Exhibit 10.43
CADENCE DESIGN SYSTEMS, INC.
FORM OF EXECUTIVE SEVERANCE AGREEMENT
THIS AGREEMENT (the "Agreement") is made effective as of the 5th day of
November, 1997, between CADENCE DESIGN SYSTEMS, INC., a Delaware corporation
("Company"), and _____________________ ("Executive").
WHEREAS, the Company is engaged in the electronic design automation
software business;
WHEREAS, Executive is currently employed by the Company as a senior
executive; and
WHEREAS, the Company desires to secure the services of Executive as
Executive Vice President and Executive desires to perform such services
for the Company, on the terms and conditions as set forth herein;
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements set forth below, it is mutually agreed as follows:
1. BENEFITS UPON TERMINATION OF EMPLOYMENT PERIOD. Executive's
employment by the Company shall terminate immediately upon Executive's
receipt of written notice of termination by the Company, upon the Company's
receipt of written notice of termination by Executive, or upon Executive's
death or permanent disability. "Permanent disability" shall mean any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months and which renders Executive
unable to perform effectively the duties and responsibilities of his office.
Except in connection with a termination for Cause (as defined in Subsection
1.2), or on account of permanent disability (as defined above), or a
voluntary termination by Executive for other than Good Reason (as defined in
Subsection 1.3), upon execution by Executive of an effective release of
claims substantially in the form attached as Exhibit A as shall be finally
determined by the Company, the Company shall provide Executive with
termination benefits upon termination of the Employment Period, as follows:
1.1 TERMINATION BENEFITS. An amount equal to one year's base salary at
the time of termination shall be paid by the Company in one lump sum amount.
Executive's target bonus for the year of termination shall also be paid in
one lump sum payment. All such amounts shall be paid by the Company as soon
as administratively possible following such termination and following the
first point in time that the Company is entitled to deduct such payments for
income tax purposes in compliance with applicable law, including but not
limited to the provisions of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"). All of the unvested options held by Executive
on the date of such termination that would have
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vested over the succeeding twenty-four month period shall immediately vest
and become exercisable in full. The options shall remain exercisable for the
period specified in such options.
1.2 CIRCUMSTANCES UNDER WHICH TERMINATION BENEFITS WOULD NOT BE PAID.
The Company shall not be obligated to pay Executive the termination benefits
or continue the option vesting described in Subsection 1.1 above if the
Executive's employment with the Company is terminated for Cause or on account
of Executive's permanent disability. For purposes of this Agreement, "Cause"
shall be limited to (1) Executive's gross misconduct or fraud, in the
performance of his employment; (2) Executive's conviction or guilty plea with
respect to any felony (except for motor vehicle violations); or (3)
Executive's material breach of this Agreement after written notice delivered
to Executive of such breach and a reasonable opportunity to cure such breach.
1.3 CONSTRUCTIVE TERMINATION. Notwithstanding anything in this Section
1 or Section 2 to the contrary, the Executive's employment with the Company
will be deemed to have been terminated (a "Constructive Termination") and
Executive will be deemed to have Good Reason for voluntary termination of his
employment ("Good Reason"), if there should occur:
(a) a material adverse change in Executive's position causing it
to be of materially less stature or responsibility without Executive's
written consent, and such a materially adverse change shall in all events be
deemed to occur if Executive no longer serves as Executive Vice President or
a more senior position, unless Executive consents in writing to such change;
(b) a reduction, without Executive's written consent, in his level
of base compensation (including base salary and fringe benefits) by more than
ten percent (10%) or a reduction by more than ten percent (10%) in his target
bonus under the Company's bonus plan in which Executive currently
participates (as such plan may be amended or substituted for from time to
time); or
(c) a relocation of his principal place of employment by more than
50 miles without Executive's consent.
2. CHANGE IN CONTROL BENEFITS.
Should there occur a Change in Control (as defined below), then the
following provisions shall become applicable in lieu of severance benefits
otherwise payable under Section l:
2.1 During the period (if any) following a Change in Control that
Executive shall continue to provide services to the Company, then the terms
and provisions of this Agreement shall continue in full force and effect, the
Company's bonus plan in which Executive participates shall be interpreted
and/or amended to evaluate Executive's achievement of goals as if the Company
continued as an independent entity, and Executive shall continue to vest in
all of his unvested stock options as specified in such options; or
2.
