def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to § 240.14a-12
CADENCE DESIGN SYSTEMS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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CADENCE
DESIGN SYSTEMS, INC.
2655
SEELY AVENUE
SAN JOSE, CALIFORNIA 95134
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
To Be Held on May 7,
2008
TO THE STOCKHOLDERS OF
CADENCE DESIGN SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
of CADENCE DESIGN SYSTEMS, INC., a Delaware corporation, will be
held on May 7, 2008, at 1:00 p.m. Pacific time,
at Cadences principal executive offices located at 2655
Seely Avenue, Building 5, San Jose, California 95134 for
the following purposes:
1. To elect directors to serve until the 2009 Annual
Meeting of Stockholders and until their successors are elected
and qualified.
2. To approve an amendment to the Amended and Restated
Employee Stock Purchase Plan to increase the number of shares of
common stock reserved for issuance thereunder.
3. To ratify the selection of KPMG LLP as the independent
registered public accounting firm of Cadence for its fiscal year
ending January 3, 2009.
4. To transact such other business as may properly come
before the meeting or any adjournment or postponement thereof.
These items of business are more fully described in the proxy
statement accompanying this notice.
Cadences Board of Directors has fixed the close of
business on March 14, 2008 as the record date for the
determination of stockholders entitled to notice of, and to vote
at, this Annual Meeting of Stockholders and at any adjournment
or postponement thereof.
By Order of the Board of Directors
R.L. Smith McKeithen
Secretary
San Jose, California
March 25, 2008
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN
PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE
CAST YOUR VOTE AS INSTRUCTED IN THE NOTICE OF INTERNET
AVAILABILITY OF PROXY MATERIALS AS PROMPTLY AS POSSIBLE. IF YOU
CHOSE TO RECEIVE PAPER COPIES OF YOUR PROXY MATERIALS, INCLUDING
THE PROXY CARD, PLEASE COMPLETE, DATE, SIGN AND RETURN THE PROXY
CARD IN THE RETURN ENVELOPE PROVIDED (WHICH IS POSTAGE PREPAID
IF MAILED IN THE UNITED STATES) AS PROMPTLY AS POSSIBLE TO
ENSURE YOUR REPRESENTATION AT THE MEETING. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE
MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF
RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE
AT THE MEETING, YOU MUST OBTAIN A PROXY ISSUED IN YOUR NAME FROM
THE RECORD HOLDER.
TABLE OF
CONTENTS
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CADENCE
DESIGN SYSTEMS, INC.
2655 SEELY AVENUE
SAN JOSE, CALIFORNIA 95134
PROXY
STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 7, 2008
INFORMATION
CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of
Directors of Cadence Design Systems, Inc., a Delaware
corporation, which is referred to in this proxy statement as
Cadence, for use at its Annual Meeting of Stockholders to be
held on May 7, 2008, at 1:00 p.m. Pacific time,
or at any adjournment or postponement thereof, for the purposes
set forth in this proxy statement and in the accompanying notice
of annual meeting. The annual meeting will be held at
Cadences offices located at 2655 Seely Avenue, Building 5,
San Jose, California 95134. Cadence intends to make
available this proxy statement on the Internet at
http://www.cadence.com/company/investor_relations/index.aspx
on or about March 25, 2008 to all stockholders entitled to
vote at the annual meeting.
INTERNET
AVAILABILITY OF PROXY MATERIALS
Pursuant to the new rules recently adopted by the Securities and
Exchange Commission, which is referred to in this proxy
statement as the SEC, Cadence is now furnishing proxy materials
to our stockholders primarily via the Internet, rather than
mailing printed copies of these materials to each stockholder.
We believe that this new process should expedite
stockholders receipt of proxy materials, lower the costs
of our annual meeting and help to conserve natural resources. On
or about March 25, 2008, we mailed to each stockholder
(other than those who previously requested electronic or paper
delivery) a Notice of Internet Availability of Proxy Materials
containing instructions on how to access and review the proxy
materials, including our proxy statement and our annual report,
on the Internet and how to access a proxy card to vote on the
Internet or by telephone. The Notice of Internet Availability of
Proxy Materials also contains instructions on how to receive a
paper copy of the proxy materials. If you received a Notice of
Internet Availability of Proxy Materials by mail, you will not
receive a printed copy of the proxy materials unless you request
one. If you received a Notice of Internet Availability by mail
and would like to receive a printed copy of our proxy materials,
please follow the instructions included in the Notice of
Internet Availability of Proxy Materials.
An audio webcast of the annual meeting will also be available on
the investor relations page of Cadences website at
www.cadence.com. The webcast will allow investors to listen to
the proceedings of the annual meeting, but stockholders
accessing the annual meeting using the Internet will not be
considered present at the annual meeting by virtue of this
access and will not be able to vote on matters presented at the
annual meeting or ask any questions of Cadences directors,
management, or its independent registered public accounting
firm. For a description of how to vote on matters presented at
the annual meeting, see Voting below. The webcast
will begin promptly at 1:00 p.m. Pacific time on the
day of the meeting and may be accessed on Cadences website
for 30 days thereafter.
VOTING
RIGHTS AND OUTSTANDING SHARES
Only holders of record of Cadences outstanding common
stock, $0.01 par value per share, at the close of business
on March 14, 2008, which is referred to in this proxy
statement as the record date, will be entitled to notice of and
to vote at the annual meeting. At the close of business on the
record date, Cadence had approximately 260,470,262 shares
of common stock outstanding and entitled to vote. Each holder of
record of common stock outstanding on the record date will be
entitled to one vote for each share held on all matters to be
voted on at the annual meeting.
1
QUORUM;
ABSTENTIONS; BROKER NON-VOTES
The presence in person or by proxy of a majority of the shares
of Cadence common stock outstanding and entitled to vote on the
record date is required for a quorum at the annual meeting. Both
abstentions and broker non-votes are counted as present for
purposes of determining the presence of a quorum, but broker
non-votes will not be counted towards the tabulation of votes
cast on proposals presented to stockholders.
Broker non-votes include shares for which a bank,
broker or other nominee (i.e., record) holder has not received
voting instructions from the beneficial owner and for which the
nominee holder does not have discretionary power to vote on a
particular matter. Under the rules that govern brokers who are
record owners of shares that are held in brokerage accounts for
the beneficial owners of the shares, brokers who do not receive
voting instructions from their clients have the discretion to
vote uninstructed shares on routine matters but have no
discretion to vote such uninstructed shares on non-routine
matters. The proposals to be voted on at the annual meeting
include both routine matters such as the proposal regarding the
election of directors and the ratification of Cadences
independent registered public accounting firm, and non-routine
matters such as the proposal regarding the Amended and Restated
Employee Stock Purchase Plan.
VOTE
REQUIRED
The election of directors at the annual meeting requires that
each director receive a majority of the votes cast with respect
to that director at the annual meeting (number of shares voted
for a director must exceed the number of votes cast
against that director), provided that in a contested
election, the directors shall be elected by the affirmative vote
of a plurality of the votes cast at the annual meeting.
Each other item to be voted on at the annual meeting requires
the affirmative vote of a majority of the shares present in
person or represented by proxy and entitled to vote at the
annual meeting.
All votes will be tabulated by a representative of the inspector
of elections appointed for the annual meeting. This
representative will separately tabulate affirmative and negative
votes, abstentions and broker non-votes. Mellon Investor
Services LLC has been appointed as the inspector of elections
for the annual meeting.
VOTING
Stockholders of record have three options for submitting their
vote prior to the annual meeting: (i) vote via the Internet
by following the instructions provided in the Notice of Internet
Availability of Proxy Materials, (ii) vote via telephone by
following the instructions provided in the Notice of Internet
Availability of Proxy Materials, or (iii) complete, sign,
date and mail in a paper proxy card in a pre-addressed envelope,
which you can request as outlined in the Notice of Internet
Availability of Proxy Materials.
If a stockholder attends the annual meeting, he or she may also
submit his or her vote in person, and any votes that were
previously submitted whether via the Internet, by
telephone or by mail will be superseded by the vote
that is cast at the annual meeting. Whether the proxy is
submitted via the Internet, by telephone or by mail, if it is
properly completed and submitted and if it is not revoked prior
to the annual meeting, the shares will be voted at the annual
meeting in the manner set forth in this proxy statement or as
otherwise specified by the stockholder.
REVOCABILITY
OF PROXIES
Whether the proxy is submitted via the Internet, by telephone or
by mail, any person giving a proxy pursuant to this solicitation
has the power to revoke it at any time before it is voted. A
proxy may be revoked by filing a written notice of revocation or
a duly executed proxy bearing a later date with the Cadence
Corporate Secretary at Cadences principal executive
offices, located at 2655 Seely Avenue, Building 5,
San Jose, California 95134, or it may be revoked by
attending the meeting and voting in person. Attendance at the
meeting will not, by itself, be sufficient to revoke a proxy.
Accessing the webcast of the annual meeting will not, by itself,
constitute attendance at the annual meeting and will not enable
a stockholder to revoke his, her or its proxy using the Internet.
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SOLICITATION
Cadence will bear the entire cost of soliciting proxies,
including the preparation, assembly, printing and mailing of
this proxy statement, the proxy card and any additional
information furnished to stockholders in connection with the
matters to be voted on at the annual meeting. Copies of
solicitation materials will be furnished to banks, brokerage
houses, fiduciaries and custodians holding shares of Cadence
common stock beneficially owned by others for forwarding to the
beneficial owners. Cadence will reimburse persons representing
beneficial owners of its common stock for their costs of
forwarding solicitation materials to the beneficial owners. The
solicitation of proxies through this proxy statement may be
supplemented by telephone, facsimile, use of the Internet, or
personal solicitation by directors, officers or other employees
of Cadence and by Georgeson Inc., which is referred to in this
proxy statement as Georgeson. Cadence has retained Georgeson to
solicit proxies for a fee of approximately $10,000, plus
reasonable expenses, and has separately retained Georgeson to
prepare a stockholder vote analysis of certain proposals. No
additional compensation will be paid to directors, officers or
other employees of Cadence or any of its subsidiaries for their
services in soliciting proxies.
HOUSEHOLDING
INFORMATION
The SEC has adopted rules that allow companies and
intermediaries, such as brokers, to deliver a single copy of
certain proxy materials to certain stockholders who share the
same address, a practice referred to as
householding. Some banks, brokers and other nominees
will be householding Cadences Notice of Internet
Availability of Proxy Materials and proxy materials for
stockholders who do not participate in electronic delivery of
proxy materials, unless contrary instructions are received from
the affected stockholders. Once you have received notice from
your broker or other nominee holder of your Cadence common stock
that the broker or other nominee holder will be householding the
Notice of Internet Availability of Proxy Materials or proxy
materials to your address, householding will continue until you
are notified otherwise or until you revoke your consent. If, at
any time, you no longer wish to participate in householding and
would prefer to receive a separate Notice of Internet
Availability of Proxy Materials and proxy materials, or if you
are receiving multiple copies of the Notice of Internet
Availability of Proxy Materials and proxy materials and wish to
receive only one copy, please notify your broker or other
nominee holder of your Cadence common stock. You may also
request additional copies of Cadences Notice of Internet
Availability of Proxy Materials and proxy materials by writing
to Cadences Corporate Secretary at 2655 Seely Avenue,
Building 5, San Jose, California 95134, or by calling
Cadences Investor Relations Group at
(408) 944-7100
or emailing the Investor Relations Group at
investor_relations@cadence.com. Please note, however, that if
you wish to receive a paper proxy or voting instruction or other
proxy materials for purposes of this years annual meeting,
you should follow the instructions provided in the Notice of
Internet Availability of Proxy Materials. Copies of
Cadences SEC filings and certain other submissions are
made available free of charge on the investor relations page of
Cadences website at www.cadence.com as soon as practicable
after we have electronically filed or furnished these documents
with the SEC.
CORPORATE
GOVERNANCE
Cadences common stock is listed on the NASDAQ Global
Select Market, which is referred to in this proxy statement as
NASDAQ.
Cadence and its Board of Directors, which is also referred to in
this proxy statement as the Board, regularly review and evaluate
Cadences corporate governance practices. Cadences
corporate governance documents are posted on the investor
relations page of its website at www.cadence.com. Printed copies
of these documents are also available to stockholders upon
written request directed to Cadences Corporate Secretary
at 2655 Seely Avenue, Building 5, San Jose, California
95134.
CORPORATE
GOVERNANCE GUIDELINES
The Board of Directors of Cadence has adopted Corporate
Governance Guidelines for the Board, which cover various topics
relating to the Board and its activities including, but not
limited to, the selection and composition of the Board, Board
leadership, compensation of directors, responsibilities of
directors, Board access to senior management and outside
advisors, meeting procedures and committee matters. The
Corporate Governance and
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Nominating Committee periodically reviews the Corporate
Governance Guidelines, which may be amended by the Board at any
time. The Corporate Governance Guidelines were most recently
amended in March 2008.
CODE OF
BUSINESS CONDUCT
Cadence has adopted a Code of Business Conduct to provide
standards for ethical conduct in dealing with customers,
suppliers, agents, political entities and others. The Code of
Business Conduct applies to all Cadence directors, officers and
employees (and those of its subsidiaries), including
Cadences Chief Executive Officer and Chief Financial
Officer. Compliance with the Code of Business Conduct is a
condition of continued service to or employment with Cadence.
The Code of Business Conduct covers topics including, but not
limited to, integrity and confidentiality of assets and
information, conflicts of interest, compliance with federal and
state securities laws, employment practices, payment practices,
compliance with competition laws and regulations, and compliance
with other laws.
Except as provided by applicable law, each person subject to the
Code of Business Conduct has the responsibility to report any
possible misconduct, including unethical business practices,
violations of the code and apparent or suspected illegal
activities, in the following manner:
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Employees must report to the Office of the General Counsel or,
in the event the report concerns a Cadence executive officer, to
the General Counsel or the chair of the Corporate Governance and
Nominating Committee (employees may report possible misconduct
on an anonymous basis);
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Executive officers must report to the General Counsel or, if the
report concerns the General Counsel, to the chair of the
Corporate Governance and Nominating Committee; and
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Directors must report to the chair of the Corporate Governance
and Nominating Committee or, if the report concerns the chair of
that committee, to another member of the committee.
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Any waiver of a provision of the Code of Business Conduct with
respect to a director or an executive officer may only be made
by the Board or the Corporate Governance and Nominating
Committee. Any waivers for other employees may be granted only
by the Chief Executive Officer or the General Counsel, or their
respective designees. Cadence will file with the SEC on
Form 8-K
amendments to the Code of Business Conduct and any waiver of its
provisions made with respect to any director or executive
officer as required under applicable SEC rules.
STOCK
OWNERSHIP GUIDELINES
Cadences Board of Directors has adopted Stock Ownership
Guidelines to align the interests of its directors and executive
officers with the interests of stockholders and to further
promote Cadences commitment to sound corporate governance.
Cadence does not require that directors or executive officers
own a specific number of shares because it expects that
directors and executive officers will act in Cadences best
interests regardless of the number of shares they own. However,
the Board has established share ownership guidelines for its
members and Cadences executive officers. Each member of
Cadences Board of Directors is encouraged to hold at least
5,000 shares of Cadence common stock within the first two
years of his or her election to the Board, and Cadences
executive officers are encouraged to hold at least the following
number of shares of Cadence common stock no later than five
years after the date of his or her designation to the following
offices: Chief Executive Officer
100,000 shares; Chief Financial Officer and Executive Vice
Presidents 50,000 shares; and Senior Vice
Presidents 25,000 shares. All directors and
executive officers met the Stock Ownership Guidelines as of the
record date.
CADENCES
BOARD OF DIRECTORS
DIRECTOR
INDEPENDENCE
Cadences Corporate Governance Guidelines require that at
least a majority of the Board of Directors be independent
directors within the meaning of the corporate governance
listing standards of NASDAQ. To be independent a
director must not have a relationship that, in the opinion of
the Board, would interfere with his or
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her exercise of independent judgment in carrying out the
responsibilities of a Cadence director. In making these
determinations, the Board considers all relevant facts and
circumstances and applies the following standards:
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A director who is employed by Cadence or any of its
subsidiaries, or whose family member is an employee of Cadence
or any of its subsidiaries, is not independent until three years
after the end of the employment relationship;
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A director who accepts, or whose family member accepts, more
than $100,000 in compensation from Cadence or any of its
subsidiaries, other than compensation for Board or Board
committee service, payments arising solely from investments in
Cadence securities, compensation paid to a family member who is
a non-executive employee of Cadence or any of its subsidiaries
and benefits under a tax-qualified retirement plan or
non-discretionary compensation, during any period of twelve
consecutive months is not independent until three years after
his or her receipt of such payments;
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A director who is, or whose family member is, a current partner
or employee of Cadences external auditor is not
independent;
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A director who was, or whose family member was, a partner or
employee of Cadences external auditor who worked on
Cadences audit during that time is not independent until
three years after the end of the employment relationship;
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A director who is, or whose family member is, employed as an
executive officer of another entity for which at any time during
the past three years any of Cadences executive officers
served on the compensation committee of such entity is not
independent; and
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A director who is, or whose family member is, a partner in, or a
controlling stockholder or executive officer of, any
organization to which Cadence made, or from which Cadence
received, payments for property or services in the current
fiscal year or any of the past three fiscal years that exceed in
such year the greater of 5% of the recipients consolidated
gross revenues or $200,000, other than payments arising solely
from investments in Cadence securities or payments under
non-discretionary charitable contribution matching programs, is
not independent until three years after such payments are made
or received.
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The Board has determined that Mr. Lucas, Mr. Scalise,
Dr. Shoven, Mr. Siboni, Mr. Swainson and
Mr. Tan, who constitute a majority of the Board, are
independent directors within the meaning of the
corporate governance listing standards of NASDAQ.
BOARD
MEETINGS
During the fiscal year ended December 29, 2007,
Cadences Board of Directors held twelve meetings, in
addition to taking other actions by unanimous written consent in
lieu of a meeting. Each Board member attended more than 75% of
the meetings of the Board and of the committees on which he
served that were held during the period for which he was a
director or committee member during fiscal 2007. Cadences
Corporate Governance Guidelines encourage directors to attend
its annual meetings of stockholders. Except for John A. C.
Swainson, all of Cadences then current directors attended
the 2007 Annual Meeting of Stockholders.
Under Cadences Corporate Governance Guidelines,
Cadences independent directors meet separately at
regularly scheduled sessions and at least twice annually.
Pursuant to Cadences Corporate Governance Guidelines,
Dr. Shoven, as the Chairman of the Board and an independent
director, presides over meetings of the independent directors.
CONTACTING
THE BOARD OF DIRECTORS
Stockholders interested in communicating directly with the Board
may do so by sending a letter to the Cadence Board of Directors,
or to any individual director, group of directors or committee
of the Board,
c/o the
Office of the Corporate Secretary, Cadence Design Systems, Inc.,
2655 Seely Avenue, Building 5, San Jose, California 95134.
Inquiries and other communications may be submitted anonymously
and confidentially. The Office of the Corporate Secretary will
review the correspondence and shall transmit such communications
as soon as practicable to the identified director addressee(s),
unless there are legal or other considerations that mitigate
against further
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transmission of the communication, as determined by the
Corporate Secretary. In that regard, certain items that are
unrelated to the duties and responsibilities of the Board of
Directors will not be forwarded by the Corporate Secretary, such
as business solicitations or advertisements, junk mail and mass
mailings, new product suggestions, product complaints, product
inquiries, resumes and other forms of job inquiries, spam and
surveys. In addition, material that the Corporate Secretary
determines is unduly hostile, threatening, illegal or similarly
unsuitable will be excluded, with the provision that the Board
of Directors or individual directors so addressed shall be
advised of any communication withheld for legal or other
considerations as soon as practicable.
COMMITTEES
OF THE BOARD OF DIRECTORS
The Board of Directors currently has the following committees:
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Audit Committee
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Compensation Committee
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Corporate Governance and Nominating Committee
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Finance Committee
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Technology Committee
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Each of the above committees has a written charter approved by
the Board. The charters of the Audit Committee, the Compensation
Committee and the Corporate Governance and Nominating Committee
are posted on the investor relations page of Cadences
website at www.cadence.com. The members and chairs of the
committees are identified in the following table.
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Corporate
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Governance and
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Director
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Audit
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Compensation
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Nominating
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Finance
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Technology
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Michael J. Fister
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Donald L. Lucas
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Chair
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Chair
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Dr. Alberto Sangiovanni-Vincentelli
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Chair
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George M. Scalise
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Dr. John B. Shoven
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Chair
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Roger S. Siboni
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Chair
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John A.C. Swainson
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ü
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Lip-Bu Tan
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ü
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ü
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Audit
Committee
The Board has determined that all members of the Audit Committee
are independent as defined by the NASDAQ corporate
governance listing standards and
Rule 10A-3
of the Securities Exchange Act of 1934, as amended, which is
referred to in this proxy statement as the Exchange Act. The
Board has also determined that each of Mr. Lucas,
Dr. Shoven and Mr. Siboni, constituting all the
members of the Audit Committee, is an audit committee
financial expert as defined in rules promulgated by the
SEC. In addition, the Board has determined that each Audit
Committee member is able to read and understand fundamental
financial statements and, other than strictly in his capacity as
a member of the Board or a committee of the Board, has not
participated in preparing Cadences financial statements in
any of the past three years.
The Audit Committee charter was most recently amended in
February 2006 and complies with the NASDAQ corporate governance
listing standards. The duties and responsibilities of the Audit
Committee include:
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Appointing, retaining, compensating, evaluating, overseeing and
terminating Cadences independent registered public
accounting firm and annually evaluating the qualifications,
performance and independence of
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the independent registered public accounting firm, including an
evaluation of the lead partner of the independent registered
public accounting firm;
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Pre-approving all audit and permissible non-audit services to be
provided by the independent registered public accounting firm
and establishing policies and procedures for such pre-approval;
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Reviewing and discussing with the independent registered public
accounting firm their report regarding all relationships or
services between Cadence and the independent registered public
accounting firm and any other relationship or services that may
impact the objectivity and independence of the independent
registered public accounting firm;
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Reviewing with the independent registered public accounting firm
their audit procedures, including the scope and timing of the
audit, the results of the annual audit and any audit problems or
difficulties and managements response to any such problems
or difficulties;
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Meeting to review with management and the independent registered
public accounting firm Cadences annual and quarterly
financial statements, reports and specific disclosures, and
recommending to the Board whether the financial statements
should be included in Cadences annual report on SEC
Form 10-K;
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Reviewing and discussing the adequacy and effectiveness of
Cadences internal controls and disclosure controls and
procedures; and
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Establishing and overseeing procedures for the receipt,
retention and treatment of complaints regarding accounting,
internal controls or auditing matters, including a system for
the confidential anonymous submission of accounting or auditing
concerns by Cadence employees.
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The Audit Committee held nine meetings during fiscal 2007. See
Report of the Audit Committee below for more
information.
Compensation
Committee
The Compensation Committee of the Board of Directors is
comprised of three non-employee directors of Cadence who the
Board has determined are all independent as defined
by the corporate governance listing standards of NASDAQ. In
addition, all Compensation Committee members are outside
directors within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (which is referred to
in this proxy statement as the Code), to allow Cadence a tax
deduction for certain employee compensation exceeding $1,000,000
for an individual. All Compensation Committee members are also
outside directors within the meaning of Exchange Act
Rule 16b-3
to exempt certain option grants and similar transactions from
the short-swing profits prohibition of Section 16 of the
Exchange Act. The Compensation Committee is comprised of
Mr. Lucas, Mr. Scalise and Dr. Shoven. As of
May 9, 2007, Dr. Shoven replaced Mr. Lucas as
Chair of the Compensation Committee. The Compensation Committee
acts on behalf of the Board, as provided in the committees
charter, to review and approve corporate goals and objectives
relevant to the compensation of Cadences CEO and other
executive officers, evaluate the CEOs performance in light
of those goals and objectives, and determine and approve the
CEOs and other executive officers compensation. At
or near the beginning of each fiscal year, the Compensation
Committee typically establishes base salary levels and target
bonuses for the CEO and other executive officers of Cadence. In
addition, the Compensation Committee administers the Senior
Executive Bonus Plan, Cadences equity-based compensation
plans and stock purchase plans, and Cadences deferred
compensation plans. The Compensation Committee also reviews and
recommends to the Board the compensation of Cadences
directors.
