OPTION AGREEMENT
THIS OPTION AGREEMENT is entered into as of October 3, 1996 by and
between CADENCE DESIGN SYSTEMS, INC., a Delaware corporation ("Parent"), and J.
XXXXXX XXXXX ("Stockholder").
RECITALS
A. Parent, HARBOR ACQUISITION SUB, INC., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and HIGH LEVEL DESIGN SYSTEMS,
INC., a Delaware corporation (the "Company"), are entering into an Agreement and
Plan of Merger and Reorganization of even date herewith (as amended from time to
time, the "Reorganization Agreement"; capitalized terms used but not otherwise
defined in this Option Agreement have the meanings assigned to such terms in the
Reorganization Agreement), which provides (subject to the conditions set forth
therein) for the merger of Merger Sub into the Company (the "Merger").
B. As of the date hereof, Stockholder owns, of record and
beneficially, the number of shares of Company Common Stock set forth below
Stockholder's name on the signature page hereof (all such shares being referred
to herein as the "Subject Shares").
C. As a condition to the willingness of Parent and Merger Sub to
enter into the Reorganization Agreement, Parent and Merger Sub have required
that Stockholder agree, and in order to induce Parent and Merger Sub to enter
into the Reorganization Agreement Stockholder has agreed, to enter into this
Option Agreement as well as the Voting Agreement of even date herewith by and
between Parent and Stockholder.
AGREEMENT
The parties to this Option Agreement, intending to be legally bound,
agree as follows:
SECTION 1. GRANT OF OPTION AND EXERCISE
1.1 GRANT OF OPTION. Stockholder hereby grants to Parent an
irrevocable option (the "Option") to purchase, on the terms and subject to the
provisions set forth herein, all, but not less than all, the Subject Shares at a
price per Subject Share equal to $8.15, subject to appropriate adjustment if
between the date of this Option Agreement and the Closing Date (as defined in
Section 1.3), the outstanding shares of Company Common Stock are changed into a
different number or class of shares by reason of any stock split, stock
dividend, reverse stock split, reclassification, recapitalization or other
similar transaction (the "Purchase Price").
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1.2 EXERCISE OF OPTION.
(a) Parent may exercise the Option with respect to the Subject
Shares at any time following the occurrence of a Purchase Event (as defined in
Section 1.2(b)) and prior to the Termination Date (as defined in Section
1.2(c)). Parent's right to purchase Subject Shares with respect to which it has
exercised the Option shall not terminate on the Termination Date; accordingly,
if Parent exercises the Option on or prior to the Termination Date, then Parent
shall be entitled to purchase the Subject Shares.
(b) For purposes of this Agreement, a "Purchase Event" shall be
deemed to have occurred upon the earlier of the following:
(i) the date of the Company Stockholders' Meeting, if
(A) an Acquisition Proposal shall have been publicly announced (and not
publicly withdrawn) prior to the Company Stockholders' Agreement and (B)
the Reorganization Agreement and the Merger shall not have been adopted
and approved at such meeting by the Required Vote; or
(ii) the occurrence of a Triggering Event.
; provided in each case that the Reorganization Agreement is terminated.
(c) For purposes of this Agreement, "Termination Date" shall
mean the earliest of the following:
(i) the date on which the Merger becomes effective;
(ii) 180 days after the date on which Parent receives
written notice from Stockholder or the Company of the occurrence of a
Purchase Event; or
(iii) the date on which the Reorganization Agreement is
validly terminated pursuant to Section 8.1 thereof, if a Purchase Event
shall not have occurred on or prior to such date;
PROVIDED, HOWEVER, that with respect to clause "(ii)" above, if the Option
cannot be exercised prior to the end of such 180-day period by reason of any
applicable judgment, decree, order, material Legal Requirement or other material
legal impediment, then the Termination Date shall be extended until the date 30
days after the date on which such impediment is removed.
1.3 CLOSING. In the event Parent wishes to exercise the Option,
Parent shall send to Stockholder a written notice (the date of which being
herein referred to as the "Notice Date") specifying (a) the place at which the
Subject Shares are to be purchased and (b) the date on which the Subject Shares
are to be purchased, which shall not be earlier than one business day nor later
than ten business days after the Notice Date. The closing of the purchase of
such Subject Shares (the "Closing") shall take place at the place specified in
such written notice and
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on the date specified in such written notice (the "Closing Date"); PROVIDED,
HOWEVER, that: (i) if such purchase cannot be consummated by reason of any
applicable judgment, decree, order, material Legal Requirement or other material
legal impediment, the Closing Date may be extended by Parent to a date not more
than 30 days after the date on which such impediment is removed; and (ii) if
prior notification to or approval of any Governmental Body is required in
connection with such purchase, Stockholder shall promptly cause to be filed the
required notice or application for approval and shall expeditiously process the
same (and Stockholder shall cooperate with Parent in the filing of any such
notice or application required to be filed by Parent and the obtaining of any
such approval required to be obtained by Parent), and the Closing Date may be
extended by Parent to a date not more than 30 days after the later of (A) the
date on which any required notification or waiting period has expired or been
validly terminated or (B) the date on which any required approval has been
obtained.
