EXHIBIT 4.1
CADENCE DESIGN SYSTEMS, INC.
1994 DEFERRED COMPENSATION PLAN
AMENDED AND RESTATED
EFFECTIVE NOVEMBER 1, 2002
Cadence Design Systems, Inc., a Delaware Corporation (referred to
hereafter as the "Employer") established effective October 1, 1994, and amended
and restated effective October 1, 1996, and January 1, 2001, this Cadence Design
Systems, Inc. 1994 Deferred Compensation Plan (the "Plan"), an unfunded plan for
the purpose of providing deferred compensation for a select group of management,
highly compensated executives, and directors. The Employer hereby amends and
restates the Plan in its entirety effective November 1, 2002, to reflect prior
and new amendments to the Plan.
RECITALS
WHEREAS, those employees or directors identified by the Compensation
Committee of the Board of Directors of the Employer or any other committee
designated by the Board of Directors of the Employer to administer this Plan in
accordance with Section 8 hereof (hereinafter referred to as the "Committee") as
eligible to participate in this Plan (each of whom are referred to hereafter as
the "Employee" or collectively as the "Employees") are employed by Employer:
WHEREAS, Employer previously adopted an unfunded deferred compensation
plan and the Employees desire the Employer to continue to pay certain deferred
compensation and/or related benefits to or for the benefit of Employees, or a
designated Beneficiary or both; and
WHEREAS, Employer believes it is in the best interest of Plan
participants and beneficiaries to amend and restate the Plan:
NOW, THEREFORE, the Employer hereby amends and restates the Plan
effective as of November 1, 2002.
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TABLE OF CONTENTS
Page
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SECTION 1 DEFINITIONS.......................................................................................... 1
1.1 "Account...................................................................................... 1
1.2 "Beneficiary.................................................................................. 1
1.3 "Change in Control............................................................................ 1
1.4 "Code......................................................................................... 1
1.5 "Committee.................................................................................... 1
1.6 "Compensation................................................................................. 1
1.7 "Effective Date............................................................................... 1
1.8 "Eligible Compensation........................................................................ 1
1.9 "Eligible Stock Option........................................................................ 1
1.10 "Employee..................................................................................... 1
1.11 "Employer..................................................................................... 2
1.12 "Employer Contributions....................................................................... 2
1.13 "Hardship..................................................................................... 2
1.14 "Non-Employee Director........................................................................ 2
1.15 "Plan......................................................................................... 2
1.16 "Plan Year.................................................................................... 2
1.17 "Permanent Disability......................................................................... 2
1.18 "Qualifying Stock Option Gain................................................................. 2
1.19 "Stock........................................................................................ 2
1.20 "Stock-for-Stock.............................................................................. 2
1.21 "Stock Option Subaccount...................................................................... 3
1.22 "Subsidiary................................................................................... 3
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1.23 "Trust" or "Trust Agreement.................................................................... 3
1.24 "Trust Fund.................................................................................... 3
1.25 "Trustee....................................................................................... 3
SECTION 2 ELIGIBILITY........................................................................................... 3
2.1 Eligibility.................................................................................... 3
SECTION 3 DEFERRED COMPENSATION & QUALIFYING STOCK OPTION GAIN.................................................. 4
3.1 Deferred Compensation.......................................................................... 4
3.2 Deferred Qualifying Stock Option Gain.......................................................... 5
3.3 Payment of Account Balances.................................................................... 5
3.4 Election to Defer.............................................................................. 7
3.5 Distribution Election.......................................................................... 9
3.6 Payment Upon Change in Control................................................................. 9
3.7 Hardship....................................................................................... 9
3.8 Employee's Right Unsecured.................................................................... 10
3.9 Investment of Contribution.................................................................... 10
SECTION 4 DESIGNATION OF BENEFICIARY........................................................................... 11
4.1 Designation of Beneficiary.................................................................... 11
SECTION 5 CHANGE IN CONTROL.................................................................................... 11
5.1 Change in Control............................................................................. 11
SECTION 6 TRUST PROVISIONS..................................................................................... 13
6.1 Trust Agreement............................................................................... 13
SECTION 7 AMENDMENT, TERMINATION AND TRANSFERS BY COMMITTEE.................................................... 13
7.1 Amendment..................................................................................... 13
7.2 Termination................................................................................... 13
7.3 Transfers by Committee........................................................................ 13
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SECTION 8 ADMINISTRATION....................................................................................... 14
8.1 Administration................................................................................ 14
8.2 Liability of Committee; Indemnification....................................................... 14
8.3 Expenses...................................................................................... 14
SECTION 9 GENERAL AND MISCELLANEOUS............................................................................ 14
9.1 Rights Against Employer....................................................................... 14
9.2 Assignment or Transfer........................................................................ 15
9.3 Severability.................................................................................. 15
9.4 Construction.................................................................................. 15
9.5 Governing Law................................................................................. 15
9.6 Payment Due to Incompetence................................................................... 15
9.7 Tax........................................................................................... 15
9.8 Attorney's Fees............................................................................... 16
9.9 Plan Binding on Successors/Assignees.......................................................... 16
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SECTION 1
DEFINITIONS
1.1 "Account" shall mean the separate account(s) established under
this Plan and the Trust for each participating Employee. Each Account shall
include, as applicable, any Stock Option Subaccount of a participating Employee.
Employer shall furnish each participant with a statement of his or her Account
balance at least annually.
1.2 "Beneficiary" shall mean the Beneficiary designated by the
Employee to receive Employee deterred compensation benefits in the event of his
or her death.
1.3 "Change in Control" shall have the meaning set forth in
Section 5.1 of the Plan.
1.4 "Code" shall mean the Internal Revenue Code of 1986 as amended
from time to n me, and the rules and regulations promulgated thereunder.
1.5 "Committee" shall mean the Compensation Committee of the Board
of Directors of the Employer or any other committee designated by the Board of
Directors of the Employer to administer this Plan in accordance with Section 8
hereof.
1.6 "Compensation" shall, for the period on or before April 1,
1998, mean the base salary and cash bonuses described in Section 3.1. On or
after April 1, 1998, "Compensation" shall mean the base salary, cash bonuses,
and director fees described in Section 3.1.
