CADENCE DESIGN SYSTEMS, INC. EMPLOYMENT AGREEMENT WITH MICHAEL J. FISTER

Exhibit 10.05

CADENCE DESIGN SYSTEMS, INC.
EMPLOYMENT AGREEMENT
WITH MICHAEL J. FISTER

     THIS AGREEMENT (this “Agreement”) dated July 29, 2008 (the “Effective Date”), between CADENCE DESIGN SYSTEMS, INC., a Delaware corporation (the “Company”), and Michael J. Fister (“Executive”) supercedes any previous employment agreement between the parties.

     WHEREAS, the Company is engaged in the electronic design automation software business; and

     WHEREAS, the Company desires to obtain the continued services of Executive as President and Chief Executive Officer, and Executive desires to continue to perform such services for the Company, on the terms and conditions as set forth herein.

     NOW, THEREFORE, in consideration of the premises and of the covenants and agreements set forth below, it is mutually agreed as follows:

1. TERM AND DUTIES.

      1.1 EFFECTIVE DATE . The Company hereby continues to employ Executive and Executive hereby accepts continued employment pursuant to the terms and provisions of this Agreement as of the Effective Date. Executive shall continue to be employed on an at will basis, meaning that either Executive or the Company may terminate Executive’s employment at any time, with or without Cause (as defined in Section 4.2 hereof), in the manner specified herein.

      1.2 SERVICES.

          (a) Executive shall have the title President and Chief Executive Officer (“CEO”). Executive’s duties will be assigned to Executive from time to time by the Board of Directors of the Company (the “Board”). Executive shall report directly to the Board.

          (b) During his employment with the Company as CEO, the Company shall recommend Executive’s membership on the Board to the Board’s Corporate Governance and Nominating Committee.

          (c) Executive shall be required to comply with all applicable company policies and procedures, as such shall be adopted, modified or otherwise established by the Company from time to time.

      1.3 NO CONFLICTING SERVICES . During his employment with the Company, Executive agrees to devote his productive time and best efforts to the performance of Executive’s duties hereunder. Executive further agrees, as a condition to the performance by the Company of each and all of its obligations hereunder, that so long as Executive is employed by the Company as CEO pursuant to the terms of this Agreement, he will not directly or indirectly render services of any nature to, otherwise become employed by, serve on the board of directors of, or otherwise

participate or engage in any other business except as expressly authorized under the Company’s Code of Business Conduct. Nothing herein contained shall be deemed to preclude Executive from having outside personal investments and involvement with appropriate community activities, or from devoting a reasonable amount of time to such matters, provided that they shall in no manner interfere with or derogate from Executive’s work for the Company and that they comply with the Company’s Code of Business Conduct.

      1.4 OFFICE . The Company shall maintain an office for Executive at the Company’s corporate headquarters, which currently are located in San Jose, California.

2. COMPENSATION.

     The Company shall pay to Executive, and Executive shall accept as full consideration for his services hereunder, compensation consisting of the following:

      2.1 BASE SALARY . As of the Effective Date, the Company shall pay Executive a base salary of One Million Dollars ($1,000,000) per year (“Base Salary”), payable in installments in accordance with the Company’s customary payroll practices, less such deductions and withholdings required by law or authorized by Executive. The Board or the Compensation Committee of the Board (the “Compensation Committee”) shall review the amount of the Base Salary from time to time, but no less frequently than annually. Any increase approved during the first four (4) months of the Company’s fiscal year shall become retroactively effective as of the beginning of such fiscal year, and any increase approved thereafter shall become effective on the date determined by the Board or the Compensation Committee, as appropriate.

      2.2 BONUS . Executive shall participate in the Company’s Senior Executive Bonus Plan or its successor (the “Bonus Plan”) at an annual target bonus of one hundred percent (100%) of Executive’s Base Salary (the “Target Bonus”) for the Company’s fiscal year with respect to which such bonus shall be determined pursuant to the terms of such Bonus Plan (the criteria for earning a bonus thereunder are set annually by the Compensation Committee). The Board or the Compensation Committee shall review the amount of the Target Bonus from time to time, but no less frequently than annually. The Board or the Compensation Committee may choose, in its sole discretion, to approve a bonus payment in excess of 100% of Executive’s Base Salary for any fiscal year.

      2.3 EQUITY GRANTS . Executive shall be eligible to receive grants of either restricted stock or stock options, or both, as the Compensation Committee may determine from time to time. All stock options shall be granted at not less than one hundred percent (100%) of the fair market value of the Company’s common stock on the date of grant. Any awards shall vest in accordance with the Company’s vesting policy for additional grants to executive officers of the Company in effect on the date of the grant by the Compensation Committee, and shall contain such other terms and conditions as shall be set forth in the agreement documenting the grant.