The Compensation Committee charter was most recently amended in
February 2007. The duties and responsibilities of the
Compensation Committee include:
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Reviewing and approving corporate goals and objectives relevant
to the compensation of Cadences Chief Executive Officer,
or CEO, and any director who is also a Cadence employee,
evaluating the performance of the CEO and any employee director
in light of those goals and objectives and determining and
approving, either as a committee or together with the
independent directors of the Board, the compensation of the CEO
and any employee director based on such evaluation;
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Overseeing the evaluation of Cadences management;
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Reporting to the Board, at least annually, on CEO succession
planning;
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Reviewing compensation programs and determining the compensation
of Cadences executive officers;
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Reviewing and discussing with management Cadences
Compensation Discussion and Analysis and related disclosures
that are required be included in Cadences annual report
and proxy statement; recommending to the Board, based on the
review and discussions, whether the Compensation Discussion and
Analysis should be included in the annual report and this proxy
statement; and preparing the compensation committee report that
SEC rules require be included in the annual report and this
proxy statement; and
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Reviewing and amending, and, in certain cases, administering
Cadences general compensation plans including:
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Equity incentive and stock purchase plans;
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Benefit programs; and
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Bonus plans.
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In fiscal 2007, the Compensation Committee retained the services
of an independent compensation consultant, Semler Brossy
Consulting Group, LLC, or Semler Brossy, for investigation into
and advice on total compensation for Cadences directors
and executive officers. The Compensation Committee believes that
having an independent evaluation of director compensation and
executive officer salary, bonus and equity compensation is a
valuable tool for the Committee and stockholders. Semler Brossy
is not otherwise engaged to perform work for Cadence.
The Compensation Committee retained Semler Brossy for a number
of purposes, including:
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Constructing and reviewing peer groups for compensation
comparison purposes;
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Performing a competitive assessment of Cadences
compensation programs, practices, and levels for its executive
officers and other select employees;
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Providing information on typical industry practices concerning
employment, severance, and change in control agreements; and
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Performing a competitive assessment of Cadences Board of
Director compensation programs, practices, and levels.
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The Compensation Committee made a number of compensation
decisions, including decisions with respect to the Named
Executive Officers, based on the competitive assessments
provided by and through consultation with Semler Brossy. The
Compensation Committees decisions were made, however,
solely by the Compensation Committee, in its sole discretion.
The Compensation Committee held six meetings during fiscal 2007.
See Compensation Discussion and Analysis below for
more information.
Corporate
Governance and Nominating Committee
The Board has determined that all Corporate Governance and
Nominating Committee members are independent as defined by the
NASDAQ corporate governance listing standards.
The Corporate Governance and Nominating Committee charter was
most recently amended in February 2007. The duties and
responsibilities of the Corporate Governance and Nominating
Committee include:
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Determining any criteria for selecting new directors;
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Interviewing and evaluating candidates for Board membership;
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Evaluating director nominees recommended by stockholders;
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Selecting, or recommending that the Board select, director
nominees for election at the next annual meeting of stockholders;
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Reviewing Cadences Corporate Governance Guidelines and
Code of Business Conduct;
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Overseeing the administration of Cadences Code of Business
Conduct and administering the Code of Business Conduct with
respect to Cadences directors and executive officers;
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Reviewing and approving any related person transactions
involving Cadence directors and executive officers and
establishing policies and procedures for the review, approval
and ratification of such transactions; and
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Overseeing the annual evaluation of the Board and its committees.
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The Corporate Governance and Nominating Committee employs a
variety of methods to identify and evaluate director nominees.
The committee periodically assesses the appropriate size of the
Board, and whether any vacancies on the Board are expected due
to retirement of directors or otherwise, and the need for
particular expertise on the Board. If vacancies are anticipated
or otherwise arise, the committee considers potential candidates
for director. Additionally, candidates may come to the attention
of the committee through current Board members, officers,
professional search firms, stockholders or other persons. These
candidates are evaluated at regular or special meetings of the
committee, and may be considered at any point during the year.
In connection with this evaluation, the Corporate Governance and
Nominating Committee determines whether to interview the
prospective nominee and, as warranted, one or more members of
the committee, and others as appropriate, interview prospective
nominees in person or by telephone. After completing this
evaluation and interview, the committee makes a recommendation
to the full Board as to the persons who should be nominated or
elected by the Board, and the Board determines whether to
reject, elect or nominate the candidate, as the case may be,
after considering the recommendation of the committee.
The Corporate Governance and Nominating Committee will consider
individuals recommended by stockholders for nomination as a
director pursuant to the provisions of Cadences Bylaws
relating to stockholder nominations. A stockholder who wishes to
recommend a prospective nominee for the Board should notify
Cadences Corporate Secretary or the Corporate Governance
and Nominating Committee in writing with the supporting material
required by Cadences Bylaws as described under Other
Matters Stockholder Proposals and Nominations
below, and any other material the stockholder considers
necessary or appropriate.
Although the Board currently has no defined minimum criteria for
consideration or continued service as a director, the Corporate
Governance and Nominating Committee evaluates prospective
nominees against the standards and qualifications set out in
Cadences Corporate Governance Guidelines and other
relevant factors as it deems appropriate. Among the factors the
Board may consider are the current composition of the Board, the
need for particular expertise, and the prospective
nominees experience, judgment, understanding of electronic
design and semiconductor technologies, and other relevant
characteristics. At least a majority of directors on the Board
must be independent as defined by the NASDAQ
corporate governance listing standards and as determined by the
Board.
The Corporate Governance and Nominating Committee held four
meetings during fiscal 2007.
Finance
Committee
The Finance Committee, on behalf of the Board, evaluates and
approves financings, mergers, acquisitions, divestitures and
other financial commitments of Cadence to unaffiliated third
parties that involve amounts greater than $50 million and
up to $125 million. The Finance Committee also monitors the
liquidation of Telos Venture Partners III, L.P., which is a
venture capital fund in which Cadence is a limited partner.
The Finance Committee held five meetings during fiscal 2007.
9
Technology
Committee
The Technology Committee monitors trends in technology that may
affect Cadences strategic plans, advises the Board
regarding Cadences research and development activities and
reviews and makes recommendations to management regarding
Cadences leading technologists and researchers.
The Technology Committee held four meetings during fiscal 2007.
COMPENSATION
OF DIRECTORS
Directors who are Cadence employees do not receive additional
compensation for their service on the Board. The following table
sets forth the compensation earned by Cadences
non-employee directors for their service on the Board in 2007:
DIRECTOR
COMPENSATION FOR FISCAL 2007
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Fees Earned
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Option
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All Other
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or Paid in Cash
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Awards (1)(2)
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Compensation (3)
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Total
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Name
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($)
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($)
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($)
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($)
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Donald L. Lucas
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257,286
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157,707
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8,963
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423,956
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Dr. Alberto Sangiovanni-Vincentelli
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145,000
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157,707
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236,190
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538,897
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George M. Scalise
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169,286
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157,707
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0
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326,993
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Dr. John B. Shoven
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301,329
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316,021
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3,309
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620,659
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Roger S. Siboni
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164,000
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157,707
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15,000
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336,707
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John A.C. Swainson
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99,000
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157,707
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0
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256,707
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Lip-Bu Tan
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169,286
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157,707
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9,391
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336,384
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(1) |
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As of December 29, 2007, the aggregate number of
outstanding options held by each director was as follows:
Mr. Lucas 280,000;
Dr. Sangiovanni-Vincentelli 357,500;
Mr. Scalise 240,000;
Dr. Shoven 360,000; Mr. Siboni
235,625; Mr. Swainson 50,000; and
Mr. Tan 106,250. |
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The assumptions made in the valuation of such options are set
forth in Note 4 to the Notes to Consolidated Financial
Statements in Cadences Annual Report on
Form 10-K
for the year ended December 29, 2007. The grant date fair
value of the options granted to each non-employee director was
$324,545 for Dr. Shoven and $162,273 for every other
non-employee director. |
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Other Compensation for Messrs. Lucas, Siboni and Tan and
Dr. Shoven consists of payments pursuant to the director
health care and prescription drug insurance coverage plan
described below. Other Compensation for
Dr. Sangiovanni-Vincentelli consists of the payment
pursuant to the director health care and prescription drug
insurance coverage plan, the consulting fees and director fees,
and the use of a car leased by Cadence, as described below. |
A non-employee director is a Cadence director who is
not otherwise an employee of Cadence or an affiliate of Cadence.
The annual retainer for non-employee directors is $80,000 per
year. The annual retainer for a non-employee director serving as
Chairman of the Board is $80,000, which is in addition to the
annual retainer for non-employee directors. A non-employee
director serving as Chairman of the Audit, Finance or Technology
Committee receives an annual retainer of $40,000 per year and a
non-employee director serving as Chairman of the Corporate
Governance and Nominating Committee or the Compensation
Committee receives an annual retainer of $20,000 per year. For a
period between January 1, 2007 and May 8, 2007, a
non-employee director serving as Chairman of the Board was not
eligible to receive fees for service as the Chairman of these
committees of the Board. Effective May 9, 2007, the Board
changed this policy, making the Chairman of the Board eligible
to receive a retainer for service as chairman of a committee of
the Board.
As a result, each non-employee director of Cadence earned the
$80,000 annual retainer for his service on the Board in 2007. In
addition to the $80,000 retainer for his service as a
non-employee director of the Board, Dr. Shoven earned the
$80,000 retainer for his service as Chairman of the Board in
2007 and $12,900 as a pro-rated annual retainer of $20,000 for
his service as Chairman of the Compensation Committee for the
period from May 9,
10
2007 until December 31, 2007. In addition to the annual
retainer, Mr. Siboni and Dr. Sangiovanni-Vincentelli
each earned an annual retainer of $40,000 for his service as
Chairman of the Audit Committee and Technology Committee,
respectively. Mr. Lucas earned $7,100 as a pro-rated
portion of the annual retainer of $20,000 for his service as the
Chairman of the Compensation Committee for the period from
January 1, 2007 until May 8, 2007, $12,900 as a
pro-rated portion of the annual retainer of $20,000 for his
service as the Chairman of the Corporate Governance and
Nominating Committee for the period from May 9, 2007 until
December 31, 2007 and an annual retainer of $40,000 for his
service as the Chairman of the Finance Committee.
Dr. Shoven and Messrs. Lucas, Scalise and Tan were
members of a Special Committee formed in 2007 to evaluate
various corporate transactions. Messrs. Lucas, Scalise and
Tan, each, earned $14,286 as a pro-rated portion of the annual
retainer of $40,000 for their services as members of the Special
Committee and Dr. Shoven earned $21,429 as pro-rated
portion of the annual retainer of $60,000 for his service as
Chairman of the Special Committee. Non-employee directors were
also paid $2,000 for each Board or committee meeting attended in
person and $1,000 for each Board or committee meeting attended
by telephone. No additional compensation was paid when the Board
or a committee acted by unanimous written consent in lieu of a
meeting. Non-employee members of the Board were also eligible
for reimbursement of their expenses incurred in connection with
attendance at Board meetings in accordance with Cadence policy.
Each non-employee director also receives stock option grants
under Cadences 1995 Directors Stock Option Plan, as
amended, which is referred to in this proxy statement as the
Directors Plan. Only non-employee directors are eligible to
receive options under the Directors Plan.
Under the Directors Plan, each non-employee director is
automatically granted a one-time option upon joining the Board
to purchase the number of shares of Cadence common stock equal
to 6,250 multiplied by the number of full calendar quarters
between the date the directors service begins and the next
April 1st. A director is considered to have served the
entire calendar quarter if he or she becomes a director at any
time during the first half of the quarter. These initial grants
vest and become exercisable in full on the
March 31st following the grant date and have an
exercise price equal to the average closing price of Cadence
common stock for the 20 trading days prior to the grant date.
In addition, every April 1st, each non-employee director is
automatically granted an option to purchase 25,000 shares
of Cadence common stock and a non-employee director serving as
Chairman of the Board is automatically granted an additional
option to purchase 25,000 shares of common stock. These
annual option grants vest and become exercisable in full on the
March 31st following the grant date and have an
exercise price equal to the average closing price of Cadence
common stock for the 20 trading days prior to the grant date.
Directors may elect to defer compensation payable to them under
Cadences deferred compensation plan. These deferred
compensation payments are held in accounts with values indexed
to the performance of selected mutual funds, self-directed
accounts or money market accounts.
In addition, a health care and prescription drug insurance
coverage plan is available for active non-employee directors,
eligible retired directors and their dependents. All
non-employee directors and their dependents are eligible for
insurance coverage under the plan during their term of service
on the Board. Retired employee and non-employee directors and
their dependents will be eligible for the coverage under the
plan for a term not to exceed their term of service on the
Board. Under the plan, Cadence reimburses 100% of the premium
for participants and their dependents up to a maximum of $15,000
per year for 2007 and $20,000 for 2008, which maximum amount may
be adjusted for future changes in health care costs. Benefits
under the plan are fully taxable to the participants and Cadence
does not defray any such taxes. Mr. Lucas,
Dr. Sangiovanni-Vincentelli, Dr. Shoven,
Mr. Siboni and Mr. Tan maintained health insurance
coverage under this plan in 2007.
Dr. Sangiovanni-Vincentelli earned $55,000 for consulting
services performed for Cadence in 2007. Cadence and
Dr. Sangiovanni-Vincentelli have entered into a consulting
agreement which provides for an annual consulting fee of $55,000
and reimbursement of reasonable costs and expenses incurred in
the performance of work under the consulting agreement in
accordance with Cadence policy. The consulting agreement also
contains confidentiality and non-solicitation provisions in
favor of Cadence. Dr. Sangiovanni-Vincentellis
consulting services consisted of providing technical and
strategic advice to Cadences CEO with respect to potential
acquisitions and organizational and customer relations matters,
serving as facilitator in customer and partner meetings to
discuss industry trends,
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collaboration on technology and business issues, representing
Cadence at industry, technical and government events, and
participating in setting the direction of the Cadence Research
Laboratories at Berkeley and of Cadences research
partnerships. Cadence does not have any comparable arrangements
with other consultants and, as a result, has no basis for
comparing the terms of Dr. Sangiovanni-Vincentellis
arrangement with others. In addition,
Dr. Sangiovanni-Vincentelli is the Scientific Director of
PARADES-EEIG, an Italian not-for-profit entity engaged in
research related to electronic systems engineering. By contract,
a Cadence subsidiary contributes up to 50% of the annual funding
needs of PARADES-EEIG. For his services to PARADES-EEIG in 2007,
Dr. Sangiovanni-Vincentelli earned 92,400
(approximately $126,592 based on the average foreign currency
exchange rate in 2007). Dr. Sangiovanni-Vincentelli is also
a member of the board of directors of Accent S.p.a., an Italian
company that provides microelectronics product design and
realization services as well as semiconductor IP licensing.
Cadence owns approximately 20% of the equity interests in Accent
(on a fully-diluted basis). For his services as a director of
Accent in 2007, Dr. Sangiovanni-Vincentelli earned
24,000 (approximately $32,881 based on the average foreign
currency exchange rate in 2007).
Dr. Sangiovanni-Vincentelli also had use of a car in Europe
that was leased by Cadence for $18,254 in 2007.
PROPOSAL 1
ELECTION
OF DIRECTORS
The Corporate Governance and Nominating Committee of the Board
has recommended, and the Board has nominated, the eight nominees
named below for election to Cadences Board of Directors.
Each director elected at the annual meeting will hold office
until the 2009 Annual Meeting of Stockholders and until his
successor is elected and qualified, or until the directors
earlier death, resignation or removal. Each nominee listed below
is currently a Cadence director. All of the nominees have
previously been elected by Cadences stockholders.
VOTE
REQUIRED AND BOARD RECOMMENDATION
Shares represented by executed proxies will be voted FOR
the election of the eight nominees named below, if authority
to do so is not withheld.
The election of directors at the annual meeting requires that
each director receive a majority of the votes cast with respect
to that director at the annual meeting, which means that the
number of shares voted for a director must exceed
the number of shares voted against that director,
provided that in a contested election, the directors shall be
elected by the affirmative vote of a plurality of the votes cast
at the annual meeting. The election this year is not contested
and the majority voting standard applies. If a nominee who is
serving as a director is not elected at the annual meeting, the
Corporate Governance and Nominating Committee will establish a
procedure for such director to tender his resignation and will
make a recommendation to the Board about whether to accept or
reject the resignation, or whether to take other action. The
Board will act on the Corporate Governance and Nominating
Committees recommendation and publicly disclose its
decision and the reasons behind it within 90 days from the
date the election results are certified.
If any nominee should be unavailable for election as a result of
unexpected circumstances, shares will be voted for the election
of any substitute nominee named by the Board. Each person
nominated for election has agreed to be named in this proxy
statement and to serve if elected, and Cadence has no reason to
believe that any nominee will be unable to serve.
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THE BOARD
OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF
EACH NAMED NOMINEE.
NOMINEES
The names of the nominees and certain information about them,
including term of service as a Cadence director and age as of
the 2008 Annual Meeting of Stockholders, are set forth below:
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Name and Principal Occupation
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Business Experience and Directorships
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Michael J. Fister
53 Years Old
Director Since 2004
President and Chief Executive Officer, Cadence Design Systems,
Inc.
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Michael J. Fister has served as President and Chief Executive
Officer of Cadence since May 2004. Prior to joining Cadence,
Mr. Fister spent 17 years at Intel Corporation, where
he was most recently Senior Vice President and General Manager
of the companys Enterprise Platforms Group. Mr. Fister is
a graduate of the University of Cincinnati where he received
B.S. and M.S. degrees in electrical engineering. Mr. Fister
also serves as a director of Autodesk, Inc.
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Donald L. Lucas
78 Years Old
Director Since 1988
Private venture capital investor
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Donald L. Lucas served as Chairman of the Board of Cadence from
1988 until May 2004. From its inception in 1983 until 1987, Mr.
Lucas served as Chairman of the Board and a director of SDA
Systems, Inc., a predecessor of Cadence. Mr. Lucas has been a
private venture capital investor since 1960. Mr. Lucas also
serves as a director of 51 job, Inc., DexCom, Inc., Oracle
Corporation, Spansion, Inc. and Vimicro International
Corporation.
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Dr. Alberto Sangiovanni-Vincentelli
60 Years Old
Director Since 1992
Professor of Electrical Engineering and Computer Sciences,
University of California, Berkeley
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Dr. Alberto Sangiovanni-Vincentelli serves as a consultant
to Cadence, providing services as Chief Technology Advisor, and
has served as a consultant to Cadence, or one of its predecessor
corporations, since 1983. Dr. Sangiovanni-Vincentelli was
a co-founder of SDA Systems, Inc., a predecessor of Cadence.
Dr. Sangiovanni-Vincentelli has been a Professor of
Electrical Engineering and Computer Sciences at the University
of California, Berkeley since 1976, where he holds The Edgar L.
& Harold H. Buttner Chair of Electrical Engineering. In
1998, Dr. Sangiovanni-Vincentelli was elected to the
National Academy of Engineering and, in 2001, was honored by the
Electronic Design Automation Consortium with the Kaufman Award,
honoring an individual who has contributed to creating or
driving technological advances that have had measurable impact
on the productivity of design engineers.
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George M. Scalise
74 Years Old
Director Since 1989
President, Semiconductor Industry Association
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George M. Scalise has served as President of the Semiconductor
Industry Association, an association of semiconductor
manufacturers and suppliers, since June 1997. Mr. Scalise
served on the Board of Directors of the Federal Reserve Bank of
San Francisco from January 2000 until December 2005,
including as Deputy Chairman from January 2001 until March 2003
and as Chairman from March 2003 until December 2005. Mr.
Scalise served as Executive Vice President and Chief
Administrative Officer of Apple Computer, Inc. from March 1996
to May 1997. Mr. Scalise also served as Senior Vice President
of Planning and Development and Chief Administrative Officer of
National Semiconductor Corporation from 1991 to 1996. Mr.
Scalise currently serves on President George W. Bushs
Council of Advisors on Science and Technology.
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13
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Name and Principal Occupation
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Business Experience and Directorships
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Dr. John B. Shoven
60 Years Old
Director Since 1992
Professor of Economics, Stanford University
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Dr. John B. Shoven has served as Chairman of the Board
since July 2005. Dr. Shoven is currently the Charles R.
Schwab Professor of Economics at Stanford University, where he
has taught since 1973. Dr. Shoven has served as director
of the Stanford Institute for Economics Policy Research since
November 1999 and served in that capacity from 1989 to 1993.
Dr. Shoven served as Chairman of the Economics Department
at Stanford University from 1986 to 1989 and as Dean of the
School of Humanities and Sciences from 1993 to 1998.
Dr. Shoven also serves as a director of Exponent, Inc., and
a member of the Mountain View Board of American Century Funds.
Dr. Shoven is also a member of the American Academy of Arts
and Sciences.
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Roger S. Siboni
53 Years Old
Director Since 1999
Independent Investor
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Roger S. Siboni served as Chairman of the Board of Epiphany,
Inc., a software company that provided customer relationship
management solutions, from July 2003 until October 2005 and as
President and Chief Executive Officer of Epiphany, Inc. from
August 1998 to July 2003. Prior to joining Epiphany, Mr. Siboni
spent more than 20 years at KPMG LLP, most recently as its
Deputy Chairman and Chief Operating Officer. Mr. Siboni also
serves as a director of Dolby Laboratories, Inc.
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John A.C. Swainson
53 Years Old
Director Since 2006
Chief Executive Officer, CA, Inc.
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John A.C. Swainson has served as the President and Chief
Executive Officer of CA, Inc. since February 2005 and as
President and Director since November 2004. Prior to joining
CA, Mr. Swainson was Vice President of Worldwide Sales of
IBM Corporations Software Group from July 2004 to
November 2004 and General Manager of the Application
Integration and Middleware division of IBMs Software Group
from 1997 to July 2004. Mr. Swainson also serves as a
director of CA, Inc. and Visa Inc.
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Lip-Bu Tan
48 Years Old
Director Since 2004
Chairman, Walden International
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Lip-Bu Tan is the founder and Chairman of Walden International,
an international venture capital firm founded in 1987. Mr. Tan
also serves as a director of Creative Technology Ltd.,
Flextronics International Ltd., Semiconductor Manufacturing
International Corporation and SINA Corporation. Mr. Tan
received an M.S. in nuclear engineering from the Massachusetts
Institute of Technology, an MBA from the University of
San Francisco, and a B.S. from Nanyang University in
Singapore.
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VOTE
REQUIRED AND BOARD RECOMMENDATION
The Board of Directors of Cadence recommends a vote FOR
the election of each of the eight director nominees. The
election of directors at the annual meeting requires that each
director receive a majority of the votes cast with respect to
that director, which means that the number of shares voted
for a director must exceed the number of shares
voted against that director. Abstentions will be
treated as being present and entitled to vote on the proposal,
however, abstentions are not counted as votes for or
against directors and will not have an effect on the
election of directors. Unless marked to the contrary, proxies
received will be voted FOR the election of each of the
eight director nominees.
PROPOSAL 2
APPROVAL
OF AMENDMENT TO THE AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN
In November 1998, Cadences Board adopted, and Cadence
stockholders subsequently approved, Cadences Amended and
Restated Employee Stock Purchase Plan, referred to in this proxy
statement as the Employee Plan,
14
which amended and restated the 1990 Employee Stock Purchase
Plan. Subsequent amendments approved by Cadences Board and
stockholders increased the shares of common stock authorized for
issuance under the Employee Plan to 46,500,000.
In February 2008, the Board approved an amendment to the
Employee Plan to increase the number of shares of common stock
authorized for issuance by 7,500,000 shares for a total of
54,000,000 shares authorized under the Employee Plan,
subject to stockholder approval.
As of March 14, 2008, 1,915,101 shares of common stock
remained available for issuance under the Employee Plan. The
proposed increase in the number of shares authorized for
issuance under the Employee Plan represents approximately 2.9%
of Cadences outstanding stock as of the record date.
