Document:

exv10w05

Exhibit 10.05

	To:  	 	Cadence Design Systems, Inc.

2655 Seely Avenue, Building 5

San Jose, CA 95134

Attention: Office of the General Counsel
	 
	From:  	 	Morgan Stanley & Co. International plc

c/o Morgan Stanley & Co. Inc.

1585 Broadway, 5th Floor

New York, NY 10036
	 
	Re:  	 	Additional Convertible Bond Hedge Transaction
	 
	Ref. No:  	 	6537190
	 
	Date:  	 	June 18, 2010

Dear Sir(s):

     The purpose of this communication (this “Confirmation”) is to set forth the terms and
conditions of the above-referenced transaction entered into on the Trade Date specified below (the
“Transaction”) between Morgan Stanley & Co. International plc (“Dealer”), through its agent Morgan
Stanley & Co. Incorporated, and Cadence Design Systems, Inc. (“Counterparty”). This communication
constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below. This
Confirmation shall replace any previous agreements and serve as the final documentation for the
Transaction.

     1. This Confirmation is subject to, and incorporates, the definitions and provisions of the
2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the
International Swaps and Derivatives Association, Inc. (“ISDA”). Certain defined terms used herein
have the meanings assigned to them in the Indenture dated as of the closing date of the initial
issuance of the Convertible Securities described below between Counterparty and Deutsche Bank Trust
Company Americas, as trustee (the “Indenture”), relating to the USD 300,000,000 principal amount of
2.625% cash convertible senior notes due June 1, 2015 and the additional USD 50,000,000 principal
amount of 2.625% cash convertible senior notes due June 1, 2015 issued pursuant to the
over-allotment option exercised on the date hereof (the “Convertible Securities”). In the event of
any inconsistency between the terms defined in the Indenture and this Confirmation, this
Confirmation shall govern. The parties acknowledge that this Confirmation is entered into on the
date hereof with the understanding that (i) definitions set forth in the Indenture which are also
defined herein by reference to the Indenture and (ii) sections of the Indenture that are referred
to herein will conform to the descriptions thereof in the Offering Memorandum dated June 9, 2010
(the “Offering Memorandum”). If any such definitions in the Indenture or any such sections of the
Indenture differ from the descriptions thereof in the Offering Memorandum, the descriptions thereof
in the Offering Memorandum will govern for purposes of this Confirmation. Subject to the foregoing,
references to the Indenture herein are references to the Indenture as in effect on the date of its
execution, and if the Indenture is amended, modified or supplemented following its execution, any
such amendment, modification or supplement will be disregarded for purposes of this Confirmation
(other than for purposes of Section 8(b) below) unless the parties agree otherwise in writing. The
Transaction is subject to early unwind if the closing of the Convertible Securities is not
consummated for any reason, as set forth below in Section 8(h).

     Each party is hereby advised, and each such party acknowledges, that the other party has
engaged in, or refrained from engaging in, substantial financial transactions and has taken other
material actions in reliance upon the parties’ entry into the Transaction to which this
Confirmation relates on the terms and conditions set forth below.

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     This Confirmation evidences a complete and binding agreement between Dealer and
Counterparty as to the terms of the Transaction to which this Confirmation relates. This
Confirmation shall be subject to an agreement (the “Agreement”) in the form of the 1992 ISDA Master
Agreement (Multicurrency—Cross Border) as if Dealer and Counterparty had executed an agreement in
such form on the date hereof (but without any Schedule except for (i) the election of Loss and
Second Method and US Dollars (“USD”) as the Termination Currency, (ii) the replacement of the word
“third” in the last line of Section 5(a)(i) of the Agreement with the word “second” and (iii) such
other elections as set forth in this Confirmation.

     All provisions contained in, or incorporated by reference to, the Agreement will govern
this Confirmation except as expressly modified herein. In the event of any inconsistency between
this Confirmation and either the Equity Definitions or the Agreement, this Confirmation shall
govern.

     The Transaction hereunder shall be the sole Transaction under the Agreement. If there exists
any ISDA Master Agreement between Dealer and Counterparty or any confirmation or other agreement
between Dealer and Counterparty pursuant to which an ISDA Master Agreement is deemed to exist
between Dealer and Counterparty, then notwithstanding anything to the contrary in such ISDA Master
Agreement, such confirmation or agreement or any other agreement to which Dealer and Counterparty
are parties, the Transaction shall not be considered a Transaction under, or otherwise governed by,
such existing or deemed ISDA Master Agreement.

