Document:

exv4w6

 

Exhibit 4.6

ENCORE MEDICAL CORPORATION

INVESTORS RIGHTS AGREEMENT

     This Investors Rights Agreement (this “Agreement”) is made and entered
into as of the 4th day of October, 2004 by and among Encore Medical
Corporation, a Delaware corporation (the “Company”), and holders of the
Company’s Common Stock listed on Exhibit A attached hereto (“Empi Principal
Shareholders”).

Recitals

     WHEREAS, (i) the Empi Principal Shareholders are parties to the Agreement
and Plan of Merger dated as of August 8, 2004 among the Company, the Empi
Principal Shareholders, Encore Merger Sub, Inc. and Empi, Inc. (the “Merger
Agreement”), (ii) pursuant to the Merger Agreement, the Company is issuing to
the Empi Principal Shareholders and the persons listed on Schedule 1 (together
with the Empi Principal Shareholders, the “Investors”) shares of Acquiror
Common Stock and (iii) certain of the Company’s and the Empi Principal
Shareholders’ obligations under the Merger Agreement are conditioned upon the
execution and delivery by the Empi Principal Shareholders and the Company of
this Agreement.

     NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:

	1.	 	REGISTRATION RIGHTS.

     1.1 Certain Definitions. Capitalized terms not otherwise defined herein
shall have the meaning set forth in the Merger Agreement. As used in this
Agreement, the following terms shall have the meanings set forth below:

          (a) “Commission” shall mean the U.S. Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.

          (b) “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.

          (c) “Holder” shall mean each Investor and any holder of Registerable
Shares to whom the registration rights conferred by this Agreement have been
transferred in compliance with this Agreement.

          (d) “Registerable Shares” shall mean (i) shares of Acquiror Common Stock
constituting the Stock Portion of the Merger Consideration, (ii) any Acquiror
Common Stock issued as a dividend or other distribution with respect to or in
exchange for or in replacement of the shares referenced in clause (i) above and
(iii) any securities into which the shares of Acquiror Common Stock described in clause (i) or (ii) above are subsequently
converted; provided, however, that Registerable Shares shall not include any
shares of Common Stock which have previously been registered or which have been
sold to the public either pursuant to a registration

 

 

statement or Rule 144, or which have been sold in a private transaction in which the transferor’s rights
under this Agreement are not assigned.

          (e) The terms “register,” “registered” and “registration” shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.

          (f) “Registration Expenses” shall mean all expenses incurred in, or
incident to, effecting any registration pursuant to this Agreement, including,
without limitation, all registration, qualification, and filing fees, printing
expenses, escrow fees, delivery expenses, fees and disbursements of counsel for
the Company, disbursements of custodians, blue sky and federal securities laws
fees and expenses, and expenses of any regular or special audits incident to or
required by any such registration, fees and disbursements of counsel for the
Holder Representative and the compensation of regular employees of the Company,
which shall be paid in any event by the Company, but shall not include Selling
Expenses.

          (g) “Restricted Securities” shall mean any Registerable Shares required to
bear the legend set forth in Section 1 .2(b) hereof.

          (h) “Rule 144” shall mean Rule 144 as promulgated by the Commission under
the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.

          (i) “Securities Act” shall mean the Securities Act of 1933, as amended, or
any similar successor federal statute and the rules and regulations thereunder,
all as the same shall be in effect from time to time.

          (j) “Selling Expense” shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of Registerable
Shares and fees and disbursements of counsel for any Holder (other than the
fees and disbursements of counsel included in Registration Expenses).

          (k) “Shares” shall mean shares of the Company’s Common Stock, par value
$.001 per share.

     1.2 Registration on Form S-3.

          (a) The Company shall file or cause to be filed with the Commission as
soon as reasonably practicable after the date hereof, a registration statement
(the “Registration Statement”) on Form S-3 (or, in the event the Company is not
eligible to register shares of its Common Stock on Form S-3, such other
appropriate form) to cover resales of all Registerable Shares. The Company
shall cause such Registration Statement to be declared effective as soon as
practicable thereafter but in any event not later than 180 days after the
Closing Date. The Company shall keep such Registration Statement continuously effective,
supplemented, amended, current and in conformity with the Securities Act and
the policies, rules and regulations of the Commission to the extent necessary
to ensure that it is available for resales of

 

 

the Registerable Shares for a period ending on the earlier of (x) the date on which all Registerable Shares
have been sold pursuant to such Registration Statement and (y) the date on
which all Registerable Shares are eligible for resale under Rule 144(k)
promulgated under the Securities Act (the “Rights Period”). The Company shall
not include any shares of Acquiror Common Stock or other securities of the
Company (other than the Registerable Shares) in the Registration Statement
effected pursuant to this Section 1.2.

          (b) The Company hereby agrees, upon written request from the Holder
Representative, to file one or more prospectus supplements or otherwise amend
the Registration Statement from time to time as appropriate to permit the sale
and distribution of the Registerable Shares in one or more (but not more than
three (3)) underwritten offerings, led by a managing underwriter selected by
the Holder Representative and reasonably acceptable to the Company. The
Company further agrees that the Registration Statement shall provide for any
intended method or methods of distribution as may be reasonably requested by
the Holder Representative in writing, and to amend or supplement the
Registration Statement from time to time as may be reasonably requested by the
Holder Representative in writing to provide for such intended method or methods
of distribution of shares.

     1.3 Company Registration.

          (a) If, during the Rights Period, the Company shall determine to register
any of its securities either for its own account or the account of a security
holder or holders exercising their respective demand registration rights, other
than a registration relating solely to employee benefit plans on Form S-8 or
any successor form, a registration relating to a corporate reorganization or
other transaction on Form S-4 or any successor form, or a registration pursuant
to Section 1.2, the Company will:

               (i) promptly give the Holder Representative written notice
thereof; and

               (ii) include in such registration (and any related
qualification under blue sky laws or other compliance), except as
set forth in Section 1.3(b) below, and in any underwriting involved
therewith, all the Registerable Shares specified in a written
request or requests, made by the Holder Representative and
delivered to the Company within twenty (20) days after the written
notice from the Company described in clause (i) above is received
by the Holder Representative.

          (b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holder Representative as a part of the written notice given pursuant
to Section 1.3(a)(i). In such event, the right of any holder of Registerable
Shares to registration pursuant to this Section 1.3 shall be conditioned upon
such holder’s participation in such underwriting and the inclusion of such
holder’s Registerable Shares in the underwriting on the same terms and
conditions as the securities to be sold on behalf of the Company. All holders
of Registerable Shares proposing to distribute their securities through such underwriting shall (together with
the Company and the other holders of securities of the Company with
registration rights to participate therein distributing their securities though
such underwriting) enter into an underwriting agreement in

 

 

customary form with the representative of the underwriter or underwriters selected by the Company
on the same terms and conditions as the securities to be sold on behalf of the
Company.

          (c) Notwithstanding any other provision of this Section 1.3, if the
representative of the underwriters of such offering reasonably determines that
marketing factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set forth
below) exclude all Registerable Shares from, or limit the number of
Registerable Shares to be included in, the registration and underwriting. The
Company shall so advise the Holder Representative, and the number of shares of
securities that are entitled to be included in the registration and
underwriting shall be allocated first to the Company for securities being sold
for its own account and thereafter as set forth in Section 1.14.

          If any person does not agree to the terms of any such underwriting, their
Registerable Shares shall be excluded therefrom by written notice from the
Company or the underwriter to the Holder Representative. Any Registerable
Shares or other securities so excluded from such underwriting shall be
withdrawn from such registration. If shares are so withdrawn from the
registration and if the number of shares of Registerable Shares to be included
in such registration was previously reduced as a result of marketing factors,
the Company shall then offer to all persons who have retained the right to
include securities in the registration the right to include additional
securities in the registration in an aggregate amount equal to the number of
shares so withdrawn, with such shares to be allocated among the persons
requesting additional inclusion in accordance with Section 1.14 hereof:

     1.4 Right to Terminate Registration. The Company shall have the right to
terminate or withdraw any registration initiated by it under Section 1.3 prior
to the effectiveness of such registration whether or not any Holder has elected
to include securities in such registration. The expenses of such withdrawn
registration shall be borne by the Company in accordance with Section 1.5
hereof.

     1.5 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.2 or 1.3 hereof and reasonable and actual fees and expenses of one
counsel for the Holder Representative (such fees and expenses of counsel for
the Holder Representative limited to $35,000 in the aggregate for each
registration or $105,000 in the aggregate for all such registrations) shall be
borne by the Company; provided, however, that with respect to underwritten
offerings effected pursuant to Section 1.2, the Company shall only bear such
Registration Expenses and fees and expenses of one counsel for the Holder
Representative for three (3) underwritten offerings. All Selling Expenses
relating to securities registered for Holders shall be borne by the Holders pro
rata on the basis of the number of shares of securities so registered on their
behalf, as shall any other expenses in connection with the registration
required to be borne by the Holder’s of such securities.

