-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PYXuPLZhphJrE2Olyr+Ka9+WKLEZRBm4LXK74HJh+52ALEorYt8KmJCOAR8TDn9a wmEAD5AvBardBpHT9HfQJg== 0000950149-02-000825.txt : 20020430 0000950149-02-000825.hdr.sgml : 20020430 ACCESSION NUMBER: 0000950149-02-000825 CONFORMED SUBMISSION TYPE: SC TO-T PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 20020430 GROUP MEMBERS: INDIANA MERGER CORPORATION GROUP MEMBERS: MENTOR GRAPHICS CORPORATION SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: INNOVEDA INC CENTRAL INDEX KEY: 0000925072 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 931137888 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T SEC ACT: 1934 Act SEC FILE NUMBER: 005-49415 FILM NUMBER: 02627491 BUSINESS ADDRESS: STREET 1: 293 BOSTON POST ROAD WEST CITY: MARLBORO STATE: MA ZIP: 01752 BUSINESS PHONE: 5084800881 MAIL ADDRESS: STREET 1: 293 BOSTON POST RD WEST CITY: MARLBORO STATE: MA ZIP: 01752 FORMER COMPANY: FORMER CONFORMED NAME: SUMMIT DESIGN INC DATE OF NAME CHANGE: 19960514 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MENTOR GRAPHICS CORP CENTRAL INDEX KEY: 0000701811 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 930786033 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T BUSINESS ADDRESS: STREET 1: 8005 SW BOECKMAN RD CITY: WILSONVILLE STATE: OR ZIP: 97070-7777 BUSINESS PHONE: 5036857000 SC TO-T 1 f81012tscto-t.txt SC TO-T - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- SCHEDULE TO (RULE 14D-100) TENDER OFFER STATEMENT UNDER SECTION 14(D)(1) OR SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 --------------------- INNOVEDA, INC. (Name of Subject Company (Issuer)) MENTOR GRAPHICS CORPORATION INDIANA MERGER CORPORATION (Names of Filing Persons (Offerors)) COMMON STOCK, PAR VALUE $0.01 PER SHARE, (Title of Class of Securities) 45769F102 (CUSIP Number of Class of Securities) WALDEN C. RHINES PRESIDENT AND CHIEF EXECUTIVE OFFICER MENTOR GRAPHICS CORPORATION 8005 S.W. BOECKMAN ROAD WILSONVILLE, OREGON 97070-7777 (503) 685-1200 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Filing Persons) COPIES TO: John J. Huber, Esq. Christopher L. Kaufman, Esq. Latham & Watkins Latham & Watkins 555 11th Street, N.W., Suite 1000 135 Commonwealth Drive Washington, D.C. 20004 Menlo Park, California 94025 (202) 637-2200 (650) 328-4600
--------------------- CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE ---------------------- -------------------- $176,874,163 $35,375
* Estimated for purposes of calculating the filing fee only. The filing fee calculation assumes the purchase of 44,778,269 shares of common stock of Innoveda, Inc., which includes 4,396,262 shares issueble upon the exercise of outstanding exercisable options, at a purchase price of $3.95 per share. The amount of the filing fee, calculated in accordance with Rule 0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50 of 1% of the transaction value. [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: N/A Filing party: N/A Form or Registration No.: N/A Date Filed: N/A
[ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: [X] third-party tender offer subject to Rule 14d-1 [ ] issuer tender offer subject to Rule 13e-4 [ ] going private transaction subject to Rule 13e-3 [ ] amendment to Schedule 13D under Rule 13d-2 Check the following box if the filing is a final amendment reporting the results of the tender offer [ ] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This Tender Offer Statement on Schedule TO relates to a tender offer by Indiana Merger Corporation, a Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Mentor Graphics Corporation, an Oregon corporation ("Mentor Graphics" and together with Purchaser, "Mentor"), to purchase all outstanding shares of common stock, par value $0.01 per share, of Innoveda, Inc., a Delaware corporation (the "Company"), for a purchase price of $3.95 per share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated April 30, 2002 (the "Offer to Purchase") and in the related Letter of Transmittal (the "Letter of Transmittal" which, together with the Offer to Purchase, as each may be amended and supplemented from time to time, constitute the "Offer"). ITEMS 1 THROUGH 9, AND ITEM 11 The information in the Offer to Purchase and the Letter of Transmittal, copies of which are filed with this Schedule TO as Exhibits (a)(1)(A) and (a)(1)(B) hereto, respectively, are incorporated herein by reference in answer to items 1 through 9, and Item 11 in this Tender Offer Statement on Schedule TO. ITEM 10. FINANCIAL STATEMENTS. Not Applicable. ITEM 12. EXHIBITS (a)(1)(A) Offer to Purchase dated April 30, 2002. (a)(1)(B) Letter of Transmittal. (a)(1)(C) Notice of Guaranteed Delivery. (a)(1)(D) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(E) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(1)(G) Joint Press Release dated April 23, 2002 (incorporated by reference to the Schedule TO-C filed by Mentor Graphics with the SEC on April 24, 2002). (a)(1)(H) Summary Advertisement, published April 30, 2002. (b)(1) Bridge Loan Agreement dated as of April 23, 2002 among Mentor Graphics Corporation, Bank of America, N.A. as agent, and the other financial institutions from time to time parties thereto. (b)(2) Promissory Note dated April 23, 2002, executed by Mentor Graphics Corporation in favor of Bank of America, N.A. (c) None. (d)(1) Mutual Non-Disclosure Agreement dated as of October 5, 2001, between Mentor Graphics Corporation and Innoveda, Inc.
2 (d)(2) Exclusivity and Confidentiality Agreement dated as of March 25, 2002, as amended, between Mentor Graphics Corporation and Innoveda, Inc. (d)(3) Agreement and Plan of Merger dated as of April 23, 2002, by and among Mentor Graphics Corporation, Indiana Merger Corporation and Innoveda, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Mentor Graphics with the SEC on April 24, 2002). (d)(4) Form of Tender and Stockholder Support Agreement dated as of April 23, 2002, by and among Mentor Graphics Corporation, Indiana Merger Corporation, and each of William Herman, Richard Lucier, Kevin O'Brien, Peter Johnson, Kyoden Company Limited, DLJ Capital Corporation and DLJ ESC II, L.P. (d)(5) Form of Tender and Stockholder Support Agreement dated as of April 23, 2002, by and among Mentor Graphics Corporation, Indiana Merger Corporation, and each of William Botts, Keith Geeslin, Lorne Cooper, Steven Erwin, Hiroshi Hashimoto and Paula Cassidy. (d)(6) Form of Non-Compete Agreement dated as of April 23, 2002, by and among Mentor Graphics Corporation, Indiana Merger Corporation, Innoveda, Inc. and each of William Herman and Richard Lucier. (e) None. (f) None. (g) None. (h) None.
3 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. MENTOR GRAPHICS CORPORATION By: /s/ GREGORY K. HINCKLEY -------------------------------------- Name: Gregory K. Hinckley Title: President INDIANA MERGER CORPORATION By: /s/ GREGORY K. HINCKLEY -------------------------------------- Name: Gregory K. Hinckley Title: Chief Financial Officer Dated: April 30, 2002 4 EXHIBIT INDEX (a)(1)(A) Offer to Purchase dated April 30, 2002. (a)(1)(B) Letter of Transmittal. (a)(1)(C) Notice of Guaranteed Delivery. (a)(1)(D) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(E) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(1)(G) Joint Press Release dated April 23, 2002 (incorporated by reference to the Schedule TO-C filed by Mentor Graphics with the SEC on April 24, 2002). (a)(1)(H) Summary Advertisement, published April 30, 2002. (b)(1) Bridge Loan Agreement dated as of April 23, 2002, among Mentor Graphics Corporation, Bank of America, N.A. as agent, and the other financial institutions from time to time parties thereto. (b)(2) Promissory Note dated April 23, 2002, executed by Mentor Graphics Corporation in favor of Bank of America, N.A. (c) None. (d)(1) Mutual Non-Disclosure Agreement dated as of October 5, 2001, between Mentor Graphics Corporation and Innoveda, Inc. (d)(2) Exclusivity and Confidentiality Agreement dated as of March 25, 2002, as amended, between Mentor Graphics Corporation and Innoveda, Inc. (d)(3) Agreement and Plan of Merger dated as of April 23, 2002, by and among Mentor Graphics Corporation, Indiana Merger Corporation and Innoveda, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report Form 8-K filed by Mentor Graphics with the SEC on April 24, 2002). (d)(4) Form of Tender and Stockholder Support Agreement dated as of April 23, 2002, by and among Mentor Graphics Corporation, Indiana Merger Corporation, and each of William Herman, Richard Lucier, Kevin O'Brien, Peter Johnson, Kyoden Company Limited, DLJ Capital Corporation and DLJ ESC II, L.P. (d)(5) Form of Tender and Stockholder Support Agreement dated as of April 23, 2002, by and among Mentor Graphics Corporation, Indiana Merger Corporation, and each of William Botts, Keith Geeslin, Lorne Cooper, Steven Erwin, Hiroshi Hashimoto and Paula Cassidy. (d)(6) Form of Non-Compete Agreement dated as of April 23, 2002, by and among Mentor Graphics Corporation, Indiana Merger Corporation, Innoveda, Inc. and each of William Herman and Richard Lucier. (e) None. (f) None. (g) None. (h) None.
EX-99.(A)(1)(A) 3 f81012tex99-a1a.txt EXHIBIT 99.(A)(1)(A) EXHIBIT (a)(1)(A) OFFER TO PURCHASE FOR CASH (THE "OFFER") ALL OUTSTANDING SHARES OF COMMON STOCK (THE "SHARES") OF INNOVEDA, INC. (THE "COMPANY") AT $3.95 NET PER SHARE BY INDIANA MERGER CORPORATION ("PURCHASER") A WHOLLY-OWNED SUBSIDIARY OF MENTOR GRAPHICS CORPORATION ("MENTOR GRAPHICS") THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MAY 28, 2002, UNLESS THE OFFER IS EXTENDED. THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF MERGER, DATED AS OF APRIL 23, 2002 (THE "MERGER AGREEMENT"), AMONG MENTOR GRAPHICS, PURCHASER AND THE COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE OF ALL DIRECTORS PRESENT AT A MEETING DULY CALLED AND HELD ON APRIL 23, 2002, HAS (I) DETERMINED THAT EACH OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING EACH OF THE OFFER AND THE MERGER DESCRIBED HEREIN, IS FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, (II) APPROVED THE OFFER AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE SUBSEQUENT MERGER OF PURCHASER WITH AND INTO THE COMPANY, AS A RESULT OF WHICH THE COMPANY WILL BECOME A WHOLLY-OWNED SUBSIDIARY OF MENTOR GRAPHICS, AND (III) RECOMMENDED THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN IMMEDIATELY PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES THAT REPRESENTS AT LEAST A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE, AND (II) THE EXPIRATION OR TERMINATION OF ANY AND ALL WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER. THE OFFER IS ALSO SUBJECT TO OTHER CONDITIONS. SEE "THE OFFER -- CONDITIONS TO THE OFFER." THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION, AND YOU SHOULD CAREFULLY READ BOTH IN THEIR ENTIRETY BEFORE YOU MAKE A DECISION WITH RESPECT TO THE OFFER. IMPORTANT If you wish to tender all or any part of your Shares, prior to the expiration date of the Offer you should either (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal included with this Offer to Purchase, have your signature thereon guaranteed if required by Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of Transmittal (or such facsimile thereof) and any other required documents to the depositary for the Offer and either deliver the certificates for such Shares to the depositary for the Offer along with the Letter of Transmittal (or a facsimile thereof) or deliver such Shares pursuant to the procedures for book-entry transfers set forth in "The Offer -- Procedure for Tendering Shares" of this Offer to Purchase, or (2) request your broker, dealer, commercial bank, trust company or other nominee to effect the transaction for you. If you have Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee, you must contact such broker, dealer, commercial bank, trust company or other nominee if you desire to tender your Shares. If you desire to tender your Shares and your certificates for such Shares are not immediately available, or you cannot comply with the procedures for book-entry transfers described in this Offer to Purchase on a timely basis, you may tender such Shares by following the procedures for guaranteed delivery set forth in "The Offer -- Procedure for Tendering Shares." A summary of the principal terms of the Offer appears on pages 1-5 of this Offer to Purchase. If you have questions about the Offer, you may call MacKenzie Partners, Inc., the information agent for the Offer, at its address and telephone number set forth on the back cover of this Offer to Purchase. You can also obtain additional copies of this Offer to Purchase, the related Letter of Transmittal and the Notice of Guaranteed Delivery from MacKenzie Partners, Inc., or your broker, dealer, commercial bank, trust company or other nominee. April 30, 2002 ii TABLE OF CONTENTS
PAGE ---- SUMMARY TERM SHEET.......................................... 1 INTRODUCTION................................................ 6 THE OFFER................................................... 8 1. Terms of the Offer; Expiration Date................... 8 2. Extension of Tender Period; Termination; Amendment.... 8 3. Acceptance for Payment and Payment.................... 10 4. Procedure for Tendering Shares........................ 10 5. Withdrawal Rights..................................... 12 6. Certain United States Federal Income Tax Considerations......................................... 13 7. Price Range of Shares; Dividends...................... 14 8. Certain Information Concerning the Company............ 14 9. Certain Information Concerning Purchaser and Mentor Graphics............................................... 18 10. Source and Amount of Funds............................ 19 11. Background of the Offer............................... 20 12. The Merger Agreement; Other Arrangements.............. 21 13. Purpose and Structure of the Offer; Plans for the Company; Appraisal Rights.............................. 33 14. Effect of the Offer on the Market for the Shares; Nasdaq Listing; Registration under the Exchange Act... 34 15. Dividends and Distributions........................... 35 16. Conditions to the Offer............................... 36 17. Certain Legal Matters; Regulatory Approvals........... 38 18. Fees and Expenses..................................... 41 19. Miscellaneous......................................... 41 Schedule I -- Directors and Executive Officers of Mentor Graphics and Purchaser.................................... I-1 Schedule II -- Section 262 of the Delaware General Corporation Law........................................... II-1
iii SUMMARY TERM SHEET Mentor Graphics Corporation ("Mentor Graphics"), through its wholly-owned subsidiary, Indiana Merger Corporation ("Purchaser," and together with Mentor Graphics, "Mentor"), is offering to purchase all of the issued and outstanding shares of common stock, par value $0.01 per share (the "Shares"), of Innoveda, Inc. (the "Company") for $3.95 per Share net to the seller in cash, without interest, in connection with the Agreement and Plan of Merger, dated as of April 23, 2002 (the "Merger Agreement") by and among Mentor Graphics, Purchaser and the Company. The following are some of the questions you, as a stockholder of the Company, may have and answers to those questions. You should carefully read this Offer to Purchase and the accompanying Letter of Transmittal in their entirety because the information in this summary term sheet is not complete, and additional important information is contained in the remainder of this Offer to Purchase and in the Letter of Transmittal. WHO IS OFFERING TO BUY MY SHARES? WHY? Our name is Mentor Graphics Corporation. We are an Oregon corporation and are making the Offer through our wholly-owned subsidiary, Indiana Merger Corporation, a Delaware corporation, which was formed for the purpose of making a tender offer for the Shares. The tender offer is the first step in our plan to acquire all of the outstanding Shares. WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER? We are seeking to purchase all of the issued and outstanding Shares. See the "Introduction" to this Offer to Purchase and "The Offer -- Terms of the Offer; Expiration Date." HOW MUCH IS MENTOR OFFERING TO PAY FOR MY SHARES, AND WHAT IS THE FORM OF PAYMENT? WILL I HAVE TO PAY ANY FEES OR COMMISSIONS? We are offering to pay $3.95 per Share, net to you, in cash, without interest. If you tender your Shares to us in the Offer, you will not have to pay brokerage fees, commissions or similar expenses. If you own your Shares through a broker or other nominee, and your broker tenders your Shares on your behalf, your broker or nominee may charge you a fee for doing so. You should consult your broker or nominee to determine whether any charges will apply. WHAT DOES THE COMPANY'S BOARD OF DIRECTORS THINK OF THE OFFER? We are making the Offer pursuant to the Merger Agreement, which has been approved by the Company's Board of Directors. By unanimous vote of all directors present at a meeting held on April 23, 2002, the Company's Board of Directors: - determined that the Offer and the Merger of Purchaser with and into the Company (the "Merger") are fair to and in the best interests of the stockholders of the Company; - approved and adopted the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger; and - recommended that the Company's stockholders accept the Offer and tender their Shares pursuant to the Offer. See the "Introduction" to this Offer to Purchase. WILL THE DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY TENDER THEIR SHARES IN THE OFFER? Yes. The members of the Company's Board of Directors, each of the executive officers of the Company and some of their respective affiliates have all agreed to tender certain shares owned by them pursuant to the Offer. Each entered into a Tender and Stockholder Support Agreement with Mentor pursuant to which they agreed to tender and sell certain shares owned by them to us in accordance with the terms of the Offer. The Tender and Stockholder Support Agreements entered into by Mentor with these individuals relate to an 1 aggregate of 15,633,687 shares or approximately 39% of the Company's shares outstanding as of April 23, 2002 (or approximately 32% of the Company's shares on a fully diluted basis). See "The Offer -- The Merger Agreement; Other Arrangements." DOES MENTOR HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT? Yes. We will need approximately $160 million (or approximately $194 million on a fully diluted basis) to purchase all Shares pursuant to the Offer and to pay related fees and expenses. Since we currently have available borrowing capacity of up to $215 million and currently have approximately $47 million in cash and working capital available to buy all of the Shares outstanding and pay related fees and expenses, the Offer is not subject to any financing condition. IS MENTOR'S FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER? Since we have sufficient cash, working capital and available borrowings to purchase the Shares and pay all fees relating to the Offer, the Offer is not subject to any financing condition. Therefore, we believe our financial condition is not material to your decision whether to tender in the Offer. If you do not tender in the Offer, in the subsequent merger (if it occurs), you will receive, for each Share you hold, the same cash price paid under the terms of the Offer. If you would like additional information about our financial condition, please see "The Offer -- Certain Information Concerning Purchaser and Mentor Graphics -- Available Information." WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER? The most significant conditions to the Offer are the following: - that the Company's stockholders validly tender and do not withdraw prior to the expiration date of the Offer the number of Shares representing at least a majority of the total number of outstanding Shares on a fully diluted basis on the date of purchase (the "Minimum Condition"); and - that any waiting periods under applicable antitrust laws have expired or have been terminated. We can waive some of the conditions to the Offer without the Company's consent in our reasonable discretion; however, we cannot waive the Minimum Condition without the Company's consent. For a complete list of the conditions to the Offer, see "The Offer -- Conditions to the Offer." HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER? You have until 12:00 Midnight, New York City time, on Tuesday, May 28, 2002 (the "Expiration Date"), to decide whether to tender your Shares in the Offer. Further, if you cannot deliver everything required to make a valid tender to Wilmington Trust Company, the depositary for the Offer, prior to such time, you may be able to use a guaranteed delivery procedure, which is described in "The Offer -- Procedure for Tendering Shares." CAN THE OFFER BE EXTENDED AND, IF SO, UNDER WHAT CIRCUMSTANCES? We may extend the period of time for which the Offer is open pursuant to, and in accordance with, the terms of the Merger Agreement or as may be required by applicable law. We may extend the Expiration Date if any of the conditions specified in "The Offer -- Conditions to the Offer" are not satisfied at the scheduled Expiration Date but in no event later than December 23, 2002. In addition, if the Offer has not been consummated at the Expiration Date due to the failure to satisfy the condition to the Offer relating to the expiration of the waiting period under any applicable antitrust statutes or regulations, we will, at the request of the Company, extend the Expiration Date for one or more periods (not in excess of ten business days each) but in no event later than December 23, 2002. We may also elect to provide a "subsequent offering period" for the Offer. A subsequent offering period, if we include one, will be an additional period of time beginning after we have purchased Shares tendered 2 during the Offer, during which stockholders may tender their Shares and receive payment for Shares validly tendered. If we decide to provide a subsequent offering period, we will make a public announcement of our decision not later than 9:00 a.m., New York City time, on the business day after the Expiration Date. We do not currently intend to include a subsequent offering period, although we reserve the right to do so. See "The Offer -- Terms of the Offer; Expiration Date." HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED? If we decide to extend the Offer, we will inform Wilmington Trust Company, the depositary for the Offer, of that fact and will make a public announcement of the extension, not later than 9:00 a.m., New York City time, on the business day after the day on which the Offer was scheduled to expire. WHAT WILL HAPPEN TO MY OPTIONS IN THE OFFER? We are not offering to purchase any options of the Company in the Offer. If you wish to tender option shares in the Offer, you must exercise those options and comply with the tender procedures described herein. In connection with the merger of Purchaser with and into the Company (the "Merger"), Mentor has agreed to assume each outstanding option to purchase Shares under any plan, agreement or arrangement pursuant to which options to purchase Shares or other equity interests of the Company have been granted. See "The Offer -- The Merger Agreement; Other Arrangements." HOW DO I TENDER MY SHARES? To tender Shares, you must deliver the certificates representing your Shares, together with a completed Letter of Transmittal, to Wilmington Trust Company, the depositary for the Offer, not later than the time the Offer expires. If your Shares are held in street name by your broker, dealer, commercial bank, trust company or other nominee, such nominee can tender your Shares through The Depository Trust Company. If you cannot deliver everything required to make a valid tender to the depositary prior to the expiration date of the Offer, you may have a limited amount of additional time by having a broker, a bank or other fiduciary which is a member of the Securities Transfer Agents Medallion Program or another eligible institution guarantee that the missing items will be received by the depositary within three Nasdaq National Market trading days after the expiration of the Offer. The depositary must receive the missing items within that three trading-day period for the tender to be valid. See "The Offer -- Procedures for Tendering Shares." UNTIL WHAT TIME CAN I WITHDRAW TENDERED SHARES? You can withdraw tendered Shares at any time until the Offer has expired and, if we have not agreed to accept your Shares for payment by June 28, 2002, you can withdraw them at any time after such date until we accept Shares for payment. If we decide to provide a subsequent offering period, we will accept Shares tendered during that period immediately and thus you will not be able to withdraw Shares tendered in the Offer during any subsequent offering period. See "The Offer -- Withdrawal Rights." HOW DO I WITHDRAW TENDERED SHARES? To withdraw Shares, you must deliver a written notice of withdrawal, or a facsimile of one, with the required information to Wilmington Trust Company, the depositary for the Offer, while you have the right to withdraw the Shares. If you tendered your Shares by giving instructions through a broker or nominee, you must instruct your broker, dealer, commercial bank, trust company or other nominee to arrange for the withdrawal of your Shares. See "The Offer -- Withdrawal Rights." WHEN AND HOW WILL I BE PAID FOR MY TENDERED SHARES? Subject to the terms and conditions of the Offer, we will pay for all validly tendered and not withdrawn Shares promptly after the Expiration Date. We will pay for your validly tendered and not withdrawn Shares by depositing the purchase price with Wilmington Trust Company, the depositary for the Offer, which will act as your agent for the purpose of receiving payments from us and transmitting such payments to you. In all cases, 3 payment for tendered Shares will be made only after timely receipt by Wilmington Trust Company of certificates for such Shares (or of a confirmation of a book-entry transfer of such Shares as described in "The Offer -- Procedure for Tendering Shares"), a properly completed and duly executed Letter of Transmittal and any other required documents for such Shares. WILL THE OFFER BE FOLLOWED BY A MERGER? Yes, unless the conditions to the Merger are not satisfied or waived. If we accept for payment and pay for at least such number of Shares that satisfies the Minimum Condition and the other conditions are satisfied or waived, Purchaser will merge with and into the Company. If the Merger takes place, Mentor will own all of the Shares of the Company and all remaining stockholders of the Company, other than the Company's dissenting stockholders who properly exercise appraisal rights, will receive $3.95 per share in cash. See the "Introduction" to this Offer to Purchase. See also "The Offer -- The Merger Agreement; Other Arrangements" for a description of the conditions to the Merger. Pursuant to the terms of the Merger Agreement and in order to facilitate a short-form merger following the completion of the Offer, the Company has granted to us an irrevocable option, exercisable in whole if the Minimum Condition is met and we accept for payment pursuant to the Offer at least 85% but less than 90% of the Shares then outstanding, to purchase additional Shares equal to an amount that, when added to the Shares that we already own at the time the option is exercised, will constitute one Share more than 90% of the Shares then outstanding (assuming the exercise of all outstanding exercisable options to purchase Shares with an exercise price less than $3.95 per Share), at a price of $3.95 per Share. We may only exercise this option so long as immediately after the exercise we would own more than 90% of the Shares then outstanding. See "The Offer -- The Merger Agreement; Other Arrangements." If we exercise this option or if we acquire more than 90% of the outstanding Shares in the Offer we intend to consummate a "short-form" merger under Delaware law, which would not require the approval of the Company's stockholders. WILL THE COMPANY CONTINUE AS A PUBLIC COMPANY AFTER THE OFFER? Yes; however, if and when the Merger takes place, the Company will no longer be publicly traded. In addition, it is possible that, following the Expiration Date but prior to the consummation of the Merger, there may be so few remaining stockholders and publicly held Shares that: - the Shares will no longer be eligible to be traded on the Nasdaq National Market or any securities exchange; - there may not be an active public trading market, or, possibly, any public trading market, for the Shares; and - the Company may cease making filings with the SEC or otherwise cease being subject to the SEC rules relating to publicly held companies. See "The Offer -- Effect of the Offer on the Market for the Shares; Nasdaq Listing; Registration under the Exchange Act." IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES? If the Merger takes place, stockholders not tendering in the Offer will receive the same amount of cash per Share that they would have received had they tendered their Shares in the Offer, subject to any appraisal rights properly exercised under Delaware law. Therefore, if the Merger takes place and you do not exercise appraisal rights, the only difference to you between tendering your Shares and not tendering your Shares is that you will be paid earlier if you tender your Shares. However, if the Merger does not take place and the Offer is consummated, the number of stockholders and Shares that are still in the hands of the public may be so small that there will no longer be an active public trading market, or, possibly, any public trading market, for the Shares, which may affect prices at which Shares trade. Also, as described above, the Company may cease making filings with the SEC or otherwise cease being subject to the SEC rules relating to publicly held companies. 4 ARE APPRAISAL RIGHTS AVAILABLE IN EITHER THE OFFER OR THE MERGER? Appraisal rights are not available in the Offer. If the Merger is consummated, holders of Shares at the effective time of the Merger who do not vote in favor of, or consent to, the Merger will have rights under Section 262 of the Delaware General Corporation Law to demand appraisal of their Shares. Under Section 262, stockholders who demand appraisal and comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, and to receive payment of that fair value in cash, together with a fair rate of interest, if any. Any such judicial determination of the fair value of Shares could be based upon factors other than, or in addition to, the price per Share to be paid in the Merger or the market value of the Shares. The value so determined could be more or less than the price per Share to be paid in the Merger. See "The Offer -- Purpose and Structure of the Offer; Plans for the Company; Appraisal Rights" and Schedule II to this Offer to Purchase for a more full discussion and the complete text of Section 262 of the Delaware General Corporation Law. WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE? On April 23, 2002, the last full trading day before we announced the execution of the Merger Agreement, the closing price of a Share on the Nasdaq National Market was $2.38. On April 29, 2002, the last full trading day before the date of this Offer to Purchase, the closing price of a Share on the Nasdaq National Market was $3.87. We recommend that you obtain a recent quotation for Shares before deciding whether to tender your Shares. WHAT ARE THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF TENDERING SHARES? The receipt of cash for shares pursuant to the Offer or the Merger will be a taxable transaction for United States federal income tax purposes. In general, a stockholder who tenders shares in the Offer or receives cash in exchange for shares in the Merger will recognize gain or loss for United States federal income tax purposes equal to the difference, if any, between the amount of cash received and the stockholder's adjusted tax basis in the shares tendered in the Offer or exchanged for cash in the Merger. If the Shares tendered or exchanged constitute capital assets in the hands of the stockholder, such gain or loss will be capital gain or loss. In general, capital gains recognized by an individual will be subject to a maximum United States federal income tax rate of 20% if the Shares were held for more than one year. See "The Offer -- Certain United States Federal Income Tax Considerations." WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER? You can call MacKenzie Partners, Inc., the information agent for the Offer, at (800) 322-2885 (toll free). See the back cover of this Offer to Purchase. 5 To the Holders of Common Stock of Innoveda, Inc.: INTRODUCTION We are Mentor Graphics Corporation, an Oregon corporation ("Mentor Graphics"). Through our wholly-owned subsidiary Indiana Merger Corporation, a Delaware corporation ("Purchaser," and together with Mentor Graphics, "Mentor"), we hereby offer to purchase all of the issued and outstanding common stock, par value $0.01 per share (the "Shares"), of Innoveda, Inc., a Delaware corporation (the "Company"), at the price of $3.95 per Share net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together, as amended, supplemented or otherwise modified from time to time, constitute the "Offer"). The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of April 23, 2002 (the "Merger Agreement"), among the Company, Mentor Graphics and Purchaser. The Merger Agreement provides that, as soon as practicable following consummation of the Offer, Purchaser will be merged with and into the Company (the "Merger") with the Company continuing as the surviving corporation (the "Surviving Corporation") and as a wholly-owned subsidiary of Mentor Graphics. Pursuant to the Merger Agreement, at the effective time of the Merger (the "Effective Time"), each Share outstanding immediately prior to the Effective Time (other than Shares owned by Mentor, the Company or any of their respective wholly-owned subsidiaries, all of which will be canceled, and Shares held by the Company's stockholders, if any, who properly exercise their appraisal rights under the Delaware General Corporation Law (the "DGCL")) will be converted into the right to receive $3.95 per Share in cash or any greater per Share price paid in the Offer, net without interest (the "Merger Consideration"). The Merger Agreement is more fully described in "The Offer -- The Merger Agreement; Other Arrangements." If you tender your Shares to us in the Offer, you will not be obligated to pay brokerage fees, commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the sale of Shares pursuant to the Offer. If you own your Shares through a broker or other nominee, and your broker or other nominee tenders your Shares on your behalf, your broker or other nominee may charge you a fee for doing so. You should consult your broker or other nominee to determine whether any charges will apply. We will pay all charges and expenses of Wilmington Trust Company (the "Depositary") and MacKenzie Partners, Inc. (the "Information Agent") incurred in connection with the Offer. See "The Offer -- Fees and Expenses." The Company's Board of Directors has (1) determined that the Offer and the Merger are fair to and in the best interests of the stockholders of the Company, (2) approved and adopted the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, and (3) recommended that the Company's stockholders accept the Offer and tender their Shares pursuant to the Offer. Robertson Stephens, Inc. ("Robertson Stephens"), the Company's financial advisor, has delivered to the Company's Board of Directors its written opinion, dated April 23, 2002, to the effect that, as of such date and based on the matters considered and subject to the assumptions, conditions and qualifications set forth in such opinion, the cash consideration to be received in the Offer and the Merger by holders of Shares (other than Mentor, affiliates of Mentor or holders of Shares for which appraisal rights have been properly exercised) was fair, from a financial point of view, to such holders. The full text of Robertson Stephens' written opinion, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is included as an annex to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which is being mailed to stockholders concurrently herewith. The opinion was not intended to be and does not constitute a recommendation to any holder of Shares whether or not to tender his or her Shares in the Offer or, if required, how to vote, or whether or not to take any action, with respect to the Offer and the Merger. Holders of Shares are urged to read the full text of such opinion carefully in its entirety. The Offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn prior to the Expiration Date a number of Shares that represents at least a majority of the total number of outstanding Shares on a fully diluted basis on the date of purchase (the "Minimum Condition"), and (2) the 6 expiration or termination of any and all waiting periods under applicable antitrust laws. The Offer is also subject to other conditions. See "The Offer -- Conditions to the Offer." The Company has advised us that as of April 23, 2002, 49,022,122 Shares were issued and outstanding, assuming the exercise of all options, warrants and other rights to purchase common stock. Immediately prior to the commencement of the Offer, Mentor and its subsidiaries beneficially owned no Shares, except for 15,633,687 Shares representing approximately 39% of the outstanding Shares (or 32% of the Shares on a fully diluted basis) beneficially owned pursuant to Tender and Stockholder Support Agreements that were entered into by certain stockholders of the Company in connection with the Merger Agreement. Accordingly, we believe that the Minimum Condition would be satisfied if approximately 24,511,062 Shares, including those subject to the Tender and Stockholder Support Agreements, were validly tendered and not withdrawn prior to the expiration of the Offer. In order to induce us to enter into the Merger Agreement, 13 stockholders of the Company (the "Significant Stockholders") consisting of its directors, executive officers and certain of their respective affiliates, owning in the aggregate approximately 39% of the issued and outstanding Shares (or 32% of the Shares on a fully diluted basis), have entered into the Tender and Stockholder Support Agreements, each dated as of April 23, 2002 (each, a "Tender Agreement") with Mentor pursuant to which the Significant Stockholders have, subject to certain limitations, (i) agreed to tender and sell 15,633,687 Shares (the "Subject Shares"), to Mentor pursuant to the Offer and (ii) agreed not to withdraw any Subject Shares tendered in the Offer. In addition, six of the Significant Stockholders have entered into Tender Agreements in which each such Significant Stockholder has, subject to certain limitations, (i) agreed to vote such Subject Shares in favor of the Merger and Merger Agreement and against any acquisition proposal other than the Merger and (ii) granted to Mentor and certain officers of Mentor an irrevocable proxy to vote such Subject Shares in favor of the transactions contemplated by the Merger Agreement. For a discussion of the Tender and Stockholder Support Agreements, see "The Offer -- The Merger Agreement; Other Arrangements." The Merger is subject to the satisfaction or waiver of certain conditions, including, if required, the approval and adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding Shares. If the Minimum Condition is satisfied and we acquire Shares pursuant to the Offer, we would have sufficient voting power to approve the Merger without the affirmative vote of any other stockholder of the Company. In addition, in order to facilitate a short-form merger following the completion of the Offer, the Company has granted us an irrevocable option, exercisable in whole if the Minimum Condition is met and we accept for payment pursuant to the Offer more than 85% but less than 90% of the Shares then outstanding, to purchase additional Shares equal to an amount that, when added to the Shares that we already own at the time the option is exercised, will constitute one Share more than 90% of the Shares then outstanding (assuming the exercise of all exercisable options to purchase Shares with an exercise price less than $3.95 per share), at a price of $3.95 per Share. We may exercise this option only so long as immediately after the exercise we would own more than 90% of the Shares outstanding. The Company has also agreed, if required, to cause a meeting of its stockholders to be held as promptly as practicable following consummation of the Offer for the purpose of considering and taking action upon the approval and adoption of the Merger Agreement. We have agreed to vote all Shares that we acquire in the Offer in favor of the approval and adoption of the Merger Agreement. See "The Offer -- The Merger Agreement; Other Arrangements." After expiration or termination of the Offer, we may seek to acquire additional Shares, through open market purchases, block trades, privately negotiated transactions, a tender offer or exchange offer or otherwise, upon such terms and at such prices as we may determine, which may be more or less than the price offered or paid per Share pursuant to the Offer and could be for cash or other consideration. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION, AND YOU SHOULD CAREFULLY READ BOTH IN THEIR ENTIRETY BEFORE YOU MAKE A DECISION WITH RESPECT TO THE OFFER. 7 THE OFFER 1. Terms of the Offer; Expiration Date. On the terms and subject to the conditions set forth in this Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), Mentor will accept for payment and pay for all Shares that are validly tendered prior to the Expiration Date and not properly withdrawn. "Expiration Date" means 12:00 Midnight, New York City time, on Tuesday, May 28, 2002, unless we extend the period of time for which the Offer is open, in which event "Expiration Date" means the latest time and date at which the Offer, as so extended, shall expire. The Offer is conditioned upon, among other things, (1) the Minimum Condition having been satisfied and (2) any waiting periods under applicable antitrust laws having expired or been terminated. The Offer is also subject to other conditions as described in "The Offer -- Conditions to the Offer." If any such condition is not satisfied, we may: (a) terminate the Offer and return all tendered Shares; (b) extend the Offer and, subject to certain conditions and to your withdrawal rights as set forth in "The Offer -- Withdrawal Rights," retain all Shares until the expiration date of the Offer as so extended; or (c) subject to the terms and conditions of the Merger Agreement, including the requirement that we obtain the Company's consent to waive the Minimum Condition, and to any requirement to extend the period of time during which the Offer must remain open, waive such condition and purchase all Shares validly tendered prior to the Expiration Date and not withdrawn or delay acceptance for payment or payment for Shares, subject to applicable law, until satisfaction or waiver of the conditions to the Offer. For a description of our right to extend, amend, delay or terminate the Offer, see "The Offer -- Extension of Tender Period; Termination; Amendment," "The Offer -- Conditions to the Offer" and "The Offer -- The Merger Agreement; Other Arrangements." On the date of this Offer to Purchase, we did not have beneficial ownership of any Shares, except for 15,633,687 Shares (representing approximately 39% of the outstanding Shares or 32% of the Shares on a fully diluted basis) beneficially owned pursuant to the Tender Agreements that were entered into by certain stockholders of the Company in connection with the Merger Agreement. For a discussion of the Tender Agreements, see "The Offer -- The Merger Agreement; Other Arrangements." The Company has advised us that as of April 23, 2002, 49,022,122 Shares were issued and outstanding on a fully diluted basis. For purposes of the Minimum Condition, the calculation of Shares issued and outstanding on a "fully diluted basis" assumes that all outstanding stock options, warrants and other rights are presently exercisable in full. The actual number of Shares that will satisfy the Minimum Condition will depend on the facts as they exist on the date of purchase. Under Rule 14d-11 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we may, subject to certain conditions, provide a subsequent offering period from three to 20 business days in length following the expiration of the Offer on the Expiration Date. A subsequent offering period would be an additional period of time, following the expiration of the Offer and the purchase of Shares in the Offer, during which stockholders may tender Shares not tendered in the Offer. A subsequent offering period, if one is included, is not an extension of the Offer, which already will have been completed. We reserve the right to include a subsequent offering period in the Offer. Pursuant to Rule 14d-7 under the Exchange Act, no withdrawal rights apply to Shares tendered during a subsequent offering period and no withdrawal rights apply during the subsequent offering period with respect to Shares tendered in the Offer and accepted for payment. We will pay the same consideration to stockholders tendering Shares in the Offer or in a subsequent offering period, if we include one. 2. Extension of Tender Period; Termination; Amendment. We reserve the right to extend the Expiration Date, in our reasonable discretion, if at the scheduled Expiration Date any of the conditions to the Offer have not been satisfied or waived. In addition, if the Offer has not been consummated at the Expiration Date due to the failure to satisfy the condition to the Offer relating to the expiration of the waiting period under any applicable antitrust statutes or regulations, we will, at the request of the Company, extend the Expiration Date for one or more periods (not in excess of ten business days each) but in no event later than December 23, 2002. We also have the right to extend the Offer for any period required by any rule, regulation, 8 interpretation or position of the Securities and Exchange Commission (the "SEC") or the SEC Staff applicable to the Offer or any period required by applicable law. Except as described in the next paragraph, we expressly reserve the right in our reasonable discretion to waive any of the conditions to the Offer, to make any change in the terms of our conditions to the Offer and to provide a subsequent offering period for the Offer in accordance with Rule 14d-11 under the Exchange Act. We will not, however, without the prior written consent of the Company, (i) decrease the price per Share to be paid in the Offer, (ii) change the form of consideration payable in the Offer, (iii) decrease the number of Shares sought to be purchased in the Offer, (iv) waive the Minimum Condition, (v) impose additional conditions to the Offer or (vi) amend any other term of the Offer in any manner adverse to the holders of Shares. If we increase or decrease the percentage of Shares being sought or increase or decrease the consideration to be paid for Shares pursuant to the Offer and the Offer is scheduled to expire at any time before the expiration of ten business days from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner specified below, the Offer will be extended until the expiration of ten business days from, and including, the date of such notice. If we make a material change in the terms of the Offer (other than a change in price or percentage of securities sought) or in the information concerning the Offer, or waive a material condition of the Offer, we will extend the Offer to the extent required by applicable law. In a published release, the SEC has stated its view that an offer must remain open for a minimum period of time following a material change in the terms of such offer and that the waiver of a condition, such as the Minimum Condition, is a material change in the terms of an offer. The release states that an offer should remain open for a minimum of five business days from the date the material change is first published, sent or given to stockholders, and that if material changes are made with respect to information that approaches the significance of price or percentage of Shares sought, a minimum of ten business days may be required to allow adequate dissemination and investor response. "Business day" means any day other than Saturday, Sunday or a federal holiday and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York City time. Any extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement, in the case of an extension of the Offer to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date, in accordance with the public announcement requirements of Rule 14e-1(d) under the Exchange Act. Subject to applicable law (including Rules 14d-4(d) and 14d-6(c) under the Exchange Act, which require that material changes in the information published, sent or given to any stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform them of such changes), and without limiting the manner in which we may choose to make any public announcement, we have no obligation to publish, advertise or otherwise communicate any public announcements other than by issuing a press release to the Dow Jones News Service. If we extend the time during which the Offer is open, or if we are delayed in our acceptance for payment of or payment for Shares pursuant to the Offer for any reason, then, without prejudice to our rights under the Offer, the Depositary may retain tendered Shares on our behalf and those Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described herein under "The Offer -- Withdrawal Rights." Our ability to delay the payment for Shares that we have accepted for payment is limited by (i) Rule 14e-1(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of stockholders promptly after the termination or withdrawal of the bidder's offer and (ii) the terms of the Merger Agreement, which require that Mentor pay for Shares that are tendered pursuant to the Offer as soon as practicable after the Expiration Date. The Company has provided us with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal and other related documents will be mailed to record holders of Shares whose names appear on the Company's stockholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the 9 names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing. 3. Acceptance for Payment and Payment. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), we will accept for payment and pay for all Shares that are validly tendered on or prior to the Expiration Date and not properly withdrawn pursuant to the Offer as soon as we are permitted to do so under applicable law, subject to the satisfaction or waiver of the conditions set forth in "The Offer -- Conditions to the Offer." In addition, we reserve the right, subject to the Merger Agreement and compliance with Rule 14e-1(c) under the Exchange Act, to delay the acceptance for payment or payment for Shares pending receipt of any regulatory or governmental approvals to the Offer as described under the caption "The Offer -- Certain Legal Matters; Regulatory Approvals." For a description of our right to terminate the Offer and not accept for payment or pay for Shares or to delay acceptance for payment or payment for Shares, see "The Offer -- Extension of Tender Period; Termination; Amendment." For purposes of the Offer, we will be deemed to have accepted for payment tendered Shares when, as and if we give oral or written notice of our acceptance to the Depositary. We will pay for Shares accepted for payment pursuant to the Offer by depositing the purchase price with the Depositary. The Depositary will act as your agent for the purpose of receiving payments from us and transmitting such payments to you. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such Shares (or of a confirmation of a book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility (as defined in "The Offer -- Procedure for Tendering Shares")), a properly completed and duly executed Letter of Transmittal and any other required documents. Accordingly, payment may be made to tendering stockholders at different times if delivery of the Shares and other required documents occurs at different times. For a description of the procedure for tendering Shares pursuant to the Offer, see "The Offer -- Procedure for Tendering Shares." Under no circumstances will we pay interest on the consideration paid for Shares pursuant to the Offer, regardless of any delay in making such payment. If we increase the consideration to be paid for Shares pursuant to the Offer, we will pay such increased consideration for all Shares purchased pursuant to the Offer. Subject to the terms and conditions of the Merger Agreement, we reserve the right to transfer or assign, in whole or from time to time in part, to one or more of our affiliates the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve us of our obligations under the Offer or prejudice your rights to receive payment for Shares validly tendered and accepted for payment. If any tendered Shares are not purchased pursuant to the Offer for any reason, or if certificates are submitted for more Shares than are tendered, certificates for such unpurchased or untendered Shares will be returned (or, in the case of Shares tendered by book-entry transfer, such Shares will be credited to an account maintained at the Book-Entry Transfer Facility as defined below), without expense to you, as promptly as practicable following the expiration or termination of the Offer. 4. Procedure for Tendering Shares. Except for Shares tendered by book-entry transfer, to tender Shares, either (1) the Depositary must receive at one of its addresses set forth on the back cover of this Offer to Purchase (A) a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other documents required by the Letter of Transmittal and (B) certificates for the Shares to be tendered by the Expiration Date, or (2) the guaranteed delivery procedure described below must be complied with. Book-Entry Delivery. The Depositary will establish an account with respect to the Shares at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in the system of the Book-Entry Transfer Facility may make delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with the procedures of the Book-Entry Transfer Facility. However, although delivery of Shares may be effected through book-entry transfer, the Letter of Transmittal properly completed and duly executed together with any required signature guarantees or an Agent's Message and any other required documents must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase by the Expiration Date, 10 or the guaranteed delivery procedure described below must be complied with. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a book-entry confirmation that states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that are the subject of such book-entry confirmation which such participant has received, and agrees to be bound by, the terms of the Letter of Transmittal and that Mentor may enforce such agreement against such participant. Signature Guarantees. Except as otherwise provided below, all signatures on a Letter of Transmittal must be guaranteed by a financial institution (including most banks, savings and loan associations and brokerage houses) that is a member of a recognized Medallion Program approved by The Securities Transfer Association, Inc. or any other "eligible guarantor institution" (as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended) (each an "Eligible Institution"). Signatures on a Letter of Transmittal need not be guaranteed (1) if the Letter of Transmittal is signed by the registered holder of the Shares tendered therewith and such holder has not completed the box entitled "Special Payment Instructions" on the Letter of Transmittal or (2) if such Shares are tendered for the account of an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal. Guaranteed Delivery. If you wish to tender Shares pursuant to the Offer and cannot deliver such Share Certificates and all other required documents to the Depositary by the Expiration Date, or cannot complete the procedure for delivery by book-entry transfer on a timely basis, you may nevertheless tender such Shares if all of the following conditions are met: - such tender is made by or through an Eligible Institution; - a properly completed and duly executed Notice of Guaranteed Delivery in the form provided by Mentor is received by the Depositary (as provided below) by the Expiration Date; and - the Share Certificates (or a Book-Entry Confirmation), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantee or an Agent's Message and any other documents required by the Letter of Transmittal, are received by the Depositary within three Nasdaq National Market trading days after the date of execution of the Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile transmission or mailed to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice. The method of delivery of Shares and all other required documents, including through the Book-Entry Transfer Facility, is at your option and risk, and the delivery will be deemed made only when actually received by the Depositary. If certificates for Shares are sent by mail, we recommend registered mail with return receipt requested, properly insured. In all cases, you should allow sufficient time to ensure timely delivery. Back-up Withholding. Under the United States federal income tax laws, the Depositary may be required to withhold a portion of the amount of any payments made to certain stockholders pursuant to the Offer or the Merger. In order to avoid such back-up withholding, you must provide the Depositary with your correct taxpayer identification number ("TIN") and certify that you are not subject to such back-up withholding by completing the Substitute Form W-9 included in the Letter of Transmittal. Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to back-up withholding. If a stockholder does not provide its correct TIN or fails to provide the certifications described above, the Internal Revenue Service may impose a penalty on the stockholder and payment of cash to the stockholder pursuant to the Offer may be subject to back-up withholding. All stockholders tendering Shares pursuant to the Offer should complete and sign the Substitute Form W-9 included in the Letter of Transmittal to provide the information necessary to avoid back-up withholding. If you are a non-resident alien or foreign entity not subject to back-up withholding, you must give the Depositary a properly completed Form W-8BEN Certificate of Foreign Status or successor form in order to avoid backup withholding with respect to payments made to you. 11 Grant of Proxy. By executing a Letter of Transmittal (or delivering an Agent's Message), you irrevocably appoint Walden C. Rhines and Gregory K. Hinckley as your attorneys and proxies in the manner set forth in the Letter of Transmittal to the full extent of your rights with respect to the Shares tendered and accepted for payment by us (and any and all other Shares or other securities issued or issuable in respect of such Shares on or after the date of this Offer to Purchase). All such attorneys and proxies are irrevocable and coupled with an interest in the tendered Shares. Such appointment is effective only upon our acceptance for payment of such Shares. Upon such acceptance for payment, all prior proxies and consents granted by you with respect to such Shares and other securities will, without further action, be revoked, and no subsequent proxies may be given nor subsequent written consents executed (and, if previously given or executed, will cease to be effective). Our designees will be empowered to exercise all your voting and other rights as they, in their sole discretion, may deem proper at any annual, special or adjourned meeting of the Company's stockholders, by written consent or otherwise. We reserve the right to require that, in order for Shares to be validly tendered, immediately upon our acceptance for payment of such Shares, we are able to exercise full voting rights with respect to such Shares and other securities (including voting at any meeting of stockholders then scheduled or acting by written consent without a meeting). The foregoing proxies are effective only upon acceptance for payment of Shares pursuant to the Offer. The Offer does not constitute a solicitation of proxies, absent a purchase of Shares, for any meeting of the Company's stockholders, which will be made only pursuant to separate proxy solicitation materials complying with the Exchange Act. The tender of Shares pursuant to any one of the procedures described above will constitute your acceptance of the Offer, as well as your representation and warranty that (1) you own the Shares being tendered and (2) you have the full power and authority to tender, sell, assign and transfer the Shares tendered, as specified in the Letter of Transmittal. Our acceptance for payment of Shares tendered by you pursuant to the Offer will constitute a binding agreement between us with respect to such Shares, upon the terms and subject to the conditions of the Offer. Validity. We will determine, in our reasonable discretion, all questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares, and our determination shall be final and binding. We reserve the absolute right to reject any or all tenders of Shares that we determine not to be in proper form or the acceptance for payment of or payment for which may, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any defect or irregularity in any tender of Shares. Our interpretation of the terms and conditions of the Offer will be final and binding. None of Mentor, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defect or irregularity in tenders or waiver of any such defect or irregularity or incur any liability for failure to give any such notification. 5. Withdrawal Rights. You may withdraw tenders of Shares made pursuant to the Offer at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable, except that they may be withdrawn after June 28, 2002 unless such Shares are accepted for payment as provided in this Offer to Purchase. If we extend the period of time during which the Offer is open, are delayed in accepting for payment or paying for Shares pursuant to the Offer for any reason, or are unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to our rights under the Offer, the Depositary may, on our behalf, retain all Shares tendered, and such Shares may not be withdrawn except as otherwise provided in this section. Any such delay will be accompanied by an extension of the Offer to the extent required by law. To withdraw tendered Shares, a written or facsimile transmission notice of withdrawal with respect to the Shares must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase, and the notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of Shares, if different from that of the person who tendered such Shares. If the Shares to be withdrawn have been delivered to the Depositary, a signed notice of withdrawal with (except in the case of Shares tendered by an Eligible Institution) signatures guaranteed by an Eligible Institution must be submitted prior to the release of such Shares. In addition, such notice must specify, in the case of Shares tendered by delivery of certificates, the 12 name of the registered holder (if different from that of the tendering stockholder) and the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn or, in the case of Shares tendered by book-entry transfer, the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered by again following one of the procedures described in "The Offer -- Procedures for Tendering Shares" at any time on or prior to the Expiration Date. We will determine, in our reasonable discretion, all questions as to the form and validity (including time of receipt) of any notice of withdrawal, and our determination shall be final and binding. None of Mentor, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defect or irregularity in any notice of withdrawal or waiver of any such defect or irregularity or incur any liability for failure to give any such notification. If we provide a subsequent offering period following the Offer, no withdrawal rights will apply to Shares tendered during that subsequent offering period or to Shares tendered in the Offer and accepted for payment. 6. Certain United States Federal Income Tax Considerations. The following summary of certain United States federal income tax consequences of the Offer and the Merger to United States Holders (as defined below) is based on the Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury Regulations, and administrative and judicial interpretations thereof, each as in effect as of the date of this Offer to Purchase, all of which may change, possibly with retroactive effect. This summary assumes that Shares are held as capital assets. It does not address all of the tax consequences that may be relevant to particular stockholders in light of their individual circumstances, or to other types of stockholders who may be subject to special rules (including, without limitation, certain financial institutions, brokers, dealers or traders in securities or commodities, insurance companies, "S" corporations, expatriates, tax-exempt organizations, Non-United States Holders (as defined below), persons who are subject to alternative minimum tax, persons who hold Shares as a position in a "straddle" or as part of a "hedging" or "conversion" transaction, persons that have a functional currency other than the United States dollar, or persons who acquired their Shares upon the exercise of stock options or otherwise as compensation). This summary also does not address any state, local or foreign tax consequences of the Offer or the Merger. WE URGE EACH HOLDER OF SHARES TO CONSULT ITS OWN TAX ADVISOR REGARDING THE UNITED STATES FEDERAL INCOME OR OTHER TAX CONSEQUENCES OF THE OFFER OR THE MERGER TO SUCH HOLDER. A "United States Holder" is a holder of Shares that for United States federal income tax purposes is (i) a citizen or resident of the United States; (ii) a corporation or partnership created or organized in or under the laws of the United States or any State or the District of Columbia; (iii) an estate the income of which is subject to United States federal income taxation regardless of its source; or (iv) a trust (a) the administration over which a United States court can exercise primary supervision and (b) all of the substantial decisions of which one or more United States persons have the authority to control and certain other trusts considered United States Holders for federal income tax purposes. A "Non-United States Holder" is a holder of Shares other than a United States Holder. The receipt of cash in exchange of Shares pursuant to the Offer or the Merger will be a taxable transaction for United States federal income tax purposes. In general, a United States Holder who sells Shares pursuant to the Offer or receives cash in exchange for Shares pursuant to the Merger will recognize gain or loss for United States federal income tax purposes equal to the difference, if any, between the amount of cash received and the holder's adjusted tax basis in the Shares sold pursuant to the Offer or exchanged for cash pursuant to the Merger. Any such gain or loss would be long-term capital gain or loss if the holding period for the Shares exceeded one year. Long-term capital gains of noncorporate taxpayers are generally taxable at a maximum rate of 20%. Capital gains of corporate stockholders are generally taxable at the regular tax rates applicable to corporations. 13 If the Merger is consummated, a United States Holder who exercises appraisal rights and receives cash in exchange for its Shares will generally recognize capital gain or loss equal to the difference between the cash received and the holder's adjusted tax basis in the Shares exchanged therefor. THE FOREGOING DOES NOT PURPORT TO BE AN ANALYSIS OF THE POTENTIAL TAX CONSIDERATIONS RELATING TO PARTICIPATION IN THE OFFER OR THE MERGER, AND IS NOT TAX ADVICE. THEREFORE, STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF TENDERING INTO THE OFFER OR EXCHANGING SHARES PURSUANT TO THE MERGER, INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS. 7. Price Range of Shares; Dividends. The Shares are listed and principally traded on the Nasdaq National Market under the symbol "INOV." The following table sets forth for the calendar quarters indicated the high and low sales prices per Share on the Nasdaq National Market based on published financial sources.
