Document:

exv10w10

 

Exhibit 10.10

CADENCE DESIGN SYSTEMS, INC.

1994 DEFERRED COMPENSATION PLAN

AMENDED AND RESTATED

EFFECTIVE NOVEMBER 20, 2003

[409A GRANDFATHERED PLAN]

 

 

CADENCE DESIGN SYSTEMS, INC.

1994 DEFERRED COMPENSATION PLAN

AMENDED AND RESTATED

EFFECTIVE NOVEMBER 20, 2003

     Cadence Design Systems, Inc., a Delaware Corporation (referred to hereafter as the
“Employer”) established effective October 1, 1994, and amended and restated effective
October 1, 1996, January 1, 2001, and November 1, 2002, this Cadence Design Systems, Inc. 1994
Deferred Compensation Plan (the “Plan”), an unfunded plan for the purpose of providing
deferred compensation for a select group of management, highly compensated executives, and
directors. The Employer hereby amends and restates the Plan in its entirety effective November 20,
2003, to reflect prior and new amendments to the Plan.

     The instant document governs the Plan with respect to all deferrals made with regard to
periods prior to January 1, 2005 and all earnings and accumulations thereon including those
occurring after December 31, 2004.

RECITALS

     WHEREAS, those employees or directors identified by the Compensation Committee of the Board of
Directors of the Employer or any other committee designated by the Board of Directors of the
Employer to administer this Plan in accordance with Section 8 hereof (hereinafter referred to as
the “Committee”) as eligible to participate in this Plan (each of whom are referred to
hereafter as the “Employee” or collectively as the “Employees”) are employed by
Employer:

     WHEREAS, Employer previously adopted an unfunded deferred compensation plan and the Employees
desire the Employer to continue to pay certain deferred compensation and/or related benefits to or
for the benefit of Employees, or a designated Beneficiary or both; and

     WHEREAS, Employer believes it is in the best interest of Plan participants and beneficiaries
to amend and restate the Plan:

     NOW, THEREFORE, the Employer hereby amends and restates the Plan effective as of November 20,
2003.

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TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	SECTION 1 DEFINITIONS	 	 	1	 
	1.1

	 	“Account
	 	 	1	 
	1.2

	 	“Beneficiary
	 	 	1	 
	1.3

	 	“Change in Control
	 	 	1	 
	1.4

	 	“Code
	 	 	1	 
	1.5

	 	“Committee
	 	 	1	 
	1.6

	 	“Compensation
	 	 	1	 
	1.7

	 	“Effective Date
	 	 	1	 
	1.8

	 	“Eligible Compensation
	 	 	1	 
	1.9

	 	“Eligible Stock Option
	 	 	1	 
	1.10

	 	“Employee
	 	 	1	 
	1.11

	 	“Employer
	 	 	2	 
	1.12

	 	“Employer Contributions
	 	 	2	 
	1.13

	 	“Hardship
	 	 	2	 
	1.14

	 	“Non-Employee Director
	 	 	2	 
	1.15

	 	“Plan
	 	 	2	 
	1.16

	 	“Plan Year
	 	 	2	 
	1.17

	 	“Permanent Disability
	 	 	2	 
	1.18

	 	“Qualifying Stock Option Gain
	 	 	2	 
	1.19

	 	“Stock
	 	 	2	 
	1.20

	 	“Stock-for-Stock
	 	 	2	 
	1.21

	 	“Stock Option Subaccount
	 	 	3	 
	1.22

	 	“Subsidiary
	 	 	3	 
	1.23

	 	“Trust” or “Trust Agreement
	 	 	3	 
	1.24

	 	“Trust Fund
	 	 	3	 
	1.25

	 	“Trustee
	 	 	3	 
	 
	 	 	 	 	 	 
	SECTION 2 ELIGIBILITY	 	 	3	 
	2.1

	 	Eligibility
	 	 	3	 
	 
	 	 	 	 	 	 
	SECTION 3 DEFERRED COMPENSATION & QUALIFYING STOCK OPTION GAIN	 	 	4	 
	3.1

	 	Deferred Compensation
	 	 	4	 
	3.2

	 	Deferred Qualifying Stock Option Gain
	 	 	5	 
	3.3

	 	Payment of Account Balances
	 	 	5	 
	3.4

	 	Election to Defer
	 	 	7	 
	3.5

	 	Distribution Election
	 	 	8	 
	3.6

	 	Payment Upon Change in Control
	 	 	9	 
	3.7

	 	Hardship
	 	 	9	 
	3.8

	 	Employee’s Right Unsecured
	 	 	10	 
	3.9

	 	Investment of Contribution
	 	 	10	 

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	SECTION 4 DESIGNATION OF BENEFICIARY	 	 	11	 
	4.1

	 	Designation of Beneficiary
	 	 	11	 
	 
	 	 	 	 	 	 
	SECTION 5 CHANGE IN CONTROL	 	 	11	 
	5.1

	 	Change in Control
	 	 	11	 
	 
	 	 	 	 	 	 
	SECTION 6 TRUST PROVISIONS	 	 	12	 
	6.1

	 	Trust Agreement
	 	 	12	 
	 
	 	 	 	 	 	 
	SECTION 7 AMENDMENT, TERMINATION AND TRANSFERS BY COMMITTEE	 	 	13	 
	7.1

	 	Amendment
	 	 	13	 
	7.2

	 	Termination
	 	 	13	 
	7.3

	 	Transfers by Committee
	 	 	13	 
	 
	 	 	 	 	 	 
	SECTION 8 ADMINISTRATION	 	 	14	 
	8.1

	 	Administration
	 	 	14	 
	8.2

	 	Liability of Committee; Indemnification
	 	 	 14	 
	8.3

	 	Expenses
	 	 	14	 
	 
	 	 	 	 	 	 
	SECTION 9 GENERAL AND MISCELLANEOUS	 	 	14	 
	9.1

	 	Rights Against Employer
	 	 	14	 
	9.2

	 	Assignment or Transfer
	 	 	15	 
	9.3

	 	Severability
	 	 	15	 
	9.4

	 	Construction
	 	 	15	 
	9.5

	 	Governing Law
	 	 	15	 
	9.6

	 	Payment Due to Incompetence
	 	 	15	 
	9.7

	 	Tax
	 	 	15	 
	9.8

	 	Attorney’s Fees
	 	 	15	 
	9.9

	 	Plan Binding on Successors/Assignees
	 	 	16	 

ii

 

 

SECTION 1

DEFINITIONS

     1.1 “Account” shall mean the separate account(s) established under this Plan and the
Trust for each participating Employee. Each Account shall include, as applicable, any Stock Option
Subaccount of a participating Employee. Employer shall furnish each participant with a statement
of his or her Account balance at least annually.

     1.2 “Beneficiary” shall mean the Beneficiary designated by the Employee to receive
Employee deterred compensation benefits in the event of his or her death.

     1.3 “Change in Control” shall have the meaning set forth in Section 5.1 of the Plan.

     1.4 “Code’’ shall mean the Internal Revenue Code of 1986 as amended from time to n me,
and the rules and regulations promulgated thereunder.

     1.5 “Committee” shall mean the Compensation Committee of the Board of Directors of the
Employer or any other committee designated by the Board of Directors of the Employer to administer
this Plan in accordance with Section 8 hereof.

     1.6 “Compensation” shall, for the period on or before April 1, 1998, mean the base
salary and cash bonuses described in Section 3.1. On or after April 1, 1998,
“Compensation” shall mean the base salary, cash bonuses, and director fees described in
Section 3.1.

     1.7 “Effective Date” of the Plan shall mean October 1, 1994, unless otherwise
specified by the Employer in a corporate resolution approving and adopting this Plan. The
effective date of this amendment and restatement shall be November 20, 2003.

     1.8 “Eligible Compensation” shall mean, for the period prior to April 1, 1998,
projected annual compensation from the Employer, determined on an annual basis by the Employer at
or before the beginning of the Plan Year, which may consist of salary, bonus, and/or incentive
payments, determined before any deductions under any qualified plan of the Employer (including a
Section 401(k) plan or a Section 125 plan) and excluding any special or nonrecurring compensatory
payments such as moving or relocation bonuses or automobile allowances. Effective on and after
April 1, 1998, the term shall mean projected annual compensation from the Employer determined on an
annual basis by the Employer at or before the beginning of the Plan, which may consist of salary,
bonus, and, and/or incentive payments, determined before any deductions under any qualified plan of
the Employer (including a Section 401(k) plan or a Section 125 plan) and excluding any special
or non-recurring compensatory payments such as moving or relocation bonuses or automobile
allowances.

     1.9 “Eligible Stock Option” shall mean one or more non-qualified stock options
selected by the Committee in its sole discretion.

     1.10 “Employee” shall, for the period before April 1, 1998, mean, each employee of
Employer. Effective on or after April 1, 1998, the term shall also include each Non-Employee

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Director. The term also shall include reference to an Employee’s Beneficiary where the context so
requires.

     1.11 “Employer” shall mean Cadence Design Systems, Inc., a Delaware corporation, and
any successor organization thereto, and any Subsidiaries, as defined in Section 7.3 of the Company.

     1.12 “Employer Contributions” shall mean the Employer’s discretionary contribution, if
any, pursuant to Section 3.1(b) of the Plan.

     1.13 “Hardship” shall have the meaning set forth in Section 3.7 of the Plan.

     1.14 “Non-Employee Director’’ shall mean a member of Employer’s Board of Directors who
is not otherwise an employee of the Employer.

     1.15 “Plan” shall mean the Cadence Design Systems, Inc. 1994 Deferred Compensation
Plan, including any amendments thereto.

     1.16 “Plan Year” shall mean the year beginning each January 1 and ending December 31;
notwithstanding the foregoing, the initial Plan Year shall mean the period beginning with the
Effective Date and ending on December 31, 1994.

     1.17 “Permanent Disability” shall mean that the Employee is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death or otherwise meets the definition of “Permanent Disability”
as set forth in the Employer’s Long Term Disability Plan. An Employee will not he considered to
have a Permanent Disability unless he or she furnishes proof of such condition sufficient to
satisfy the Employer, in its sole discretion.

     1.18 “Qualifying Stock Option Gain” shall mean an amount equal to the fair market
value of shares (or share equivalent units) of Stock acquired upon exercise of one or more Eligible
Stock Options using a Stock-for-Stock payment method, less the total stock purchase price paid to
exercise the Eligible Stock Options, less amounts withheld pursuant to Section 9.7. All such
amounts shall be calculated using the average of the high and low price of Stock on the date of
exercise of such Eligible Stock Options, as reported on the NASDAQ
Global Select Market.

     1.19 “Stock” shall mean Cadence Design Systems, Inc. common stock, $0.01 par value, or
any other equity securities of Employer designated by the Committee.

     1.20 “Stock-for-Stock” shall mean a payment method by which certain Employees exercise
their Eligible Stock Options by paying the exercise price with Stock, as follows: the Employee
delivers to Employer shares of Stock already owned by Employee for at least six (6) months as of
the date of exercise (or, instead of delivering actual shares, Employee delivers “phantom shares”
by delivering an affidavit of ownership of the already-owned Stock but does not deliver cash or any
other property) having a fair market value equal to the exercise price of the Eligible Stock
Options to be exercised.

