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                                                                    EXHIBIT 10.1

                          CADENCE DESIGN SYSTEMS, INC.

                  EMPLOYMENT AGREEMENT WITH H. RAYMOND BINGHAM

      THIS AGREEMENT (the "Agreement") is made effective as of October 1, 2004,
between CADENCE DESIGN SYSTEMS, INC., a Delaware corporation ("Company"), and H.
RAYMOND BINGHAM ("Executive").

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

      WHEREAS, Executive is currently employed by the Company as Executive
Chairman of the Board and serves as a member of the Board of Directors of the
Company (the "Board"); and

      WHEREAS, the Company desires to continue to secure the services of
Executive as Executive Chairman of the Board, and Executive desires to perform
such services for the Company, on the terms and conditions as set forth herein;

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

      1. EFFECTIVE DATE AND DUTIES.

            1.1 EFFECTIVE DATE. The at-will employment of Executive in his
capacity as Executive Chairman of the Board under the terms of this Agreement
shall commence upon the effective date of this Agreement (the "Effective Date")
and shall continue thereafter on the terms and conditions set forth herein until
terminated. Attached hereto as Exhibit A is the Executive Transition and Release
Agreement (the "Transition Agreement"), which provides for a Transition Period
(as defined therein) and the provision of certain benefits (as more fully
described therein) following the termination of Executive's employment with the
Company.

            1.2 DUTIES. Executive shall render such business and professional
services in the performance of his duties as Executive Chairman of the Board
("Executive Chairman") as are consistent with such position. These duties shall
focus on corporate strategy, developing markets, strategic investments, customer
and investor relations, leadership of the activities of the Board and such other
additional duties as agreed to between the Company's Chief Executive Officer and
the Executive Chairman from time to time.

            1.3 DEVOTION OF TIME. Executive shall devote his full business time,
attention, energies and best efforts to the business of the Company; provided,
however, that Executive may (1) maintain, and be re-elected to, any seats
Executive currently holds on the board of directors of one or more corporations,
(2) sit on the board of directors of one or more additional corporations with
the reasonable approval of the Board, (3) engage in charitable work, (4) manage
Executive's own investments, and (5) conduct any other activities; provided,
however, that any such activities do not materially conflict with or materially
adversely affect Executive's duties as Executive Chairman.

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            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.

            1.5 POSITIONS. The Board has previously elected Executive to the
Board on or before the Effective Date, and the Board and the Company shall use
their best efforts to have Executive elected and re-elected to the Board at each
future Annual Stockholders' Meeting at which Executive's membership on the Board
shall be submitted to the Company's stockholders for their approval which is
held during Executive's period of service as Executive Chairman.

      2. COMPENSATION. The Company shall pay to Executive, and Executive shall
accept as full consideration for the Services, compensation consisting of the
following:

            2.1 BASE SALARY. Company shall pay Executive Eight Hundred Thousand
Dollars ($800,000) per year base salary ("Base Salary"), payable in installments
in accordance with the Company's normal payroll practices, less such deductions
or 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 continue to 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 for the
Company's fiscal year with respect to which such bonus shall be determined
pursuant to the terms of such Bonus Plan (the "Target Bonus"). For the Company's
fiscal year ending on December 31, 2004, Executive's Target Bonus shall be
$837,500.

            2.3 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 or other person 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 described in the Indemnification Agreement attached as Exhibit B.

      3. BENEFITS. Executive shall receive the same or greater pension, profit
sharing, welfare benefits, fringe benefits, and other benefits and perquisites,
valued in the aggregate, as the Board or the Compensation Committee provides to
the President and Chief Executive Officer of the Company, and Executive shall
also receive any enhancements to any such benefit or perquisite that the Board
or the Compensation Committee may determine to provide to the President and
Chief Executive Officer of the Company in the future.

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      4.TERMINATION OF EMPLOYMENT AS EXECUTIVE CHAIRMAN.

            4.1 GENERAL. Executive's employment by the Company as Executive
Chairman under this Agreement shall terminate (i) immediately upon receipt by
Executive of written notice of termination by the Company for Cause (as defined
in Section 4.2 hereof), (ii) upon receipt by Executive of written notice of
termination by the Company at least thirty (30) days prior to the specified
effective date of such termination (iii) 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 (iv) upon Executive's death or
Permanent Disability (as defined in Section 4.4 hereof); provided, however, that
five (5) business days' written notice shall be required in connection with
Executive's voluntary termination pursuant to Sections 4.3(a) or (d) hereof and
no written notice shall be required in connection with Executive's voluntary
termination pursuant to Sections 4.3(b), (c), (e), (f), (g) or (h) hereof. In
the event of Executive's termination, except (i) where Executive is terminated
for Cause (as defined in Section 4.2 hereof), (ii) where Executive is terminated
as the result of a Permanent Disability or death or (iii) where Executive
voluntarily terminates his employment for any reason other than in connection
with a Constructive Termination, then in exchange for Executive executing and
delivering the Transition Agreement, the Company shall provide Executive with
the benefits set forth in Section 5 of the Transition Agreement.

            4.2 DEFINITION OF CAUSE. For purposes of this Agreement, "Cause"
shall be limited to:

                  (a) Executive's gross misconduct or fraud in the performance
of his services hereunder;

                  (b) Executive's conviction or guilty plea or plea of nolo
contendere with respect to any felony;

                  (c) Executive's engaging in any material act of theft or other
material misappropriation of company property in connection with his employment;

                  (d) 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;

                  (e) Executive's material breach of the Proprietary Information
Agreement (as described in Section 6 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; or

                  (f) 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

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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 terminate his employment
upon or within ninety (90) days following the occurrence of an event
constituting a Constructive Termination (after providing the notice, if any,
required by Section 4.1 hereof) and be eligible for the benefits set forth in
Section 5 of the Transition Agreement in exchange for executing and delivering
such Transition Agreement. For purposes of this Agreement, "Constructive
Termination" shall mean:

                  (a) a material adverse change in Executive's position as
Executive Chairman (including Executive's duties (as described in Section 1.2
hereof), title and/or reporting relationship to the Board) causing Executive's
position to be of materially less stature or responsibility, unless Executive
consents in writing to such change, and such a material adverse change shall in
all events be deemed to occur if Executive no longer serves as Executive
Chairman, unless Executive consents in writing to such change;

                  (b) any failure of the Board to reelect Executive as Chairman
of the Board without Executive's express written consent to such failure to
reelect;

                  (c) any failure of the stockholders of the Company to reelect
Executive as member of the Board (unless such failure relates to Executive's
express written consent in Section 4.3(b) above);

                  (d) a reduction, without Executive's written consent, in
Executive's level of base compensation (including Base Salary as well as
benefits and perquisites) 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 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;

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

                  (f) any material breach by the Company of any provision of
this Agreement after written notice delivered to the Company of such breach and
a reasonable opportunity to cure such breach (which opportunity shall not extend
beyond a period of thirty (30) days from the date of delivery of written
notice);

                  (g) any failure by the Company to obtain the assumption of
this Agreement by any successor to the Company; or

                  (h) any reduction by the Company in Executive's full-time
service to the Company without his express written consent to such reduction.

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            4.4 PERMANENT DISABILITY. For purposes of this Agreement, "Permanent
Disability" shall mean any medically determinable physical or mental impairment
which can be reasonably expected to result in death or which has lasted or can
be reasonably expected to last for a continuous period of not less than twelve
(12) months and which renders Executive unable to perform effectively the duties
and responsibilities of his office.

            4.5 CHANGE IN CONTROL. During the period (if any) upon or following
a Change in Control that Executive shall continue to provide services under this
Agreement, then the terms and provisions of this Agreement shall continue in
full force and effect and, the Bonus Plan shall be interpreted and/or amended to
evaluate Executive's achievement of goals as if the Company continued as an
independent entity (unless Executive agrees in writing to a different form of
cash incentive compensation plan), and Executive shall continue to vest in all
of his unvested stock options and other stock awards as specified in the
agreements documenting such options and stock awards.

                  (a) Should there occur a Change in Control (as defined below)
and if within three (3) months before the Change in Control 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 the benefits set forth in
Section 6 of the Transition Agreement.

                  (b) For purposes of this Section 4.5, a Change in Control
shall be deemed to occur upon the consummation of any one of the following
events:

                     (i) any "person" (as such term is used in sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 of that Act), directly or
indirectly, of securities of the Company representing more than twenty percent
(20%) of the total voting power represented by the Company's then outstanding
voting securities; or

                     (ii) a change in the composition of the Board occurring
within a two-year period, as a result of which fewer than a majority of the
directors are Incumbent Directors ("Incumbent Directors" means directors who
either (A) are directors of the Company as of the Effective Date, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination, but will not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to the Board); or

                     (iii) the consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation in
which the holders of the Company's outstanding voting securities immediately
prior to such merger or consolidation receive, in exchange for their voting
securities of the Company in consummation of such merger or consolidation,
securities possessing at least eighty percent (80%) 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

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                     (iv) the consummation of the sale or disposition by the
Company of all or substantially all the Company's assets; or

                     (v) the liquidation or dissolution of the Company.