     2. The Transaction constitutes a Share Option Transaction for purposes of the Equity
Definitions. The terms of the particular Transaction to which this Confirmation relates are as
follows:

	 	 	 

	General Terms:

	 	
	 
	 	 
	Trade Date:

	 	June 18, 2010
	 
	 	 
	Effective Date:

	 	The closing date of the Convertible Securities issued
pursuant to the over-allotment option exercised on
the date hereof.
	 
	 	 
	Option Style:

	 	Modified American, as described under “Procedures
for Exercise” below.
	 
	 	 
	Option Type:

	 	Call
	 
	 	 
	Seller:

	 	Dealer
	 
	 	 
	Buyer:

	 	Counterparty
	 
	 	 
	Shares:

	 	The Common Stock of Counterparty, par value USD
0.01 per share (Ticker Symbol: “CDNS”).
	 
	 	 
	Number of Options:

	 	The number of Convertible Securities in
denominations of USD 1,000 principal amount
purchased by the Initial Purchasers (as defined in the
Purchase Agreement) at their option exercised on the
date hereof pursuant to the second paragraph of
Section 2 of the Purchase Agreement (as defined
below). For the avoidance of doubt, the Number of
Options outstanding shall be reduced by each
exercise of Options hereunder.
	 
	 	 
	Applicable Percentage:

	 	10%
	 
	 	 
	Option Entitlement:

	 	As of any date, a number of Shares per Option equal
to the “Conversion Rate” (as defined in the
Indenture), but without regard to any adjustments to
the Conversion Rate as set forth in Section 13.02 of

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	 	the Indenture (a “Make-Whole Fundamental Change Adjustment”) or a discretionary adjustment
as set forth in Section 13.04(g) of the Indenture (a
“Discretionary Adjustment”).
	 
	 	 
	Strike Price:

	 	As of any date, an amount in USD, rounded to the
nearest cent (with 0.5 cents being rounded upwards),
equal to USD 1,000 divided by the Option
Entitlement as of such date.
	 
	 	 
	Number of Shares:

	 	As of any date, the product of the Number of
Options, the Option Entitlement and the Applicable
Percentage.
	 
	 	 
	Premium:

	 	USD 1,173,500.00.
	 
	 	 
	Premium Payment Date:

	 	The Effective Date
	 
	 	 
	Exchange:

	 	NASDAQ Global Select Market
	 
	 	 
	Related Exchange:

	 	All Exchanges
	 
	 	 
	Procedures for Exercise:
	 	 
	 
	 	 
	Exercise Dates:

	 	Each Conversion Date.
	 
	 	 
	Conversion Date:

	 	Each “Conversion Date” (as defined in the Indenture)
occurring during the Exercise Period for Convertible
Securities, excluding (A) Convertible Securities
(“Exchanged Convertible Securities”) (i) with
respect to which Counterparty has elected the
“Exchange in Lieu of Conversion” option to
designate a financial institution to deliver the
consideration due upon any conversion of any
Convertible Securities in exchange for such
Convertible Securities and (ii) that have been
accepted by the designated financial institution
pursuant to Section 13.09 of the Indenture and (B)
Convertible Securities that are “Relevant Convertible
Securities” under (and as defined in) the Base
Convertible Bond Hedge Transaction dated June 9,
2010 (Ref. No. 6537190) between Dealer and
Counterparty (the “Base Convertible Bond Hedge
Transaction Confirmation”) (such Convertible
Securities, the “Relevant Convertible Securities”
for such Conversion Date). For the purpose of
determining whether any Convertible Securities will
be Relevant Convertible Securities hereunder or
“Relevant Convertible Securities” under the Base
Convertible Bond Hedge Transaction Confirmation,
Convertible Securities that are converted pursuant to
the Indenture shall be allocated first to the Base
Convertible Bond Hedge Transaction Confirmation
until all Options thereunder are exercised or
terminated.
	 
