Document:

10.35 Amendment Number Five Wells Fargo Finance

AMENDMENT NUMBER FIVE TO CREDIT AGREEMENT

This Amendment Number Five to Credit Agreement (“Amendment”) is entered into as of October 19, 2011, by and among the lenders identified on the signature pages hereof (such lenders, together with their respective successors and permitted assigns, are referred to hereinafter each individually as a “Lender” and collectively as the “Lenders”), and WELLS FARGO CAPITAL FINANCE, LLC, a Delaware limited liability company, as the agent for the Lenders (in such capacity, together with its successors and assigns in such capacity, “Agent”), on the one hand, and MAGMA DESIGN AUTOMATION, INC., a Delaware corporation (“Borrower”), on the other hand, with reference to the following facts:

A. Borrower, Agent, and Lenders have previously entered into that certain Credit Agreement, dated as of March 19, 2010 (as amended and modified, from time to time, the “Agreement”).

B. Borrower has requested that Agent and Lenders make certain amendments to the Agreement as provided for and on the conditions set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto amend and supplement the Agreement as follows:

1. DEFINITIONS. All initially capitalized terms used in this Amendment shall have the meanings given to them in the Agreement unless specifically defined herein.

2. AMENDMENTS.

(a) Schedule 1.1 of the Agreement is amended to include the following terms:

“Accelerated Reporting Period” means a period which shall (a) commence on an Accelerated Reporting Trigger Event and continue until the date on which (1) if the relevant Accelerated Reporting Trigger Event is caused by an Event of Default, such Event of Default no longer exists, or (2) the sum of Availability plus domestic Qualified Cash has been greater than or equal to $20,000,000 for a period of 90 consecutive days following the date of the Accelerated Reporting Trigger Event and no Event of Default is then continuing.

“Accelerated Reporting Trigger Event” means, as of any date, that (a) an Event of Default has occurred and is continuing as of such date or (b) the sum of Availability plus domestic Qualified Cash on such date is below $20,000,000.

“Fifth Amendment Effective Date” has the meaning specified therefor in that certain Amendment Number Five to Credit Agreement by and among Borrower, Agent and Lenders dated October 19, 2011.

(b) The following definition set forth in Schedule 1.1 of the Agreement is amended to read as follows:

“LIBOR Rate Margin” means 3.00 percentage points.

(c) Section 2.2 of the Agreement is amended to read as follows:

2.2 Term Loans.

(a) Term Loan A. Subject to the terms and conditions of this Agreement, on the Fourth Amendment Effective Date each Lender with a Term Loan A Commitment has agreed (severally, not jointly or jointly and severally) to continue the term loans (collectively, “Term Loan A”) to Borrower in an amount equal to such Lender’s Pro Rata Share of the Term Loan A Amount. The principal of Term Loan A shall be repaid on the following dates and in the following amounts:

	
				
	Date
	Installment Amount

	October 31, 2010
	$
	562,500
	

	January 31, 2011
	$
	562,500
	

	April 30, 2011
	$
	562,500
	

	July 31, 2011
	$
	562,500
	

	October 31, 2011
	$
	375,000
	

	January 31, 2012
	$
	375,000
	

	April 30, 2012
	$
	375,000
	

	July 31, 2012
	$
	375,000
	

	October 31, 2012
	$
	375,000
	

	January 31, 2013
	$
	375,000
	

	April 30, 2013
	$
	375,000
	

	July 31, 2013
	$
	375,000
	

	October 31, 2013
	$
	375,000
	

	January 31, 2014
	$
	375,000
	

	April 30, 2014
	$
	375,000
	

	July 31, 2014
	$
	375,000
	

The outstanding unpaid principal balance and all accrued and unpaid interest on Term Loan A shall be due and payable on the earlier of (i) the Maturity Date and (ii) the date of the acceleration of Term Loan A in accordance with the terms hereof. Any principal amount of Term Loan A that is repaid or prepaid may not be reborrowed. All principal of, interest on, and other amounts payable in respect of Term Loan A shall constitute Obligations. Notwithstanding the foregoing, commencing on October 31, 2011, Borrower may make an applicable quarterly scheduled principal repayment with respect to Term Loan A in an amount not to exceed $562,500 without incurring the Applicable Partial Prepayment Premium set forth in Section 4(b) of the Fee Letter.