2.2 In the event of (y) a termination of the Executive's
employment with the Company by the Company other than either for Cause or on
account of total disability within thirteen (13) months after a Change in
Control or (z) a Constructive Termination of the Executive's employment with
the Company within thirteen (13) months after a Change in Control, upon
execution by Executive of an effective release of claims substantially in the
form attached as Exhibit A as shall be finally determined by the Company, all
the following benefits shall become due and payable:
(a) The Company shall pay to Executive as severance pay in
one lump sum amount, an amount equal to two year's base salary plus twice
(2x) Executive's target bonus for the year of termination in effect
immediately prior to such termination. All such amounts shall be paid by the
Company as soon as administratively possible following such termination and
following the first point in time that the Company is entitled to deduct such
payments for income tax purposes in compliance with applicable law, including
but not limited to the provisions of Section 162(m) of the Code.
(b) All of the unvested options held by Executive on the date
of such Change in Control shall immediately vest and become exercisable in
full and shall remain exercisable for the period specified in such options.
For purposes of this Section 2, a Change in Control shall be deemed to
occur upon:
(i) the sale, lease, conveyance or other disposition of all
or substantially all of the Company's assets as an entirety or substantially
as an entirety to any person, entity or group of persons acting in concert
other than in the ordinary course of business;
(ii) any transaction or series of related transactions (as a
result of a tender offer, merger, consolidation or otherwise) that results in
any Person (as defined in Section 13(h)(8)(E) under the Securities Exchange
Act of 1934) becoming the beneficial owner (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934), directly or indirectly, more than 50%
of the aggregate voting power of all classes of common equity of the Company,
except if such Person is (A) a subsidiary of the Company, (B) a tax-qualified
retirement plan for employees of the Company or (C) a company formed to hold
the Company's common equity securities and whose shareholders constituted, at
the time such company became such holding company, substantially all the
shareholders of the Company (a "Cadence Holding Company"); or
(iii) a change in the composition of the Company's Board of
Directors over a period of twenty four (24) consecutive months or less such
that a majority of the then current Board members ceases to be comprised of
individuals who either (a) have been Board members continuously since the
beginning of such period ("Incumbent Directors"), or (b) have been elected or
nominated for election as Board members during such period by at least a
majority of the Incumbent Directors who were still in office at the time such
election or nomination was approved by the Board (whereupon such new Board
member shall be deemed to be an Incumbent Director with respect to the
election or nomination of future Board members).
3.
In the event that the severance and other benefits provided to Executive
(i) constitute "parachute payments" within the meaning of Section 280G of the
Code and (ii) but for this Section 2, such severance and benefits would be
subject to the excise tax imposed by Section 4999 of the Code, then
Executive's severance benefits under this Section 2 shall be payable either:
(a) in full,
(b) as to such lesser amount which would result in no portion of
such severance and other benefits being subject to excise tax under Section
4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Section
4999, results in the receipt by Executive on an after-tax basis, of the
greatest amount of severance benefits under Section 2. Unless the Company
and Executive otherwise agree in writing, any determination required under
this Section 2 shall be made in writing by independent public accountants
agreed to by the Company and Executive (the "Accountants"), whose
determination shall be conclusive and binding upon Executive and the Company
for all purposes. For purposes of making the calculations required by this
Section 2, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the
Code. The Company and Executive shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order
to make a determination under this Section 2. The Company shall bear all
costs the Accountants may reasonably incur in connection with any
calculations contemplated by this Section 2.
3. DISPUTE RESOLUTION. The Company and Executive agree that any
dispute regarding the interpretation or enforcement of this Agreement or any
dispute arising out of Executive's employment or the termination of that
employment with the Company, except for disputes regarding the interpretation
of those agreements referred to in Section[s] 5 [and 6] and disputes
involving the protection of the Company's intellectual property, 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.
4. COOPERATION WITH THE COMPANY, AFTER TERMINATION OF THE EMPLOYMENT
PERIOD. Following termination of Executive's employment with the Company,
Executive shall fully cooperate with the Company in all matters relating to
the winding up of his pending work on behalf of the Company and the orderly
transfer of any such pending work to other employees of the Company as may be
designated by the Company.
5. CONFIDENTIALITY; RETURN OF PROPERTY. Executive acknowledges that
the Employee Invention and Confidential Information Agreement executed by
Executive on May 18, 1994 and attached hereto as Exhibit B shall continue in
effect.
4.
6. GENERAL.
6.1 WAIVER. Neither party shall, by mere lapse of time, without
giving notice or taking other action hereunder, be deemed to have waived any
breach by the other party of any of the provisions of this Agreement.
Further, the waiver by either party of a particular breach of this Agreement
by the other shall neither be construed as, nor constitute a, continuing
waiver of such breach or of other breaches by the same or any other provision
of this Agreement.
6.2 SEVERABILITY. If for any reason a court of competent
jurisdiction or arbitrator finds any provision of this Agreement to be
unenforceable, the provision shall be deemed amended as necessary to conform
to applicable laws or regulations, or if it cannot be so amended without
materially altering the intention of the parties, the remainder of the
Agreement shall continue in full force and effect as if the offending
provision were not contained herein.