HIGH LOW ----- ----- FISCAL 2000 Quarter ended April 1, 2000............................... $9.38 $3.44 Quarter ended July 1, 2000................................ $5.75 $3.56 Quarter ended September 30, 2000.......................... $4.81 $3.53 Quarter ended December 30, 2000........................... $3.50 $1.75 FISCAL 2001 Quarter ended March 31, 2001.............................. $4.31 $2.06 Quarter ended June 30, 2001............................... $3.98 $2.38 Quarter ended September 29, 2001.......................... $2.68 $0.67 Quarter ended December 29, 2001........................... $2.00 $0.65 FISCAL 2002 Quarter ended March 30, 2002.............................. $2.80 $1.74 Quarter ending June 29, 2002 (through April 29, 2002)..... $3.90 $1.67
On April 23, 2002, the last full trading day before we announced the execution of the Merger Agreement, the closing price of a Share on the Nasdaq National Market was $2.38. On April 29, 2002, the last full trading day before the date of this Offer to Purchase, the reported closing sales price per Share on the Nasdaq National Market was $3.87. We urge you to obtain current market quotations for the Shares. The Company has never declared or paid cash dividends on its stock. 8. Certain Information Concerning the Company. General. The Company is a Delaware corporation, with principal executive offices at 293 Boston Post Road West, Marlboro, Massachusetts 01752. The telephone number of the Company's executive offices is (508) 480-0881. The Company develops electronic design automation ("EDA") technology, software and services for businesses in the consumer electronics, computer, telecommunications, automotive and aerospace industries. Available Information. The Company is subject to the informational requirements of the Exchange Act and in accordance therewith files periodic reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters. The Company is required to disclose in such proxy statements certain information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company. Such reports, proxy statements and other information may be inspected at the SEC's public reference facilities at Room 1024 -- Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549. Copies of such material can also be obtained at prescribed rates 14 by writing to the SEC's Public Reference Section at the address set forth above, by calling (800) SEC-0330 or by accessing the SEC's Web site at http://www.sec.gov. The information concerning the Company contained in this Offer to Purchase, including, without limitation, financial information and the recommendation of the Company's board of directors (the "Company Board"), has been furnished by the Company or its representatives or taken from or based upon publicly available reports on file with the SEC and other public sources. The summary information set forth below is qualified in its entirety by reference to such publicly available information (which may be obtained and inspected as described herein) and should be considered in conjunction with the more comprehensive financial and other information in such reports and other publicly available information. Although we have no knowledge that would indicate that any statements contained herein based upon such reports and documents are untrue, we take no responsibility for the accuracy or completeness of the information contained in such reports and other documents or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information but that are unknown to us. Summary Financial Information. The summary consolidated financial information for each of the Company's last three fiscal years set forth below is derived from the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2001 and the quarterly information for the fiscal quarter ended March 30, 2002 is derived from the Company's press release issued April 24, 2002. More comprehensive financial information is included in the referenced filings (including management's discussion and analysis of financial condition and results of operation) and other documents filed by the Company with the SEC. The following summary is qualified in its entirety by reference to such reports and other documents and all of the financial information and notes contained therein. Copies of such reports and other documents may be examined at or obtained from the SEC in the manner set forth above. SUMMARY CONSOLIDATED FINANCIAL INFORMATION
YEAR ENDED (1) ---------------------------------------- JANUARY 1, DECEMBER 30, DECEMBER 29, QUARTER ENDED 2000 2000(2) 2001 MARCH 30, 2002 ---------- ------------ ------------ -------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) CONSOLIDATED STATEMENT OF OPERATIONS DATA: Total revenue............................. $ 53,499 $ 89,859 $ 91,417 $ 15,707 Restructuring and merger costs............ -- 2,736 5,865 -- Impairment of intangible assets........... -- -- 32,945 -- In-process research and development....... -- 5,453 -- -- Total operating expenses.................. 51,317 98,896 147,315 19,913 Income (loss) from operations............. 2,182 (9,037) (55,898) (4,206) Net income (loss)......................... 259 (11,168) (42,637) (3,061) Net income (loss) per diluted share....... 0.02 (0.40) (1.09) (0.08) Number of shares used in computing diluted earnings (loss) per share.............. 15,586 28,252 39,224 40,035 CONSOLIDATED BALANCE SHEET DATA: Working capital (deficit)................. $ (7,959) $ 4,656 $ (9,532) $(11,732) Total assets.............................. 31,445 142,624 72,292 63,168 Long-term obligations, less current portion................................ 14,379 6,000 1,750 -- Redeemable convertible preferred stock.... 32,000 -- -- -- Stockholders' equity (deficit)............ (45,399) 54,600 12,391 9,806
- --------------- (1) Innoveda was created by the business combination of Summit Design, Inc. and Viewlogic Systems, Inc., which was consummated on March 23, 2000. The business combination was accounted for as a reverse 15 acquisition as former shareholders of Viewlogic owned a majority of the outstanding capital stock of Summit Design subsequent to the business combination. Therefore, for accounting purposes, Viewlogic is deemed to have acquired Summit Design. All pre-merger financial information presented represents the financial results for Viewlogic. (2) Financial information for the fiscal year ended December 30, 2000, includes the results of Summit Design, Inc. form March 24, 200 and PADS Software, Inc. from September 22, 2000. On April 24, 2002, the Company announced the divestiture of its system-level design software unit ("SLD") to a technology investment fund and reported its financial results for the first quarter ended March 30, 2002. As indicated in the table above, for the first quarter of 2002, the Company reported revenue of $15.7 million with a net loss for the quarter of $3.1 million or $0.08 per share. For the same period last year, the Company reported revenue of $27.3 million, operating income, before amortization, of $1.8 million and a net loss of $2.1 million, or $0.05 per share. Certain Financial Forecasts. In connection with our review of the transactions contemplated by the Merger Agreement, the Company provided us with certain financial projections of the Company. In late March 2002, the Company provided us with projections that included, among other things, the Company's projections for total revenue and net income for the Company for 2002 assuming that SLD was sold as of the beginning of the second quarter of 2002. Set forth in the first table below is a summary of such projections. In early April 2002, the Company provided us with updated projections for the Company for 2002 that assumed no sale of SLD. Set forth in the second table below is a summary of such updated projections. All of these projections were prepared by the management of the Company to reflect the anticipated operation of the Company on a stand-alone basis and do not give effect to the Offer, the Merger or any changes that may result due to the future operation of the Company as a subsidiary of Mentor following completion of the Merger, nor should such projections be considered in evaluating the future performance of Mentor and the Company on a consolidated basis. These projections should be read together with the financial statements of the Company that can be obtained from the SEC as described above. INNOVEDA, INC. CONSOLIDATED FORECAST FISCAL YEAR 2002 (ASSUMES SALE OF SLD) (IN THOUSANDS)
FORECAST FORECAST FORECAST FORECAST Q1 Q2 Q3 Q4 2002 2002 2002 2002 -------- -------- -------- -------- Total assets..................................... $68,035 $57,760 $56,628 $60,655 ======= ======= ======= ======= Total liabilities................................ 63,308 56,946 43,626 41,982 ------- ------- ------- ------- Total stockholders' equity....................... 12,391 11,089 14,134 14,646 ======= ======= ======= =======
FORECAST FORECAST FORECAST FORECAST FORECAST TOTAL Q1 Q2 Q3 Q4 FY 2002 2002 2002 2002 2002 -------- -------- -------- -------- -------- Total revenue........................... $71,490 $18,051 $16,004 $17,380 $20,055 Total operating expenses excluding amortization.......................... 62,568 17,921 14,752 14,835 15,061 ------- ------- ------- ------- ------- Operating income before amortization.... 8,921 130 1,253 2,545 4,994 Operating income before tax............. 6,900 (2,090) 5,002 739 3,250 Income/(loss) before tax................ 6,522 (2,166) 4,888 638 3,161 Net income.............................. 3,715 (1,428) 2,817 355 1,970 ======= ======= ======= ======= =======
16 INNOVEDA, INC. CONSOLIDATED FORECAST FISCAL YEAR 2002 (ASSUMES NO SALE OF SLD) (IN THOUSANDS)
FORECAST FORECAST FORECAST FORECAST Q1 Q2 Q3 Q4 2002 2002 2002 2002 -------- -------- -------- -------- Total assets............................. $ 64,385 $ 58,924 $ 56,767 $ 59,704 ======== ======== ======== ======== Total liabilities........................ 53,524 49,024 45,911 46,355 -------- -------- -------- -------- Total stockholders' equity............... 10,860 9,900 10,856 13,349 ======== ======== ======== ========
FORECAST FORECAST FORECAST FORECAST FORECAST TOTAL Q1 Q2 Q3 Q4 FY2002 2002 2002 2002 2002 -------- -------- -------- -------- -------- Total revenue........................ $78,070 $17,602 $18,449 $19,685 $22,334 ------- ------- ------- ------- ------- Total operating expenses excluding amortization....................... 66,020 17,821 15,935 16,019 16,245 ------- ------- ------- ------- ------- Operating income before amortization....................... 12,050 (219) 2,513 3,666 6,090 ======= ======= ======= ======= ======= Operating income before tax.......... 1,361 (2,439) (1,550) 1,432 3,918 ------- ------- ------- ------- ------- Income/(loss) before tax............. 943 (2,554) (1,663) 1,331 3,829 Net income........................... 392 (1,688) (1,117) 799 2,398 ======= ======= ======= ======= =======
The Company has advised us that these projections were not prepared with a view to public disclosure or in compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants regarding projections or forecasts. This information was provided to us under a confidentiality agreement in connection with our evaluation of a business combination transaction. These projections have been included in this Offer to Purchase solely because they were made available to us and our advisors in connection with our consideration of the Offer. These projections do not purport to present operations in accordance with generally accepted accounting principles, and the Company's independent auditors have not examined or compiled these projections and accordingly assume no responsibility for them. The Company has advised us that its internal financial forecasts (upon which these projections provided to us were based in part) are, in general, prepared solely for internal use and capital budgeting and other management decisions and are subjective in many respects and thus susceptible to interpretations and periodic revision based on actual experience and business developments. These projections also reflect numerous estimates and assumptions (not all of which were provided to us), all made by management of the Company, with respect to industry performance, general business, economic, market and financial conditions and other matters, including effective tax rates consistent with historical levels for the Company, all of which are difficult to predict, many of which are beyond the Company's control, and none of which is subject to approval by us. In particular, these projections assume the availability of working capital. Accordingly, there can be no assurance that the assumptions made in preparing these projections will prove accurate. It is likely that there will be differences between actual and projected results, and actual results may be materially greater or less than those contained in these projections. The inclusion of these projections herein should not be regarded as an indication that any of Mentor, the Company or their respective affiliates or representatives (including their financial advisors and accountants) considered or consider these projections to be a reliable prediction of future events. While these projections were furnished to us by the Company, we did not use or rely on them in determining the $3.95 per Share consideration in the Offer and the Merger. None of Mentor, the Company nor any of their respective affiliates or representatives has made or makes any representation to any person regarding the ultimate performance of the Company compared to the 17 information contained in these projections, and none of them intends to update or otherwise revise these projections after the date when made or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying these projections are shown to be in error. 9. Certain Information Concerning Purchaser and Mentor Graphics. General. Purchaser is a Delaware corporation incorporated on April 3, 2002, with principal executive offices at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. The telephone number of Purchaser's principal executive offices is (503) 685-7000. To date, Purchaser has engaged in no activities other than those incident to Purchaser's formation and the commencement of the Offer. Purchaser is a wholly-owned subsidiary of Mentor Graphics. Mentor Graphics is an Oregon corporation with principal executive offices at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. The telephone number of Mentor Graphics' executive offices is (503) 685-7000. Mentor Graphics manufactures, markets and supports software and hardware EDA products and provides related services which enable engineers to design, analyze, simulate, model, implement and verify the components of electronic systems. In 1996, Mentor Graphics expanded its product offerings beyond traditional EDA to include (1) intellectual property products and services intended to increase design efficiency by delivering standard, reusable functions for the design of hardware components and (2) embedded software development and system verification tools intended to shorten product time-to-market by allowing for simultaneous development and testing of hardware and embedded software. Mentor Graphics markets its products primarily to large companies in the communications, computer, semiconductor, consumer electronics, aerospace and transportation industries. Customers use Mentor Graphics' software in the design of such diverse products as supercomputers, automotive electronics, telephone-switching systems, cellular base stations and handsets, computer network hubs and routers, signal processors and personal computers. The name, business address, principal occupation or employment, five-year employment history and citizenship of each director and executive officer of Mentor Graphics and Purchaser and certain other information are set forth on Schedule I to this Offer to Purchase. Except as set forth in this Offer to Purchase, during the past two years, none of Mentor Graphics or Purchaser, nor, to our best knowledge, any of the persons listed on Schedule I hereto, has had any business relationship or transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the SEC applicable to the Offer. Except as set forth in this Offer to Purchase, none of the persons listed in Schedule I, nor any of their respective associates or majority-owned subsidiaries, beneficially owns any securities of the Company. Except as set forth in this Offer to Purchase, there have been no contacts, negotiations or transactions between us or any of our subsidiaries or, to our best knowledge, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. None of the persons listed in Schedule I has, during the past five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). Except as described in Schedule I, none of the persons listed in Schedule I has, during the past five years, been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. As of the date of this Offer to Purchase, Mentor does not beneficially own any Shares, except for 15,633,687 Shares (representing approximately 39% of the outstanding Shares or 32% of the Shares on a fully diluted basis) beneficially owned pursuant to the Tender Agreements. For a discussion of the Tender Agreements, see "The Offer -- The Merger Agreement; Other Arrangements." Available Information. Mentor is subject to the informational requirements of the Exchange Act and in accordance therewith files periodic reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters. Mentor is required to disclose in such proxy statements certain information, as of particular dates, concerning its directors and officers, their remuneration, stock 18 options granted to them, the principal holders of its securities and any material interests of such persons in transactions with Mentor. Such reports, proxy statements and other information should be available for inspection and copying at the offices of the SEC in the same manner as set forth with respect to the Company in "Certain Information Concerning the Company -- Available Information." 10. Source and Amount of Funds. We will need approximately $160 million (or approximately $194 million on a fully diluted basis) to purchase all of the outstanding Shares pursuant to the Offer and to pay related fees and expenses. Purchaser intends to obtain all funds needed for the Offer and the Merger through a capital contribution or a loan from Mentor Graphics. Mentor Graphics plans to provide the funds for such capital contribution or loan from its available borrowings, cash and working capital. The Offer is not subject to any financing condition. Financing Documents and Terms. On April 23, 2002, Mentor Graphics entered into a Bridge Loan Agreement (the "Loan Agreement") with Bank of America, N.A., serving as administrative agent ("Bank of America"), and Banc of America Securities LLC ("BAS") the lead arranger, pursuant to which Bank of America will provide a 6-month unsecured non-revolving facility of up to $125 million (the "Credit Facility"), on similar terms and conditions as were contained in Mentor Graphics' existing credit agreement with Bank of America dated as of January 2001, as amended. The Credit Facility has been underwritten by Bank of America, and BAS intends to syndicate post-closing a portion of the Credit Facility to financial institutions acceptable to Bank of America and BAS. The facility will terminate and all outstanding amounts will become due and payable on October 31, 2002. Borrowings under the Credit Facility may be used to purchase the Shares pursuant to the Offer and the Merger and to pay for certain fees, expenses and costs (including restructuring costs) in connection with the acquisition and integration of the Company. The initial borrowing under the Loan Agreement will be subject to the satisfaction of certain conditions, including (i) the valid tender, acquisition or pledge of more than 50% of the Company's issued and outstanding capital stock, (ii) material changes to the terms of the acquisition since the closing of the Loan Agreement being reasonably satisfactory to Bank of America and the majority banks (as defined in the Loan Agreement), (iii) all governmental and third-party approvals necessary for the acquisition having been obtained and all applicable waiting periods having expired and (iv) the delivery to Bank of America of executed copies of all material agreements and documents related to the acquisition. Interest Rates. Under the Loan Agreement, Mentor Graphics will have the option of borrowing funds at variable interest rates based either on a base rate of interest or LIBOR, plus, in each case, a variable applicable margin. Interest on loans based on a base rate of interest ("Base Rate Loans") will be payable at the higher of (i) the prime rate charged by Bank of America and (ii) the federal funds rate plus 0.50%, plus 1.25% (the "Base Interest Rate"). Interest on a loan based on LIBOR ("LIBOR Loans") will be payable at the rate equal to the reserve adjusted LIBOR rate plus 2.50%. The interest rates on both Base Rate Loans and LIBOR Loans will increase by 0.75% on August 1, 2002 and by another 1.00% on September 15, 2002. A default rate will apply in the event of a default on any loans under the Credit Facility at a rate per annum of 2.00% above the then applicable Base Interest Rate. Other Material Terms and Conditions. The Credit Facility contains representations, warranties and conditions to borrowing, covenants and events of default customary for facilities of this nature. Other than the covenants and provisions pertaining to the acquisition of the Company, the Loan Agreement's provisions are materially similar to the provisions contained in Mentor Graphics' existing credit agreement. The foregoing description of the terms and conditions of the Loan Agreement is qualified in its entirety by reference to the full text thereof, a copy of which has been filed as an exhibit to the Tender Offer Statement on Schedule TO filed with the SEC and is incorporated herein by reference. Plans to Finance and Repay the Loan. No final decisions have been made concerning the method Mentor Graphics will employ to repay its borrowings under the Loan Agreement. These decisions, when made, will be based on Mentor Graphics' review from time to time of the advisability of particular actions, as well as on prevailing interest rates, capital market conditions and other economic factors. Furthermore, of 19 course, there can be no assurance that Mentor Graphics will be able to utilize any one or more of the repayment options or as to the amount that will be available under any of them. 11. Background of the Offer. As part of the continuous evaluation of its business, Mentor regularly considers a variety of strategic options and transactions. As part of this process, Mentor has evaluated various alternatives for expanding its business, including discussions with the Company from time to time concerning the acquisition of the Company. On September 18, 2001, Henry Potts, General Manager of Mentor's systems division, and Will Herman, Chief Executive Officer of the Company, had a telephone discussion concerning the possibility of an acquisition of the Company by Mentor. They agreed to meet in Chicago on September 21, 2001 to discuss the matter further. On September 21, 2001, Mr. Potts, Dennis Weldon, Treasurer of Mentor, Mr. Herman and Richard Lucier, Chief Operating Officer of the Company, met in Chicago and discussed differences between Mentor's and the Company's products in the context of a potential acquisition of the Company by Mentor. The parties agreed to schedule a telephone call the following week to discuss these matters further. On telephone calls during the week of September 24, 2001 and in a meeting on October 18, 2002 in Wilsonville, Oregon, Mr. Weldon, Mr. Potts, Mr. Herman and Mr. Lucier discussed the possibility of Mentor acquiring the Company. Based upon differences between the parties' perceptions of the Company's performance, the parties concluded at the October 18, 2001 meeting that an acquisition by Mentor was not practicable at that time but agreed to pursue discussions regarding a potential acquisition in the future. On November 7, 2001, Bruce Alexander of the investment banking firm of Needham & Company, or Needham, called Mr. Herman at Mentor's request to discuss Mentor's potential interest in acquiring the Company. On January 9, 2002, Mr. Alexander and Mr. Herman met while attending an investor conference in New York and discussed Mr. Herman's point of view of the Company regarding the potential acquisition of the Company by Mentor. Given the differences of opinion between the parties concerning this matter, the parties did not pursue further discussions at that time. On March 5, 2002, Mr. Herman left a voicemail message with Gregory Hinckley, President and Chief Operating Officer of Mentor, suggesting they meet at a trade show they would both be attending. Mr. Hinckley and Mr. Herman met at the trade show in Paris on March 6, 2002 and discussed a potential acquisition of the Company by Mentor. From March 12, 2002 to March 18, 2002, Mr. Alexander, Mr. Herman, Mr. Hinckley, and Mr. Weldon had daily telephone discussions with respect to a potential acquisition of the Company by Mentor. On March 14, 2002, Mr. Weldon, Mr. Hinckley, Mr. Potts and Mr. Herman met in Denver to discuss a potential acquisition of the Company by Mentor. The Mentor representatives discussed the possibility of acquiring the Company for $3.00 per share plus the net proceeds from the sale of the Company's system-level design, or SLD, business. Mr. Herman agreed to discuss the matter further with the Company Board. On March 18, 2002, Mentor formally retained Needham to act as Mentor's financial advisor in connection with a potential acquisition of the Company. On March 20, 2002, Mentor's management submitted a draft term sheet to the Company (the "Term Sheet") and a draft letter agreement with respect to exclusivity and confidentiality (the "Exclusivity and Confidentiality Agreement"). The Term Sheet contemplated an acquisition of the outstanding shares of the Company for $3.50 per share, plus the proceeds from the sale of the SLD business, pursuant to a definitive agreement to be negotiated during a period of exclusive negotiations between the parties, which period of exclusivity would end in late April 2002. From March 20, 2002 to March 24, 2002, Mr. Alexander had several telephone calls with Mr. Herman and Mentor management to discuss various potential acquisition prices. At the outset of these discussions, Mentor suggested an acquisition price of $3.50 per share, plus the proceeds from the sale of the SLD business, 20 which Mentor subsequently increased to $3.95 per share, plus the proceeds from the sale of the SLD business, immediately prior to the March 24, 2002 Company Board meeting. After the Company Board meeting on March 24, 2002, Mr. Herman had a telephone call with representatives of Mentor during which they agreed to first negotiate the terms of the Exclusivity and Confidentiality Agreement and then proceed to negotiate a definitive merger agreement, rather than pursue negotiations with respect to the Term Sheet. On March 25, 2002, Mentor and the Company entered into the Exclusivity and Confidentiality Agreement, which provided that the Company would negotiate exclusively with Mentor with respect to the sale of the Company until April 15, 2002, unless extended. Between March 25, 2002 and April 23, 2002, representatives of Mentor, together with its legal and financial advisors conducted due diligence with respect to the Company. From March 29, 2002 to April 23, 2002, representatives of Mentor and its legal and financial advisors negotiated the terms and conditions of the proposed Merger Agreement and proposed Tender Agreement with representatives of the Company and its legal advisors. Between April 15, 2002 and April 23, 2002, the Company and Mentor extended the expiration date of the Confidentiality and Exclusivity Agreement six times. On April 23, 2002, all of the directors present at a meeting of the Company Board unanimously approved the Merger Agreement, the Offer and the Merger. As a condition to and an inducement for Mentor entering into the Merger Agreement, on April 23, 2002, Mentor entered into separate Tender Agreements with each of the Significant Stockholders. On April 23, 2002, Mentor and the Company issued a joint press release announcing the Merger Agreement and the Offer. On April 30, 2002, Mentor commenced the Offer in accordance with the Merger Agreement. 12. The Merger Agreement; Other Arrangements. The following is a summary of the material provisions of the Merger Agreement, a copy of which is filed as an exhibit to the Tender Offer Statement on Schedule TO filed with the SEC. The summary is qualified in its entirety by reference to the Merger Agreement, which is incorporated by reference herein. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Merger Agreement. THE MERGER AGREEMENT AND THE TENDER AGREEMENTS Overview. Pursuant to the terms and conditions of the Merger Agreement, Mentor and the Company are required to use their reasonable best efforts to take, or cause to be taken, all action and do, or cause to be done, all other things necessary, proper or appropriate to consummate and make effective the transactions provided for or contemplated by the Merger Agreement, including the commencement by Mentor of the Offer to purchase all outstanding Shares at $3.95 per Share. The obligation of Mentor to accept for payment or pay for any Shares tendered pursuant to the Offer will be subject only to the satisfaction of the conditions set forth in Section 16 of the Offer to Purchase. The conditions described in Section 16, except for the Minimum Condition, are for the sole benefit of Mentor and may be asserted by Mentor regardless of the circumstances giving rise to any such conditions and may be waived by Mentor, in whole or in part, at any time and from time to time, in its reasonable discretion. In order to induce Mentor to enter into the Merger Agreement, Mentor entered into a Tender and Stockholder Support Agreement (each, a "Tender Agreement") with the Significant Stockholders under which each Significant Stockholder has, among other things, agreed to tender such Significant Stockholder's Shares in the Offer upon the terms and conditions set forth therein. For additional information see "The Tender Agreements" below. 21 As a further inducement to Mentor to enter into the Merger Agreement, the Company granted Mentor an irrevocable option (the "Top-Up Option"), exercisable if the Minimum Condition is met and Mentor accepts for payment Shares tendered pursuant to the Offer or shares acquired pursuant to the Tender Agreements at least 85% of the Shares then outstanding (the "Top-Up Exercise Event"), to purchase that number of Shares equal to the lowest number of Shares that, when added to the number of Shares owned by Mentor or any other subsidiary of Mentor at the time of such exercise, will constitute one Share more than 90% of the outstanding Shares (assuming issuance of Shares pursuant to the Top-Up Option and the exercise of all outstanding exercisable options to purchase Shares with an exercise price less than the price per Share in the Offer), at a price equal to $3.95 per Share; provided, however, that the Top-Up Option shall not be exercisable unless immediately after such exercise Mentor would own more than 90% of the Shares then outstanding. Mentor may exercise the Top-Up Option in whole but not in part at any one time after the occurrence of the Top-Up Exercise Event and prior to the Effective Time or the termination of the Merger Agreement. In the Merger Agreement, the Company has agreed that concurrently with the date Mentor's Offer documents are filed with the SEC, it will file with the SEC and mail to its stockholders a Solicitation/ Recommendation Statement on Schedule 14D-9 containing the recommendation of the Company Board that the Company's stockholders accept the Offer, tender all their Shares to Mentor and approve the Merger Agreement and the transactions contemplated thereby. The Merger. The Merger Agreement provides that, if all of the conditions to the Merger have been fulfilled or waived and the Merger Agreement has not been terminated, Purchaser will be merged with and into the Company, and the Company will continue as the surviving corporation (the "Surviving Corporation") and a wholly-owned subsidiary of Mentor. At the Effective Time, each Share issued and outstanding immediately prior thereto (other than Shares owned by the Company or any Company Subsidiary or by Mentor or any other subsidiary of Mentor, all of which will be canceled, and Shares held by stockholders who properly exercise their appraisal rights under the DGCL) will, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive a cash payment of $3.95 net without any interest thereon, payable in cash to the holder thereof. Each share of common stock of Purchaser outstanding immediately prior to the Effective Time will automatically be converted at the Effective Time into one validly issued and outstanding share of common stock of the Surviving Corporation. The Merger Agreement provides that upon acceptance for payment of, and payment by Mentor in accordance with the Offer for, at least a majority of the outstanding Shares, Mentor will be entitled to designate such number of directors, rounded up to the next whole number, as will give Mentor representation on the Company Board equal to the product of (i) the total number of directors on the Company Board (giving effect to the directors elected pursuant to this provision) and (ii) the percentage that the number of Shares purchased by Mentor or any of its affiliates bears to the aggregate number of Shares outstanding, and the Company will, upon the request by Mentor, promptly secure the resignations of the number of directors as is necessary to enable Mentor's designees to be elected to the Company Board and will cause Mentor's designees to be so elected, provided, however, that at all times prior to the Effective Time at least two members of the Company Board will be Continuing Directors (as defined below). Following the election or appointment of Mentor's designees pursuant to this provision and prior to the Effective Time, (i) any amendment or termination of the Merger Agreement by or on behalf of the Company, (ii) any exercise or waiver of any of the Company's rights or remedies under the Merger Agreement and (iii) any extension of time for the performance or waiver of any the obligations or other acts of Mentor under the Merger Agreement will require the approval of a majority of the directors of the Company then in office who are not designated by Mentor (the "Continuing Directors"), except to the extent that applicable law requires that such action be acted upon by the full the Company Board, in which case the action will require the approval of both a majority of the full the Company Board and a majority of the Continuing Directors. 22 Recommendation. The Company represents and warrants in the Merger Agreement that the Company Board at a meeting duly called and held has by unanimous vote of all directors present at such meeting duly adopted resolutions: (i) determining that each of the transactions contemplated by the Merger Agreement, including each of the Offer and the Merger, is fair to and in the best interests of the Company and its stockholders; (ii) approving the Offer and adopting the Merger Agreement in accordance with the DGCL; (iii) recommending acceptance of the Offer and approval of the Merger Agreement by the Company's stockholders (if such approval is required by applicable law); and (iv) taking all other action necessary to render the restrictions on business combinations contained in Section 203 of the DGCL inapplicable to the Offer, the Merger and the other agreements contemplated by the Merger Agreement. The Company Board agreed not to withdraw, modify or propose to publicly withdraw or modify its recommendation described above in a manner adverse to Mentor, except that the Company Board shall be permitted to withdraw or modify its recommendation of the Merger Agreement, the Offer or the Merger in a manner adverse to Mentor or approve or recommend or enter into an agreement with respect to a Superior Proposal (as defined below) if the Company has complied with the terms of the Merger Agreement. A withdrawal, modification or a public proposal to publicly withdraw or modify the recommendation of the Company Board or any committee thereof in any manner adverse to Mentor, however, may give rise to certain termination rights on the part of Mentor under the Merger Agreement and the right to receive certain termination fees as set forth therein. See "Termination" and "Termination Fees and Expenses" below. Representations and Warranties. In the Merger Agreement, the Company has made customary representations and warranties to Mentor, including but not limited to representations and warranties relating to the Company's organization and qualification, authority to enter into the Merger Agreement and consummate the transactions contemplated thereby, compliance with applicable laws, capitalization, subsidiaries, ability to enter into and consummate the transactions contemplated by the Merger Agreement without breaching contracts or violating laws, required consents and approvals, SEC filings (including financial statements), the documents supplied by the Company related to the Offer, the absence of certain material adverse changes or events since December 29, 2001, taxes, employee benefit plans, absence of brokers, licenses and permits, environmental matters, labor and employment matters, intellectual property, material agreements, restrictions on business activities, litigation, insurance, affiliate transactions, opinion of its financial advisor, required vote of stockholders, state takeover statutes, transaction expenses and regulatory filings. Mentor has also made customary representations and warranties to the Company, including representations and warranties relating to Mentor's organization and qualification, authority to enter into the Merger Agreement and consummate the transactions contemplated thereby, documents supplied by Mentor related to the Offer, required consents and approvals, ability to enter into and consummate the transactions contemplated by the Merger Agreement without breaching contracts or violating laws, the availability of sufficient funds to perform their obligations under the Merger Agreement, the interim operations of Mentor and the absence of brokers. Interim Agreements of Mentor and the Company. Pursuant to the Merger Agreement, unless Mentor has agreed in writing thereto or except as otherwise expressly contemplated by the Merger Agreement, the Company will, and will cause each Company Subsidiary to: (i) conduct its operations only in the ordinary and usual course of business consistent with past practice; and (ii) use its commercially reasonable efforts to keep available the services of the current officers, key employees and key consultants of the Company and each Company Subsidiary, and preserve current relationships with such customers, suppliers and other persons with which the Company and each Company Subsidiary has significant business relations as is reasonably necessary to preserve substantially intact its business organization. 23 In addition, from the date of the Merger Agreement to the Effective Time, unless Mentor has consented in writing thereto or except as otherwise expressly contemplated by the Merger Agreement, the Company will not and will not permit any Company Subsidiary, directly or indirectly, to do or agree to do, any of the following: (i) amend or otherwise change its certificate of incorporation or bylaws or equivalent organizational documents; (ii) (A) issue, sell, pledge, dispose of, grant, transfer, encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer, or encumbrance of any shares of capital stock of, or other Equity Interests in, the Company or any Company Subsidiary of any class, or securities convertible or exchangeable or exercisable for any shares of such capital stock or other Equity Interests, or any options, warrants or other rights of any kind to acquire any shares of such capital stock or other Equity Interests or such convertible or exchangeable securities, or any other ownership interest, of the Company or any Company Subsidiary, other than the issuance of Shares upon the exercise of Company Options outstanding as of the date of the Merger Agreement (or Company Options outstanding that were otherwise approved by Mentor) in accordance with their terms or (B) sell, pledge, dispose of, transfer, lease, license, guarantee or encumber, or authorize the sale, pledge, disposition, transfer, lease, license, guarantee or encumbrance of, any material property or assets (including Intellectual Property) of the Company or any Company Subsidiary, except pursuant to existing contracts or commitments or the sale, purchase or licensing of goods, products and software in the ordinary course of business consistent with past practice; (iii) declare, set aside, make or pay any dividend or other distribution (whether payable in cash, stock, property or a combination thereof) with respect to any of its capital stock (other than dividends paid by a wholly-owned Company Subsidiary to the Company or to any other wholly-owned Company Subsidiary) or enter into any agreement with respect to the voting of its capital stock; (iv) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock, other Equity Interests or any other securities; (v) (A) acquire (including, without limitation, by merger, consolidation, or acquisition of stock or assets) any ownership interest in any person or any division thereof or any assets, other than acquisitions of assets in the ordinary course of business consistent with past practice; (B) except for accounts payable incurred in the ordinary course of business consistent with past practice, incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person (other than a wholly-owned Company Subsidiary) for borrowed money; (C) terminate, cancel or agree to any material change in any Company Material Contract other than in the ordinary course of business consistent with past practice; or (D) make or authorize any capital expenditure in excess of the Company's budget as disclosed to Mentor prior to the date hereof; (vi) except as may be required by contractual commitments or corporate policies with respect to severance or termination pay in existence on the date of the Merger Agreement as disclosed in the Company Disclosure Schedule: (A) increase the compensation or benefits payable or to become payable to its directors, executive officers or employees (except for increases in accordance with past practices in salaries or wages of employees of the Company or any Company Subsidiary which are not across-the-board increases), (B) except to the extent that the Company's existing severance policies are applicable to employees hired after the date hereof, grant any rights to severance or termination pay to, or enter into any employment or severance agreement with, any director, executive officer or employee of the Company or any Company Subsidiary, or establish, adopt, enter into or amend in any material respect any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, executive officer or employee, except to the extent required by applicable law or the terms of a collective bargaining agreement in existence on the date of the Merger Agreement or (C) take any affirmative action to amend or waive any performance or vesting criteria or accelerate vesting, exercisability or funding under any Company Benefit 24 Plan, except, in each case, to the extent required by applicable law or existing term of any such Company Benefit Plan described in the Company Disclosure Schedule or as contemplated by the Merger Agreement; (vii) (A) pre-pay any long-term debt or pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, contingent or otherwise), except in the ordinary course of business consistent with past practice and in accordance with their terms, (B) accelerate or delay collection of notes or accounts receivable in advance of or beyond their regular due dates or the dates when the same would have been collected in the ordinary course of business consistent with past practice or (C) delay or accelerate payment of any account payable or in advance of its due date or the date such liability would have been paid in the ordinary course of business consistent with past practice; (viii) make any change in accounting policies or procedures, other than in the ordinary course of business consistent with past practice or except as required by GAAP or by a Governmental Entity; (ix) waive, release, assign, settle or compromise any material claims, or any material litigation or arbitration; (x) make or change any election in respect of taxes, adopt or change any material accounting method in respect of taxes, enter into any tax allocation agreement, tax sharing agreement, tax indemnity agreement or closing agreement, settle or compromise any claim, notice, audit report or assessment in respect of taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of taxes; (xi) modify, amend or terminate, or waive, release or assign any material rights or claims with respect to any confidentiality or standstill agreement to which the Company is a party; (xii) write up, write down or write off the book value of any assets, individually or in the aggregate, for the Company and the Company Subsidiaries taken as a whole, except for depreciation and amortization in accordance with GAAP consistently applied; (xiii) take any action to exempt or make not subject to (A) the provisions of Section 203 of the DGCL or (B) any other state takeover law or state law that purports to limit or restrict business combinations or the ability to acquire or vote shares, any person (other than Mentor and any subsidiary of Mentor) or any action taken thereby, which person or action would have otherwise been subject to the restrictive provisions thereof and not exempt therefrom; (xiv) take any action that is intended or would reasonably be expected to result in any of Conditions to the Offer or the conditions to the Merger set forth in the Merger Agreement not being satisfied; (xv) license, transfer, sell, distribute, encumber or grant access to any Intellectual Property of the Company or any Company Subsidiary, other than in the ordinary course of business; (xvi) enter into any new material line of business; or (xvii) authorize or enter into any agreement or otherwise make any commitment to do any of the foregoing. OTHER AGREEMENTS OF MENTOR AND THE COMPANY Stockholder Approval; Proxy Statement. In the Merger Agreement, the parties have agreed that, if required by applicable law, the Company will (1) call and hold a special meeting of its stockholders for the purpose of voting upon the Merger as promptly as practicable following the Expiration Date or upon the request of Mentor, (2) prepare and file with the SEC and mail to its stockholders a proxy statement relating to the Merger Agreement and (3) recommend to its stockholders that they vote in favor of the approval of the Merger and the Merger Agreement and the other transactions contemplated thereby, unless the Company Board approves or recommends, or enters into an agreement with respect to, a Superior Proposal (as defined below), or except to the extent that the Company Board determines in good faith (after consultation with outside counsel) that to do so would constitute a breach by the Company Board of its fiduciary duties to the Company's stockholders. The Company must use reasonable efforts to obtain the necessary approvals by its stockholders for the Merger and take all other actions reasonably requested by Mentor to secure the vote of 25 stockholders for approval of the Merger, the Merger Agreement and the other transactions contemplated thereby. At any such meeting, all of the Shares then owned by Mentor and by any of Mentor's other subsidiaries or affiliates will be voted in favor of the Merger and the Merger Agreement. Notwithstanding the foregoing, in the event that Purchaser, or any other direct or indirect subsidiary of Mentor Graphics, acquires at least 90% of the outstanding Shares, the Company and Mentor will take all necessary and appropriate action to cause the Merger to become effective as soon as practicable in accordance with Section 253 of the DGCL. No Solicitation. The Company has agreed that, prior to the Effective Time, it will not, and will not authorize or permit any Company Subsidiary or Company Representative, directly or indirectly, to take any action to (A) encourage (including by way of furnishing non-public information), solicit, initiate or facilitate any Acquisition Proposal (as defined below), (B) enter into any agreement with respect to any Acquisition Proposal or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Merger or any other transaction contemplated by the Merger Agreement or (C) participate in any way in discussions or negotiations with, or furnish any information to, any person in connection with, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal; provided, however, that if, at any time prior to the consummation of the Offer, the Company Board determines in good faith, after consultation with outside counsel, that it would otherwise constitute a breach of its fiduciary duties to stockholders, the Company may, in response to a Superior Proposal (as defined below) and subject to the Company's compliance with the Merger Agreement, (1) furnish information with respect to the Company and the Company Subsidiaries to the person making such Superior Proposal pursuant to a customary confidentiality agreement the benefits of the terms of which are no more favorable to the other party to such confidentiality agreement than those in place with Mentor as amended as of the date thereof and (2) following the execution of such a confidentiality agreement, participate in discussions with respect to such Superior Proposal. The Merger Agreement requires that the Company, its affiliates and their respective officers, directors, employees, representatives legal counsel, advisors and agents cease immediately and cause to be terminated any and all existing discussions or negotiations with any parties conducted before execution of the Merger Agreement with respect to an Acquisition Proposal and promptly request that all confidential information with respect thereto furnished on behalf of the Company be returned. "Acquisition Proposal" is defined in the Merger Agreement as any offer or proposal concerning any (A) merger, consolidation, other business combination or similar transaction involving the Company or any Company Subsidiary, (B) sale, lease or other disposition directly or indirectly by merger, consolidation, business combination, share exchange, joint venture or otherwise, of assets of the Company or any Company Subsidiary representing 15% or more of the consolidated assets, revenues or net income of the Company and the Company Subsidiaries, (C) issuance or sale or other disposition (including by way of merger, consolidation, business combination, share exchange, joint venture or similar transaction) of Equity Interests representing 15% or more of the voting power of the Company, (D) transaction in which any person will acquire beneficial ownership or the right to acquire beneficial ownership or any group has been formed which beneficially owns or has the right to acquire beneficial ownership of, Equity Interests representing 15% or more of the voting power of the Company or (E) any combination of the foregoing (other than the Offer and the Merger); provided, however, that an Acquisition Proposal shall not include the disposition of the assets of the Company's system level design ("SLD") business or products. "Superior Proposal" is defined as any bona fide Acquisition Proposal (but with all of the percentages included in the definition of such term raised to 50.01% for purposes of this definition) made by a third party which was not solicited by the Company in violation of the Merger Agreement, any Company Subsidiary, any Company Representatives or any other Company affiliates and which, in the good faith judgment of the Company Board, taking into account, to the extent deemed appropriate by the Company Board, the various legal, financial and regulatory aspects of the proposal and the person making such proposal (A) if accepted, is reasonably likely to be consummated, (B) if consummated would, after consultation with the Company's nationally recognized independent financial advisor as to whether the Acquisition Proposal constitutes a Superior Proposal, result in a transaction that is more favorable to the Company's stockholders, from a financial point of view, than the Offer and the Merger as the same may be proposed by Mentor to be amended 26 in response thereto and as provided in the Merger Agreement and (C) is not subject to any financing condition. The Merger Agreement requires the Company to advise Mentor immediately of any inquiry received by it relating to any potential Acquisition Proposal and of the terms of any proposal or inquiry, including the identity of the person and its affiliates making the same, that it may receive in respect of any such potential Acquisition Proposal, or of any information requested from it or of any negotiations or discussions being sought to be initiated with it, will furnish to Mentor a copy of any such proposal or inquiry, if it is in writing, or a written summary of any such proposal or inquiry (as well as of any additional information received by the Company with respect to an Acquisition Proposal), if it is not in writing and to keep Mentor fully informed on a current basis with respect to the status of any such negotiations or discussions and any developments with respect to the foregoing. Neither the Company Board nor any committee thereof will (A) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Mentor, the approval or recommendation by the Company Board or such committee of the Offer and the Merger and the adoption and approval of the Merger Agreement, (B) approve or recommend, or propose publicly to approve or recommend, any Acquisition Proposal other than the Offer and the Merger, or (C) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other agreement related to any Acquisition Proposal other than the Offer and the Merger, provided, however, that the Company may (1) take and disclose to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) under the Exchange Act with regard to an Acquisition Proposal (provided that the Company Board shall not withdraw or modify in an adverse manner its approval or recommendation of the Offer, the Merger or the Merger Agreement except as set forth below) or (2) in the event that a Superior Proposal is made and the Company Board determines in good faith, after consultation with outside counsel, that it would otherwise constitute a breach of its fiduciary duty to stockholders, withdraw or modify its recommendation of the Offer and the Merger prior to the purchase of Shares pursuant to the Offer, so long as the Company continues to comply with all other provisions of the Merger Agreement and so long as all the conditions to the Company's right to terminate the Merger Agreement have been satisfied (including the expiration of the five business day period described therein and the payment of all amounts required pursuant thereto). Employee Benefit Matters. Mentor has agreed to recognize all service of the Company's employees for purposes of vacation and severance and participation in any employee benefit plan of Mentor or any of its subsidiaries in which such employees may be eligible to participate after the Effective Time. Stock Options. At the Effective Time, each of the Company's stock plans and each outstanding option to purchase Shares under such plans, whether vested or unvested, will be assumed by Mentor. Each such option so assumed by Mentor will continue to be subject to the same terms and conditions set forth in the applicable stock plan and the applicable stock option agreement, immediately prior to the Effective Time, except that (i) such option will be exercisable for that number of whole shares of common stock of Mentor (the "Mentor Common Stock") equal to the product of the number of Shares that were issuable upon exercise of such option immediately prior to the Effective Time multiplied by the Option Exchange Ratio (as defined below) and rounded down to the nearest whole number of shares of Mentor Common Stock, and (ii) the per share exercise price for the shares of Mentor Common Stock issuable upon exercise of such assumed option will be equal to the quotient determined by dividing the exercise price per share of Common Stock at which such option was exercisable immediately prior to the Effective Time by the Option Exchange Ratio, rounded up to the nearest whole cent. The "Option Exchange Ratio" shall mean the quotient obtained by dividing (i) Merger Consideration by (ii) the average last sale price per share of the Mentor Common Stock on the Nasdaq Stock Market as reported in The Wall Street Journal (or, if either party disputes the accuracy of the prices therein reported, another mutually agreeable authoritative source) for the ten full trading-day period ending on the fifth full trading day prior to the Closing Date. Within 15 business days after the Effective Time, Mentor will issue to each person who, immediately prior to the Effective Time was a holder of an outstanding option under the Company's stock plans a document evidencing the foregoing assumption of such option by Mentor, and Mentor may prohibit option exercises beginning at the Effective Time and ending upon the filing of a registration statement on Form S-8 27 with respect to such options. Mentor has agreed to file that registration statement no later than 15 business days after the Effective Time. The Merger Agreement provides that no later than immediately prior to the Effective Time, each unvested share of restricted stock and each unvested stock option held by any of the current executive officers of the Company shall become vested and all repurchase rights of the company with respect thereto shall lapse. Prior to the Effective Time, the Company's Board of Directors, or an appropriate committee of non-employee directors thereof, shall adopt a resolution consistent with the interpretive guidance of the SEC so that the disposition by any officer or director of the Company who is a covered person of the Company for purposes of Section 16 of the Exchange Act and the rules and regulations thereunder ("Section 16") of Common Stock or options to acquire Common Stock pursuant to the Merger Agreement and the Merger shall be an exempt transaction for purposes of Section 16. Indemnity; Insurance. The parties have agreed that the indemnification obligations set forth in the Company's certificate of incorporation and the Company's bylaws shall survive the Merger and shall not be amended, repealed or otherwise modified for a period of six years after the Effective Time in any manner that would adversely affect the rights thereunder of any individual who on or prior to the Effective Time was a director, officer, trustee, fiduciary, employee or agent of the Company or any Company Subsidiary or who served at the request of the Company or any Company Subsidiary as a director, officer, trustee, partner, fiduciary, employee or agent of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise, unless such amendment or modification is required by law. For six years from the Effective Time, the Surviving Corporation will provide to the Company's directors and officers (as of the date hereof and as of the Effective Time) an insurance and indemnification policy that provides coverage for events occurring prior to the Effective Time that is no less favorable than the Company's existing policy or, if substantially equivalent insurance coverage is unavailable, the best available coverage; provided, however, that the Surviving Corporation shall not be required to pay an annual premium for the director's and officer's insurance in excess of 250% of the last annual premium paid prior to the date of the Merger Agreement, which premium the Company represents and warrants to be approximately $415,000. Parent Agreement Concerning the Purchaser; Parent Guaranty. Mentor has agreed to cause the Purchaser to comply with its obligations under the Merger Agreement. Mentor has unconditionally guaranteed the Purchaser's and the Surviving Corporation's obligations under the Merger Agreement and has agreed to be liable for any breach of the Merger Agreement by the Purchaser or the Surviving Corporation. Additional Covenants. The Merger Agreement contains the following additional covenants of the parties: - Mentor and the Company have agreed to cooperate in the preparation and filing of tender offer and proxy filings in connection with the transactions contemplated by the Merger Agreement and the seeking of any actions, consents, approvals or waivers of any governmental entities or third parties required to be obtained in connection with the transactions contemplated by the Merger Agreement; - the Company has agree to provide Mentor and Purchaser with reasonable access to the Company's books, records and facilities, and Mentor and Purchaser have agreed to treat any information derived from that access as confidential; - each of the parties have agreed to promptly notify the other parties of the occurrence or non-occurrence of events, including a failure to comply with any covenant, condition or agreement of the Merger Agreement, which would be likely to cause any of the conditions to any of the transactions contemplated by the Merger Agreement not to be satisfied; and - Mentor and the Company have agreed to consult with each other before issuing any press release or otherwise making any public statements with respect to the Merger and to not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law or any listing agreement with a stock market. 