CADENCE DESIGN SYSTEMS, INC.
1997 NONSTATUTORY STOCK OPTION PLAN
AS ADOPTED EFFECTIVE ON MAY 1, 1997
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and
Consultants (as such terms are defined below) of the Company and its
Affiliates, and to promote the success of the Company's business.
Only "nonstatutory stock options" may be granted hereunder.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "AFFILIATE" shall mean any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code, or such other parent
corporation or subsidiary corporation designated by the Board.
(b) "BOARD" shall mean the Committee, if one has been appointed, or
the Board of Directors, if no Committee is appointed.
(c) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one
is appointed.
(f) "COMMON STOCK" shall mean the Common Stock of the Company.
(g) "COMPANY" shall mean CADENCE DESIGN SYSTEMS, INC., a Delaware
corporation.
(h) "CONSULTANT" shall mean any consultants, independent contractors
or advisers to the Company or an Affiliate (provided that such persons render
bona fide services not in connection with the offering and sale of securities
in capital raising transactions) excluding officers and directors of the
Company and stockholders beneficially owning 10% or more of the Company's
Common Stock.
(i) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" shall mean the
absence of any interruption or termination of service to the Company or an
Affiliate, whether as an Employee or Consultant. The Board or the Chief
Executive Officer of the Company may
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determine, in that party's sole discretion, whether Continuous Status as an
Employee or Consultant shall be considered interrupted in the case of: (i)
any leave of absence approved by the Board or the Chief Executive Officer of
the Company, including sick leave, military leave, or any other personal
leave; or (ii) transfers between the Company, Affiliates or their successors.
(j) "EMPLOYEE" shall mean any person employed by the Company or by
any Affiliate, excluding officers and directors of the Company and
stockholders beneficially owning 10% or more of the Company's Common Stock.
(k) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
(l) "NONSTATUTORY STOCK OPTION" shall mean an Option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(m) "OPTION" shall mean a nonstatutory stock option granted pursuant
to the Plan.
(n) "OPTION AGREEMENT" shall mean a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and
conditions of the Plan.
(o) "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.
(p) "OPTIONEE" shall mean an Employee or Consultant who receives an
Option.
(q) "PLAN" shall mean this 1997 Nonstatutory Stock Option Plan.
(r) "SHARE" shall mean a share of Common Stock, as adjusted in
accordance with Section 11 of the Plan.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is ten million (10,000,000) shares of Common Stock. The
Shares may be authorized, but unissued, or reacquired Common Stock. If an
Option should expire or become unexercisable for any reason without having
been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
2.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE. The Plan shall be administered by the Board of
Directors. The Board of Directors may appoint a Committee consisting of not
less than two members of the Board of Directors to administer the Plan on
behalf of the Board of Directors, subject to such terms and conditions as the
Board of Directors may prescribe. Once appointed, the Committee shall
continue to serve until otherwise directed by the Board of Directors. From
time to time the Board of Directors may increase the size of the Committee
and appoint additional members thereof, remove members (with or without
cause), and appoint new members in substitution therefor, fill vacancies
however caused and remove all members of the Committee, and thereafter
directly administer the Plan. Notwithstanding anything in this Section 4 to
the contrary, at any time the Board of Directors or the Committee may
delegate to a committee of one or more members of the Board of Directors the
authority to grant Options to all Employees and Consultants or any portion or
class thereof.