1.7 "Effective Date" of the Plan shall mean October 1, 1994,
unless otherwise specified by the Employer in a corporate resolution approving
and adopting this Plan. The effective date of this amendment and restatement
shall be November 1, 2002.
1.8 "Eligible Compensation" shall mean, for the period prior to
April 1, 1998, projected annual compensation from the Employer, determined on an
annual basis by the Employer at or before the beginning of the Plan Year, which
may consist of salary, bonus, and/or incentive payments, determined before any
deductions under any qualified plan of the Employer (including a Section 401(k)
plan or a Section 125 plan) and excluding any special or nonrecurring
compensatory payments such as moving or relocation bonuses or automobile
allowances. Effective on and after April 1, 1998, the term shall mean projected
annual compensation from the Employer determined on an annual basis by the
Employer at or before the beginning of the Plan, which may consist of salary,
bonus, and, and/or incentive payments, determined before any deductions under
any qualified plan of the Employer (including a Section 401(k) plan or a Section
125 plan) and excluding any special or non-recurring compensatory payments such
as moving or relocation bonuses or automobile allowances.
1.9 "Eligible Stock Option" shall mean one or more non-qualified
stock options selected by the Committee in its sole discretion.
1.10 "Employee" shall, for the period before April 1, 1998, mean,
each employee of Employer. Effective on or after April 1, 1998, the term shall
also include each Non-Employee
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Director. The term also shall include reference to an Employee's Beneficiary
where the context so requires.
1.11 "Employer" shall mean Cadence Design Systems, Inc., a Delaware
corporation, and any successor organization thereto, and any Subsidiaries, as
defined in Section 7.3 of the Company.
1.12 "Employer Contributions" shall mean the Employer's
discretionary contribution, if any, pursuant to Section 3.1(b) of the Plan.
1.13 "Hardship" shall have the meaning set forth in Section 3.7 of
the Plan.
1.14 "Non-Employee Director" shall mean a member of Employer's
Board of Directors who is not otherwise an employee of the Employer.
1.15 "Plan" shall mean the Cadence Design Systems, Inc. 1994
Deferred Compensation Plan, including any amendments thereto.
1.16 "Plan Year" shall mean the year beginning each January 1 and
ending December 31; notwithstanding the foregoing, the initial Plan Year shall
mean the period beginning with the Effective Date and ending on December 31,
1994.
1.17 "Permanent Disability" shall mean that the Employee is unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or otherwise meets the definition of "Permanent Disability" as set forth
in the Employer's Long Term Disability Plan. An Employee will not he considered
to have a Permanent Disability unless he or she furnishes proof of such
condition sufficient to satisfy the Employer, in its sole discretion.
1.18 "Qualifying Stock Option Gain" shall mean an amount equal to
the fair market value of shares (or share equivalent units) of Stock acquired
upon exercise of one or more Eligible Stock Options using a Stock-for-Stock
payment method, less the total stock purchase price paid to exercise the
Eligible Stock Options, less amounts withheld pursuant to Section 9.7. All such
amounts shall be calculated using the average of the high and low price of Stock
on the date of exercise of such Eligible Stock Options, as reported on the New
York Stock Exchange.
1.19 "Stock" shall mean Cadence Design Systems, Inc. common stock,
$0.01 par value, or any other equity securities of Employer designated by the
Committee.
1.20 "Stock-for-Stock" shall mean a payment method by which certain
Employees, including Non-Employee Directors, exercise their Eligible Stock
Options by paying the exercise price with Stock, as follows: the Employee
delivers to Employer shares of Stock already owned by Employee for at least six
(6) months as of the date of exercise (or, instead of delivering actual shares,
Employee delivers "phantom shares" by delivering an affidavit of ownership of
the already-owned Stock but does not deliver cash or any other property) having
a fair market value equal to the exercise price of the Eligible Stock Options to
be exercised.
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1.21 "Stock Option Subaccount" shall mean (i) the sum of Qualifying
Stock Option Gain deferred in accordance with Section 3.2 of this Plan, plus
(ii) amounts credited or debited in accordance with Section 3.9(d) of this Plan,
less (iii) all distributions made to the Employee or his or her beneficiary in
accordance with Section 3.3(g) of this Plan.
1.22 "Subsidiary" shall mean any corporation (other than the
Employer) in an unbroken chain of corporations or other entities beginning with
the Employer, if each of the entities other than the last entity in the unbroken
chain owns stock, partnership rights or other ownership interest possessing
fifty (50) percent or more of the total combined voting power of all classes of
stock, partnership rights or other ownership interest in one of the other
entities in such chain.
1.23 "Trust" or "Trust Agreement" shall mean the Cadence Design
Systems, Inc. 1994 Deferred Compensation Plan Rabbi Trust Agreement, including
any amendments thereto, entered into between the Employer and the Trustee to
carry out the provisions of the Plan.
1.24 "Trust Fund" shall mean the cash and other assets and/or
properties held and administered by' Trustee pursuant to the Trust to carry out
the provisions of the Plan.
1.25 "Trustee" shall mean the designated Trustee acting at any time
under the Trust.
SECTION 2
ELIGIBILITY
2.1 Eligibility. Eligibility to participate in the Plan shall be
limited to Employees of the Employer who (a) have Eligible Compensation of at
least $150,000 for the Plan Year, (b) are classified as officers,
vice-presidents, directors, or an equivalent title, and (c) have been selected
by the Committee to participate in the Plan. The Committee shall designate
Employees who shall be covered by this Plan in a separate Acknowledgment (in the
form attached hereto as Appendix 1) for each such Employee. Participation in the
Plan shall commence as of the date such Acknowledgment is signed by the Employee
and delivered to the Employer, provided that deferral of compensation under the
Plan shall not commence until the Employee has complied with the election
procedures set forth in Section 3.4. Notwithstanding the foregoing,
participation by an Employee in the Plan does not make such Employee eligible
automatically to defer Qualifying Stock Option Gain. Employees, including
Non-Employee Directors, whose Stock Options are Eligible Stock Options and who
are eligible to defer Qualifying Stock Option Gain under the Plan pursuant to
Section 3.2, will be designated by the Committee in a separate Acknowledgement
(in the form attached hereto as Appendix 2) for each such Employee. Nothing in
the Plan or in the Acknowledgments should be construed to require any
contributions to the Plan on behalf of the Employee by Employer.
