Exhibit 10.7

Note: Information in this document marked with “[***]” has been omitted and
filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.

 

WELLS FARGO   REVOLVING LINE OF CREDIT NOTE $15,000,000.00   San Jose,
California   October 31, 2008

FOR VALUE RECEIVED, the undersigned Magma Design Automation, Inc. (“Borrower”)
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”)
at its office at Santa Clara Valley RCBO, 121 Park Center Plaza, Second Floor,
San Jose, CA 95113, or at such other place as the holder hereof may designate,
in lawful money of the United States of America and in immediately available
funds, the principal sum of $15,000,000.00, or so much thereof as may be
advanced and be outstanding, with interest thereon, to be computed on each
advance from the date of its disbursement as set forth herein.

 

1. DEFINITIONS:

  As used herein, the following terms shall have the meanings set forth after
each, and any other term defined in this Note shall have the meaning set forth
at the place defined:

1.1     “Business Day” means any day except a Saturday, Sunday or any other day
on which commercial banks in California are authorized or required by law to
close.

1.2     “Fixed Rate Term” means a period commencing on a Business Day and
continuing for 1, 2 or 3 months, as designated by Borrower, during which all or
a portion of the outstanding principal balance of this Note bears interest
determined in relation to LIBOR; provided however, that no Fixed Rate Term may
be selected for a principal amount less than $100,000.00; and provided further,
that no Fixed Rate Term shall extend beyond the scheduled maturity date hereof.
If any Fixed Rate Term would end on a day which is not a Business Day, then such
Fixed Rate Term shall be extended to the next succeeding Business Day.

1.3     “LIBOR” means the rate per annum (rounded upward, if necessary, to the
nearest whole 1/8 of 1%) determined by dividing Base LIBOR by a percentage equal
to 100% less any LIBOR Reserve Percentage.

(a)    “Base LIBOR” means the rate per annum for United States dollar deposits
quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding
that such rate is quoted by Bank for the purpose of calculating effective rates
of interest for loans making reference thereto, on the first day of a Fixed Rate
Term for delivery of funds on said date for a period of time approximately equal
to the number of days in such Fixed Rate Term and in an amount approximately
equal to the principal amount to which such Fixed Rate Term applies. Borrower
understands and agrees that Bank may base its quotation of the Inter-Bank Market
Offered Rate upon such offers or other market indicators of the Inter-Bank
Market as Bank in its discretion deems appropriate including, but not limited
to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market.

(b)    “LIBOR Reserve Percentage” means the reserve percentage prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
“Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable Fixed Rate Term.

1.4     “Prime Rate” means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank’s base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.

 

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2. INTEREST:

2.1     Interest.  The outstanding principal balance of this Note shall bear
interest (computed on the basis of a 360-day year, actual days elapsed) either
(a) at a fluctuating rate per annum 2.50000% above the Prime Rate in effect from
time to time, or (b) at a fixed rate per annum determined by Bank to be 2.50000%
above LIBOR in effect on the first day of the applicable Fixed Rate Term. When
interest is determined in relation to the Prime Rate, each change in the rate of
interest hereunder shall become effective on the date each Prime Rate change is
announced within Bank. With respect to each LIBOR selection option selected
hereunder, Bank is hereby authorized to note the date, principal amount,
interest rate and Fixed Rate Term applicable thereto and any payments made
thereon on Bank’s books and records (either manually or by electronic entry)
and/or on any schedule attached to this Note, which notations shall be prima
facie evidence of the accuracy of the information noted.

2.2     Selection of Interest Rate Options.  At any time any portion of this
Note bears interest determined in relation to LIBOR, it may be continued by
Borrower at the end of the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Prime Rate, Borrower
may convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At such time as
Borrower requests an advance hereunder or wishes to select a LIBOR option for
all or a portion of the outstanding principal balance hereof, and at the end of
each Fixed Rate Term, Borrower shall give Bank notice specifying: (a) the
interest rate option selected by Borrower; (b) the principal amount subject
thereto; and (c) for each LIBOR selection, the length of the applicable Fixed
Rate Term. Any such notice may be given by telephone (or such other electronic
method as Bank may permit) so long as, with respect to each LIBOR selection,
(i) if requested by Bank, Borrower provides to Bank written confirmation thereof
not later than 3 Business Days after such notice is given, and (ii) such notice
is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate Term, or
at a later time during any Business Day if Bank, at it’s sole option but without
obligation to do so, accepts Borrower’s notice and quotes a fixed rate to
Borrower. If Borrower does not immediately accept a fixed rate when quoted by
Bank, the quoted rate shall expire and any subsequent LIBOR request from
Borrower shall be subject to a redetermination by Bank of the applicable fixed
rate. If no specific designation of interest is made at the time any advance is
requested hereunder or at the end of any Fixed Rate Term, Borrower shall be
deemed to have made a Prime Rate interest selection for such advance or the
principal amount to which such Fixed Rate Term applied.

2.3     Taxes and Regulatory Costs.  Borrower shall pay to Bank immediately upon
demand, in addition to any other amounts due or to become due hereunder, any and
all (a) withholdings, interest equalization taxes, stamp taxes or other taxes
(except income and franchise taxes) imposed by any domestic or foreign
governmental authority and related in any manner to LIBOR, and (b) future,
supplemental, emergency or other changes in the LIBOR Reserve Percentage,
assessment rates imposed by the Federal Deposit Insurance Corporation, or
similar requirements or costs imposed by any domestic or foreign governmental
authority or resulting from compliance by Bank with any request or directive
(whether or not having the force of law) from any central bank or other
governmental authority and related in any manner to LIBOR to the extent they are
not included in the calculation of LIBOR. In determining which of the foregoing
are attributable to any LIBOR option available to Borrower hereunder, any
reasonable allocation made by Bank among its operations shall be conclusive and
binding upon Borrower.

2.4     Payment of Interest.  Interest accrued on this Note shall be payable on
the last day of each month, commencing November 30, 2008.

2.5     Default Interest.  From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to 4% above the rate of
interest from time to time applicable to this Note.

 

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3. BORROWING AND REPAYMENT:

3.1     Borrowing and Repayment.  Borrower may from time to time during the term
of this Note borrow, partially or wholly repay its outstanding borrowings, and
reborrow, subject to all of the limitations, terms and conditions of this Note
and of the Credit Agreement between Borrower and Bank defined below; provided
however, that the total outstanding borrowings under this Note shall not at any
time exceed the principal amount stated above. The unpaid principal balance of
this obligation at any time shall be the total amounts advanced hereunder by the
holder hereof less the amount of principal payments made hereon by or for
Borrower, which balance may be endorsed hereon from time to time by the holder.
The outstanding principal balance of this Note shall be due and payable in full
on December 31, 2009.

3.2     Advances.  Advances hereunder, to the total amount of the principal sum
available hereunder, may be made by the holder at the oral or written request of
(a) Peter Teshima or Greg S. Wagenhoffer, anyone acting alone, who are
authorized to request advances and direct the disposition of any advances until
written notice of the revocation of such authority is received by the holder at
the office designated above, or (b) any person, with respect to advances
deposited to the credit of any deposit account of Borrower, which advances, when
so deposited, shall be conclusively presumed to have been made to or for the
benefit of Borrower regardless of the fact that persons other than those
authorized to request advances may have authority to draw against such account.
The holder shall have no obligation to determine whether any person requesting
an advance is or has been authorized by Borrower.