	 	 
	 

	 	If such designated financial institution fails to deliver
the consideration due upon such conversion and, as a
result, Counterparty is required to deliver such
consideration pursuant to Section 13.09(e) of the

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	 	Indenture, Counterparty shall, promptly following
such failure, notify Dealer in writing of such failure
and the number of Exchanged Convertible Securities
affected by such failure (such notice, a “Failed
Exchange Notice”). The receipt by Dealer of a
Failed Exchange Notice shall constitute an
Additional Termination Event in respect of which
Dealer shall designate an Exchange Business Day
within a commercially reasonable period of time
following receipt of such Failed Exchange Notice
(which in no event shall be earlier than the related
settlement date for the Exchanged Convertible
Securities) as an Early Termination Date with respect
to a portion of the Transaction corresponding to a
number of Options (the “Cancelled Options”) equal
to the lesser of (A) the number of such Exchanged
Convertible Securities specified in such Failed
Exchange Notice minus the number of Cancelled
Options (as defined in the Base Convertible Bond
Hedge Transaction Confirmation), if any, that relate
to such Exchanged Convertible Securities and (B) the
Number of Options as of the date Dealer designates
such Early Termination Date and, as of such date, the
Number of Options shall be reduced by the number
of Cancelled Options. Any payment hereunder with
respect to such termination shall be calculated
pursuant to Section 6 of the Agreement as if (1) an
Early Termination Date had been designated in
respect of a Transaction having terms identical to this
Transaction and a Number of Options equal to the
number of Cancelled Options, (2) Counterparty were
the sole Affected Party with respect to such
Additional Termination Event and (3) the terminated
portion of the Transaction were the sole Affected
Transaction.
	 
	 	 
	Exercise Period:

	 	The period from and excluding the Effective Date to
and including the Expiration Date.
	 
	 	 
	Expiration Date:

	 	The earlier of (i) the last day on which any
Convertible Securities remain outstanding and (ii) the
“Maturity Date” (as defined in the Indenture).
	 
	 	 
	Automatic Exercise on
Conversion Dates:

	 	Applicable; and means that on each Conversion Date,
a number of Options equal to the number of Relevant
Convertible Securities for such Conversion Date in
denominations of USD1,000 principal amount shall
be automatically exercised, subject to “Notice of
Exercise” below.
	 
	 	 
	Notice Deadline:

	 	In respect of any exercise of Options hereunder on
any Conversion Date, 5:00 P.M., New York City
time, on the Exchange Business Day prior to the first
“Scheduled Trading Day” of the “Observation
Period” (each as defined in the Indenture) with

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	 	respect to the Relevant Convertible Securities for
such Conversion Date; provided that in the case of
any exercise of Options hereunder in connection with
the conversion of any Relevant Convertible
Securities on any Conversion Date occurring during
the period beginning on, and including, March 1,
2015 and ending on, and including, the second
“Scheduled Trading Day” (as defined in the
Indenture) immediately preceding the Maturity Date
(such period, the “Final Convertibility Period”), the
Notice Deadline shall be 5:30 P.M., New York City
time, on the second “Scheduled Trading Day”
immediately preceding the Maturity Date.
	 
	 	 
	Notice of Exercise:

	 	Notwithstanding anything to the contrary in the
Equity Definitions, Dealer shall have no obligation to
make any payment in respect of any exercise of
Options hereunder unless Counterparty notifies
Dealer in writing prior to the Notice Deadline in
respect of such exercise of (i) the number of Options
being exercised on such Exercise Date, (ii) the
scheduled settlement date under the Indenture for the
Relevant Convertible Securities for the Conversion
Date corresponding to such Exercise Date, and (iii)
the first “Scheduled Trading Day” (as defined in the
Indenture) of the Observation Period; provided that,
notwithstanding the foregoing, such notice (and the
related Automatic Exercise of Options) shall be
effective if given after the Notice Deadline but prior
to 5:00 P.M., New York City time, on the fifth
Exchange Business Day of such Observation Period,
in which event the Calculation Agent shall have the
right to adjust the Convertible Obligation (as defined
below) as appropriate to reflect the additional costs
(including, but not limited to, hedging mismatches
and market losses) and reasonable expenses incurred
by Dealer in connection with its hedging activities
(including the unwinding of any hedge position) as a
result of its not having received such notice prior to
the Notice Deadline; provided, further, that in the
case of any exercise of Options hereunder in
connection with the conversion of any Relevant
Convertible Securities on any Conversion Date
occurring during the Final Convertibility Period, the
contents of such notice shall be as set forth in clause
(i) above; and provided, further, that any “Notice of
Exercise” delivered to Dealer pursuant to the Base
Convertible Bond Hedge Transaction Confirmation
shall be deemed to be a Notice of Exercise pursuant
to this Confirmation and the terms of such Notice of
Exercise shall apply, mutatis mutandis, to this
Confirmation. For the avoidance of doubt and
subject to the first proviso in the immediately
preceding sentence, if Counterparty fails to give such
notice when due in respect of any exercise of Options

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	 	hereunder, Dealer’s obligation to make any payment
in respect of such exercise shall be permanently
extinguished, and late notice shall not cure such
failure.
	 
