EXECUTIVE TRANSITION AND RELEASE
AGREEMENT
This Executive
Transition and Release Agreement (this “Agreement”) is
entered into between H. Raymond Bingham (“Executive”)
and Cadence Design Systems, Inc., a Delaware corporation
(“Cadence” or the “Company”).
1.
EFFECTIVE DATE OF RETIREMENT . As of July 8, 2005 (the
“Transition Date”), Executive has resigned from his
position as Executive Chairman of the Board (“Executive
Chairman”) and acknowledges and agrees that he has
relinquished all of the authority and responsibilities of such
position. Executive also resigned from the Board of Directors of
the Company (the “Board”), and his positions with any
and all of the Company’s subsidiaries and affiliates, as well
as any trade associations and similar memberships, effective as of
the Transition Date; provided, however, that Executive shall remain
an employee of Cadence until 11:59 p.m., California time, on
July 31, 2005 (the “Termination Date”). On or
after the Termination Date, Executive will (a) be paid
promptly any earned but unpaid base salary, less applicable tax
deductions and withholding; (b) not later than on or about
August 18, 2005, be paid a bonus of 40% of Executive’s
annual target bonus under Cadence’s Senior Executive Bonus
Plan with respect to performance for the first half of 2005, to be
calculated using the Company Performance Multiplier achieved by
Cadence for the first half of 2005 and an Individual Performance
Multiplier of 1.0, less applicable tax deductions and withholding;
(c) have submitted, on or before September 1, 2005, any
requests for expense reimbursement, which requests shall be
processed and paid in accordance with the Company’s
applicable expense reimbursement policy as currently in effect; and
(d) be paid other unpaid vested amounts or benefits under the
compensation, incentive and benefit plans of the Company in which
Executive participates or for which Executive is eligible, whether
as an employee of the Company or as a member of the Board, or under
the Employment Agreement (as defined in Section 2(g) hereof), in
each case in accordance with the terms of such compensation,
incentive and benefit plans or the Employment Agreement. The
payment of the foregoing amounts shall in any event be made to
Executive on or before the date required by applicable
law.
As of the first
day of the month following the Termination Date, except as
otherwise expressly provided herein, Executive will no longer
participate in Cadence’s employee benefit plans and will not
be eligible for a bonus for any services rendered after that date,
except as expressly provided herein.
2.
NONCOMPETITION AND SOLICITATION .
a. Except as
otherwise provided in Section 2(b) of this Agreement,
Executive’s obligations hereunder will not preclude Executive
from accepting and holding full-time employment or providing his
personal services elsewhere.
b. As a
member of Cadence’s Board, as well as other positions
Executive has held with Cadence, Executive has obtained extensive
and valuable knowledge and information concerning Cadence’s
business (including confidential information relating to Cadence
and its operations, intellectual property, assets, contracts,
customers, suppliers, personnel, plans, marketing plans, research
and development plans and prospects). Executive acknowledges and
agrees that it
would be
virtually impossible for Executive to work as an employee,
consultant or advisor in those businesses in the electronic design
automation industry that compete most directly with Cadence without
inevitably disclosing confidential and proprietary information
belonging to Cadence. Accordingly, for a period of 12 months
following the Termination Date, Executive will not, directly or
indirectly, provide services, whether as an employee, consultant,
independent contractor, agent, sole proprietor, partner, joint
venturer, corporate officer or director, on behalf of Synopsys,
Inc., Magma Design Automation, Inc., Mentor Graphics Corporation,
or PDF Solutions, Inc. Executive may, however, provide such
services to any other business without violating this
Section 2(b), as long as such services comply with the
Employee Proprietary Information and Inventions Agreement (as
defined in Section 8 below).
c. For a
period of 24 months following the Termination Date, Executive
will be prohibited, to the fullest extent allowed by applicable
law, and except with the advance written approval of the then Chief
Executive Officer (“CEO”) or General Counsel of
Cadence, from voluntarily or involuntarily, for any reason
whatsoever, directly or indirectly, individually or on behalf of
persons or entities not now parties to this Agreement, encouraging,
inducing or attempting to induce, soliciting or attempting to
solicit for employment, contractor or consulting opportunities
anyone who is employed at the Termination Date, or was employed
during the previous one year, by Cadence or any Cadence
affiliate.
d. For a
period of 12 months following the Termination Date, Executive
will be prohibited, to the fullest extent allowed by applicable
law, and except with the advance written approval of the then CEO
or General Counsel of Cadence, from directly or indirectly,
individually or on behalf of persons or entities not now parties to
this Agreement, intentionally and knowingly interfering or
attempting to interfere with the relationship or prospective
relationship of Cadence or any Cadence affiliate with any former,
present or future client, customer, supplier, joint venture partner
or financial backer of Cadence or any Cadence affiliate.