Notwithstanding the foregoing, Non-Employee Directors shall be eligible
to participate in the Plan and shall be eligible to defer Qualifying Stock
Option Gain under the Plan. A Non-Employee Director shall commence participation
in the Plan as of the later of April 1, 1998, or the date the Non-Employee
Director first becomes a Non-Employee Director, provided that
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deferral of Compensation under the Plan shall not commence until the
Non-Employee Director has complied with the election procedures set forth in
Section 3.4.
SECTION 3
DEFERRED COMPENSATION & QUALIFYING STOCK OPTION GAIN
3.1 Deferred Compensation.
(a) Each participating Employee may elect, in accordance
with Section 3.4 of this Plan, to defer semi-annually the receipt of a portion
of the Compensation for active service otherwise payable to him or her by
Employer during each semi-annual period or portion of a semi-annual period that
the Employee shall be employed by the Employer. Any Compensation deferred by
Employee pursuant to Section 3.4 shall be recorded by the Employer in an
Account, maintained in the name of the Employee, which Account shall be credited
with a dollar amount equal to the total amount of Compensation deferred during
each semi-annual period under the Plan, together with earnings thereon credited
in accordance with Section 3.9. The amount or percentage of Compensation that
Employee elects to defer under Section 3.4 will remain constant for the
semi-annual period and shall not be subject to change during such semi-annual
period Effective April 1 1998, each such deferral election as to "base salary"
or "director's fees" or discontinuance of a deferral election as to "base
salary" or "director's fees" will continue in force for each successive year or
semiannual period, as appropriate, until or unless suspended or modified by the
filing of a subsequent election with the Employer by the Employee or
Non-Employee Director in accordance with Section 3.4 of the Plan. Each deferral
election as to an Employee's "cash bonus" shall continue in force only for the
single semi-annual period in which it is paid, regardless of the period of time
as to which it is awarded, and shall not apply to any successive semi-annual
periods. Any deferral election with respect to a "cash bonus" must be made prior
to the time the amount of the bonus is determined, prior to the end of the
period of time as to which the bonus is awarded, and at a time that the amount
of any such bonus remains substantially uncertain. All deferrals pursuant to
this Section 3.1 shall be fully vested at all times. Effective April 1, 1998,
deferral elections shall be subject to minimum dollar and maximum percentage
amount limits as follows: (i) the minimum semi-annual deferral amount is $2,500
(prior to July 1, 1998, the minimum annual deferral amount was $5,000), which
shall be withheld from the Employee's or Non-Employee Director's Compensation,
and (ii) the maximum deferral percentage amount is 80% of the Employee's "base
salary," 100% of the Employee's "cash bonus," and 100% of the Non-Employee
Director's "director's fees." For purposes of the Plan, "base salary" for a
given semi-annual period means an "Employee's regular compensation payable
during the semi-annual period, excluding bonuses, commissions, overtime,
incentive payments, non-monetary awards, compensation deferred pursuant to all
Section 125 (cafeteria) or Section 401(k) (savings) plans of the Employer and
other special compensation, and reduced by the tax withholding obligations
imposed on the Employer and any other withholding requirements imposed by law
with respect to such amounts. For purposes of the Plan, "cash bonus" shall mean
amounts (if any) awarded under the bonus policies maintained by the Employer and
any commissions earned on sales. For purposes of the Plan, "director's fees" for
a given semi-annual period means the annual retainer, per meeting fees,
committee meeting fees, and consulting fees payable during the semi-annual
period. Except as otherwise expressly provided herein, this Section 3.1(a) is
effective as of July 1, 1998.
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(b) Employer shall not be obligated to make any other
contribution to the Plan on behalf of any Employee at any time. Employer may
make Employer Contributions to the Plan on behalf of one or more Employees.
Employer Contributions, if any, made to Accounts of Employees shall be
determined in the sole and absolute discretion of the Employer, and may be made
without regard to whether the Employee to whose Account such contribution is
credited has made, or is making, contributions pursuant to Section 3.1(a). The
Employer shall not be bound or obligated to apply any specific formula or basis
for calculating the amount of any Employer Contributions and Employer shall have
sole and absolute discretion as to the allocation of Employer Contributions
among participating Employee Accounts. The use of any particular formula or
basis for making an Employer Contribution in one year shall not bind or obligate
the Employer to use such formula or basis in any other year. Employer
Contributions may be subject to a substantial risk of forfeiture in accordance
with the terms of a vesting schedule, which may be selected by the Employer in
its sole and absolute discretion.
(c) Amounts deferred under the Plan shall be calculated
and withheld from the Employee's base salary and/or cash bonus after such
compensation has been reduced to reflect salary reduction contributions to the
Employer's Code Section 125 (cafeteria) and Code Section 401(k) (savings) plans,
but before any reductions for contributions to the Code Section 423 (employee
stock purchase) plan.
(d) Effective April 1, 2000, the Committee in its sole
discretion may direct the Trustee to accept the transfer of funds held in trust
under the Cadence Design Systems, Inc. 1996 Deferred Compensation Venture
Investment Trust Agreement ("Telos Trust"), for a participant in the Cadence
Design Systems, Inc. 1996 Deferred Compensation Venture Investment Plan ("Telos
Plan"), which is an unfunded nonqualified deferred compensation plan for a
select group of management and highly compensated executives of the Company, in
which case the transferred funds shall be held by the Trustee under and be
subject to the terms of the Plan and invested and accounted for as directed by
the Committee except as otherwise provided in Section 3.3(e). Such amounts
transferred from the Telos Trust to the Trust ("Transferred Funds") may not be
returned to the Telos Plan or Telos Trust. The transfer of such Transferred
Funds shall not cause any of the participant's rights to a distribution under
the Plan or the Telos Plan (including the Transferred Funds) to be a secured
right to a distribution under either plan.
