EXECUTIVE TRANSITION AND RELEASE
AGREEMENT
This Executive
Transition and Release Agreement (this “Agreement”) is
entered into between Michael J. Fister (“Executive”)
and Cadence Design Systems, Inc., a Delaware corporation
(“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 President and Chief Executive Officer
(“CEO”) and will be relieved of all of
Executive’s authority and responsibilities in those
positions. Executive will be paid (a) any earned but unpaid
base salary for his services as CEO 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
May 12, 2004 and amended thereafter from time to time (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 not 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 pursuant to this Agreement terminates (the
“Transition Termination Date”) is called the
“Transition Period” in this Agreement.
Executive’s Transition 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 his duties or obligations under
paragraph 3(b), 3(c) or 3(e) of 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; or
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 Board of Directors or Chief Executive
Officer on an as-needed basis. Executive’s time rendering
those services is not expected to exceed twenty (20) hours per
month. Executive shall not be required to perform those services on
the Company’s premises and shall instead be permitted to
perform those services at a location determined by Executive.
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 under Section 409A of the Code
as of the Transition Commencement Date.
b. As
President and Chief Executive Officer and Director of Cadence, 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 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
then Chairperson of the Board 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
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Cadence). The
restrictions contained in subparagraph (i) of this paragraph
3(c) shall also be in effect for a period of one year following the
Transition 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
May 12, 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 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 9 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 for
Executive’s execution and delivery of an effective release of
claims as set forth 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 relating to confidential,
proprietary or sensitive company information in his possession or
control during his period of employment as CEO, as well as all
other Company-owned property then in his possession, except to the
extent retained pursuant to Section 7 of the Employment
Agreement:
a. provided
that Executive does not resign from employment with Cadence under
this Agreement and Cadence does not terminate Executive’s
employment with Cadence due to a breach by Executive of
Executive’s duties under this Agreement, a monthly salary
commencing on the first pay date following the date that is six
months after the Transition Commencement Date of $4,000 less
applicable tax withholdings and deductions, payable for a period of
six months. in accordance with Cadence’s regular payroll
schedule;
b. 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 twenty-four
(24) months following the date of termination had
Executive
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continued to
serve as CEO under his Employment Agreement during that period
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 except as otherwise provided by paragraph 6
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 through the end of the applicable
performance period, 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 twenty-four (24) months following the date of termination
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 6 hereof. Any acceleration
pursuant to this paragraph 4(b) will have no effect on any other
provisions of the stock awards;
c. Executive’s
employment pursuant to this Agreement shall be considered a
continuation of employee status and continuous service for all
purposes under, but only under, any equity compensation awards
previously granted to Executive by the Company and outstanding on
the Transition Commencement Date; and
d. 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 the
COBRA premiums for Executive and his qualified beneficiaries during
the Transition Period.
Except as so
provided or as otherwise set forth in paragraph 6 hereof, Executive
will receive no other compensation or benefits from Cadence in
consideration of Executive’s services during the Transition
Period.
5.
TERMINATION PAYMENTS AND BENEFITS; REFUND OF
PAYMENTS.
a. Provided
that Executive does not resign from employment with Cadence under
this Agreement and Cadence does not terminate Executive’s
employment with Cadence due to a material breach by Executive of
Executive’s duties under this Agreement, and in consideration
for 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 1 hereto on a date
that is at least six months after the Transition Commencement Date,
Cadence will provide to Executive the following termination
payments and benefits 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:
i.
a lump-sum payment of three million dollars ($3,000,000), less
applicable tax deductions and withholdings; payable on the
thirtieth (30th) day following the date that is six months after
the Transition Commencement Date (the “Initial Payment
Date”); and
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ii. commencing
on the first payroll date coincident with or following the Initial
Payment Date and continuing on each payroll date thereafter until
the Transition Termination Date, one million dollars ($1,000,000),
less applicable tax deductions and withholdings, payable in equal
pro rata insta
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