e. Executive
will fully cooperate with Cadence in all matters relating to his
employment and the termination thereof, including the winding up of
work performed in Executive’s prior position and the orderly
transition of such work to other Cadence employees. Cadence will
reasonably supply Executive with the resources that he requests in
order to discharge such responsibilities, including but not limited
to staff support and tech support until the Termination Date or, in
Cadence’s sole discretion, thereafter (but not beyond
August 31, 2005). From August 1, 2005 until
October 31, 2005, Cadence will provide Executive with access
to voicemail and a Cadence e-mail address. Executive also agrees to
participate as a witness in any litigation or regulatory proceeding
to which the Company or any of its affiliates is a party at the
request of the Company upon delivery to Executive of reasonable
advance notice and the Company’s written commitment to
reimburse Executive for all reasonable expenses incurred in
connection therewith.
f. Executive will
not make any statement, written or oral, that disparages Cadence or
any of its affiliates, or any of Cadence’s or its
affiliates’ products, services, policies, business practices,
employees, executives, officers or directors. The foregoing
provision shall not preclude Executive from making any statements
required by applicable law.
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g. Notwithstanding
Section 5 of Executive’s Employment Agreement with the
Company, effective as of October 1, 2004 (the
“Employment Agreement”), the parties agree that damages
would be an inadequate remedy for Cadence in the event of a breach
or threatened breach by Executive of Section 2(b), 2(c), 2(d) or
2(f) hereof. In the event of any such breach or threatened breach,
Cadence may, either with or without pursuing any potential damage
remedies, obtain from a court of competent jurisdiction, and
enforce, an injunction prohibiting Executive from violating any
such section of this Agreement and requiring Executive to comply
with such terms of this Agreement.
3.
TRANSITION AND TERMINATION PAYMENTS AND BENEFITS . In
consideration for Executive’s resignation and
Executive’s execution of this Agreement (including the
release set forth in Section 5 hereof), Cadence will provide the
following termination payments and benefits to which Executive
would not otherwise be entitled, provided that (i) the
Effective Date (as defined in Section 6 hereof) and the
Termination Date have occurred and (ii) Executive has returned
to the Company all copies (whether printed, electronic or in any
other medium) of all records, documents, materials and files
containing or relating to confidential, proprietary or sensitive
company information in his possession or control during his period
of employment with Cadence, as well as all other company-owned
property then in his possession (other than those items set forth
in Section 3(c) below):
a. All of the
unvested options and other outstanding stock awards held by
Executive on the Termination Date, which would have vested over the
succeeding thirty (30) month period had Executive continued to
serve as Executive Chairman under the Employment Agreement during
that period, shall immediately vest and become exercisable in full
on the Termination Date; there shall be no further vesting of those
options or stock awards, notwithstanding any provision in any stock
option or stock agreement to the contrary. This acceleration will
have no effect on any other provisions of the stock awards. For the
avoidance of doubt, the Company hereby confirms that Executive
shall have a period of one (1) year from the Termination Date
during which to exercise the outstanding options held by Executive
on the Termination Date, as set forth in the terms of the option
agreements documenting the terms of such grants from the Company to
Executive. Executive hereby acknowledges and agrees that he is in
possession of material, non-public information regarding Cadence
and, as a result, shall remain subject to the Company’s
“Insider Trading Policy” until August 1, 2005,
after which time he will no longer be subject to the
Company’s “Insider Trading Policy” unless
specifically notified by the Company’s General Counsel prior
to August 1, 2005 as to the additional length of time that he
shall be subject to such policy and the reason therefor.
b. The
Company shall continue to provide Executive with, and bear the full
cost of, health, disability and life insurance coverage for
Executive, his spouse and dependents to the extent that such
coverage is commensurate with the coverage now provided to
Executive, his spouse and dependents as of the Transition Date, for
a period of 12 months following the Termination Date. The
Company shall structure such health, disability and life insurance
coverage as nontaxable benefits to the maximum extent possible,
but, as long as the Company has satisfied its obligation under this
sentence, the Company’s cost coverage or reimbursement
obligation shall in no event include any amount to compensate for
any tax liability including without limitation any
“gross-up” amount. For a period of six months following
the Termination
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Date, Executive
shall be responsible for the full cost of such coverage; provided,
however, that such costs paid by Executive shall be fully
reimbursed by the Company as soon as administratively feasible
following the termination of such six month period. For the second
six month period, commencing on February 1, 2006 and ending on
July 31, 2006, the Company shall pay directly the full cost of
such coverage. With respect to Executive’s disability
insurance coverage, which, after the Termination Date, the Company
is unable to provide to Executive under the Company-sponsored
disability insurance plans, the Company will use its best efforts
to assist Executive in applying for alternative coverage that is
commensurate with the coverage Executive had under existing Company
plans immediately prior to the Transition Date. Specifically for
health insurance coverage, to the extent permitted by the
Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”) and by the Company’s group health
insurance policies, Executive shall elect COBRA continuation
coverage and Executive shall be responsible for the full cost of
Executive’s and his covered dependents’ COBRA
continuation premiums for a period of six months follo
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