<PAGE>
FORM 10-Q
______________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
___ THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _________________
Commission file number 1-10606
CADENCE DESIGN SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0148231
(State or other jurisdiction of (I.R.S.Employer Identification No.)
incorporation or organization)
555 River Oaks Parkway, San Jose, California 95134
(Address of principal executive offices) (Zip Code)
(408) 943-1234
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes __X__ No _____
At August 5, 1994 there were 39,240,810 shares of the
registrant's Common Stock, $0.01 par value outstanding.
<PAGE>
CADENCE DESIGN SYSTEMS, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets:
June 30, 1994 and December 31, 1993 3
Condensed Consolidated Statements of Income:
Three and Six Months Ended June 30, 1994 and 1993 4
Condensed Consolidated Statements of Cash Flows:
Six Months Ended June 30, 1994 and 1993 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of
Security-Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 15
<PAGE>
CADENCE DESIGN SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
1994 1993
--------- ----------
(Unaudited)
ASSETS
Current Assets:
Cash and cash investments $ 68,387 $ 61,382
Short-term investments 28,412 31,423
Accounts receivable, net 74,156 101,890
Inventories 5,204 5,744
Prepaid expenses and other assets 15,185 18,036
Total current assets 191,344 218,475
Property, plant and equipment, net 93,421 61,477
Software development costs, net 30,484 31,265
Purchased software and other intangibles, net 10,189 12,787
Other assets 11,227 15,297
Total assets $ 336,665 $ 339,301
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term obligations $ 2,792 $ 3,962
Accounts payable 13,598 13,513
Accrued liabilities 52,317 51,352
Income taxes payable 5,548 6,541
Deferred revenue 52,731 38,111
Total current liabilities 126,986 113,479
Long-term obligations 2,292 4,001
Lease liabilities 9,819 10,722
Deferred income taxes 2,202 2,243
Other noncurrent liabilities 2,558 2,734
Total long-term liabilities 16,871 19,700
Put warrants 44,270 - - -
Stockholders' Equity:
Common stock 465 460
Additional paid-in capital 209,599 250,501
Treasury shares at cost (6,512,380
and 4,857,200 shares, respectively) (76,750) (52,178)
Retained earnings 14,292 8,527
Accumulated translation adjustment 932 (1,188)
Total stockholders' equity 148,538 206,122
Total liabilities and stockholders' equity $ 336,665 $ 339,301
The accompanying notes are an integral part of these statements.
<PAGE>
CADENCE DESIGN SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
--------- -------- -------- -------
(Unaudited) (Unaudited)
REVENUE
Product $ 62,685 $ 60,301 $ 123,832 $107,415
Maintenance 38,358 28,513 73,989 57,516
Total revenue 101,043 88,814 197,821 164,931
COST OF REVENUE
Product 19,260 18,894 38,976 35,783
Maintenance 3,309 3,845 7,134 7,803
Total cost of revenue 22,569 22,739 46,110 43,586
Gross margin 78,474 66,075 151,711 121,345
OPERATING EXPENSES
Marketing and sales 39,418 38,968 78,442 76,467
Research and development 18,299 16,134 35,288 33,052
General and administrative 9,807 9,370 20,406 18,847
Restructuring costs - - - - - - - - - 13,450
Provision for settlement of
litigation (2,050) - - - 10,054 - - -
Total operating expenses 65,474 64,472 144,190 141,816
INCOME (LOSS) FROM CONTINUING
OPERATIONS 13,000 1,603 7,521 (20,471)
Other income, net 443 598 790 1,102
Income (loss) from continuing operations
before provision (benefit)
for income taxes 13,443 2,201 8,311 (19,369)
Provision (benefit) for income
taxes 3,361 292 2,078 (5,440)
NET INCOME (LOSS) FROM CONTINUING
OPERATIONS 10,082 1,909 6,233 (13,929)
LOSS FROM DISCONTINUED
OPERATIONS - - - (1,077) - - - (1,555)
NET INCOME (LOSS) $ 10,082 $ 832 $ 6,233 $(15,484)
NET INCOME (LOSS) PER SHARE
From continuing operations $ .23 $ .04 $ .14 $ (.32)
From discontinued operations - - - (.02) - - - (.04)
Net income (loss)
per share $ .23 $ .02 $ .14 $ (.36)
Weighted average common and common
equivalent shares outstanding 44,576 43,011 44,973 43,573
The accompanying notes are an integral part of these statements.
<PAGE>
CADENCE DESIGN SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
June 30, June 30,
1994 1993
-------- ---------
(Unaudited)
CASH AND CASH INVESTMENTS AT
BEGINNING OF PERIOD $ 61,382 $ 78,976
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) 6,233 (15,484)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 23,967 22,123
Lease liabilities (960) (1,709)
Deferred income taxes, noncurrent (41) 5,573
Write-offs of capitalized software
development costs, purchased software
and intangibles 807 - - -
Accruals for severance and facilities
restructure costs - - - 6,833
Decrease in other noncurrent liabilities (196) (9)
Write down and reserve of assets
related to restructure - - - 6,617
Net changes in current assets and
liabilities, net of purchase of
third-party interests in partnerships:
Decrease in accounts receivable 30,855 40,666
Decrease (increase) in inventories 506 (1,177)
Decrease (increase) in prepaid expenses
and other assets 3,075 (10,044)
Decrease in accrued liabilities and payables (770) (10,359)
Increase in deferred revenue 14,003 5,942
Net cash provided by operating
activities 77,479 48,972
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments (28,074) (42,846)
Sale of short-term investments 31,085 20,059
Purchase of property and equipment (8,356) (11,780)
Capitalization of software development
costs (6,124) (7,911)
Increase in other assets and purchased
software and intangibles (229) (532)
Payment for purchase of third-party
interests in partnerships, net of cash
acquired (8,729) - - -
Sale of put warrants 5,801 - - -
Purchase of call options (5,801) - - -
Net cash used for investing
activities (20,427) (43,010)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable
and long-term obligations (27,170) (6,069)
Sale of common stock, net of notes
receivable from stockholders 3,373 4,925
Purchase of treasury stock, net (25,040) (27,460)
Net cash used for financing
activities (48,837) (28,604)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,210) (980)
INCREASE (DECREASE) IN CASH AND CASH INVESTMENTS 7,005 (23,622)
CASH AND CASH INVESTMENTS AT END OF PERIOD $ 68,387 $ 55,354
The accompanying notes are an integral part of these statements.