            4.6 TERMINATION FOR CAUSE, DEATH, PERMANENT DISABILITY OR VOLUNTARY
TERMINATION OTHER THAN A CONSTRUCTIVE TERMINATION. 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, then:

                  (a) Executive will be paid only (i) any earned but unpaid Base
Salary, and (ii) other unpaid vested amounts or benefits under the compensation,
incentive and benefit plans of the Company in which Executive participates, in
each case under this clause (ii) as of the effective date of such termination;
and

                  (b) Executive shall not become a party to the Transition
Agreement and shall not be bound by any of the terms and provisions thereof.

            4.7 EXCISE TAX. In the event that any benefits payable to Executive
pursuant to the Transition 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 4.7 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 taxable under the Excise Tax. Unless the Company
and Executive otherwise agree in writing, any determination required under this
Section 4.7 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 shall be given the choice of which
benefits to reduce. If Executive does not provide written identification to the
Company of which benefits he chooses to reduce within ten (10) days after notice
of the Accountants' determination, and Executive has not disputed the
Accountants' determination, then the Company shall select the benefits to be
reduced. For purposes of making the calculations required by this Section 4.7,
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 4.7. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 4.7.

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      If, notwithstanding any reduction described in this Section 4.7, the
Internal Revenue Service (the "IRS") determines that Executive is liable for the
Excise Tax as a result of the receipt of the payment of benefits as described
above, 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 payment equal to the "Repayment Amount." The Repayment Amount
with respect to the payment of 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 any payment of 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.

      Notwithstanding any other provision of this Section 4.7, if (1) there is a
reduction in the payment of benefits as described in this Section 4.7, (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 benefits had not previously been reduced), and (3)
Executive pays the Excise Tax, then the Company shall pay to Executive those
benefits which were reduced pursuant to this subsection 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 benefits are
maximized.

            4.8 ENFORCEMENT OF RIGHTS. If Executive is involved in any actual or
threatened legal proceeding to enforce or defend his contractual rights under
this Agreement or the Transition Agreement upon or following the occurrence of a
Change in Control, the Company shall reimburse Executive for all of the
reasonable attorneys' fees and costs and other expenses incurred by Executive in
connection therewith.

      5. 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 or the Transition
Agreement, except those arising under Section 5(d) hereof or under the
Proprietary Information Agreement (as defined in Section 6 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 (i) Executive's employment by the Company as chief
executive officer or Executive Chairman or (ii) the termination of Executive's
employment as chief executive officer or Executive Chairman 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 5 does not

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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 be 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 4.8 or
7.3(b) 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 any provision of the Proprietary Information Agreement (defined in Section 6
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 any provision of the Proprietary Information Agreement
(described in Section 6 hereof) and requiring Executive to comply with the terms
of that agreement.

      6. PROPRIETARY INFORMATION AGREEMENT. Executive acknowledges that he has
executed and continues to be bound by the terms of the Employee Proprietary
Information and Inventions Agreement ("Proprietary Information Agreement")
attached hereto as Exhibit C.

      7. GENERAL.

            7.1 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.

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            7.2 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.

            7.3 ATTORNEYS' FEES.

                  (a) The Company shall pay or reimburse Executive for all
reasonable attorneys' fees incurred by Executive in connection with the
negotiation, creation and implementation of this Agreement and any other
agreements contemplated by this Agreement.

                  (b) Upon the event of any dispute, controversy, claim,
litigation or arbitration arising out of or concerning Executive's employment by
the Company as Executive Chairman or this Agreement, the prevailing party in any
such dispute, controversy, claim, litigation or arbitration shall be entitled to
reasonable attorneys' fees (excluding expert fees and costs), except as set
forth in Section 4.8 hereof.

            7.4 MITIGATION. Executive shall not be required to mitigate damages
or reduce the amount of any payment provided under this Agreement by seeking
other employment or otherwise, nor shall the amount of any payment provided for
under this Agreement be reduced by any compensation earned by Executive as a
result of employment by another employer or by retirement benefits after the
date of termination, or otherwise.

            7.5 NOTICES. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
considered effective either (a) upon personal service or (b) upon delivery by
facsimile and depositing such notice in the U.S. Mail, postage prepaid, return
receipt requested and addressed to the Company in care of the General Counsel of
the Company at the Company's principal corporate address, and to Executive at
his most recent address shown on the Company's corporate records, or at any
other address which Executive may specify in any appropriate notice to the
Company, or (c) upon only depositing such notice in the U.S. Mail as described
in (b) above.

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

            7.7 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, and
the documents, plans and policies referred to in this Agreement (which are
hereby incorporated by reference), including, without limitation, the
Proprietary Information Agreement, the Transition Agreement and the
Indemnification Agreement constitute the complete and exclusive statement of the
agreement, between the parties and supersedes all proposals (oral or written),
understandings, representations, conditions, covenants, and all other
communications between the parties relating to the subject matter hereof.

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

            7.9 ASSIGNMENT AND SUCCESSORS. The Company shall have the right to
assign its rights and obligations under this Agreement to an entity that
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, as
permitted by this Agreement, or as otherwise agreed to by the Company.

            7.10 DURATION. This Agreement is for no specific term, and either
Executive or the Company may terminate this Agreement in writing at any time,
for any reason or for no reason, and with or without prior notice as set forth
in further detail herein.

            7.11 AMENDMENTS. This Agreement and the terms and conditions of the
matters addressed in this Agreement may only be amended in writing executed both
by the Executive and a duly authorized representative of the Company.

            7.12 SURVIVAL OF CERTAIN PROVISIONS. Notwithstanding the termination
of this Agreement, the following provisions of the Agreement shall survive its
termination: Executive's obligations under Section 6, the Company's obligations
to provide compensation and benefits earned through the termination of the
employment relationship under Sections 2 and 3 hereof, the Company's and
Executive's obligations under Section 4.7 hereof, the Company's obligations
under Section 4.8 hereof, the Company's obligation to indemnify Executive
pursuant to Section 2.4 hereof and the attached Indemnification Agreement, the
Company's and Executive's obligations enumerated in the Transition Agreement and
the dispute resolution provisions of Section 5 hereof and, to the extent
applicable, this Section 7.

            IN WITNESS WHEREOF, the parties have executed this Agreement on this
13th day of December, 2004.

CADENCE DESIGN SYSTEMS, INC.                     EXECUTIVE

By: /s/ R.L. Smith McKeithen                     /s/ H. Raymond Bingham
    ----------------------------------           -----------------------------
    R.L. Smith McKeithen                         H. Raymond Bingham
    Senior Vice President and General Counsel

                                       10
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                                    EXHIBIT A

                   EXECUTIVE TRANSITION AND RELEASE AGREEMENT

<PAGE>

                   EXECUTIVE TRANSITION AND RELEASE AGREEMENT

      This Executive Transition and Release Agreement (this "Agreement") is
entered into between H. Raymond Bingham ("Executive") and Cadence Design
Systems, Inc., a Delaware corporation ("Cadence" or the "Company").

      1. TRANSITION COMMENCEMENT DATE. As of ____________________ (the
"Transition Commencement Date"), Executive will no longer hold the position of
Executive Chairman of the Board ("Executive Chairman") and will be relieved of
all of Executive's authority and responsibilities in such position and will
resign from the Board of Directors of the Company (the "Board") upon request by
the Company. Executive will be paid (a) any earned but unpaid base salary for
his services as Executive Chairman prior to the Transition Commencement Date,
(b) any outstanding expense reimbursements submitted and approved pursuant to
the Company's applicable expense reimbursement policy as currently in effect;
and (c) other unpaid vested amounts or benefits under the compensation,
incentive and benefit plans of the Company in which Executive participates, in
each case under this clause (c) as of the Transition Commencement Date. The
payment of the foregoing amounts shall be made to Executive by not later than
the next regular payroll date following the Transition Commencement Date.

      As of the first day of the month following the Transition Commencement
Date, except as otherwise provided herein, Executive will no longer participate
in Cadence's employee benefit plans and will not be eligible for a bonus for any
services rendered after that date, except as expressly provided herein.

      2. TRANSITION PERIOD. The period from the Transition Commencement Date to
the date when Executive's employment with Cadence pursuant to this Agreement
terminates (the "Transition Termination Date") is called the "Transition Period"
in this Agreement. Executive's Transition Termination Date will be the earliest
to occur of:

            a.    the date on which Executive provides Cadence with his written
                  resignation from his employment with Cadence pursuant to this
                  Agreement;

            b.    the date on which Cadence terminates Executive's employment
                  due to a material breach by Executive of his duties or
                  obligations under paragraph 3(b), 3(c) or 3(d) 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; and

            c.    one year from the Transition Commencement Date.

