . . . . . . . 9
3.19 Certain Agreements of Officers, Employees and Consultants . . . . . 9
3.20 Contracts or Commitments; Indebtedness. . . . . . . . . . . . . . . 9
3.21 GM Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.22 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . .10
3.23 Deposit Accounts and Investment Accounts. . . . . . . . . . . . . .10
ARTICLE 4. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . .10
4.1 Principal Loan Documents. . . . . . . . . . . . . . . . . . . . . .10
4.2 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . .11
4.3 Amendment of Borrower Stock Option Plan . . . . . . . . . . . . . .11
4.4 Amendment of GM Agreement.. . . . . . . . . . . . . . . . . . . . .11
4.5 Representations and Warranties Correct. . . . . . . . . . . . . . .11
4.6 Compliance Certificate. . . . . . . . . . . . . . . . . . . . . . .11
4.7 Amendment to Articles of Incorporation. . . . . . . . . . . . . . .11
4.8 Corporate Documents . . . . . . . . . . . . . . . . . . . . . . . .11
4.9 Consents; Permits; Waivers. . . . . . . . . . . . . . . . . . . . .12
4.10 Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.11 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . .12
4.12 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . .12
4.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.14 Conditions to Lender's Obligation to Make Each Loan . . . . . . . .12
4.15 Agreement to Deliver. . . . . . . . . . . . . . . . . . . . . . . .13
ARTICLE 5. COVENANTS OF BORROWER.. . . . . . . . . . . . . . . . . . . . . .13
5.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . .13
5.2 Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE 6. ADDITIONAL LENDER RIGHTS. . . . . . . . . . . . . . . . . . . . .17
6.1 Notice of Events Not in Ordinary Course . . . . . . . . . . . . . .17
6.2 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . .17
6.3 Appraisal of Material Software. . . . . . . . . . . . . . . . . . .18
6.4 Additional Actions in Connection with Borrower's Stock Option Plan.18
ARTICLE 7. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . .18
7.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . .18
7.2 Rights of Lender upon Default . . . . . . . . . . . . . . . . . . .20
ARTICLE 8. CONFIDENTIAL INFORMATION. . . . . . . . . . . . . . . . . . . . .20
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TABLE OF CONTENTS
(CONTINUED)
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ARTICLE 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . .21
9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
9.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
9.4 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . .22
9.5 Waivers; Amendments . . . . . . . . . . . . . . . . . . . . . . . .23
9.6 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . .23
9.7 Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
9.8 No Third Party Rights . . . . . . . . . . . . . . . . . . . . . . .24
9.9 Partial Invalidity. . . . . . . . . . . . . . . . . . . . . . . . .24
9.10 Arbitration.. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
9.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
SCHEDULE I - DEFINITIONS
SCHEDULE II - NOTICE OF BORROWING
SCHEDULE III - DISCLOSURE SCHEDULE
SCHEDULE IV - BUDGET
EXHIBIT A - NOTE
EXHIBIT B - SECURITY AGREEMENT
EXHIBIT C - STOCK PLEDGE AGREEMENT
EXHIBIT D - INTELLECTUAL PROPERTY SECURITY AGREEMENT
EXHIBIT E - PURCHASE OPTIONS
EXHIBIT F - DISTRIBUTION AGREEMENT
EXHIBIT G - EMPLOYMENT AGREEMENT
EXHIBIT H - ESCROW AGREEMENT
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LOAN AGREEMENT
This LOAN AGREEMENT (this "LOAN AGREEMENT"), dated as of July 16, 1997 is
entered into by and between:
(1) Summit Design, Inc., a Delaware corporation ("LENDER"); and
(2) Dasys, Inc., a Pennsylvania corporation ("BORROWER").
RECITALS
A. Borrower desires to obtain financing for working capital purposes.
B. Lender desires to assist Borrower by providing such financing
subject to the terms and conditions of this Loan Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the covenants,
conditions and agreements set forth herein, the parties agree as follows:
ARTICLE 1. INTERPRETATION.
1.1 DEFINITIONS. Unless otherwise indicated in this Loan Agreement,
each term set forth in Schedule I, when used in this Loan Agreement, shall have
the respective meaning given to that term in Schedule I or in the provision of
this Loan Agreement referenced in Schedule I.
1.2 GAAP. Unless otherwise indicated in this Loan Agreement, all
accounting terms used in this Loan Agreement shall be construed, and all
accounting and financial computations hereunder or thereunder shall be computed,
in accordance with GAAP. If GAAP changes during the term of this Loan Agreement
such that any covenants contained herein would then be calculated in a different
manner or with different components, Borrower and Lender agree to negotiate in
good faith to amend this Loan Agreement in such respects as are necessary to
conform those covenants as criteria for evaluating Borrower's financial
condition to substantially the same criteria as were effective prior to such
change in GAAP; PROVIDED, HOWEVER, that, until Borrower and Lender so amend this
Loan Agreement, all such covenants shall be calculated in accordance with GAAP
as in effect immediately prior to such change.
1.3 HEADINGS. Headings in this Loan Agreement and each of the other
Loan Documents are for convenience of reference only and are not part of the
substance hereof or thereof.
1.4 PLURAL TERMS. All terms defined in this Loan Agreement or any
other Loan Document in the singular form shall have comparable meanings when
used in the plural form and VICE VERSA.
1.5 TIME. All references in this Loan Agreement and each of the other
Loan Documents to a time of day shall mean Oregon time, unless otherwise
indicated.
1.6 GOVERNING LAW. This Loan Agreement and each of the other Loan
Documents shall be governed by and construed in accordance with the laws of the
State of Delaware without reference to conflicts of law rules.
1.7 CONSTRUCTION. Each of this Loan Agreement and the other Loan
Documents is the result of negotiations among, and has been reviewed by,
Borrower, Lender and their respective counsel. Accordingly, this Loan Agreement
and the other Loan Documents shall be deemed to be the product of all parties
hereto, and no ambiguity shall be construed in favor of or against Borrower or
Lender.
1.8 ENTIRE AGREEMENT. This Loan Agreement and each of the other Loan
Documents, taken together, constitute and contain the entire agreement of
Borrower and Lender and supersede any and all prior agreements, negotiations,
correspondence, understandings and communications among the parties, whether
written or oral, respecting the subject matter hereof.
1.9 CALCULATION OF INTEREST AND FEES. All calculations of interest
and fees under this Loan Agreement and the other Loan Documents for any period
shall include the first day of such period and exclude the last day of such
period.
1.10 OTHER INTERPRETIVE PROVISIONS. References in this Loan Agreement
to "Recitals," "Sections," "Paragraphs," "Subparagraphs," "Exhibits" and
"Schedules" are to recitals, sections, paragraphs, subparagraphs, exhibits and
schedules herein and hereto unless otherwise indicated. References in this Loan
Agreement and each of the other Loan Documents to any document, instrument or
agreement (a) shall include all exhibits, schedules and other attachments
thereto, (b) shall include all documents, instruments or agreements issued or
executed in replacement thereof, and (c) shall mean such document, instrument or
agreement, or replacement or predecessor thereto, as amended, modified and
supplemented from time to time and in effect at any given time. The words
"hereof," "herein" and "hereunder" and words of similar import when used in this
Loan Agreement or any other Loan Document shall refer to this Loan Agreement or
such other Loan Document, as the case may be, as a whole and not to any
particular provision of this Loan Agreement or such other Loan Document, as the
case may be. The words "include" and "including" and words of similar import
when used in this Loan Agreement or any other Loan Document shall not be
construed to be limiting or exclusive.
ARTICLE 2. LOANS.
2.1 TERMS; TIMING.
(a) Subject to the terms and conditions of this Loan Agreement,
Lender agrees to advance to Borrower one or more term loans (each, a "LOAN" and
collectively, the "LOANS") in an aggregate principal amount not to exceed
$2,500,000. Each Loan shall be in an amount of at least $50,000 or any integral
multiple of $10,000 in excess thereof and shall be made on a date at least five
(5) Business Days after the delivery to Lender in the manner specified in
Section 9.1 of a notice of borrowing in the form of Schedule II hereto (the
"NOTICE OF BORROWING"), which Notice of Borrowing shall have been approved in
accordance with Section 2.1(b) below prior to any obligation on the part of
Lender to provide such funds.
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(b) Except as provided in Section 2.1(b)(i) below, Borrower
shall be entitled to submit not more than one Notice of Borrowing with
respect to any calendar quarter. In the event Borrower desires to draw down
a Loan with respect to any calendar quarter, at least five (5) Business Days
prior to the beginning of such calendar quarter, Borrower shall submit to the
Budget Committee a Notice of Borrowing specifying in reasonable detail
Borrower's estimated expenses and working capital requirements for such
upcoming calendar quarter on a monthly basis, which expenses and working
capital requirements shall be in accordance with the then-existing Budget.
Disbursements of Loans may only be requested by Borrower in accordance with
the then-existing Budget, and Lender shall have no obligation to make any
Loan which is not in accordance therewith. In addition, each Notice of
Borrowing shall be subject to the review of the Budget Committee; provided,
however that the Budget Committee shall not have the discretion to disapprove
a Loan that is otherwise within the then-existing Budget. The Budget
Committee shall approve any qualified Notice of Borrowing within ten (10)
days after the receipt thereof. After review and approval by the Budget
Committee, the Notice of Borrowing, including any adjustments mandated by the
Budget Committee, shall be submitted to Lender for draw down of a Loan in
accordance with Section 2.1(a) above.
(i) Notwithstanding the provisions of Section 2.1(b),
Borrower may submit to the Budget Committee up to two (2) additional Notices of
Borrowing during any calendar quarter (a "Monthly Notice"). A Monthly Notice
must be submitted at least five (5) Business Days prior to the beginning of such
month and shall specify in reasonable detail Borrower's estimated expenses and
working capital requirements for such upcoming month, which expenses and working
capital requirements shall be in accordance with the then-existing Budget.
Lender shall have no obligation to make any Loan which is not in accordance with
the then-existing Budget. Each Monthly Notice shall be subject to the review of
the Budget Committee. The Budget Committee shall approve any qualified Monthly
Notice within five (5) days after the receipt thereof. After review and
approval by the Budget Committee, the Monthly Notice, including any adjustments
mandated by the Budget Committee, shall be submitted to Lender for draw down of
a Loan in accordance with Section 2.1(a) above.
2.2 INTEREST PAYMENTS. Borrower shall pay interest on the unpaid
principal amount of the Loans from the date of each such Loan until the Maturity
thereof, quarterly within thirty (30) days of the last Business Day of each
calendar quarter, beginning on September 30, 1997, and at Maturity, at a rate
per annum equal at all times to the Prime Rate (as in effect on the first day of
each new quarterly period) plus two percent (2 %). All computations of such
interest shall be based on a year of 360 days for actual days elapsed.
2.3 MATURITY; PAYMENT OF OUTSTANDING LOANS; TERMINATION OF
OBLIGATIONS.
(a) MATURITY DATE. Unless earlier prepaid, all outstanding
Loans shall be due and payable on April 1, 2000 (the "MATURITY DATE"); provided,
however that no Loans shall be made after December 31, 1999.
(b) PAYMENT OF OUTSTANDING LOANS. Unless earlier prepaid, on
the Maturity Date, Borrower shall repay all outstanding Loans, including all
unpaid fees, costs, expenses, accrued interest and principal (the "Aggregate
Loan Amount"), in lawful money of the United States and in same day or
immediately available funds; provided, however, that prior to the Maturity Date,
Borrower may, by vote of its shareholders including the affirmative votes of the
holders of a majority of the outstanding shares of preferred stock, elect to
repay the Aggregate Loan Amount by tendering to Lender one hundred percent
(100%) of Borrower's outstanding Equity Securities, duly endorsed in blank
pursuant to the Pledge Agreement. In the event that the Fair Market Value of
Borrower is greater than the Aggregate Loan Amount, Lender shall pay to the
holders of Borrower's Equity Securities the difference between the Fair Market
Value of Borrower and the Aggregate Loan Amount. Any such
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payment by Lender to holders of Borrower's Equity Securities shall
be made, at the option of Lender, in cash or Lender Common Stock (valued at
the Fair Market Value of Lender Common Stock). In the event that the Fair
Market Value of Borrower is less than the Aggregate Loan Amount, all
Obligations of Borrower owing pursuant to this Loan Agreement and the Loan
Documents shall be deemed to be satisfied completely upon tender of
Borrower's Equity Securities to Lender, duly endorsed in blank. Any payment
by Lender pursuant to this Section 2.3(b), whether in cash or Lender Common
Stock, shall be made in accordance with written instructions received from
Borrower's Representatives, and upon such payment, Lender shall have no
liability to any holder of Borrower's Equity Securities for any amounts
otherwise payable hereunder.