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     1.21 “Stock Option Subaccount” shall mean (i) the sum of Qualifying Stock Option Gain
deferred in accordance with Section 3.2 of this Plan, plus (ii) amounts credited or debited in
accordance with Section 3.9(d) of this Plan, less (iii) all distributions made to the Employee or
his or her beneficiary in accordance with Section 3.3(g) of this Plan.

     1.22 “Subsidiary” shall mean any corporation (other than the Employer) in an unbroken
chain of corporations or other entities beginning with the Employer, if each of the entities other
than the last entity in the unbroken chain owns stock, partnership rights or other ownership
interest possessing fifty (50) percent or more of the total combined voting power of all classes of
stock, partnership rights or other ownership interest in one of the other entities in such chain.

     1.23 “Trust” or “Trust Agreement” shall mean the Cadence Design Systems, Inc.
1994 Deferred Compensation Plan Rabbi Trust Agreement, including any amendments thereto, entered
into between the Employer and the Trustee to carry out the provisions of the Plan.

     1.24 “Trust Fund” shall mean the cash and other assets and/or properties held and
administered by’ Trustee pursuant to the Trust to carry out the provisions of the Plan.

     1.25 “Trustee” shall mean the designated Trustee acting at any time under the Trust.

SECTION 2

ELIGIBILITY

     2.1 Eligibility. Eligibility to participate in the Plan shall be limited to Employees
of the Employer who (a) have Eligible Compensation of at least $150,000 for the Plan Year, (b) are
classified as officers, vice-presidents, directors, or an equivalent title, and (c) have been
selected by the Committee to participate in the Plan. The Committee shall designate Employees who
shall be covered by this Plan in a separate Acknowledgment (in the form attached hereto as
Appendix 1) for each such Employee. Participation in the Plan shall commence as of the
date such Acknowledgment is signed by the Employee and delivered to the Employer, provided that deferral of compensation under the Plan
shall not commence until the Employee has complied with the election procedures set forth in
Section 3.4. Notwithstanding the foregoing, participation by an Employee in the Plan does not make
such Employee eligible automatically to defer Qualifying Stock Option Gain. Employees whose Stock
Options are Eligible Stock Options and who are eligible to defer Qualifying Stock Option Gain under
the Plan pursuant to Section 3.2, will be designated by the Committee in a separate Acknowledgement
(in the form attached hereto as Appendix 2) for each such Employee. Nothing in the Plan or in the
Acknowledgments should be construed to require any contributions to the Plan on behalf of the
Employee by Employer.

     Notwithstanding the foregoing, Non-Employee Directors shall be eligible to participate in the
Plan and a Non-Employee Director shall commence participation in the Plan as of the later of
April 1, 1998, or the date the Non-Employee Director first becomes a Non-Employee Director,
provided that deferral of Compensation under the Plan shall not commence until the Non-Employee
Director has complied with the election procedures set forth in Section 3.4.

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SECTION 3

DEFERRED COMPENSATION & QUALIFYING STOCK OPTION GAIN

     3.1 Deferred Compensation.

          (a) Each participating Employee may elect, in accordance with Section 3.4 of this Plan, to
defer semi-annually the receipt of a portion of the Compensation for active service otherwise
payable to him or her by Employer during each semi-annual period or portion of a semi-annual period
that the Employee shall be employed by the Employer. Any Compensation deferred by Employee
pursuant to Section 3.4 shall be recorded by the Employer in an Account, maintained in the name of
the Employee, which Account shall be credited with a dollar amount equal to the total amount of
Compensation deferred during each semi-annual period under the Plan, together with earnings thereon
credited in accordance with Section 3.9. The amount or percentage of Compensation that Employee
elects to defer under Section 3.4 will remain constant for the semi-annual period and shall not be
subject to change during such semi-annual period Effective April 1 1998, each such deferral
election as to “base salary” or “director’s fees’’ or discontinuance of a deferral election as to
“base salary” or ''director’s fees’’ will continue in force for each successive year or semiannual
period, as appropriate, until or unless suspended or modified by the filing of a subsequent
election with the Employer by the Employee or Non-Employee Director in accordance with Section 3.4
of the Plan. Each deferral election as to an Employee’s “cash bonus’’ shall continue in force only
for the single semi-annual period in which it is paid, regardless of the period of time as to which
it is awarded, and shall not apply to any successive semi-annual periods. Any deferral election
with respect to a “cash bonus” must be made prior to the time the amount of the bonus is
determined, prior to the end of the period of time as to which the bonus is awarded, and at a time
that the amount of any such bonus remains substantially uncertain. All deferrals pursuant to this
Section 3.1 shall be fully vested at all times. Effective April 1, 1998, deferral elections shall
be subject to minimum dollar and maximum percentage amount limits as follows: (i) the minimum
semi-annual deferral amount is $2,500 (prior to July 1, 1998, the minimum annual deferral amount
was $5,000), which shall be withheld from the Employee’s or Non-Employee Director’s Compensation,
and (ii) the maximum
deferral percentage amount is 80% of the Employee’s “base salary,” 100% of the Employee’s
“cash bonus,” and 100% of the Non-Employee Director’s “director’s fees.” For purposes of the Plan,
“base salary” for a given semi-annual period means an “Employee’s regular compensation payable
during the semi-annual period, excluding bonuses, commissions, overtime, incentive payments,
non-monetary awards, compensation deferred pursuant to all Section 125 (cafeteria) or
Section 401(k) (savings) plans of the Employer and other special compensation, and reduced by the
tax withholding obligations imposed on the Employer and any other withholding requirements imposed
by law with respect to such amounts. For purposes of the Plan, “cash bonus” shall mean
amounts (if any) awarded under the bonus policies maintained by the Employer and any commissions
earned on sales. For purposes of the Plan, “director’s fees” for a given semi-annual
period means the annual retainer, per meeting fees, committee meeting fees, and consulting fees
payable during the semi-annual period. Except as otherwise expressly provided herein, this
Section 3.1(a) is effective as of July 1, 1998.

          (b) Employer shall not be obligated to make any other contribution to the Plan on behalf of
any Employee at any time. Employer may make Employer Contributions to the

4

 

Plan on behalf of one or
more Employees. Employer Contributions, if any, made to Accounts of Employees shall be determined
in the sole and absolute discretion of the Employer, and may be made without regard to whether the
Employee to whose Account such contribution is credited has made, or is making, contributions
pursuant to Section 3.1(a). The Employer shall not be bound or obligated to apply any specific
formula or basis for calculating the amount of any Employer Contributions and Employer shall have
sole and absolute discretion as to the allocation of Employer Contributions among participating
Employee Accounts. The use of any particular formula or basis for making an Employer Contribution
in one year shall not bind or obligate the Employer to use such formula or basis in any other year.
Employer Contributions may be subject to a substantial risk of forfeiture in accordance with the
terms of a vesting schedule, which may be selected by the Employer in its sole and absolute
discretion.

          (c) Amounts deferred under the Plan shall be calculated and withheld from the Employee’s base
salary and/or cash bonus after such compensation has been reduced to reflect salary reduction
contributions to the Employer’s Code Section 125 (cafeteria) and Code Section 401(k) (savings)
plans, but before any reductions for contributions to the Code Section 423 (employee stock
purchase) plan.

          (d) The Committee in its sole discretion may direct the Trustee to accept the transfer of
funds held in trust under any plan sponsored or maintained by the Employer or an affiliate thereof
which is an unfunded nonqualified deferred compensation plan for a select group of management and
highly compensated executives of the Employer (a “Transferor Plan”), in which case the
transferred funds (the “Transferred Amounts”) shall be held by the Trustee under and be
subject to the terms of the Plan and invested and accounted for as directed by the Committee except
as otherwise provided in Section 3.3(e). The Transferred Amounts may not be transferred back to
the Transferor Plan or its trust. The transfer of such Transferred Amounts shall not cause any of
the participant’s rights to a distribution under the Plan or the Transferor Plan (including the
Transferred Amounts) to be a secured right to a distribution under either plan.

     3.2 Deferred Qualifying Stock Option Gain. Eligible Employees designated by the
Committee as described in
Section 2.1 may elect, in accordance with Section 3.4(b) of this Plan, to defer the receipt of
Qualifying Stock Option Gain upon the exercise of any Eligible Stock Option. Any Qualifying Stock
Option Gain deferred by an Employee shall be recorded in a Stock Option Subaccount, maintained in
the name of the Employee, which subaccount shall be credited with an amount of shares (or share
equivalent units) of Stock equal to the total amount of Qualifying Stock Option Gain deferred,
together with any earnings thereon credited in accordance with Section 3.9(d).

     3.3 Payment of Account Balances.

          (a) Effective July 1, 1998, the Employee shall elect whether he or she will receive
distribution of his or her Account, not including his or her Stock Option Subaccount, subject to
tax withholding requirements, (i) upon reaching a specified age, (ii) upon passage of a specified
number of years, (iii) upon termination of employment of Employee with Employer, (iv) upon the
earlier to occur of (A) termination of employment of Employee with Employer or (B) passage of a
specified number of years or attainment of a specified age, or (v) upon the later to occur of
(A) termination of employment of Employee with Employer or (B) passage of a

5

 

specified number of
years or attainment of a specified age, as elected by Employee in accordance with the form
established by the Committee. Such form may permit an election among some or all of the
alternatives listed in this Section 3.3(a), as determined in the Committee’s sole discretion. A
designation of the time of distribution shall be required as a condition of participation under
this Plan. The Employee also shall elect to receive all amounts payable to him or her in a lump
sum or in equal monthly installments over a designated period of five or ten years, pursuant to the
provisions of Section 3.3(e). These elections shall be made in accordance with Section 3.5 of this
Plan.

          (b) Distributions shall be made to the maximum extent allowable under the election made by
Employee, except that no distribution shall be made to the extent that the receipt of such
distribution, when combined with the receipt of all other “applicable employee remuneration” (as
defined in Code Section 162(m)(4)) would cause any remuneration received by the Employee to be
nondeductible by the Employer under Code Section 162(m)(1). The portion of any distributable
amount that is not distributed by operation of this Section 3.3(b) shall be distributed in
subsequent years in the manner elected by the Employee until the Employee’s Account has been fully
liquidated. The commencement date of the lump sum payment or the five- or ten-year period
(whichever is applicable) shall be automatically extended, when necessary to satisfy the
requirements of this subsection, for one-year periods until all Account balances have been
distributed in the manner elected by the Employee.

          (c) Effective July 1, 1998, upon termination of Employee’s employment with Employer by reason
of death or Permanent Disability prior to the time when payment of Account balances otherwise would
commence under the provisions of Section 3.3(a), Employee or Employee’s designated Beneficiary will
be entitled to receive all amounts credited to the Account of Employee as of the date of his or her
death or Permanent Disability (notwithstanding any contrary election to receive distributions under
the first sentence of Section 3.3(a)). Upon termination of Employee’s employment with Employer by
reason other than death or Permanent Disability prior to the date when payment of Account balances
otherwise would commence under the provisions of Section 3.3(a), the Employer may, in the sole
discretion of the
Committee, distribute to Employee or Employee’s designated Beneficiary all amounts credited to
the Employee’s Account as of the date of such termination (notwithstanding any contrary election to
receive distributions under the first sentence of Section 3.3(a)). Said amounts shall be payable
in the form determined pursuant to the provisions of Section 3.3(e).