3.2 Deferred Qualifying Stock Option Gain. Eligible Employees,
including Non-Employee Directors, designated by the Committee as described in
Section 2.1 may elect, in accordance with Section 3.4(b) of this Plan, to defer
the receipt of Qualifying Stock Option Gain upon the exercise of any Eligible
Stock Option. Any Qualifying Stock Option Gain deferred by an Employee shall be
recorded in a Stock Option Subaccount, maintained in the name of the Employee,
which subaccount shall be credited with an amount of shares (or share equivalent
units) of Stock equal to the total amount of Qualifying Stock Option Gain
deferred, together with any earnings thereon credited in accordance with Section
3.9(d).
3.3 Payment of Account Balances.
(a) Effective July 1, 1998, the Employee shall elect
whether he or she will receive distribution of his or her Account, not including
his or her Stock Option Subaccount, subject to tax withholding requirements, (i)
upon reaching a specified age, (ii) upon passage of a
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specified number of years, (iii) upon termination of employment of Employee with
Employer, (iv) upon the earlier to occur of (A) termination of employment of
Employee with Employer or (B) passage of a specified number of years or
attainment of a specified age, or (v) upon the later to occur of (A) termination
of employment of Employee with Employer or (B) passage of a specified number of
years or attainment of a specified age, as elected by Employee in accordance
with the form established by the Committee. Such form may permit an election
among some or all of the alternatives listed in this Section 3.3(a), as
determined in the Committee's sole discretion. A designation of the time of
distribution shall be required as a condition of participation under this Plan.
The Employee also shall elect to receive all amounts payable to him or her in a
lump sum or in equal monthly installments over a designated period of five or
ten years, pursuant to the provisions of Section 3.3(e). These elections shall
be made in accordance with Section 3.5 of this Plan.
(b) Distributions shall be made to the maximum extent
allowable under the election made by Employee, except that no distribution shall
be made to the extent that the receipt of such distribution, when combined with
the receipt of all other "applicable employee remuneration" (as defined in Code
Section 162(m)(4)) would cause any remuneration received by the Employee to be
nondeductible by the Employer under Code Section 162(m)(1). The portion of any
distributable amount that is not distributed by operation of this Section 3.3(b)
shall be distributed in subsequent years in the manner elected by the Employee
until the Employee's Account has been fully liquidated. The commencement date of
the lump sum payment or the five- or ten-year period (whichever is applicable)
shall be automatically extended, when necessary to satisfy the requirements of
this subsection, for one-year periods until all Account balances have been
distributed in the manner elected by the Employee.
(c) Effective July 1, 1998, upon termination of
Employee's employment with Employer by reason of death or Permanent Disability
prior to the time when payment of Account balances otherwise would commence
under the provisions of Section 3.3(a), Employee or Employee's designated
Beneficiary will be entitled to receive all amounts credited to the Account of
Employee as of the date of his or her death or Permanent Disability
(notwithstanding any contrary election to receive distributions under the first
sentence of Section 3.3(a)). Upon termination of Employee's employment with
Employer by reason other than death or Permanent Disability prior to the date
when payment of Account balances otherwise would commence under the provisions
of Section 3.3(a), the Employer may, in the sole discretion of the Committee,
distribute to Employee or Employee's designated Beneficiary all amounts credited
to the Employee's Account as of the date of such termination (notwithstanding
any contrary election to receive distributions under the first sentence of
Section 3.3(a)). Said amounts shall be payable in the form determined pursuant
to the provisions of Section 3.3(e).
(d) Upon the death of Employee prior to complete
distribution to him or her of the entire balance of his or her Account (and
after the date of termination of employment with Employer), the balance of his
or her Account on the date of death shall be payable to Employee's designated
Beneficiary pursuant to Section 3.3(e). Effective July 1, 1998, notwithstanding
any other provision of the Plan to the contrary, the Employee's designated
Beneficiary may receive the distribution of the remaining portion of such
deceased Employee's Account in the form of a lump sum if the Beneficiary
requests such a distribution and the Committee, in its sole discretion, consents
to such a distribution.
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(e) The Employer shall distribute or direct distribution
of the balance of amounts previously credited to Employee's Account, in a lump
sum, or in monthly installments over a period of five (5) years or ten (10)
years as Employee shall designate. A designation of the form of distribution
shall be required as a condition of participation under this Plan. Distribution
of the lump sum or the first installment shall be made or commence within ninety
(90) days following the date specified in the first sentence of Section 3.3(a),
or as otherwise provided in 3.3(c). Subsequent installments, if any, shall be
made on the first day of each month following the last installment as determined
by Employer. The amount of each installment shall be calculated by dividing the
Account balance as of the date of the distribution by the number of installments
remaining pursuant to the Employee's distribution election. Each such
installment, if any, shall take into account earnings credited to the balance of
the Account remaining unpaid. The Employee's distribution election shall be made
on a form provided by Employer.
Notwithstanding any provision herein to the contrary,
effective April 1, 2000, Transferred Funds from the Telos Trust under the Telos
Plan to the Trust for the benefit of a participant in the Telos Plan, shall be
distributable under the Plan according to the terms of the elections permitted
and made by the participant under the Telos Plan unless subsequently modified by
the participant as permitted under this Plan.
(f) Effective April 1, 1998, for purposes of this Section
3.3, reference to termination of employment shall also include termination of
service as a Non-Employee Director of the Employer (except in the event such
termination is due to becoming an Employee).
(g) An Employee, including a Non-Employee Director, shall
make a separate election to receive distributions from his or her Stock Option
Subaccount, subject to tax withholding requirements. Upon termination of
Employee's employment with Employer by reason of death or Permanent Disability
prior to the time when payment of Employee's Stock Option Subaccount balance
otherwise would commence pursuant to Employee's election, Employee or Employee's
designated Beneficiary will be entitled to receive all amounts credited to the
Stock Option Subaccount of Employee as of the date of his or her death or
Permanent Disability (notwithstanding any contrary election to receive
distributions pursuant to this Section 3.3(g)). Upon termination of Employee's
employment with Employer by reason other than death or Permanent Disability
prior to the date when payment of Employee's Stock Option Subaccount balance
otherwise would commence pursuant to Employee's election, Employer may, in the
sole discretion of the Committee, distribute to Employee or Employee's
designated Beneficiary all amounts credited to Employee's Account as of the date
of such termination (notwithstanding any contrary election to receive
distributions pursuant to this Section 3.3(g)). All distributions from an
Employee's Stock Option Subaccount shall be made in the form of Stock, except
for distributions upon a Change in Control, to be made in a lump sum payment in
accordance with Section 3.6.