(i) REGISTRATION OF LENDER COMMON STOCK. In the event
that Lender elects to deliver Lender Common Stock to holders of Borrower's
Equity Securities, pursuant to either Section 2.3(b) above or upon exercise of
the Purchase Options, Lender shall file within thirty (30) days of delivery of
such Lender Common Stock a registration statement on Form S-3 with the
Securities and Exchange Commission covering the shares of Lender Common Stock
received by the holders of Borrower's Equity Securities so as to permit the
public resale thereof. Lender shall use its reasonable best efforts to have
such registration statement declared effective within sixty (60) days of the
filing of such registration statement. Such registration shall be on
commercially reasonable terms applicable to "demand" registration rights as
shall be mutually agreed upon by Lender and holders of Borrower's Equity
Securities. Notwithstanding the foregoing, Lender shall have no obligation to
file such registration statement (A) prior to the later of (i) the Maturity Date
and (ii) thirty (30) days after the date of delivery of Lender Common Stock or
(B) if all shares of Lender Common Stock so issued may be sold by the holders
thereof within a three-month period pursuant to Rule 144 of the Securities Act
following the date as of which the registration statement would otherwise be
required to be filed hereunder.
(c) TERMINATION OF OBLIGATIONS. Nothing contained in Section
2.3(b) above shall be construed to obligate Lender to accept Borrower's Equity
Securities as payment for the Aggregate Loan Amount. In the event Borrower
tenders the Equity Securities in accordance with Section 2.3 and Lender notifies
Borrower of its intention not to accept such Equity Securities as payment, the
Aggregate Loan Amount shall nonetheless be deemed to be satisfied in full and
Borrower shall have no further obligations under this Loan Agreement or any
other Loan Document, except that the Distribution Agreement will be modified in
accordance with the provisions contained therein.
2.4 PROCEEDS OF THE LOANS. Borrower shall use the proceeds of the
Loans solely to satisfy current expense requirements and for general working
capital purposes.
2.5 PREPAYMENTS.
(a) TERMS OF ALL PREPAYMENTS. Upon the prepayment of any Loan
(whether such prepayment is an optional prepayment under Section 2.5(b) or a
mandatory prepayment required by any other provision of this Loan Agreement or
the other Loan Documents, including, without limitation, a prepayment upon
acceleration), Borrower shall pay to Lender all accrued interest to the date of
such prepayment on the amount prepaid.
(b) OPTIONAL PREPAYMENTS. At its option, Borrower may, upon
three (3) Business Days' notice to Lender, prepay the Loans in whole, or in part
in the amount of Ten Thousand Dollars ($10,000) or any integral multiple
thereof.
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(c) APPLICATION OF PREPAYMENTS. All prepayments hereunder
shall be applied first to unpaid fees, costs and expenses then due and payable
under this Loan Agreement or the other Loan Documents, second to accrued
interest then due and payable under this Loan Agreement or the other Loan
Documents and finally to reduce the principal amount of outstanding Loans.
2.6 OTHER PAYMENT TERMS.
(a) PLACE AND MANNER. Other than pursuant to Section
2.3(b)(i), Borrower shall make all payments due to Lender hereunder to a bank
account designated by Lender or, at Lender's option, at the address specified in
Section 9.1, in each case in lawful money of the United States and in same day
or immediately available funds.
(b) DATE. Whenever any payment due hereunder shall fall due on
a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included in the
computation of interest or fees, as the case may be.
(c) DEFAULT RATE. From and after the occurrence of an Event of
Default and during the continuance thereof, Borrower shall pay interest on the
aggregate, outstanding balance of the Loans, and on interest (compounded
monthly) and other amounts not paid when due hereunder or under the other Loan
Documents, from the date due thereof until those amounts are paid in full at a
per annum rate equal to the Prime Rate PLUS three percent (3%), such rate to
change from time to time as the Prime Rate shall change. All computations of
such interest shall be based on a year of 360 days for actual days elapsed.
2.7 NOTE. The obligation of Borrower to repay the Loans and to pay
interest thereon at the rates provided herein shall be evidenced by a promissory
note in the form of Exhibit A (the "NOTE").
2.8 LOAN FUNDING. Lender shall disburse the proceeds of the Loans
into a bank account of Borrower in which Lender has a first priority perfected
security interest.
2.9 SECURITY; FURTHER ASSURANCES.
(a) SECURITY. The Obligations shall be secured by the
following:
(i) A Security Agreement in the form of Exhibit B
hereto (the "SECURITY AGREEMENT");
(ii) A Stock Pledge Agreement in the form of
Exhibit C hereto (the "PLEDGE AGREEMENT"), executed by each holder
of Equity Securities of Borrower; and
(iii) An Intellectual Property Security Agreement
in the form of Exhibit D hereto (the "INTELLECTUAL PROPERTY
SECURITY AGREEMENT").
(b) FURTHER ASSURANCES. Borrower shall deliver, or shall cause
to be delivered, to Lender the Security Agreement, the Pledge Agreement and the
Intellectual Property Security Agreement and such other instruments, agreements,
certificates, opinions and documents as Lender may reasonably request to create,
perfect, evidence and maintain (i) a first priority security interest of Lender
in all of the assets of Borrower and the Equity Securities of Borrower as
further set forth in the Security Agreement, the Pledge Agreement and the
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Intellectual Property Security Agreement and (ii) the rights of Lender under
this Loan Agreement and the other Loan Documents. Borrower shall fully
cooperate with Lender and perform all additional acts reasonably requested by
Lender to effect the purposes of the foregoing and the rights granted to Lender
hereunder.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BORROWER.
To induce Lender to enter into this Loan Agreement and to make Loans
hereunder, Borrower represents and warrants to Lender that, except as set
forth in the Disclosure Schedule (which Disclosure Schedule shall set forth
exceptions to each Section of this Article 3 in a separate item and no
exception to one Section shall be deemed to relate to another Section unless
a specific cross-reference is made in the Disclosure Schedule item
corresponding to such other Section):
3.1 DUE INCORPORATION, QUALIFICATION, ETC. Borrower (i) is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation; (ii) has the power and authority to own, lease
and operate its properties and carry on its business as now conducted; and (iii)
is duly qualified, licensed to do business and in good standing as a foreign
corporation in each jurisdiction where the failure to be so qualified or
licensed could reasonably be expected to have a Material Adverse Effect.
3.2 AUTHORITY. The execution, delivery and performance by Borrower of
each Loan Document to be executed by Borrower and the consummation of the
transactions contemplated thereby (i) are within the power of Borrower and (ii)
have been duly authorized by all necessary actions on the part of Borrower.
3.3 ENFORCEABILITY. Each Loan Document executed, or to be executed,
by Borrower has been, or will be, duly executed and delivered by Borrower and
constitutes, or will constitute, a legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms, except as
limited by bankruptcy, insolvency or other laws of general application relating
to or affecting the enforcement of creditors' rights generally and general
principles of equity.
3.4 NON-CONTRAVENTION. The execution and delivery by Borrower of the
Loan Documents executed by Borrower and the performance and consummation of the
transactions contemplated thereby do not and will not (i) violate any
Requirement of Law applicable to Borrower; (ii) violate any provision of, or
result in the breach or the acceleration of, or entitle any other Person to
accelerate (whether after the giving of notice or lapse of time or both), any
Contractual Obligation of Borrower; or (iii) result in the creation or
imposition of any Lien upon any property, asset or revenue of Borrower (except
such Liens as may be created in favor of Lender pursuant to this Loan Agreement
or the other Loan Documents).
3.5 APPROVALS. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority or other
Person (including, without limitation, the shareholders of any Person) is
required in connection with the execution and delivery of the Loan Documents
executed by Borrower and the performance and consummation of the transactions
contemplated thereby.
3.6 NO VIOLATION OR DEFAULT. Borrower is not in violation of or in
default with respect to (i) any Requirement of Law; (ii) any Contractual
Obligation (nor is there any waiver in effect which, if not in effect, would
result in such a violation or default), where, in each case, such violation or
default, individually, or together with all such violations or defaults, could
reasonably be expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, Borrower (A) has not violated any Environmental
Laws,
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(B) does not have any liability under any Environmental Laws, or (C) has
not received notice or other communication of an investigation nor is under
investigation by any Governmental Authority having authority to enforce
Environmental Laws, where such violation, liability or investigation could
reasonably be expected to have a Material Adverse Effect. No Event of Default
or Default has occurred and is continuing.
3.7 LITIGATION. Except as set forth (with estimates of the dollar
amounts involved) in Item 3.7 of the Disclosure Schedule, no actions (including,
without limitation, derivative actions), suits, proceedings or investigations
are pending or, to the knowledge of Borrower, threatened against Borrower at law
or in equity in any court or before any other Governmental Authority which if
adversely determined (i) would (alone or in the aggregate) have a Material
Adverse Effect or (ii) seeks to enjoin, either directly or indirectly, the
execution, delivery or performance by Borrower of the Loan Documents or the
transactions contemplated thereby.
3.8 TITLE. Borrower owns and has good and marketable title in fee
simple absolute to, or a valid leasehold interest in, all its real properties
and good title to its other assets and properties as reflected in the most
recent Financial Statements delivered to Lender (except those assets and
properties disposed of in the ordinary course of business since the date of such
Financial Statements) and all assets and properties acquired by Borrower since
such date (except those disposed of in the ordinary course of business). Such
assets and properties are subject to no Lien, except for Permitted Liens.
3.9 FINANCIAL STATEMENTS. The Financial Statements of Borrower which
have been delivered to Lender, (i) are in accordance with the books and records
of Borrower, which have been maintained in accordance with good business
practice; (ii) have been prepared in conformity with GAAP; and (iii) fairly
present the consolidated financial position of Borrower as of the dates
presented therein and the results of operations, and changes in financial
positions or cash flows, as the case may be, for the periods presented therein.
Borrower does not have any contingent obligations, liability for taxes or other
outstanding obligations which are material in the aggregate, except as disclosed
in the Financial Statements dated December 31, 1996, furnished by Borrower to
Lender prior to the date hereof.
3.10 EQUITY SECURITIES. Borrower's total authorized and issued
capitalization (including the appropriate conversion ratios) is as set forth in
Item 3.10 of the Disclosure Schedule. The Equity Securities of Borrower have
the respective rights, preferences and privileges set forth in Borrower's
Charter Documents in effect on the date hereof. All of the outstanding Equity
Securities of the Borrower have been duly authorized and are validly issued,
fully paid and nonassessable. Except as expressly referenced herein or as set
forth in Item 3.10 of the Disclosure Schedule, there are as of the date of this
Loan Agreement no options, warrants or rights to purchase Equity Securities
authorized, issued or outstanding, nor is Borrower obligated in any other manner
to issue shares of its Equity Securities. There are no restrictions on the
transfer of shares of capital stock of Borrower, other than those imposed by
Borrower's Charter Documents as of the date hereof, or relevant state and
federal securities laws, and no holder of any Equity Security of Borrower is
entitled to preemptive or similar statutory or contractual rights, either
arising pursuant to any agreement or instrument to which Borrower is a party or
that are otherwise binding upon Borrower. The offer and sale of all shares of
Equity Securities of Borrower issued before the Closing Date complied with or
were exempt from registration or qualification under all applicable federal and
state securities laws. No Person has the right to demand or other rights to
cause Borrower to file any registration statement under the Securities Act,
relating to any Equity Securities of Borrower presently outstanding or that may
be subsequently issued, or any right to participate in any such registration
statement.