          (d) Upon the death of Employee prior to complete distribution to him or her of the entire
balance of his or her Account (and after the date of termination of employment with Employer), the
balance of his or her Account on the date of death shall be payable to Employee’s designated
Beneficiary pursuant to Section 3.3(e). Effective July 1, 1998, notwithstanding any other
provision of the Plan to the contrary, the Employee’s designated Beneficiary may receive the
distribution of the remaining portion of such deceased Employee’s Account in the form of a lump sum
if the Beneficiary requests such a distribution and the Committee, in its sole discretion, consents
to such a distribution.

          (e) The Employer shall distribute or direct distribution of the balance of amounts previously
credited to Employee’s Account, in a lump sum, or in monthly installments over a period of five (5)
years or ten (10) years as Employee shall designate. A designation of

6

 

the form of distribution
shall be required as a condition of participation under this Plan. Distribution of the lump sum or
the first installment shall be made or commence within ninety (90) days following the date
specified in the first sentence of Section 3.3(a), or as otherwise provided in 3.3(c). Subsequent
installments, if any, shall be made on the first day of each month following the last installment
as determined by Employer. The amount of each installment shall be calculated by dividing the
Account balance as of the date of the distribution by the number of installments remaining pursuant
to the Employee’s distribution election. Each such installment, if any, shall take into account
earnings credited to the balance of the Account remaining unpaid. The Employee’s distribution
election shall be made on a form provided by Employer.

          Notwithstanding any provision herein to the contrary, any Transferred Amounts shall be
distributable under the Plan according to the terms of the elections permitted and made by the
participant under the applicable Transferor Plan unless subsequently modified by the participant as
permitted under this Plan.

          (f) Effective April 1, 1998, for purposes of this Section 3.3, reference to termination of
employment shall also include termination of service as a Non-Employee Director of the Employer
(except in the event such termination is due to becoming an Employee).

          (g) An Employee shall make a separate election to receive distributions from his or her Stock
Option Subaccount, subject to tax withholding requirements. Upon termination of Employee’s
employment with Employer by reason of death or Permanent Disability prior to the time when payment
of Employee’s Stock Option Subaccount balance otherwise would commence pursuant to Employee’s
election, Employee or Employee’s designated Beneficiary will be entitled to receive all amounts
credited to the Stock Option Subaccount of Employee as of the date of his or her death or Permanent
Disability (notwithstanding any contrary election to receive distributions pursuant to this
Section 3.3(g)). Upon termination of Employee’s employment with Employer by reason other than
death or Permanent Disability prior to the date when payment of Employee’s Stock Option Subaccount
balance otherwise would commence
pursuant to Employee’s election, Employer may, in the sole discretion of the Committee,
distribute to Employee or Employee’s designated Beneficiary all amounts credited to Employee’s
Account as of the date of such termination (notwithstanding any contrary election to receive
distributions pursuant to this Section 3.3(g)). All distributions from an Employee’s Stock Option
Subaccount shall be made in the form of Stock, except for distributions upon a Change in Control,
to be made in a lump sum payment in accordance with Section 3.6.

     3.4 Election to Defer.

          (a) Compensation. Each election of an Employee to defer Compensation as provided in
Section 3.1 of this Plan shall be in writing, signed by the Employee, and delivered to Employer,
together with all other documents required under the provisions of this Plan, within such time as
determined by the Committee and communicated to those Employees who are eligible to participate in
the Plan. Such deferral elections must be delivered to Employer prior to the beginning of the Plan
Year with respect to which the Compensation to be deferred is otherwise payable to Employee.
Provided, however, that effective April 1, 1998, an Employee who is hired or promoted to a position
of eligibility for participation in the Plan during a Plan

7

 

Year (effective January 1, 2001, on or
before the first business day of a semi annual period) or a Non-Employee Director who is elected to
become a Non-Employee Director shall have thirty (30) days from the date of notification of
eligibility for participation in the Plan in which to submit the required election documents for
the then current semi-annual period. Any deferral election made by Employee shall be irrevocable
with respect to any Compensation covered by such election, including Compensation payable in the
semi-annual period in which the election suspending or modifying the prior deferral election is
delivered to Employer. Notwithstanding the foregoing, with respect to cash bonuses payable to an
Employee for the year ended December 31, 1996, but which will not be paid to the Employee until
after January 1, 1997, the Employee may make a separate deferral election with respect to, or
revise a previous deferral election with respect to, such cash bonuses until such time on or before
December 31, 1996 as determined by the Committee, so long as at that time the amount of any such
bonus has not yet been determined and remains substantially uncertain. The Employer shall withhold
the amount or percentage of base salary specified to be deferred in equal amounts for each payroll
period and shall withhold the amount or percentage of each cash bonus specified to be deferred at
the time or times such bonus is or otherwise would be paid to the Employee. The election to defer
Compensation shall be made on the form provided by Employer. Effective April 1, 1998, the Employer
shall withhold the amount or percentage of director’s fees specified to be deferred at the time or
times such director’s fees are or otherwise would be paid to the Non-Employee Director.
Notwithstanding the foregoing, with respect to Compensation payable to a Non-Employee Director for
the Plan Year ending December 31, 1998, but which will not be paid to the Non-Employee Director
until after March 31, 1998, the Non-Employee Director may make a deferral election with respect to
such Compensation until March 31, 1998. Notwithstanding any other provision of the Plan to the
contrary, with respect to base salary and cash bonuses payable to an Employee for the six-month
period from July 1, 1998 through December 31, 1998, prior to July 1, 1998, the Employee may revise
a previous deferral election with respect to such base salary to increase (but not decrease) the
amount or percentage of base salary to be deferred. Except as otherwise expressly provided herein,
this Section 3.4(a) is effective as of July 1, 1998.

          (b) Qualifying Stock Option Gain. Notwithstanding any provision of Section 3.4(a) to
the contrary, with respect to Qualifying Stock Option Gain to be deferred, (i) the Employee must
make a separate deferral election on a separate deferral election form with respect to such
Qualifying Stock Option Gain; (ii) such form must be timely delivered to the Vice President of
Human Resources or his or her designee at least six (6) months before the date the Employee elects
to exercise the Eligible Stock Option; (iii) the Eligible Stock Option must be exercised using an
actual or phantom Stock-for-Stock payment method; and (iv) the Stock actually or constructively
delivered by the Employee to exercise the Eligible Stock Option must have been owned by the
Employee during the entire six (6) month period before its delivery. The amount of Qualifying
Stock Option Gain permitted to be deferred also may be limited by other terms or conditions set
forth in the stock option plan or agreement under which the relevant stock option or options were
granted. The Employee’s Qualifying Stock Option Gain deferral election shall be made on a form
provided by Employer.

     3.5 Distribution Election. The initial distribution election of an Employee as
provided in Section 3.3 of this Plan, including an election made pursuant to Section 3.3(g) of this
Plan, shall be in writing, signed by the Employee, and delivered to Employer, together with all
other documents required under the provisions of this Plan, within such period of time determined

8

 

by the Committee and communicated to those Employees who are eligible to participate in the Plan.
Such distribution elections must be delivered to the Employer prior to the beginning of the first
Plan Year in which Employee is eligible to participate in the Plan, or, in the case of n
distribution election pursuant to Section 3.3(g), prior to six months before the date of exercise
of an Eligible Stock Option. Provided, however, that effective April 1, 1998, an Employee who is
hired or promoted to a position of eligibility for participation in the Plan or a Non-Employee
Director who is elected to become a Non-Employee Director during a Plan Year shall have thirty (30)
days from the date of notification of eligibility for participation in the Plan in which to submit
the required distribution election documents. If permitted by the Committee, an Employee may
change the terms of his or her initial distribution election by making a new election, and any such
new election will be effective as of the later of the date that is (a) six (6) months following the
date the new election is made or (b) the first day of the Plan Year following the Plan Year in
which the new election is made and such new election will apply to the Employee’s entire Account,
except for the Employee’s Stock Option Subaccount. Any changes to an Employee’s distribution
election pursuant to Section 3.3(g) must be submitted on a separate form, and such changes will
apply only to the Employee’s Stock Option Subaccount. An Employee may not make a new election once
distributions from the Plan have commenced or which would first become effective at a time when
distributions from the Plan have commenced. Notwithstanding any other provisions of this
Section 3.5, an Employee’s distribution election shall be in the form established by the Committee
in accordance with the terms of the Plan.

     3.6 Payment Upon Change in Control. Notwithstanding any other provisions of this Plan
(including without limitation Section 3.3), the aggregate balance credited to and held in the
Employees’ Accounts, including any Stock Option Subaccounts, shall be distributed to Employees in a
lump sum on the thirtieth day following a Change in Control (except that distribution shall be on
the sixtieth day in the case of a Change in Control under Section 5.1(a)), as defined in
Section 5.1, unless the Committee, the Board of Directors of the Employer, or the 401(k)/NQDC
Administrative
Committee of the Employer (as each is composed immediately prior to such Change in Control),
in the sole discretion of any of the foregoing, decides prior to that date that Employees’ Accounts
shall remain in the Plan.

     3.7 Hardship.

          (a) An Employee may apply for distributions from his or her Account to the extent that the
Employee demonstrates to the reasonable satisfaction of the Committee that he or she needs the
funds due to Hardship. For purposes of this Section 3.7, a distribution is made on account of
Hardship only if the distribution is made on account of an unforeseeable immediate and heavy
emergency financial need of the Employee and is necessary to satisfy that emergency financial need.
Whether an Employee has an immediate and heavy emergency financial need shall be determined by the
Committee based on all relevant facts and circumstances, and shall include, but not be limited to,
the need to pay funeral expenses of a family member; the need to pay expenses for medical care for
Employee, the Employee’s spouse or any dependent of Employee resulting from sudden unexpected
illness or accident; payments necessary to prevent the eviction of Employee from Employee’s
principal residence or foreclosure on the mortgage on that residence; or other similar
extraordinary and unforeseeable circumstances arising as a result of events beyond the control of
Employee. A Hardship distribution shall not exceed the amount required to relieve the financial
need of the Employee, nor shall a Hardship distribution be made

9

 

if the need may be satisfied from
other resources reasonably available to the Employee. For purposes of this paragraph, an
Employee’s resources shall be deemed to include those assets of the Employee’s spouse and minor
children that are reasonably available to the Employee. Prior to approving a Hardship
distribution, Employer shall require the Employee to certify in writing that the Employee’s
financial need cannot reasonably be relieved:

          (i) through reimbursement or compensation by insurance or otherwise or

          (ii) by other distributions or nontaxable (at the time of the loan) loans from plans
maintained by the Employer or by any other employer, or by borrowing from commercial sources
on reasonable commercial terms, in an amount sufficient to satisfy the need.