6.3 NOTICES. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
considered effective either (a) upon personal service or (b) upon delivery by
facsimile and depositing such notice in the U.S. Mail, postage prepaid,
return receipt requested and addressed to the Chief Executive Officer of the
Company at its principal corporate address, and to Executive at his most
recent address shown on the Company's corporate records, or at any other
address which he may specify in any appropriate notice to the Company, or (c)
upon only depositing such notice in the U.S. Mail as described in (b) above.
6.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
taken together constitutes one and the same instrument and in making proof
hereof it shall not be necessary to produce or account for more than one such
counterpart.
6.5 ENTIRE AGREEMENT. The parties hereto acknowledge that each
has read this Agreement, understands it, and agrees to be bound by its terms.
The parties further agree that this Agreement and the documents referred to
herein constitute the complete and exclusive statement of the agreement
between the parties and supersedes all proposals (oral or written),
understandings, representations, conditions, covenants, and all other
communications between the parties relating to the subject matter hereof.
Notwithstanding anything to the contrary, Sections 1 and 2 of this Agreement
shall govern all options issued to Executive by the Company prior to and
after the effective date of this Agreement, and the Company shall use its
best efforts to place appropriate language describing the relevant terms of
this Agreement in all options issued or to be issued to Executive by the
Company.
6.6 GOVERNING LAW. This Agreement shall be governed by the law of
the State of California.
6.7 ASSIGNMENT AND SUCCESSORS. The Company shall have the right
to assign its rights and obligations under this Agreement to an entity which
acquires substantially all of the assets of the Company. The rights and
obligation of the Company under this Agreement shall inure to the benefit and
shall be binding upon the successors and assigns of the Company.
5.
Executive shall not have any right to assign his obligations under this
Agreement and shall only be entitled to assign his rights under this
Agreement by will or the laws of descent and distribution.
6.8 DURATION. Executive's employment with the Company is for no
specific term, and either Executive or Company may terminate such employment
in writing at any time, for any reason, or for no reason.
6.9 AMENDMENTS. This Agreement and the terms and conditions of
the matters addressed in this Agreement may only be amended in writing
executed both by the Executive and a duly authorized representative of the
Company.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
CADENCE DESIGN SYSTEMS, INC. EXECUTIVE
By:
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Name:
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Title:
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6.
EXHIBIT A
RELEASE AND WAIVER OF CLAIMS:
EXECUTIVE SEVERANCE AGREEMENT
In exchange for payment to me of amounts pursuant to Section 1 or 2 of
my executive severance agreement with the Company, entered into effective as
of November 5, 1997, as it may be amended from time to time, to which this
form is attached, I hereby furnish Cadence Design Systems, Inc. (the
"Company") with the following release and waiver.
I hereby release, and forever discharge the Company, its officers,
directors, agents, employees, stockholders, successors, assigns and
affi1iates, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys' fees, damages, indemnities and
obligations of every kind and nature, in law, equity, or otherwise, known and
unknown, suspected and unsuspected, disclosed and undisclosed, arising at any
time prior to and including my employment termination date with respect to
any claims relating to my employment and the termination of my employment,
including but not limited to, claims pursuant to any federal, state or local
law relating to employment, including, but not limited to, discrimination
claims, claims under the California Fair Employment and Housing Act, and the
Federal Age Discrimination in Employment Act of 1967, as amended ("ADEA"), or
claims for wrongful termination, breach of the covenant of good faith,
contract claims, tort claims, and wage or benefit claims, including but not
limited to, claims for salary, bonuses, commissions, stock, stock options,
vacation pay, fringe benefits, severance pay or any form of compensation.
I also acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "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." I hereby expressly waive
and relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to any claims I may have against
the Company.
I acknowledge that, among other rights, I am waiving and releasing any
rights I may have under ADEA, that this waiver and release is knowing and
voluntary, and that the consideration given for this waiver and release is in
addition to anything of value to which I was already entitled as an employee
of the Company. I further acknowledge that I have been advised, as required
by the Older Workers Benefit Protection Act, that: (a) the waiver and release
granted herein does not relate to claims which may arise after this agreement
is executed; (b) I have the right to consult with an attorney prior to
executing this agreement (although I may choose voluntarily not to do so);
(c) I have twenty-one (21) days from the date I receive this agreement, in
which to consider this agreement (although I may choose voluntarily to
execute this agreement earlier); (d) I have seven (7) days following the
execution of this agreement to revoke my consent to the agreement; and (e)
this agreement shall not be effective until the seven (7) day revocation
period has expired.
Date: By:
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