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3.11 NO AGREEMENTS TO SELL ASSETS. Borrower does not have any legal
obligation, absolute or contingent, to any Person to sell any of the assets of
Borrower (other than sales in the ordinary course of business), or to effect any
merger, consolidation or other reorganization of Borrower or to enter into any
agreement with respect thereto.
3.12 EMPLOYEE BENEFIT PLANS.
(a) Borrower and its ERISA Affiliates have no Employee Benefit
Plan that is an "employee pension benefit plan" (within the meaning of section
3(2) of ERISA). Neither Borrower nor any ERISA Affiliate has any liability with
respect to any post-retirement benefit under any Employee Benefit Plan which is
a welfare plan (as defined in section 3(1) of ERISA), other than liability for
health plan continuation coverage described in Part 6 of Title I(B) of ERISA,
which liability for health plan contribution coverage cannot reasonably be
expected to have a Material Adverse Effect.
(b) Each Employee Benefit Plan complies, in both form and
operation, in all material respects, with its terms, ERISA and the Code, and no
condition exists or event has occurred with respect to any such plan which would
result in the incurrence by either Borrower or any ERISA Affiliate of any
material liability, fine or penalty. Each Employee Benefit Plan, related trust
agreement, arrangement and commitment of Borrower or any ERISA Affiliate is
legally valid and binding and in full force and effect. No Employee Benefit
Plan is being audited or investigated by any government agency or is subject to
any pending or threatened claim or suit. Neither Borrower nor any ERISA
Affiliate nor any fiduciary of any Employee Benefit Plan has engaged in a
prohibited transaction under section 406 of ERISA or section 4975 of the Code.
(c) Neither Borrower nor any ERISA Affiliate contributes to any
Multiemployer Plan. Neither Borrower nor any ERISA Affiliate has incurred any
material liability (including secondary liability) to any Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan under
section 4201 of ERISA or as a result of a sale of assets described in section
4204 of ERISA. Neither Borrower nor any ERISA Affiliate has been notified that
any Multiemployer Plan is in reorganization or insolvent under and within the
meaning of section 4241 or section 4245 of ERISA or that any Multiemployer Plan
intends to terminate or has been terminated under section 4041A of ERISA.
3.13 OTHER REGULATIONS. Borrower is not subject to regulation under
the Investment Company Act of 1940, the Public Utility Holding Company Act of
1935, the Federal Power Act, the Interstate Commerce Act, any state public
utilities code or to any federal or state statute or regulation limiting its
ability to incur Indebtedness.
3.14 GOVERNMENTAL CHARGES AND OTHER INDEBTEDNESS. Borrower has filed
or caused to be filed all tax returns which are required to be filed by it.
Borrower has paid, or made provision for the payment of, all taxes and other
Governmental Charges which have or may have become due pursuant to said returns
or otherwise and all other Indebtedness, except such Governmental Charges or
Indebtedness, if any, which are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have been provided or
which could not reasonably be expected to have a Material Adverse Effect if
unpaid.
3.15 SUBSIDIARIES, ETC. Borrower has no Subsidiaries and is not a
partner in any partnership or a joint venturer in any joint venture.
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3.16 CATASTROPHIC EVENTS; LABOR DISPUTES. Neither Borrower nor any of
its properties is or has been affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or other casualty that could reasonably be expected to have a Material
Adverse Effect. There are no disputes presently subject to grievance procedure,
arbitration or litigation under any of the collective bargaining agreements,
employment contracts or employee welfare or incentive plans to which Borrower is
a party, and there are no strikes, lockouts, work stoppages or slowdowns, or, to
the best knowledge of Borrower, jurisdictional disputes or organizing activity
occurring or threatened which could reasonably be expected to have a Material
Adverse Effect.
3.17 NO MATERIAL ADVERSE EFFECT. No event has occurred and, to the
knowledge of Borrower, no condition exists which could reasonably be expected to
have a Material Adverse Effect.
3.18 ACCURACY OF INFORMATION FURNISHED. None of the Loan Documents and
none of the other certificates, statements or information furnished to Lender by
or on behalf of Borrower in connection with the Loan Documents or the
transactions contemplated thereby contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
3.19 CERTAIN AGREEMENTS OF OFFICERS, EMPLOYEES AND CONSULTANTS.
(a) No officer, employee or consultant of Borrower is, or is
now expected to be, in violation of any term of any employment contract,
proprietary information agreement, nondisclosure agreement, noncompetition
agreement, or any other contract or agreement or any restrictive covenant
relating to the right of any such officer, employee or consultant to be employed
by Borrower because of the nature of the business conducted or to be conducted
by Borrower or relating to the use of trade secrets or proprietary information
of others, and to the best of Borrower's knowledge, after due inquiry, the
continued employment of Borrower's officers, employees and consultants do not
subject Borrower to any liability for any claim or claims, which if adversely
decided could reasonably be expected to have a Material Adverse Effect, arising
out of or in connection with any such contract, agreement, or covenant.
(b) To the knowledge of Borrower, after due inquiry, no
officers of Borrower, and no employee or consultant of Borrower whose
termination or discontinuation of full-time employment, either individually or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect, has any present intention of terminating or otherwise materially
altering his or her employment or consulting relationship with Borrower.
(c) All officers, employees and consultants of Borrower have
executed an agreement relating to the use of trade secrets or proprietary
information of Borrower, and Borrower has provided to Lender a copy of such
agreements.
3.20 CONTRACTS OR COMMITMENTS; INDEBTEDNESS.
(a) Neither Borrower nor any of its properties is subject to
any Contractual Obligation or Requirement of Law which could reasonably be
expected to have a Material Adverse Effect. Except for this Loan Agreement, the
Note and the other Loan Documents, Borrower is not a party to any contracts or
commitments (or group of related contracts or commitments) involving more than
Fifty Thousand Dollars ($50,000) or having a term (including renewals or
extensions optional with another party) of more than one (1)
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year from the date thereof. Except as set forth in Item 3.20 of the
Disclosure Schedule, Borrower has no Indebtedness other than Permitted
Indebtedness.
3.21 GM AGREEMENT. The GM Agreement is valid, binding and in full
force and effect and is enforceable by Borrower in accordance with its terms and
will continue in full force and effect after the Closing. Borrower has
performed all its obligations required to be performed by it to date under the
GM Agreement, and Borrower is not in breach or default in any material respect
thereunder and, to the knowledge of Borrower, GM is not in breach or default in
any material respect thereunder. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship of Borrower with GM, and there exists no present or
future condition or state of facts or circumstances involving GM that Borrower
can now reasonably foresee which would have a Material Adverse Effect on
Borrower's business or prevent the conduct of Borrower's business after the
consummation of the transactions contemplated by this Loan Agreement and the
Loan Documents in essentially the same manner in which such business has
heretofore been conducted. Nothing contained in this Section 3.21 shall in any
way limit the representations and warranties of Borrower with respect to the GM
Agreement contained elsewhere in this Loan Agreement and the Loan Documents.
3.22 TRANSACTIONS WITH AFFILIATES. There are no loans, leases, royalty
agreements or other continuing transactions between Borrower and any Affiliate
of Borrower, except as set forth on the Disclosure Schedule, all of which are
transactions in the ordinary course of business and on terms at least as
favorable to Borrower as would be the case in an arms-length transaction with an
unaffiliated Person.
3.23 DEPOSIT ACCOUNTS AND INVESTMENT ACCOUNTS. Except as set forth in
Item 3.23 of the Disclosure Schedule, Borrower has no deposit accounts with
banks or investment or similar accounts with brokerage firms.
ARTICLE 4. CONDITIONS TO CLOSING.
Lender's obligation to make the initial Loan is subject to the prior
satisfaction or waiver of all the conditions set forth in Sections 4.1 through
4.13 of this Article 4. Lender's obligation to make each subsequent Loan is
subject to the prior satisfaction or waiver of all the conditions set forth in
Section 4.14 of this Article 4.
4.1 PRINCIPAL LOAN DOCUMENTS. Borrower shall have, or shall have
caused to have been, duly executed and delivered to Lender the following
documents, each in form and substance satisfactory to Lender:
(a) The Loan Agreement;
(b) The Note;
(c) The Security Agreement;
(d) The Intellectual Property Security Agreement;
(e) A Pledge Agreement, duly executed by each holder of
Borrower's Equity Securities, together with original stock certificates
representing 100% of Borrower's Equity Securities, and stock powers executed in
blank;
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(f) The Purchase Options, duly executed by each holder of
Equity Securities of Borrower, in the form of Exhibit E hereto;
(g) The Distribution Agreement between Lender and Borrower in
the form attached hereto as Exhibit F (the "DISTRIBUTION AGREEMENT");
(h) A Notice of Borrowing (at least five (5) Business Days
prior to the Closing Date); and
(i) Such Uniform Commercial Code financing statements and other
documents, instruments and agreements as Lender may reasonably request to
perfect the security interests granted to Lender in the Security Agreement, the
Pledge Agreement and the Intellectual Property Security Agreement.
4.2 EMPLOYMENT AGREEMENTS. Borrower shall have entered into
employment agreements with each of its executive officers and key employees in
the form attached hereto as Exhibit G (collectively, the "EMPLOYMENT
AGREEMENTS").
4.3 AMENDMENT OF BORROWER STOCK OPTION PLAN. Borrower shall have
amended the Dasys Inc. Stock Purchase and Stock Option Plan of 1992 (the
"Stock Option Plan"), in form and substance satisfactory to Lender, to
provide, among other things, (i) for an authorized option pool not to exceed
ten percent (10%) of the outstanding Equity Securities of Borrower at any
given time, on an as-converted/exercised basis, and (ii) that each such
option will obligate the optionholder to be bound by the terms of the Pledge
Agreement and the Purchase Options.
4.4 AMENDMENT OF GM AGREEMENT. Borrower shall have entered into an
amendment to the GM Agreement in form and substance reasonably satisfactory to
Lender.
4.5 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by Borrower in Article 3 hereof, and by each holder of
Borrower's Equity Securities in the Purchase Options and the Stock Pledge
Agreements, shall be true and correct as of the Closing Date and after giving
effect to the making of the initial Loan.
4.6 COMPLIANCE CERTIFICATE. Borrower shall have delivered to Lender
on the Closing Date a certificate of Borrower certifying the accuracy of all
representations and warranties set forth in Article 3 and certifying that all
conditions to closing have been completed, executed by the Chief Executive
Officer of Borrower and dated as of such Closing Date.
4.7 AMENDMENT TO ARTICLES OF INCORPORATION. Borrower shall have
amended its Articles of Incorporation to modify its total number of authorized
shares to 3,155,656 and to prohibit the issuance of any additional Equity
Securities without the prior written consent of Lender.
4.8 CORPORATE DOCUMENTS. Borrower shall have delivered to Lender each
of the following:
(a) The Articles of Incorporation of Borrower, as amended in
accordance with Section 4.7, certified as of a recent date prior to the Closing
Date by the Secretary of State of Pennsylvania;
(b) A Certificate of Good Standing or comparable certificate
for Borrower, certified as of a recent date prior to the Closing Date by the
Secretary of State of Pennsylvania.
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(c) A certificate of the Secretary of Borrower, dated the
Closing Date, certifying (a) that the Articles of Incorporation of Borrower,
delivered to Lender pursuant to Section 4.8(a) hereof, is in full force and
effect and has not been amended, supplemented, revoked or repealed since the
date of such certification; (b) that attached thereto is a true and correct copy
of the Bylaws of Borrower as in effect on the Closing Date; (c) that attached
thereto are true and correct copies of resolutions duly adopted by the Board of
Directors of Borrower and continuing in effect, which authorize the execution,
delivery and performance by Borrower of this Loan Agreement and the other Loan
Documents executed or to be executed by Borrower and the consummation of the
transactions contemplated hereby and thereby; and (d) that there are no
proceedings for the dissolution or liquidation of Borrower (commenced or
threatened); and
(d) A certificate of the Secretary of Borrower, dated the
Closing Date, certifying the incumbency, signatures and authority of the
officers of Borrower authorized to execute, deliver and perform this Loan
Agreement and the other applicable Loan Documents on behalf of Borrower.
