Exhibit 10.42
December 5, 1997
Joseph B. Costello
914 Lundy Lane
Los Altos, CA 94024
Dear Joe:
On October 19, 1997 you resigned as Cadence's President and Chief Executive
Officer and as member of its Board of Directors, and all other positions you
may hold with Cadence. As we discussed, Cadence is prepared to enter into
the following agreement with you to facilitate a smooth transition for you
and the Company.
Under our agreement, you became a part-time employee of Cadence from November
1, 1997 and will continue in that capacity through July 15, 1998 (the
"Part-Time Employment Period"). In this capacity, you will report to the
President and Chief Executive Officer and provide such advice and assistance
as is reasonably requested of you by him or other members of the Executive
Staff for up to twenty (20) hours per month. You will be free to engage in
other employment during this period and Cadence will not require you to
render part-time services to Cadence at a time or in a manner which would
interfere with your ability to engage in such other employment. Your salary
for the Part-Time Employment Period will be $2,500 per month, subject to
standard withholdings and deductions paid on our regular payroll schedule.
During your Part-Time Employment Period, you will not accrue vacation or
receive Company benefits. At the end of the Part-Time Employment Period,
your employment with Cadence (and any subsidiary thereof) will terminate.
During your Part-Time Employment Period, your Cadence stock options
(including the option granted on April 11, 1996) will continue to vest
according to their terms until the termination of your part-time employment.
After the termination of your part-time employment, you will be able to
exercise any of your vested options pursuant to the terms of each applicable
option agreement.
The Employment Invention and Confidential Information Agreement
("Confidentiality Agreement") which you signed on September 17, 1984, will
continue to be in effect through your Part-Time Employment Period, and you
will agree to comply with Cadence's employee policies and procedures. In the
event that Cadence terminates your part-time employment for cause, Cadence's
obligation to pay your salary shall end and your stock vesting shall cease.(1)
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(1) Under this letter agreement, "cause" shall mean: (a) any gross misconduct
or fraud in the performance of your employment; (b) a conviction or guilty
plea with respect to any felony; (c) material breach of this agreement, your
Confidentiality Agreement, or Cadence policies, after providing written
notice to you of such breach and a reasonable opportunity to cure such
breach, unless such breach cannot reasonably be cured; or (d) conduct by you
which in the good faith and reasonable determination of the Board
demonstrates gross unfitness to serve (e.g., sustained physical or mental
disability).
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In order to protect the trade secrets and confidential and proprietary
information of the Company, you agree that through May 31, 1999, you will not
perform work for any business entity, or engage in any work activity which is
in competition, or is preparing to compete, with the Company in its business
of developing, marketing and providing services relating to electronic design
automation software tools, or its services and consulting business involving
electronic product design realization, design process optimization, and
advice and implementation relating to electronics services and corporate and
government development projects ("Competitive Activity"). If you are in
doubt as to whether a particular work activity may comprise Competitive
Activity, you will obtain the written consent of the Company's Board of
Directors, which shall not be unreasonably withheld, before undertaking such
work activity. For purposes of this paragraph, the holding of less than five
percent (5%) of the outstanding voting securities of any firm or business
organization in competition with the Company shall not constitute activities
or services precluded by this paragraph.
You also agree that through May 31, 1999, you will not directly or indirectly
solicit or encourage any employee, independent contractor, supplier or
customer of the Company to terminate his, her or its relationship with the
Company. Cadence agrees that general advertisements for employment not
targeted, directly or indirectly, at Cadence shall not be prohibited under
this paragraph. Cadence also agrees that your Executive Administrator at
Cadence, Peggy Thompson, may work for you as you engage in other employment
activities.
You and the Company agree not to disparage the other, its subsidiaries and
affiliates, and their officers, directors, employees, shareholders and agents
in any manner likely to be harmful to them or their business, business
reputation or personal reputation; provided that both you and the Company
shall respond accurately and fully to any question, inquiry or request for
information when required by legal process.
The Company will pay you all accrued salary, and all accrued and unused
vacation earned through October 19, 1997 subject to standard payroll
deductions and withholding. You are entitled to these payments regardless of
whether you sign this Agreement. In this agreement, you are waiving any
claim you may have to any payment under the Chief Executive Officer Bonus
Plan in respect of 1997 as well as to any other form of compensation or
benefit from Cadence, except as specified herein. Both parties agree: this
letter sets forth the entire agreement relating to the termination of your
full-time employment and other positions with Cadence and the terms of your
part-time employment; it supersedes any other promise, representation, or
agreement, written or oral, relating to such subjects; and it cannot be
amended except in writing. If any provision of this Agreement is determined
to be invalid or unenforceable, in whole or in part, this determination will
not affect any other provision of this Agreement and the provision in
question shall be modified by the court so as to be rendered enforceable.
Except with respect to obligations undertaken in this letter, you release and
discharge Cadence and its officers, directors, shareholders, agents,
employees, subsidiaries and affiliates from any and all liabilities and
claims, known and unknown, arising from agreements or acts at any time prior
to your execution of this agreement, including but not limited to any claims
arising from your employment at Cadence, or the termination thereof, or any
payments, severance, bonus (including but not limited to any rights under the
1996 Chief Executive Officer Bonus Plan) or other benefits relating thereto.
You acknowledge that the consideration for your release is in
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addition to anything to which you are already entitled, and that you are
knowingly and voluntarily releasing any rights you may have under the Age
Discrimination in Employment Act. Cadence hereby advises you that: (a) your
release does not apply to any rights or claims that may arise after the
execution date of this agreement; (b) you should consult with an attorney
prior to executing this agreement; (c) you have twenty-one (21) days to
consider this agreement (although you may choose to voluntarily execute it
earlier); (d) you have seven days following your execution of this agreement
to revoke the agreement; and (e) this agreement shall not be effective until
the date upon which the revocation period has expired ("Effective Date").
Notwithstanding anything else in this agreement, the Company agrees to defend
and indemnify you with respect to your actions within the course and scope of
your service as an officer, director, and employee of the Company to the
fullest extent permitted by Section 317 of the California Corporations Code,
including, but not limited to litigation currently pending against you in
which you are named as an individual defendant and in which the Company is
providing a defense.
In releasing unknown claims, you agree to waive any rights under Section 1542
of the California Civil Code, which reads: "A general release does not extend
to claims which the creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor."
While it is Cadence's policy not to give releases from claims to departing
employees, the Company is not now aware of any claims it may have against you.
You and Cadence agree that any disputes regarding the interpretation or
enforcement of this agreement shall be decided by confidential, final and
binding arbitration conducted by Judicial Arbitration and Mediation Services
("JAMS") under the then-existing JAMS rules, rather than by litigation in
court, trial by jury, administrative proceeding, or in any other forum.
If this agreement is acceptable to you, please sign in the space provided
below and return the original to me. I wish you all the best in your new
ventures.
Very truly yours,
/s/ R.L. Smith McKeithen
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R. L. Smith McKeithen
Vice President and General Counsel
ACKNOWLEDGED AND AGREED:
/s/ Joseph B. Costello
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Joseph B. Costello
Dated: 12/8/97
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cc: Steve Wilson
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