1
Exhibit 10.11
CADENCE DESIGN SYSTEMS, INC.
1996 DEFERRED COMPENSATION VENTURE INVESTMENT PLAN
TABLE OF CONTENTS PAGE
SECTION 1 DEFINITIONS 2
SECTION 2 ELIGIBILITY 4
SECTION 3 DEFERRED COMPENSATION 4
SECTION 4 DESIGNATION OF BENEFICIARY 10
SECTION 5 CHANGE IN CONTROL 10
SECTION 6 TRUST PROVISIONS 11
SECTION 7 AMENDMENT AND TERMINATION 12
SECTION 8 ADMINISTRATION 12
SECTION 9 GENERAL AND MISCELLANEOUS 12
1996 DEFERRED COMPENSATION VENTURE INVESTMENT PLAN
CADENCE DESIGN SYSTEMS, INC. a Delaware corporation (referred to
hereafter as the "Employer") hereby establishes an unfunded plan for the purpose
of providing deferred compensation for a select group of management and highly
compensated executives of the Employer.
RECITALS
WHEREAS, those employees 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; and;
WHEREAS, Employer desires to adopt an unfunded deferred compensation
plan and the Employees desire the Employer to pay certain deferred compensation
and/or related benefits to or for the benefit of Employees, or a designated
Beneficiary, or both;
NOW, THEREFORE, the Employer hereby establishes this deferred
compensation plan.
1.
DEFINITIONS
61
2
1.1 "ACCOUNT" shall mean the separate account(s) established under this
Plan and the Trust for each 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's deferred 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 time, 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 mean the base salary and cash bonuses
described in Section 3.1.
1.7 "EFFECTIVE DATE" shall mean January 1, 1996.
1.8 "ELIGIBLE COMPENSATION" shall mean 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 Section 125 plan) and excluding
any special or non-recurring compensatory payments such as moving or relocation
bonuses or automobile allowances.
1.9 "EMPLOYEE" shall mean each employee of Employer who (a) is a U.S.
citizen or is a lawful permanent resident of the U.S., within the meaning of
Code Section 7701(b)(1)(A)(i), (b) earns solely U.S. source income from
Employer, and (c) is exclusively on Employer's U.S. payroll system; references
to Employee herein shall include references to an Employee's Beneficiary where
the context so requires.
1.10 "EMPLOYER" shall mean Cadence Design Systems, Inc., a Delaware
corporation, and any successor organization thereto. This term shall not include
any subsidiaries or affiliates of the Employer.
1.11 "EMPLOYER CONTRIBUTIONS" shall mean the Employer's discretionary
contribution, if any, pursuant to Section 3.1(b) of the Plan.
1.12 "PLAN YEAR" shall mean the calendar year beginning each January 1
and ending December 31.
1.13 "PLAN" shall mean the Cadence Design Systems, Inc. 1996 Deferred
Compensation Venture Investment Plan.
1.14 "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 be considered
to have a Permanent Disability unless he or she furnishes proof of such
condition sufficient to satisfy the Employer, in its sole discretion.
1.15 "TRUST" or TRUST AGREEMENT" shall mean the Cadence Design Systems,
Inc. 1996 Deferred Compensation Venture Investment Trust Agreement, including
any amendments thereto, entered into between the Employer and the Trustee to
carry out the provisions of the Plan.
1.16 "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.
62
3
1.17 "TRUSTEE" shall mean the designated Trustee acting at any time
under the Trust.
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. Participation in the Plan shall
commence as of the effective date of the Employee's enrollment form, which shall
be completed and submitted to the Employer in accordance with the provisions of
Section 3.3. Nothing in the Plan or in any administrative form used to
administer the Plan or Trust shall be construed to require any contributions to
the Plan on behalf of the Employee by Employer. The Committee has the discretion
to end the eligibility of one or more participating Employees at any time in the
sole discretion of the Committee.
3
DEFERRED COMPENSATION
3.1 DEFERRED COMPENSATION. (a) Each participating Employee may elect,
in accordance with Section 3.3 of this Plan, to defer annually the receipt of a
portion of the Compensation for active service otherwise payable to him or her
by Employer during each Plan Year or portion of a Plan Year that the Employee
shall be employed by the Employer. Any Compensation deferred by Employee
pursuant to Section 3.3 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
Plan Year under the Plan, together with earnings thereon credited in accordance
with Section 3.7 and expenses allocated thereto in accordance with Section 3.8.