      3. DUTIES AND OBLIGATIONS DURING THE TRANSITION PERIOD AND AFTERWARDS.

      a. During the Transition Period, Executive will assume the position of a
non-executive employee. In this position, Executive will render those services
requested by Cadence's Board on an as-needed basis. Executive's time rendering
those services is not

<PAGE>

expected to exceed 20 hours per month. Executive shall not be required to
perform those services on the Company's premises and shall instead be permitted
to perform those services at a location determined by Executive. Except as
otherwise provided in paragraph 3(b) of this Agreement, Executive's obligations
hereunder will not preclude Executive from accepting and holding full-time
employment elsewhere.

      b. As a member of Cadence's Board, as well as other positions Executive
may have held with Cadence, Executive has obtained extensive and valuable
knowledge and information concerning Cadence's business (including confidential
information relating to Cadence and its operations, intellectual property,
assets, contracts, customers, personnel, plans, marketing plans, research and
development plans and prospects). Executive acknowledges and agrees that it
would be virtually impossible for Executive to work as an employee, consultant
or advisor in the electronic design automation industry without inevitably
disclosing confidential and proprietary information belonging to Cadence.
Accordingly, during the Transition Period, Executive will not, directly or
indirectly, provide services, whether as an employee, consultant, independent
contractor, agent, sole proprietor, partner, joint venture, corporate officer or
director, on behalf of any corporation, limited liability company, partnership,
or other entity or person or successor thereto that (i) is listed on Attachment
I attached hereto, as modified or amended by the Board from time to time and
delivered to Executive prior to the Company's termination of his employment as
Executive Chairman or the Company's notifying him of such termination as
Executive Chairman (or, in the event Executive terminates his employment as
Executive Chairman, prior to the date on which Executive has notified the
Company of his decision to terminate such employment), or (ii) is named as a
competitor of Cadence in the most recent applicable document filed by Cadence
before the Transition Commencement Date with the Securities and Exchange
Commission that contains such information; provided, however, that the number of
competitors designated pursuant to clause (i) above shall not, when added to the
competitors designated pursuant to clause (ii) above, result in the total number
of competitors being greater than ten (10).

      c. During the Transition Period and for a period of one year following the
Transition Termination Date, Executive will be prohibited, to the fullest extent
allowed by applicable law, and except with the written advance approval of the
then Chief Executive Officer ("CEO") or General Counsel of Cadence, from
voluntarily or involuntarily, for any reason whatsoever, directly or indirectly,
individually or on behalf of persons or entities not now parties to this
Agreement, encouraging, inducing, attempting to induce, soliciting or attempting
to solicit for employment, contractor or consulting opportunities anyone who is
employed at that time, or was employed during the previous one year, by Cadence
or any Cadence affiliate.

      d. During the Transition Period, Executive will be prohibited, to the
fullest extent allowed by applicable law, and except with the written advance
approval of the then CEO or General Counsel of Cadence, from directly or
indirectly, individually or on behalf of persons or entities not now parties to
this Agreement, intentionally and knowingly interfering or attempting to
interfere with the relationship or prospective relationship of Cadence or any
Cadence affiliate with any former, present or future client, customer, joint
venture partner, or financial backer of Cadence or any Cadence affiliate.

                                       2
<PAGE>

      e. Executive will fully cooperate with Cadence in all matters relating to
his employment, including the winding up of work performed in Executive's prior
position and the orderly transition of such work to other Cadence employees.
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 commitment to reimburse Executive for all
reasonable expenses incurred in connection therewith.

      f. Executive will not make any statement, written or oral, that disparages
Cadence or any of its affiliates, or any of Cadence's or its affiliates'
products, services, policies, business practices, employees, executives,
officers or directors. The foregoing provision shall not preclude Executive from
making any statements required by law.

      g. Notwithstanding Section 5 of Executive's Employment Agreement with the
Company dated as of October 1, 2004 (the "Employment Agreement"), the parties
agree that damages would be an inadequate remedy for Cadence in the event of a
breach or threatened breach by Executive of paragraph 3(b), 3(c), 3(d) or 3(f)
hereof. In the event of any such breach or threatened breach, Cadence 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 this Agreement and requiring Executive to comply with
the terms of this Agreement.

      4. TRANSITION COMPENSATION AND BENEFITS. In consideration and compensation
for Executive's services during the Transition Period, Cadence will provide the
following to Executive:

            a.    a monthly salary of $2,125 less applicable tax withholdings
                  and deductions, payable in accordance with Cadence's regular
                  payroll schedule;

            b.    all of the unvested options and other outstanding stock awards
                  held by Executive on the Transition Commencement Date that
                  would have vested over the succeeding thirty (30) month period
                  had Executive continued to serve as Executive Chairman under
                  the Executive's Employment Agreement during that period shall
                  immediately vest and become exercisable in full on the
                  Effective Date of this Agreement, and there shall be no
                  further vesting of those options or stock awards during the
                  Transition Period, notwithstanding any provision in any stock
                  option or stock agreement to the contrary. This acceleration
                  will have no effect on any other provisions of the stock
                  awards;

            c.    Executive's employment pursuant to this Agreement shall be
                  considered a continuation of employee status and continuous
                  service for purposes of continued exercisability, with respect
                  to any stock options previously granted to Executive by the
                  Company and that are outstanding on the Transition
                  Commencement Date; provided that no additional vesting shall
                  be granted with respect to stock options or restricted stock;
                  and

                                       3
<PAGE>

            d.    the Company shall continue to provide Executive with, and pay
                  the full cost of, health, disability and life insurance
                  coverage for Executive, his spouse and dependents that is
                  commensurate with the coverage then provided to Executive, his
                  spouse and dependents at the time of termination. The Company
                  shall structure such health, disability and life insurance
                  coverage as nontaxable benefits to the maximum extent
                  possible. Specifically for health insurance coverage, to the
                  extent permitted by the Consolidated Omnibus Budget
                  Reconciliation Act of 1985 ("COBRA") and by the Company's
                  group health insurance policies, the Executive shall elect
                  COBRA continuation coverage and the Company shall pay
                  Executive and his covered dependents' COBRA continuation
                  premiums during the Transition Period. Executive agrees to
                  notify both the General Counsel and the Senior Vice President
                  of Human Resources of Cadence, in writing, immediately upon
                  the commencement of health benefit coverage that would cause
                  Executive's COBRA continuation coverage to cease. This Section
                  4(d) provides only for the Company's payment of COBRA
                  continuation premiums for the periods specified above and is
                  not intended to affect, nor does it affect, the rights of
                  Executive, or Executive's covered dependents under any
                  applicable law with respect to health insurance continuation
                  coverage.

Except as so provided or as otherwise set forth in paragraph 6 hereof, Executive
will receive no other compensation or benefits from Cadence in consideration of
Executive's services during the Transition Period.

      5. TERMINATION PAYMENTS AND BENEFITS. In consideration for Executive's
acceptance of this Agreement, Cadence will provide to Executive within or
commencing within ten (10) business days after the Effective Date (as defined in
paragraph 8 hereof) and after Executive has returned to the Company all hard and
soft copies of records, documents, materials and files relating to confidential,
proprietary or sensitive company information in his possession or control during
his period of employment as CEO or Executive Chairman, as well as all other
company-owned property then in his possession, the following termination
payments and benefits to which Executive would not otherwise be entitled:

            a.    a lump-sum payment equal to 180% of Executive's annual Base
                  Salary at the highest rate in effect during Executive's
                  employment as Executive Chairman, less applicable tax
                  deductions and withholdings; and

            b.    an amount equal to 180% of Executive's annual Target Bonus at
                  the highest target rate in effect during Executive's
                  employment as Executive Chairman, less applicable tax
                  deductions and withholdings, payable in twelve (12) monthly
                  pro rata installments, provided that the twelfth payment is
                  contingent upon Executive further executing and not revoking
                  the Release of Claims in the form of Attachment II to this
                  Agreement; provided, further, that the Company shall have no
                  further obligation to make any monthly installments after the
                  Transition Termination Date should such date occur pursuant to
                  paragraph 2(a) or 2(b) hereof.

                                       4
<PAGE>

Executive agrees that execution of and not revoking the Release of Claims
described in this Section 5 is consideration for the payments made to Executive
pursuant to this Section 5.