<PAGE>
CADENCE DESIGN SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The condensed consolidated financial statements included
herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such
rules and regulations. However, the Company believes that
the disclosures are adequate to make the information
presented not misleading. These condensed consolidated
financial statements should be read in conjunction with the
financial statements and the notes thereto included in the
Company's annual report on Form 10-K for the year ended
December 31, 1993.
The unaudited condensed consolidated financial statements
included herein reflect all adjustments (which include only
normal, recurring adjustments) that are, in the opinion of
management, necessary to state fairly the results for the
periods presented. The results for such periods are not
necessarily indicative of the results to be expected for the
full fiscal year.
2. Acquisition of Third-Party Interests in Real Estate
Partnerships
In March 1994 the Company acquired all third-party interests
in two real estate partnerships in which it was a 46.5% and
80% limited partner, respectively, for approximately $9
million in cash and the assumption of a secured construction
loan of approximately $23.5 million. The Company leased
buildings from one of the limited partnerships and the
second limited partnership owned unencumbered land adjacent
to the leased property. The Company paid off the secured
construction loan with its cash reserves in May 1994.
3. Discontinued Operations
In December 1993 the Company sold its Automated Systems
("ASI") division. The operating results of ASI have been
reported as discontinued operations in the consolidated
statements of income for all periods presented. Revenue of
the discontinued division was approximately $2.9 million and
$6.1 million for the quarter and six months ended June 30,
1993, respectively.
4. Purchase of Comdisco Systems, Inc.
In June 1993 the Company acquired the business and certain
assets of Comdisco Systems, Inc. ("Comdisco"), a subsidiary
of Comdisco, Inc. in exchange for 1,050,000 shares of the
Company's common stock and a warrant to purchase 1,300,000
shares of the Company's common stock. The acquisition was
accounted for as a purchase. Accordingly, the results of
Comdisco from the date of acquisition forward have been
recorded in the Company's consolidated financial statements.
Comparative pro forma financial information has not been
presented as the results of operations for Comdisco are not
material to the Company's consolidated financial statements
for 1993.
5. Disclosure of Noncash Investing Activities
As discussed in Note 2 the Company purchased all third-party
interests in two real estate partnerships for approximately
$9 million. In connection with the acquisition, net assets
acquired were as follows (in thousands):
Property and other assets $ 36,083
Liabilities assumed (23,576)
Less cash acquired (3,778)
Total $ 8,729
<PAGE>
6. Investments in Debt and Equity Securities
Effective January 1, 1994 the Company adopted Statement of
Financial Accounting Standards No. 115 "Accounting for
Certain Investments in Debt and Equity Securities". There
was no effect on the Company's operating results due to the
adoption of this statement. The Company classifies its
investments as "held-to-maturity" for the purposes of this
statement. The investments mature at various dates through
December 1994.
7. Net Income (Loss) Per Share
The number of shares used in the computation of net income
per share for each period is calculated by dividing net
income by the weighted average number of common stock and
common stock equivalents outstanding during the period.
Common stock equivalents consist of dilutive shares issuable
upon the exercise of outstanding common stock options and
warrants. Net loss per share is calculated by dividing net
loss by the weighted average number of shares of common
stock. Fully diluted net income (loss) per share is
substantially the same as primary net income (loss) per
share.
8. Inventories
Inventories which consist primarily of testing equipment are
stated at the lower of cost (first-in, first-out method) or
market. Cost includes labor, material and manufacturing
overhead. Inventories consisted of the following (in
thousands):
June 30, December 31,
1994 1993
--------- ------------
(Unaudited)
Raw materials and supplies $1,070 $2,240
Work-in-progress 2,669 2,214
Finished goods 1,465 1,290
Total $5,204 $5,744
<PAGE>
9. Commitments and Contingencies
Securities class action lawsuits were filed against the
Company and certain of its officers and directors in the
United States District Court for the Northern District of
California, San Jose Division, on April 8 and 9, 1991. The
lawsuits, which were consolidated into a single action,
allege violation of certain federal securities laws by
maintaining artificially high market prices for the
Company's common stock through alleged misrepresentations
and nondisclosures regarding the Company's financial
condition. Court rulings in response to the Company's
motions to dismiss the lawsuit limited the class period to
include purchasers of the Company's common stock between
January 29, 1991 and April 3, 1991.
On March 23, 1993 a separate class action lawsuit was filed
against the Company and certain of its directors and
officers in the United States District Court, Northern
District of California, San Jose Division. This lawsuit,
which was consolidated into a single action with two
virtually identical lawsuits filed later in March and in
April 1993, alleges violation of certain federal securities
laws by maintaining artificially high market prices for the
Company's common stock through alleged misrepresentations
and nondisclosures regarding the Company's financial
condition. On November 18, 1993, the District Court granted
the Company's motion to dismiss the 1993 complaint. The
effect of the ruling was to dismiss the complaint except as
to a statement allegedly made on January 28, 1993, but
plaintiffs were granted leave to further amend their
complaint.
In April 1994 the Company entered into tentative agreements
to settle both of the above class action lawsuits for a
combined settlement of $16.5 million, of which
approximately $7.5 million was covered by the
Company's insurance carriers. The agreements are subject to
negotiation and execution of final settlement agreements and
final court approval. The Company remitted into escrow
approximately $13.2 million during the second quarter of
1994 and will remit the remaining $3.3 million in the third
quarter of 1994. In May 1994 the Company concluded
negotiations on the second lawsuit with its secondary
insurance carrier, who agreed to provide coverage on the
settlement. Accordingly, net income for the second quarter
included a credit to operating expenses of approximately
$2.1 million for additional insurance proceeds and the
reduction of accruals for legal expenses relating to the
provision taken in the first quarter for settlement of the
two shareholder class action suits.
10. Put Warrants
During the second quarter, the Company, through private
placement, sold three million put warrants that entitle the
holder of each warrant to sell one share of common stock to
the Company at a specified price ranging from $13.13 to
$16.58 per share. Additionally, the Company purchased
2,250,000 call options that entitle the Company to buy one
share of common stock at prices ranging from $14.94 to
$17.83 per share. These put warrants and call options
outstanding at June 30, 1994 expire on various dates between
April 1995 and June 1995. The amount related to the
Company's maximum potential repurchase obligation under the
put warrants at June 30, 1994 has been reclassified from
stockholders' equity to put warrants in the accompanying
balance sheet. The Company has the right to settle these
put warrants with stock, or a cash settlement equal to the
difference between the exercise price and market value at
the date of exercise. These securities had no significant
dilutive effect on net income per share for the periods
presented.