          (b) Any Employee receiving a Hardship distribution under this section shall be ineligible to
defer any additional compensation under the Plan until the first day of the Plan Year following the
second anniversary of the date of the distribution. In addition, a new Election of Deferral must
be submitted to the Employer as a condition of participation in the Plan.

     3.8 Employee’s Right Unsecured. The right of the Employee or his or her designated
Beneficiary to receive a distribution hereunder shall be an unsecured claim against the general
assets of the Employer, and neither the Employee nor his or her designated Beneficiary shall have
any rights in or against any amount credited to his or her Account or any other specific assets of
the Employer, except as otherwise provided in the Trust. Nothing contained in this Plan, and no
action taken pursuant to its provisions, shall create or be construed to create a trust of any kind
or a fiduciary relationship between the Plan and the Employer or any other person.

     3.9 Investment of Contribution.

          (a) The investment options available to each Employee shall be determined by the Employer and
set forth in a separate written document, a copy of which shall be attached hereto and by this
reference is incorporated herein. Each Employee shall have the sole and exclusive right to direct
the Trustee as to the investment of his or her Accounts in accordance with policies arid procedures
implemented by the Trustee. The right of an Employee to direct the investment of his or her
Account into one or more of the available investment options shall not in any way be considered to
alter the fact that an Account is a bookkeeping account only that measures the Employer’s
obligation to pay benefits hereunder, that the assets being invested at the direction of an
Employee are assets of the Employer and that the Employee’s rights under the Plan remain those of
an unsecured, general creditor of the Employer.

          Employer shall not be liable for any investment decision made by any Employee while such funds
are held by the Trustee.

          (b) Accounts shall be credited with the actual financial performance or earnings generated by
such investments directed by the Employee and made by the Trustee, until the Account has been fully
distributed to the Employee or to the Employee’s designated Beneficiary.

10

 

          (c) Notwithstanding any other provision in this Section 3.9 to the contrary, the Committee may
determine not to take account of Employee’s designated investments and determine to have the
Employee’s Account invested in any other manner as the Committee shall determine.

          (d) Notwithstanding any other provision in this Section 3.9 to the contrary, no investment
options are available to an Employee with respect to amounts held in the Employee’s Stock Option
Subaccount. Such Stock Option Subaccount only shall be credited or debited with the actual
financial performance or earnings generated by Stock. During the deferral period, dividend
equivalents will be credited in the form of additional shares or share equivalent units of Stock to
the Employee’s Stock Option Subaccount.

SECTION 4

DESIGNATION OF BENEFICIARY

     4.1 Designation of Beneficiary. Employee may designate a Beneficiary or Beneficiaries
to receive all amounts, if any, due hereunder to Employee but unpaid at the time of Employee’s
death by written notice thereof to Employer at any time prior to Employee’s death and may revoke or
change the Beneficiary designated therein without the Beneficiary’s consent by written notice
delivered to Employer at any time and from time to time prior to Employee’s death. If Employee is
married and a resident of a community property state, one half of any amount due hereunder which is
the result of an amount contributed to the Plan during such marriage is the community property of
the Employee’s spouse and Employee may designate a Beneficiary or Beneficiaries to receive only the
Employee’s one-half interest. If Employee shall have failed to designate a Beneficiary, or if
no such Beneficiary shall survive him or her, then such amount shall be paid to his or her
estate. Designations of Beneficiaries shall be made on the form provided by Employer.

SECTION 5

CHANGE IN CONTROL

     5.1 Change in Control. For the purposes of this Plan, “Change in Control”
means, the happening of any of the following:

          (a) The first public announcement or public acknowledgment (including without limitation, a
report filed pursuant to Section 13(d) of the Securities Exchange Act of 1934 as amended (the
“Exchange Act”)) by the Employer that a “person,” as such term is used in Sections 13(d)
and 14(d) of the Exchange Act (other than the Employer, a Subsidiary or an employee benefit plan of
the Employer or a Subsidiary, or other controlled affiliate of the Employer, including any trustee
of such plan acting as trustee), is or has become the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act or comparable successor rule), directly or indirectly, of securities of the
Employer representing fifty percent (50%) or more of the combined voting power of the Employer’s
then outstanding Common Stock entitled to vote in the election of directors, where such person’s
beneficial ownership of the Employer’s Common Stock was not initiated by the Employer or approved
by the Employer’s Board of Directors;

11

 

          (b) The sale, lease or other disposition of all or substantially all of the assets of the
Employer;

          (c) The merger or consolidation of the Employer with or into another corporation not initiated
by the Employer, in which the Employer is not the surviving corporation and the stockholders of the
Employer immediately prior to the merger or consolidation fail to possess direct or indirect
beneficial ownership of more than eighty percent (80%) of the voting power of the securities of the
surviving corporation (or if the surviving corporation is a controlled affiliate of another entity,
then the required beneficial ownership shall be determined with respect to the securities of that
entity which controls the surviving corporation and is not itself a controlled affiliate of any
other entity) immediately following such transaction, or a reverse merger not initiated by the
Employer, in which the Employer is the surviving corporation and the stockholders of the Employer
immediately prior to the reverse merger fail to possess direct or indirect beneficial ownership of
more than eighty percent (80%) of the securities of the Employer (or if the Employer is a
controlled affiliate of another entity, then the required beneficial ownership shall be determined
with respect to the securities of that entity which controls the Employer and is not itself a
controlled affiliate of any other entity) immediately following the reverse merger. For purposes
of this Section 5.1(c), any person who acquired securities of the Employer prior to the occurrence
of a merger, reverse merger, or consolidation in contemplation of such transaction and who after
such transaction possesses direct or indirect beneficial ownership of at least ten percent (10%) of
the Common Stock of the Employer or the surviving corporation (or if the Employer or the surviving
corporation is a controlled affiliate, then of the appropriate entity as determined above)
immediately following such transaction shall not be included in the group of stockholders of the
Employer immediately prior to such transaction;

          (d) A change in the composition of the Board of Directors of the Employer, as a result of
which fewer than a majority of the directors are Incumbent Directors. “Incumbent
Directors” shall mean directors who either (i) are directors of the Employer as of the date
hereof, or (ii) are elected, or nominated for election, to the Board of Directors of the Employer
with the affirmative votes of at least a majority of the Incumbent Directors at the time of such
election or nomination (but shall 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
Employer); or

          (e) Any liquidation or dissolution of the Employer.

SECTION 6

TRUST PROVISIONS

     6.1 Trust Agreement. The Employer may establish the Trust for the purpose of
retaining assets, including deferred Qualifying Stock Option Gain, set aside by Employer pursuant
to the Trust Agreement for payment of all or a portion of the amounts payable pursuant to the Plan.
Any benefits not paid from the Trust shall be paid solely from Employer’s general funds, and any
benefits paid from the Trust shall be credited against and reduce by a corresponding amount the
Employer’s liability to Employees under the Plan. No special or

12

 

separate fund, other than the
Trust Agreement, shall be established and no other segregation of assets shall be made to assure
the payment of any benefits hereunder. All Trust Funds shall be subject to the claims of general
creditors of the Employer in the event the Employer is Insolvent as defined in Section 3 of the
Trust Agreement. The obligations of the Employer to pay benefits tinder the Plan constitute an
unfunded, unsecured promise to pay and Employees shall have no greater rights than general
creditors of the Employer.

SECTION 7

AMENDMENT, TERMINATION AND TRANSFERS BY COMMITTEE

     7.1 Amendment. The Committee shall have the right to amend this Plan at any time and
from time to time, including a retroactive amendment. Any such amendment shall come effective upon
the date stated therein, and shall be binding on all Employees, except as otherwise provided in
such amendment; provided, however, that said amendment shall not affect adversely benefits payable
to an affected Employee without the Employee’s written approval.

     7.2 Termination. The Committee shall have the right to terminate this Plan at any
time and direct the lump sum payments of all assets held by the Trust if the Employer is not
Insolvent (as defined in Article 3 of the Trust Agreement) at that time.

     7.3 Transfers by Committee.

          (a) In the event that an Employee transfers employment from the Employer to a Subsidiary, the
Committee shall have the right, but no obligation, to direct the Trustee to
transfer funds in an amount equal to the amount credited to such Employee’s Account (the
“Transferred Account”) to a trust established under a Transferee Plan maintained by such
Subsidiary. The Committee shall determine, in its sole discretion, whether such transfer shall be
made and the timing of such transfer. Such transfer shall be made only if, and to the extent,
approval of such transfer is obtained from the Trustee. No transfer shall be made unless the
Subsidiary meets the requirements of subsection 7.3(b)(i) as of the date of the transfer.

          (b) Definitions.

          (i) For purposes of this Section 7.3, “Subsidiary” shall mean any corporation
(other than the Employer) in an unbroken chain of corporations beginning with the Employer,
if each of the corporations other than the last corporation in the unbroken chain owns stock
possessing fifty (50) percent or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

          (ii) For purposes of this Section 7.3, “Transferee Plan” shall mean an
unfunded, nonqualified deferred compensation plan described in Section 201(2), 301(a)(3) and
401(a)(1) of the Employee Retirement Income Security Act of 1974 (“ERISA”).

          (c) No transfer shall be made under this Section 7.3 unless the Employee for whose benefit the
Transferred Account is held executes a written waiver of all of such

13

 

Employee’s rights and benefits
under this Plan in such form as shall be acceptable to the Committee.

SECTION 8

ADMINISTRATION

     8.1 Administration. The Committee shall administer and interpret this Plan in
accordance with the provisions of the Plan and the Trust Agreement. Any determination or decision
by the Committee shall be conclusive and binding on all persons who at any time have or claim to
have any interest whatever under this Plan. The Committee may employ legal counsel, consultants,
actuaries and agents as it may deem desirable in the administration of the Plan and may rely on the
opinion of such counsel or the computations of such consultant or other agent. The Committee shall
have the authority to delegate some or all of the powers and responsibilities under the Plan and
the Trust Agreement to such person or persons as it shall deem necessary, desirable or appropriate
for administration of the Plan.

     8.2 Liability of Committee; Indemnification. To the maximum extent not prohibited by
law, no member of the Committee shall be liable to any person and in any event shall be indemnified
by the Employer for any action taken or omitted in connection with the interpretation and
administration of this Plan unless attributable to his or her own bad faith or willful misconduct.

     8.3 Expenses. The costs of the establishment of the Plan and the adoption of the Plan
by Employer, including but not limited to legal and
accounting fees, shall be borne by Employer. The expenses of administering the Plan and the
Trust shall be borne by the Trust unless the Employer elects in its sole discretion to pay some or
all of those expenses; provided, however, that Employer shall bear, and shall not be reimbursed by,
the Trust for any tax liability of Employer associated with the investment of assets by the Trust.