3.3     Application of Payments.  Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the outstanding
principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.

 

4. PREPAYMENT:

4.1     Prime Rate.  Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to the Prime Rate at any time, in
any amount and without penalty.

4.2     LIBOR.  Borrower may prepay principal on any portion of this Note which
bears interest determined in relation to LIBOR at any time and in the minimum
amount of $100,000.00; provided however, that if the outstanding principal
balance of such portion of this Note is less than said amount, the minimum
prepayment amount shall be the entire outstanding principal balance thereof. In
consideration of Bank providing this prepayment option to Borrower, or if any
such portion of this Note shall become due and payable at any time prior to the
last day of the Fixed Rate Term applicable thereto by acceleration or otherwise,
Borrower shall pay to Bank immediately upon demand a fee which is the sum of the
discounted monthly differences for each month from the month of prepayment
through the month in which such Fixed Rate Term matures, calculated as follows
for each such month:

(a)    Determine the amount of interest which would have accrued each month on
the amount prepaid at the interest rate applicable to such amount had it
remained outstanding until the last day of the Fixed Rate Term applicable
thereto.

(b)    Subtract from the amount determined in (a) above the amount of interest
which would have accrued for the same month on the amount prepaid for the
remaining term of such Fixed Rate Term at LIBOR in effect on the date of
prepayment for new loans made for such term and in a principal amount equal to
the amount prepaid.

(c)    If the result obtained in (b) for any month is greater than zero,
discount that difference by LIBOR used in (b) above.

 

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Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum 2.000% above the Prime Rate in
effect from time to time (computed on the basis of a 360-day year, actual days
elapsed).

 

5. EVENTS OF DEFAULT:

  This Note is made pursuant to and is subject to the terms and conditions of
that certain Credit Agreement between Borrower and Bank dated as of October 31,
2008, as amended from time to time (the “Credit Agreement”). Any default in the
payment or performance of any obligation under this Note, or any defined event
of default under the Credit Agreement, shall constitute an “Event of Default”
under this Note.

 

6. MISCELLANEOUS:

6.1     Remedies.  Upon the occurrence of any Event of Default, the holder of
this Note, at the holder’s option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Borrower shall pay to the holder immediately
upon demand the full amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys’ fees (to include outside counsel fees
and all allocated costs of the holder’s in-house counsel), expended or incurred
by the holder in connection with the enforcement of the holder’s rights and/or
the collection of any amounts which become due to the holder under this Note,
and the prosecution or defense of any action in any way related to this Note,
including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrower or any other person or entity.

6.2     Obligations Joint and Several.  Should more than one person or entity
sign this Note as a Borrower, the obligations of each such Borrower shall be
joint and several.

6.3     Governing Law.  This Note shall be governed by and construed in
accordance with the laws of the State of California.

IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first
written above.

 

Magma Design Automation, Inc. By:  

/s/ Peter Teshima

  Peter Teshima, Chief Financial Officer By:  

/s/ Roy Jewell

  Roy Jewell, President

 

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  SECURITY AGREEMENT WELLS FARGO   SPECIFIC RIGHTS TO PAYMENT

1.     GRANT OF SECURITY INTEREST.  For valuable consideration, the undersigned
Magma Design Automation, Inc., or any of them (“Debtor”), hereby grants and
transfers to WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) a security interest
in the following accounts, deposit accounts, chattel paper (whether electronic
or tangible), instruments, promissory notes, documents, general intangibles,
payment intangibles, software, letter of credit rights, health-care insurance
receivables and other rights to payment (collectively called “Collateral”):

All funds, including both principal and interest, evidenced by Wells Fargo Bank
certificate of deposit #6834998673 dated 11/21/08, and all renewals thereof,
whether or not any such renewal is evidenced by a certificate of deposit. The
amount of such funds shall at all times be equal to the amount of the
Overadvance, as defined in the Credit Agreement dated as of October 31,2008, by
and between Debtor and Bank (as amended or restated from time to time)

and all renewals thereof, including all securities, guaranties, warranties,
indemnity agreements, insurance policies, supporting obligations and other
agreements pertaining to the same or the property described therein, together
with whatever is receivable or received when any of the Collateral or proceeds
thereof are sold, collected, exchanged or otherwise disposed of, whether such
disposition is voluntary or involuntary, including without limitation, all
rights to payment, including returned premiums, with respect to any insurance
relating to any of the foregoing, and all rights to payment with respect to any
claim or cause of action affecting or relating to any of the foregoing
(hereinafter called “Proceeds”).

2.     OBLIGATIONS SECURED.  The obligations secured hereby are the payment and
performance of: (a) all present and future Indebtedness of Debtor to Bank;
(b) all obligations of Debtor and rights of Bank under this Agreement; and
(c) all present and future obligations of Debtor to Bank of other kinds. The
word “Indebtedness” is used herein in its most comprehensive sense and includes
any and all advances, debts, obligations and liabilities of Debtor, or any of
them, heretofore, now or hereafter made, incurred or created, whether voluntary
or involuntary and however arising, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, including
under any swap, derivative, foreign exchange, hedge, deposit, treasury
management or other similar transaction or arrangement, and whether Debtor may
be liable individually or jointly, or whether recovery upon such Indebtedness
may be or hereafter becomes unenforceable.

3.     TERMINATION.  This Agreement will terminate upon the performance of all
obligations of Debtor to Bank, including without limitation, the payment of all
Indebtedness of Debtor to Bank, and the termination of all commitments of Bank
to extend credit to Debtor, existing at the time Bank receives written notice
from Debtor of the termination of this Agreement.

4.     OBLIGATIONS OF BANK.  Bank has no obligation to make any loans hereunder.
Any money received by Bank in respect of the Collateral may be deposited, at
Bank’s option, into a non-interest bearing account over which Debtor shall have
no control, and the same shall, for all purposes, be deemed Collateral
hereunder.

5.     REPRESENTATIONS AND WARRANTIES.  Debtor represents and warrants to Bank
that: (a) Debtor’s legal name is exactly as set forth on the first page of this
Agreement, and all of Debtor’s organizational documents or agreements delivered
to Bank are complete and accurate in every respect; (b) Debtor is the owner and
has possession or control of the Collateral and Proceeds; (c) Debtor has the
exclusive right to grant a security interest in the Collateral and Proceeds;
(d) all Collateral and Proceeds are genuine, free from liens, adverse claims,
setoffs, default, prepayment, defenses and conditions precedent of any kind or
character, except the lien created hereby or as otherwise agreed to by Bank, or
heretofore disclosed by Debtor to Bank, in writing; (e) all statements contained
herein and, where applicable, in the Collateral are true and complete in all
material respects; (f) no financing statement covering any of the Collateral or
Proceeds, and naming any secured party

 

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other than Bank, is on file in any public office; (g) all persons appearing to
be obligated on Collateral and Proceeds have authority and capacity to contract
and are bound as they appear to be; (h) all property subject to chattel paper
has been properly registered and filed in compliance with law and to perfect the
interest of Debtor in such property; and (i) all Collateral and Proceeds comply
with all applicable laws concerning form, content and manner of preparation and
execution, including where applicable Federal Reserve Regulation Z and any State
consumer credit laws.

