This Indemnity
Agreement (this “Agreement”), dated as of ___, is made
by and between Cadence Design Systems, Inc., a Delaware corporation
(the “Company”), and ___, a ___of the Company (the
“Indemnitee”).
A. The
Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors or officers of
corporations unless they are protected by comprehensive liability
insurance and indemnification, due to increased exposure to
litigation costs and risks resulting from their service to such
corporations;
B. Plaintiffs
often seek damages in such large amounts and the costs of
litigation may be so substantial (whether or not the case is
meritorious), that the defense and/or settlement of such litigation
is often beyond the personal resources of officers and
directors;
C. The
Company believes that its directors and officers and the directors
and officers of its subsidiaries should be able to serve as such,
and in such other capacities as the Company may request, as the
case may be, free from undue concern about the risk of large
judgments and other expenses that may be incurred as a result of
the good faith performance of their duties to the Company or its
subsidiaries;
D. The
Company recognizes that the long period of time that may elapse
before the trial or other disposition of legal proceedings may
extend beyond the normal time for retirement for such director or
officer, with the result that the Indemnitee, after retirement or
in the event of the Indemnitee’s death, the
Indemnitee’s spouse, heirs, executors or administrators, may
be faced with limited ability and undue hardship in maintaining an
adequate defense, which may discourage such director or officer
from serving in that position;
E. Based upon
their experience as business managers, the Board of Directors of
the Company (the “Board”) has concluded that, to retain
and attract talented and experienced individuals to serve as
directors and certain officers of the Company and its subsidiaries
and to encourage such individuals to take the business risks
necessary for the success of the Company and its subsidiaries, it
is necessary, and in the best interests of the Company and its
stockholders, for the Company to contractually indemnify such
individuals, and to assume for itself maximum liability for claims
against such persons in connection with their service;
F. The
Company desires and has requested the Indemnitee to serve or
continue to serve as a director and/or an officer of the Company
and/or the subsidiaries of the Company, free from undue concern for
claims for damages arising out of or related to such services to
the Company and/or the subsidiaries of the Company; and
G. The
Indemnitee is willing to serve, or to continue to serve, the
Company and/or the subsidiaries of the Company provided that the
Indemnitee is furnished the indemnity provided for
herein.
NOW, THEREFORE,
the parties hereto, intending to be legally bound, hereby agree as
follows:
(a)
Change in Control . For purposes of this Agreement, a
“change in control” shall be deemed to have occurred if
(i) any “person” (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a
corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under Securities
Exchange Act of 1934, as amended), directly or indirectly, of
securities of the Company representing 20% or more of the total
voting power represented by the Company’s then outstanding
voting securities; or (ii) during any period of two
consecutive years, individuals who at the beginning of such period
constitute the Board and any new director whose election by the
Board or nomination for election by the Company’s
stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority thereof; or (iii) the stockholders of
the Company approve a merger or consolidation of the Company with
any other corporation, other than a merger or consolidation that
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving entity) at least 80% of the total voting power
represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation; or (iv) the stockholders of the Company approve
a plan of complete liquidation of the Company or an agreement for
the sale or disposition by the Company (in one transaction or a
series of transactions) of all or substantially all of the
Company’s assets.
(b)
Covered Person . For purposes of this Agreement, a
“covered person” shall include the Indemnitee and any
heir, executor, administrator or other legal representative of the
Indemnitee following the Indemnitee’s death or
incapacity.
(c)
Disinterested Directors . For purposes of this Agreement,
“disinterested directors” mean any director of the
Company who is not or was not a party to the proceeding in respect
of which indemnification is being sought by a covered
person.
(d)
Expenses . For purposes of this Agreement,
“expenses” include all direct and indirect costs of any
type or nature whatsoever (including, without limitation, all
attorneys’ fees and related disbursements and other
out-of-pocket costs) actually and reasonably incurred by a covered
person in connection with either the investigation, defense or
appeal of a
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proceeding or
establishing or enforcing a right to indemnification or advancement
under this Agreement, Section 145 of the Delaware General
Corporation Law or otherwise.