11. Subsequent Event
In July 1994, the Company and Redwood Design Automation,
Inc. ("Redwood") entered into a definitive merger agreement
which provides that approximately 500,000 shares of the
Company's common stock will be issued in exchange for all of
the outstanding stock of Redwood. The merger will be
accounted for as a purchase. The acquisition of Redwood is
expected to be completed during the third quarter and is not
expected to have a material impact on the financial position
or results of operations of the Company. In addition, the
Company has loaned Redwood $2.5 million in the form of a
$1.0 million note payable due August 30, 1996 and a $1.5
million note payable due September 30, 1996. Interest on
both notes is compounded monthly at a prime rate.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Revenue for the second quarter ended June 30, 1994 was
$101.0 million compared with $88.8 million for the same
period of the prior year, an increase of 14%. For the six
months ended June 30, 1994, revenue was $197.8 million, an
increase of 20% from revenue of $164.9 million recorded for
the same period of 1993.
Product revenue increased $2.4 million from $60.3 million
for the quarter ended June 30, 1993 to $62.7 million for the
quarter ended June 30, 1994. For the six month period ended
June 30, 1994, product revenue was $123.8 million as
compared to $107.4 million for the same period in 1993. The
increase in product revenue for the six month period is
partially due to improved economic conditions and increased
demand for the Company's products resulting partly from the
addition of Comdisco operations. Also, revenue for the
first six months of 1993 was adversely impacted by a shift
in the Company's systems product strategy. Maintenance
revenue increased in absolute dollars by $9.8 million and
$16.5 million for the three and six month periods ended June
30, 1994, respectively, as compared to the same periods in
1993, in part because of a larger customer base, continued
focus on customer renewals and the addition of Comdisco
operations.
Cost of product was $19.3 million and $39.0 million for the
three and six month periods ended June 30, 1994,
respectively, as compared to $18.9 million and $35.8
million for the same periods in 1993. Cost of product for
the quarter ended June 30, 1994 was $.4 million greater than
cost of product for the quarter ended June 30, 1993.
Increased expenses related to the addition of Comdisco
operations were partly offset by decreased royalty and
purchased software expense. The increase in cost of product
for the six month period ended June 30, 1994 is partially
the result of increased expenses related to the addition of
Comdisco operations, as well as increased amortization and
write-off of purchased software and intangibles. Cost of
maintenance decreased in absolute dollars from $3.8 million
and $7.8 million for the quarter and six month period ended
June 30, 1993, respectively, to $3.3 million and $7.1
million for the same periods in 1994. These decreases
resulted primarily from utilizing a more cost-effective
update program and lower cost media in 1994.
As a result of the factors discussed above, gross margin
increased from 74% for the three and six month
periods ended June 30, 1993, respectively, to 78% and 77%
for the same periods in 1994.
Marketing and sales expenses were $39.4 million for the
quarter ended June 30, 1994 as compared to $39.0 million for
the same period in 1993. For the six months ended June 30,
1994, as compared to the same period in the prior year,
marketing and sales expenses increased from $76.5 million to
$78.4 million. This increase in marketing and sales expense
was primarily due to the addition of Comdisco operations and
increased facilities costs.
Research and development expenses for the second quarter
ended June 30, 1994 were $18.3 million as compared to $16.1
million for the same period of the prior year, an increase
of 13%. Capitalization of software development costs for
the quarters ended June 30, 1994 and 1993 was $2.8 million
and $4.2 million, which represented 13% and 20% of total
research and development expenditures made in each of those
periods, respectively. For the six months ended June 30,
1994, research and development expenses were $35.3 million
compared with $33.1 million for the same period in 1993,
after capitalization of $6.1 million and $7.9 million, which
represented 15% and 19% of total research and development
expenditures made in those periods, respectively. Gross
research and development expenditures increased from $20.3
million for the three months ended June 30, 1993 to $21.1
million for the same period in the current year and
increased to $41.4 million for the six months ended June 30,
1994 from $41.0 million for the same period in the prior
year. These increases were primarily due to increased costs
related to the addition of Comdisco operations partially
offset by cost savings resulting from the purchase of
facilities in the first quarter of 1994.
General and administrative expenses increased to $9.8
million for the second quarter ended June 30, 1994 from $9.4
million for the same period in 1993, an increase of 5%. This
increase resulted primarily from increased costs associated
with the addition of Comdisco operations. For the six
months ended June 30, 1994, general and administrative
expenses were $20.4 million as compared to $18.8 million for
the same period in 1993, an increase of 8%. The year over
year increase for the six month period was primarily the
result of increased costs related to the addition of
Comdisco operations, increased professional services and
provisions for bad debt partly offset by cost savings
resulting from the purchase of facilities in the first
quarter of 1994.
In March 1994 the Company recorded a provision of $12.1
million for settlement of the stockholder class action
lawsuits filed against the Company and certain of its
officers and directors in 1991 and 1993. This $12.1 million
provision was comprised of $17.9 million for settlement
payments and legal costs offset by $5.8 million of
receivables due from the Company's insurance carriers. In
May 1994 the Company concluded negotiations on the second
lawsuit with its secondary insurance carrier, who agreed to
provide coverage on the settlement. Accordingly, the
results of operations for the second quarter ended June 30,
1994 included a $2.1 million credit to operating expenses
for the additional insurance proceeds received and the
reduction of accruals for legal expenses relating to the
provision taken in the first quarter.
In March 1993 the Company recorded restructuring costs of
$13.5 million associated with a planned restructure of
certain areas of sales, operations and administration due to
business conditions. The restructuring charge reflects
costs associated with employee terminations, excess
facilities and the write-off of purchased software and
intangibles arising from required adjustments to the
Company's cost structure necessitated by lower revenue
levels. Also included in the restructuring charge was an
additional provision for doubtful accounts and the write-off
of certain software development costs resulting from changes
in the systems product strategy.
Net other income for the second quarter ended June 30, 1994
was $.4 million compared with $.6 million for the same
period in 1993. For the six months ended June 30, 1994, net
other income was $.8 million as compared to $1.1 million for
the same period in 1993. There were no material
fluctuations in the components of other income.
The Company's estimated annual effective tax rate for fiscal
1994 is 25% as compared to 26% for the same period in the
prior year.
The Company's operating expenses are partially based on its
expectations of future revenue. The Company's results of
operations may be adversely affected if revenue does not
materialize in a quarter as expected. Since expense levels
are usually committed in advance of revenues and because
only a small portion of expenses vary with revenue, the
Company's operating results may be impacted significantly by
lower revenue. Based on the Company's operating history and
factors that may cause fluctuations in the quarterly
results, quarter to quarter comparisons should not be relied
upon as indicators of future performance.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1994 the Company's cash
and cash investments and short-term investments increased
$4.0 million from $92.8 million to $96.8 million. This
increase was primarily due to net cash generated from
operating activities exceeding net cash used for investing
and financing activities. Cash used for financing activities
included approximately $25.0 million of net treasury stock
purchases and an approximate $23.5 million payment of a
construction loan.