      2.4 INDEMNIFICATION . In the event Executive is made, or threatened to be made, a party to any legal action or proceeding, whether civil or criminal, by reason of the fact that Executive is or was a director or officer of the Company or serves or served any other

corporation, limited liability company, partnership, joint venture or other entity which is at least fifty percent (50%) or more owned by the Company or controlled by the Company in any capacity at the Company’s request, Executive shall be indemnified by the Company, and the Company shall pay Executive’s related expenses when and as incurred, all to the fullest extent not prohibited by law, as more fully described in and subject to the terms of the form of Indemnity Agreement attached hereto as Exhibit A.

3. EXPENSES AND BENEFITS.

      3.1 REASONABLE AND NECESSARY BUSINESS EXPENSES . In addition to the compensation provided for in Section 2 hereof, the Company shall reimburse Executive for all reasonable, customary and necessary expenses incurred in the performance of Executive’s duties hereunder. Executive shall first account for such expenses by submitting a statement itemizing such expenses prepared in accordance with the policy set by the Company for reimbursement of such expenses. The amount, nature and extent of reimbursement for such expenses shall always be subject to the control, supervision and direction of the Company’s Chief Financial Officer, and/or its General Counsel, and the Board.

      3.2 BENEFITS . During Executive’s full-time employment with the Company, pursuant to this Agreement:

          (a) Executive shall be eligible to participate in the Company’s standard U.S. health insurance, life insurance and disability insurance plans, as such plans may be modified from time to time;

          (b) Executive shall be eligible to participate in the Company’s qualified and non-qualified retirement and other deferred compensation programs pursuant to their terms, as such programs may be modified from time to time; and

          (c) Executive shall be eligible to participate in any other benefit plan or arrangement implemented for other executive officers of the Company for which he satisfies the same eligibility requirements applicable to those executive officers.

      3.3 SARBANES-OXLEY ACT LOAN PROHIBITION . To the extent that any company benefit, program, practice, arrangement, or any term of this Agreement would or might otherwise result in the Company’s extension of a credit arrangement to Executive not permissible under the Sarbanes-Oxley Act of 2002 (a “Loan”), the Company will use reasonable efforts to provide Executive with a substitute for such Loan, which is lawful and of at least equal value.

4. TERMINATION OF EMPLOYMENT.

      4.1 GENERAL . Executive’s employment by the Company as CEO under this Agreement shall terminate immediately upon delivery to Executive of written notice of termination by the Company, upon the Company’s receipt of written notice of termination by Executive at least thirty (30) days before the specified effective date of such termination, or upon Executive’s death or Permanent Disability (as defined in Section 4.4 hereof); provided, however, that only five (5) business days’ written notice, but subject to any cure provision, shall be required under this Section 4.1 in connection with Executive’s voluntary termination of his

employment in connection with a Constructive Termination (as defined in Section 4.3 hereof). In the event of such termination, except where Executive is terminated for Cause (as defined in Section 4.2 hereof) or as the result of a Permanent Disability or death, or where Executive voluntarily terminates his employment for any reason other than in connection with a Constructive Termination, and upon execution by Executive at or about the effective date of such termination of the Executive Transition and Release Agreement, in the form attached hereto as Exhibit B (the “Transition Agreement”), the Company shall provide Executive with the benefits set forth in the Transition Agreement.

      4.2 DEFINITION OF CAUSE . For purposes of this Agreement, “Cause” shall be limited to (1) Executive’s gross misconduct or fraud in the performance of his services hereunder; (2) Executive’s conviction or guilty plea or plea of nolo contendere with respect to any felony other than vicarious liability solely as a result of his position as Chief Executive Officer; (3) Executive’s engaging in any material act of theft or other material misappropriation of company property in connection with his employment; (4) Executive’s material breach of this Agreement after written notice delivered to Executive identifying such breach and his failure to cure such breach, if curable, within thirty (30) days following delivery of such notice; (5) Executive’s material breach of the Proprietary Information Agreement (as defined in Section 8 hereof) after written notice delivered to Executive identifying such breach and his failure to cure such breach, if curable, within thirty (30) days following delivery of such notice; (6) Executive’s material failure/refusal to perform his assigned duties after written notice delivered to Executive identifying such failure/refusal and his failure to cure such failure/refusal, if curable, within thirty (30) days following delivery of such notice; or (7) Executive’s material breach of the Company’s Code of Business Conduct as such code may be revised from time to time after written notice delivered to Executive identifying such breach and his failure to cure such breach, if curable, within thirty (30) days following delivery of such notice. In no event may the Company terminate Executive’s employment for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of at least a majority of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to Executive and an opportunity for Executive, together with Executive’s counsel, to be heard before the Board), finding that in the good faith opinion of the Board, Executive was culpable for the conduct constituting “Cause” and specifying the particulars thereof.