(b) Term Loan B. Subject to the terms and conditions of this Agreement, on the Fourth Amendment Effective Date each Lender with a Term Loan B Commitment agree (severally, not jointly or jointly and severally) to make the term loans (collectively, “Term Loan B”) to Borrower in an amount equal to such Lender’s Pro Rata Share of the Term Loan B Amount. The principal of Term Loan B shall be repaid on the following dates and in the following amounts:

	
				
	Date
	Installment Amount

	April 30, 2011
	$
	375,000
	

	July 31, 2011
	$
	375,000
	

	October 31, 2011
	$
	250,000
	

	January 31, 2012
	$
	250,000
	

	April 30, 2012
	$
	250,000
	

	July 31, 2012
	$
	250,000
	

	October 31, 2012
	$
	250,000
	

	January 31, 2013
	$
	250,000
	

	April 30, 2013
	$
	250,000
	

	July 31, 2013
	$
	250,000
	

	October 31, 2013
	$
	250,000
	

	January 31, 2014
	$
	250,000
	

	April 30, 2014
	$
	250,000
	

	July 31, 2014
	$
	250,000
	

The outstanding unpaid principal balance and all accrued and unpaid interest on Term Loan B shall be due and payable on the earlier of (i) the Maturity Date and (ii) the date of the acceleration of Term Loan B in accordance with the terms hereof. Any principal amount of Term Loan B that is repaid or prepaid may not be reborrowed. All principal of, interest on, and other amounts payable in respect of Term Loan B shall constitute Obligations. Notwithstanding the foregoing, commencing on October 31, 2011, Borrower may make an applicable quarterly scheduled principal repayment with respect to Term Loan B in an amount not to exceed $375,000 without incurring the Applicable Partial Prepayment Premium set forth in Section 4(b) of the Fee Letter.

(d) Schedule 5.2 to the Agreement is amended and restated as set forth in Exhibit A attached hereto.

3. REPRESENTATIONS AND WARRANTIES. Borrower hereby affirms to Agent and Lenders that all of Borrower’s representations and warranties set forth in the Agreement are true, complete and accurate in all respects as of the date hereof.

4. NO DEFAULTS. Borrower hereby affirms to Agent and Lenders that no Event of Default has occurred and is continuing as of the date hereof.

5. CONDITIONS PRECEDENT. The effectiveness of this Amendment, which shall have retroactive effect from October 1, 2011 upon the Fifth Amendment Effective Date, is hereby conditioned upon receipt by Agent of (i) a fully executed copy of this Amendment from each party hereto and (ii) a fully executed copy of the attached Reaffirmation of General Continuing Guaranty (the first date on which all such conditions have been satisfied is referred hereto as, the “Fifth Amendment Effective Date”).

6. REAFFIRMATION. Borrower acknowledges and reaffirms (i) all of its obligations and duties under the Loan Documents, and (ii) that the Agent, for the ratable benefit of the Lender Group, has and shall continue to have valid, perfected Liens in the Collateral as provided in the Security Agreement.

7. COSTS AND EXPENSES. Borrower shall pay to Agent and Lenders all of Agent’s and
Lenders’ out-of-pocket costs and expenses (including, without limitation, the fees and expenses of its counsel, which counsel may include any local counsel deemed necessary, search fees, filing and recording fees, documentation fees, appraisal fees, travel expenses, and other fees) arising in connection with the preparation, execution, and delivery of this Amendment and all related documents.
8. LIMITED EFFECT. In the event of a conflict between the terms and provisions of this
Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern. In all other respects, the Agreement, as amended and supplemented hereby, shall remain in full force and effect.

9. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed and delivered shall be deemed to be an original. All such counterparts, taken together, shall constitute but one and the same Amendment. This Amendment shall become effective upon the execution of a counterpart of this Amendment by each of the parties hereto. This Amendment is a Loan Document and is subject to all the terms and conditions, and entitled to all the protections, applicable to Loan Documents generally.

[remainder of page left blank intentionally; signatures to follow]

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first set forth above.
 
	
			
	 
	 
	 

	MAGMA DESIGN AUTOMATION, INC.,

	a Delaware corporation

	 
	 

	By:
	 
	/s/ Peter S. Teshima

	Name: 
	 
	Peter S. Teshima

	Title:
	 
	CFO

Amendment Number Five to Credit Agreement 

                        	
			
	WELLS FARGO CAPITAL FINANCE, LLC, a Delaware limited liability company, as Agent and Lender

	 

	By:
	 
	/s/ Daniel Morihiro

	Name: 
	 
	Daniel Morihiro

	Title:
	 
	VP

Amendment Number Five to Credit Agreement and Consent

REAFFIRMATION OF GENERAL CONTINUING GUARANTY
Dated as of October 17, 2011

The undersigned (the “Guarantor”), has executed a General Continuing Guaranty, dated as of March 19, 2010 (the “Guaranty”), in favor of Wells Fargo Capital Finance, LLC (“Agent”), respecting the obligations of Magma Design Automation, Inc., a Delaware corporation (“Borrower”) pursuant to that certain Credit Agreement dated as of March 19, 2010 by and among Borrower, the Lenders signatory thereto and Agent, and other Loan Documents.  Guarantor acknowledges the terms of the above Amendment and reaffirms and agrees that: (a) its Guaranty remains in full force and effect; (b) nothing in the Guaranty obligates Agent to notify the undersigned of any changes in the loans and financial accommodations made available to Borrower or to seek reaffirmation of the Guaranty; and (c) no requirement to so notify any of the undersigned or to seek reaffirmation in the future shall be implied by the execution of this reaffirmation.
	
		
	GUARANTOR:
	MAGMA SERVICES, INC.,
a Delaware corporation

	 
	By: /s/ Peter S. Teshima

	 
	Name: Peter S. Teshima

	 
	Title: CFO

EXHIBIT A

Schedule 5.2
Provide Agent (and if so requested by Agent, with copies for each Lender) with each of the documents set forth below at the following times in form satisfactory to Agent:

	
		
	During an Accelerated Reporting Period, monthly (not later than the 15th day of each month) 
	(a)  a report that (i) segregates trailing twelve months revenue into licenses revenue, maintenance revenue, and services revenue, and (ii) within licenses revenue, includes (A) sub-totals for perpetual and time-based licenses, and (B) further sub-totals for up-front, ratable, due and payable, and cash receipts revenue.

	Quarterly (no later than 45 days following the end of each fiscal quarter)
	(b) a Credit Amount Certificate, together with supporting schedules and documentation, 

	(c) a report that (i) segregates trailing twelve months revenue into licenses revenue, maintenance revenue, and services revenue, and (ii) within licenses revenue, includes (A) sub-totals for perpetual and time-based licenses, and (B) further sub-totals for up-front, ratable, due and payable, and cash receipts revenue,

	(d) a backlog report delineating scheduled vs. unscheduled backlog, and segmented by estimated period of recognition, and

	(e) a lost material customer report, with identified cause (if known) and trailing twelve months revenue contribution for each lost customer.

	Upon request by Agent
	Such other reports, including but not limited to a summary aging of the Borrower's Accounts, and a summary aging, by vendor, of Borrower's accounts payable, and any book overdrafts, and as to the Collateral or the financial condition of Borrower and its Subsidiaries, as Agent may reasonably request.