     1.6 Registration Procedures. In connection with the registration and sale
of the Registerable Shares pursuant to Section 1.2 and, pursuant to Section 1.3
solely with respect to clauses (c) and (d) below, the Company will:

 

 

          (a) Prepare and file with the SEC as soon as practicable the Registration
Statement as set forth above;

          (b) Prepare and file with the SEC such amendments and post-effective
amendments to the applicable Registration Statement as may be necessary to keep
such Registration Statement effective for the applicable period set forth in
Section 1.2; cause the Registration Statement to be supplemented by any
required supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act, and to comply fully with Rules 424, 430A and 462, as
applicable, under the Securities Act in a timely manner; and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable period
in accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement;

          (c) Provide to each holder of Registerable Shares such copies of the
Registration Statement and related prospectus, and each amendment and
supplement thereto, as are reasonably requested to satisfy any prospectus
delivery requirements;

          (d) Use its best efforts to register or qualify the Registerable Shares
under such other securities or blue sky laws of such jurisdictions as each
holder of Registerable Shares may reasonably request and do any and all other
acts and things which may be reasonably necessary or advisable to enable each
holder of Registerable Shares to consummate the disposition of the Registerable
Shares owned by such holder in such jurisdictions; provided, however, that the
Company will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph, (ii) subject itself to taxation in any such jurisdiction, or
(iii) consent to general service of process in any such jurisdiction;

          (e) Upon the occurrence of any event that would cause the Registration
Statement (i) to contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) to be not effective and useable for
resale of the Registerable Shares during the period that such Registration
Statement is required to be effective and useable, the Company shall as
promptly as practicable file any correcting information or an appropriate
amendment to the Registration Statement, as the Company deems appropriate,
correcting any such defect, and use its best efforts to cause such amendment to
be declared effective and such Registration Statement to become useable as soon
as practicable thereafter;

          (f) cause all Registerable Shares to be listed for quotation on the NASDAQ
National Market (or other interdealer quotation system or national market on
which the Shares are traded);

          (g) provide a CUSIP for all Registerable Shares not later than the
effective date of the Registration Statement;

          (h) cooperate with the Holder Representative and the managing underwriter,
if any, to facilitate the timely preparation and delivery of certificates not
bearing any restrictive

 

 

legends representing the Registerable Shares to be sold
and cause such Registerable Shares to be in such denominations and registered
in such names as the managing underwriter may reasonably request;

          (i) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement in customary form with
the managing underwriter of such offering and perform all other action as are
customary in such an underwritten public offering, including, if requested by
the underwriter, reasonable participation of senior management of the Company
in a “road show” to the extent such participation does not unduly interfere
with the conduct of the Company’s business; provided, however, that the Company
shall not be obligated to provide its cooperation with respect to more than
three (3) underwritten public offerings (excluding underwritten offerings
effected pursuant to Section 1.3) made at the request of the Holder
Representative; and

          (j) enter into such agreements (including an underwriting agreement) and
do anything else reasonably necessary or advisable in order to expedite or
facilitate the disposition of such Registerable Shares in accordance with
applicable law and the disclosure set forth in the applicable Registration
Statement; provided, however, that the Company shall not be obligated to
provide its cooperation with respect to more than three (3) underwritten public
offerings made at the request of the Holder Representative.

     1.7 Notwithstanding anything to the contrary in this Agreement, the
Company may prohibit offers and sales of the Registerable Shares pursuant to
the Registration Statement once during any 12-month period if:

          (a) (i) it is in possession of material non-public information, (ii) the
Board of Directors determines based on advice of counsel that such prohibition
is necessary in order to avoid a requirement to disclose such material
non-public information, and (iii) the Board of Directors of the Company
determines in good faith that disclosure of such material non-public
information would not be in the best interests of the Company and its
stockholders, or

          (b) the Company has made a public announcement relating to an acquisition
or business combination transaction including the Company and/or one or more of
its subsidiaries (i) that is material to the Company and its subsidiaries taken
as a whole, and (ii) the Board of Directors of the Company determines in good
faith that offers and sales of the Registerable Shares pursuant to the
Registration Statement prior to the consummation of such transaction (or such
earlier date as the Board of Directors shall determine) is not in the best
interests of the Company and its stockholders.

          The period during which any such prohibition of offers and sales of
Registerable Shares pursuant to the Registration Statement is in effect
pursuant to subsections (a) or (b) of this Section 1.7 is referred to herein as
a “Suspension Period”. A Suspension Period shall commence
on and include the date on which the Company provides written notice to
holders of the Company Common Stock covered by the Registration Statement that
offers and sales of Registerable Shares cannot be made thereunder in accordance
with this Section 1.7 and shall end three business days after the earlier to
occur of (x) the date on which such material information is

 

 

disclosed to the public or ceases to be material or the Company is able to so comply with its
disclosure obligations and SEC requirements, or (y) sixty (60) days after
written notice is provided by the Company to the holders of Registerable Shares
of the commencement of such Suspension Period. Each notice shall state to the
extent, if any, as is practicable, an estimate of the expected duration of the
Suspension Period.

     1.8 Holder Information. As a condition to including Registerable Shares
of a Holder in any registration, such Holder shall furnish to the Company such
information requested by the Company as is required by law to be disclosed in
the Registration Statement with respect to a sale by such Holder (the
“Requisite Information”) with respect to any such sales pursuant to such
Registration Statement. Each Holder as to which any Registration Statement is
being effected agrees prior to effecting any sale of the Registerable Shares
thereunder to furnish promptly to the Company all information required to be
disclosed in order to make any Requisite Information previously furnished to
the Company by such Holder not materially misleading or necessary to cause such
Registration Statement not to omit a material fact with respect to such Holder
necessary in order to make the statements therein not misleading.

     1.9 Suspension of Disposition of Registerable Shares. Each Holder agrees
that, upon receipt of a notice from the Company of the existence of any fact of
the kind described in Subsection 1.6(e) hereof (an “Amendment Notice”), such
Holder will forthwith discontinue disposition of Registerable Shares until such
Holder’s receipt of (a) copies of the supplemented or amended prospectus
contemplated by Subsection 1.6(e) hereof, or until counsel for the Company
shall have determined that such disclosure is not required due to subsequent
events, or (b) notice in writing from the Company that the use of the
prospectus may be resumed. In the event the Company shall give any such
notice, the time period regarding the filing of the Registration Statement set
forth in Section 1.2 hereof shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 1.7 hereof to and including the date when each holder of Registerable
Shares covered by such Registration Statement shall have received the copies of
the supplemented or amended prospectus contemplated by this Section 1.9.

     1.10 Indemnification.

          (a) The Company will indemnify each Holder, each of its officers,
directors, partners, employees, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section 1, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, preliminary prospectus, offering circular, or
other document (including any related registration statement, notification, or
the like) incident to any such registration, qualification, or compliance,
or based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any rule
or regulation thereunder applicable to the Company and relating to action or

 

 

inaction required of the Company in connection with any such registration,
qualification, or compliance, and will reimburse each such Holder, each of its
officer’s, directors, partners, legal counsel, and accountants and each person
controlling such Holder, each such underwriter, and each person who controls
any such underwriter, for any legal and any other expenses reasonably incurred
in connection with investigating and defending or settling any such claim,
loss, damage, liability, or action; provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability, or expense rises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such Holder
or underwriter and stated to be specifically for use therein or by such
Holder’s failure to deliver a copy of the Registration Statement or prospectus
or any amendments or supplements thereto to the extent the same had been
delivered by the Company to such Holder. It is agreed that the indemnity
agreement contained in this Section 1.10(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld).

          (b) Each Holder will, if Registerable Shares held by such Holder are
included in the securities as to which such registration, qualification, or
compliance is being effected, indemnify the Company, each of its directors,
officers, partners, employees, legal counsel, and accountants and each
underwriter, if any, of the Company’s securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, each other such Holder, and each
of their officers, directors, and partners, and each person controlling such
Holder against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, preliminary prospectus, offering circular, or other
document, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company and such Holder’s, directors,
officers, partners, legal counsel, and accountants, persons, underwriters, or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability, or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder (with respect to such Holder) and
stated to be specifically for use therein provided, however, that the
obligations of such Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld); and provided that
that the obligation to indemnify under this Section 1.10(b) will be several,
not joint and several, among the Holders and in no event shall any indemnity
under this Section 1.10(b) exceed the net amount received by such Holder from
the sale of Registerable Shares pursuant to the Registration Statement.

          (c) Each party entitled to indemnification under this Section 1.10 (the
“Indemnified Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the

 

 

defense of such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at such party’s expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1.10, to the extent
such failure is not prejudicial. Notwithstanding the foregoing, any Indemnified
Party shall have the right to employ separate counsel in any such action and
participate in the defense thereof; but the fees and expenses of such counsel
shall be at the expense of the Indemnified Party unless (i) the Indemnified
Party shall have been advised by counsel that representation of the Indemnified
Party by counsel provided by the Indemnifying Party would be inappropriate due
to actual or potential conflicting interests between the Indemnifying Party and
the Indemnified Party, including situations in which there are one or more
legal defenses available to the Indemnified Party that are different from or
additional to those available to the Indemnifying Party, (ii) the Indemnifying
Party shall have authorized in writing the employment of counsel for the
Indemnified Party at the expense of the Indemnifying Party, or (iii) the
Indemnifying Party shall have failed to assume the defense or retain counsel
reasonably satisfactory to the Indemnified Party. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.

          (d) If the indemnification provided for in this Section 1.10 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission. In no event
shall any contribution by a Holder under this Section 1.10 exceed the net
amount received by such Holder from the sale of Registerable Shares pursuant to
the Registration Statement.

          (e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in any underwriting agreement
entered into in connection with the underwritten public offering of
Registerable Shares are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control,

 

 

          (f) This Section 1.10 shall survive the completion of any offering of
Registerable Shares in a registration statement under this Section 1, and
otherwise.