6.     COVENANTS OF DEBTOR.

6.1   Debtor Agrees in general: (a) to pay Indebtedness secured hereby when due;
(b) to indemnify Bank against all losses, claims, demands, liabilities and
expenses of every kind caused by property subject hereto; (c) to permit Bank to
exercise its powers; (d) to execute and deliver such documents as Bank deems
necessary to create, perfect and continue the security interests contemplated
hereby; (e) not to change its name, and as applicable, its chief executive
office, its principal residence or the jurisdiction in which it is organized
and/or registered without giving Bank prior written notice thereof; (f) not to
change the places where Debtor keeps any Collateral or Debtor’s records
concerning the Collateral and Proceeds without giving Bank prior written notice
of the address to which Debtor is moving same; and (g) to cooperate with Bank in
perfecting all security interests granted herein and in obtaining such
agreements from third parties as Bank deems necessary, proper or convenient in
connection with the preservation, perfection or enforcement of any of its rights
hereunder.

6.2   Debtor agrees with regard to the Collateral and Proceeds, unless Bank
agrees otherwise in writing: (a) that Bank is authorized to file financing
statements in the name of Debtor to perfect Bank’s security interest in
Collateral and Proceeds; (b) where applicable, to insure the Collateral with
Bank named as loss payee, in form, substance and amounts, under agreements,
against risks and liabilities, and with insurance companies satisfactory to
Bank; (c) not to permit any security interest in or lien on the Collateral or
Proceeds, except in favor of Bank; (d) not to sell, hypothecate or otherwise
dispose of, nor permit the transfer by operation of law of, any of the
Collateral or Proceeds or any interest therein, nor withdraw any funds from any
deposit account pledged to Bank hereunder; (e) to keep, in accordance with
generally accepted accounting principles, complete and accurate records
regarding all Collateral and Proceeds, and to permit Bank to inspect the same
and make copies thereof at any reasonable time; (f) if requested by Bank, to
receive and use reasonable diligence to collect Proceeds, in trust and as the
property of Bank, and to immediately endorse as appropriate and deliver such
Proceeds to Bank daily in the exact form in which they are received together
with a collection report in form satisfactory to Bank; (g) not to commingle
Collateral or Proceeds, or collections thereunder, with other property; (h) in
the event Bank elects to receive payments of Collateral or Proceeds hereunder,
to pay all expenses incurred by Bank in connection therewith, including expenses
of accounting, correspondence, collection efforts, reporting to account or
contract debtors, filing, recording, record keeping and expenses incidental
thereto; and (i) to provide any service and do any other acts which may be
necessary to keep all Collateral and Proceeds free and clear of all defenses,
rights of offset and counterclaims.

7.     POWERS OF BANK.  Debtor appoints Bank its true attorney-in-fact to
perform any of the following powers, which are coupled with an interest, are
irrevocable until termination of this Agreement and may be exercised from time
to time by Bank’s officers and employees, or any of them, whether or not Debtor
is in default: (a) to perform any obligation of Debtor hereunder in Debtor’s
name or otherwise; (b) to give notice to account debtors or others of Bank’s
rights in the Collateral and Proceeds, to enforce or forebear from enforcing the
same and make extension or modification agreements with respect thereto; (c) to
release persons liable on Collateral or Proceeds and to give receipts and
acquittances and compromise disputes in connection therewith; (d) to release or
substitute security; (e) to resort to security in any order; (f) to prepare,
execute, file, record or deliver notes, assignments, schedules, designation
statements, financing statements, continuation statements, termination
statements, statements of assignment, applications for registration or like
papers to perfect, preserve or release Bank’s interest in the Collateral and
Proceeds; (g) to receive, open and read mail addressed to Debtor; (h) to take
cash, instruments for the payment of money and other property to which Bank is
entitled; (i) to verify facts concerning the Collateral and Proceeds by inquiry
of obligors thereon, or otherwise, in its own name or a fictitious name; (j) to
endorse, collect, deliver and receive payment under instruments for the payment
of money constituting or relating to Proceeds; (k) to prepare, adjust, execute,
deliver and receive payment under insurance claims, and to collect and receive
payment of and endorse any instrument in payment of loss or returned

 

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premiums or any other insurance refund or return, and to apply such amounts
received by Bank, at Bank’s sole option, toward repayment of the Indebtedness;
(I) to exercise all rights, powers and remedies which Debtor would have, but for
this Agreement, with respect to all Collateral and Proceeds subject hereto;
(m) to make withdrawals from and to close deposit accounts or other accounts
with any financial institution, wherever located, into which Proceeds may have
been deposited, and to apply funds so withdrawn to payment of the Indebtedness;
(n) to preserve or release the interest evidenced by chattel paper to which Bank
is entitled hereunder and to endorse and deliver any evidence of title
incidental thereto; and (0) to do all acts and things and execute all documents
in the name of Debtor or otherwise, deemed by Bank as necessary, proper and
convenient in connection with the preservation, perfection or enforcement of its
rights hereunder.

8.     PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS.  Debtor
agrees to pay, prior to delinquency, all insurance premiums, taxes, charges,
liens and assessments against the Collateral and Proceeds, and upon the failure
of Debtor to do so, Bank at its option may pay any of them and shall be the sole
judge of the legality or validity thereof and the amount necessary to discharge
the same. Any such payments made by Bank shall be obligations of Debtor to Bank,
due and payable immediately upon demand, together with interest at a rate
determined in accordance with the provisions of this Agreement, and shall be
secured by the Collateral and Proceeds, subject to all terms and conditions of
this Agreement.

9.     EVENTS OF DEFAULT.  The occurrence of any of the following shall
constitute an “Event of Default” under this Agreement: (a) any default in the
payment or performance of any obligation, or any defined event of default, under
(i) any contract or instrument evidencing any Indebtedness, or (ii) any other
agreement between Debtor and Bank, including without limitation any loan
agreement, relating to or executed in connection with any Indebtedness; (b) any
representation or warranty made by Debtor herein shall prove to be incorrect,
false or misleading in any material respect when made; (c) Debtor shall fail to
observe or perform any obligation or agreement contained herein; (d) any
impairment of the rights of Bank in any Collateral or Proceeds or any attachment
or like levy on any property of Debtor; and (e) Bank, in good faith, believes
any or all of the Collateral and/or Proceeds to be in danger of misuse,
dissipation, commingling, loss, theft, damage or destruction, or otherwise in
jeopardy or unsatisfactory in character or value.

10.   REMEDIES.  Upon the occurrence of any Event of Default, Bank shall have
the right to declare immediately due and payable all or any Indebtedness secured
hereby and to terminate any commitments to make loans or otherwise extend credit
to Debtor. Bank shall have all other rights, powers, privileges and remedies
granted to a secured party upon default under the California Uniform Commercial
Code or otherwise provided by law, including without limitation, the right
(a) to contact all persons obligated to Debtor on any Collateral or Proceeds and
to instruct such persons to deliver all Collateral and/or Proceeds directly to
Bank, and (b) to sell, lease, license or otherwise dispose of any or all
Collateral. All rights, powers, privileges and remedies of Bank shall be
cumulative. No delay, failure or discontinuance of Bank in exercising any right,
power, privilege or remedy hereunder shall affect or operate as a waiver of such
right, power, privilege or remedy; nor shall any single or partial exercise of
any such right, power, privilege or remedy preclude, waive or otherwise affect
any other or further exercise thereof or the exercise of any other right, power,
privilege or remedy. Any waiver, permit, consent or approval of any kind by Bank
of any default hereunder, or any such waiver of any provisions or conditions
hereof, must be in writing and shall be effective only to the extent set forth
in writing. It is agreed that public or private sales or other dispositions, for
cash or on credit, to a wholesaler or retailer or investor, or user of property
of the types subject to this Agreement, or public auctions, are all commercially
reasonable since differences in the prices generally realized in the different
kinds of dispositions are ordinarily offset by the differences in the costs and
credit risks of such dispositions.