28 Conditions to the Merger. The respective obligations of each party to consummate the Merger shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions: (i) the Merger Agreement and the Merger shall have been approved and adopted by the requisite vote of the stockholders of the Company, if required by applicable law; (ii) Mentor shall have purchased, or caused to be purchased, pursuant to the Offer all shares duly tendered and not withdrawn; provided, however, that Mentor shall not assert this condition if Mentor, in violation of the terms of the Offer or the Merger Agreement, fails to accept for payment or pay for Shares validly tendered pursuant to the Offer; (iii) the consummation of the Merger shall not be restrained, enjoined or prohibited by any order, judgment, decree, injunction or ruling (whether temporary, preliminary or permanent) of a court of competent jurisdiction or any other Governmental Entity and there shall not have been any statute, rule or regulation enacted, promulgated or deemed applicable to the Merger by any Governmental Entity which prevents the consummation of the Merger or has the effect of making the purchase of Shares illegal; and (iv) any applicable waiting periods, together with any extensions thereof, under the HSR Act and the antitrust or competition laws of any other applicable jurisdiction shall have expired or been terminated. Termination. The Merger Agreement may be terminated, and the Merger may be abandoned, at any time prior to the Effective Time by action taken or authorized by the board of directors of the terminating party or parties, whether before or after approval of the Merger by the stockholders of the Company: (i) by mutual written consent of Mentor and the Company, by action of their respective Boards of Directors; (ii) by the Company if (A) Mentor fails to commence the Offer by the date that is five business days from the date of the Merger Agreement or (B) Mentor shall not have accepted for payment and paid for Shares pursuant to the Offer in accordance with the terms hereof and thereof on or before December 23, 2002; provided, however, that the Company may not terminate the Merger Agreement if the Company shall have (1) failed to fulfill any obligation under the Merger Agreement, which failure has been the proximate cause of, or resulted in, the failure of any condition to the Offer to have been satisfied on or before such date, or (2) otherwise materially breached the Merger Agreement; (iii) by either the Company or Mentor if the Offer is terminated or withdrawn pursuant to its terms without any Shares being purchased thereunder; provided, however, that neither the Company nor Mentor may terminate the Merger Agreement if such party shall have materially breached the Merger Agreement; (iv) by either the Company or Mentor if any court of competent jurisdiction or other Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting (A) the acceptance for payment of, or payment for, Shares pursuant to the Offer or (B) the Merger, and such order, decree, ruling or other action shall have become final and nonappealable (which order, decree, ruling or other action the party seeking to terminate the Merger Agreement shall have used its reasonable best efforts to resist, resolve or lift, as applicable); (v) by Mentor prior to the purchase of Shares pursuant to the Offer, if (A) the Company Board shall have withdrawn or adversely modified (including by amendment to the Schedule 14D-9), or failed upon Mentor's request to reconfirm, its approval or recommendation of the Offer, the Merger or the Merger Agreement (or determined to do so); (B) the Company Board shall have determined to recommend to the Company's stockholders that they approve an Acquisition Proposal other than the Offer and the Merger or shall have determined to accept a Superior Proposal; or (C) a tender offer or exchange offer that, if successful, would result in any person or group becoming a beneficial owner of 15% or more of the outstanding Shares is commenced (other than by Mentor or an affiliate of Mentor) and 29 the Company Board fails to recommend that the Company's stockholders not tender their Shares in such tender or exchange offer; (vi) by the Company, if the Company Board determines to accept a Superior Proposal, but only after the Company (A) provides Mentor with not less than five business days' notice of its determination to accept such Superior Proposal, including all terms thereof (after giving effect to all of the concessions which may be offered by Mentor pursuant to clause (B) below), (B) within the not less than five business day period referred, the Company has and has caused its financial and legal advisors to, negotiate with Mentor to make such adjustments in the terms and conditions of the Merger Agreement with the goal of enabling the Company to proceed with the transactions contemplated hereby, and (C) pays to Mentor an amount up to $7,342,500 (provided that the Company's right to terminate the Merger Agreement shall not be available if the Company is then in breach of the nonsolicitation provisions of the Merger Agreement); or (vii) by Mentor, prior to the purchase of Shares pursuant to the Offer, if the Minimum Condition shall not have been satisfied by the Expiration Date of the Offer and on or prior to such Expiration Date the Company shall have received an Acquisition Proposal (other than from Mentor). Termination Fee and Expenses. If the Merger Agreement is terminated (A) pursuant to (v) or (vi) above, (B) pursuant to (vii) above and the Company either enters into a definitive agreement relating to or consummates such Acquisition Proposal (with, for purposes of this provision, all of the references to 15% changed to "at least 50%" in the definition of "Acquisition Proposal") within 12 months of such termination, or (C) by Mentor pursuant to (iii) above by reason of a failure of certain conditions to the Offer and the Company either enters into a definitive agreement relating to or consummates an Acquisition Proposal (with, for purposes of this provision, all of the references to 15% changed to "at least 50%" in the definition of "Acquisition Proposal") within 12 months of such termination, then, in any such case, the Company shall pay to Mentor an amount equal to the sum of Mentor's Expenses up to an amount equal to $7,342,500. In addition to any payment of Expenses described above, (A) in the event that the Merger Agreement is terminated pursuant to (v) or (vi), then the Company shall pay to Mentor a termination fee of $7,342,500 less any Expenses paid by the Company; and (B) in the event that the Merger Agreement is terminated pursuant to (vii) above and the Company either enters into a definitive agreement relating to or consummates such Acquisition Proposal (with, for purposes of this provision, all of the references to 15% changed to "at least 50%" in the definition of "Acquisition Proposal") within 12 months of such termination, then the Company shall pay Mentor a termination fee of $7,342,500 less any Expenses paid by the Company. THE TENDER AGREEMENTS Mentor has entered into a separate Tender Agreement with each of the Significant Stockholders. The Significant Stockholders own an aggregate of 16,281,333 Shares, of which 15,633,687 Shares (representing approximately 39% of the outstanding Shares or 32% of the Shares on a fully diluted basis) are subject to the Tender Agreements (the "Subject Shares"). Pursuant to the Tender Agreements, each Significant Stockholder has agreed to tender and sell all Subject Shares owned by it to Mentor pursuant to and in accordance with the terms of the Offer. During the term of the Tender Agreements, no Significant Stockholder shall (A) sell, transfer, pledge, encumber, assign or otherwise dispose of or enter into any contract, option or other arrangement or understanding with respect to the transfer by such Stockholder of, any of the Subject Shares or offer any interest in any Subject Shares thereof to any person other than pursuant to the terms of the Offer, the Merger or the Tender Agreements, (B) enter into any voting arrangement or understanding, whether by proxy, power of attorney, voting agreement, voting trust or otherwise with respect to the Subject Shares, or (C) take any action that would make any representation or warranty of such Significant Stockholder contained in its respective Tender Agreement untrue or incorrect in any material respect or have the effect of preventing or disabling such Significant Stockholder from performing its obligations under its respective Tender Agreement. 30 Under each Tender Agreement, the Significant Stockholder has granted to Mentor an irrevocable option to purchase from time to time the Subject Shares owned by the Significant Stockholder, upon the terms and subject to the conditions set forth in the Tender Agreement. The Option may be exercised by Mentor in whole or from time to time in part, at any time following the occurrence of a Triggering Event (as defined below) and prior to the termination of the Option on the earlier of 45 days after the date the Merger Agreement is terminated in accordance with its terms or the Effective Time. Mentor's right to exercise the Option is subject to the following conditions: (i) Neither Mentor Graphics nor Purchaser shall have breached any of its material obligations under the Merger Agreement; (ii) No preliminary or permanent injunction or other order issued by any federal or state court of competent jurisdiction in the United States invalidating the grant or prohibiting the exercise of the Option or the delivery of the Optioned Shares shall be in effect; (iii) All applicable waiting periods under the HSR Act shall have expired or been terminated; and (iv) One or more of the following events (each, a "Triggering Event") shall have occurred on or after April 23, 2002: (A) the Company Board shall have withdrawn or adversely modified (including by amendment to the Schedule 14D-9), or failed upon Mentor's request to reconfirm, its approval or recommendation of the Offer, the Merger or the Merger Agreement (or determined to do so); (B) the Company Board shall have determined to recommend to the Company's stockholders that they approve an Acquisition Proposal other than the Offer and the Merger or shall have determined to accept a Superior Proposal; (C) a tender offer or exchange offer that, if successful, would result in any person or group becoming a beneficial owner of 15% or more of the outstanding Shares is commenced (other than by Mentor or an affiliate of Mentor); or (D) there is a public announcement with respect to a plan or intention by the Company, other than with respect to Mentor or its affiliates, to effect any of the foregoing transactions. During the term of the Tender Agreements, the Significant Stockholders have agreed not to and have agreed not to authorize, permit or cause any of their respective directors, officers, employees, agents, representatives and advisors to directly or indirectly (A) solicit, initiate, encourage (including by way of furnishing non-public information) or facilitate any Acquisition Proposal or (B) participate in any way in discussions or negotiations with, or furnish any information to, any person in connection with, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal, or otherwise cooperate in any way with, or participate in or assist, facilitate or encourage any effort or attempt by any other person to do or seek any of the foregoing. Each Significant Stockholder has agreed to promptly communicate to Mentor, to the same extent as required by the Company pursuant to, and subject to the same conditions contained in, the Merger Agreement, the terms and other information concerning, any proposal, discussion, negotiation or inquiry and the identity of the party making such proposal or inquiry which such Significant Stockholder may receive in respect of any such Acquisition Proposal. During the term of the Tender Agreements, William Herman, Richard Lucier, Kevin O'Brien, Peter Johnson, Kyoden Company Limited, DLJ Capital Corporation and DLJ ESC II, L.P. (such Significant Stockholders owning in the aggregate approximately 38.8% of the outstanding Shares) have agreed to vote each of their respective Shares at any meeting of the stockholders of the Company, however called, (A) in favor of the Merger and the Merger Agreement and the transactions contemplated thereby, and (B) against any action or agreement (other than the Merger and the other transactions contemplated by the Merger Agreement) that would impede, interfere with, delay, postpone or attempt to discourage the Merger, the Offer 31 or the other transactions contemplated by the Merger Agreement and the Tender Agreement, including, but not limited to: (i) any Acquisition Proposal; (ii) any action that is reasonably likely to result in a breach in any respect of any representation, warranty, covenant or any other obligation or agreement of the Company under the Merger Agreement or result in any of the conditions of the Offer not being fulfilled; (iii) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or its subsidiaries; (iv) a sale, lease or transfer of a material amount of assets of the Company and its subsidiaries or a reorganization, recapitalization, dissolution, winding up or liquidation of the Company and its subsidiaries; (v) any change in the management or Company Board, except as otherwise agreed to in writing by Mentor; (vi) any material change in the present capitalization or dividend policy of the Company; and (vii) any other material change in the Company's corporate structure, business, certificate of incorporation or bylaws that is not agreed to by Mentor in the exercise of Mentor's discretion. These Significant Stockholders also irrevocably granted and appointed certain officers of Mentor their proxy and attorney-in-fact to vote their respective Subject Shares in favor of the Merger, the Merger Agreement and the transactions contemplated thereby, and against any Acquisition Proposal. Each Tender Agreement terminates on the earlier of (A) 45 days after the date on which the Merger Agreement is terminated in accordance with its terms (except in certain situations upon which the Tender Agreements will terminate immediately upon termination of the Merger Agreement), and (B) the Effective Time. The voting obligations of the Significant Stockholders terminate in the event of the termination of the Merger Agreement, if and only if the Company gives Mentor notice of a record date for a vote on an Acquisition Proposal, other than the Merger Agreement at least 13 business days prior the date of such record date. NON-COMPETE AGREEMENTS Prior to the execution of the Merger Agreement, Mentor and the Company entered into non-compete agreements with the Company's chairman and chief executive officer and the Company's president (each, a "Principal"). Under the non-compete agreements, each Principal has agreed that for a period of 18 months from the later to occur of the Effective Time or the date of termination or expiration of his employment with the Company (the "Non-Competition Period"), he will not, unless acting with Mentor's prior written consent, directly or indirectly, own, manage, join, operate or control, or participate in the ownership, management, operation or control of, or be engaged as a director, officer, employer, employee, partner, consultant or independent contractor with, or permit his name to be used by or in connection with, any business or organization which directly or indirectly competes with the Mentor's business or the Company's business in each and every state in the United States and every country in the world in which Mentor and the Company conduct business. In addition, each Principal has agreed that during the Non-Competition Period, he will not hire, as director, officer, employer, employee, partner, consultant, independent contractor or otherwise, any person who during the term of his employment by the Company or Mentor was employed by Mentor, Purchaser or the Company or any affiliate thereof, except for any person involuntarily terminated by the Company, Mentor, or Purchaser or any person who has not been in such employment within nine months from the date of the proposed hire by such Principal. 32 EXCLUSIVITY AND CONFIDENTIALITY AGREEMENT The Exclusivity and Confidentiality Agreement, dated March 25, 2002, contains customary provisions pursuant to which, among other matters, Mentor and the Company agreed to keep confidential all confidential information concerning the Company or Mentor, respectively, furnished to each party by the other, to use such material solely in connection with evaluating or consummating an acquisition of the Company by Mentor, and, except with the prior written consent of the other party, not to disclose the fact that discussions or negotiations have or are taking place concerning a possible transaction involving the Company or the status thereof. In consideration of the substantial investment of time and resources that Mentor made in order to evaluate and consummate an acquisition of the Company by Mentor, the Company agreed that, from the date of the Exclusivity and Confidentiality Agreement until the earlier of (a) 6:00 p.m. Pacific Time on April 15, 2002 (subsequently extended through April 23, 2002), (b) the date that the definitive Merger Agreement is fully executed and becomes effective, or (c) the date on which Mentor shall deliver notice in writing to the Company that the exclusivity provisions of the Exclusivity and Confidentiality Agreement are terminated, neither the Company nor any of its officers, employees, directors, affiliates or other representatives would, directly or indirectly, (i) solicit, encourage, initiate, entertain, substantively review or participate in any negotiations or discussions with respect to any offer or proposal (formal or informal, oral, written or otherwise) to acquire all or any material part of the Company, whether by purchase of assets, exclusive license, joint venture formation, purchase of stock, business combination or otherwise; (ii) disclose any information not customarily disclosed to any person concerning the Company and which the Company believes would be used for the purposes of formulating any such an offer or proposal; (iii) assist, cooperate with, facilitate or encourage any person to make any offer or proposal to acquire all or any material part of the Company (directly or indirectly); (iv) agree to, enter into a contract regarding, approve, recommend or endorse any transaction involving the acquisition of all or any material part of the Company; or (v) authorize or permit any of the Company's officers, employees, directors, affiliates or other representatives to take any such action; provided, however, that the Company could engage in discussions and negotiations with respect to the sale of all or any portion of the Company's SLD business or products and/or the conduct of its business in the ordinary course, including but not limited to the licensing of its products to end users and resellers. The Company agreed to cease and cause to be terminated all existing discussions or negotiations with any parties, other than Mentor, conducted prior to the date of the Exclusivity and Confidentiality Agreement with respect to any competing proposed transaction and that, subject to the exceptions above, it would not engage in any material transaction involving the transfer or licensing of any intellectual property to a third party or the issuance or exchange of the Company's equity securities or securities convertible into equity securities (other than routine awards of stock options and restricted stock under the Company's existing stock plans and exercises of such awards) or any material financing transaction without Mentor's advance written consent. 13. Purpose and Structure of the Offer; Plans for the Company; Appraisal Rights. Purpose of the Offer. The purpose of the Offer is to acquire control of, and ultimately the entire equity interest in, the Company. The Offer, as the first step in the acquisition of the Company, is intended to facilitate the acquisition of the Company. The purpose of the Merger is to acquire all outstanding Shares not purchased pursuant to the Offer. If the Offer is successful, Mentor intends to consummate the Merger as promptly as practicable. If Mentor owns 90% or more of the outstanding Shares, following consummation of the Offer, whether through purchases pursuant to the Offer or otherwise or a combination of purchases and the Top-Up Option, Mentor intends to consummate the Merger as a "short-form" merger pursuant to Section 253 of the DGCL. Under such circumstances, neither the approval of any holder of Shares nor the Company Board would be required. 33 If, following the consummation of the Offer, Mentor owns less than 90% of the outstanding Shares, the Company Board will be required to submit the Merger to the Company's stockholders for approval at a stockholders' meeting convened for that purpose in accordance with Delaware law. If the Minimum Condition is satisfied, Mentor will, upon consummation of the Offer, have sufficient voting power to ensure approval of the Merger at the stockholders' meeting without the affirmative vote of any other stockholder. Upon consummation of the Merger, the Company will become a wholly-owned subsidiary of Mentor Graphics. The Offer does not constitute a solicitation of proxies for any meeting of the Company's stockholders. Any such solicitation which Mentor might make would be made only pursuant to separate proxy materials complying with the requirements of the Exchange Act. Section 203 of the DGCL. Section 203 of the DGCL prevents certain "business combinations" with an "interested stockholder" (generally, any person who owns or has the right to acquire 15% or more of a corporation's outstanding voting stock) for a period of three years following the time such person became an interested stockholder unless, among other things, prior to the time the interested stockholder became such, the board of directors of the corporation approved either the business combination or the transaction in which the interested stockholder became such. The Company's Board of Directors has approved the Offer, the Merger, the Merger Agreement and the Tender Agreement and the transactions contemplated thereby for the purposes of Section 203 of the DGCL. See "The Offer -- Certain Legal Matters; Regulatory Approvals." Plans for the Company. Mentor believes that its acquisition of the Company will broaden Mentor's position in both the PCB systems and wire harness design markets through the integration of the Company's complementary solutions with Mentor's. Mentor is studying how the Company's business will be integrated into Mentor's systems design business. Mentor is in the process of evaluating the business and operations of the Company and after the consummation of the Offer and the Merger will take such actions as it deems appropriate under the circumstances. Except as described above or elsewhere in this Offer to Purchase, Mentor has no present plans or proposals that would relate to or result in an extraordinary corporate transaction involving the Company or any of its subsidiaries (such as a merger, reorganization, liquidation, relocation of any operations or sale or other transfer of a material amount of assets), any change in the Company Board or management or any material change in the Company's capitalization or dividend policy. Appraisal Rights. Appraisal rights are not available in the Offer. If the Merger is consummated, however, holders of Shares at the effective time of the Merger who do not vote in favor of, or consent to, the Merger will have rights under Section 262 of the DGCL to demand appraisal of their Shares. Under Section 262, stockholders who demand appraisal and comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, and to receive payment of that fair value in cash, together with a fair rate of interest, if any. Any such judicial determination of the fair value of Shares could be based upon factors other than, or in addition to, the price per Share to be paid in the Merger or the market value of the Shares. The value so determined could be more or less than the price per Share to be paid in the Merger. The foregoing summary of Section 262 does not purport to be complete and is qualified in its entirety by reference to Section 262 attached hereto as Schedule II. Failure to follow the steps that Section 262 requires for perfecting appraisal rights may result in the loss of those rights. 14. Effect of the Offer on the Market for the Shares; Nasdaq Listing; Registration under the Exchange Act. The purchase of Shares by us pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and may reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public. Depending upon the number of Shares purchased pursuant to the Offer and the aggregate market value of any Shares not purchased pursuant to the Offer, the Shares may no longer meet the standards for continued listing on the Nasdaq National Market and may be delisted from the Nasdaq National Market. The published 34 guidelines of the Nasdaq National Market indicate that the Nasdaq National Market would consider delisting the Shares if, among other things, either (1) the number of round lot holders of Shares should fall below 400, the number of publicly held Shares should fall below 750,000, the aggregate market value of the publicly held Shares should fall below $5,000,000, the minimum bid price for Shares should fall below $1 per Share, the stockholders' equity in the Company should fall below $10,000,000, and there should be less than two registered and active market makers providing quotations for the Shares, or, alternatively, (2) the market capitalization of the Company (or the Company's total assets and total revenue for the last completed fiscal year, respectively) should fall below $50,000,000, the number of round lot holders of Shares should fall below 400, the number of publicly held Shares should fall below 1,100,000, the aggregate market value of the publicly held Shares should fall below $15,000,000, the minimum bid price for Shares should fall below $3 per Share and there should be less than four registered and active market makers providing quotations for the Shares. To the extent the Shares are delisted from the Nasdaq National Market, the market for the Shares could be adversely affected. If the Nasdaq National Market were to delist the Shares, it is possible that the Shares would continue to trade in the over-the-counter market and that price quotations for the Shares would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend on the number of holders of Shares remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act (as described below) and other factors. Mentor cannot predict whether the reduction in the number of Shares that might otherwise trade publicly, if any, effected by the Offer would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future market prices to be greater or less than the price per Share to be paid in the Merger. The Shares are currently "margin securities," as such term is defined under the rules of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities. Depending upon factors similar to those described above regarding listing and market quotations, following the Offer it is possible that the Shares might no longer constitute "margin securities" for purposes of the margin regulations of the Federal Reserve Board, in which event such Shares could no longer be used as collateral for loans made by brokers. The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application by the Company to the SEC if the Shares are no longer authorized for quotation on the Nasdaq National Market and there are fewer than 300 record holders. The termination of the registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of Shares and to the SEC and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with stockholders' meetings and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Shares. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of such securities pursuant to Rule 144 under the Securities Act. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for reporting on the National Association of Securities Dealers Automated Quotation System. We presently intend to seek to cause the Company to terminate the registration of the Shares under the Exchange Act as soon as possible after the consummation of the Offer and the Merger as the requirements for termination of registration are met. 15. Dividends and Distributions. If on or after the date of this Offer to Purchase, the Company should split, combine or otherwise change the Shares or its capitalization, acquire or otherwise cause a reduction in the number of outstanding Shares or issue or sell any additional Shares (other than Shares issued pursuant to and in accordance with the terms in effect on April 23, 2002 upon exercise of employee stock options outstanding prior to such date), shares of any other class or series of capital stock, other voting securities or any securities convertible into, or options, rights, or warrants, conditional or otherwise, to acquire, any of the foregoing, then, without prejudice to our rights under "The Offer -- Conditions to the Offer," we may, in our 35 reasonable discretion, make such adjustments in the purchase price and other terms of the Offer as we deem appropriate including the number or type of securities to be purchased. 16. Conditions to the Offer. Notwithstanding any other provisions of the Offer, Mentor shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC including Rule 14e-1(c) promulgated under the Exchange Act, pay for any tendered Shares, and may terminate or, subject to the terms of the Merger Agreement, amend the Offer, unless (i) there shall have been validly tendered and not validly withdrawn immediately prior to the Expiration Date that number of Shares which represents at least a majority of the total number of outstanding Shares on a fully diluted basis on the date of purchase (the "Minimum Condition") and (ii) any applicable waiting period under the HSR Act or under any applicable foreign statutes or regulations shall have expired or been terminated prior to the Expiration Date. In addition, notwithstanding any other term of the Offer or the Merger Agreement, Mentor shall not be required to accept for payment or, subject as aforesaid, pay for any tendered Shares, and may terminate or, subject to the terms of the Merger Agreement, amend the Offer, at any time on or after the date of the Merger Agreement and prior to the time of acceptance for payment or payment for any Shares, if any of the following events shall occur and be continuing and such event shall not have been proximately caused by the breach of Mentor of any of its obligations under the Merger Agreement: (A) there shall be any action taken, or any statute, rule, regulation, legislation, interpretation, judgment, order or injunction enacted, enforced, promulgated, amended, issued or deemed applicable to the Offer, by any legislative body, court, government or governmental, administrative or regulatory authority or agency, domestic or foreign, other than the application of the waiting period provisions of the HSR Act to the Offer or the Merger, that, in the reasonable judgment of Mentor, would be expected to, directly or indirectly: (i) make illegal or otherwise prohibit or materially delay consummation of the Offer or the Merger or seek to obtain material damages or make materially more costly the making of the Offer; (ii) prohibit or materially limit the ownership or operation by Mentor of all or any material portion of the business or assets of the Company and the Company Subsidiaries taken as a whole or compel Mentor to dispose of or hold separate all or any material portion of the business or assets of Mentor, or of the Company and the Company Subsidiaries taken as a whole, or seek to impose any material limitation on the ability of Mentor to conduct its business or own such assets; (iii) impose material limitations on the ability of Mentor effectively to acquire, hold or exercise full rights of ownership of the Shares, including without limitation the right to vote any Shares acquired or owned by Mentor on all matters properly presented to the Company's stockholders; (iv) require divestiture by Mentor of any Shares; (v) result in a material diminution of the value of the Shares or the benefits expected to be derived by Mentor as a result of the Offer or the Merger Agreement; (vi) restrains or prohibits or seeks to restrain or prohibit the performance of any of the contracts or other arrangements entered into by Mentor or any of its affiliates in connection with the acquisition of the Company or obtains or seeks to obtain any material damages or otherwise directly or indirectly adversely affects to the Offer in any material respect; or (vii) result in a Company Material Adverse Effect; or (B) there shall be instituted or pending any action or proceeding by any Governmental Entity seeking, or that would reasonably be expected to result in, any of the consequences referred to in clauses (i) through (vii) of paragraph (A) above or by any third party for which there is a substantial likelihood of resulting in any of the consequences referred to in clauses (i) through (vii) of paragraph (A) above; or 36 (C) any development or change shall have occurred in the business, assets, liabilities, condition (financial or otherwise) or results of operations of the Company or any Company Subsidiary that has had, or could reasonably be expected to have, a Company Material Adverse Effect; or (D) (i) the Company Board shall have withdrawn or adversely modified (including by amendment to the Schedule 14D-9), or failed promptly upon Mentor's request to reconfirm, its approval or recommendation of the Offer, the Merger or the Merger Agreement; (ii) the Company Board shall have decided to recommend to the Company's stockholders that they approve an Acquisition Proposal other than the Offer and the Merger or shall have decided to accept a Superior Proposal; (iii) a tender offer or exchange offer that, if successful, would result in any person or group becoming a beneficial owner of 15% or more of the outstanding Shares is commenced (other than by Mentor or an affiliate of Mentor) and the Company Board fails to recommend that the Company's stockholders not tender their Shares in such tender or exchange offer; or (iv) any person (other than Mentor or an affiliate of Mentor) or group becomes the beneficial owner of 15% or more of the outstanding Shares; or (E) the Company and Mentor shall have reached an agreement that the Offer or the Merger Agreement be terminated, or the Merger Agreement shall have been terminated in accordance with its terms; or (F) (i) any of the representations and warranties of the Company contained in the Merger Agreement that are qualified by reference to a Company Material Adverse Effect shall not be true when made or at any time prior to the consummation of the Offer as if made at and as of such time (except for representations and warranties which speak as of a particular date, shall not be true as of such particular date); or (ii) any of the representations and warranties of the Company contained in the Merger Agreement that are not so qualified shall not be true in all material respects when made or at any time prior to the consummation of the Offer as if made at and as of such time (except for representations and warranties which speak as of a particular date, shall not be true as of such particular date); or (G) the Company shall have failed to perform in any material respect or to comply in any material respect with any of its material obligations, covenants or agreements under the Merger Agreement or any Ancillary Agreement; or (H) there shall have occurred, and continued to exist, (i) any general suspension of, or limitation on prices for, trading in securities on the New York Stock Exchange or on the over-the-counter stock market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System; (ii) any decline of at least 25% in either the Dow Jones Average of Industrial Stocks, the Standard & Poor's 500 Index or the Nasdaq National Market from the close of business on the last trading day immediately preceding the date of the Merger Agreement through the Expiration Date; (iii) a commencement of a war, armed hostilities, acts of terrorism or other national or international crisis involving the United States or, in the case of any of the foregoing existing on the date of the Merger Agreement, a material acceleration or worsening thereof, in each case that could reasonably be expected to have a material adverse effect on the Company, Mentor or the consummation of the Offer; or (iv) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or a material limitation (whether or not mandatory) by any Governmental Entity on the extension of credit by banks or other lending institutions; or 37 (I) (i) any required approval, permit, authorization or consent, with respect to the Company, the Company Subsidiaries or the Company's business, of any other person or entity shall not have been obtained the lack of which, individually or in the aggregate, has had or could reasonably be expected to have a Company Material Adverse Effect; or (ii) any required material approval, permit, authorization or consent of any Governmental Entity or any other person or entity, shall not have been obtained on terms satisfactory to Mentor in its reasonable discretion. The foregoing conditions (including those set forth in clauses (i) and (ii) of the initial paragraph) are for the benefit of Mentor and may be asserted by Mentor regardless of the circumstances giving rise to any such conditions and (except for the Minimum Condition) may be waived by Mentor in whole or in part at any time and from time to time in its reasonable discretion, in each case subject to the terms of the Merger Agreement. The failure by Mentor at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. 17. Certain Legal Matters; Regulatory Approvals. General. We are not aware of any governmental license or regulatory permit that appears to be material to the Company's business that might be adversely affected by our acquisition of Shares pursuant to the Offer or, except as set forth below, of any approval or other action by any government or governmental administrative or regulatory authority or agency, domestic or foreign, that would be required for our acquisition or ownership of Shares pursuant to the Offer. Should any such approval or other action be required, we currently contemplate that such approval or other action would be sought. However, we do not intend to delay the purchase of Shares tendered pursuant to the Offer pending the outcome of any action or the receipt of any such approval. There can be no assurance that any such approval or other action, if needed, would be obtained (with or without substantial conditions) or that if such approvals were not obtained or such other actions were not taken adverse consequences might not result to the Company's business or certain parts of the Company's business might not have to be disposed of, any of which could cause us to elect to terminate the Offer without the purchase of Shares thereunder. Our obligation under the Offer to accept for payment and pay for Shares is subject to certain conditions. See "The Offer -- Conditions to the Offer." State Takeover Laws. Section 203 of the DGCL, in general, prohibits a Delaware corporation such as the Company from engaging in a "Business Combination" (defined as a variety of transactions, including mergers) with an "Interested Stockholder" (defined generally as a person that is the beneficial owner of 15% or more of a corporation's outstanding voting stock) for a period of three years following the time that such person became an interested stockholder unless: (a) prior to the time such person became an interested stockholder, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (b) upon consummation of the transaction that resulted in the stockholder becoming an Interested Stockholder, the Interested Stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding stock held by directors who are also officers of the corporation and employee stock ownership plans that do not provide employees with the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or (c) on or subsequent to the date such person became an Interested Stockholder, the Business Combination is approved by the board of directors of the corporation and authorized at a meeting of stockholders, and not by written consent, by the affirmative vote of the holders of a least 66 2/3% of the outstanding voting stock of the corporation not owned by the Interested Stockholder. The Company Board has approved the Merger Agreement, the Offer, the Merger and the other transactions contemplated by the Merger Agreement for purposes of Section 203 of the DGCL. The foregoing description of Section 203 does not purport to be complete and is qualified in its entirety by reference to the provisions of Section 203. The Company is incorporated under the laws of the State of Delaware and its operations are conducted throughout the United States. A number of states have adopted takeover laws and regulations that purport to 38 be applicable to attempts to acquire securities of corporations that are incorporated in those states or that have substantial assets, stockholders, principal executive offices or principal places of business in those states. To the extent that these state takeover statutes purport to apply to the Offer or the Merger, we believe that those laws conflict with U.S. federal law and are an unconstitutional burden on interstate commerce. In 1982, the Supreme Court of the United States, in Edgar v. MITE Corporation, invalidated on constitutional grounds the Illinois Business Takeover Statute, which, as a matter of state securities law, made takeover of corporations meeting certain requirements more difficult. The reasoning in that decision is likely to apply to certain other state takeover statutes. In 1987, however, in CTS Corporation v. Dynamics Corporation of America, the Supreme Court of the United States held that the State of Indiana could as a matter of corporate law and, in particular, those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining stockholders, as long as those laws were applicable only under certain conditions. Subsequently, in TLX Acquisition Corporation v. Telex Corporation, a federal district court in Oklahoma ruled that the Oklahoma statutes were unconstitutional insofar as they apply to corporations incorporated outside Oklahoma, because they would subject those corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a federal district court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as applied to corporations incorporated outside Tennessee. This decision was affirmed by the United State Court of Appeals for the Sixth Circuit. In December 1988, a federal district court in Florida held, in Grand Metropolitan PLC v. Butterworth, that the provisions of the Florida Affiliated Transactions Act and Florida Control Share Acquisition Act were unconstitutional as applied to corporations incorporated outside of Florida. Except as described herein, we have not attempted to comply with any state takeover statutes in connection with this Offer or the Merger. We reserve the right to challenge the validity or applicability of any state law allegedly applicable to the Offer or the Merger, and nothing in this Offer to Purchase nor any action that we take in connection with the Offer is intended as a waiver of that right. In the event that it is asserted that one or more takeover statutes apply to the Offer or the Merger, and it is not determined by an appropriate court that the statutes in question do not apply or are invalid as applied to the Offer or the Merger, as applicable, we may be required to file certain documents with, or receive approvals from, the relevant state authorities, and we might be unable to accept for payment or purchase Shares tendered in the Offer or be delayed in continuing or consummating the Offer. In that case, we may not be obligated to accept for purchase, or pay for, any Shares tendered. See "The Offer -- Conditions to the Offer." Antitrust. Under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the rules that have been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. The purchase of Shares pursuant to the Offer is subject to such requirements. Pursuant to the requirements of the HSR Act, each of Mentor and the Company intends to file a Notification and Report Form with respect to the Offer and the Merger with the Antitrust Division and the FTC on or about May 1, 2002. As a result, we anticipate that the waiting period applicable to the purchase of Shares pursuant to the Offer is scheduled to expire at 11:59 p.m., New York City time, on or about Thursday, May 16, 2002. However, prior to such time, the Antitrust Division or the FTC may extend the waiting period by formally requesting additional information or documentary material relevant to the Offer from us. If such a request is made, the waiting period will be extended until 11:59 p.m., New York City time, on the tenth day after our substantial compliance with such request. Thereafter, the Antitrust Division or the FTC may defer the consummation of the Merger and the transactions contemplated thereby only by court order. A request will be made pursuant to the HSR Act for early termination of the waiting period applicable to the Offer. There can be no assurance, however, that the HSR Act waiting period will be terminated early. Shares will not be accepted for payment or paid for pursuant to the Offer until the expiration or earlier termination of the applicable waiting period under the HSR Act. See "The Offer -- Conditions to the Offer." Subject to certain circumstances described in "The Offer -- Extension of Tender Period; Termination; 39 Amendment," any extension of the waiting period will not give rise to any withdrawal rights not otherwise provided for by applicable law. If our acquisition of Shares is delayed pursuant to a request by the Antitrust Division or the FTC for additional information or documentary material pursuant to the HSR Act, the Offer may be extended. The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as Mentor's acquisition of Shares pursuant to the Offer. At any time before or after the consummation of any such transactions, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or seeking divestiture of the Shares so acquired or divestiture of Mentor's or the Company's substantial assets. Private parties (including individual states) may also bring legal actions under the antitrust laws. Mentor does not believe that the consummation of the Offer will result in a violation of any applicable antitrust laws. However, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made, or if such a challenge is made, what the result will be. See "The Offer -- Conditions to the Offer" for certain conditions to the Offer, including conditions with respect to litigation and certain governmental actions. The Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2001 indicates that the Company and certain of its subsidiaries conduct business in foreign countries where regulatory filings or approvals under antitrust and other laws may be required or desirable in connection with the consummation of the Offer and the Merger. Certain of such filings for approvals, if required or desirable, may not be made or obtained prior to the expiration of the Offer. After commencement of the Offer, Mentor will seek further information regarding the applicability of any such laws and currently intend to take such action as may be required or desirable. If any government or governmental authority or agency takes any action prior to the completion of the Offer that, in the sole judgment of Mentor, might have certain adverse effects, Mentor will not be obligated to accept for payment or pay for any Shares tendered. Appraisal Rights. Holders of Shares do not have appraisal rights as a result of the Offer. However, if the Merger is consummated, holders of Shares will have certain rights pursuant to the provisions of Section 262 of the DGCL to dissent and demand appraisal of their Shares in connection with the Merger. Under Section 262, dissenting stockholders who comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, and to receive payment of such fair value in cash, together with a fair rate of interest, if any. Any such judicial determination of the fair value of the Shares could be based upon factors other than, or in addition to, the price per Share to be paid in the Merger or the market value of the Shares. The value so determined could be more or less than the price per Share to be paid in the Merger. The foregoing summary of Section 262 does not purport to be complete and is qualified in its entirety by reference to Section 262 attached hereto as Schedule II. Delaware Law. The Merger also would need to comply with other applicable procedural and substantive requirements of Delaware law. Several decisions by Delaware courts have held that, in certain circumstances, a controlling stockholder of a corporation involved in a merger has a fiduciary duty to the other stockholders that requires the merger to be fair to such other stockholders. In determining whether a merger is fair to minority stockholders, Delaware courts have considered, among other things, the type and amount of consideration to be received by the stockholders and whether there were fair dealings among the parties. Foreign Laws. According to publicly available information, the Company also leases property and conducts businesses in a number of other jurisdictions. In connection with the acquisition of the Shares pursuant to the Offer, the laws of Germany and other foreign countries and jurisdictions may require the filing of information with, or the obtaining of the approval of, governmental authorities in such countries and jurisdictions. In addition, the waiting period prior to consummation of the Offer associated with such filings or approvals may extend beyond the scheduled Expiration Date. The governments in such countries and jurisdictions might attempt to impose additional conditions on the Company's operations conducted in such countries and jurisdictions as a result of the acquisition of Shares pursuant to the Offer or the Merger. 40 18. Fees and Expenses. Mentor has retained Needham & Company, Inc. to act as its financial advisor, MacKenzie Partners, Inc. to act as the Information Agent and Wilmington Trust Company to act as the Depositary in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telegraph and personal interviews and may request brokers, dealers, banks, trust companies and other nominees to forward materials relating to the Offer to beneficial owners. The Information Agent and the Depositary each will receive customary compensation for their respective services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities in connection therewith, including certain liabilities under the federal securities laws. We will not pay any fees or commissions to any broker or dealer or any other person for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by us for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers. 19. Miscellaneous. The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the laws of such jurisdiction. However, we will make a good faith effort to take such action as we may deem necessary to make the Offer in any such jurisdiction and extend the Offer to holders of Shares in such jurisdiction. No person has been authorized to give any information or make any representation on behalf of Mentor Graphics or Purchaser not contained in this Offer to Purchase or in the Letter of Transmittal and, if given or made, such information or representation must not be relied upon as having been authorized. We have filed with the SEC a Tender Offer Statement on Schedule TO, together with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, furnishing certain additional information with respect to the Offer. The Schedule TO and any amendments thereto, including exhibits, may be examined and copies may be obtained from the offices of the SEC in the manner set forth in "The Offer -- Certain Information Concerning the Company -- Available Information" of this Offer to Purchase. MENTOR GRAPHICS CORPORATION INDIANA MERGER CORPORATION April 30, 2002 41 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF MENTOR GRAPHICS AND PURCHASER The name, current principal occupation or employment and material occupations, positions, offices or employment for the past five years, of each director and executive officer of Mentor Graphics are set forth below. References herein to "Mentor Graphics" mean Mentor Graphics Corporation. Unless otherwise indicated below, the business address of each director and officer is c/o Mentor Graphics Corporation, 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. Where no date is shown, the individual has occupied the position indicated for the past five years. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Mentor Graphics. Except as described herein, none of the directors and officers of Mentor Graphics listed below has, during the past five years, (1) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (2) been a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. All directors and officers listed below are citizens of the United States.
PRESENT PRINCIPAL OCCUPATION AND NAME TITLE FIVE YEAR EMPLOYMENT HISTORY - ---- ----- -------------------------------- Walden C. Rhines Chairman of the Board and Chief Dr. Rhines has served as Chairman Executive Officer of the Board and Chief Executive Officer of Mentor Graphics since 2000. From 1993 to 2000 he was Director, Chief Executive Officer and President of Mentor Graphics. Gregory K. Hinckley Director, President and Chief Mr. Hinckley has served as Operating Officer Director and President of Mentor Graphics since 2000. From 1997 to 2000 he served as Executive Vice President, Chief Operating Officer and Chief Financial Officer of Mentor Graphics. From 1995 until 1996 Mr. Hinckley was Senior Vice President of VLSI Technology, Inc. L. Don Maulsby Senior Vice President, World Trade Mr. Maulsby has served as Senior Vice President, World Trade since October 1999. From June 1998 to October 1999, he was president of Tri-Tech and Associates, a manufacturer's representative firm. From June 1997 to June 1998 he was Vice President of World Wide Sales and Marketing for Interphase Corporation, a manufacturer of high performance network and mass storage products. From April 1988 to December 1997, he was employed by VLSI Technology, Inc. where his duties included Vice President Worldwide Sales and Vice President and General Manager of its Computing Division.
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PRESENT PRINCIPAL OCCUPATION AND NAME TITLE FIVE YEAR EMPLOYMENT HISTORY - ---- ----- -------------------------------- Anthony B. Adrian Vice President, Corporate Mr. Adrian has served as Vice Controller President, Corporate Controller since joining Mentor Graphics in January 1998. From August to December of 1997, he held the position of Vice President and Acting Controller for Wickland Oil Company, a petroleum marketing and distribution company. From January 1996 to August 1997, Mr. Adrian served as Managing Director of Wickland Terminals in Australia. From November 1992 to January 1996, Mr. Adrian served as Vice President and Controller of Wickland Oil. Jue-Hsien Chern Vice President, Deep Submicron Dr. Chern has served as Vice Division President and General Manager of Mentor Graphics' Deep Submicron (DSM) Division since joining Mentor in January 2000. From 1994 to 1998, Dr. Chern served as Vice President and Chief Technology Officer for Technology Modeling Associates. In 1998 Technology Modeling Associates merged with Avant! Corporation and Dr. Chern became head of Avant!'s DSM Business Unit. From August 1999 to December 1999, Dr. Chern was President of Ultima Corporation. Brian Derrick Vice President Mr. Derrick has served as Vice President and General Manager of Mentor Graphics' Physical Verification (PVX) Division since November 2000. From March 1998 to November 2000, he was the Director of Mentor Graphics' Calibre and Velocity Strategic Business Unit. From January 1997 to March 1998, he was marketing manager for Mentor Graphics' Calibre Business Unit. Mr. Derrick was employed by Allied Signal Corporation from 1988 to 1997, where his duties included marketing manager. He has been with Mentor Graphics since 1997. Dean Freed Vice President, General Counsel Mr. Freed has served as Vice and Secretary President, General Counsel and Secretary of Mentor Graphics since July 1995. Mr. Freed served as Deputy General Counsel and Assistant Secretary of Mentor Graphics from April 1994 to July 1995. He has been employed by Mentor Graphics since January 1989.
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PRESENT PRINCIPAL OCCUPATION AND NAME TITLE FIVE YEAR EMPLOYMENT HISTORY - ---- ----- -------------------------------- Henry Potts Vice President and General Mr. Potts has served as Vice Manager, Systems Design Division President and General Manager of the Systems Design Division (SDD) since joining Mentor Graphics in April 1999. From 1997 to 1998, Mr. Potts was Vice President of Engineering for Hitachi Micro Systems, a semiconductor research and development company. From 1994 to 1997, he was employed by Motorola Semiconductor where his duties included leading the development activities for Advanced Signal Processor Silicon and software products. Anne Wagner Sanquini Vice President and General Ms. Sanquini has served as Vice Manager, HDL Division President and General Manager of the Hardware Description Language (HDL) Design Division since April 1999. From June 1998 to April 1999, Ms. Sanquini served as Vice President, Marketing for Mentor Graphics. From 1996 to 1998, Ms. Sanquini was Vice President of Corporate Marketing for the SunSoft operating company of Sun Microsystems, Inc. Ms. Sanquini has been with Mentor Graphics since June 1998. Dennis Weldon Treasurer Mr. Weldon has served as Treasurer and Director of Corporate Business Development since February 1996. Mr. Weldon served as Director of Business Development from June 1994 to January 1996. Mr. Weldon has been employed by Mentor Graphics since July 1988. Marsha B. Congdon Director Ms. Congdon has served as a Director of Mentor Graphics since 1991. Since 1997, Ms. Congdon's principal occupation has been private investment. Ms. Congdon served as Vice President, Policy and Strategy of US West Inc. from 1995 to 1997.