REASONS
FOR THE PROPOSED AMENDMENT
The Board approved the amendment to the Employee Plan to ensure
that Cadence can continue to grant purchase rights to its
employees at levels determined appropriate by the Board. The
Employee Plan helps to attract and retain employees because
employee stock purchase plans are a common benefit offered by
our competitors and other industry bellwethers. In addition,
approximately 70% of Cadences eligible employees
participate in the Employee Plan. As confirmed by the high level
of employee participation, Cadence believes that the Employee
Plan is a highly valued benefit that is necessary in order for
Cadence to compete with other companies in attracting and
retaining employees. The Employee Plan also provides eligible
employees with the opportunity to become Cadence stockholders
and participate in Cadences success, which aligns the
interests of participating employees with those of stockholders.
VOTE
REQUIRED AND BOARD RECOMMENDATION
The Board of Directors recommends a vote FOR approval of
the amendment to the Employee Plan. The affirmative vote of a
majority of the shares present in person or represented by proxy
and entitled to vote on the proposal is required for approval of
the proposal. Abstentions will be treated as being present and
entitled to vote on the proposal and, therefore, will have the
effect of votes against the proposal. Broker non-votes will be
treated as not being entitled to vote on the proposal and,
therefore, are not counted for purposes of determining whether
the proposal has been approved. Unless marked to the contrary,
proxies received will be voted FOR approval of the
amendment to the Employee Plan.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF
PROPOSAL 2.
SUMMARY
OF THE EMPLOYEE PLAN
The following summary of the main features of the Employee Plan,
as amended, is qualified in its entirety by the complete text of
the Employee Plan, a copy of which is attached as
Appendix A to this proxy statement.
PURPOSE
The purpose of the Employee Plan is to provide a means by which
employees of Cadence, and any parent or subsidiary of Cadence
designated by the Board, may be given an opportunity to purchase
Cadence common stock, through payroll deductions, to assist
Cadence in retaining the services of its employees, to secure
and retain the services of new employees, and to provide
incentives for these persons to exert maximum efforts for the
success of Cadence.
The rights to purchase common stock granted under the Employee
Plan are intended to qualify as options issued under an
employee stock purchase plan as that term is defined
in Section 423(b) of the Internal Revenue Code.
15
ADMINISTRATION
The Board administers the Employee Plan and has the final power
to construe and interpret both the Employee Plan and the rights
granted under it. The Board has the power, subject to the
provisions of the Employee Plan, to determine when and how
rights to purchase Cadence common stock will be granted, the
provisions of each offering of these rights (which need not be
identical), and whether employees of a parent or subsidiary of
Cadence will be eligible to participate in the Employee Plan.
The Board may delegate administration of the Employee Plan to a
committee comprised of not less than two Board members. The
Board has delegated administration of the Employee Plan to the
Compensation Committee. As used in this proxy statement solely
with respect to the Employee Plan, the Board refers
to any committee the Board appoints to administer the Employee
Plan as well as to the Board itself.
STOCK
SUBJECT TO EMPLOYEE PLAN
Upon stockholder approval of this Proposal, an additional
7,500,000 shares of common stock would be reserved for
issuance under the Employee Plan for an aggregate of 9,415,101
reserved but unissued shares, representing approximately 3.6% of
Cadences outstanding stock as of the record date. If
rights granted under the Employee Plan expire, lapse or
otherwise terminate without being exercised, the shares of
common stock not purchased under the rights again become
available for issuance under the Employee Plan.
Because benefits under the Employee Plan depend on
employees voluntary elections to participate and the fair
market value of Cadences common stock at various future
dates, it is not possible as of the date of this proxy statement
to determine future benefits that will be received by executive
officers and other employees under the Employee Plan.
OFFERINGS
The Board implements the Employee Plan by offering participation
rights to all eligible employees. Currently, the offering
periods of the Employee Plan are six months long commencing on
February 1 and August 1 of each year and ending on July 31 and
January 31, respectively. The Board has the power to change
the duration of offering periods with respect to future
offerings without stockholder approval if such change is
announced at least fifteen (15) days prior to the scheduled
beginning of the first offering period to be affected.
ELIGIBILITY
Any person who is employed at least 20 hours per week and
five months per calendar year by Cadence, or any parent or
subsidiary of Cadence designated by the Board, is eligible to
participate in an offering if the employee was employed by
Cadence or the designated affiliate on the 15th day of the
month before the first day of the offering period. Almost all of
Cadences and its subsidiaries approximately
5,300 employees, including all of Cadences executive
officers, are eligible to participate in the Employee Plan.
However, employees of certain international Cadence subsidiaries
are not eligible to participate in the Employee Plan because of
local tax or regulatory issues. Cadences non-employee
directors are not eligible to participate in the Employee Plan.
No employee is eligible to participate in the Employee Plan if,
immediately after the grant of purchase rights, the employee
would, directly or indirectly, own stock or hold options
possessing 5% or more of the total combined voting power or
value of all classes of stock of Cadence or of any Cadence
parent or subsidiary, including any stock which the employee may
purchase under outstanding rights and options. In addition, no
employee may accrue the right to purchase shares under the
Employee Plan at a rate that exceeds $25,000 worth of common
stock (determined at the fair market value of the shares at the
time the right is granted, which fair market value is based upon
the closing price of the shares) for each calendar year in which
such right is outstanding at any time.
Rights granted in any offering under the Employee Plan terminate
immediately upon cessation of an employees employment for
any reason, and Cadence will distribute to a terminated employee
all of his or her accumulated payroll deductions, without
interest.
16
PARTICIPATION
IN THE PLAN
Eligible employees enroll in the Employee Plan by delivering to
Cadence, no later than the fifteenth (15th) day of the month
before the offering period, an agreement authorizing payroll
deductions of an amount between 2% to 12% of the employees
gross earnings (before withholding of taxes and other amounts).
A participant will automatically participate in all future
offerings unless such participant withdraws from the Employee
Plan or subsequently becomes ineligible to participate in the
Employee Plan. A participant may terminate payroll deductions
and withdraw from a given offering under the Employee Plan by
delivering a notice of withdrawal to Cadence at any time prior
to the 15th day of month in which the offering period ends
(i.e., by January 15th or July 15th).
Upon an employees withdrawal from an offering, Cadence
will distribute to the employee his or her accumulated payroll
deductions, without interest, less any accumulated deductions
previously applied to the purchase of common stock on the
employees behalf during the offering.
PURCHASE
PRICE
The purchase price at which shares of common stock are sold in
an offering under the Employee Plan is the lower of:
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85% of the closing price of a share of common stock on the first
day of the offering period, or
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85% of the closing price of a share of common stock on the last
day of the offering period.
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PURCHASE
OF STOCK
A participant accumulates the purchase price of the shares by
payroll deductions over the course of the offering period. One
time during the offering, a participant may reduce or terminate
his or her payroll deductions if the Board has provided for such
reduction or termination for that offering. The Board may
provide that an employee who first becomes eligible to
participate in the Employee Plan after an offering has begun may
participate in the Employee Plan, as of a date specified during
the offering period. Cadence will credit all payroll deductions
made for a participant to the participants account under
the Employee Plan and will deposit the payroll deductions into a
Cadence bank account, which also contains the general funds of
Cadence. A participant may not make additional payments into his
or her account.
In connection with offerings made under the Employee Plan, the
Board may specify a maximum number of shares of common stock an
employee may be granted the right to purchase and the maximum
number of shares of common stock that may be purchased in that
offering by all participants. If the total number of shares to
be purchased upon exercise of rights granted in the offering
exceeds the maximum aggregate number of shares of common stock
available for the offering, the Board will make a pro rata
allocation of available shares in a uniform and equitable
manner. Unless the employees participation is
discontinued, his or her right to purchase shares is exercised
automatically at the end of the purchase period at the then
applicable purchase price.
DURATION,
AMENDMENT AND TERMINATION
The Board may suspend or terminate the Employee Plan at any
time. Unless terminated earlier, the Employee Plan will
terminate when all of the shares reserved shares for issuance
under the Employee Plan, as increased or adjusted from time to
time, have been issued.
The Board may amend the Employee Plan at any time. Any amendment
of the Employee Plan must be approved by the stockholders within
12 months before or after its adoption by the Board to the
extent stockholder approval is necessary for the Employee Plan
to satisfy Section 423 of the Code,
Rule 16b-3
under the Exchange Act or any NASDAQ or other applicable
securities exchange listing requirements. Currently, under the
Code, stockholder approval must be obtained if the amendment
would, among other things:
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increase the number of shares of common stock reserved for
issuance under the Employee Plan, or
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modify the requirements relating to eligibility for
participation in the Employee Plan.
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17
Rights granted before any amendment or termination of the
Employee Plan will not be altered or impaired by any amendment
or termination of the Employee Plan without the consent of the
employee to whom such rights were granted.
EFFECT OF
CERTAIN CORPORATE EVENTS
In the event of a dissolution or liquidation of Cadence, all
offerings will terminate prior to the consummation of the
proposed transaction or, at the Boards discretion, the
purchase date of any offering will be accelerated so that the
outstanding rights may be exercised before or concurrent with
the proposed transaction. In the event of a proposed sale of all
or substantially all of the assets of Cadence, or the merger of
Cadence with or into another corporation where Cadence is not
the surviving corporation, all offerings will terminate prior to
the consummation of the proposed event, unless the surviving
corporation assumes the rights under the Employee Plan or
substitutes similar rights, or the Board, at its discretion,
provides that participants may exercise outstanding rights. If
the Board makes a right exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the
Board must notify participants that their rights under the
Employee Plan will be fully exercisable for a period of
20 days from the date of such notice, or other period of
time as the Board determines.
FEDERAL
INCOME TAX INFORMATION
The following is an overview, as of the date of this proxy
statement, of the effect of federal income taxation upon the
participants and Cadence with respect to the grant and exercise
of rights granted under the Employee Plan, but is not complete,
does not discuss the income tax laws of any state or foreign
country in which a participant may reside, is subject to change
and is not intended to be relied upon as tax advice.
Participants in the Employee Plan should consult their own tax
advisors regarding the specific tax consequences to them of
participating in the Employee Plan.
Rights granted under the Employee Plan are intended to qualify
for favorable federal income tax treatment associated with
rights granted under an employee stock purchase plan that
qualifies under Section 423 of the Code, which requires
stockholder approval of the Employee Plan and certain amendments.
A participant will be taxed on amounts withheld for the purchase
of shares of common stock under the Employee Plan as if such
amounts were actually received. No other income will be taxable
to a participant as a result of participating in the Employee
Plan until the disposition of the acquired shares, and the
effect of taxation will depend on the holding period of the
acquired shares.
If the stock is disposed of more than two years after the
beginning of the offering period and more than one year after
the stock is transferred to the participant, then the
participant will recognize ordinary income equal to the lesser
of:
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the amount by which the fair market value of the stock at the
time of such disposition exceeds the purchase price, or
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the amount by which the fair market value of the stock as of the
beginning of the offering period exceeds the purchase price
determined as of the beginning of the offering period.
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Any further gain or any loss will be taxed as a long-term
capital gain or loss. Generally, long-term capital gains are
currently subject to lower tax rates than ordinary income. The
deductibility of capital losses is limited.
If the stock is sold or disposed of before the expiration of
either of the two holding periods described above, then the
amount by which the fair market value of the stock on the
purchase date exceeds the purchase price will be treated as
ordinary income at the time of disposition. The balance of any
gain will be treated as capital gain. Even if the stock is later
disposed of for less than its fair market value on the purchase
date, the same amount of ordinary income is attributed to the
participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of
the stock on the purchase date. Any capital gain or loss will be
short-term or long-term, depending on how long the stock has
been held. As mentioned above, the deductibility of capital
losses is limited, and thus a disposition of the stock, before
the expiration of the one and two-year holding periods described
above,
18
for an amount less than the fair market value of the stock on
the purchase date could result in ordinary income (and a tax
liability) and a non-deductible capital loss.
Cadence generally is entitled to a tax deduction to the extent
amounts are taxed as ordinary income to a participant, subject
to satisfying tax reporting obligations. In all other cases, no
tax deduction is allowed to Cadence.
PROPOSAL 3
RATIFICATION
OF APPOINTMENT OF THE INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee has selected KPMG LLP as Cadences
independent registered public accounting firm for the fiscal
year ending January 3, 2009. Pursuant to the Audit
Committee charter, the Board has directed management to submit
the selection of the independent registered public accounting
firm for ratification by the stockholders at the annual meeting.
KPMG LLP has audited Cadences financial statements since
fiscal 2002. Representatives from KPMG LLP are expected to be
present at the annual meeting, will have an opportunity to make
a statement, if they so desire, and will be available to respond
to appropriate questions.
Stockholder ratification of the selection of KPMG LLP as
Cadences independent registered public accounting firm is
not required by Cadences Bylaws or otherwise. However, the
Board is submitting the selection of KPMG LLP to the
stockholders for ratification as a matter of good corporate
practice. If Cadences stockholders fail to ratify the
selection, the Audit Committee will reconsider whether or not to
retain KPMG LLP. Even if the selection is ratified, the Audit
Committee, in its discretion, may direct the appointment of a
different independent registered public accounting firm at any
time during the year, if it determines that such a change would
be in the best interests of Cadence and its stockholders.
VOTE
REQUIRED AND BOARD RECOMMENDATION
The Board of Directors of Cadence recommends a vote FOR
ratification of the selection of KPMG LLP. The affirmative
vote of a majority of the shares present in person or
represented by proxy and entitled to vote on the proposal is
required for approval of this proposal. Abstentions will be
treated as being present and entitled to vote on the proposal
and, therefore, will have the effect of votes against the
proposal. Unless marked to the contrary, proxies received will
be voted FOR ratification of the selection of KPMG LLP.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF
PROPOSAL 3.
REPORT OF
THE AUDIT COMMITTEE
The Audit Committee of the Board is comprised of three
non-employee directors of Cadence who are
independent as defined by the corporate governance
listing standards of NASDAQ and as defined under the Exchange
Act. During fiscal 2007, the Audit Committee was comprised of
Mr. Lucas, Dr. Shoven and Mr. Siboni as Chairman.
The Audit Committee met nine times in fiscal 2007.
The Audit Committee operates under a charter, which was most
recently amended by the Board in February 2006. The Audit
Committee charter is posted on the investor relations page of
Cadences website at www.cadence.com. As more fully
described in its charter, the Audit Committee appoints and
retains the independent registered public accounting firm and
oversees the quality and integrity of Cadences financial
statements, Cadences compliance with legal and regulatory
requirements, the independent registered public accounting
firms qualifications and independence, and the performance
of Cadences internal audit function, the independent
registered public accounting firm, Cadences accounting and
financial reporting processes and the audits of Cadences
financial statements on behalf of the Board.
In this context, the Audit Committee has reviewed and discussed
the audited financial statements with Cadences management
and our independent registered public accounting firm, KPMG LLP.
The Audit Committee has also discussed with KPMG LLP the matters
required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees), as amended.
In addition, the Audit Committee has received from KPMG
19
LLP the written disclosures and the letter required by
Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and has discussed with KPMG
LLP its independence from Cadence and its management. The Audit
Committee has also considered whether the provision of other
non-audit services by KPMG LLP to Cadence is compatible with the
auditors independence.
In reliance on the reviews and discussions referred to above,
the Audit Committee recommended to the Board, and the Board
approved, the inclusion of the audited financial statements in
Cadences Annual Report on
Form 10-K
for the year ended December 29, 2007 for filing with the
SEC.
AUDIT COMMITTEE
Roger S. Siboni, Chairman
Donald L. Lucas
John B. Shoven
The foregoing Audit Committee report is not soliciting material,
is not deemed filed with the SEC and is not to be incorporated
by reference in any filing of Cadence under the Securities Act
of 1933, as amended, which is referred to in this proxy
statement as the Securities Act, or under the Exchange Act,
whether made before or after the date of this proxy statement
and irrespective of any general incorporation language in any
such filing.
FEES
BILLED TO CADENCE BY KPMG LLP DURING FISCAL 2007 AND
2006
The following table presents fees incurred by Cadence for
professional services rendered by KPMG LLP for the fiscal years
ended December 29, 2007 and December 30, 2006.
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Fiscal Year Ended
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Fiscal Year Ended
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December 29,
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December 30,
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2007
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2006
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(In thousands)
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Audit Fees(1)
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$
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4,180
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$
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3,745
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Audit-Related Fees(2)
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6
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(4)
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Audit and Audit-Related Fees
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4,186
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3,745
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Tax Fees(3)
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45
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(5)
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123
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(6)
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All Other Fees
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Total Fees
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$
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4,231
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$
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3,868
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(1) |
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Includes fees for the audit of Cadences consolidated
financial statements included in Cadences Annual Report on
Form 10-K,
fees for the audit of Cadences internal control over
financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002, fees for the review of the interim
condensed consolidated financial statements included in
Cadences Quarterly Reports on
Form 10-Q,
and fees for services that are normally provided by KPMG LLP in
connection with statutory and regulatory filings or other
engagements. The amount for fiscal 2007 includes estimated fees
of $1,318,745 not yet paid as of the date of this filing, which
includes fees for services rendered in connection with
Cadences year-end financial statement audit and the audit
of Cadences internal control over financial reporting in
accordance with Section 404 of the Sarbanes-Oxley Act of
2002 of $742,745 and fees for statutory and regulatory filings
related to the 2007 fiscal year of $576,000. |
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Includes fees for assurance and related services that are
reasonably related to the performance of the audit or review of
Cadences consolidated financial statements that are not
reported under Audit Fees. |
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Includes fees for tax compliance, tax advice and tax planning. |
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(4) |
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Audit-Related Fees for fiscal 2007 consisted of compliance audit
fees for a project partially funded by a European government
authority. |
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Tax Fees for fiscal 2007 consisted of tax compliance fees of
$31,464 and tax planning and consulting fees of $13,484. |
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(6) |
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Tax Fees for fiscal 2006 consisted of tax compliance fees of
$36,522 and tax planning and consulting fees of $86,957. |
20
AUDIT
COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Audit Committee pre-approves all audit and permissible
non-audit services provided by KPMG LLP prior to the engagement
of KPMG LLP with respect to such services. Pursuant to its
pre-approval policy, the Audit Committee has pre-approved tax
compliance services, tax planning and related tax services, and
the following audit-related services:
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Accounting consultations and audits in connection with
acquisitions;
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Attest services not required by statute or regulation;
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Adoption of new accounting pronouncements or reporting
requirements;
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Accounting, internal control or regulatory consultations and
assistance; and
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Review of information systems security and controls.
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However, engagements for these pre-approved audit-related and
tax services with an estimated cost of more than $250,000 or
that exceed the applicable budgeted amount for the pre-approved
services must be pre-approved on a
case-by-case
basis by the Audit Committee or the Chairman of the Audit
Committee, or, if the Chairman is unavailable, another member of
the Audit Committee. In addition, any proposed engagement of
KPMG LLP for services that are not pre-approved audit-related
and tax services as described above must also be pre-approved on
a
case-by-case
basis by the Audit Committee or the Chairman of the Audit
Committee, or, if the Chairman is unavailable, another member of
the Audit Committee. The members to whom such authority is
delegated must report any approval decisions to the full Audit
Committee at its next scheduled meeting. None of the services
described in the table above entitled Fees Billed to
Cadence by KPMG During Fiscal 2007 and 2006 were approved
by the Audit Committee under the de minimis exception
provided by
Rule 2-01(c)(7)(i)(C)
of
Regulation S-X.
21
SECURITY
OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of Cadences common stock as of March 14,
2008, the record date, unless otherwise indicated below, by:
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All those known by Cadence to be beneficial owners of more than
five percent of its common stock;
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Each of the executive officers named in the Summary Compensation
Table presented below under Compensation of Executive
Officers;
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All directors and director nominees; and
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All current executive officers and directors of Cadence as a
group.
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Beneficial Ownership(1)
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Number of
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Percent of
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Beneficial Owner
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Shares
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Total
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Five Percent Stockholders:
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Franklin Resources, Inc.(2)
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26,827,429
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10.30
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%
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One Franklin Parkway
San Mateo, CA 94403
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|
Wellington Management Company, LLP(3)
|
|
|
23,600,655
|
|
|
|
9.06
|
%
|
75 State Street
Boston, MA 02109
|
|
|
|
|
|
|
|
|
Barclays Global Investors, NA(4)
|
|
|
18,839,411
|
|
|
|
7.23
|
%
|
45 Fremont Street
San Francisco, CA 94105
|
|
|
|
|
|
|
|
|
Lord, Abbett & Co. LLC(5)
|
|
|
17,433,374
|
|
|
|
6.69
|
%
|
90 Hudson Street
Jersey City, NJ 07302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors and Executive Officers:
|
|
|
|
|
|
|
|
|
Donald L. Lucas(6)
|
|
|
240,000
|
|
|
|
*
|
|
Alberto Sangiovanni-Vincentelli(6)
|
|
|
341,493
|
|
|
|
*
|
|
George M. Scalise(6)
|
|
|
227,500
|
|
|
|
*
|
|
John B. Shoven(6)
|
|
|
341,250
|
|
|
|
*
|
|
Roger S. Siboni(6)
|
|
|
240,625
|
|
|
|
*
|
|
John A.C. Swainson(6)
|
|
|
55,000
|
|
|
|
*
|
|
Lip-Bu Tan(6)(7)
|
|
|
117,250
|
|
|
|
*
|
|
Michael J. Fister(6)
|
|
|
5,747,154
|
|
|
|
2.17
|
%
|
William Porter(6)
|
|
|
1,416,650
|
|
|
|
*
|
|
Kevin Bushby(6)
|
|
|
1,029,377
|
|
|
|
*
|
|
James S. Miller, Jr.(6)
|
|
|
711,464
|
|
|
|
*
|
|
R.L. Smith McKeithen.(6)
|
|
|
704,352
|
|
|
|
*
|
|
Moshe Gavrielov(6)
|
|
|
301,688
|
|
|
|
*
|
|
All current executive officers and directors as a group
(13 persons)(8)
|
|
|
11,473,803
|
|
|
|
4.25
|
%
|
|
|
|
* |
|
Less than 1% |
|
(1) |
|
This table is based upon information supplied by officers,
directors and principal stockholders and Schedules 13G filed
with the SEC. Unless otherwise indicated in the footnotes to
this table and subject to community property laws where
applicable, Cadence believes that each of the stockholders named
in this table has sole voting and investment power with respect
to the shares indicated as beneficially owned by such
stockholder. Beneficial ownership of greater than five percent
of Cadences outstanding common stock reflects ownership as
of the most recent date indicated under filings with the SEC as
noted below, while beneficial ownership of executive officers
and directors is |
22
|
|
|
|
|
as of March 14, 2008, the record date. Applicable
percentages are based on 260,470,262 shares of Cadence
common stock outstanding on the record date, adjusted as
required by rules promulgated by the SEC. |
|
(2) |
|
Franklin Resources, Inc., or Franklin, filed an amended
Schedule 13G with the SEC on February 6, 2008,
indicating that Franklin, through its direct and indirect
investment management subsidiaries, beneficially owns
26,827,429 shares, but does not have voting power or
investment power with respect to such shares. Of the shares
reported by Franklin, Charles B. Johnson and Rupert H. Johnson,
Jr., as a result of their control over Franklin, are each deemed
to be beneficial owners of 26,827,429 shares, but do not
have voting power or investment power with respect to such
shares. Of the shares reported by Franklin, Templeton Global
Advisors Limited, an investment management subsidiary of
Franklin, beneficially owns 21,959,557 shares for which it
has sole voting power with respect to 21,829,557 shares,
sole investment power with respect to 21,933,168 shares and
shared investment power with respect to 26,389 shares. Each
of Franklin, its investment management subsidiaries, Charles B.