4.9 CONSENTS; PERMITS; WAIVERS. Borrower shall have obtained all
consents, permits and waivers necessary or appropriate for consummation of the
transactions contemplated by this Loan Agreement which need to be obtained prior
to the Closing Date, including without limitation the consent of Design
Solutions, Inc. pursuant to the DSI Distribution Agreement and evidence of
qualification of this Loan Agreement and the Note under applicable blue sky laws
for the State of Pennsylvania and Oregon.
4.10 LEGAL MATTERS. All material matters of a legal nature which
pertain to this Loan Agreement and the other Loan Documents and the transactions
contemplated hereby and thereby shall be reasonably satisfactory to Lender and
its counsel.
4.11 OPINION OF COUNSEL. There shall have been delivered to Lender a
favorable written opinion of Buchanan & Ingersoll, counsel to Borrower, in form
and substance reasonably acceptable to Lender, dated as of the Closing Date.
4.12 FINANCIAL STATEMENTS. Borrower shall have delivered to Lender
copies of Borrower's most recent Financial Statements, which shall include
information no less recent than May 31, 1997.
4.13 INSURANCE. Borrower shall have delivered to Lender an insurance
certificate showing Borrower's insurance coverage complying with the provisions
of Section 5.1(d) and naming Lender as loss payee with respect to casualty
policies and as an additional insured with respect to liability policies.
4.14 CONDITIONS TO LENDER'S OBLIGATION TO MAKE EACH LOAN. The making
of each Loan is subject to the further condition that on the date such Loan is
made and after giving effect thereto, the following shall be true and correct:
(a) The representations and warranties set forth in Article 3
are true and correct in all material respects as if made on such date;
(b) No Default or Event of Default has occurred and is
continuing or will result from the making of the Loan;
(c) Each of the Loan Documents remains in full force and
effect; and
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(d) The Notice of Borrowing shall have been approved by the
Budget Committee in accordance with the provisions of Section 2.1(b).
The submission by Borrower to Lender of an approved Notice of Borrowing with
respect to the Loan shall be deemed to be a representation and warranty by
Borrower as of the date thereof as to the above.
4.15 AGREEMENT TO DELIVER. Borrower agrees (not as a condition but as
a covenant) to deliver to Lender each item required to be delivered to Lender as
a condition to closing under this Article 4. Borrower expressly agrees that the
occurrence of the Closing Date prior to the receipt by Lender of any such item
shall not constitute a waiver by Lender of Borrower's obligation to deliver such
item.
ARTICLE 5. COVENANTS OF BORROWER.
5.1 AFFIRMATIVE COVENANTS. Until the termination of the commitment to
make Loans under this Loan Agreement and the satisfaction in full by Borrower of
all Obligations, Borrower shall comply, and shall cause compliance, with the
following affirmative covenants unless Lender shall otherwise consent in
writing:
(a) FINANCIAL STATEMENTS, REPORTS, ETC. Borrower shall furnish
to Lender the following, each in such form and such detail as Lender shall
reasonably request:
(i) Within forty-five (45) days after the last
day of each fiscal quarter of Borrower, a copy of the Financial
Statements of Borrower for such quarter and for the fiscal year to
date, certified by the chief financial officer or controller of
Borrower to present fairly the financial condition, results of
operations and other information presented therein and to have
been prepared in accordance with GAAP consistently applied,
subject to normal year end adjustments and except that no
footnotes need be included with such Financial Statements;
(ii) Within ninety (90) days after the close of
each fiscal year of Borrower, (A) copies of the audited Financial
Statements of Borrower for such year, audited by independent
certified public accountants reasonably acceptable to Lender, (B)
copies of the unqualified opinions and management letters
delivered by such accountants in connection with such Financial
Statements and (C) certificates of such accountants to Lender
stating that in making the examination necessary for their opinion
they have obtained no knowledge of any Event of Default or
Default, or if, in the opinion of such accountants, an Event of
Default or Default has occurred, a statement as to the nature
thereof (or other certificates of such accountants reasonably
acceptable to Lender);
(iii) Contemporaneously with the quarterly and
year-end financial statements required by the foregoing CLAUSES
(ii) AND (iii), a certificate of the president or chief financial
officer of Borrower stating that no Event of Default and no
Default has occurred, or, if any such Event of Default or Default
has occurred, a statement as to the nature thereof and what action
Borrower proposes to take with respect thereto;
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(iv) As soon as possible and in no event later
than five (5) Business Days after the occurrence or existence of:
(A) any Reportable Event under any Employee Benefit Plan or
Multiemployer Plan; (B) any actual or threatened litigation,
suits, claims or disputes against Borrower involving potential
monetary damages payable by Borrower of One Hundred Thousand
Dollars ($100,000) or more (alone or in the aggregate); (C) any
other event or condition which could reasonably be expected to
have a Material Adverse Effect; or (D) any Event of Default or
Default; the statement of the president or chief financial officer
of Borrower setting forth details of such event, condition, Event
of Default or Default and the action which Borrower proposes to
take with respect thereto;
(v) As soon as possible and in no event later
than five (5) Business Days after they are filed, copies of all
IRS Form 5500 reports for all Employee Benefit Plans required to
file such form;
(vi) Promptly after the commencement thereof,
notice of any and all agreements with any entity, or events,
actions, suits and proceedings of the type described in Section
3.7 before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign;
(vii) Within sixty (60) days of the commencement of
each fiscal year of Borrower, a copy of the draft operating plan
and budget of Borrower for such fiscal year, which operating plan
and budget shall be finalized within thirty (30) days of the
commencement of such fiscal year, in form, substance and detail
satisfactory to Lender. Upon the Budget Committee's review and
approval, in its sole discretion, of such operating plan and
budget, the same shall become the Budget with respect to which
Loans may be requested by Borrower in accordance with Section
2.1(b);
(viii) Notice of the filing for or issuance of a
registered patent or copyright or of the filing for or issuance of
a registered trademark with respect to Borrower as soon as
Borrower makes such filing or receives such notice and, in any
event, within ten (10) business days of Borrower's receipt of such
notice; and
(ix) Such other instruments, agreements,
certificates, opinions, statements, documents and information
relating to the operations or condition (financial or otherwise)
of Borrower and compliance by Borrower with the terms of this Loan
Agreement and the other Loan Documents as Lender may from time to
time reasonably request.
(b) BOOKS AND RECORDS. Borrower shall at all times keep proper
books of record and account in which full, true and correct entries will be made
of their transactions in accordance with GAAP.
(c) INSPECTIONS. Borrower shall permit any Person designated
by Lender, upon reasonable notice and during normal business hours, to visit and
inspect any of the properties and offices of Borrower, to examine the books of
account of Borrower and to discuss the affairs, finances and accounts of
Borrower with, and to be advised as to the same by, their officers, auditors,
consultants, advisors and accountants, all at such times and intervals as Lender
may reasonably request. Notwithstanding the foregoing, Lender may conduct such
inspections no more frequently than once per fiscal quarter.
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(d) INSURANCE. Borrower shall (i) carry and maintain insurance
at its expense of the types and in the amounts customarily carried from time to
time during the term of this Loan Agreement by others engaged in substantially
the same business as such Person and operating in the same geographic area as
such Person, including, but not limited to, fire, public liability, property
damage and worker's compensation, such insurance to be in such form as is
carried with companies and in amounts satisfactory to Lender, and (ii) deliver
to Lender from time to time, as Lender may request, schedules or insurance
certificates setting forth all insurance then in effect. All such policies of
property insurance shall name Lender as loss payee thereunder and all liability
insurance policies shall show Lender as an additional insured, and shall specify
that the insurer must give at least twenty (20) days notice to Lender (or ten
(10) days in the case of cancellation for non-payment of premiums) before
canceling its policy for any reason. All proceeds under the property insurance
shall, at the option of Borrower, be payable to Lender to be applied to the
Obligations.
(e) GOVERNMENTAL CHARGES AND OTHER INDEBTEDNESS. Borrower
shall promptly pay and discharge when due (i) all taxes and other Governmental
Charges prior to the date upon which penalties accrue thereon, (ii) all
Indebtedness which, if unpaid, could become a Lien upon the property of Borrower
and (iii) all other Indebtedness which, if unpaid, could reasonably be expected
to have a Material Adverse Effect, except such Indebtedness as may in good faith
be contested or disputed, or for which arrangements for deferred payment have
been made, provided that in each such case appropriate reserves are maintained
in accordance with GAAP and otherwise to the reasonable satisfaction of Lender.
(f) USE OF PROCEEDS. Borrower shall use the proceeds of the
Loans only for the respective purposes set forth in Section 2.4.
(g) GENERAL BUSINESS OPERATIONS. Borrower shall (i) preserve
and maintain its corporate existence and all of its rights, privileges and
franchises reasonably necessary to the conduct of its business, (ii) conduct its
business activities in compliance with all Requirements of Law and Contractual
Obligations applicable to such Person, (iii) keep all property useful and
necessary in its business in good working order and condition, ordinary wear and
tear excepted, and (iv) maintain its chief executive office and principal place
of business in Pittsburgh, Pennsylvania unless it shall have given Lender thirty
(30) days' prior written notice of its intent to change the location thereof.
(h) REGISTRATION OF COPYRIGHTS; SOURCE CODE ESCROW. Borrower
shall cause to be registered with the United States Copyright Office within
ninety (90) days of the Closing Date the source code and user manuals for all
software which is significant to the business of Borrower or software the
licensing revenues from which constitute or can reasonably be expected to
constitute in excess of five percent (5%) of the consolidated revenue of
Borrower (collectively and including source code and user manuals, "MATERIAL
SOFTWARE"). On an ongoing basis Borrower will register Material Software and
major revisions of Material Software with the United States Copyright Office.
On or prior to the Closing Date, Borrower shall have delivered to Escrow Agent
pursuant to that certain Escrow Agreement in the form attached hereto as Exhibit
H (the "ESCROW AGREEMENT") a true and correct copy of the source code for the
Material Software. Not less often than quarterly after the Closing Date,
Borrower will deliver copies of the source code for the latest versions of the
Material Software and any new Material Software.
5.2 NEGATIVE COVENANTS. Until the termination of the commitment to
make Loans under this Loan Agreement and the satisfaction in full by Borrower of
all Obligations, and except as otherwise provided in Section 9.3 hereof,
Borrower shall comply, and shall cause compliance, with the following negative
covenants unless Lender shall otherwise consent in writing:
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(a) INDEBTEDNESS. Borrower shall not create, incur, assume or
permit to exist any Indebtedness except for Permitted Indebtedness.
(b) LIENS. Borrower shall not create, incur, assume or permit
to exist any Lien on or with respect to any of its assets or property of any
character, whether now owned or hereafter acquired, except for Permitted Liens.
(c) ASSET DISPOSITIONS. Borrower shall not sell, lease,
transfer, license or otherwise dispose of (collectively, a "TRANSFER") any of
its assets or property, whether now owned or hereafter acquired, except
Transfers in the ordinary course of its business consisting of (i) the sale of
software products pursuant to non-exclusive licenses, (ii) sales of fully
depreciated, worn-out or obsolete equipment, and (iii) other sales of tangible
assets not material to the business of Borrower in an amount not to exceed
Twenty Five Thousand Dollars ($25,000) in any fiscal year.
(d) MERGERS, ACQUISITIONS, ETC. Borrower shall not consolidate
with or merge into any other Person or permit any other Person to merge into it,
or acquire all or substantially all of the assets or capital stock of any other
Person.
(e) INVESTMENTS; SUBSIDIARIES. Borrower shall not make any
Investment except for Permitted Investments. Borrower shall not create, acquire
or permit to exist any Subsidiary.
(f) DIVIDENDS, REDEMPTIONS, ETC. Borrower shall not (i) pay
any dividends or make any distributions on its Equity Securities; (ii) purchase,
redeem, retire, defease or otherwise acquire for value any of its Equity
Securities (other than repurchases by cancellation of indebtedness pursuant to
the terms of employee stock purchase plans, employee restricted stock agreements
or similar arrangements); (iii) return any capital to any holder of its Equity
Securities as such; (iv) make any distribution of assets, Equity Securities,
obligations or securities to any holder of its Equity Securities as such; (v)
set apart any sum for any such purpose; or (vi) unless unanimously approved by
the Board of Directors of Borrower, pay any bonus or bonuses to officers,
directors, employees or consultants of Borrower in an aggregate amount greater
than One Hundred Thousand Dollars ($100,000) in any twelve (12) month period.