The amount or percentage of Compensation that Employee elects to defer under
Section 3.3 will remain constant for the year of the election and shall not be
subject to change during such year. Each such deferral election as to "base
salary" or discontinuance of a deferral election as to "base salary" will
continue in force for each successive year until or unless suspended or modified
by the filing of a subsequent election with the Employer by the Employee in
accordance with Section 3.3 of the Plan. Each deferral election as to an
Employee's "cash bonus" shall continue in force only for the single year with
respect to which it was made and shall not apply to any successive years. 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. Deferral elections shall be subject to a
minimum dollar and maximum percentage amounts as follows: (i) the minimum annual
deferral amount is $10,000, which shall be withheld from the participating
Employee's "base salary" and "cash bonus," and (ii) the maximum deferral
percentage amount is 80% of the Employee's "base salary" and 100% of the
Employee's "cash bonus". For purposes of the Plan, "base salary" for a given
Plan Year means an "Employee's regular annual compensation payable during the
Plan Year, 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.
(a) 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
63
4
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 Plan Year shall not bind or obligate the
Employer to use such formula or basis in any other Plan 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.
(b) 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 any tax withholding obligations imposed
on the Employer, any other withholding requirements imposed by law, 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 Employer's Code Section 423 (employee stock purchase) plan or the Cadence
Design Systems, Inc. 1994 Deferred Compensation Plan.
3.2 PAYMENT OF ACCOUNT BALANCES. (a) The Employee shall elect whether
he or she will receive distribution of his or her entire Account, subject to tax
withholding requirements, (i) upon reaching a specified age, (ii) upon passage
of a 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 3.2, 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
shall also 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 3.2(e). These elections shall be made in
accordance with Section 3.4 of this Plan.
(a) Distribution 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 3.2(b)
shall be distributed in subsequent years in the manner elected by the Employee
until the Employee's Account has been fully liquidated. For Employees who have
elected to receive payment in a lump sum or over five or ten years, 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.
(b) 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
3.2(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 3.2(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 3.2(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 3.2(a)). Said amounts
shall be payable in the form determined pursuant to the provisions of Section
3.2(e).
(c) 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 3.2(e). Notwithstanding any other provision of the Plan to the
contrary, except for Section 3.2(f), the Employee's designated Beneficiary may
receive the distribution of the remaining portion of such
64
5
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.
(d) 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 generally shall be made or commence within
ninety (90) days following the date specified in the first sentence of Section
3.2(a). Subsequent installments, if any, shall be made on the first day of each
month following the first 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 in the form established by the
Committee in accordance with the terms of the Plan.
(e) Notwithstanding any other provisions of the Plan or the
Trust to the contrary, no distribution will be made pursuant to the terms of the
Plan if the distribution would require either the transfer of a limited
partnership interest in Telos Venture Partners, L.P. or any other venture
capital investment partnership in which some or all of the assets of the Trust
might be invested (the "Partnership") or a distribution of assets from the
Partnership. In addition, no distribution will be made if the Committee
determines in its sole discretion that the Plan's assets would be insufficient
to satisfy any future capital calls anticipated to be made by the General
Partner of the Partnership, or if the Employee's Account has any amounts
relating to unpaid debt or expenses thereon allocated to such Account. The terms
of an Employee's election shall be followed to the fullest extent possible upon
the distribution of assets from the Partnership to the Trust as determined in
accordance with the terms of the Partnership Agreement. No provision of this
Plan or the Trust Agreement (except for those provisions relating to the
Insolvency of the Employer as set forth in Article 7 of the Trust Agreement)
shall have any impact on the operation of the Partnership.
3.3 ELECTION TO DEFER COMPENSATION. Each election of an Employee to
defer Compensation as provided in Section 3.1 of the 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, at least twenty (20) days
(or such other period of time determined by the Committee and communicated to
those Employees who are eligible to participate in the Plan) 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 an Employee who is
hired or promoted during a Plan Year to a position of eligibility for
participation in the Plan 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 Plan Year. Any deferral
election made by Employee shall be irrevocable with respect to any Compensation
covered by such election, including Compensation payable in the Plan Year in
which an election suspending or modifying the prior deferral election for the
subsequent Plan Year is delivered to the Employer. 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
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 in the form established by the Committee in accordance with the terms
of the Plan.