      4.3 CONSTRUCTIVE TERMINATION . Notwithstanding anything in this Section 4 to the contrary, Executive may voluntarily end his employment as CEO and President of the Company in the event one or more of the circumstances or events of “Constructive Termination” set forth below occurs, provided that he shall provide five (5) days’ written notice to the Company, subject to any cure provisions set forth below, of the circumstance(s) or event(s), delivered upon or within ninety (90) days following the occurrence of the event or circumstance constituting a Constructive Termination. Upon a Constructive Termination, he will be eligible for the benefits set forth in the Transition Agreement in exchange for executing and delivering that agreement in accordance with Section 9.3 hereof. For purposes of this Agreement, “Constructive Termination” shall mean:

          (a) a material adverse change, without Executive’s written consent, in Executive’s authority, duties, title or reporting relationship to the Board causing Executive’s

position to be of materially less stature or responsibility, after written notice delivered to the Company of such change and the Company’s failure to cure such change, if curable, within thirty (30) days following delivery of such notice; provided, however, that such a material adverse change shall not be deemed to occur if Executive continues to serve as the Chief Executive Officer of the Company or its successor entity, regardless of whether the Company or its successor entity is a publicly traded company;

          (b) a reduction, without Executive’s written consent, in Executive’s Base Salary in effect on the Effective Date (or such higher level as may be in effect in the future) by more than ten percent (10%) or a reduction by more than ten percent (10%) in Executive’s stated Target Bonus in effect on the Effective Date (or such greater Target Bonus amount as may be in effect in the future) under the Bonus Plan;

          (c) a relocation of Executive’s principal place of employment by more than thirty (30) miles, unless Executive consents in writing to such relocation;

          (d) any material breach by the Company of any provision of this Agreement, after written notice delivered to the Company of such breach and the Company’s failure to cure such breach, if curable, within thirty (30) days following delivery of such notice; or

          (e) any failure by the Company to obtain the assumption of this Agreement by any successor to the Company.

     In the event of an event or circumstance constituting Constructive Termination, the Company may notify Executive at any time prior to expiration of the cure period that it will not cure the circumstance, in which case the cure period shall end immediately upon such notification.

      4.4 PERMANENT DISABILITY . For purposes of this Agreement, “Permanent Disability” shall mean any medically determinable physical or mental impairment that can reasonably be expected to result in death or that has lasted or can reasonably be expected to last for a continuous period of not less than twelve (12) months and renders Executive unable to perform effectively all of the material and substantial duties of President and Chief Executive Officer pursuant to this Agreement.

      4.5 CHANGE IN CONTROL .

          (a) Should there occur a Change in Control (as defined below) and if within three (3) months prior to or thirteen (13) months following the Change in Control either (i) Executive’s employment under this Agreement is terminated without Cause or (ii) Executive terminates his employment pursuant to this Agreement as a result of an event constituting a Constructive Termination, then, in exchange for executing and delivering the Transition Agreement, Executive shall be entitled to all of the benefits set forth therein, except that (1) the amount of the payment described in paragraph 5(a)(i) of the Transition Agreement shall equal three hundred seventy five percent (375%) of Executive’s Base Salary at the highest level in effect at any time during the term of this Agreement (the “Highest Base Salary”), in lieu of the amount described in paragraph 5(a)(i) of the form of Transition Agreement attached hereto, (2) the amount of the payments described in paragraph 5(a)(ii) of the Transition Agreement shall

equal) one hundred twenty five percent (125%) of Executive’s Highest Base Salary, in lieu of the amount described in paragraph 5(a)(ii) of the form of Transition Agreement attached hereto; and (3) in lieu of the acceleration described in paragraph 4(b) of the form of Transition Agreement attached hereto, all unvested equity compensation awards (including stock options, restricted stock and restricted stock units) that are outstanding and held by Executive on the Transition Commencement Date shall immediately vest and become exercisable in full on the Transition Commencement Date; provided, that, if Executive’s termination of employment without Cause or by reason of Constructive Termination occurs within three months prior to a Change in Control, any unvested equity compensation awards that do not vest on the Transition Commencement Date shall vest in full immediately prior to the effective time of the Change in Control. Any acceleration of vesting pursuant to this Section 4.5(a) shall have no effect on any other provisions of the equity compensation awards or the plans governing such awards.

