Exhibit 10.41
CADENCE DESIGN SYSTEMS, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is made effective as of the 19th day of
October, 1997, between CADENCE DESIGN SYSTEMS, INC., a Delaware corporation
("Company"), and XXXX X. XXXXXXX ("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
President and Chief Executive Officer, 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. EFFECTIVE DATE, TERM, AND DUTIES. The term of employment of
Executive by the Company hereunder shall commence upon the date of this
Agreement (the "Commencement Date") and shall continue thereafter on the same
terms and conditions (such term being hereinafter referred to as the
"Employment Period") unless earlier terminated pursuant to Section 4.
Executive shall have such duties as the Board of Directors of the Company may
from time to time prescribe consistent with his position as President and
Chief Executive Officer of the Company (the "Services"). Executive shall
report directly to the Board of Directors. Executive shall devote his full
time, attention, energies and best efforts to the business of the Company.
The Company shall maintain an office for Executive at the Company's corporate
headquarters, which is currently located in San Jose, California. The Board
of Directors has elected Executive to the Board of Directors as of the date
hereof and the Company shall use its best efforts to have Executive elected
and re-elected to the Board at each Annual Stockholder Meeting held during
his period of service as President and Chief Executive Officer of the Company.
2. COMPENSATION. The Company shall pay and Executive shall accept
as full consideration for the Services compensation consisting of the
following:
2.1 BASE SALARY. $500,000 per year base salary, payable in
installments in accordance with the Company's normal payroll practices, less
such deductions or withholdings required by law.
2.2 BONUS. Participation in the Chief Executive Officer Bonus
Plan (the "CEO Bonus Plan") at an annual target bonus of $500,000 per year
pursuant to the terms of such CEO Bonus Plan. Such bonus shall be prorated
for the remainder of 1997.
2.3 STOCK OPTIONS. Executive shall be entitled to a grant of
an additional stock option for 600,000 shares under the Company's 1987 Stock
Option Plan (the "Stock Option Plan") to be awarded by the Compensation
Committee of the Company's Board of Directors within thirty (30) days after
the date hereof. Such option shall be granted at the fair market value of
the Company's common stock on the date of grant and shall vest in accordance
with the Company's vesting policy for additional grants to executive officers
of the Company in effect on the date of the grant of such option by the
Compensation Committee.
2.4 INDEMNIFICATION. In the event Executive is made, or
threatened to be made, a party to any legal action or proceeding, whether
civil or criminal, by reason of the fact that Executive is or was a director
or officer of the Company or serves or served any other corporation fifty
percent (50%) or more owned or controlled by the Company in any capacity at
the Company's request, Executive shall be indemnified by the Company, and the
Company shall pay Executive's related expenses when and as incurred, all to
the fullest extent permitted by law, as more fully described in that
Indemnification Agreement attached as Exhibit A.
3. BENEFITS. Executive shall receive such pension, profit sharing
and fringe benefits as the Board of Directors of the Company may, from time
to time, determine to provide for the key executives of the Company.
4. 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
4.2), or on account of permanent disability (as defined above), or a
voluntary termination by Executive for other than Good Reason (as defined in
Subsection 4.3), upon execution by Executive of an effective release of
claims substantially in the form attached as Exhibit B as shall be finally
determined by the Company, the Company shall provide Executive with
termination benefits upon termination of the Employment Period, as follows:
4.1 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 (but no
less than $500,000) shall 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 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.
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4.2 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 4.1 above if the
Employment Period 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.
4.3 CONSTRUCTIVE TERMINATION. Notwithstanding anything in this Section
4 or Section 5 to the contrary, the Employment Period will be deemed to have
been terminated (a "Constructive Termination") and Executive will be deemed
to have Good Reason for voluntary termination of the Employment Period ("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 President and Chief Executive
Officer reporting to the Board of Directors, 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 CEO Bonus Plan; or
(c) a relocation of his principal place of employment by more than
50 miles without Executive's consent.
5. 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 4:
5.1 During the period (if any) following a Change in Control that
Executive shall continue to provide the Services, then the terms and
provisions of this Agreement shall continue in full force and effect, the CEO
Bonus Plan 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
5.2 In the event of (y) a termination of the Employment Period 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 Employment Period within thirteen (13) months after a
Change in Control, upon execution by Executive of an effective
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release of claims substantially in the form attached as Exhibit B 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 (which annual target
bonus shall be no less than $500,000) 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 5, 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).
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
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Section 5, 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 5 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 5. Unless the Company
and Executive otherwise agree in writing, any determination required under
this Section 5 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 5, 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 5. The Company shall bear all
costs the Accountants may reasonably incur in connection with any
calculations contemplated by this Section 5.
6. 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 Sections 8 and 9 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.
7. COOPERATION WITH THE COMPANY, AFTER TERMINATION OF THE EMPLOYMENT
PERIOD. Following termination of the Employment Period by Executive,
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.
8. CONFIDENTIALITY; RETURN OF PROPERTY. Executive acknowledges that the
Employee Invention and Confidential Information Agreement executed by
Executive on October 28, 1996 and attached hereto as Exhibit C shall continue
in effect.
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9. NON-COMPETITION. Executive acknowledges that the Noncompetition
Agreement executed by Executive on October 28, 1996 and attached hereto as
Exhibit D shall continue in effect.
10. GENERAL.
10.1 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.
10.2 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.
10.3 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 Chairman of the Board 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.
10.4 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.
10.5 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 referenced stock
option agreement 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.
The parties further agree that this Agreement supersedes the employment
agreement between the Company and Executive dated October 28, 1996.
Notwithstanding anything to the contrary, Sections 4 and 5 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
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describing the relevant terms of this Agreement in all options issued or to
be issued to Executive by the Company.
10.6 GOVERNING LAW. This Agreement shall be governed by the law of
the State of California.
10.7 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. 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.
10.8 DURATION. This Agreement is for no specific term, and either
Executive or Company may terminate this Agreement in writing at any time, for
any reason, or for no reason.
10.9 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: /s/ X.X. Xxxxx XxXxxxxxx /s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx
Name: X.X. Xxxxx XxXxxxxxx
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Title: Vice President & General Counsel
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