     1.11 Rule 144 Reporting and S-3. With a view to making available the
benefits of certain rules and regulations of the Commission that may permit the
sale of the Restricted Securities to the public without registration and to
permit the use of Form S-3, the Company agrees to:

          (a) Make and keep public information regarding the Company available as
those terms are understood and defined in Rule 144 under the Securities Act (or
any successor provision), at all times from and after the date hereof;

          (b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
as a condition to the availability of Rule 144 under the Securities Act (or any
successor provision) by the holders of Registerable Shares and the use of Form
S-3; and

          (c) So long as a Holder owns any Registerable Shares, furnish to such
Holder forthwith upon written request a written statement by the Company as to
its compliance with the reporting requirements of Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents filed by
the Company with the Commission as a Holder may reasonably request in availing
itself of any rule or regulation of the Commission allowing a Holder to sell
any such securities without registration.

     1.12 Transfer or Assignment of Registration Rights. The rights to cause
the Company to register securities granted to MPI by the Company under this
Agreement may be transferred or assigned by MPI only to its Affiliates or its
members (or the Affiliate thereof), provided that the Company is given written
notice at the time of or within a reasonable time after said transfer or
assignment, stating the name and address of the transferee or assignee and
identifying the securities with respect to which such registration rights are
being transferred or assigned, and, provided further, that the transferee or
assignee of such rights assumes in writing the obligations of MPI under this
Section 1.

     1.13 “Market Stand-Off” Agreement. If requested by an underwriter of the
Company’s Shares (or other securities) sold in a registration of the type
effected pursuant to Section 1.3 and each Holder is notified in writing of such
request, a Holder shall not sell or otherwise transfer or dispose of any
Registerable Shares (or other securities of the Company) held by such Holder
(other than those included in the registration) during the one hundred eighty
(180) day period following the effective date of a registration statement of
the Company filed under the Securities Act; provided, however, that this
Section 1.13 shall not apply in the event of a Registration Statement to any
Holder who is not selling Registerable Shares pursuant to such Registration
Statement. The Company may impose stop-transfer instructions with respect
to the Registerable Shares subject to the foregoing restriction until the end
of such one hundred eighty (180) day period.

 

 

     1.14 Allocation of Registration Opportunities. In any circumstance in
which the Registerable Shares and other shares of Common Stock of the Company
(including shares of Common Stock issued or issuable upon conversion of shares
of any series of Preferred Stock of the Company) with registration rights (the
“Other Shares”) requested to be included in a registration effected pursuant to
Section 1.3 on behalf of the Holder’s or other selling stockholders cannot be
so included as a result of limitations of the aggregate number of shares of
Registerable Shares and Other Shares that may be so included, the number of
shares of Registerable Shares and Other Shares that may be so included shall be
allocated among the Holders and other selling stockholders requesting inclusion
of shares pro rata on the basis of the number of shares of Registerable Shares
and other shares that would be held by such Holders and other selling
stockholders, assuming conversion (“Other Shares”); provided, however that such
allocation shall not operate to reduce the aggregate number of Registerable
Shares and Other Shares to be included in such registration, if any Holder or
other selling stockholder does not request inclusion of the maximum number of
shares of Registerable Shares and Other Shares allocated to him pursuant to the
above-described procedure, in which case the remaining portion of his
allocation shall be reallocated among those requesting Holders and other
selling stockholders whose allocations did not satisfy their requests pro rata
on the basis of the number of shares of Registerable Shares and Other Shares
which would be held by such Holder’s and other selling stockholders, assuming
conversion, and this procedure shall be repeated until all of the shares of
Registerable Shares and Other Shares which may be included in the registration
on behalf of the Holder’s and other selling stockholder’s have been so
allocated. The Company shall not limit the number of Registerable Shares to be
included in a registration pursuant to this Agreement in order to include
shares held by stockholders with no registration rights or to include shares of
stock issued to employees, officers, directors, or consultants pursuant to the
Company’s stock option or similar compensation plan, or in the case of the
registration under Section 1.2 hereof, in order to include in such registration
securities registered for the Company’s own account,

     1.15 Termination of Registration Rights.

          (a) Except as set forth in subparagraph (b) below, the right of any Holder
to request registration or inclusion in any registration pursuant to Section
1.2 or 1.3 shall terminate if all shares of Registerable Shares held by such
Holder may be sold under Rule 144 during any 90-day period.

          (b) The provisions of subparagraph (a) above shall not apply to any Holder
who owns more than one percent (1%) of the Company’s outstanding stock until
such time as such Holder owns less than one percent (1%) of the outstanding
stock of the Company.

	2.	 	COVENANTS OF THE COMPANY.

     The Company hereby covenants and agrees as follows:

     2.1 Information Rights.

          (a) So long as MPI or any of its Affiliates own any Registerable Shares,
the Company shall, provide MPI, or its designee, reasonable access to Company
information to the

 

 

extent reasonably necessary to comply with applicable
“Venture Capital Operating Company” requirements, including, without
limitation, the right to visit and inspect the Company’s properties, to examine
its books of account and records and to discuss the Company’s affairs, finances
and accounts with its management, all at such reasonable times as may be
requested by MPI.

          (b) The provisions of Section 2.l(a) shall not be in limitation of any
rights which MPI or its Affiliates may have with respect to the books and
records of the Company and its subsidiaries, or to inspect their properties or
discuss their affairs, finances and accounts, under the laws of the
jurisdictions in which they are incorporated.

          (c) MPI hereby agrees, and agrees to cause its Affiliates, successors and
assigns, to hold in confidence and trust and not to disclose any confidential
information provided pursuant to this Section 2.1; provided, however, MPI may
disclose any such confidential information: (i) if the Company consents in
writing to such disclosure; (ii) if the confidential information is or becomes
generally available to the public other than as a result of a disclosure by
MPI, its Affiliates, successors or assigns; or (iii) if the confidential
information becomes available to MPI on a non-confidential basis from a source
other than the Company, provided that MPI does not know or have reason to
believe that the source of such information is bound by a confidentiality
agreement with, or other contractual, legal or fiduciary obligation of
confidentiality to, the Company.

          (d) The Company shall not be required to comply with this Section 2.1 with
respect to non-public, commercially sensitive information of the Company in the
event MPI becomes a Competitor of the Company or greater than five percent (5%)
stockholder of a Competitor of the Company. For purposes of this Agreement, a
“Competitor” of the Company shall mean a person who is primarily engaged in the
orthopedic rehabilitation business.

     2.2 Observer Rights. As long as MPI or its Affiliates owns not less than
five percent (5%) of the outstanding Shares, the Company shall invite a
representative of MPI (as selected by MPI), or its designee, to attend all
meetings of its Board of Directors in a nonvoting observer capacity and, in
this respect, shall give such representative copies of all notices, minutes,
consents and other materials that it provides to its directors at the same time
such materials are provided to the members of the Board of Directors, provided,
however, that such representative (i) shall agree to hold in confidence and
trust and to act in a fiduciary manner with respect to all information so
provided and (ii) shall not be a director, officer or employee of an entity
that is a Competitor of the Company.

     2.3 Form S-3 Eligibility. The Company shall use its best efforts to
maintain its qualification for registration on Form S-3 or any comparable or
successor form or forms.

	3.	 	MISCELLANEOUS.

     3.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of Delaware, without regard to its conflicts of laws
principles.

 

 

     3.2 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successor’s, assigns, heir’s, executor’s and administrators of the
parties hereto and the Investors listed on Schedule I that receive Acquiror
Common Stock pursuant to the Merger Agreement and the Indemnification Escrow
Agreement shall be intended third party beneficiaries of this Agreement.

     3.3 Entire Agreement; Amendment, Waiver. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subjects hereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated, except by a written instrument
signed by the Company and MPI and any such amendment, waiver, discharge or
termination shall be binding on all the Holders.

     3.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, sent by facsimile or delivered personally by
hand or nationally recognized courier addressed (a) if to a Holder, as
indicated in the Merger Agreement or at such other address or facsimile number
as such Holder or permitted assignee shall have furnished to the Company in
writing, or (b) if to the Company, at such address or facsimile number as the
Company shall have furnished to each Holder in writing. All such notices and
other written communications shall be effective on the date of mailing,
confirmed facsimile transfer or delivery.

     3.5 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any Holder; upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default therefore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder; shall be cumulative
and not alternative.

     3.6 Rights; Separability. Unless otherwise expressly provided herein, a
Holder’s rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

     3.7 Information Confidential. Each Holder acknowledges that the
information received pursuant hereto may be confidential and for its use only,
and it will not use such confidential information in violation of the Exchange
Act or reproduce, disclose or disseminate such information to any other person (other than its employees or agents
having a need to know the contents of such information, and its attorneys),
except in connection with the exercise of rights under this Agreement, unless
the Company has made such information available to the public generally or such
Holder is required to disclose such information by a governmental body.

 

 

     3.8 Titles and Subtitles. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing or interpreting this Agreement.

     3.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

[Balance of the page intentionally left blank.]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Investors’
Rights Agreement effective as of the day and year first above written.