While an Event of Default exists: (a) Debtor will deliver to Bank from time to
time, as requested by Bank, current lists of all Collateral and Proceeds;
(b) Debtor will not dispose of any Collateral or Proceeds except on terms
approved by Bank; (c) Bank may, at any time and at Bank’s sole option, liquidate
any time deposits pledged to Bank hereunder and apply the Proceeds thereof to
payment of the Indebtedness, whether or not said time deposits have matured and
notwithstanding the fact that such liquidation may give rise to penalties for
early withdrawal of funds; and (d) at Bank’s request, Debtor will assemble and
deliver all Collateral and Proceeds, and books and records pertaining thereto,
to Bank at a reasonably convenient place designated by Bank. Debtor further
agrees that Bank shall have no obligation to process or prepare any Collateral
for sale or other disposition.

 

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11.   DISPOSITION OF COLLATERAL AND PROCEEDS; TRANSFER OF INDEBTEDNESS.  In
disposing of Collateral hereunder, Bank may disclaim all warranties of title,
possession, quiet enjoyment and the like. Any proceeds of any disposition of any
Collateral or Proceeds, or any part thereof, may be applied by Bank to the
payment of expenses incurred by Bank in connection with the foregoing, including
reasonable attorneys’ fees, and the balance of such proceeds may be applied by
Bank toward the payment of the Indebtedness in such order of application as Bank
may from time to time elect. Upon the transfer of all or any part of the
Indebtedness, Bank may transfer all or any part of the Collateral or Proceeds
and shall be fully discharged thereafter from all liability and responsibility
with respect to any of the foregoing so transferred, and the transferee shall be
vested with all rights and powers of Bank hereunder with respect to any of the
foregoing so transferred; but with respect to any Collateral or Proceeds not so
transferred Bank shall retain all rights, powers, privileges and remedies herein
given.

12.   STATUTE OF LIMITATIONS.  Until all Indebtedness shall have been paid in
full and all commitments by Bank to extend credit to Debtor have been
terminated, the power of sale or other disposition and all other rights, powers,
privileges and remedies granted to Bank hereunder shall continue to exist and
may be exercised by Bank at any time and from time to time irrespective of the
fact that the Indebtedness or any part thereof may have become barred by any
statute of limitations, or that the personal liability of Debtor may have
ceased, unless such liability shall have ceased due to the payment in full of
all Indebtedness secured hereunder.

13.   MISCELLANEOUS.  When there is more than one Debtor named herein: (a) the
word “Debtor” shall mean all or anyone or more of them as the context requires;
(b) the obligations of each Debtor hereunder are joint and several; and
(c) until all Indebtedness shall have been paid in full, no Debtor shall have
any right of subrogation or contribution, and each Debtor hereby waives any
benefit of or right to participate in any of the Collateral or Proceeds or any
other security now or hereafter held by Bank. Debtor hereby waives any right to
require Bank to (i) proceed against Debtor or any other person, (ii) marshal
assets or proceed against or exhaust any security from Debtor or any other
person, (iii) perform any obligation of Debtor with respect to any Collateral or
Proceeds, and (d) make any presentment or demand, or give any notice of
nonpayment or nonperformance, protest, notice of protest or notice of dishonor
hereunder or in connection with any Collateral or Proceeds. Debtor further
waives any right to direct the application of payments or security for any
Indebtedness of Debtor or indebtedness of customers of Debtor.

14.    NOTICES.  All notices, requests and demands required under this Agreement
must be in writing, addressed to Bank at the address specified in any other loan
documents entered into between Debtor and Bank and to Debtor at the address of
its chief executive office (or principal residence, if applicable) specified
below or to such other address as any party may designate by written notice to
each other party, and shall be deemed to have been given or made as follows:
(a) if personally delivered, upon delivery; (b) if sent by mail, upon the
earlier of the date of receipt or 3 days after deposit in the U. S. mail, first
class and postage prepaid; and (c) if sent by telecopy, upon receipt.

15.   COSTS, EXPENSES AND ATTORNEYS’ FEES.  Debtor shall pay to Bank immediately
upon demand the full amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys’ fees (to include outside counsel fees
and all allocated costs of Bank’s in-house counsel), expended or incurred by
Bank in connection with (a) the perfection and preservation of the Collateral or
Bank’s interest therein, and (b) the realization, enforcement and exercise of
any right, power, privilege or remedy conferred by this Agreement, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Debtor or in any way affecting any of the Collateral or Bank’s ability to
exercise any of its rights or remedies with respect thereto. All of the
foregoing shall be paid by Debtor with interest from the date of demand until
paid in full at a rate per annum equal to the greater of ten percent (10%) or
Bank’s Prime Rate in effect from time to time.

16.   SUCCESSORS; ASSIGNS; AMENDMENT.  This Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties, and may be amended or
modified only in writing signed by Bank and Debtor.

 

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17.   OBLIGATIONS OF MARRIED PERSONS.  Any married person who signs this
Agreement as Debtor hereby expressly agrees that recourse may be had against his
or her separate property for all his or her Indebtedness to Bank secured by the
Collateral and Proceeds under this Agreement.

18.   SEVERABILITY OF PROVISIONS.  If any provision of this Agreement shall be
held to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.

19.   GOVERNING LAW.  This Agreement shall be governed by and construed in
accordance with the laws of the State of California.

Debtor warrants that Debtor is an organization registered under the laws of
Delaware.

Debtor warrants that its chief executive office (or principal residence, if
applicable) is located at the following address: 1650 Technology Drive, San
Jose, CA 95110

IN WITNESS WHEREOF, this Agreement has been duly executed as of October 31,
2008.

 

Magma Design Automation, Inc. By:  

/s/ Peter Teshima

  Peter Teshima, Chief Financial Officer By:  

/s/ Roy Jewell

  Roy Jewell, President

 

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CREDIT AGREEMENT

THIS CREDIT AGREEMENT (this “Agreement”) is entered into as of October 31, 2008,
by and between MAGMA DESIGN AUTOMATION, INC., a Delaware corporation
(“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”).

RECITALS

Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Bank and Borrower hereby agree as follows:

ARTICLE I

CREDIT TERMS

SECTION 1.1.    LINE OF CREDIT.

(a)     Line of Credit.  Subject to the terms and conditions of this Agreement,
Bank hereby agrees to make advances to Borrower from time to time up to and
including December 31, 2009, not to exceed at any time the aggregate principal
amount of Fifteen Million Dollars ($15,000,000.00) (“Line of Credit”), the
proceeds of which shall be used first, to refinance Borrower’s existing debt
with Bank and second, to finance Borrower’s working capital requirement.
Borrower’s obligation to repay advances under the Line of Credit shall be
evidenced by a promissory note dated as of October 31, 2008 (“Line of Credit
Note”), all terms of which are incorporated herein by this reference.