Johnson and Rupert H. Johnson, Jr. disclaims beneficial
ownership of or any pecuniary interest in such shares. |
|
(3) |
|
Wellington Management Company, LLP, or Wellington, filed an
amended Schedule 13G with the SEC on February 14,
2008, indicating that Wellington, in its capacity as investment
adviser, beneficially owns 23,600,655 shares. Wellington
has shared voting power with respect to 16,382,915 shares
and shared investment power with respect to
23,600,655 shares. |
|
(4) |
|
Barclays Global Investors, NA., or Barclays, filed a
Schedule 13G with the SEC on February 5, 2008,
indicating that Barclays and its affiliated entities
collectively have sole voting power with respect to
16,584,096 shares and sole investment power with respect to
18,839,411 shares. Barclays and its affiliated entities
reported sole voting and investment power as follows:
(i) Barclays beneficially owns 12,510,711 shares for
which it has sole voting power with respect to
10,468,926 shares and sole investment power with respect to
12,510,711 shares, (ii) Barclays Global
Fund Advisors beneficially owns 4,388,870 shares for
which it has sole voting and investment power,
(iii) Barclays Global Investors, LTD beneficially owns
1,223,577 shares for which it has sole voting power with
respect to 1,010,047 shares and sole investment power with
respect to 1,223,577 shares, (iv) Barclays Global
Investors Japan Limited beneficially owns 646,586 shares
for which it has sole voting and investment power,
(v) Barclays Global Investors Canada Limited beneficially
owns 69,667 shares for which it has sole voting and
investment power, and (vi) Barclays Global Investors Japan
Trust and Banking Company Limited, Barclays Global Investors
Australia Limited, Barclays Global Investors (Deutschland) AG,
which have no voting or investment power over any shares. |
|
(5) |
|
Lord, Abbett & Co. LLC, or Lord Abbett, filed an
amended Schedule 13G with the SEC on February 14,
2008, indicating that Lord Abbett beneficially owns
17,433,374 shares. Lord Abbett has sole voting power with
respect to 16,829,574 shares and sole investment power with
respect to 17,433,374 shares. |
|
(6) |
|
Includes shares which certain current and former executive
officers and directors of Cadence have the right to acquire
within 60 days after the record date upon exercise of
outstanding options as follows: |
|
|
|
|
|
|
|
|
|
|
|
Michael J. Fister
|
|
|
4,861,009
|
|
|
Alberto Sangiovanni-Vincentelli
|
|
|
335,000
|
|
Kevin Bushby
|
|
|
743,750
|
|
|
George M. Scalise
|
|
|
217,500
|
|
Moshe Gavrielov
|
|
|
207,938
|
|
|
John B. Shoven
|
|
|
326,250
|
|
R.L. Smith McKeithen
|
|
|
590,000
|
|
|
Roger S. Siboni
|
|
|
235,625
|
|
James S. Miller, Jr.
|
|
|
374,166
|
|
|
John A.C. Swainson
|
|
|
50,000
|
|
William Porter
|
|
|
977,500
|
|
|
Lip-Bu Tan
|
|
|
106,250
|
|
Donald L. Lucas
|
|
|
235,000
|
|
|
|
|
|
|
|
|
|
|
(7) |
|
Includes 11,000 shares for which Mr. Tan has shared
voting and investment power, of which 5,000 shares are held
in the name of Lip-Bu Tan and Ysa Loo Trustees, FBO Lip-Bu Tan
and Ysa Loo Trust Dated February 3, 1992 for the
benefit of Mr. Tan and his wife; 5,000 shares that are
held in the name of A&E Investment LLC, the sole member of
which is Lip-Bu Tan and Ysa Loo Trust; and 1,000 shares
that are held in the name of L. Tan & N
Lee & W Lee Trustees, Pacven Walden Inc. 401(k) PSP
FBO Lip-Bu Tan. Mr. Tan disclaims beneficial ownership of
such shares except to the extent of his pecuniary interest
therein. |
|
(8) |
|
Includes 9,259,988 shares which all current executive
officers and directors in the aggregate have the right to
acquire within 60 days after the record date upon exercise
of outstanding options. |
23
COMPENSATION
DISCUSSION AND ANALYSIS
OVERALL
OBJECTIVES OF EXECUTIVE COMPENSATION PROGRAM
Cadences compensation program for its Named Executive
Officers is designed to attract, motivate and retain highly
qualified individuals with the leadership skills necessary to
achieve Cadences annual and long-term business objectives
and to create stockholder value. Cadences executive
compensation program is based on the following underlying
principles:
|
|
|
|
|
Executives total direct compensation (consisting of
salary, annual incentive compensation, and long-term equity
incentive opportunities) should be competitive with market
practice;
|
|
|
|
The executive compensation program should align the interests of
the Named Executive Officers with the interests of stockholders
by providing executives with long-term equity incentive
compensation opportunities and promoting stock
ownership; and
|
|
|
|
A substantial portion of executives compensation should be
at risk and should vary based on Cadences financial and
operational performance as well as the executives level of
responsibility and individual performance.
|
The Compensation Committee assesses Cadences executive
compensation program annually to monitor Cadences
adherence to these principles.
DETERMINING
EXECUTIVE COMPENSATION
Competitive
Compensation Levels
Each year the Compensation Committee benchmarks the
competitiveness of the elements of the Named Executive
Officers total direct compensation previously listed. The
Compensation Committee also periodically reviews the
competitiveness of the Named Executive Officers severance
and change in control arrangements and the broad-based employee
benefit plans in which Named Executive Officers participate (as
discussed in more detail below).
In 2007, the Compensation Committee developed two separate peer
groups for benchmarking purposes. One peer group was used to
understand market trends with respect to pay programs and
practices among business and talent competitors and other
industry bellwethers, which is referred to in this proxy
statement as the Direct Practices Peer Group. The other was used
to assess the competitiveness of the Named Executive
Officers total direct compensation in light of the total
direct compensation offered to executives with similar titles
and responsibilities at companies with which Cadence competes
for talent, which is referred to in this proxy statement as the
Primary Compensation Peer Group.
Direct
Practices Peer Group
This group was determined qualitatively by the Compensation
Committee with the assistance of its compensation consultant and
is comprised of technology bellwethers, companies in nearby or
adjacent markets, and other business and talent competitors.
While the Compensation Committee monitors the compensation
practices of the companies in this group, it does not generally
consider the level of compensation that they actually pay to
their executive officers (other than those for companies that
are also in the Primary Compensation Peer Group) because of
differences in the scope of job responsibilities or the breadth
of the organizations reporting to executives holding the same or
similar titles.
The following companies (four of which were also included in the
Primary Compensation Peer Group) comprised the Direct Practices
Peer Group for 2007:
|
|
|
|
|
Adobe Systems Incorporated
|
|
Intel Corporation
|
|
Oracle Corporation
|
Applied Materials, Inc.
|
|
KLA-Tencor Corporation
|
|
Synopsys, Inc.
|
Broadcom Corporation
|
|
Mentor Graphics Corporation
|
|
VMware, Inc.
|
Cisco Systems, Inc.
|
|
NVIDIA Corporation
|
|
|
24
Primary
Compensation Peer Group
In order to reflect more accurately the pool from which
executive talent is drawn and to which it is lost, this peer
group is not limited to Cadences direct business
competitors. Rather, the Compensation Committee included
companies that have a technology emphasis, are located in the
San Francisco Bay Area, are similar in size to Cadence, and
currently or prospectively compete in the same talent market as
Cadence. The group was determined by applying the following
criteria: technology companies primarily located in the Silicon
Valley, where Cadence is headquartered, with revenue between .5
and 2.5 times that of Cadences fiscal year 2006 revenue,
and market capitalizations between .25 and 4 times that of
Cadences market capitalization as of July 2007. The
resulting group of 31 companies was used to assess the
competitiveness of the Named Executive Officers base
salaries, target and actual annual incentive compensation,
long-term equity incentive opportunities, and total direct
compensation.
The following companies (four of which were also included in the
Direct Practices Peer Group) comprised the Primary Compensation
Peer Group for 2007 for determining competitive compensation
levels:
|
|
|
|
|
Adobe Systems Incorporated
|
|
JDS Uniphase Corporation
|
|
Network Appliance Inc.
|
Altera Corporation
|
|
Juniper Networks Inc.
|
|
Novellus Systems, Inc.
|
Atmel Corporation
|
|
KLA-Tencor Corporation
|
|
NVIDIA Corporation
|
Autodesk, Inc.
|
|
Lam Research Corporation
|
|
Palm, Inc.
|
BEA Systems, Inc.
|
|
Linear Technology Corporation
|
|
SanDisk Corporation
|
Brocade Communications Systems, Inc.
|
|
Logitech International S.A.
|
|
Sybase, Inc.
|
Cypress Semiconductor Corporation
|
|
LSI Corporation
|
|
Synopsys, Inc.
|
Electronic Arts Inc.
|
|
Maxim Integrated Products, Inc.
|
|
Trimble Navigation Limited
|
Integrated Device Technology, Inc.
|
|
McAfee, Inc.
|
|
VeriSign, Inc.
|
Intersil Corporation
|
|
National Semiconductor Corporation
|
|
Xilinx, Inc.
|
Intuit Inc.
|
|
|
|
|
Compensation
Determinations
Consistent with the general principles outlined above, after the
Compensation Committee has determined the market levels of
compensation based on the compensation paid by the Primary
Compensation Peer Group, the Compensation Committee assesses the
appropriateness of each Named Executive Officers
compensation level relative to similar executives at the
comparator companies. Cadence does not target Named Executive
Officer compensation at a specific level or percentage relative
to compensation provided by the companies in the Primary
Compensation Peer Group, whether for total direct compensation
or any element of total direct compensation. Instead, when
determining compensation levels for the Named Executive
Officers, the Compensation Committee takes into account not only
the information regarding compensation paid to executives with
similar titles and responsibilities at the companies in the
Primary Compensation Peer Group, but also each of the following
factors, without prescribing particular weightings:
Cadence
Factors
|
|
|
|
|
Cadences business and financial performance as compared to
the performance of the companies in the Primary Compensation
Peer Group; and
|
|
|
|
Cadences relative size and the scope of Cadences
business as compared to the companies in the Primary
Compensation Peer Group.
|
Individual
Factors
|
|
|
|
|
Strategic importance of the position;
|
|
|
|
Scarcity in the market of the individuals skills and
talents;
|
|
|
|
Individual performance over the preceding year;
|
25
|
|
|
|
|
Expected future contributions;
|
|
|
|
Historical compensation;
|
|
|
|
Ability to impact corporate
and/or
business unit results;
|
|
|
|
Retention risks; and
|
|
|
|
Relative positioning/performance versus other executives.
|
For each Named Executive Officer other than the CEO, the CEO
makes recommendations to the Compensation Committee for annual
adjustments to base salary, annual cash incentive compensation,
and long-term equity incentive compensation components based
upon the CEOs assessment of the factors described above.
The Compensation Committee reviews with the CEO these
assessments and recommendations for each Named Executive Officer
other than the CEO and determines whether or not to approve
and/or
modify the CEOs recommendations. The CEOs
performance with respect to these individual factors is
evaluated by the Compensation Committee. Annual adjustments to
the CEOs compensation levels for these elements of total
direct compensation are based on these assessments without input
from management.
ELEMENTS
OF EXECUTIVE COMPENSATION
The executive compensation program is comprised of the following
elements, although not all the Named Executive Officers receive
each element listed under other compensation and
benefits:
|
|
|
|
|
Total direct compensation, consisting of:
|
|
|
|
|
|
Base salary;
|
|
|
|
Annual cash incentive compensation; and
|
|
|
|
Long-term equity incentive compensation (including stock options
and shares of restricted stock).
|
|
|
|
|
|
Other compensation and benefits, consisting of:
|
|
|
|
|
|
Participation in Cadences broad-based benefit plans;
|
|
|
|
Participation in Cadences nonqualified deferred
compensation plans; and
|
|
|
|
Perquisites.
|
Consistent with the principles outlined above, a substantial
portion of total direct compensation varies based upon
Cadences achievement of its financial and operational
objectives, as well as an executives individual
performance objectives. Cadence does not have a pre-established
policy or target for allocating between fixed and variable
compensation or among the different types of variable
compensation, although this allocation is influenced by the
Compensation Committees assessment of the compensation
practices of the companies in the Primary Compensation Peer
Group. Instead, the Compensation Committee aims to provide fixed
pay (base salary) at levels sufficient, but not greater, to
attract and retain qualified executives. The remaining portion
of total direct compensation is comprised of variable
compensation in the form of annual cash incentive compensation
and long-term equity incentives. In 2007, approximately 80% to
90% of each Named Executive Officers total direct
compensation was allocated to variable compensation. Cadence
believes that executives should be rewarded for achieving annual
performance goals, but that consistent and sustained performance
is the single most important influence on long-term stockholder
value. Accordingly, the Named Executive Officers variable
compensation is weighted towards long-term equity incentives
rather than annual cash incentive compensation. In 2007,
approximately 70% to 85% of each Named Executive Officers
variable compensation was allocated to long-term equity
incentives compensation.
Base
Salaries
Cadence offers all of its Named Executive Officers an annual
base salary to compensate them for services rendered during the
year. Base salaries are essential for the attraction and
retention of talented executives and are determined consistent
with the methodology outlined above under Compensation
Determinations. Salaries are
26
reviewed annually by the Compensation Committee, but do not
automatically increase. Changes to base salaries, if any, are
typically made in the first quarter of the year. In February
2007, the Compensation Committee reviewed the base salaries of
the Named Executive Officers, and decided not to increase base
salaries for 2007.
Annual
Cash Incentive Compensation
Cadence provides all Named Executive Officers the opportunity to
earn variable cash compensation under the stockholder-approved
Cadence Senior Executive Bonus Plan. The purpose of this plan is
to reward the Named Executive Officers for performance during a
single fiscal year and to provide incentives for them to achieve
Cadences annual business and financial goals, as measured
against specific performance criteria relative to their
respective business groups and Cadences overall business
results. Bonus payouts are made semi-annually, with 40% of the
annual target payable for performance in the first half of the
year and 60% payable for performance in the second half. Greater
emphasis is placed on the second half of the year because a
greater share of annual revenue and profits are typically earned
during that half of the year. The annual bonus paid to each
Named Executive Officer is determined based upon the Named
Executive Officers target bonus multiplied by a Cadence
group modifier and an individual performance modifier (each
described in more detail below). For each Named Executive
Officer other than the CEO, the Compensation Committee reviews
and approves (with or without modification, in its sole
discretion) the CEOs recommendations as to the
executives target bonus based on the methodology outlined
above under Compensation Determinations. The
Compensation Committee also assigns the CEO a target bonus based
on the methodology outlined above under Compensation
Determinations. Target bonuses for Named Executive
Officers are expressed as either a dollar amount or a percent of
salary. In February 2007, the Compensation Committee reviewed
the target bonus amounts for the Named Executive Officers, and
decided not to make any changes for 2007.
Cadence
Group Modifier
The Cadence group modifier is a percentage that reflects
Cadences overall performance (the company performance
modifier) and, for all Named Executive Officers except the CEO,
the performance of the business group for which the Named
Executive Officer is responsible (the business objectives
modifier). The weightings and performance measures used to
determine the Cadence group modifier (including both the
performance metrics for the company performance modifier and the
business group objectives) are reviewed semi-annually by the
Compensation Committee, in consultation with the CEO, to assure
that they align with what the Compensation Committee and the CEO
believe are the most important factors that influence both
annual business and financial performance and long-term
stockholder value.
For 2007, the performance metrics for the company performance
modifier were total revenue (defined as the total dollar value
of revenue as disclosed in Cadences periodic reports on
Forms 10-Q
and 10-K)
and non-GAAP operating margin (defined as non-GAAP income from
operations, as disclosed in Cadences current reports on
Form 8-K,
which incorporate quarterly announcement of financial results,
represented as a percentage of total revenue). The achievement
of the company performance modifier is determined based on a
formula.
The business objectives modifier is based on the achievement of
qualitative short-term and long-term performance goals that vary
by business group. For each business group, these goals are
related to one or more of the following: operational excellence
and efficiencies, new product development, customer
satisfaction, innovation and goals related to Cadences
long-term business strategy. The business objectives for the
Chief Financial Officer included increasing operational
excellence and efficiency. The business objectives for the
Executive Vice President, Worldwide Field Operations included
bookings and revenue growth and increased customer satisfaction
through delivery of world-class customer support. The business
objectives for the Executive Vice President, Products and
Technologies Organization and Executive Vice President and
General Manager, Verification Division were centered on
increased innovation, achievement of product milestones and
increased customer satisfaction. The business objectives for the
Senior Vice President and General Counsel were focused on
strategic and commercial transaction support, identification and
protection of Cadences intellectual property, regulatory
compliance and mitigation of legal risk. The Compensation
Committee reviews the achievement of these goals based upon the
CEOs assessment of each business groups performance
relative to its specific objectives. The business objectives
modifier for the CEO is the average of the business objective
modifiers for each of his direct
27
reports. The Compensation Committee intends for the achievement
of the business group goals at the 100% level to present a
significant challenge to the Named Executive Officers. Over the
past three years (comprising six semi-annual performance periods
from 2005 through 2007), each Named Executive Officer met or
exceeded all of his overall business group objectives.
For 2007, the total revenue target represented 35%, the
operating margin target represented 30% and the business
objectives modifier represented 35% of the company performance
modifier. Performance targets for the company performance
modifier were based on achievement of Cadences 2007
business plan and were approved by the Compensation Committee.
Performance on each measure was determined independently (e.g.,
it was possible to miss the performance target for one or more
measures and still receive a payout based upon the achievement
of the remaining performance targets). For the first half of
2007, the total revenue target was $742 million and the
non-GAAP
operating margin target was 25.8%. For the second half of 2007,
the total revenue target was $858 million and the non-GAAP
operating margin target was 33.5%. For 2007, achievement of 90%
of target level of total revenue and operating margin was
required before any payment with respect of each such measure
pursuant to the plan could be made. Cadence achieved total
revenue of $756 million and operating margin of 26.3% for
the first half of 2007 and total revenue of $859 million
and operating margin of 34.0% for the second half of 2007, which
results, combined with the Named Executive Officers
achievement with respect to their business group objectives and
the Compensation Committees determination of their
individual performance modifier (discussed in more detail below)
yielded the bonus awards shown in the Summary Compensation Table.
Individual
Performance Modifier
The individual performance modifier is derived from subjective
assessments of individual performance during the performance
period, based upon the individual factors listed above in the
Compensation Determinations section. Together with
the CEO, the Compensation Committee evaluates the performance of
each Named Executive Officer (other than the CEO) during the
performance period and, based in part upon the CEOs
recommendations, approves the individual performance modifiers
for each of the Named Executive Officers, other than the CEO.
The Compensation Committee evaluates the CEOs performance
based upon the CEOs individual performance and
contributions, and Cadences overall performance. This
evaluation determines the CEOs individual performance
modifier.
In February 2008, the Compensation Committee, consistent with
the terms of the Senior Executive Bonus Plan, changed the
structure of annual cash incentive compensation program for the
Named Executive Officers for the 2008 fiscal year to provide for
one payout based on full year performance, rather than
semi-annual bonus payouts based upon performance in each half of
the fiscal year. The performance criteria established under the
program for 2008 are based upon the same metrics as used in 2007
(namely, total revenue and non-GAAP operating margin, as well as
business group objectives). The Compensation Committee changed
the performance periods from semi-annual to annual in order to
focus the Named Executive Officers on consistent performance
throughout the fiscal year.
Long-Term
Equity Incentive Compensation
Consistent with the principles outlined above, long-term
incentives are designed to provide the Named Executive Officers
with an equity stake in Cadence, promote stock ownership to
align the Named Executive Officers interests with those of
Cadences stockholders and create significant incentives
for executive retention. In addition, the Compensation Committee
approves individual equity grants based on the methodology
outlined above under Compensation Determinations.
In 2007, Cadence made equity grants in the form of stock options
and restricted stock to the Named Executive Officers. Stock
options provide an opportunity for Cadence to reward its Named
Executive Officers if Cadences share price increases and
the Named Executive Officers remain employed by Cadence during
the period required for the options to vest. Awards of
restricted stock align the interests of Named Executive Officers
with the interests of stockholders through stock ownership, and
increase the reward to the Named Executive Officers when
Cadences stock price increases. Stock options and awards
of restricted stock serve as a retention tool for the Named
Executive Officers. Stock options granted to Named Executive
Officers in 2007 vest monthly over four years from the date of
28
grant and expire seven years from the date of grant. Awards of
restricted stock granted to Named Executive Officers in 2007
vest 25% on each of the first four anniversaries of the
grant date.
When allocating long-term incentive compensation opportunities
for Named Executive Officers other than the CEO, the
Compensation Committee currently targets between 60% and 80% of
the total value of equity grants in the form of restricted
stock, with the remainder comprised of stock options with an
exercise price equal to the fair market value of Cadence common
stock on the grant date. The Compensation Committee believes
this mix of restricted stock and options creates an effective
tool for incentivizing and retaining those executives who are
most responsible for influencing stockholder value.
In 2007, the equity grants made to the CEO were more heavily
weighted towards stock options than the grants made to the other
Named Executive Officers, with one-third of the total value of
the CEOs equity grants in the form of restricted stock,
one-third in the form of stock options with an exercise price
equal to the closing price of Cadence common stock on the grant
date, and the remaining one-third in fully vested
out-of-the-money stock options. The exercise price for the
out-of-the-money stock options was equal to 125% of
the closing price of Cadence common stock on the grant date. The
CEO will not realize any value from the out-of-the-money options
until shareholders have realized a 25% gain in the stock price
over the price on the grant date. The Compensation Committee
chose this mix to further promote share ownership, strengthen
shareholder alignment, and incentivize sustained stock price
growth. The Compensation Committee granted out-of-the-money
stock options to the Chief Executive Officer and not the other
Named Executive Officers to focus strong incentives for
substantial appreciation in the stock price on the senior
executive most able to affect the stock price by his individual
actions and decisions.
Grant
Timing Policy
The Compensation Committee and senior management monitor
Cadences stock option and restricted stock grant policies
to ensure that they comply with governing regulations and are
consistent with good corporate practice. In each of 2006 and
2007, grants to executive officers were made at Compensation
Committee meetings held in February, after results for the
preceding fiscal year became publicly available, enabling the
Compensation Committee to consider both the prior years
performance and expectations for the succeeding year in making
grant decisions. However, the Compensation Committee may make
grants at any time of the year it deems appropriate.
Deferred
Compensation
The Named Executive Officers may elect to defer compensation
payable to them under Cadences 1994 Deferred Compensation
Plan. This plan is designed to allow for retirement savings
above the limits imposed by the Code for 401(k) plans on an
income tax-deferred basis for Cadence employees at the level of
vice president (or its equivalent) and above who choose to
participate. Amounts deferred into the plan are held in accounts
with values indexed to the performance of selected mutual funds
or money market accounts. On January 1, 2007, Cadence
eliminated, with respect to new deferrals, a self-directed
investment option previously available under the plan. With the
elimination of this investment option, the investment options
made available under the plan are substantially similar to those
available under Cadences tax-qualified 401(k) plan.
Cadence does not provide a match on executive deferrals under
the deferred compensation plan. Cadence maintains this plan for
the purposes of providing a competitive benefit and allowing all
participants, including the Named Executive Officers, an
opportunity to defer income tax payments on their cash
compensation.
Other
Employee Benefit Plans
The Named Executive Officers are eligible for the same benefits
available to Cadence employees generally. These include
participation in a tax-qualified 401(k) plan, employee stock
purchase plan, and group life, health, dental, vision, and
disability insurance plans. Cadence also routinely benchmarks
its broad-based employee benefit plans based upon a review of
the benefits survey conducted by the Silicon Valley
Employers Forum. Cadence aims to provide benefits to its
employees that are consistent with market practice.
29
Perquisites
Cadence has decided not to provide any material perquisites and
other personal benefits to the Named Executive Officers as part
of its overall compensation philosophy. However, Cadence will
provide perquisites selectively in extraordinary situations and
as incentives and rewards for exceptional efforts and time
commitments.
In connection with his initial hire, Cadence agreed to provide
Michael J. Fister, President and CEO, with financial
reimbursement related to his relocation to and housing in the
San Jose area. Similarly, Cadence has provided relocation
and housing assistance to Kevin Bushby, Executive Vice
President, Worldwide Field Operations, in connection with his
relocation from England to the San Jose area. The
Compensation Committee believes that these benefits are
reasonable and necessary to attract
and/or
retain each of these executives.