	 	 	 	 	 	 	 	 	 	 	 
	COMPANY:	 	INVESTORS:
	 
	 	 	 	 	 	 	 	 	 	 
	ENCORE MEDICAL CORPORATION	 	MPI HOLDINGS, LLC
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 /s/ Harry L. Zimmerman	 	By:	 	/s/ W. R. Dahl	 	 	 	 
	

	 	

	 	 	 	 
	 	 	 	 
	Name:

	 	Harry L. Zimmerman	 	Name:	 	 	 	 	 	 
	

	 	 
	 	 	 	
	 	 	 	 
	Title:

	 	EVP — General Counsel	 	Title:	 	 	 	 	 	 
	

	 	 
	 	 	 	
	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	GE CAPITAL EQUITY INVESTMENTS, INC.
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	By:	 	/s/ Steve Warner	 	 	 	 
	

	 	 	 	 	 	
	 	 	 	 
	

	 	 	 	Name:	 	Steve Warner	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	Title:	 	Duly Authorized Signatory	 	 	 	 
	 

	 	 	 	 	 	
 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	/s/ Patrick D. Spangler
	 	 	 	 	

	 	 	 	 	Patrick D. Spangler

	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	/s/ H. Philip Vierling
	 	 	 	 	

	 	 	 	 	H. Philip Vierling

[Signature Page to Investors Rights Agreement]

 

 

SCHEDULE 1

ADDITIONAL INVESTORS

	 	 	 	 	 	 	 	 	 
	Additional	 	 	 	 	 	 	 	International
	Investors
	 	Street
	 	City
	 	State, ZIP
	 	Address

	Bjerke, Marlin C.

	 	18081 SD Highway 15
	 	Clear Lake
	 	SD, 57226	 	 
	 
	 	 	 	 	 	 	 	 
	Boemers, Frank

	 	 	 	 	 	 	 	Kreuzgartenstrasse 1

79238 Ehrenkirche

Germany
	 
	 	 	 	 	 	 	 	 
	Burnham, William

	 	P.O. Box 282
	 	Yardley
	 	PA, 19067	 	 
	 
	 	 	 	 	 	 	 	 
	Clapp, Robert

	 	2316 19th Avenue NE
	 	Minneapolis
	 	MN, 55418	 	 
	 
	 	 	 	 	 	 	 	 
	Cox, Craig C.

	 	5722 Rosemount Way
	 	Medina
	 	OH, 44256	 	 
	 
	 	 	 	 	 	 	 	 
	Cox, John C.

	 	1307 Fallsworth Terrace
	 	Acworth
	 	GA, 30101	 	 
	 
	 	 	 	 	 	 	 	 
	Davis, Lawrence II

	 	5101 Newtown Road
	 	Placerville
	 	CA, 95667	 	 
	 
	 	 	 	 	 	 	 	 
	Grider, James

	 	15200 Manitou Road
	 	Prior Lake
	 	MN, 55372	 	 
	 
	 	 	 	 	 	 	 	 
	Gunderson,
Priscilla A.

	 	6556 White Oak Road
	 	Lino Lakes
	 	MN, 55038	 	 
	 
	 	 	 	 	 	 	 	 
	Rudiger, Hausherr

	 	 	 	 	 	 	 	Goethestrasse 58,

79100 Freiburg

Germany
	 
	 	 	 	 	 	 	 	 
	Hughes, Thomas P.

	 	1816 Interlachen Alcove
	 	Woodbury
	 	MN, 55125	 	 
	 
	 	 	 	 	 	 	 	 
	Hutto, Barbara C.

	 	1206 Benton Street
	 	Anoka
	 	MN, 55303	 	 
	 
	 	 	 	 	 	 	 	 
	Kircher, Kyle C.

	 	1020-G Oswald Road
	 	Yuba City
	 	CA, 95993	 	 
	 
	 	 	 	 	 	 	 	 
	Laptewicz, Joseph

	 	311 Neuse Road
	 	Chocowinity
	 	NC, 27817	 	 
	 
	 	 	 	 	 	 	 	 
	LeFauve, Michael

	 	20126 Tailwind Lane
	 	Cornelius
	 	NC, 28031	 	 
	 
	 	 	 	 	 	 	 	 
	Meidt, Gregory J.

	 	3065 Meadow Brook Court
	 	Woodbury
	 	MN, 55125	 	 
	 
	 	 	 	 	 	 	 	 
	Pierson, Michelle Marie

	 	1101 Sibley Memorial Highway
	 	Lilydale
	 	MN, 55118	 	 
	 
	 	 	 	 	 	 	 	 
	Schoenhals, Jeff A.

	 	2712 Pine Valley
	 	Edmond
	 	OK, 73003	 	 
	 
	 	 	 	 	 	 	 	 
	Schulze, Gerald

	 	9 North Point Trail
	 	Beaufort
	 	SC, 29907	 	 
	 
	 	 	 	 	 	 	 	 
	Sellers, Kenneth R.

	 	113 Walter Hagen Drive
	 	Mebane
	 	NC, 27302	 	 
	 
	 	 	 	 	 	 	 	 
	Stem, Birt Clinton

	 	2970 East
	 	Highlands
	 	CO, 80126	 	 

Schedule 1 to Investors Rights Agreement

 

 

	 	 	 	 	 	 	 	 	 
	Additional	 	 	 	 	 	 	 	International
	Investors
	 	Street
	 	City
	 	State, ZIP
	 	Address

	 

	 	Timberchase Trail
	 	Ranch
	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Strand, Joan Elizabeth

	 	5345 Hodgson Road
	 	Shoreview
	 	MN, 55126	 	 
	 
	 	 	 	 	 	 	 	 
	Tarnowski, Patrick
J.

	 	4740 Bassett Creek
	 	Golden Valley
	 	MN, 55422	 	 
	 
	 	 	 	 	 	 	 	 
	Waller, Thomas Scott

	 	14412 Cecil Drive
	 	Little Rock
	 	AR, 72223	 	 
	 
	 	 	 	 	 	 	 	 
	Wass, Loren W.

	 	34 Hog Hill Road
	 	Pepperell
	 	MA, 01463	 	 
	 
	 	 	 	 	 	 	 	 
	White, Keith A.

	 	6281 Hilton Court

North
	 	Pine Springs
	 	MN, 55115	 	 

Schedule 1 to Investors Rights Agreement

 

 

EXHIBIT A

EMPI PRINCIPAL SHAREHOLDERS

	1.	 	MPI Holdings, LLC, including the members of MPI Holdings, LLC that
receive Registerable Shares as part of a distribution by MPI Holdings, LLC
and the Affiliates of such members that may also receive distributions

	2.	 	GE Capital Equity Investments, Inc.

	3.	 	Patrick D. Spangler

	4.	 	H. Philip Vierling<PAGE>

                                                                    EXHIBIT 10.1

                          CADENCE DESIGN SYSTEMS, INC.
                              EMPLOYMENT AGREEMENT
                               WITH WILLIAM PORTER

      THIS AGREEMENT (this "Agreement") is made effective as of January 1, 2005
(the "Effective Date"), between CADENCE DESIGN SYSTEMS, INC., a Delaware
corporation (the "Company"), and WILLIAM PORTER ("Executive").

      WHEREAS, Executive is currently employed by the Company as Chief Financial
Officer; and

      WHEREAS, the Company and Executive wish to enter into a formal employment
agreement on the terms and conditions as set forth herein.

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

1. TERM AND DUTIES.

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

      1.2 SERVICES.

            (a) Executive shall continue to have the title of Chief Financial
Officer. Executive's duties will be assigned to Executive by the Company's Chief
Executive Officer ("CEO"), or such other persons as may be specified by the CEO.

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

<PAGE>

      1.3 SERVICES TO BE EXCLUSIVE. During his employment with the Company,
Executive agrees to devote his full productive time and best efforts to the
performance of Executive's duties hereunder. Executive further agrees, as a
condition to the performance by the Company of each and all of its obligations
hereunder, that so long as Executive is employed by the Company or receiving
compensation or any other consideration from the Company, he will not directly
or indirectly render services of any nature to, otherwise become employed by,
serve on the board of directors of, or otherwise participate or engage in any
other business without the CEO's prior written consent. Nothing herein contained
shall be deemed to preclude Executive from having outside personal investments
and involvement with appropriate community activities, or from devoting a
reasonable amount of time to such matters, provided that they shall in no manner
interfere with or derogate from Executive's work for the Company.

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

2. COMPENSATION.

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

      2.1 BASE SALARY. The Company shall initially pay Executive a base salary
of Four Hundred Thousand Dollars ($400,000) per year ("Base Salary"), payable in
installments in accordance with the Company's customary payroll practices, less
such deductions and withholdings required by law or authorized by Executive. The
Board of Directors of the Company (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.

      2.2 BONUS. Executive shall participate in the Company's Senior Executive
Bonus Plan or its successor (the "Bonus Plan") at an annual target bonus of
Three Hundred Thousand Dollars ($300,000) (the "Target Bonus") pursuant to the
terms of

                                        2

<PAGE>

such Bonus Plan (the criteria for earning a bonus thereunder are set annually by
the Compensation Committee). The Board or the Compensation Committee shall
review the amount of the Target Bonus from time to time, but no less frequently
than annually.

      2.3 EQUITY GRANTS. Executive has previously been granted stock options by
the Company which remain in full force and effect in accordance with the terms
of the stock option agreements documenting such grants. Executive shall be
eligible to receive additional grants of either restricted stock or stock
options or both as the Compensation Committee may determine from time to time.
All stock options shall be granted at one hundred percent (100%) of the fair
market value of the Company's common stock on the date of grant. Any awards
shall vest in accordance with the Company's vesting policy for additional grants
to executive officers of the Company in effect on the date of the grant by the
Compensation Committee, and shall contain such other terms and conditions as
shall be set forth in the agreement documenting the grant.

      2.4 INDEMNIFICATION. In the event Executive is made, or threatened to be
made, a party to any legal action or proceeding, whether civil or criminal, by
reason of the fact that Executive is or was a director or officer of the Company
or serves or served any other corporation 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 more fully
described in that Indemnification Agreement between the Company and Executive
dated as of August 4, 1999, and attached hereto as Exhibit A.

