Moshe
Gavrielov
1900 Webster St.
Palo Alto, CA 94301
We are very
pleased to offer you employment in the position of Executive Vice
President and General Manager, Verification Division, with Cadence
Design Systems, Inc. (“Cadence”), following the
completion of the merger of Verisity Ltd., an Israeli corporation
(the “Company”), with a wholly-owned subsidiary
(“Scioto River Ltd.”) of Cadence (the
“Transaction”). In this position, your responsibilities
will be to manage the entire Verification Division of Cadence and
you will report directly to the Chief Executive Officer of Cadence.
This letter agreement (the “Agreement”) sets forth the
terms of our offer of employment to you as well as other related
matters for your approval and signature. This offer will become
effective upon consummation of the Transaction (the
“Effective Time”) and is conditioned upon consummation
of the Transaction and upon your successfully passing the Cadence
background verification check. However, should the merger agreement
among Cadence, Scioto River Ltd. and the Company (the “Merger
Agreement”) be terminated for any reason, this Agreement
shall immediately and automatically terminate and be of no further
force or effect.
1. Your
annualized base salary as a full-time employee will be $400,000 per
year, paid semi-monthly in accordance with Cadence’s normal
payroll practices. Payments of salary and other compensation will
be subject to customary tax and other withholding.
2. Even
though your employment with Cadence will start after the beginning
of the measurement period under Cadence’s Key Contributor
Incentive Plan (the “Plan”), you will be eligible to
participate in the Plan for an annualized bonus targeted at 75% of
your annual base salary in accordance with the terms of the Plan,
in lieu of participating in the Company bonus plan. Regardless of
the actual date of the Effective Time, you will receive credit for
your participation in the Plan as of January 1, 2005. Actual
payment is based on company performance and your individual
achievements, as well as your continued employment by Cadence
through the applicable payout date.
3. In
addition, within 20 days after the Effective Time, Cadence
will pay you $100,000 (the “Signing Bonus”); provided,
however, that if your employment with Cadence is terminated for
“cause” (as defined below) or you resign for reasons
other than “good reason” (as defined below) prior to
the first anniversary of the Effective Time, the entire Signing
Bonus shall be repaid by you to Cadence on your termination date.
Payment of the Signing Bonus will be subject to customary tax and
other withholding. You hereby agree that any amount due Cadence
with respect to the Signing Bonus may be offset and deducted in
full against any amount due you, including any amount that would
otherwise be paid to you in your final paycheck, whether with
respect to salary, benefits or otherwise.
4. Please
note that, upon consummation of the Transaction, (i) your
options to acquire Company ordinary shares (the
“Options”) will automatically be converted into options
for Cadence common stock and, subject to the existing terms and
conditions of the plans under which the Options were granted and
the related option agreements, the Options will continue to vest in
accordance with their terms, as long as you are employed by Cadence
or any of its subsidiaries, and (ii) the Merger Consideration
(as defined in the Merger Agreement) you receive in exchange for
your shares of restricted Company ordinary shares, if any, pursuant
to the Merger Agreement will be subject to restrictions similar to
the restrictions currently affecting your restricted Company
ordinary shares prior to the Effective Time, in each case in the
manner described in the Merger Agreement. In addition, you will be
granted a nonqualified stock option for 300,000 shares of Cadence
common stock, which will be granted by the Compensation Committee
shortly after the Effective Time, at the average of the high and
low market price of Cadence common stock on the date of grant. This
option will vest as to 25% of the shares on the
first
anniversary of the Effective Time and as to 1/48th of the shares
monthly thereafter on the last day of each month during your
employment. You will also be granted 100,000 shares of Cadence
restricted stock, which will be granted by the Compensation
Committee shortly after the Effective Time and will vest as to 25%
of the shares on each of the first four (4) anniversaries of
the Effective Time.
5. While you
are a full-time Cadence employee, you will receive benefits
comparable in the aggregate to the health and other benefits that
are generally available to the rest of Cadence’s full-time
U.S.-based employees (provided, of course, you meet the standard
eligibility requirements for such benefits). You will receive full
credit for service as an employee of the Company for eligibility
and/or vesting purposes, subject to applicable law and the terms
and conditions of Cadence’s benefit plans. In addition, you
hereby acknowledge and agree that you shall receive a lump sum
payout within 45 days after the Effective Time, as a result of
the Merger, with respect to any accrued and unpaid vacation hours
to which you are entitled to under the Company’s vacation
policy as of the Effective Time. As an executive of Cadence, you
may take personal time off at your discretion, with your
manager’s approval. Thus, you will not accrue vacation, and
you will have flexibility with respect to taking time off from
work. The cash and other benefits payable under this Agreement are
intended to constitute reasonable compensation for the services you
render to Cadence after the Effective Time.
6. As part of
this offer of employment, Cadence agrees that, should your
employment with Cadence (or one of its subsidiaries) be terminated
without “cause” (as defined below) or due to death or
disability, or you resign for “good reason” (as defined
below), at any time during the three (3) years following the
Effective Time (the “Term”), then, subject to your
signing Cadence’s standard release agreement and in lieu of
your receiving any other severance or termination benefits of any
sort from Cadence, Cadence will provide you with (i) a
one-time lump sum payment on or about the effective date of your
termination (the “Termination Date”), but in no event
later than ten (10) days after the effective date of the
release agreement, in an amount equal to the aggregate of
(A) any base salary (without bonus) earned but unpaid during
the year which includes the Termination Date, (B) your base
salary (at the rate in effect on the Termination Date, without
bonus) that you would have earned from the day following the
Termination Date until the earlier of (1) the last day of the
Term or (2) the date that is one year after the Termination
Date, and (C) one year’s target bonus (at the rate in effect
on the Termination Date); unless there is less than one year
remaining in the Term after the Termination Date, in which case the
amount to be paid under this clause (C) shall be prorated
(i.e., if there are nine months left in the Term after the
Termination Date, the amount to be paid under this clause
(C) shall be 9/12th of one year’s target bonus in effect
on the Termination Date), (ii) continuation of your health
benefits for the lesser of 12 months and the remainder of the
Term, and (iii) immediate vesting of all Options granted to
you prior to the date of this Agreement that are converted into
options to purchase Cadence common stock upon the consummation of
the Transaction which remain unvested on the Termination Date, and
(iv) immediate vesting of any options to purchase shares of
Cadence common stock and shares of Cadence restricted stock granted
to you from and after the date of this Agreement which remain
unvested on the Termination Date and which would have vested over
the 12-month period beginning on the Termination Date. Cadence will
withhold from all such payments taxes and any other amounts
required by law. All employee benefits, other than those described
above, will terminate on the Termination Date regardless of the
reason for your termination of employment.
If you resign
without “good reason” (as defined below) or you are
terminated for “
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