SECTION 9

GENERAL AND MISCELLANEOUS

     9.1 Rights Against Employer. Except as expressly provided by the Plan, the
establishment of this Plan shall not be construed as giving to any Employee or to any person
whomsoever, any legal, equitable or other rights against the Employer, or against its officers,
directors, agents or shareholders, or as giving to any Employee or Beneficiary any equity or other
interest in the assets, business or shares of Employer stock or giving any Employee the right to be
retained in the employment of the Employer. Neither this plan nor any action taken hereunder shall
be construed as giving to any Employee the right to be retained in the employ of the Employer or as
affecting the right of the Employer to dismiss any Employee. Any benefit payable under the Plan
shall not be deemed salary or other compensation for the purpose of computing benefits under any
employee benefit plan or other arrangement of the Employer for the benefit of its Employees.
Nothing in the Plan or in any instrument executed pursuant thereto shall confer upon any
Non-Employee Director any right to continue in the service of the Employer in any capacity or shall
affect any right of the Employer, its Board of Directors or

14

 

stockholders to remove any Non-Employee
Director pursuant to the Employer’s By-Laws and the provisions of the Delaware General Corporation
Law.

     9.2 Assignment or Transfer. No right, title or interest of any kind in the Plan shall
be transferable or assignable by any Employee or Beneficiary or be subject to alienation,
anticipation, encumbrance, garnishment, attachment, execution or levy of any kind, whether
voluntary or involuntary, nor subject to the debts, contracts, liabilities, engagements, or torts
of the Employee or Beneficiary. Any attempt to alienate, anticipate, encumber, sell, transfer,
assign, pledge, garnish, attach or otherwise subject to legal or equitable process or encumber or
dispose of any interest in the Plan shall be void.

     9.3 Severability. If any provision of this Plan shall be declared illegal or invalid
for any reason, said illegality or invalidity shall not affect the remaining provisions of this
Plan but shall be fully severable, and this Plan shall be construed and enforced as if said illegal
or invalid provision had never been inserted herein.

     9.4 Construction. The article and section headings and numbers are included only for
convenience of reference and are not to be taken as limiting or extending the meaning of any of the
terms and provisions of this Plan. Whenever appropriate, words used in the singular shall include
the plural or the plural may be read as the singular. When used herein, the masculine gender
includes the feminine gender.

     9.5 Governing Law. The validity and effect of this Plan and the rights and
obligations of all persons affected hereby shall be construed and determined in accordance with the
laws of the State of California unless superseded by federal law.

     9.6 Payment Due to Incompetence. If the Committee receives evidence that an Employee
or Beneficiary entitled to receive any payment under the Plan is physically or mentally incompetent
to receive such payment, the Committee may, in its sole and absolute discretion, direct the payment
to any other person or Trust which has been legally appointed by the courts or to any other person
determined by the Employer to be a proper recipient on behalf of such person otherwise entitled to
payment, or any of them, in such manner and proportion as the Employer may deem proper. Any such
payment shall be in complete discharge of the Employer’s obligations under this Plan.

     9.7 Tax. The Employer may withhold from any benefits payable under this Plan, all
federal, state, city or other taxes as shall be required pursuant to any law or governmental
regulation or ruling. In the case of an Employee’s exercise of an Eligible Stock Option and
election to defer Qualifying Stock Option Gain, Employer shall withhold from Employee’s
non-deferred Compensation and/or Qualifying Stock Option Gain, in a manner determined by Employer,
Employee’s share of FICA and other employment taxes on such deferred Qualifying Stock Option Gain.
If necessary, the Committee may reduce the deferred Qualifying Stock Option Gain in order to comply
with this Section 9.7.

     9.8 Attorney’s Fees. Employer shall pay the reasonable attorney’s fees incurred by
any Employee in an action brought against Employer to enforce Employee’s rights under

15

 

the Plan,
provided that such fees shall only be payable in the event that the Employee prevails in such
action.

     9.9 Plan Binding on Successors/Assignees. This Plan shall be binding upon and inure
to the benefit of the Employer and its successor and assigns and the Employee and the Employee’s
designee and estate.

     The Employer has caused its authorized officer to execute this amended and restated Plan this
20th day of November, 2003.

	 	 	 	 	 	 	 
	 	 	CADENCE DESIGN SYSTEMS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 

16

 

APPENDIX 1

ACKNOWLEDGMENT

     The undersigned Employee hereby acknowledges that Employer has selected him or her as a
participant in the Cadence Design Systems, Inc. 1994 Deferred Compensation Plan, subject to all
terms and conditions of the Plan, a copy of which has been received, read, and understood by the
Employee in conjunction with executing this Acknowledgment. Employee acknowledges that he or she
has had satisfactory opportunity to ask questions regarding his or her participation in the Plan
and has received satisfactory answers to any questions asked. Employee also acknowledges that he
or she has sufficient knowledge and experience in financial and business matters to be capable of
evaluating the merits and risks of participation in the Plan. Employee understands that his or her
participation in the Plan shall not begin until this Acknowledgment has been signed by Employee and
returned to Employer.

	 	 	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	Signed:	 	 	 	 
	 

	 	 

	 	 
	 	 	 	 

Employee
	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	CADENCE DESIGN SYSTEMS, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	Signed:	 	 	 	 
	 

	 	 

	 	 
	 	 	 	 

[Officer]
	 	 

17

 

APPENDIX 2

ACKNOWLEDGMENT

(for Deferral of Qualifying Stock Option Gain ONLY)

     The undersigned Employee hereby acknowledges that Employer has selected him or her as a
participant in the portion of Cadence Design Systems, Inc. 1994 Deferred Compensation Plan
pertaining to the deferral of Qualifying Stock Option Gain (as defined in the Plan document),
subject to all terms and conditions of the Plan, a copy of which has been received, read, and
understood by the Employee in conjunction with executing this Acknowledgment. Employee
acknowledges that he or she has had satisfactory opportunity to ask questions regarding his or her
participation in the portion of the Plan pertaining to the deferral of Qualifying Stock Option Gain
and has received satisfactory answers to any questions asked. Employee also acknowledges that he
or she has sufficient knowledge and experience in financial and business matters to be capable of
evaluating the merits and risks of such participation in the Plan. Employee understands that his
or her participation in the portion of the Plan pertaining to the deferral of Qualifying Stock
Option Gain shall not begin until this Acknowledgment has been signed by Employee and returned to
Employer.

	 	 	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	Signed:	 	 	 	 
	 

	 	 

	 	 
	 	 	 	 

Employee
	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	CADENCE DESIGN SYSTEMS, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	Signed:	 	 	 	 
	 

	 	 

	 	 
	 	 	 	 

[Officer]
	 	 

18exv10w13

 

Exhibit 10.13

Cadence Design Systems, Inc.

2009 Deferred Compensation Plan

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 
	SECTION 1 DEFINITIONS	 	1
	 
	 	 	 	 	 	 
	 
	 	1.1	 	“Account”	 	1
	 
	 	1.2	 	“Affiliate”	 	1
	 
	 	1.3	 	“Beneficiary”	 	1
	 
	 	1.4	 	“Change in Control”	 	2
	 
	 	1.5	 	“Code”	 	2
	 
	 	1.6	 	“Committee”	 	2
	 
	 	1.7	 	“Compensation”	 	2
	 
	 	1.8	 	“Eligible Compensation”	 	2
	 
	 	1.9	 	“Employee”	 	2
	 
	 	1.10	 	“Employer”	 	2
	 
	 	1.11	 	“Employer Contributions”	 	2
	 
	 	1.12	 	“Entity”	 	2
	 
	 	1.13	 	“Hardship”	 	2
	 
	 	1.14	 	“Non-Employee Director”	 	2
	 
	 	1.15	 	“Permanent Disability”	 	2
	 
	 	1.16	 	“Plan”	 	2
	 
	 	1.17	 	“Plan Year”	 	2
	 
	 	1.18	 	“Specified Employee”	 	3
	 
	 	1.19	 	“Trust” or “Trust Agreement”	 	3
	 
	 	1.20	 	“Trustee”	 	3
	 
	 	1.21	 	“Trust Fund”	 	3
	 
	 	 	 	 	 	 
	SECTION 2 ELIGIBILITY	 	3
	 
	 	 	 	 	 	 
	 
	 	2.1	 	Eligibility	 	3
	 
	 	 	 	 	 	 
	SECTION 3 DEFERRED COMPENSATION	 	3
	 
	 	 	 	 	 	 
	 
	 	3.1	 	Deferred Compensation	 	3
	 
	 	3.2	 	Payment of Account Balances	 	5
	 
	 	3.3	 	Election to Defer	 	7
	 
	 	3.4	 	Distribution Election	 	7
	 
	 	3.5	 	Payment Upon Change in Control	 	8
	 
	 	3.6	 	Hardship	 	8
	 
	 	3.7	 	Employee’s Right Unsecured	 	9
	 
	 	3.8	 	Investment of Contribution	 	9
	 
	 	 	 	 	 	 
	SECTION 4 DESIGNATION OF BENEFICIARY	 	10
	 
	 	 	 	 	 	 
	 
	 	4.1	 	Designation of Beneficiary	 	10

i

 

TABLE OF CONTENTS
(continued)

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 
	SECTION 5 TRUST PROVISIONS	 	10
	 
	 	 	 	 	 	 
	 
	 	5.1	 	Trust Agreement	 	10
	 
	 	 	 	 	 	 
	SECTION 6 AMENDMENT, TERMINATION AND TRANSFERS BY COMMITTEE	 	10
	 
	 	 	 	 	 	 
	 
	 	6.1	 	Amendment	 	10
	 
	 	6.2	 	Termination	 	10
	 
	 	6.3	 	Transfers by Committee	 	11
	 
	 	 	 	 	 	 
	SECTION 7 ADMINISTRATION	 	11
	 
	 	 	 	 	 	 
	 
	 	7.1	 	Administration	 	11
	 
	 	7.2	 	Liability of Committee; Indemnification	 	12
	 
	 	7.3	 	Expenses	 	12
	 
	 	 	 	 	 	 
	SECTION 8 GENERAL AND MISCELLANEOUS	 	12
	 
	 	 	 	 	 	 
	 
	 	8.1	 	Rights Against Employer	 	12
	 
	 	8.2	 	Assignment or Transfer	 	12
	 
	 	8.3	 	Severability	 	12
	 
	 	8.4	 	Construction	 	13
	 
	 	8.5	 	Governing Law	 	13
	 
	 	8.6	 	Payment Due to Incompetence	 	13
	 
	 	8.7	 	Tax	 	13
	 
	 	8.8	 	Attorney’s Fees	 	13
	 
	 	8.9	 	Plan Binding on Successors/Assignees	 	13

ii

 

CADENCE DESIGN SYSTEMS, INC.

2009 DEFERRED COMPENSATION PLAN

     Cadence Design Systems, Inc., a Delaware Corporation (referred to hereafter as the
“Employer”) established effective October 1, 1994, and amended and restated effective
October 1, 1996, January 1, 2001, November 1, 2002 and November 20, 2003 this Cadence Design
Systems, Inc. 2009 Deferred Compensation Plan (the “Plan”), an unfunded plan for the
purpose of providing deferred compensation for a select group of management, highly compensated
executives, and directors.

     Effective as of January 1, 2009, the Employer bifurcated the Plan into this document, which is
intended to comply with the provisions of Section 409A of the Code and the final regulations
promulgated thereunder, and a grandfathered document, which applies to amounts not subject to
Section 409A of the Code.