Severance
Benefits
Cadence has entered into agreements with all of its current
Named Executive Officers that provide for benefits upon
termination of employment under certain circumstances, including
in connection with a change in control of Cadence. Cadence
provides these benefits as a means of remaining competitive,
retaining executives, focusing executives on stockholder
interests when considering strategic alternatives, and providing
income protection in the event of involuntary loss of
employment. Please refer to the discussion under Potential
Payments upon Termination or Change in Control and Employment
Contracts below for a more detailed discussion of these
arrangements. In general, these arrangements provide for
severance benefits upon Cadences termination of the Named
Executive Officers employment without cause or resignation
by the executive for good reason. In the event of a change in
control of Cadence, and if the executive is terminated without
cause or resigns for good reason, the Named Executive Officer
will receive enhanced severance benefits. Accordingly, Cadence
provides for severance benefits only in the event of a
double trigger, because it believes that executives
are materially harmed only if a change in control results in
reduced responsibilities or compensation or loss of employment.
In early 2006, the Compensation Committee engaged its
compensation consultant to provide information on typical
industry practices concerning employment, severance, and change
in control agreements. Based on this review, the Compensation
Committee believes that Cadences current arrangements with
the Named Executive Officers are consistent with competitive
practices. The Compensation Committee intends to review these
arrangements every few years or to respond to changing
circumstances.
STOCK
OWNERSHIP GUIDELINES
Cadence maintains stock ownership guidelines for its Named
Executive Officers. The guidelines are designed to promote
alignment with the interests of stockholders and Cadences
commitment to sound corporate governance. Before establishing
these guidelines, Cadence reviewed industry standard practices.
The Compensation Committee has established the guidelines below.
Currently, all of Cadences Named Executive Officers
satisfy Cadences ownership guidelines.
Stock
Ownership Guidelines
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Position
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Shares(1)
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Years to Meet Guideline
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Chief Executive Officer
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100,000
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|
|
|
|
|
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|
Chief Financial Officer/Executive Vice Presidents
|
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50,000
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5 years
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Senior Vice Presidents
|
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25,000
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(1) |
|
For purposes of determining stock ownership levels, the
following forms of equity interests in Cadence count towards
satisfaction of the guidelines: restricted or incentive shares
(whether vested or unvested), shares obtained through the
Cadence Employee Stock Purchase Plan, shares acquired and held
through the exercise of stock options, shares purchased on the
open market, shares owned outright by the executive officer or
director or his or her immediate family members residing in the
same household, shares held in trust for the benefit of the
executive officer or director or his or her family. |
30
TAX
CONSIDERATIONS
Section 162(m)
of the Internal Revenue Code of 1986
Section 162(m) of the Code limits deductions for certain
executive compensation in excess of $1,000,000 in any fiscal
year. Certain types of compensation are deductible only if
performance criteria are specified in detail and payments are
contingent on stockholder approval of the compensation
arrangement. Cadence attempts to structure its compensation
arrangements to achieve deductibility under Section 162(m),
unless the benefit of such deductibility is outweighed by the
need for flexibility or the attainment of other corporate
objectives. The Compensation Committee will continue to monitor
issues concerning the deductibility of executive compensation
and will take appropriate action if and when it is warranted.
Since corporate objectives may not always be consistent with the
requirements for full deductibility, the Compensation Committee
is prepared, if it deems appropriate, to enter into compensation
arrangements under which payments may not be deductible under
Section 162(m). Thus, deductibility will not be the sole
factor used by the Compensation Committee in ascertaining
appropriate levels or modes of compensation.
In 2007, all annual incentive plan payments, stock option
grants, and restricted stock awards were structured with the
intent to qualify them as performance-based compensation under
Section 162(m), and should be fully deductible.
Section 280G
of the Internal Revenue Code of 1986
Section 280G of the Code disallows a companys tax
deduction for what are defined as excess parachute
payments and Section 4999 of the Code imposes a 20%
excise tax on certain persons who receive excess parachute
payments. Named Executive Officers are not provided with tax
gross-up
payments in the event their payments become subject to this
excise tax, but instead are entitled to the best after-tax
alternative. In other words, the Named Executive Officers are
entitled to whichever of the following payments results in the
largest after-tax amount:
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The full payout including any portion that would be classified
as an excess parachute payment; or
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The maximum payout that would result in no portion of the payout
being subject to the excise tax.
|
Cadence chose to provide the Named Executive Officers with the
best after-tax alternative to maximize the benefits provided to
each executive in connection with a change in control while
allowing Cadence to avoid making any
gross-up
payments.
In the event that a portion of the payout would be classified as
an excess parachute payment, Cadences tax deduction would
be disallowed under Section 280G and an excise tax would be
imposed on the Named Executive Officer under Section 4999.
Please refer to the discussion below under Potential
Payments upon Termination or Change in Control and Employment
Contracts for more detail on the potential lost tax
deductions.
COMPENSATION
COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis above with management. In
reliance on the review and discussions referred to above, the
Compensation Committee recommended to the Board, and the Board
approved, the inclusion of the Compensation Discussion and
Analysis in this proxy statement and incorporation by reference
into Cadences Annual Report on
Form 10-K
for the fiscal year ended December 29, 2007.
COMPENSATION COMMITTEE
John B. Shoven, Chairman
Donald L. Lucas
George M. Scalise
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is, or was during or
prior to fiscal 2007, an officer or employee of Cadence or any
of its subsidiaries. None of Cadences executive officers
serves or served as a director or member of the compensation
committee of another entity in a case where an executive officer
of such other entity serves or served as a director or member of
the Compensation Committee of Cadence.
31
COMPENSATION
OF EXECUTIVE OFFICERS
The following table shows, for fiscal year 2007, compensation
awarded or paid to, or earned by, Cadences CEO, CFO, the
three most highly compensated executive officers other than the
CEO and CFO, and an additional individual for whom disclosure
would have been provided as one of the three most highly
compensated executive officers but for the fact that he was not
serving as an executive officer at the end of 2007 (collectively
referred to herein as the Named Executive Officers):
SUMMARY
COMPENSATION TABLE
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Non-Equity
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Incentive
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All
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Stock
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Option
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Plan
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Other
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Name and
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Compensation
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Total
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Principal Position
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Year
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($)(1)
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($)
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($)(2)
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($)(2)
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($)(1)
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($)(4)
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($)(1)
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Michael J. Fister
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2007
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1,000,000
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3,353,016
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(3)
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7,254,766
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(3)
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1,513,594
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388,275
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13,509,651
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President and Chief
Executive Officer
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2006
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1,000,000
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4,638,918
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(3)
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5,257,032
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(3)
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2,478,700
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362,956
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13,737,606
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William Porter
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2007
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450,000
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2,118,984
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570,617
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586,008
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68,251
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3,793,860
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Executive Vice
President and
Chief Financial
Officer
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2006
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450,000
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1,470,183
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514,093
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860,490
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9,354
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3,304,120
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Kevin Bushby
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2007
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500,000
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80,000
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(5)
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1,635,978
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333,583
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1,126,499
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182,699
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3,858,759
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Executive Vice
President, Worldwide
Field Operations
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2006
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500,000
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1,442,380
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563,727
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1,302,080
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192,840
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4,001,027
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James S. Miller, Jr.
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2007
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400,000
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1,803,205
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850,173
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549,432
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1,824
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3,604,634
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Executive Vice
President, Products and Technologies
Organization
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2006
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400,000
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1,154,405
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701,616
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796,160
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1,037
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3,053,218
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R.L. Smith McKeithen
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2007
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400,000
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773,103
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380,411
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502,592
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12,294
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|
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2,068,400
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Senior Vice President
and General Counsel
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2006
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400,000
|
|
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721,190
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378,586
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673,920
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11,088
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2,184,784
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Moshe Gavrielov(6)
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2007
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376,923
|
|
|
|
|
|
|
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799,322
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|
|
|
1,260,472
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412,988
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833,438
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3,683,143
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|
Former Executive
Vice President and
General Manager,
Verification Division
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2006
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400,000
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661,337
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576,738
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716,160
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9,048
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2,363,283
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|
|
|
|
(1) |
|
Includes amounts deferred pursuant to Section 401(k) of the
Code and Cadences 1994 Deferred Compensation Plan. |
|
(2) |
|
The assumptions made in the valuation of such awards are set
forth in Note 4 to the Notes to Consolidated Financial
Statements in Cadences Annual Report on
Form 10-K
for the fiscal year ended December 29, 2007. |
|
(3) |
|
In accordance with SEC rules, the amount shown is the
compensation expense recognized in the financial statements
during fiscal 2007 and fiscal 2006, including compensation
expenses of $1,105,833 and $3,590,373 related to the stock
awards and option awards, respectively, granted to
Mr. Fister upon commencement of his employment with Cadence
in May 2004. In addition, in accordance with SEC rules, the
compensation expense recognized in the financial statements
during fiscal 2007 and thus reported in the option awards column
includes a compensation expense of $1,491,476 related to the
out-of-the-money option awards granted to Mr. Fister in
February 2007 (as described above under Compensation
Discussion and Analysis Elements of Executive
Compensation Long-Term Equity Incentive
Compensation). For Mr. Gavrielov, the amount shown as
compensation expense during fiscal 2007 includes compensation
expense related to acceleration of vesting of certain stock
awards and option awards of $211,417 and $625,099, respectively,
in accordance with the terms of his Executive Release and
Transition Agreement. Additionally, the amount shown as
compensation |
32
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|
expense for stock awards during fiscal 2007 includes a reversal
of previously recognized compensation expense of $472,132
related to the forfeiture of certain performance-based stock
awards in connection with Mr. Gavrielovs resignation. |
|
(4) |
|
The payments listed in the All Other Compensation
column above reflect the following and, unless noted below, are
based upon the actual cost expended by Cadence in connection
with the amounts described herein: |
|
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|
For Mr. Fister, the amount shown includes (for
2007): a housing allowance related to
Mr. Fisters relocation to the San Jose area from
Portland, Oregon ($204,000), tax
gross-up
payments paid with respect to Mr. Fisters housing
allowance ($148,638), personal travel ($25,856), 401(k) matching
contributions ($6,750), term life insurance premium payments
($2,688) and incentive awards.
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|
For Mr. Porter, the amount shown includes (for
2007): 401(k) matching contributions ($6,750), term life
insurance premium payments ($2,688), an incentive trip abroad
($33,847) and a tax
gross-up
payment paid with respect to the incentive trip ($24,966).
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|
For Mr. Bushby, the amount shown includes (for
2007): a housing allowance related to
Mr. Bushbys relocation to the San Jose area from
England ($110,400), tax
gross-up
payments paid with respect to Mr. Bushbys housing
allowance ($65,345), term life insurance premium payments
($2,688) and incentive awards. In addition, Mr. Bushby
continues to be a UK citizen, and Mr. Bushby has retained
coverage under the health care plan of Cadences UK
subsidiary, which is a broad-based plan covering substantially
all of Cadences UK employees. Mr. Bushby also remains
a participant in an employee benefit trust established by
Cadences UK subsidiary for select key employees while he
was located in the UK. Cadence stopped making contributions to
the trust on behalf of Mr. Bushby prior to
Mr. Bushbys relocation to the US. An independent
trustee holds prior contributions and earnings in accounts for
each participant for whom contributions were made. Cadence has
no rights under the trust agreement to determine the use of
trust assets or to receive any of the trust assets. Under the
terms of the trust, the independent trustee has broad discretion
to use the assets for the benefit of the beneficiaries as the
trustee determines, including the power to make distributions,
extend loans, allow the use of tangible trust assets or provide
other benefits. As of December 29, 2007, the net balance in
the account for the benefit of Mr. Bushby and his family
was £1,050,860 (approximately $2,096,950 based on the
foreign currency exchange rate on December 28, 2007).
|
|
|
|
For Mr. Miller, the amount shown includes (for
2007): term life insurance premium payments ($1,824).
|
|
|
|
For Mr. McKeithen, the amount shown includes (for 2007):
401(k) matching contributions ($6,750) and term life insurance
premium payments ($5,544).
|
|
|
|
For Mr. Gavrielov, the amount shown includes (for 2007):
401(k) matching contributions ($6,750), term life insurance
premium payments ($2,688), his severance payment ($800,000) and
consulting fees ($24,000).
|
|
|
|
(5) |
|
Mr. Bushby was paid in 2007 a discretionary bonus of
$80,000 for outstanding performance in the fourth quarter of
fiscal year 2006. |
|
(6) |
|
Mr. Gavrielov resigned as Executive Vice President and
General Manager of the Verification Division effective as of
November 30, 2007. |
Certain of the elements of compensation set forth in the Summary
Compensation Table above and in the Grants of Plan-Based Awards
table below reflect the terms of employment agreements between
Cadence and each of Messrs. Fister, Porter, Bushby, Miller
and McKeithen.
Michael J. Fister. Cadence is party to an
employment agreement with Mr. Fister pursuant to which
Mr. Fister serves as President and Chief Executive Officer.
The agreement provides for an initial base salary of $800,000
per year and for Mr. Fisters participation in
Cadences Senior Executive Bonus Plan at an annual target
bonus of 100% of his base salary, each subject to review by the
Board or the Compensation Committee from time to time. In 2005,
the Compensation Committee increased Mr. Fisters base
salary to $1,000,000. In 2005, Mr. Fister bought a house in
California, but as of the date of this proxy statement,
Mr. Fister has not sold his houses in Oregon. Pursuant to
the agreement as amended in May 2005 and December 2007,
Mr. Fister was entitled to a housing allowance of $17,000
per month from May 16, 2005 until December 31, 2007,
and such housing allowance was further extended from
January 1, 2008 until the earlier of
(a) December 31, 2008, or (b) the later closing
date of the sale of each of Mr. Fisters two private
residences in Oregon and reimbursement of such other reasonable
and actual relocation expenses (including brokers
commissions and closing costs paid in connection with the sale
of his Oregon house)
33
incurred by Mr. Fister as may be agreed to by Cadence.
Under the agreement, to the extent that any of the relocation
benefits provided by the agreement, including the housing
allowance, are included in Mr. Fisters gross income
for tax purposes, Mr. Fister will receive additional tax
gross-up
payments with respect to such amounts.
William Porter. Cadence is party to an
employment agreement with Mr. Porter pursuant to which
Mr. Porter serves as Executive Vice President and Chief
Financial Officer. The agreement provides for an initial base
salary of $400,000 per year and for Mr. Porters
participation in Cadences Senior Executive Bonus Plan at
an annual target bonus of $300,000, each subject to review by
the Board or the Compensation Committee from time to time. In
2005, the Compensation Committee increased
Mr. Porters base salary to $450,000 per year and
annual target bonus to $375,000, which annual target bonus was
increased by the Compensation Committee in 2006 to 100% of his
base salary.
Kevin Bushby. Cadence is party to an
employment agreement with Mr. Bushby pursuant to which
Mr. Bushby serves as Executive Vice President, Worldwide
Field Operations. The agreement provides for an initial base
salary of $450,000 per year and for Mr. Bushbys
participation in Cadences Senior Executive Bonus Plan at
an annual target bonus of $650,000, each subject to review by
the Board or the Compensation Committee from time to time. In
2005, the Compensation Committee increased
Mr. Bushbys base salary to $500,000. Under the
agreement, Cadence was also required to pay Mr. Bushby cost
of living adjustment payments of $6,600 per month, net of taxes,
and tax equalization payments for 2003 through 2005. Effective
in 2007, Mr. Bushbys cost of living adjustment
payments were increased to $9,200 per month, net of taxes. In
addition, under the agreement Cadence will cause the landlord,
which is a wholly-owned subsidiary of Cadence, not to terminate
Mr. Bushbys residential lease described below under
Transactions with Related Persons during
Mr. Bushbys full-time employment with Cadence (except
upon Mr. Bushbys default under the lease) and
negotiate in good faith to extend the term of the residential
lease if it expires during Mr. Bushbys employment
with Cadence.
James S. Miller, Jr. Cadence is party to
an employment agreement with Mr. Miller pursuant to which
Mr. Miller serves as Executive Vice President, Products and
Technologies Organization. The agreement provides for an initial
base salary of $400,000 per year and for Mr. Millers
participation in Cadences Senior Executive Bonus Plan at
an annual target bonus of 100% of his base salary, each subject
to review by the Board or the Compensation Committee from time
to time.
R. L. Smith McKeithen. Cadence is party to an
employment agreement with Mr. McKeithen pursuant to which
Mr. McKeithen will serve as Executive Vice President,
effective April 1, 2008. The agreement provides for an
initial base salary of $400,000 per year and for
Mr. McKeithens participation in Cadences Senior
Executive Bonus Plan at an annual target bonus of 100% of his
base salary, each subject to review by the Board or the
Compensation Committee from time to time. For each fiscal year
(or shorter period over which executive bonuses are measured and
paid) beginning with the 2008 fiscal year, Mr. McKeithen is
guaranteed to receive an annual bonus at least equal to his
target bonus. The agreement expires on March 31, 2010,
unless it is renewed for additional one year periods by mutual
agreement of Mr. McKeithen and Cadence.
Cadence has also entered into an Executive Release and
Transition Agreement with Mr. Gavrielov. See
Potential Payments Upon Termination or Change in Control
and Employment Contracts below.
The proportion of salary to total compensation of the Named
Executive Officers is explained above under Compensation,
Discussion and Analysis Elements of Executive
Compensation.
34
GRANTS OF
PLAN-BASED AWARDS IN FISCAL YEAR 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
Closing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
|
|
|
Price of
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Exercise or
|
|
|
Common
|
|
|
Fair Value
|
|
|
|
|
|
|
Estimated Future Payouts Under
|
|
|
Shares of
|
|
|
Securities
|
|
|
Base Price
|
|
|
Stock on
|
|
|
of Stock
|
|
|
|
|
|
|
Non-Equity Incentive Plan Awards
|
|
|
Stock or
|
|
|
Underlying
|
|
|
of Option
|
|
|
the Grant
|
|
|
and Option
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Units
|
|
|
Options
|
|
|
Awards
|
|
|
Date
|
|
|
Awards
|
|
Name
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/Sh)
|
|
|
($/Sh)
|
|
|
($)
|
|
|
Michael J. Fister
|
|
|
2/2/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,166,982
|
|
|
|
|
2/2/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
384,902
|
|
|
|
20.06
|
|
|
|
20.06
|
|
|
|
2,132,080
|
|
|
|
|
2/2/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
677,187
|
|
|
|
25.08
|
|
|
|
20.06
|
|
|
|
2,169,424
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
1,000,000
|
|
|
|
5,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Porter
|
|
|
2/7/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,006,000
|
|
|
|
|
2/2/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
20.06
|
|
|
|
20.06
|
|
|
|
830,970
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
450,000
|
|
|
|
2,025,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin Bushby
|
|
|
2/2/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,805,400
|
|
|
|
|
2/2/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000
|
|
|
|
20.06
|
|
|
|
20.06
|
|
|
|
664,776
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
650,000
|
|
|
|
2,925,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James S. Miller, Jr.
|
|
|
2/2/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,006,000
|
|
|
|
|
2/2/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
20.06
|
|
|
|
20.06
|
|
|
|
553,980
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
400,000
|
|
|
|
1,800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R.L. Smith McKeithen
|
|
|
2/2/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
802,400
|
|
|
|
|
2/2/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
20.06
|
|
|
|
20.06
|
|
|
|
553,980
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
400,000
|
|
|
|
1,800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Moshe Gavrielov
|
|
|
2/2/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,303,900
|
|
|
|
|
2/2/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
20.06
|
|
|
|
20.06
|
|
|
|
553,980
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
400,000
|
|
|
|
1,800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The actual payouts under the non-equity incentive plan awards
granted to the Named Executive Officers are made under the
Senior Executive Bonus Plan and are determined as described
above under Compensation Discussion and
Analysis Elements of Executive
Compensation Annual Cash Incentive
Compensation.
The stock awards granted to the Named Executive Officers were
granted under the 1987 Plan and vest over four years, with
1/4th of the shares subject to such stock award vesting on
each anniversary after the date of grant, subject to the
achievement of certain specified performance goals intended to
ensure that the awards qualify as performance-based
compensation under Section 162(m) of the Code. The
stock options granted to the Named Executive Officers were
granted under the 1987 Plan and, with the exception of
Mr. Fisters grant of out-of-the-money options, vest
over four years, with 1/48th of the shares subject to such
option vesting at the end of each month after the date of grant.
Prior to January 1, 2007, the exercise price of options
granted under the 1987 Plan was equal to or greater than the
average of the high and low price of Cadence common stock on the
date of grant. As of January 1, 2007, the exercise price of
options granted under the 1987 Plan is equal to the closing
price of Cadence common stock on the date of grant. Dividends,
if any, are payable to the holders of restricted stock issued
under Cadences plans.