3. EXPENSES AND BENEFITS.

      3.1 REASONABLE AND NECESSARY BUSINESS EXPENSES. In addition to the
compensation provided for in Section 2 hereof, the Company shall reimburse

                                        3

<PAGE>

Executive for all reasonable, customary and necessary expenses incurred in the
performance of Executive's duties hereunder. Executive shall first account for
such expenses by submitting a signed statement itemizing such expenses prepared
in accordance with the policy set by the Company for reimbursement of such
expenses. The amount, nature and extent of reimbursement for such expenses shall
always be subject to the control, supervision and direction of the CEO and the
Board, or such other persons as may be specified from time to time by the CEO.

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

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

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

      3.3 SARBANES-OXLEY ACT LOAN PROHIBITION. To the extent that any company
benefit, program, practice, arrangement, or any term of this Agreement would or
might otherwise result in the Company's extension of a credit arrangement to
Executive not permissible under the Sarbanes-Oxley Act of 2002 (a "Loan"), the
Company will use reasonable efforts to provide Executive with a substitute for
such Loan, which is lawful and of at least equal value. If this cannot be done,
or if doing so would be significantly more expensive to the Company than making
a Loan, then the Company need not make or maintain a Loan or provide a
substitute for it.

4. TERMINATION OF EMPLOYMENT.

      4.1 GENERAL. Executive's employment by the Company under this Agreement
shall terminate immediately upon delivery to Executive of written notice of
termination by the Company, upon the Company's receipt of written notice of

                                        4

<PAGE>

termination by Executive within thirty (30) days before the specified effective
date of such termination, or upon Executive's death or Permanent Disability (as
defined in Section 4.4 hereof). In the event of such termination, except where
Executive is terminated for Cause (as defined in Section 4.2 hereof) or as the
result of a Permanent Disability or death, or where Executive voluntarily
terminates his employment other than a Constructive Termination (as defined in
Section 4.3 hereof), and upon execution by Executive at or about the effective
date of such termination of the Executive Transition and Release Agreement, in
the form attached hereto as Exhibit B (the "Transition Agreement"), the Company
shall provide Executive with the benefits as set forth in the Transition
Agreement.

      4.2 DEFINITION OF CAUSE. For purposes of this Agreement, "Cause" shall be
deemed to mean (1) Executive's gross misconduct or fraud in the performance of
his duties under this Agreement; (2) Executive's conviction or guilty plea or
plea of nolo contendere with respect to any felony or act of moral turpitude;
(3) Executive's engaging in any material act of theft or material
misappropriation of company property in connection with his employment; (4)
Executive's material breach of this Agreement, after written notice delivered to
Executive of such breach and failure to cure such breach, if curable, within
thirty (30) days following delivery of such notice; (5) Executive's material
breach of the Proprietary Information Agreement (as defined in Section 8
hereof); (6) Executive's material failure/refusal to perform his assigned
duties, and, where such failure/refusal is curable, if such failure/refusal is
not cured within thirty (30) days following delivery of written notice thereof
from the Company; or (7) Executive's material breach of the Company's Code of
Business Conduct as such code may be revised from time to time.

      4.3 CONSTRUCTIVE TERMINATION. Notwithstanding anything in this Section 4
to the contrary, Executive may, upon written notice to the Company, voluntarily
end his employment upon or within ninety (90) days following the occurrence

                                        5

<PAGE>

of an event constituting a Constructive Termination and be eligible to receive
the benefits set forth in the Transition Agreement in exchange for executing and
delivering that agreement in accordance with Section 9.3 hereof. For purposes of
this Agreement, "Constructive Termination" shall mean:

            (a) a material adverse change, without Executive's written consent,
in Executive's authority, duties or title causing Executive's position to be of
materially less stature or responsibility, after written notice delivered to the
Company of such change and the Company's failure to cure such change, if
curable, within thirty (30) days following delivery of such notice; provided,
however, that such a material adverse change shall in all events be deemed to
occur if Executive no longer serves as the Chief Financial Officer of a publicly
traded company, unless Executive consents in writing to such change;

            (b) any change, without Executive's written consent, to Executive's
reporting structure causing Executive to no longer report to the CEO of the
Company, after written notice delivered to the Company of such change and the
Company's failure to cure such change, if curable, within thirty (30) days
following delivery of such notice;

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

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

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

                                       6

<PAGE>

            (f) any failure by the Company to obtain the written assumption of
this Agreement by any successor to the Company;

            (g) in the event Executive, prior to a Change in Control (as defined
in Section 4.5 hereof), is identified as an executive officer of the Company for
purposes of the rules promulgated under Section 16 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and following a Change in Control
in which the Company or any successor remains a publicly traded entity,
Executive is not identified as an executive officer for purposes of Section 16
of the Exchange Act at any time within one (1) year after the Change in Control.

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

      4.5 CHANGE IN CONTROL.

            (a) Should there occur a Change in Control (as defined below) and if
within ninety (90) days prior to, or thirteen (13) months following the Change
in Control either (i) Executive is terminated without Cause or (ii) Executive
resigns his employment as a result of an event constituting a Constructive
Termination, then, in exchange for signing the Transition Agreement, Executive
shall be entitled to all of the benefits set forth therein, except that Section
4(b) of the Transition Agreement will be replaced by the following provision:
"all outstanding stock options granted and restricted stock issued by the
Company to the Executive prior to the Change in Control (as defined in Section
4.5 of Executive's Employment Agreement) shall have their vesting fully
accelerated so as to be 100% vested as of the Effective Date of this Agreement.
This

                                       7

<PAGE>

acceleration will have no effect on any other provisions of the plans governing
the stock options and restricted stock."

            (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 Exchange Act) becomes the "beneficial
                        owner" (as defined in Rule 13d-3 of the Exchange Act),
                        directly or indirectly, of securities of the Company
                        representing more than fifty percent (50%) of the total
                        voting power represented by the Company's then
                        outstanding voting securities;

                  (ii)  except pursuant to the exception applicable to clause
                        (iii) below, 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 (i) are directors of the Company as of the
                        Effective Date, or (ii) 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);

                  (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

                                       8

<PAGE>

                        securities of the Company in consummation of such merger
                        or consolidation, securities possessing at least fifty
                        percent (50%) of the total voting power represented by
                        the outstanding voting securities of the surviving
                        entity (or parent thereof) immediately after such merger
                        or consolidation; or

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

      4.6 TERMINATION FOR CAUSE, ON ACCOUNT OF DEATH, PERMANENT DISABILITY, OR
VOLUNTARY 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, then Executive will be paid only (a)
any earned but unpaid base salary and any outstanding expense reimbursements
submitted and approved pursuant to Section 3.1 hereof, and (b) other unpaid
vested amounts or benefits under Company compensation, incentive and benefit
plans, in each case as of the effective date of such termination.

5. 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 5 would be subject to the excise tax imposed by Section
4999 of the Code, or any comparable successor provisions (the "Excise Tax"),
then Executive's Termination Benefits hereunder 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

                                       9

<PAGE>

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 5 shall be made in writing in good faith by a nationally recognized
accounting firm selected by the Company (the "Accountants"). In the event of a
reduction of benefits hereunder, Executive 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
written 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 5, the
Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of the Code, and other applicable legal authority.
The Company and Executive shall furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make a
determination under this Section 5. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 5.

      If, notwithstanding any reduction described in this Section 5, the IRS
determines that Executive is liable for the Excise Tax as a result of the
receipt of any Termination Benefits, then Executive shall be obligated to pay
back to the Company, within thirty (30) days after a final IRS determination or
in the event that Executive challenges the final IRS determination, a final
judicial determination, a portion of the Termination Benefits equal to the
"Repayment Amount." The Repayment Amount shall be the smallest such amount, if
any, as shall be required to be paid to the Company so that Executive's net
after-tax proceeds with respect to the Termination Benefits (after taking into
account the payment of the Excise Tax and all other applicable taxes imposed on

                                       10

<PAGE>

such benefits) shall be maximized. The Repayment Amount 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 Termination 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 5, if (1) there is a
reduction in the payment of the Termination Benefits as described in this
Section 5, (2) the IRS later determines that Executive is liable for the Excise
Tax, the payment of which would result in the maximization of Executive's net
after-tax proceeds (calculated as if Executive's benefits had not previously
been reduced), and (3) Executive pays the Excise Tax, then the Company shall pay
to Executive those Termination Benefits which were reduced pursuant to this
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
the Termination Benefits are maximized.

6. DISPUTE RESOLUTION.

      (a) Each of the parties expressly agrees that, to the extent permitted by
applicable law and to the extent that the enforceability of this Agreement is
not thereby impaired, any and all disputes, controversies or claims between
Executive and the Company arising under this Agreement (as opposed to the
Transition Agreement), except those arising under Section 6(d) hereof or under
the Proprietary Information Agreement (as defined in Section 8 hereof), shall be
determined exclusively by final and binding arbitration before a single
arbitrator in accordance with the JAMS Arbitration Rules and Procedures, or
successor rules then in effect, and that judgment upon the award of the
arbitrator may be rendered in any court of competent jurisdiction. This
includes, without limitation, any and all disputes, controversies, and/or claims
arising out of or concerning Executive's employment by the Company or the
termination of his employment or this Agreement, and includes, without
limitation, claims by Executive against directors, officers or employees of the
Company, whether arising under theories

                                       11

<PAGE>

of liability or damages based on contract, tort or statute, to the full extent
permitted by law. As a material part of this agreement to arbitrate claims, the
parties expressly waive all rights to a jury trial in court on all statutory or
other claims. This Section 6 does not purport to limit either party's ability to
recover any remedies provided for by statute, including attorneys' fees.