3.4 DISTRIBUTION ELECTION. The initial distribution election of an
Employee as provided in Section 3.2 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, at least twenty (20) days (or such
other period of time determined by the Committee and communicated to those
Employees who are eligible to participate in the Plan) prior to the beginning of
the Plan Year with respect to which the distribution election is to apply;
provided, however, that an Employee who is hired or promoted during a Plan Year
to a position of eligibility for participation in the Plan 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
Plan Year. 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 will
apply to the Employee's entire Account.
65
6
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. Employee's distribution election shall be in the
form established by the Committee in accordance with the terms of the Plan.
3.5 PAYMENT UPON CHANGE IN CONTROL. Notwithstanding any other provision
of this Plan, except Section 3.2(f), the aggregate balances credited to and held
in the Employees' Accounts shall be distributed to Employees in a lump sum
within thirty (30) days following a Change in Control, as defined in Section
5.1.
3.6 EMPLOYEE'S RIGHTS 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 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.
3.7 INVESTMENT OF CONTRIBUTIONS. (a) The investment options available
to each Employee shall be determined by the Employer and described in a separate
written document, a copy of which shall be attached hereto and by this reference
is incorporated herein. Initially the Employer intends to invest all of the
assets of the Trust to acquire a limited partnership interest in the
Partnership, and investment in the Partnership shall be the sole investment
option available to Employees. In the event that the Employer makes more than
one investment option available to Employees, each Employee shall have the sole
and exclusive right to direct the Trustee as to the investment of his or her
Accounts among those investment options in accordance with policies and
procedures implemented by the Trustee and the terms and conditions of those
investment options. Employer shall not be liable for any investment decision
made by any Employee while such funds are held by the Trustee. Employer may
provide in its sole discretion for the transfer of some or all of the Plan's
assets from the Trust to another trust established under the terms of a
non-qualified deferred compensation plan sponsored by the Employer in order to
provide additional investment options to Employees; provided, however, that
prior to any such transfer, Employer shall have determined (after consulting
with legal counsel for Employer with respect to the Plan) that such transfer
shall not cause any participating Employee to incur any income tax liability
with respect to his or her benefits under the Plan and shall not impair the
rights of any Employee to accrue and/or receive benefits under the Plan.
(a) Accounts shall be credited with the actual financial
performance or earnings generated by such investments made by the Trustee in
accordance with the terms of the Plan and Trust, until the Account has been
fully distributed to the Employee or to the Employee's designated Beneficiary.
Notwithstanding the foregoing, Accounts shall be maintained, credited and
debited with respect to an investment in the Partnership as provided under the
terms of the Partnership Agreement. Furthermore, the Trust's limited partnership
interest in the Partnership for a given Plan Year which is acquired with
deferrals of Compensation from participating Employees shall be allocated to the
Accounts of those participating Employees in the same proportion as the deferred
amounts invested in the Partnership for such Plan Year are allocated to those
Accounts. The Trust's limited partnership interest in the Partnership for a
given Plan Year which is acquired with loan proceeds shall be allocated to the
Accounts of those participating Employees who remain employed by the Employer
(or a subsidiary or affiliate of the Employer) at the end of such Plan Year in
the same proportion as the deferred amounts invested in the Partnership for such
Plan Year are allocated to the Accounts of those remaining Employees.
(b) Notwithstanding any provision in this Section 3.7 to the
contrary, the Committee may determine not to take account of Employee's
designated investments, if any, and determine to have the Employee's Account
invested in any other manner as the Committee shall determine. The Committee may
also designate how the Plan's assets shall be invested for interim short-term
periods of time pending investment in the Partnership or following distribution
from the Partnership but prior to distribution from the Plan or re-investment in
the Plan (or a similar non-qualified deferred compensation plan) in another
investment option.
66
7
3.8 ALLOCATION OF EXPENSES
(a) Expenses of administering the Plan and the Trust which are
paid out of the Trust Fund shall be allocated to the Accounts of participating
Employees on a periodic basis determined by the Committee using any method which
the Committee determines is fair and equitable to participating Employees. The
selection of a given method of allocating expenses among participating
Employees' Accounts shall not be deemed to restrict the Committee in any manner
whatsoever from selecting a different method for future allocations or to imply
that a different method would not be fair and equitable to participating
Employees.