(e)
Independent Legal Counsel . For purposes of this Agreement,
“independent legal counsel” means a law firm or a
member of a law firm that neither is presently nor in the past five
years has been retained to represent (i) the Company or a
covered person in any matter material to either such party, or
(ii) any other party to the proceeding giving rise to a claim
for indemnification or advancement hereunder. “Independent
legal counsel” shall not include any person who, under the
applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or
the covered person in an action to determine such covered
person’s right to indemnification or advancement under this
Agreement.
(f)
Proceeding . For purposes of this Agreement,
“proceeding” means any threatened, pending or completed
action, suit or other proceeding, whether civil, criminal,
administrative, legislative, investigative or of any other type
whatsoever, and including any of the foregoing commenced by or on
behalf of the Company, derivatively or otherwise.
(g)
Subsidiary . For purposes of this Agreement,
“subsidiary” means any corporation of which more than
50% of the outstanding voting securities is owned directly or
indirectly by the Company, and one or more other subsidiaries, or
by one or more other subsidiaries.
2.
Agreement to Serve . The Indemnitee agrees to serve and/or
continue to serve the Company and/or its subsidiaries in the
Indemnitee’s present capacity, so long as the Indemnitee is
duly appointed or elected or until such time as the Indemnitee
tenders a written resignation; provided, however, that nothing
contained in this Agreement is intended to create any right to
continued employment or other form of service for the Company or
its subsidiaries by Indemnitee.
3.
Maintenance of Liability Insurance .
(a) The
Company hereby covenants and agrees that, so long as the Indemnitee
shall continue to serve as an officer or director of the Company or
any of its subsidiaries, and thereafter so long as the Indemnitee
shall be subject to any possible proceeding by reason of such
service, the Company, subject to Section 3(b), shall use
reasonable efforts to obtain and maintain in full force and effect
directors’ and officers’ liability insurance
(“D&O Insurance”) in reasonable amounts from
established and reputable insurers.
(b) Notwithstanding
the foregoing, the Company shall have no obligation to obtain or
maintain D&O Insurance if the Company determines in good faith
that such insurance is not reasonably available, the premium costs
for such insurance are disproportionate to the amount of coverage
provided, the coverage provided by such insurance is limited by
exclusions so as to provide an insufficient benefit, or the
Indemnitee is covered by similar insurance maintained by a
subsidiary of the Company.
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4.
Mandatory Indemnification .
(a)
Right to Indemnification . In the event a covered person was
or is made a party or is threatened to be made a party to or is
involved in any proceeding, by reason of the fact that the
Indemnitee is or was a director, officer, employee or agent of the
Company (including any subsidiary or affiliate thereof or any
constituent corporation or any of the foregoing absorbed in any
merger) or is or was serving at the request of the Company
(including such subsidiary, affiliate or constituent corporation)
as a director, officer, employee or agent of another corporation,
or of a partnership, joint venture, trust or other entity,
including service with respect to employee benefit plans, such
person shall be indemnified and held harmless by the Company to the
fullest extent permitted by applicable law and the Company’s
Bylaws, against all expenses, liability and loss (including,
without limitation, attorneys’ fees, judgments, fines,
forfeitures, ERISA excise and other taxes and penalties, and
amounts paid or to be paid in settlement) actually and reasonably
incurred or suffered by such person in connection therewith. Such
indemnification shall continue after the Indemnitee has ceased to
serve in such capacity and shall inure to the benefit of the
Indemnitee’s heirs, executors, administrators and other legal
representatives; provided, however, that except for a proceeding
pursuant to Section 7, the Company shall indemnify any such
person in connection with a proceeding (or part thereof) initiated
by such person only if such proceeding (or part thereof) was
authorized by the Board.
(b)
Exception for Amounts Covered by Insurance . Notwithstanding
the foregoing, the Company shall not be obligated to indemnify a
covered person for expenses or liabilities of any type whatsoever
(including, but not limited to, attorneys’ fees, judgments,
fines, forfeitures, ERISA excise and other taxes and penalties, and
amounts paid or to be paid in settlement) which have been paid
directly to such person or a third party on the covered
person’s behalf by D&O Insurance.
(c)
Partial Indemnification; Successful Defense . If a covered
person is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of any
expenses or liabilities of any type whatsoever (including, but not
limited to,
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