(g) ARTICLES OF INCORPORATION. Borrower shall not amend or
otherwise modify its Articles of Incorporation, as amended, except in accordance
with Section 4.7 hereof.
(h) CAPITAL EXPENDITURES. Borrower shall not pay or incur
Capital Expenditures which exceed in aggregate in any fiscal year One Hundred
Thousand Dollars ($100,000) unless the Board of Directors of Borrower shall have
unanimously approved a higher amount.
(i) CHANGE IN BUSINESS. Borrower shall not engage, either
directly or indirectly through Affiliates, in any business substantially
different from its present business.
(j) INDEBTEDNESS PAYMENTS. Borrower shall not (i) prepay,
redeem, purchase, defease or otherwise satisfy in any manner prior to the
scheduled repayment thereof any Indebtedness for borrowed money (other than the
Obligations) or lease obligations, (ii) amend, modify or otherwise change the
terms of any Indebtedness for borrowed money (other than the Obligations) or
lease obligations so as to accelerate the scheduled repayment thereof or (iii)
repay any notes to officers, directors or shareholders (other than the
Obligations).
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(k) SECURITY ISSUANCES. Borrower shall not issue, offer or
sell any Equity Securities of Borrower; provided, however that Borrower may
issue options to employees of Borrower hired after the date of this Loan
Agreement. Such options shall not in the aggregate exceed ten percent (10%)
of the outstanding Equity Securities of Borrower at any given time, on an
as-converted/exercised basis, and each such option will obligate the
optionholder to be bound by the terms of the Pledge Agreement and the
Purchase Options.
(l) ERISA. Neither Borrower nor any ERISA Affiliate shall (i)
adopt or institute any Employee Benefit Plan that is an employee pension benefit
plan within the meaning of section 3(2) of ERISA, (ii) take any action which
will result in the partial or complete withdrawal, within the meanings of
sections 4203 and 4205 of ERISA, from a Multiemployer Plan, (iii) engage or
permit any Person to engage in any transaction prohibited by section 406 of
ERISA or section 4975 of the Code involving any Employee Benefit Plan or
Multiemployer Plan which would subject either Borrower or any ERISA Affiliate to
any tax, penalty or other liability including a liability to indemnify, (iv)
incur or allow to exist any accumulated funding deficiency (within the meaning
of section 412 of the Code or section 302 of ERISA), (v) fail to make full
payment when due of all amounts due as contributions to any Employee Benefit
Plan or Multiemployer Plan, (vi) fail to comply with the requirements of section
4980B of the Code or Part 6 of Title I(B) of ERISA, or (vii) adopt any amendment
to any Employee Benefit Plan which would require the posting of security
pursuant to section 401(a)(29) of the Code, where singly or cumulatively, the
above would have a Material Adverse Effect.
(m) TRANSACTIONS WITH AFFILIATES. Borrower shall not enter
into any Contractual Obligation with any Affiliate or engage in any other
transaction with any Affiliate except upon terms at least as favorable to
Borrower as an arms-length transaction with unaffiliated Persons and unless the
Board of Directors of Borrower shall have unanimously approved such transaction.
(n) TERMINATION OF EMPLOYEES. Borrower shall not terminate the
employment of any of the individuals covered by the Employment Agreements or any
other key employee hired by Borrower after the date hereof.
(o) ACCOUNTING CHANGES. Borrower shall not change (i) its
fiscal year (currently December 31) or (ii) its accounting practices except as
required by GAAP, in which case Borrower shall promptly advise Lender of such
change.
ARTICLE 6. ADDITIONAL LENDER RIGHTS.
6.1 NOTICE OF EVENTS NOT IN ORDINARY COURSE. Borrower shall provide
Lender with written notice at least thirty (30) days prior to the proposed date
of closing of any transaction not in the ordinary course of business involving
an aggregate amount in excess of Fifty Thousand Dollars ($50,000).
6.2 BOARD OF DIRECTORS. Borrower shall have its authorized number of
directors set at five (5) and shall have the Independent Representative serve as
a director at all times. Borrower will use its best efforts to have its Board
of Directors meet once each calendar quarter. In the event that the number of
directors increases to a number greater than five (5), another Independent
Representative shall be appointed such that the number of Independent
Representatives is never less than twenty percent (20%) of the total number of
directors. In addition to the above Independent Representative, Lender's Chief
Financial Officer shall have visitation rights with respect to each meeting of
Borrower's Board of Directors.
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6.3 APPRAISAL OF MATERIAL SOFTWARE. From time to time during the term
of this Agreement, Lender may request an independent appraisal of the value of
the Material Software. Borrower shall use its best efforts to cooperate with
Lender in conducting appraisals of the Material Software. Such appraisals shall
be conducted by an independent appraisal firm selected by Lender. Lender shall
pay any and all expenses of such appraisal firm.
6.4 ADDITIONAL ACTIONS IN CONNECTION WITH BORROWER'S STOCK OPTION
PLAN. During the term of this Agreement and for so long thereafter as the
Purchase Options remain exercisable, Borrower shall take such actions as
Lender or its counsel may request from time to time to provide that (i) the
authorized option pool under the Stock Option Plan does not exceed ten
percent (10%) of the outstanding Equity Securities of Borrower at any given
time, on an as-converted/exercised basis, and (ii) that each share issued
upon exercise of an option granted thereunder, as a condition precedent to
issuance of such share, is subject to a pledge agreement and an option
agreement on terms and conditions substantially identical to the Pledge
Agreement and the Purchase Options.
ARTICLE 7. EVENTS OF DEFAULT.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Loan Agreement and the Note;
provided, however that if an Event of Default as specified in this Section 7.1
results from the unintentional acts or omissions of Borrower, and Borrower
immediately notifies Lender as soon as it becomes aware of any such
unintentional act or omission and otherwise undertakes to use its best efforts
to cure such Event of Default, it shall not be deemed an Event of Default for
purposes of Section 7.2, unless such Event of Default is not and cannot be cured
within thirty (30) days and has a Material Adverse Effect:
(a) FAILURE TO PAY. Borrower shall fail to pay (i) when due
any principal payment on the due date hereunder or (ii) any interest or other
payment required under the terms of this Loan Agreement or any other Loan
Document on the date due and such payment shall not have been made within five
(5) days; or
(b) BREACHES OF CERTAIN COVENANTS. Borrower shall fail to
observe or perform any covenant, obligation, condition or agreement set forth in
Section 5.1(f) or Section 5.2; or
(c) BREACHES OF OTHER COVENANTS. Borrower shall fail to
observe or perform any other covenant, obligation, condition or agreement
contained in this Loan Agreement or the other Loan Documents (other than those
specified in Sections 7.1(a) and 7.1(b)) and (i) such failure shall continue for
fifteen (15) days, or (ii) if such failure is not curable within such fifteen
(15) day period, but is reasonably capable of cure within forty-five (45) days,
either (A) such failure shall continue for forty-five (45) days or (B) Borrower
shall not have commenced a cure in a manner reasonably satisfactory to Lender
within the initial fifteen (15) day period; or
(d) REPRESENTATIONS AND WARRANTIES. Any representation,
warranty, certificate, or other statement (financial or otherwise) made or
furnished by or on behalf of Borrower to Lender in writing in connection with
this Loan Agreement or any of the other Loan Documents, or as an inducement to
Lender to enter into this Loan Agreement, shall be false, incorrect, incomplete
or misleading in any material respect when made or furnished; or
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(e) OTHER PAYMENT OBLIGATIONS. Borrower shall (A)(i) fail to
make any payment when due under the terms of any bond, debenture, note or other
evidence of Indebtedness to be paid by such Person (excluding this Loan
Agreement and the other Loan Documents but including any other evidence of
Indebtedness of Borrower to Lender) and such failure shall continue beyond any
period of grace provided with respect thereto, or (ii) default in the observance
or performance of any other agreement, term or condition contained in any such
bond, debenture, note or other evidence of Indebtedness, and (B) the effect of
such failure or default is to cause, or permit the holder or holders thereof to
cause Indebtedness in an aggregate amount of Fifty Thousand Dollars ($50,000) or
more to become due prior to its stated date of maturity; or
(f) VOLUNTARY BANKRUPTCY OR INSOLVENCY PROCEEDINGS. Borrower
shall (i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of its
property, (ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v)
become insolvent (as such term may be defined or interpreted under any
applicable statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it, or (vii) take any action for the purpose of effecting any
of the foregoing; or
(g) INVOLUNTARY BANKRUPTCY OR INSOLVENCY PROCEEDINGS.
Proceedings for the appointment of a receiver, trustee, liquidator or custodian
of Borrower or of all or a substantial part of the property thereof, or an
involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to Borrower or the debts thereof under any bankruptcy,
insolvency or other similar law now or hereafter in effect shall be commenced
and an order for relief entered or such proceeding shall not be dismissed or
discharged within sixty (60) days of commencement; or
(h) JUDGMENTS. A final judgment or order for the payment of
money in excess of Fifty Thousand Dollars ($50,000) (exclusive of amounts
covered by insurance issued by an insurer not an Affiliate of Borrower) shall be
rendered against Borrower and the same shall remain undischarged for a period of
thirty (30) days during which execution shall not be effectively stayed, or any
judgment, writ, assessment, warrant of attachment, or execution or similar
process shall be issued or levied against a substantial part of the property of
Borrower and such judgment, writ, or similar process shall not be released,
stayed, vacated or otherwise dismissed within thirty (30) days after issue or
levy; or
(i) LOAN DOCUMENTS. Any Loan Document or any material term
thereof shall cease to be, or be asserted by Borrower not to be, a legal, valid
and binding obligation of Borrower enforceable in accordance with its terms or
if the Liens of Lender in any of the assets of Borrower shall cease to be or
shall not be valid, first priority perfected Liens or Borrower shall assert that
such Liens are not valid, first priority and perfected Liens; or
(j) ERISA. Any Reportable Event occurs which constitutes
grounds for the termination of any Employee Benefit Plan by the PBGC or for the
appointment of a trustee to administer any Employee Benefit Plan, or any
Employee Benefit Plan shall be terminated within the meaning of Title IV of
ERISA or a trustee shall be appointed to administer any Employee Benefit Plan;
or
(k) SALES OF COMPANY SECURITIES. A Sale or offer of any Equity
Securities of Borrower; or
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(l) LOSS OF EMPLOYMENT OF KEY INDIVIDUALS. The termination of
employment of any of the employees executing the Employment Agreements, either
at the election of the employee or Borrower, except by reason of the death or
continued disability of such employee, or a Material Reduction in Employment
with respect to any of the employees executing the Employment Agreements; or
(m) MATERIAL ADVERSE EFFECT. One or more conditions exist or
events have occurred which could reasonably indicate, or reasonably result in, a
Material Adverse Effect.
7.2 RIGHTS OF LENDER UPON DEFAULT.
(a) Except for an Event of Default covered by Section 7.2(b),
upon the occurrence or existence of any Event of Default (other than an Event of
Default referred to in Sections 7.1(f) and 7.1(g)) and at any time thereafter
during the continuance of such Event of Default, Lender may, by written notice
to Borrower, declare all outstanding Obligations payable by Borrower hereunder
to be immediately due and payable without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived, anything
contained herein or in the Note to the contrary notwithstanding. Upon the
occurrence or existence of any Event of Default described in Sections 7.1(f) and
7.1(g), immediately and without notice, all outstanding Obligations payable by
Borrower hereunder shall automatically become immediately due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the Note to
the contrary notwithstanding.
(b) FORECLOSURE ON COLLATERAL FOR INTENTIONAL BREACH. If an
Event of Default is caused by the intentional breach by Borrower of any of the
covenants contained in Section 5.2, Borrower acknowledges and agrees that Lender
may foreclose on the Collateral and Lender shall have no duty to, and Borrower
hereby waives any right that it may have to require Lender to, account to
Borrower for any surplus proceeds resulting from any such foreclosure.
