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                                                                   EXHIBIT 10.05

                          CADENCE DESIGN SYSTEMS, INC.

                        1995 DIRECTORS STOCK OPTION PLAN

1.    PURPOSE.

      (a)   The purpose of the 1995 Directors Stock Option Plan (the "Plan") is
to provide a means by which each director of Cadence Design Systems, Inc., a
Delaware corporation (the "Company"), who is not otherwise at the time of grant
an employee of the Company or of any Affiliate of the Company (each such person
being hereafter referred to as a "Non-Employee Director") will be given an
opportunity to purchase stock of the Company through the grant of options.

      (b)   The word "Affiliate" as used in the Plan means any corporation or
other entity which is controlled by the Company, which controls the Company, or
which is under common control with the Company.

      (c)   The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.

      (d)   No option granted under the Plan is intended to be an "incentive
stock option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").

2.    ADMINISTRATION.

      (a)   The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to a
committee, as provided in section 2(c).

      (b)   The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan, to construe, interpret and
administer the Plan and options granted under the Plan, and to establish, amend
and revoke rules and regulations for its administration. The Board, in the
exercise of this power, may correct any defect, omission or inconsistency in the
Plan or in any option, in a manner and to the extent it shall deem necessary or
desirable to make the Plan fully effective. All decisions of the Board on such
matters shall be final, binding and conclusive on all persons having an interest
in such decision.

      (c)   The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the
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powers theretofore possessed by the Board, subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee at any time
and revest in the Board the administration of the Plan.

3.    SHARES SUBJECT TO THE PLAN.

      (a)   The number of shares of the Company's $.01 par value common stock
(the "Common Stock") that may be sold pursuant to options granted under the Plan
shall not exceed in the aggregate two million five hundred fifty thousand
(2,550,000) shares of Common Stock. If any option granted under the Plan shall
for any reason expire or otherwise terminate without having been exercised in
full, the stock not purchased under such option shall again become available for
issuance under the Plan. The number of shares of Common Stock authorized for
issuance under the Plan shall be subject to and adjusted by the provisions of
Section 10 relating to adjustments in the capital structure of the Company.

      (b)   The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

4.    ELIGIBILITY.

      Options shall be granted only to Non-Employee Directors of the Company.

5.    NON-DISCRETIONARY GRANTS.

      (a)   Each person who first becomes a Non-Employee Director shall
automatically be granted an option to purchase six thousand two hundred fifty
(6,250) shares of Common Stock multiplied by the number of calendar quarters
occurring between the date on which such person begins serving as a director of
the Company and the first April 1 occurring after the date such person becomes a
director of the Company on the terms and conditions set forth herein. If a
person becomes a Non-Employee Director during a calendar quarter, he or she
shall be treated as serving as a director of the Company for the entire such
calendar quarter only if he or she becomes a Non-Employee Director during the
first half of such calendar quarter.

      (b)   On April 1 of each year, each person who on that date is then a
Non-Employee Director shall automatically be granted an annual option to
purchase twenty five thousand (25,000) shares of Common Stock on the terms and
conditions set forth herein. If the Non-Employee Director is an "Active Board
Member" on the date the annual option is granted but is not then serving as the
Chairman of the Board, then such director shall automatically be granted an
option to purchase an additional twelve thousand five hundred (12,500) shares of
Common Stock on the terms and conditions set forth herein on each annual option
grant date. If the Non-Employee Director is serving as the Chairman of the Board
on the date the annual option is granted, then such director shall automatically
be granted an option to purchase an additional twenty five thousand (25,000)
shares of Common Stock on the terms and conditions set forth herein on each
annual option grant date. An "Active Board Member" shall be defined as a
Non-Employee Director who is the chairman of one committee of the Board and is
serving as a member of at least one additional committee of the Board.


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      (c)   In addition to the other options specified in section 5, each
Non-Employee Director who serves on the Venture Committee of the Board shall be
granted one (but no more than one) Venture Committee membership option as
follows, and each Non-Employee Director who serves as chairman of the Venture
Committee of the Board shall be granted, in addition to the one-time Venture
Committee membership option, one (but no more than one) Venture Committee
chairman's option as follows:

            (i)   Each Non-Employee Director who is selected for the first time
to serve on the Venture Committee automatically shall, upon the date of his or
her initial selection to serve on the Venture Committee, be granted a Venture
Committee membership option to purchase thirty-three thousand seven hundred
fifty (33,750) shares of Common Stock on the terms and conditions set forth
herein.

