Document:

exv10w86

 

Exhibit
10.86

Morgan Stanley & Co. International Limited

c/o Morgan Stanley Bank

1585 Broadway

New York, NY 10036

(212)761-4000

December 14,
2006

To:
Cadence Design Systems, Inc.

Bldg. 5, MS 5B1 

2655 Seely Avenue 

San Jose, CA 95134 

Attention: Legal Department 

Telephone No.: (408) 943-1234 

Facsimile No.: (408) 943-0513

Re: Warrants

Reference:      CEDGP8

     The
purpose of this Confirmation (this “Confirmation”) is to confirm the terms and conditions
of the Warrants issued by Cadence Design Systems, Inc., a Delaware
corporation (“Company”), to
Morgan Stanley & Co. International Limited
(“Dealer”), represented by Morgan Stanley Bank
(“Agent”), as its agent, on the Trade Date specified below
(the “Transaction”). This Confirmation,
constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below. This
Confirmation shall replace any previous letter and serve as the final documentation for this
Transaction.

     The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the
“Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc.,
are incorporated into this Confirmation. In the event of any inconsistency between the Equity
Definitions and this Confirmation, this Confirmation shall govern. This Transaction shall be deemed
to be a Share Option Transaction within the meaning set forth in the Equity Definitions.

     Each
party is here by advised, and each such party acknowledges, that the other party has
engaged in, or refrained from engaging in, substantial financial transactions and has taken other
material actions in reliance upon the parties’ entry into the Transaction to which this
Confirmation relates on the terms and conditions set forth below.

1. This Confirmation evidences a complete and binding agreement between Dealer and Company as to
the terms of the Transaction to which this Confirmation relates. This
Confirmation shall supplement, form a
part of, and be subject to an agreement in the form of the 2002 ISDA
Master Agreement (the “Agreement”) as if
Dealer and Company had executed an agreement in such form (but without any Schedule except for the election of
the laws of the State of New York as the governing law) on the Trade Date. In the event of any inconsistency
between provisions of that Agreement and this Confirmation, this Confirmation will prevail for the purpose of the
Transaction to which this Confirmation relates. The parties hereby agree that no Transaction other than the Transaction to
which this Confirmation relates shall be governed by the Agreement.

2. The terms of the particular Transaction to which this Confirmation relates are
as follows:

General Terms:

     Trade Date:                                December 14, 2006

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	 	Warrants:
	 	Equity call warrants, each giving the holder the right to purchase
one Share at the Strike Price, subject to the Settlement Terms set
forth below. For the purposes of the Equity Definitions, each
reference to a Warrant herein shall be deemed to be a reference to a
Call Option.
	 
	 	 	 	 
	 

	 	Components:
	 	The Transaction will be divided into individual Components, each with the terms set
forth in this Confirmation, and, in particular, with the Number of Warrants and
Expiration Date set forth for such Components in this Confirmation. The payments and
deliveries to be made upon settlement of the Transaction will be determined separately
for each Component as if each Component were a separate Transaction under the
Agreement.
	 
	 	 	 	 
	 

	 	Warrant Style:
	 	European
	 
	 	 	 	 
	 

	 	Buyer:
	 	Dealer
	 
	 	 	 	 
	 

	 	Seller:
	 	Company
	 
	 	 	 	 
	 

	 	Shares:
	 	The common stock of Company, par value USD 0.01 per Share (Exchange symbol
“CDNS”)
	 
	 	 	 	 
	 

	 	Number of Warrants:
	 	For each Component, as provided in Annex A to this
Confirmation.
	 
	 	 	 	 
	 

	 	Warrant Entitlement:
	 	One Share per Warrant
	 
	 	 	 	 
	 

	 	Strike Price:
	 	USD 31.50
	 
	 	 	 	 
	 

	 	Premium:
	 	USD 3,787,500
	 
	 	 	 	 
	 

	 	Premium Payment Date:
	 	The Effective Date or such later date as agreed upon by the parties
	 
	 	 	 	 
	 

	 	Effective Date:
	 	December 19, 2006
	 
	 	 	 	 
	 

	 	Exchange:
	 	NASDAQ Global Select Market.
	 
	 	 	 	 
	 

	 	Related Exchange(s):
	 	The principal exchange(s) for options contracts or futures
contracts, if any, with respect to the Shares
	 
	 	 	 	 
	Exercise and Valuation:	 	 
	     In respect of any Component:	 	 
	 
	 	 	 	 
	 

	 	Expiration Time:
	 	The Valuation Time
	 
	 	 	 	 
	 

	 	Expiration Dates:
	 	As provided inAnnex A to
this Confirmation (or, if such date is not a Scheduled
Trading Day, the next following Scheduled Trading Day that is not already an Expiration
Date for another Component); provided that if that date is a Disrupted Day, the
Expiration Date for such Component shall be the first succeeding Scheduled Trading Day
that is not a Disrupted Day and is not or

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	 	 	 	is not deemed to be an Expiration Date
in respect of any other Component of the
Transaction hereunder; and provided further
that if such Expiration Date has not
occurred pursuant to the preceding proviso
as of the Final Disruption Date, the Final
Disruption Date shall be the Expiration
Date for such Component (irrespective of
whether such date is an Expiration Date in
respect of any other Component for the
Transaction) and, notwithstanding anything
to the contrary in this Confirmation or the
Definitions, the Relevant Price for such
Expiration Date shall be the prevailing
market value per Share determined by the
Calculation Agent in a commercially
reasonable manner, “Final Disruption Date”
means April 20, 2014. Notwithstanding the
foregoing and anything to the contrary in
the Equity Definitions, if a Market
Disruption Event occurs on any Expiration
Date, the Calculation Agent may determine
that such Expiration Date is a Disrupted
Day only in part, in which case the
Calculation Agent shall make adjustments to
the Number of Warrants for the relevant
Component for which such day shall be the
Expiration Date and shall designate the
Scheduled Trading Day determined in the
manner described in the immediately
preceding sentence as the Expiration Date
for the remaining Warrants for such
Component. Section 6.6 of the Equity
Definitions shall not apply to any
Valuation Date occurring on an Expiration
Date.
	 
	 	 	 	 
	 

	 	Market Disruption Event:
	 	Section 6.3(a) of the Equity
Definitions is hereby amended by deleting
the words “during the one hour period that
ends at the relevant Valuation Time, Latest
Exercise Time, Knock-in Valuation Time or
Knock-out Valuation Time, as the case may
be,” in clause (ii) thereof.
	 
	 	 	 	 
	 

	 	Automatic Exercise:
	 	Applicable; and means that, for each
Component, each Warrant for such Component
not previously exercised will be deemed to
be automatically exercised at the
Expiration Time on the Expiration Date for
such Component unless Dealer notifies
Seller (by telephone or in writing) prior
to the Expiration Time on such Expiration
Date that it does not wish Automatic
Exercise to occur, in which case Automatic
Exercise will not apply.
	 
	 	 	 	 
	 

	 	Company’s Telephone Number	 	 
	 

	 	and Telex and/or Facsimile Number	 	 
	 

	 	and Contact Details for purpose of	 	 
	 

	 	Giving Notice:
	 	Cadence Design Systems, Inc.
	 

	 	 	 	Bldg. 5, MS 5B1
	 

	 	 	 	2655 Seely Avenue
	 

	 	 	 	San Jose, CA 95134
	 

	 	 	 	Attention: Legal Department
	 

	 	 	 	Telephone No.: (408) 943-1234
	 

	 	 	 	Facsimile No. : (408) 943-0513

Valuation applicable to each Warrant:

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	 	Valuation Time:
	 	At the close of trading of
the regular trading session on the
Exchange; provided that if the
regular trading session is
extended, the Calculation Agent
shall determine the Valuation Time
in its reasonable discretion.
	 
	 	 	 	 
	 

	 	Valuation Date:
	 	Each Exercise Date.
	 
	 	 	 	 
	Settlement Terms:	 	 
	     In respect of any Component:	 	 
	 
	 	 	 	 
	 

	 	Method of Settlement:
	 	Net Share Settlement
	 
	 	 	 	 
	 

	 	Net Share Settlement:
	 	On each Settlement Date,
Company shall deliver to Dealer
the Delivery Requirement for such
Settlement Date to the account
specified herein, free of payment
through the Clearance System.
	 
	 	 	 	 
	 

	 	Delivery Requirement:
	 	For any Settlement Date, (i) a
number of Shares (rounded down to
the nearest whole Share), as
calculated by the Calculation
Agent, equal to (A) the
Net Share Settlement Amount
for such Settlement Date
divided by (B) the Settlement
Price on the Valuation Date in
respect of such Settlement Date
and (ii) cash in lieu of any
fractional shares (based on such
Settlement Price).
	 
	 	 	 	 
	 

	 	Net Share Settlement Amount:
	 	For any Settlement Date, an
amount equal to the product of (i)
the Number of Warrants exercised
or deemed exercised on the
relevant Exercise Date, (ii) the
Strike Price Differential for the
relevant Valuation Date and (iii)
the Warrant Entitlement.
	 
	 	 	 	 
	 

	 	Settlement Price:
	 	For any Valuation Date, the
per Share volume-weighted average
price as displayed under the
heading “Bloomberg VWAP” on
Bloomberg page <CDNS>.UQ
<equity> AQR (or any
successor thereto) in respect of
the period from 9:30 a.m. to 4:00
p.m. (New York City time) on such
Valuation Date (or if such
volume-weighted average price is
unavailable, the market value of
one Share on such Valuation Date,
as determined by the Calculation
Agent). Notwithstanding anything
to the contrary in the Equity
Definitions, if there is a
Market Disruption Event on any
Valuation Date, then the
Calculation Agent shall determine
the Settlement Price for such
Valuation Date on the basis of its
good faith estimate of the market
value for the relevant Shares on
such Valuation Date.
	 
	 	 	 	 
	 

	 	Settlement Date:
	 	For any Exercise Date, the
date defined as such in Section
9.4 of the Equity Definitions,
subject to Section 9(n)(i)
hereof.
	 
	 	 	 	 
	 

	 	Failure to Deliver:
	 	Inapplicable
	 
	 	 	 	 
	Other Applicable Provisions:	 	The provisions of Sections
9.1(c), 9.8, 9.9, 9.10, 9.11
(except that the Representation
and Agreement contained in Section
9.11 of the Equity Definitions
shall be modified by excluding
any representations therein
relating to restrictions,
obligations, limitations or
requirements under applicable
securities laws as a

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	 	 	 	result of the fact that Seller is the issuer of the Shares) and 9.12 of the Equity Definitions will be applicable, as if “Physical
Settlement” applied to the Transaction.
	 
	 	 	 	 
	3. Additional Terms applicable to the Transaction:	 	 
	 
	 	 	 	 
	Adjustments applicable to the Warrants:	 	 
	     In respect of any Component:	 	 
	 
	 	 	 	 
	 

	 	Method of Adjustment:
	 	Calculation Agent Adjustment. For avoidance of doubt, in making
any adjustments under the Equity Definitions, the Calculation Agent
may adjust the Strike Price, the Number of Warrants and the Warrant
Entitlement. Notwithstanding the foregoing, any cash dividends or
distributions, whether or not extraordinary, shall be governed by
Section 9(j) of this Confirmation and not by Section 11.2 of the
Equity Definitions.
	 
	 	 	 	 
	Extraordinary Events applicable to the Transaction:	 	 
	 
	 	 	 	 
	 

	 	Tender Offer:
	 	Applicable
	 
	 	 	 	 
	 

	 	Consequence of Merger Events and	 	 
	 

	 	Tender Offers	 	 
	 
	 	 	 	 
	 

	 	(a) Share-for-Share:
	 	Modified Calculation Agent Adjustment
	 
	 	 	 	 
	 

	 	(b) Share-for-Other:
	 	Cancellation and Payment (Calculation Agent Determination)
	 
	 	 	 	 
	 

	 	(c) Share-for-Combined:
	 	Cancellation and Payment (Calculation Agent Determination)
provided that the Calculation Agent may elect Component
Adjustment (Calculation Agent Determination).
	 
	 	 	 	 
	 

	 	Nationalization, Insolvency

or Delisting:
	 	Cancellation and Payment (Calculation Agent Determination);
provided that (i) Section 12.6(a)(iii) of the Equity Definitions
shall be amended to delete, in the definition of the term
“Delisting” the parenthetical “(or will cease)” and (ii) in addition
to the provisions of Section 12.6(a)(iii) of the Equity Definitions,
it shall also constitute a Delisting if the Exchange is located in
the United States and the Shares are not immediately re-listed, re-traded or
re-quoted on any of the New York Stock Exchange, the
American Stock Exchange, The NASDAQ Global Select Market
or The NASDAQ Global Market (or their respective successors);
if the Shares are immediately re-listed, re-traded or re-quoted on
any such exchange or quotation system, such exchange or
quotation system shall thereafter be deemed to be the Exchange
and the Calculation Agent shall make any adjustments it deems
necessary to the terms of the Transaction, as if Modified
Calculation Agent Adjustment were applicable to such event.
	 
	 	 	 	 
	Additional Disruption Events:	 	 
	 
	 	 	 	 
	 

	 	(a) Change in Law:
	 	Applicable

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	 	(b) Insolvency Filing:
	 	Applicable
	 
	 	 	 	 
	 

	 	(c) Hedging Disruption:
	 	Applicable
	 
	 	 	 	 
	 

	 	(d) Increased Cost of Hedging:
	 	Applicable
	 
	 	 	 	 
	 

	 	(e) Loss of Stock Borrow:
	 	Applicable
	 
	 	 	 	 
	 

	 	      Maximum Stock Loan Rate:
	 	1.0% 
	 
	 	 	 	 
	 

	 	(f) Increased Cost of Stock Borrow:
	 	Applicable
	 
	 	 	 	 
	 

	 	      Initial Stock Loan Rate:
	 	0.25% 
	 
	 	 	 	 
	 

	 	Hedging Party:
	 	Dealer for all applicable Additional Disruption Events
	 
	 	 	 	 
	 

	 	Determining Party:
	 	Dealer for all applicable Additional Disruption Events
	 
	 	 	 	 
	Non-Reliance:	 	Applicable
	 
	 	 	 	 
	Agreements and Acknowledgments	 	 
	Regarding Hedging Activities:	 	Applicable
	 
	 	 	 	 
	Additional Acknowledgments:	 	Applicable
	 
	 	 	 	 
	4. Calculation Agent:	 	Dealer. The Calculation Agent
shall, upon request by;
party, provide a written explanation of any calculation adjustment
made by it hereunder, including, where applicable description of
the methodology and data applied.
	 