          (b) For purposes of this Section 4.5, a Change in Control shall be deemed to have occurred if:

          (a) In the event Executive’s employment is terminated for Cause or Executive voluntarily terminates his employment with the Company other than in connection with a Constructive Termination, then Executive will be paid only (i) any earned but unpaid Base Salary and any outstanding expense reimbursements submitted and approved pursuant to Section 3.1 hereof, and (ii) other unpaid vested amounts or benefits under the Company compensation, incentive and benefit plans in which Executive participates, in each case under this clause (ii) as of the effective date of such termination; and

          (b) In the event Executive’s employment is terminated on account of death or Permanent Disability, then, in addition to all amounts payable pursuant to Section 4.6(a), upon execution by Executive or Executive’s representative or a representative of Executive’s estate, as soon as reasonably practicable but in no event later than one hundred eighty (180) days following the date of Executive’s termination of employment, of the Release Agreement, in the form attached hereto as Exhibit C, and such Release Agreement becoming effective, the Company shall provide Executive or his estate, as the case may be, the following benefits to which Executive would not otherwise be entitled: (i) all unvested equity compensation awards (including stock options, restricted stock and restricted stock units) outstanding and held by Executive on the date of his termination that would have vested over the twelve (12) months following the date of termination had Executive continued in employment under his Employment Agreement during that period shall immediately vest and become exercisable in full on the date of such termination, such equity compensation awards and all previously vested equity, compensation awards shall remain exercisable for twenty-four (24) months from the date of such termination (but not later than the expiration of the term of the applicable equity compensation award), and there shall be no further vesting of any equity compensation awards thereafter; provided that this acceleration will have no effect on any other provisions of the equity compensation awards; and (ii) solely in the event of termination on account of Permanent Disability, if Executive elects to continue coverage under Cadence’s medical, dental and vision insurance plans pursuant to COBRA, Cadence will pay Executive’s COBRA premiums for twelve (12) months following such termination. In the event that Executive performs full-time or part-time employment or consulting services during the 12-month period following his termination on account of Permanent Disability without the written consent of the Company, then all equity compensation awards the vesting of which had been accelerated pursuant to the preceding sentence shall be forfeited and Executive shall return to the Company all stock obtained or on which restrictions terminated upon such vesting and the proceeds from the sale of

any such stock, and all stock, net of exercise price, obtained upon the exercise of options that vested pursuant to the preceding sentence and the proceeds, net of exercise price, from the sale of any such stock.

          (c) In the event Executive’s employment is terminated for Cause, or on account of death or Permanent Disability, or Executive voluntarily terminates his employment with the Company other than in connection with a Constructive Termination, Executive shall not become a party to the Transition Agreement and shall not be bound by any of the terms and provisions thereof.

5. EXCISE TAX.

     In the event that any benefits payable to Executive pursuant to the Transition Agreement or this Agreement (“Termination Benefits”) (i) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), or any comparable successor provisions, and (ii) but for this Section 5 would be subject to the excise tax imposed by Section 4999 of the Code, or any comparable successor provisions (the “Excise Tax”), then Executive’s Termination Benefits shall be either (a) provided to Executive in full, or (b) provided to Executive as to such lesser extent which would result in no portion of such benefits being subject to the Excise Tax, whichever of the foregoing amounts, when taking into account applicable federal, state, local and foreign income and employment taxes, the Excise Tax, and any other applicable taxes, results in the receipt by Executive, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be subject to the Excise Tax. Unless the Company and Executive otherwise agree in writing, any determination required under this Section 5 shall be made in writing in good faith by a nationally recognized accounting firm selected by the Company (the “Accountants”). In the event of a reduction of benefits hereunder, Executive’s Termination Benefits shall be reduced in the order specified in the letter agreement attached to this Agreement as Exhibit D. For purposes of making the calculations required by this Section 5, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code, and other applicable legal authority. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 5 The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 5.

     If, notwithstanding any reduction described in this Section 5, the Internal Revenue Service (the “IRS”) determines that Executive is liable for the Excise Tax as a result of the receipt of any Termination Benefits, then Executive shall be obligated to pay back to the Company, within thirty (30) days after a final IRS determination or in the event that Executive challenges the final IRS determination, a final judicial determination, a portion of the Termination Benefits equal to the “Repayment Amount.” The Repayment Amount with respect to the Termination Benefits shall be the smallest such amount, if any, as shall be required to be paid to the Company so that Executive’s net after-tax proceeds with respect to the Termination Benefits (after taking into account the payment of the Excise Tax and all other applicable taxes imposed on such payment) shall be maximized. The Repayment Amount with respect to the payment of benefits shall be zero if a Repayment Amount of more than zero would not result in

Executive’s net after-tax proceeds with respect to the payment of such benefits being maximized. If the Excise Tax is not eliminated pursuant to this paragraph, Executive shall pay the Excise Tax and shall not be obligated to surrender any Termination Benefits.