As part of its authorized stock repurchase program, the
Company has the maximum potential obligation at June 30,
1994 to buy back three million shares of its common stock at
an aggregate price of $44.3 million. The Company has the
right to settle these put warrants with stock, or a cash
settlement equal to the difference between the exercise
price and market value at the date of exercise.
In addition to the $96.8 million in cash and cash
investments and short-term investments at June 30, 1994, the
Company had available $15.0 million under equipment lease
lines and $17.5 million under bank lines of credit. The
Company was not in compliance with certain financial
covenants under its lines of credit as of June 30, 1994,
primarily due to its stock repurchase activity. The items
of noncompliance related to net worth, stock repurchase and
current ratio levels. Subsequent to June 30, 1994, the
Company obtained waivers of the noncompliance from the
banks. The Company is currently in the process of
renegotiating the bank lines of credit and has obtained
extensions of the current lines of credit through May and
June 1995.
Anticipated cash requirements in 1994 include the purchase
of treasury stock, the settlement of the class action
lawsuits (approximately $3.3 million to be paid during the
third quarter) and contemplated additions of capital
equipment. Prior to 1993, the Company authorized the
repurchase of up to 2.8 million shares of common stock in
the open market to satisfy its estimated requirements for
shares to be issued under its employee stock option and
stock purchase plans. In April 1993, February 1994 and June
1994, the Company authorized the repurchase of an
additional 4.0 million shares, 2.9 million shares and 5.2
million shares, respectively, of common stock from time to
time. Some purchases are necessary to satisfy estimated
requirements for shares to be issued under the Company's
employee stock option and stock purchase plans. The Company
anticipates that current cash and short-term investment
balances, cash flows from operations and unused balances on
equipment lease lines and lines of credit will be sufficient
to meet its working capital and capital expenditure
requirements for the foreseeable future.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Securities class action lawsuits were filed against the
Company and certain of its officers and directors in the
United States District Court for the Northern District of
California, San Jose Division, on April 8 and 9, 1991. The
lawsuits, which were consolidated into a single action,
allege violation of certain federal securities laws by
maintaining artificially high market prices for the
Company's common stock through alleged misrepresentations
and nondisclosures regarding the Company's financial
condition. Court rulings in response to the Company's
motions to dismiss the lawsuit limited the class period to
include purchasers of the Company's common stock between
January 29, 1991 and April 3, 1991.
On March 23, 1993 a separate class action lawsuit was filed
against the Company and certain of its directors and
officers in the United States District Court, Northern
District of California, San Jose Division. This lawsuit,
which was consolidated into a single action with two
virtually identical lawsuits filed later in March and in
April 1993, alleges violation of certain federal securities
laws by maintaining artificially high market prices for the
Company's common stock through alleged misrepresentations
and nondisclosures regarding the Company's financial
condition. On November 18, 1993, the District Court granted
the Company's motion to dismiss the 1993 complaint. The
effect of the ruling was to dismiss the complaint except as
to a statement allegedly made on January 28, 1993, but
plaintiffs were granted leave to further amend their
complaint.
In April 1994 the Company entered into tentative agreements
to settle both of the above class action lawsuits for a
combined settlement of $16.5 million of which approximately
$7.5 million was covered by the Company's insurance
carriers. The agreements are subject to negotiation and
execution of final settlement agreements and final court
approval. The Company remitted into escrow approximately
$13.2 million during the second quarter of 1994 and will
remit the remaining $3.3 million in the third quarter of
1994. In May 1994 the Company concluded negotiations on the
second lawsuit with its secondary insurance carrier, who
agreed to provide coverage on the settlement. Accordingly,
net income for the second quarter included a credit to
operating expenses of approximately $2.1 million for
additional insurance proceeds and the reduction of accruals
for legal expenses relating to the provision taken in the
first quarter for settlement of the two shareholder class
action suits.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held May 17, 1994, the
stockholders of the Company approved the following matters.
1. A proposal to approve the Company's 1993 Directors
Stock Option Plan authorizing the issuance of up
to 107,223 shares of common stock under the Plan was
approved by a vote of 21,599,006 for, 13,004,672 opposed and
791,970 withheld.
2. An amendment of the Company's 1990 Employee Stock
Purchase Plan to increase the number of shares
reserved for issuance thereunder by 1,500,000 shares was
approved by a vote of 29,447,795 for, 5,164,992
opposed and 782,862 withheld.
3. All director nominees were re-elected and the
votes cast with respect to each director are as follows:
NOMINEE IN FAVOR OPPOSED
Carol Bartz 35,271,653 123,996
Joseph B. Costello 35,268,220 127,429
Raymond J. Lane 35,254,100 141,549
Leonard Y.W. Liu 35,271,632 124,017
Donald L. Lucas 35,271,626 124,023
Alberto Sangiovanni-
Vincentelli 35,271,888 123,761
George M. Scalise 35,271,408 124,241
John B. Shoven 35,255,618 140,031
James E. Solomon 35,272,292 124,023
4. A proposal for the ratification of the selection
of Arthur Andersen & Co. as independent public
accountants was approved by a vote of 35,265,941 for, 80,064
opposed and 49,643 withheld.