3.4 Election to Defer.
(a) Compensation. Each election of an Employee to defer
Compensation as provided in Section 3.1 of this Plan shall be in writing, signed
by the Employee, and delivered to Employer, together with all other documents
required under the provisions of this Plan, within
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such time as determined by the Committee and communicated to those Employees who
are eligible to participate in the Plan. Such deferral elections must be
delivered to Employer prior to the beginning of the Plan Year with respect to
which the Compensation to be deferred is otherwise payable to Employee.
Provided, however, that effective April 1, 1998, an Employee who is hired or
promoted to a position of eligibility for participation in the Plan during a
Plan Year (effective January 1, 2001, on or before the first business day of a
semi annual period) or a Non-Employee Director who is elected to become a
Non-Employee Director shall have thirty (30) days from the date of notification
of eligibility for participation in the Plan in which to submit the required
election documents for the then current semi-annual period. Any deferral
election made by Employee shall be irrevocable with respect to any Compensation
covered by such election, including Compensation payable in the semi-annual
period in which the election suspending or modifying the prior deferral election
is delivered to Employer. Notwithstanding the foregoing, with respect to cash
bonuses payable to an Employee for the year ended December 31, 1996, but which
will not be paid to the Employee until after January 1, 1997, the Employee may
make a separate deferral election with respect to, or revise a previous deferral
election with respect to, such cash bonuses until such time on or before
December 31, 1996 as determined by the Committee, so long as at that time the
amount of any such bonus has not yet been determined and remains substantially
uncertain. The Employer shall withhold the amount or percentage of base salary
specified to be deferred in equal amounts for each payroll period and shall
withhold the amount or percentage of each cash bonus specified to be deferred at
the time or times such bonus is or otherwise would be paid to the Employee. The
election to defer Compensation shall be made on the form provided by Employer.
Effective April 1, 1998, the Employer shall withhold the amount or percentage of
director's fees specified to be deferred at the time or times such director's
fees are or otherwise would be paid to the Non-Employee Director.
Notwithstanding the foregoing, with respect to Compensation payable to a
Non-Employee Director for the Plan Year ending December 31, 1998, but which will
not be paid to the Non-Employee Director until after March 31, 1998, the
Non-Employee Director may make a deferral election with respect to such
Compensation until March 31, 1998. Notwithstanding any other provision of the
Plan to the contrary, with respect to base salary and cash bonuses payable to an
Employee for the six-month period from July 1, 1998 through December 31, 1998,
prior to July 1, 1998, the Employee may revise a previous deferral election with
respect to such base salary to increase (but not decrease) the amount or
percentage of base salary to be deferred. Except as otherwise expressly provided
herein, this Section 3.4(a) is effective as of July 1, 1998.
(b) Qualifying Stock Option Gain. Notwithstanding any
provision of Section 3.4(a) to the contrary, with respect to Qualifying Stock
Option Gain to be deferred, (i) the Employee, including a Non-Employee Director,
must make a separate deferral election on a separate deferral election form with
respect to such Qualifying Stock Option Gain; (ii) such form must be timely
delivered to the Vice President of Human Resources or his or her designee at
least six (6) months before the date the Employee elects to exercise the
Eligible Stock Option; (iii) the Eligible Stock Option must be exercised using
an actual or phantom Stock-for-Stock payment method; and (iv) the Stock actually
or constructively delivered by the Employee to exercise the Eligible Stock
Option must have been owned by the Employee during the entire six (6) month
period before its delivery. The amount of Qualifying Stock Option Gain permitted
to be deferred also may be limited by other terms or conditions set forth in the
stock option plan or
8
agreement under which the relevant stock option or options were granted. The
Employee's Qualifying Stock Option Gain deferral election shall be made on a
form provided by Employer.
3.5 Distribution Election. The initial distribution election of an
Employee as provided in Section 3.3 of this Plan, including an election made
pursuant to Section 3.3(g) of this Plan, shall be in writing, signed by the
Employee, and delivered to Employer, together with all other documents required
under the provisions of this Plan, within such period of time determined by the
Committee and communicated to those Employees who are eligible to participate in
the Plan. Such distribution elections must be delivered to the Employer prior to
the beginning of the first Plan Year in which Employee is eligible to
participate in the Plan, or, in the case of n distribution election pursuant to
Section 3.3(g), prior to six months before the date of exercise of an Eligible
Stock Option. Provided, however, that effective April 1, 1998, an Employee who
is hired or promoted to a position of eligibility for participation in the Plan
or a Non-Employee Director who is elected to become a Non-Employee Director
during a Plan Year shall have thirty (30) days from the date of notification of
eligibility for participation in the Plan in which to submit the required
distribution election documents. If permitted by the Committee, an Employee may
change the terms of his or her initial distribution election by making a new
election, and any such new election will be effective as of the later of the
date that is (a) six (6) months following the date the new election is made or
(b) the first day of the Plan Year following the Plan Year in which the new
election is made and such new election will apply to the Employee's entire
Account, except for the Employee's Stock Option Subaccount. Any changes to an
Employee's distribution election pursuant to Section 3.3(g) must be submitted on
a separate form, and such changes will apply only to the Employee's Stock Option
Subaccount. An Employee may not make a new election once distributions from the
Plan have commenced or which would first become effective at a time when
distributions from the Plan have commenced. Notwithstanding any other provisions
of this Section 3.5, an Employee's distribution election shall be in the form
established by the Committee in accordance with the terms of the Plan.
3.6 Payment Upon Change in Control. Notwithstanding any other
provisions of this Plan (including without limitation Section 3.3), the
aggregate balance credited to and held in the Employees' Accounts, including any
Stock Option Subaccounts, shall be distributed to Employees in a lump sum on the
thirtieth day following a Change in Control (except that distribution shall be
on the sixtieth day in the case of a Change in Control under Section 5.1(a)), as
defined in Section 5.1, unless the Committee, the Board of Directors of the
Employer, or the 401(k)/NQDC Administrative Committee of the Employer (as each
is composed immediately prior to such Change in Control), in the sole discretion
of any of the foregoing, decides prior to that date that Employees' Accounts
shall remain in the Plan.