	 	 	 	 
	5. Account Details:	 	 
	 
	 	 	 	 
	 

	(a) 	Account for payments to Company:	 	 
	 
	 	 	 	 
	 

	 	Cadence Design Systems, Inc.	 	 
	 

	 	Account                          	 	 
	 

	 	Wells Fargo Bank	 	 
	 

	 	550 California Street — 10th Floor	 	 
	 

	 	San Francisco CA 94104	 	 
	 

	 	ABA#                          	 	 
	 
	 	 	 	 
	 

	 	Account for delivery of Shares from Company:	 	 
	 
	 	 	 	 
	 

	 	Mellon Investor Services	 	 
	 

	 	235 Montgomery Street, 23rd Floor	 	 
	 

	 	San Francisco, CA 94104	 	 
	 

	 	Cadence Design Systems Book Memo Treasury Reserve Account	 	 
	 

	 	Comment: When you are ready to deliver Shares contact
Cadence FIRST.	 	 
	 
	 	 	 	 
	 

	(b) 	Account for payments to Dealer:	 	 
	 
	 	 	 	 
	 

	 	CITIBANK NA	 	 

6

 

	 	 	 	 	 
	 

	 	Swift                          

ABA#                          

MS & CO Inc OTC Equity Derivatives

A/C#                          

REF:                          
	 	 
	 
	 	 	 	 
	 

	 	Account for delivery of Shares to Dealer:	 	 
	 
	 	 	 	 
	 

	 	To be advised.	 	 

6. Offices:

The Office of Company for the Transaction is: Inapplicable, Company is not a Multibranch Party.

The Office of Dealer for the Transaction is:

1585 Broadway, New York, NY 10036

7. Notices: For purposes of this Confirmation:

	 	(a)	 	        Address for notices or communications to Company:

Cadence Design Systems, Inc.
 Bldg.
5, MS 5B1
2655 Seely Avenue
 San Jose,
CA 95134
 Attention: Legal Department

Telephone No.: (408) 943-1234

Facsimile No.: (408) 943-0513

	 	(b)	 	        Address for notices or communications to Dealer:

Morgan Stanley & Co. International Limited

c/o Morgan Stanley Bank

One New York Plaza, 4th Floor

New York, NY 10004

Attention: Fred Gonfiantini

Facsimile No.: (212) 507-0724

Telephone No.: (212) 276-2427

With a copy to:

Law Division

Morgan Stanley

1585 Broadway, 38th Floor

New York, NY 10036

Attention: Anthony Cicia

Facsimile No: (212) 507-4338

Telephone No: (212) 761-3452

7

 

8. Representations and Warranties of Company

The representations and warranties of Company set forth in Section 1 of the Purchase Agreement
dated as of the Trade Date among Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated, J.P, Morgan Securities Inc. and Deutsche Bank Securities Inc.
are true and correct and are hereby deemed to be repeated to Dealer as if set forth herein.
Company hereby further represents and warrants to Dealer that:

	 	(a)	 	Company has all necessary corporate power and authority to execute, deliver and
perform its obligations in respect of this Transaction; such execution, delivery and performance
have been duty authorized by all necessary corporate action on Company’s part; and this
Confirmation has been duly and validly executed and delivered by Company and constitutes its valid
and binding obligation, enforceable against Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and
similar laws affecting creditors’ rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of commercial reasonableness, good faith
and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and
except that rights to indemnification and contribution hereunder may be limited by federal or state
securities laws or public policy relating thereto.
	 
	 	(b)	 	Neither the execution and delivery of this Confirmation nor the incurrence or
performance of obligations of Company hereunder will conflict with or result in a breach of (i) the
certificate of incorporation or by-laws (or any equivalent documents) of Company, or any applicable
law or regulation, or (ii) any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which Company or any of its subsidiaries
is a party or by which Company or any of its subsidiaries is bound or to which Company or any of
its subsidiaries is subject, or constitute a default under, or result in the creation of
any lien under, any such agreement or instrument, or breach or constitute a default under any agreements
and contracts of Counterparty or its significant subsidiaries filed as exhibits to
Counterparty’s Annual Report on Form 10-K for the year ended December 31, 2005, incorporated by reference
in the Offering Memorandum, as updated by any subsequent filings.
	 
	 	(c)	 	No consent, approval, authorization, or order of, or filing with, any
governmental agency or body or any court is required in connection with the execution, delivery or performance
by Company of this Confirmation, except such as have been obtained or made and such as may be
required under the Securities Act of 1933, as amended (the “Securities Act”) or state securities
laws.
	 
	 	(d)	 	Company is not, and after giving effect to the transactions contemplated hereby
will not be, an “investment company” as such term is defined in the Investment Company Act of 1940,
as amended.
	 
	 	(e)	 	The Shares of Company initially issuable upon exercise of the Warrants by the
net share settlement method (die “Warrant Shares”) have been reserved for issuance by all
required corporate action of Company, The Warrant Shares have been duly authorized and, when
delivered as contemplated by the terms of the Warrants following the exercise of the Warrants
in accordance with its terms and conditions, will be validly issued, fully-paid and
non-assessable, and the issuance of the Warrant Shares will not be subject to any preemptive or similar
rights.
	 
	 	(f)	 	Company is an “eligible contract participant” (as such term is defined in
Section 1a(12) of the Commodity Exchange Act, as amended (the
“CEA”)) because one or more of the following
is true:
	 
	 	 	 	Company is a corporation, partnership, proprietorship, organization, trust or other
entity and:

8

 

	 	(A)	 	Company has total assets in excess of USD 10,000,000;
	 
	 	(B)	 	the obligations of Company hereunder are guaranteed, or otherwise
supported by a letter of credit or keepwell, support or other agreement, by an entity of the type
described in Section 1a(12)(A)(i) through (iv), 1a(12)(A)(v)(I),
1a(12)(A)(vii) or
1a(12)(C) of the CEA; or
	 
	 	(C)	 	Company has a net worth in excess of USD 1,000,000 and has
entered into this Agreement in connection with the conduct of Company’s business or to manage
the risk associated with an asset or liability owned or incurred or reasonably likely
to be owned or incurred by Company in the conduct of Company’s business.

	 	(g)	 	On the Trade Date, (A) none of Company and its officers and directors is aware
of any material nonpublic information regarding Company or the Shares and (B) all
reports and other documents filed by Company with the Securities and Exchange
Commission pursuant to the Exchange Act when considered as a whole (with the more
recent such reports and documents deemed to amend inconsistent statements contained in
any earlier such reports and documents), do not contain any untrue statement of a
material fact or any omission of a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in which
they were made, not misleading.
	 
	 	(h)	 	Without limiting the generality of Section 3(a)(iii) of the Agreement, the
Transaction will not violate Rule 13e 1 or Rule 13e 4 under
the Exchange Act.
	 
	 	(i)	 	Company’s investments in and liabilities in respect of the Transaction, which it
understands are not readily marketable, are not disproportionate to its net worth, and it is able
to bear any loss in connection with the Transaction, including the loss of its
entire investment in the Transaction.
	 
	 	(j)	 	Company understands no obligations of Dealer to it hereunder will be entitled to the
benefit of deposit insurance and that such obligations will not be guaranteed by any affiliate
of Dealer or any governmental agency.
	 
	 	(k)	 	Company is capable of assessing the merits of and understanding (on its own
behalf or through independent professional advice), and understands and accepts, the
terms, conditions and risks of the Transaction.
	 
	 	(l)	 	Without limiting the generality of Section 13.1 of the Equity Definitions, Company
acknowledges that Dealer is not making any representations or warranties with respect to the
treatment of the Transaction under FASB Statements 128, 133, as amended, 149 or
150, EITF Issue No. 00-19, Issue No. 01-6 or Issue No. 03-6 (or any successor issue
statements) or under FASB’s Liabilities & Equity Project.
	 
	 	(m)	 	Company agrees that, for purposes of Rule 144(d) under the Securities Act, the
holding period of Dealer in Shares received hereunder in any Net Share Settlement or in
Shares comprising Share Termination Delivery Units received pursuant to Section 9(m)
hereof shall start on the Premium Payment Date.

9. Other Provisions:

	 	(a)	 	Opinions. Company shall deliver to Dealer an opinion of counsel, dated as of
the Effective Date, with respect to the matters set forth in Sections 8(a) through (e) of this
Confirmation.

9

 

	 	(b)	 	Limitations on Settlement by Company. Notwithstanding anything herein or in
the Agreement to the contrary, in no event shall Company be required to deliver Shares in connection with
the Transaction in excess of 5,319,147 Shares (the “Capped Number”). Company represents and
warrants (which shall be deemed to be repeated on each day that the Transaction is
outstanding) that the Capped Number is equal to or less than the number of authorized but unissued
Shares of the Company that are not reserved for future issuance in connection with transactions in
the Shares (other than the Transaction) on the date of the determination of the Capped Number (such
Shares, the “Available Shares”). Company shall not take any action to decrease the number of
Available Shares below the Capped Number. In the event Company shall not have delivered the full
number of Shares that would be deliverable but for this Section 9(b) (the resulting deficit, the
“Deficit Shares”), Company shall be continually obligated to deliver, from time to time until the
full number of Deficit Shares have been delivered pursuant to this paragraph, Shares when, and
to the extent, that (i) Shares are repurchased, acquired or otherwise received by Company or any
of its subsidiaries after the Trade Date (whether or not in exchange for cash, fair value or any
other consideration), (ii) authorized and unissued Shares reserved for issuance in respect of
other transactions prior to such date which prior to the relevant date become no longer so
reserved and (iii) Company additionally authorizes any unissued Shares that are not reserved for other
transactions. Company shall immediately notify Dealer of the occurrence of any of the
foregoing events (including the number of Shares subject to clause (i), (ii) or (iii) and the
corresponding number of Shares to be delivered) and promptly deliver
such Shares thereafter.
	 
	 	(c)	 	Right to Extend, Dealer may postpone any Exercise Date or any other date of
valuation or delivery with respect to some or all of the relevant Warrants (in which event the
Calculation Agent shall make appropriate adjustments to the Number of Warrants for one or more Components),
if (x) the average daily trading volume of the Shares for the four calendar weeks immediately
preceding the week in which such Exercise date or date of valuation or delivery occurs is
less than 1,505,000 Shares, which, for the avoidance of doubt, shall be subject to adjustments as a
result of Potential Adjustment Events and (y) Dealer determines, in its reasonable discretion, that
such extension is reasonably necessary or appropriate to preserve Dealer’s hedging or hedge
unwind activity hereunder in light of existing liquidity conditions or to enable Dealer to effect
purchases of Shares in connection with its hedging, hedge unwind or settlement activity hereunder in a
manner that would, if Dealer were Company or an affiliated purchaser of Company, be reasonably
deemed to be in compliance with applicable legal, regulatory or self-regulatory requirements, or
with related policies and procedures applicable to Dealer.
	 
	 	(d)	 	No Manipulation. Company is not entering into this Transaction to create actual or
apparent trading activity in the Shares (or any security convertible into or exchangeable for the
Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security
convertible into or exchangeable for the Shares) or to violate the
Exchange Act.
	 
	 	(e)	 	Repurchase Notices. Company shall, on any day on which Company effects any
repurchase of Shares, promptly give Dealer a written notice of such repurchase (a “Repurchase Notice”) on
such day if, following such repurchase, the Warrant Equity Percentage as determined on such
day is (i) greater than 6% and (ii) greater by 0.5% than the Warrant Equity Percentage included
in the immediately preceding Repurchase Notice (or, in the case of the first such Repurchase
Notice, greater than the Warrant Equity Percentage as of the date hereof). The “Warrant Equity
Percentage” as of any day is the fraction (A) the numerator of which is the sum of (x) the
Number of Shares hereunder and (y) the Number of Shares for the warrant transaction (reference
no.CEDAO8) entered into by the parties on the date hereof and (B) the denominator of which
is the number of Shares outstanding on such day. Company agrees to indemnify and hold harmless
Dealer and its affiliates and their respective officers, directors, employees, affiliates,
advisors, agents and controlling persons (each, an “Indemnified Person”) from and against any and all
losses (including losses relating to Dealer’s hedging activities as a consequence of
becoming, or of

10

 

	 	 	 	the risk of becoming, a Section 16 “insider”, including without limitation, any
forbearance from hedging activities or cessation of hedging activities and any losses in
connection therewith with respect to this Transaction), claims, damages, judgments,
liabilities and expenses (including reasonable attorney’s fees), joint or several, which an
Indemnified Person may become subject to, as a result of Company’s failure to provide
Dealer with a Repurchase Notice on the day and in the manner specified in this Section
9(e), and to reimburse, within 30 days, upon written request, each of such Indemnified
Persons for any reasonable legal or other expenses incurred in connection with
investigating, preparing for, providing testimony or other evidence in connection with or
defending any of the foregoing. If any suit, action, proceeding (including any governmental
or regulatory investigation), claim or demand shall be brought or asserted against the
Indemnified Person, such Indemnified Person shall promptly notify Company in writing, and
Company, upon request of the Indemnified Person, shall retain counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person and any others
Company may designate in such proceeding and shall pay the fees and expenses of such
counsel related to such proceeding. Company shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, Company agrees to indemnify any Indemnified
Person from and against any loss or liability by reason of such settlement or judgment.
Company shall not, without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any Indemnified
Person is or could have been a party and indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement includes an unconditional release of such
Indemnified Person from all liability on claims that are the subject matter of such
proceeding. If the indemnification provided for in this paragraph (e) is unavailable to an
Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then Company under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by such
Indemnified Person as a result of such losses, claims, damages or liabilities. The remedies
provided for in this paragraph (e) are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any Indemnified Person at law or in equity.
The indemnity and contribution agreements contained in this paragraph (e) shall remain
operative and in full force and effect regardless of the termination of this Transaction.
	 