(b) POWERS OF THE BOARD. Subject to the provisions of the Plan, the
Board shall have such authority with regard to the Plan and the options as
determined by the Board of Directors, including the authority, in its
discretion: (i) to grant options under the Plan, provided, however, that only
nonstatutory options may be granted under the Plan; (ii) to determine, upon
review of relevant information and in accordance with Section 8(c) of the
Plan, the fair market value of the Common Stock; (iii) to determine the
exercise price per share of Options to be granted, which exercise price shall
be determined in accordance with Section 8(a) of the Plan; (iv) to determine
the Employees or Consultants to whom, and the time or times at which, Options
shall be granted and the number of Shares to be represented by each Option,
provided that no Options may be granted to persons who are neither Employees
nor Consultants; (v) to interpret the Plan; (vi) to prescribe, amend and
rescind rules and regulations relating to the Plan; (vii) to determine the
terms and provisions of each Option granted (which need not be identical) in
accordance with the Plan, and, with the consent of the holder thereof with
respect to any adverse change, modify or amend each Option; (viii) to
accelerate or defer (the latter with the consent of the Optionee) the
exercise date and vesting of any Option; (ix) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the
grant of an Option previously granted by the Board; and (x) to make all other
determinations deemed necessary or advisable for the administration of the
Plan.
(c) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and
any other holders of any Options granted under the Plan.
5. ELIGIBILITY. Options may be granted only to Employees or Consultants
as defined in Section 2 hereof. An Employee or Consultant who has been
granted an Option may, if he or she is otherwise eligible, be granted an
additional Option or Options. Notwithstanding the foregoing, no Employee who
is an executive officer of the Company within the meaning of Section 16 of
the Exchange Act or who is a member of the Board of Directors shall be
entitled to receive the grant of an Option under the Plan.
3.
The Plan shall not confer upon any Optionee any right with respect to
continuation of employment or consultancy by the Company, nor shall it
interfere in any way with the Optionee's right or the Company's right to
terminate the Optionee's employment at any time or the Optionee's consultancy
pursuant to the terms of the Consultant's agreement with the Company.
6. TERM OF THE PLAN. The Plan shall become effective upon its adoption
by the Board of Directors. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 13 of the Plan.
7. TERM OF OPTION. The term of each Option shall be ten (10) years from
the date of grant thereof or such shorter term as may be provided in the
Option Agreement.
8. EXERCISE PRICE, CONSIDERATION AND VESTING.
(a) EXERCISE PRICE. The per Share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be no less than 100% of the
fair market value per Share on the date of grant.
(b) FAIR MARKET VALUE. The fair market value shall be determined by
the Board in its discretion; provided however, that where there is a public
market for the Common Stock, the fair market value per Share shall be the
average of the high and low prices of the Common Stock on the date of grant,
as reported on the New York Stock Exchange.
(c) CONSIDERATION. The consideration to be paid for the Shares to
be issued upon exercise of an Option, including the method of payment, shall
be determined by the Board and may consist entirely of (i) cash or check;
(ii) promissory note (except that payment of the common stock's "par value",
as defined in the Delaware General Corporation Law, shall not be made by
deferred payment); (iii) other shares of the Common Stock of the Company
having a fair market value on the date of surrender equal to the aggregate
exercise price of the Shares as to which the Option shall be exercised,
including by delivering to the Company an attestation of ownership of owned
and unencumbered shares of the Common Stock of the Company in a form approved
by the Company; (iv) payment pursuant to a program developed under Regulation
T as promulgated by the Federal Reserve Board which, prior to the issuance of
Common Stock, results in either the receipt of cash (or check) by the Company
or the receipt of irrevocable instructions to pay the aggregate exercise
price to the Company from the sales proceeds; (v) any combination of such
methods of payment; or (vi) such other consideration and method of payment
for the issuance of Shares to the extent permitted under applicable law. In
making its determination as to the type of consideration to accept, the Board
shall consider if acceptance of such consideration may be reasonably expected
to benefit the Company.
(d) VESTING. The total number of Shares subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not,
be equal). The Option Agreement may provide that, from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the Shares allotted to that
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period, and may be exercised with respect to some or all of the Shares
allotted to such period and/or any prior period as to which the Option became
vested but was not fully exercised. The Option may be subject to such other
terms and conditions on the time or times when it may be exercised (which may
be based on performance or other criteria) as the Board may deem appropriate.
