EXECUTIVE TRANSITION AND RELEASE
AGREEMENT
This Executive
Transition and Release Agreement (this “Agreement”) is
entered into between William Porter (“Executive”) and
Cadence Design Systems, Inc. (“Cadence” or the
“Company”).
1. TRANSITION COMMENCEMENT DATE. As of October 15,
2008 (the “Transition Commencement Date”), Executive
will no longer hold the position of Executive Vice President and
Chief Administrative Officer and will be relieved of all of
Executive’s authority and responsibilities in that position.
Executive will be paid (a) any earned but unpaid base salary
for his services as an officer of the Company prior to the
Transition Commencement Date and any outstanding expense
reimbursements submitted and approved pursuant to Section 3.1
of Executive’s Employment Agreement with the Company
effective January 1, 2005 (the “Employment
Agreement”); and (b) other unpaid vested amounts or
benefits under the compensation, incentive and benefit plans of the
Company in which Executive participates, in each case under this
clause (b) as of the Transition Commencement Date. The payment
of the foregoing amounts shall be made to Executive by no later
than the next regular payroll date following the Transition
Commencement Date. As of the first day of the month following the
Transition Commencement Date, Executive will no longer participate
in Cadence’s medical, dental, and vision insurance plans
(unless Executive elects to continue coverage pursuant to COBRA ),
and will not be eligible for a bonus for any services rendered
after that date.
2. TRANSITION PERIOD. The period from the Transition
Commencement Date to the date when Executive’s employment
with Cadence under this Agreement terminates (the
“Termination Date”) is called the “Transition
Period” in this Agreement. Executive’s Termination Date
will be the earliest to occur of:
a. the
date on which Executive provides Cadence with his written
resignation from his employment with Cadence pursuant to this
Agreement;
b. the
date on which Cadence terminates Executive’s employment due
to a material breach by Executive of Executive’s duties or
obligations under this Agreement after written notice delivered to
Executive identifying such breach and his failure to cure such
breach, if curable, within thirty (30) days following delivery
of such notice; and
c. one
year from the Transition Commencement Date.
3. DUTIES
AND OBLIGATIONS DURING THE TRANSITION PERIOD AND
AFTERWARDS.
a. During
the Transition Period, Executive will assume the position of
Consultant. In this position, Executive will render those services
requested by Cadence’s the Board of Directors or the Chief
Executive Officer on an as-needed basis at mutually-convenient
times. Executive’s time rendering those services shall not
exceed twenty (20) hours per month. Except as otherwise
provided in paragraph 3(b) of this Agreement, Executive’s
obligations hereunder will not preclude Executive from accepting
and holding full-time employment elsewhere. Neither party expects
that Executive will resume employment with Cadence in
the
future at a
level that exceeds the level set forth in this Section 3(a) and it
is the parties’ intent that Executive will have experienced a
“separation from service” as defined in
Section 409A of the Code as of the Transition Commencement
Date.
b. As
a Cadence Executive Vice President, as well as other positions
Executive may have 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, 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 any
business in which Cadence engages on the Transition Commencement
Date, including the electronic design automation
(“EDA”) industry, without inevitably disclosing
confidential and proprietary information belonging to Cadence.
Accordingly, during the Transition Period, 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 any corporation, limited liability company, partnership, or
other entity or person or successor thereto that (i) is
engaged in any business in which Cadence or any of its affiliates
is engaged on the Transition Commencement Date or has been engaged
at any time during the 12-month period immediately preceding the
Transition Commencement Date, whether in the EDA industry or
otherwise, anywhere in the world (a “Cadence
Business”), or (ii) produces, markets, distributes or
sells any products, directly or indirectly through intermediaries,
that are competitive with Cadence or any of its affiliates. As used
in this paragraph, the term “EDA industry” means the
research, design or development of electronic design automation
software, electronic design verification, emulation hardware and
related products, such products containing hardware, software and
both hardware and/or software products, designs or solutions for,
and all intellectual property embodied in the foregoing, or in
commercial electronic design and/or maintenance services, such
services including all intellectual property embodied in the
foregoing. If, during the Transition Period, Executive receives an
offer of employment or consulting from any person or entity that
engages in whole or in part in a Cadence Business during the
Transition Period, then Executive must first obtain written
approval from Cadence’s CEO before accepting said
offer.
c. During the
Transition Period, Executive will be prohibited, to the fullest
extent allowed by applicable law, and except with the written
advance approval of Cadence’s CEO (or his successor(s)), 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: (i) encouraging, inducing,
attempting to induce, recruiting, attempting to recruit, soliciting
or attempting to solicit or participating in any way in hiring or
retaining for employment, contractor or consulting opportunities
anyone who is employed at that time, or was employed during the
previous one year, by Cadence or any Cadence affiliate;
(ii) 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,
joint venture partner, or financial backer of Cadence or any
Cadence affiliate; or (iii) soliciting, diverting or accepting
business, in any line or area of business engaged in by Cadence or
any Cadence affiliate, from any former or present client, customer
or joint venture partner of Cadence or any Cadence affiliate (other
than on behalf of Cadence), except that Executive may solicit or
accept business, in a line of business engaged in by Cadence or a
Cadence affiliate, from a former or present client, if and only if
Executive had
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previously
provided consulting services in such line of business, to such
client, prior to ever being employed by Cadence, but in no event
may Executive violate paragraph 3(b) hereof. The restrictions
contained in subparagraph (i) of this paragraph 3(c) shall
also be in effect for a period of one year following the
Termination Date. This paragraph 3(c) does not alter any of the
obligations the Executive may have under the Employee Proprietary
Information and Inventions Agreement, dated as of December 30,
2004.
d. Executive
will fully cooperate with Cadence in all matters relating to his
employment, including the winding up of work performed in
Executive’s prior position and the orderly transition of such
work to other Cadence employees.
e. 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, past, present or
future. Similarly. Cadence agrees to instruct its executive
officers and members of the Company’s Board of Directors not
to make any statement, written or oral, that disparages Executive.