     Notwithstanding any other provision of this Section 5, if (1) there is a reduction in the payment of Termination Benefits as described in this Section 5, (2) the IRS later determines that Executive is liable for the Excise Tax, the payment of which would result in the maximization of Executive’s net after-tax proceeds (calculated as if Executive’s Termination Benefits had not previously been reduced), and (3) Executive pays the Excise Tax, then the Company shall pay to Executive those Termination Benefits which were reduced pursuant to this Section 5 in the reverse order of the reduction set forth in Exhibit D as soon as administratively possible after Executive pays the Excise Tax so that Executive’s net after-tax proceeds with respect to the payment of Termination Benefits are maximized.

6. DISPUTE RESOLUTION.

          (a) Each of the parties expressly agrees that, to the extent permitted by applicable law and to the extent that the enforceability of this Agreement is not thereby impaired, any and all disputes, controversies or claims between Executive and the Company arising under this Agreement (as opposed to the Transition Agreement), except those arising under Sections 6(d) and 9.10 hereof or under the Proprietary Information Agreement (as defined in Section 8 hereof), shall be determined exclusively by final and binding arbitration before a single arbitrator in accordance with the JAMS Arbitration Rules and Procedures, or successor rules then in effect, and that judgment upon the award of the arbitrator may be rendered in any court of competent jurisdiction. This includes, without limitation, any and all disputes, controversies, and/or claims arising out of or concerning Executive’s employment by the Company as CEO or the termination of Executive’s employment as CEO or this Agreement, and includes, without limitation, claims by Executive against directors, officers or employees of the Company, whether arising under theories of liability or damages based on contract, tort or statute, to the full extent permitted by law. As a material part of this agreement to arbitrate claims, the parties expressly waive all rights to a jury trial in court on all statutory or other claims. This Section 6 does not purport to limit either party’s ability to recover any remedies provided for by statute, including attorneys’ fees.

          (b) The arbitration shall be held in the San Jose, California metropolitan area, and shall be administered by JAMS or, in the event JAMS does not then conduct arbitration proceedings, a similarly reputable arbitration administrator. Under such proceeding, the parties shall select a mutually acceptable, neutral arbitrator from among the JAMS panel of arbitrators. Except as provided herein, the Federal Arbitration Act shall govern the interpretation and enforcement of such arbitration proceeding. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the State of California, or federal law, if California law is preempted, and the arbitrator is without jurisdiction to apply any different substantive law. The parties agree that they will be allowed to engage in adequate discovery, the scope of which will he determined by the arbitrator, consistent with the nature of the claims in dispute. The arbitrator shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The arbitrator shall render an award that shall include a written statement of

opinion setting forth the arbitrator’s findings of fact and conclusions of law. Judgment upon the award may be entered in any court having jurisdiction thereof. The parties intend this arbitration provision to be valid, enforceable, irrevocable and construed as broadly as possible.

          (c) The Company shall be responsible for payment of the arbitrator’s fees as well as all administrative fees associated with the arbitration. The parties shall be responsible for their own attorneys’ fees and costs (including expert fees and costs), except as provided in Section 9.14 hereof.

          (d) The parties agree, however, that damages would be an inadequate remedy for the Company in the event of a breach or threatened breach of Section 1.3 of this Agreement or any provision of the Proprietary Information Agreement (as defined in Section 8 hereof). In the event of any such breach or threatened breach, the Company may, either with or without pursuing any potential damage remedies, obtain from a court of competent jurisdiction, and enforce, an injunction prohibiting Executive from violating Section 1.3 of this Agreement or any provision of the Proprietary Information Agreement (as defined in Section 8 hereof) and requiring Executive to comply with the terms of those agreements.

7. COOPERATION WITH THE COMPANY AFTER TERMINATION OF THE EMPLOYMENT PERIOD.

     Following the termination of his full-time employment for any reason (other than death), Executive shall cooperate with the Company in all matters relating to the winding up of his pending work on behalf of the Company and the orderly transfer of any such pending work to other employees of the Company as may be designated by the Company. Such cooperation shall be provided by Executive at mutually convenient times. Executive also agrees to participate as a witness in any litigation or regulatory proceeding to which the Company or any of its affiliates is a party at the request of the Company upon delivery to Executive of reasonable advance notice and the Company’s written obligation to reimburse Executive for all reasonable and documented expenses incurred in connection therewith. Furthermore, Executive agrees to return to the Company all property of the Company, including all hard and soft copies of records, documents, materials and files relating to confidential, proprietary or sensitive company information in his possession or control, as well as all other company-owned property in his possession or control, at the time of the termination of his full-time employment, except to the extent that the Company determines that retention of any of such property is necessary, desirable or convenient in order to permit Executive to satisfy his obligations under this Section 7 or under the Transition Agreement. after which time Executive shall promptly return all such retained company property.

8. PROPRIETARY INFORMATION AGREEMENT.

     The Executive’s Employee Proprietary Information and Inventions Agreement was executed on May 12, 2004 in the form attached hereto as Exhibit D (the “Proprietary Information Agreement”).