      (b) The arbitration shall be held in the San Jose, California metropolitan
area, and shall be administered by JAMS or, in the event JAMS does not then
conduct arbitration proceedings, a similarly reputable arbitration
administrator. Under such proceeding, the parties shall select a mutually
acceptable, neutral arbitrator from among the JAMS panel of arbitrators. Except
as provided herein, the Federal Arbitration Act shall govern the interpretation
and enforcement of such arbitration proceeding. The arbitrator shall apply the
substantive law (and the law of remedies, if applicable) of the State of
California, or federal law, if California law is preempted, and the arbitrator
is without jurisdiction to apply any different substantive law. The parties
agree that they will be allowed to engage in adequate discovery, the scope of
which will 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 that if any party prevails on a statutory claim that
entitles the prevailing party to

                                       12

<PAGE>

reasonable attorneys' fees (with or without expert fees) as part of the costs,
the arbitrator may award reasonable attorneys' fees (with or without expert
fees) to the prevailing party in accord with such statute.

      (d) The parties agree, however, that damages would be an inadequate remedy
for the Company in the event of a breach or threatened breach of Section 1.3 of
this Agreement or any provision of the Proprietary Information Agreement (as
defined in Section 8 hereof). In the event of any such breach or threatened
breach, 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 Section 1.3 of this Agreement or
any provision of the Proprietary Information Agreement (as defined in Section 8
hereof) and requiring Executive to comply with the terms of those agreements.

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

      Following his termination of full-time employment for any reason (other
than death), Executive shall cooperate with the Company in all matters relating
to the winding up of his pending work on behalf of the Company and the orderly
transfer of any such pending work to other employees of the Company as may be
designated by the Company. Such cooperation shall be provided by Executive at
mutually-convenient times. Executive also agrees to participate as a witness in
any litigation or regulatory proceeding to which the Company is a party at the
request of the Company upon delivery to Executive of reasonable advance notice.
With respect to the cooperation/participation described in the preceding
sentences, the Company will reimburse Executive for all reasonable expenses
incurred by Executive in the course of such cooperation/participation.
Furthermore, Executive agrees to return to the Company all property of the
Company, including all hard and soft copies of records, documents, materials and
files relating to confidential, proprietary or sensitive company

                                       13

<PAGE>

information in his possession or control, as well as all other company-owned
property in his possession or control, at the time of the termination of his
full-time employment, except to the extent that retention of any of such
property is necessary or desirable or convenient in order to permit Executive to
satisfy his obligations under this Section 7 or under the Transition Agreement,
after which time Executive shall promptly return all such retained company
property.

8. PROPRIETARY INFORMATION AGREEMENT.

      Executive shall, on the Effective Date, execute and deliver to the Company
an Employee Proprietary Information and Inventions Agreement, in the form
attached hereto as Exhibit C (the "Proprietary Information Agreement").

9. GENERAL.

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

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

      9.3 NOTICES. All notices and other communications required or permitted to
be given under this Agreement 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, if addressed to

                                       14

<PAGE>

the Company, in care of the CEO at the Company's principal corporate address,
and, if addressed to Executive, at his most recent address shown on the
Company's corporate records or at any other address 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 clause (b) of this paragraph.

      9.4 COUNTERPARTS. This Agreement may be executed by facsimile and in any
number of counterparts, each of which shall be deemed an original and all of
which taken together 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.

      9.5 ENTIRE AGREEMENT. The parties hereto acknowledge that each has read
this Agreement, understands it, and agrees to be bound by its terms. The parties
further agree that this Agreement, the exhibits to this Agreement, any existing
stock option agreements between the parties, and the documents, plans and
policies referred to in this Agreement (which are hereby incorporated herein by
reference) constitute the complete and exclusive statement of the agreement
between the parties and supersedes all proposals (oral or written),
understandings, agreements (including, but not limited to, the Executive
Retention Agreement signed by Executive on or about September 29, 1999),
representations, conditions, covenants, and all other communications between the
parties relating to the subject matter hereof; provided, however, that the
Employee Invention and Confidential Information Agreement signed by Executive on
or about February 14, 1994, and Executive's agreement, made prior to the
Effective Date of this Agreement, to abide by the Company's policies, including
but not limited to the Company's Employee Handbook, Sexual Harassment Policy and
Code of Business Conduct, remain in full force and effect and govern Executive's
conduct from the date of execution of such agreements until the Effective Date
of this Agreement.

                                       15

<PAGE>

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

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

      9.8 AMENDMENTS. This Agreement, and the terms and conditions of the
matters addressed in this Agreement, may only be amended in writing executed
both by the Executive and the CEO of the Company.

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

      9.10 DEPARTMENT OF HOMELAND SECURITY VERIFICATION REQUIREMENT. If
Executive has not already done so, he will timely file all documents required by
the Department of Homeland Security to verify his identity and his lawful

                                       16

<PAGE>

employment in the United States. Notwithstanding any other provision of this
Agreement, if Executive fails to meet any such requirements promptly after
receiving a written request from the Company to do so, his employment will
terminate immediately upon notice from the Company and he will not be entitled
to any compensation from the Company of any type.

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

      9.12 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.

                                       17

<PAGE>

      IN WITNESS WHEREOF, the parties have executed this Agreement on this 30th
day of December 2004.

CADENCE DESIGN SYSTEMS, INC.               EXECUTIVE

By: /s/ Michael J. Fister                  /s/ William Porter
    ---------------------------------      -------------------------------------
             Michael J. Fister                           William Porter

Title: President, Chief Executive Officer

                                       18

<PAGE>

                                    EXHIBIT A

                            INDEMNIFICATION AGREEMENT

<PAGE>

                               INDEMNITY AGREEMENT

This Indemnity Agreement, dated as of August 4, 1999, is made by and between
Cadence Design Systems, Inc., a Delaware corporation (the "Company"), and
William Porter, an Officer of the Company (the "Indemnitee").

                                    RECITALS

      A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors or officers of corporations unless
they are protected by comprehensive liability insurance 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.

      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.

                                        9

<PAGE>

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

                                    By   /s/ R. L. Smith McKeithen
                                         ---------------------------------------
                                         R. L. Smith McKeithen
                                    Its: Senior Vice President & General Counsel

                                    INDEMNITEE:

                                        /s/ William Porter
                                        ----------------------------------------
                           Address: 2655 Seely Road
                                    San Jose, CA 95134

                                       10

<PAGE>

                                    EXHIBIT B

                   EXECUTIVE TRANSITION AND RELEASE AGREEMENT

<PAGE>

                   EXECUTIVE TRANSITION AND RELEASE AGREEMENT

      This Executive Transition and Release Agreement (this "Agreement") is
entered into between William Porter ("Executive") and Cadence Design Systems,
Inc. ("Cadence" or the "Company").

      1. TRANSITION COMMENCEMENT DATE. As of <<Transition Commencement Date>>
(the "Transition Commencement Date"), Executive will no longer hold the position
of Chief Financial Officer and will be relieved of all of Executive's authority
and responsibilities in that position. Executive will be paid all accrued salary
for his services as Chief Financial Officer to the Transition Commencement Date
by not later than the following regular payroll date. Following the Transition
Commencement Date, Executive will no longer participate in Cadence's medical,
dental, and vision insurance plans (unless Executive elects to continue coverage
pursuant to COBRA), and will not be eligible for a bonus for any services
rendered after that date.

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

            a.    the date on which Executive resigns from all employment with
                  Cadence;

            b.    the date on which Cadence terminates Executive's employment
                  due to a breach by Executive of Executive's duties or
                  obligations under this Agreement; 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<<New Position Title>>. In this position, Executive will render those services
requested by Cadence's <<Management Representative>> on an as-needed basis.
Executive's time rendering those services is not expected to exceed twenty (20)
hours per week but is expected to consume twenty (20) hours per month.

            b. As a Cadence executive, 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 ("EDA") industry (as defined
below) 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

<PAGE>

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 that (i) is
engaged in the EDA industry, (ii) directly competes against Cadence or any of
its existing or future affiliates in the EDA industry anywhere in the world, or
(iii) produces, markets, distributes or sells any products, directly or
indirectly through intermediaries, that are competitive with EDA industry
products produced, marketed, sold or distributed by Cadence. As used in this
paragraph, the term "EDA industry" means the research, design or development of
electronic design automation software, electronic design verification, emulation
hardware and related products, such products containing hardware, software and
both hardware and/or software products, designs or solutions for, and all
intellectual property embodied in the foregoing, or in commercial electronic
design and/or maintenance services, such services including all intellectual
property embodied in the foregoing. If Executive receives an offer of employment
or consulting from any person or entity during the Transition Period, then
Executive must first obtain written approval from Cadence's Chief Executive
Officer ("CEO") before accepting said offer.

            c. During the Transition Period, Executive will be prohibited, to
the full extent allowed by applicable law, and except with the written advance
approval of Cadence's CEO (or his successor(s)), 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: (i)
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; (ii) 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; or (iii) soliciting,
diverting or accepting business, in any line or area of business engaged in by
Cadence or any Cadence affiliate, from any former or present client, customer or
joint venture partner of Cadence or any Cadence affiliate (other than on behalf
of Cadence), except that Executive may solicit or accept business, in a line of
business engaged in by Cadence or a Cadence affiliate, from a former or present
client, if and only if Executive had previously provided consulting services in
such line of business, to such client, prior to ever being employed by Cadence,
but in no event may Executive violate paragraph 3(b) hereof. The restrictions
contained in subparagraph (i) of this paragraph 3(c) shall also be in effect for
a period of one year following the Termination Date. This paragraph 3(c) does
not alter any of the obligations the Executive may have under the Employee
Proprietary Information Agreement, dated as of December 30, 2004.

            d. 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.

            e. 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.