1.4 PAYMENT AND DELIVERY OF CERTIFICATES. On the Closing Date, (i)
Parent will deliver to Stockholder the Purchase Price payable for the Subject
Shares and (ii) Stockholder shall deliver to Parent certificates representing
the Subject Shares, duly endorsed in blank or accompanied by stock powers duly
executed by Stockholder in blank, in proper form for transfer, with appropriate
signature guarantees.
1.5 DISTRIBUTIONS. Any dividends or other distributions (whether
payable in cash, stock or otherwise) by the Company with respect to the Subject
Shares purchased pursuant to the Option with a record date on or after the
Notice Date will belong to Parent. If any such dividend or distribution
belonging to Parent is paid by the Company to Stockholder, Stockholder shall
hold such dividend or distribution in trust for the benefit of Parent and shall
promptly remit such dividend or distribution to Parent in exactly the form
received, accompanied by appropriate instruments of transfer.
1.6 VOTING AGREEMENT.
(a) Subject to Section 1.6(b), upon any exercise of the Option
by Parent, Parent shall enter into a voting agreement pursuant to which Parent
shall agree that until the tenth anniversary of the Closing Date, at any meeting
of the stockholders of the Company, however called, and in any written action by
consent of stockholders of the Company, Parent shall vote the Subject Shares as
directed in writing by Stockholder.
(b) Notwithstanding the foregoing, if an Acquisition Proposal
is made and publicly announced at any time prior to the Company Stockholders'
Meeting and such Acquisition Proposal is not publicly withdrawn prior to such
Company Stockholders' Meeting, and if the Reorganization Agreement and the
Merger are not approved at such meeting by the Required Vote, then prior to the
date that is 180 days after the valid termination of the Reorganization
Agreement, at any meeting of the stockholders of the Company, however called,
and in any written action by consent of stockholders of the Company, Parent
shall be entitled to vote the Subject Shares:
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(i) against any Acquisition Proposal (including any
Acquisition Proposal that is different from any Acquisition Proposal that
is made and publicly announced at any time prior to the Company
Stockholders' Meeting) and any related transaction or agreement; and
(ii) against any action which is intended, or is likely,
to facilitate the consummation of any transaction contemplated by any
Acquisition Proposal (including any Acquisition Proposal that is
different from any Acquisition Proposal that is made and publicly
announced at any time prior to the Company Stockholders' Meeting).
Stockholder shall not enter into any agreement or understanding with any Person
prior to the earlier to occur of the valid termination of the Reorganization
Agreement or the Effective Time to vote or give instructions in any manner
inconsistent with clause "(i)" or "(ii)" of the preceding sentence. For
purposes of this Section 1.6, an Acquisition Proposal shall be deemed to have
been "publicly withdrawn" only if (i) acting in good faith, the Person who made
such Acquisition Proposal publicly announces the withdrawal of such Acquisition
Proposal and (ii) it is not reasonably expected that such Acquisition Proposal
will be resubmitted or that such Person will make, submit or announce any other
Acquisition Proposal.
1.7 SALE OF SUBJECT SHARES. In the event Parent tenders, sells or
otherwise transfers any of the Subject Shares prior to the tenth anniversary of
the Closing Date, Parent shall remit to Stockholder 50% of the net proceeds, if
any, received by Parent on each Subject Share in excess of $8.15 per Subject
Share (subject to appropriate adjustments if between the date of this Option
Agreement and the date of such sale, the outstanding shares of Company Common
Stock are changed into a different number or class of shares by reason of any
stock split, stock dividend, reverse stock split, reclassification,
recapitalization or other similar transaction).
SECTION 2. TRANSFER OF SUBJECT SHARES
2.1 NO DISPOSITION OR ENCUMBRANCE OF SUBJECT SHARES. Stockholder
hereby covenants and agrees that, from the date hereof to the Termination Date,
Stockholder will not, directly or indirectly, (a) offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise dispose or
transfer (or announce any offer, sale, offer of sale, contract of sale or grant
of any option to purchase or other disposition or transfer) any Subject Shares
to any Person other than Parent or Parent's designee, (b) create or permit to
exist any Encumbrance of any of the Subject Shares or (c) reduce his beneficial
ownership of, interest in, or risk relating to the Subject Shares.