(a) The following exhibits are filed herewith:
Exhibit
Number Exhibit Title
10.01 The Registrant's 1987 Stock Option Plan, as
amended to date, (incorporated by reference to Exhibit 4.01
to the Registrant's Form S-8 Registration Statement (No. 33-
53913) filed on May 31, 1994 (the "1994 Form S-8")).*
10.02 Form of Stock Option Agreement and Form of Stock
Option Exercise Request, as currently in effect under the
Registrant's 1987 Stock Option Plan (incorporated by
reference to Exhibit 4.01 to the Registrant's Form S-8
Registration Statement (No. 33-22652) filed on June 20,
1988).*
10.03 The Registrant's 1988 Directors Stock Option Plan,
as amended to date, including the Stock Option Grant and
Stock Option Exercise Notice and Agreement (the first
document is incorporated by reference to Exhibit 4.02 of the
Registrant's 1994 Form S-8 and the latter two documents are
incorporated by reference to Exhibit 10.08 - 10.10 of the
1988 Form S-1).*
10.04 The Registrant's 1993 Directors Stock Option Plan including
the Stock Option Grant (incorporated by reference to the
Registrant's Form 10-K for the fiscal year ended
December 31, 1993 (the "1993 Form 10-K")).*
10.05 The Registrant's 1990 Employee Stock Purchase Plan
as amended to date (incorporated by reference to Exhibit
4.03 of the 1994 Form S-8).*
10.06 The Registrant's Senior Executive Bonus Plan for
1993 (incorporated by reference to Exhibit 10.07 of the
Registrant's Form 10-K for the fiscal year ended December
31, 1992 (the "1992 Form 10-K")).*
10.07 The Registrant's Key Contributor Bonus Plan for
1993 (incorporated by reference to Exhibit 10.08 of the 1992
Form 10-K).*
10.08 The Registrant's Senior Executive Bonus Plan for
1994 (incorporated by reference to the 1993 Form 10-K).*
10.09 The Registrant's Key Contributor Bonus Plan for
1994 (incorporated by reference to the 1993 Form 10-K).*
10.10 The Registrant's Cash or Deferred Profit Sharing
Plan, as currently in effect (certain amendments are
incorporated by reference to the 1993 Form 10-K; the Plan
itself is incorporated by reference to Exhibit 10.12 to the
Registrant's Form S-4 Registration Statement (No. 33-31673),
originally filed on October 18, 1989 (the "1989 Form S4")).*
10.11 Amended and Restated Lease, dated June 29, 1989,
by and between River Oaks Place Associates, a California
limited partnership, ("ROPA") and the Registrant, for the
Registrant's executive offices at 555 River Oaks Parkway,
San Jose, California (incorporated by reference to Exhibit
10.14 to the Registrant's Form 10-K for the fiscal year
ended December 31, 1990) (the "1990 Form 10-K")).
10.12 Lease dated June 29, 1989 by and between ROPA and
the Registrant for the Registrant's offices at 575 River
Oaks Parkway, San Jose, California (incorporated by
reference to Exhibit 10.16 to the 1990 Form 10-K).
10.13 Lease dated June 29, 1989 by and between ROPA and
the Registrant for the Registrant's offices at 535 and 545
River Oaks Parkway, San Jose, California (incorporated by
reference to Exhibit 10.17 to the 1990 Form 10-K).
10.14 Lease dated September 3, 1985 by and among the
Richard T. Peery and John Arrillaga Separate Property Trusts
("P/A Trusts") and Valid Logic Systems Incorporated
("Valid") (which merged into the Registrant) for the
Registrant's offices at 75 West Plumeria Avenue, San Jose,
California (incorporated by reference to Exhibit 10.16 to
the Form 10-K for Valid for the fiscal year ended December
30, 1990 (the "1990 Valid Form 10-K")).
10.15 Amendment Number 1, dated March 2, 1988, to Lease
Agreement for 75 West Plumeria Avenue, San Jose, California,
by and among Valid and the P/A Trusts (incorporated by
reference to Exhibit 10.17 to the 1990 Valid Form 10-K).
10.16 Lease dated December 19, 1988 by and among the P/A
Trusts and Valid for the Registrant's offices at 2835 North
First Street, San Jose, California (incorporated by
reference to Exhibit 10.18 to the 1990 Valid Form 10-K).
10.17 Lease dated September 3, 1985 by and among the P/A
Trusts and Valid for the Registrant's offices at 2820
Orchard Parkway, San Jose, California (incorporated by
reference to Exhibit 10.14 to the 1990 Valid Form 10-K).
10.18 Amendment Number 1, dated March 2, 1988, to Lease
Agreement for 2820 Orchard Parkway, San Jose, California, by
and among Valid and the P/A Trusts (incorporated by
reference to Exhibit 10.15 to the 1990 Valid Form 10-K).
10.19 Form of Executive Compensation Agreement dated May
1989 between Registrant and Mr. Costello (incorporated by
reference to Exhibit 10.20 to the 1989 Form S-4).*
10.20 Lease dated as of June 18, 1991 by and between
C.T. Montague I, L.P., a California limited partnership, and
the Registrant for improved real property including office
buildings located at Seely Road and Montague Avenue, San
Jose, California (incorporated by reference to Exhibit 10.24
to the 1991 Form S-4).
10.21 Employment Agreement dated as of December 1, 1989
between the Registrant and Mr. Doug Hajjar (incorporated by
reference to Exhibit 10.36 to Form 10-K for Valid for the
fiscal year ended December 31, 1989). *
10.22 Modification to Employment Agreement with Mr.
Hajjar (incorporated by reference to Exhibit 10.03 to the
1991 Form S-4). *
10.23 Amendment to Employment Agreement with Mr. Hajjar
dated December 16, 1992 (incorporated by reference to
Exhibit 10.18 to the Registrant's Form 10-K for the fiscal
year ended December 31, 1992). *
10.24 Offer letter to H. Raymond Bingham dated May
12, 1993 (incorporated by reference to the 1993 Form 10K).*
10.25 Offer letter to M. Robert Leach dated May
17, 1993 (incorporated by reference to the 1993 Form 10-K).*
10.26 Letter agreement dated March 9, 1994 by and among
C.T. Properties, Inc. ("General Partner"), Registrant,
Montague Investors, L.P. ("Montague") and David M. Thede
("Thede") whereby Registrant acquired all of Thede's
ownership interests in the C.T. Montague I, L.P. and C.T.
Montague II, L.P. limited partnerships and the General
Partner and all of Montague's interests in C.T. Montague I,
L.P. (incorporated by reference to the 1993 Form 10-K).
10.27 1993 Non-Statutory Stock Option Plan,
(incorporated by reference to Exhibit 4.05 to the 1994 Form
S-8).
10.28 Consulting agreement dated May 1, 1994 with Henry
E. Johnston, who was made a director on July 5, 1994 by
unanimous written consent.
10.29 Consulting agreement dated October 26, 1993 with
Alberto Sangiovanni-Vincentelli.
(b) No reports on Form 8-K have been filed during the
quarter ended June 30, 1994.
* A management contract or compensatory plan required to be filed
as an exhibit to Form 10-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
CADENCE DESIGN SYSTEMS, INC.
(Registrant)
DATE: August 12, 1994 By: /s/ Joseph B. Costello
JOSEPH B. COSTELLO
President and Chief Executive Officer
DATE: August 12, 1994 By: /s/ H. Raymond Bingham
H. RAYMOND BINGHAM
Executive Vice President
and Chief Financial Officer
CADENCE DESIGN SYSTEMS, INC.
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and
entered into this 1rst day of May 1994 between CADENCE
DESIGN SYSTEMS, INC. (the "COMPANY") and Henry E. Johnston,
("CONSULTANT").