      6. CHANGE IN CONTROL. If this Agreement is executed by Executive pursuant
to Section 4.5 of the Employment Agreement in connection with a Change in
Control (as defined in Section 4.5 of the Employment Agreement), then the
following adjustments shall be made to paragraph 5 hereof:

            a.    all of the unvested options and other outstanding stock awards
                  held by Executive on the Transition Commencement Date shall
                  immediately vest in full and become exercisable on the
                  Transition Commencement Date as to all the underlying shares
                  of the Company's common stock;

            b.    the lump sum payment to be made to Executive pursuant to
                  paragraph 5(a) hereof shall be equal to 250% of Executive's
                  annual Base Salary at the highest rate in effect during
                  Executive's employment as Executive Chairman, less applicable
                  tax deductions and withholdings; and

            c.    the amount to be paid to Executive in monthly installments
                  pursuant to paragraph 5(b) hereof shall be equal, in the
                  aggregate, to 250% of Executive's annual Target Bonus at the
                  highest target rate in effect during Executive's employment as
                  Executive Chairman, less applicable tax deductions and
                  withholdings.

      7. GENERAL RELEASE OF CLAIMS.

      a. Executive hereby irrevocably, fully and finally releases Cadence, its
parent, subsidiaries, affiliates, directors, officers, agents and employees
("Releasees") from all causes of action, claims, suits, demands or other
obligations or liabilities, whether known or unknown, suspected or unsuspected,
that Executive ever had or now has as of the time that Executive signs this
Agreement which relate to his hiring, his employment with the Company, the
termination of his employment with the Company and claims asserted in
shareholder derivative actions or shareholder class actions against the Company
and its officers and Board of Directors, to the extent those derivative or class
actions relate to the period during which Executive served as CEO or Executive
Chairman. The claims released include, but are not limited to, any claims
arising from or related to Executive's employment with Cadence, such as claims
arising under (as amended) Title VII of the Civil Rights Act of 1964, the Civil
Rights Act of 1991, the Age Discrimination in Employment Act of 1974, the
Americans with Disabilities Act, the Equal Pay Act, the Fair Labor Standards
Act, the California Fair Employment and Housing Act, the California Labor Code,
the Employee Retirement Income and Security Act of 1974 (except for any vested
right Executive has to benefits under an ERISA plan), the state and federal
Worker Adjustment and Retraining Notification Act, and the California Business
and Professions Code; any other local, state, federal, or foreign law governing
employment; and the common law of contract and tort. In no event, however, shall
any claims, causes of action, suits, demands or other obligations or liabilities
be released pursuant to the foregoing if and to the extent they relate to:

                                       5
<PAGE>

            i. any amounts or benefits to which Executive is or becomes entitled
to pursuant to the provisions of this Agreement (including, without limitation,
paragraphs 1, 4, 5 and 6 hereof) or pursuant to the provisions designated in
Section 7.12 of the Employment Agreement to survive the termination of
Executive's full-time employment as Executive Chairman;

            ii. claims for workers' compensation benefits under any of the
Company's workers' compensation insurance policies or funds; and

            iii. claims related to Executive's COBRA rights.

      b. Executive represents and warrants that he has not filed any claim,
charge or complaint against any of the Releasees.

      c. Executive acknowledges that the payments provided in this Agreement
constitute adequate consideration for the release set forth in this paragraph 7.

      d. Executive intends that this release of claims cover all claims subject
to this release, whether or not known to Executive. Executive further recognizes
the risk that, subsequent to the execution of this Agreement, Executive may
incur loss, damage or injury that Executive attributes to the claims encompassed
by this release. Executive expressly assumes this risk by signing this Agreement
and voluntarily and specifically waives any rights conferred by California Civil
Code section 1542 which provides as follows:

      A general release does not extend to claims which the creditor does not
      know or suspect to exist in his favor which if known by him must have
      materially affected his settlement with the debtor.

      e. Executive represents and warrants that there has been no assignment or
other transfer of any interest in any claim by Executive that is covered by this
release.

      8. REVIEW OF AGREEMENT; REVOCATION OF ACCEPTANCE. Executive has been given
at least 21 days in which to review and consider this Agreement, although
Executive is free to accept this Agreement anytime within that 21-day period.
Executive is advised to consult with an attorney about this Agreement. If
Executive accepts this Agreement, Executive will have an additional 7 days from
the date that Executive signs this Agreement to revoke that acceptance, which
Executive may effect by means of a written notice sent to both the General
Counsel and the Senior Vice President of Human Resources of Cadence. If this
7-day period expires without a timely revocation, this Agreement will become
final and effective on the 8th day following the date of Executive's signature
and will be the "Effective Date" of this Agreement.

      9. NO ADMISSION OF LIABILITY. Nothing in this Agreement will constitute or
be construed in any way as an admission of any liability or wrongdoing
whatsoever by Cadence or Executive.

      10. INTEGRATED AGREEMENT. This Agreement, together with the provisions
designated in Section 7.12 of the Employment Agreement to survive the
termination of

                                       6
<PAGE>

Executive's full-time employment as Executive Chairman, is intended by the
parties to be a complete and final expression of their rights and duties
respecting the subject matter of this Agreement. Except as expressly provided
herein, nothing in this Agreement is intended to negate Executive's agreement to
abide by Cadence's policies while serving as a Cadence employee, including but
not limited to Cadence's Employee Handbook, Sexual Harassment Policy and Code of
Business Conduct, or Executive's continuing obligations under Executive's
Employee Proprietary Information and Inventions Agreement, or any other
agreement governing the disclosure and/or use of proprietary information, which
Executive signed while working with Cadence or its predecessors; nor to waive
any of Executive's obligations under state and federal trade secret laws.

      11. FULL SATISFACTION OF COMPENSATION OBLIGATIONS; ADEQUATE CONSIDERATION.
Executive agrees that the payments and benefits provided herein, together with
any payments or benefits to which Executive is or may become entitled to
pursuant to the provisions of the Employment Agreement that survive the
termination of Executive's full-time employment as Executive Chairman pursuant
to Section 7.12 of the Employment Agreement, are in full satisfaction of all
obligations of Cadence to Executive arising out of or in connection with
Executive's employment through the Transition Termination Date, including,
without limitation, all compensation, salary, bonuses, reimbursement of
expenses, and benefits.

      12. ENFORCEMENT OF RIGHTS.

      a. If Executive is involved in any actual or threatened legal proceeding
to enforce or defend his contractual rights under this Agreement or the
Employment Agreement upon or following the occurrence of a Change in Control (as
defined in Section 4.5 of the Employment Agreement), the Company shall reimburse
Executive for all of the reasonable attorneys fees and costs and other expenses
incurred by Executive in connection therewith.

      b. Upon the event of any dispute, controversy, claim, litigation or
arbitration arising out of or concerning Executive's employment by the Company
as Executive Chairman or this Agreement, the prevailing party in any such
dispute, controversy, claim, litigation or arbitration shall be entitled to
reasonable attorneys' fees (excluding expert fees and costs), except as
otherwise set forth in Section 4.8 of the Employment Agreement or Section 12(a)
above.

      13. 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.

      14. 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.

                                       7
<PAGE>

      15. MODIFICATION. This Agreement may not be modified unless such
modification is embodied in writing, signed by the party against whom the
modification is to be enforced.

      16. ASSIGNMENT AND SUCCESSORS. Cadence 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 Cadence. The
rights and obligations of Cadence under this Agreement shall inure to the
benefit and shall be binding upon the successors and assigns of Cadence.
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, solely to the extent permitted by this Agreement, or as
otherwise agreed to by Cadence.

      17. SEVERABILITY. In the event that any part of this Agreement is found to
be void or unenforceable, all other provisions of the Agreement will remain in
full force and effect.

      18. GOVERNING LAW. This Agreement will be governed and enforced in
accordance with the laws of the State of California, without regard to its
conflict of laws principles.

                             EXECUTION OF AGREEMENT

      The parties execute this Agreement to evidence their acceptance of it.

Dated: __________________.                      Dated: __________________.

H. Raymond Bingham                              CADENCE DESIGN SYSTEMS, INC.

________________________                        By: ____________________________

                                                Name/Title: ____________________

                                       8
<PAGE>

                                  ATTACHMENT I

Synopsys, Inc.

Magma Design Automation, Inc.

Mentor Graphics Corporation

PDF Solutions, Inc.

<PAGE>

                                  ATTACHMENT II

                                RELEASE OF CLAIMS

      1. For valuable consideration, I irrevocably, fully and finally release
Cadence Design Systems, Inc. ("Cadence"), its parent, subsidiaries, affiliates,
directors, officers, agents and employees from all causes of action, claims,
suits, demands or other obligations or liabilities, whether known or unknown,
suspected or unsuspected, that I ever had or now have as of the time that I sign
this Release which relate to my hiring, my employment with Cadence, the
termination of my employment with Cadence and claims asserted in shareholder
derivative actions or shareholder class actions against Cadence and its officers
and Board of Directors, to the extent those derivative or class actions relate
to the period during which I served as President and Chief Executive Officer or
as Executive Chairman. The claims released include, but are not limited to, any
claims arising from or related to my employment with Cadence, such as claims
arising under (as amended) Title VII of the Civil Rights Act of 1964, the Civil
Rights Act of 1991, the Age Discrimination in Employment Act of 1974, the
Americans with Disabilities Act, the Equal Pay Act, the Fair Labor Standards
Act, the California Fair Employment and Housing Act, the California Labor Code,
the Employee Retirement Income and Security Act of 1974 (except for any vested
right I have to benefits under an ERISA plan), the state and federal Worker
Adjustment and Retraining Notification Act, and the California Business and
Professions Code; any other local, state, federal, or foreign law governing
employment; and the common law of contract and tort. This Release is not
intended to, and does not, encompass (i) any right to compensation or benefits
that I have under my Executive Transition and Release Agreement with Cadence
(including, without limitation, paragraphs 1, 4, 5 and 6 thereof) or pursuant to
those provisions of my Employment Agreement dated as of October 1, 2004 with
Cadence, which, pursuant to Section 7.12 of such Employment Agreement, survive
the termination of my full-time employment as Executive Chairman, (ii) any
claims I may have for workers' compensation benefits under any of Cadence's
workers' compensation insurance policies or funds, and (iii) any claims related
to my COBRA rights.