(c) ADDITIONAL REMEDIES. In addition to the foregoing
remedies, upon the occurrence or existence of any Event of Default, Lender may
exercise any other right, power or remedy granted to it by the Loan Documents,
including without limitation exercise of the Purchase Options, or otherwise
permitted to it by law, either by suit in equity or by action at law, or both.
ARTICLE 8. CONFIDENTIAL INFORMATION.
Each of Lender and Borrower agree not to use any Confidential Information
of the other party disclosed to it, for its own use or use by any other Person
or for any purpose except to carry out and perform its obligations under
agreements between Borrower and Lender, and not to disclose any such
Confidential Information except to employees (or consultants subject to
confidentiality provisions similar to this Article 8) who are required to have
such information in order to carry out and perform such obligations. Borrower
and Lender will take all reasonable measures to protect the secrecy and avoid
disclosure or use of Confidential Information in order to prevent it from
entering the public domain or possession of Persons other than those Persons
authorized hereunder to have any such information, which measures shall include,
without limitation, the highest degree of care that each utilizes to protect its
own confidential information of a similar nature. Either party shall notify the
affected party promptly in writing of any misuse or misappropriation of
Confidential Information which may come to such party's attention.
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For purposes of this section, "Confidential Information" means (a) the
terms of this Loan Agreement and the other Loan Documents and accompanying
transactions, as well as (b) any proprietary information, technical data, trade
secrets or know-how, including, without limitation, research, product plans,
products, services, customers, markets, software, developments, inventions,
processes, formulae, technology, designs, drawings, engineering, hardware
configuration information, marketing, finances or other business or
technological information disclosed by either party to the other either directly
or indirectly. "Confidential Information" of a disclosing party does not
include any information which: (i) is known to the receiving party at the time
of disclosure; (ii) has become publicly known through no wrongful act of the
receiving party; (iii) has been rightfully received by the receiving party from
a third party without restriction on disclosure and without breach of any
agreement with the disclosing party; (iv) has been independently developed by
the receiving party as evidenced by appropriate documentation; (v) has been
approved for release by written authorization executed by an authorized officer
of the non-disclosing party; (vi) is required to be disclosed by the receiving
party pursuant to a Requirement of Law (including without limitation filing the
Loan Documents as exhibits to Lender's periodic reports required under the U.S.
securities laws); or (vii) (A) is not provided in writing or on magnetic media,
or (B) if provided orally, is not confirmed in writing to be confidential within
fifteen (15) days after disclosure. Notwithstanding the foregoing, Borrower may
disclose generally to potential customers of Borrower the existence of a
collaborative relationship between Borrower and Lender, where such disclosure
does not include disclosure of any of the terms of this Loan Agreement or the
other Loan Documents. Should Borrower wish to disclose the specific terms of
this Loan Agreement or the other Loan Documents to a potential investor or
investors, it shall first obtain written consent to such disclosure from Lender,
which consent shall not be unreasonably withheld with respect to bona fide
potential investors. Notwithstanding the foregoing, Lender may issue a press
release with respect to the transactions contemplated hereby to the extent it
deems such disclosure necessary or advisable.
Each party acknowledges that the other's Confidential Information is
unique property of extreme value to the other party, and that unauthorized use
or disclosure thereof would cause the other party irreparable harm that could
not be compensated by monetary damages. Accordingly, each party agrees that the
other will be entitled to injunctive and preliminary relief to remedy any actual
or threatened unauthorized use or disclosure of the other party's Confidential
Information.
Nothing in this Article 8 is intended to supersede any existing agreement
between the parties under which confidential technical or market information has
or may be given by one party to the other. As to matters not covered by such
existing agreements, this Article 8 shall control in the absence of any specific
agreement to the contrary.
ARTICLE 9. MISCELLANEOUS.
9.1 NOTICES. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Lender or Borrower under this Agreement or the other Loan Documents shall be in
writing and telecopied, mailed or delivered to each party at its telecopier
number or address set forth below (or to such other telecopier number or address
for any party as indicated in any notice given by that party to the other
party). All such notices and communications shall be effective (a) when sent by
Federal Express or other overnight service of recognized standing, on the
Business Day following the deposit with such service; (b) when mailed by
registered or certified mail, first class postage prepaid and addressed as
aforesaid through the United States Postal Service, upon receipt; (c) when
delivered by hand, upon delivery; and
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(d) when telecopied, upon confirmation of receipt; PROVIDED, HOWEVER, that
any notice delivered to Lender under Article 2 shall not be effective until
received by Lender.
Lender: Summit Design, Inc.
9305 S.W. Gemini Drive
Beaverton, OR 97008-7158
Attn: Chief Financial Officer
Telephone: (503) 643-9281
Telecopier: (503) 646- 9320
Borrower: Dasys, Inc.
3547 Shadeland Avenue
Pittsburgh, PA 15212
Attn: Chief Executive Officer
Telephone:(412)
Telecopier: (412)
9.2 EXPENSES. Each party shall bear its own expenses with respect to
the preparation, execution and delivery of this Agreement and the Loan
Documents; provided, however, that Borrower agrees that any fees and expenses
incurred by Borrower in excess of $40,000 shall not be eligible to be paid with
the proceeds of any Loan made hereunder. Borrower shall pay on demand all
reasonable fees and expenses, including reasonable attorneys' fees and expenses,
incurred by Lender with respect to the exercise of its duties under this
Agreement and the other Loan Documents or with respect to any amendments or
waivers hereof requested by Borrower or in the enforcement or attempted
enforcement of any of the Obligations or in preserving any of Lender's rights
and remedies (including, without limitation, all such fees and expenses incurred
in connection with any "workout" or restructuring affecting the Loan Documents
or the Obligations or any bankruptcy or similar proceeding involving Borrower).
9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS. All
representations and warranties made by Borrower hereunder shall remain in effect
for so long as any Loans are outstanding. All covenants made by Borrower
hereunder shall remain in effect for so long as any Loans are outstanding;
provided, however that the rights of Lender contained in Section 6 and the
covenants made by Borrower in Section 5.2, except for those in Section 5.2(a),
(l) and (j), shall survive the termination of this Agreement and remain in
effect for the term of the Purchase Options granted to Lender in connection with
this Agreement.
9.4 INDEMNIFICATION.
(a) Borrower shall indemnify, defend, and hold harmless Lender
and each of Lender's Subsidiaries, Affiliates, directors, officers, employees
and agents (collectively, the "INDEMNIFIED PERSONS"), and reimburse the
Indemnified Persons for, from, and against all demands, claims, actions or
causes of action, assessments, losses, damages, liabilities, costs and expenses,
including, without limitation, interest, penalties and reasonable attorneys'
fees, disbursements and expenses, arising out of or in connection with (i) any
breach by Borrower of any of the representations and warranties contained in
this Loan Agreement or the other Loan Documents, (ii) any failure by Borrower to
perform any covenant, undertaking or obligation hereunder, or (iii) any matter,
action or failure to act by the Indemnified Persons arising out of or relating
to thee Loan Documents, including without limitation any use by Borrower of any
proceeds of the Loans, except to the extent
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such liability arises from the gross negligence or willful misconduct of the
Indemnified Person seeking indemnity hereunder.
(b) If any action or claim shall be brought or asserted
against an Indemnified Person under this Section 9.4 in respect of which
indemnity may be sought from Borrower under this Section 9.4, the Indemnified
Person shall promptly notify Borrower who shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all reasonable expenses; except that any
delay or failure to so notify Borrower shall only relieve the Borrower of its
obligation hereunder to the extent, if at all, that it is prejudiced by
reason of such delay or failure. The Indemnified Person shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the Indemnified Party unless (i) the employment thereof shall have been
specifically directed and required by the Borrower, (ii) the Borrower shall
have elected not to assume the defense and employ counsel, or (iii) there
exists an actual or potential conflict of interest between Lender and
Borrower which, in the reasonable judgment of counsel to Lender, makes
employing separate counsel advisable. Without the prior written consent of
the Indemnified Party, the Borrower shall have no right to settle or
compromise on any nonmonetary matter. This Section 9.4, in its entirety,
shall survive termination of this Loan Agreement
9.5 WAIVERS; AMENDMENTS. Any term, covenant, agreement or condition
of this Agreement or any other Loan Document may be amended or waived if such
amendment or waiver is in writing and is signed by Borrower and Lender. No
failure or delay by Lender in exercising any right hereunder shall operate as a
waiver thereof or of any other right nor shall any single or partial exercise of
any such right preclude any other further exercise thereof or of any other
right. A waiver or consent given hereunder shall be effective only if in
writing and in the specific instance and for the specific purpose for which
given.
9.6 SUCCESSORS AND ASSIGNS. This Agreement and the other Loan
Documents shall be binding upon and inure to the benefit of Borrower, Lender,
all future holders of the Note and their respective successors and permitted
assigns, except that neither Lender nor Borrower may assign or transfer any of
its rights or obligations under any Loan Document without the prior written
consent of the other party; provided, however that a change in control of equity
ownership of Lender or other corporate proceeding whereby substantially all of
the assets or shares of Lender are sold or transferred to a third party shall
not be deemed to be an assignment for purposes of this Loan Agreement or any of
the Loan Documents. All references in this Agreement to any Person shall be
deemed to include all successors and assigns of such Person. Borrower shall
keep at its principal office a register in which Borrower shall provide for the
registration and transfer of the Note. Upon surrender for registration of
transfer of a Note at the principal office of Borrower, Borrower shall execute
and deliver a new Note of like tenor and principal amount registered in the name
of such assign. Prior to due presentment for registration of transfer to an
assign, Borrower may treat the Person in whose name such Note is registered as
the owner thereof for purposes of receiving payments and for all other purposes.
9.7 SET-OFF. In addition to any rights and remedies of Lender
provided by law, Lender shall have the right, without prior notice to Borrower,
any such notice being expressly waived by Borrower to the extent permitted by
applicable law, upon the occurrence and during the continuance of a Default or
an Event of Default, to set-off and apply against any indebtedness, whether
matured or unmatured, of Borrower to Lender (including, without limitation, the
Obligations), any amount owing from Lender to Borrower. The aforesaid right of
set-off may be exercised by Lender against Borrower or against any trustee in
bankruptcy, debtor-in-possession, assignee for the benefit of creditors,
receiver or execution, judgment or attachment creditor of Borrower or against
anyone else claiming through or against Borrower or such trustee in bankruptcy,
debtor-in-possession,
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assignee for the benefit of creditors, receiver, or execution, judgment or
attachment creditor, notwithstanding the fact that such right of set-off
shall not have been exercised by Lender prior to the occurrence of a Default
or an Event of Default. Lender agrees promptly to notify Borrower after any
such set-off and application made by Lender, PROVIDED that the failure to
give such notice shall not affect the validity of such set-off and
application.
9.8 NO THIRD PARTY RIGHTS. Nothing expressed in or to be implied from
this Agreement or any other Loan Document is intended to give, or shall be
construed to give, any Person, other than the parties hereto and thereto and
their permitted successors and assigns, any benefit or legal or equitable right,
remedy or claim under or by virtue of this Agreement or any other Loan Document.
9.9 PARTIAL INVALIDITY. If at any time any provision of this
Agreement is or becomes illegal, invalid or unenforceable in any respect under
the law of any jurisdiction, neither the legality, validity or enforceability of
the remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
9.10 ARBITRATION. If any dispute arises with respect to this Agreement
or the Loan Documents or the transactions contemplated hereby or thereby, then
any party (the "DEMANDING PARTY") may demand, by written notice to each other
party to the dispute (collectively, the "RESPONDING PARTY"), that such issue
shall be settled by binding arbitration to be held in the city where the
Responding Party has its principal corporate office (an "ARBITRATION DEMAND").
All claims shall be settled by three arbitrators in accordance with the
Commercial Arbitration Rules then in effect of the American Arbitration
Association (the "ARBITRATION RULES"). The Demanding Party and the Responding
Party shall each designate one (1) arbitrator within fifteen (15) calendar days
after the delivery of the Arbitration Demand. Such designated arbitrators shall
mutually agree upon and shall designate a third arbitrator. The final decision
of a majority of the arbitrators shall be furnished to Demanding Party and the
Responding Party in writing and shall constitute a conclusive determination of
the issue in question, binding upon all parties and shall not be contested by
any of them. The non-prevailing party shall bear all costs and expenses
associated with such arbitration, including all arbitrators' fees and attorneys'
fees.