            (ii)  Each Non-Employee Director who is selected for the first time
to serve as the chairman of the Venture Committee automatically shall, upon the
date of his or her initial selection to serve as the chairman of the Venture
Committee, be granted a Venture Committee chairman's option to purchase an
additional thirty-three thousand seven hundred fifty (33,750) shares of Common
Stock on the terms and conditions set forth herein.

      The Venture Committee options provided under this section 5(c) are not
subject to adjustment as provided in section 5(a).

      (d)   (i)   Subject to section 5(d)(ii), on January 30 of each year, each
Non-Employee Director who on that date is then serving as the Chairman of the
Board and has completed five (5) years of service as the Chairman of the Board
shall automatically receive an option to purchase one hundred one thousand two
hundred fifty (101,250) shares of Common Stock on the terms and conditions set
forth herein.

            (ii)  No Non-Employee Director shall receive more than one grant
under section 5(d).

6.    OPTION PROVISIONS.

      Each option shall be subject to the following terms and conditions:

      (a)   The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ten (10) years
from the date of grant (the "Expiration Date"). In any and all circumstances, an
option may be exercised only as to no more than that number of shares as to
which it is exercisable at the time in question under the provisions of section
6(e).

      (b)   The exercise price of each option shall be one hundred percent
(100%) of the fair market value of the stock subject to such option on the date
such option is granted. The "fair market value" of the Common Stock shall be the
mean average of the closing price of the Company's common stock for each of the
last twenty trading days prior to the date of the grant of the option on the
national securities exchange, national market system or other trading market on
which the Company's common stock has the highest average trading volume.

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      (c)   The optionholder may elect to make payment of the exercise price
under one of the following alternatives:

            (i)   Payment of the exercise price per share in cash (by check) at
the time of exercise; or

            (ii)  Provided that at the time of the exercise the Common Stock is
publicly traded and quoted regularly in the Wall Street Journal, payment by
delivery of shares of Common Stock already owned by the optionholder for the
period required to avoid a charge to the Company's reported earnings, and owned
free and clear of any liens, claims, encumbrances or security interest, which
common stock shall be valued at its fair market value on the last day on which
the Common Stock was actively traded preceding the date of exercise;

            (iii) Payment by the delivery of the optionholder's full recourse
promissory note on such terms as may be determined by the Board which are not
inconsistent with the terms of the Plan; or

            (iv)  Payment by a combination of the methods of payment specified
in sections 6(c)(i) through 6(c)(iii) above.

      For purposes of section 6(c)(ii), the "fair market value" of Common Stock
shall be the closing price of such stock on the last trading day preceding the
date of delivery of such Common Stock to the Company on the national securities
exchange, national market system or other trading market on which the Common
Stock has the highest average trading volume. If the optionholder uses a
promissory note as partial payment of the exercise price pursuant to section
6(c)(iii), then such principal amount of such note may not exceed the maximum
amount permitted by law (including but not limited to the limitation under the
Delaware General Corporation Law that the par value of shares of stock may not
be paid with a promissory note) and interest shall be compounded at least
annually and shall be charged at no less than the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
terms of such promissory note.

      Notwithstanding the foregoing, this option may be exercised pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
which results in the receipt of cash (or check) by the Company either prior to
the issuance of shares of the Company's common stock or pursuant to the terms of
irrevocable instructions issued by the optionholder prior to the issuance of
shares of the Company's common stock.

      (d)   Except as otherwise expressly provided in an optionholder's option
agreement, an option shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person or by his guardian or
legal representative. The person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the optionholder,
shall thereafter be entitled to exercise the option.

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      (e)   (i)   An option granted pursuant to section 5(a) or 5(b) shall vest
and become exercisable in full on the first March 31 following the grant of such
option; provided, however, the optionholder has continuously served in the same
capacity which entitled him or her to the grant of such option from the date of
grant until and including the next following March 31.