2.2 TRANSFER OF VOTING RIGHTS. Stockholder covenants and agrees that,
during the period from the date hereof through the Termination Date, Stockholder
will not deposit any Subject Shares into a voting trust or grant a proxy or
enter into a voting agreement with respect to any Subject Shares.
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SECTION 3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder hereby represents and warrants to Parent as follows:
3.1 DUE AUTHORIZATION. Stockholder has all requisite power to execute
and deliver this Option Agreement, to grant the Option and to consummate the
transactions contemplated hereby. This Option Agreement has been duly executed
and delivered by or on behalf of Stockholder and, assuming its due
authorization, execution and delivery by Parent, constitutes a legal, valid and
binding obligation of Stockholder, enforceable against Stockholder in accordance
with its terms except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or affecting
creditors' rights from time to time in effect and subject to general equity
principles and to limitations on the availability of equitable relief.
3.2 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Option Agreement by
Stockholder do not, and the performance of this Option Agreement by Stockholder
will not: (i) conflict with or violate any current Legal Requirement, order,
decree or judgment applicable to Stockholder or by which it or any of its
properties is bound or affected; or (ii) result in any breach of or constitute a
default (with notice or lapse of time, or both) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of an Encumbrance on the Subject Shares, pursuant to any indenture
or other loan document provisions or other Contract, license, franchise, permit
or other instrument or obligation to which such Stockholder is a party or by
which Stockholder or any of his properties is bound or affected.
(b) The execution and delivery of this Option Agreement by
Stockholder do not, and the performance of this Option Agreement by Stockholder
will not, require any Consent of any Person except for any Governmental
Authorization required under any law not currently in effect.
3.3 TITLE TO SUBJECT SHARES. Stockholder owns of record and
beneficially the Subject Shares set forth under Stockholder's name on the
signature page hereof and does not directly or indirectly own, either
beneficially or of record, any shares of Company Capital Stock, or rights to
acquire any shares of Company Capital Stock, other than the Subject Shares set
forth below Stockholder's name on the signature page hereof and Company Capital
Stock issuable upon exercise of options granted under the Company's 1993 Stock
Option Plan and 1995 Special Nonstatutory Stock Option Plan. Stockholder has,
and the transfer by Stockholder of the Subject Shares hereunder will pass, good
and marketable title to the Subject Shares free and clear of any Encumbrance.
3.4 NO BROKERS. Except for Deutsche Xxxxxx Xxxxxxx and Xxxxxxx, Xxxxx
& Co., no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or
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commission in connection with the transactions contemplated by this Option
Agreement based upon arrangements made by or on behalf of Stockholder.
3.5 ACCURACY OF REPRESENTATIONS. The representations and warranties
contained in this Option Agreement are accurate in all material respects as of
the date of this Option Agreement, will be accurate in all material respects at
all times through the Closing Date and will be accurate in all material respects
as of the Closing Date as if made on that date.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to Stockholder that Parent has the
absolute and unrestricted right, power and authority to perform its obligations
under this Option Agreement; and the execution, delivery and performance by
Parent of this Option Agreement have been duly authorized by all necessary
action on the part of Parent and its board of directors. This Option Agreement
constitutes the legal, valid and binding obligation of Parent, enforceable
against it in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
SECTION 5. COVENANTS OF STOCKHOLDER
5.1 FURTHER ASSURANCES. If Parent shall exercise the Option in
accordance with the terms of this Option Agreement, from time to time and
without additional consideration, Stockholder will execute and deliver, or cause
to be executed and delivered, such additional or further transfers, assignments,
endorsements, consents and other instruments as Parent may reasonably request
for the purpose of effectively carrying out the transactions contemplated by
this Option Agreement, including the transfer of the Subject Shares to Parent
and the release of any and all Encumbrances with respect thereto.
5.2 LEGENDS.
(a) Stockholder shall instruct the Company to cause each
certificate of Stockholder evidencing the Subject Shares to bear a legend in the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE SOLD, EXCHANGED OR OTHERWISE TRANSFERRED OR
DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS AND
CONDITIONS OF THE OPTION AGREEMENT DATED AS OF
OCTOBER 3, 1996, AS IT MAY BE AMENDED, BETWEEN THE
ISSUER AND THE REGISTERED HOLDER OF THIS
CERTIFICATE, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER.