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PRESENT PRINCIPAL OCCUPATION AND NAME TITLE FIVE YEAR EMPLOYMENT HISTORY - ---- ----- -------------------------------- James R. Fiebiger Director Dr. Fiebiger has served as a Director of Mentor Graphics since 1994. He has been Chairman of the Board and Chief Executive Officer of Lovoltech Inc. (a semiconductor company) since 1999; Vice Chairman and Managing Director of Technology Licensing of Gatefield Corporation (a semiconductor company) from 1998 to 2000; President and Chief Executive Officer of Gatefield Corporation from 1996 to 1998; Chairman of the Board and Managing Director of Thunderbird Technologies, Inc. (a technology licensing company) from 1992 to 1997; Chairman of the Board of Directors of Thunderbird Technologies, Inc.; Director of QLogic Corporation (a developer of semiconductor and board-level products) and Actel Corporation (a developer of field programmable gate arrays). David A. Hodges Director Dr. Hodges has served as Director of Mentor Graphics since 1995. Dr. Hodges is a Professor in the Graduate School of the Department of Electrical Engineering and Computer Science at the University of California at Berkeley ("UC Berkeley") where he has been a faculty member since 1970. Dr. Hodges was Dean of the College of Engineering at UC Berkeley from 1990 to 1996. Dr. Hodges is also a Director of Silicon Image, Inc. Kevin C. McDonough Director Dr. McDonough has served as a Director of Mentor Graphics since 1999. Since 1999, he has served as President and Chief Executive Officer of ChipData, Inc. Dr. McDonough was Vice President and General Manager of National Semiconductor Corporation from 1997 to 1999 and served as Senior Vice President of Engineering of Cyrix Corporation from 1989 to 1997. Fontaine K. Richardson Director Dr. Richardson has served as a Director of Mentor Graphics since 1983. His principal occupation since 2000 has been private investment. Dr. Richardson has been a General Partner of Eastech III and Vice President of Eastech Management Company from 1983 to 2000. He also serves as Director of ePresence, Inc.
I-4 The name and position with Purchaser of each director and officer of Purchaser are set forth below. The business address, Mentor Graphics principal occupation or employment, five-year employment history and citizenship of each such person is set forth above.
NAME TITLE - ---- ----- Walden C. Rhines President, Chief Executive Officer and Director Gregory K. Hinckley Chief Financial Officer and Director Dean Freed Secretary
I-5 SCHEDULE II SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW RIGHTS OF APPRAISAL SECTION 262. APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to sec.228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder's shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words "depositary receipt" mean a receipt or other instrument issued by a depositary representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depositary. (b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to sec.251 (other than a merger effected pursuant to sec.251(g) of this title), sec.252, sec.254, sec.257, sec.258, sec.263 or sec.264 of this title: (1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depositary receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of sec.251 of this title. (2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except: a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depositary receipts in respect thereof; b. Shares of stock of any other corporation, or depositary receipts in respect thereof, which shares of stock (or depositary receipts in respect thereof) or depositary receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders; c. Cash in lieu of fractional shares or fractional depositary receipts described in the foregoing subparagraphs a. and b. of this paragraph; or d. Any combination of the shares of stock, depositary receipts and cash in lieu of fractional shares or fractional depositary receipts described in the foregoing subparagraphs a., b., and c. of this paragraph. II-1 (3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under sec.253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation. (c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable. (d) Appraisal rights shall be perfected as follows: (1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsections (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder's shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder's shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or (2) If the merger or consolidation was approved pursuant to sec.228 or sec.253 of this title, then either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within ten days thereafter, shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder's shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder's shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, II-2 that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given. (e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who was complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw such stockholder's demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder's written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later. (f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation. (g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. (h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder's certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section. II-3 (i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state. (j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal. (k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just. (l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation. II-4 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF INNOVEDA, INC. AT $3.95 NET PER SHARE BY INDIANA MERGER CORPORATION A WHOLLY-OWNED SUBSIDIARY OF MENTOR GRAPHICS CORPORATION The Letter of Transmittal and certificates for Shares and any other required documents should be sent to the Depositary at one of the addresses set forth below: The Depositary for the Offer is: [WILMINGTON TRUST LOGO] By Mail: By Hand/Overnight Courier: CT Reorg. Svcs., Drop Code 1615 Wilmington Trust Company Wilmington Trust Company Rodney Square North P.O. Box 8861 1100 North Market Street Wilmington, Delaware 19899-8861 Wilmington, Delaware 19890-1615 Attn: Corporate Trust Reorg. Svcs.
By Facsimile: (302) 636-4145 Confirm by Telephone: (302) 636-6518 If you have questions or need additional copies of this Offer to Purchase and the Letter of Transmittal, you can call the Information Agent at its address and telephone number set forth below. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: LOGO 105 Madison Avenue New York, New York 10016 (212) 929-5500 (Call Collect) E-mail: proxy@mackenziepartners.com or Call Toll Free (800) 322-2885 EX-99.(A)(1)(B) 4 f81012tex99-a1b.txt EXHIBIT 99.(A)(1)(B) EXHIBIT (a)(1)(B) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF INNOVEDA, INC. AT $3.95 NET PER SHARE PURSUANT TO THE OFFER TO PURCHASE DATED APRIL 30, 2002 BY INDIANA MERGER CORPORATION A WHOLLY-OWNED SUBSIDIARY OF MENTOR GRAPHICS CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MAY 28, 2002, UNLESS THE OFFER IS EXTENDED. THE DEPOSITARY FOR THE OFFER IS: [WILMINGTON TRUST LOGO] For Telephone Inquires: (866) 521-0079 By Mail: By Facsimile: By Hand/Overnight Courier: CT Reorg. Svcs., Drop Code 1615 (302) 636-4145 Wilmington Trust Company Wilmington Trust Company Confirm by Telephone: Rodney Square North P.O. Box 8861 (302) 636-6518 1100 North Market Street Wilmington, Delaware 19899-8861 Wilmington, Delaware 19890-1615 Attn: Corporate Trust Reorg. Svcs.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be used if certificates are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase dated April 30, 2002 (the "Offer to Purchase")) is utilized, if delivery of Shares (as defined below) is to be made by book-entry transfer to the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Offer -- Procedure for Tendering Shares" of the Offer to Purchase.
- ------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARES TENDERED AND SHARES TENDERED APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF SHARES NUMBER CERTIFICATE REPRESENTED BY OF SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ Total Shares - ------------------------------------------------------------------------------------------------------------------------ * Need not be completed by stockholders tendering by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the Depositary are being tendered. See Instruction 4. - ------------------------------------------------------------------------------------------------------------------------
Holders of outstanding shares of common stock, par value $0.01 per share (the "Shares"), of Innoveda, Inc. (the "Company") whose certificates for such Shares (the "Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary on or prior to the Expiration Date (as defined in the Offer to Purchase), or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Shares according to the guaranteed delivery procedure set forth in "The Offer -- Procedure for Tendering Shares -- Guaranteed Delivery" of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. LOST CERTIFICATES [ ] I HAVE LOST MY CERTIFICATE(S) THAT REPRESENTED ________________ SHARES AND REQUIRE ASSISTANCE IN OBTAINING A REPLACEMENT CERTIFICATE(S). I UNDERSTAND THAT I MUST CONTACT THE DEPOSITARY AND/OR THE COMPANY TO OBTAIN INSTRUCTIONS FOR REPLACING LOST CERTIFICATES. SEE INSTRUCTION 9. NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY. [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution ----------------------------------------------------------------------------- Account Number ----------------------------------------------------------------------------- Transaction Code Number ----------------------------------------------------------------------------- [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Tendering Stockholder(s) ----------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery --------------------------------------------------------------------- Name of Institution which Guaranteed Delivery -------------------------------------------------------------------------- If delivery is by book-entry transfer: Name of Tendering Institution ----------------------------------------------------------------------------- Account Number ----------------------------------------------------------------------------- Transaction Code Number ----------------------------------------------------------------------------- 2 Ladies and Gentlemen: The undersigned hereby tenders to Indiana Merger Corporation ("Purchaser"), a Delaware corporation and a wholly-owned subsidiary of Mentor Graphics Corporation, an Oregon corporation, the above-described shares of common stock, par value $0.01 per share ("Shares") of Innoveda, Inc., a Delaware corporation (the "Company"), pursuant to Purchaser's offer to purchase all of the outstanding Shares at $3.95 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase dated April 30, 2002 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together, as each may be amended or supplemented from time to time, constitute the "Offer"). Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer or prejudice the undersigned's rights to receive payment for Shares validly tendered and accepted for payment. Upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, the terms of any such extension or amendment) and effective upon acceptance for payment of and payment for the Shares tendered herewith, the undersigned hereby sells, assigns and transfers to, or upon the order of, Purchaser all right, title and interest in and to all the Shares that are being tendered hereby (and any and all other Shares or other securities issued or issuable in respect thereof on or after April 23, 2002 (collectively, the "Distributions")) and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and any Distributions), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver certificates for such Shares (and any Distributions), or transfer ownership of such Shares (and any Distributions) on the account books maintained by the Book-Entry Transfer Facility, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of Purchaser, (ii) present such Shares (and any Distributions) for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any Distributions), all in accordance with the terms and conditions of the Offer. The undersigned hereby irrevocably appoints Walden C. Rhines and Gregory K. Hinckley, individually, as the attorneys and proxies of the undersigned, each with full power of substitution, to exercise all voting and other rights of the undersigned in such manner as each such attorney and proxy or his substitute shall in his sole discretion deem proper, with respect to all of the Shares tendered hereby which have been accepted for payment by Purchaser prior to the time of any vote or other action (and any associated Distributions), at any meeting of stockholders of the Company (whether annual or special and whether or not an adjourned meeting), by written consent or otherwise. This proxy is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares by Purchaser in accordance with the terms of the Offer. Such acceptance for payment shall revoke any other proxy or written consent granted by the undersigned at any time with respect to such Shares (and any associated Distributions), and no subsequent proxies will be given or written consents will be executed by the undersigned (and if given or executed, will not be deemed to be effective). The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and any Distributions) and that when the same are accepted for payment by Purchaser, Purchaser will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby (and any Distributions). All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in "The Offer -- Procedure for Tendering Shares" of the Offer to Purchase and the instructions hereto will constitute the undersigned's acceptance of the Offer and that Purchaser's acceptance for payment of the Shares tendered will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, Purchaser may not be required to accept for payment any of the Shares tendered hereby. 3 Unless otherwise indicated under "Special Payment Instructions," please issue the check for the purchase price of any Share Certificates purchased, and return any Shares not tendered or not purchased, in the name(s) of the undersigned (and, in the case of Shares tendered by book-entry transfer, by credit to the account at the Book-Entry Transfer Facility). Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price of any Share Certificates purchased and any certificates for Shares not tendered or not purchased (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s). In the event that both "Special Payment Instructions" and "Special Delivery Instructions" are completed, please issue the check for the purchase price of any Share Certificates purchased and return any Shares not tendered or not purchased in the name(s) of, and mail said check and any certificates to, the person(s) so indicated. The undersigned recognizes that Purchaser has no obligation, pursuant to the "Special Payment Instructions," to transfer any Shares from the name of the registered holder(s) thereof if Purchaser does not accept for payment any of the Shares so tendered. SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 6 AND 7) To be completed ONLY if the check for the purchase price of Share Certificates purchased (less the amount of any federal income and backup withholding tax required to be withheld) or certificates for Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned. Mail: [ ] check [ ] certificates to: Name: - ---------------------------------------------- (PLEASE PRINT) Address: - -------------------------------------------- - ------------------------------------------------------ (ZIP CODE) - ------------------------------------------------------ (TAXPAYER IDENTIFICATION NO.) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 6 AND 7) To be completed ONLY if the check for the purchase price of Share Certificates purchased (less the amount of any federal income and backup withholding tax required to be withheld) or certificates for Shares not tendered or not purchased are to be mailed to someone other than the undersigned or to the undersigned at an address other than that shown below the undersigned's signature(s). Mail: [ ] check [ ] certificates to: Name: - ---------------------------------------------- (PLEASE PRINT) Address: - -------------------------------------------- - ------------------------------------------------------ (ZIP CODE) - ------------------------------------------------------ (TAXPAYER IDENTIFICATION NO.) 4 SIGN HERE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (SIGNATURE(S) OF OWNERS) Dated - ------------------------ Name(s) - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (full title) - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number - -------------------------------------------------------------------------------- (Must be signed by registered holder(s) exactly as name(s) appear(s) on Share Certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5.) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Authorized Signature - -------------------------------------------------------------------------------- Name - -------------------------------------------------------------------------------- Title - -------------------------------------------------------------------------------- (PLEASE TYPE OR PRINT) Name of Firm - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number - -------------------------------------------------------------------------------- Dated - ------------------------ FOR USE BY FINANCIAL INSTITUTIONS ONLY FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE ABOVE 5
- ------------------------------------------------------------------------------------------------------------------ PAYER'S NAME: WILMINGTON TRUST COMPANY - ------------------------------------------------------------------------------------------------------------------ SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT ----------------------------- FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW Social Security Number OR DEPARTMENT OF THE TREASURY ----------------------------- INTERNAL REVENUE SERVICE Employer Identification Number(s) ------------------------------------------------------------------------------------- PAYER'S REQUEST FOR PART 2 -- FOR PAYEES EXEMPT FROM BACKUP WITH- TAXPAYER IDENTIFICATION HOLDING (See Page 2 of enclosed Guidelines) ----------------------------------------------------- NUMBER (TIN) AND PART 3 -- Certification Under Penalties of Perjury, PART 4 -- CERTIFICATION I certify that: Awaiting TIN [ ] (1) The number shown on this form is my current taxpayer identification number (or I am waiting for a number to be issued to me) and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. ------------------------------------------------------------------------------------- CERTIFICATION INSTRUCTIONS -- You must cross out item (2) in Part 3 above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you are subject to backup withholding you receive another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2). SIGNATURE DATE ____________ NAME ADDRESS CITY STATE ____________ ZIP CODE ________ - ------------------------------------------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECK THE BOX IN PART 4 OF SUBSTITUTE FORM W-9 PAYER'S NAME: WILMINGTON TRUST COMPANY CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within sixty (60) days, a portion of all reportable payments made to me thereafter will be withheld until I provide such a number. Signature Date ____________ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF A PORTION OF ANY PAYMENT MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most banks, savings and loan associations and brokerage houses) that is a member of a recognized Medallion Program approved by The Securities Transfer Association, Inc. or any other "eligible guarantor institution" (as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended) (each an "Eligible Institution"). Signatures on this Letter of Transmittal need not be guaranteed (i) if this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered herewith and such holder(s) have not completed the instruction entitled "Special Payment Instructions" on this Letter of Transmittal or (ii) if such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. Delivery of Letter of Transmittal and Shares. This Letter of Transmittal is to be used if Share Certificates are to be forwarded herewith or, unless an Agent's Message is utilized, if deliveries are to be made by book-entry transfer pursuant to the procedures set forth in "The Offer -- Procedure for Tendering Shares" of the Offer to Purchase. Share Certificates for all physically delivered Shares, or a confirmation of a book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility of all Shares delivered electronically, as well as a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) and any other documents required by this Letter of Transmittal, or an Agent's Message in the case of a book-entry transfer, must be received by the Depositary at one of its addresses set forth on the front page of this Letter of Transmittal by the Expiration Date (as defined in the Offer to Purchase). Stockholders whose Share Certificates are not immediately available, who cannot deliver their Share Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedure for delivery by book-entry transfer on a timely basis, may tender their Shares pursuant to the guaranteed delivery procedure described in Section 4 of the Offer to Purchase. Pursuant to such procedure: (a) such tender must be made by or through an Eligible Institution; (b) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser, must be received by the Depositary prior to the Expiration Date; and (c) Share Certificates for all tendered Shares, in proper form for tender, or a confirmation of a book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility of all Shares delivered electronically, as well as a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), and any other documents required by this Letter of Transmittal, must be received by the Depositary within three Nasdaq National Market trading days of the date of execution of such Notice of Guaranteed Delivery. The method of delivery of Shares and all other required documents is at the option and risk of the tendering stockholder. If certificates for Shares are sent by mail, registered mail with return receipt requested, properly insured, is recommended. No alternative, conditional or contingent tenders will be accepted, and no fractional Shares will be purchased. By executing this Letter of Transmittal, the tendering stockholder waives any right to receive any notice of the acceptance for payment of the Shares. 3. Inadequate Space. If the space provided herein is inadequate, the Share Certificate numbers, the number of Shares evidenced by such Share Certificates and the number of Shares tendered should be listed on a separate signed schedule and attached hereto. 4. Partial Tenders (not applicable to stockholders who tender by book-entry transfer). If fewer than all the Shares represented by any certificate delivered to the Depositary are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such case, a new certificate for the remainder of the Shares represented by the old certificate will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the appropriate box on this Letter of Transmittal, as promptly as practicable following the expiration or termination of the Offer. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 7 5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are held of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in different names on different certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of certificates or separate stock powers are required unless payment of the purchase price is to be made, or Shares not tendered or not purchased are to be returned, in the name of any person other than the registered holder(s). Signatures on any such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, certificates must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name(s) of the registered holder(s) appear(s) on the certificates for such Shares. Signature(s) on any such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of the authority of such person so to act must be submitted. 6. Stock Transfer Taxes. Purchaser will pay any stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or Shares not tendered or not purchased are to be returned in the name of, any person other than the registered holder(s), or if a transfer tax is imposed for any reason other than the sale or transfer of Shares to Purchaser pursuant to the Offer, then the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted herewith. 7. Special Payment and Delivery Instructions. If the check for the purchase price of any Shares purchased is to be issued, or any Shares not tendered or not purchased are to be returned, in the name of a person other than the person(s) signing this Letter of Transmittal or if the check or any certificates for Shares not tendered or not purchased are to be mailed to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal at an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Stockholders tendering Shares by book-entry transfer may request that Shares not purchased be credited to such account at the Book-Entry Transfer Facility as such stockholder may designate under "Special Payment Instructions." If no such instructions are given, any such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated above. 8. Substitute Form W-9. Under the United States federal income tax laws, the Depositary will be required to withhold a portion of the amount of any payments made to certain stockholders pursuant to the Offer. In order to avoid such backup withholding, each tendering stockholder, and, if applicable, each other payee, must provide the Depositary with such stockholder's or payee's correct taxpayer identification number and certify that such stockholder or payee is not subject to such backup withholding by completing the Substitute Form W-9. In general, if a stockholder or payee is an individual, the taxpayer identification number is the Social Security number of such individual. If the Depositary is not provided with the correct taxpayer identification number, the stockholder or payee may be subject to a $50 penalty imposed by the Internal Revenue Service. For further information concerning backup withholding and instructions for completing the Substitute Form W-9 (including how to obtain a taxpayer identification number if you do not have one and how to complete the Substitute Form W-9 if Shares are held in more than one name), consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. 8 Certain stockholders or payees (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order to satisfy the Depositary that a foreign individual qualifies as an exempt recipient, such stockholder or payee must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status, on a properly completed Form W-8BEN, or successor form. Such statements can be obtained from the Depositary. Failure to complete the Substitute Form W-9 will not, by itself, cause Shares to be deemed invalidly tendered, but may require the Depositary to withhold a portion of the amount of any payments made pursuant to the Offer. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained provided that the required information is furnished to the Internal Revenue Service. NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF A PORTION OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 9. Mutilated, Lost, Stolen or Destroyed Certificates. Any holder of a certificate(s) which represented Shares whose certificate(s) has been mutilated, lost, stolen, or destroyed should (i) complete this Letter of Transmittal and check the appropriate box above and (ii) contact the Depositary immediately by calling (302) 636-6518. The Depositary will provide such holder will all necessary forms and instructions to replace any mutilated, lost, stolen or destroyed certificates. The holder may also be required to give the Company a bond as indemnity against any claim that may be made against it with respect to the certificate(s) alleged to have been mutilated, lost, stolen, or destroyed. However, there can be no assurances that such mutilated, lost, stolen or destroyed certificates will be replaced prior to the expiration date of the Offer. 10. Waiver of Conditions. Subject to the terms and conditions of the Merger Agreement, the Conditions of the Offer may be waived, in whole or in part, by Purchaser, in its sole discretion, at any time and from time to time, in the case of any shares tendered. 11. Requests for Assistance or Additional Copies. Requests for assistance or additional copies of the Offer to Purchase and this Letter of Transmittal may be obtained from the Information Agent at its address or telephone number set forth on the back cover of this Letter of Transmittal. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE HEREOF) OR AN AGENT'S MESSAGE TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE. 9 - ---------------------------------------------------------------------------------------------------------------------- (DO NOT WRITE IN THE SPACES BELOW) Date Received --------------- Accepted by --------------- Checked by --------------- ------------------------------------------------------------------------------------------------------------ SHARES SHARES SHARES CHECK AMOUNT SHARES CERTIFICATE BLOCK SURRENDERED TENDERED ACCEPTED NO. OF CHECK RETURNED NO. NO. ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------ --- --- --- Gr --- --- --- --- --- --- Net --- --- --- Delivery Prepared By --------------- Checked By --------------- Date --------------- - ----------------------------------------------------------------------------------------------------------------------
Any questions and requests for assistance may be directed to the Information Agent at its telephone numbers and address listed below. Additional copies of the Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent at its address and telephone numbers set forth below. Holders of Shares may also contact their broker, dealer, commercial bank or trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: [MACKENZIE LOGO] 105 Madison Avenue New York, NY 10016 (212) 929-5500 (Call Collect) E-mail: proxy@mackenziepartners.com or Call Toll-Free (800) 322-2885 EX-99.(A)(1)(C) 5 f81012tex99-a1c.txt EXHIBIT 99.(A)(1)(C) EXHIBIT (a)(1)(C) NOTICE OF GUARANTEED DELIVERY TO TENDER SHARES OF COMMON STOCK OF INNOVEDA, INC. AT $3.95 NET PER SHARE PURSUANT TO THE OFFER TO PURCHASE DATED APRIL 30, 2002 BY INDIANA MERGER CORPORATION A WHOLLY-OWNED SUBSIDIARY OF MENTOR GRAPHICS CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MAY 28, 2002, UNLESS THE OFFER IS EXTENDED. This form, or a form substantially equivalent to this form, must be used to accept the Offer (as defined below) if certificates evidencing shares of common stock, par value $0.01 per share (the "Shares"), of Innoveda, Inc., a Delaware corporation (the "Company"), are not immediately available, or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach Wilmington Trust Company (the "Depositary") on or prior to the Expiration Date (as defined in the Offer to Purchase dated April 30, 2002 (the "Offer to Purchase")). This Notice of Guaranteed Delivery may be delivered by hand or facsimile transmission or mail to the Depositary. See "The Offer -- Procedure for Tendering Shares" of the Offer to Purchase. The Depositary for the Offer is: [WILMINGTON TRUST LOGO] By Mail: By Hand/Overnight Courier: CT Reorg. Svcs., Drop Code 1615 Wilmington Trust Company Wilmington Trust Company Rodney Square North P.O. Box 8861 1100 North Market Street Wilmington, Delaware 19899-8861 Wilmington, Delaware 19890-1615 Attn: Corporate Trust Reorg. Svcs.
By Facsimile: (302) 636-4145 Confirm by Telephone: (302) 636-6518 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS LISTED ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "eligible guarantor institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to Indiana Merger Corporation ("Purchaser"), a Delaware corporation and a wholly-owned subsidiary of Mentor Graphics Corporation, an Oregon corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase dated April 30, 2002 (the "Offer to Purchase") and the related Letter of Transmittal (which together, as each may be amended, supplemented or otherwise modified from time to time, constitute the "Offer"), receipt of which is hereby acknowledged, the number of Shares specified below pursuant to the guaranteed delivery procedure set forth in "The Offer -- Procedure for Tendering Shares" of the Offer to Purchase. ------------------------------------------------ CERTIFICATE NUMBERS (IF AVAILABLE) ------------------------------------------------ [ ] CHECK HERE IF SHARES WILL BE TENDERED BY BOOK-ENTRY TRANSFER ------------------------------------------------ NUMBER OF SHARES TENDERED ------------------------------------------------ ACCOUNT NUMBER SIGN HERE ------------------------------------------------ SIGNATURE ------------------------------------------------ (NAME(S)) (PLEASE PRINT) NAME OF TENDERING INSTITUTION ------------------------------------------------ ADDRESS ------------------------------------------------ (ZIP CODE) ------------------------------------------------ (AREA CODE AND TELEPHONE NUMBER) 2 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association, Inc. or any other "eligible guarantor institution" (as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended), guarantees (a) that the above named person(s) "own(s)" the Shares tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, (b) that such tender of Shares complies with Rule 14e-4 and (c) to deliver to the Depositary of the Shares tendered hereby, in proper form of transfer, or a Book- Entry Confirmation (as defined in the Offer to Purchase), together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other required documents within three Nasdaq National Market trading days of the date hereof. - -------------------------------------------------------------------------------- (NAME OF FIRM) - -------------------------------------------------------------------------------- (AUTHORIZED SIGNATURE) - -------------------------------------------------------------------------------- (NAME) - -------------------------------------------------------------------------------- (ADDRESS) - -------------------------------------------------------------------------------- (ZIP CODE) - -------------------------------------------------------------------------------- (AREA CODE AND TELEPHONE NUMBER) DATED: - --------------------------------------------- DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.(A)(1)(D) 6 f81012tex99-a1d.txt EXHIBIT 99.(A)(1)(D) EXHIBIT (a)(1)(D) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF INNOVEDA, INC. AT $3.95 NET PER SHARE BY INDIANA MERGER CORPORATION A WHOLLY-OWNED SUBSIDIARY OF MENTOR GRAPHICS CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MAY 28, 2002, UNLESS THE OFFER IS EXTENDED. April 30, 2002 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: This letter relates to the offer being made by Mentor Graphics Corporation, an Oregon corporation ("Mentor Graphics"), through Indiana Merger Corporation, a Delaware corporation ("Purchaser" and together with Mentor Graphics, "Mentor") and a wholly-owned subsidiary of Mentor, to purchase all of the issued and outstanding common stock, par value $0.01 per share (the "Shares"), of Innoveda, Inc., a Delaware corporation (the "Company"), at a price of $3.95 per Share net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in Mentor's Offer to Purchase dated April 30, 2002 (the "Offer to Purchase") and the related Letter of Transmittal (which together, as each may be amended, supplemented or otherwise modified from time to time, constitute the "Offer"). For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, we are enclosing the following documents: 1. Offer to Purchase dated April 30, 2002; 2. Letter of Transmittal for your use and for the information of your clients (including Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 providing information relating to backup federal income tax withholding); 3. Notice of Guaranteed Delivery to be used to accept the Offer if the Shares and all other required documents cannot be delivered to Wilmington Trust Company ("the Depositary") by the Expiration Date (as defined in Offer to Purchase); 4. A form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 5. The letter to stockholders of the Company from William J. Herman, the Chairman and Chief Executive Officer of the Company, accompanied by the Company's Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company, which includes the recommendation of the Board of Directors of the Company (the "Board of Directors") that stockholders accept the Offer and tender their Shares to Mentor pursuant to the Offer; and 6. Return envelope addressed to the Depositary. THIS OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN IMMEDIATELY PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES THAT REPRESENTS AT LEAST A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE AND (II) THE EXPIRATION OR TERMINATION OF ANY AND ALL WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS DESCRIBED IN SECTION 16 OF THE OFFER TO PURCHASE. THE OFFER IS NOT CONDITIONED UPON MENTOR OBTAINING FINANCING. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MAY 28, 2002, UNLESS THE OFFER IS EXTENDED. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of April 23, 2002 (the "Merger Agreement"), among the Company, Mentor Graphics and Purchaser. The Merger Agreement provides for, among other things, the making of the Offer by Purchaser, and further provides that, as soon as practicable following consummation of the Offer, Purchaser will be merged with and into the Company (the "Merger") with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Mentor Graphics. The Board of Directors by unanimous vote of all directors present at a meeting of the Company's Board of Directors held on April 23, 2002 (1) determined that the Offer and the Merger are fair to and in the best interests of the stockholders of the Company, (2) approved and adopted the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger and (3) recommended that the Company's stockholders accept the Offer and tender their Shares pursuant to the Offer. Purchaser will not pay any fees or commissions to any broker or dealer or other person for soliciting tenders of Shares pursuant to the Offer. Purchaser will, however, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers. Purchaser will pay all stock transfer taxes applicable to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of the Letter of Transmittal. In order to accept the Offer, a duly executed and properly completed Letter of Transmittal and any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares, together with certificates representing the Shares tendered or timely confirmation of the book-entry transfer of such Shares, and any other required documents, should be sent to the Depositary by 12:00 Midnight, New York City time, on Tuesday, May 28, 2002. Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed materials may be obtained from, the Information Agent or the Depositary at the addresses and telephone numbers set forth on the back cover of the Offer to Purchase. Very truly yours, MENTOR GRAPHICS CORPORATION INDIANA MERGER CORPORATION NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU AS THE AGENT OF PURCHASER, MENTOR GRAPHICS, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. 2 EX-99.(A)(1)(E) 7 f81012tex99-a1e.txt EXHIBIT 99.(A)(1)(E) EXHIBIT (a)(1)(E) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF INNOVEDA, INC. AT $3.95 NET PER SHARE BY INDIANA MERGER CORPORATION A WHOLLY-OWNED SUBSIDIARY OF MENTOR GRAPHICS CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MAY 28, 2002, UNLESS THE OFFER IS EXTENDED. To Our Clients: Enclosed for your consideration is an Offer to Purchase dated April 30, 2002 (the "Offer to Purchase") and the related Letter of Transmittal (which together, as each may be amended, supplemented or otherwise modified from time to time constitute the "Offer") in connection with the offer by Mentor Graphics Corporation, an Oregon corporation ("Mentor Graphics"), through Indiana Merger Corporation, a Delaware corporation ("Purchaser" and, together with Mentor Graphics, "Mentor") and a wholly-owned subsidiary of Mentor Graphics, to purchase for cash all of the shares of common stock, par value $0.01 per share (the "Shares"), of Innoveda, Inc., a Delaware corporation (the "Company"), at a purchase price of $3.95 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase and the Letter of Transmittal. We are the holder of record of Shares held for your account. A tender of such Shares can be made only by us as the holder of record and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Shares held by us for your account. We request instructions as to whether you wish us to tender any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer to Purchase and the Letter of Transmittal. Your attention is invited to the following: 1. The tender price is $3.95 per Share, net to you in cash. 2. The Offer is being made for all of the outstanding Shares. 3. The Offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn immediately prior to the expiration of the Offer a number of Shares that represents at least a majority of the total number of outstanding Shares on a fully diluted basis on the date of purchase and (2) the expiration or termination of any and all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder. The Offer is also subject to certain other conditions described in Section 16 of the Offer to Purchase. The Offer is not conditioned upon Mentor obtaining financing. 4. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of April 23, 2002 (the "Merger Agreement"), among the Company, Mentor Graphics and Purchaser. The Merger Agreement provides for, among other things, the making of the Offer by Mentor, and further provides that, as soon as practicable following consummation of the Offer, Purchaser will be merged with and into the Company (the "Merger") with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Mentor Graphics. 5. The Board of Directors of the Company by unanimous vote of all directors present at a meeting of the Company's Board of Directors held on April 23, 2002, (1) determined that the Offer and the Merger are fair to and in the best interests of the stockholders of the Company, (2) approved and adopted the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger and (3) recommended that the Company's stockholders accept the Offer and tender their Shares pursuant to the Offer. 6. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MAY 28, 2002, UNLESS THE OFFER IS EXTENDED. 7. Any stock transfer taxes applicable to a sale of Shares to the Purchaser will be borne by Purchaser, except as otherwise provided in Instruction 6 of the Letter of Transmittal. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing, detaching and returning to us the instruction form on the detachable part hereof. An envelope to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified on the detachable part hereof. Your instructions should be forwarded to us in ample time to permit us to submit a tender on your behalf by the expiration of the Offer. The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the laws of such jurisdiction. Payment for Shares purchased pursuant to the Offer will in all cases be made only after timely receipt by Wilmington Trust Company (the "Depositary") of (a) certificates representing the Shares tendered or timely confirmation of the book-entry transfer of such Shares into the account maintained by the Depositary at The Depository Trust Company (the "Book-Entry Transfer Facility"), pursuant to the procedures set forth in Section 4 of the Offer to Purchase, (b) the Letter of Transmittal, properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase), in connection with a book-entry delivery, and (c) any other documents required by the Letter of Transmittal. Accordingly, payment may not be made to all tendering stockholders at the same time depending upon when certificates for or confirmations of book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility are actually received by the Depositary. 2 INSTRUCTIONS WITH RESPECT TO OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF INNOVEDA, INC. BY INDIANA MERGER CORPORATION A WHOLLY-OWNED SUBSIDIARY OF MENTOR GRAPHICS CORPORATION The undersigned acknowledge(s) receipt of your letter enclosing the Offer to Purchase dated April 30, 2002 (the "Offer to Purchase") and the related Letter of Transmittal, in connection with the offer by Mentor Graphics Corporation through Indiana Merger Corporation to purchase all of the shares of common stock, $0.01 par value per share (the "Shares"), of Innoveda, Inc. (the "Company"), at a purchase price of $3.95 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase and the Letter of Transmittal. This will instruct you to tender the number of Shares indicated below held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal. Number of Shares to be Tendered: -------------------------------------------- Shares* Dated -------------------------------------------- SIGN HERE ----------------------------------------------------- ----------------------------------------------------- SIGNATURE(S) ----------------------------------------------------- PLEASE TYPE OR PRINT NAME(S) ----------------------------------------------------- ADDRESS ----------------------------------------------------- AREA CODE AND TELEPHONE NUMBER ----------------------------------------------------- TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. 3 EX-99.(A)(1)(F) 8 f81012tex99-a1f.txt EXHIBIT 99.(A)(1)(F) EXHIBIT (a)(1)(F) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security Numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer Identification Numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer.