RECITALS

     WHEREAS, Employer previously adopted an unfunded deferred compensation plan and the Employees
desire the Employer to continue to pay certain deferred compensation and/or related benefits to or
for the benefit of the Employees, or a designated Beneficiary or both;

     WHEREAS, Employer believes it is in the best interest of the Employees and Beneficiaries to
amend and restate the Plan; and

     WHEREAS, this amendment and restatement includes, inter alia, amendments intended to
comply with the provisions of Section 409A of the Code, and this amended and restated Plan will be
interpreted accordingly.

     NOW, THEREFORE, the Employer hereby amends and restates the Plan effective as of January 1,
2009.

SECTION 1

DEFINITIONS

     1.1 “Account” shall mean the separate account(s) established under this Plan and the
Trust for each participating Employee. Employer shall furnish each participant with a statement of
his or her Account balance at least annually.

     1.2 “Affiliate” shall mean any Entity in an unbroken chain of Entities with the
Employer, if each of the Entities other than the last Entity in the unbroken chain owns stock or
other equity interests possessing fifty (50) percent or more of the total combined voting power of all classes of
stock or other equity interests in one of the other Entities in such chain.

     1.3 “Beneficiary” shall mean the Beneficiary designated by the Employee to receive the
Employee deferred compensation benefits in the event of his or her death.

 

 

     1.4 “Change in Control” means a “change in the ownership” of the Employer, a “change
in effective control” of the Employer or a “change in the ownership of a substantial portion of the
assets” of the Employer, in each case, as defined under Code Section 409A.

     1.5 “Code” shall mean the Internal Revenue Code of 1986 as amended from time to time,
and the rules and regulations promulgated thereunder.

     1.6 “Committee” shall mean the Compensation Committee of the Board of Directors of the
Employer or any other committee designated by the Board of Directors of the Employer to administer
this Plan in accordance with Section 7 hereof.

     1.7 “Compensation” shall mean the base salary, cash bonuses, and director fees
described in Section 3.1.

     1.8 “Eligible Compensation” shall mean projected annual compensation from the Employer
determined on an annual basis by the Employer at or before the beginning of the Plan Year, which
may consist of salary, bonus, and, and/or incentive payments, determined before any deductions
under any qualified plan of the Employer (including a Section 401(k) plan or a Section 125 plan)
and excluding any special or non-recurring compensatory payments such as moving or relocation
bonuses or automobile allowances.

     1.9 “Employee” shall mean each employee of Employer and each Non-Employee Director.
The term also shall include reference to an Employee’s Beneficiary where the context so requires.

     1.10 “Employer” shall mean Cadence Design Systems, Inc., a Delaware corporation, and
any successor organization thereto, and any Affiliate.

     1.11 “Employer Contributions” shall mean the Employer’s discretionary contribution, if any, pursuant to Section 3.1(b) of
the Plan.

     1.12 “Entity” shall mean any corporation, partnership, limited liability company, or
other legal entity.

     1.13 “Hardship” shall have the meaning set forth in Section 3.6 of the Plan.

     1.14 “Non-Employee Director” shall mean a member of Employer’s Board of Directors who
is not otherwise an employee of the Employer.

     1.15 “Permanent Disability” shall mean a “disability” as defined under Treasury
regulation Section 1.409A-3(i)(4).

     1.16 “Plan” shall mean the Cadence Design Systems, Inc. 2009 Deferred Compensation
Plan, including any amendments thereto.

     1.17 “Plan Year” shall mean the year beginning each January 1 and ending December 31.

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     1.18 “Specified Employee” shall mean any Participant who is a “specified employee” (as
such term is defined under Section 409A of the Code) of the Employer.

     1.19 “Trust” or “Trust Agreement” shall mean the Cadence Design Systems, Inc.
1994 Deferred Compensation Plan Rabbi Trust Agreement, including any amendments thereto, entered
into between the Employer and the Trustee to carry out the provisions of the Plan.

     1.20 “Trustee” shall mean the designated Trustee acting at any time under the Trust.

     1.21 “Trust Fund” shall mean the cash and other assets and/or properties held and
administered by Trustee pursuant to the Trust to carry out the provisions of the Plan.

SECTION 2

ELIGIBILITY

     2.1 Eligibility. Eligibility to participate in the Plan shall be limited to the
Employees of the Employer who (a) have Eligible Compensation of at least $150,000 for the Plan
Year, (b) are classified as officers, vice-presidents, directors, or an equivalent title, and
(c) have been selected by the Committee to participate in the Plan. Employer shall designate the
Employees who shall be covered by this Plan in a separate Acknowledgment (in the form attached
hereto as Appendix 1) for each such Employee. Participation in the Plan shall commence as
of the date such Acknowledgment is signed by the Employee and delivered to the Employer, provided
that deferral of Compensation under the Plan shall not commence until the Employee has complied
with the election procedures set forth in Section 3.3. Nothing in the Plan or in the
Acknowledgments should be construed to require any contributions to the Plan on behalf of the
Employee by Employer.

     Notwithstanding the foregoing, a Non-Employee Director may commence participation in the Plan
on the date the Non-Employee Director first becomes a Non-Employee Director, provided that deferral
of Compensation under the Plan shall not commence until the Non-Employee Director has complied with
the election procedures set forth in Section 3.3.

SECTION 3

DEFERRED COMPENSATION

     3.1 Deferred Compensation.

          (a) Each participating Employee may elect, in accordance with Section 3.3 of this Plan, to
defer the receipt of a portion of the Compensation for active service otherwise payable to him or
her by Employer during each semi-annual period or portion of a semi-annual period that the Employee
shall be employed by the Employer. Any Compensation deferred by an Employee pursuant to
Section 3.3 shall be recorded by the Employer in an Account, maintained in the name of the
Employee, which Account shall be credited with a dollar amount equal to the total amount of
Compensation deferred during each semi-annual period under the Plan, together with earnings thereon
credited in accordance with Section 3.8. Each such deferral election as to “base salary” or
“director’s fees” or discontinuance of a deferral election as to “base

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salary” or “director’s fees”
will continue in force for each successive year or semiannual period, as appropriate, until or
unless suspended or modified by the filing of a subsequent election with the Employer by the
Employee or Non-Employee Director in accordance with Section 3.3 of the Plan. Each deferral
election as to an Employee’s “cash bonus” shall continue in force only for the single semi-annual
period in which it is paid, regardless of the period of time as to which it is awarded, and shall
not apply to any successive semi-annual periods. Any deferral election with respect to a “cash
bonus” must be made prior to the time the amount of the bonus is determined,
prior to the end of the period of time as to which the bonus is awarded, and at a time that
the amount of any such bonus remains substantially uncertain. All deferrals pursuant to this Plan
shall be fully vested at all times. Deferral elections shall be subject to minimum dollar and
maximum percentage amount limits as follows: (i) the minimum semi-annual deferral amount is
$2,500, which shall be withheld from the Employee’s or Non-Employee Director’s Compensation, and
(ii) the maximum deferral percentage amount is 80% of the Employee’s “base salary,” 100% of the
Employee’s “cash bonus,” and 100% of the Non-Employee Director’s “director’s fees.” For purposes
of the Plan, “base salary” for a given semi-annual period means an Employee’s regular salary
payable during the semi-annual period, excluding bonuses, commissions, overtime, incentive
payments, non-monetary awards, compensation deferred pursuant to all Section 125 (cafeteria) or
Section 401(k) (savings) plans of the Employer and other special compensation, and reduced by the
tax withholding obligations imposed on the Employer and any other withholding requirements imposed
by law with respect to such amounts. For purposes of the Plan, “cash bonus” shall mean amounts (if
any) awarded under the bonus policies maintained by the Employer and any commissions earned on
sales. For purposes of the Plan, “director’s fees” for a given semi-annual period means
the annual retainer, per meeting fees, committee meeting fees, and consulting fees payable during
the semi-annual period.

          (b) Employer shall not be obligated to make any other contribution to the Plan on behalf of
any Employee at any time. Employer may make Employer Contributions to the Plan on behalf of one or
more Employees. Employer Contributions, if any, made to Accounts of the Employees shall be
determined in the sole and absolute discretion of the Employer, and may be made without regard to
whether the Employee to whose Account such contribution is credited has made, or is making,
contributions pursuant to Section 3.1(a). The Employer shall not be bound or obligated to apply
any specific formula or basis for calculating the amount of any Employer Contributions and Employer
shall have sole and absolute discretion as to the allocation of Employer Contributions among
participating Employee Accounts. The use of any particular formula or basis for making an Employer
Contribution in one year shall not bind or obligate the Employer to use such formula or basis in
any other year. Employer Contributions may be subject to a substantial risk of forfeiture in
accordance with the terms of a vesting schedule, which may be selected by the Employer in its sole
and absolute discretion.

          (c) Amounts deferred under the Plan shall be calculated and withheld from the Employee’s base
salary and/or cash bonus after such Compensation has been reduced to reflect salary reduction
contributions to the Employer’s Code Section 125 (cafeteria) and Code Section 401(k) (savings)
plans, but before any reductions for contributions to the Code Section 423 (employee stock
purchase) plan.

          (d) The Committee in its sole discretion may direct the Trustee to accept the transfer of
funds held in trust under any plan sponsored or maintained by the Employer or an

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affiliate thereof
which is an unfunded nonqualified deferred compensation plan for a select group of management and
highly compensated executives of the Employer (a “Transferor Plan”), in which case the
transferred funds (the “Transferred Amounts”) shall be held by the Trustee under and be
subject to the terms of the Plan and invested and accounted for as directed by the Committee. The
Transferred Amounts may not be transferred back to the Transferor Plan or its trust. The transfer
of such Transferred Amounts shall not cause any of the participant’s rights to
a distribution under the Plan or the Transferor Plan (including the Transferred Amounts) to be
a secured right to a distribution under either plan.

     3.2 Payment of Account Balances.

          (a) The Employee shall elect whether he or she will receive distribution of his or her
Account, subject to tax withholding requirements, (i) upon reaching a specified age, (ii) upon
passage of a specified number of years, (iii) upon termination of employment of the Employee with
Employer, (iv) upon the earlier to occur of (A) termination of employment of the Employee with
Employer or (B) passage of a specified number of years or attainment of a specified age, or
(v) upon the later to occur of (A) termination of employment of the Employee with Employer or
(B) passage of a specified number of years or attainment of a specified age, as elected by the
Employee in accordance with the form established by the Committee. Such form may permit an
election among some or all of the alternatives listed in this Section 3.2(a), as determined in the
Committee’s sole discretion. A designation of the time of distribution shall be required as a
condition of participation under this Plan. The Employee also shall elect to receive all amounts
payable to him or her in a lump sum or in equal monthly installments over a designated period of
five or ten years, pursuant to the provisions of Section 3.2(e). These elections shall be made in
accordance with Section 3.4 of this Plan.

          (b) Distributions shall be made to the maximum extent allowable under the election made by the
Employee, except that no distribution (or portion thereof) shall be made to the extent that the
receipt of such distribution, when combined with the receipt of all other “applicable employee
remuneration” (as defined in Code Section 162(m)(4)) would cause any remuneration received by the
Employee to be nondeductible by the Employer under Code Section 162(m)(1). Any distribution (or
portion thereof) that is delayed pursuant to the preceding sentence shall be distributed at the
earliest possible time at which the deduction limitation under Code Section 162(m)(1) would not
apply.