	 	(f)	 	Board Authorization. Company represents that it is entering into the Transaction,
solely for the purposes stated in the board resolution authorizing this Transaction and in its public
disclosure. Company further represents that there is no internal policy, whether written or oral, of
Company that would prohibit Company from entering into any aspect of this Transaction, including,
but not limited to, the issuance of Shares to be made pursuant hereto.
	 
	 	(g)	 	Transfer or Assignment. Company may not transfer any of its rights or obligations
under this Transaction without the prior written consent of Dealer. Dealer may transfer or assign all
or any portion of its rights or obligations under this Transaction without consent of Company.
	 
	 	(h)	 	Effectiveness. If, on or prior to the Effective Date (or such later date as agreed
upon by the parties), Dealer reasonably determines that it is advisable to cancel the Transaction
because of concerns that Dealer’s related hedging activities would be reasonably viewed as
not complying with applicable securities laws, rules or regulations, the Transaction shall
be cancelled and shall not become effective, and neither party shall have any obligation
to the other party in respect of the Transaction.
	 
	 	(i)	 	Equity Rights. Dealer acknowledges and agrees that this Confirmation is not intended to
convey to it rights with respect to the Transaction that are senior to the claims of common
stockholders in the event of Company’s bankruptcy.

11

 

	 	(j)	 	Dividends. If at any time during the period from and including the Trade Date, to
but excluding the Expiration Date, an ex-dividend date for a cash dividend occurs with respect to the
Shares (an “Ex-Dividend Date”) and that dividend is greater than the Regular Dividend on a
per Share basis, then the Calculation Agent will adjust the Strike Price, the Number of
Warrants and the Warrant Entitlement to preserve the fair value of the Warrant to Dealer
after taking into account such dividend. “Regular Dividend” shall mean USD 0.00 per Share
per quarter.
	 
	 	(k)	 	Additional Provisions.

(i) The first sentence of Section 11.2(c) of the Equity Definitions, prior to clause (A)
thereof, is hereby amended to read as follows: ‘(c) If “Calculation Agent Adjustment” is
specified as the Method of Adjustment in the related Confirmation of a Share Option
Transaction, then following the announcement or occurrence of any Potential Adjustment
Event, the Calculation Agent will determine whether such Potential Adjustment Event has a
material effect on the theoretical value of the relevant Shares or options on the Shares
and, if so, will (i) make appropriate adjustment(s), if any, to any one or more of:’ and,
the portion of such sentence immediately preceding clause (ii) thereof is hereby amended
by deleting the words “diluting or concentrative” and the words “(provided that no
adjustments will be made to account solely for changes in volatility, expected dividends,
stock loan rate or liquidity relative to the relevant Shares)” and replacing such latter
phrase with the words “(and, for the avoidance of doubt, adjustments may be made to
account solely for changes in volatility, expected dividends, stock loan rate or liquidity
relative to the relevant Shares)”;

(ii) Section 11.2(e)(vii) of the Equity Definitions is hereby amended by deleting the
words “diluting or concentrative” and replacing them with “material”; and adding the
following words at the end of the sentence “or options on Shares”.

	 	(l)	 	No Collateral; Setoff. Notwithstanding any provision of the Agreement or any other
agreement between the parties to the contrary, the obligations of Company hereunder are not secured
by any collateral. The provisions of Section 2(c) of the Agreement shall not apply to the
Transaction. Each party waives any and all rights it may have to set-off delivery or
payment obligations it owes to the other party under the Transaction against any delivery
or payment obligations owed to it by the other party, whether arising under the Agreement,
under any other agreement between parties hereto, by operation of law or otherwise.
	 
	 	(m)	 	Alternative Calculations and Payment on Early Termination and on Certain Extraordinary
Events. If, in respect of this Transaction, an amount is payable by Company to Dealer,
(i) pursuant to Section 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions (except in
the event of a Nationalization or Insolvency or a Merger Event, in each case in which the
consideration to be paid to holders of Shares consists solely of cash) or (ii) pursuant to
Section 6(d)(ii) of the Agreement (except in the event of an Event of Default in which
Company is the Defaulting Party or a Termination Event in which Company is the Affected
Party, other than an Event of Default of the type described in Section 5(a)(iii), (v), (vi),
(vii) or (viii) of the Agreement or a Termination Event of the type described in Section
5(b)(i), (ii), (iii), (iv), (v) or (vi) of the Agreement, in each case resulting from an
event or events outside Company’s control) (a “Payment Obligation”), Company may, in its sole
discretion, satisfy any such Payment Obligation by the Share Termination Alternative (as
defined below) and shall give irrevocable telephonic notice to Dealer, confirmed in writing
within one Currency Business Day, no later than 12:00 p.m. New York local time on the Merger
Date, the Announcement Date or the Early Termination Date, as applicable; provided that if
Company does not validly elect to satisfy its Payment Obligation by the Share Termination
Alternative, Dealer shall nevertheless have the right, in its sole discretion, to require
Company to satisfy its Payment Obligation by the Share Termination Alternative,
notwithstanding Company’s lack of election. In calculating any amounts under Section 6(e) of
the Agreement,

12

 

	 	 	 	notwithstanding anything to the contrary in the Agreement, (1) separate amounts shall be
calculated as set forth in Section 6(e) with respect to (i) this Transaction and (ii) all other
Transactions, and (2) such separate amounts shall be payable pursuant to Section 6(d)(ii) of the
Agreement, subject to, in the case of clause (1)(i), the Share Termination Alternative right
hereunder.

	 	 	 	 	 
	 

	 	Share Termination Alternative:
	 	If applicable, Company
shall deliver to Dealer the
Share Termination Delivery
Property on the date when
the Payment Obligation would
otherwise be due pursuant to
Section 12.7 or 12.9 of the
Equity Definitions or
Section 6(d)(ii) and 6(e) of
the Agreement, as applicable
(the “Share Termination
Payment Date”), subject to
paragraph (n)(i) below, in
satisfaction, subject to
paragraph (n)(ii) below, of
the Payment Obligation in
the manner reasonably
requested by Dealer free of
payment.
	 
	 	 	 	 
	 

	 	Share Termination Delivery Property:
	 	A number of Share
Termination Delivery Units,
as calculated by the
Calculation Agent, equal to
the Payment Obligation
divided by the Share
Termination Unit Price. The
Calculation Agent shall
adjust the Share Termination
Delivery Property by
replacing any fractional
portion of a security
therein with an amount of
cash equal to the value of
such fractional security
based on the values used to
calculate the Share
Termination Unit Price.
	 
	 	 	 	 
	 

	 	Share Termination Unit Price:
	 	The value to Dealer of
property contained in one
Share Termination Delivery
Unit on the date such Share
Termination Delivery Units
are to be delivered as Share
Termination Delivery
Property, as determined by
the Calculation Agent in its
discretion by commercially
reasonable means and
notified by the Calculation
Agent to Company at the time
of notification of the
Payment Obligation. In the
case of a Private Placement
Settlement of Share
Termination Delivery Units
that are Restricted Shares
as set forth in paragraph
(n)(i) below, the Share
Termination Unit Price shall
be determined by the
discounted price applicable
to such Share Termination
Delivery Units. In the case
of a Registration Settlement
of Share Termination
Delivery Units that are
Restricted Shares (as
defined below) as set forth
in paragraph (n)(ii) below,
the Share Termination Unit
Price shall be the
Settlement Price on the
Merger Date, the date of the
occurrence of the
Nationalization or
Insolvency, the date of the
Share De-listing or the
Early Termination Date, as
applicable.
	 
	 	 	 	 
	 

	 	Share Termination Delivery Unit:
	 	In the case of a
De-listing, Termination
Event or Event of Default,
one Share or, in the case of
Nationalization or
Insolvency, a Merger Event
or a Tender Offer, one Share
or a unit consisting of
the

13

 

	 	 	 	 	 
	 

	 	 	 	number or amount of each type of property received by a
holder of one Share (without consideration of any requirement to pay
cash or other consideration in lieu of fractional amounts of any
securities) in such Nationalization, Insolvency, Merger Event or
Tender Offer, as determined by the Calculation Agent, as the case may
be. If such Nationalization, Insolvency, Merger Event or Tender
Offer involves a choice of consideration to be received by holders,
such holder shall be deemed to have elected to receive the
maximum possible amount of cash.
	 
	 	 	 	 
	 

	 	Failure to Deliver:
	 	Inapplicable
	 
	 	 	 	 
	 

	 	Other applicable provisions:
	 	If Share Termination Alternative is applicable, the
provisions of Sections 9.8, 9.9, 9.10, 9.11 (except that
the Representation and Agreement contained in
Section 9.11 of the Equity Definitions shall be
modified by excluding any representations therein
relating to restrictions, obligations, limitations or
requirements under applicable securities laws as a
result of the fact that Seller is the issuer of the
Shares) and 9.12 of the Equity Definitions will be
applicable, as if “Physical Settlement” applied to
such cancellation or termination of the Transaction,
except that all references therein to “Shares” shall be
read as references to “Share Termination Delivery
Units”.

	 	(n)	 	Registration/Private Placement Procedures. If, in the reasonable opinion of
Dealer, following any delivery of Shares or Share Termination Delivery Property to Dealer
hereunder, such Shares or Share Termination Delivery Property would be in the hands of Dealer
subject to any applicable restrictions with respect to any registration or qualification
requirement or prospectus delivery requirement for such Shares or Share Termination Delivery
Property pursuant to any applicable federal or state securities law (including, without
limitation, any such requirement arising under Section 5 of the Securities Act as a result of
such Shares or Share Termination Delivery Property being “restricted securities”, as such
term is defined in Rule 144 under the Securities Act, or as a result of the sale of such
Shares or Share Termination Delivery Property being subject to paragraph (c) of Rule 145
under the Securities Act) (such Shares or Share Termination Delivery
Property, “Restricted
Shares”), then delivery of such Restricted Shares shall be effected pursuant to either clause
(i) or (ii) below at the election of Company, unless waived by Dealer; provided that, in the
event such obligation to deliver Restricted Shares would have arisen from a Net Share
Settlement, at the election of the Company, Company may satisfy such Share delivery
obligation by paying Dealer on the relevant Settlement Date an amount in cash equal to the
relevant Net Share Settlement Amount. Notwithstanding anything to the contrary in the Equity
Definitions, Company shall notify Dealer, prior to the first Expiration Date, whether (x) it
elects to cash settle the Number of Warrants for all Expiration Dates, if Dealer determines
the Shares that would be delivered in the Net Share Settlement of such Number of Warrants
would be Restricted Shares and (y) if cash settlement is not elected, whether a Private
Placement Settlement or Registered Settlement would apply. Such election shall apply to all
Expiration Dates and all Settlement Dates related to Expiration Dates, and the procedures in
clause (i) or clause (ii) below shall apply for all such Restricted Shares delivered in
respect of all Expiration Dates on an aggregate basis commencing on the Settlement Date
relating to the first Expiration Date. In such case, the

14

 

Calculation Agent shall make reasonable adjustments to settlement terms and provisions under
this Confirmation to reflect a single Private Placement Settlement or Registered Settlement for
such aggregate Restricted Shares delivered heretmder. If Company elects Share Termination
Alternative in accordance with Section 9(m) hereof and Dealer determines in accordance with this
paragraph that the Share Termination Delivery Property to be delivered in such Share Termination
Alternative would constitute Restricted Shares, then Company shall immediately notify Dealer
whether a Private Placement Settlement or Registered Settlement would apply to the delivery of such
Share Termination Delivery Property.

	(i) 		 	If Company elects to settle the Transaction pursuant to this clause (j) (a “Private
Placement Settlement”), then delivery of Restricted Shares by Company shall be effected in
customary private placement procedures with respect to such Restricted Shares reasonably
acceptable to Dealer; provided that Company may not elect a Private Placement Settlement if,
on the date of its election, it has taken, or caused to be taken, any action that would make
unavailable either the exemption pursuant to Section 4(2) of the Securities Act for the sale
by Company to Dealer (or any affiliate designated by Dealer) of the Restricted Shares or the
exemption pursuant to Section 
4(1) or Section 4(3) of the Securities Act for resales of the
Restricted Shares by Dealer (or any such affiliate of Dealer). The Private Placement
Settlement of such Restricted Shares shall include customary representations, covenants, blue
sky and other governmental filings and/or registrations, indemnities to Dealer, due diligence
rights (for Dealer or any designated buyer of the Restricted Shares by Dealer), opinions and
certificates, and such other documentation as is customary for private placement agreements,
all reasonably acceptable to Dealer. In the case of a Private Placement Settlement, Dealer
shall determine the appropriate discount to the Share Termination Unit Price (in the case of
settlement of Share Termination Delivery Units pursuant to paragraph (m) above) or any
Settlement Price (in the case of settlement of Shares pursuant to Section 2 above) applicable
to such Restricted Shares in a commercially reasonable manner and appropriately adjust the
amount of such Restricted Shares to be delivered to Dealer hereunder. Notwithstanding the
Agreement or this Confirmation, the date of delivery of such Restricted Shares shall be the
Exchange Business Day following notice by Dealer to Company of such applicable discount and
the number of Restricted Shares to be delivered pursuant to this clause (i). For the
avoidance of doubt, delivery of Restricted Shares shall be due as set forth in the previous
sentence and not be due on the Share Termination Payment Date (in the case of settlement of
Share Termination Delivery Units pursuant to paragraph (m) above) or on the Settlement Date
for such Restricted Shares (in the case of settlement of Shares pursuant to Section 2 above).
	 
	 	 	 	In the event Company shall not have delivered the full number of Restricted Shares
otherwise applicable as a result of either the proviso above or the last sentence of
clause (ii) below relating to the Maximum Amount (such deficit,
the “Deficit Restricted
Shares”), Company shall be continually obligated to deliver, from time to time until the
full number of Deficit Restricted Shares have been delivered pursuant to this paragraph,
Restricted Shares when, and to the extent, that (i) Shares are repurchased, acquired or
otherwise received by Company or any of its subsidiaries after the Trade Date (whether or
not in exchange for cash, fair value or any other consideration), (ii) authorized and
unissued Shares reserved for issuance in respect of other transactions prior to such date
which prior to the relevant date become no longer so reserved and (iii) Company
additionally authorizes any unissued Shares that are not reserved for other transactions.
Company shall immediately notify Dealer of the occurrence of any of the foregoing events
(including the number of Shares subject to clause (i), (ii) or (iii) and the
corresponding number of Restricted Shares to be delivered) and promptly deliver such
Restricted Shares thereafter.