9.11 COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the parties have executed this Loan Agreement as of
the date first set forth above.
SUMMIT DESIGN, INC. DASYS, INC.
a Delaware corporation a Pennsylvania corporation
By: /s/ Larry Gerhard By: /s/ David Springer
----------------------------- ----------------------------
Name: Larry Gerhard Name: David Springer
Title: President Title: President
SCHEDULE I
DEFINITIONS
"AFFILIATE" shall mean, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially or as a trustee,
guardian or other fiduciary, five percent (5%) or more of any class of Equity
Securities of such Person, (b) each Person that controls, is controlled by or is
under common control with such Person or any Affiliate of such Person or (c)
each of such Person's officers, directors, joint venturers and partners;
PROVIDED, HOWEVER, that in no case shall Lender be deemed to be an Affiliate of
Borrower for purposes of this Loan Agreement. For the purpose of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.
"AGGREGATE LOAN AMOUNT" shall have the meaning in Section 2.3(b).
"ANNUALIZED REVENUE" shall mean the greater of (A) the product of (i) two
(2), multiplied by (ii) the sum of Net Revenue for each of the past two (2)
fiscal quarters of Borrower, or (B) the sum of Net Revenue for each of the last
four (4) fiscal quarters of Borrower.
"BORROWER" shall have the meaning given to that term in clause (2) of the
introductory paragraph hereof.
"BORROWER'S REPRESENTATIVES" shall mean David Springer and Eric Cooper,
or their respective successors of whom Lender has been notified in writing.
"BUDGET" shall mean, initially the operating plan and budget of Borrower
attached as Schedule IV to this Agreement, and any subsequent operating budget
that has been delivered to the Budget Committee in accordance with Section
5.1(a)(vii) and approved by the Budget Committee in its sole discretion.
"BUDGET COMMITTEE" shall mean a committee composed of three (3) members
of Borrower's Board of Directors, one of whom shall be the Independent
Representative, and Lender's Chief Financial Officer. The Budget Committee
shall have authority to review and approve the Budget.
"BUSINESS DAY" shall mean any day on which commercial banks are not
authorized or required to close in Beaverton, Oregon.
"CAPITAL ASSET" shall mean, with respect to any Person, tangible property
owned or leased (in the case of a Capital Lease) by such Person, or any expense
incurred by any Person that is required by GAAP to be reported as an asset on
such Person's balance sheet.
"CAPITAL EXPENDITURES" shall mean, with respect to any Person and any
period, all amounts expended and Indebtedness incurred or assumed by such Person
during such period for the acquisition of real property and other Capital Assets
(including amounts expended and Indebtedness incurred or assumed in connection
with Capital Leases).
"CAPITALIZED LEASE OBLIGATIONS" shall mean any and all lease obligations
that, in accordance with GAAP, are required to be capitalized on the books of a
lessee.
I-1
"CHARTER DOCUMENTS" shall mean, with respect to any Person, the Articles
or Certificate of Incorporation and Bylaws or any other organizational or
governing documents of such Person, in each case as amended to date.
"CLOSING DATE" shall mean the date on which each of the conditions set
forth in Articles 4 shall have been satisfied or waived in writing and the Loans
are made.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"COLLATERAL" shall mean those assets, interests and Equity Securities
secured by the Security Agreement, the Intellectual Property Security Agreement
and the Pledge Agreement.
"COMMON STOCK" shall mean the common stock of the applicable Person.
"COMMON STOCK HOLDER" shall mean, collectively, any Person and all
Affiliates of such Person, in each case in whose name or for whose benefit
shares of Common Stock are registered or held.
"CONFIDENTIAL INFORMATION" shall have the meaning given to that term in
Article 8.
"CONTRACTUAL OBLIGATION" of any Person shall mean, any indenture, note,
security, deed of trust, mortgage, security agreement, lease, guaranty,
instrument, contract, agreement or other form of obligation or undertaking to
which such Person is a party or by which such Person or any of its property is
bound.
"DEFAULT" shall mean any event or circumstance not yet constituting an
Event of Default but which, with the giving of any notice or the lapse of any
period of time or both, would become an Event of Default.
"DISCLOSURE SCHEDULE" shall mean the Disclosure Schedule attached hereto
as Schedule III.
"DISTRIBUTION AGREEMENT" shall have the meaning given in Section 4.1(f).
"DOLLARS" and "$" shall mean the lawful currency of the United States of
America and, in relation to any payment under this Loan Agreement, same day or
immediately available funds.
"DSI DISTRIBUTION AGREEMENT" shall mean that certain Distribution
Agreement dated September 20, 1996, by and between Design Solutions, Inc. and
Borrower.
"EMPLOYEE BENEFIT PLAN" shall mean any employee benefit plan within the
meaning of section 3(3) of ERISA maintained or contributed to by Borrower or any
ERISA Affiliate, other than a Multiemployer Plan.
"ENVIRONMENTAL LAWS" means all Requirements of Law relating to the
protection of human health or the environment, including, without limitation,
(a) all Requirements of Law, pertaining to reporting, licensing, permitting,
investigation, and remediation of emissions, discharges, releases, or threatened
releases of hazardous materials, chemical substances, pollutants, contaminants,
or hazardous or toxic substances, materials or wastes whether solid, liquid, or
gaseous in nature, into the air, surface water, groundwater, or land, or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of chemical substances, pollutants,
contaminants, or hazardous or toxic substances, materials, or wastes, whether
solid, liquid, or gaseous in nature; and (b) all Requirements of Law pertaining
to the protection of the health and safety of employees or the public.
I-2
"EQUITY SECURITIES" of any Person shall mean (a) all common stock,
preferred stock, participations, shares, partnership interests or other equity
interests in and of such Person (regardless of how designated and whether or not
voting or non-voting) and (b) all warrants, options and other rights to acquire
any of the foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may from time to time be amended or supplemented, including any
rules or regulations issued in connection therewith.
"ERISA AFFILIATE" shall mean any Person which is treated as a single
employer with Borrower under section 414 of the Code.
"ESCROW AGENT" shall mean Data Securities International, Inc.
"ESCROW AGREEMENT" shall have the meaning given in Section 5.1(h).
"EVENT OF DEFAULT" shall have the meaning given to that term in Section
7.1.
"FAIR MARKET VALUE OF BORROWER" shall mean on the date of any
determination, one (1) times the Annualized Revenue of Borrower. For example,
if Fair Market Value of Borrower were to be calculated as of March 1, 2000, Fair
Market Value of Borrower would be equal to the greater of (A) the product of (i)
two (2), multiplied by (ii) the sum of Net Revenue in the fiscal quarter ended
September 30, 1999 plus Net Revenue in the fiscal quarter ended December 31,
1999, or (B) the sum of Net Revenue in each of the fiscal quarters ended March
31, 1999, June 30, 1999, September 30, 1999 and December 31, 1999.
"FAIR MARKET VALUE OF LENDER COMMON STOCK" shall mean the average of the
last sale prices of Lender's Common Stock on the Nasdaq National Market for ten
(10) trading days immediately preceding the relevant date of determination.
"FINANCIAL STATEMENTS" shall mean, with respect to any accounting period
for any Person, statements of income and of cash flow of such Person for such
period, and balance sheets of such Person as of the end of such period, setting
forth in each case in comparative form figures for the corresponding period in
the preceding fiscal year if such period is less than a full fiscal year or, if
such period is a full fiscal year, corresponding figures from the preceding
fiscal year, all prepared in reasonable detail and in accordance with GAAP.
Unless otherwise indicated, each reference to Financial Statements of any Person
shall be deemed to refer to Financial Statements prepared on a consolidated
basis.
"FULLY DILUTED BASIS" shall mean, as of any date, with respect to
calculations involving the capital stock of any Person, making the assumption
that all convertible securities of such Person then outstanding were converted
on such date and that all options, warrants and similar rights to acquire shares
of capital stock of such Person were exercised on such date.
"GAAP" shall mean generally accepted accounting principles and practices
as in effect in the United States of America from time to time, consistently
applied.
"GM AGREEMENT" shall mean that certain Software License Agreement dated
January 16, 1996, as amended by Amendment dated June 26, 1997, by and between
General Motors Corporation and Borrower.
I-3
"GOVERNMENTAL AUTHORITY" shall mean any domestic or foreign national,
state or local government, any political subdivision thereof, any department,
agency, authority or bureau of any of the foregoing, or any other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GOVERNMENTAL CHARGES" shall mean all taxes, levies, assessments, fees,
claims or other charges imposed by any Governmental Authority upon or relating
to (i) Borrower, (ii) the Loans, (iii) employees, payroll, income or gross
receipts of Borrower, (iv) the ownership or use of any of its assets by
Borrower, or (v) any other aspect of the business of Borrower.
"GOVERNMENTAL RULE" shall mean any law, rule, regulation, ordinance,
order, code interpretation, judgment, decree, directive, guidelines, policy or
similar form of decision of any Governmental Authority.
"GUARANTY OBLIGATIONS" shall mean, with respect to any Person, any direct
or indirect liability of that Person with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary obligations") of
another Person (the "primary obligor"), including any obligation of that Person,
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligations or any property constituting direct or indirect security
therefor, or (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, or (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (d) otherwise to assure or hold harmless the holder of any such
primary obligation against loss in respect thereof.
"INDEBTEDNESS" of any Person shall mean and include the aggregate amount
of, without duplication (a) all obligations of such Person for borrowed money,
(b) all obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, (c) all obligations of such Person to pay the
deferred purchase price of property or services (other than accounts payable
incurred in the ordinary course of business determined in accordance with GAAP),
(d) all Capitalized Lease Obligations of such Person, (e) all obligations or
liabilities of others secured by a lien on any asset of such Person, whether or
not such obligation or liability is assumed, (f) all Guaranty Obligations of
such Person; (g) all obligations created or arising under any conditional sale
or other title retention agreement with respect to property acquired by such
Person (even if the rights and remedies of the seller or lender under such
agreement upon an event of default are limited to repossession or sale of such
property), (h) net exposure under interest rate interest rate swap, currency
swap, currency swap, forward, cap, floor or other similar contract that is not
entered to in connection with a bona fide hedging operation that provides
offsetting benefits to such Person, which agreements shall be marked to marked
on a current basis, (i) all reimbursement and other payment obligations,
contingent or otherwise, in respect of letters of credit.
"INDEMNIFIED PERSONS" has the meaning given in Section 9.4.
"INDEPENDENT REPRESENTATIVE" shall mean an individual not affiliated with
Borrower, either directly or indirectly, elected by Borrower to serve as a
director on Borrower's Board of Directors.
"INVESTMENT" of any Person shall mean any loan or advance of funds by
such Person to any other Person (other than advances to employees of such Person
for moving and travel expense, drawing accounts and similar expenditures in the
ordinary course of business), any purchase or other acquisition of any Equity
Securities or
I-4
Indebtedness of any other Person, any capital contribution by such Person to
or any other investment by such Person in any other Person (including,
without limitation, any Indebtedness incurred by such Person of the type
described in CLAUSES (b) AND (c) of the definition of "Indebtedness" on
behalf of any other Person); PROVIDED, HOWEVER, that Investments shall not
include accounts receivable or other indebtedness owed by customers of such
Person which are current assets and arose from sales in the ordinary course
of such Person's business.
"LENDER" shall have the meaning given in clause 1 of the introductory
paragraph hereof.
"LENDER COMMON STOCK" shall mean the common stock of Lender, or such
other publicly traded equity securities of any successor of Lender.
"LIEN" shall mean, with respect to any property, any security interest,
mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such
property or the income therefrom, including, without limitation, the interest of
a vendor or lessor under a conditional sale agreement, Capital Lease or other
title retention agreement, or any agreement to provide any of the foregoing, and
the filing of any financing statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction.
"LOAN" shall have the meaning given in Section 2.1.
"LOAN AGREEMENT" shall mean this Loan Agreement.