3.7 Hardship.
(a) An Employee may apply for distributions from his or
her Account to the extent that the Employee demonstrates to the reasonable
satisfaction of the Committee that he or she needs the funds due to Hardship.
For purposes of this Section 3.7, a distribution is made on account of Hardship
only if the distribution is made on account of an unforeseeable immediate and
heavy emergency financial need of the Employee and is necessary to satisfy that
emergency financial need. Whether an Employee has an immediate and heavy
emergency financial need shall be determined by the Committee based on all
relevant facts and circumstances, and shall
9
include, but not be limited to, the need to pay funeral expenses of a family
member; the need to pay expenses for medical care for Employee, the Employee's
spouse or any dependent of Employee resulting from sudden unexpected illness or
accident; payments necessary to prevent the eviction of Employee from Employee's
principal residence or foreclosure on the mortgage on that residence; or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of Employee. A Hardship distribution shall not exceed
the amount required to relieve the financial need of the Employee, nor shall a
Hardship distribution be made if the need may be satisfied from other resources
reasonably available to the Employee. For purposes of this paragraph, an
Employee's resources shall be deemed to include those assets of the Employee's
spouse and minor children that are reasonably available to the Employee. Prior
to approving a Hardship distribution, Employer shall require the Employee to
certify in writing that the Employee's financial need cannot reasonably be
relieved:
(i) through reimbursement or compensation by
insurance or otherwise or
(ii) by other distributions or nontaxable (at the
time of the loan) loans from plans maintained by the Employer or by any
other employer, or by borrowing from commercial sources on reasonable
commercial terms, in an amount sufficient to satisfy the need.
(b) Any Employee receiving a Hardship distribution under
this section shall be ineligible to defer any additional compensation under the
Plan until the first day of the Plan Year following the second anniversary of
the date of the distribution. In addition, a new Election of Deferral must be
submitted to the Employer as a condition of participation in the Plan.
3.8 Employee's Right Unsecured. The right of the Employee or his
or her designated Beneficiary to receive a distribution hereunder shall be an
unsecured claim against the general assets of the Employer, and neither the
Employee nor his or her designated Beneficiary shall have any rights in or
against any amount credited to his or her Account or any other specific assets
of the Employer, except as otherwise provided in the Trust. Nothing contained in
this Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind or a fiduciary relationship between the
Plan and the Employer or any other person.
3.9 Investment of Contribution.
(a) The investment options available to each Employee
shall be determined by the Employer and set forth in a separate written
document, a copy of which shall be attached hereto and by this reference is
incorporated herein. Each Employee shall have the sole and exclusive right to
direct the Trustee as to the investment of his or her Accounts in accordance
with policies arid procedures implemented by the Trustee. The right of an
Employee to direct the investment of his or her Account into one or more of the
available investment options shall not in any way be considered to alter the
fact that an Account is a bookkeeping account only that measures the Employer's
obligation to pay benefits hereunder, that the assets being invested at the
direction of an Employee are assets of the Employer and that the Employee's
rights under the Plan remain those of an unsecured, general creditor of the
Employer.
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Employer shall not be liable for any investment decision
made by any Employee while such funds are held by the Trustee.
(b) Accounts shall be credited with the actual financial
performance or earnings generated by such investments directed by the Employee
and made by the Trustee, until the Account has been fully distributed to the
Employee or to the Employee's designated Beneficiary.
(c) Notwithstanding any other provision in this Section
3.9 to the contrary, the Committee may determine not to take account of
Employee's designated investments and determine to have the Employee's Account
invested in any other manner as the Committee shall determine.
(d) Notwithstanding any other provision in this Section
3.9 to the contrary, no investment options are available to an Employee with
respect to amounts held in the Employee's Stock Option Subaccount. Such Stock
Option Subaccount only shall be credited or debited with the actual financial
performance or earnings generated by Stock. During the deferral period, dividend
equivalents will be credited in the form of additional shares or share
equivalent units of Stock to the Employee's Stock Option Subaccount.
SECTION 4
DESIGNATION OF BENEFICIARY
4.1 Designation of Beneficiary. Employee may designate a
Beneficiary or Beneficiaries to receive all amounts, if any, due hereunder to
Employee but unpaid at the time of Employee's death by written notice thereof to
Employer at any time prior to Employee's death and may revoke or change the
Beneficiary designated therein without the Beneficiary's consent by written
notice delivered to Employer at any time and from time to time prior to
Employee's death. If Employee is married and a resident of a community property
state, one half of any amount due hereunder which is the result of an amount
contributed to the Plan during such marriage is the community property of the
Employee's spouse and Employee may designate a Beneficiary or Beneficiaries to
receive only the Employee's one-half interest. If Employee shall have failed to
designate a Beneficiary, or if no such Beneficiary shall survive him or her,
then such amount shall be paid to his or her estate. Designations of
Beneficiaries shall be made on the form provided by Employer.