(b) From time to time the Trustee may borrow funds to satisfy
the obligations of the Trust, whether to meet capital calls issued by the
General Partner of the Partnership or otherwise. The principal amount of any
such loan shall be allocated to the Accounts of participating Employees in a
manner which the Committee determines is fair and equitable, and for loan
principal used to acquire an interest in the Partnership, is also consistent
with the allocation of interests in the Partnership acquired with loan proceeds
as described in Section 3.7. The costs associated with interest expenses on that
principal amount (and any interest expenses incurred with respect to previously
accrued but unpaid interest), any other expenses incurred with respect to that
principal amount, as well as the costs associated with repayment of principal,
shall be allocated to the same Accounts to which the principal amounts were
allocated initially in proportion to the principal amounts allocated to the
Accounts at such time. Once additional interest or other expenses are allocated
to an Account, such expenses shall be treated as principal with respect to
future allocations of expenses related to that debt. Notwithstanding the
foregoing, the Committee shall have the authority to establish a different
method for allocating costs, expenses, and/or repayment of principal which it
concludes is fair and equitable to participating Employees. The selection of a
given method of allocating expenses among participating Employees' Accounts
shall not be deemed to restrict the Committee in any manner whatsoever from
selecting a different method for future allocations or to imply that a different
method would not be fair and equitable to participating Employees.
4
DESIGNATION OF BENEFICIARY
4.1 DESIGNATION OF BENEFICIARY. Employee may designate a Beneficiary or
Beneficiaries to receive any amount due hereunder by Employee by written notice
thereof to Employer at any time prior to his or her 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 while residing in a community
property state 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 in the form
determined by the Committee.
67
8
5
CHANGE IN CONTROL
5.1 CHANGE IN CONTROL. For purposes of this Plan, a "Change of Control"
means the happening of any of the following:
(i) When any "person," as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 as amended ("Exchange Act")
(other than the Employer, a subsidiary of the Employer or an employee benefit
plan sponsored by the Employer or a subsidiary of the Employer, including any
trustee of such plan acting as trustee) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), 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 securities, where such
person's beneficial ownership of the Employer's securities was not initiated by
the Employer or approved by the Employer's Board of Directors; or
(ii) The occurrence of a transaction requiring shareholder
approval, and involving the sale of all or substantially all of the assets of
the Employer or the merger of the Employer with or into another corporation,
where such merger was not initiated by the Employer or approved by the
Employer's Board of Directors; or
(iii) 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 (A)
are directors of the Employer as of the date hereof, or (B) 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 an actual or
threatened tender offer with respect to the Employer's publicly traded
securities); or
(iv) Any liquidation or dissolution of the Employer.
6
TRUST PROVISIONS
6.1 TRUST AGREEMENT. The Employer shall establish the Trust within an
administratively reasonable period of time following the adoption of the Plan
for the purpose of retaining assets set aside by Employer pursuant to the Trust
Agreement for payment of 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 required to
be established and no other segregation of assets shall be required to 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 Article 7 of the Trust Agreement. The
obligations of the Employer to pay benefits under the Plan constitute an
unfunded, unsecured promise to pay and Employee shall have no greater rights
than general creditors of the Employer.
7
AMENDMENT AND TERMINATION
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 become effective upon the date stated therein, and shall be
binding on all Employees, except as otherwise provided in such amendment;
68
9
provided, however, that any such 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 at that time (as defined in Article 7 of
the Trust Agreement), notwithstanding any other provision of the Plan to the
contrary (except for Section 3.2(f)).
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.
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. 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. The Committee shall provide for the keeping of written minutes of
its actions hereunder which shall be reviewed by the legal counsel engaged by
the Committee prior to their finalization.
8.2 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.
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, directors, agents or stockholders, or as
giving to any Employee or Beneficiary any equitable 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 or 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 paid or 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, but deferrals under the Plan shall be deemed salary or other
compensation for the purpose of computing benefits under other employee benefit
plans or other arrangements of the Employer for the benefit of its Employees to
the extent provided under the terms of such other plans or arrangements.
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, or
69
10
be 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 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 to the extent of such payment.
9.7 TAXES. 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 regulation or ruling.
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 document
this 28th day of December, 1995.
CADENCE DESIGN SYSTEMS, INC.
By:
-------------------------
H. Raymond Bingham
Executive Vice President and
Chief Financial Officer
70