(b)     Limitation on Borrowings.  Outstanding borrowings and Letter of Credit
liabilities under the Line of Credit (collectively “Outstandings”), to a maximum
of the principal amount set forth above, shall not at any time exceed an
aggregate of eighty percent (80%) of Borrower’s eligible accounts receivable
(the “Borrowing Base”) plus an additional amount not to exceed $3,000,000.00.
All of the foregoing shall be determined by Bank upon receipt and review of all
collateral reports required hereunder and such other documents and collateral
information as Bank may from time to time require. Borrower acknowledges that
said borrowing base was established by Bank with the understanding that, among
other items, the aggregate of all returns, rebates, discounts, credits and
allowances for the immediately preceding three (3) months at all times shall be
less than five percent (5%) of Borrower’s gross sales for said period. If such
dilution of Borrower’s accounts for the immediately preceding three (3) months
at any time exceeds five percent (5%) of Borrower’s gross sales for said period,
or if there at any time exists any other matters, events, conditions or
contingencies which Bank reasonably believes may affect payment of any portion
of Borrower’s accounts, Bank, in its sole discretion, may reduce the foregoing
advance rate against eligible accounts receivable to a percentage appropriate to
reflect such additional dilution and/or establish additional reserves against
Borrower’s eligible accounts receivable.

As used herein, “eligible accounts receivable” shall consist solely of trade
accounts created in the ordinary course of Borrower’s business, upon which
Borrower’s right to receive payment is absolute and not contingent upon the
fulfillment of any condition whatsoever, and in which Bank has a perfected
security interest of first priority, and shall not include:

(i)    any account which is unpaid more than 90 days after invoice date or, if
the payment term is less than net 30 days, which is unpaid more than 3 times the
payment term;

 

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(ii)   that portion of any account for which there exists any right of setoff,
defense or discount (except regular discounts allowed in the ordinary course of
business to promote prompt payment) or for which any defense or counterclaim has
been asserted;

(iii)   any account which represents an obligation of any state or municipal
government or of the United States government or any political subdivision
thereof (except accounts which represent obligations of the United States
government and for which the assignment provisions of the Federal Assignment of
Claims Act, as amended or recodified from time to time, have been complied with
to Bank’s satisfaction);

(iv)   any account which represents an obligation of an account debtor located
in a foreign country other than an account debtor located in a Canadian province
or territory, so long as, in Bank’s determination, such Canadian jurisdiction
recognizes Bank’s first priority security interest in and right to collect such
account as a consequence of any security agreements and UCC filings in favor of
Bank, except to the extent any such account, in Bank’s determination, is
supported by a letter of credit or insured under a policy of foreign credit
insurance, in each case in form, substance and issued by a party acceptable to
Bank;

(v)   any account which arises from the sale or lease to or performance of
services for, or represents an obligation of, an employee, affiliate, partner,
member, parent or subsidiary of Borrower;

(vi)   that portion of any account, which represents interim or progress
billings or retention rights on the part of the account debtor;

(vii)  any account which represents an obligation of any account debtor when
twenty percent (20%) or more of Borrower’s accounts from such account debtor are
not eligible pursuant to (i) above;

(viii)  that portion of any account from an account debtor which represents the
amount by which Borrower’s total accounts from said account debtor exceeds
twenty-five percent (25%) of Borrower’s total accounts;

(ix)   any account deemed ineligible by Bank when Bank, in its sole discretion,
deems the creditworthiness or financial condition of the account debtor, or the
industry in which the account debtor is engaged, to be unsatisfactory.

The amount by which Outstandings at any time exceed the Borrowing Base is
referred to as the “Overadvance.”

(c)     Letter of Credit Subfeature.  As a subfeature under the Line of Credit,
Bank agrees from time to time during the term thereof to issue or cause an
affiliate to issue standby letters of credit for the account of Borrower (each,
a “Letter of Credit” and collectively, “Letters of Credit”); provided however,
that the aggregate undrawn amount of all outstanding Letters of Credit shall not
at any time exceed Two Million Five Hundred Thousand Dollars ($2,500,000.00).
The form

 

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and substance of each Letter of Credit shall be subject to approval by Bank, in
its sole discretion. No Letter of Credit shall have an expiration date
subsequent to the maturity date of the Line of Credit, except existing Letters
of Credit numbered 584969 and 587968 for $200,000.00 and $1,500,000.00,
respectively, which are deemed to have been issued hereunder. To the extent that
the subject Line of Credit terminates for any reason prior to expiration of
Letters of Credit, Borrower shall pledge cash collateral maintained at Bank
equal to 100% of the stated amount of all such Letters of Credit. The undrawn
amount of all Letters of Credit shall be reserved under the Line of Credit and
shall not be available for borrowings thereunder. Each Letter of Credit shall be
subject to the additional terms and conditions of the Letter of Credit
agreements, applications and any related documents required by Bank in
connection with the issuance thereof. Each drawing paid under a Letter of Credit
shall be deemed an advance under the Line of Credit and shall be repaid by
Borrower in accordance with the terms and conditions of this Agreement
applicable to such advances; provided however, that if advances under the Line
of Credit are not available, for any reason, at the time any drawing is paid,
then Borrower shall immediately pay to Bank the full amount drawn, together with
interest thereon from the date such drawing is paid to the date such amount is
fully repaid by Borrower, at the rate of interest applicable to advances under
the Line of Credit. In such event Borrower agrees that Bank, in its sole
discretion, may debit any account maintained by Borrower with Bank for the
amount of any such drawing.

(d)     Borrowing and Repayment.  Borrower may from time to time during the term
of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above.

SECTION 1.2.    INTEREST/FEES.

(a)     Interest.  The outstanding principal balance of each credit subject
hereto shall bear interest at the rate of interest set forth in each promissory
note or other instrument or document executed in connection therewith.

(b)     Computation and Payment.  Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in each promissory note or other instrument or document required
hereby.

(c)     Commitment Fee.  Borrower shall pay to Bank a non-refundable commitment
fee for the Line of Credit equal to Ten Thousand Dollars ($10,000.00), which fee
shall be due and payable in full on the date of this Agreement.

(d)     Unused Commitment Fee.  Borrower shall pay to Bank a fee equal to
one-eighth percent (0.125%) per annum (computed on the basis of a 360-day year,
actual days elapsed) on the average daily unused amount of the Line of Credit,
which fee shall be calculated on a quarterly basis by Bank and shall be due and
payable by Borrower in arrears within ten (10) days after each billing is sent
by Bank.

(e)     Letter of Credit Fees.  Borrower shall pay to Bank (i) fees upon the
issuance of each Letter of Credit equal to two percent (2.00%) per annum
(computed on the basis of a 360-day year, actual days elapsed) of the face
amount thereof, and (ii) fees upon the payment or negotiation of each drawing
under any Letter of Credit and fees upon the occurrence of any other activity
with respect to any Letter of Credit (including without limitation, the
transfer, amendment or cancellation of any Letter of Credit) determined in
accordance with Bank’s standard fees and charges then in effect for such
activity.

 

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SECTION 1.3.    COLLECTION OF PAYMENTS.  Borrower authorizes Bank to collect all
interest and fees due under each credit subject hereto by charging Borrower’s
deposit account number 4050-015742 with Bank, or any other deposit account
maintained by Borrower with Bank, for the full amount thereof. Should there be
insufficient funds in any such deposit account to pay all such sums when due,
the full amount of such deficiency shall be immediately due and payable by
Borrower.

SECTION 1.4.    COLLATERAL.