The restrictions described in this paragraph shall not apply to any
truthful statements made in response to a subpoena or other
compulsory legal process.
f. Notwithstanding
paragraph 10 hereof, the parties agree that damages would be an
inadequate remedy for Cadence in the event of a breach or
threatened breach by Executive of paragraph 3(b) or 3(c), or for
Cadence or Executive in the event of a breach or threatened breach
of paragraph 3(e). In the event of any such breach or threatened
breach, the non-breaching party may, either with or without
pursuing any potential damage remedies, obtain from a court of
competent jurisdiction, and enforce, an injunction prohibiting the
other party from violating this Agreement and requiring the other
party to comply with the terms of this Agreement.
4. TRANSITION COMPENSATION AND BENEFITS. In
consideration of Executive’s execution of the release of
claims in this Agreement and as compensation for Executive’s
services during the Transition Period, Cadence will provide the
following payments and benefits to Executive (to which Executive
would not otherwise be entitled), after Executive has returned to
the Company all hard and soft copies of records, documents,
materials and files in his possession or control, which contain or
relate to confidential, proprietary or sensitive information
obtained by Executive in conjunction with his employment with the
Company, as well as all other Company-owned property, except to the
extent retained pursuant to Section 7 of the Employment
Agreement:
a. all
of the unvested equity compensation awards (including stock
options, restricted stock and restricted stock units) that are not
performance-based within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the “Code”),
that are outstanding and held by Executive on the Transition
Commencement Date and that would have vested over the twelve (12)
months following the Transition Commencement Date had Executive
continued to serve as an executive of the Company pursuant to his
Employment Agreement, shall immediately vest and become exercisable
in full on the Effective Date of this Agreement, and there shall be
no further vesting of those equity compensation awards during or
after the Transition Period, notwithstanding any provision in any
equity compensation award to the
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contrary,
except as otherwise provided by paragraph 7 hereof. Provided
Executive continues in employment under this Agreement through the
end of the applicable performance period, unvested equity
compensation awards that are performance-based within the meaning
of Section 162(m) of the Code and that are outstanding and held by
Executive on the Transition Commencement Date shall continue to
vest though the end of the applicable performance period provided
any such performance period ends within twelve (12) months
following the Transition Commencement Date, but only to the extent
justified by the satisfaction of the performance goals prescribed
for such equity awards. Upon the conclusion of the performance
period, such awards shall immediately vest to the extent they would
have vested over the twelve (12) months following the
Transition Commencement Date had Executive continued to serve as an
executive of the Company pursuant to his Employment Agreement, and
there shall be no further vesting of such awards during or after
the Transition Period except as otherwise provided by paragraph 7
hereof. Any acceleration pursuant to this paragraph 4(a) will have
no effect on any other provisions of the stock awards;
b. Executive’s
employment pursuant to this Agreement shall be considered a
continuation of employee status and continuous service for all
purposes under any equity compensation awards previously granted to
Executive by the Company and outstanding on the Transition
Commencement Date; and
c. if
Executive elects to continue coverage under Cadence’s
medical, dental, and vision insurance plans pursuant to COBRA
following the Transition Commencement Date, Cadence will pay
Executive’s COBRA premiums during the Transition
Period.
Except as so
provided or as otherwise set forth in paragraphs 5 and 7 hereof,
Executive will receive no other compensation or benefits from
Cadence in consideration of Executive’s services during the
Transition Period.
5. FIRST
TERMINATION PAYMENT AND BENEFITS. Provided that Executive does
not resign from employment with Cadence under this Agreement and
Cadence does not terminate Executive’s employment with
Cadence pursuant to paragraph 2(b) due to a material breach by
Executive of Executive’s duties under this Agreement, and in
consideration for, and subject to, Executive’s execution and
acceptance of and adherence to this Agreement and Executive’s
further execution and delivery of a Release of Claims in the form
of Attachment I hereto on a date that is at least six months after
the Transition Commencement Date, and as compensation for
Executive’s services during the Transition Period, Cadence
will provide to Executive the following termination payment, to
which Executive would not otherwise be entitled, in each case, so
long as the revocation period of the Release of Claims (as defined
in that document) has expired prior to the date of
payment:
a. a
lump-sum payment of four hundred and fifty thousand dollars
($450,000), less applicable tax deductions and withholdings,
payable on the thirtieth (30th) day following the date that is six
months after the Transition Commencement Date; and
b. for
a period of six months, a monthly salary of $4,000 less applicable
tax withholdings and deductions, payable in accordance with
Cadence’s regular payroll schedule,
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commencing on
the first pay date that is more than thirty (30) days
following the date that is six months after the Transition
Commencement Date.
6. SECOND
TERMINATION PAYMENT AND BENEFITS; REFUND OF
PAYMENTS.
a. Provided
that Executive does not resign from employment with Cadence under
th
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