15

 

	 	(ii)	 	If Company elects to settle the Transaction pursuant to this
clause (ii) (a “Registration Settlement”), then Company shall promptly (but in any event no later than the beginning of
the Resale Period) file and use its reasonable best efforts to make effective under the
Securities Act a registration statement or supplement or amend an outstanding registration
statement in form and substance reasonably satisfactory to Dealer, to cover the resale of
such Restricted Shares in accordance with customary resale registration procedures,
including covenants, conditions, representations, underwriting discounts (if applicable),
commissions (if applicable), indemnities due diligence rights, opinions and certificates,
and such other documentation as is customary for equity resale underwriting agreements,
all reasonably acceptable to Dealer. If Company shall fail to comply with the requirements
set forth in the immediately preceding sentence, Private Placement Settlement shall apply.
If Dealer is satisfied with such procedures and documentation, it shall sell the
Restricted Shares pursuant to such registration statement during a period (the “Resale
Period”) commencing on the Exchange Business Day following delivery of such Restricted
Shares (which, for the avoidance of doubt, shall be (x) the Share Termination Payment Date
in case of settlement of Share Termination Delivery Units pursuant to paragraph (m) above
or (y) the Settlement Date in respect of the first Expiration Date) and ending on the
earliest of (x) the Exchange Business Day on which Dealer completes the sale of all
Restricted Shares or, in the case of settlement of Share Termination Delivery Units, a
sufficient number of Restricted Shares so that the realized net proceeds of such sales
exceed the Payment Obligation or the Net Share Settlement Amount, as the case may be, (y)
the date upon which all Restricted Shares have been sold or transferred pursuant to Rule
144 (or similar provisions then in force) or Rule 145(d)(1) or (2) (or any similar
provision then in force) under the Securities Act and (iii) the date upon which all
Restricted Shares may be sold or transferred by a non-affiliate
pursuant to Rule 144(k)
(or any similar provision then in force) or Rule 145(d)(3) (or any similar provision then
in force) under the Securities Act. If the Payment Obligation or the Net Share Settlement
Amount, as the case may be, exceeds the realized net proceeds from such resale, Company
shall transfer to Dealer by the open of the regular trading session on the Exchange on the
Exchange Trading Day immediately following the last day of the Resale Period the amount of
such excess (the “Additional Amount”) in cash or in a number of Restricted Shares
(“Make-whole Shares”) in an amount that, based on the Settlement Price on the last day of
the Resale Period (as if such day was the “Valuation
Date” for purposes of computing such
Settlement Price), has a dollar value equal to the Additional Amount. The Resale Period
shall continue to enable the sale of the Make-whole Shares. If Company elects to pay the
Additional Amount in Restricted Shares, the requirements and provisions for Registration
Settlement shall apply. This provision shall be applied successively until the Additional
Amount is equal to zero. For the avoidance of doubt, Company’s obligation to deliver
Make-whole Shares shall apply to both Private Placement Settlements and Registration
Settlements.
	 
	 	(iii)	 	Without limiting the generality of the foregoing, Company agrees that any Restricted Shares
delivered to Dealer, as purchaser of such Restricted Shares, (i) may be transferred by and
among Dealer and its affiliates and Company shall effect such transfer without any further
action by Dealer and (ii) after the minimum “holding period” within the meaning of Rule
144(d) under the Securities Act has elapsed after any Settlement Date for such Restricted
Shares, Company shall promptly remove, or cause the transfer agent for such Restricted Shares
to remove, any legends referring to any such restrictions or requirements from such
Restricted Shares upon delivery by Dealer (or such affiliate of Dealer) to Company or such
transfer agent of seller’s and broker’s representation letters customarily delivered by
Dealer in connection with resales of restricted securities pursuant to Rule 144 under the
Securities Act, without any further requirement for the delivery of any certificate, consent,
agreement, opinion of counsel, notice or any other

16

 

	 	 	 	document, any transfer tax stamps or payment of any other amount or any other
action by Dealer (or such affiliate of Dealer).

	 	 	If the Private Placement Settlement or the Registration Settlement shall not be effected
as set forth in clauses (i) or (ii), as applicable, then failure to effect such Private
Placement Settlement or such Registration Settlement shall constitute an Event of Default
with respect to which Company shall be the Defaulting Party.
	 
	(o)	 	Limit on Beneficial Ownership. Notwithstanding any other provisions hereof, Dealer
may not exercise any Warrant hereunder, and Automatic Exercise shall not apply with respect
thereto, to the extent (but only to the extent) that such receipt would result in Dealer
directly or indirectly beneficially owning (as such term is defined for purposes of Section
13(d) of the Exchange Act) at any time in excess of 9.0% of the outstanding Shares. Any
purported delivery hereunder shall be void and have no effect to the extent (but only to the
extent) that such delivery would result in Dealer directly or indirectly so beneficially
owning in excess of 9.0% of the outstanding Shares. If any delivery owed to Dealer hereunder
is not made, in whole or in part, as a result of this provision, Company’s obligation to make
such delivery shall not be extinguished and Company shall make such delivery as promptly as
practicable after, but in no event later than one Exchange Business Day after, Dealer gives
notice to Company that such delivery would not result in Dealer directly or indirectly so
beneficially owning in excess of 9.0% of the outstanding Shares.
	 
	(p)	 	Share Deliveries. Company acknowledges and agrees that, to the extent the holder of
this Warrant is not then an affiliate and has not been an affiliate for 90 days (it being
understood that Dealer will not be considered an affiliate under this Section 9(p) solely by
reason of its receipt of Shares pursuant to this Transaction), and otherwise satisfies all
holding period and other requirements of Rule 144 of the Securities Act applicable to it, any
delivery of Shares or Share Termination Delivery Property hereunder at any time after two
years from the Premium Payment Date shall be eligible for resale under Rule 144(k) of the
Securities Act and Company agrees to promptly remove, or cause the transfer agent for such
Shares or Share Termination Delivery Property, to remove, any legends referring to any
restrictions on resale under the Securities Act from the Shares or Share Termination Delivery
Property. Company further agrees, for any delivery of Shares or Share Termination Delivery
Property hereunder at any time after one year from the Premium Payment Date but within 2
years of the Premium Payment Date, to the extent the holder of this Warrant then satisfies
the holding period and other requirements of Rule 144 of the Securities Act, to promptly
remove, or cause the transfer agent for such Shares or Share Termination Delivery Property to
remove, any legends referring to any such restrictions or requirements from such Shares or
Share Termination Delivery Property. Such Shares or Share Termination Delivery Property will
be de-Iegended upon delivery by Dealer (or such affiliate of Dealer) to Company or such
transfer agent of customary seller’s and broker’s representation letters in connection with
resales of restricted securities pursuant to Rule 144 of the Securities Act, without any
further requirement for the delivery of any certificate, consent, agreement, opinion of
counsel, notice or any other document, any transfer tax stamps or payment of any other amount
or any other action by Dealer (or such affiliate of Dealer). Company further agrees that any
delivery of Shares or Share Termination Delivery Property prior to the date that is one year
from the Premium Payment Date, may be transferred by and among Dealer and its affiliates and
Company shall effect such transfer without any further action by Dealer. Notwithstanding
anything to the contrary herein, Company agrees that any delivery of Shares or Share
Termination Delivery Property shall he effected by book-entry transfer through the facilities
of DTC, or any successor depositary, if at the time of delivery, such class of Shares or
class of Share Termination Delivery Property is in book-entry form at DTC or such successor
depositary. Notwithstanding anything to the contrary herein, to the extent the provisions of
Rule 144 of the Securities Act or any successor rule are amended, or the applicable
interpretation thereof by the Securities and Exchange Commission or any court change after
the Trade Date, the agreements of Company herein shall be deemed modified to the extent
necessary, in the opinion of outside counsel of Company, to comply

17

 

	 	 	with Rule 144 of the Securities Act, including Rule 144(k) as in effect at the time of
delivery of the relevant Shares or Share Termination Delivery Property.
	 
	(q)	 	Additional Termination Event. If within the period commencing on the Trade Date and
ending on the second anniversary of the Premium Payment Date, Buyer reasonably determines
that it is advisable to terminate a portion of the Transaction so that Buyer’s related
hedging activities will reasonably be deemed to comply with applicable securities laws, rules
or regulations, an Additional Termination Event shall occur in respect of which (1) Company
shall be the sole Affected Party and (2) the Transaction shall be the sole Affected
Transaction.
	 
	(r)	 	Securities Contract; Swap Agreement. Each of Dealer and Company agrees and
acknowledges that Dealer is a “stock broker,” “swap participant” and “financial participant” within the
meaning of Sections 101(22), 101(53C) and 101(22A) of Title 11 of the United States Code
(the “Bankruptcy Code”). The parties hereto further agree and acknowledge (A) that this
Confirmation is (i) a “securities contract,” as such term is defined in Section 741(7) of
the Bankruptcy Code, with respect to which each payment and delivery hereunder is a
“settlement payment,” as such term is defined in Section 741(8) of the Bankruptcy Code,
and (ii) a “swap agreement,” as such term is defined in Section 101(53B) of the Bankruptcy
Code, with respect to which each payment and delivery hereunder is a “transfer,” as such
term is defined in Section 101(54) of the Bankruptcy Code, and (B) that Dealer is entitled
to the protections afforded by, among other sections, Section 362(b)(6), 362(b)(17),
546(e), 546(g), 555 and 560 of the Bankruptcy Code.
	 
	(s)	 	Disclosure. Effective from the date of commencement of discussions concerning the
Transaction, Company and each of its employees, representatives, or other agents may disclose
to any and all persons, without limitation of any kind, the tax treatment and tax structure
of the Transaction and all materials of any kind (including opinions or other tax analyses)
that are provided to Company relating to such tax treatment and tax structure.
	 
	(t)	 	Governing Law. New York law (without reference to choice of law doctrine).
	 
	(u)	 	Waiver of Jury Trial. Each party waives, to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in respect of any suit, action or
proceeding relating to this Transaction. Each party (i) certifies that no representative,
agent or attorney of the other party has represented, expressly or otherwise, that such other
party would not, in the event of such a suit, action or proceeding, seek to enforce the
foregoing waiver and (ii) acknowledges that it and the other party have been induced to enter
into this Transaction, as applicable, by, among other things, the mutual waivers and
certifications provided herein.
	 
	(v)	 	Quarterly Valuations. Dealer hereby agrees, upon request by Company, to provide to
Company, within 5 Exchange Business Days after the end of the fiscal quarter of Company during
which Company made such request, a valuation estimate of the fair value of the Transaction
as of Company’s fiscal quarter end.
	 
	(w)	 	Role of Agent. Each party agrees and acknowledges that:
	 
	 	 	(i)  Agent is acting as agent for both parties but does not guarantee the performance of
either party; (ii) Dealer is not a member of the Securities Investor Protection
Corporation; (iii) Agent, Dealer and Company each hereby acknowledges that any
transactions by Dealer or Agent in the Shares will be undertaken by Dealer as principal
for its own account; and (iv) all of the actions to be taken by Dealer and Agent in
connection with the Transaction, including but not limited to any exercise of any
Warrants, shall be taken by Dealer or Agent independently and without any advance or
subsequent consultation with Company; and (v) Agent is hereby authorized to act as

18

 

	 	 	agent for Company only to the extent required to satisfy the requirements of Rule 15a-6 under
the Exchange Act in respect of the Warrants described hereunder.

19

 

     Please confirm that the foregoing correctly sets forth the terms of our agreement by
executing this Confirmation and returning it by facsimile to the address provided in the Notices
section of this Confirmation.

Very truly yours,

	 	 	 	 	 
	 	Morgan Stanley & Co.

International Limited

 	 
	 	By:  	/s/ Steven Nash
 	 
	 	Authorized Signatory  	 
	 	Name: Steven Nash

Executive Director 	 
	 

	 	 	 	 	 
	 	 Morgan Stanley Bank, as agent

 	 
	 	By:  	/s/ Richard A. Uhlig
 	 
	 	Authorized Signatory  	 
	 	Name: Richard A. Uhlig

            Chairman

            Chief Executive Officer 	 
	 

Accepted and confirmed

as of the Trade Date:

Cadence Design Systems, Inc.

	 	 	 	 	 
	By:

	 	/s/ William Porter	 	 
	 

Authorized Signatory

Name: William Porter
	 	 

 

 

Annex A

For each Component of the Transaction, the Number of Warrants and Expiration Date is set
forth below.

	 	 	 	 	 	 	 
	Component Number	 	Number of Warrants	 	Expiration Date
	1.

	 	 	49,251	 	 	2/19/2014
	2.

	 	 	49,251	 	 	2/20/2014
	3.

	 	 	49,251	 	 	2/21/2014
	4.

	 	 	49,251	 	 	2/24/2014
	5.

	 	 	49,251	 	 	2/25/2014
	6.

	 	 	49,251	 	 	2/26/2014
	7.

	 	 	49,251	 	 	2/27/2014
	8.

	 	 	49,251	 	 	2/28/2014
	9.

	 	 	49,251	 	 	3/3/2014
	10.

	 	 	49,251	 	 	3/4/2014
	11.

	 	 	49,251	 	 	3/5/2014
	12.

	 	 	49,251	 	 	3/6/2014
	13.

	 	 	49,251	 	 	3/7/2014
	14.

	 	 	49,251	 	 	3/10/2014
	15.

	 	 	49,251	 	 	3/11/2014
	16.

	 	 	49,251	 	 	3/12/2014
	17.

	 	 	49,251	 	 	3/13/2014
	18.

	 	 	49,251	 	 	3/14/2014
	19.

	 	 	49,251	 	 	3/17/2014
	20.

	 	 	49,251	 	 	3/18/2014
	21.

	 	 	49,251	 	 	3/19/2014
	22.

	 	 	49,251	 	 	3/20/2014
	23.

	 	 	49,251	 	 	3/21/2014
	24.