                                        2

<PAGE>

Similarly, Cadence agrees to instruct its executive officers and members of the
Company's Board of Directors not to make any statement, written or oral, that
disparages Executive. The restrictions described in this paragraph shall not
apply to any truthful statements made in response to a subpoena or other
compulsory legal process.

            f. Notwithstanding paragraph 10 hereof, 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) or 3(c), or for Cadence or
Executive in the event of a breach or threatened breach of paragraph 3(e). In
the event of any such breach or threatened breach, the non-breaching party may,
either with or without pursuing any potential damage remedies, obtain from a
court of competent jurisdiction, and enforce, an injunction prohibiting the
other party from violating this Agreement and requiring the other party 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 $2,000 less applicable tax withholdings
                  and deductions, payable in accordance with Cadence's regular
                  payroll schedule;

            b.    continued vesting of stock options and restricted stock
                  granted to Executive prior to the Termination Date, provided
                  that Executive has executed all necessary stock option and
                  restricted stock agreements on or before <<Stock Option
                  Agreement Execution Date>>, and with the understanding that
                  upon Executive's Termination Date, all vested options may be
                  exercised in accordance with the applicable stock option
                  agreement, any unvested options will expire, and any unvested
                  restricted stock will be forfeited; and

            c.    if Executive elects to continue coverage under Cadence's
                  medical, dental, and vision insurance plans pursuant to COBRA
                  following the Transition Commencement Date, Cadence will pay
                  Executive's COBRA premiums during the Transition Period.

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

      5. FIRST TERMINATION PAYMENT AND BENEFITS. Provided that Executive does
not resign from employment with Cadence and Cadence does not terminate
Executive's employment with Cadence due to a breach by Executive of Executive's
duties under this Agreement, and in consideration for Executive's acceptance of
this Agreement and Executive's further execution and delivery of a Release of
Claims in the form of Attachment 1 hereto, Cadence will provide to Executive
within ten business days after

                                        3

<PAGE>

the Effective Date (as defined in paragraph 9 hereof) of this Agreement 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, as well as all other
Company-owned property, the following termination payment to which Executive
would not otherwise be entitled:

            a.    a lump-sum payment of one year's base salary at the highest
                  rate in effect during Executive's employment as Chief
                  Financial Officer, less applicable tax deductions and
                  withholdings.

      6. SECOND TERMINATION PAYMENT AND BENEFITS. Provided that Executive does
not resign from employment with Cadence and Cadence does not terminate
Executive's employment with Cadence due to a breach by Executive of Executive's
duties under this Agreement, upon the Termination Date, and in consideration for
Executive's acceptance of this Agreement and Executive's further execution of a
Release of Claims in the form of Attachment 2 to this Agreement, Cadence will
provide to Executive within ten business days after the expiration of the
revocation period of the Release of Claims (as defined in that document) the
following termination payment to which Executive would not otherwise be
entitled:

            a.    a lump-sum payment of one year's target bonus at the highest
                  rate in effect during Executive's employment as Chief
                  Financial Officer, 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 was employed by the
Company. 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:

                                        4

<PAGE>

                  i. any amounts or benefits to which Executive is or becomes
entitled to pursuant to the provisions of this Agreement or pursuant to the
provisions designated in Section 9.9 of the Employment Agreement to survive the
termination of Executive's full-time employment;

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

                  iii. claims related to Executive's COBRA rights; and

                  iv. any rights that Executive has or may have to be
indemnified by Cadence pursuant to any contract, statute, or common law
principle.

            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,
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 which 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 the 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 the CEO. If this 7-day
period expires without a timely revocation, this Agreement will become final and
effective on the eighth day following the date of Executive's signature, which
eighth day will be the "Effective Date" of this Agreement.

      9. ARBITRATION. Subject to paragraph 3(f) hereof, all claims, disputes,
questions, or controversies arising out of or relating to this Agreement,
including without

                                        5

<PAGE>

limitation the construction or application of any of the terms, provisions, or
conditions of this Agreement, will be resolved exclusively in final and binding
arbitration in accordance with the Arbitration Rules and Procedures, or
successor rules then in effect, of Judicial Arbitration & Mediation Services,
Inc. ("JAMS"). The arbitration will be held in the San Jose, California,
metropolitan area, and will be conducted and administered by JAMS or, in the
event JAMS does not then conduct arbitration proceedings, a similarly reputable
arbitration administrator. Executive and Cadence will select a mutually
acceptable, neutral arbitrator from among the JAMS panel of arbitrators. Except
as provided by this Agreement, the Federal Arbitration Act will govern the
administration of the arbitration proceedings. The arbitrator will apply the
substantive law (and the law of remedies, if applicable) of the State of
California, or federal law, as applicable, and the arbitrator is without
jurisdiction to apply any different substantive law. Executive and Cadence will
each be allowed to engage in adequate discovery, the scope of which will be
determined by the arbitrator consistent with the nature of the claim[s] in
dispute. The arbitrator will have the authority to entertain a motion to dismiss
and/or a motion for summary judgment by any party and will apply the standards
governing such motions under the Federal Rules of Civil Procedure. The
arbitrator will render a written award and supporting opinion that will set
forth the arbitrator's findings of fact and conclusions of law. Judgment upon
the award may be entered in any court of competent jurisdiction. Cadence will
pay the arbitrator's fees, as well as all administrative fees, associated with
the arbitration. Each party will be responsible for paying its own attorneys'
fees and costs (including expert witness fees and costs, if any). However, in
the event a party prevails at arbitration on a statutory claim that entitles the
prevailing party to reasonable attorneys' fees as part of the costs, then the
arbitrator may award those fees to the prevailing party in accordance with that
statute.

      10. 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.

      11. INTEGRATED AGREEMENT. This Agreement 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.

      12. FULL SATISFACTION OF COMPENSATION OBLIGATIONS; ADEQUATE CONSIDERATION.
Executive agrees that the payments and benefits provided herein are in full
satisfaction of all obligations of Cadence to Executive arising out of or in
connection with Executive's employment through the Termination Date, including,
without limitation, all compensation, salary, bonuses, reimbursement of
expenses, and benefits.

                                        6

<PAGE>

      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.

      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.

                                        7

<PAGE>

                             EXECUTION OF AGREEMENT

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

Dated: ____________________.                      Dated: ______________________.

WILLIAM PORTER                                    CADENCE DESIGN SYSTEMS, INC.

___________________________                       By: __________________________
                                                             <<HRVP_Name>>
                                                            <<HRVP_Title_1>>

                                        8

<PAGE>

                                  ATTACHMENT 1

                                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 was employed by Cadence. 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 any right to
compensation or benefits that I have under my Executive Transition and Release
Agreement with Cadence. 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:

                  i. any amounts or benefits to which Executive is or becomes
entitled to pursuant to the provisions of this Agreement or pursuant to the
provisions designated in Section 9.9 of the Employment Agreement to survive the
termination of Executive's full-time employment;

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

                  iii. claims related to Executive's COBRA rights; and

                  iv. any rights that I have or may have to be indemnified by
Cadence pursuant to any contract, statute, or common law principle.

      2. I intend that this Release cover all claims, 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 which 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:

<PAGE>

      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 Release by means of a written notice of
revocation given to ________. This Release will not be final and effective until
the expiration of this revocation period.

Dated: ____________________.                     _______________________________
                                                          Print Name

                                                 _______________________________
                                                          Sign Name

                                       10

<PAGE>

                                  ATTACHMENT 2

                                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 was employed by Cadence. 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 any right to
compensation or benefits that I have under my Executive Transition and Release
Agreement with Cadence. 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:

                  i. any amounts or benefits to which Executive is or becomes
entitled to pursuant to the provisions of this Agreement or pursuant to the
provisions designated in Section 9.9 of the Employment Agreement to survive the
termination of Executive's full-time employment;

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

                  iii. claims related to Executive's COBRA rights; and

                  iv. any rights that I have or may have to be indemnified by
Cadence pursuant to any contract, statute, or common law principle.

      2. I intend that this Release cover all claims, 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 which 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:

<PAGE>

      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 Release by means of a written notice of
revocation given to ________. This Release will not be final and effective until
the expiration of this revocation period.

Dated: ____________________.                     _______________________________
                                                          Print Name

                                                 _______________________________
                                                          Sign Name

                                       12

<PAGE>

                                    EXHIBIT C

            EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS 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. or one of its subsidiaries (collectively, 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) unless: (a) such disclosure, use or publication may
be required in connection with my work for the Company; or (b) an officer of the
Company provides advance written authorization for such disclosure, use or
publication. I will obtain the advance written authorization of an officer of
the Company before publishing or submitting for publication any material
(written, spoken, or otherwise) that relates to my work at the Company and/or
incorporates any Proprietary Information. I understand 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
belonging to 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, algorithms, techniques, developmental or experimental
work, improvements, unpublished patent applications, source code 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; (c) customer and vendor lists, contacts,
plans, and agreements with customers, vendors, and others; (d) program and
product designs, specifications; and (e) personnel and contact lists,
organization charts and all confidential employee data, including without
limitation information regarding the skills, expertise and compensation of
Cadence personnel.