- -------------------------------------------------------- GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - -------------------------------------------------------- 1. An individual's The individual account 2. Two or more The actual owner of the individuals (joint account or, if combined account) funds, any one of the individuals(1) 3. Husband and wife The actual owner of the (joint account) account or, if joint funds, either person(1) 4. Custodian account of a The minor(2) minor (Uniform Gift to Minors Act) 5. Adult and minor (joint The adult or, if the minor account) is the only contributor, the minor(1) 6. Account in the name of The ward, minor, or guardian or committee incompetent person(3) for a designated ward, minor, or incompetent person 7. a. The usual revocable The grantor-trustee(1) savings trust account (grantor is also trustee) b. So-called trust The actual owner(1) account that is not a legal or valid trust under State law - --------------------------------------------------------
- -------------------------------------------------------- GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - -------------------------------------------------------- 8. Sole proprietorship The Owner(4) account 9. A valid trust, estate The legal entity (Do not or pension trust furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title)(5) 10. Corporate account The corporation 11. Religious, charitable, The organization or educational organization account 12. Partnership account The partnership held in the name of the business 13. Association, club, or The organization other tax-exempt organization 14. A broker or registered The broker or nominee nominee 15. Account with the The public entity Department of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments - --------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) You must show your individual name, but you may also enter your business or "doing business" name. You may use either your Social Security Number or Employer Identification Number. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you do not have a taxpayer identification number or if you do not know your number, obtain Form SS-5, Application for Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service (the "IRS") and apply for a number. Payees specifically exempted from backup withholding on ALL payments by brokers include the following: - A corporation. - A financial institution. - An organization exempt from a tax under Section 501(a), or an individual retirement plan or a custodial account under Section 403(b)(7) if the account satisfies the requirements of Section 401(F)(2). - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under Section 584(a). - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. - A futures commission merchant registered with the Commodity Futures Trading Commission. - A person registered under the Investment Advisors Act of 1940 who regularly acts as a broker. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under Section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under Section 852). - Payments described in Section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under Section 1451. - Payments made by certain foreign corporations. - Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, CHECK "EXEMPT" IN PART 2 OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. Certain payments other than interest, dividends, and patronage dividends, which are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under Section 6041, 6041(A)(a), 6045, and 6050A. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Beginning January 1, 1993, payers must generally withhold a portion of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an under-payment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.(A)(1)(H) 9 f81012tex99-a1h.txt EXHIBIT 99.(A)(1)(H) Exhibit (a)(1)(H) THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER TO SELL SHARES. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE DATED APRIL 30, 2002 AND THE RELATED LETTER OF TRANSMITTAL AND ANY AMENDMENTS OR SUPPLEMENTS THERETO, AND IS BEING MADE TO ALL HOLDERS OF SHARES. PURCHASER IS NOT AWARE OF ANY JURISDICTION WHERE THE MAKING OF THE OFFER IS PROHIBITED BY ADMINISTRATIVE OR JUDICIAL ACTION PURSUANT TO ANY VALID STATUTE. IF PURCHASER BECOMES AWARE OF ANY VALID STATUTE PROHIBITING THE MAKING OF THE OFFER OR THE ACCEPTANCE OF SHARES PURSUANT THERETO, PURCHASER WILL MAKE A GOOD FAITH EFFORT TO COMPLY WITH SUCH STATUTE. IF, AFTER SUCH GOOD FAITH EFFORT, PURCHASER CANNOT COMPLY WITH SUCH STATUTE, THE OFFER WILL NOT BE MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF) THE HOLDERS OF SHARES IN SUCH JURISDICTION. IN ANY JURISDICTION WHERE THE SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO BE MADE ON BEHALF OF PURCHASER BY ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTION. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock of Innoveda, Inc. at $3.95 Net Per Share in Cash by Indiana Merger Corporation a wholly-owned subsidiary of Mentor Graphics Corporation Indiana Merger Corporation, a Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Mentor Graphics Corporation, an Oregon corporation ("Mentor Graphics"), is offering to purchase all outstanding shares of common stock, par value $0.01 per share (the "Shares"), of Innoveda, Inc., a Delaware corporation (the "Company"), at a price of $3.95 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated April 30, 2002 (the "Offer to Purchase") and in the related Letter of Transmittal (which, as each may be amended and supplemented from time to time, together constitute the "Offer"). Purchaser is offering to acquire the Shares as a first step in acquiring the entire equity interest in the Company. Following the consummation of the Offer, Purchaser intends to effect the Merger described below. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MAY 28, 2002 (THE "EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN IMMEDIATELY PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES THAT REPRESENTS AT LEAST A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (THE "MINIMUM CONDITION"); AND (2) THE EXPIRATION OR TERMINATION OF ANY AND ALL WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER. THE OFFER IS ALSO SUBJECT TO OTHER CONDITIONS DESCRIBED IN THE OFFER TO PURCHASE. Except for the Minimum Condition, Purchaser, in its discretion, can waive the conditions to the Offer without the Company's consent. The Offer is not conditioned on Mentor Graphics or Purchaser obtaining financing. The Offer is being made pursuant to the Agreement and Plan of Merger dated as of April 23, 2002 (the "Merger Agreement"), among the Company, Mentor Graphics and Purchaser. The Merger Agreement provides that, as soon as practicable following consummation of the Offer, Purchaser will be merged with and into the Company (the "Merger") with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Mentor Graphics. Pursuant to the Merger Agreement, at the effective time of the Merger (the "Effective Time"), each Share outstanding immediately prior to the Effective Time (other than Shares owned by Mentor Graphics, Purchaser, any wholly-owned subsidiary of Mentor Graphics or Purchaser, the Company or any wholly-owned subsidiary of the Company, all of which will be canceled, and Shares held by the Company's stockholders, if any, who properly exercise their appraisal rights under the Delaware General Corporation Law) will be converted into the right to receive $3.95 per share in cash or any greater per Share price paid in the Offer, net without interest. The purpose of the Offer is for Purchaser to acquire a majority voting interest in the Company as the first step in Mentor Graphics acquiring the entire equity interest in the Company. The purpose of the Merger is to acquire all outstanding Shares not tendered and purchased pursuant to the Offer. The Merger is subject to the satisfaction or waiver of certain conditions, including, if required, the approval and adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding Shares. If the Minimum Condition is satisfied and Purchaser acquires Shares pursuant to the Offer, Purchaser would have sufficient voting power to approve the Merger without the affirmative vote of any other stockholder of the Company. In addition, in order to facilitate a short-form merger following the completion of the Offer, the Company has granted to Purchaser an irrevocable option, exercisable in whole if the Minimum Condition is met and Purchaser accepts for payment pursuant to the Offer more than 85% but less than 90% of the Shares then outstanding, to purchase additional Shares equal to an amount that, when added to the Shares that Purchaser already owns at the time the option is exercised, will constitute one Share more than 90% of the Shares then outstanding (assuming the exercise of all exercisable options to purchase Shares with an exercise price less than $3.95 per share), at a price of $3.95 per Share. Purchaser may only exercise this option so long as immediately after the exercise it would own more than 90% of the Shares outstanding. The Company has also agreed, if required, to cause a meeting of its stockholders to be held as promptly as practicable following consummation of the Offer for the purpose of considering and taking action upon the approval and adoption of the Merger Agreement. Purchaser has agreed to vote all Shares that it acquires in the Offer in favor of the approval and adoption of the Merger Agreement. The Merger Agreement is more fully described in the Offer to Purchase. ALL DIRECTORS PRESENT AT A MEETING OF THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY (1) DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY, (2) APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND (3) RECOMMENDED THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. As a condition to and an inducement for Mentor Graphics and Purchaser entering into the Merger Agreement, certain stockholders of the Company (each a "Significant Stockholder"), consisting of the Company's directors, executive officers and certain of their respective affiliates, have entered into Tender and Stockholder Support Agreements with Mentor Graphics pursuant to which the Significant Stockholders have (i) agreed to tender and sell approximately 39% of the issued and outstanding Shares (approximately 32% on a fully diluted basis) to Purchaser pursuant to the Offer, (ii) agreed not to withdraw any Shares tendered in the Offer and (iii) granted to Mentor Graphics and certain officers of Mentor Graphics an irrevocable proxy to vote such Shares in favor of the transactions contemplated by the Merger Agreement. In addition, certain of the Significant Stockholders have agreed to vote their Shares in favor of the Merger and Merger Agreement and against any acquisition proposal other than the Merger. For purposes of the Offer, Purchaser shall be deemed to have accepted for payment tendered Shares when, as and if Purchaser gives oral or written notice of its acceptance to Wilmington Trust Company, N.A. (the "Depositary"). Purchaser will pay for Shares accepted for payment pursuant to the Offer by depositing the purchase price with the Depositary. The Depositary will act as agent for all tendering stockholders for the purpose of receiving payments from Purchaser and transmitting such payments to tendering stockholders whose Shares have been accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE FOR SHARES PURSUANT TO THE OFFER, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (1) certificates for such Shares or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility, (2) a properly completed and duly executed Letter of Transmittal and (3) any other required documents. Accordingly, payment may be made to tendering stockholders at different times if delivery of the Shares and other required documents occurs at different times. Subject to the terms of the Merger Agreement and applicable law, if, at any Expiration Date, any of the conditions to the Offer are not satisfied or waived by Purchaser, Purchaser may, but shall not be required to, extend the Offer. In addition, if the Offer has not been consummated at the Expiration Date due to the failure to satisfy the condition to the Offer relating to the expiration of the waiting period under any applicable antitrust statutes or regulations, Purchaser will, at the request of the Company, extend the Expiration Date for one or more periods (not in excess of ten business days each) but in no event later than December 23, 2002. Any extension will be followed as promptly as practicable by public announcement to be made no later than 9:00 a.m. New York City time, on the next business day after the previously schedule Expiration Date. Subject to the terms of the Offer and the Merger Agreement and the satisfaction or waiver of all the conditions to the Offer as of any Expiration Date, Purchaser will accept for payment and pay for all Shares validly tendered and not validly withdrawn pursuant to the Offer as soon as practicable after such Expiration Date. Tendering stockholders who are record owners of their Shares and tender directly to the Depositary will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by Purchaser pursuant to the Offer. Stockholders who hold their Shares through a broker or bank should consult such institution as to whether it charges any service fees. Purchaser will pay all charges and expenses of the Depositary and MacKenzie Partners, Inc., which is acting as the information agent (the "Information Agent"), incurred in connection with the Offer. Purchaser does not currently intend to include a subsequent offering period in the Offer, although it reserves the right to do so in its sole discretion. Under Exchange Act Rule 14d-7, no withdrawal rights apply to Shares tendered during a subsequent offering period and no withdrawal rights apply during the subsequent offering period with respect to Shares tendered in the Offer and accepted for payment. Purchaser will pay the same consideration to stockholders tendering Shares in the Offer or in a subsequent offering period, if it includes one. Tendering stockholders may withdraw tenders of Shares made pursuant to the Offer at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable, except that they may be withdrawn after June 28, 2002 unless such Shares are accepted for payment as provided in the Offer to Purchase. If Purchaser extends the period of time during which the Offer is open, is delayed in accepting for payment or paying for Shares pursuant to the Offer for any reason, or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may, on Purchaser's behalf, retain all Shares tendered, and such Shares may not be withdrawn except as otherwise provided in the Offer to Purchase. To withdraw tendered Shares, a written or facsimile transmission notice of withdrawal with respect to the Shares must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase, and the notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of Shares, if different from that of the person who tendered such Shares. If the Shares to be withdrawn have been delivered to the Depositary, a signed notice of withdrawal with (except in the case of Shares tendered by an Eligible Institution) signatures guaranteed by an Eligible Institution must be submitted prior to the release of such Shares. In addition, such notice must specify, in the case of Shares tendered by delivery of certificates, the name of the registered holder (if different from that of the tendering stockholder) and the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn or, in the case of Shares tendered by book-entry transfer, the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered by again following one of the procedures described in Section 4 of the Offer to Purchase at any time prior to the Expiration Date. Purchaser will determine, in its discretion, all questions as to the form and validity (including time of receipt) of any notice of withdrawal, and its determination shall be final and binding. None of Mentor Graphics, Purchaser, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defect or irregularity in any notice of withdrawal or waiver of any such defect or irregularity or incur any liability for failure to give any such notification. The Company has provided Purchaser with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and other related materials are being mailed to record holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. The information required to be disclosed by Exchange Act Rule 14d-6(d)(1) is contained in the Offer to Purchase and is incorporated herein by reference. THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Questions and requests for assistance or for copies of the Offer to Purchase and the related Letter of Transmittal, and other Offer materials, may be directed to the Information Agent as set forth below, and copies will be furnished promptly at Purchaser's expense. No fees or commissions will be paid to brokers, dealers or other persons (other than the Information Agent) for soliciting tenders of Shares pursuant to the Offer. THE INFORMATION AGENT FOR THE OFFER IS: [Mackenzie Logo] 105 Madison Avenue New York, New York 10016 (212) 929-5500 (call collect) E-mail: proxy@mackenziepartners.com or Call Toll-Free (800) 322-2885 April 30, 2002 EX-99.(B)(1) 10 f81012tex99-b1.txt EXHIBIT 99.(B)(1) Exhibit (b)(1) BRIDGE LOAN AGREEMENT DATED AS OF APRIL 23, 2002 AMONG MENTOR GRAPHICS CORPORATION, BANK OF AMERICA, N.A., AS AGENT, AND THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO ARRANGED BY BANC OF AMERICA SECURITIES LLC TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS...........................................................................1 1.01 Certain Defined Terms.................................................................1 1.02 Other Interpretive Provisions........................................................18 1.03 Accounting Principles................................................................18 1.04 Designation of Unrestricted Subsidiaries.............................................19 ARTICLE II THE CREDITS..........................................................................19 2.01 Amounts and Terms of Commitments.....................................................19 2.02 Loan Accounts........................................................................20 2.03 Procedure for Borrowing..............................................................20 2.04 Conversion and Continuation Elections................................................21 2.05 Voluntary Termination or Reduction of Commitments....................................22 2.06 Prepayments..........................................................................22 2.07 Repayment............................................................................23 2.08 Interest.............................................................................23 2.09 Fees.................................................................................23 2.10 Computation of Fees and Interest.....................................................24 2.11 Payments by the Company..............................................................24 2.12 Payments by the Banks to the Agent...................................................25 2.13 Sharing of Payments, Etc.............................................................25 ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY...............................................26 3.01 Taxes................................................................................26 3.02 Illegality...........................................................................27 3.03 Increased Costs and Reduction of Return..............................................27 3.04 Funding Losses.......................................................................28 3.05 Inability to Determine Rates.........................................................29 3.06 Reserves on Offshore Rate Loans......................................................29 3.07 Certificates of Banks................................................................29 3.08 Delay................................................................................29 3.09 Substitution of Banks................................................................30
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PAGE ---- 3.10 Survival.............................................................................30 ARTICLE IV CONDITIONS PRECEDENT.................................................................30 4.01 Conditions to Effectiveness of Agreement.............................................30 4.02 Conditions to All Borrowings and to Conversion/Continuation of Loans.................31 4.03 Additional Conditions Precedent to Initial Loans.....................................32 ARTICLE V REPRESENTATIONS AND WARRANTIES.......................................................32 5.01 Corporate Existence and Power........................................................32 5.02 Corporate Authorization; No Contravention............................................33 5.03 Governmental Authorization...........................................................33 5.04 Binding Effect.......................................................................33 5.05 Litigation...........................................................................33 5.06 No Default...........................................................................34 5.07 ERISA Compliance.....................................................................34 5.08 Use of Proceeds; Margin Regulations..................................................35 5.09 Title to Properties..................................................................35 5.10 Taxes................................................................................35 5.11 Financial Condition..................................................................35 5.12 Environmental Matters................................................................35 5.13 Regulated Entities...................................................................36 5.14 No Burdensome Restrictions...........................................................36 5.15 Copyrights, Patents, Trademarks and Licenses, etc....................................36 5.16 Subsidiaries.........................................................................36 5.17 Insurance............................................................................36 5.18 Swap Obligations.....................................................................36 5.19 Full Disclosure......................................................................37 ARTICLE VI AFFIRMATIVE COVENANTS................................................................37 6.01 Financial Statements.................................................................37 6.02 Certificates; Other Information......................................................37
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PAGE ---- 6.03 Notices..............................................................................38 6.04 Preservation of Corporate Existence, Etc.............................................39 6.05 Maintenance of Property..............................................................40 6.06 Insurance............................................................................40 6.07 Payment of Obligations...............................................................40 6.08 Compliance with Laws.................................................................40 6.09 Compliance with ERISA................................................................40 6.10 Inspection of Property and Books and Records.........................................40 6.11 Environmental Laws...................................................................41 6.12 Use of Proceeds......................................................................41 6.13 IKOS Acquisition.....................................................................41 6.14 Innoveda Acquisition.................................................................41 ARTICLE VII NEGATIVE COVENANTS...................................................................41 7.01 Limitation on Liens..................................................................41 7.02 Disposition of Assets................................................................43 7.03 Consolidations and Mergers...........................................................45 7.04 Loans and Investments................................................................45 7.05 Limitation on Indebtedness...........................................................46 7.06 Transactions with Affiliates.........................................................47 7.07 Use of Proceeds......................................................................47 7.08 Contingent Obligations...............................................................48 7.09 Lease Obligations....................................................................48 7.10 Restricted Payments..................................................................49 7.11 ERISA................................................................................49 7.12 Change in Business...................................................................49 7.13 Accounting Changes...................................................................49 7.14 Financial Covenants..................................................................49 7.15 Amendments to Terms of Innoveda Acquisition..........................................51 ARTICLE VIII EVENTS OF DEFAULT....................................................................51
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PAGE ---- 8.01 Event of Default.....................................................................51 8.02 Remedies.............................................................................53 8.03 Rights Not Exclusive.................................................................53 ARTICLE IX THE AGENT............................................................................53 9.01 Appointment and Authorization of Agent...............................................53 9.02 Delegation of Duties.................................................................54 9.03 Liability of Agent...................................................................54 9.04 Reliance by Agent....................................................................54 9.05 Notice of Default....................................................................55 9.06 Credit Decision; Disclosure of Information by Agent..................................55 9.07 Indemnification of Agent.............................................................56 9.08 Agent in its Individual Capacity.....................................................56 9.09 Successor Agent......................................................................56 ARTICLE X MISCELLANEOUS........................................................................57 10.01 Amendments, Etc......................................................................57 10.02 Notices and Other Communications; Facsimile Copies...................................58 10.03 No Waiver; Cumulative Remedies.......................................................59 10.04 Attorney Costs, Expenses and Taxes...................................................59 10.05 Indemnification by the Company.......................................................59 10.06 Payments Set Aside...................................................................60 10.07 Successors and Assigns...............................................................60 10.08 Confidentiality......................................................................62 10.09 Set-off..............................................................................63 10.10 Automatic Debits of Fees.............................................................63 10.11 Interest Rate Limitation.............................................................63 10.12 Counterparts.........................................................................63 10.13 Integration..........................................................................64 10.14 Survival of Representations and Warranties...........................................64 10.15 Severability.........................................................................64
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PAGE ---- 10.16 Tax Forms............................................................................64 10.17 Governing Law........................................................................65 10.18 Waiver of Right to Trial by Jury.....................................................65
-v- TABLE OF CONTENTS (CONTINUED) SCHEDULES Schedule 2.01 Commitments and Pro Rata Shares Schedule 5.05 Litigation Schedule 5.07 ERISA Schedule 5.12 Environmental Matters Schedule 5.15 Intellectual Property Matters Schedule 5.16 Subsidiaries and Equity Investments Schedule 5.17 Insurance Matters Schedule 7.01 Permitted Liens Schedule 7.02 Permitted Asset Dispositions Schedule 7.04 Permitted Investments Schedule 7.05 Permitted Indebtedness Schedule 7.08 Contingent Obligations Schedule 10.02 Offshore and Domestic Lending Offices, Addresses for Notices EXHIBITS Exhibit A Form of Notice of Borrowing Exhibit B Form of Notice of Conversion/Continuation Exhibit C Form of Compliance Certificate Exhibit D-1 Form of Opinion of General Counsel of Company Exhibit D-2 Form of Opinion of Latham & Watkins Exhibit E Form of Assignment and Assumption Exhibit F Form of Promissory Note Exhibit G Form of Notice of Designation of Unrestricted Subsidiary vi BRIDGE LOAN AGREEMENT This BRIDGE LOAN AGREEMENT is entered into as of April 23, 2002, among Mentor Graphics Corporation, an Oregon corporation (the "Company"), the several financial institutions from time to time party to this Agreement (collectively, the "Banks"; individually, a "Bank"), and Bank of America, N.A., as administrative agent for the Banks. WHEREAS, the Banks have agreed to make available to the Company bridge loans upon the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: ARTICLE I DEFINITIONS 1.01 Certain Defined Terms. The following terms have the following meanings: "Acquisition" means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any line of business or division of a Person; (b) the acquisition of in excess of 50% of the capital stock, partnership interests, membership interests or equity of any Person, or otherwise causing any Person to become a Subsidiary; or (c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary) provided that the Company or the Subsidiary is the surviving entity. "Affiliate" means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by, or is under common Control with the Person specified. Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract, or otherwise. "Agent" means Bank of America in its capacity as administrative agent for the Banks hereunder, and any successor administrative agent arising under Section 9.09. "Agent-Related Persons" means the Agent (including any successor administrative agent arising under Section 9.09), together with its Affiliates (including, in the case of Bank of America, the Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Agent's Payment Office" means the address for payments set forth in Schedule 10.02 or such other address as the Agent may from time to time specify. "Agreement" means this Credit Agreement. "Applicable Margin" means (a) with respect to Offshore Rate Loans (i) 2.50% for the period from and including the Closing Date to but excluding August 1, 2002, (ii) 3.25% for the period from and including August 1, 2002 to but excluding September 15, 2002, and (iii) 4.25% thereafter; and (b) with respect to Base Rate Loans, (i) 1.25% for the period from and including the Closing Date to but excluding August 1, 2002, (ii) 2.00% for the period from and including August 1, 2002 to but excluding September 15, 2002, and (iii) 3.00% thereafter. "Arranger" means Banc of America Securities LLC. "ATI" means Accelerated Technology Inc. "ATI Acquisition" means the Acquisition of ATI by the Company or a Subsidiary. "Attorney Costs" means and includes all fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services and all disbursements of internal counsel. "Attributable Indebtedness" means, on any date, (a) in respect of any capital lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP; and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease. "Bank" has the meaning specified in the introductory clause hereto. "Bank of America" means Bank of America, N.A., a national banking association. "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.Section 101, et seq.). "Base Rate" means for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1%; and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its "prime rate." Such rate is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Loan" means a Loan that bears interest based on the Base Rate. "Borrowing" means a borrowing hereunder consisting of Loans of the same Type made to the Company on the same day by the Banks under Article II, and, other than in the case of Base Rate Loans, having the same Interest Period. 2 "Borrowing Date" means any date on which a Borrowing occurs under Section 2.03. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in New York City, San Francisco, California, or Portland, Oregon, are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market. "Capital Adequacy Regulation" means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank. "Cash Equivalents" means: (a) securities issued or fully guaranteed or insured by the United States Government or any agency thereof having maturities of not more than 12 months from the date of acquisition; (b) certificates of deposit, time deposits, Eurodollar time deposits, repurchase agreements, reverse repurchase agreements, or bankers' acceptances, having in each case a tenor of not more than 12 months, issued by (i) any U.S. commercial bank or any commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (but including, in any event, Singapore, Israel, India and Egypt), or a political subdivision of any such country, in each case having combined capital and surplus of not less than $100,000,000 and whose short-term securities are rated at least A-1 by Standard & Poor's Corporation ("S&P") or at least P-1 by Moody's Investor Service, Inc. ("Moody's"), or (ii) any Bank; (c) taxable and tax-exempt commercial paper of an issuer rated at least A-l by S&P or at least P-l by Moody's and in either case having a tenor of not more than 270 days; (d) medium term notes of an issuer rated at least AA by S&P or at least Aa2 by Moody's and having a remaining term of not more than 12 months after the date of acquisition by the Company or its Subsidiaries; (e) municipal notes and bonds which are rated at least SP-2 or AA by S&P or at least MIG-2 or Aa by Moody's with tenors of not more than 12 months; (f) investments in taxable or tax-exempt money market funds with assets greater than $500,000,000 and whose assets have average maturities less than or equal to 180 days and are rated at least A-l by S&P or at least P-l by Moody's; (g) money market preferred instruments of an issuer rated at least A-1 by S&P or at least P-1 by Moody's with tenors of not more than 12 months; or 3 (h) other similar investments, subject to the Majority Banks' prior written approval. "Change of Control" means, with respect to any Person, an event or series of events by which: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of such Person or its subsidiaries, and any Person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group shall be deemed to have "beneficial ownership" of all securities that such person or group has the right to acquire (such right, an "option right"), so long as exercisable within 60 days, directly or indirectly, of 35% or more of the equity securities of such Person entitled to vote for members of the board of directors or equivalent governing body of such Person; or (b) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of such Person cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body. "Closing Date" means the date on which all conditions precedent set forth in Section 4.01 are satisfied or waived by all Banks (or, in the case of subsection 4.01(e), waived by the Person entitled to receive such payment). "Code" means the Internal Revenue Code of 1986, and regulations promulgated thereunder. "Commitment", as to each Bank, has the meaning specified in Section 2.01. "Compliance Certificate" means a certificate substantially in the form of Exhibit C. "Consolidated EBITDA" means, for any period, for the Company and its Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Consolidated Net Income; (b) Consolidated Interest Charges; (c) the amount of taxes, based on or measured by income, used or included in the determination of such Consolidated Net Income; (d) the amount of depreciation and amortization expense deducted in determining such Consolidated Net Income; (e) restructuring charges taken in the third and fourth fiscal quarters of fiscal year 2001 and the first fiscal quarter of fiscal year 2002; and (f) any Acquisition-related expenses, restructuring charges and write-offs (relating to in-process 4 research and development, goodwill and other intangibles associated with the ATI Acquisition, the IKOS Acquisition or the Innoveda Acquisition) taken in the fiscal quarter in which consummation of the applicable Acquisition occurs or in the immediately following fiscal quarter. "Consolidated Funded Indebtedness" means, as of any date of determination, for the Company and its Subsidiaries on a consolidated basis, the sum of (a) the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments; (b) Attributable Indebtedness (other than that of ATI, IKOS and Innoveda) in respect of capital leases and Synthetic Lease Obligations; and (c) without duplication, all Guaranty Obligations with respect to Indebtedness of the types specified in subsections (a) and (b) above of Persons other than the Company or any Subsidiary, except with respect to automobile leasing programs for employees in Europe. "Consolidated Interest Charges" means, for any period, for the Company and its Subsidiaries on a consolidated basis, the sum of (a) all interest, premium payments, fees, charges and related expenses of the Company and its Subsidiaries in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP; and (b) the portion of rent expense of the Company and its Subsidiaries with respect to such period under capital leases that is treated as interest in accordance with GAAP. "Consolidated Net Income" means, for any period, for the Company and its Subsidiaries on a consolidated basis, the net income of the Company and its Subsidiaries. "Consolidated Tangible Net Worth" means, at any time of determination, in respect of the Company and its Subsidiaries, determined on a consolidated basis, total assets (exclusive of goodwill, trademarks, trade names, organization expense, treasury stock, unamortized debt discount and premium and other like intangibles) minus total liabilities (including accrued and deferred income taxes), at such time, all as determined in accordance with GAAP. "Contingent Obligation" means, as to any Person, any direct or indirect liability of that Person, whether or not contingent, with or without recourse, (a) with respect to any Indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligations") of another Person (the "primary obligor") including any obligation of that Person (i) to purchase, repurchase or otherwise acquire such primary obligations or any security therefor, (ii) to advance or provide funds for the payment or discharge of any such primary obligation or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (iv) otherwise to assure or hold harmless the holder of any such primary 5 obligation against loss in respect thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety Instrument issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or payments; (c) to purchase any materials, supplies or other property from, or to obtain the services of, another Person if the relevant contract or other related document or obligation requires that payment for such materials, supplies or other property, or for such services, shall be made regardless of whether delivery of such materials, supplies or other property is ever made or tendered, or such services are ever performed or tendered; or (d) in respect of any Swap Contract. The amount of any Contingent Obligation shall, in the case of Guaranty Obligations, be deemed equal to the stated or determinable amount of the primary obligation at the time of such determination in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof at the time of such determination, and in the case of other Contingent Obligations other than in respect of Swap Contracts, shall be equal to the maximum reasonably anticipated liability in respect thereof and, in the case of Contingent Obligations in respect of Swap Contracts, shall be equal to the Swap Termination Value at the time of such determination. "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound. "Conversion/Continuation Date" means any date on which, under Section 2.04, the Company (a) converts Loans of one Type to another Type; or (b) continues as Loans of the same Type, but with a new Interest Period, Loans having Interest Periods expiring on such date. "Default" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. "Dollars", "dollars" and "$" each mean lawful money of the United States. "Eligible Assignee" means (a) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the United States; (c) a Person that is primarily engaged in the business of commercial banking and that is (i) a Subsidiary of an Initial Bank or Eligible Assignee, (ii) a Subsidiary of a Person of which an Initial Bank or Eligible Assignee is a Subsidiary, or (iii) a Person of which an Initial Bank or Eligible Assignee is a Subsidiary; and (d) a Fund. 6 "Environmental Claims" means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, including for release or injury to the environment. "Environmental Laws" means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, safety and land use matters. "ERISA" means the Employee Retirement Income Security Act of 1974, and regulations promulgated thereunder. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). "ERISA Event" means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which could reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA in excess of $1,000,000, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate. "Event of Default" means any of the events or circumstances specified in Section 8.01. "Exchange Act" means the Securities Exchange Act of 1934, and regulations promulgated thereunder. "Existing Credit Agreement" means the Credit Agreement dated as of January 10, 2001 by and among the Company, Bank of America, as administrative agent, The Bank of Nova Scotia, as documentation agent, Fleet National Bank, N.A., as syndication agent, and the other lenders party thereto, as amended by the First Amendment to Credit Agreement dated as of January 24, 2002. "Federal Funds Rate" means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of 7 the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day; and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Bank of America on such day on such transactions as determined by the Agent. "Fee Letter" has the meaning specified in subsection 2.09(a). "Foreign Bank" has the meaning specified in subsection 10.16(a). "FRB" means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions. "Fund" means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. "Approved Fund" means any Fund that is administered or managed by (a) a Bank; (b) an Affiliate of a Bank; or (c) an entity or an Affiliate of an entity that administers or manages a Bank. "Further Taxes" means any and all present or future taxes, levies, assessments, imposts, duties, deductions, fees, withholdings or similar charges (including, without limitation, net income taxes and franchise taxes), and all liabilities with respect thereto, imposed by any jurisdiction on account of amounts payable or paid pursuant to Section 3.01. "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Guaranty Obligation" has the meaning specified in the definition of "Contingent Obligation." "Hazardous Materials" means all explosive radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated 8 biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "IKOS" means IKOS Systems, Inc., a Delaware corporation. "IKOS Acquisition" means the Acquisition of IKOS by the Company or a Subsidiary. "IKOS Acquisition Date" means the date that the Company or a Wholly-Owned Subsidiary shall have acquired more than 50% of the outstanding shares of the capital stock of IKOS. "Indebtedness" of any Person means, without duplication, (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business on ordinary terms); (c) all non-contingent reimbursement or payment obligations with respect to Surety Instruments; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); (f) all obligations with respect to capital leases; (g) all indebtedness referred to in clauses (a) through (f) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; and (h) all Guaranty Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (g) above; provided, however, that Indebtedness shall not include sales of Permitted Receivables sold pursuant to Permitted Receivables Purchase Facilities and indemnification, recourse or repurchase obligations thereunder. For all purposes of this Agreement, the Indebtedness of any Person shall include all recourse Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer. "Indemnified Liabilities" has the meaning specified in Section 10.05. "Indemnified Person" has the meaning specified in Section 10.05. "Independent Auditor" has the meaning specified in subsection 6.01(a). "Initial Bank" means a Bank party to this Agreement on the Closing Date. "Innoveda" means Innoveda, Inc., a Delaware corporation. "Innoveda Acquisition" means the Acquisition of Innoveda by the Company or a Subsidiary. 9 "Innoveda Acquisition Agreement" means the agreement between the Company and Innoveda pursuant to which the Innoveda Acquisition takes place. "Insolvency Proceeding" means, with respect to any Person, (a) any case, action or proceeding with respect to such Person before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors; or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code. "Interest Payment Date" means, as to any Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Loan and, as to any Base Rate Loan, the last Business Day of each calendar month. "Interest Period" means, as to any Offshore Rate Loan, the period commencing on the Borrowing Date of such Loan or on the Conversion/Continuation Date on which the Loan is converted into or continued as an Offshore Rate Loan, and ending on the date one month thereafter; provided that: (i) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of an Offshore Rate Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (ii) any Interest Period pertaining to an Offshore Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iii) no Interest Period for any Loan shall extend beyond October 31, 2002. "IRS" means the Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions under the Code. "Lending Office" means, as to any Bank, the office or offices of such Bank specified as its "Lending Office" or "Domestic Lending Office" or "Offshore Lending Office", as the case may be, set forth in Schedule 10.02, or such other office or offices as such Bank may from time to time notify the Company and the Agent. "Lien" means any security interest, mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or preferential arrangement of any kind or nature whatsoever in respect of any property (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease, any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien 10 relates as debtor, under the Uniform Commercial Code or any comparable law) and any contingent or other agreement to provide any of the foregoing, but not including the interest of a lessor under an operating lease or the interest of a purchaser of Permitted Receivables under any Permitted Receivables Purchase Facility. "Loan" means an extension of credit by a Bank to the Company under Article II, and may be a Base Rate Loan or an Offshore Rate Loan (each, a "Type" of Loan). "Loan Documents" means this Agreement, any Notes, the Fee Letter and all other documents delivered to the Agent or any Bank in connection herewith (other than the Existing Credit Agreement and any amendments thereto). "Majority Banks" means, as of any date of determination, at least two Banks then holding more than 50% of the then aggregate unpaid principal amount of the Loans, or, if no such principal amount is then outstanding, at least two Banks then holding more than 50% of the Commitments. "Margin Stock" means "margin stock" as such term is defined in Regulation T, U or X of the FRB. "Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole; (b) a material impairment of the ability of the Company to perform under any Loan Document and to avoid any Event of Default; or (c) a material impairment of the rights of or benefits available to the Banks or the Agent under any Loan Document. "Material Subsidiary" means any Subsidiary which, for any period, has revenues or assets equal to or greater than 5% of the consolidated revenues or assets of the Company and its Subsidiaries, taken as a whole, but in any event shall not include any Unrestricted Subsidiary. "Multiemployer Plan" means a "multiemployer plan", within the meaning of Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes, is making, or is obligated to make contributions or, during the preceding three calendar years, has made, or been obligated to make, contributions. "Net Issuance Proceeds" means, as to any issuance of debt or equity by any Person, cash proceeds and non-cash proceeds received or receivable by such Person in connection therewith, net of commissions, normal underwriting fees and discounts and reasonable out-of-pocket costs and expenses paid or incurred in connection therewith in favor of any Person not an Affiliate of such Person. "Net Sale Proceeds" means, with respect to any asset sale, cash payments (including any cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received from such asset sale, net of any bona fide direct costs incurred in connection with such asset sale, including (a) income taxes reasonably estimated to be actually payable within two years 11 of the date of such asset sale as a result of any gain recognized in connection therewith; and (b) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness that is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of such asset sale. "Note" means a promissory note executed by the Company in favor of a Bank pursuant to subsection 2.02(b), in substantially the form of Exhibit F. "Notice of Borrowing" means a notice in substantially the form of Exhibit A. "Notice of Conversion/Continuation" means a notice in substantially the form of Exhibit B. "Notice of Designation" has the meaning set forth in subsection 1.04(b). "Obligations" means all advances, debts, liabilities, obligations, covenants and duties arising under any Loan Document owing by the Company to any Bank, the Agent, or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and including interest that accrues after the commencement by or against the Company or any Affiliate thereof of any Insolvency Proceeding. "Offshore Rate" means, for any Interest Period, with respect to Offshore Rate Loans: (a) the rate per annum equal to the rate determined by the Agent to be the offered rate that appears on the page of the Telerate screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period; or (b) if the rate referenced in the preceding subsection (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by the Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period; or (c) if the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum determined by the Agent as the rate of interest at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Offshore Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America's London Branch to major banks in the London interbank offshore market at their request at approximately 4:00 p.m. (London time) two Business Days prior to the first day of such Interest Period. 12 "Offshore Rate Loan" means a Loan that bears interest based on the Offshore Rate. "Organization Documents" means, (a) for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation; and (b) for any Person not a corporation, the partnership agreement, operating agreement and/or such other documents which govern such Person. "Other Taxes" means any present or future stamp, court or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, this Agreement or any other Loan Documents. "Participant" has the meaning specified in subsection 10.07(d). "PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental Authority succeeding to any of its principal functions under ERISA. "Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA which the Company sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five (5) plan years. "Permitted Liens" has the meaning specified in Section 7.01. "Permitted Investments" means: (a) securities issued or fully guaranteed or insured by the United States Government or any agency thereof having maturities of not more than three years from the date of acquisition; (b) certificates of deposit, time deposits, Eurodollar time deposits, repurchase agreements, reverse repurchase agreements, or bankers' acceptances, having in each case a tenor of not more than three years, issued by any U.S. commercial bank or any commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (but including, in any event, Singapore, Israel, India and Egypt), or a political subdivision of any such country, in each case having combined capital and surplus of not less than $100,000,000 and whose short-term securities are rated at least A-2 by Standard & Poor's Corporation ("S&P") or at least P-2 by Moody's Investor Service, Inc. ("Moody's"); 13 (c) taxable and tax-exempt commercial paper of an issuer rated at least A-2 by S&P or at least P-2 by Moody's and in either case having a tenor of not more than 270 days; (d) medium term notes of an issuer rated at least AA by S&P or at least Aa2 by Moody's and having a remaining term of not more than three years after the date of acquisition by the Company or its Subsidiaries; (e) municipal notes and bonds which are rated at least SP-2 or AA by S&P or at least MIG-2 or Aa by Moody's with tenors of not more than three years; (f) investments in taxable or tax-exempt money market funds with assets greater than $500,000,000 and whose assets have average maturities less than or equal to 180 days and are rated at least A-2 by S&P or at least P-2 by Moody's; (g) money market preferred instruments of an issuer rated at least A-2 by S&P or at least P-2 by Moody's with tenors of not more than three years; or (h) other similar investments, subject to the Majority Banks' prior written approval. "Permitted Receivables" shall mean all obligations of any obligor (whether now existing or hereafter arising) under a contract for sale of goods or services by the Company or any of its Subsidiaries, including any obligation of such obligor (whether now existing or hereafter arising) to pay interest, finance charges or amounts with respect thereto, and, with respect to any of the foregoing receivables or obligations, (a) all of the interest of the Company or any of its Subsidiaries in the goods (including returned goods) the sale of which gave rise to such receivable or obligation after the passage of title thereto to any obligor; (b) all other Liens and property subject thereto from time to time purporting to secure payment of such receivables or obligations; and (c) all guarantees, insurance, letters of credit and other agreements or arrangements of whatever character from time to time supporting or securing payment of any such receivables or obligations. "Permitted Receivables Purchase Facility" shall mean any agreement of the Company or any of its Subsidiaries providing for sales, transfers or conveyances of Permitted Receivables purporting to be sales (and considered sales under GAAP) that do not provide, directly or indirectly, for recourse against the seller of such Permitted Receivables (or against any of such seller's Affiliates) by way of a guaranty or any other support arrangement, with respect to the amount of such Permitted Receivables (based on the financial condition or circumstances of the obligor thereunder), other than such limited recourse as is reasonable given market standards for transactions of a similar type, taking into account such factors as product performance and product acceptance. "Permitted Swap Obligations" means all obligations (contingent or otherwise) of the Company or any Subsidiary existing or arising under Swap Contracts, provided that each of the following criteria is satisfied: (a) such obligations are (or were) entered into 14 by such Person in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments or assets held by such Person, or changes in the value of securities issued by such Person in conjunction with a securities repurchase program not otherwise prohibited hereunder, and not for purposes of speculation or taking a "market view;" and (b) such Swap Contracts do not contain (i) any provision ("walk-away" provision) exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party, or (ii) any provision creating or permitting the declaration of an event of default, termination event or similar event upon the occurrence of an Event of Default hereunder (other than an Event of Default under subsection 8.01(a)). "Person" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority. "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which the Company sponsors or maintains or to which the Company makes, is making, or is obligated to make contributions and includes any Pension Plan. "Pro Rata Share" means, as to any Bank at any time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Bank's Commitment divided by the combined Commitments of all Banks (or, if all Commitments have been terminated, the aggregate principal amount of such Bank's Loans divided by the aggregate principal amount of the Loans then held by all Banks). "Register" has the meaning specified in subsection 10.07(c). "Replacement Bank" has the meaning specified in Section 3.09. "Reportable Event" means, any of the events set forth in Section 4043(c) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC. "Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject. "Responsible Officer" means the chief financial officer, the chief operating officer or the treasurer of the Company, or any other officer having substantially the same authority and responsibility; or, with respect to compliance with financial covenants, any of the above officers or the chief accounting officer of the Company, or any other officer having substantially the same authority and responsibility. "SEC" means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions. 15 "Subordinated Indebtedness" means Indebtedness incurred from time to time and subordinated in right of payment to the Obligations hereunder. "Subsidiary" of a Person means any corporation, association, partnership, limited liability company, joint venture or other business entity of which more than 50% of the voting stock, membership interests or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof, but in any event shall not include any Unrestricted Subsidiary other than for purposes of Sections 6.01, 7.07 and 7.14(b). Unless the context otherwise clearly requires, references herein to a "Subsidiary" or to "Subsidiaries" refer to a Subsidiary or Subsidiaries of the Company. "Surety Instruments" means all letters of credit (including standby and commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds and similar instruments. "Swap Contract" means any agreement, whether or not in writing, relating to any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond, note or bill option, interest rate option, forward foreign exchange transaction, cap, collar or floor transaction, currency swap, cross-currency rate swap, swaption, currency option or any other, similar transaction (including any option to enter into any of the foregoing) or any combination of the foregoing, and, unless the context otherwise clearly requires, any master agreement relating to or governing any or all of the foregoing. "Swap Termination Value" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined by the Company based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include any Bank). "Synthetic Lease Obligation" means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment). "Taxes" means any and all present or future taxes, levies, assessments, imposts, duties, deductions, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, respectively, (a) taxes imposed on or measured by its net income by the jurisdiction (or any political subdivision thereof) under the laws of which such Bank or the Agent, as the case may be, is 16 organized or maintains a lending office; (b) withholding taxes imposed on amounts payable to a Bank (or the Agent) herewith at the time the Bank (or the Agent) became a party to this Agreement (irrespective of compliance with Section 10.16); and (c) any taxes attributed to the failure or inability of a Bank (or the Agent) to comply with Section 10.16; provided, however, that if a Bank (or the Agent) shall have complied with Section 10.16 at the time it became a party to this Agreement, nothing in this Agreement shall relieve the Company of its obligation to pay any amounts pursuant to Section 3.01 in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, subsequent to the date such Bank (or the Agent) became a party to this Agreement, the Bank (or the Agent) is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing that the Bank (or the Agent) is entitled to an exemption from, or reduction of, withholding tax as described in Section 10.16. "Termination Date" means the earlier to occur of: (a) October 31, 2002; and (b) the date on which the Commitments terminate in accordance with the provisions of this Agreement. "Type" has the meaning specified in the definition of "Loan." "Unfunded Pension Liability" means the excess of a Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. "United States" and "U.S." each means the United States of America. "Unrestricted Subsidiary" shall mean any Subsidiary designated as such by the Company in accordance with Section 1.04. "Wholly-Owned Subsidiary" means any corporation in which (other than directors' qualifying shares required by law or other de minimis shares owned by third parties as required by law) 100% of the capital stock of each class having ordinary voting power, and 100% of the capital stock of every other class, in each case, at the time as of which any determination is being made, is owned, beneficially and of record, by the Company, or by one or more of the other Wholly-Owned Subsidiaries, or both. "Wilsonville Facility" means the Company's principal facility and headquarters located in Wilsonville, Oregon, and does not include any vacant land owned by the Company in Wilsonville, Oregon. 17 1.02 Other Interpretive Provisions. (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. (b) The words "hereof," "herein," "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced, whether in physical or electronic form. (ii) The term "including" is not limiting and means "including without limitation." (iii) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding," and the word "through" means "to and including." (c) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement and the Existing Credit Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. (d) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (e) This Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. Unless otherwise expressly provided, any reference to any action of the Agent or the Banks by way of consent, approval or waiver shall be deemed modified by the phrase "in its/their sole discretion." (f) This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Agent, the Company and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Banks or the Agent merely because of the Agent's or Banks' involvement in their preparation. 1.03 Accounting Principles. (a) Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. 18 (b) References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Company. (c) If the Company or the Majority Banks notify the Agent that the Company or the Majority Banks, as the case may be, desire to amend any covenant in Article VII or any definition relating thereto to eliminate the effect of any change in GAAP occurring after the Closing Date on the operation of any such covenant, then the Company's compliance with such covenant shall be determined in accordance with GAAP as in effect immediately prior to such change in GAAP until either such notice is withdrawn or such covenant or related definition is amended in a manner reasonably satisfactory to the Company and the Majority Banks. 1.04 Designation of Unrestricted Subsidiaries. (a) The Company, at its option, may from time to time designate any Subsidiary as an "Unrestricted Subsidiary" for purposes hereof in accordance with the following: (i) any Subsidiary that is not a Material Subsidiary may be designated by the Company as an Unrestricted Subsidiary in its sole discretion, (ii) any Material Subsidiary may be designated by the Company as an Unrestricted Subsidiary only with the prior written consent of the Majority Banks; provided, however, no Subsidiary may be designated as an Unrestricted Subsidiary if (A) immediately after giving effect to any such designation, the aggregate revenues or aggregate assets of all Unrestricted Subsidiaries shall exceed 15% of the aggregate revenues or aggregate assets of the Company, its Subsidiaries and its Unrestricted Subsidiaries, taken as a whole or (B) any Default or Event of Default then exists or would result from any such designation. (b) Whenever the Company desires to designate a Subsidiary as an Unrestricted Subsidiary, the Company shall provide to the Agent a Notice of Designation of Unrestricted Subsidiary (a "Notice of Designation") in substantially the form of Exhibit G signed by a Responsible Officer. Subject to the preceding subsection (a), any designation by the Company of an Unrestricted Subsidiary shall become effective (i) in the case of any Subsidiary that is not a Material Subsidiary, three Business Days after the Agent's receipt of a completed Notice of Designation in respect of such Subsidiary, and (ii) in the case of any Material Subsidiary, upon the written consent of the Majority Banks. In the case of the preceding clause (ii), the Majority Banks shall use good-faith efforts to consent to or deny the Company's request to designate a Material Subsidiary as an Unrestricted Subsidiary within 30 days of the Agent's receipt of a completed Notice of Designation in respect of such Material Subsidiary. ARTICLE II THE CREDITS 2.01 Amounts and Terms of Commitments. Each Bank severally agrees, on the terms and conditions set forth herein, to make loans to the Company from time to time on any Business Day during the period from the Closing Date to the Termination Date in an aggregate amount of $125,000,000, each such Bank committing to lend the amount set forth opposite the name of such Bank on Schedule 2.01 (such amount as the same may be reduced under Section 2.05 or as a result of one or more assignments under Section 10.07 (but not as a result of the making of any Loans), the Bank's "Commitment"); provided, however, that, after giving effect to any 19 Borrowing, the aggregate principal amount of all outstanding Loans shall not at any time exceed the combined Commitments. 2.02 Loan Accounts. (a) The Loans made by each Bank shall be evidenced by one or more loan accounts or records maintained by such Bank in the ordinary course of business. The loan accounts or records maintained by the Agent and each Bank shall be conclusive absent manifest error of the amount of the Loans made by the Banks to the Company and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Company hereunder to pay any amount owing with respect to the Loans. (b) Upon the request of any Bank made through the Agent, the Loans made by such Bank may be evidenced by one or more Notes, instead of or in addition to loan accounts. Each such Bank shall endorse on the schedules annexed to its Note(s) the date, amount and maturity of each Loan made by it and the amount of each payment of principal made by the Company with respect thereto. Each such Bank is irrevocably authorized by the Company to endorse its Note(s) and each Bank's record shall be conclusive absent manifest error; provided, however, that the failure of a Bank to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of the Company hereunder or under any such Note to such Bank. 2.03 Procedure for Borrowing. (a) Each Borrowing shall be made upon the Company's irrevocable written notice delivered to the Agent in the form of a Notice of Borrowing (which notice must be received by the Agent prior to 9:00 a.m. (San Francisco time)) (i) three Business Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans, or (ii) on the requested Borrowing Date, in the case of Base Rate Loans, specifying: (A) the amount of the Borrowing, which shall be in an aggregate minimum amount of $10,000,000, in the case of Offshore Rate Loans, or $5,000,000, in the case of Base Rate Loans, or any multiple of $1,000,000 in excess thereof; (B) the requested Borrowing Date, which shall be a Business Day; and (C) the Type of Loans comprising the Borrowing. (b) The Agent will promptly notify each Bank of its receipt of any Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that Borrowing. (c) Each Bank will make the amount of its Pro Rata Share of each Borrowing available to the Agent for the account of the Company at the Agent's Payment Office by 11:00 a.m. (San Francisco time) on the Borrowing Date requested by the Company in funds immediately available to the Agent. The proceeds of all such Loans will then be made available 20 to the Company by the Agent at such office by crediting the account of the Company on the books of the Agent with the aggregate of the amounts made available to the Agent by the Banks and in like funds as received by the Agent. (d) After giving effect to any Borrowing, unless the Agent shall otherwise consent, there may not be more than six Interest Periods in effect. 