THE PARTIES AGREE AS FOLLOWS:
1. Consultancy. CONSULTANT shall serve as a
Consultant to the COMPANY for a period commencing on the
date of this Agreement and concluding on the date set forth
in Schedule A hereto, subject to the termination of this
Agreement in accordance with Section 8. The period during
which CONSULTANT shall serve as a Consultant to the COMPANY
pursuant to this Agreement shall constitute the "Consulting
Period".
2. Duties. CONSULTANT shall serve as a consultant to
the COMPANY in the activities of the COMPANY set forth in
Schedule A or as otherwise requested by an officer of the
COMPANY. CONSULTANT shall perform such services under the
general direction of the COMPANY or its officers, but
CONSULTANT shall determine the manner and means by which the
services are accomplished. During the Consulting Period,
CONSULTANT agrees to perform all duties to the best of
his/her ability. In the performance of such duties,
CONSULTANT shall consult with the COMPANY up to the number
of days per month set forth at Schedule A, which days of
consulting will take place at the COMPANY's facilities or at
such other places as the COMPANY shall reasonably request.
CONSULTANT shall remain available for telephone consultation
with the officers, employees, or consultants of the COMPANY
or any of its subsidiaries or affiliates.
3. Other Employment.
3.1 Other Affiliation. CONSULTANT shall not use,
disclose or deliver any proprietary or confidential
information of third parties in dealings with the COMPANY or
in providing the services under this agreement. CONSULTANT
represents that he/she is not a party to any existing
agreement that would prevent him/her from entering into this
Agreement, and that the only agreements with third parties
which may restrict his/her consulting activities on behalf
of the COMPANY at the time of this Agreement are
CONSULTANT's obligations pursuant to the agreements set
forth in Schedule A. The COMPANY understands and agrees
that during the Consulting Period CONSULTANT may be retained
by other companies, corporations, and/or commercial
enterprises which are not engaged in the design,
development, manufacture or marketing of products similar to
those of the COMPANY. CONSULTANT agrees to inform the
COMPANY of any such agreement immediately. CONSULTANT
agrees to use his/her best efforts to segregate work done
under this Agreement from all work done at, or for, any such
company, corporation, and/or other commercial enterprise.
In any dealings with any such company, corporation, and/or
other commercial enterprise, CONSULTANT shall protect and
guard the COMPANY's "Confidential Information" (as defined
in Section 5.1 below) in accordance with the terms of this
Agreement.
3.2 Conflict of Interest. CONSULTANT warrants
that he/she is not obligated under any other consulting,
employment, or other agreement which would affect the
COMPANY's rights or CONSULTANT's duties under this Agreement
other than those referred to in Section 3.1.
4. Compensation.
4.1 Consulting Fees. The COMPANY agrees to pay
CONSULTANT and CONSULTANT agrees to accept for CONSULTANT's
services under this Agreement consulting fees (the
"Consulting Fees") as set forth in Schedule A. Payment of
the Consulting Fees will be made within 30 days after the
receipt of CONSULTANT's invoice.
4.2 Employment Taxes and Benefits. CONSULTANT
acknowledges and agrees that it shall be CONSULTANT'S sole
obligation to report as self-employment income all
compensation received by CONSULTANT from the COMPANY for
CONSULTANT'S services as a consultant. CONSULTANT agrees
to indemnify the COMPANY and hold it harmless to the extent
of any obligations imposed by law on the COMPANY to pay any
withholding taxes, social security, unemployment or
disability insurance or similar items in connection with any
payments made to CONSULTANT by the Company for CONSULTANT'S
services as a consultant.
4.3 Legal Relationship. CONSULTANT shall be an
independent contractor with respect to the COMPANY and shall
not be an employee or agent of the COMPANY. CONSULTANT
shall be entitled to no benefits or compensation from the
COMPANY except as set forth in this Agreement and shall in
no event be entitled to any fringe benefits payable to
employees of the COMPANY.
4.4 Expenses. CONSULTANT will be reimbursed only
reasonable costs and expenses incurred in performing duties
hereunder and only if the incurring of such costs and
expenses was approved in advance by an authorized individual
of the COMPANY. Such reimbursement shall be made within
thirty (30) days of submission of adequate and appropriate
documentation of such costs and expenses.
5. Confidentiality.
5.1 Confidential Information. CONSULTANT's work
for the COMPANY creates a relationship of trust and
confidence between the COMPANY and CONSULTANT. During and
after CONSULTANT's work for the COMPANY, CONSULTANT will not
use or disclose or allow anyone else to use or disclose any
"Confidential Information" (as defined below) relating to
the COMPANY, its products, suppliers or customers, except as
may be necessary in the performance of CONSULTANT's work for
the COMPANY or as may be authorized in advance by
appropriate officials of the COMPANY. "Confidential
Information" includes Innovations (as defined in Section 6.2
below), marketing plans, product plans, business strategies,
financial information, forecasts, personnel information,
customer lists, trade secrets, any other non-public
technical or business information, third party information
made available to CONSULTANT, joint research agreements or
agreements entered into by the COMPANY or any of its
affiliates, whether in writing or given to CONSULTANT
orally, which CONSULTANT knows or has reason to know the
COMPANY would like to treat as confidential for any purpose,
such as maintaining a competitive advantage or avoiding
undesirable publicity. CONSULTANT will keep Confidential
Information secret and will not allow any unauthorized use
of the same whether or not any document containing it is
marked as confidential. These restrictions, however, will
not apply to Confidential Information that has become known
to the public generally through no fault or breach of
CONSULTANT or that the COMPANY regularly gives to third
parties without restriction on use or disclosure.
5.2 Records. CONSULTANT agrees to keep separate
and segregated from other work all documents, records,
notebooks and correspondence which directly relate to
his/her work under this Agreement.
5.3 Record of Confidential Information. All
notes, memoranda, reports, drawings, manuals, materials,
data and any papers or records of every kind which are or
shall come into CONSULTANT's possession at any time during
the Consulting Period related to Confidential Information of
the COMPANY shall be the sole and exclusive property of the
COMPANY. This property shall be surrendered to the COMPANY
upon termination of the Consulting Period or upon request of
the COMPANY at any time either during or after the
termination of the Consulting Period, and no copies, notes,
or excerpts thereof shall be retained.