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(b) In the event that the Subject Shares shall cease to be
subject to the restrictions on transfer set forth in this Option Agreement, the
Company shall, upon the written request of the holder thereof, issue to such
holder a new certificate evidencing such Subject Shares without the legend
required by Section 5.2(a).
SECTION 6. MISCELLANEOUS
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements made by Stockholder and the Company
in this Option Agreement shall survive the Closing Date.
6.2 INDEMNIFICATION.
(a) Without in any way limiting any of the rights or remedies
otherwise available to Parent, Stockholder shall hold harmless and indemnify
Parent from and against, and shall compensate and reimburse Parent for, any
Damages which are directly or indirectly suffered or incurred at any time by
Parent, or to which Parent otherwise becomes subject (regardless of whether or
not such Damages relate to a third-party claim), and that arise from or are
directly or indirectly connected with any breach of any representation,
warranty, covenant or obligation of Stockholder contained herein.
(b) Without in any way limiting any of the rights or remedies
otherwise available to Stockholder, Parent shall hold harmless and indemnify
Stockholder from and against, and shall compensate and reimburse Stockholder
for, any Damages which are directly or indirectly suffered or incurred at any
time by Stockholder, or to which Stockholder otherwise becomes subject
(regardless of whether or not such Damages relate to a third-party claim), and
that arise from or are directly or indirectly connected with any breach of any
covenant or obligation of Parent contained herein.
6.3 RELATIONSHIP TO VOTING AGREEMENT. Nothing in this Option
Agreement is intended to limit or otherwise impact the provisions of the Voting
Agreement of even date herewith by and between Parent and Stockholder.
6.4 EXPENSES. Except as otherwise provided herein, all costs and
expenses incurred in connection with the transactions contemplated by this
Option Agreement shall be paid by the party incurring such costs and expenses.
6.5 NOTICES. All notices or other communications under this Option
Agreement shall be in writing and shall be given by delivery in person, by
facsimile, cable, telegram, telex or other standard form of telecommunications,
or by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows (or such other address for a party as shall be specified in
a notice given in accordance with this Section 6.5) and shall be deemed to have
been given one business day after transmission by facsimile, cable, telegram,
telex of other standard form of telecommunications or four days after deposit in
the U.S. mail:
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If to Stockholder, at the address or facsimile number of Stockholder set
forth on the signature page hereto, with a copy to:
c/o High Level Design Systems, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attention: Chief Executive Officer
Facsimile No.:(000) 000-0000
and
Wilson, Sonsini, Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to Parent or Merger Sub:
Cadence Design Systems, Inc.
000 Xxxxx Xxxx Xxxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
With a copy to:
Cooley Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
6.6 SEVERABILITY. Any term or provision of this Option Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Option Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Option Agreement in any
other jurisdiction. If any provision of this Option Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
6.7 ENTIRE AGREEMENT. This Option Agreement and any documents
delivered by the parties in connection herewith constitute the entire agreement
among the parties with respect to
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the subject matter hereof and supersede all prior agreements and understandings
among the parties with respect thereto. No addition to or modification of any
provision of this Option Agreement shall be binding upon any party hereto unless
made in writing and signed by all parties hereto.
6.8 ASSIGNMENT, BINDING EFFECT. Except as provided herein, neither
this Option Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties, except that
Parent or Merger Sub may assign all or any of their rights and obligations
hereunder to any affiliate of Parent, provided that no such assignment shall
relieve Parent or Merger Sub of its obligations hereunder if such assignee does
not perform such obligations. Subject to the preceding sentence, this Option
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Option Agreement to the contrary, nothing in this Option
Agreement, expressed or implied, is intended to confer on any Person other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Option
Agreement.
6.9 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Option
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Option Agreement and
to enforce specifically the terms and provisions hereof in any Delaware Court,
this being in addition to any other remedy to which they are entitled at law or
in equity.
6.10 GOVERNING LAW. This Option Agreement shall be governed in all
respects by the laws of the State of Delaware, as applied to contracts entered
into and to be performed entirely within the State of Delaware.
6.11 HEADINGS. Headings of the Sections of this Option Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
6.12 COUNTERPARTS. This Option Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed by all
of the parties hereto.
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IN WITNESS WHEREOF, Parent and Stockholder have caused this Option
Agreement to be executed, as of the date first written above.
CADENCE DESIGN SYSTEMS, INC.
By: /s/ X.X. Xxxxx XxXxxxxxx
---------------------------
Name: X.X. Xxxxx XxXxxxxxx
Title: Vice President and
General Counsel
/s/ J. Xxxxxx Xxxxx
--------------------------------------
J. Xxxxxx Xxxxx
Address: 00000 Xxxxx Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Number of Shares of Company
Common Stock: 1,800,000
-----------------
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