      1.3 THIRD PARTY INFORMATION. I understand that the Company has in its
possession, and will continue to receive, confidential or proprietary
information belonging to third parties ("Third Party Information"), which the
Company is obligated to keep confidential and to use only for certain prescribed
purposes. During my employment with the Company and continuing thereafter, I
will hold all Third Party Information in the strictest confidence and will not
disclose it to anyone (other than Company personnel who need to know such
information in connection with their work for the Company) or use it for any
purpose (except in connection with my work for the Company), without the advance
written authorization of an officer of the Company.

      1.4 NO IMPROPER USE OF INFORMATION OF PRIOR EMPLOYERS AND OTHERS. During
my employment with the Company I will not improperly use or disclose any
confidential information or trade secrets of any former employer or any other
person to whom I have an obligation of confidentiality. In addition, I will not
bring any unpublished documents or any property belonging to my former employer
or any other person to whom I have an obligation of confidentiality onto the
Company's premises without first obtaining and providing to my manager written
authorization from that former employer or person. I will use in the performance
of my duties only information that is: (a) generally known and used by persons
with training and experience comparable to my own; (b) common knowledge in the
industry or otherwise legally in the public domain; or (c) otherwise provided or
developed by the Company.

2. ASSIGNMENT OF INVENTIONS

      2.1 INVENTIONS AND PROPRIETARY RIGHTS. The term "Proprietary Rights" shall
mean all trade secret, patent, copyright, mask work and other intellectual
property rights throughout the world. The term "Inventions" is defined in
Section 1.2 above. The term "Company Inventions" shall mean all Inventions, and
all Proprietary Rights with respect to Inventions, that I have, directly or
indirectly, alone or jointly with others, made, authored, conceived, developed
or reduced to practice during my employment with the Company and for one (1)
year thereafter, as well as any and all patent applications

                                       1.

<PAGE>

filed by me or by a third party based on such Inventions.

      2.2 ASSIGNMENT OF INVENTIONS. I hereby assign to the Company, or to a
third party as directed by the Company, all my rights, title and interest in and
to any and all Company Inventions.

      2.3 PRIOR INVENTIONS AND NON-EMPLOYMENT INVENTIONS. As an exception to
Section 2.2, I understand that I am not required to assign, and do not hereby
assign, under this Agreement:

(a) any Invention to the extent it was created by me prior to the commencement
of my employment with the Company (each a "Prior Invention"), or

(b) any Invention that does not relate to the Company's business (or actual or
demonstrably anticipated research and development) and does not result from any
work I perform for the Company, to the extent that I develop such Invention
entirely on my own time without using the Company's equipment, supplies,
facilities or Proprietary Information (each a "Non-employment Invention"). To
preclude any possible uncertainty, I have set forth on Exhibit B attached hereto
a complete list of all 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. I agree that I will not incorporate, or permit to be
incorporated, Prior Inventions or Non-employment Inventions in any work I do for
the Company without the advance written authorization of an officer of the
Company. If, in the course of my employment with the Company, I do, in violation
of this section, incorporate a Prior Invention or a Non-employment Invention
into work I do for the Company, I hereby grant the Company, and will take all
reasonable actions necessary to assist the Company in obtaining, 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 Inventions and Non-employment Inventions.

      2.4 OBLIGATION TO KEEP COMPANY INFORMED. I agree to promptly disclose to
the Company fully and in writing all Company Inventions. In addition, I agree to
promptly disclose to the Company all patent applications filed by me or on my
behalf during my employment, or after if based on a Company Invention. At the
time of each such disclosure, I will advise the Company in writing of any
Inventions that I believe fully qualify as Non-employment Inventions and I will
provide the Company with a written account of all of the evidence necessary to
substantiate my belief.

      2.5 OBLIGATIONS OF CONFIDENTIALITY. The Company agrees to keep in
confidence and 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 Non-employment Inventions, except as
reasonably necessary to exercise any licenses I may grant to the Company
regarding such Non-employment Inventions. I agree to keep in confidence and not
use for any purpose other than the performance of my duties to the Company, or
disclose to third parties without the Company's consent, any Proprietary
Information or Company Inventions.

      2.6 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.

(a) 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, Proprietary Rights
relating to Company Inventions in any and all countries and jurisdictions. To
that end I will execute, verify and deliver such documents, appear as a witness,
and perform other acts as the Company may reasonably request in connection with
applying for, obtaining, perfecting, evidencing, defending, sustaining and
enforcing its Proprietary Rights and the assignment thereof. In addition, I will
execute, verify and deliver assignments of Proprietary Rights to the Company or
its designee. My obligation to assist the Company with respect to Proprietary
Rights relating to Company Inventions in any and all countries shall continue
beyond the termination of my employment.

(b) 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. This appointment is coupled with an interest to act for and on
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.

                                       2.

<PAGE>

(c) 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, electronic files, and in any other form that
may be required by the Company) of all Proprietary Information developed by me
and all Company Inventions (the "Company Records"). I agree not to keep copies
of the Company Records in locations outside the Company unless necessary to
fulfill my duties to the Company, and then only upon obtaining prior written
approval from my manager. I agree that the Company Records are the sole property
of the Company and I agree to make Company Records available to the Company at
all times.

4. RETURN OF COMPANY DOCUMENTS AND PROPERTY. When I leave the employ of the
Company, I will deliver to either my manager or the Company's legal department:

(a) all drawings, notebooks, notes, memoranda, source code, specifications,
devices, formulas, records, manuals, reports and documents, together with all
copies thereof in my possession, custody or control;

(b) all Company Records and any other material containing or disclosing any
Company Inventions, Third Party Information or Proprietary Information in my
possession, custody or control, and

(c) all Company property or Company equipment in my possession, custody or
control. Prior to leaving, I will cooperate with the Company in completing and
signing the Company's Exit Acknowledgement form.

5. ADDITIONAL ACTIVITIES. I agree that during my employment with the Company I
will not engage in any employment outside the Company nor will I engage in any
business activity, which is competitive with or would otherwise conflict with my
employment with the Company, without first obtaining the prior written approval
of the Office of the General Counsel. A form for obtaining such approval is
available to me through the Company's Intranet.

6. NO SOLICITATION. I agree that 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: (a) solicit or 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; or (b) solicit the business of any
client or customer of the Company with whom I had a relationship while employed
with the Company or whom I know as a result of my employment with the Company.

7. NO CONFLICTING OBLIGATION. I represent that I owe no obligations, of
confidentiality or otherwise, to any third party that could:

(a) prevent me from performing the duties of my job with the Company; or

(b) prevent me from fully complying with the terms of this Agreement.

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

9. AT-WILL EMPLOYMENT. I understand and agree the Company is an at-will employer
and 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
further understand that only a written agreement signed by the executive in
charge of Human Resources can alter the at-will nature of my employment with the
Company.

10. NOTICES. Any notices required or permitted by this Agreement shall be given
to the Company at its San Jose, California headquarters' address, and to me at
the address specified beneath my signature below, unless either party specifies
in writing its preference to receive notices relating to this Agreement at
another address. 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

                                       3.

<PAGE>

hereby authorize the Company to notify 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. Alternatively, if my last place
of employment with the Company is in a location outside of California, then
Sections 5 and 6 of this Agreement shall be governed by and construed by the
laws of that State. 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 of the provisions contained in this
Agreement are, for any reason, 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 of the provisions contained in this Agreement are for
any reason held to be excessively broad as to duration, geographic scope,
activity or subject, such provisions shall be construed by limiting the
duration, geographic scope, activity or subject only to the extent necessary to
render them enforceable and compatible with applicable law.

      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. This Agreement, together with the Cadence Code of
Business Conduct and my offer letter, both of which I have signed, and both of
which are incorporated herein, constitute the complete and exclusive agreement
of the parties with respect to the subject matter hereof and supersedes all
prior discussions between us. 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 Company's General Counsel. Any subsequent change or
changes in my duties, salary or compensation will not affect the validity or
scope of this Agreement.

      This Agreement shall be effective as of the first day of my employment
with the Company, namely: December 30, 2004.

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

Dated: December 30, 2004

/s/ William Porter
---------------------------------------
Signature

William Porter
---------------------------------------
(Printed Name)

---------------------------------------
(Address)

---------------------------------------
(Address)

---------------------------------------
(Address)

                                       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; or

      (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.

      By signing below, I ACKNOWLEDGE RECEIPT of this notification.

                                          By: /s/ William Porter
                                              ----------------------------------

                                          Print Name of Employee: William Porter

                                          Date: December 30, 2004

WITNESSED BY:

/s/ Christina R. Jones
------------------------------------
Signature of Witness

CHRISTINA R. JONES
------------------------------------
(printed name of witness)

                                       5.

<PAGE>

                                    EXHIBIT B

TO: Cadence Design Systems, Inc.

FROM: William Porter
      ---------------------------
      (Print name of employee)

DATE: December 30, 2004

SUBJECT: Prior 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 Cadence Design Systems, Inc. (the "Company") that have been made
or conceived or first reduced to practice by me alone or jointly with others
prior to my employment or consulting relationship with by the Company [CHECK THE
APPLICABLE BOXE(S)]:

      [X] No inventions or improvements.

      [ ] See below:

      ______________________________________________________________________
      ______________________________________________________________________
      ______________________________________________________________________

      [ ] 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) [CHECK THE APPLICABLE
BOXE(S)]:

      [X] Not applicable.

      Invention or Improvement        Party (ies)              Relationship
1.    ___________________________     ______________________   _________________

2.    ___________________________     ______________________   _________________

3.    ___________________________     ______________________   _________________

      [ ] Additional sheets attached.

                                          By: /s/ William Porter
                                              ----------------------------------

                                          Print Name of Employee: William Porter

                                          Date: December 30, 2004

                                       6.

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