	 	 	49,251	 	 	3/24/2014
	25.

	 	 	49,251	 	 	3/25/2014
	26.

	 	 	49,251	 	 	3/26/2014
	27.

	 	 	49,251	 	 	3/27/2014
	28.

	 	 	49,251	 	 	3/28/2014
	29.

	 	 	49,251	 	 	3/31/2014
	30.

	 	 	49,251	 	 	4/1/2014
	31.

	 	 	49,251	 	 	4/2/2014
	32.

	 	 	49,251	 	 	4/3/2014
	33.

	 	 	49,251	 	 	4/4/2014
	34.

	 	 	49,251	 	 	4/7/2014
	35.

	 	 	49,251	 	 	4/8/2014
	36.

	 	 	49,264	 	 	4/9/2014

A-1exv10w87

 

Exhibit 10.87

Morgan Stanley & Co. International Limited

c/o Morgan Stanley Bank

1585 Broadway

New York, NY 10036

(212) 761-4000

December 14, 2006

To: Cadence Design Systems,
Inc.

 Bldg. 5, MS 5B1 

2655 Seely
Avenue 

San Jose, CA 95134

Attention: Legal Department

Telephone No.: (408) 943-1234

Facsimile No.: (408) 943-0513

Re: Warrants

			
	Reference:	 	CEDAO8

     The purpose of this Confirmation (this “Confirmation”) is to confirm the terms and conditions
of the Warrants issued by Cadence Design Systems, Inc., a Delaware corporation (“Company”), to
Morgan Stanley & Co. International Limited (“Dealer”), represented by Morgan Stanley Bank
(“Agent”), as its agent, on the Trade Date specified below (the “Transaction”). This Confirmation
constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below. This
Confirmation shall replace any previous letter and serve as the final documentation for this
Transaction.

     The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the
“Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc.,
are incorporated into this Confirmation. In the event of any inconsistency between the Equity
Definitions and this Confirmation, this Confirmation shall govern. This Transaction shall be deemed
to be a Share Option Transaction within the meaning set forth in the Equity Definitions.

     Each party is hereby advised, and each such party acknowledges, that the other party has
engaged in, or refrained from engaging in, substantial financial transactions and has taken other
material actions in reliance upon the parties’ entry into the Transaction to which this
Confirmation relates on the terms and conditions set forth below.

1. This Confirmation evidences a complete and binding agreement between Dealer and Company as to
the terms
of the Transaction to which this Confirmation relates. This Confirmation shall supplement, form a
part of, and be
subject to an agreement in the form of the 2002 ISDA Master Agreement (the “Agreement”) as if
Dealer and
Company had executed an agreement in such form (but without any Schedule except for the election of
the laws of the
State of New York as the governing law) on the Trade Date. In the event of any inconsistency
between provisions of
that Agreement and this Confirmation, this Confirmation will prevail for the purpose of the
Transaction to which this
Confirmation relates. The parties hereby agree that no Transaction other than the Transaction to
which this
Confirmation relates shall be governed by the Agreement.

2. The terms of the particular Transaction to which this Confirmation relates are
as follows:

General Terms:

	 	 	 	 	 
	 

	 	Trade Date:
	 	December 14, 2006

1

 

	 	 	 	 	 
	 

	 	Warrants:
	 	Equity call warrants, each giving the holder the right to purchase
one Share at the Strike Price, subject to the Settlement
Terms set forth below. For the purposes of the Equity
Definitions, each reference to a Warrant herein shall be
deemed to be a reference to a Call Option.
	 
	 	 	 	 
	 

	 	Components:
	 	The Transaction will be divided into individual Components, each
with the terms set forth in this Confirmation, and, in
particular, with the Number of Warrants and Expiration
Date set forth for such Components in this Confirmation.
The payments and deliveries to be made upon settlement of
the Transaction will be determined separately for each
Component as if each Component were a separate
Transaction under the Agreement.
	 
	 	 	 	 
	 

	 	Warrant Style:
	 	European
	 
	 	 	 	 
	 

	 	Buyer:
	 	Dealer
	 
	 	 	 	 
	 

	 	Seller:
	 	Company
	 
	 	 	 	 
	 

	 	Shares:
	 	The common stock of Company, par value USD 0.01 per Share
(Exchange symbol “CDNS”)
	 
	 	 	 	 
	 

	 	Number of Warrants:
	 	For each Component, as provided in
Annex A to this
Confirmation.
	 
	 	 	 	 
	 

	 	Warrant Entitlement:
	 	One Share per Warrant
	 
	 	 	 	 
	 

	 	Strike Price:
	 	USD 31.50
	 
	 	 	 	 
	 

	 	Premium:
	 	USD 2,122,500
	 
	 	 	 	 
	 

	 	Premium Payment Date:
	 	The Effective Date or such later
date as agreed upon by the parties
	 
	 	 	 	 
	 

	 	Effective Date:
	 	December 19, 2006
	 
	 	 	 	 
	 

	 	Exchange:
	 	NASDAQ Global Select Market.
	 
	 	 	 	 
	 

	 	Related Exchange(s):
	 	The principal exchange(s) for options contracts or futures
contracts, if any, with respect to the Shares
	 
	 	 	 	 
	Exercise and Valuation:	 	 
	   In respect of any Component:	 	 
	 
	 	 	 	 
	 

	 	Expiration Time:
	 	The Valuation Time
	 
	 	 	 	 
	 

	 	Expiration Dates:
	 	As provided in Annex A to this Confirmation (or, if such date is
not a Scheduled Trading Day, the next following
Scheduled Trading Day that is not already an
Expiration Date for another Component); provided that
if that date is a Disrupted Day, the Expiration Date
for such Component shall be the first succeeding
Scheduled Trading Day that is not a Disrupted Day and
is not or

2

 

	 	 	 	 	 
	 

	 	 	 	is not deemed to be an Expiration Date in respect
of any other Component of the Transaction hereunder; and
provided further that if such Expiration Date has not
occurred pursuant to the preceding proviso as of the
Final Disruption Date, the Final Disruption Date shall be
the Expiration Date for such Component (irrespective of
whether such date is an Expiration Date in respect of any
other Component for the Transaction) and, notwithstanding
anything to the contrary in this Confirmation or the
Definitions, the Relevant Price for such Expiration Date
shall be the prevailing market value per Share determined
by the Calculation Agent in a commercially reasonable
manner. “Final Disruption Date” means April 22, 2012.
Notwithstanding the foregoing and anything to the
contrary in the Equity Definitions, if a Market
Disruption Event occurs on any Expiration Date, the
Calculation Agent may determine that such Expiration Date
is a Disrupted Day only in part, in which case the
Calculation Agent shall make adjustments to the Number of
Warrants for the relevant Component for which such day
shall be the Expiration Date and shall designate the
Scheduled Trading Day determined in the manner described
in the immediately preceding sentence as the Expiration
Date for the remaining Warrants for such Component.
Section 6.6 of the Equity Definitions shall not apply to
any Valuation Date occurring on an Expiration Date.
	 
	 	 	 	 
	 

	 	Market Disruption Event:
	 	Section 6.3(a) of the Equity Definitions is hereby amended by
deleting the words “during the one hour period that
ends at the relevant Valuation Time, Latest Exercise
Time, Knock-in Valuation Time or Knock-out Valuation
Time, as the case may be,” in clause (ii) thereof.
	 
	 	 	 	 
	 

	 	Automatic Exercise:
	 	Applicable; and means that, for each Component, each Warrant
for such Component not previously exercised will be
deemed to be automatically exercised at the Expiration
Time on the Expiration Date for such Component unless
Dealer notifies Seller (by telephone or in writing)
prior to the Expiration Time on such Expiration Date
that it does not wish Automatic Exercise to occur, in
which case Automatic Exercise will not apply.
	 
	 	 	 	 
	 

	 	Company’s Telephone Number	 	 
	 

	 	and Telex and/or Facsimile Number	 	 
	 

	 	and Contact Details for purpose of	 	 
	 

	 	Giving Notice:
	 	Cadence Design Systems, Inc.
	 

	 	 	 	Bldg. 5, MS 5B1
	 

	 	 	 	2655 Seely Avenue
	 

	 	 	 	San Jose, CA 95134
	 

	 	 	 	Attention: Legal Department
	 

	 	 	 	Telephone No.: (408) 943-1234
	 

	 	 	 	Facsimile No.: (408) 943-0513
	 
	 	 	 	 
	Valuation applicable to each Warrant:	 	 

3

 

	 	 	 	 	 
	 

	 	Valuation Time:
	 	At the close of trading of the regular trading session on the
Exchange; provided that if the regular trading session is
extended, the Calculation Agent shall determine the
Valuation Time in its reasonable discretion.
	 
	 	 	 	 
	 

	 	Valuation Date:
	 	Each Exercise Date.
	 
	 	 	 	 
	Settlement Terms:	 	 
	   In respect of any Component:	 	 
	 
	 	 	 	 
	 

	 	Method of Settlement:
	 	Net Share Settlement
	 
	 	 	 	 
	 

	 	Net Share Settlement:
	 	On each Settlement Date, Company shall deliver to Dealer the
Delivery Requirement for such Settlement Date to the
account specified herein, free of payment through the
Clearance System.
	 
	 	 	 	 
	 

	 	Delivery Requirement:
	 	For any Settlement Date, (i) a number of Shares (rounded down to
the nearest whole Share), as calculated by the
Calculation Agent, equal to (A) the Net Share
Settlement Amount for such Settlement Date divided by
(B) the Settlement Price on the Valuation Date in
respect of such Settlement Date and (ii) cash in lieu
of any fractional shares (based on such Settlement
Price).
	 
	 	 	 	 
	 

	 	Net Share Settlement Amount:
	 	For any Settlement Date, an amount equal to the product of (i)
the
Number of Warrants exercised or deemed exercised on
the relevant Exercise Date, (ii) the Strike Price
Differential for the relevant Valuation Date and (iii)
the Warrant Entitlement
	 
	 	 	 	 
	 

	 	Settlement Price:
	 	For any Valuation Date, the per Share volume-weighted average
price as displayed under the heading “Bloomberg VWAP”
on Bloomberg page <CDNS>.UQ <equity> AQR
(or any successor thereto) in respect of the period
from 9:30 a.m. to 4:00 p.m. (New York City time) on
such Valuation Date (or if such volume-weighted
average price is unavailable, the market value of one
Share on such Valuation Date, as determined by the
Calculation Agent). Notwithstanding anything to the
contrary in the Equity Definitions, if there is a
Market Disruption Event on any Valuation Date, then
the Calculation Agent shall determine the Settlement
Price for such Valuation Date on the basis of its good
faith estimate of the market value for the relevant
Shares on such Valuation Date.
	 
	 	 	 	 
	 

	 	Settlement Date:
	 	For any Exercise Date, the date defined as such in Section 9.4 of
the Equity Definitions, subject to Section 9(n)(i) hereof.
	 
	 	 	 	 
	 

	 	Failure to Deliver:
	 	Inapplicable
	 
	 	 	 	 
	Other Applicable Provisions:	 	The provisions of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 (except that
the Representation and Agreement contained in Section
9.11 of the Equity Definitions shall be modified by
excluding any representations therein relating to
restrictions, obligations, limitations or requirements
under applicable securities laws as a

4

 

	 	 	 	 	 
	 

	 	 	 	result of the fact that Seller is the issuer of
the Shares) and 9.12 of the Equity Definitions will be
applicable, as if “Physical Settlement” applied to the
Transaction.
	 
	 	 	 	 
	3. Additional Terms applicable to the Transaction:

	 	 	 	 	 
	Adjustments applicable to the Warrants:	 	 
	    In respect of any Component:	 	 
	 
	 	 	 	 
	 

	 	Method of Adjustment:
	 	Calculation Agent Adjustment. For avoidance of doubt, in making
any adjustments under the Equity Definitions, the
Calculation Agent may adjust the Strike Price, the Number
of Warrants and the Warrant Entitlement. Notwithstanding
the foregoing, any cash dividends or distributions,
whether or not extraordinary, shall be governed by
Section 9(j) of this Confirmation and not by Section 11.2
of the Equity Definitions.
	 
	 	 	 	 
	Extraordinary Events applicable to the Transaction:
	 
	 	 	 	 
	 

	 	Tender Offer:
	 	Applicable
	 
	 	 	 	 
	 

	 	Consequence of Merger Events	 	 
	 

	 	and Tender Offers	 	 
	 
	 	 	 	 
	 

	 	(a) Share-for-Share:
	 	Modified Calculation Agent Adjustment
	 
	 	 	 	 
	 

	 	(b) Share-for-Other:
	 	Cancellation and Payment (Calculation Agent Determination)
	 
	 	 	 	 
	 

	 	(c) Share-for-Combined:
	 	Cancellation and Payment (Calculation Agent Determination)
provided that the Calculation Agent may elect
Component Adjustment (Calculation Agent
Determination).
	 
	 	 	 	 
	 

	 	Nationalization, Insolvency	 	 
	 

	 	or Delisting:
	 	Cancellation and Payment (Calculation Agent Determination);
provided that (i) Section 12.6(a)(iii) of the Equity
Definitions shall be amended to delete, in the
definition of the term “Delisting” the parenthetical“(or will cease)” and (ii) in addition to the
provisions of Section 12.6(a)(iii) of the Equity
Definitions, it shall also constitute a Delisting if
the Exchange is located in the United States and the
Shares are not immediately re-listed, re-traded or
re-quoted on any of the New York Stock Exchange, the
American Stock Exchange, The NASDAQ Global Select
Market or The NASDAQ Global Market (or their
respective successors); if the Shares are immediately
re-listed, re-traded or re-quoted on any such exchange
or quotation system, such exchange or quotation system
shall thereafter be deemed to be the Exchange and the
Calculation Agent shall make any adjustments it deems
necessary to the terms of the Transaction, as if
Modified Calculation Agent Adjustment were applicable
to such event.
	 