      2. I intend that this Release cover all claims subject hereto, whether or
not known to me. I further recognize the risk that, subsequent to the execution
of this Agreement, I may incur loss, damage or injury that I attribute to the
claims encompassed by this Release. I expressly assume this risk by signing this
Release and voluntarily and specifically waive any rights conferred by
California Civil Code section 1542 which provides as follows:

      A general release does not extend to claims which the creditor does not
      know or suspect to exist in his favor which if known by him must have
      materially affected his settlement with the debtor.

      3. I represent and warrant that there has been no assignment or other
transfer of any interest in any claim by me that is covered by this Release.

      4. I acknowledge that Cadence has given me 21 days in which to consider
this Release and advised me to consult an attorney about it. I further
acknowledge that once I execute this Release, I will have an additional 7 days
in which to revoke my acceptance of this

<PAGE>

Release by means of a written notice of revocation given to both the General
Counsel and the Senior Vice President of Human Resources of Cadence. This
Release will not be final and effective until the expiration of this revocation
period.

Dated: __________________.                     _________________________________
                                               H.Raymond Bingham

                                       2
<PAGE>

                                   EXHIBIT B

                           INDEMNIFICATION AGREEMENT

<PAGE>

                               INDEMNITY AGREEMENT

This Indemnity Agreement, dated as of September 16, 1999, is made by and between
Cadence Design Systems, Inc., a Delaware corporation (the "Company"), and H.
Raymond Bingham, Chief Executive Officer and President 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 or indemnification, due
to increased exposure to litigation costs and risks resulting from their service
to such corporations, and due to the fact that the exposure frequently bears no
reasonable relationship to the compensation of such directors and officers;

      B. The statutes and judicial decisions regarding the duties of directors
and officers are often difficult to apply, ambiguous, or conflicting, and
therefore fail to provide such directors and officers with adequate, reliable
knowledge of legal risks to which they are exposed or information regarding the
proper course of action to take;

      C. 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;

      D. The Company believes that it is unfair for its directors and officers
and the directors and officers of its subsidiaries to assume the risk of large
judgments and other expenses that may be incurred in cases in which the director
or officer received no personal profit and in cases where the director or
officer was not culpable;

      E. The Company recognizes that the issues in controversy in litigation
against a director or officer of a corporation such as the Company or a
subsidiary of the Company are often related to the knowledge, motives and intent
of such director or officer, that he is usually the only witness with knowledge
of the essential facts and exculpating circumstances regarding such matters and
that the long period of time which usually elapses before the trial or other
disposition of such litigation often extends beyond the time that the director
or officer can reasonably recall such matters; and may extend beyond the normal
time for retirement for such director or officer with the result that he, after
retirement or in the event of his death, his spouse, heirs, executors or
administrators, may be faced with limited ability and undue hardship in
maintaining an adequate defense, which may discourage such a director or officer
from serving in that position;

      F. 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 officers and directors 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 for the Company to contractually indemnify its officers and
directors

<PAGE>

and the officers and directors of its subsidiaries, and to assume for itself
maximum liability for expenses and damages in connection with claims against
such officers and directors in connection with their service to the Company and
its subsidiaries, and has further concluded that the failure to provide such
contractual indemnification could result in great harm to the Company and its
subsidiaries and the Company's shareholders;

      G. Section 145 of the General Corporation Law of Delaware, under which the
Company is organized ("Section 145"), empowers the Company to indemnify by
agreement its officers, directors, employees and agents, and persons who serve,
at the request of the Company, as directors, officers, employees or agents of
other corporations or enterprises, and expressly provides that the
indemnification provided by Section 145 is not exclusive;

      H. The Company, after reasonable investigation prior to the date hereof,
has determined that the liability insurance coverage available to the Company
and its subsidiaries as of the date hereof is inadequate and/or unreasonably
expensive. The Company believes, therefore, that the interests of the Company's
shareholders would best be served by a combination of such insurance as the
Company may obtain, or request a subsidiary to obtain, pursuant to the Company's
obligations hereunder, and the indemnification by the Company of the directors
and officers of the Company and its subsidiaries.

      I. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director or 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

      J. The Indemnitee is willing to serve, or to continue to serve, the
Company and/or the subsidiaries of the Company, provided that he 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) Agent. For the purposes of this Agreement, "agent" of the
Company means any person who is or was a director, officer, employee or other
agent of the Company or a subsidiary of the Company; or is or was serving at the
request of, for the convenience of, or to represent the interest of the Company
or a subsidiary of the Company as a director, officer, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise; or was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor corporation of the Company or a
subsidiary of the Company, or was a director, officer, employee or agent of
another enterprise at the request of, for the convenience of, or to represent
the interests of such predecessor corporation.

                                        2
<PAGE>
\
            (b) Expenses. For purposes of this Agreement, "expenses" includes
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 the Indemnitee in
connection with either the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification under this Agreement,
Section 145 or otherwise; provided, however, that expenses shall not include any
judgments, fines, ERISA excise taxes or penalties or amounts paid in settlement
of a proceeding.

            (c) Proceeding. For the purposes of this Agreement, "proceeding"
means any threatened, pending, or completed action, suit or other proceeding,
whether civil, criminal, administrative, investigative or any other type
whatsoever.

            (d) Subsidiary. For the 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, 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 as an agent of the Company, at its will (or under separate agreement, if
such agreement exists), in the capacity Indemnitee currently serves as an agent
of the Company, so long as he is duly appointed or elected and qualified in
accordance with the applicable provisions of the Bylaws of the Company or any
subsidiary of the Company or until such time as he tenders his resignation in
writing, provided, however, that nothing contained in this Agreement is intended
to create any right to continued employment 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 agent of the Company and thereafter so
long as the Indemnitee shall be subject to any possible proceeding by reason of
the fact that the Indemnitee was an agent of the Company, the Company, subject
to Section 3(b), shall use reasonable efforts to obtain and maintain in full
force and effect director's and officer's liability ("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.

                                        3
<PAGE>

      4. Mandatory Indemnification. The Company shall indemnify the Indemnitee:

            (a) Third Party Actions. If the Indemnitee is a person who was or is
a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the company) by reason of the fact that he is or
was an agent of the Company, or by reason of anything done or not done by him in
any such capacity, against any and all expenses and liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
or penalties, and amounts paid in settlement) actually and reasonably incurred
by him in connection with the investigation, defense, settlement or appeal of
such proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful; and

            (b) Derivative Actions. If the Indemnitee is a person who was or is
a party or is threatened to be made a party to any proceeding by or in the right
of the Company to procure a judgment in its favor by reason of the fact that he
is or was an agent of the Company, or by reason of anything done or not done by
him in any such capacity, against any amounts paid in settlement of any such
proceeding and all expenses actually and reasonably incurred by him in
connection with the investigation, defense, settlement, or appeal of such
proceeding if he acted in good faith and in manner he reasonably believed to be
in or not opposed to the best interests of the Company; except that no
indemnification under this subsection shall be made in respect of any claim,
issue or matter as to which such person shall have been finally adjudged to be
liable to the Company by a court of competent jurisdiction due to willful
misconduct of a culpable nature in the performance of his duty to the Company
unless and only to the extent that the Court of Chancery or the court in which
such proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such amounts which the
Court of Chancery or such other court shall deem proper; and

            (c) Actions Where Indemnitee is Deceased. If the Indemnitee is a
person who was or is a party or is threatened to be made a party to any
proceeding by reason of the fact that he is or was an agent of the Company, or
by reason of anything done or not done by him in any such capacity, against any
and all expenses and liabilities of any type whatsoever (including, but not
limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid
in settlement) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal of such proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company, and, prior to, during the pendency or after
completion of such proceeding Indemnitee is deceased, except that in a
proceeding by or in the right of the Company no indemnification shall be due
under the provisions of this subsection in respect of any claim, issue or matter
as to which such person shall have been finally adjudged to be liable to the
Company, by a court of competent jurisdiction due to willful misconduct of a
culpable nature in the performance of his duty to the Company, unless and only
to the extent that the Court of Chancery or the court in which such proceeding
was brought shall determine upon application that, despite the adjudication of
liability but in

                                       4
<PAGE>

view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnify for such amounts which the Court of Chancery or such other
court shall deem proper; and

            (d) Exception for Amounts Covered by Insurance. Notwithstanding the
foregoing, the Company shall not be obligated to indemnify the Indemnitee for
expenses or liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties, and amounts paid in
settlement) which have been paid directly to Indemnitee by D&O Insurance.