SECTION 5
CHANGE IN CONTROL
5.1 Change in Control. For the purposes of this Plan, "Change in
Control" means, the happening of any of the following:
(a) The first public announcement or public
acknowledgment (including without limitation, a report filed pursuant to Section
13(d) of the Securities Exchange Act of 1934 as amended (the "Exchange Act")) by
the Employer that a "person," as such term is used in
11
Sections 13(d) and 14(d) of the Exchange Act (other than the Employer, a
Subsidiary or an employee benefit plan of the Employer or a Subsidiary, or other
controlled affiliate of the Employer, including any trustee of such plan acting
as trustee), is or has become the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act or comparable successor rule), directly or indirectly, of
securities of the Employer representing fifty percent (50%) or more of the
combined voting power of the Employer's then outstanding Common Stock entitled
to vote in the election of directors, where such person's beneficial ownership
of the Employer's Common Stock was not initiated by the Employer or approved by
the Employer's Board of Directors;
(b) The sale, lease or other disposition of all or
substantially all of the assets of the Employer;
(c) The merger or consolidation of the Employer with or
into another corporation not initiated by the Employer, in which the Employer is
not the surviving corporation and the stockholders of the Employer immediately
prior to the merger or consolidation fail to possess direct or indirect
beneficial ownership of more than eighty percent (80%) of the voting power of
the securities of the surviving corporation (or if the surviving corporation is
a controlled affiliate of another entity, then the required beneficial ownership
shall be determined with respect to the securities of that entity which controls
the surviving corporation and is not itself a controlled affiliate of any other
entity) immediately following such transaction, or a reverse merger not
initiated by the Employer, in which the Employer is the surviving corporation
and the stockholders of the Employer immediately prior to the reverse merger
fail to possess direct or indirect beneficial ownership of more than eighty
percent (80%) of the securities of the Employer (or if the Employer is a
controlled affiliate of another entity, then the required beneficial ownership
shall be determined with respect to the securities of that entity which controls
the Employer and is not itself a controlled affiliate of any other entity)
immediately following the reverse merger. For purposes of this Section 5.1(c),
any person who acquired securities of the Employer prior to the occurrence of a
merger, reverse merger, or consolidation in contemplation of such transaction
and who after such transaction possesses direct or indirect beneficial ownership
of at least ten percent (10%) of the Common Stock of the Employer or the
surviving corporation (or if the Employer or the surviving corporation is a
controlled affiliate, then of the appropriate entity as determined above)
immediately following such transaction shall not be included in the group of
stockholders of the Employer immediately prior to such transaction;
(d) A change in the composition of the Board of Directors
of the Employer, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean directors who either (i)
are directors of the Employer as of the date hereof, or (ii) are elected, or
nominated for election, to the Board of Directors of the Employer with the
affirmative votes of at least a majority of the Incumbent Directors at the time
of such election or nomination (but shall not include an individual whose
election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Employer); or
(e) Any liquidation or dissolution of the Employer.
12
SECTION 6
TRUST PROVISIONS
6.1 Trust Agreement. The Employer may establish the Trust for the
purpose of retaining assets, including deferred Qualifying Stock Option Gain,
set aside by Employer pursuant to the Trust Agreement for payment of all or a
portion of the amounts payable pursuant to the Plan. Any benefits not paid from
the Trust shall be paid solely from Employer's general funds, and any benefits
paid from the Trust shall be credited against and reduce by a corresponding
amount the Employer's liability to Employees under the Plan. No special or
separate fund, other than the Trust Agreement, shall be established and no other
segregation of assets shall be made to assure the payment of any benefits
hereunder. All Trust Funds shall be subject to the claims of general creditors
of the Employer in the event the Employer is Insolvent as defined in Section 3
of the Trust Agreement. The obligations of the Employer to pay benefits tinder
the Plan constitute an unfunded, unsecured promise to pay and Employees shall
have no greater rights than general creditors of the Employer.
SECTION 7
AMENDMENT, TERMINATION AND TRANSFERS BY COMMITTEE
7.1 Amendment. The Committee shall have the right to amend this
Plan at any time and from time to time, including a retroactive amendment. Any
such amendment shall come effective upon the date stated therein, and shall be
binding on all Employees, except as otherwise provided in such amendment;
provided, however, that said amendment shall not affect adversely benefits
payable to an affected Employee without the Employee's written approval.
7.2 Termination. The Committee shall have the right to terminate
this Plan at any time and direct the lump sum payments of all assets held by the
Trust if the Employer is not Insolvent (as defined in Article 3 of the Trust
Agreement) at that time.
7.3 Transfers by Committee.
(a) In the event that an Employee transfers employment
from the Employer to a Subsidiary, the Committee shall have the right, but no
obligation, to direct the Trustee to transfer funds in an amount equal to the
amount credited to such Employee's Account (the "Transferred Account") to a
trust established under a Transferee Plan maintained by such Subsidiary. The
Committee shall determine, in its sole discretion, whether such transfer shall
be made and the timing of such transfer. Such transfer shall be made only if,
and to the extent, approval of such transfer is obtained from the Trustee. No
transfer shall be made unless the Subsidiary meets the requirements of
subsection 7.3(b)(i) as of the date of the transfer.
(b) Definitions.
(i) For purposes of this Section 7.3,
"Subsidiary" shall mean any corporation (other than the Employer) in an
unbroken chain of corporations beginning with the Employer, if each of
the corporations other than the last corporation in the
13
unbroken chain owns stock possessing fifty (50) percent or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
(ii) For purposes of this Section 7.3,
"Transferee Plan" shall mean an unfunded, nonqualified deferred
compensation plan described in Section 201(2), 301(a)(3) and 401(a)(1)
of the Employee Retirement Income Security Act of 1974 ("ERISA").
(c) No transfer shall be made under this Section 7.3
unless the Employee for whose benefit the Transferred Account is held executes a
written waiver of all of such Employee's rights and benefits under this Plan in
such form as shall be acceptable to the Committee.
SECTION 8
ADMINISTRATION
8.1 Administration. The Committee shall administer and interpret
this Plan in accordance with the provisions of the Plan and the Trust Agreement.
Any determination or decision by the Committee shall be conclusive and binding
on all persons who at any time have or claim to have any interest whatever under
this Plan. The Committee may employ legal counsel, consultants, actuaries and
agents as it may deem desirable in the administration of the Plan and may rely
on the opinion of such counsel or the computations of such consultant or other
agent. The Committee shall have the authority to delegate some or all of the
powers and responsibilities under the Plan and the Trust Agreement to such
person or persons as it shall deem necessary, desirable or appropriate for
administration of the Plan.
8.2 Liability of Committee; Indemnification. To the maximum extent
not prohibited by law, no member of the Committee shall be liable to any person
and in any event shall be indemnified by the Employer for any action taken or
omitted in connection with the interpretation and administration of this Plan
unless attributable to his or her own bad faith or willful misconduct.
8.3 Expenses. The costs of the establishment of the Plan and the
adoption of the Plan by Employer, including but not limited to legal and
accounting fees, shall be borne by Employer. The expenses of administering the
Plan and the Trust shall be borne by the Trust unless the Employer elects in its
sole discretion to pay some or all of those expenses; provided, however, that
Employer shall bear, and shall not be reimbursed by, the Trust for any tax
liability of Employer associated with the investment of assets by the Trust.