35
OUTSTANDING
EQUITY AWARDS AT 2007 FISCAL YEAR END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
Market Value of
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
Stock that
|
|
|
Shares of Stock
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Option
|
|
|
have not
|
|
|
that have not
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Vested
|
|
Name
|
|
Exercisable(1)
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
Michael J. Fister
|
|
|
2,687,500
|
(2)
|
|
|
312,500
|
|
|
|
13.06
|
|
|
|
5/12/14
|
|
|
|
|
|
|
|
|
|
|
|
|
687,500
|
|
|
|
312,500
|
|
|
|
14.55
|
|
|
|
3/22/15
|
|
|
|
|
|
|
|
|
|
|
|
|
183,333
|
|
|
|
216,667
|
|
|
|
16.53
|
|
|
|
2/08/16
|
|
|
|
|
|
|
|
|
|
|
|
|
80,187
|
|
|
|
304,715
|
|
|
|
20.06
|
|
|
|
2/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
677,187
|
|
|
|
0
|
|
|
|
25.08
|
|
|
|
2/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
187,500
|
(3)
|
|
|
3,193,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,025
|
(4)
|
|
|
1,839,666
|
|
William Porter
|
|
|
30,000
|
(5)
|
|
|
0
|
|
|
|
35.06
|
|
|
|
4/09/08
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
(5)
|
|
|
0
|
|
|
|
22.59
|
|
|
|
9/04/08
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(5)
|
|
|
0
|
|
|
|
19.88
|
|
|
|
10/09/08
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(5)
|
|
|
0
|
|
|
|
12.59
|
|
|
|
5/12/09
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
(5)
|
|
|
0
|
|
|
|
13.06
|
|
|
|
5/21/09
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(5)
|
|
|
0
|
|
|
|
14.28
|
|
|
|
10/08/09
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(5)
|
|
|
0
|
|
|
|
19.57
|
|
|
|
3/23/11
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
0
|
|
|
|
20.99
|
|
|
|
1/18/12
|
|
|
|
|
|
|
|
|
|
|
|
|
106,250
|
|
|
|
43,750
|
|
|
|
13.61
|
|
|
|
2/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
68,750
|
|
|
|
81,250
|
|
|
|
16.53
|
|
|
|
2/08/16
|
|
|
|
|
|
|
|
|
|
|
|
|
31,250
|
|
|
|
118,750
|
|
|
|
20.06
|
|
|
|
02/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,834
|
(11)
|
|
|
354,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
(3)
|
|
|
1,277,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(4)
|
|
|
1,703,000
|
|
Kevin Bushby
|
|
|
110,000
|
(5)
|
|
|
0
|
|
|
|
22.59
|
|
|
|
6/05/08
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
(5)
|
|
|
0
|
|
|
|
19.16
|
|
|
|
12/17/09
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
(6)
|
|
|
0
|
|
|
|
12.59
|
|
|
|
5/12/09
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
0
|
|
|
|
14.69
|
|
|
|
5/19/10
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
0
|
|
|
|
19.57
|
|
|
|
3/23/11
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
0
|
|
|
|
20.99
|
|
|
|
1/18/12
|
|
|
|
|
|
|
|
|
|
|
|
|
18,750
|
|
|
|
0
|
|
|
|
10.11
|
|
|
|
1/29/13
|
|
|
|
|
|
|
|
|
|
|
|
|
55,000
|
|
|
|
65,000
|
|
|
|
16.53
|
|
|
|
2/08/16
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
95,000
|
|
|
|
20.06
|
|
|
|
2/2/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
(3)
|
|
|
766,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
(4)
|
|
|
1,532,700
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
Market Value of
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
Stock that
|
|
|
Shares of Stock
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Option
|
|
|
have not
|
|
|
that have not
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Vested
|
|
Name
|
|
Exercisable(1)
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
James S. Miller, Jr.
|
|
|
98,125
|
(2)
|
|
|
46,875
|
|
|
|
13.10
|
|
|
|
9/17/14
|
|
|
|
|
|
|
|
|
|
|
|
|
102,083
|
|
|
|
72,917
|
|
|
|
13.61
|
|
|
|
2/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
68,750
|
|
|
|
81,250
|
|
|
|
16.53
|
|
|
|
2/08/16
|
|
|
|
|
|
|
|
|
|
|
|
|
20,833
|
|
|
|
79,167
|
|
|
|
20.06
|
|
|
|
2/02/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
(9)
|
|
|
212,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(10)
|
|
|
425,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
(3)
|
|
|
1,277,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(4)
|
|
|
1,703,000
|
|
R.L. Smith McKeithen
|
|
|
75,000
|
|
|
|
0
|
|
|
|
25.13
|
|
|
|
1/23/08
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
0
|
|
|
|
22.59
|
|
|
|
9/04/08
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
0
|
|
|
|
19.16
|
|
|
|
12/17/09
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
0
|
|
|
|
14.69
|
|
|
|
5/19/10
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
0
|
|
|
|
15.49
|
|
|
|
9/21/11
|
|
|
|
|
|
|
|
|
|
|
|
|
80,000
|
|
|
|
0
|
|
|
|
10.11
|
|
|
|
1/29/13
|
|
|
|
|
|
|
|
|
|
|
|
|
70,833
|
|
|
|
29,167
|
|
|
|
13.61
|
|
|
|
2/14/15
|
|
|
|
|
|
|
|
|
|
|
|
|
20,833
|
|
|
|
79,167
|
|
|
|
20.06
|
|
|
|
2/2/14
|
|
|
|
|
|
|
|
|
|
|
|
|
45,833
|
|
|
|
54,167
|
|
|
|
16.53
|
|
|
|
2/8/16
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
12.63
|
|
|
|
7/31/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500
|
(3)
|
|
|
383,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
(4)
|
|
|
681,200
|
|
Moshe Gavrielov
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,688
|
(7)
|
|
|
0
|
|
|
|
16.83
|
|
|
|
5/29/13
|
|
|
|
|
|
|
|
|
|
|
|
|
10,125
|
(7)
|
|
|
0
|
|
|
|
6.67
|
|
|
|
5/27/14
|
|
|
|
|
|
|
|
|
|
|
|
|
118,750
|
(8)
|
|
|
0
|
|
|
|
13.86
|
|
|
|
4/15/15
|
|
|
|
|
|
|
|
|
|
|
|
|
43,750
|
|
|
|
0
|
|
|
|
16.53
|
|
|
|
2/08/16
|
|
|
|
|
|
|
|
|
|
|
|
|
43,750
|
|
|
|
0
|
|
|
|
20.06
|
|
|
|
2/2/14
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Unless otherwise indicated, options granted to the Named
Executive Officers were granted on the date 10 years prior
to the expiration date (except for the options scheduled to
expire on February 2, 2014, which were granted on
February 2, 2007) and vest at a rate of 1/48th per
month each month after the date of grant. |
|
(2) |
|
Option vests at a rate of 1/4th on the first anniversary of the
grant date and 1/48th per month thereafter. |
|
(3) |
|
Restricted stock was granted on February 8, 2006 and vests
at a rate of 1/4th on each anniversary of the grant date,
subject to the achievement of certain specified performance
goals. |
|
(4) |
|
Restricted stock was granted on February 2, 2007 and vests
at a rate of 1/4th on each anniversary of the grant date. |
|
(5) |
|
Option vests at a rate of 1/60th per month each month after the
date of grant. |
|
(6) |
|
Option vests in full eight years after the date of grant, but
vesting may be accelerated upon achievement of certain
performance goals. |
|
(7) |
|
Option was assumed by Cadence in connection with its acquisition
of Verisity Ltd. in 2005 and vests at a rate of 1/4th on the
first anniversary of the grant date and 1/48th per month
thereafter. |
|
(8) |
|
Option vests at a rate of 1/4th on the first anniversary of the
grant date and 1/48th per month thereafter. |
37
|
|
|
(9) |
|
Restricted stock was granted on September 17, 2004 and
vests at a rate of 1/4th on each anniversary of the grant date. |
|
(10) |
|
Restricted stock was granted on October 7, 2005 and vests
at a rate of 1/4th on each anniversary of the grant date. |
|
(11) |
|
Restricted stock was granted on December 30, 2004 and vests
at a rate of 7/36ths on August 1, 2005 and 1/6th each
February 1st and August 1st thereafter, with the final
5/36ths vesting on February 1, 2008. |
OPTION
EXERCISES AND STOCK VESTED IN FISCAL YEAR 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
Acquired on
|
|
|
Value Realized on
|
|
|
Acquired on
|
|
|
Value Realized on
|
|
|
|
Exercise
|
|
|
Exercise
|
|
|
Vesting
|
|
|
Vesting
|
|
Name
|
|
(#)
|
|
|
($)(1)
|
|
|
(#)
|
|
|
($)(2)
|
|
|
Michael J. Fister
|
|
|
|
|
|
|
0
|
|
|
|
262,499
|
|
|
|
5,674,353
|
|
William Porter
|
|
|
70,000
|
|
|
|
580,570
|
|
|
|
75,000
|
|
|
|
1,537,000
|
|
Kevin Bushby
|
|
|
200,875
|
|
|
|
1,543,652
|
|
|
|
76,112
|
|
|
|
1,557,146
|
|
James S. Miller, Jr.
|
|
|
180,000
|
|
|
|
1,428,748
|
|
|
|
50,000
|
|
|
|
1,058,750
|
|
R.L. Smith McKeithen
|
|
|
61,000
|
|
|
|
431,492
|
|
|
|
38,056
|
|
|
|
778,573
|
|
Moshe Gavrielov
|
|
|
270,435
|
|
|
|
1,676,807
|
|
|
|
86,250
|
|
|
|
1,622,100
|
|
|
|
|
(1) |
|
Equal to the difference between the market price of the
underlying securities at exercise and the exercise price of the
options. |
|
(2) |
|
Equal to the number of shares vested multiplied by the closing
price of Cadence common stock on the date of vesting. |
NONQUALIFIED
DEFERRED COMPENSATION FOR FISCAL YEAR 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Contributions in
|
|
|
Contributions in
|
|
|
Earnings in
|
|
|
Withdrawals/
|
|
|
Balance
|
|
|
|
Last FY (1)
|
|
|
Last FY
|
|
|
Last FY
|
|
|
Distributions
|
|
|
at Last FYE
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Michael J. Fister
|
|
|
99,722
|
|
|
|
|
|
|
|
19,627
|
|
|
|
|
|
|
|
458,130
|
|
William Porter
|
|
|
1,146,298
|
|
|
|
|
|
|
|
352,857
|
|
|
|
|
|
|
|
5,189,767
|
|
Kevin Bushby
|
|
|
875,628
|
|
|
|
|
|
|
|
261,962
|
|
|
|
|
|
|
|
3,593,719
|
|
James S. Miller, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
R.L. Smith McKeithen
|
|
|
30,776
|
|
|
|
|
|
|
|
52,810
|
|
|
|
|
|
|
|
1,008,933
|
|
Moshe Gavrielov
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
(1) |
|
All executive contributions are reported as either salary or
non-equity incentive plan compensation in the Summary
Compensation Table above. |
Executive officers may elect to defer up to 80% of their base
salary and up to 100% of the non-equity incentive plan
compensation payable to them under Cadences 1994 Deferred
Compensation Plan. These deferred compensation payments are held
in accounts with values indexed to the performance of selected
mutual funds or money market accounts. Executive officers may
elect to receive distributions from their account upon
termination of employment with Cadence, the passage of a
specified number of years or the attainment of a specified age,
whichever event occurs first. In addition, executive officers
may elect a lump-sum payment or monthly installments over a five
or ten year period.
38
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL AND
EMPLOYMENT CONTRACTS
The information below describes certain compensation that would
have become payable under existing plans and contractual
arrangements assuming a termination of employment or change in
control and termination of employment had occurred on
December 29, 2007 (based upon the closing price of
Cadences common stock on December 28, 2007 of $17.03
per share), given the Named Executive Officers
compensation and service levels as of such date. In addition to
the benefits described below, upon any termination of
employment, each of the Named Executive Officers would also be
entitled to the amount shown in the column labeled
Aggregate Balance at Last FYE of the table of
Nonqualified Deferred Compensation for Fiscal Year 2007 above.
As of December 29, 2007, Cadence had entered into
employment agreements with each of Messrs. Fister, Porter,
Bushby, Miller and McKeithen, and had entered into an executive
release and transition agreement with Mr. Gavrielov. The
employment agreements with Messrs. Fister, Porter, Bushby,
Miller, and McKeithen as in effect on December 29, 2007
generally provide for the payment of benefits if the
executives employment with Cadence is terminated either by
Cadence without cause (as defined below) or by the
executive in connection with a constructive
termination (as defined below). These employment
agreements do not provide for any additional payments or
benefits upon a termination of employment by Cadence for cause,
upon the executives resignation other than in connection
with a constructive termination or for good
reason, as applicable, or upon the executives death
or permanent disability. Each of the employment agreements also
provides for enhanced benefits upon a termination either by
Cadence without cause or by the executive in
connection with a constructive termination that
occurs during the period commencing three months before a
change in control of Cadence and ending thirteen
months following a change in control. Following the
end of the fiscal year, Cadence entered into a new employment
agreement with Mr. McKeithen. The new employment agreement
provides for enhanced severance benefits under certain
circumstances as compared to the agreement in effect as of
December 29, 2007 (described in more detail below).
For purposes of the employment agreements with
Messrs. Fister, Porter, Bushby, Miller and McKeithen,
cause, constructive termination and
change in control are defined as follows.
Cause generally means an executives:
|
|
|
|
|
gross misconduct or fraud in the performance of his duties under
the employment agreement;
|
|
|
|
conviction or guilty plea or plea of nolo contendere with
respect to any felony or, with respect to Messrs. Porter,
Bushby, Miller and McKeithen, act of moral turpitude;
|
|
|
|
engaging in any material act of theft or material
misappropriation of company property in connection with his
employment;
|
|
|
|
material breach of the employment agreement, after written
notice is delivered to the executive of such breach and failure
to cure such breach, if curable, within thirty (30) days
following delivery of such notice;
|
|
|
|
material breach of Cadences Employee Proprietary
Information and Inventions Agreement (as defined in the
employment agreement);
|
|
|
|
for Messrs. Porter, Bushby, Miller and McKeithen, material
failure/refusal to perform the assigned duties, and, where such
failure/refusal is curable, if such failure/refusal is not cured
within thirty (30) days following delivery of written
notice thereof; or
|
|
|
|
material breach of Cadences Code of Business Conduct, as
such code may be revised from time to time.
|
Constructive termination generally means the
occurrence of any one of the following events:
|
|
|
|
|
a material adverse change, without the executives written
consent, in executives authority, duties or title or, with
respect to Mr. Fister, reporting relationship to the Board,
causing executives position to be of materially less
stature or responsibility, after written notice is delivered to
the Company of such change and the Companys failure to
cure such change, if curable, within thirty (30) days
following delivery of such notice; provided, however, that for
Messrs. Fister and Porter such a material adverse change
shall in all events be
|
39
|
|
|
|
|
deemed to occur if the executive no longer serves in his
respective position of a publicly traded company, unless an
executive consents in writing to such change;
|
|
|
|
|
|
for Messrs. Porter, Bushby, Miller and McKeithen, any
change, without executives written consent, to
executives reporting structure causing executive to no
longer report to the CEO of the Company, after written notice is
delivered to the Company of such change and the Companys
failure to cure such change, if curable, within thirty
(30) days following delivery of such notice;
|
|
|
|
a reduction, without executives written consent, in
executives base salary in effect by more than ten percent
(10%) or a reduction by more than ten percent (10%) in
executives stated target bonus in effect under a bonus
plan;
|
|
|
|
a relocation of executives principal place of employment
by more than thirty (30) miles, unless executive consents
in writing to such relocation;
|
|
|
|
any material breach by the Company of any provision of the
employment agreement, after written notice is delivered to the
Company of such breach and the Companys failure to cure
such breach, if curable, within thirty (30) days following
delivery of such notice;
|
|
|
|
any failure by the Company to obtain the written assumption of
the employment agreement by any successor to the Company; or
|
|
|
|
for Messrs. Porter and Miller, in the event the executive,
prior to a change in control (as that term is defined in the
employment agreement), is identified as an executive officer of
the Company for purposes of the rules promulgated under
Section 16 of the Exchange Act and following a change in
control in which the Company or any successor remains a publicly
traded entity, an executive is not identified as an executive
officer for purposes of Section 16 of the Exchange Act at
any time within one (1) year after the change in control.
|
Change in control generally means the occurrence of
any one of the following events:
|
|
|
|
|
any person acquires more than 50% of the total voting power
represented by Cadences then outstanding voting securities;
|
|
|
|
if a majority of the members of the Board of Directors are
replaced in any two-year period other than in specific
circumstances;
|
|
|
|
the consummation of a merger or consolidation of Cadence with
any other corporation, other than a merger or consolidation in
which the holders of Cadences outstanding voting
securities immediately prior to such merger or consolidation
receive securities possessing at least 50% of the total voting
power represented by the outstanding voting securities of the
surviving entity (or parent thereof) immediately after such
merger or consolidation; or
|
|
|
|
the consummation of the sale or disposition by Cadence of all or
substantially all of Cadences assets.
|
Under the employment agreements with Messrs. Fister,
Porter, Bushby, Miller, and McKeithen as in effect on
December 29, 2007, if the executives employment is
terminated by Cadence without cause or if the
executive terminates his employment in connection with a
constructive termination, the executive will be
entitled to the benefits provided for in an Executive Transition
and Release Agreement in exchange for his execution and delivery
of that agreement. These transition agreements provide for the
following payments and benefits:
|
|
|
|
|
continued employment by Cadence for up to one year after his
termination as a non-executive employee at a monthly salary of
$2,000 (for Mr. Miller this salary is $4,000 per month,
payable for up to six months commencing six months following the
date of his termination);
|
|
|
|
provided the executive elects COBRA coverage, continued coverage
for up to one year under Cadences medical, dental and
vision insurance plans, at Cadences expense;
|
40
|
|
|
|
|
for Messrs. Fister, Porter, Bushby, and McKeithen,
continued vesting of outstanding and unvested stock option and
restricted stock awards for up to one year after termination
(twenty-four months for Mr. Fister);
|
|
|
|
for Mr. Miller, accelerated vesting, as of the date of his
termination, of his outstanding and unvested stock options and
restricted stock awards that would have vested over the
succeeding
12-month
period;
|
|
|
|
a lump-sum payment equal to one years base salary (180% of
one years base salary for Mr. Fister) at the highest
rate in effect during the executives employment, payable
within 10 days following the date the transition agreement
becomes effective (for Mr. Miller such amount is payable
six months after the date of his termination);
|
|
|
|
for Messrs. Porter, Bushby, Miller and McKeithen, a
lump-sum payment equal to one years annual target bonus at
the highest rate in effect during the executives
employment, payable upon termination of the transition
agreement; and
|
|
|
|
for Mr. Fister, payment of an amount equal to 180% of his
annual target bonus at the highest target rate in effect during
his employment, payable in twelve monthly pro rata installments
following his termination.
|
In addition, the employment agreements with Messrs. Fister,
Porter, Bushby, Miller, and McKeithen as in effect on
December 29, 2007 provide that if, within 90 days
before or 13 months after a change in control,
an executives employment is terminated without
cause or the executive terminates his employment in
connection with a constructive termination (any such
termination, a Change of Control Termination), then,
in exchange for the executives execution and delivery of
the transition agreement, all of the executives unvested
stock options and outstanding restricted stock awards will
immediately vest in full. All other provisions of the transition
agreement described in the paragraph above remain unchanged,
except that for Mr. Fister, the lump-sum payment payable in
connection with the execution of the transition agreement will
equal 200% (rather than 180%) of base salary and his twelve
monthly payments will equal pro rata installments of 200%
(rather than 180%) of his annual target bonus at the highest
target rate in effect during his employment.
The receipt of benefits following termination under each of the
employment agreements as in effect on December 29, 2007 is
contingent upon the affected executive executing and not
revoking a general release in favor of Cadence. In addition, the
post-termination benefits provided for under these employment
agreements are contingent upon the affected executive complying
with the terms of an Executive Transition and Release Agreement.
These transition agreements provides that the affected executive
will continue to provide services to Cadence for a one-year
transition period. During this one-year transition period, the
executive is entitled to receive the termination payments
described above, is prohibited from competing with Cadence,
soliciting employees of Cadence or interfering with
Cadences relationship with its current or prospective
clients, customers, joint-venture partners or financial backers,
and must provide Cadence with continued cooperation in matters
related to his employment. Any violation of the provisions of
the transition agreement would result in the cessation of
Cadences obligation to provide the then unpaid portion of
the affected executives termination benefits.
As described above, following the end of the fiscal year,
Mr. McKeithen entered into a new employment agreement with
Cadence, which new agreement provides for enhanced severance
benefits under certain circumstances as compared to the
agreement in effect as of December 29, 2007. Under the new
employment agreement, if Mr. McKeithens employment is
terminated on account of his death or permanent disability or by
Cadence without cause or if he terminates his
employment in connection with a constructive
termination, contingent upon Mr. McKeithen complying
with the covenants and agreements in his new employment
agreement regarding releases, cooperation with Cadence after the
expiration of the term of the agreement, confidential
information, and non-disparagement, he will be entitled to the
following payments and benefits:
|
|
|
|
|
only if the termination is not a Change of Control Termination,
a lump-sum payment equal to the greater of the base salary and
target bonus Mr. McKeithen could have earned had he
remained employed through the initial term of his agreement
(which initial term expires on March 31, 2010) or
$800,000;
|
|
|
|
only if the termination is not a Change of Control Termination,
immediate and full vesting of outstanding and unvested stock
option and restricted stock awards that would have vested if
Mr. McKeithen continued to
|
41
|
|
|
|
|
serve Cadence for the greater of the remainder of the initial
term of his agreement or one year following termination;
|
|
|
|
|
|
only in a Change of Control Termination, a lump-sum payment
equal to the greater of the base salary Mr. McKeithen could
have earned had he remained employed through the initial term of
his agreement or $800,000;
|
|
|
|
only in a Change of Control Termination, a lump-sum payment
equal to the greater of the target bonus Mr. McKeithen
could have earned had he remained employed through the initial
term of his agreement or $800,000;
|
|
|
|
only in a Change of Control Termination, for a period of six
(6) months, a monthly salary of $4,000;
|
|
|
|
only in a Change of Control Termination, all of his unvested
stock options and outstanding restricted stock awards will
immediately vest in full; and
|
|
|
|
provided Mr. McKeithen elects COBRA coverage, continued
coverage under Cadences medical, dental and vision
insurance plans, at Cadences expense for the entire period
that he is eligible to receive such benefits under COBRA (with
such period not to exceed 18 months following death or
disability).
|
Under the new employment agreement, if Mr. McKeithen
resigns, except as a result of a permanent disability or death
or constructive termination, he will be entitled to
the following payments and benefits:
|
|
|
|
|
a lump-sum payment equal to the base salary and target bonus
Mr. McKeithen could have earned had he remained employed
through the initial term of his agreement, or if the term has
been extended, for the remainder of the then applicable
extension;
|
|
|
|
immediate and full vesting of outstanding and unvested stock
option and restricted stock awards granted to Mr. McKeithen
prior to February 2008 that would have vested if
Mr. McKeithen continued to serve Cadence for the lesser of
the remainder of the initial term of his agreement or one year
following termination; and
|
|
|
|
provided Mr. McKeithen elects COBRA coverage, continued
coverage under Cadences medical, dental and vision
insurance plans, at Cadences expense for the greater of
the remainder of the initial term of his agreement or one year
following termination.
|
The tables below set forth the estimated value of the potential
payments to each Named Executive Officer, assuming the
executives employment had terminated on December 29,
2007 under the employment and other agreements in effect at that
time, and, for purposes of the second table below, that a change
in control of Cadence had also occurred on that date. Amounts
are reported without any reduction for possible delay in the
commencement or timing of payments. Please note that the
potential payments that could become payable to
Mr. McKeithen pursuant to his new employment agreement are
not reflected in the tables below.
Potential
Payments and Benefits Upon a Termination of Employment by
Cadence
Without Cause or by Executive in Connection with a Constructive
Termination Not
in Connection with a Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of
|
|
|
|
|
|
|
Transition
|
|
|
Termination
|
|
|
Termination
|
|
|
Company-
|
|
|
Vesting of
|
|
|
Restricted
|
|
|
|
|
|
|
Period
|
|
|
Payment
|
|
|
Payment
|
|
|
Paid
|
|
|
Stock
|
|
|
Stock
|
|
|
Pre-Tax
|
|
|
|
Salary
|
|
|
(Salary)
|
|
|
Bonus
|
|
|
COBRA
|
|
|
Options
|
|
|
Awards
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)
|
|
|
Michael J. Fister
|
|
|
24,000
|
|
|
|
1,800,000
|
|
|
|
1,800,000
|
|
|
|
13,775
|
|
|
|
2,118,188
|
|
|
|
3,048,574
|
|
|
|
8,804,537
|
|
William Porter
|
|
|
24,000
|
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
18,405
|
|
|
|
147,375
|
|
|
|
1,206,303
|
|
|
|
2,296,083
|
|
Kevin Bushby(3)
|
|
|
24,000
|
|
|
|
500,000
|
|
|
|
650,000
|
|
|
|
5,234
|
|
|
|
15,150
|
|
|
|
638,625
|
|
|
|
1,833,009
|
|
James S. Miller, Jr.
|
|
|
24,000
|
|
|
|
400,000
|
|
|
|
400,000
|
|
|
|
18,405
|
|
|
|
417,220
|
|
|
|
1,277,250
|
|
|
|
2,536,875
|
|
R.L. Smith McKeithen
|
|
|
24,000
|
|
|
|
400,000
|
|
|
|
400,000
|
|
|
|
6,806
|
|
|
|
98,250
|
|
|
|
298,025
|
|
|
|
1,227,081
|
|
|
|
|
(1) |
|
These amounts are calculated assuming that the market price per
share of Cadences common stock on the date of termination
of employment was equal to the closing price of Cadences
common stock on December 28, |
42
|
|
|
|
|
2007 of $17.03 per share and are based upon the difference
between such closing price and the exercise price of the options
held by the Named Executive Officer. |
|
(2) |
|
These amounts are calculated assuming that the market price per
share of Cadences common stock on the date of termination
of employment was equal to the closing price of Cadences
common stock on December 28, 2007 of $17.03 per share. |
|
(3) |
|
If Mr. Bushby relocates from the San Jose area to the
United Kingdom within 12 months after termination, Cadence
will reimburse Mr. Bushby for the reasonable and necessary
relocation expenses incurred. |
Potential
Payments and Benefits Upon a Termination of Employment by
Cadence
Without Cause or by Executive in Connection with a Constructive
Termination for
Good Reason Within 3 Months Prior to or 13 Months Following a
Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of
|
|
|
|
|
|
|
Transition
|
|
|
Termination
|
|
|
Termination
|
|
|
Company-
|
|
|
Vesting of
|
|
|
Restricted
|
|
|
|
|
|
|
Period
|
|
|
Payment
|
|
|
Payment
|
|
|
Paid
|
|
|
Stock
|
|
|
Stock
|
|
|
Pre-Tax
|
|
|
|
Salary
|
|
|
(Salary)
|
|
|
Bonus
|
|
|
COBRA
|
|
|
Options
|
|
|
Awards
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)(4)
|
|
|
Michael J. Fister
|
|
|
24,000
|
|
|
|
2,000,000
|
|
|
|
2,000,000
|
|
|
|
13,775
|
|
|
|
2,126,604
|
|
|
|
5,032,791
|
|
|
|
11,197,170
|
|
William Porter
|
|
|
24,000
|
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
18,405
|
|
|
|
190,875
|
|
|
|
3,335,053
|
|
|
|
4,468,333
|
|
Kevin Bushby(3)
|
|
|
24,000
|
|
|
|
500,000
|
|
|
|
650,000
|
|
|
|
5,234
|
|
|
|
32,825
|
|
|
|
2,299,050
|
|
|
|
3,511,109
|
|
James S. Miller, Jr.