            (ii)  An option granted pursuant to section 5(c) or 5(d) shall
become exercisable in installments over a period of three years from the date of
grant at the rate of one-third (1/3rd) of the total number of shares subject to
such option upon the first anniversary of the date of grant and subsequently at
the rate of one thirty-sixth (1/36th) of the total number of shares subject to
the option a month, in twenty-four (24) equal monthly installments; provided,
however, that the optionholder has, during the entire period from the grant date
to such vesting date, continuously served in the same capacity which entitled
him or her to the grant of such option, whereupon such option shall become fully
exercisable in accordance with its terms with respect to that portion of the
shares represented by that installment.

      (f)   The Company may require any optionholder, or any person to whom an
option is transferred under section 6(d), as a condition of exercising any such
option: (i) to give written assurances satisfactory to the Company as to the
optionholder's knowledge and experience in financial and business matters; and
(ii) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the option has been registered under a then-currently effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii), as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may require
any optionholder to provide such other representations, written assurances or
information which the Company shall determine is necessary, desirable or
appropriate to comply with applicable securities laws as a condition of granting
an option to the optionholder or permitting the optionholder to exercise the
option. The Company may, upon advice of counsel to the Company, place legends on
stock certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.

      (g)   Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.

7.    COVENANTS OF THE COMPANY.

      (a)   During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of the Common Stock
required to satisfy such options.

      (b)   The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of


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Common Stock upon exercise of the options granted under the Plan; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act either the Plan, any option granted under the Plan, or any
stock issued or issuable pursuant to any such option. If, after reasonable
efforts, the Company is unable to obtain from any such regulatory commission or
agency the authority which counsel for the Company deems necessary for the
lawful issuance and sale of stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell stock upon exercise of such
options.

8.    USE OF PROCEEDS FROM STOCK.

      Proceeds from the sale of Common Stock pursuant to options granted under
the Plan shall constitute general funds of the Company.

9.    MISCELLANEOUS.

      (a)   Neither an optionholder nor any person to whom an option is
transferred under section 6(d) shall be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares subject to such option
unless and until such person has satisfied all requirements for exercise of the
option pursuant to its terms.

      (b)   Throughout the term of any option granted pursuant to the Plan, the
Company shall make available to the holder of such option, not later than one
hundred twenty (120) days after the close of each of the Company's fiscal years
during the option term, upon request, such financial and other information
regarding the Company as comprises the annual report to the stockholders of the
Company provided for in the Bylaws of the Company and such other information
regarding the Company as the holder of such option may request under applicable
law.

      (c)   Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate in any capacity or shall affect any right of the
Company, its Board or stockholders or any Affiliate to remove any Non-Employee
Director pursuant to the Company's Bylaws and the provisions of the Delaware
General Corporation Law (or the laws of the Company's state of incorporation
should that change in the future).

      (d)   No Non-Employee Director, individually or as a member of a group,
and no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.

      (e)   In connection with each option made pursuant to the Plan, it shall
be a condition precedent to the Company's obligation to issue or transfer shares
to a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.

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      (f)   The size of the Plan's share reserve set forth in section 3, the
size of individual option grants described in section 5, and all other
references in the Plan to specific numbers of shares of the Common Stock reflect
and have taken into account (i) the Company's three-for-two (3:2) stock
dividends effective as of October 31, 1995 and May 31, 1996, including all
options granted under the Plan prior to May 31, 1996 and (ii) the Company's
two-for-one (2:1) stock dividend effective as of November 14, 1997, including
all options granted under the Plan prior to November 14, 1997.

10.   ADJUSTMENTS UPON CHANGES IN STOCK.

      (a)   If any change is made in the Common Stock subject to the Plan, or
subject to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding options will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and exercise price per share
of stock subject to outstanding options. Such adjustments shall be made by the
Board, the determination of which shall be final, binding, and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as
a "transaction not involving the receipt of consideration by the Company.") No
adjustment shall result in the creation of a fractional share of stock or in an
exercise price per share of stock expressed in units of less than one cent
($.01).