9. GENERAL.

      9.1 WAIVER . Neither party shall, by mere lapse of time, without giving notice or taking other action hereunder, be deemed to have waived any breach by the other party of any of the provisions of this Agreement. Further, the waiver by either party of a particular breach of this Agreement by the other shall neither be construed as, nor constitute, a continuing waiver of such breach or of other breaches of the same or any other provision of this Agreement.

      9.2 SEVERABILITY . If for any reason a court of competent jurisdiction or arbitrator finds any provision of this Agreement to be unenforceable, the provision shall be deemed amended as necessary to conform to applicable laws or regulations, or if it cannot be so amended without materially altering the intention of the parties, the remainder of the Agreement shall continue in full force and effect as if the offending provision were not contained herein.

      9.3 NOTICES . All notices and other communications required or permitted to be given under this Agreement must be in writing and shall be considered effective either (a) upon personal service or (b) upon delivery by facsimile and depositing such notice in the U.S. Mail, postage prepaid, return receipt requested and, if addressed to the Company, in care of the General Counsel at the Company’s principal corporate address, and, if addressed to Executive, at his most recent address shown on the Company’s corporate records or at any other address that Executive may specify by notice to the Company, or (c) three (3) days after depositing such notice in the U.S. Mail as described in clause (b) of this paragraph, or (d) upon delivery by email, if addressed to the Company to generalcounsel@cadence.com and if addressed to Executive to such email address as Executive may specify by notice to the Company.

      9.4 COUNTERPARTS . This Agreement may be executed by facsimile and in any number of counterparts, each of which shall be deemed an original and all of which taken together constitute one and the same instrument and in making proof hereof it shall not be necessary to produce or account for more than one such counterpart.

      9.5 ENTIRE AGREEMENT . The parties hereto acknowledge that each has read this Agreement, understands it, and agrees to be bound by its terms. The parties further agree that this Agreement, the exhibits to this Agreement, any existing equity compensation award agreements between the parties, and the documents, plans and policies referred to in this Agreement (which are hereby incorporated herein by reference) constitute the complete and exclusive statement of the agreement between the parties and supersedes all proposals (oral or written), understandings, agreements, representations, conditions, covenants, and all other communications between the parties relating to the subject matter hereof; provided, however, that the Proprietary Information Agreement, and Executive’s agreement, made prior to the Effective Date of this Agreement, to abide by the Company’s policies, including but not limited to the Company’s Employee Handbook, Sexual Harassment Policy and Code of Business Conduct, as amended from time to time, remain in full force and effect and govern Executive’s conduct from the date of execution of such agreements until the Effective Date of this Agreement.

      9.6 GOVERNING LAW . This Agreement shall be governed by the laws of the State of California, without regard to its conflict of laws principles.

      9.7 ASSIGNMENT AND SUCCESSORS . The Company shall have the right to assign its rights and obligations under this Agreement to an entity that, directly or indirectly, acquires all or substantially all of the assets of the Company. The rights and obligations of the Company under this Agreement shall inure to the benefit and shall be binding upon the successors and assigns of the Company. Executive shall not have any right to assign his obligations under this Agreement and shall only be entitled to assign his rights under this Agreement upon his death, to his estate or designated beneficiary, or as otherwise agreed to by the Company.

      9.8 AMENDMENTS . This Agreement, and the terms and conditions of the matters addressed in this Agreement, may only be amended in writing executed both by the Executive and the Chairman of the Board and/or the General Counsel of the Company; provided however that any amendment to this Agreement or the Transition Agreement that constitutes a subsequent deferral of deferred compensation under Section 409A (as defined below) shall be done in a manner that conforms with the requirements of such statute, and payment of amounts constituting deferred compensation payable hereunder or under the Transition Agreement may be accelerated only in accordance with Treas. Reg §1.409A-3(j)(4).

      9.9 TERMINATION AND SURVIVAL OF CERTAIN PROVISIONS . This Agreement shall terminate upon the termination of Executive’s full-time employment for any reason; provided, however, that the following provisions of this Agreement shall survive its termination: the Company’s and Executive’s obligations under Section 7 hereof; the Company’s obligations to provide compensation earned through the termination of the employment relationship, plus all reimbursements to which Executive is entitled, under Sections 2 and 3 hereof; the Company’s and Executive’s obligations under Section 5 hereof; the Company’s and Executive’s obligations enumerated in Section 4 hereof and in the Transition Agreement, if applicable; the Company’s obligation to indemnify Executive pursuant to Section 2.4 hereof and the referenced Indemnity Agreement; the dispute resolution provisions of Section 6 hereof; and, to the extent applicable, this Section 9.