      5. Partial Indemnification. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts
paid in settlement) incurred by him in the investigation, defense, settlement or
appeal of a proceeding but not entitled, however, to indemnification for all of
the total amount thereof, the Company shall nevertheless indemnify the
Indemnitee for such total amount except as the portion thereof to which the
Indemnitee is not entitled.

      6. Mandatory Advancement of Expenses. Subject to Section 10 below, the
Company shall advance all expenses incurred by the Indemnitee in connection
with the investigation, defense, settlement or appeal of any proceeding to which
the Indemnitee is a party or is threatened to be made a party by reason of the
fact that the Indemnitee is or was an agent of the Company or by reason of
anything done or not done by him in any such capacity. Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Company as authorized hereby. The advances to be made
hereunder shall be paid by the Company to the Indemnitee within twenty (20) days
following delivery of a written request therefore by the Indemnitee to the
Company.

      7. Notice and Other Indemnification Procedures.

            (a) Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto
may be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.

            (b) If, at the time of receipt of a notice of the commencement of a
proceeding pursuant to Section 7(a) hereof, the Company has D&O Insurance in
effect, the Company shall give prompt notice of the commencement of such
proceeding to the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such proceeding in accordance with the terms of
such policies.

            (c) In the event the Company shall be obligated to advance the
expenses for any proceeding against the Indemnitee, the Company, if appropriate,
shall be entitled to assume the defense of such proceeding, with counsel
approved by the Indemnitee, upon the delivery to

                                       5
<PAGE>

the Indemnitee of written notice of its election so to do. After delivery of
such notice, approval of such counsel by the Indemnitee and the retention of
such counsel by the Company, the Company will not be liable to the Indemnitee
under this Agreement for any fees of counsel subsequently incurred by the
Indemnitee with respect to the same proceeding, provided that (i) the Indemnitee
shall have the right to employ his counsel in any such proceeding at the
Indemnitee's expense; and (ii) if (A) the employment of counsel by the
Indemnitee has been previously authorized by the Company, (B) the Indemnitee
shall have reasonably concluded that there may be a conflict of interest between
the company and the Indemnitee in the conduct of any such defense or (C) the
Company shall not, in fact, have employed counsel to assume the defense of such
proceeding, the fees and expenses of Indemnitee's counsel shall be at the
expense of the Company.

      8. Determination of Right to Indemnification.

            (a) To the extent the Indemnitee has been successful on the merits
or otherwise in defense of any proceeding referred to in Section 4(a), 4(b), or
4(c) of this Agreement or in the defense of any claim, issue or matter described
therein, the Company shall indemnify the Indemnitee against expenses actually
and reasonably incurred by him in connection with the investigation, defense or
appeal of such proceeding.

            (b) In the event that Section 8(a) is inapplicable, the Company
shall also indemnify the Indemnitee unless, and only to the extent that, the
Company shall prove by clear and convincing evidence to a forum listed in
Section 8(c) below that the Indemnitee has not met the applicable standard of
conduct required to entitle the Indemnitee to such indemnification.

            (c) The Indemnitee shall be entitled to select the forum in which
the validity of the Company's claim under Section 8(b) hereof that the
Indemnitee is not entitled to indemnification will be heard from among the
following:

                  (1) A quorum of the Board consisting of directors who are not
parties to the proceeding for which indemnification is being sought;

                  (2) The stockholders of the Company;

                  (3) Legal counsel selected by the Indemnitee, and reasonably
approved by the Board, which counsel shall make such determination in a written
opinion.

                  (4) A panel of three arbitrators, one of whom is selected by
the Company, another of whom is selected by the Indemnitee and the last of whom
is selected by the first two arbitrators so selected.

            (d) As soon as practicable, and in no event later than 30 days after
written notice of the Indemnitee's choice of forum pursuant to Section 8(c)
above, the Company shall, at its own expense, submit to the selected forum in
such manner as the Indemnitee or the Indemnitee's counsel may reasonably
request, its claim that the Indemnitee is not entitled to

                                       6
<PAGE>

indemnification; and the Company shall act in the utmost good faith to assure
the Indemnitee a complete opportunity to defend against such claim.

            (e) If the forum listed in Section 8(c) hereof selected by
Indemnitee determines that Indemnitee is entitled to indemnification with
respect to a specific proceeding, such determination shall be final and binding
on the Company. If the forum listed in Section 8(c) hereof selected by
Indemnitee determines that Indemnitee is not entitled to indemnification with
respect to a specific proceeding, the Indemnitee shall have the right to apply
to the Court of Chancery of Delaware, the court in which that proceeding is or
was pending or any other court of competent jurisdiction, for the purpose of
enforcing the Indemnitee's right to indemnification pursuant to the Agreement.

            (f) Notwithstanding any other provision in this Agreement to the
contrary, the Company shall indemnify the Indemnitee against all expenses
incurred by the Indemnitee in connection with any hearing or proceeding under
this Section 8 involving the Indemnitee and against all expenses incurred by the
Indemnitee in connection with any other proceeding between the Company and the
Indemnitee involving the interpretation or enforcement of the rights of the
Indemnitee under this Agreement unless a court of competent jurisdiction finds
that each of the material claims and/or defenses of the Indemnitee in any such
proceeding was frivolous or not made in good faith.

      9. Limitation of Actions and Release of Claims. No proceeding shall
be brought and no cause of action shall be asserted by or on behalf of the
Company or any subsidiary against the Indemnitee, his spouse, heirs, estate,
executors or administrators after the expiration of one year from the act or
omission of the Indemnitee upon which such proceeding is based; however, in a
case where the Indemnitee fraudulently conceals the facts underlying such cause
of action, no proceeding shall be brought and no cause of action shall be
asserted after the expiration of one year from the earlier of (i) the date the
Company or any subsidiary of the Company discovers such facts, or (ii) the date
the Company or any subsidiary of the Company could have discovered such facts by
the exercise of reasonable diligence. Any claim or cause of action of the
Company or any subsidiary of the Company, including claims predicated upon the
negligent act or omission of the Indemnitee, shall be extinguished and deemed
released unless asserted by filing of a legal action within such period. This
Section 9 shall not apply to any cause of action which has accrued on the date
hereof and of which the Indemnitee is aware on the date hereof, but as to which
the Company has no actual knowledge apart from the Indemnitee's knowledge.

      10. Expectations. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:

            (a) Claims Initiated by Indemnitee. To indemnify or advance expenses
to the Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by the Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145, but such indemnification or advancement of expenses may be provided
by the Company in specific cases if the Board of Directors finds it to be
appropriate; or

                                       7
<PAGE>

            (b) Lack of Good Faith. To indemnify the Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by the
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or

            (c) Unauthorized Settlements. To Indemnify the Indemnitee under this
Agreement for any amounts paid in settlement of a proceeding unless the Company
consents to such settlement; or

            (d) Claims by the Company for Willful Misconduct. To indemnify or
advance expenses to the Indemnitee under this Agreement for any expenses
incurred by the Indemnitee with respect to any proceeding or claim brought by
the Company against Indemnitee for willful misconduct, unless a court of
competent jurisdiction determines that each of such claims was not made in good
faith or was frivolous; or

            (e) 16(b) Actions. To indemnify the Indemnitee on account of any
suit in which judgment is rendered against Indemnitee for an accounting of
profits made from the purchase or sale by Indemnitee of securities of the
Company pursuant to the provisions of Section 16(b) of the Securities and
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law; or

            (f) Willful Misconduct. To indemnify the Indemnitee on account of
Indemnitee's conduct which is finally adjudged to have been knowingly fraudulent
or deliberately dishonest, or to constitute willful misconduct; or

            (g) Unlawful Indemnification. To indemnify the Indemnitee if a final
decision by a court having jurisdiction in the matter shall determine that such
indemnification is not lawful.

      11. Non-exclusivity. The provisions for indemnification and advancement of
expenses set forth in this Agreement shall not be deemed exclusive of any other
rights which the indemnitee may have under any provision of law, the Company's
Certificate of Incorporation or Bylaws, the vote of the Company's shareholders
or disinterested directors, other agreements, or otherwise, both as to action in
his official capacity and to action in another capacity while occupying his
position as an agent of the Company, and the Indemnitee's rights hereunder shall
continue after the Indemnitee has ceased acting as an agent of the Company and
shall inure to the benefit of the heirs, executors and administrators of the
Indemnitee.