SECTION 9
GENERAL AND MISCELLANEOUS
9.1 Rights Against Employer. Except as expressly provided by the
Plan, the establishment of this Plan shall not be construed as giving to any
Employee or to any person whomsoever, any legal, equitable or other rights
against the Employer, or against its officers,
14
directors, agents or shareholders, or as giving to any Employee or Beneficiary
any equity or other interest in the assets, business or shares of Employer stock
or giving any Employee the right to be retained in the employment of the
Employer. Neither this plan nor any action taken hereunder shall be construed as
giving to any Employee the right to be retained in the employ of the Employer or
as affecting the right of the Employer to dismiss any Employee. Any benefit
payable under the Plan shall not be deemed salary or other compensation for the
purpose of computing benefits under any employee benefit plan or other
arrangement of the Employer for the benefit of its Employees. Nothing in the
Plan or in any instrument executed pursuant thereto shall confer upon any
Non-Employee Director any right to continue in the service of the Employer in
any capacity or shall affect any right of the Employer, its Board of Directors
or stockholders to remove any Non-Employee Director pursuant to the Employer's
By-Laws and the provisions of the Delaware General Corporation Law.
9.2 Assignment or Transfer. No right, title or interest of any
kind in the Plan shall be transferable or assignable by any Employee or
Beneficiary or be subject to alienation, anticipation, encumbrance, garnishment,
attachment, execution or levy of any kind, whether voluntary or involuntary, nor
subject to the debts, contracts, liabilities, engagements, or torts of the
Employee or Beneficiary. Any attempt to alienate, anticipate, encumber, sell,
transfer, assign, pledge, garnish, attach or otherwise subject to legal or
equitable process or encumber or dispose of any interest in the Plan shall be
void.
9.3 Severability. If any provision of this Plan shall be declared
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining provisions of this Plan but shall be fully severable, and
this Plan shall be construed and enforced as if said illegal or invalid
provision had never been inserted herein.
9.4 Construction. The article and section headings and numbers are
included only for convenience of reference and are not to be taken as limiting
or extending the meaning of any of the terms and provisions of this Plan.
Whenever appropriate, words used in the singular shall include the plural or the
plural may be read as the singular. When used herein, the masculine gender
includes the feminine gender.
9.5 Governing Law. The validity and effect of this Plan and the
rights and obligations of all persons affected hereby shall be construed and
determined in accordance with the laws of the State of California unless
superseded by federal law.
9.6 Payment Due to Incompetence. If the Committee receives
evidence that an Employee or Beneficiary entitled to receive any payment under
the Plan is physically or mentally incompetent to receive such payment, the
Committee may, in its sole and absolute discretion, direct the payment to any
other person or Trust which has been legally appointed by the courts or to any
other person determined by the Employer to be a proper recipient on behalf of
such person otherwise entitled to payment, or any of them, in such manner and
proportion as the Employer may deem proper. Any such payment shall be in
complete discharge of the Employer's obligations under this Plan.
9.7 Tax. The Employer may withhold from any benefits payable under
this Plan, all federal, state, city or other taxes as shall be required pursuant
to any law or governmental
15
regulation or ruling. In the case of an Employee's exercise of an Eligible Stock
Option and election to defer Qualifying Stock Option Gain, Employer shall
withhold from Employee's non-deferred Compensation and/or Qualifying Stock
Option Gain, in a manner determined by Employer, Employee's share of FICA and
other employment taxes on such deferred Qualifying Stock Option Gain. If
necessary, the Committee may reduce the deferred Qualifying Stock Option Gain in
order to comply with this Section 9.7.
9.8 Attorney's Fees. Employer shall pay the reasonable attorney's
fees incurred by any Employee in an action brought against Employer to enforce
Employee's rights under the Plan, provided that such fees shall only be payable
in the event that the Employee prevails in such action.
9.9 Plan Binding on Successors/Assignees. This Plan shall be
binding upon and inure to the benefit of the Employer and its successor and
assigns and the Employee and the Employee's designee and estate.
The Employer has caused its authorized officer to execute this amended
and restated Plan this _____ day of _______________, 2002.
CADENCE DESIGN SYSTEMS, INC.
By: ________________________
Name: ________________________
Title: ________________________
16
APPENDIX 1
ACKNOWLEDGMENT
The undersigned Employee hereby acknowledges that Employer has selected
him or her as a participant in the Cadence Design Systems, Inc. 1994 Deferred
Compensation Plan, subject to all terms and conditions of the Plan, a copy of
which has been received, read, and understood by the Employee in conjunction
with executing this Acknowledgment. Employee acknowledges that he or she has had
satisfactory opportunity to ask questions regarding his or her participation in
the Plan and has received satisfactory answers to any questions asked. Employee
also acknowledges that he or she has sufficient knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
of participation in the Plan. Employee understands that his or her participation
in the Plan shall not begin until this Acknowledgment has been signed by
Employee and returned to Employer.
Dated: _______________________ Signed:______________________________
Employee
Dated: _______________________
CADENCE DESIGN SYSTEMS, INC.
Signed:______________________________
[Officer]
17
APPENDIX 2
ACKNOWLEDGMENT
(FOR DEFERRAL OF QUALIFYING STOCK OPTION GAIN ONLY)
The undersigned Employee hereby acknowledges that Employer has selected
him or her as a participant in the portion of Cadence Design Systems, Inc. 1994
Deferred Compensation Plan pertaining to the deferral of Qualifying Stock Option
Gain (as defined in the Plan document), subject to all terms and conditions of
the Plan, a copy of which has been received, read, and understood by the
Employee in conjunction with executing this Acknowledgment. Employee
acknowledges that he or she has had satisfactory opportunity to ask questions
regarding his or her participation in the portion of the Plan pertaining to the
deferral of Qualifying Stock Option Gain and has received satisfactory answers
to any questions asked. Employee also acknowledges that he or she has sufficient
knowledge and experience in financial and business matters to be capable of
evaluating the merits and risks of such participation in the Plan. Employee
understands that his or her participation in the portion of the Plan pertaining
to the deferral of Qualifying Stock Option Gain shall not begin until this
Acknowledgment has been signed by Employee and returned to Employer.
Dated: _______________________ Signed:______________________________
Employee
Dated: _______________________
CADENCE DESIGN SYSTEMS, INC.
Signed:______________________________
[Officer]
18