  

Exhibit AExhibit 10.3 Promissory Note

Exhibit 10.3

UNSECURED PROMISSORY NOTE

PRINCIPAL AMOUNT:  

$10,000

LOAN DATE:  

October 25, 2011

EXECUTION DATE:

December 6, 2011

INTEREST RATE: 

10.00% SIMPLE INTEREST

BORROWER:

HAPYKIDZ.COM, INC.

LENDER:

HOLLI MORRIS

PAYMENT:

$10,000 DUE ON DEMAND 

1.

Principal Repayment.  For value received, HapyKidz.com, Inc., a Nevada corporation (the “Borrower”) hereby unconditionally promises to pay to the order of Holli Morris (the “Lender”), the principal amount of Ten Thousand Dollars ($10,000), with simple interest accruing at a annual rate of 10.00% thereon. The principal amount is due and payable on demand upon 10 days written notice by Lender (the “Due Date”).

2.

Payment Terms. Borrower shall pay the principal and any accrued interest in full on or before Due Date.

3.

Default. Borrower will be in default if any of the following occur: 

(a)

Borrower fails to make the Principal Repayment when due; 

(b)

Borrower breaks any promise Borrower has made to Lender in this Note or Borrower fails to perform promptly at the time and strictly in the manner provided in this Note; 

(c)

Any representation or statement made or furnished to Lender by Borrower or on Borrower's behalf in connection with this Note is false or misleading in any material respect; or, 

(d)

A receiver is appointed for any part of Borrower's property, Borrower makes an assignment for the benefit of creditors, or any proceeding is commenced either by Borrower or against Borrower under any Bankruptcy or insolvency laws seeking the liquidation or reorganization of Borrower and such proceeding is not dismissed within 60 days after such filing.

4.

Borrower’s Right to Prepay.  Borrower may pay without penalty, all or a portion of the amount owed earlier that it is due. Any prepayment shall be first applied against any accrued and unpaid interest and then to reduce the amount of principal due under this Note.

5.

Waiver of Demand, Presentment, etc. The Borrower hereby expressly waives demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, bringing of suit and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereunder, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for hereunder.

6.

Payment.  Except as otherwise provided for herein, all payments with respect to this Note shall be made in lawful currency of the United States of America by check or wire transfer of immediately available funds, at the option of the Lender, at the principal office of the Lender or such other place or places or designated accounts as may be reasonably specified by the Lender of this Note in a written notice to the Borrower at least one (1) business day prior to payment. 

7.

Assignment.  The rights and obligations of the Borrower and the Lender of this Note shall be binding upon, and inure to the benefit of, the permitted successors, assigns, heirs, administrators and transferees of the parties hereto.

8.

Waiver and Amendment.  Any provision of this Note, including, without limitation, the due date hereof, and the observance of any term hereof, may be amended, waived or modified (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Borrower and the Lender.

9.

Notices. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by registered or certified mail, postage prepaid, or delivered by facsimile transmission, to the Borrower at the address or facsimile number set forth herein or to the Lender at its address or facsimile number set forth in the records of the Borrower.  Any party hereto may by notice so given change its address for future notice hereunder.  Notice shall conclusively be deemed to have been given when personally delivered or when deposited in the mail in the manner set forth above and shall be deemed to have been received when delivered or, if notice is given by facsimile transmission, when delivered with confirmation of receipt.

10.

Severability.  If one or more provisions of this Note are held to be unenforceable under applicable law, such provisions shall be excluded from this Note, and the balance of this Note shall be interpreted as if such provisions were so excluded and shall be enforceable in accordance with its terms.

11.

Headings.  Section headings in this Note are for convenience only, and shall not be used in the construction of this Note.

IN WITNESS WHEREOF, the Borrower has caused this Note to be issued as of the date first above written.

HAPYKIDZ.COM, INC.

By:  /s/ Holli Morris      

Name: Holli Morris

Title: CEO

2

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