	 	 	 	 
	Additional Disruption Events:	 	 
	 
	 	 	 	 
	 

	 	(a) Change in Law:
	 	Applicable

5

 

	 	 	 	 	 
	 

	 	(b) Insolvency Filing:
	 	Applicable
	 
	 	 	 	 
	 

	 	(c) Hedging Disruption:
	 	Applicable
	 
	 	 	 	 
	 

	 	(d) Increased Cost of Hedging:
	 	Applicable
	 
	 	 	 	 
	 

	 	(e) Loss of Stock Borrow:
	 	Applicable
	 
	 	 	 	 
	 

	 	  Maximum Stock Loan Rate:
	 	 1.0%
	 
	 	 	 	 
	 

	 	(f) Increased Cost of Stock Borrow:
	 	Applicable
	 
	 	 	 	 
	 

	 	  Initial Stock Loan Rate:
	 	 0.25%
	 
	 	 	 	 
	 

	 	Hedging Party:
	 	Dealer for all applicable Additional Disruption Events
	 
	 	 	 	 
	 

	 	Determining Party:
	 	Dealer for all applicable Additional Disruption Events
	 
	 	 	 	 
	Non-Reliance:	 	Applicable
	 
	 	 	 	 
	Agreements and Acknowledgments	 	 
	Regarding Hedging Activities:	 	Applicable
	 
	 	 	 	 
	Additional
Acknowledgments:

	 	Applicable
	 
	 	 	 	 
	4. Calculation Agent:	 	Dealer. The Calculation Agent shall, upon request by either
party, provide a written explanation of any calculation
or adjustment made by it hereunder, including, where
applicable, a description of the methodology and data
applied.

5. Account Details:

	 	(a)	 	Account for payments to Company:

Cadence Design Systems, Inc.

Account                          

Wells Fargo Bank

550 California Street — 10th Floor

San Francisco CA 94104

ABA#                          

Account for delivery of Shares from Company:

Mellon Investor Services

235 Montgomery Street, 23rd Floor

San Francisco, CA 94104

Cadence Design Systems Book Memo Treasury Reserve Account

Comment: When you are ready to deliver Shares contact Cadence FIRST.

	 	(b)	 	Account for payments to
Dealer:

CITIBANK NA

6

 

Swift                          

ABA#                          

MS & CO Inc OTC Equity Derivatives

A/C#                          

REF:                          

Account for delivery of Shares to Dealer:

To be advised.

6. Offices:

The Office of Company for the Transaction is: Inapplicable, Company is not a Multibranch Party.

The Office of Dealer for the Transaction is:

1585 Broadway, New York, NY 10036

7. Notices: For purposes of this Confirmation:

	 	(a)	 	Address for notices or communications to
Company:

Cadence Design Systems, Inc.

Bldg. 5, MS 5B1

 2655 Seely Avenue

San Jose, CA 95134 

Attention:
Legal Department 

Telephone No.:
(408) 943-1234 

Facsimile No.:
(408) 943-0513

	 	(b)	 	Address for notices or communications to
Dealer:

Morgan
Stanley & Co. International Limited

c/o Morgan Stanley Bank 
One New
York Plaza, 4th Floor

New York, NY 10004 

Attention: Fred
Gonfiantini 

Facsimile No.: (212)
507-0724 

Telephone No.: (212)
276-2427

With a copy to:

Law Division

Morgan Stanley

1585 Broadway, 38th Floor

New York, NY 10036

Attention: Anthony Cicia

Facsimile No: (212) 507-4338

Telephone No: (212) 761-3452

7

 

8. Representations and Warranties of Company

The representations and warranties of Company set forth in Section 1 of the Purchase Agreement
dated as of the Trade Date among Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated, J,P. Morgan Securities Inc. and Deutsche Bank Securities Inc.
are true and correct and are hereby deemed to be repeated to Dealer as if set forth herein.
Company hereby further represents and warrants to Dealer that:

	 	(a)	 	Company has all necessary corporate power and authority to execute, deliver and
perform its
obligations in respect of this Transaction; such execution, delivery and performance
have been
duly authorized by all necessary corporate action on Company’s part; and this
Confirmation has
been duly and validly executed and delivered by Company and constitutes its valid
and binding
obligation, enforceable against Company in accordance with its terms, subject to
applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws
affecting creditors’ rights and remedies generally, and subject, as to
enforceability, to general
principles of equity, including principles of commercial reasonableness, good faith
and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or in
equity) and
except that rights to indemnification and contribution hereunder may be limited by
federal or state
securities laws or public policy relating thereto.
	 
	 	(b)	 	Neither the execution and delivery of this Confirmation nor the incurrence or
performance of
obligations of Company hereunder will conflict with or result in a breach of (i) the
certificate of
incorporation or by-laws (or any equivalent documents) of Company, or any applicable
law or
regulation, or (ii) any order, writ, injunction or decree of any court or
governmental authority or
agency, or any agreement or instrument to which Company or any of its subsidiaries
is a party or
by which Company or any of its subsidiaries is bound or to which Company or any of
its
subsidiaries is subject, or constitute a default under, or result in the creation of
any lien under, any
such agreement or instrument, or breach or constitute a default under any agreements
and
contracts of Counterparty or its significant subsidiaries filed as exhibits to
Counterparty’s Annual
Report on Form 10-K for the year ended December 31, 2005, incorporated by reference
in the
Offering Memorandum, as updated by any subsequent filings.
	 
	 	(c)	 	No consent, approval, authorization, or order of, or filing with, any
governmental agency or body
or any court is required in connection with the execution, delivery or performance
by Company of
this Confirmation, except such as have been obtained or made and such as may be
required under
the Securities Act of 1933, as amended (the “Securities Act”) or state securities
laws.
	 
	 	(d)	 	Company is not, and after giving effect to the transactions contemplated hereby
will not be, an
“investment company” as such term is defined in the Investment Company Act of 1940,
as
amended.
	 
	 	(e)	 	The Shares of Company initially issuable upon exercise of the Warrants by the
net share
settlement method (the “Warrant Shares”) have been reserved for issuance by all
required
corporate action of Company. The Warrant Shares have been duly authorized and, when
delivered
as contemplated by the terms of the Warrants following the exercise of the Warrants
in accordance
with its terms and conditions, will be validly issued, fully-paid and
non-assessable, and the
issuance of the Warrant Shares will not be subject to any preemptive or similar
rights.
	 
	 	(f)	 	Company is an “eligible contract participant” (as such term is defined in
Section 1a(12) of the
Commodity Exchange Act, as amended (the “CEA”)) because one or more of the following
is
true:
	 
	 	 	 	Company is a corporation, partnership, proprietorship, organization, trust or other
entity and:

8

 

	 	(A)	 	Company has total assets in excess of USD 10,000,000;
	 
	 	(B)	 	the obligations of Company hereunder are guaranteed, or otherwise
supported by a letter
of credit or keepwell, support or other agreement, by an entity of the type
described in
Section 1a(12)(A)(i) through (iv), 1a(12)(A)(v)(I), 1a(12)(A)(vii) or
1a(12)(C) of the
CEA; or
	 
	 	(C)	 	Company has a net worth in excess of USD 1,000,000 and has
entered into this
Agreement in connection with the conduct of Company’s business or to manage
the risk
associated with an asset or liability owned or incurred or reasonably likely
to be owned or
incurred by Company in the conduct of Company’s business.

	 	(g)	 	On the Trade Date, (A) none of Company and its officers and directors is aware
of any material nonpublic information regarding Company or the Shares and (B) all
reports and other documents filed by Company with the Securities and Exchange
Commission pursuant to the Exchange Act when considered as a whole (with the more
recent such reports and documents deemed to amend inconsistent statements contained in
any earlier such reports and documents), do not contain any untrue statement of a
material fact or any omission of a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in which
they were made, not misleading.
	 
	 	(h)	 	Without limiting the generality of Section 3(a)(iii) of the Agreement, the
Transaction will not violate Rule 13e 1 or Rule 13e 4 under the Exchange Act.
	 
	 	(i)	 	Company’s investments in and liabilities in respect of the Transaction, which it
understands are
not readily marketable, are not disproportionate to its net worth, and it is able
to bear any loss in connection with the Transaction, including the loss of its
entire investment in the Transaction.
	 
	 	(j)	 	Company understands no obligations of Dealer to it hereunder will be entitled to the
benefit of
deposit insurance and that such obligations will not be guaranteed by any affiliate
of Dealer or any governmental agency.
	 
	 	(k)	 	Company is capable of assessing the merits of and understanding (on its own
behalf or through independent professional advice), and understands and accepts, the
terms, conditions and risks of the Transaction.
	 
	 	(l)	 	Without limiting the generality of Section 13.1 of the Equity Definitions, Company
acknowledges
that Dealer is not making any representations or warranties with respect to the
treatment of the Transaction under FASB Statements 128, 133, as amended, 149 or
150, EITF Issue No. 00-19, Issue No. 01-6 or Issue No. 03-6 (or any successor issue
statements) or under FASB’s Liabilities & Equity Project.
	 
	 	(m)	 	Company agrees that, for purposes of Rule 144(d) under the Securities Act, the
holding period of Dealer in Shares received hereunder in any Net Share Settlement or
in Shares comprising Share Termination Delivery Units received pursuant to Section
9(m) hereof shall start on the Premium Payment Date.

9. Other Provisions:

	 	(a)	 	Opinions. Company shall deliver to Dealer an opinion of counsel, dated
as of the Effective Date, with respect to the matters set forth in Sections 8(a)
through (e) of this Confirmation.

9

 

	 	(b)	 	Limitations on Settlement by Company. Notwithstanding anything herein or in
the Agreement to
the contrary, in no event shall Company be required to deliver Shares in connection with
the
Transaction in excess of 5,319,147 Shares (the “Capped Number”). Company represents and
warrants (which shall be deemed to be repeated on each day that the Transaction is
outstanding)
that the Capped Number is equal to or less than the number of authorized but unissued
Shares of
the Company that are not reserved for future issuance in connection with transactions in
the Shares
(other than the Transaction) on the date of the determination of the Capped Number (such
Shares,
the “Available Shares”), Company shall not take any action to decrease the number of
Available
Shares below the Capped Number. In the event Company shall not have delivered the full
number
of Shares that would be deliverable but for this Section 9(b) (the resulting deficit, the
“Deficit
Shares”), Company shall be continually obligated to deliver, from time to time until the
full
number of Deficit Shares have been delivered pursuant to this paragraph, Shares when, and
to the
extent, that (i) Shares are repurchased, acquired or otherwise received by Company or any
of its
subsidiaries after the Trade Date (whether or not in exchange for cash, fair value or any
other
consideration), (ii) authorized and unissued Shares reserved for issuance in respect of
other
transactions prior to such date which prior to the relevant date become no longer so
reserved and
(iii) Company additionally authorizes any unissued Shares that are not reserved for other
transactions. Company shall immediately notify Dealer of the occurrence of any of the
foregoing
events (including the number of Shares subject to clause (i), (ii) or (iii) and the
corresponding
number of Shares to be delivered) and promptly deliver such Shares thereafter.
	 
	 	(c)	 	Right to Extend. Dealer may postpone any Exercise Date or any other date of
valuation or
delivery with respect to some or all of the relevant Warrants (in which event the
Calculation Agent
shall make appropriate adjustments to the Number of Warrants for one or more Components),
if
(x) the average daily trading volume of the Shares for the four calendar weeks immediately
preceding the week in which such Exercise date or date of valuation or delivery occurs is
less than
1,505,000 Shares, which, for the avoidance of doubt, shall be subject to adjustments as a
result of
Potential Adjustment Events and (y) Dealer determines, in its reasonable discretion, that
such
extension is reasonably necessary or appropriate to preserve Dealer’s hedging or hedge
unwind
activity hereunder in light of existing liquidity conditions or to enable Dealer to effect
purchases of
Shares in connection with its hedging, hedge unwind or settlement activity hereunder in a
manner
that would, if Dealer were Company or an affiliated purchaser of Company, be reasonably
deemed
to be in compliance with applicable legal, regulatory or self-regulatory requirements, or
with
related policies and procedures applicable to Dealer.
	 
	 	(d)	 	No Manipulation. Company is not entering into this Transaction to create actual or
apparent
trading activity in the Shares (or any security convertible into or exchangeable for the
Shares) or to
raise or depress or otherwise manipulate the price of the Shares (or any security
convertible into or
exchangeable for the Shares) or to violate the Exchange Act.
	 
	 	(e)	 	Repurchase Notices. Company shall, on any day on which Company effects any
repurchase of
Shares, promptly give Dealer a written notice of such repurchase (a “Repurchase Notice”) on
such day if, following such repurchase, the Warrant Equity Percentage as determined on such
day
is (i) greater than 6% and (ii) greater by 0.5% than the Warrant Equity Percentage included
in the
immediately preceding Repurchase Notice (or, in the case of the first such Repurchase
Notice,
greater than the Warrant Equity Percentage as of the date hereof). The “Warrant Equity
Percentage” as of any day is the fraction (A) the numerator of which is the sum of (x) the
Number
of Shares hereunder and (y) the Number of Shares for the warrant transaction (reference no.
CEDGP8) entered into by the parties on the date hereof and (B) the denominator of which is
the
number of Shares outstanding on such day. Company agrees to indemnify and hold harmless
Dealer and its affiliates and their respective officers, directors, employees, affiliates,
advisors,
agents and controlling persons (each, an “Indemnified Person”) from and against any and all
losses (including losses relating to Dealer’s hedging activities as a consequence of
becoming, or of

10

 

	 	 	 	the risk of becoming, a Section 16 “insider”, including without limitation, any forbearance
from hedging activities or cessation of hedging activities and any losses in connection
therewith with respect to this Transaction), claims, damages, judgments, liabilities and
expenses (including reasonable attorney’s fees), joint or several, which an Indemnified
Person may become subject to, as a result of Company’s failure to provide Dealer with a
Repurchase Notice on the day and in the manner specified in this Section 9(e), and to
reimburse, within 30 days, upon written request, each of such Indemnified Persons for any
reasonable legal or other expenses incurred in connection with investigating, preparing for,
providing testimony or other evidence in connection with or defending any of the foregoing.
If any suit, action, proceeding (including any governmental or regulatory investigation),
claim or demand shall be brought or asserted against the Indemnified Person, such
Indemnified Person shall promptly notify Company in writing, and Company, upon request of
the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified
Person to represent the Indemnified Person and any others Company may designate in such
proceeding and shall pay the fees and expenses of such counsel related to such proceeding.
Company shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final judgment for the
plaintiff, Company agrees to indemnify any Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Company shall not, without the prior
written consent of the Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Person, unless such
settlement includes an unconditional release of such Indemnified Person from all liability
on claims that are the subject matter of such proceeding. If the indemnification provided
for in this paragraph (e) is unavailable to an Indemnified Person or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then Company under such
paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to
the amount paid or payable by such Indemnified Person as a result of such losses, claims,
damages or liabilities. The remedies provided for in this paragraph (e) are not exclusive
and shall not limit any rights or remedies which may otherwise be available to any
Indemnified Person at law or in equity. The indemnity and contribution agreements contained
in this paragraph (e) shall remain operative and in full force and effect regardless of the
termination of this Transaction.