      12. Interpretation of Agreement. It is understood that the parties hereto
intend this Agreement to be interpreted and enforced so as to provide
indemnification to the Indemnitee to the fullest extent now or hereafter
permitted by law.

      13. Severability. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever, (i)
the validity, legality and

                                       8
<PAGE>

enforceability of the remaining provisions of the Agreement (including, without
limitation, all portions of any paragraphs of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that are not themselves
invalid, illegal or unenforceable) shall not in any way be affected or impaired
thereby, and (ii) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
be construed so as to give effect to the intent manifested by the provision held
invalid, illegal or unenforceable and to give effect to Section 12 hereof.

      14. Modification And Waiver. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.

      15. Successors and Assigns. The terms of this Agreement shall bind, and
shall inure to the benefit of, the successors and assigns of the parties hereto.

      16. Notice. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee or (ii) if mailed by
certified or registered mail with postage prepaid, on the third business day
after the mailing date. Addresses for notice to either party are as shown on the
signature page of this Agreement, or as subsequently modified by written notice.

      17. Governing Law. This Agreement shall be governed exclusively by and
construed according to the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
with Delaware.

                                       9
<PAGE>

      18. Consent to Jurisdiction. The Company and the Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement.

      The parties hereto have entered into this Indemnity Agreement effective as
of the date first above written.

                               Address: Cadence Design Systems, Inc.
                                        2655 Seely Rd.
                                        San Jose, CA 95134

                                        By /s/ R.L. Smith McKeithen
                                           -------------------------------------

                                        Its
                                           -------------------------------------

                                        INDEMNITEE:

                                        /s/ H. Raymond Bingham
                                        ----------------------------------------
                                        H. Raymond Bingham

                               Address:
                                        ----------------------------------------

                                        ----------------------------------------


                                       10
<PAGE>

                                    EXHIBIT C

                        PROPRIETARY INFORMATION AGREEMENT
<PAGE>

                          CADENCE DESIGN SYSTEMS, INC.

           EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

      In consideration of my employment or continued employment by Cadence
Design Systems, Inc. (the "Company"), and the compensation now and hereafter
paid to me, I hereby accept and agree to the following:

1.    NONDISCLOSURE

      1.1 RECOGNITION OF COMPANY'S RIGHTS; NONDISCLOSURE. At all times during my
employment and thereafter, I will hold in strictest confidence and will not
disclose, use, lecture upon or publish any of the Company's Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain Company's
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns.

      1.2 PROPRIETARY INFORMATION. The term "Proprietary Information" shall mean
any and all confidential and/or proprietary knowledge, data or information of,
or acquired by, the Company. By way of illustration but not limitation,
"Proprietary Information" includes (a) information relating to products,
processes, know-how, designs, drawings, concepts, circuits, test data, formulas,
methods, compositions, ideas, algorithms, techniques, developmental or
experimental work, improvements and discoveries, (hereinafter collectively
referred to as "Inventions"); (b) information regarding plans for research,
development, new products, marketing and selling, business plans, budgets and
unpublished financial statements, licenses, prices and costs, suppliers and
customers; and (c) information regarding the skills and compensation of other
employees of the Company. Notwithstanding the foregoing, it is understood that,
at all such times, I am free to use information which is generally known in the
trade or industry, which is not gained as result of a breach of this Agreement,
and my own, skill, knowledge, know-how and experience to whatever extent and in
whichever way I wish.

      1.3 THIRD PARTY INFORMATION. I understand, in addition, that the Company
has received and in the future will receive from third parties confidential or
proprietary information ("Third Party Information") subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes. During the term of my employment and
thereafter, I will hold Third Party Information in the strictest confidence and
will not disclose to anyone (other than Company personnel who need to know such
information in connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information unless
expressly authorized by an officer of the Company in writing.

      1.4 NO IMPROPER USE OF INFORMATION OF PRIOR EMPLOYERS AND OTHERS. During
my employment by the Company I will not improperly use or disclose any
confidential information or trade secrets, if any, of any former employer or any
other person to whom I have an obligation of confidentiality, and I will not
bring onto the premises of the Company any unpublished documents or any property
belonging to my former employer or any other person to whom I have an obligation
of confidentiality unless consented to in writing by that former employer or
person. I will use in the performance of my duties only information which is
generally known and used by persons with training and experience comparable to
my own, which is common knowledge in the industry or otherwise legally in the
public domain, or which is otherwise provided or developed by the Company.

2.    ASSIGNMENT OF INVENTIONS

      2.1 "PROPRIETARY RIGHTS". The term "Proprietary Rights" shall mean all
trade secret, patent, copyright, mask work and other intellectual property
rights throughout the world.

      2.2 PRIOR INVENTIONS. Inventions, if any, patented or unpatented, which I
made prior to the commencement of my employment with the Company are excluded
from the scope of this Agreement. To preclude any possible uncertainty, I have
set forth on Exhibit B (Previous Inventions) attached hereto a complete list of
all inventions that I have, alone or jointly with others, conceived, developed
or reduced to practice or caused to be conceived, developed or reduced to
practice prior to the commencement of my employment with the

                                       1
<PAGE>

Company, that I consider to be my that I wish to have excluded from the scope of
this Agreement (collectively referred to as "Prior Inventions"). If disclosure
of any such Prior Invention(s) would cause me to violate any prior
confidentiality agreement, I understand that I am not to list such Prior
Invention(s) in Exhibit B, but am only to disclose a cursory name for each such
invention, a listing of the party(ies) to whom it belongs and the fact that full
disclosure as to such inventions has not been made for that reason. A space is
provided on Exhibit B for such purpose. If no such disclosure is attached, I
represent that there are no Prior Inventions. If, in the course of my employment
with the Company, I incorporate a Prior Invention into a Company product,
process or machine, the Company is hereby granted and shall have a nonexclusive,
royalty-free, irrevocable, perpetual, worldwide license (with rights to
sublicense through multiple tiers of sublicensees) to make, have made, modify,
use and sell such Prior Invention. Notwithstanding the foregoing, I agree that I
will not incorporate, or permit to be incorporated, Prior Inventions in any
Company Inventions without the Company's prior written consent.

      2.3 ASSIGNMENT OF INVENTIONS. Subject to Sections 2.4, and 2.6, I hereby
assign and agree to assign in the future (when any such Inventions or
Proprietary Rights are first reduced to practice or first fixed in a tangible
medium, as applicable) to the Company all my right, title and interest in and to
any and all Inventions (and all Proprietary Rights with respect thereto) whether
or not patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or jointly with
others, during the period of my employment with the Company. Inventions assigned
to the Company, or to a third party as directed by the Company pursuant to this
Section 2, are hereinafter referred to as "Company Inventions."

      2.4 NONASSIGNABLE INVENTIONS. This Agreement does not apply to an
Invention which qualifies fully as a nonassignable Invention under Section 2870
of the California Labor Code (hereinafter "Section 2870"). I have reviewed the
notification on Exhibit A (Limited Exclusion Notification) and agree that my
signature acknowledges receipt of the notification.

      2.5 OBLIGATION TO KEEP COMPANY INFORMED. During the period of my
employment and for one (1) year after termination of my employment with the
company, I will promptly disclose to the Company fully and in writing all
Inventions authored, conceived or reduced to practice by me, either alone or
jointly with others, particularly if I leave the Company and become employed by
a competitor of the Company, or if I commercialize an idea that the Company
decided not to pursue. In addition, I will promptly disclose to the Company all
patent applications filed by me or on my behalf during my employment At the time
of each such disclosure, I will advise the Company in writing of any Inventions
that I believe fully qualify for protection under Section 2870; and I will at
that time provide to the Company in writing all evidence necessary to
substantiate that belief. The Company will keep in confidence and will not use
for any purpose or disclose to third parties without my consent any confidential
information disclosed in writing to the Company pursuant to this Agreement
relating to Inventions that qualify fully for protection under the provisions of
Section 2870. I will preserve the confidentiality of any Invention that does not
fully qualify for protection under Section 2870. For one (1) year following my
termination of employment any and all patent applications filed by me or by a
third party based on my work will be presumed to be owned by the Company. I can
rebut this presumption by providing evidence sufficient to establish ownership
by the party applying for the patent.

      2.6 GOVERNMENT OR THIRD PARTY. I also agree to assign all my right, title
and interest in and to any particular Invention to a third party, including
without limitation the United States, as directed by the Company.

      2.7 WORKS FOR HIRE. I acknowledge that all original works of authorship
which are made by me (solely or jointly with others) within the scope of my
employment and which are protectable by copyright are "works made for hire,"
pursuant to United States Copyright Act (17 U.S.C. Section 101).