As security for all indebtedness and other obligations of Borrower to Bank
subject hereto, Borrower hereby grants to Bank security interests of first
priority in all Borrower’s accounts receivable, and other rights to payment,
general intangibles, inventory and equipment, provided however that
notwithstanding the foregoing, Bank disclaims a security interest in any of
Debtor’s intellectual property (other than proceeds, accounts, payment
intangibles, and other rights to payment related to intellectual property).
Notwithstanding the foregoing, the first sentence of Section 5.6. (entitled
“Double Negative Pledge”) shall continue to apply, subject to the exceptions
therein, to all of Borrower’s assets, including its intellectual property.

In addition, upon the occurrence of an Overadvance, Borrower shall, within 5
calendar days, establish with and grant to Bank a security interest in a deposit
account with a balance therein at all times equal to the amount of the
Overadvance, failing which Borrower shall immediately repay the Overadvance.

All of the foregoing shall be evidenced by and subject to the terms of such
security agreements, financing statements, deeds or mortgages, and other
documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall pay to Bank immediately upon demand the
full amount of all charges, costs and expenses (to include fees paid to third
parties and all allocated costs of Bank personnel), expended or incurred by Bank
in connection with any of the foregoing security, including without limitation,
filing and recording fees and costs of appraisals, audits and title insurance.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.

SECTION 2.1.    LEGAL STATUS.  Borrower is a corporation, duly organized and
existing and in good standing under the laws of Delaware, and is qualified or
licensed to do business (and is in good standing as a foreign corporation, if
applicable) in all jurisdictions in which such qualification or licensing is
required or in which the failure to so qualify or to be so licensed could have a
material adverse effect on Borrower.

SECTION 2.2.    AUTHORIZATION AND VALIDITY.  This Agreement and each promissory
note, contract, instrument and other document required hereby or at any time

 

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hereafter delivered to Bank in connection herewith (collectively, the “Loan
Documents”) have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.

SECTION 2.3.    NO VIOLATION.  The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.

SECTION 2.4.    LITIGATION.  There are no pending, or to the best of Borrower’s
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material adverse effect on the financial condition or
operation of Borrower other than those disclosed by Borrower to Bank in writing
prior to the date hereof.

SECTION 2.5.    CORRECTNESS OF FINANCIAL STATEMENT.  The annual financial
statement of Borrower dated April 6, 2008, and all interim financial statements
delivered to Bank since said date, true copies of which have been delivered by
Borrower to Bank prior to the date hereof, (a) are complete and correct and
present fairly the financial condition of Borrower, (b) disclose all liabilities
of Borrower that are required to be reflected or reserved against under
generally accepted accounting principles, whether liquidated or unliquidated,
fixed or contingent, and (c) have been prepared in accordance with generally
accepted accounting principles consistently applied. Since the dates of such
financial statements there has been no material adverse change in the financial
condition of Borrower, nor has Borrower mortgaged, pledged, granted a security
interest in or otherwise encumbered any of its assets or properties except in
favor of Bank or as otherwise noted in Section 5.2 or permitted by Bank in
writing.

SECTION 2.6.    INCOME TAX RETURNS.  Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.

SECTION 2.7.    NO SUBORDINATION.  There is no agreement, indenture, contract or
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower’s obligations
subject to this Agreement to any other obligation of Borrower.

SECTION 2.8.    PERMITS, FRANCHISES.  Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.

SECTION 2.9.    ERISA.  Borrower is in compliance in all material respects with
all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time (“ERISA”); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a “Plan”); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.

 

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SECTION 2.10.    OTHER OBLIGATIONS.  Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.

SECTION 2.11.    ENVIRONMENTAL MATTERS.  Except as disclosed by Borrower to Bank
in writing prior to the date hereof, Borrower is in compliance in all material
respects with all applicable federal or state environmental, hazardous waste,
health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower’s operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.

ARTICLE III

CONDITIONS

SECTION 3.1.    CONDITIONS OF INITIAL EXTENSION OF CREDIT.  The obligation of
Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank’s satisfaction of all of the following conditions:

(a)     Approval of Bank Counsel.  All legal matters incidental to the extension
of credit by Bank shall be satisfactory to Bank’s counsel.

(b)     Documentation.  Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:

 

  (i) This Agreement and each promissory note or other instrument or document
required hereby.

  (ii) Corporate Resolution: Borrowing.

  (iii) Certificate of Incumbency.

  (iv) Continuing Security Agreement: Rights to Payment and Inventory.

  (v) Security Agreement: Equipment.

  (vi) Security Agreement: Specific Rights to Payment.

  (vii) Such other documents as Bank may require under any other Section of this
Agreement.

(c)     Financial Condition.  There shall have been no material adverse change,
as determined by Bank, in the financial condition or business of Borrower, nor
any material decline, as determined by Bank, in the market value of any
collateral required hereunder or a substantial or material portion of the assets
of Borrower.

(d)     Insurance.  Borrower shall have delivered to Bank evidence of insurance
coverage on all Borrower’s property, in form, substance, amounts, covering risks
and issued by companies satisfactory to Bank, and where required by Bank, with
loss payable endorsements in favor of Bank.

 

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SECTION 3.2.    CONDITIONS OF EACH EXTENSION OF CREDIT.  The obligation of Bank
to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank’s satisfaction of each of the following
conditions:

(a)     Compliance.  The representations and warranties contained herein and in
each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.

(b)     Documentation.  Bank shall have received all additional documents which
may be required in connection with such extension of credit.

ARTICLE IV

AFFIRMATIVE COVENANTS

Borrower covenants that so long as Bank remains committed to extend credit to
Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:

SECTION 4.1.    PUNCTUAL PAYMENTS.  Punctually pay all principal, interest, fees
or other liabilities due under any of the Loan Documents at the times and place
and in the manner specified therein, and immediately upon demand by Bank, the
amount by which the outstanding principal balance of any credit subject hereto
at any time exceeds any limitation on borrowings applicable thereto.

SECTION 4.2.    ACCOUNTING RECORDS.  Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at least two times per calendar year and
at such other times as Bank may require, to inspect, audit and examine such
books and records, to make copies of the same, and to inspect the properties of
Borrower.

SECTION 4.3.    FINANCIAL STATEMENTS.  Provide to Bank all of the following, in
form and detail satisfactory to Bank:

(a)     not later than 90 days after and as of the end of each fiscal year, a
consolidated financial statement of Borrower, audited by a certified public
accountant acceptable to Bank, to include balance sheet, income statement and
statement of cash flow;

(b)     not later than 60 days after and as of the end of each fiscal quarter, a
financial statement of Borrower, prepared by Borrower, to include balance sheet,
income statement and statement of cash flow;

(c)     not later than 15 days after and as of the end of each calendar month a
detailed aged listing of accounts receivable and accounts payable, by invoice
date and due date, with Borrowing Base Certificate (“BBC”) and a list of the
names, addresses and phone numbers of all Borrower’s account debtors. The BBC
shall include schedule of memo items showing disbursements to accounts
receivable account debtors;

 

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(d)     from time to time such other information as Bank may reasonably request.

SECTION 4.4.    COMPLIANCE.  Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower’s continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.

SECTION 4.5.    INSURANCE.  Maintain and keep in force, for each business in
which Borrower is engaged, insurance of the types and in amounts customarily
carried in similar lines of business, including but not limited to fire,
extended coverage, public liability, flood, property damage and workers’
compensation, with all such insurance carried with companies and in amounts
satisfactory to Bank, and deliver to Bank from time to time at Bank’s request
schedules setting forth all insurance then in effect.

SECTION 4.6.    FACILITIES.  Keep all properties useful or necessary to
Borrower’s business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.