          (c) Upon termination of the Employee’s employment with Employer by reason of death or
Permanent Disability prior to the time when payment of Account balances otherwise would commence
under the provisions of Section 3.2(a), the Employee or the Employee’s designated Beneficiary will
receive all amounts credited to the Employee’s Account as of the date of his or her death or
Permanent Disability (notwithstanding any contrary election to receive distributions under the
first sentence of Section 3.2(a)) in a lump sum, distributed not after the later of (i) 90 days
following the date of the Employee’s death or Permanent Disability, or (ii) the last day of the
Employee’s taxable year in which the death or Permanent Disability occurs. Upon termination of the
Employee’s employment with Employer by reason other than death or Permanent Disability prior to the
date when payment of Account balances otherwise would commence under the provisions of
Section 3.2(a), the Employee will receive (or, in the case of installment payments, will commence
receiving) all amounts credited to the Employee’s

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Account as of the date of termination of
employment (notwithstanding any contrary election to receive distributions under the first sentence
of Section 3.2(a)) in the form determined pursuant to the provisions of Section 3.2(e), distributed
not after the later of (i) 90 days following the date of the Employee’s termination of employment,
or (ii) the last day of the Employee’s
taxable year in which the termination of employment occurs; provided further, however, that if the Employee
is a Specified Employee, then, such amounts may not be distributed until at least six months
following his or her termination of employment.

          (d) Upon the death of the Employee prior to complete distribution to him or her of the entire
balance of his or her Account (and after the date of termination of employment with Employer), the
balance of his or her Account on the date of death shall be payable to the Employee’s designated
Beneficiary in the form of a lump sum as soon as administratively practicable following the
Employee’s death.

          (e) The Employer shall distribute or direct distribution of the balance of amounts previously
credited to the Employee’s Account, in a lump sum, or in monthly installments over a period of five
(5) years or ten (10) years, as the Employee shall designate. A designation of the form of
distribution shall be required as a condition of participation under this Plan. Distribution of
the lump sum or the first installment shall be made or commence within ninety (90) days following
the date specified in the first sentence of Section 3.2(a), or as otherwise provided in 3.2(c).
Subsequent installments, if any, shall be made on the first business day of each month following
the last installment. The amount of each installment shall be calculated by dividing the Account
balance as of the date of the distribution by the number of installments remaining pursuant to the
Employee’s distribution election. Each such installment, if any, shall take into account earnings
credited to the balance of the Account remaining unpaid. The Employee’s distribution election
shall be made on a form provided by Employer.

          Notwithstanding any provision herein to the contrary, any Transferred Amounts shall be
distributable under the Plan according to the terms of the elections permitted and made by the
participant under the applicable Transferor Plan unless subsequently modified by the participant as
permitted under this Plan.

          (f) For purposes of this Section 3.2, reference to termination of employment shall mean a
“separation from service” (as such term is defined under Section 409A of the Code).
Notwithstanding any other provision of the Plan to the contrary, payments to Specified Employees
upon a termination of employment shall be delayed six months to the extent required under Section
409A of the Code. Amounts delayed pursuant to the preceding sentence shall be paid in a lump sum
on or as soon as administratively practicable after the first day of the seventh month.

          (g) Notwithstanding any other provision in Section 3.8 to the contrary, the Employee must
direct the sale of Account assets within fifteen (15) days following a written (or electronic)
request by the Committee or its delegate, or, within such shorter time period as the Committee or
its delegate may specify; provided, however, that such notice period may not be less than
forty-eight (48) hours.

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          Upon failure to respond in the specified timeframe, and pursuant to its authority described in
Section 3.8(c), the Committee or its delegate shall direct, and the Trustee shall sell, a portion
of each asset in the Account calculated by dividing the value of each asset by the number of
remaining installments pursuant to the Employee’s distribution election.

          By failing to respond to the written request within the time specified in this paragraph, the
Employee waives any and all rights against the Committee or its delegate in respect of the
Committee’s direction of a trade in the Employee’s Account pursuant to this Section 3.2(g).

     3.3 Election to Defer. Each election of an Employee to defer Compensation under this
Plan shall be in writing, signed by the Employee, and delivered to Employer, together with all
other documents required under the provisions of this Plan, within such time as determined by the
Committee and communicated to those Employees who are eligible to participate in the Plan. Such
deferral elections must be delivered to Employer prior to the beginning of the Plan Year with
respect to which the Compensation to be deferred is otherwise payable to the Employee and shall be
irrevocable. An Employee who is hired or promoted to a position of eligibility for participation
in the Plan during a Plan Year or a Non-Employee Director who is elected to become a Non-Employee
Director shall have thirty (30) days from the date of notification of eligibility for participation
in the Plan (or any other plan aggregated with the Plan under Code Section 409A) in which to submit
the required election documents for the then-current semi-annual period and any other semi-annual
period within that same Plan Year. Any deferral election made by the Employee shall be irrevocable
with respect to any Compensation covered by such election, including Compensation payable in the
semi-annual period in which the election suspending or modifying the prior deferral election is
delivered to Employer. The Employer shall withhold the amount or percentage of base salary
specified to be deferred in equal amounts for each payroll period and shall withhold the amount or
percentage of each cash bonus specified to be deferred at the time or times such bonus is or
otherwise would be paid to the Employee. The election to defer Compensation shall be made on the
form provided by Employer. The Employer shall withhold the amount or percentage of director’s fees
specified to be deferred at the time or times such director’s fees are or otherwise would be paid
to the Non-Employee Director.

     3.4 Distribution Election. The initial distribution election of an Employee shall be
in writing, signed by the Employee, and delivered to Employer, together with all other documents
required under the provisions of this Plan, within such period of time determined by the Employer
and communicated to those Employees who are eligible to participate in the Plan. Such distribution
elections must be delivered to the Employer prior to the beginning of the first Plan Year in which
the Employee is eligible to participate in the Plan. Provided, however, that an Employee who is
hired or promoted to a position of eligibility for participation in the Plan or a Non-Employee
Director who is elected to become a Non-Employee Director during a Plan Year shall have thirty (30)
days from the date of notification of eligibility for participation in the Plan (or any other plan
aggregated with the Plan under Code Section 409A) in which to submit the required distribution
election documents.

     If permitted by the Committee, an Employee may change the terms of his or her initial
distribution election by making a new election. Such distribution election change shall be

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effective only if (i) the Employee makes such election at least one year prior to the date the
previously elected payment or payments were to commence, (ii) the change does not take effect
until at least one year after the Employee submits the revised election form; and (iii) the
change provides for the deferral of the date of the payment for a minimum of five additional years.
For purposes of the 5-year re-deferral limitation set forth in clause (iii) of the preceding
sentence, distributions payable in installments (as opposed to a lump sum) shall be treated as a
single payment payable on the date the installments are due to commence. An Employee may not make
a new election once distributions from the Plan have commenced or which would first become
effective at a time when distributions from the Plan have commenced. An Employee’s distribution
election shall be in the form established by the Committee in accordance with the terms of the
Plan.

     3.5 Payment Upon Change in Control. Notwithstanding any other provisions of this Plan
(including without limitation Section 3.4), the aggregate balance credited to and held in the
Employees’ Accounts shall be distributed to the Employees in a lump sum not later than the
thirtieth day following a Change in Control unless the Committee, the Board of Directors of the
Employer, or the 401(k)/NQDC Administrative Committee of the Employer (as each is composed
immediately prior to such Change in Control), in the sole discretion of any of the foregoing,
decides prior to that date that the Employees’ Accounts shall remain in the Plan.

     3.6 Hardship.

          (a) An Employee may apply for distributions from his or her Account to the extent that the
Employee demonstrates to the reasonable satisfaction of the Committee that he or she needs the
funds due to Hardship. For purposes of this Section 3.6, a distribution is made on account of
Hardship only if the distribution is made on account of an unforeseeable immediate and heavy
emergency financial need of the Employee and is necessary to satisfy that emergency financial need.
Whether an Employee has an immediate and heavy emergency financial need shall be determined by the
Committee based on all relevant facts and circumstances, and shall include, but not be limited to,
the need to pay funeral expenses or for medical care for the Employee, the Employee’s spouse, the
Employee’s Beneficiary, or any dependent of the Employee (as defined in Section 152 of the Code,
without regard to Section 152(b)(1), (b)(2), and (d)(1)(B)) resulting from sudden unexpected
illness or accident; payments necessary to prevent the eviction of the Employee from the Employee’s
principal residence or foreclosure on the mortgage on that residence; or other similar
extraordinary and unforeseeable circumstances arising as a result of events beyond the control of
the Employee. A Hardship distribution shall not exceed the amount required to relieve the
financial need of the Employee, nor shall a Hardship distribution be made if the need may be
satisfied from other resources reasonably available to the Employee. For purposes of this
paragraph, an Employee’s resources shall be deemed to include those assets of the Employee’s spouse
and minor children that are reasonably available to the Employee. Prior to approving a Hardship
distribution, Employer shall require the Employee to certify in writing that the Employee’s
financial need cannot reasonably be relieved:

          (i) through reimbursement or compensation by insurance or otherwise or

8

 

          (ii) by other distributions or nontaxable (at the time of the loan) loans from plans
maintained by the Employer or by any other employer, or by borrowing from commercial sources
on reasonable commercial terms, in an amount sufficient to satisfy the need.

          (b) Any Employee receiving a Hardship distribution under this section shall be ineligible to
defer any additional compensation under the Plan until the first day of the Plan Year following the
second anniversary of the date of the distribution. In addition, a new Election of Deferral must
be submitted to the Employer as a condition of participation in the Plan.

     3.7 Employee’s Right Unsecured. The right of the Employee or his or her designated
Beneficiary to receive a distribution hereunder shall be an unsecured claim against the general
assets of the Employer, and neither the Employee nor his or her designated Beneficiary shall have
any rights in or against any amount credited to his or her Account or any other specific assets of
the Employer, except as otherwise provided in the Trust. Nothing contained in this Plan, and no
action taken pursuant to its provisions, shall create or be construed to create a trust of any kind
or a fiduciary relationship between the Plan and the Employer or any other person.

     3.8 Investment of Contribution.

          (a) The investment options available to each Employee shall be determined by the Employer and
set forth in a separate written document, a copy of which shall be attached hereto and by this
reference is incorporated herein. Each Employee shall have the sole and exclusive right to direct
the Trustee as to the investment of his or her Accounts in accordance with policies arid procedures
implemented by the Trustee. The right of an Employee to direct the investment of his or her
Account into one or more of the available investment options shall not in any way be considered to
alter the fact that an Account is a bookkeeping account only that measures the Employer’s
obligation to pay benefits hereunder, that the assets being invested at the direction of an
Employee are assets of the Employer and that the Employee’s rights under the Plan remain those of
an unsecured, general creditor of the Employer.

          Employer shall not be liable for any investment decision made by any Employee while such funds
are held by the Trustee.

          (b) Accounts shall be credited with the actual financial performance or earnings generated by
such investments directed by the Employee and made by the Trustee, until the Account has been fully
distributed to the Employee or to the Employee’s designated Beneficiary.