2.04 Conversion and Continuation Elections. (a) The Company may, upon irrevocable written notice to the Agent in accordance with subsection 2.04(b): (i) elect, as of any Business Day, in the case of Base Rate Loans, or as of the last day of the applicable Interest Period, in the case of any other Type of Loans, to convert any such Loans (or any part thereof in an amount not less than $10,000,000, or that is in an integral multiple of $1,000,000 in excess thereof) into Loans of any other Type; or (ii) elect, as of the last day of the applicable Interest Period, to continue any Loans having Interest Periods expiring on such day (or any part thereof in an amount not less than $10,000,000, or that is in an integral multiple of $1,000,000 in excess thereof); provided, that if at any time the aggregate amount of Offshore Rate Loans in respect of any Borrowing is reduced, by payment, prepayment, or conversion of part thereof to be less than $10,000,000, such Offshore Rate Loans shall automatically convert into Base Rate Loans, and on and after such date the right of the Company to continue such Loans as, and convert such Loans into, Offshore Rate Loans shall terminate. (b) The Company shall deliver a Notice of Conversion/Continuation to be received by the Agent not later than 9:00 a.m. (San Francisco time) (i) three Business Days in advance of the Conversion/Continuation Date, if the Loans are to be converted into or continued as Offshore Rate Loans, and (ii) on the Conversion/Continuation Date, if the Loans are to be converted into Base Rate Loans, specifying: (A) the proposed Conversion/Continuation Date; (B) the aggregate amount of Loans to be converted or continued; and (C) the Type of Loans resulting from the proposed conversion or continuation. (c) If upon the expiration of any Interest Period applicable to Offshore Rate Loans, (i) the Company has failed to deliver a Notice of Conversion/Continuation or (ii) any Default or Event of Default then exists, the Company shall be deemed to have elected to convert such Offshore Rate Loans into Base Rate Loans effective as of the expiration date of such Interest Period. 21 (d) The Agent will promptly notify each Bank of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by the Company, the Agent will promptly notify each Bank of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Loans with respect to which the notice was given held by each Bank. (e) Unless the Majority Banks otherwise consent, during the existence of a Default or Event of Default, the Company may not elect to have a Loan converted into or continued as an Offshore Rate Loan. (f) After giving effect to any conversion or continuation of Loans, unless the Agent shall otherwise consent, there may not be more than six Interest Periods in effect. 2.05 Voluntary Termination or Reduction of Commitments. The Company may, upon not less than five Business Days' prior notice to the Agent, terminate the Commitments or permanently reduce the Commitments in whole (but not in part). Once reduced in accordance with this Section, the Commitments may not be increased. Any reduction of the Commitments shall be applied to each Bank according to its Pro Rata Share. All accrued commitment fees to, but not including the effective date of any reduction or termination of Commitments, shall be paid on the effective date of such reduction or termination. 2.06 Prepayments. (a) Optional Prepayments. Subject to Section 3.04, the Company may, at any time, (i) in the case of Offshore Rate Loans, upon not less than three Business Days' irrevocable notice to the Agent, and (ii) in the case of Base Rate Loans, upon irrevocable notice to the Agent given no later than 9:00 a.m. (San Francisco time) on the date of prepayment, ratably prepay the Loans in whole (but not in part). Such notice of prepayment shall specify the date and amount of such prepayment. The Agent will promptly notify each Bank of its receipt of any such notice, and of such Bank's Pro Rata Share of such prepayment. If such notice is given by the Company, the Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 3.04. (b) Mandatory Prepayments and Mandatory Reductions of Commitments. The Loans shall be prepaid and/or the Commitments shall be permanently reduced: (i) on the date of receipt by or on behalf of the Company of the cash Net Issuance Proceeds of any new equity issued by the Company, in an aggregate amount equal to such cash Net Issuance Proceeds, excluding any equity issued pursuant to employee stock purchase or option programs or paid as dividends; (ii) on the date of receipt by or on behalf of the Company or any of its Subsidiaries of the cash Net Issuance Proceeds of Indebtedness (other than Indebtedness permitted under subsections 7.05(a) through (f)), in an aggregate amount equal to such Net Issuance Proceeds, excluding (A) factored receivables in an aggregate amount not to exceed $40,000,000 (net of any repurchase obligations) and (B) drawings under other Indebtedness in an aggregate amount not to exceed $10,000,000; and 22 (iii) on the date of receipt by or on behalf of the Company or any of its Subsidiaries of the Net Sale Proceeds of the sale of the Wilsonville Facility, in an aggregate amount equal to such Net Sale Proceeds. (c) Amounts prepaid on the Loans pursuant to subsections (a) and (b) above may not be reborrowed. 2.07 Repayment. The Company shall repay to the Banks on the Termination Date the aggregate principal amount of Loans outstanding on such date. 2.08 Interest. (a) Each Loan shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at a rate per annum equal to the Offshore Rate or the Base Rate, as the case may be (and subject to the Company's right to convert to other Types of Loans under Section 2.04), plus the Applicable Margin. (b) Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Offshore Rate Loans under Section 2.06 for the portion of the Offshore Rate Loans so prepaid and upon payment (including prepayment) in full thereof and, during the existence of any Event of Default, interest shall be paid on demand of the Agent at the request or with the consent of the Majority Banks. (c) Notwithstanding subsection (a) of this Section, if any amount of principal of or interest on any Loan, or any other amount payable hereunder or under any other Loan Document is not paid in full when due (whether at stated maturity, by acceleration, demand or otherwise), the Company agrees to pay interest on such unpaid principal or other amount, from the date such amount becomes due until the date such amount is paid in full, and after as well as before any entry of judgment thereon to the extent permitted by law, payable on demand, at a fluctuating rate per annum equal to the Base Rate plus the Applicable Margin, plus 2%. (d) Anything herein to the contrary notwithstanding, the obligations of the Company to any Bank hereunder shall be subject to the limitation that payments of interest shall not be required for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by such Bank would be contrary to the provisions of any law applicable to such Bank limiting the highest rate of interest that may be lawfully contracted for, charged or received by such Bank, and in such event the Company shall pay such Bank interest at the highest rate permitted by applicable law. 2.09 Fees. (a) Agency and Other Fees. The Company shall (i) pay an agency fee to the Agent for the Agent's own account, and (ii) pay certain other fees to the Agent, in each case in the amounts and at the times specified in the Fee Letter. Such fees shall be fully earned when paid and shall be nonrefundable for any reason whatsoever. (b) Commitment Fees. The Company shall pay to the Agent for the account of each Bank a commitment fee of 0.50% on the actual daily unused portion of such Bank's 23 Commitment, computed on a quarterly basis in arrears on the last Business Day of each calendar quarter. Such commitment fee shall accrue from the earlier of (i) the initial Borrowing Date, and (ii) July 1, 2002, to but excluding the Termination Date and shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter during such period, with the final payment to be made on the Termination Date. The commitment fees provided in this subsection shall accrue at all times after the above-mentioned commencement date, including at any time during which one or more conditions in Article IV are not met. 2.10 Computation of Fees and Interest. (a) All computations of interest for Base Rate Loans when the Base Rate is determined by Bank of America's prime rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365-day year). Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid; provided that any Loan that is repaid on the same day on which it is made shall bear interest for one day. (b) Each determination of an interest rate by the Agent shall be conclusive and binding on the Company and the Banks in the absence of manifest error. The Agent will, at the request of the Company or any Bank, deliver to the Company or the Bank, as the case may be, a statement showing the quotations used by the Agent in determining any interest rate and the resulting interest rate. 2.11 Payments by the Company. (a) All payments to be made by the Company shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by the Company shall be made to the Agent for the account of the Banks at the Agent's Payment Office, and shall be made in dollars and in immediately available funds, no later than 11:00 a.m. (San Francisco time) on the date specified herein. The Agent will promptly distribute to each Bank its Pro Rata Share (or other applicable share as expressly provided herein) of such payment in like funds as received. Any payment received by the Agent later than 11:00 a.m. (San Francisco time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue. (b) Subject to the provisions set forth in the definition of "Interest Period" herein, whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. (c) Unless the Agent receives notice from the Company prior to the date on which any payment is due to the Banks that the Company will not make such payment in full as and when required, the Agent may assume that the Company has made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Bank on such due date an amount 24 equal to the amount then due such Bank. If and to the extent the Company has not made such payment in full to the Agent, each Bank shall repay to the Agent on demand such amount distributed to such Bank, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Bank until the date repaid. 2.12 Payments by the Banks to the Agent. (a) Unless the Agent receives notice from a Bank on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, at least one Business Day prior to the date of such Borrowing, that such Bank will not make available as and when required hereunder to the Agent for the account of the Company the amount of that Bank's Pro Rata Share of the Borrowing, the Agent may assume that each Bank has made such amount available to the Agent in immediately available funds on the Borrowing Date and the Agent may (but shall not be so required), in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent any Bank shall not have made its full amount available to the Agent in immediately available funds and the Agent in such circumstances has made available to the Company such amount, that Bank shall on the Business Day following such Borrowing Date make such amount available to the Agent, together with interest at the Federal Funds Rate for each day during such period. A notice of the Agent submitted to any Bank with respect to amounts owing under this subsection (a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Bank's Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to the Agent on the Business Day following the Borrowing Date, the Agent will notify the Company of such failure to fund and, upon demand by the Agent, the Company shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing. Such payment by the Company to the Agent shall be without prejudice to the Company's rights, if any, against the Bank which failed to fund. (b) The failure of any Bank to make any Loan on any Borrowing Date shall not relieve any other Bank of any obligation hereunder to make a Loan on such Borrowing Date, but no Bank shall be responsible for the failure of any other Bank to make the Loan to be made by such other Bank on any Borrowing Date. 2.13 Sharing of Payments, Etc. If, other than as expressly provided elsewhere herein, any Bank shall obtain on account of the Loans made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its ratable share (or other share contemplated hereunder), such Bank shall immediately (a) notify the Agent of such fact, and (b) purchase from the other Banks such participations in the Loans made by them as shall be necessary to cause such purchasing Bank to share the excess payment pro rata with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Bank, such purchase shall to that extent be rescinded and each other Bank shall repay to the purchasing Bank the purchase price paid therefor, together with an amount equal to such paying Bank's ratable share (according to the proportion of (i) the amount of such paying Bank's required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in 25 respect of the total amount so recovered. The Company agrees that any Bank so purchasing a participation from another Bank may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 10.09) with respect to such participation as fully as if such Bank were the direct creditor of the Company in the amount of such participation. The Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section and will in each case notify the Banks following any such purchases or repayments. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 Taxes. (a) Any and all payments by the Company to each Bank or the Agent under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for, any Taxes. In addition, the Company shall pay all Other Taxes. (b) If the Company shall be required by law to deduct or withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum payable hereunder to any Bank or the Agent, then: (i) the sum payable shall be increased as necessary so that, after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section), such Bank or the Agent, as the case may be, receives and retains an amount equal to the sum it would have received and retained had no such deductions or withholdings been made; (ii) the Company shall make such deductions and withholdings; (iii) the Company shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and (iv) the Company shall also pay to each Bank or the Agent for the account of such Bank, at the time interest is paid, Further Taxes in the amount that the respective Bank specifies as necessary to preserve the after-tax yield the Bank would have received if such Taxes, Other Taxes or Further Taxes had not been imposed. (c) The Company agrees to indemnify and hold harmless each Bank and the Agent for the full amount of (i) Taxes, (ii) Other Taxes, and (iii) Further Taxes in the amount that the respective Bank specifies as necessary to preserve the after-tax yield the Bank would have received if such Taxes, Other Taxes or Further Taxes had not been imposed, and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes, Other Taxes or Further Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 30 days after the date the Bank or the Agent makes written demand therefor. 26 (d) Within 30 days after the date of any payment by the Company of Taxes, Other Taxes or Further Taxes, the Company shall furnish to each Bank or the Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to such Bank or the Agent. (e) If the Company is required to pay any amount to any Bank or the Agent pursuant to subsection (b) or (c) of this Section, then such Bank shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office so as to eliminate any such additional payment by the Company which may thereafter accrue, if such change in the sole judgment of such Bank is not otherwise disadvantageous to such Bank. 3.02 Illegality. (a) If any Bank determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Bank or its applicable Lending Office to make Offshore Rate Loans, then, on notice thereof by the Bank to the Company through the Agent, any obligation of that Bank to make Offshore Rate Loans shall be suspended until the Bank notifies the Agent and the Company that the circumstances giving rise to such determination no longer exist. (b) If a Bank determines that it is unlawful to maintain any Offshore Rate Loan, the Company shall, upon its receipt of notice of such fact and demand from such Bank (with a copy to the Agent), prepay in full such Offshore Rate Loans of that Bank then outstanding, together with interest accrued thereon and amounts required under Section 3.04, either on the last day of the Interest Period thereof, if the Bank may lawfully continue to maintain such Offshore Rate Loans to such day, or immediately, if the Bank may not lawfully continue to maintain such Offshore Rate Loan. If the Company is required to so prepay any Offshore Rate Loan, then concurrently with such prepayment, the Company shall borrow from the affected Bank, in the amount of such repayment, a Base Rate Loan. (c) If the obligation of any Bank to make or maintain Offshore Rate Loans has been so terminated or suspended, the Company may elect, by giving notice to the Bank through the Agent that all Loans which would otherwise be made by the Bank as Offshore Rate Loans shall be instead Base Rate Loans. (d) Before giving any notice to the Agent under this Section, the affected Bank shall designate a different Lending Office with respect to its Offshore Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Bank, be illegal or otherwise disadvantageous to the Bank. 3.03 Increased Costs and Reduction of Return. (a) If any Bank determines that, due to either (i) the introduction of or any change (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the Offshore Rate) in or in the interpretation of any law or regulation, or (ii) the compliance by that Bank with any guideline or request from any central bank or other 27 Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Bank of agreeing to make or making, funding or maintaining any Offshore Rate Loans, then the Company shall be liable for, and shall from time to time, upon demand (with a copy of such demand to be sent to the Agent), pay to the Agent for the account of such Bank, additional amounts as are sufficient to compensate such Bank for such increased costs; provided, however, that (x) this subsection 3.03(a) shall not apply to matters covered by Section 3.01 and (y) any increase, subsequent to the date a Bank (or the Agent) became a party to this Agreement, in the rate or basis of computation of any tax imposed on or measured by its net income by the jurisdiction (or any political subdivisions thereof) under the laws of which such Bank or the Agent, as the case may be, is organized or maintains a lending office shall not result in increased costs for purposes of this subsection 3.03(a). (b) If any Bank shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by the Bank (or its Lending Office) or any corporation controlling the Bank with any Capital Adequacy Regulation, affects or would affect the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank and (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy and such Bank's desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitment, loans, credits or obligations under this Agreement, then, upon demand of such Bank to the Company through the Agent, the Company shall pay to the Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate the Bank for such increase. 3.04 Funding Losses. The Company shall reimburse each Bank and hold each Bank harmless from any loss or expense which the Bank may sustain or incur as a consequence of: (a) the failure of the Company to make on a timely basis any payment of principal of any Offshore Rate Loan; (b) the failure of the Company to borrow, continue or convert a Loan after the Company has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/Continuation; (c) the failure of the Company to make any prepayment in accordance with any notice delivered under Section 2.06; (d) the prepayment (including pursuant to Section 2.06) or other payment (including after acceleration thereof) of an Offshore Rate Loan on a day that is not the last day of the relevant Interest Period; or (e) the automatic conversion under the proviso of subsection 2.04(a) of any Offshore Rate Loan to a Base Rate Loan on a day that is not the last day of the relevant Interest Period; 28 including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its Offshore Rate Loans or from fees payable to terminate the deposits from which such funds were obtained. For purposes of calculating amounts payable by the Company to the Banks under this Section and under subsection 3.03(a), each Offshore Rate Loan made by a Bank (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the LIBOR used in determining the Offshore Rate for such Offshore Rate Loan by a matching deposit or other borrowing in the interbank Eurodollar market for a comparable amount and for a comparable period, whether or not such Offshore Rate Loan is in fact so funded. 3.05 Inability to Determine Rates. If the Agent determines that for any reason adequate and reasonable means do not exist for determining the Offshore Rate for any requested Interest Period with respect to a proposed Offshore Rate Loan, or that the Offshore Rate applicable pursuant to subsection 2.08(a) for any requested Interest Period with respect to a proposed Offshore Rate Loan does not adequately and fairly reflect the cost to the Banks of funding such Loan, the Agent will promptly so notify the Company and each Bank. Thereafter, the obligation of the Banks to make or maintain Offshore Rate Loans, as the case may be, hereunder shall be suspended until the Agent revokes such notice in writing. Upon receipt of such notice, the Company may revoke any Notice of Borrowing or Notice of Conversion/Continuation then submitted by it. If the Company does not revoke such Notice, the Banks shall make, convert or continue the Loans, as proposed by the Company, in the amount specified in the applicable notice submitted by the Company, but such Loans shall be made, converted or continued as Base Rate Loans instead of Offshore Rate Loans. 3.06 Reserves on Offshore Rate Loans. The Company shall pay to each Bank, as long as such Bank shall be required under regulations of the FRB to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as "Eurocurrency liabilities"), additional costs on the unpaid principal amount of each Offshore Rate Loan equal to the actual costs of such reserves allocated to such Loan by the Bank (as determined by the Bank in good faith, which determination shall be conclusive absent manifest error), payable on each date on which interest is payable on such Loan, provided the Company shall have received at least 15 days' prior written notice (with a copy to the Agent) of such additional interest from the Bank. If a Bank fails to give notice 15 days prior to the relevant Interest Payment Date, such additional interest shall be payable 15 days from receipt of such notice. 3.07 Certificates of Banks. Any Bank claiming reimbursement or compensation under this Article III shall deliver to the Company (with a copy to the Agent) a certificate setting forth in reasonable detail the amount payable to the Bank hereunder and such certificate shall be conclusive and binding on the Company in the absence of manifest error. 3.08 Delay. Failure or delay on the part of any Bank to demand compensation under this Article III shall not constitute a waiver of such Bank's right to demand such compensation; provided, that no Bank shall be entitled to compensation under this Article III for any increased costs or reductions incurred or suffered with respect to any date unless such Bank shall have notified the Company not more than 90 days after the later of (a) such date and (b) the date on which such Bank shall have become aware of such costs or reductions. 29 3.09 Substitution of Banks. Upon the receipt by the Company from any Bank (an "Affected Bank") of a claim for compensation under Section 3.03 or if the Company is required to pay any amount to any Affected Bank or the Agent for the account of an Affected Bank pursuant to subsection 3.01(b) or 3.01(c) and such Affected Bank has not changed the jurisdiction of its Lending Office so as to eliminate such additional payment by the Company within 30 days after a request by the Company to effect such change, the Company may: (i) request the Affected Bank to use its best efforts to obtain a replacement bank or financial institution satisfactory to the Company (which shall, in any event, be an Eligible Assignee) to acquire and assume all or a ratable part of all of such Affected Bank's Loans and Commitment (a "Replacement Bank"), (ii) request one or more of the other Banks to acquire and assume all or part of such Affected Bank's Loans and Commitment, or (iii) designate a Replacement Bank. Any such designation of a Replacement Bank under clause (i) or (iii) or of an existing Bank under clause (ii) shall be subject to the prior written consent of the Agent (which consent shall not be unreasonably withheld or delayed), and shall be effected in accordance with all requirements for an assignment set forth in Section 10.07 hereof. Without limiting the generality of the foregoing, the Company agrees to pay to each Affected Bank any amounts arising under Section 3.04 by virtue of such Affected Bank's replacement on a date other than the last day of an Interest Period, with respect to any Offshore Rate Loans then outstanding. 3.10 Survival. The agreements and obligations of the Company in this Article III shall survive the payment of all other Obligations. ARTICLE IV CONDITIONS PRECEDENT 4.01 Conditions to Effectiveness of Agreement. This Agreement shall not become effective until the Agent shall have received, on or before the Closing Date, all of the following, in form and substance reasonably satisfactory to the Agent and each Bank, and in sufficient copies for each Bank: (a) Credit Agreement and Notes. This Agreement and the Notes, if any, executed by each party thereto; (b) Resolutions; Incumbency. (i) Copies of the resolutions of the board of directors of the Company authorizing the transactions contemplated hereby, certified as of the Closing Date by the Secretary or an Assistant Secretary of the Company; and (ii) A certificate of the Secretary or Assistant Secretary of the Company certifying the names and true signatures of the officers of the Company authorized to execute and deliver this Agreement, and all other Loan Documents to be delivered by it hereunder; (c) Organization Documents; Good Standing. Each of the following documents: 30 (i) the articles of incorporation and the bylaws of the Company as in effect on the Closing Date, certified by the Secretary or Assistant Secretary of the Company as of the Closing Date; and (ii) a status certificate for the Company from the Secretary of State of Oregon and a certificate of foreign qualification and good standing of the Company in California, in each case, as of a recent date, together with a bring-down certificate by facsimile, dated the Closing Date; (d) Legal Opinions. An opinion of Dean Freed, Vice President and General Counsel of the Company substantially in the form of Exhibit D-1 and of Latham & Watkins substantially in the form of Exhibit D-2, each addressed to the Agent and the Banks; (e) Payment of Fees. Evidence of payment by the Company of all accrued and unpaid fees, costs and expenses to the extent then due and payable on the Closing Date, together with Attorney Costs of the Agent to the extent invoiced prior to or on the Closing Date; including any such costs, fees and expenses arising under or referenced in Sections 2.09 and 10.04; (f) Certificate. A certificate signed by a Responsible Officer, dated as of the Closing Date, stating that: (i) the representations and warranties contained in Article V are true and correct on and as of such date, as though made on and as of such date; (ii) no Default or Event of Default exists or would result from the initial Borrowing; and (iii) there has occurred since December 31, 2001, no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect; (g) Amendment of Existing Credit Agreement. An amendment to the Existing Credit Agreement, executed by the Company and Majority Banks (as such terms are defined therein) reasonably satisfactory to the Banks and the Agent permitting this Agreement, the Innoveda Acquisition and the issuance by the Company of Subordinated Indebtedness; (h) Innoveda Acquisition. The Company shall have delivered to the Agent executed copies of the Innoveda Acquisition Agreement and all other material agreements and documents related to the Innoveda Acquisition and the terms of the Innoveda Acquisition shall be reasonably satisfactory in all material respects to the Agent, the Banks, and the Arranger; and (i) Other Documents. Such other approvals, opinions, documents or materials as the Agent or any Bank may reasonably request. 4.02 Conditions to All Borrowings and to Conversion/Continuation of Loans. The obligation of each Bank to make any Loan to be made by it (including its initial Loan) or to 31 continue or convert any Loan under Section 2.04 is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date or the Conversion/Continuation Date: (a) Notice of Borrowing or Conversion/Continuation. The Agent shall have received a Notice of Borrowing or a Notice of Conversion/Continuation, as applicable; (b) Continuation of Representations and Warranties. The representations and warranties in Article V shall be true and correct in all material respects on and as of such Borrowing Date or Conversion/Continuation Date with the same effect as if made on and as of such Borrowing Date or Conversion/Continuation Date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date); and (c) No Existing Default. No Default or Event of Default shall exist or shall result from such Borrowing or continuation or conversion. Each Notice of Borrowing and Notice of Conversion/Continuation submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of each such notice and as of each Borrowing Date or Conversion/Continuation Date, as applicable, that the conditions in this Section 4.02 are satisfied. 4.03 Additional Conditions Precedent to Initial Loans. Without limiting the operation of the preceding Sections 4.01 and 4.02, the obligation of each Bank to make its initial Loans hereunder is subject to the additional conditions precedent that (a) the Company shall have acquired and/or have tendered to it and/or have pledged to it under a binding shareholder agreement more than 50% of the issued and outstanding capital stock of Innoveda in accordance with the terms and conditions of the Innoveda Acquisition Agreement; (b) any material changes to the terms of the Innoveda Acquisition since the Closing Date shall be reasonably satisfactory to the Agent and Majority Banks; (c) all governmental and third-party approvals necessary in connection with the Innoveda Acquisition shall have been obtained and be in full force and effect and all applicable waiting periods shall have expired without notice of any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose material adverse conditions on the Innoveda Acquisition; and (d) the Company shall have delivered to the Agent executed copies of all amendments or supplements to the Innoveda Acquisition Agreement and all other material agreements and documents related to the Innoveda Acquisition not previously delivered to the Agent, including but not limited to any tender offer materials and other documents filed with the SEC. ARTICLE V REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Agent and each Bank that: 5.01 Corporate Existence and Power. The Company and each of its Material Subsidiaries: 32 (a) is an entity duly organized, validly existing and, if applicable in such jurisdiction, in good standing under the laws of the jurisdiction of its incorporation or other establishment; (b) has (i) the power and authority and (ii) all governmental licenses, authorizations, consents and approvals, in each case, to own its assets, carry on its business and to execute, deliver, and perform its obligations under the Loan Documents to which it is a party; (c) is duly qualified as a foreign corporation or other entity and is licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification or license; and (d) is in compliance with all Requirements of Law; except, in each case referred to in clause (b)(ii), clause (c) or clause (d), to the extent that the failure to do so is not reasonably expected to have a Material Adverse Effect. 5.02 Corporate Authorization; No Contravention. The execution, delivery and performance by the Company of this Agreement and each other Loan Document to which the Company is party, have been duly authorized by all necessary corporate action, and do not and will not: (a) contravene the terms of any of the Company's Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any Contractual Obligation to which the Company is a party or any order, injunction, writ or decree of any Governmental Authority to which the Company or its property is subject; or (c) violate any Requirement of Law; except, in each case referred to in the foregoing clauses (b) and (c), where the conflict, breach, contravention, creation or violation would not reasonably be expected to have a Material Adverse Effect. 5.03 Governmental Authorization. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Company of this Agreement or any other Loan Document. 5.04 Binding Effect. This Agreement and each other Loan Document to which the Company is a party constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 5.05 Litigation. Except as specifically disclosed in Schedule 5.05, there are no actions, suits, proceedings, claims or disputes pending, or to the best knowledge of the Company, 33 threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against the Company, or its Subsidiaries or any of their respective properties which: (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby or thereby; or (b) would reasonably be expected to have a Material Adverse Effect. No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided. 5.06 No Default. No Default or Event of Default exists or would result from the incurring of any Obligations by the Company. As of the Closing Date, neither the Company nor any Subsidiary is in default under or with respect to any Contractual Obligation in any respect which, individually or together with all such defaults, could reasonably be expected to have a Material Adverse Effect, or that would, if such default had occurred after the Closing Date, create an Event of Default under subsection 8.01(e). 5.07 ERISA Compliance. Except as specifically disclosed in Schedule 5.07: (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other applicable federal or state law, except to the extent that the failure to comply is not reasonably expected to have a Material Adverse Effect. Each Plan which is intended to qualify under Section 401(a) of the Code has received or has applied for when due and not been denied a favorable determination letter from the IRS and to the best knowledge of the Company, nothing has occurred which would cause the loss of such qualification. The Company and each ERISA Affiliate has made or duly provided for all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan. (b) There are no pending or, to the best knowledge of Company, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. (c) (i) No ERISA Event has occurred or is reasonably expected to occur, (ii) no Pension Plan has any Unfunded Pension Liability, (iii) neither the Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA), (iv) neither the Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA 34 with respect to a Multiemployer Plan, and (v) neither the Company nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA. 5.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans are to be used solely for the purposes set forth in and permitted by Section 6.12 and Section 7.07. Neither the Company nor any Subsidiary is generally engaged in the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock. 5.09 Title to Properties. The Company and each Subsidiary have good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of their respective businesses, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. As of the Closing Date, the real and personal property of the Company and its Material Subsidiaries is subject to no Liens, other than Permitted Liens. 5.10 Taxes. The Company and its Subsidiaries have filed all Federal and other material tax returns and reports required to be filed, and have paid all Federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP. To the best knowledge of the Company, there is no proposed tax assessment against the Company or any Subsidiary that would, if made, have a Material Adverse Effect. 5.11 Financial Condition. (a) The audited consolidated balance sheets of the Company and its Subsidiaries as of December 31, 2001, and the related consolidated statements of operations and cash flows for the fiscal year ended on that date: (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Company and its Subsidiaries as of the date thereof and results of operations for the period covered thereby; and (iii) reflect or disclose all material Indebtedness and other liabilities of the Company and its consolidated Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Contingent Obligations. (b) Since December 31, 2001, there has been no Material Adverse Effect. 5.12 Environmental Matters. The Company conducts in the ordinary course of business a review of the effect of existing Environmental Laws and existing Environmental Claims on its business, operations and properties, and as a result thereof the Company has reasonably concluded that, except as specifically disclosed in Schedule 5.12, such Environmental 35 Laws and Environmental Claims are not, individually or in the aggregate, reasonably expected to have a Material Adverse Effect. 5.13 Regulated Entities. None of the Company, any Person controlling the Company, or any Subsidiary, is an "Investment Company" within the meaning of the Investment Company Act of 1940. The Company is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal or state statute or regulation limiting its ability to incur Indebtedness. 5.14 No Burdensome Restrictions. Neither the Company nor any Subsidiary is a party to or bound by any Contractual Obligation, or subject to any restriction in any Organization Document, or any Requirement of Law, which could reasonably be expected to have a Material Adverse Effect. 5.15 Copyrights, Patents, Trademarks and Licenses, etc. Except as disclosed on Schedule 5.15, the Company or its Subsidiaries own or are licensed or otherwise have the right to use all of the patents, trademarks, service marks, trade names, copyrights, contractual franchises, authorizations and other rights that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person. To the best knowledge of the Company, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Company or any Subsidiary infringes upon any rights held by any other Person. Except as specifically disclosed in Schedule 5.05, no claim or litigation regarding any of the foregoing is pending or threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of the Company, proposed, which, in either case, could reasonably be expected to have a Material Adverse Effect. 5.16 Subsidiaries As of the Closing Date, the Company has no Subsidiaries other than those specifically disclosed in part (a) of Schedule 5.16 and has no material equity investments in any other corporation or entity other than those specifically disclosed in part (b) of Schedule 5.16. 5.17 Insurance. Except as specifically disclosed in Schedule 5.17, the properties of the Company and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Company, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Company or such Subsidiary operates. 5.18 Swap Obligations. Neither the Company nor any of its Subsidiaries has incurred any outstanding obligations under any Swap Contracts, other than Permitted Swap Obligations. The Company has undertaken its own independent assessment of its consolidated assets, liabilities and commitments and has considered appropriate means of mitigating and managing risks associated with such matters and has not relied on any swap counterparty or any Affiliate of any swap counterparty in determining whether to enter into any Swap Contract. 36 5.19 Full Disclosure. None of the representations or warranties made by the Company or any Subsidiary in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, statement or certificate furnished by or on behalf of the Company or any Subsidiary in connection with the Loan Documents (including the offering and disclosure materials delivered by or on behalf of the Company to the Banks prior to the Closing Date), contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered. ARTICLE VI AFFIRMATIVE COVENANTS So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing: 6.01 Financial Statements. The Company shall deliver to the Agent and each Bank, in form and detail reasonably satisfactory to the Agent and the Majority Banks: (a) as soon as available, but not later than 100 days after the end of each fiscal year, a copy of the audited consolidated balance sheet of the Company and its Subsidiaries as at the end of such year and the related consolidated statements of operations and cash flows for such year, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by the opinion of a nationally-recognized independent public accounting firm ("Independent Auditor") which report shall state that such consolidated financial statements present fairly the financial position for the periods indicated in conformity with GAAP consistently applied. Such opinion shall not be qualified or limited because of a restricted or limited examination by the Independent Auditor of any material portion of the Company's or any Material Subsidiary's records; and (b) as soon as available, but not later than 50 days after the end of each of the first three fiscal quarters of each fiscal year, a copy of the unaudited consolidated balance sheet of the Company and its Subsidiaries as of the end of such quarter and the related consolidated statements of operations and cash flows for the period commencing on the first day and ending on the last day of such quarter, and certified by a Responsible Officer as fairly presenting, in accordance with GAAP (subject to the absence of footnotes and ordinary, good faith year-end audit adjustments), the financial position and the results of operations of the Company and the Subsidiaries. 6.02 Certificates; Other Information. The Company shall furnish to the Agent and each Bank: (a) concurrently with the delivery of the financial statements referred to in subsections 6.01(a) and (b), a Compliance Certificate executed by a Responsible Officer; 37 (b) promptly, but in no event later than 10 days of filing the same, copies of all financial statements and reports that the Company sends to its shareholders, and copies of all financial statements and regular, periodical or special reports (including Forms 10K, 10Q and 8K) that the Company or any Subsidiary may make to, or file with, the SEC; and (c) promptly, such additional information regarding the business, financial or corporate affairs of the Company or any Subsidiary as the Agent, at the request of any Bank, may from time to time reasonably request. Reports required to be delivered pursuant to subsections 6.01(a) or (b) or 6.02(b) shall be deemed to have been delivered on the date on which the Company posts such reports on the Company's website on the Internet at the website address set forth in Schedule 10.02 or when such report is posted on the SEC's website at www.sec.gov; provided that (x) the Company shall deliver paper copies of such reports to the Agent or any Bank who requests the Company to deliver such paper copies until written request to cease delivering paper copies is given by the Agent or such Bank, (y) the Company shall notify by facsimile or by electronic mail the Agent and each Bank of the posting of any such reports, and (z) in every instance the Company shall provide paper copies of the Compliance Certificates required by subsection 6.02(a) to the Agent and each of the Banks. Except for such Compliance Certificates, the Agent shall have no obligation to request the delivery or to maintain copies of the reports referred to above, and in any event shall have no responsibility to monitor compliance by the Company with any such request for delivery, and each Bank shall be solely responsible for requesting delivery to it or maintaining its copies of such reports. 6.03 Notices. The Company shall promptly notify the Agent and each Bank: (a) of the occurrence of any Default or Event of Default; (b) as soon as a Responsible Officer becomes aware thereof, of any matter that could reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of the Company or any Subsidiary, (ii) any dispute, litigation, investigation, proceeding or suspension between the Company or any Subsidiary and any Governmental Authority, or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Company or any Material Subsidiary, including pursuant to any applicable Environmental Laws; (c) of the occurrence of any of the following events affecting the Company or any ERISA Affiliate (but in no event more than 10 days after such event), and deliver to the Agent and each Bank a copy of any notice with respect to such event that is filed with a Governmental Authority and any notice delivered by a Governmental Authority to the Company or any ERISA Affiliate with respect to such event: (i) an ERISA Event; (ii) a material increase in the Unfunded Pension Liability of any Pension Plan; 38 (iii) the adoption of, or the commencement of contributions to, any Plan subject to Section 412 of the Code by the Company or any ERISA Affiliate; or (iv) the adoption of any amendment to a Plan subject to Section 412 of the Code, if such amendment results in a material increase in contributions or Unfunded Pension Liability; (d) of the execution of any material amendment to the Innoveda Acquisition Agreement or any other material agreements or documents related to the Innoveda Acquisition, in which case the Company shall promptly deliver to the Agent executed copies of such material agreements and documents and any amendments and supplements thereto to the extent not previously delivered to the Agent pursuant to Sections 4.01 and 4.03; and (e) upon the request from time to time (but not more frequently than once each fiscal quarter unless a Default or an Event of Default exists) of the Agent, the Swap Termination Values, together with a description of the method by which such values were determined, relating to any then-outstanding Swap Contracts to which the Company or any of its Subsidiaries is party. Each notice under this Section shall be accompanied by a written statement by a Responsible Officer setting forth details of the occurrence referred to therein, and stating what action the Company or any affected Subsidiary proposes to take with respect thereto and at what time. Each notice under subsection 6.03(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been breached or violated, but the reasonable failure to identify all such clauses or provisions shall not, of itself, constitute a failure to comply with subsection 6.03(a). 6.04 Preservation of Corporate Existence, Etc. The Company shall, and shall cause each Material Subsidiary to: (a) except as otherwise permitted by this Agreement, preserve and maintain in full force and effect its corporate existence and good standing under the laws of its state or jurisdiction of incorporation; (b) preserve and maintain in full force and effect all governmental rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of its business except (i) in connection with transactions permitted by Section 7.03 and sales of assets permitted by Section 7.02, or (ii) where such failure to preserve or maintain could not reasonably be expected to result in a Material Adverse Effect; (c) use reasonable efforts, in the ordinary course of business, to preserve its business organization and goodwill; and (d) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect. 39 6.05 Maintenance of Property. The Company shall, and shall cause each Subsidiary to, maintain and preserve all of its material property which is used or useful in its business in good working order and condition, ordinary wear and tear excepted, except as permitted by Section 7.02. The Company and each Subsidiary shall use the standard of care typical in the industry in the operation and maintenance of its facilities. 6.06 Insurance. The Company shall maintain, and shall cause each Material Subsidiary to maintain, with financially sound and reputable independent insurers, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons. 6.07 Payment of Obligations. Unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Company or such Subsidiary, the Company shall, and shall cause each Material Subsidiary to, pay and discharge as the same shall become due and payable, all their respective obligations and liabilities, including: (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property not otherwise permitted hereunder; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness. 6.08 Compliance with Laws. The Company shall comply, and shall cause each Material Subsidiary to comply, in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards Act), except such as may be contested in good faith or as to which a bona fide dispute may exist. 6.09 Compliance with ERISA. The Company shall, and shall cause each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; and (c) make all required contributions to any Plan subject to Section 412 of the Code, except in each case to the extent that any failure to maintain such compliance or qualification or to make such contributions could not reasonably be expected to have a Material Adverse Effect. 6.10 Inspection of Property and Books and Records. The Company shall maintain and shall cause each Material Subsidiary to maintain adequate books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Company or such Material Subsidiary. The Company shall permit, and shall cause each Material Subsidiary to permit, representatives and independent contractors of the Agent or any Bank to visit and inspect 40 any of their respective properties, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective directors, officers, and independent public accountants at such reasonable times during normal business hours and as often as may be reasonably necessary upon reasonable advance notice to the Company and, in the case of any discussion with independent public accountants of the Company or any Material Subsidiary, upon providing the Company's representatives with a reasonable opportunity to participate in and/or be present at any such discussion; provided, however, when an Event of Default exists the Agent or any Bank may do any of the foregoing at the expense of the Company and at any time during normal business hours without advance notice (except that the Company's representatives shall be given a reasonable opportunity to participate in and/or be present at any discussions with independent public accountants of the Company or any Material Subsidiary). 6.11 Environmental Laws. The Company shall, and shall cause each Subsidiary to, conduct its operations and keep and maintain its property in compliance, in all material respects, with all Environmental Laws. 6.12 Use of Proceeds. The Company shall use the proceeds of the Loans (a) to effect the Innoveda Acquisition and (b) to pay fees, expenses and costs (including restructuring costs) in connection with the Innoveda Acquisition and integration thereof. 6.13 IKOS Acquisition. The Company shall cause IKOS to become a Wholly-Owned Subsidiary on, or within a reasonable period of time after, the IKOS Acquisition Date. 6.14 Innoveda Acquisition. The Company shall cause Innoveda to become a Wholly-Owned Subsidiary on, or within a reasonable period of time after, the date of consummation of the Innoveda Acquisition. ARTICLE VII NEGATIVE COVENANTS So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing: 7.01 Limitation on Liens. The Company shall not, and shall not suffer or permit any Material Subsidiary to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its property, whether now owned or hereafter acquired, other than the following ("Permitted Liens"): (a) any Lien existing on property of the Company or any Subsidiary on the Closing Date and set forth in Schedule 7.01 either (i) securing Indebtedness outstanding on such date or (ii) which does not otherwise secure Indebtedness; (b) any Lien created under any Loan Document; 41 (c) Liens for taxes, fees, levies, imposts, assessments or other governmental charges which are not delinquent or remain payable without penalty, or to the extent that non-payment thereof is permitted by Section 6.07, provided that no notice of lien has been filed or recorded under the Code; (d) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other similar Liens arising in the ordinary course of business which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto; (e) Liens (other than any Lien imposed by ERISA) consisting of pledges or deposits required in the ordinary course of business in connection with workers' compensation, unemployment insurance and other social security legislation; (f) Liens on the property of the Company or its Subsidiary securing (i) the non-delinquent performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, (ii) contingent obligations on surety and appeal bonds, and (iii) other non-delinquent obligations of a like nature; in each case, incurred in the ordinary course of business, provided all such Liens in the aggregate would not (even if enforced) cause a Material Adverse Effect; (g) Liens consisting of judgment or judicial attachment liens, provided that the enforcement of such Liens is effectively stayed and all such liens in the aggregate at any time outstanding for the Company and its Subsidiaries do not exceed $20,000,000; (h) easements, rights-of-way, zoning or use restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the businesses of the Company and its Subsidiaries; (i) Liens on assets acquired by the Company or any Subsidiary or on any assets of Persons which become Subsidiaries, in each case, which assets or Persons are acquired after the date of this Agreement, provided, however, that such Liens existed at the time such assets were acquired by the Company or any Subsidiary or such Persons became Subsidiaries and were not created in anticipation thereof; (j) purchase money security interests on any property acquired, constructed or held by the Company or its Subsidiaries in the ordinary course of business, securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such property; provided that (i) any such Lien attaches to such property concurrently with or within 30 days after the acquisition or construction thereof, (ii) such Lien attaches solely to the property so acquired or constructed in such transaction, (iii) the principal amount of the debt secured thereby does not exceed 100% of the cost of such property, and (iv) the principal amount of the Indebtedness secured by any and all such purchase money security interests shall not at any time exceed $10,000,000; 42 (k) Liens securing obligations in respect of capital leases on assets subject to such leases, provided that such capital leases are otherwise permitted hereunder; (l) Liens arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided that (i) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Company in excess of those set forth by regulations promulgated by the FRB, and (ii) such deposit account is not intended by the Company or any Subsidiary to provide collateral to the depository institution; (m) Liens consisting of pledges of cash collateral or government securities to secure on a mark-to-market basis Permitted Swap Obligations only, provided that (i) the counterparty to any Swap Contract relating to any such Permitted Swap Obligation is under a similar requirement to deliver similar collateral from time to time to the Company or the Subsidiary party thereto on a mark-to-market basis, and (ii) the aggregate value of such collateral so pledged by the Company and the Subsidiaries together in favor of any counterparty does not at any time exceed $10,000,000; (n) Liens securing Refinancing Indebtedness (as defined in subsection 7.05(f)) which was originally secured by a Lien permitted by this Section 7.01; provided that such Lien does not apply to any other property or assets of the Company or any Subsidiary other than the proceeds of the property or assets subject to such Lien; (o) Liens pursuant to Permitted Receivables Purchase Facilities permitted by the terms hereof; (p) other non-consensual Liens arising in the ordinary course of business the existence or enforcement of which would not result in a Material Adverse Effect; (q) other Liens securing Indebtedness and obligations in an aggregate principal amount at any time outstanding not exceeding $5,000,000; provided that any such Lien shall not encumber cash (other than to the extent such cash constitutes proceeds of the property subject to any such Lien), inventory or accounts receivable; (r) Liens on Margin Stock of Innoveda; and (s) Liens on Margin Stock of IKOS. 7.02 Disposition of Assets. The Company shall not, and shall not suffer or permit any Subsidiary to, directly or indirectly, sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or a series of transactions) any property (including accounts and notes receivable, with or without recourse) or enter into any agreement to do any of the foregoing, except: (a) dispositions of inventory, or used, worn-out or surplus equipment, all in the ordinary course of business; 43 (b) the sale of equipment to the extent that such equipment is exchanged for credit against the purchase price of similar replacement equipment, or the proceeds of such sale are reasonably promptly applied to the purchase price of such replacement equipment; (c) dispositions of inventory or equipment by the Company or any Subsidiary to the Company or any Subsidiary pursuant to reasonable business requirements; (d) dispositions of Permitted Receivables pursuant to Permitted Receivables Purchase Facilities; provided that (i) for those Permitted Receivables having a final maturity date which is less than 12 months after the date such obligations arise, the value of such accounts receivable so sold by the Company and its Subsidiaries shall not exceed $50,000,000 at any time outstanding, and (ii) the value of all Permitted Receivables (whether or not having a final maturity date which is less than 12 months after the date such obligations arise) so sold by the Company and its Subsidiaries shall not exceed $50,000,000 at any time outstanding; and provided, further, however, that no dispositions of any Permitted Receivables shall be permitted at any time that any of the following circumstances exist: (A) if after giving effect to such disposition, the Company would not be in pro forma compliance with the financial covenants set forth in subsections 7.14(a) through (d), measured as of the last day of the fiscal quarter then most recently ended for which a Compliance Certificate has been delivered to the Agent and the Banks pursuant to subsection 6.02(b), or (B) any Event of Default then exists or would result from such disposition; (e) the sale of the Wilsonville Facility for fair market value (as determined in good faith at the time of such sale by the board of directors of the Company); provided that (i) no Default or Event of Default then exists or would result from such sale, and (ii) the Net Sale Proceeds thereof are applied to prepay the Loans hereunder; (f) the sale or lease of any property set forth in Schedule 7.02 and any excess facilities acquired at the time of the ATI Acquisition, the IKOS Acquisition or the Innoveda Acquisition, in each case for fair market value (as determined in good faith at the time of such sale by the board of directors of the Company or the applicable Subsidiary, as the case may be); provided that no Default or Event of Default then exists or would result from such sale; (g) dispositions not otherwise permitted hereunder which are made for fair market value; provided, that (i) at the time of any disposition, no Event of Default shall exist or shall result from such disposition, (ii) the aggregate net book value of all assets so sold by the Company and its Subsidiaries, together, shall not exceed in any fiscal year $10,000,000, and (iii) any such disposition made pursuant to this subsection (g) shall not be of accounts receivable of the Company or any of its Subsidiaries; (h) dispositions to the extent permitted under Section 7.03; (i) the sale of Margin Stock of Innoveda for fair market value (as determined in good faith at the time of such sale by the board of directors of the Company or the applicable Subsidiary, as the case may be); and 44 (j) the sale of Margin Stock of IKOS for fair market value (as determined in good faith at the time of such sale by the board of directors of the Company or the applicable Subsidiary, as the case may be). 7.03 Consolidations and Mergers. The Company shall not, and shall not suffer or permit any Subsidiary to, merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except: (a) any Subsidiary may merge with the Company (provided that the Company shall be the continuing or surviving corporation) or with any one or more Subsidiaries (provided that, if any transaction shall be between a Subsidiary and a Wholly-Owned Subsidiary, the continuing or surviving corporation shall be a Wholly-Owned Subsidiary); (b) any Subsidiary may sell all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Company or a Wholly-Owned Subsidiary; (c) the Company or any Subsidiary may merge with any Person in connection with the ATI Acquisition, the IKOS Acquisition and the Innoveda Acquisition so long as (i) either (A) the surviving entity is the Company or such Subsidiary; provided that in any such merger involving the Company, the Company shall be the surviving entity; (B) if the merger involves a Subsidiary being absorbed into the target Person, such target Person shall become a Wholly-Owned Subsidiary of Company upon the consummation of the Acquisition; or (C) such merger is otherwise permitted pursuant to clause (a) above, (ii) such Acquisition is otherwise permitted hereunder, and (iii) immediately before and after giving effect to such merger no Default or Event of Default shall exist; and (d) any Subsidiary may merge with any Person pursuant to a disposition of such Subsidiary or the assets of such Subsidiary, in each case, permitted under Section 7.02. 7.04 Loans and Investments. The Company shall not purchase or acquire, or suffer or permit any Subsidiary to purchase or acquire, for cash or property, or make any commitment therefor, any capital stock, equity interest, obligations or other securities of, or any interest in, any Person, or make or commit to make any Acquisitions, or make or commit to make any advance, loan, extension of credit or capital contribution to or any other investment in, any Person including any Affiliate of the Company (together, "Investments"), except for: (a) Investments held by the Company or any Subsidiary in the form of Cash Equivalents or short term marketable securities or Permitted Investments; (b) extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business; (c) Investments by the Company in any of its Wholly-Owned Subsidiaries or by any of its Wholly-Owned Subsidiaries in the Company or another of its Wholly-Owned Subsidiaries; 45 (d) Investments constituting Permitted Swap Obligations or payments or advances under Swap Contracts relating to Permitted Swap Obligations; (e) Investments permitted under subsection 7.10(b); (f) loans made by the Company or any Subsidiary in the ordinary course of business to a Person not an Affiliate of the Company in an aggregate principal amount not exceeding $15,000,000 at any time outstanding for all such loans; (g) loans made by the Company or any Subsidiary in the ordinary course of business and consistent with past practice to employees in an aggregate principal amount not exceeding $2,500,000 at any time outstanding and not exceeding $500,000 to any individual employee; (h) Investments of the Company or its Subsidiaries outstanding on the Closing Date and set forth in Schedule 7.04; (i) the purchase by the Company of the capital stock of Innoveda; (j) the purchase by the Company of the capital stock of IKOS; and (k) other Investments, the value of which as reflected on the Company's balance sheet does not exceed $10,000,000 in the aggregate in any fiscal year. 7.05 Limitation on Indebtedness. The Company shall not, and shall not suffer or permit any Subsidiary to, create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement and the Existing Credit Agreement; (b) Indebtedness consisting of Contingent Obligations permitted pursuant to Section 7.08; (c) Indebtedness existing on the Closing Date and set forth in Schedule 7.05; (d) Indebtedness secured by Liens permitted by subsection 7.01(i), (j), (k) and (m); (e) Indebtedness incurred in connection with leases permitted pursuant to Section 7.09; (f) extensions, renewals or refinancings of Indebtedness permitted under this Section 7.05, so long as (i) such Indebtedness (the "Refinancing Indebtedness") is in an aggregate principal amount not greater than the aggregate principal amount of the Indebtedness being extended, renewed or refinanced plus the amount of any premiums required to be paid therefor and fees and expenses associated therewith, (ii) such Refinancing Indebtedness has a later or equal final maturity and a longer or equal weighted average life as the Indebtedness 46 being extended, refinanced or renewed, (iii) the interest rate applicable to such Refinancing Indebtedness shall not exceed a market rate (as determined in good faith by the board of directors of the Company or the relevant Subsidiary, as the case may be) as of the time of such extension, renewal or refinancing, (iv) if the Indebtedness being extended, renewed or refinanced is subordinated to the Obligations, such Refinancing Indebtedness is subordinated to the Obligations to the same extent as the Indebtedness being extended, renewed or refinanced and (v) at the time of and after giving effect to such extension, renewal or refinancing, no Default or Event of Default shall exist; (g) Indebtedness incurred by the Company or any Subsidiary pursuant to Permitted Receivables Purchase Facilities permitted hereunder; and (h) other unsecured Indebtedness in an aggregate principal amount outstanding not exceeding $10,000,000 at any time. 7.06 Transactions with Affiliates. Except as otherwise expressly permitted hereunder, the Company shall not, and shall not suffer or permit any Subsidiary to, enter into any transaction with any Affiliate of the Company, except upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would obtain in a comparable arm's-length transaction with a Person not an Affiliate of the Company or such Subsidiary; provided, that the loans permitted by subsection 7.04(g) and the Company's or any Subsidiary's employee relocation program as in effect on the Closing Date, as such programs may be amended or otherwise modified after the Closing Date in the ordinary course of business, shall not be subject to the application of this Section 7.06. 7.07 Use of Proceeds. (a) The Company shall not, and shall not suffer or permit any Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of the Company or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock, in the case of each of the preceding clauses (i) (ii) and (iii), in violation of Regulation T, U or X of the FRB, or (iv) to acquire any security (other than Margin Stock of Innoveda) in any transaction that is subject in Section 13(d) or 14(d) of the Exchange Act. (b) The Company shall not, directly or indirectly, use any portion of the Loan proceeds (i) knowingly to purchase Ineligible Securities from the Arranger during any period in which the Arranger makes a market in such Ineligible Securities, (ii) knowingly to purchase during the underwriting or placement period Ineligible Securities being underwritten or privately placed by the Arranger, or (iii) to make payments of principal or interest on Ineligible Securities underwritten or privately placed by the Arranger and issued by or for the benefit of the Company or any Affiliate of the Company. The Arranger is a registered broker-dealer and permitted to underwrite and deal in certain Ineligible Securities; and "Ineligible Securities" means securities which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended. 