      (b)   In the event of the occurrence of a Change in Control, to the extent
not prohibited by applicable law, the time during which options outstanding
under the Plan may be exercised shall be accelerated by the Board to a time
prior to or as of the occurrence of such event and the options terminated if not
exercised by the time specified by the Board, which in any event shall be after
the effective time of such acceleration. If the Board fails to specify a time
for acceleration of outstanding options and/or termination of outstanding
options, then the time during which options outstanding under the Plan may be
exercised shall be accelerated to a time immediately preceding the occurrence of
the Change in Control, and the options terminated if not exercised prior to or
upon the occurrence of a Change in Control defined in section 10(b)(i) or
section 10(b)(iii) or within three (3) months following the occurrence of a
Change in Control defined in section 10(b)(ii), section 10(b)(iv), or section
10(b)(v).

      For purposes of the Plan, a "Change in Control" means the happening of any
of the following events:

            (i)   A dissolution or liquidation of the Company.

            (ii)  A sale of all or substantially all of the assets of the
Company.

            (iii) Either a merger or consolidation in which the Company is not
the surviving corporation and the stockholders of the Company immediately prior
to the merger or consolidation fail to possess direct or indirect beneficial
ownership of more than eighty percent (80%) of the voting power of the
securities of the surviving corporation (or if the surviving corporation is a
controlled affiliate of another entity, then the required beneficial ownership
shall


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be determined with respect to the securities of that entity which controls the
surviving corporation and is not itself a controlled affiliate of any other
entity) immediately following such transaction, or a reverse merger in which the
Company is the surviving corporation and the stockholders of the Company
immediately prior to the reverse merger fail to possess direct or indirect
beneficial ownership of more than eighty percent (80%) of the securities of the
Company (or if the Company is a controlled affiliate of another entity, then the
required beneficial ownership shall be determined with respect to the securities
of that entity which controls the Company and is not itself a controlled
affiliate of any other entity) immediately following the reverse merger. For
purposes of this section 10(b)(iii), any person who acquired securities of the
Company prior to the occurrence of a merger, reverse merger, or consolidation in
contemplation of such transaction and who after such transaction possesses
direct or indirect beneficial ownership of at least ten percent (10%) of the
securities of the Company or the surviving corporation (or if the Company or the
surviving corporation is a controlled affiliate, then of the appropriate entity
as determined above) immediately following such transaction shall not be
included in the group of stockholders of the Company immediately prior to such
transaction.

            (iv)  An acquisition by any person, entity or group within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or a subsidiary or other controlled affiliate of the Company) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least twenty percent (20%) of the combined voting power entitled
to vote in the election of directors.

            (v)   The individuals who, as of the date immediately following the
Company's 1999 Annual Meeting of Stockholders, are members of the Board (the
"Incumbent Board"), cease for any reason to constitute at least fifty percent
(50%) of the Board. If the election, or nomination for election by the Company's
stockholders, of any new director was approved by a vote of at least fifty
percent (50%) of the Incumbent Board, such new director shall be considered as a
member of the Incumbent Board; provided, however, that no individual shall be
considered a member of the Incumbent Board if the individual initially assumed
office as a result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest.

11.   AMENDMENT OF THE PLAN.

      (a)   The Board at any time, and from time to time, may amend the Plan
and/or some or all outstanding options granted under the Plan. Except as
provided in section 10 relating to adjustments upon changes in stock, no
amendment shall be effective unless approved by the stockholders of the Company
where the amendment would:

            (i)   Increase the number of shares which may be issued under the
Plan;

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            (ii)  Modify the requirements as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in order
for the Plan to comply with the requirements of Rule 16b-3); or

            (iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to comply with the requirements of
Rule 16b-3 or any securities exchange or other trading market on which the
Common Stock is actively traded.

      (b)   Rights and obligations under any option granted before any amendment
of the Plan or of the terms of such option shall not be impaired by such
amendment unless (i) the Company requests the consent of the person holding the
option, and (ii) such person consents in writing.

12.   TERMINATION OR SUSPENSION OF THE PLAN.

      (a)   The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the date that all of the shares
of the Company's Common Stock have been issued. No options may be granted under
the Plan while the Plan is suspended or after it is terminated.

      (b)   Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the holder of the option.





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