          (c) Notwithstanding any other provision in this Section 3.8 to the contrary, the Committee may
determine not to take account of the Employee’s designated investments and
determine to have the Employee’s Account invested in any other manner as the Committee shall
determine.

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SECTION 4

DESIGNATION OF BENEFICIARY

     4.1 Designation of Beneficiary. The Employee may designate a Beneficiary or
Beneficiaries to receive all amounts, if any, due hereunder to the Employee but unpaid at the time
of the Employee’s death by written notice thereof to Employer at any time prior to the Employee’s
death and may revoke or change the Beneficiary designated therein without the Beneficiary’s consent
by written notice delivered to Employer at any time and from time to time prior to the Employee’s
death. If the Employee is married and a resident of a community property state, one half of any
amount due hereunder which is the result of an amount contributed to the Plan during such marriage
is the community property of the Employee’s spouse and the Employee may designate a Beneficiary or
Beneficiaries to receive only the Employee’s one-half interest. If the Employee shall have failed
to designate a Beneficiary, or if no such Beneficiary shall survive him or her, then such amount
shall be paid to his or her estate. Designations of Beneficiaries shall be made on the form
provided by Employer.

SECTION 5

TRUST PROVISIONS

     5.1 Trust Agreement. The Employer may establish the Trust for the purpose of
retaining assets set aside by Employer pursuant to the Trust Agreement for payment of all or a
portion of the amounts payable pursuant to the Plan. Any benefits not paid from the Trust shall be
paid solely from Employer’s general funds, and any benefits paid from the Trust shall be credited
against and reduce by a corresponding amount the Employer’s liability to the Employees under the
Plan. No special or separate fund, other than the Trust Agreement, shall be established and no
other segregation of assets shall be made to assure the payment of any benefits hereunder. All
Trust Funds shall be subject to the claims of general creditors of the Employer in the event the
Employer is Insolvent as defined in Section 3 of the Trust Agreement. The obligations of the
Employer to pay benefits tinder the Plan constitute an unfunded, unsecured promise to pay and the
Employees shall have no greater rights than general creditors of the Employer.

SECTION 6

AMENDMENT, TERMINATION AND TRANSFERS BY COMMITTEE

     6.1 Amendment. The Committee shall have the right to amend this Plan at any time and
from time to time, including a retroactive amendment. Any such amendment shall come effective upon
the date stated therein, and shall be binding on all Employees, except as otherwise provided in
such amendment; provided, however, that said amendment shall not affect adversely benefits payable
to an affected Employee without the Employee’s written approval.

     6.2 Termination. The Committee shall have the right to terminate this Plan at any
time and direct the lump sum payments of all assets held by the Trust if the Employer is not
Insolvent (as defined in Article 3 of the Trust Agreement) at that time. In addition, upon any
termination of this Plan, to the extent permissible under Section 409A of the Code without the

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imposition of any additional or accelerated taxes under Section 409A of the Code, the Employer may
in its sole discretion, accelerate the payment of amounts credited as of the date of termination of
this Plan; provided that all such distributions (i) commence no earlier than the date that is
twelve (12) months following the date of such termination (or such earlier date permitted under
Section 409A of the Code without the imposition of any additional or accelerated taxes under
Section 409A of the Code), and (ii) are completed by the date that is twenty-four (24) months
following the date of such termination (or such later date permitted under Section 409A of the Code
without the imposition of any additional or accelerated taxes under Section 409A of the Code). In
addition, payments may be accelerated upon Plan termination as provided above only if, to the
extent required under Code Section 409A, (i) all other nonqualified deferred compensation “account
balance plans” (as such term is defined under Code Section 409A), in which any Participant
hereunder participates are terminated along with this Plan, and (ii) the Employer does not adopt
any new nonqualified deferred compensation “account balance plan” (as such term is defined under
Code Section 409A), for five years following the date of such Plan termination.

     6.3 Transfers by Committee.

          (a) In the event that an Employee transfers employment from the Employer to an Affiliate, the
Committee shall have the right, but no obligation, to direct the Trustee to transfer funds in an
amount equal to the amount credited to such Employee’s Account (the “Transferred Account”)
to a trust established under a Transferee Plan maintained by such Affiliate. The Committee shall
determine, in its sole discretion, whether such transfer shall be made and the timing of such
transfer. Such transfer shall be made only if, and to the extent, approval of such transfer is
obtained from the Trustee.

          (b) For purposes of this Section 6.3, “Transferee Plan” shall mean an unfunded,
nonqualified deferred compensation plan described in Section 201(2), 301(a)(3) and 401(a)(1) of the
Employee Retirement Income Security Act of 1974 (“ERISA”).

          (c) No transfer shall be made under this Section 6.3 unless the Employee for whose benefit the
Transferred Account is held executes a written waiver of all of such Employee’s rights and benefits
under this Plan in such form as shall be acceptable to the Committee.

SECTION 7

ADMINISTRATION

     7.1 Administration. The Committee shall administer and interpret this Plan in
accordance with the provisions of the Plan and the Trust Agreement. Any determination or decision
by the Committee shall be conclusive and binding on all persons who at any time have or claim to
have any interest whatever under this Plan. The Committee may employ legal counsel, consultants,
actuaries and agents as it may deem desirable in the administration of the Plan and may rely on the
opinion of such counsel or the computations of such consultant or other agent. The Committee shall
have the authority to delegate some or all of the powers and

11

 

responsibilities under the Plan and
the Trust Agreement to such person or persons as it shall deem necessary, desirable or appropriate
for administration of the Plan.

     7.2 Liability of Committee; Indemnification. To the maximum extent not prohibited by
law, no member of the Committee shall be liable to any person and in any event shall be indemnified
by the Employer for any action taken or omitted in connection with the interpretation and
administration of this Plan unless attributable to his or her own bad faith or willful misconduct.

     7.3 Expenses. The costs of the establishment of the Plan and the adoption of the Plan
by Employer, including but not limited to legal and accounting fees, shall be borne by Employer.
The expenses of administering the Plan and the Trust shall be borne by the Trust unless the
Employer elects in its sole discretion to pay some or all of those expenses; provided, however,
that Employer shall bear, and shall not be reimbursed by, the Trust for any tax liability of
Employer associated with the investment of assets by the Trust.

SECTION 8

GENERAL AND MISCELLANEOUS

     8.1 Rights Against Employer. Except as expressly provided by the Plan, the
establishment of this Plan shall not be construed as giving to any Employee or to any person
whomsoever, any legal, equitable or other rights against the Employer, or against its officers,
directors, agents or shareholders, or as giving to any Employee or Beneficiary any equity or other
interest in the assets, business or shares of Employer stock or giving any Employee the right to be
retained in the employment of the Employer. Neither this Plan nor any action taken hereunder shall
be construed as giving to any Employee the right to be retained in the employ of the Employer or as
affecting the right of the Employer to dismiss any Employee. Any benefit payable under the Plan
shall not be deemed salary or other compensation for the purpose of computing benefits under any
employee benefit plan or other arrangement of the Employer for the benefit of its Employees.
Nothing in the Plan or in any instrument executed pursuant thereto shall confer upon any Non-Employee Director any
right to continue in the service of the Employer in any capacity or shall affect any right of the
Employer, its Board of Directors or stockholders to remove any Non-Employee Director pursuant to
the Employer’s By-Laws and the provisions of the Delaware General Corporation Law.

     8.2 Assignment or Transfer. No right, title or interest of any kind in the Plan shall
be transferable or assignable by any Employee or Beneficiary or be subject to alienation,
anticipation, encumbrance, garnishment, attachment, execution or levy of any kind, whether
voluntary or involuntary, nor subject to the debts, contracts, liabilities, engagements, or torts
of the Employee or Beneficiary. Any attempt to alienate, anticipate, encumber, sell, transfer,
assign, pledge, garnish, attach or otherwise subject to legal or equitable process or encumber or
dispose of any interest in the Plan shall be void.

     8.3 Severability. If any provision of this Plan shall be declared illegal or invalid
for any reason, said illegality or invalidity shall not affect the remaining provisions of this
Plan but

12

 

shall be fully severable, and this Plan shall be construed and enforced as if said illegal
or invalid provision had never been inserted herein.

     8.4 Construction. The article and section headings and numbers are included only for
convenience of reference and are not to be taken as limiting or extending the meaning of any of the
terms and provisions of this Plan. Whenever appropriate, words used in the singular shall include
the plural or the plural may be read as the singular. When used herein, the masculine gender
includes the feminine gender.

     8.5 Governing Law. The validity and effect of this Plan and the rights and
obligations of all persons affected hereby shall be construed and determined in accordance with the
laws of the State of California unless superseded by federal law.

     8.6 Payment Due to Incompetence. If the Committee receives evidence that an Employee
or Beneficiary entitled to receive any payment under the Plan is physically or mentally incompetent
to receive such payment, the Committee may, in its sole and absolute discretion, direct the payment
to any other person or Trust which has been legally appointed by the courts or to any other person
determined by the Employer to be a proper recipient on behalf of such person otherwise entitled to
payment, or any of them, in such manner and proportion as the Employer may deem proper. Any such
payment shall be in complete discharge of the Employer’s obligations under this Plan.

     8.7 Tax . The Employer may withhold from any benefits payable under this Plan, all federal, state,
city or other taxes as shall be required pursuant to any law or governmental regulation or ruling.

     8.8 Attorney’s Fees. Employer shall pay the reasonable attorney’s fees incurred by
any Employee in an action brought against Employer to enforce the Employee’s rights under the Plan,
provided that such fees shall only be payable in the event that the Employee prevails in such
action.

     8.9 Plan Binding on Successors/Assignees. This Plan shall be binding upon and inure
to the benefit of the Employer and its successor and assigns and the Employee and the Employee’s
designee and estate.

     The Employer has caused its authorized officer to execute this amended and restated Plan this
      day of                     ,      , but to be effective as of January 1, 2009.

	 	 	 	 	 	 	 
	 	 	CADENCE DESIGN SYSTEMS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

13

 

APPENDIX 1

ACKNOWLEDGMENT

     The undersigned Employee hereby acknowledges that Employer has selected him or her as a
participant in the Cadence Design Systems, Inc. 2009 Deferred Compensation Plan, subject to all
terms and conditions of the Plan, a copy of which has been received, read, and understood by the
Employee in conjunction with executing this Acknowledgment. The Employee acknowledges that he or
she has had satisfactory opportunity to ask questions regarding his or her participation in the
Plan and has received satisfactory answers to any questions asked. The Employee also acknowledges
that he or she has sufficient knowledge and experience in financial and business matters to be
capable of evaluating the merits and risks of participation in the Plan. The Employee understands
that his or her participation in the Plan shall not begin until this Acknowledgment has been signed
by the Employee and returned to Employer.

	 	 	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	Signed:	 	 	 	 
	 

	 	 

	 	 
	 	 	 	 

Employee
	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	CADENCE DESIGN SYSTEMS, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	Signed:	 	 	 	 
	 

	 	 

	 	 
	 	 	 	 

[Officer]
	 	 

2-1

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