SECTION 4.7.    TAXES AND OTHER LIABILITIES.  Pay and discharge when due any and
all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except (a) such as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank’s satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.

SECTION 4.8.    LITIGATION.  Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower.

SECTION 4.9.    FINANCIAL CONDITION.  Maintain Borrower’s consolidated financial
condition as follows using generally accepted accounting principles consistently
applied and used consistently with prior practices (except to the extent
modified by the definitions herein):

(a)     Liquidity Ratio not at any time less than 2.0 to 1.0, with “Liquidity
Ratio” defined as the ratio of (i) the sum of unencumbered cash and cash
equivalents plus accounts receivable (excluding all accounts which are
ineligible to be included in the Borrowing Base) to (ii) the maximum amount of
Bank’s commitment under the Line of Credit.

(b)     [***]

(c)     Non-GAAP Operating Income/(Loss) in each fiscal quarter, determined as
of the end of each of the following fiscal quarters of (i) not greater than
[***] as of the end of the second fiscal quarter of year 2009 ending November 2,
2008, (ii) not greater than

 

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[***] as of the end of the third fiscal quarter of year 2009 ending February 1,
2009, (iii) not less than [***] as of the end of the fourth fiscal quarter of
year 2009 ending May 3, 2009, (iv) not less than [***] as of the end of the
first fiscal quarter of year 2010 ending August 3, 2009, and (v) not less than
[***] as of the end of the second fiscal quarter of year 2010 ending
November 1,2009. “Non-GAAP Operating Income” is defined as GAAP operating income
less the following adjustments (only to the extent already included in GAAP
operating income): (1) amortization of intangible assets; (2) amortization of
developed technology; (3) in-process research and development charge;
(4) stock-based compensation; (5) acquisition-related expenses (only if taken in
the quarter of such acquisition), and (6) restructuring expenses related to
headcount reduction of no greater than [***] for the second fiscal quarter of
year 2009 ending November 2,2008 and [***] for the fourth fiscal quarter of year
2009 ending May 3, 2009.

SECTION 4.10.    NOTICE TO BANK.  Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower’s property.

ARTICLE V

NEGATIVE COVENANTS

Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not (and will not cause or permit any
Subsidiary, as defined at the end of Article V, to) without Bank’s prior written
consent:

SECTION 5.1.    USE OF FUNDS.  Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof.

SECTION 5.2.    OTHER INDEBTEDNESS.  Create, incur, assume or permit to exist
any indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower or such Subsidiary to
Bank, (b) indebtedness to UBS resulting from loans made by UBS against the value
of auction rate securities held by UBS for the account of Borrower or its
Subsidiaries, and (c) any other liabilities of Borrower or such Subsidiary
existing as of, and disclosed to Bank prior to, the date hereof.

SECTION 5.3.    SPECIFIED TRANSACTIONS.  Enter into any Specified Transaction
unless all consideration paid or payable by Borrower and/or any Subsidiary for
such Specified Transactions consists of common stock of Borrower. “Specified
Transaction” means any of the following, provided that the applicable
transaction has been approved by the Board of Directors of the entity whose
assets or the equity interests in which are being acquired or which is merging
with Borrower or a Subsidiary:

(a)     the acquisition by Borrower or a Subsidiary of all or substantially all
of the assets of another entity or division of such entity;

 

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(b)     the merger or consolidation of Borrower or any Subsidiary with or into
any other entity, so long as, in the case of Borrower, Borrower is the surviving
entity; and

(c)     the acquisition by Borrower or any Subsidiary of a controlling or
majority interest in any other entity;

SECTION 5.4.    MERGER, CONSOLIDATION, TRANSFER OF ASSETS.  Except as permitted
in Section 5.3., merge into or consolidate with any other entity; make any
substantial change in the nature of Borrower’s and Subsidiaries’ business, taken
as a whole, as conducted as of the date hereof; acquire all or substantially all
of the assets of any other entity; nor sell, lease, transfer or otherwise
dispose of all or a substantial or material portion of Borrower’s assets except
in the ordinary course of its business.

SECTION 5.5.    DIVIDENDS, DISTRIBUTIONS.  Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower’s stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any class of Borrower’s stock now or hereafter outstanding.

SECTION 5.6.    DOUBLE NEGATIVE PLEDGE.  Mortgage, pledge, grant or permit to
exist a security interest in, or lien upon, all or any portion of Borrower’s or
any Subsidiary’s assets now owned or hereafter acquired, except any of the
foregoing (a) in favor of Bank, (b) which is existing as of, and disclosed to
Bank in writing prior to, the date hereof, and (c) which consist of security
interests in auction rate securities described in and subject to the terms of
Section 5.2.(b) above. In addition, Borrower shall not agree with any other
creditor to prohibit, encumber or condition the granting of a security interest
in its intellectual property (or any portion thereof).

SECTION 5.7.    GUARANTIES.  Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower or any
Subsidiary as security for, any liabilities or obligations of any other person
or entity, except any of the foregoing in favor of Bank.

SECTION 5.8.    LOANS, ADVANCES, INVESTMENTS.  Make any loans or advances to or
investments in any person or entity, except (a) any of the foregoing existing as
of, and disclosed to Bank prior to, the date hereof, (b) investments which
constitute Specified Transactions, subject to the terms of Section 5.3., and
(c) additional investments made in accordance with Borrower’s Investment Policy
as adopted by its Board of Directors.

Each entity (Whether now existing or hereafter formed or acquired) in which
Borrower, directly or indirectly, owns a controlling or majority interest, is
referred to as a “Subsidiary.”

ARTICLE VI

EVENTS OF DEFAULT

SECTION 6.1.    The occurrence of any of the following shall constitute an
“Event of Default” under this Agreement:

(a)     Borrower shall fail to pay when due any principal, interest, fees or
other amounts payable under any of the Loan Documents.

 

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(b)     Any financial statement or certificate furnished to Bank in connection
with, or any representation or warranty made by Borrower or any other party
under this Agreement or any other Loan Document shall prove to be incorrect,
false or misleading in any material respect when furnished or made.

(c)     Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections (a) and (b) above), and with
respect to any such default which by its nature can be cured, such default shall
continue for a period of twenty (20) days from its occurrence.

(d)     Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower, any Subsidiary, any
guarantor hereunder or any general partner or joint venturer in Borrower if a
partnership or joint venture (with each such guarantor, general partner and/or
joint venturer referred to herein as a “Third Party Obligor”) has incurred any
debt or other liability to any person or entity, including Bank.

(e)     The filing of a notice of judgment lien against Borrower, any Subsidiary
or any Third Party Obligor; or the recording of any abstract of judgment against
Borrower, any Subsidiary or any Third Party Obligor in any county in which
Borrower, any Subsidiary or such Third Party Obligor has an interest in real
property; or the service of a notice of levy and/or of a writ of attachment or
execution, or other like process, against the assets of Borrower, any Subsidiary
or any Third Party Obligor; or the entry of a judgment against Borrower, any
Subsidiary or any Third Party Obligor.