	 	(f)	 	Board Authorization. Company represents that it is entering into the Transaction,
solely for the
purposes stated in the board resolution authorizing this Transaction and in its public
disclosure.
Company further represents that there is no internal policy, whether written or oral, of
Company
that would prohibit Company from entering into any aspect of this Transaction, including,
but not
limited to, the issuance of Shares to be made pursuant hereto.
	 
	 	(g)	 	Transfer or Assignment. Company may not transfer any of its rights or obligations
under this
Transaction without the prior written consent of Dealer. Dealer may transfer or assign all
or any
portion of its rights or obligations under this Transaction without consent of Company.
	 
	 	(h)	 	Effectiveness. If, on or prior to the Effective Date (or such later date as agreed
upon by the parties), Dealer reasonably determines that it is advisable to cancel the
Transaction because of concerns that Dealer’s related hedging activities would be reasonably
viewed as not complying with applicable securities laws, rules or regulations, the
Transaction shall be cancelled and shall not become effective, and neither party shall have
any obligation to the other party in respect of the Transaction.
	 
	 	(i)	 	Equity Rights. Dealer acknowledges and agrees that this Confirmation is not intended to
convey
to it rights with respect to the Transaction that are senior to the claims of common
stockholders in the event of Company’s bankruptcy.

11

 

	 	(j)	 	Dividends. If at any time during the period from and including the Trade Date, to
but excluding
the Expiration Date, an ex-dividend date for a cash dividend occurs with respect to the
Shares (an “Ex-Dividend Date”) and that dividend is greater than the Regular Dividend on a
per Share basis, then the Calculation Agent will adjust the Strike Price, the Number of
Warrants and the Warrant Entitlement to preserve the fair value of the Warrant to Dealer
after taking into account such dividend. “Regular Dividend” shall mean USD 0.00 per Share
per quarter.

	 	(k)	 	Additional Provisions.

(i) The first sentence of Section 11.2(c) of the Equity Definitions, prior to clause (A)
thereof,
is hereby amended to read as follows: ‘(c) If “Calculation Agent Adjustment” is specified
as the Method of Adjustment in the related Confirmation of a Share Option Transaction,
then following the announcement or occurrence of any Potential Adjustment Event, the
Calculation Agent will determine whether such Potential Adjustment Event has a material
effect on the theoretical value of the relevant Shares or options on the Shares and, if
so, will (i) make appropriate adjustment(s), if any, to any one or more of:’ and, the
portion of such sentence immediately preceding clause (ii) thereof is hereby amended by
deleting the words “diluting or concentrative” and the words “(provided that no
adjustments will be made to account solely for changes in volatility, expected dividends,
stock loan rate or liquidity relative to the relevant Shares)” and replacing such latter
phrase with the words “(and, for the avoidance of doubt, adjustments may be made to
account solely for changes in volatility, expected dividends, stock loan rate or liquidity
relative to the relevant Shares)”;

(ii) Section 11.2(e)(vii) of the Equity Definitions is hereby amended by deleting the
words “diluting or concentrative” and replacing them with “material”; and adding the
following words at the end of the sentence “or options on Shares”.

	 	(l)	 	No Collateral; Setoff. Notwithstanding any provision of the Agreement or any other
agreement
between the parties to the contrary, the obligations of Company hereunder are not secured
by any collateral. The provisions of Section 2(c) of the Agreement shall not apply to the
Transaction. Each party waives any and all rights it may have to set-off delivery or
payment obligations it owes to the other party under the Transaction against any delivery
or payment obligations owed to it by the other party, whether arising under the Agreement,
under any other agreement between parties hereto, by operation of law or otherwise.
	 
	 	(m)	 	Alternative Calculations and Payment on Early Termination and on Certain Extraordinary
Events. If, in respect of this Transaction, an amount is payable by Company to Dealer, (i)
pursuant to Section 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions (except in the
event of a Nationalization or Insolvency or a Merger Event, in each case in which the
consideration to be paid to holders of Shares consists solely of cash) or (ii) pursuant to
Section 6(d)(ii) of the Agreement (except in the event of an Event of Default in which Company
is the Defaulting Party or a Termination Event in which Company is the Affected Party, other
than an Event of Default of the type described in Section 5(a)(iii), (v), (vi), (vii) or
(viii) of the Agreement or a Termination Event of the type described in Section 5(b)(i), (ii),
(iii), (iv), (v) or (vi) of the Agreement, in each case resulting from an event or events
outside Company’s control) (a “Payment Obligation”), Company may, in its sole discretion,
satisfy any such Payment Obligation by the Share Termination Alternative (as defined below)
and shall give irrevocable telephonic notice to Dealer, confirmed in writing within one
Currency Business Day, no later than 12:00 p.m. New York local time on the Merger Date, the
Announcement Date or the Early Termination Date, as applicable; provided that if Company does
not validly elect to satisfy its Payment Obligation by the Share Termination Alternative,
Dealer shall nevertheless have the right, in its sole discretion, to require Company to
satisfy its Payment Obligation by the Share Termination Alternative, notwithstanding Company’s
lack of election. In calculating any amounts under Section 6(e) of the Agreement,

12

 

notwithstanding anything to the contrary in the Agreement, (1) separate amounts shall be
calculated as set forth in Section 6(e) with respect to (i) this Transaction and (ii) all other
Transactions, and (2) such separate amounts shall be payable
pursuant to Section 6(d)(ii) of the
Agreement, subject to, in the case of clause (l)(i), the Share Termination Alternative right
hereunder.

	 	 	 	 	 
	 

	 	Share Termination Alternative:
	 	If applicable, Company shall deliver to Dealer the
Share Termination Delivery Property on the date when
the Payment Obligation would otherwise be due pursuant
to Section 12.7 or 12.9 of the Equity Definitions or
Section 6(d)(ii) and 6(e) of the Agreement, as
applicable (the “Share Termination Payment Date”),
subject to paragraph (n)(i) below, in satisfaction,
subject to paragraph (n)(ii) below, of the Payment
Obligation in the manner reasonably requested by Dealer
free of payment.
	 
	 	 	 	 
	 

	 	Share Termination Delivery Property:
	 	A number of Share Termination Delivery Units, as
calculated by the Calculation Agent, equal to the
Payment Obligation divided by the Share Termination
Unit Price. The Calculation Agent shall adjust the
Share Termination Delivery Property by replacing any
fractional portion of a security therein with an
amount of cash equal to the value of such fractional
security based on the values used to calculate the
Share Termination Unit Price.
	 
	 	 	 	 
	 

	 	Share Termination Unit Price:
	 	The value to Dealer of property contained in one
Share Termination Delivery Unit on the date such Share
Termination Delivery Units are to be delivered as
Share Termination Delivery Property, as determined by
the Calculation Agent in its discretion by
commercially reasonable means and notified by the
Calculation Agent to Company at the time of
notification of the Payment Obligation. In the case of
a Private Placement Settlement of Share Termination
Delivery Units that are Restricted Shares as set forth
in paragraph (n)(i) below, the Share Termination Unit
Price shall be determined by the discounted price
applicable to such Share Termination Delivery Units.
In the case of a Registration Settlement of Share
Termination Delivery Units that are Restricted Shares
(as defined below) as set forth in paragraph (n)(ii)
below, the Share Termination Unit Price shall be the
Settlement Price on the Merger Date, the date of the
occurrence of the Nationalization or Insolvency, the
date of the Share De-listing or the Early Termination
Date, as applicable.
	 
	 	 	 	 
	 

	 	Share Termination Delivery Unit:
	 	In the case of a De-listing, Termination Event or
Event of Default, one Share or, in the case of
Nationalization or Insolvency, a Merger Event or a
Tender Offer, one Share or a unit consisting of the

13

 

	 	 	 	 	 
	 

	 	 	 	number or amount of each type of property
received by a holder of one Share (without
consideration of any requirement to pay cash or
other consideration in lieu of fractional amounts
of any securities) in such Nationalization,
Insolvency, Merger Event or Tender Offer, as
determined by the Calculation Agent, as the case
may be. If such Nationalization, Insolvency,
Merger Event or Tender Offer involves a choice of
consideration to be received by holders, such
holder shall be deemed to have elected to receive
the maximum possible amount of cash.
	 
	 	 	 	 
	 

	 	Failure to Deliver:
	 	Inapplicable
	 
	 	 	 	 
	 

	 	Other applicable provisions:
	 	If Share Termination Alternative is applicable, the
provisions of Sections 9.8, 9.9, 9.10, 9.11
(except that the Representation and Agreement
contained in Section 9.11 of the Equity
Definitions shall be modified by excluding any
representations therein relating to restrictions,
obligations, limitations or requirements under
applicable securities laws as a result of the
fact that Seller is the issuer of the Shares) and
9.12 of the Equity Definitions will be
applicable, as if “Physical Settlement” applied
to such cancellation or termination of the
Transaction, except that all references therein
to “Shares” shall be read as references to “Share
Termination Delivery Units”.

	 	(n)	 	Registration/Private Placement Procedures. If, in the reasonable opinion of Dealer,
following any delivery of Shares or Share Termination Delivery Property to Dealer hereunder,
such Shares or Share Termination Delivery Property would be in the hands of Dealer subject to
any applicable restrictions with respect to any registration or qualification requirement or
prospectus delivery requirement for such Shares or Share Termination Delivery Property
pursuant to any applicable federal or state securities law (including, without limitation,
any such requirement arising under Section 5 of the Securities Act as a result of such Shares
or Share Termination Delivery Property being “restricted securities”, as such term is defined
in Rule 144 under the Securities Act, or as a result of the sale of such Shares or Share
Termination Delivery Property being subject to paragraph (c) of Rule 145 under the Securities
Act) (such Shares or Share Termination Delivery Property, “Restricted Shares”), then delivery
of such Restricted Shares shall be effected pursuant to either clause (i) or (ii) below at
the election of Company, unless waived by Dealer; provided that, in the event such obligation
to deliver Restricted Shares would have arisen from a Net Share Settlement, at the election
of the Company, Company may satisfy such Share delivery obligation by paying Dealer on the
relevant Settlement Date an amount in cash equal to the relevant Net Share Settlement Amount.
Notwithstanding anything to the contrary in the Equity Definitions, Company shall notify
Dealer, prior to the first Expiration Date, whether (x) it elects to cash settle the Number
of Warrants for all Expiration Dates, if Dealer determines the Shares that would be delivered
in the Net Share Settlement of such Number of Warrants would be Restricted Shares and (y) if
cash settlement is not elected, whether a Private Placement Settlement or Registered
Settlement would apply. Such election shall apply to all Expiration Dates and all Settlement
Dates related to Expiration Dates, and the procedures in clause (i) or clause (ii) below
shall apply for all such Restricted Shares delivered in respect of all Expiration Dates on an
aggregate basis commencing on the Settlement Date relating to the first Expiration Date. In
such case, the

14

 

Calculation Agent shall make reasonable adjustments to settlement terms and provisions under
this Confirmation to reflect a single Private Placement Settlement or Registered Settlement for
such aggregate Restricted Shares delivered hereunder. If Company elects Share Termination
Alternative in accordance with Section 9(m) hereof and Dealer determines in accordance with this
paragraph that the Share Termination Delivery Property to be delivered in such Share Termination
Alternative would constitute Restricted Shares, then Company shall immediately notify Dealer
whether a Private Placement Settlement or Registered Settlement would apply to the delivery of such
Share Termination Delivery Property.

	 	(i)	 	If Company elects to settle the Transaction pursuant to this clause (i) (a “Private Placement
Settlement”), then delivery of Restricted Shares by Company shall be effected in customary
private placement procedures with respect to such Restricted Shares reasonably acceptable to
Dealer; provided that Company may not elect a Private Placement Settlement if, on the date of
its election, it has taken, or caused to be taken, any action that would make unavailable
either the exemption pursuant to Section 4(2) of the Securities Act for the sale by Company to
Dealer (or any affiliate designated by Dealer) of the Restricted Shares or the exemption
pursuant to Section 4(1) or Section 4(3) of die Securities Act for resales of the Restricted
Shares by Dealer (or any such affiliate of Dealer). The Private Placement Settlement of such
Restricted Shares shall include customary representations, covenants, blue sky and other
governmental filings and/or registrations, indemnities to Dealer, due diligence rights (for
Dealer or any designated buyer of the Restricted Shares by Dealer), opinions and certificates,
and such other documentation as is customary for private placement agreements, all reasonably
acceptable to Dealer. In the case of a Private Placement Settlement, Dealer shall determine
the appropriate discount to the Share Termination Unit Price (in the case of settlement of
Share Termination Delivery Units pursuant to paragraph (m) above) or any Settlement Price (in
the case of settlement of Shares pursuant to Section 2 above) applicable to such Restricted
Shares in a commercially reasonable manner and appropriately adjust the amount of such
Restricted Shares to be delivered to Dealer hereunder. Notwithstanding the Agreement or this
Confirmation, the dale of delivery of such Restricted Shares shall be the Exchange Business
Day following notice by Dealer to Company of such applicable discount and the number of
Restricted Shares to be delivered pursuant to this clause (i). For the avoidance of doubt,
delivery of Restricted Shares shall be due as set forth in the previous sentence and not be
due on the Share Termination Payment Date (in the case of settlement of Share Termination
Delivery Units pursuant to paragraph (m) above) or on the Settlement Date for such Restricted
Shares (in the case of settlement of Shares pursuant to Section 2 above).
	 