The provisions of this Section 8(e) are subject to any Option provisions
governing the minimum number of Shares as to which an Option may be
exercised. The vesting schedule based on continuous service shall be no
shorter than the following schedule: 1/5th (20%) of the Shares will vest
(become exercisable) one year after the date of grant and 1/60th of the
Shares will then vest (and become exercisable) each month thereafter until
either (i) the Optionee ceases to provide services to the Company or its
Affiliates for any reason, or (ii) the Option becomes fully vested.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible under
the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 11 of the
Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes
of the Plan and for sale under the Option, by the number of Shares as to
which the Option is exercised.
The Option may, but need not, include a provision whereby the
Optionee may elect at any time while an Employee or Consultant (or while an
officer or director of the Company) to exercise the Option as to any part or
all of the shares subject to the Option, subject to a repurchase right in
favor of the Company on such terms as the Board shall establish.
(b) TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. If an
Optionee ceases to serve as an Employee or Consultant for any reason other
than death or disability, the Optionee may, but only within three (3) months
(or such other period of time as is determined
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by the Board) after the date the Optionee ceases to be an Employee or
Consultant, exercise the Option to the extent that the Optionee was entitled
to exercise it at the date of such termination. To the extent that the
Optionee was not entitled to exercise the Option at the date of such
termination, or if the Optionee does not exercise such Option (which the
Optionee was entitled to exercise) within the time specified herein, the
Option shall terminate.
(c) DEATH OF OPTIONEE. In the event of the death of an Optionee
during the term of the Option who is at the time of his or her death an
Employee or Consultant and who shall have been in Continuous Status as an
Employee or Consultant since the date of grant of the Option, the Option may
be exercised at any time within twelve (12) months (or such other period of
time as is determined by the Board) following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, to the extent that the Optionee was
entitled to exercise it at the date of such termination. To the extent that
the Optionee was not entitled to exercise the Option at the date of such
termination, or if the Option is not exercised (to the extent the Optionee
was entitled to exercise) within the time specified herein, the Option shall
terminate.
(d) DISABILITY OF OPTIONEE. In the event of the disability of an
Optionee during the term of the Option who is at the time of his or her
disability an Employee or Consultant and who shall have been in Continuous
Status as an Employee or Consultant since the date of grant of the Option,
the Optionee may, but only within twelve (12) months (or such other period of
time as is determined by the Board) after the date the Optionee ceases to be
an Employee or Consultant on account of such disability, exercise the Option
to the extent that the Optionee was entitled to exercise it at the date of
such termination. To the extent that the Optionee was not entitled to
exercise the Option at the date of such termination, or if the Optionee does
not exercise such Option (which the Optionee was entitled to exercise) within
the time specified herein, the Option shall terminate.
(e) WITHHOLDING. To the extent provided by the terms of the Option
Agreement, the Optionee may satisfy any federal, state or local tax
withholding obligation relating to the exercise of such Option by any of the
following means or by a combination of such means: (i) tendering a cash
payment; (ii) authorizing the Company to withhold Shares from the Shares
otherwise issuable to the Optionee as a result of the exercise of the Option;
or (iii) delivering to the Company owned and unencumbered shares of the
common stock of the Company.
10. TRANSFERABILITY OF OPTIONS. Except as otherwise expressly provided
in the terms of the Option Agreement, the Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than
by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee. Notwithstanding
the foregoing, the Optionee may, by delivering written notice to the Company,
in a form satisfactory to the Company, designate a third party who, in the
event of the death of the Optionee, shall thereafter be entitled to exercise
the Option.
6.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. The number of
Shares covered by each outstanding Option, and the number of Shares which
have been authorized for issuance under the Plan but as to which no Options
have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per Share
covered by each such outstanding Option, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split or the payment of a stock dividend with respect
to the Common Stock or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to an Option.