(f)      Borrower, any Subsidiary or any Third Party Obligor shall become
insolvent, or shall suffer or consent to or apply for the appointment of a
receiver, trustee, custodian or liquidator of itself or any of its property, or
shall generally fail to pay its debts as they become due, or shall make a
general assignment for the benefit of creditors; Borrower, any Subsidiary or any
Third Party Obligor shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors or
any other relief under the Bankruptcy Reform Act, Title 11 of the United States
Code, as amended or recodified from time to time (“Bankruptcy Code”), or under
any state or federal law granting relief to debtors, whether now or hereafter in
effect; or any involuntary petition or proceeding pursuant to the Bankruptcy
Code or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors is filed or commenced against
Borrower, any Subsidiary or any Third Party Obligor, or Borrower, any Subsidiary
or any Third Party Obligor shall file an answer admitting the jurisdiction of
the court and the material allegations of any involuntary petition; or Borrower,
any Subsidiary or any Third Party Obligor shall be adjudicated a bankrupt, or an
order for relief shall be entered against Borrower, any Subsidiary or any Third
Party Obligor by any court of competent jurisdiction under the Bankruptcy Code
or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors.

(g)     There shall exist or occur any event or condition which Bank in good
faith believes impairs, or is substantially likely to impair, the prospect of
payment or performance by Borrower of its obligations under any of the Loan
Documents.

 

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(h)     The death or incapacity of Borrower or any Third Party Obligor if an
individual. The dissolution or liquidation of Borrower or any Third Party
Obligor if a corporation, partnership, joint venture or other type of entity; or
Borrower or any such Third Party Obligor. or any of its directors, stockholders
or members, shall take action seeking to effect the dissolution or liquidation
of Borrower or such Third Party Obligor.

(i)      Any change in ownership of an aggregate of twenty-five percent (25%) or
more of the common stock of Borrower in a single or in a series of related
transactions.

SECTION 6.2.    REMEDIES.  Upon the occurrence of any Event of Default: (a) all
indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank’s option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by Borrower; (b) the
obligation, if any, of Bank to extend any further credit under any of the Loan
Documents shall immediately cease and terminate; and (c) Bank shall have all
rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any credit subject hereto and to exercise any or all of the rights
of a beneficiary or secured party pursuant to applicable law. All rights, powers
and remedies of Bank may be exercised at any time by Bank and from time to time
after the occurrence of an Event of Default, are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies provided by law
or equity.

ARTICLE VII

MISCELLANEOUS

SECTION 7.1.    NO WAIVER.  No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.

SECTION 7.2.    NOTICES.  All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:

 

BORROWER:    MAGMA DESIGN AUTOMATION, INC.    1650 Technology Drive    San Jose,
CA 95110 BANK:    WELLS FARGO BANK, NATIONAL ASSOCIATION    Santa Clara Valley
RCBO    121 Park Center Plaza, 2nd Floor    San Jose, CA 95113

or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.

 

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SECTION 7.3.    COSTS, EXPENSES AND ATTORNEYS’ FEES.  Borrower shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys’ fees (to include outside
counsel fees and all allocated costs of Bank’s in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents, Bank’s continued administration hereof
and thereof, and the preparation of any amendments and waivers hereto and
thereto, (b) the enforcement of Bank’s rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrower or any other person or entity.

SECTION 7.4.    SUCCESSORS, ASSIGNMENT.  This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interests or rights hereunder without
Bank’s prior written consent. Bank reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in,
Bank’s rights and benefits under each of the Loan Documents. In connection
therewith, Bank may disclose all documents and information which Bank now has or
may hereafter acquire relating to any credit subject hereto, Borrower or its
business, or any collateral required hereunder.

SECTION 7.5.    ENTIRE AGREEMENT; AMENDMENT.  This Agreement and the other Loan
Documents constitute the entire agreement between Borrower and Bank with respect
to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only in writing signed by each
party hereto.

SECTION 7.6.    NO THIRD PARTY BENEFICIARIES.  This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.

SECTION 7.7.    TIME.  Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.

SECTION 7.8.    SEVERABILITY OF PROVISIONS.  If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.

SECTION 7.9.    COUNTERPARTS.  This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.

 

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SECTION 7.10.    GOVERNING LAW.  This Agreement shall be governed by and
construed in accordance with the laws of the State of California.

SECTION 7.11.    ARBITRATION.

(a)     Arbitration.  The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise in any way arising out of
or relating to (i) any credit subject hereto, or any of the Loan Documents, and
their negotiation, execution, collateralization, administration, repayment,
modification, extension, substitution, formation, inducement, enforcement,
default or termination; or (ii) requests for additional credit.

(b)     Governing Rules.  Any arbitration proceeding will (i) proceed in a
location in California selected by the American Arbitration Association (“MA”);
(ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
documents between the parties; and (iii) be conducted by the MA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
MA’s commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
MA’s optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to herein, as applicable, as the “Rules”). If
there is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. §91 or any
similar applicable state law.

(c)     No Waiver of Provisional Remedies, Self-Help and Foreclosure.  The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.

(d)     Arbitrator Qualifications and Powers.  Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of California or a neutral retired judge of the
state or federal judiciary of California, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the

 

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arbitrator’s discretion) any pre-hearing motions which are similar to motions to
dismiss for failure to state a claim or motions for summary adjudication. The
arbitrator shall resolve all disputes in accordance with the substantive law of
California and may grant any remedy or relief that a court of such state could
order or grant within the scope hereof and such ancillary relief as is necessary
to make effective any award. The arbitrator shall also have the power to award
recovery of all costs and fees, to impose sanctions and to take such other
action as the arbitrator deems necessary to the same extent a judge could
pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil
Procedure or other applicable law. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction. The institution and
maintenance of an action for judicial relief or pursuit of a provisional or
ancillary remedy shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the controversy or claim to arbitration if
any other party contests such action for judicial relief.

(e)     Discovery.  In any arbitration proceeding, discovery will be permitted
in accordance with the Rules. All discovery shall be expressly limited to
matters directly relevant to the dispute being arbitrated and must be completed
no later than 20 days before the hearing date. Any requests for an extension of
the discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential for the party’s presentation and that no alternative means for
obtaining information is available.

(f)     Class Proceedings and Consolidations.  No party hereto shall be entitled
to join or consolidate disputes by or against others in any arbitration, except
parties who have executed any Loan Document, or to include in any arbitration
any dispute as a representative or member of a class, or to act in any
arbitration in the interest of the general public or in a private attorney
general capacity.

(g)     Payment Of Arbitration Costs And Fees.  The arbitrator shall award all
costs and expenses of the arbitration proceeding.

(h)     Real Property Collateral; Judicial Reference.  Notwithstanding anything
herein to the contrary, no dispute shall be submitted to arbitration if the
dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such dispute is not submitted to arbitration, the dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA’s selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.

(i)      Miscellaneous.  To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the

 

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arbitration provision most directly related to the Loan Documents or the subject
matter of the dispute shall control. This arbitration provision shall survive
termination, amendment or expiration of any of the Loan Documents or any
relationship between the parties.

(j)     Small Claims Court.  Notwithstanding anything herein to the contrary,
each party retains the right to pursue in Small Claims Court any dispute within
that court’s jurisdiction. Further, this arbitration provision shall apply only
to disputes in which either party seeks to recover an amount of money (excluding
attorneys’ fees and costs) that exceeds the jurisdictional limit of the Small
Claims Court.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date and year first written above.

 

MAGMA DESIGN AUTOMATION, INC.     WELLS FARGO BANK, NATIONAL ASSOCIATION By:  

/s/ Peter Teshima

    By:  

/s/ Debra Bowman

  Peter Teshima       Debra Bowman   Chief Financial Officer       Vice
President By:  

/s/ Roy Jewell

        Roy Jewell         President      

 

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