|
|
|
24,000
|
|
|
|
400,000
|
|
|
|
400,000
|
|
|
|
18,405
|
|
|
|
474,991
|
|
|
|
3,618,875
|
|
|
|
4,936,271
|
|
R.L. Smith McKeithen
|
|
|
24,000
|
|
|
|
400,000
|
|
|
|
400,000
|
|
|
|
6,806
|
|
|
|
162,501
|
|
|
|
1,064,375
|
|
|
|
2,022,432
|
|
|
|
|
(1) |
|
These amounts are calculated assuming that the market price per
share of Cadences common stock on the date of termination
of employment was equal to the closing price of Cadences
common stock on December 28, 2007 of $17.03 per share and
are based upon the difference between such closing price and the
exercise price of the options held by the Named Executive
Officer. |
|
(2) |
|
These amounts are calculated assuming that the market price per
share of Cadences common stock on the date of termination
of employment was equal to the closing price of Cadences
common stock on December 28, 2007 of $17.03 per share. |
|
(3) |
|
If Mr. Bushby relocates from the San Jose area to the
United Kingdom within 12 months after termination, Cadence
will reimburse Mr. Bushby for the reasonable and necessary
relocation expenses incurred. |
|
(4) |
|
Assuming a base amount under Section 280G of the Code based
on taxable wages for the years 2002 through 2006 and annualized
for the year in which the executive commenced employment with
Cadence (if after 2001), none of the payments to the Named
Executive Officers set forth in this table would be subject to
the excise tax under Section 4999 of the Code. |
43
Potential
Payments and Benefits Upon a Termination of Employment by Reason
of Death
Separate and apart from the employment agreements and offer
letter described above, the award agreements governing the
shares of restricted Cadence common stock granted to each of the
Named Executive Officers generally provide that if the Named
Executive Officer to whom the restricted stock has been granted
dies while employed by Cadence, that portion of the restricted
stock award that would have vested on the next following vesting
date will be deemed to have vested immediately prior to the
affected executives death. The tables below set forth the
estimated value of the potential payments to each Named
Executive Officer, assuming the executives employment had
terminated on December 29, 2007 by reason of the
executives death. Amounts are reported without any
reduction for possible delay in the commencement or timing of
payments.
|
|
|
|
|
|
|
Vesting of Restricted
|
|
|
|
Stock Awards
|
|
|
|
Upon Executives
|
|
Name
|
|
Death ($)(1)
|
|
|
Michael J. Fister
|
|
|
1,524,291
|
|
William Porter
|
|
|
1,206,303
|
|
Kevin Bushby
|
|
|
638,625
|
|
James S. Miller, Jr.
|
|
|
1,277,250
|
|
R.L. Smith McKeithen
|
|
|
298,025
|
|
|
|
|
(1) |
|
These amounts are calculated assuming that the market price per
share of Cadences common stock on the date of termination
of employment was equal to the closing price of Cadences
common stock on December 28, 2007 of $17.03 per share. |
EXECUTIVE
RELEASE AND TRANSITION AGREEMENT WITH MOSHE GAVRIELOV
On September 18, 2007, Cadence entered into an Executive
Release and Transition Agreement with Moshe Gavrielov as
contemplated by his employment agreement, dated as of
January 12, 2005. The Transition Agreement provides that
Mr. Gavrielovs employment as Executive Vice President
and General Manager of the Verification Division at Cadence
terminated as of November 30, 2007, and that Cadence will
retain Mr. Gavrielov as a consultant for Cadence at a
monthly salary of $4,000 (commencing on the first payroll date
after May 30, 2008) until the Termination
Date, which is the earliest to occur of (i) the date
on which Mr. Gavrielov resigns from all employment with
Cadence; (ii) the date on which Cadence terminates
Mr. Gavrielovs employment due to
Mr. Gavrielovs breach of his duties or obligations
under the Transition Agreement; and (iii) November 30,
2008. Until the Termination Date, Mr. Gavrielov is required
to comply with non-solicitation and non-competition provisions
in favor of Cadence.
In exchange for a release of claims, the Transition Agreement
provides for the immediate vesting on November 30, 2007 of
all of Mr. Gavrielovs unvested options and restricted
stock awards that would ordinarily have vested in the period
from November 30, 2007 through November 30, 2008, and
the forfeiture of all of Mr. Gavrielovs other
unvested options and restricted stock awards; and, following the
Termination Date, all vested options may be exercised in
accordance with the applicable stock option agreement. In
addition, if Mr. Gavrielov elects to continue coverage
under Cadences medical, dental and vision insurance plans
pursuant to COBRA, Cadence will pay Mr. Gavrielovs
COBRA premiums until the Termination Date. Provided that
Mr. Gavrielov does not resign from employment with Cadence
and Cadence does not terminate Mr. Gavrielovs
employment due to Mr. Gavrielovs breach of his duties
or obligations under the Transition Agreement, on or about
May 30, 2008, Mr. Gavrielov will receive a lump-sum
payment of $400,000, less applicable tax deductions and
withholdings, and a prorated bonus for the second half of 2007.
44
EQUITY
COMPENSATION PLAN INFORMATION
The following table provides information about Cadences
equity compensation plans, including its equity incentive plans
and employee stock purchase plans, as of December 29, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
Remaining Available
|
|
|
|
Number of Securities
|
|
|
Weighted-Average
|
|
for Future Issuance
|
|
|
|
to be Issued Upon
|
|
|
Exercise Price of
|
|
Under Equity
|
|
|
|
Exercise of
|
|
|
Outstanding
|
|
Compensation Plans
|
|
|
|
Outstanding Options,
|
|
|
Options, Warrants
|
|
(Excluding Securities
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
and Rights
|
|
Reflected in Column (a))
|
|
|
|
(a)
|
|
|
(b)
|
|
(c)
|
|
|
Equity compensation plans approved by security holders
|
|
|
7,459,112(1)
|
|
|
$18.34
|
|
|
13,309,964(2)
|
|
Equity compensation plans not approved by security holders
|
|
|
30,438,193(3)
|
|
|
$16.37
|
|
|
6,960,414
|
|
Total
|
|
|
37,897,305
|
|
|
$16.76
|
|
|
20,270,378
|
|
|
|
|
(1) |
|
This amount excludes purchase rights accruing under
Cadences Employee Plan for which remaining available
rights are included in column (c). Under the Employee Plan, each
eligible employee may purchase shares of Cadence common stock at
six-month intervals at a purchase price per share equal to 85%
of the lower of the fair market value of Cadence common stock on
(i) the first day of an offering period (currently six
months in duration), or (ii) the last day of the offering
period. |
|
(2) |
|
This amount includes 4,633,751 shares available for
issuance at the end of fiscal 2007 under the Employee Plan. |
|
(3) |
|
This amount excludes 3,276,978 shares subject to options
assumed in connection with acquisitions at a weighted average
exercise price of $10.53. No additional options may be granted
under the assumed plans. |
Cadences 1993 Nonstatutory Stock Incentive Plan, 1997
Nonstatutory Stock Incentive Plan and 2000 Nonstatutory Equity
Incentive Plan, which are referred to below as the 1993 Plan,
the 1997 Plan and the 2000 Plan, respectively, and are
collectively referred to below as the Plans, provide for the
issuance of nonstatutory stock options, restricted stock,
restricted stock units, stock bonuses and rights to acquire
restricted stock to Cadence employees and consultants who are
not executive officers, directors or beneficial owners of 10% or
more of Cadence common stock. As of December 29, 2007:
|
|
|
|
|
Under the 1993 Plan there were no shares subject to unvested
restricted stock grants, options to purchase 848,859 shares
outstanding with a weighted average exercise price of $17.94,
and 7,073 shares remaining available for grant of the
24,750,000 shares reserved for issuance;
|
|
|
|
Under the 1997 Plan there were 3,098,812 shares subject to
unvested restricted stock grants, options to purchase
6,679,888 shares outstanding with a weighted average
exercise price of $14.58, and 391,536 shares remaining
available for grant of the 30,000,000 shares reserved for
issuance; and
|
|
|
|
Under the 2000 Plan there were 1,464,530 shares subject to
unvested restricted stock grants, options to purchase
22,909,446 shares outstanding with a weighted average
exercise price of $16.84, and 6,561,805 shares remaining
available for grant of the 50,000,000 shares reserved for
issuance.
|
The exercise price of options granted under the Plans may not be
less than the fair market value of a share of Cadence common
stock on the grant date. Prior to January 1, 2007, the fair
market value was the average of the high and low price of
Cadence common stock on the grant date. On or after
January 1, 2007, the fair market value is the closing price
of Cadence common stock on the grant date. Options granted to
new employees under the Plans generally become exercisable over
a four-year period, with one-fourth of the shares vesting one
year from the vesting commencement date, and the remaining
shares vesting in 36 equal monthly installments thereafter.
Options granted to current employees under the Plans generally
become exercisable over a four-year period, vesting in 48 equal
monthly installments. Options granted under the Plans prior to
October 1, 2006 generally expire ten years from the grant
date and options granted under the Plans on or after
October 1, 2006 expire seven years from the grant date.
Awards of restricted stock granted under the Plans vest at the
times and in installments determined by the Board. The vesting
of options and restricted stock may be subject to continued
employment, the passage of time
45
and/or
performance criteria deemed appropriate by the Board. Stock
bonus awards and restricted stock awards granted under the Plans
are subject to the terms and conditions determined by the Board.
CERTAIN
TRANSACTIONS
REVIEW,
APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED
PERSONS
In February 2007, the Board of Directors adopted written Related
Party Transaction Policies and Procedures which require that all
interested transactions with related
parties (each as defined below) be subject to approval or
ratification in accordance with the procedures set forth therein.
An interested transaction is any transaction,
arrangement or relationship, or series of similar transactions,
arrangements or relationships, in which:
|
|
|
|
|
The aggregate amount involved will or may be expected to exceed
$100,000 in any calendar year;
|
|
|
|
Cadence is a participant; and
|
|
|
|
Any related party has or will have a direct or
indirect interest (other than solely as a result of being a
director or less than 10% beneficial owner of another entity).
|
A related party covered by the policy is any:
|
|
|
|
|
Person who was or is (since the beginning of the last fiscal
year for which Cadence has filed an Annual Report on Form
10-K or
proxy statement) an executive officer, director or nominee for
election as a director;
|
|
|
|
Greater than 5% beneficial owner of Cadences common
stock; or
|
|
|
|
Immediate family member of the foregoing, which includes a
persons spouse, parents, stepparents, children,
stepchildren, siblings, mothers- and
fathers-in-law,
sons- and
daughters-in-law,
and brothers- and sisters- in law and anyone residing in such
persons home (other than tenants or employees).
|
The Corporate Governance and Nominating Committee of the Board
reviews the material facts of all interested transactions and
either approves or disapproves of the entry into the
transaction. If advanced approval of an interested transaction
is not feasible, the transaction is reviewed and, if the
Committee determines it to be appropriate, ratified at the
Committees next scheduled meeting. In determining whether
to approve or ratify an interested transaction, the Committee
takes into account, among other appropriate factors, the extent
of the related partys interest in the transaction and
whether the interested transaction is on terms no less favorable
than terms generally available to unaffiliated third parties
under similar circumstances. Directors may not participate in
any discussion or approval of an interested transaction for
which they are a related party.
The Corporate Governance and Nominating Committee has
pre-approved or ratified the following categories of interested
transactions:
|
|
|
|
|
Any employment by Cadence of an executive officer of Cadence if:
|
|
|
|
|
|
The related compensation is required to be reported in
Cadences proxy statement under the SECs compensation
disclosure requirements; or
|
|
|
|
The executive officer is not an immediate family of another
executive officer or director of Cadence, the related
compensation would be reported in Cadences proxy statement
under the SECs compensation disclosure requirements if the
executive officer was a named executive officer and the
Compensation Committee approved (or recommended that the Board
approve) such compensation.
|
|
|
|
|
|
Any compensation paid to a director if the compensation is
required to be reported in Cadences proxy statement under
the SECs compensation disclosure requirements.
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Any transaction with another company in which the related
persons only relationship is as a non-executive employee,
director or beneficial owner of less than 10% of that
companys shares, if the amount involved does not exceed
the greater of $1,000,000 or 2% of that companys total
annual revenues.
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46
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Any charitable contribution by Cadence to a charitable
organization, foundation or university at which a related
persons only relationship is as a non-executive employee
or director, if the amount involved does not exceed the lesser
of $100,000 or 2% of the charitable organizations total
annual receipts.
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Any transaction where the related persons interest arises
solely from the ownership of Cadence common stock and all
holders of Cadence common stock received the same benefit on a
pro rata basis.
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Any transaction with a related party involving services as a
bank depositary of funds, transfer agent, registrar, trustee
under an indenture or similar services.
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In addition, the Board has delegated to the Chairman of the
Corporate Governance and Nominating Committee the authority to
pre-approve or ratify any interested transaction with a related
party in which the aggregate amount is expected to be less than
$1,000,000.
TRANSACTIONS
WITH RELATED PERSONS
On March 11, 2007, 849 College Avenue, Inc., a subsidiary
of Cadence, entered into an amended and restated residential
housing lease with Mr. Bushby. The amended and restated
lease is effective as of February 21, 2007 and replaces the
residential lease previously entered into by the parties in
March 2003. The lease provides for an initial term commencing on
January 1, 2007 and ending on February 29, 2008, with
aggregate annual rental payments of $90,000, comprised of
monthly rental payments of $7,500. Mr. Bushby has exercised
his right to extend the lease for one year, such that the lease
is now scheduled to expire on February 28, 2009. The lease
may be terminated by either party upon 180 days prior
written notice. However, the Cadence subsidiary may not
terminate the lease, except upon Mr. Bushbys default
thereunder, as long as Mr. Bushby is a full-time Executive
Vice President in good standing at Cadence. In addition, if the
lease expires during Mr. Bushbys employment, the
lease provides that the Cadence subsidiary must negotiate in
good faith an extension of the lease. If Mr. Bushby is
terminated other than for cause (as described above
under Employment Agreement with Kevin Bushby) or if
Mr. Bushby resigns from Cadence in connection with a
constructive termination (as described above under
Employment Agreement with Kevin Bushby), the Cadence
subsidiary may not terminate the lease (except upon
Mr. Bushbys default under the lease) with effect
earlier than 12 months following the date
Mr. Bushbys employment terminates. Mr. Bushby
also has an option to purchase the property at any time during
the term of the lease, as extended, for a price equal to the
greater of the propertys fair market value or the purchase
price originally paid for the property by the Cadence subsidiary.
INDEMNIFICATION
AGREEMENTS
Cadences Bylaws provide that Cadence will indemnify its
directors and officers to the fullest extent permitted by the
Delaware General Corporation Law. Cadences Bylaws also
authorize the Board to cause Cadence to enter into
indemnification contracts with its directors, officers and
employees and to purchase insurance on behalf of any person it
is permitted to indemnify. Pursuant to these Bylaw provisions,
Cadence has entered into indemnity agreements with each of its
directors and executive officers, and has also purchased
insurance on behalf of the directors and executive officers.
Each indemnity agreement provides, among other things, that
Cadence will indemnify each signatory to the extent provided in
the agreement, for expenses, witness fees, damages, judgments,
fines and amounts paid in settlement and any other amounts that
the individual becomes legally obligated to pay because of any
claim or claims made against or by him or her in connection with
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, arbitral, administrative or
investigative, to which the individual is or may be made a party
by reason of his or her position as a director, officer,
employee or other agent of Cadence, and otherwise as may be
provided to the individual by Cadence under the non-exclusivity
provisions of the Delaware General Corporation Law and
Cadences Bylaws.
47
OTHER
MATTERS
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the directors
and executive officers of Cadence, and persons who own more than
ten percent of a registered class of Cadences equity
securities, to file with the SEC initial reports of ownership
and reports of changes in ownership of common stock and other
equity securities. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish
Cadence with copies of all Section 16(a) forms they file.
To Cadences knowledge, based solely on a review of the
copies of the reports furnished to us and written
representations that no other reports were required, all
Section 16(a) filing requirements applicable to its
executive officers and directors and greater than ten percent
beneficial owners were complied with on a timely basis, except
that the Form 4 Statement of Changes in Beneficial
Ownership for Mr. Gavrielov filed on May 18,
2007 was late (transaction occurred on May 15, 2007).
STOCKHOLDER
PROPOSALS AND NOMINATIONS
From time to time, Cadence stockholders submit proposals that
they believe should be voted upon at the annual meeting or
nominate persons for election to the Board of Directors. Under
Rule 14a-8
of the Exchange Act, certain stockholder proposals may be
eligible for inclusion in Cadences proxy statement and
form of proxy in connection with the 2009 Annual Meeting of
Stockholders. Stockholder proposals must be submitted in writing
to the Corporate Secretary of Cadence no later than
November 25, 2008 to be included in the proxy statement and
form of proxy relating to Cadences 2008 Annual Meeting of
Stockholders. The submission of a stockholder proposal does not
guarantee that it will be included in Cadences proxy
statement and form of proxy.
Alternatively, under Cadences Bylaws, any director
nominations or proposals which the stockholder does not seek to
include in Cadences proxy statement and form of proxy
pursuant to
Rule 14a-8
under the Exchange Act must be submitted in writing to
Cadences Corporate Secretary no later than
February 6, 2009, nor earlier than January 7, 2009,
and must otherwise satisfy the requirements of Cadences
Bylaws. If the date of the 2009 Annual Meeting of Stockholders
changes by more than 30 days from the anniversary date of
the 2008 Annual Meeting, stockholder proposals or nominations
must be submitted in writing to Cadences Corporate
Secretary no later than ten days following the first public
announcement of the date of the meeting. If the stockholder does
not also comply with the requirements of
Rule 14a-4
under the Exchange Act, Cadence may exercise discretionary
voting authority under proxies it solicits to vote in accordance
with its best judgment on any such stockholder proposal or
nomination submitted by a stockholder.
A stockholders notice must include: (A) as to each
person whom the stockholder proposes to nominate for election as
a director, all information relating to the candidate that is
required to be disclosed in proxy solicitations for a contested
election of directors, or is otherwise required pursuant to
Regulation 14A under the Exchange Act, accompanied by the
candidates written consent to being named in the proxy
statement as a nominee and to serving as a director if elected;
(B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for
conducting such business at the meeting and any material
interest in such business of such stockholder and the beneficial
owner, if any, on whose behalf the proposal is made; (C) as
to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they
appear on Cadences books, and of such beneficial owner,
and (ii) the class and number of shares of Cadence common
stock owned beneficially and of record by such stockholder and
such beneficial owner; and (D) any other information
required to be provided by the stockholder pursuant to
Regulation 14A under the Exchange Act as a proponent to a
stockholder proposal.
Only candidates nominated in accordance with the procedures set
forth above are eligible to serve as directors. Except as
otherwise provided by law, the Chairman of the meeting
determines whether a nomination or any business proposed to be
brought before the meeting was made, or proposed, as the case
may be, in accordance with the procedures set forth in
Cadences Bylaws and, if any proposed nomination or
business is not in compliance with the
48
Bylaws, whether to declare that such defective proposal or
nomination shall not be presented for stockholder action at the
meeting.
OTHER
MATTERS
The Board of Directors knows of no other matters that will be
presented for consideration at the annual meeting of
stockholders. If any other matters are properly brought before
the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with
their best judgment.
By Order of the Board of Directors
R.L. Smith McKeithen
Secretary
March 25, 2008
A COPY OF CADENCES ANNUAL REPORT ON
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 29, 2007 CAN BE FOUND ON
THE INTERNET AT
HTTP://WWW.CADENCE.COM/COMPANY/INVESTOR_RELATIONS/INDEX.ASPX
OR, IF A SHAREHOLDER REQUESTED A PAPER COPY, IS BEING DELIVERED
WITH THIS PROXY STATEMENT, BUT IS ALSO AVAILABLE WITHOUT CHARGE
UPON WRITTEN REQUEST TO: INVESTOR RELATIONS, CADENCE DESIGN
SYSTEMS, INC., 2655 SEELY AVENUE, BUILDING 5, SAN JOSE,
CALIFORNIA 95134.
49
APPENDIX A
AMENDED
AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
1. Purpose.
(a) The Plan initially was established effective as of
January 30, 1990 (the Initial Plan) and has
been amended subsequently from time to time. The Initial Plan
hereby is amended and restated in its entirety as the Amended
and Restated Employee Stock Purchase Plan effective as of the
date of its adoption. The terms of the Initial Plan shall remain
in effect and apply to all Rights granted pursuant to the
Initial Plan.
(b) The purpose of the Plan is to provide a means by which
Employees of the Company and certain designated Affiliates may
be given an opportunity to purchase Shares of the Company.
(c) The Company, by means of the Plan, seeks to retain the
services of such Employees, to secure and retain the services of
new Employees and to provide incentives for such persons to
exert maximum efforts for the success of the Company and its
Affiliates.
(d) The Company intends that the Rights to purchase Shares
granted under the Plan be considered options issued under an
employee stock purchase plan, as that term is
defined in Section 423(b) of the Code.
2. Definitions.
(a) Affiliate means any parent
corporation or subsidiary corporation, whether now or hereafter
existing, as those terms are defined in Sections 424(e) and
(f), respectively, of the Code.
(b) Board means the Board of Directors
of the Company.
(c) Code means the United States
Internal Revenue Code of 1986, as amended.
(d) Committee means a committee of the
Board appointed by the Board in accordance with subsection 3(c)
of the Plan.
(e) Company means
Cadence Design
Systems, Inc., a Delaware corporation.
(f) Director means a member of the Board.
(g) Eligible Employee means an Employee
who meets the requirements set forth in the Offering Memorandum
for eligibility to participate in the Offering.
(h) Employee means any person, including
Officers and Directors, employed by the Company or an Affiliate
of the Company. Neither service as a Director nor payment of a
directors fee shall be sufficient to constitute
employment by the Company or the Affiliate.
(i) Employee Stock Purchase Plan means a
plan that grants rights intended to be options issued under an
employee stock purchase plan, as that term is
defined in Section 423(b) of the Code.
(j) Exchange Act means the United States
Securities Exchange Act of 1934, as amended.
(k) Fair Market Value means the value of
a security, as determined in good faith by the Board. If the
security is listed on the New York Stock Exchange or any other
established stock exchange or traded on the Nasdaq Global Select
Market, the Nasdaq Global Market or the Nasdaq Capital Market,
the Fair Market Value of the security shall be the closing sales
price (rounded up where necessary to the nearest whole cent) for
such security (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or, in the event that the
security is traded on more than one such exchange or market, the
exchange or market with the greatest volume of trading in the
relevant security of the Company) on the trading day occurring
on or closest to the relevant determination date, as reported in
The Wall Street Journal or such other source as the Board
deems reliable, and on the date as determined more precisely in
the Offering Memorandum.
(l) Non-Employee Director means a
Director who either (i) is not a current Employee or
Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company
or its
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parent or subsidiary for services rendered as a consultant or in
any capacity other than as a Director (except for an amount as
to which disclosure would not be required under Item 404(a)
of
Regulation S-K
promulgated pursuant to the Securities Act
(Regulation S-K)),
does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of
Regulation S-K,
and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of
Regulation S-K;
or (ii) is otherwise considered a non-employee
director for purposes of
Rule 16b-3.
(m) Offering means the grant of Rights
to purchase Shares under the Plan to Eligible Employees.
(n) Offering Date means a date selected
by the Board for an Offering to commence.
(o) Offering Memorandum means a
memorandum describing the terms of the then current or otherwise
relevant Offering.
(p) Outside Director means a Director
who either (i) is not a current employee of the Company or
an affiliated corporation (within the meaning of the
Treasury regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or an
affiliated corporation receiving compensation for
prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an
affiliated corporation at any time, and is not
currently receiving direct or indirect remuneration from the
Company or an affiliated corporation for services in
any capacity other than as a Director, or (ii) is otherwise
considered an outside director for purposes of
Section 162(m) of the Code.