6. Innovations.
6.1 Company Property. All Innovations (as
defined in Section 6.2 below) made, conceived, or completed
by CONSULTANT, individually or in conjunction with others
during the Consulting Period shall be the sole and exclusive
property of the COMPANY, provided such Innovations (i) are
made, conceived or completed with equipment, supplies, or
facilities of the COMPANY, its subsidiaries or affiliates,
or (ii) are made, conceived or completed by CONSULTANT
during hours in which CONSULTANT is performing services for
the COMPANY or any of its subsidiaries or affiliates. It is
understood that nothing contained herein shall affect the
rights or obligations of CONSULTANT with respect to any
Innovations which are protected by Section 2870 of the
California Labor Code.
6.2 a) Disclosure of Innovations.
CONSULTANT shall disclose in writing to the
COMPANY all inventions, discoveries, concepts, ideas,
improvements and other innovations of any kind that
CONSULTANT may make, conceive, develop or reduce to
practice, alone or jointly with others, in the course of
performing work for the COMPANY or as a result of that work,
whether or not they are related to CONSULTANT's work for the
COMPANY and whether or not they are eligible for patent,
copyright, trademark, trade secret or other legal protection
("Innovations"). Examples of Innovations include:
formulas, algorithms, methods, processes, databases,
mechanical and electronic hardware, electronic components,
computers and their parts, computer languages, computer
programs and their documentation, encoding techniques,
articles, writings, compositions, works of authorship,
marketing and new product plans, production processes,
advertising, packaging and marketing techniques, and
improvements to anything.
b) Assignment of Ownership.
CONSULTANT agrees that all Innovations will
be the sole and exclusive property of the COMPANY and hereby
assigns to the COMPANY all rights in the Innovations and in
all related patents, patent applications, copyrights, mask
work rights, trademarks, trade secrets, rights of priority
and other proprietary rights. At the COMPANY's request and
expense, during and after the period during which CONSULTANT
acts as a CONSULTANT to the COMPANY, CONSULTANT will assist
and cooperate with the COMPANY in all respects and will
execute documents, and subject to reasonable availability,
give testimony and take further acts requested by the
COMPANY to acquire, transfer, maintain and enforce patent,
copyright, trademark, mask work, trade secret and other
legal protection for the Innovation(s). CONSULTANT hereby
appoints the Secretary of the Company as CONSULTANT's
attorney-in-fact to execute documents on CONSULTANT's behalf
for this purpose.
c) Moral Rights Waiver.
CONSULTANT hereby irrevocably transfers and
assigns to the COMPANY any and all "Moral Rights" (as
defined below) that CONSULTANT may have in or with respect
to any Innovation. CONSULTANT also hereby forever waives
and agrees never to assert any and all "Moral Rights"
CONSULTANT may have in or with respect to any Innovation,
even after termination of CONSULTANT's work on behalf of the
COMPANY. "Moral Rights" mean any rights of paternity or
integrity, any right to claim authorship of an Innovation,
to object to any distortion, mutilation or other
modification of, or other derogatory action in relation to,
any Innovation, whether or not such would be prejudicial to
CONSULTANT's honor or reputation, and any similar right,
existing under judicial or statutory law of any country in
the world, or under any treaty, regardless of whether or not
such right is denominated or generally referred to as a
"moral right".
6.3 Legal Proceedings. Whenever requested to do
so by the COMPANY, CONSULTANT shall promptly deliver to the
COMPANY evidence for interference purposes or other legal
proceedings and testify in any interference or other legal
proceedings which relates to any matters on which CONSULTANT
has provided services to the COMPANY.
6.4 Non-Infringement. CONSULTANT represents and
warrants that the services performed under this Agreement
and the Innovations made or contributed by CONSULTANT
hereunder will not infringe on any rights of any third
party.
6.5 License. To the extent that the COMPANY's
use or exploitation of any Innovations made or contributed
by CONSULTANT hereunder may require a license from
CONSULTANT under any other proprietary rights held by
CONSULTANT, CONSULTANT hereby grants the COMPANY a fully-
paid, royalty-free, perpetual, worldwide license to make,
use, sell, copy, modify, distribute, perform, display and
otherwise exploit such Innovations.
7. Non-Solicitation. CONSULTANT agrees that, during
the Consulting Period and for a period of two years after
the expiration or earlier termination of the Consulting
Period, CONSULTANT will not solicit or recruit Cadence
employees for any other employers outside the COMPANY or
employ any of the employees of the COMPANY without its prior
written consent.
8. Termination. The Consulting Period may be
terminated immediately, at-will by the COMPANY or CONSULTANT
for any or no reason upon notice to the other party. The
covenants and agreements set forth in Sections 5, 6 and 7
shall survive the Consulting Period and remain in full force
and effect regardless of such termination.
9. Severability. If a court finds any provision of
this Agreement invalid or unenforceable as applied to any
circumstance, that provision shall be enforced to the
maximum extent permitted by law, and the other provisions
will remain in full force and effect.
10. Notice. Any notice to be delivered pursuant to
this Agreement shall be in writing and shall be deemed
delivered upon service, if served personally, or three days
after deposit in the United States Mail, if mailed by first
class mail, postage prepaid, registered or certified with
return receipt requested, and addressed to the other party
at the following address, or such address as may be
designated in accordance herewith:
TO the COMPANY: CADENCE DESIGN SYSTEMS, INC.
Human Resources Department
2655 Seely Rd., Bldg. 5
San Jose, CA 95134
TO CONSULTANT: Henry E. Johnston
4001 Glenwick
Dallas, Texas 75205
11. Binding Effect; No Assignment. This Agreement
shall be binding upon CONSULTANT, and except as regards
personal services, upon CONSULTANT's heirs, personal
representatives, executors and administrators, and shall
inure to the benefit of the COMPANY, its successors and
assigns. This Agreement may not be assigned by CONSULTANT
and any attempted assignment by CONSULTANT shall be void.
12. Amendment. This Agreement may be modified or
amended only by mutual written consent of the parties.
13. Governing Law. This Agreement shall be governed
and enforced in accordance with the laws of the State of
California, excluding that body of law known as choice of
law.
14. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same Agreement.
15. Entire Agreement. This instrument contains the
entire agreement of the parties relating to the subject
matter hereof, and supersedes all prior and contemporaneous
negotiations, correspondence, understanding and agreements
of the parties relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
CONSULTANT: CADENCE DESIGN SYSTEMS, INC.
/s/ Henry E. Johnston By: /s/Thomas F. Rouse
Requester/Manager
Henry E. Johnston Thomas F. Rouse
(Please Print) (Please Print)
Social Security No.###-##-#### Title:Director, Comp & Benefits
or
Federal Tax I.D.# __________________
By: /s/ Scott W. Sherwood
Department V.P. (Up to $10K)
By: ______________________________
Controller (Up to $25K)
Forward to HR for Approval By: ______________________________
Exec. VP Finance (Up to $50K)
By: /s/ Scott W. Sherwood By: /s/ Joseph B. Costello
Human Resources 7/28/94 President (Over $50K)
Schedule A to
Consulting Agreement
ALL ITEMS BELOW MUST BE COMPLETELY FILLED IN.