      2.8 ENFORCEMENT OF PROPRIETARY RIGHTS. During and after my employment
with the Company, I will assist the Company in every proper way to obtain, and
from time to time enforce, United States and foreign Proprietary Rights relating
to Company Inventions in any and all countries. To that end I will execute,
verify and deliver such documents and perform such other acts (including
appearances as a witness) as the Company may reasonably request for use in
applying for, obtaining, perfecting, evidencing, sustaining and enforcing such
Proprietary Rights and the assignment thereof. In addition, I will execute,
verify and deliver assignments of such Proprietary Rights to the Company or its
designee. My obligation to assist the Company with respect to Proprietary Rights
relating to such Company Inventions in any and all countries

                                       2
<PAGE>

shall continue beyond the termination of my employment.

      In the event the Company is unable for any reason, after reasonable effort
to secure my signature on any document needed in connection with the actions
specified in the preceding paragraph, I hereby irrevocably designate and appoint
the Company and its duly authorized officers and agents as my agent and attorney
in fact, which appointment is coupled with an interest, to act for and in my
behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any Proprietary Rights assigned
hereunder to the Company.

3. RECORDS. I agree to keep and maintain adequate and current records (in the
form of notes, sketches, drawings and in any other form that may be required by
the Company) of all Proprietary Information developed by me and all Inventions
made by me during the period of my employment at the Company, which records
shall be available to and remain the sole property of the Company at all times.

4. ADDITIONAL ACTIVITIES. I agree that during the period of my employment by the
Company I will not, without the Company's express written consent, engage in any
employment or business activity which is competitive with, or would otherwise
conflict with, my employment by the Company.

5. NO SOLICITATION. I agree that (1) during the term of my employment with the
Company, and for a period of one (1) year following the date of my termination
of employment with the Company, I will not solicit, recruit, for my own benefit
or on behalf of any entity, any person who is at that time an employee of the
Company or who has been employed by the Company for any period of time during
the previous three (3) months, nor shall I induce or encourage any such person
to leave the employ of the Company; and (2) during the term of my employment
with the Company, and for a period of one (1) year following the date of my
termination of employment with the Company, I will not solicit the business
(selling of products or services that compete with products or services offered
by the Company) of any client or customer of the Company with whom I had a
relationship while employment with the Company or whom I know as a result of my
employment with the Company.

6. NO CONFLICTING OBLIGATION. I represent that my performance of all the terms
of this Agreement, and of my duties as an employee of the Company, does not and
will not breach any agreement to keep in confidence information acquired by me
in confidence or in trust prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any agreement either written or
oral in conflict herewith.

7. RETURN OF COMPANY DOCUMENTS AND PROPERTY. When I leave the employ of the
Company, I will deliver to the Company any and all drawings, notebooks, notes,
memoranda, source code, specifications, devices, formulas, records, manuals,
reports and documents, together with all copies thereof, and any other material
containing or disclosing any Company Inventions, Third Party Information or
Proprietary Information of the Company, that is within my possession, custody or
control. Further, upon termination of employment I also will return any and all
Company property or equipment in my possession, custody or control. Prior to
leaving, I will cooperate with the Company in completing and signing the
Company's trade secret acknowledgement form.

8. NON-PRIVATE NATURE OF COMPANY PROPERTY. I understand that I have no
expectation of privacy in the voicemail and electronic mail provided to me by
the Company or in any property situated on the Company's premises and/or owned
by the Company, including disks and other storage media, filing cabinets or
other work areas. I further understand that such property, including voicemail
and electronic mail, is subject to inspection by Company personnel at any time.

9. AT-WILL EMPLOYMENT. I agree and understand that nothing in this Agreement
shall confer any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with my right or the Company's right
to terminate the employment relationship at any time, for any reason, with or
without cause, and with or without notice. I understand that, other than the
Company's Senior Vice President of Human Resources, no manager, supervisor,
employee or any other representative or agent of the Company has the authority
to enter into an agreement to the contrary. I further understand that an
agreement to the contrary by the Senior Vice President of Human Resources is not
valid unless it is in writing.

10. NOTICES. Any notices required or permitted hereunder shall be given to the

                                       3
<PAGE>

appropriate party at the address specified below or at such other address as the
party shall specify in writing. Such notice shall be deemed given upon personal
delivery to the appropriate address or if sent by certified or registered mail,
three (3) days after the date of mailing.

11. NOTIFICATION OF NEW EMPLOYER. In the event that I leave the employ of the
Company, I hereby consent to the notification of my new employer of my rights
and obligations under this Agreement.

12. GENERAL PROVISIONS.

      12.1 GOVERNING LAWS, CONSENT TO PERSONAL JURISDICTION. This Agreement
will be governed by and construed according to the laws of the State of
California, as such laws are applied to agreements entered into and to be
performed entirely within California between California residents. I hereby
expressly consent to the personal jurisdiction of the state and federal courts
located in Santa Clara County, California for any lawsuit filed there against me
by Company arising from or related to this Agreement.

      12.2 SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. If, moreover, any one or more of the
provisions contained in this Agreement shall for any reason be held to be
excessively broad as to duration, geographical scope, activity or subject, it
shall be construed by limiting and reducing it, so as to be enforceable to the
extent compatible with the applicable law as it shall then appear.

      12.3 SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the
Company to any successor in interest or other assignee.

      12.4 WAIVER. No waiver by the Company of any breach of this Agreement
shall be a waiver of any preceding or succeeding breach. No waiver by the
Company of any right under this Agreement shall be construed as a wavier of any
other right. The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.

      12.5 ENTIRE AGREEMENT. The obligations pursuant to Sections 1 and 2 of
this Agreement shall apply to any time during which I was previously employed,
or am in the future employed, by the Company as a consultant if no other
agreement governs nondisclosure and assignment of inventions during such period.
This Agreement is the final, complete and exclusive agreement of the parties
with respect to the subject matter hereof and supersedes all prior discussions
between us, except that the Cadence Code of Conduct and my offer letter, both of
which I signed, are incorporated herein. No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, will be effective
unless in writing and signed by the party to be charged. Any subsequent change
or changes in my duties, salary or compensation will not affect the validity or
scope of this Agreement.

      I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT B TO THIS AGREEMENT.

Dated: Sept. 16, 1999

By: /s/ H. Raymond Bingham
    ---------------------------------
    H. Raymond Bingham
    President and Chief Executive Officer

ACCEPTED AND AGREED TO:

CADENCE DESIGN SYSTEMS, INC.

By: /s/ R.L. Smith Mckeithen
    ---------------------------

Title: R.L. SMITH MCKEITHEN

Date: SR. VP & GENERAL COUNSEL

                                       4
<PAGE>

                                   EXHIBIT A

                         LIMITED EXCLUSION NOTIFICATION

      THIS IS TO NOTIFY you in accordance with Section 2872 of the California
Labor Code that the foregoing Agreement between you and the Company does not
require you to assign or offer to assign to the Company any invention that you
developed entirely on your own time without using the Company's equipment,
supplies, facilities or trade secret information except for those inventions
that either:

      (1) Relate at the time of conception or reduction to practice of the
invention to the Company's business, or actual or demonstrably anticipated
research or development of the Company;

      (2) Result from any work performed by you for the Company.

      To the extent a provision in the foregoing Agreement purports to require
you to assign an invention otherwise excluded from the preceding paragraph, the
provision is against the public policy of this state and is unenforceable.

      This limited exclusion does not apply to any patent or invention covered
by a contract between the Company and the United States or any of its agencies
requiring full title to such patent or invention to be in the United States.

      I ACKNOWLEDGE RECEIPT of a copy of this notification.

                                By: /s/ H. Raymond Bingham
                                    ----------------------------
                                    H. Raymond Bingham

                                Date: Sept 16, 1999

WITNESSED BY:

/s/ Alyssa Allen
--------------------------------
(printed name of representative)

Dated: Sept. 16, 1999

                                      A-1.
<PAGE>

                                   EXHIBIT B

TO:      Cadence Design Systems, Inc.

FROM: ______________________________

DATE:  ______________________________

SUBJECT: Previous Inventions

      1. Except as listed in Section 2 below, the following is a complete list
of all inventions or improvements relevant to the subject matter of my
employment by [Company] (the "Company") that have been made or conceived or
first reduced to practice by me alone or jointly with others prior to my
engagement by the Company:

      [ ] 1. No inventions or improvements.

      [ ] 2. See below:

          ______________________________________________

          ______________________________________________

          ______________________________________________

      [ ] 3. Additional sheets attached.

      2. Due to a prior confidentiality agreement, I cannot complete the
disclosure under Section 1 above with respect to inventions or improvements
generally listed below, the proprietary rights and duty of confidentiality with
respect to which I owe to the following party(ies);

      Invention or Improvement      Party(ies)           Relationship

1.    ________________________     ______________       _______________

2.    ________________________     ______________       _______________

3.    ________________________     ______________       _______________

[ ]   4. Additional sheets attached.

                                       B-1.