47 7.08 Contingent Obligations. The Company shall not, and shall not suffer or permit any Subsidiary to, create, incur, assume or suffer to exist any Contingent Obligations except: (a) endorsements for collection or deposit in the ordinary course of business; (b) Permitted Swap Obligations; (c) Contingent Obligations of the Company and its Subsidiaries existing as of the Closing Date and set forth in Schedule 7.08 and any equivalent replacements thereof; (d) Contingent Obligations with respect to Surety Instruments incurred in the ordinary course of business in an aggregate amount not to exceed $5,000,000; (e) Guaranty Obligations by the Company of Indebtedness and other obligations of a Subsidiary, or by any Subsidiary of Indebtedness and other obligations of the Company or any other Subsidiary, provided that, in each case, such Indebtedness and other obligations are otherwise permitted hereunder; (f) Contingent Obligations under the Company's or any Subsidiary's employee relocation plan as in effect on the Closing Date, as such plans may be amended or otherwise modified after the Closing Date in the ordinary course of business; and (g) Contingent Obligations in respect of any bond or credit enhancement posted or otherwise provided by or on behalf of the Company in connection with the appeal by the Company of any judgment, order, decree or arbitration award entered against the Company relating to the ongoing patent litigation between the Company and Cadence Design Systems, Inc.; provided that the aggregate principal amount of such bond(s) or credit enhancement(s) shall not at any time exceed $20,000,000. 7.09 Lease Obligations. The Company shall not, and shall not suffer or permit any Subsidiary to, create or suffer to exist any obligations for the payment of rent for any property under lease or agreement to lease, except for: (a) operating leases existing on or entered into by the Company or any Subsidiary after the Closing Date in the ordinary course of business and reported in the Company's consolidated financial statements in accordance with GAAP; provided that payments in respect of all such operating leases, together with all payments in respect of capital leases permitted under clause (c) of this Section, do not exceed $30,000,000 in the aggregate in any fiscal year; (b) leases entered into by the Company or any Subsidiary after the Closing Date pursuant to sale-leaseback transactions (i) in connection with a sale of the Wilsonville Facility permitted under subsection 7.02(e), and (ii) if the disposition of the asset is permitted under subsection 7.02(g); (c) capital leases, other than those permitted under clause (b) of this Section, entered into by the Company or any Subsidiary after the Closing Date to finance the acquisition of equipment; provided that the payments in respect of all such capital leases, together with all 48 payments in respect of operating leases permitted under clause (a) of this Section, do not exceed $30,000,000 in the aggregate in any fiscal year; and (d) leases entered into by ATI and IKOS; provided that such leases existed at the time each such Person became a Subsidiary and were not created in anticipation thereof, and leases entered into by Persons which become Subsidiaries after the date of this Agreement, provided that such leases existed at the time such Persons became Subsidiaries and were not created in anticipation thereof. 7.10 Restricted Payments. The Company shall not declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of its capital stock, or purchase, redeem or otherwise acquire for value any shares of its capital stock or any warrants, rights or options to acquire such shares, now or hereafter outstanding; or make any payment or prepayment of principal of, premium, if any, or interest on, or redeem, purchase, retire, defease (including in-substance or legal defeasance), or make any sinking fund or similar payment with respect to, the Subordinated Indebtedness, except that: (a) the Company may declare and make dividend payments or other distributions payable solely in its common stock; and (b) so long as no Default or Event of Default exists or would result therefrom, the Company may purchase, redeem or otherwise acquire shares of its common stock or warrants or options to acquire any such shares pursuant to any employee stock option or purchase plan; provided that all such purchases, redemptions or other acquisitions otherwise permitted under this clause (b) do not exceed $5,000,000 in the aggregate in any fiscal year. 7.11 ERISA. The Company shall not, and shall not suffer or permit any of its ERISA Affiliates to engage in a prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan or engage in a transaction that could be subject to Section 4069 or 4212(c) of ERISA which has resulted or could reasonably be expected to result in liability of the Company in an aggregate amount in excess of $5,000,000. 7.12 Change in Business. The Company shall not, and shall not suffer or permit any Material Subsidiary to, engage in any material line of business substantially different from design automation and reasonably related lines of business. 7.13 Accounting Changes. The Company shall not make any significant change in accounting treatment or reporting practices, except as required by GAAP or the SEC or any other Governmental Authority, or change the fiscal year of the Company. 7.14 Financial Covenants. (a) Minimum Liquidity. The Company shall not permit the ratio (determined in respect of the Company and its Subsidiaries on a consolidated basis) of (i) cash plus the value (valued in accordance with GAAP) of all Cash Equivalents plus net current accounts receivable (valued in accordance with GAAP), other than cash, Cash Equivalents and net current accounts receivable subject to a Lien securing Indebtedness, to (ii) Consolidated Funded Indebtedness, as 49 of June 30, 2002 to be less than 0.95 to 1.00 and as of the end of each fiscal quarter thereafter to be less than 1.00 to 1.00. (b) Minimum Tangible Net Worth. The Company shall not as of the end of any fiscal quarter permit Consolidated Tangible Net Worth to be less than the sum of (i) Consolidated Tangible Net Worth as of the last day of the fiscal quarter in which the consummation of the Innoveda Acquisition occurs, less (ii) $5,000,000, plus (iii) 75% of Consolidated Net Income (before write-offs related to or incurred in respect of the ATI Acquisition, the IKOS Acquisition and the Innoveda Acquisition relating to goodwill and other intangibles previously capitalized on the Company's balance sheet associated with any such Acquisition excluding write-offs for in-process research and development not previously capitalized on the Company's balance sheet) for each fiscal quarter commencing after the last day of the fiscal quarter in which the consummation of the Innoveda Acquisition occurs (to the extent such Consolidated Net Income for any such fiscal quarter is positive), plus (iv) 100% of the Net Issuance Proceeds of any new equity issued by the Company after the last day of the fiscal quarter in which the consummation of the Innoveda Acquisition occurs (excluding equity issued under employee stock option or purchase plans); provided, however, that in no event shall Consolidated Tangible Net Worth as of the last day of the fiscal quarter in which the consummation of the Innoveda Acquisition occurs be less than $-75,000,000. (c) Minimum Net Income. The Company shall not as of the end of any fiscal quarter permit Consolidated Net Income (excluding amortization of intangibles and restructuring charges and non-cash expenses and write-offs related to or incurred in respect of the ATI Acquisition, the IKOS Acquisition and the Innoveda Acquisition taken in the fiscal quarter in which the consummation of such Acquisition occurs, or in the immediately following fiscal quarter) to be less than $0 at any time. (d) Maximum Consolidated Funded Indebtedness to Consolidated EBITDA. The Company shall not as of the end of any fiscal quarter permit the ratio of (i) Consolidated Funded Indebtedness as of such date to (ii) Consolidated EBITDA for the four fiscal quarter period ended on such date to be more than (A) 2.35 to 1.00 for the fiscal quarter ended June 30, 2002, and (B) 2.00 to 1.00 for each fiscal quarter thereafter. (e) Maximum Capital Expenditures. The Company shall not, and shall not suffer or permit any Subsidiary to, make or become legally obligated to make any expenditure in respect of the purchase or other acquisition of any fixed or capital asset (excluding normal replacements and maintenance which are properly charged to current operations), except for capital expenditures in the ordinary course of business not exceeding, in the aggregate for the Company and its Subsidiaries during fiscal year 2002, $35,000,000. 50 7.15 Amendments to Terms of Innoveda Acquisition. The Company shall not agree to any material amendment to, or waive any of its material rights under, the terms of the Innoveda Acquisition after the initial Borrowing Date without obtaining the prior written consent of the Agent and Majority Banks. ARTICLE VIII EVENTS OF DEFAULT 8.01 Event of Default. Any of the following shall constitute an "Event of Default": (a) Non-Payment. The Company fails to pay, (i) when and as required to be paid herein, any amount of principal of any Loan, or (ii) within five days after the same becomes due, any interest, fee or any other amount payable hereunder or under any other Loan Document; or (b) Representation or Warranty. Any representation or warranty by the Company or any Subsidiary made or deemed made herein, in any other Loan Document, or which is contained in any certificate, document or financial or other statement by the Company, any Subsidiary, or any Responsible Officer, furnished at any time under this Agreement, or in or under any other Loan Document, is incorrect in any material respect on or as of the date made or deemed made; or (c) Specific Defaults. The Company fails to perform or observe any term, covenant or agreement contained in any of Section 6.01, 6.03(a) or 6.12 or in Article VII; or (d) Other Defaults. The Company fails to perform or observe any other term or covenant contained in this Agreement or any other Loan Document, and such default shall continue unremedied for a period of 30 days after the earlier of (i) the date upon which a Responsible Officer knew of such failure, or (ii) the date upon which written notice thereof is given to the Company by the Agent or any Bank; or (e) Cross-Default. (i) The Company or any Material Subsidiary (A) fails to make any payment in respect of any Indebtedness or Contingent Obligation (other than in respect of Swap Contracts), having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $10,000,000 when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure; or (B) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any such Indebtedness or Contingent Obligation, and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure if the effect of such failure, event or condition under the preceding clauses (A) or (B) is to cause such Indebtedness to be declared to be due and payable prior to its stated maturity, or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded, or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which the Company or 51 any Subsidiary is the Defaulting Party (as defined in such Swap Contract); or (B) any Termination Event (as so defined) as to which the Company or any Subsidiary is an Affected Party (as so defined), and, in either event, the Swap Termination Value owed by the Company or such Subsidiary as a result thereof is greater than $10,000,000; or (f) Insolvency; Voluntary Proceedings. The Company or any Material Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise, (ii) voluntarily ceases to conduct its business in the ordinary course, (iii) commences any Insolvency Proceeding with respect to itself, or (iv) takes any action to effectuate or authorize any of the foregoing; or (g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is commenced or filed against the Company or any Material Subsidiary, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against a substantial part of the Company's or any Material Subsidiary's properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within 60 days after commencement, filing or levy, (ii) the Company or any Material Subsidiary admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding, or (iii) the Company or any Material Subsidiary acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its property or business; or (h) ERISA. (i) An ERISA Event shall occur with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Company under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $10,000,000, (ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans at any time exceeds $10,000,000, or (iii) the Company or any ERISA Affiliate shall fail to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $10,000,000; or (i) Monetary Judgments. One or more non-interlocutory judgments, non-interlocutory orders, decrees or arbitration awards is entered against the Company or any Subsidiary involving in the aggregate a liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) as to any single or related series of transactions, incidents or conditions, of $20,000,000 or more, and the same shall remain unsatisfied, unvacated and unstayed pending appeal for a period of 10 days after the entry thereof; or (j) Non-Monetary Judgments. Any non-monetary judgment, order or decree is entered against the Company or any Subsidiary which has a Material Adverse Effect, and there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or 52 (k) Change of Control. There occurs any Change of Control; or (l) Adverse Change. There occurs a Material Adverse Effect; or (m) Invalidity of Subordination Provisions. The subordination provisions of any agreement or instrument governing any Indebtedness which is subordinated to the Indebtedness hereunder is for any reason revoked, invalidated or otherwise breached by the Company or any Subsidiary, or otherwise ceases to be in full force and effect as a result of any act or omission of the Company or any Subsidiary, or the Company or any Subsidiary otherwise contests in any manner the validity or enforceability thereof or denies that it has any further liability or obligation thereunder. 8.02 Remedies. If any Event of Default occurs, the Agent shall, at the request of, or may, with the consent of, the Majority Banks, (a) declare the commitment of each Bank to make Loans to be terminated, whereupon such commitments shall be terminated; (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company; and (c) exercise on behalf of itself and the Banks all rights and remedies available to it and the Banks under the Loan Documents or applicable law; provided, however, that upon the occurrence of any event specified in subsection (f) or (g) of Section 8.01 (in the case of clause (i) of subsection (g) upon the expiration of the 60-day period mentioned therein), the obligation of each Bank to make Loans shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further act of the Agent or any Bank. 8.03 Rights Not Exclusive. The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. ARTICLE IX THE AGENT 9.01 Appointment and Authorization of Agent. Each Bank hereby irrevocably appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan 53 Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Bank or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" herein and in the other Loan Documents with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. 9.02 Delegation of Duties. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct. 9.03 Liability of Agent. No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein); or (b) be responsible in any manner to any Bank or participant for any recital, statement, representation or warranty made by the Company or any Subsidiary or Affiliate of the Company or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Company or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Bank or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Company or any Affiliate thereof. 9.04 Reliance by Agent. (a) The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Majority Banks as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or 54 in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Majority Banks or all the Banks, if required hereunder, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks and participants. Where this Agreement expressly permits or prohibits an action unless the Majority Banks otherwise determine, the Agent shall, and in all other instances, the Agent may, but shall not be required to, initiate any solicitation for the consent or a vote of the Banks. (b) For purposes of determining compliance with the conditions specified in Section 4.01, each Bank that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Agent to such Bank for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to a Bank. 9.05 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Banks, unless the Agent shall have received written notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." The Agent will notify the Banks of its receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be directed by the Majority Banks in accordance with Article VIII; provided, however, that unless and until the Agent has received any such direction, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Banks. 9.06 Credit Decision; Disclosure of Information by Agent. Each Bank acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by the Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of the Company and its Subsidiaries or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Bank as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each Bank represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Company and its respective Subsidiaries, and all applicable bank or other regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Company. Each Bank also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly required to be furnished to the Banks by the Agent herein, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, property, financial and 55 other condition or creditworthiness of the Company, its Subsidiaries or any of their respective Affiliates which may come into the possession of any Agent-Related Person. 9.07 Indemnification of Agent. Whether or not the transactions contemplated hereby are consummated, the Banks shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), pro rata, and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided, however, that no Bank shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities to the extent determined in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Person's own gross negligence or willful misconduct; provided, however, that no action taken in accordance with the directions of the Majority Banks shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limitation of the foregoing, each Bank shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Company. The undertaking in this Section shall survive termination of the Commitments, the payment of all Obligations hereunder and the resignation of the Agent. 9.08 Agent in its Individual Capacity. The Agent and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Company, its Subsidiaries and each of their respective Affiliates as though the Agent were not the Agent hereunder and without notice to or consent of the Banks. The Banks acknowledge that, pursuant to such activities, the Agent or its Affiliates may receive information regarding the Company or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Affiliate) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to its Loans, the Agent shall have the same rights and powers under this Agreement as any other Bank and may exercise such rights and powers as though it were not the Agent and the terms "Bank" and "Banks" include the Agent in its individual capacity. 9.09 Successor Agent. The Agent may resign as Agent upon 30 days' notice to the Banks. If the Agent resigns under this Agreement, the Majority Banks shall appoint from among the Banks a successor Agent for the Banks which successor Agent shall be consented to by the Company at all times other than during the existence of an Event of Default (which consent of the Company shall not be unreasonably withheld or delayed). If no successor Agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Banks and the Company, a successor Agent from among the Banks. Upon the acceptance of its appointment as successor Agent hereunder, the Person acting as such successor Agent shall succeed to all the rights, powers and duties of the retiring Agent and the respective terms "Agent," shall mean such successor Agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as 56 Agent, the provisions of this Article IX and Sections 10.04 and 10.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor Agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Agent hereunder until such time, if any, as the Majority Banks appoint a successor agent as provided for above. ARTICLE X MISCELLANEOUS 10.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Company therefrom, shall be effective unless in writing signed by the Majority Banks and the Company and acknowledged by the Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall, unless in writing and signed by each of the Banks directly affected thereby and by the Company, and acknowledged by the Agent, do any of the following: (a) extend or increase the Commitment of any Bank (or reinstate any Commitment terminated pursuant to Section 8.02); (b) postpone any date fixed by this Agreement or any other Loan Document for any payment or mandatory prepayment of principal, interest, fees or other amounts due to the Banks (or any of them) hereunder or under any other Loan Document; (c) reduce the principal of, or the rate of interest specified herein on, any Loan or (subject to clause (ii) of the proviso below) any fees or other amounts payable hereunder or under any other Loan Document, or change the manner of computation of any financial covenant to the extent used in determining the Applicable Margin that would result in a reduction of any interest rate on any Loan; provided, however, that only the consent of the Majority Banks shall be necessary to amend the definition of "Default Rate" or to waive any obligation of the Company to pay interest at the Default Rate; (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Banks or any of them to take any action hereunder; or (e) amend this Section, or Section 2.13, or any provision herein providing for consent or other action by all the Banks; and; provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Majority Banks or each directly-affected Bank, as the case may be, affect the rights or duties of the Agent under this Agreement or any other Loan Document, and (ii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the respective parties thereto. Notwithstanding anything to the contrary herein, any Bank that has failed to fund any portion of the Commitment on any Borrowing Date, shall not have any right to approve or disapprove any amendment, waiver or 57 consent hereunder, except that the Pro Rata Share of such Bank may not be increased without the consent of such Bank. 10.02 Notices and Other Communications; Facsimile Copies. (a) General. Unless otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including by facsimile transmission) and mailed, faxed or delivered, to the address, facsimile number or (subject to subsection (c) below) electronic mail address specified for notices on Schedule 10.02; or, in the case of the Company or the Agent, to such other address as shall be designated by such party in a notice to the other parties, and in the case of any other party, to such other address as shall be designated by such party in a notice to the Company and the Agent. All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the intended recipient, and (ii) (A) if delivered by hand or by courier, when signed for by the intended recipient; (B) if delivered by mail, four Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone (on a Business Day); and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of subsection (c) below), when delivered; provided, however, that notices and other communications to the Agent shall not be effective until actually received by the Agent. Any notice or other communication permitted to be given, made or confirmed by telephone hereunder shall be given, made or confirmed by means of a telephone call to the intended recipient at the number specified on Schedule 10.02, it being understood and agreed that a voicemail message shall in no event be effective as a notice, communication or confirmation hereunder. (b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may be transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures shall, subject to applicable law, have the same force and effect as manually-signed originals and shall be binding on the Company, the Agent and the Banks. The Agent may also require that any such documents and signatures be confirmed by a manually-signed original thereof; provided, however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature. (c) Limited Use of Electronic Mail. Electronic mail and Internet and intranet websites may be used only to distribute routine communications, such as financial statements and other information as provided in Section 6.02, and to distribute Loan Documents for execution by the parties thereto, and may not be used for any other purpose. (d) Reliance by Agent and Banks. The Agent and the Banks shall be entitled to rely and act upon any notices purportedly given by or on behalf of the Company even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Company shall indemnify each Agent-Related Person and each Bank from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Company; provided that such indemnity shall not be available to the extent that such losses, costs, expenses and liabilities resulted solely from the gross negligence or willful misconduct of such Person. 58 All telephonic notices to and other communications with the Agent pursuant to Section 2 may be recorded by the Agent, and each of the parties hereto hereby consents to such recording. 10.03 No Waiver; Cumulative Remedies. No failure by any Bank or the Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.04 Attorney Costs, Expenses and Taxes. The Company agrees (a) within 30 calendar days after demand, to pay or reimburse the Agent for all reasonable costs and expenses incurred in connection with the development, preparation, negotiation, execution and syndication of this Agreement and the other Loan Documents and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated hereby or thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including all reasonable Attorney Costs; and (b) within five Business Days after demand, to pay or reimburse the Agent and each Bank for all costs and expenses incurred in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any "workout" or restructuring in respect of the Obligations and during any legal proceeding, including any Insolvency Proceeding), including all Attorney Costs. The foregoing costs and expenses shall include all search, filing, recording, title insurance and appraisal charges and fees and taxes related thereto, and other out-of-pocket expenses incurred by the Agent and the cost of independent public accountants and other outside experts retained by the Agent or any Bank. The agreements in this Section shall survive the termination of the Commitments and repayment of all other Obligations. 10.05 Indemnification by the Company. Whether or not the transactions contemplated hereby are consummated, the Company shall indemnify and hold harmless each Agent-Related Person, each Bank and their respective Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively the "Indemnitees") from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including reasonable Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby; (b) any Commitment or Loan or the use or proposed use of the proceeds therefrom; (c) any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by the Company, or any Environmental Claims related in any way to the Company; or (d) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, 59 collectively, the "Indemnified Liabilities"), in all cases, whether or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulted solely from the gross negligence or willful misconduct of such Indemnitee. The agreements in this Section shall survive the resignation of the Agent, the replacement of any Bank, the termination of the Commitments and the repayment, satisfaction or discharge of all the other Obligations. All amounts due under this Section 10.05 shall be payable within ten Business Days after demand therefor. 10.06 Payments Set Aside. To the extent that the Company makes a payment to the Agent or any Bank, or the Agent or any Bank exercises its right of set-off, and such payment or the proceeds of such set-off or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred; and (b) each Bank severally agrees to pay to the Agent upon demand its applicable share of any amount so recovered from or repaid by the Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. 10.07 Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Company may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Bank (and any attempted assignment or transfer by the Company without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Bank may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans (including for purposes of this subsection (b), at the time owing to it); provided that (i) so long as no Event of Default has occurred and is continuing, the Company consents thereto (each such consent not to be unreasonably withheld or delayed), (ii) except in the case of an assignment of the entire remaining amount of the assigning Bank's Commitment and the Loans at the time owing to it or in the case of an assignment to a Bank or an Affiliate of a Bank or an Approved Fund with respect to a Bank, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Agent or, if "Trade Date" is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Agent and, so long as no 60 Event of Default has occurred and is continuing, the Company otherwise consents (each such consent not to be unreasonably withheld or delayed), (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Bank's rights and obligations under this Agreement with respect to the Loans or the Commitment assigned, and (iv) the parties to each assignment shall execute and deliver to the Agent an Assignment and Assumption in the form of Exhibit E ("Assignment and Assumption"), together with a processing and recordation fee of $3,500. Subject to acceptance and recording thereof by the Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Bank under this Agreement, and the assigning Bank thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Bank's rights and obligations under this Agreement, such Bank shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.01, 3.03, 3.04 and 10.5 with respect to facts and circumstances occurring prior to the effective date of such assignment). Upon request, the Company (at its expense) shall execute and deliver new or replacement Notes to the assigning Bank and the assignee Bank; provided, that the assigning Bank shall have delivered to the Company either each original Note to be replaced, marked "canceled", or its executed standard form of lost note indemnity. Any assignment or transfer by a Bank of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Bank of a participation in such rights and obligations in accordance with subsection (d) of this Section. (c) The Agent, acting solely for this purpose as an agent of the Company, shall maintain at the Agent's Payment Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Banks, and the Commitments of, and principal amounts of the Loans owing to, each Bank pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Company, the Agent and the Banks may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Bank hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Company and any Bank, at any reasonable time and from time to time upon reasonable prior notice. (d) Any Bank may at any time, without the consent of, or notice to, the Company or the Agent, sell participations to any Person (other than a natural person or the Company or any of the Company's Affiliates or Subsidiaries (each, a "Participant") in all or a portion of such Bank's rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Bank's obligations under this Agreement shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, and (iii) the Company, the Agent and the other Banks shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Bank sells such a participation shall provide that such Bank shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Bank will 61 not, without the consent of the Participant, agree to any amendment, waiver or other modification that would (i) postpone any date upon which any payment of money is scheduled to be paid to such Participant, or (ii) reduce the principal, interest, fees or other amounts payable to such Participant. Subject to subsection (e) of this Section, the Company agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.03 and 3.04 to the same extent as if it were a Bank and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.09 as though it were a Bank, provided such Participant agrees to be subject to Section 2.13 as though it were a Bank. (e) A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.03 than the applicable Bank would have been entitled to receive with respect to the participation sold to such Participant (determined as if the Bank had not sold such participation), unless the sale of the participation to such Participant is made with the Company's prior written consent. A Participant that would be a Foreign Bank if it were a Bank shall not be entitled to the benefits of Section 3.01 unless the Company is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Company, to comply with Section 10.16 as though it were a Bank. (f) Any Bank may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Notes, if any) to secure obligations of such Bank, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Bank from any of its obligations hereunder or substitute any such pledgee or assignee for such Bank as a party hereto. 10.08 Confidentiality. Each of the Agent and the Banks agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent requested by any regulatory authority; (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process; (d) to any other party to this Agreement; (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder; (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any Eligible Assignee of or Participant in, or any prospective Eligible Assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any direct or indirect contractual counterparty or prospective counterparty (or such contractual counterparty's or prospective counterparty's professional advisor) to any credit derivative transaction relating to obligations of the Company; (g) with the consent of the Company; (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Agent or any Bank on a nonconfidential basis from a source other than the Company; or (i) to the National Association of Insurance Commissioners or any other similar organization or any nationally recognized rating agency that requires access to information about a Bank's or its Affiliates' investment portfolio in connection with ratings issued with respect to such Bank or its Affiliates. For the purposes of this Section, "Information" means all information received from the Company relating to the Company or its business, other 62 than any such information that is available to the Agent or any Bank on a nonconfidential basis prior to disclosure by the Company; provided that, in the case of information received from the Company after the date hereof, such information is clearly identified in writing at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. 10.09 Set-off. In addition to any rights and remedies of the Banks provided by law, upon the occurrence and during the continuance of any Event of Default, each Bank is authorized at any time and from time to time, without prior notice to the Company, any such notice being waived by the Company (on its own behalf and on behalf of its Subsidiaries) to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Bank to or for the credit or the account of the respective Loan Parties against any and all Obligations owing to such Bank, now or hereafter existing, irrespective of whether or not the Agent or such Bank shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured. Each Bank agrees promptly to notify the Company and the Agent after any such set-off and application made by such Bank; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. 10.10 Automatic Debits of Fees. With respect to any commitment fee, utilization fee, arrangement fee, or other fee, or any other cost or expense (including Attorney Costs) due and payable to the Agent or the Arranger under the Loan Documents, the Company hereby irrevocably authorizes the Agent to debit any deposit account of the Company with the Agent in an amount such that the aggregate amount debited from all such deposit accounts does not exceed such fee or other cost or expense. If there are insufficient funds in such deposit accounts to cover the amount of the fee or other cost or expense then due, such debits will be reversed (in whole or in part, in the Agent's sole discretion) and such amount not debited shall be deemed to be unpaid. No such debit under this Section shall be deemed a set-off. 10.11 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable law (the "Maximum Rate"). If the Agent or any Bank shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Company. In determining whether the interest contracted for, charged, or received by the Agent or a Bank exceeds the Maximum Rate, such Person may, to the extent permitted by applicable law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest; (b) exclude voluntary prepayments and the effects thereof; and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations. 10.12 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 63 10.13 Integration. This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Agent or the Banks in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof. 10.14 Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Agent and each Bank, regardless of any investigation made by the Agent or any Bank or on their behalf and notwithstanding that the Agent or any Bank may have had notice or knowledge of any Default or Event of Default at the time of the Borrowers, and shall continue in full force and effect as long as any Loan or any other Obligation shall remain unpaid or unsatisfied. 10.15 Severability. Any provision of this Agreement and the other Loan Documents to which the Company is a party that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions thereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.16 Tax Forms. Each Bank that is not a "United States person" within the meaning of Section 7701(a)(30) of the Code (a "Foreign Bank") shall deliver to the Agent, prior to receipt of any payment subject to withholding under the Code (or upon accepting an assignment of an interest herein), two duly signed completed copies of either IRS Form W-8BEN or any successor thereto (relating to such Person and entitling it to an exemption from, or reduction of, withholding tax on all payments to be made to such Person by the Company pursuant to this Agreement) or IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Person by the Company pursuant to this Agreement) or such other evidence satisfactory to the Company and the Agent that such Person is entitled to an exemption from, or reduction of, U.S. withholding tax. Thereafter and from time to time, each such Person shall (i) promptly submit to the Agent such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and regulations to avoid, or such evidence as is satisfactory to the Company and the Agent of any available exemption from or reduction of, United States withholding taxes in respect of all payments to be made to such Person by the Company pursuant to this Agreement, (ii) promptly notify the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (iii) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Bank, and as may be reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement of applicable Laws that the Company make any deduction or withholding for taxes from amounts 64 payable to such Person. If such Person fails to deliver the above forms or other documentation, then the Agent may withhold from any interest payment to such Person an amount equivalent to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code, without reduction. (a) Upon the request of the Agent, each Bank that is a "United States person" within the meaning of Section 7701(a)(30) of the Code shall deliver to the Agent two duly signed completed copies of IRS Form W-9. If such Bank fails to deliver such forms, then the Agent may withhold from any interest payment to such Bank an amount equivalent to the applicable back-up withholding tax imposed by the Code, without reduction. (b) If any Governmental Authority asserts that the Agent did not properly withhold or backup withhold, as the case may be, any tax or other amount from payments made to or for the account of any Bank, such Bank shall indemnify the Agent therefor, including all penalties and interest, any taxes imposed by any jurisdiction on the amounts payable to the Administrative Agent under this Section, and costs and expenses (including Attorney Costs) of the Agent. The obligation of the Banks under this Section shall survive the termination of the Commitments, repayment of all Obligations and the resignation of the Agent. 10.17 Governing Law. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE AGENT AND EACH BANK SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OREGON OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA OR OREGON, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY, THE Agent AND EACH BANK CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE COMPANY, THE Agent AND EACH BANK IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO. THE COMPANY, THE Agent AND EACH BANK WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE. 10.18 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE 65 DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. [Signature pages follow.] 66 IN WITNESS WHEREOF, the parties hereto have caused this Bridge Loan Agreement to be duly executed and delivered in San Francisco, California, by their proper and duly authorized officers as of the day and year first above written. MENTOR GRAPHICS CORPORATION By: /s/ Gregory K. Hinckley -------------------------------------- Name: Gregory K. Hinckley Title: President By: /s/ Dennis Weldon -------------------------------------- Name: Dennis Weldon Title: Treasurer BANK OF AMERICA, N.A., as Agent and as a Bank By: /s/ Kevin McMahon -------------------------------------- Name: Kevin McMahon Title: Managing Director SCHEDULE 2.01 COMMITMENTS AND PRO RATA SHARES
Bank Commitment Pro Rata Share ---- ---------- -------------- Bank of America, N.A. $125,000,000 100% TOTAL $125,000,000 100%
SCHEDULE 10.02 OFFSHORE AND DOMESTIC LENDING OFFICES, ADDRESSES FOR NOTICES MENTOR GRAPHICS CORPORATION Address for Notices: Mentor Graphics Corporation 8005 S.W. Boeckman Road Wilsonville, OR 97070-7777 Attention: Dean Freed Telephone: (503) 685-1295 Facsimile: (503) 685-7707 Website: www.mentorg.com BANK OF AMERICA, N.A., as Agent Borrowing Notices: Bank of America, N.A. Credit Services-Agency 1850 Gateway Boulevard, 5th Floor Concord, California 94520-3281 Attention: Brian Graybill Telephone: (925) 675-8414 Facsimile: (888) 969-9147 E-mail: brian.graybill@bankofamerica.com Agent's Payment Office: Bank of America, N.A. ABA 121-000-358 Attention: PSO #5693 1850 Gateway Boulevard, 5th Floor Concord, California 94520 For Credit to Account No.: 12336-16087 All Other Notices: Bank of America, N.A., Agency Management - Mail CA5-701-05-19 1455 Market Street, 5th Floor San Francisco, California 94103-1399 Attention: Matthew A. Gabel, Vice President Telephone: (415) 436-2614 Facsimile: (415) 503-5060 E-mail: matthew.gabel@bankofamerica.com 1 BANK OF AMERICA, N.A., as Bank Domestic and Offshore Lending Office: Bank of America, N.A. Global Payment Operations CA4-706-05-09 1850 Gateway Boulevard, 5th floor Concord, California 94520-3281 Attention: Brian Graybill Telephone: (925) 675-8414 Facsimile: (888) 969-9147 E-mail: brian.graybill@bankofamerica.com Notices (other than Borrowing Notices and Notices of Conversion/Continuation): Bank of America, N.A., Mail Code CA5-705-12-08 555 California Street - 12th Floor San Francisco, California 94104 Attention: Kevin McMahon, Managing Director Telephone: (415) 622-8088 Facsimile: (415) 622-4057 Email: kevin.mcmahon@bankofamerica.com 2 EX-99.(B)(2) 11 f81012tex99-b2.txt EXHIBIT 99.(B)(2) Exhibit (b)(2) PROMISSORY NOTE $125,000,000 April 23, 2002 FOR VALUE RECEIVED, the undersigned, Mentor Graphics Corporation, an Oregon corporation (the "Company"), hereby promises to pay to BANK OF AMERICA, N.A. (the "Payee") or its registered assigns the principal sum of One Hundred Twenty Five Million Dollars ($125,000,000) or, if less, the aggregate unpaid principal amount of all Loans made by the Payee to the Company pursuant to the Bridge Loan Agreement, dated as of April 23, 2002 (such Bridge Loan Agreement, as it may be extended, renewed, amended or restated from time to time, being hereinafter called the "Credit Agreement"), among the Company, the Payee, the other banks parties thereto, and Bank of America, N.A., as Agent for the Banks, on the dates and in the amounts provided in the Credit Agreement. The Company further promises to pay interest on the unpaid principal amount of the Loans evidenced hereby from time to time at the rates, on the dates, and otherwise as provided in the Credit Agreement. The Payee is authorized to endorse the amount and the date on which each Loan is made, the maturity date therefor and each payment of principal with respect thereto on the schedules annexed hereto and made a part hereof, or on continuations thereof which shall be attached hereto and made a part hereof; provided, that any failure to endorse such information on such schedule or continuation thereof shall not in any manner affect any obligation of the Company under the Credit Agreement and this Promissory Note (the "Note"). Unless and until an Assignment and Acceptance effecting the assignment or transfer of this Note shall have been accepted by the Agent and recorded in the Register as provided in Section 10.07(c) of the Credit Agreement, the Company and the Agent shall be entitled to deem and treat the Payee as the owner and holder of this Note and the Loans evidenced hereby. This Note is one of the Notes referred to in, and is entitled to the benefits and subject to the terms of, the Credit Agreement, which Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligations of the Company, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE AGENT AND EACH BANK SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. MENTOR GRAPHICS CORPORATION By: /s/ Gregory K. Hinckley ------------------------- Title: President ---------------------- SCHEDULE A TO NOTE BASE RATE LOANS AND REPAYMENT OF BASE RATE LOANS
(1) (2) (3) (4) (5) MATURITY DATE AMOUNT OF AMOUNT OF BASE OF BASE RATE LOAN NOTATION DATE RATE LOAN BASE RATE LOAN REPAID MADE BY - ------------ -------------- -------------- -------------- ---------- - ------------ -------------- -------------- -------------- ---------- - ------------ -------------- -------------- -------------- ---------- - ------------ -------------- -------------- -------------- ---------- - ------------ -------------- -------------- -------------- ---------- - ------------ -------------- -------------- -------------- ---------- - ------------ -------------- -------------- -------------- ---------- - ------------ -------------- -------------- -------------- ---------- - ------------ -------------- -------------- -------------- ----------
SCHEDULE B TO NOTE OFFSHORE RATE LOANS AND REPAYMENT OF OFFSHORE RATE LOANS
(1) (2) (3) (4) (5) MATURITY DATE AMOUNT OF AMOUNT OF OF OFFSHORE RATE OFFSHORE RATE OFFSHORE RATE LOAN NOTATION DATE LOAN LOAN REPAID MADE BY - ------------ ------------- ------------- ------------- ---------- - ------------ ------------- ------------- ------------- ---------- - ------------ ------------- ------------- ------------- ---------- - ------------ ------------- ------------- ------------- ---------- - ------------ ------------- ------------- ------------- ---------- - ------------ ------------- ------------- ------------- ---------- - ------------ ------------- ------------- ------------- ---------- - ------------ ------------- ------------- ------------- ---------- - ------------ ------------- ------------- ------------- ---------- - ------------ ------------- ------------- ------------- ---------- - ------------ ------------- ------------- ------------- ---------- - ------------ ------------- ------------- ------------- ----------
EX-99.(D)(1) 12 f81012tex99-d1.txt EXHIBIT 99.(D)(1) Exhibit (d)(1) MUTUAL NON-DISCLOSURE AGREEMENT This Non-Disclosure Agreement (this "Agreement") is made as of October 5, 2001 by and between Innoveda, Inc., having a principal place of business at 293 Boston Post Road West, Marlboro, Massachusetts 01752 ("Innoveda") and Mentor Graphics Corporation having a principal place of business at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070 (the "Company"). In the course of dealings between Innoveda and Company, either party may learn or receive from the other party "Confidential Information" (as that term is later defined in this Agreement) for the purpose of considering various business relationships between Company and Innoveda. Company and Innoveda desire to establish and set forth each party's obligations with respect to the other party's Confidential Information. In consideration of the foregoing, Company and Innoveda agree as follows: 1. The term "Confidential Information" shall mean any and all data, know-how, trade secrets, software, technology, intellectual property, financial information, product plans, marketing plans, documentation and other information which is related to the products, technology, intellectual property or business of either party and which either party learns or receives from the other party, except that which the receiving party can establish: (1) was, on the date of this Agreement, generally known to the public; or (2) became generally known to the public after the date of this Agreement other than as a result of the act or omission of the receiving party or such party's directors, officers, partners or employees; or (3) was rightfully known to the receiving party prior to learning or receiving same from the other party; or (4) is or was disclosed by the disclosing party to third parties generally without restrictions on use and disclosure; or (5) the receiving party lawfully received from a third party without that third party's breach of agreement or obligation of trust; or (6) was independently developed by the receiving party without the use of the other party's Confidential Information; or (7) is not disclosed to the receiving party in tangible form and conspicuously labeled as "confidential," "proprietary" or some similar designation, or, if disclosed orally, is not stated to be confidential at the time of disclosure and summarized in writing within fifteen days after disclosure and conspicuously labeled as confidential or some similar designation. 2. Each party considers all of its Confidential Information to be confidential and proprietary. All of the disclosing party's Confidential Information shall at all times, and throughout the world, remain the property of the disclosing party, exclusively, and all applicable rights in patents, copyrights and trade secrets, and all other intellectual property rights, shall remain in the disclosing party, exclusively. 3. The receiving party shall not directly or indirectly use any of the disclosing party's Confidential Information for any purpose, except for the purpose set forth above. 4. The receiving party shall not disclose, or permit access to, any portion of the other party's Confidential Information to any person except if: (1) such person is an employee or consultant of the receiving party and has a need to know the Confidential Information for the purpose set forth above; and (2) such person is legally bound by a written contract to comply with the provisions of this Agreement. The receiving party shall use the same degree of care that the receiving party uses with respect to its own information of a similar nature, but in any event reasonable care, to prevent disclosure of the other party's Confidential Information. Provided, however, Confidential Information of the disclosing party may be disclosed by the receiving party as required by applicable law or court order but only if prior to any such disclosure, such party shall, to the extent permitted by applicable law, first give the other party a reasonable opportunity to review the proposed disclosure and to comment thereon and to provide for the protection of the Confidential Information. 5. This Agreement shall be effective as of the date first written above and shall continue until either party terminates this Agreement upon ten days prior written notice to the other party. Each party's obligations with respect to each item of Confidential Information which it learns or receives from the other party prior to the date of termination of this Agreement shall terminate five years after the date of termination of this Agreement. Promptly after termination of this Agreement, each party shall return to the other party all of the other party's Confidential Information in tangible form, which is in its possession at the time of termination. 6. This Agreement is the complete and exclusive statement of the agreement between the parties and supersedes all prior written and oral communications and agreements relating to the subject matter hereof; however, if a specific item or items of Confidential Information are governed by another valid and binding written agreement between the parties hereto, such other written agreement shall govern in the event of conflict with this Agreement. No modification, termination, extension, renewal or waiver of any provision of this Agreement shall be effective unless in writing and signed by an authorized representative of each party. AGREED TO AND ACCEPTED BY: INNOVEDA, INC. MENTOR GRAPHICS CORPORATION By /s/ Peter T. Johnson By /s/ Yvonne Lawson ------------------------------------- -------------------------------- Title Chief Legal Officer Title Associate General Counsel ----------------------------------- ----------------------------- Date 10/5/01 Date 10/5/01 ------------------------------------ ------------------------------- 2 EX-99.(D)(2) 13 f81012tex99-d2.txt EXHIBIT 99.(D)(2) Exhibit (d)(2) [MENTOR GRAPHICS CORPORATION LETTERHEAD] March 25, 2002 INNOVEDA, INC. ATTN: WILLIAM J. HERMAN CHAIRMAN AND CEO CONFIDENTIAL RE: EXCLUSIVITY AND CONFIDENTIALITY AGREEMENT Ladies and Gentlemen: This letter agreement, upon your execution and delivery of a copy hereof to Mentor Graphics Corporation ("MENTOR"), shall constitute a binding commitment of exclusivity and confidentiality in connection with the proposed acquisition of all of the outstanding shares of Innoveda, Inc. ("INNOVEDA"), by Mentor or Mentor's subsidiary (the "PROPOSED TRANSACTION"), as follows: 1. Exclusivity. Innoveda acknowledges that Mentor will expend substantial amounts of resources in negotiating towards a definitive agreement regarding the Proposed Transaction (the "DEFINITIVE AGREEMENT"). In consideration therefor, Innoveda hereby agrees that from the date of this letter agreement until whichever is the earliest of (a) 11:59 p.m. (Pacific Time) on April 23, 2002, (b) the date that the Definitive Agreement is fully executed and becomes effective, or (c) the date on which Mentor shall deliver notice in writing to Innoveda that the exclusivity provisions of this letter agreement are terminated (such earliest date being termed the "EXPIRY DATE"), neither Innoveda nor any of its directors, officers, employees, affiliates or other representatives (collectively, "REPRESENTATIVES") will directly or indirectly: (i) solicit, encourage, initiate, entertain, substantively review or participate in any negotiations or discussions with respect to any offer or proposal (formal or informal, oral, written or otherwise) to acquire all or any material part of Innoveda, whether by purchase of assets, exclusive license, joint venture formation, purchase of stock, business combination or otherwise, (ii) disclose any information not customarily disclosed to any person concerning Innoveda and which Innoveda believes would be used for the purposes of formulating any such an offer or proposal, (iii) assist, cooperate with, facilitate or encourage any person to make any offer or proposal to acquire all or any material part of Innoveda (directly or indirectly), (iv) agree to, enter into a contract regarding, approve, recommend or endorse any transaction involving the acquisition of all or any material part of Innoveda (a "COMPETING PROPOSED TRANSACTION"), or (v) authorize or permit any of Innoveda's Representatives to take any such action. Notwithstanding anything to the contrary in this letter agreement, a Competing Proposed Transaction shall not include, and Innoveda shall have no restrictions with respect to, (y) any sale or disposition (whether by asset sale, stock sale, sale of a subsidiary or subsidiaries, merger or otherwise) of all or any portion of Innoveda's system level design business or products and/or (z) the conduct by Innoveda of its business in the ordinary course, including but not limited to the licensing of Innoveda's products to end users and resellers. Through the Expiry Date, Innoveda shall notify Mentor immediately if any proposal or offer (formal or informal, oral, written or otherwise), or any material inquiry or contact with any person with respect thereto, regarding a Competing Proposed Transaction is made after the date hereof, such notice to include the identity of the person proposing such Competing Proposed Transaction and the material terms thereof, and shall keep Mentor apprised, on a current basis, of the status of any such Competing Proposed Transaction and of any modifications to the terms thereof; provided that this provision shall not in any way be deemed to limit the obligations of Innoveda and its Representatives set forth in the second sentence of this section. Innoveda immediately shall cease and cause to be terminated all existing discussions or negotiations with any parties other than Mentor conducted heretofore with respect to any Competing Proposed Transaction. Subject to the exceptions set forth in clauses (y) and (z) above, through the Expiry Date, Innoveda will not engage in any material transaction involving the transfer or licensing of any intellectual property to a third party or the issuance or exchange of Innoveda equity securities or securities convertible into equity securities (other than routine awards of stock options and restricted stock under Innoveda's existing stock plans and exercises of such awards) or any material financing transaction without Mentor's advance written consent. 2. Confidentiality. From the date hereof and until a Definitive Agreement regarding the Proposed Transaction has been executed by the parties hereto and publicly announced, except as may be otherwise required by applicable law, rule, regulation, stock market requirement or judicial or administrative proceeding or authority, each party will keep the existence and terms of the Proposed Transaction strictly confidential and will restrict all information about the Proposed Transaction to those employees, directors and other agents (including financial advisors, counsel and accountants) directly involved in the negotiations, or who otherwise have a legitimate need to know about the Proposed Transaction in order for such person to evaluate or implement the transaction, and who have agreed that they will treat such information as confidential or are otherwise obligated to do so. If a Definitive Agreement is not executed for any reason, the parties and their respective agents will keep the existence and terms of the Proposed Transaction strictly confidential except as and then only to the extent otherwise required by applicable law, rule, regulation, stock market requirement or judicial or administrative proceeding or authority. 3. General. The parties hereby agree to negotiate in good faith to achieve a Definitive Agreement for the Proposed Transaction based upon the non-binding terms set forth in the draft Term Sheet of even date herewith (the "TERM SHEET"); provided that Mentor may terminate such negotiations at any time for any reason or no reason and that Innoveda may terminate such negotiations at any time after April 20, 2002 and for any reason or no reason. However, until and unless a Definitive Agreement regarding the Proposed Transaction has been executed by the parties hereto, neither party hereto shall be under any legal obligation or have any liability to the other party of any nature whatsoever with respect to the Proposed Transaction, by virtue of this letter agreement or otherwise, other than with respect to the exclusivity, confidentiality and other matters specifically set forth in this letter agreement. In addition, absent breach of this letter agreement neither party will be in any way responsible for the other party's costs or expenses (including fees and expenses of professional advisers and representatives) incurred in the negotiations relating to the Proposed Transaction. 4. Injunctive Relief; Waiver. Without prejudice to the rights and remedies otherwise available to either party, each party shall be entitled to equitable relief by way of injunction or otherwise if the other party or any of its Representatives breach or threaten to breach any of the provisions of this letter agreement. It is further understood and agreed that no failure or delay by Mentor or Innoveda in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. 5. Governing Law. This letter agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its principles or rules regarding conflicts of laws, other than such principles directing application of Delaware law. Each party hereby consents and agrees to the exclusive jurisdiction and venue of the federal and state courts located within Delaware for the institution and resolution of any action or proceeding of any kind or nature with respect to or arising out of this letter agreement. 6. Entire Agreement. This letter agreement contains the entire agreement between the parties hereto concerning the matters addressed herein, and supersedes all prior oral or written agreements, understandings, representations and warranties, and courses of conduct and dealing between the parties relating to the Proposed Transaction. No modification of this letter agreement or waiver of the terms and conditions hereof shall be binding upon either party hereto, unless approved in writing by such party. Notwithstanding the foregoing, the Non-Disclosure Agreement dated as of October 5, 2001 previously entered into by the parties shall remain in full force and effect in accordance with its terms. In the event of a conflict between the terms of that Non-Disclosure Agreement and those of this letter agreement, this letter agreement shall prevail. 7. Counterparts. This letter agreement may be executed in two or more counterparts, each of which will be deemed to be an original copy hereof and all of which, when taken together, will be deemed to constitute one and the same instrument. Please confirm your agreement with the foregoing by signing a duplicate copy of this letter where indicated below and returning the same to the undersigned by fax, with the signed original following by mail. Sincerely yours, MENTOR GRAPHICS CORPORATION, AN OREGON CORPORATION By: /s/ Gregory K. Hinckley --------------------------------------- Name: Gregory K. Hinckley Its: President ACCEPTED AND AGREED TO AS OF THE DATE FIRST WRITTEN ABOVE: INNOVEDA, INC. A DELAWARE CORPORATION By: /s/ William J. Herman ------------------------------- Name: William J. Herman Its: Chairman and CEO EX-99.(D)(4) 14 f81012tex99-d4.txt EXHIBIT 99.(D)(4) Exhibit (d)(4) TENDER AND STOCKHOLDER SUPPORT AGREEMENT TENDER AND STOCKHOLDER SUPPORT AGREEMENT, dated as of April 23, 2002 (the "Agreement"), by and among Mentor Graphics Corporation, an Oregon corporation ("Parent"), Indiana Merger Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and _________ (the "Stockholder"). RECITALS WHEREAS, Parent, Merger Sub and Innoveda, Inc., a Delaware corporation (the "Company"), propose to enter into an Agreement and Plan of Merger, dated as of April 23, 2002 (as the same may be amended or supplemented from time to time, the "Merger Agreement"), which provides, among other things, that Merger Sub will make a cash tender offer (the "Offer") for all of the outstanding capital stock of the Company and, after expiration of the Offer, will merge with and into the Company (the "Merger"), in each case upon the terms and subject to the conditions in the Merger Agreement (with all capitalized terms used but not defined herein having the meanings set forth in the Merger Agreement); WHEREAS, the Stockholder owns the number of shares of common stock, par value $0.01 per share, of the Company (the "Common Stock") set forth and further described on Annex A hereto (such shares of Common Stock, together with any other shares of capital stock of the Company acquired (whether beneficially or of record) by the Stockholder after the date hereof and prior to the earlier of the Effective Time and the termination of all of the Stockholder's obligations under this Agreement, including any shares acquired by means of purchase, dividend or distribution, or issued upon the exercise of any warrants or options, and the conversion of any convertible securities or otherwise being collectively referred to herein as, the "Subject Shares"); and WHEREAS, as a condition to the willingness of Parent and Merger Sub to enter into the Merger Agreement and make the Offer, Parent has required that the Stockholder agree and, in order to induce Parent and Merger Sub to enter into the Merger Agreement, the Stockholder has agreed, to enter into this Agreement. NOW, THEREFORE, to induce Parent and Merger Sub to enter into, and in consideration of their entering into, the Merger Agreement, and in consideration of the premises and the representations, warranties and agreements contained herein, the parties agree as follows: 1. Representations and Warranties of the Stockholder. The Stockholder hereby represents and warrants to Parent and Merger Sub as of the date hereof as follows: (a) Organization. To the extent applicable, the Stockholder is a corporation, partnership or limited liability company, duly organized, validly existing and in good standing under the laws of the jurisdiction of the Stockholder's organization. (b) Authority. The Stockholder has the legal capacity and all requisite power and authority to execute and deliver this Agreement and to perform the Stockholder's obligations hereunder and consummate the transactions contemplated hereby. To the extent applicable, the execution, delivery and performance by the Stockholder of this Agreement and the consummation by the Stockholder of the transactions contemplated hereby have been duly and validly authorized by the Stockholder (or its board of directors or similar governing body, as applicable), and no other actions or proceedings on the part of the Stockholder are necessary to authorize the execution and delivery by the Stockholder of this Agreement and the consummation by the Stockholder of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Stockholder, and constitutes a valid and binding obligation of the Stockholder enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law). (c) The Subject Shares. Except as set forth on Annex A hereto, (i) the Stockholder is the record and beneficial owner of, and has good and marketable title to, the Subject Shares set forth on Annex A hereto, free and clear of any and all liens and other encumbrances; (ii) the Stockholder does not own, of record or beneficially, any shares of capital stock of the Company (or rights to acquire any such shares) other than the Subject Shares set forth on Annex A hereto; and (iii) the Stockholder has the sole right to vote, sole power of disposition, sole power to issue instructions with respect to the matters set forth in Sections 3, 4, 5 and 6 hereof, sole power of conversion, sole power to demand appraisal rights and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Stockholder's Subject Shares, with no material limitations, qualification or restrictions on such rights, subject to applicable federal securities laws and the terms of this Agreement. (d) No Conflicts. (A) Except (i) for the filings required under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Securities Act of 1933, as amended (the "Securities Act"), (ii) for any filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and any other applicable law governing antitrust or competition matters, (iii) for the filings required under the rules and regulations of the National Association of Securities Dealers, Inc. (the "NASD"), (iv) for the applicable requirements of state securities, takeover or Blue Sky laws, no filing with, and no permit, authorization, consent or approval of, any state, federal or foreign public body or authority is necessary for the execution of this Agreement by the Stockholder and the consummation by the Stockholder of the transactions contemplated hereby, and (v) as set forth on Annex A hereto, (B) the execution and delivery of this Agreement by the Stockholder do not, and the consummation by the Stockholder of the transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation of, or breach or default (with or without notice or lapse of time or both) under, (1) to the extent applicable, any provisions of the organizational documents of the Stockholder, (2) any provision of any material trust, loan or credit agreement, note, bond, mortgage, indenture, guarantee, lease, license, contract or other agreement to which the Stockholder is a party or by which the Stockholder is bound, or (3) any material franchise, judgment, order, writ, injunction, notice, decree, statute, law, ordinance, rule or regulation applicable to 2 the Stockholder or the Stockholder's property or assets, and (C) the execution and delivery of this Agreement by the Stockholder do not, and the consummation by the Stockholder of the transactions contemplated hereby will not, violate any material laws applicable to the Stockholder or result in Parent or Merger Sub becoming non-exempt interested stockholders under Section 203 of the DGCL. 2. Representations and Warranties of Parent and Merger Sub. Each of Parent and Merger Sub hereby represents and warrants to the Stockholder as of the date hereof as follows: (a) Organization. Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. (b) Authority. Each of Parent and Merger Sub has the requisite corporate power and authority to execute and deliver this Agreement and to perform its respective obligations hereunder and consummate the transactions contemplated hereby. The execution, delivery and performance by Parent and Merger Sub of this Agreement and the consummation by them of the transactions contemplated hereby, have been duly and validly authorized by the Board of Directors of Parent and Merger Sub and no other corporate or other action or proceedings on the part of Parent and Merger Sub are necessary to authorize the execution and delivery by them of this Agreement and the consummation by them of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent and Merger Sub, and constitutes a valid and binding obligation of Parent and Merger Sub enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law). (c) No Conflicts. Except for (i) the filings required under the Exchange Act and the Securities Act, (ii) the filings required under the HSR Act, and any other applicable law governing antitrust or competition matters, (iii) the filings required under the rules and regulations of the NASD, and (iv) the applicable requirements of state securities, takeover or Blue Sky laws, and (iv) such notifications, filings, authorizing actions, orders and approvals as may be required under other laws, (A) no material filing with, and no material permit, authorization, consent or approval of, any state, federal or foreign public body or authority is necessary for the execution of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated hereby, (B) the execution and delivery of this Agreement by Parent and Merger Sub do not, and the consummation by them of the transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation of, or breach or default (with or without notice or lapse of time or both) under (1) the charter documents of Parent or Merger Sub, (2) any provision of any material trust, loan or credit agreement, note, bond, mortgage, indenture, guarantee, lease, license, contract or other agreement to which Parent or Merger Sub is a party or by which 3 it is bound, or (3) any material franchise, judgment, order, writ, injunction, notice, decree, statute, law, ordinance, rule or regulation applicable to Parent or Merger Sub or their respective properties or assets, and (C) the execution and delivery of this Agreement by Parent and Merger Sub do not, and the consummation by them of the transactions contemplated hereby will not, violate any laws applicable to Parent or Merger Sub, except in the case of clauses (B)(2), (B)(3) and (C) above, for any such conflicts, violations, breaches or defaults that would not have a material adverse effect on the ability of Parent or Merger Sub to consummate the transactions contemplated hereby. 3. Tender of Subject Shares. (a) Parent and Merger Sub agree, subject to the conditions of the Offer set forth in Annex I to the Merger Agreement and the other terms and conditions of the Merger Agreement, that (i) Merger Sub will commence the Offer as promptly as practicable (and in any event within five business days after the date of the Merger Agreement); and (ii) Merger Sub will accept for payment, purchase and pay for, in accordance with the terms of the Offer and the Merger Agreement, all shares of Common Stock validly tendered pursuant to the Offer. (b) The Stockholder agrees (i) to tender the Subject Shares into the Offer promptly, and in any event no later than the fifth business day following the commencement of the Offer, or, if any Stockholder has not received the Offer Documents by such time, within two business days following receipt of such documents but in any event prior to the date of expiration of such Offer, in each case, free and clear of any liens or other encumbrances except as disclosed herein or those arising from this Agreement and (ii) not to withdraw any Subject Shares so tendered so long as there is no decrease in the Offer Price and the Offer Price is payable in cash. If any Stockholder acquires Subject Shares after the date hereof, the Stockholder shall tender (or cause the record holder to tender) such Subject Shares on or before such fifth business day following the commencement of the Offer, or, if later, on or before the second business day after such acquisition. The Stockholder acknowledges and agrees that Parent's and Merger Sub's obligation to accept for payment and pay for the Subject Shares in the Offer is subject to the terms and conditions of the Offer. (c) The Stockholder will receive the same Offer Price received by other stockholders of the Company in the Offer with respect to Subject Shares tendered by the Stockholder in the Offer. In the event that, notwithstanding the provisions of the first sentence of Section 3(b), any Subject Shares are for any reason withdrawn from the Offer, such Subject Shares will remain subject to the terms of this Agreement. (d) The Stockholder agrees to permit Parent and the Company to publish and disclose in the Offer Documents and Schedule 14D-9 and, if approval of the stockholders of the Company is required under applicable law, the Proxy Statement (including all documents and schedules filed with the Securities and Exchange Commission (the "SEC"), the Stockholder's identity and ownership of Common Stock and the nature of the Stockholder's commitments, arrangements and understandings under this Agreement. 4 4. Agreement to Vote. The Stockholder agrees that: (a) At any meeting of stockholders of the Company called to vote upon the Merger Agreement and the transactions contemplated thereby, however called, or at any adjournment or postponement thereof or in connection with any written consent of the holders of Common Stock or in any other circumstances upon which a vote, consent or other approval with respect to the Merger Agreement and the transactions contemplated thereby is sought, the Stockholder shall be present (in person or by proxy) and shall vote (or cause to be voted) all Subject Shares then held of record or beneficially owned by the Stockholder in favor of the Merger and the Merger Agreement and the transactions contemplated thereby. (b) At any meeting of stockholders of the Company, however called, or at any adjournment or postponement thereof or in any other circumstances upon which a vote or other approval is sought from the Company's stockholders, the Stockholder shall vote (or cause to be voted) all Subject Shares then held of record or beneficially owned by the Stockholder against any action or agreement (other than the Merger Agreement or the transactions contemplated thereby) that would impede, interfere with, delay, postpone or attempt to discourage the Merger, the Offer or the other transactions contemplated by this Agreement and the Merger Agreement, including, but not limited to any of the following which have such an effect: (i) any Acquisition Proposal; (ii) any action that is reasonably likely to result in a breach in any respect of any representation, warranty, covenant or any other obligation or agreement of the Company under the Merger Agreement or result in any of the conditions set forth in Annex I to the Merger Agreement not being fulfilled; (iii) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company and its subsidiaries; (iv) a sale, lease or transfer of a material amount of assets of the Company and its subsidiaries or a reorganization, recapitalization, dissolution, winding up or liquidation of the Company and its subsidiaries; (v) any change in the management or board of directors of the Company, except as otherwise agreed to in writing by Parent; (vi) any other material change in the Company's corporate structure, business, certificate of incorporation or bylaws that is not agreed to by Parent in the exercise of Parent's discretion; and (vii) any material change in the present capitalization or dividend policy of the Company. (c) The Stockholder hereby irrevocably grants to, and appoints Walden C. Rhines and Gregory K. Hinckley (the "Proxyholders"), or either of them, in their respective capacities as officers or directors of Parent, and any individual who shall hereafter succeed to any such office or directorship of Parent, and each of them individually, the Stockholder's proxy and attorney-in-fact (with full power of substitution and re-substitution), for and in the name, place and stead of the Stockholder, to vote the Subject Shares in favor of the Merger, the Merger Agreement and the transactions contemplated thereby, against any Acquisition Proposal and as otherwise required by this Section 4, subject to the limitations contained herein. The Stockholder represents that any proxies heretofore given in respect of the Subject Shares are revocable, and that any such proxies are hereby, or have previously been, revoked. This proxy will terminate 5 upon the termination of this Agreement in accordance with its terms. The Stockholder authorizes the Proxyholders to file this proxy and any substitution or revocation of substitution with the Secretary of the Company and with any Inspector of Elections at any meeting of the stockholders of the Company. (d) The Stockholder understands and acknowledges that Parent and Merger Sub are entering into the Merger Agreement in reliance upon the Stockholder's execution and delivery of this Agreement. The Stockholder hereby affirms that the irrevocable proxy set forth in this Section 4 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of the Stockholder under this Agreement. The Stockholder hereby further affirms that the irrevocable proxy is coupled with an interest. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of Section 212(e) of the Delaware General Corporation Law. 5. The Option; Exercise; Adjustments. (a) The Stockholder hereby grants to Parent an irrevocable option (the "Option") to purchase from time to time the Subject Shares, upon the terms and subject to the conditions set forth herein (the "Optioned Shares"). The Option may be exercised by Parent in whole or from time to time in part, at any time following the occurrence of a Triggering Event (as defined below) and prior to the termination of the Option in accordance with Section 9. In the event Parent wishes to exercise the Option, Parent shall send a written notice to the Stockholder (the "Stock Exercise Notice") specifying the total number of Optioned Shares it wishes to purchase and a date (not later than 10 business days and not earlier than one business day from the date such notice is given; provided, however, that if Rule 14e-5 under the Exchange Act is applicable at the time of exercise of the Option, the period in this clause shall not begin before the expiration or termination of the tender offer and shall extend for 10 business days after the expiration or termination of the tender offer) for the closing of such purchase (the "Closing Date"). Parent may revoke an exercise of the Option at any time prior to the Closing Date by written notice to the applicable Stockholder; provided, that Parent may make no more than a total of one such revocation with respect to any and all exercises relating to the Optioned Shares. In the event of any change in the number of issued and outstanding shares of Subject Shares by reason of any stock dividend, stock split, split-up, recapitalization, merger or other change in the corporate or capital structure of the Company, the number of Optioned Shares subject to the Option and the Exercise Price (as hereinafter defined) per Optioned Share shall be appropriately adjusted. (b) Parent's right to exercise the Option is subject to the following conditions: (i) Neither Parent nor Merger Sub shall have breached any of its material obligations under the Merger Agreement; 6 (ii) No preliminary or permanent injunction or other order issued by any federal or state court of competent jurisdiction in the United States invalidating the grant or prohibiting the exercise of the Option or the delivery of the Optioned Shares shall be in effect; (iii) All applicable waiting periods under the HSR Act shall have expired or been terminated; and (iv) One or more of the following events (each, a "Triggering Event") shall have occurred on or after the date hereof: (A) the Company Board shall have withdrawn or adversely modified (including by amendment to the Schedule 14D-9), or failed upon Parent's request to reconfirm, its approval or recommendation of the Offer, the Merger or the Merger Agreement (or determined to do so); (B) the Company Board shall have determined to recommend to the Company's stockholders that they approve an Acquisition Proposal other than the Offer and the Merger or shall have determined to accept a Superior Proposal; (C) a tender offer or exchange offer that, if successful, would result in any person or group becoming a beneficial owner of 15% or more of the outstanding Shares is commenced (other than by Parent or an affiliate of Parent); or (D) there is a public announcement with respect to a plan or intention by the Company, other than with respect to Parent or its affiliates, to effect any of the foregoing transactions. For purposes of this subparagraph (iv), the terms "group" and "beneficial owner" shall be defined by reference to Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder. (c) Parent's obligation to purchase the Optioned Shares following the exercise of the Option, and the Stockholder's obligation to deliver the Optioned Shares, are subject to the conditions that: (i) No preliminary or permanent injunction or other order issued by any federal or state court of competent jurisdiction in the United States prohibiting the delivery of the Optioned Shares shall be in effect; (ii) The purchase of the Optioned Shares will not violate any material law, rule or regulation; and (iii) All applicable waiting periods under the HSR Act shall have expired or been terminated. (d) At any Closing Date, the applicable Stockholder will deliver to Parent a certificate or certificates for any shares that are certificated representing the Optioned Shares in the denominations designated by Parent in its Stock Exercise Notice, and Parent will purchase the Optioned Shares from the Stockholder at a price per Optioned Share equal to the Offer Price (the "Exercise Price"), payable in cash. Payment made by Parent to the Stockholder pursuant to this Agreement shall be made by wire transfer of federal funds to a bank designated by the Stockholder. After payment of the Exercise Price for the Optioned Shares covered by the Stock Exercise Notice, the Option shall be deemed 7 exercised to the extent of the Optioned Shares specified in the Stock Exercise Notice as of the date such Stock Exercise Notice is given to the Stockholder. (e) Any closing hereunder shall take place on the Closing Date specified by Parent in its Stock Exercise Notice pursuant to Section 5(a) at 10:00 a.m., local time, or the first business day thereafter on which all of the conditions in Section 5(b) and 5(c) are met, at the principal executive office of the Company, or at such other time and place as the parties hereto may agree. (f) In the event that Parent sells, conveys, exchanges or otherwise transfers any Optioned Share to a party which is not an affiliate of Parent ("Third Party Purchaser") at any time within twelve months of Parent's acquisition of such Optioned Share, Parent shall promptly pay to the Stockholder the amount, if any, by which the consideration for such Optioned Share received by Parent from such Third Party Purchaser exceeds the Exercise Price less (i) Parent's cost per share, including without limitation applicable brokerage commissions and other actual transaction costs, associated solely with such sale to such Third Party Purchaser and (ii) Parent's cost of investment in such Optioned Share, as measured by applying the prime rate of the Bank of America as measured from time to time from the date of Parent's purchase of the Optioned Share to the date of Parent's receipt of such consideration from such Third Party Purchaser, to the Exercise Price. 6. Restriction on Transfer. Other than pursuant to this Agreement, the Stockholder agrees not (a) to sell, transfer, pledge, encumber, assign or otherwise dispose of (collectively, "Transfer"), or enter into any contract, option or other arrangement or understanding with respect to the Transfer by the Stockholder of, any of the Subject Shares or offer any interest in any thereof to any person other than pursuant to the terms of the Offer, the Merger or this Agreement, (b) to enter into any voting arrangement or understanding, whether by proxy, power of attorney, voting agreement, voting trust or otherwise with respect to the Subject Shares, or (c) to take any action that would make any representation or warranty of the Stockholder contained herein untrue or incorrect in any material respect or have the effect of preventing or disabling the Stockholder from performing its obligations under this Agreement. 7. No Solicitation of Acquisition Proposals. The Stockholder shall not, and shall not authorize, permit or cause any of its, directors, officers, employees, agents, representatives and advisors (including any investment banker, attorney or accountant retained by the Company or any of its Subsidiaries or the Stockholder) to, directly or indirectly, (i) encourage (including by way of furnishing non-public information), solicit, initiate or facilitate any Acquisition Proposal, or (ii) participate in any way in discussions or negotiations with, or furnish any information to, any person in connection with, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal, or otherwise cooperate in any way with, or participate in or assist, facilitate or encourage any effort or attempt by any other person to do or seek any of the foregoing. The Stockholder shall promptly communicate to Parent, to the same extent as is required by the Company pursuant to, and subject to the same conditions contained in, the Merger Agreement, the terms, and other information concerning, any proposal, 8 discussion, negotiation or inquiry and the identity of the party making such proposal or inquiry which the Stockholder may receive in respect of any such Acquisition Proposal. 8. Further Assurances. Upon the terms and subject to the conditions hereof and of the Merger Agreement and the Offer, each of the parties hereto shall use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. Without limiting the foregoing, each party hereto will, from time to time and without further consideration, execute and deliver, or cause to be executed and delivered, such additional or further consents, documents and other instruments and shall take all such other action as any other party may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement, including (a) vesting good title to the Subject Shares in Merger Sub and (b) using its reasonable best efforts to obtain all consents and approvals of governmental authorities and parties to contracts as are necessary for the consummation of the transactions contemplated by this Agreement. 9. Termination. All obligations, agreements and waivers hereunder, will terminate and be of no further force and effect on the earlier of: (a) forty-five days after the date the Merger Agreement is terminated in accordance with its terms; and (b) the Effective Time; provided, however, that (i) the obligations, agreements and waivers of the Stockholder under this Agreement shall terminate immediately upon termination of the Merger Agreement pursuant Section 7.1.1, 7.1.2 or 7.1.4 of the Merger Agreement; (ii) the obligations of the Stockholder under Section 4 of this Agreement shall terminate in the event of the termination of the Merger Agreement if and only if the Company gives Parent and Merger Sub notice of a record date for a vote on an Acquisition Proposal other than the Merger Agreement at least 13 business days prior the date of such record date, such termination of obligations under Section 4 of this Agreement to be effective at the close of business on such 13th business day; and (iii) nothing herein shall relieve any party from liability for any breach hereof. 10. Waiver of Appraisal and Dissenter's Rights. The Stockholder waives and agrees not to exercise any rights of appraisal or rights to dissent from the Merger that the Stockholder may have with respect to the Stockholder's Subject Shares. 11. Stockholder Capacity. No person executing this Agreement who is or becomes during the term hereof a director or officer of the Company makes any agreement or understanding herein or is obligated hereunder in his or her capacity as such director or officer. The Stockholder signs solely in its capacity as the record holder and beneficial owner (as further set forth on Annex A hereto) of the Stockholder's Subject Shares, and nothing herein shall limit or affect any actions taken by any Stockholder in the Stockholder's capacity as an officer or director of the Company to the extent specifically permitted by the Merger Agreement. 12. Parent Guarantee. Parent hereby guarantees the due and punctual payment and performance of any and all obligations and liabilities of Merger Sub under or arising out of this Agreement and the transactions contemplated hereby. 13. Specific Performance. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance 9 with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to the remedy of specific performance of such provisions and to an injunction or injunctions and/or such other equitable relief as may be necessary to prevent breaches of this Agreement. 14. Stop Transfer Order; Legend. In furtherance of this Agreement, concurrently herewith, the Stockholder shall, and hereby does authorize the Company or its counsel to, notify the Company's transfer agent that there is a stop transfer order with respect to all of the Subject Shares (and that this Agreement places limits on the voting and transfer of such shares). The Stockholder agrees as promptly as is reasonably practicable to apply a legend to all certificates representing the Subject Shares referring to any and all rights granted to Parent by this Agreement; provided that, no such legend shall restrict the transfer of the Subject Shares if such transfer is made pursuant to the Offer. 15. Adjustments to Prevent Dilution, Etc. In the event of any change in the number of issued and outstanding shares of Subject Shares by reason of any stock dividend, stock split, split-up, recapitalization, merger or other change in the corporate or capital structure of the Company, the term "Subject Shares" shall be deemed to refer to and include the Subject Shares as well as all such stock dividends and distributions and any shares into which or for which any or all of the Subject Shares may be changed or exchanged. In such event, the amount to be paid per share by Parent pursuant to this Agreement shall be proportionately adjusted. 16. General Provisions. (a) Amendments. This Agreement may not be modified, altered, supplemented or amended except by an instrument in writing signed by each of the parties hereto. (b) Notice. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to Parent or Merger Sub in accordance with Section 8.3 of the Merger Agreement and to the Stockholder at the Stockholder's address set forth in Annex A hereto (or to such other address as any party may have furnished to the other parties in writing in accordance herewith). (c) Interpretation. When a reference is made in this Agreement to Sections, such reference shall be to a Section to this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (d) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more of the counterparts have been signed by each of the parties and delivered to the other party, it being understood that each party need not sign the same counterpart. 10 (e) Entire Agreement; No Third-Party Beneficiaries. This Agreement (including, without limitation, the documents and instruments referred to herein), (i) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and (ii) is not intended to confer upon any person or entity other than the parties hereto any rights or remedies hereunder; provided that the Company is an intended third-party beneficiary of Section 3(d). (f) Binding Agreement. This Agreement and the obligations hereunder shall attach to the Subject Shares and shall be binding upon the parties and any person or entity to which legal or beneficial ownership of the Subject Shares shall pass, whether by operation of law or otherwise, including, without limitation, the Stockholder's administrators or successors. Notwithstanding any transfer of Subject Shares, the transferor shall remain liable for the performance of all obligations of the transferor under this Agreement. (g) Governing Law; Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. All parties to this Agreement hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the "Delaware Court"), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement or any of the transactions contemplated hereby, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, irrevocably RL&F Service Corp., One Rodney Square, 10th Floor, 10th and King Streets, Wilmington, Delaware 19801 as its agent in the State of Delaware as such party's agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum or is subject to a jury trial. A prevailing party in any action or proceeding arising out of or in connection with this Agreement or any of the transactions contemplated hereby shall be entitled to reimbursement of its attorneys' fees and costs incurred in such action or proceeding by the other party. (h) Costs and Expenses. Whether or not the Offer or the Merger is consummated, except as otherwise expressly set forth in this Agreement, all costs and expenses incurred in connection with this Agreement and the consummation of the transactions contemplated hereby shall be paid by the party incurring such expenses. 11 (i) Assignment. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of the Stockholder or Merger Sub and Parent, as the case may be, provided (i) that Merger Sub or Parent may assign, in its respective sole discretion its rights and obligations hereunder to any direct or indirect subsidiary of Parent and (ii) that the Stockholder may assign its rights and obligations hereunder to a party that is not making any Acquisition Proposal and is not a competitor of Parent in connection with its transfer of its Shares to such party (the "Successor") if and only if the Successor becomes a party to this Agreement as the Stockholder and assumes all the obligations of the Stockholder hereunder, the Stockholder hereby agreeing that in connection with any such assignment, the Stockholder shall remain responsible and liable for the performance of all obligations under this Agreement by such Successor. (j) Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. 12 IN WITNESS WHEREOF, Parent, Merger Sub and the Stockholder have caused this Agreement to be duly executed as of the date first written above. PARENT MENTOR GRAPHICS CORPORATION By: ------------------------------------ MERGER SUB INDIANA MERGER CORPORATION By: ------------------------------------ STOCKHOLDER --------------------------------------- ANNEX A
OPTIONS OR OTHER RIGHTS SHARES OF OUTSTANDING TO ACQUIRE SHARES STOCKHOLDER'S NAME AND ADDRESS COMMON STOCK OF COMMON STOCK - ------------------------------ --------------------- -----------------------
EX-99.(D)(5) 15 f81012tex99-d5.txt EXHIBIT 99.(D)(5) Exhibit(d)(5) TENDER AND STOCKHOLDER SUPPORT AGREEMENT TENDER AND STOCKHOLDER SUPPORT AGREEMENT, dated as of April 23, 2002 (the "Agreement"), by and among Mentor Graphics Corporation, an Oregon corporation ("Parent"), Indiana Merger Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and _________ (the "Stockholder"). RECITALS WHEREAS, Parent, Merger Sub and Innoveda, Inc., a Delaware corporation (the "Company"), propose to enter into an Agreement and Plan of Merger, dated as of April 23, 2002 (as the same may be amended or supplemented from time to time, the "Merger Agreement"), which provides, among other things, that Merger Sub will make a cash tender offer (the "Offer") for all of the outstanding capital stock of the Company and, after expiration of the Offer, will merge with and into the Company (the "Merger"), in each case upon the terms and subject to the conditions in the Merger Agreement (with all capitalized terms used but not defined herein having the meanings set forth in the Merger Agreement); WHEREAS, the Stockholder owns the number of shares of common stock, par value $0.01 per share, of the Company (the "Common Stock") set forth and further described on Annex A hereto (such shares of Common Stock, together with any other shares of capital stock of the Company acquired (whether beneficially or of record) by the Stockholder after the date hereof and prior to the earlier of the Effective Time and the termination of all of the Stockholder's obligations under this Agreement, including any shares acquired by means of purchase, dividend or distribution, or issued upon the exercise of any warrants or options, and the conversion of any convertible securities or otherwise being collectively referred to herein as, the "Subject Shares"); and WHEREAS, as a condition to the willingness of Parent and Merger Sub to enter into the Merger Agreement and make the Offer, Parent has required that the Stockholder agree and, in order to induce Parent and Merger Sub to enter into the Merger Agreement, the Stockholder has agreed, to enter into this Agreement. NOW, THEREFORE, to induce Parent and Merger Sub to enter into, and in consideration of their entering into, the Merger Agreement, and in consideration of the premises and the representations, warranties and agreements contained herein, the parties agree as follows: 1. Representations and Warranties of the Stockholder. The Stockholder hereby represents and warrants to Parent and Merger Sub as of the date hereof as follows: (a) Organization. To the extent applicable, the Stockholder is a corporation, partnership or limited liability company, duly organized, validly existing and in good standing under the laws of the jurisdiction of the Stockholder's organization. (b) Authority. The Stockholder has the legal capacity and all requisite power and authority to execute and deliver this Agreement and to perform the Stockholder's obligations hereunder and consummate the transactions contemplated hereby. To the extent applicable, the execution, delivery and performance by the Stockholder of this Agreement and the consummation by the Stockholder of the transactions contemplated hereby have been duly and validly authorized by the Stockholder (or its board of directors or similar governing body, as applicable), and no other actions or proceedings on the part of the Stockholder are necessary to authorize the execution and delivery by the Stockholder of this Agreement and the consummation by the Stockholder of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Stockholder, and constitutes a valid and binding obligation of the Stockholder enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law). (c) The Subject Shares. Except as set forth on Annex A hereto, (i) the Stockholder is the record and beneficial owner of, and has good and marketable title to, the Subject Shares set forth on Annex A hereto, free and clear of any and all liens and other encumbrances; (ii) the Stockholder does not own, of record or beneficially, any shares of capital stock of the Company (or rights to acquire any such shares) other than the Subject Shares set forth on Annex A hereto; and (iii) the Stockholder has the sole right to vote, sole power of disposition, sole power to issue instructions with respect to the matters set forth in Sections 3, 5 and 6 hereof, sole power of conversion, sole power to demand appraisal rights and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Stockholder's Subject Shares, with no material limitations, qualification or restrictions on such rights, subject to applicable federal securities laws and the terms of this Agreement. (d) No Conflicts. (A) Except (i) for the filings required under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Securities Act of 1933, as amended (the "Securities Act"), (ii) for any filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and any other applicable law governing antitrust or competition matters, (iii) for the filings required under the rules and regulations of the National Association of Securities Dealers, Inc. (the "NASD"), (iv) for the applicable requirements of state securities, takeover or Blue Sky laws, no filing with, and no permit, authorization, consent or approval of, any state, federal or foreign public body or authority is necessary for the execution of this Agreement by the Stockholder and the consummation by the Stockholder of the transactions contemplated hereby, and (v) as set forth on Annex A hereto, (B) the execution and delivery of this Agreement by the Stockholder do not, and the consummation by the Stockholder of the transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation of, or breach or default (with or without notice or lapse of time or both) under, (1) to the extent applicable, any provisions of the organizational documents of the Stockholder, (2) any provision of any material trust, loan or credit agreement, note, bond, mortgage, indenture, guarantee, lease, license, contract or other agreement to which the Stockholder is a party or by which the Stockholder is bound, or (3) any material franchise, judgment, order, writ, injunction, notice, decree, statute, law, ordinance, rule or regulation applicable to 2 the Stockholder or the Stockholder's property or assets, and (C) the execution and delivery of this Agreement by the Stockholder do not, and the consummation by the Stockholder of the transactions contemplated hereby will not, violate any material laws applicable to the Stockholder or result in Parent or Merger Sub becoming non-exempt interested stockholders under Section 203 of the DGCL. 2. Representations and Warranties of Parent and Merger Sub. Each of Parent and Merger Sub hereby represents and warrants to the Stockholder as of the date hereof as follows: (a) Organization. Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. (b) Authority. Each of Parent and Merger Sub has the requisite corporate power and authority to execute and deliver this Agreement and to perform its respective obligations hereunder and consummate the transactions contemplated hereby. The execution, delivery and performance by Parent and Merger Sub of this Agreement and the consummation by them of the transactions contemplated hereby, have been duly and validly authorized by the Board of Directors of Parent and Merger Sub and no other corporate or other action or proceedings on the part of Parent and Merger Sub are necessary to authorize the execution and delivery by them of this Agreement and the consummation by them of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent and Merger Sub, and constitutes a valid and binding obligation of Parent and Merger Sub enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law). (c) No Conflicts. Except for (i) the filings required under the Exchange Act and the Securities Act, (ii) the filings required under the HSR Act, and any other applicable law governing antitrust or competition matters, (iii) the filings required under the rules and regulations of the NASD, and (iv) the applicable requirements of state securities, takeover or Blue Sky laws, and (iv) such notifications, filings, authorizing actions, orders and approvals as may be required under other laws, (A) no material filing with, and no material permit, authorization, consent or approval of, any state, federal or foreign public body or authority is necessary for the execution of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated hereby, (B) the execution and delivery of this Agreement by Parent and Merger Sub do not, and the consummation by them of the transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation of, or breach or default (with or without notice or lapse of time or both) under (1) the charter documents of Parent or Merger Sub, (2) any provision of any material trust, loan or credit agreement, note, bond, mortgage, indenture, guarantee, lease, license, contract or other agreement to which Parent or Merger Sub is a party or by which 3 it is bound, or (3) any material franchise, judgment, order, writ, injunction, notice, decree, statute, law, ordinance, rule or regulation applicable to Parent or Merger Sub or their respective properties or assets, and (C) the execution and delivery of this Agreement by Parent and Merger Sub do not, and the consummation by them of the transactions contemplated hereby will not, violate any laws applicable to Parent or Merger Sub, except in the case of clauses (B)(2), (B)(3) and (C) above, for any such conflicts, violations, breaches or defaults that would not have a material adverse effect on the ability of Parent or Merger Sub to consummate the transactions contemplated hereby. 3. Tender of Subject Shares. (a) Parent and Merger Sub agree, subject to the conditions of the Offer set forth in Annex I to the Merger Agreement and the other terms and conditions of the Merger Agreement, that (i) Merger Sub will commence the Offer as promptly as practicable (and in any event within five business days after the date of the Merger Agreement); and (ii) Merger Sub will accept for payment, purchase and pay for, in accordance with the terms of the Offer and the Merger Agreement, all shares of Common Stock validly tendered pursuant to the Offer. (b) The Stockholder agrees (i) to tender the Subject Shares into the Offer promptly, and in any event no later than the fifth business day following the commencement of the Offer, or, if any Stockholder has not received the Offer Documents by such time, within two business days following receipt of such documents but in any event prior to the date of expiration of such Offer, in each case, free and clear of any liens or other encumbrances except as disclosed herein or those arising from this Agreement and (ii) not to withdraw any Subject Shares so tendered so long as there is no decrease in the Offer Price and the Offer Price is payable in cash. If any Stockholder acquires Subject Shares after the date hereof, the Stockholder shall tender (or cause the record holder to tender) such Subject Shares on or before such fifth business day following the commencement of the Offer, or, if later, on or before the second business day after such acquisition. The Stockholder acknowledges and agrees that Parent's and Merger Sub's obligation to accept for payment and pay for the Subject Shares in the Offer is subject to the terms and conditions of the Offer. (c) The Stockholder will receive the same Offer Price received by other stockholders of the Company in the Offer with respect to Subject Shares tendered by the Stockholder in the Offer. In the event that, notwithstanding the provisions of the first sentence of Section 3(b), any Subject Shares are for any reason withdrawn from the Offer, such Subject Shares will remain subject to the terms of this Agreement. (d) The Stockholder agrees to permit Parent and the Company to publish and disclose in the Offer Documents and Schedule 14D-9 and, if approval of the stockholders of the Company is required under applicable law, the Proxy Statement (including all documents and schedules filed with the Securities and Exchange Commission (the "SEC"), the Stockholder's identity and ownership of Common Stock and the nature of the Stockholder's commitments, arrangements and understandings under this Agreement. 4 4. Intentionally omitted. 5. The Option; Exercise; Adjustments. (a) The Stockholder hereby grants to Parent an irrevocable option (the "Option") to purchase from time to time the Subject Shares, upon the terms and subject to the conditions set forth herein (the "Optioned Shares"). The Option may be exercised by Parent in whole or from time to time in part, at any time following the occurrence of a Triggering Event (as defined below) and prior to the termination of the Option in accordance with Section 9. In the event Parent wishes to exercise the Option, Parent shall send a written notice to the Stockholder (the "Stock Exercise Notice") specifying the total number of Optioned Shares it wishes to purchase and a date (not later than 10 business days and not earlier than one business day from the date such notice is given; provided, however, that if Rule 14e-5 under the Exchange Act is applicable at the time of exercise of the Option, the period in this clause shall not begin before the expiration or termination of the tender offer and shall extend for 10 business days after the expiration or termination of the tender offer) for the closing of such purchase (the "Closing Date"). Parent may revoke an exercise of the Option at any time prior to the Closing Date by written notice to the applicable Stockholder; provided, that Parent may make no more than a total of one such revocation with respect to any and all exercises relating to the Optioned Shares. In the event of any change in the number of issued and outstanding shares of Subject Shares by reason of any stock dividend, stock split, split-up, recapitalization, merger or other change in the corporate or capital structure of the Company, the number of Optioned Shares subject to the Option and the Exercise Price (as hereinafter defined) per Optioned Share shall be appropriately adjusted. (b) Parent's right to exercise the Option is subject to the following conditions: (i) Neither Parent nor Merger Sub shall have breached any of its material obligations under the Merger Agreement; (ii) No preliminary or permanent injunction or other order issued by any federal or state court of competent jurisdiction in the United States invalidating the grant or prohibiting the exercise of the Option or the delivery of the Optioned Shares shall be in effect; (iii) All applicable waiting periods under the HSR Act shall have expired or been terminated; and (iv) One or more of the following events (each, a "Triggering Event") shall have occurred on or after the date hereof: (A) the Company Board shall have withdrawn or adversely modified (including by amendment to the Schedule 14D-9), or failed upon Parent's request to reconfirm, its approval or recommendation of the Offer, the Merger or the Merger Agreement (or determined to do so); (B) the Company Board shall have determined to 5 recommend to the Company's stockholders that they approve an Acquisition Proposal other than the Offer and the Merger or shall have determined to accept a Superior Proposal; (C) a tender offer or exchange offer that, if successful, would result in any person or group becoming a beneficial owner of 15% or more of the outstanding Shares is commenced (other than by Parent or an affiliate of Parent); or (D) there is a public announcement with respect to a plan or intention by the Company, other than with respect to Parent or its affiliates, to effect any of the foregoing transactions. For purposes of this subparagraph (iv), the terms "group" and "beneficial owner" shall be defined by reference to Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder. (c) Parent's obligation to purchase the Optioned Shares following the exercise of the Option, and the Stockholder's obligation to deliver the Optioned Shares, are subject to the conditions that: (i) No preliminary or permanent injunction or other order issued by any federal or state court of competent jurisdiction in the United States prohibiting the delivery of the Optioned Shares shall be in effect; (ii) The purchase of the Optioned Shares will not violate any material law, rule or regulation; and (iii) All applicable waiting periods under the HSR Act shall have expired or been terminated. (d) At any Closing Date, the applicable Stockholder will deliver to Parent a certificate or certificates for any shares that are certificated representing the Optioned Shares in the denominations designated by Parent in its Stock Exercise Notice, and Parent will purchase the Optioned Shares from the Stockholder at a price per Optioned Share equal to the Offer Price (the "Exercise Price"), payable in cash. Payment made by Parent to the Stockholder pursuant to this Agreement shall be made by wire transfer of federal funds to a bank designated by the Stockholder. After payment of the Exercise Price for the Optioned Shares covered by the Stock Exercise Notice, the Option shall be deemed exercised to the extent of the Optioned Shares specified in the Stock Exercise Notice as of the date such Stock Exercise Notice is given to the Stockholder. (e) Any closing hereunder shall take place on the Closing Date specified by Parent in its Stock Exercise Notice pursuant to Section 5(a) at 10:00 a.m., local time, or the first business day thereafter on which all of the conditions in Section 5(b) and 5(c) are met, at the principal executive office of the Company, or at such other time and place as the parties hereto may agree. (f) In the event that Parent sells, conveys, exchanges or otherwise transfers any Optioned Share to a party which is not an affiliate of Parent ("Third Party Purchaser") at any time within twelve months of Parent's acquisition of such Optioned Share, Parent shall promptly pay to the Stockholder the amount, if any, by which the consideration for such Optioned Share received by Parent from such Third Party 6 Purchaser exceeds the Exercise Price less (i) Parent's cost per share, including without limitation applicable brokerage commissions and other actual transaction costs, associated solely with such sale to such Third Party Purchaser and (ii) Parent's cost of investment in such Optioned Share, as measured by applying the prime rate of the Bank of America as measured from time to time from the date of Parent's purchase of the Optioned Share to the date of Parent's receipt of such consideration from such Third Party Purchaser, to the Exercise Price. 6. Restriction on Transfer. Other than pursuant to this Agreement, the Stockholder agrees not (a) to sell, transfer, pledge, encumber, assign or otherwise dispose of (collectively, "Transfer"), or enter into any contract, option or other arrangement or understanding with respect to the Transfer by the Stockholder of, any of the Subject Shares or offer any interest in any thereof to any person other than pursuant to the terms of the Offer, the Merger or this Agreement, (b) to enter into any voting arrangement or understanding, whether by proxy, power of attorney, voting agreement, voting trust or otherwise with respect to the Subject Shares, or (c) to take any action that would make any representation or warranty of the Stockholder contained herein untrue or incorrect in any material respect or have the effect of preventing or disabling the Stockholder from performing its obligations under this Agreement. 7. No Solicitation of Acquisition Proposals. The Stockholder shall not, and shall not authorize, permit or cause any of its, directors, officers, employees, agents, representatives and advisors (including any investment banker, attorney or accountant retained by the Company or any of its Subsidiaries or the Stockholder) to, directly or indirectly, (i) encourage (including by way of furnishing non-public information), solicit, initiate or facilitate any Acquisition Proposal, or (ii) participate in any way in discussions or negotiations with, or furnish any information to, any person in connection with, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal, or otherwise cooperate in any way with, or participate in or assist, facilitate or encourage any effort or attempt by any other person to do or seek any of the foregoing. The Stockholder shall promptly communicate to Parent, to the same extent as is required by the Company pursuant to, and subject to the same conditions contained in, the Merger Agreement, the terms, and other information concerning, any proposal, discussion, negotiation or inquiry and the identity of the party making such proposal or inquiry which the Stockholder may receive in respect of any such Acquisition Proposal. 8. Further Assurances. Upon the terms and subject to the conditions hereof and of the Merger Agreement and the Offer, each of the parties hereto shall use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. Without limiting the foregoing, each party hereto will, from time to time and without further consideration, execute and deliver, or cause to be executed and delivered, such additional or further consents, documents and other instruments and shall take all such other action as any other party may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement, including (a) vesting good title to the Subject Shares in Merger Sub and (b) using its reasonable best efforts 7 to obtain all consents and approvals of governmental authorities and parties to contracts as are necessary for the consummation of the transactions contemplated by this Agreement. 9. Termination. All obligations, agreements and waivers hereunder, will terminate and be of no further force and effect on the earlier of: (a) forty-five days after the date the Merger Agreement is terminated in accordance with its terms; and (b) the Effective Time; provided, however, that (i) the obligations, agreements and waivers of the Stockholder under this Agreement shall terminate immediately upon termination of the Merger Agreement pursuant Section 7.1.1, 7.1.2 or 7.1.4 of the Merger Agreement; and (ii) nothing herein shall relieve any party from liability for any breach hereof. 10. Waiver of Appraisal and Dissenter's Rights. The Stockholder waives and agrees not to exercise any rights of appraisal or rights to dissent from the Merger that the Stockholder may have with respect to the Stockholder's Subject Shares. 11. Stockholder Capacity. No person executing this Agreement who is or becomes during the term hereof a director or officer of the Company makes any agreement or understanding herein or is obligated hereunder in his or her capacity as such director or officer. The Stockholder signs solely in its capacity as the record holder and beneficial owner (as further set forth on Annex A hereto) of the Stockholder's Subject Shares, and nothing herein shall limit or affect any actions taken by any Stockholder in the Stockholder's capacity as an officer or director of the Company to the extent specifically permitted by the Merger Agreement. 12. Parent Guarantee. Parent hereby guarantees the due and punctual payment and performance of any and all obligations and liabilities of Merger Sub under or arising out of this Agreement and the transactions contemplated hereby. 13. Specific Performance. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to the remedy of specific performance of such provisions and to an injunction or injunctions and/or such other equitable relief as may be necessary to prevent breaches of this Agreement. 14. Stop Transfer Order; Legend. In furtherance of this Agreement, concurrently herewith, the Stockholder shall, and hereby does authorize the Company or its counsel to, notify the Company's transfer agent that there is a stop transfer order with respect to all of the Subject Shares (and that this Agreement places limits on the voting and transfer of such shares). The Stockholder agrees as promptly as is reasonably practicable to apply a legend to all certificates representing the Subject Shares referring to any and all rights granted to Parent by this Agreement; provided that, no such legend shall restrict the transfer of the Subject Shares if such transfer is made pursuant to the Offer. 15. Adjustments to Prevent Dilution, Etc. In the event of any change in the number of issued and outstanding shares of Subject Shares by reason of any stock dividend, stock split, split-up, recapitalization, merger or other change in the corporate or capital structure of the Company, the term "Subject Shares" shall be deemed to refer to and include the Subject 8 Shares as well as all such stock dividends and distributions and any shares into which or for which any or all of the Subject Shares may be changed or exchanged. In such event, the amount to be paid per share by Parent pursuant to this Agreement shall be proportionately adjusted. 16. General Provisions. (a) Amendments. This Agreement may not be modified, altered, supplemented or amended except by an instrument in writing signed by each of the parties hereto. (b) Notice. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to Parent or Merger Sub in accordance with Section 8.3 of the Merger Agreement and to the Stockholder at the Stockholder's address set forth in Annex A hereto (or to such other address as any party may have furnished to the other parties in writing in accordance herewith). (c) Interpretation. When a reference is made in this Agreement to Sections, such reference shall be to a Section to this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (d) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more of the counterparts have been signed by each of the parties and delivered to the other party, it being understood that each party need not sign the same counterpart. (e) Entire Agreement; No Third-Party Beneficiaries. This Agreement (including, without limitation, the documents and instruments referred to herein), (i) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and (ii) is not intended to confer upon any person or entity other than the parties hereto any rights or remedies hereunder; provided that the Company is an intended third-party beneficiary of Section 3(d). (f) Binding Agreement. This Agreement and the obligations hereunder shall attach to the Subject Shares and shall be binding upon the parties and any person or entity to which legal or beneficial ownership of the Subject Shares shall pass, whether by operation of law or otherwise, including, without limitation, the Stockholder's administrators or successors. Notwithstanding any transfer of Subject Shares, the transferor shall remain liable for the performance of all obligations of the transferor under this Agreement. (g) Governing Law; Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws 9 rules. All parties to this Agreement hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the "Delaware Court"), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement or any of the transactions contemplated hereby, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, irrevocably RL&F Service Corp., One Rodney Square, 10th Floor, 10th and King Streets, Wilmington, Delaware 19801 as its agent in the State of Delaware as such party's agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum or is subject to a jury trial. A prevailing party in any action or proceeding arising out of or in connection with this Agreement or any of the transactions contemplated hereby shall be entitled to reimbursement of its attorneys' fees and costs incurred in such action or proceeding by the other party. (h) Costs and Expenses. Whether or not the Offer or the Merger is consummated, except as otherwise expressly set forth in this Agreement, all costs and expenses incurred in connection with this Agreement and the consummation of the transactions contemplated hereby shall be paid by the party incurring such expenses. (i) Assignment. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of the Stockholder or Merger Sub and Parent, as the case may be, provided (i) that Merger Sub or Parent may assign, in its respective sole discretion its rights and obligations hereunder to any direct or indirect subsidiary of Parent and (ii) that the Stockholder may assign its rights and obligations hereunder to a party that is not making any Acquisition Proposal and is not a competitor of Parent in connection with its transfer of its Shares to such party (the "Successor") if and only if the Successor becomes a party to this Agreement as the Stockholder and assumes all the obligations of the Stockholder hereunder, the Stockholder hereby agreeing that in connection with any such assignment, the Stockholder shall remain responsible and liable for the performance of all obligations under this Agreement by such Successor. (j) Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such 10 invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. 11 IN WITNESS WHEREOF, Parent, Merger Sub and the Stockholder have caused this Agreement to be duly executed as of the date first written above. PARENT MENTOR GRAPHICS CORPORATION By: ------------------------------------ MERGER SUB INDIANA MERGER CORPORATION By: ------------------------------------ STOCKHOLDER --------------------------------------- ANNEX A
OPTIONS OR OTHER RIGHTS SHARES OF OUTSTANDING TO ACQUIRE SHARES STOCKHOLDER'S NAME AND ADDRESS COMMON STOCK OF COMMON STOCK - ------------------------------ --------------------- -----------------------
EX-99.(D)(6) 16 f81012tex99-d6.txt EXHIBIT 99.(D)(6) Exhibit (d)(6) NON-COMPETE AGREEMENT This Non-Compete Agreement (this "Non-Compete Agreement"), dated as of April 23, 2002, is entered into by Mentor Graphics Corporation, an Oregon corporation ("Mentor"), Indiana Merger Corporation, a Delaware corporation and wholly-owned subsidiary of Mentor ("Merger Sub"), Innoveda, Inc., a Delaware corporation ("Innoveda"), and _________________, an individual (the "Principal"). RECITALS A. The Principal is a shareholder and employee of Innoveda. Innoveda has been engaged primarily in the business of designing and manufacturing electronic design automation ("EDA") software (the "Innoveda Business"). B. Mentor is engaged primarily in the business of designing and manufacturing EDA software and hardware, embedded software and cable harness design software (the "Mentor Business"). C. Concurrently with the execution and delivery hereof, Mentor, Merger Sub and Innoveda are entering into an Agreement and Plan of Merger dated as of April 23, 2002 (the "Merger Agreement") pursuant to which Merger Sub will acquire all of the outstanding shares of common stock of Innoveda and will be merged with and into Innoveda with Innoveda continuing as the surviving corporation and a wholly-owned subsidiary of Mentor. D. The Principal acknowledges and agrees that the Principal has technical expertise associated with the Innoveda Business. In addition, the Principal has valuable business contacts with clients and potential clients of the Innoveda Business. Furthermore, the Principal's reputation and goodwill are an integral part of the success of the Innoveda Business throughout the areas where the Innoveda Business is conducted. If the Principal deprives Mentor, Merger Sub or Innoveda of any of the Principal's goodwill, or in any manner uses Innoveda's or the Principal's reputation and goodwill in competition with Mentor, Merger Sub or Innoveda, Mentor, Merger Sub and Innoveda will be deprived of the benefits each has bargained for pursuant to this Non-Compete Agreement and the Merger Agreement. Because the Principal has the ability to compete with Innoveda in the operation of the Innoveda Business and with Mentor in the operation of the Mentor Business, Mentor, Merger Sub and Innoveda desire that the Principal enter into this Non-Compete Agreement. But for the Principal's entering into this Non-Compete Agreement, Mentor, Merger Sub and Innoveda would not have entered into the Merger Agreement. E. The Principal has obtained the advice of its own counsel (and not Innoveda's nor Mentor's nor Merger Sub's) in connection with negotiating and executing this Non-Compete Agreement. AGREEMENT NOW THEREFORE, as a material inducement to Mentor and Merger Sub and Innoveda to enter into the Merger Agreement, the parties hereby agree as follows: 1. Defined Terms. Capitalized terms used herein without definition shall have the meanings ascribed to them in the Merger Agreement. 2. Covenant Not To Compete. For a period from the date hereof to a date that is eighteen (18) months from the later to occur of (i) the Effective Time and (ii) the date of termination or expiration of Principal's employment with Innoveda (the "Non-Competition Period"), the Principal shall not, unless acting with Mentor's prior written consent (which consent may be withheld in Mentor's sole and absolute discretion), directly or indirectly, own, manage, join, operate or control, or participate in the ownership, management, operation or control of, or be engaged as a director, officer, employer, employee, partner, consultant or independent contractor with, or permit the Principal's name to be used by or in connection with, any profit or non-profit business or organization which directly or indirectly competes with (a) the Innoveda Business conducted immediately prior to the Effective Time, (b) the Innoveda Business or the Mentor Business as conducted during the term of the Principal's employment by Innoveda through the date of termination of such employment of the Principal or (c) the Innoveda Business or the Mentor Business as known by the Principal prior to the date of termination of such employment to be or proposed to be conducted by Innoveda, Merger Sub or Mentor prior to the end of the Non-Competition Period, provided, however, that with respect to any Embedded Software Business (as defined below), such Non-Competition Period shall be only twelve (12) months. For purposes of this Section 2, "Embedded Software Business" shall mean any profit or non-profit business or organization which directly or indirectly competes with the Innoveda Business or Mentor Business in the development, manufacture or sale of real-time operating systems, debuggers or compilers, regardless of whether as such organization's primary business or as a division thereof; provided, however, that if the Embedded Software Business is not the primary business of such organization, the Principal may be employed by such organization in a division of such organization that does not participate in the Embedded Software Business. The territory in which such non-compete provisions shall be effective shall be each and every state in the United States and country in the world in which the Innoveda Business or the Mentor Business is conducted. The foregoing shall not, however, prohibit the Principal from making passive investments in less than 1% of the outstanding equity securities in any entity listed for trading on a national stock exchange or quoted on any nationally recognized automated quotation system. 3. Covenant Not to Hire. Except for any person who has been involuntarily terminated by Innoveda, Mentor or Merger Sub or has not been employed by Innoveda, Mentor or Merger Sub within nine months from the date of the proposed hire of such person by Principal, during the Non-Competition Period the Principal shall not hire, as director, officer, 2 employer, employee, partner, consultant, independent contractor or otherwise, any person who during the term of the Principal's employment by Innoveda or Mentor was employed by Mentor, Merger Sub or Innoveda or any affiliate thereof. 4. No Disparagement. During the Non-Competition Period, the Principal will not, and will use reasonable efforts to ensure that the Principal's attorneys, agents or other representatives do not, take any action or make or publish any statement, whether oral or written, which disparages in any way, directly or indirectly, Innoveda, Merger Sub or Mentor or any of the present or former employees or directors of Innoveda, Merger Sub or Mentor. 5. Severability of Provisions. If any covenant set forth in this Non-Compete Agreement is determined by any court to be unenforceable by reason of its extending for too great a period of time or over too great a geographic area, or by reason of its being too extensive in any other respect, such covenant shall be interpreted to extend only for the longest period of time and over the greatest geographic area, and to otherwise have the broadest application, as shall be enforceable. The invalidity or unenforceability of any particular provision of this Non-Compete Agreement shall not affect the other provisions hereof, which shall continue in full force and effect. Without limiting the foregoing, the covenants contained herein shall be construed as separate covenants, covering their respective subject matters, with respect to each of the separate cities, counties and states of the United States, and each other country, and political subdivision thereof, in which Innoveda or Mentor transacts any business 6. Effectiveness. This Non-Compete Agreement shall only become effective at the Effective Time. 7. Notices. Unless otherwise provided herein, any notice, request, instruction or other document to be given hereunder by any party to the other shall be in writing and delivered in person or by courier, telegraphed, telexed or by facsimile transmission or mailed by registered or certified mail, postage prepaid, return receipt requested (such mailed notice to be effective on the date of such receipt is acknowledged), as follows: If to Mentor, Merger Sub or Innoveda: Mentor Graphics Corporation 8005 S.W. Boeckman Road Wilsonville, Oregon 97070-7777 Attention: General Counsel Telephone: (503) 685-7000 Fax: (503) 685-1485 With a copy to: Latham & Watkins 135 Commonwealth Drive Menlo Park, California 94025-3656 3 Attn: Christopher L. Kaufman, Esq. Telephone: (650) 328-4600 Fax: (650) 463-2600 If to the Principal: ____________________________ ____________________________ Telephone:__________________ Fax:________________________ With a copy to: ____________________________ ____________________________ ____________________________ ____________________________ Any party may, from time to time, designate any other address to which any such notice to it, him or her shall be sent. Any such notice shall be deemed to have been delivered upon receipt. 7. Incorporation of Recitals. The Recitals to this Non-Compete Agreement are incorporated fully herein and shall be treated as an integral part of this Non-Compete Agreement. 8. Entire Agreement; Amendments and Waivers. This Non-Compete Agreement constitutes the complete, final and exclusive statement of the agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. No amendment, supplement, modification, rescission or waiver of this Non-Compete Agreement shall be binding unless executed in writing by the parties. No waiver of any of the provisions of this Non-Compete Agreement shall be deemed or shall constitute a continuing waiver unless otherwise expressly provided. The parties expressly acknowledge that they have not relied upon any prior agreements, understandings, negotiations and discussions, whether oral or written. 9. Assignment. The Principal agrees that Mentor, Merger Sub or Innoveda may assign their respective rights and obligations under this Non-Compete Agreement to any successor-in-interest. Except as expressly provided in this paragraph, no party may assign its rights and obligations under this Non-Compete Agreement; and any attempt to do so shall be 4 void. Subject to the foregoing, the rights and obligations of the parties under this Non-Compete Agreement shall inure to the benefit of and be binding upon their respective successors and assigns. 10. Injunctive Relief; Costs. The Principal agrees that (a) the provisions of Sections 2, 3 and 4 are reasonable and necessary to protect the legitimate interests of Mentor, Merger Sub and Innoveda, and (b) any violation of Sections 2 or 3 will result in irreparable injury to Mentor, Merger Sub and Innoveda, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such violation would not be reasonable or adequate compensation to Mentor, Merger Sub and Innoveda for such a violation. Accordingly, the Principal agrees that if the Principal violates the provisions of Section 2 or 3, Mentor, Merger Sub or Innoveda shall be entitled to specific performance and injunctive relief, without posting bond or other security, and without the necessity of proving actual damages, in addition to any other remedy which may be available at law or in equity, including consequential damages. If the Principal shall fail to perform any of the Principal's obligations under this Non-Compete Agreement, the parties hereby agree that all reasonable fees and expenses, including reasonable attorneys' fees, which may be incurred by Mentor, Merger Sub or Innoveda in enforcing this Non-Compete Agreement and incurred by the Principal in defending against such enforcement, shall be paid by the prevailing party. 11. Choice of Law. This Non-Compete Agreement shall be construed, interpreted and the rights of the parties determined in accordance with the laws of the Commonwealth of Massachusetts, as applied to agreements among Massachusetts residents entered into and wholly to be performed within the Commonwealth of Massachusetts (without reference to any choice of law rules that would require the application of the laws of any other jurisdiction). 12. Captions. All Section titles or captions contained in this Non-Compete Agreement are for convenience only and shall not be deemed as part of this Non-Compete Agreement. [This space left blank intentionally] 5 IN WITNESS WHEREOF, the parties hereto have executed this Non-Compete Agreement as of the day and year first above written. MENTOR GRAPHICS CORPORATION By: --------------------------------- Name: ---------------------------- Title: --------------------------- INDIANA MERGER CORPORATION By: --------------------------------- Name: ---------------------------- Title: --------------------------- INNOVEDA, INC. By: --------------------------------- Name: ---------------------------- Title: --------------------------- PRINCIPAL ------------------------------------ , an individual --------------------- -----END PRIVACY-ENHANCED MESSAGE-----