DO NOT LEAVE ANY BLANK LINES.
1. Name of Consultant: Henry E. Johnston
2. Address of Consultant for notice:
4001 Glenwick
Dallas, Texas 75205
3. Term of Consulting Period: Start Date End Date
05/01/94 12/31/94
(a) Terms of Termination Agreement:
After 12/31/94, in accordance with Section 8 of this Agreement.
4. Duties of Consultant:
Provide Executive Consultation and advice to Cadence with emphasis
on Consulting Services and Sales Distribution channel segments
of the business.
5. Individual to whom Consultant reports (include location
and extension):
Joseph Costello, San Jose Five, Extension 7400.
6. Department Number/Account Number to be charged:
000-4100
7. Maximum number of days of consulting to be performed
per month:
Five
8. Other existing agreements of Consultant:
N/A
9. Consulting Fees (stated as dollars per hour or day, or
other agreed upon terms):
Stock options in lieu of cash payment through 12/31/94.
15,000 shares to vest on 12/31/94. Cash to cover benefit cost.
10. The dollar value of this Consulting Agreement is not to
exceed N/A.
/s/ Henry E. Johnston /s/ Scott W. Sherwood
Consultant Cadence Design Systems, Inc.
MISSING INFORMATION COULD CAUSE A DELAY IN THE PROCESSING OF
THE CONSULTING AGREEMENT AND/OR PAYMENT TO THE CONSULTANT.
Schedule A to
Consulting Agreement
A D D E N D U M
SUMMARY OF AGREEMENT
Henry E. Johnston
- - -- For the period May 1, 1994 through December 31, 1994,
Mr. Henry E. Johnston agrees to a minimum of five days
consulting per month. Any additional days to be mutually
acceptable between Mr. Joseph Costello and Mr. Henry E.
Johnston.
- - -- Consulting Agreement to remain effect through December
31, 1994. After December 31, 1994 Agreement governed by Section 8 of
the Consulting Agreement.
- - -- Mr. Henry E. Johnston shall receive an option to
purchase 15,000 shares of Cadence stock, priced at date of
grant. These shares will vest 100% as of December 31, 1994.
- - -- All options granted during the life of this Consulting
Agreement, that are vested at the end of the unbroken
Consulting Agreement, can be exercised up to one year from
the date the Agreement is terminated, or ten years from the
grant date, which-ever occurs sooner.
- - -- Cadence MED 100 and High Dental coverage will be provided to
Mr. Henry E. Johnston, his spouse, Katrina B. and student son,
James F. (eligible as a full time student).
- - -- Medical benefits will have an inputed income value that
will show as payment to Mr. Henry E. Johnston. Cadence will
deliver cash equivalent to 50% of this inputed income to
compensate Mr. Henry E. Johnston for any tax liabilities that
might occur.
Consulting Agreement
ALL ITEMS BELOW MUST BE COMPLETELY FILLED IN.
DO NOT LEAVE ANY BLANK LINES.
1. Name of Consultant: Alberto Sangiovanni-Vincentelli
2. Address of Consultant for notice:
200 Tunnel Road
Berkeley, CA 94705
3. Term of Consulting Period: Start Date End Date
7/1/93 12/31/94
4. Duties of Consultant: Member, Cadence Board of
Directors Chair, Cadence Scientific Advisory Committee
Consultant, Cadence Product/Marketing/Sales/Labs Group and
commercial joint ventures.
A quarterly report will be submitted to Sylvia Hill,
Programs Director, Cadence Labs, which details a listing of
consulting activity, including: Group, Topic, Date,
Duration of Meeting Results/Action Items/Conclusions. Plans
for consulting in next quarter. Reports are due on
September 30, 1993 and December 31, 1993.
5. Individual to whom Consultant reports: VP of Cadence
Labs, SJ3 X7026
6. Department Number/Account Number to be charged:
000-3900-741100
7. Maximum number of days of consulting to be performed
per month: Five
8. Other existing agreements of Consultant: See attached
9. Consulting Fees (stated as dollars per hour or day, or
other agreed upon terms): Consultant to be issued a stock
option to purchase 15,000 shares of Cadence Common Stock,
subject to approval by the Compensation Committee of the
Board of Directors. This option will vest 25% at the end of
the first year of this contract and monthly thereafter with
vesting of all of such shares occurring at the end of four
years. In addition, subject to approval by the Compensation
Committee of the Board of Directors, Consultant will be
granted a stock option to purchase 15,000 shares of Cadence
Common Stock with cliff vesting (100% vested after ten years
from the date of grant). However, 5,000 of these shares
shall become fully vested upon achievement of delivery by
the Berkeley Labs unit of Cadence of the prototype for Logic
Simulation and Timing Verification by January 1, 1994, 5,000
of these shares shall become fully vested upon the product
release by Cadence of Logic Simulation and Timing
Verification by January 1, 1995 and the last 5,000 of these
shares shall become fully vested upon the achievement of
product release by Cadence of a third product deliverable.
Options are generally approved and granted every two weeks
by the Compensation Committee at the average of the high and
low market price of Cadence Common Stock on that date.
10. The dollar value of this Consulting Agreement is not to
exceed One Hundred and Fifteen Thousand Dollars ($115,000.00)
per year.
CONSULTANT: CADENCE DESIGN SYSTEMS, INC.
/s/ Alberto Sangiovanni-Vincentelli By: /s/P. Scaglia
Requester/Manager
Alberto Sangiovanni-Vincentelli Patrick Scaglia
(Please Print) (Please Print)
Social Security No.###-##-#### Title:V.P., Cadence Laboratories
or
Federal Tax I.D.# __________________
By: /s/ Scott W. Sherwood 10/26/93
Department V.P. (Up to $10K)
By: /s/ Larry Sferra 12/10/93
Controller (Up to $25K)
Forward to HR for Approval By: ______________________________
Exec. VP Finance (Up to $50K)
By: /s/ Scott W. Sherwood By: /s/ Leonard Liu
Human Resources 7/28/94 Chief Operating Officer (Over $50K)
MISSING INFORMATION COULD CAUSE A DELAY IN THE PROCESSING OF
THE CONSULTING AGREEMENT AND/OR PAYMENT TO THE CONSULTANT.