	 	 	 	In the event Company shall not have delivered the full number of Restricted Shares
otherwise applicable as a result of either the proviso above or the last sentence of
clause (ii) below relating to the Maximum Amount (such deficit, the “Deficit Restricted
Shares”), Company shall be continually obligated to deliver, from time to time until the
full number of Deficit Restricted Shares have been delivered pursuant to this paragraph,
Restricted Shares when, and to the extent, that (i) Shares are repurchased, acquired or
otherwise received by Company or any of its subsidiaries after the Trade Date (whether or
not in exchange for cash, fair value or any other consideration), (ii) authorized and
unissued Shares reserved for issuance in respect of other transactions prior to such date
which prior to the relevant date become no longer so reserved and (iii) Company
additionally authorizes any unissued Shares that are not reserved for other transactions.
Company shall immediately notify Dealer of the occurrence of any of the foregoing events
(including the number of Shares subject to clause (i), (ii) or (iii) and the
corresponding number of Restricted Shares to be delivered) and promptly deliver such
Restricted Shares thereafter.

15

 

	 	(ii)	 	If Company elects to settle the Transaction pursuant to this clause (ii) (a “Registration
Settlement”), then Company shall promptly (but in any event no later than the beginning of
the Resale Period) file and use its reasonable best efforts to make effective under the
Securities Act a registration statement or supplement or amend an outstanding registration
statement in form and substance reasonably satisfactory to Dealer, to cover the resale of
such Restricted Shares in accordance with customary resale registration procedures,
including covenants, conditions, representations, underwriting discounts (if applicable),
commissions (if applicable), indemnities due diligence rights, opinions and certificates,
and such other documentation as is customary for equity resale underwriting agreements,
all reasonably acceptable to Dealer. If Company shall fail to comply with the requirements
set forth in the immediately preceding sentence, Private Placement Settlement shall apply.
If Dealer is satisfied with such procedures and documentation, it shall sell the
Restricted Shares pursuant to such registration statement during a period (the “Resale
Period”) commencing on the Exchange Business Day following delivery of such Restricted
Shares (which, for the avoidance of doubt, shall be (x) the Share Termination Payment Date
in case of settlement of Share Termination Delivery Units pursuant to paragraph (m) above
or (y) the Settlement Date in respect of the first Expiration Date) and ending on the
earliest of (x) the Exchange Business Day on which Dealer completes the sale of all
Restricted Shares or, in the case of settlement of Share Termination Delivery Units, a
sufficient number of Restricted Shares so that the realized net proceeds of such sales
exceed the Payment Obligation or the Net Share Settlement Amount, as the case may be, (y)
the date upon which all Restricted Shares have been sold or transferred pursuant to Rule
144 (or similar provisions then in force) or Rule 145(d)(l) or (2) (or any similar
provision then in force) under the Securities Act and (iii) the date upon which all
Restricted Shares may be sold or transferred by a non-affiliate pursuant to Rule 144(k)
(or any similar provision then in force) or Rule 145(d)(3) (or any similar provision then
in force) under the Securities Act. If the Payment Obligation or the Net Share Settlement
Amount, as the case may be, exceeds the realized net proceeds from such resale, Company
shall transfer to Dealer by the open of the regular trading session on the Exchange on the
Exchange Trading Day immediately following the last day of the Resale Period the amount of
such excess (the “Additional Amount”) in cash or in a number of Restricted Shares
(“Make-whole Shares”) in an amount that, based on the Settlement Price on the last day of
the Resale Period (as if such day was the “Valuation Date” for purposes of computing such
Settlement Price), has a dollar value equal to the Additional Amount. The Resale Period
shall continue to enable the sale of the Make-whole Shares. If Company elects to pay the
Additional Amount in Restricted Shares, the requirements and provisions for Registration
Settlement shall apply. This provision shall be applied successively until the Additional
Amount is equal to zero. For the avoidance of doubt, Company’s obligation to deliver
Make-whole Shares shall apply to both Private Placement Settlements and Registration
Settlements.
	 
	 	(iii)	 	Without limiting the generality of the foregoing, Company agrees that any Restricted Shares
delivered to Dealer, as purchaser of such Restricted Shares, (i) may be transferred by and
among Dealer and its affiliates and Company shall effect such transfer without any further
action by Dealer and (ii) after the minimum “holding period” within the meaning of Rule
144(d) under the Securities Act has elapsed after any Settlement Date for such Restricted
Shares, Company shall promptly remove, or cause the transfer agent for such Restricted Shares
to remove, any legends referring to any such restrictions or requirements from such
Restricted Shares upon delivery by Dealer (or such affiliate of Dealer) to Company or such
transfer agent of seller’s and broker’s representation letters customarily delivered by
Dealer in connection with resales of restricted securities pursuant to Rule 144 under the
Securities Act, without any further requirement for the delivery of any certificate, consent,
agreement, opinion of counsel, notice or any other

16

 

	 	 	 	document, any transfer tax stamps or payment of any other amount or any other
action by Dealer (or such affiliate of Dealer).

	 	 	 	If the Private Placement Settlement or the Registration Settlement shall not be effected
as set forth in clauses (i) or (ii), as applicable, then failure to effect such Private
Placement Settlement or such Registration Settlement shall constitute an Event of Default
with respect to which Company shall be the Defaulting Party.

	 	(o)	 	Limit on Beneficial Ownership. Notwithstanding any other provisions hereof, Dealer
may not exercise any Warrant hereunder, and Automatic Exercise shall not apply with respect
thereto, to the extent (but only to the extent) that such receipt would result in Dealer
directly or indirectly beneficially owning (as such term is defined for purposes of Section
13(d) of the Exchange Act) at any time in excess of 9.0% of the outstanding Shares. Any
purported delivery hereunder shall be void and have no effect to the extent (but only to the
extent) that such delivery would result in Dealer directly or indirectly so beneficially
owning in excess of 9.0% of the outstanding Shares. If any delivery owed to Dealer hereunder
is not made, in whole or in part, as a result of this provision, Company’s obligation to make
such delivery shall not be extinguished and Company shall make such delivery as promptly as
practicable after, but in no event later than one Exchange Business Day after, Dealer gives
notice to Company that such delivery would not result in Dealer directly or indirectly so
beneficially owning in excess of 9.0% of the outstanding Shares.
	 
	 	(p)	 	Share Deliveries. Company acknowledges and agrees that, to the extent the holder of
this Warrant is not then an affiliate and has not been an affiliate for 90 days (it being
understood that Dealer will not be considered an affiliate under this Section 9(p) solely by
reason of its receipt of Shares pursuant to this Transaction), and otherwise satisfies all
holding period and other requirements of Rule 144 of the Securities Act applicable to it, any
delivery of Shares or Share Termination Delivery Property hereunder at any time after two
years from the Premium Payment Date shall be eligible for resale under Rule 144(k) of the
Securities Act and Company agrees to promptly remove, or cause the transfer agent for such
Shares or Share Termination Delivery Property, to remove, any legends referring to any
restrictions on resale under the Securities Act from the Shares or Share Termination Delivery
Property. Company further agrees, for any delivery of Shares or Share Termination Delivery
Property hereunder at any time after one year from the Premium Payment Date but within 2
years of the Premium Payment Date, to the extent the holder of this Warrant then satisfies
the holding period and other requirements of Rule 144 of the Securities Act, to promptly
remove, or cause the transfer agent for such Shares or Share Termination Delivery Property to
remove, any legends referring to any such restrictions or requirements from such Shares or
Share Termination Delivery Property. Such Shares or Share Termination Delivery Property will
be de-legended upon delivery by Dealer (or such affiliate of Dealer) to Company or such
transfer agent of customary seller’s and broker’s representation letters in connection with
resales of restricted securities pursuant to Rule 144 of the Securities Act, without any
further requirement for the delivery of any certificate, consent, agreement, opinion of
counsel, notice or any other document, any transfer tax stamps or payment of any other amount
or any other action by Dealer (or such affiliate of Dealer). Company further agrees that any
delivery of Shares or Share Termination Delivery Property prior to the date that is one year
from the Premium Payment Date, may be transferred by and among Dealer and its affiliates and
Company shall effect such transfer without any further action by Dealer. Notwithstanding
anything to the contrary herein, Company agrees that any delivery of Shares or Share
Termination Delivery Property shall be effected by book-entry transfer through the facilities
of DTC, or any successor depositary, if at the time of delivery, such class of Shares or
class of Share Termination Delivery Property is in book-entry form at DTC or such successor
depositary. Notwithstanding anything to the contrary herein, to the extent the provisions of
Rule 144 of the Securities Act or any successor rule are amended, or the applicable
interpretation thereof by the Securities and Exchange Commission or any court change after
the Trade Date, the agreements of Company herein shall be deemed modified to the extent
necessary, in the opinion of outside counsel of Company, to comply

17

 

	 	 	 	with Rule 144 of the Securities Act, including Rule 144(k) as in effect at the time
of delivery of the relevant Shares or Share Termination Delivery Property.

	 	(q)	 	Additional Termination Event. If within the period commencing on the Trade Date and
ending on the second anniversary of the Premium Payment Date, Buyer reasonably determines
that it is advisable to terminate a portion of the Transaction so that Buyer’s related
hedging activities will reasonably be deemed to comply with applicable securities laws, rules
or regulations, an Additional Termination Event shall occur in respect of which (1) Company
shall be the sole Affected Party and (2) the Transaction shall be the sole Affected
Transaction.
	 
	 	(r)	 	Securities Contract: Swap Agreement. Each of Dealer and Company agrees and
acknowledges that Dealer is a “stock broker,” “swap participant” and “financial participant” within the
meaning of Sections 101(22), 101(53C) and 101(22A) of Title 11 of the United States Code
(the “Bankruptcy Code”). The parties hereto further agree and acknowledge (A) that this
Confirmation is (i) a “securities contract,” as such term is defined in Section 741(7) of
the Bankruptcy Code, with respect to which each payment and delivery hereunder is a
“settlement payment,” as such term is defined in Section 741(8) of the Bankruptcy Code,
and (ii) a “swap agreement,” as such term is defined in Section 101(53B) of the Bankruptcy
Code, with respect to which each payment and delivery hereunder is a “transfer,” as such
term is defined in Section 101(54) of the Bankruptcy Code, and (B) that Dealer is entitled
to the protections afforded by, among other sections, Section 362(b)(6), 362(b)(17),
546(e), 546(g), 555 and 560 of the Bankruptcy Code.
	 
	 	(s)	 	Disclosure. Effective from the date of commencement of discussions concerning the
Transaction, Company and each of its employees, representatives, or other agents may disclose
to any and all persons, without limitation of any kind, the tax treatment and tax structure
of the Transaction and all materials of any kind (including opinions or other tax analyses)
that are provided to Company relating to such tax treatment and tax structure.
	 
	 	(t)	 	Governing Law. New York law (without reference to choice of law doctrine).
	 
	 	(u)	 	Waiver of Jury Trial. Each party waives, to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in respect of any suit, action or
proceeding relating to this Transaction. Each party (i) certifies that no representative,
agent or attorney of the other party has represented, expressly or otherwise, that such other
party would not, in the event of such a suit, action or proceeding, seek to enforce the
foregoing waiver and (ii) acknowledges that it and the other party have been induced to enter
into this Transaction, as applicable, by, among other things, the mutual waivers and
certifications provided herein.
	 
	 	(v)	 	Quarterly Valuations. Dealer hereby agrees, upon request by Company, to provide to
Company, within 5 Exchange Business Days after the end of the fiscal quarter of Company
during which Company made such request, a valuation estimate of the fair value of the
Transaction as of Company’s fiscal quarter end.
	 
	 	(w)	 	Role of Agent. Each party agrees and acknowledges that:

(i) Agent is acting as agent for both parties but does not guarantee the performance of
either party; (ii) Dealer is not a member of the Securities Investor Protection
Corporation; (iii) Agent, Dealer and Company each hereby acknowledges that any
transactions by Dealer or Agent in the Shares will be undertaken by Dealer as principal
for its own account; and (iv) all of the actions to be taken by Dealer and Agent in
connection with the Transaction, including but not limited to any exercise of any
Warrants, shall be taken by Dealer or Agent independently and without any advance or
subsequent consultation with Company; and (v) Agent is hereby authorized to act as

18

 

agent for Company only to the extent required to satisfy the requirements of Rule 15a-6 under
the Exchange Act in respect of the Warrants described hereunder.

19

 

     Please confirm that the foregoing correctly sets forth the terms of our agreement by
executing this Confirmation and returning it by facsimile to the address provided in the Nonces
section of this Confirmation.

	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Morgan Stanley & Co,

International Limited	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	By: /s/ Steven
Nash     	 	 
	 

	 	 	 	Authorized Signatory

Name: Steven Nash
Executive Director	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Morgan Stanley Bank, as agent	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	By: /s/ Richard A. Uhlig    	 	 
	 

	 	 	 	Authorized Signatory

Name: Richard A. Uhlig
            Chairman 
            Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	          Accepted and confirmed

          as of the Trade Date:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	          Cadence
Design Systems, Inc.
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	          By:
/s/ William Porter
    
	 	 	 	 	 	 
	          Authorized Signatory

          Name:
William Porter
	 	 	 	 	 	 

 

 

Annex A

For each Component of the Transaction, the Number of Warrants and Expiration Date is set forth below.

	 	 	 	 	 
	Component Number	 	Number of Warrants	 	Expiration Date
	1.

2.

3.

4.

5.

6,

7.

8. 

9. 

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

33.

34.

35.

36.

	 	49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,251

49,264
	 	2/16/2012

2/17/2012

2/21/2012

2/22/2012

2/23/2012

2/24/2012

2/27/2012

2/28/2012

2/29/2012

3/1/2012

3/2/2012

3/5/2012

3/6/2012

3/7/2012

3/8/2012

3/9/2012

3/12/2012

3/13/2012

3/14/2012

3/15/2012

3/16/2012

3/19/2012

3/20/2012

3/21/2012

3/22/2012

3/23/2012

3/26/2012

3/27/2012

3/28/2012

3/29/2012

3/30/2012

4/2/2012

4/3/2012

4/4/2012

4/5/2012

4/9/2012

A-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00117-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00117-of-00352.parquet"}]]