(q) Participant means an Eligible
Employee who holds an outstanding Right granted pursuant to the
Plan or, if applicable, such other person who holds an
outstanding Right granted under the Plan.
(r) Plan means this Amended and Restated
Employee Stock Purchase Plan.
(s) Purchase Date means one or more
dates established by the Board during an Offering on which
Rights granted under the Plan shall be exercised and purchases
of Shares carried out in accordance with such Offering.
(t) Right means an option to purchase
Shares granted pursuant to the Plan.
(u) Rule 16b-3
means
Rule 16b-3
of the Exchange Act or any successor to
Rule 16b-3
as in effect with respect to the Company at the time discretion
is being exercised regarding the Plan.
(v) Securities Act means the United
States Securities Act of 1933, as amended.
(w) Share means a share of the common
stock of the Company.
3. Administration.
(a) The Board shall administer the Plan unless and until
the Board delegates administration to a Committee, as provided
in subsection 3(c). Whether or not the Board has delegated
administration, the Board shall have the final power to
determine all questions of policy and expediency that may arise
in the administration of the Plan.
(b) The Board (or the Committee) shall have the power,
subject to, and within the limitations of, the express
provisions of the Plan:
(i) To determine when and how Rights to purchase Shares
shall be granted and the provisions of each Offering of such
Rights (which need not be identical).
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and Rights granted
under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise
of this power, may correct any defect, omission or inconsistency
in the Plan, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in Section 14.
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(v) Generally, to exercise such powers and to perform such
acts as it deems necessary or expedient to promote the best
interests of the Company and its Affiliates and to carry out the
intent that the Plan be treated as an Employee Stock Purchase
Plan.
(c) The Board may delegate administration of the Plan to a
Committee of the Board composed of two (2) or more members,
all of the members of which Committee may be, in the discretion
of the Board, Non-Employee Directors
and/or
Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by
the Board, including the power to delegate to a subcommittee of
two (2) or more Outside Directors any of the administrative
powers the Committee is authorized to exercise (and references
in this Plan to the Board shall thereafter be to the Committee
or such a subcommittee), subject, however, to such resolutions,
not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish
the Committee at any time and revest in the Board the
administration of the Plan.
4. Shares Subject to the Plan.
(a) Subject to the provisions of Section 13 relating
to adjustments upon changes in securities, the Shares that may
be sold pursuant to Rights granted under the Plan shall not
exceed in the aggregate Fifty-Four Million (54,000,000) Shares.
If any Right granted under the Plan shall for any reason
terminate without having been exercised, the Shares not
purchased under such Right shall again become available for the
Plan.
(b) The Shares subject to the Plan may be unissued Shares
or Shares that have been bought on the open market at prevailing
market prices or otherwise.
5. Grant of Rights; Offering.
(a) The Board may from time to time grant or provide for
the grant of Rights to purchase Shares of the Company under the
Plan to Eligible Employees in an Offering on one or more
Offering Dates selected by the Board. Each Offering shall be in
such form and shall contain such terms and conditions as the
Board shall deem appropriate, which shall comply with the
requirements of Section 423(b)(5) of the Code that all
Employees granted Rights to purchase Shares under the Plan shall
have the same rights and privileges. The terms and conditions of
an Offering shall be incorporated by reference into the Plan and
treated as part of the Plan. The provisions of separate
Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by
reference in the Offering Memorandum or otherwise) the period
during which the Offering shall be effective, which period shall
not exceed twenty-seven (27) months beginning with the
Offering Date, and the substance of the provisions contained in
Sections 6 through 9, inclusive.
(b) If a Participant has more than one Right outstanding
under the Plan, unless he or she otherwise indicates in
agreements or notices delivered hereunder: (i) each
agreement or notice delivered by that Participant will be deemed
to apply to all of his or her Rights under the Plan, and
(ii) an earlier-granted Right (or a Right with a lower
exercise price, if two Rights have identical grant dates) will
be exercised to the fullest possible extent before a
later-granted Right (or a Right with a higher exercise price if
two Rights have identical grant dates) will be exercised.
6. Eligibility.
(a) Rights may be granted only to Employees of the Company
or, as the Board may designate as provided in subsection 3(b),
to Employees of an Affiliate. Except as provided in subsection
6(b), an Employee shall not be eligible to be granted Rights
under the Plan unless, on the Offering Date, such Employee has
been in the employ of the Company or the Affiliate, as the case
may be, for such continuous period preceding such grant as the
Board may require, but in no event shall the required period of
continuous employment be equal to or greater than two
(2) years.
(b) The Board may provide that each person who, during the
course of an Offering, first becomes an Eligible Employee will,
on a date or dates specified in the Offering which coincides
with the day on which such person becomes an Eligible Employee
or which occurs thereafter, receive a Right under that Offering,
which Right shall
A-3
thereafter be deemed to be a part of that Offering. Such Right
shall have the same characteristics as any Rights originally
granted under that Offering, as described herein, except that:
(i) the date on which such Right is granted shall be the
Offering Date of such Right for all purposes,
including determination of the exercise price of such Right;
(ii) the period of the Offering with respect to such Right
shall begin on its Offering Date and end coincident with the end
of such Offering; and
(iii) the Board may provide that if such person first
becomes an Eligible Employee within a specified period of time
before the end of the Offering, he or she will not receive any
Right under that Offering.
(c) No Employee shall be eligible for the grant of any
Rights under the Plan if, immediately after any such Rights are
granted, such Employee owns stock possessing five percent (5%)
or more of the total combined voting power or value of all
classes of stock of the Company or of any Affiliate. For
purposes of this subsection 6(c), the rules of
Section 424(d) of the Code shall apply in determining the
stock ownership of any Employee, and stock which such Employee
may purchase under all outstanding rights and options shall be
treated as stock owned by such Employee.
(d) An Eligible Employee may be granted Rights under the
Plan only if such Rights, together with any other Rights granted
under all Employee Stock Purchase Plans of the Company and any
Affiliates, as specified by Section 423(b)(8) of the Code,
do not permit such Eligible Employees rights to purchase
Shares of the Company or any Affiliate to accrue at a rate which
exceeds twenty five thousand dollars ($25,000) of the fair
market value of such Shares (determined at the time such Rights
are granted) for each calendar year in which such Rights are
outstanding at any time.
(e) The Board may provide in an Offering that Employees who
are highly compensated employees within the meaning of
Section 423(b)(4)(D) of the Code shall not be eligible to
participate.
7. Rights; Purchase Price.
(a) On each Offering Date, each Eligible Employee, pursuant
to an Offering made under the Plan, shall be granted the Right
to purchase up to the number of Shares purchasable either:
(i) with a percentage designated by the Board not exceeding
fifteen percent (15%) of such Employees Earnings (as
defined by the Board in each Offering) during the period which
begins on the Offering Date (or such later date as the Board
determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no later than the
end of the Offering; or
(ii) with a maximum dollar amount designated by the Board
that, as the Board determines for a particular Offering,
(1) shall be withheld, in whole or in part, from such
Employees Earnings (as defined by the Board in each
Offering) during the period which begins on the Offering Date
(or such later date as the Board determines for a particular
Offering) and ends on the date stated in the Offering, which
date shall be no later than the end of the Offering
and/or
(2) shall be contributed, in whole or in part, by such
Employee during such period.
(b) The Board shall establish one or more Purchase Dates
during an Offering on which Rights granted under the Plan shall
be exercised and purchases of Shares carried out in accordance
with such Offering.
(c) In connection with each Offering made under the Plan,
the Board may specify a maximum amount of Shares that may be
purchased by any Participant as well as a maximum aggregate
amount of Shares that may be purchased by all Participants
pursuant to such Offering. In addition, in connection with each
Offering that contains more than one Purchase Date, the Board
may specify a maximum aggregate amount of Shares which may be
purchased by all Participants on any given Purchase Date under
the Offering. If the aggregate purchase of Shares upon exercise
of Rights granted under the Offering would exceed any such
maximum aggregate amount, the Board shall make a pro rata
allocation of the Shares available in as nearly a uniform manner
as shall be practicable and as it shall deem to be equitable.
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(d) The purchase price of Shares acquired pursuant to
Rights granted under the Plan shall be not less than the lesser
of:
(i) an amount equal to eighty-five percent (85%) of the
fair market value of the Shares on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the
fair market value of the Shares on the Purchase Date.
8. Participation; Withdrawal; Termination.
(a) An Eligible Employee may become a Participant in the
Plan pursuant to an Offering by delivering a participation
agreement to the Company within the time specified in the
Offering Memorandum, in such form as the Company provides. Each
such agreement shall authorize payroll deductions of up to the
maximum percentage specified by the Board of such
Employees Earnings during the Offering (as defined in each
Offering). The payroll deductions made for each Participant
shall be credited to a bookkeeping account for such Participant
under the Plan and either may be deposited with the general
funds of the Company or may be deposited in a separate account
in the name of, and for the benefit of, such Participant with a
financial institution designated by the Company. To the extent
provided in the Offering, a Participant may reduce (including to
zero) or increase such payroll deductions. To the extent
provided in the Offering, a Participant may begin such payroll
deductions after the beginning of the Offering. A Participant
may make additional payments into his or her account only if
specifically provided for in the Offering and only if the
Participant has not already had the maximum permitted amount
withheld during the Offering.
(b) At any time during an Offering, a Participant may
terminate his or her payroll deductions under the Plan and
withdraw from the Offering by delivering to the Company a notice
of withdrawal in such form as the Company provides. Such
withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board in the Offering. Upon
such withdrawal from the Offering by a Participant, the Company
shall distribute to such Participant all of his or her
accumulated payroll deductions (reduced to the extent, if any,
such deductions have been used to acquire Shares for the
Participant) under the Offering, without interest unless
otherwise specified in the Offering, and such Participants
interest in that Offering shall be automatically terminated. A
Participants withdrawal from an Offering will have no
effect upon such Participants eligibility to participate
in any other Offerings under the Plan but such Participant will
be required to deliver a new participation agreement in order to
participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan
shall terminate immediately upon cessation of any participating
Employees employment with the Company and its designated
Affiliates for any reason (subject to any post-employment
participation period required by law) or other lack of
eligibility. The Company shall distribute to such terminated
Employee all of his or her accumulated payroll deductions
(reduced to the extent, if any, such deductions have been used
to acquire Shares for the terminated Employee) under the
Offering, without interest unless otherwise specified in the
Offering. If the accumulated payroll deductions have been
deposited with the Companys general funds, then the
distribution shall be made from the general funds of the
Company, without interest. If the accumulated payroll deductions
have been deposited in a separate account with a financial
institution as provided in subsection 8(a), then the
distribution shall be made from the separate account, without
interest unless otherwise specified in the Offering.
(d) Rights granted under the Plan shall not be transferable
by a Participant otherwise than by will or the laws of descent
and distribution, or by a beneficiary designation as provided in
Section 15 and, otherwise during his or her lifetime, shall
be exercisable only by the person to whom such Rights are
granted.
9. Exercise.
(a) On each Purchase Date specified therefor in the
relevant Offering, each Participants accumulated payroll
deductions and other additional payments specifically provided
for in the Offering (without any increase for interest) will be
applied to the purchase of Shares up to the maximum amount of
Shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the
Offering. No fractional Shares
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shall be issued upon the exercise of Rights granted under the
Plan unless specifically provided for in the Offering and
permitted by law.
(b) Unless otherwise specifically provided in the Offering,
the amount, if any, of accumulated payroll deductions remaining
in any Participants account after the purchase of Shares
that is equal to the amount required to purchase one or more
whole Shares on the final Purchase Date of the Offering shall be
distributed in full to the Participant at the end of the
Offering, without interest. If the accumulated payroll
deductions have been deposited with the Companys general
funds, then the distribution shall be made from the general
funds of the Company, without interest. If the accumulated
payroll deductions have been deposited in a separate account
with a financial institution as provided in subsection 8(a),
then the distribution shall be made from the separate account,
without interest unless otherwise specified in the Offering.
(c) The amount, if any, of accumulated payroll deductions
remaining in any Participants account after the purchase
of Shares that is less than the amount required to purchase one
whole Share on the final Purchase Date of the Offering shall be
carried forward, without interest, into the next Offering.
(d) No Rights granted under the Plan may be exercised to
any extent unless the Shares to be issued upon such exercise
under the Plan (including Rights granted thereunder) are covered
by an effective registration statement pursuant to the
Securities Act and the Plan is in material compliance with all
applicable state, foreign and other securities and other laws
applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance,
no Rights granted under the Plan or any Offering shall be
exercised on such Purchase Date, and the Purchase Date shall be
delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the
Purchase Date shall not be delayed more than twelve
(12) months and the Purchase Date shall in no event be more
than twenty-seven (27) months from the Offering Date. If,
on the Purchase Date of any Offering hereunder, as delayed to
the maximum extent permissible, the Plan is not registered and
in such compliance, no Rights granted under the Plan or any
Offering shall be exercised and all payroll deductions
accumulated during the Offering (reduced to the extent, if any,
such deductions have been used to acquire Shares) shall be
distributed to the Participants, without interest unless
otherwise specified in the Offering. If the accumulated payroll
deductions have been deposited with the Companys general
funds, then the distribution shall be made from the general
funds of the Company, without interest. If the accumulated
payroll deductions have been deposited in a separate account
with a financial institution as provided in subsection 8(a),
then the distribution shall be made from the separate account,
without interest unless otherwise specified in the Offering.
10. Covenants of the Company.
(a) During the terms of the Rights granted under the Plan,
the Company shall ensure that the amount of Shares required to
satisfy such Rights are available.
(b) The Company shall seek to obtain from each federal,
state, foreign or other regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to
issue and sell Shares upon exercise of the Rights granted under
the Plan. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the
lawful issuance and sale of Shares under the Plan, the Company
shall be relieved from any liability for failure to issue and
sell Shares upon exercise of such Rights unless and until such
authority is obtained.
11. Use of Proceeds from Shares.
Proceeds from the sale of Shares pursuant to Rights granted
under the Plan shall constitute general funds of the Company.
12. Rights as a Stockholder and Employee.
(a) A Participant shall not be deemed to be the holder of,
or to have any of the rights of a holder with respect to, Shares
subject to Rights granted under the Plan unless and until the
Participants Shares acquired upon exercise of Rights under
the Plan are recorded in the books of the Company.
A-6
(b) Neither the Plan nor the grant of any Right thereunder
shall confer any right on any Employee to remain in the employ
of the Company or any Affiliate or restrict the right of the
Company or any Affiliate to terminate such Employees
employment.
13. Adjustments Upon Changes in Securities.
(a) Subject to any required action by the stockholders of
the Company, the number of Shares covered by each Right under
the Plan that has not yet been exercised and the number of
Shares that have been authorized for issuance under the Plan but
have not yet been placed under a Right (collectively, the
Reserves), as well as the price per Share covered by
each Right under the Plan that has not yet been exercised, shall
be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split or the
payment of stock dividend (but only on the Common Stock) or any
other increase or decrease in the number of Shares effected
without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the
Company shall not be deemed to have been effected without
receipt of consideration. Such adjustment shall be made by
the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no
issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to a Right.
(b) In the event of the proposed dissolution or liquidation
of the Company, any and all Offerings shall terminate
immediately prior to the consummation of such proposed action,
unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that
the Rights under the Plan shall terminate as of a date fixed by
the Board and give each Participant the right to exercise his or
her Right. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of
the Company with or into another corporation or a parent or
subsidiary of such successor corporation when the Company is not
the surviving corporation, any and all Offerings shall terminate
immediately prior to the consummation of such proposed action,
unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, and in lieu
of assumption or substitution of the Rights, provide that each
Participant shall have the right to exercise his or her Right.
If the Board makes a Right exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the
Board shall notify the Participant that the Right shall be fully
exercisable for a period of twenty (20) days from the date
of such notice (or such other period of time as the Board shall
determine), and the Right shall terminate upon the expiration of
such period.
(c) The Board may, if it so determines in the exercise of
its sole discretion, also make provision for adjusting the
Reserves, as well as the price per Share covered by each
outstanding Right, in the event that the Company effects one or
more reorganizations, recapitalizations, rights offering, or
other increases or reductions of outstanding Shares, and in the
event of the Company being consolidated with or merged into any
other corporation.
14. Amendment of the Plan.
(a) The Board at any time, and from time to time, may amend
the Plan. However, except as provided in Section 13
relating to adjustments upon changes in securities and except as
to minor amendments to benefit the administration of the Plan,
to take account of a change in legislation or to obtain or
maintain favorable tax, exchange control or regulatory treatment
for Participants or the Company or any Affiliate, no amendment
shall be effective unless approved by the stockholders of the
Company to the extent stockholder approval is necessary for the
Plan to satisfy the requirements of Section 423 of the
Code,
Rule 16b-3
under the Exchange Act or any Nasdaq or other securities
exchange listing requirements. Currently under the Code,
stockholder approval within twelve (12) months before or
after the adoption of the amendment is required where the
amendment will:
(i) Increase the amount of Shares reserved for Rights under
the Plan;
(ii) Modify the provisions as to eligibility for
participation in the Plan to the extent such modification
requires stockholder approval in order for the Plan to obtain
employee stock purchase plan treatment under Section 423 of
the Code; or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain
employee stock purchase plan treatment under Section 423 of
the Code.
A-7
(b) It is expressly contemplated that the Board may amend
the Plan in any respect the Board deems necessary or advisable
to provide Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations
promulgated thereunder relating to Employee Stock Purchase Plans
and/or to
bring the Plan
and/or
Rights granted under it into compliance therewith.
(c) Rights and obligations under any Rights granted before
amendment of the Plan shall not be impaired by any amendment of
the Plan without the consent of the person to whom such Rights
were granted, or except as necessary to comply with any laws or
governmental regulations, or except as necessary to ensure that
the Plan
and/or
Rights granted under the Plan comply with the requirements of
Section 423 of the Code.
15. Designation of Beneficiary.
(a) A Participant may file a written designation of a
beneficiary who is to receive any Shares
and/or cash,
if any, from the Participants account under the Plan in
the event of such Participants death subsequent to the end
of an Offering but prior to delivery to the Participant of such
Shares and cash. In addition, a Participant may file a written
designation of a beneficiary who is to receive any cash from the
Participants account under the Plan in the event of such
Participants death during an Offering.
(b) The Participant may change such designation of
beneficiary at any time by written notice. In the event of the
death of a Participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of
such Participants death, the Company shall deliver such
Shares
and/or cash
to the executor or administrator of the estate of the
Participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its
sole discretion, may deliver such Shares
and/or cash
to the spouse or to any one or more dependents or relatives of
the Participant, or if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may
designate.
16. Termination or Suspension of the Plan.
(a) The Board in its discretion may suspend or terminate
the Plan at any time. Unless sooner terminated, the Plan shall
terminate at the time that all of the Shares subject to the
Plans reserve, as increased
and/or
adjusted from time to time, have been issued under the terms of
the Plan. No Rights may be granted under the Plan while the Plan
is suspended or after it is terminated.
(b) Rights and obligations under any Rights granted while
the Plan is in effect shall not be impaired by suspension or
termination of the Plan, except as expressly provided in the
Plan or with the consent of the person to whom such Rights were
granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that
the Plan
and/or
Rights granted under the Plan comply with the requirements of
Section 423 of the Code.
17. Effective Date of Plan.
The Plan shall become effective upon adoption by the Board.
18. Reorganization of Cadence Design Foundry
Business.
Nothing in this Plan shall be construed to restrict the ability
of the Company to effect the transactions, amendments and
termination described in Section A.2. of that certain Plan
of Reorganization for Cadence Design Foundry Business, adopted
by the Board on October 30, 2002, and the Plan shall hereby
deemed to be amended in accordance therewith; provided that such
transactions shall be effected in a manner consistent with
applicable law.
A-8
PROXY
Cadence Design Systems, Inc.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 7, 2008
The undersigned hereby appoints Michael J. Fister, William Porter and
R.L. Smith McKeithen, or any of them, each with power of substitution, to attend and to represent the undersigned at the 2008 Annual Meeting of Stockholders of Cadence Design Systems, Inc., to be held at Cadence Design Systems, Inc., 2655 Seely Avenue, Building 5, San Jose, California 95134, on May 7, 2008 at 1:00 p.m. Pacific time and any continuation or adjournment thereof, and to vote the number of shares of common stock of Cadence the
undersigned would be entitled to vote if personally present at the meeting in accordance with the instructions set forth on this proxy card. Any proxy heretofore given by the undersigned with respect to such shares of common stock is hereby revoked.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CADENCE.
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THE SHARES WILL BE VOTED AS DIRECTED ON
THE REVERSE. IN THE ABSENCE OF DIRECTION, THIS PROXY WILL BE VOTED
FOR EACH OF THE EIGHT NOMINEES FOR ELECTION, FOR
PROPOSAL 2, AND FOR PROPOSAL 3. IF ANY OTHER MATTERS ARE PROPERLY BROUGHT BEFORE THE ANNUAL MEETING, PROXIES WILL BE VOTED ON THESE MATTERS AS THE PROXIES NAMED ABOVE MAY DETERMINE IN THEIR SOLE DISCRETION.
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(Continued, and to be marked, dated and signed, on the other side) |
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Address Change/Comments
(Mark the corresponding box on the
reverse side) |
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5FOLD AND DETACH HERE5
You can now access your Cadence Design Systems, Inc. account online.
Access your Cadence Design Systems, Inc. stockholder account online via Investor ServiceDirect® (ISD).
The transfer agent for Cadence Design Systems, Inc. now makes it easy and convenient to get current information on your shareholder account.
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View account status
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View payment history for dividends
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View certificate history
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Make address changes |
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View book-entry information
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Obtain a duplicate 1099 tax form |
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Establish/change your PIN |
Visit us on the web at http://www.bnymellon.com/shareowner
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
****TRY IT OUT****
www.bnymellon.com/shareowner/isd
Investor ServiceDirect®
Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-877-899-9107
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THIS
PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED FOR THE PROPOSALS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
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Mark Here
for Address
Change or
Comments
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PLEASE SEE REVERSE SIDE
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1. Election of Directors |
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FOR
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AGAINST
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ABSTAIN
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FOR
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AGAINST
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ABSTAIN |
01 Michael J. Fister
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05 John B. Shoven
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FOR
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AGAINST
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ABSTAIN
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AGAINST
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02 Donald L. Lucas
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06 Roger S. Siboni
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AGAINST
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ABSTAIN
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AGAINST
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03 Al berto Sangiovanni-Vincentelli
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07 John A. C. Swainson
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AGAINST
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AGAINST
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04 George M. Scalise
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08 Lip-Bu Tan
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AGAINST |
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2.
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Approval of an amendment to the Cadence
Design Systems, Inc . Amended and
Restated Employee Stock Purchase Plan.
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FOR
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3.
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Ratification of the selection of KPMG
LLP as the independent registered
public accounting firm of Cadence for
its fiscal year ending January 3, 2009.
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Authority is hereby given to the proxies identified on the front of this card to vote in their discretion upon such other business as may properly come before the meeting or any adjournment thereof. |
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The undersigned hereby acknowledges receipt of: (a) Notice of Internet Availability of Proxy Materials, (b) Notice of Annual Meeting of Stockholders of Cadence, (c) accompanying Proxy Statement, and (d) Annual Report on
Form 10-K for the fiscal year ended December 29, 2007. |
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
5 FOLD AND DETACH HERE 5
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING,
BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
Internet and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
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INTERNET
http://www.proxyvoting.com/cdns
Use the Internet to vote your proxy.
Have your proxy card in hand when you access the website.
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OR
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TELEPHONE
1-866-540-5760
Use any touch-tone telephone to
vote your proxy. Have your proxy
card in hand when you call.
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If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy
card.
To vote by mail, mark, sign and date your proxy card and return it in the enclosed
postage-paid envelope.
Choose MLinkSM for fast, easy and secure 24/7 online access to your future proxy
materials, investment plan statements, tax documents and more. Simply log on to Investor
ServiceDirect® at www.bnymellon.com/shareowner/isd where step-by-step
instructions will prompt you through enrollment.
You can view the Annual Report and Proxy Statement on the Internet at
http://bnymellon.mobular.net/bnymellon/cdns