"LOAN DOCUMENTS" shall mean and include this Loan Agreement, the Note,
the Security Agreement, the Pledge Agreement, the Intellectual Property Security
Agreement, the Purchase Options, the Distribution Agreement and all other
documents, instruments and agreements delivered to Lender in connection with
this Loan Agreement.
"LOANS" shall have the meaning given in Section 2.1.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a) the
business, assets, operations, prospects or financial or other condition of
Borrower, taken as a whole; (b) the ability of Borrower to pay or perform the
Obligations in accordance with the terms of this Loan Agreement and the other
Loan Documents and to avoid an Event of Default under any Loan Document; or (c)
the rights and remedies of Lender under this Loan Agreement, the other Loan
Documents or any related document, instrument or agreement.
"MATERIAL REDUCTION IN EMPLOYMENT" shall be deemed to occur with respect
to an employee of Borrower if such employee ceases to work at least 40 hours per
week for a period of three (3) consecutive weeks, excepting accrued vacation
time and absence due to a bona fide illness. Furthermore, the absence of an
employee for up to one (1) month due to family emergencies or up to two (2)
months for pregnancy shall not be deemed a Material Reduction in Employment,
provided that such an absence does not occur more frequently than once in any
given year.
"MATERIAL SOFTWARE" shall have the meaning given in Section 5.1(h).
"MATURITY" shall mean, with respect to any Loan, interest, fees or other
amount payable by Borrower under this Loan Agreement or the other Loan
Documents, the date on which such Loan, interest, fee or other amount becomes
due, whether upon the stated maturity or due date, upon acceleration or
otherwise.
I-5
"MATURITY DATE" shall have the meaning given in Section 2.3(a).
"MONTHLY NOTICE" shall have the meaning given in Section 2.1(b)(i).
"MULTIEMPLOYER PLAN" shall mean any multiemployer plan within the meaning
of section 3(37) of ERISA maintained or contributed to by Borrower or any ERISA
Affiliate.
"NET REVENUE" shall mean Lender's gross sales attributable to Borrower's
Products (as such term is defined in the Distribution Agreement) minus
distributor discounts and commissions.
"NOTE" shall mean the Note in the form attached hereto as Exhibit A.
"NOTICE OF BORROWING" shall have the meaning given in Section 2.1.
"OBLIGATIONS" shall mean and include all loans, advances, debts,
liabilities, and obligations, howsoever arising, owed by Borrower to Lender of
every kind and description (whether or not evidenced by any note or instrument
and whether or not for the payment of money), direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising pursuant to
the terms of this Loan Agreement or any of the other Loan Documents, including,
without limitation, all interest, fees, charges, expenses, reasonable attorneys'
fees and accountants' fees and expenses chargeable to Borrower or payable by
Borrower hereunder or thereunder.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PERMITTED INDEBTEDNESS" shall mean and include:
(a) Indebtedness of Borrower to Lender;
(b) Indebtedness of Borrower under Capital Leases and operating
leases to the extent that rental payments under such leases do not
exceed, in the aggregate, One Hundred Thousand Dollars ($100,000) in any
fiscal year;
(c) Indebtedness arising from the endorsement of instruments in
the ordinary course of business; and
(d) Other Indebtedness of Borrower not exceeding Fifty Thousand
Dollars ($50,000) at any time.
"PERMITTED INVESTMENTS" shall mean and include:
(a) Deposits with commercial banks organized under the laws of
the United States or a state thereof to the extent such deposits are
fully insured by the Federal Deposit Insurance Corporation;
(b) Investments in marketable obligations issued or fully
guaranteed by the United States and maturing not more than one (1) year
from the date of issuance; and
(c) Investments in open market commercial paper rated at least
"A1" or "P1" or higher by a national credit rating agency and maturing
not more than one (1) year from the creation thereof.
I-6
(d) Investments pursuant to or arising under currency
agreements or interest rate agreements entered into in the ordinary
course of business;
(e) Investments consisting of deposit accounts of Borrower in
which Lender has a perfected security interest; and
(f) Other Investments aggregating not in excess of Fifty
Thousand Dollars ($50,000) at any time.
"PERMITTED LIENS" shall mean and include:
(a) Liens for taxes or other Governmental Charges not at the
time delinquent or thereafter payable without penalty or being contested
in good faith, provided provision is made to the reasonable satisfaction
of Lender for the eventual payment thereof if subsequently found payable;
(b) Liens of carriers, warehousemen, mechanics, materialmen,
vendors, and landlords incurred in the ordinary course of business for
sums not overdue or being contested in good faith, provided provision is
made to the reasonable satisfaction of Lender for the eventual payment
thereof if subsequently found payable;
(c) Deposits under workers' compensation, unemployment
insurance and social security laws or to secure the performance of bids,
tenders, contracts (other than for the repayment of borrowed money) or
leases, or to secure statutory obligations of surety or appeal bonds or
to secure indemnity, performance or other similar bonds in the ordinary
course of business;
(d) Liens arising out of a judgment or award in circumstances
not constituting an Event of Default under Section 10.1(h);
(e) Liens securing obligations under a Capital Lease if such
lease is Permitted Indebtedness pursuant to clause (c) of the definition
thereof and such Liens do not extend to property other than the property
leased under such Capital Lease; and
(f) Liens upon any equipment acquired or held by Borrower to
secure the purchase price of such equipment or indebtedness incurred
solely for the purpose of financing the acquisition of such equipment;
(g) Easements, reservations, rights of way, restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances affecting real property in a manner not materially or
adversely affecting the value or use of such property;
(h) Liens on insurance proceeds in favor of insurance companies
to secure the financing of insurance premiums;
(i) Liens which constitute rights of setoff of a customary
nature or bankers' Liens with respect to amounts on deposit, whether
arising by operation of law or by contract, in connection with
arrangements entered into with banks in the ordinary course of business
not relating to a financing transaction; and
I-7
(j) Liens in favor of Lender.
"PERSON" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, a limited
liability company, an unincorporated association, a joint venture or other
entity or a Governmental Authority.
"PRIME RATE" shall mean the per annum rate publicly announced by
Citibank, N.A., from time to time in New York, New York.
"PURCHASE OPTION" shall mean options to be executed and delivered by
each holder of Equity Securities of Borrower on or prior to the initial
Closing Date. Each Purchase Option shall be made in favor of Lender and
shall, among other things, entitle Lender to purchase such Equity Securities
at the Fair Market Value of Borrower on the date of exercise (on a pro rata
percentage for the Equity Securities represented by each such Purchase
Option). The Purchase Options shall become exercisable on January 1, 2000
and shall have a term of two (2) years thereafter; provided that the
exercisability of the Purchase Options shall accelerate upon (i) an Event of
Default under the Loan Agreement, or (ii) the prepayment of the Aggregate
Loan Amount.
"REPORTABLE EVENT" shall have the meaning given to that term in ERISA and
applicable regulations thereunder.
"REQUIREMENT OF LAW" applicable to any Person shall mean (a) the Charter
Documents of such Person, (b) any Governmental Rule applicable to such Person,
(c) any license, permit, approval or other authorization granted by any
Governmental Authority to or for the benefit of such Person and (d) any
judgment, decision or determination of any Governmental Authority or arbitrator,
in each case applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SOFTWARE" shall mean all of Borrower's proprietary products.
"SUBSIDIARY" of any Person shall mean (a) any corporation of which more
than 50% of the issued and outstanding Equity Securities having ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned or controlled by such
Person, by such Person and one or more of its other Subsidiaries or by one or
more of such Person's other Subsidiaries, (b) any partnership, joint venture, or
other association of which more than 50% of the equity interest having the power
to vote, direct or control the management of such partnership, joint venture or
other association is at the time owned and controlled by such Person, by such
Person and one or more of the other Subsidiaries or by one or more of such
Person's other subsidiaries and (c) any other Person included in the Financial
Statements of such Person on a consolidated basis. Any reference to a
Subsidiary without designation of the ownership of such Subsidiary shall be
deemed to refer to a Subsidiary of Borrower.
I-8
SCHEDULE II
NOTICE OF BORROWING
_____________________, 199__
Summit Design, Inc.
9305 S.W. Gemini Drive
Beaverton, OR 97008-7158
Attn: Chief Financial Officer
1. Reference is made to that certain Loan Agreement, dated as
of July 16, 1997 (the "LOAN AGREEMENT"), between Dasys, Inc. ("BORROWER") and
Summit Design, Inc. ("LENDER"). Unless otherwise indicated, all terms defined
in the Loan Agreement have the same respective meanings when used herein.
2. Pursuant to SECTION 2.1 of the Loan Agreement, Borrower
hereby requests a Loan upon the following terms:
(a) The principal amount of the requested Loan is to be
$__________;
(b) The date of the requested Loan is to be __________,
199 .
3. Borrower hereby certifies to Lender that, on the date of
such borrowing and after giving effect to the requested borrowing:
(a) The expenses for the calendar quarter of Borrower
ending ___________, 199_ are estimated to be approximately
$___________.
(b) The representations and warranties set forth in
Article 3 of the Loan Agreement will be true and correct as if
made on such date;
(c) No Event of Default or Default has occurred and is
continuing; and
(d) Each of the Loan Documents remains in full force and
effect.
4. Please disburse the proceeds of the requested Loan to
________________________.
[The remainder of this page is intentionally left blank.]
IN WITNESS WHEREOF, Borrower has executed this Notice of Borrowing
on the date set forth above.
DASYS, INC.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
ACKNOWLEDGED AND APPROVED:
BUDGET COMMITTEE
By:
--------------------
Name: C. Albert Koob
Title: Chief Financial Officer, Lender
By:
---------------------------
Name:
Title: Chairman, Board of Directors, Borrower
SCHEDULE III
DISCLOSURE SCHEDULE
SCHEDULE IV
BUDGET
EXHIBIT A
NOTE
$2,500,000
FOR VALUE RECEIVED, Dasys, Inc., a Pennsylvania corporation ("BORROWER"),
agrees to pay to the order of Summit Design, Inc., a Delaware corporation
("LENDER"), at Lender's principal office, the principal sum of Two Million Five
Hundred Thousand Dollars ($2,500,000) or such lower amount as shall equal the
aggregate outstanding balance of the Loans, at such times as are set forth in,
and together with interest from the date hereof on the unpaid principal balance
thereof at the rates and on the dates provided in, the Loan Agreement dated as
of July 16, 1997, between Lender and Borrower (the "LOAN AGREEMENT"). If
Borrower shall have paid any interest on this Note in excess of that permitted
by law, then it is the express intent of Borrower and Lender that all excess
amounts previously collected by Borrower be applied to reduce the principal
balance of this Note, and the provisions hereof immediately be deemed reformed
and the amounts thereafter collectable as interest hereunder be reduced, without
the necessity of the execution of any new document, so as to comply with the
then applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder.
Borrower shall make all payments hereunder to Lender as indicated in the
Loan Agreement, in lawful money of the United States and in same day or
immediately available funds.
This Note is the Note referred to in the Loan Agreement. This Note is
subject to the terms of the Loan Agreement, including the rights of prepayment
and the rights of acceleration of maturity. Terms used herein have the meanings
assigned to those terms in the Loan Agreement, unless otherwise defined herein.
THE OBLIGATIONS DUE UNDER THIS NOTE ARE SECURED BY A SECURITY AGREEMENT,
A STOCK PLEDGE AGREEMENT AND AN INTELLECTUAL PROPERTY SECURITY AGREEMENT, IN
EACH CASE DATED AS OF THE DATE HEREOF AND EXECUTED BY BORROWER OR THE
SHAREHOLDERS OF BORROWER, AS THE CASE MAY BE, IN FAVOR OF LENDER. ADDITIONAL
RIGHTS OF THE HOLDER OF THIS NOTE ARE SET FORTH IN SUCH AGREEMENTS.
If any action should be undertaken to collect this Note or enforce the
Lender's security interest herein, Borrower agrees to pay all costs and
expenses, including reasonable attorney's fees, incurred in connection with such
action.
Borrower hereby waives notice of presentment, demand, protest or notice
of any other kind. This Note shall be governed by and construed in accordance
with the laws of the State of Delaware.
DASYS, INC.
By:
-----------------------
Name:
-----------------------
Title:
----------------------