For purposes of the Plan, a "Change in Control" shall be deemed to occur
upon the consummation of any one of the following events: (a) a sale of all
or substantially all of the assets of the Company; (b) a merger or
consolidation in which the Company is not the surviving corporation (other
than a transaction the principal purpose of which is to change the state of
the Company's incorporation or a transaction in which the voting securities
of the Company are exchanged for beneficial ownership of at least 50% of the
voting securities of the controlling acquiring corporation); (c) a merger or
consolidation in which the Company is the surviving corporation and less than
50% of the voting securities of the Company which are outstanding immediately
after the consummation of such transaction are beneficially owned, directly
or indirectly, by the persons who owned such voting securities immediately
prior to such transaction; (d) any transaction or series of related
transactions after which any person (as such term is used in Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended), other than any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
subsidiary of the Company, becomes the beneficial owner of voting securities
of the Company representing 40% or more of the combined voting power of all
of the voting securities of the Company; (e) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the membership of the Company's Board of Directors ("Incumbent Directors")
cease for any reason to have authority to cast at least a majority of the
votes which all directors on the Board of Directors are entitled to cast,
unless the election, or the nomination for election by the Company's
stockholders, of a new director was approved by a vote of at least two-thirds
of the votes entitled to be cast by the Incumbent Directors, in which case
such director shall also be treated as an Incumbent Director in the future;
or (f) the liquidation or dissolution of the Company.
In the event of a Change in Control, then: (a) any surviving or acquiring
corporation shall assume Options outstanding under the Plan or shall
substitute similar options (including an option to acquire the same
consideration paid to stockholders in the transaction described in this
Section 11 for those outstanding under the Plan, or (b) in the event any
surviving or acquiring corporation refuses to assume such Options or to
substitute similar options for those outstanding
7.
under the Plan, (i) with respect to Options held by persons then performing
services as Employees or Consultants, the vesting of such Options and the
time during which such Options may be exercised shall be accelerated prior to
such event and the Options terminated if not exercised after such
acceleration and at or prior to such event, and (ii) with respect to any
other Options outstanding under the Plan, such Options shall be terminated if
not exercised prior to such event.
Notwithstanding the foregoing, the Board shall at all times have the
complete and sole discretion to accelerate the vesting and exercisability of
some or all of the shares of Common Stock subject to any or all of then
outstanding Options granted under the Plan and to establish the date as of
which any such Option shall terminate (and all other terms and conditions
relating to such termination.)
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Board makes the determination granting
such Option. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem advisable.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated unless mutually agreed otherwise between the Optionee
and the Board, which agreement must be in writing and signed by the Optionee
and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. The Company may require any
Optionee, or any person to whom an Option is transferred under Section 10, as
a condition of exercising any such Option, (i) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced
in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits
and risks of exercising the Option; and (ii) to give written assurances
satisfactory to the Company stating that such person is acquiring the Shares
subject to the Option for such person's own account and not with any present
intention of selling or otherwise distributing the Shares. The foregoing
requirements, and any assurances given pursuant to such requirements, shall
be inoperative if (1) the issuance of the Shares upon the exercise of the
Option has been registered under a then currently effective registration
statement under the Securities Act of 1933, as amended, or (2) as to any
particular requirement, a determination is made by counsel for the Company
that such requirement need not be met in the circumstances under the then
applicable securities laws. The Company may require the Optionee to provide
such other representations, written assurances or information which the
Company
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shall determine is necessary, desirable or appropriate to comply with
applicable securities and other laws as a condition of granting an Option to
such Optionee or permitting the Optionee to exercise such Option. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including,
but not limited to, legends restricting the transfer of the shares.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel
to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue
or sell such Shares as to which such requisite authority shall not have been
obtained.
16. OPTION AGREEMENT. Options shall be evidenced by written Option
Agreements in such form or forms as the Board or the Committee shall approve.
17. EFFECTIVE DATE. The Plan shall become effective on May 1, 1997.
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