      9.10 FORMER EMPLOYERS . Executive represents and warrants to the Company that he is not subject to any employment, confidentiality or other agreement or restriction that would prevent him from fully satisfying his duties under this Agreement or that would he violated if he did so. Without the Company’s prior written approval, Executive will not:

     Executive shall indemnify and hold the Company harmless from any liabilities, including reasonable defense costs, it may incur because he is alleged to have broken any of these promises

or improperly revealed or used such proprietary information or to have threatened to do so, or if a former employer challenges Executive’s entering into this Agreement or rendering services pursuant to it.

      9.11 DEPARTMENT OF HOMELAND SECURITY VERIFICATION REQUIREMENT . If Executive has not already done so, he will timely file all documents required by the Department of Homeland Security to verify his identity and his lawful employment in the United States. Notwithstanding any other provision of this Agreement, if Executive fails to meet any such requirements promptly after receiving a written request from the Company to do so, his employment will terminate immediately upon notice from the Company and he will not be entitled to any compensation from the Company of any type.

      9.12 HEADINGS . The headings of the several sections and paragraphs of this Agreement are inserted solely for the convenience of reference and are not a part of and are not intended to govern, limit or aid in the construction of any term or provision hereof.

      9.13 REIMBURSEMENT OF EXECUTIVE’S ATTORNEYS’ FEES . The Company shall reimburse, as promptly as practicable after its receipt of documentation therefor, all of Executive’s reasonable and documented attorneys’ fees and expenses in connection with the negotiation, and execution and delivery of, this Agreement and the exhibits attached hereto.

      9.14 ATTORNEYS’ FEES . In the event of any dispute, controversy, claim, litigation or arbitration arising out of or concerning Executive’s employment by the Company as CEO or the termination of Executive’s employment as CEO or this Agreement, the prevailing party on the preponderance of issues resolved in any such dispute, controversy, claim, litigation or arbitration shall be entitled to reasonable attorneys’ fees (excluding expert fees and costs).

      9.15 TAXES AND OTHER WITHHOLDINGS . Notwithstanding any other provision of this Agreement, the Company may withhold from amounts payable hereunder all federal, state, local and foreign taxes and other amounts that are required to be withheld by applicable laws or regulations, and the withholding of any amount shall be treated as payment thereof for purposes of determining whether Executive has been paid amounts to which he is entitled.

      9.16 TAX MATTERS . Notwithstanding anything in this Agreement or the Transition Agreement to the contrary, if Executive is a “specified employee” within the meaning of Section 409A of the Code and any final regulations and guidance promulgated thereunder (collectively “Section 409A”) at the time of Executive’s “separation from service” (as defined under Section 409A) that is not as a result of his death, and the severance payable to Executive, if any, pursuant to this Agreement, when considered together with any other severance payments or separation benefits may be considered deferred compensation under Section 409A (together, the “Deferred Compensation Separation Benefits”), then no portion of the Deferred Compensation Separation Benefits may be made within the first six (6) months following Executive’s separation from service. All Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following his separation of service but prior to the six (6) month anniversary of the date thereof, then any payments delayed

in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit. It is the intent of this Agreement to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. Each payment of Deferred Compensation Separation Benefits that is scheduled to be made on a different date hereunder or under the Transition Agreement is designed as a separate payment and will not collectively he treated as a single payment.

     IN WITNESS WHEREOF, the parties have executed this Agreement on this 29th day of July, 2008.

EXHIBIT A

INDEMNITY AGREEMENT

INDEMNITY AGREEMENT

     This Indemnity Agreement (this “Agreement”), dated as of July 29, 2008, is made by and between Cadence Design Systems, Inc., a Delaware corporation (the “Company”), and Michael J. Fister, President and Chief Executive Officer of the Company (the “Indemnitee”).

RECITALS

     A. The Company is aware that competent and experienced persons are increasingly reluctant to serve as directors or officers of corporations unless they are protected by comprehensive liability insurance and indemnification, due to increased exposure to litigation costs and risks resulting from their service to such corporations;

     B. Plaintiffs often seek damages in such large amounts and the costs of litigation may be so substantial (whether or not the case is meritorious), that the defense and/or settlement of such litigation is often beyond the personal resources of officers and directors;

     C. The Company believes that its directors and officers and the directors and officers of its subsidiaries should be able to serve as such, and in such other capacities as the Company may request, as the case may be, free from undue concern about the risk of large judgments and other expenses that may be incurred as a result of the good faith performance of their duties to the Company or its subsidiaries;

     D. The Company recognizes that the long period of time that may elapse before the trial or other disposition of legal proceedings may extend beyond the normal time for retirement for such director or officer, with the result that the Indemnitee, after retirement or in the event of the lndemnitee’s death, the Indemnitee’s spouse, heirs, executors or administrators, may be faced with limited ability and undue hardship in maintaining an adequate defense, which may discourage such director or officer from serving in that position;

     E. Based upon their experience as business managers, the Board of Directors of the Company (the “Board”) has concluded that, to retain and attract talented and experienced individuals to serve as directors and certain officers of the Company and its subsidiaries and to encourage such individuals to take the business risks necessary for the success of the Company and its subsidiaries, it is necessary, and in the best interests of the Company and its stockholders, for the Company to contractually indemnify such individuals, and to assume for itself maximum liability for claims against such persons in connection with their service;

     F. The Company desires and has requested the Indemnitee to serve or continue to serve as a director and/or an officer of the Company and/or the subsidiaries of the Company, free from undue concern for claims for damages arising out of or related to such services to the Company and/or the subsidiaries of the Company; and

     G. The Indemnitee is willing to serve, or to continue to serve, the Company and/or the subsidiaries of the Company provided that the Indemnitee is furnished the indemnity provided for herein.

AGREEMENT

     NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

     1.  Definitions .

          (a) Change in Control . For purposes of this Agreement, a “change in control” shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under Securities Exchange Act of 1934, as amended), directly or indirectly, of securities of the Company representing 20% or more of the total voting power represented by the Company’s then outstanding voting securities; or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80% of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company’s assets.

          (b) Covered Person . For purposes of this Agreement, a “covered person” shall include the Indemnitee and any heir, executor, administrator or other legal representative of the Indemnitee following the Indemnitee’s death or incapacity.

          (c) Disinterested Directors . For purposes of this Agreement, “disinterested directors” mean any director of the Company who is not or was not a party to the proceeding in respect of which indemnification is being sought by a covered person.

          (d) Expenses . For purposes of this Agreement, “expenses” include all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements and other out-of-pocket costs) actually and reasonably incurred by a covered person in connection with either the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification or advancement under this Agreement, Section 145 of the Delaware General Corporation Law or otherwise.

          (e) Independent Legal Counsel . For purposes of this Agreement, “independent legal counsel” means a law firm or a member of a law firm that neither is presently nor in the past five years has been retained to represent (i) the Company or a covered person in any matter material to either such party, or (ii) any other party to the proceeding giving rise to a claim for indemnification or advancement hereunder. “Independent legal counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or the covered person in an action to determine such covered person’s right to indemnification or advancement under this Agreement.

          (F) Proceeding . For purposes of this Agreement, “proceeding” means any threatened, pending or completed action, suit or other proceeding, whether civil, criminal, administrative, legislative, investigative or of any other type whatsoever, and including any of the foregoing commenced by or on behalf of the Company, derivatively or otherwise.

          (g) Subsidiary . For purposes of this Agreement, “subsidiary” means any corporation of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company, and one or more other subsidiaries, or by one or more other subsidiaries.

     2.  Agreement to Serve . The Indemnitee agrees to serve and/or continue to serve the Company and/or its subsidiaries in the Indemnitee’s present capacity, so long as the Indemnitee is duly appointed or elected or until such time as the Indemnitee tenders a written resignation; provided, however, that nothing contained in this Agreement is intended to create any right to continued employment or other form of service for the Company or its subsidiaries by Indemnitee.

     3.  Maintenance of Liability Insurance .

          (a) The Company hereby covenants and agrees that, so long as the Indemnitee shall continue to serve as an officer or director of the Company or any of its subsidiaries, and thereafter so long as the Indemnitee shall be subject to any possible proceeding by reason of such service, the Company, subject to Section 3(b), shall use reasonable efforts to obtain and maintain in full force and effect directors’ and officers’ liability insurance (“D&O Insurance”) in reasonable amounts from established and reputable insurers.

          (b) Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain D&O Insurance if the Company determines in good faith that such insurance is not reasonably available, the premium costs for such insurance are disproportionate to the amount of coverage provided, the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or the Indemnitee is covered by similar insurance maintained by a subsidiary of the Company.

     4.  Mandatory Indemnification .

          (a) Right to Indemnification . In the event a covered person was or is made a party or is threatened to be made a party to or is involved in any proceeding, by reason of the fact that the Indemnitee is or was a director, officer, employee or agent of the Company (including

any subsidiary or affiliate thereof or any constituent corporation or any of the foregoing absorbed in any merger) or is or was serving at the request of the Company (including such subsidiary, affiliate or constituent corporation) as a director, officer, employee or agent of another corporation, or of a partnership, joint venture, trust or other entity, including service with respect to employee benefit plans, such person shall be indemnified and held harmless by the Company to the fullest extent permitted by applicable law and the Company’s Bylaws, against all expenses, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, forfeitures, ERISA excise and other taxes and penalties, and amount