	 	 
	Dealer’s Telephone Number
and Telex and/or Facsimile Number
and Contact Details for purpose of
Giving Notice:

	 	As specified in Section 6(b) below.
	 
	 	 
	Settlement Terms:
	 	 
	 
	 	 
	Settlement Method:

	 	Cash Settlement.
	 
	 	 
	Settlement Date:

	 	In respect of an Exercise Date occurring on a
Conversion Date, the settlement date for the cash to
be paid in respect of the Relevant Convertible
Securities converted on such Conversion Date
pursuant to Section 13.03(a) or 13.02(b) of the
Indenture, as the case may be; provided that the
Settlement Date will not be prior to the Exchange
Business Day immediately following the date
Counterparty provides the Notice of Delivery
Obligation prior to 5:00 P.M., New York City time.
	 
	 	 
	Delivery Obligation:

	 	In lieu of the obligations set forth in Section 8.1 of
the Equity Definitions, and subject to “Notice of
Exercise” above, in respect of an Exercise Date
occurring on a Conversion Date, Dealer will pay to
Counterparty, on the related Settlement Date, an
amount of cash in USD equal to the product of (i) the
Applicable Percentage and (ii) the aggregate amount
of cash, if any, in excess of USD1,000 per
Convertible Security (in denominations of
USD1,000) that Counterparty would be obligated to
pay to holder(s) of the Relevant Convertible
Securities for such Conversion Date pursuant to
Section 13.03(a) of the Indenture (the “Convertible
Obligation”); provided that such obligation shall be
determined excluding any cash that Counterparty is
obligated to pay to holder(s) of the Relevant
Convertible Securities as a result of any adjustments
to the Conversion Rate pursuant to a Make-Whole
Fundamental Change Adjustment or a Discretionary
Adjustment and any interest payment that
Counterparty is obligated to deliver to holder(s) of
the Relevant Convertible Securities for such
Conversion Date.
	 
	 	 
	Notice of Delivery Obligation:

	 	No later than 5:00 P.M., New York City time, on the
Exchange Business Day immediately following the
last day of the relevant Observation Period,
Counterparty shall give Dealer notice of the final
amount of cash comprising the Convertible
Obligation; provided that, with respect to any
Exercise Date occurring during the Final
Convertibility Period, Counterparty may provide

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	 	Dealer with a single notice of the aggregate amount
of cash comprising the Convertible Obligations for
all Exercise Dates occurring in such period (it being
understood, for the avoidance of doubt, that the
requirement of Counterparty to deliver such notice
shall not limit Counterparty’s obligations with
respect to Notice of Exercise).
	 
	 	 
	Adjustments:
	 	 
	 
	 	 
	Method of Adjustment:

	 	Notwithstanding Section 11.2 of the Equity
Definitions (and, for the avoidance of doubt, in lieu
of any adjustments pursuant to such section), upon
the occurrence of any event or condition set forth in
Section 13.05 or sub-sections (a) through (e) of
Section 13.04 of the Indenture (each an “Adjustment
Event”) and the Calculation Agent receiving notice
of the adjustments to be made to the terms of the
Indenture and the Convertible Securities in respect of
such Adjustment Event pursuant to the succeeding
sentence, the Calculation Agent shall make a
corresponding adjustment (in respect of any such
adjustment under the Indenture) to the terms relevant
to the exercise, settlement or payment of the
Transaction; provided that, in the case of any
adjustment to the terms of the Indenture and the
Convertible Securities that involves an exercise of
discretion by Counterparty or its board of directors
(including, without limitation, pursuant to Section
13.05 of the Indenture or in connection with any
proportional adjustment or the determination of the
fair value of any securities, property, rights or other
assets), then in each such case, the Counterparty
agrees to exercise such discretion in good faith and in
a commercially reasonable manner and to promptly
provide the Calculation Agent with any additional
information it reasonably requests (in addition to any
information required to be provided pursuant to the
succeeding sentence) about the Counterparty’s
calculations and methodology for such adjustment.
Promptly upon the occurrence of any Adjustment
Event, Counterparty shall notify the Calculation
Agent of such Adjustment Event; and once the
adjustments to be made to the terms of the Indenture
and the Convertible Securities in respect of such
Adjustment Event have been determined,
Counterparty shall promptly (and in any event within
five Exchange Business Days after such
determination) notify the Calculation Agent in
writing of the details of such adjustments.

7

 

	 	 	 
	Extraordinary Events:  
	 	 
	 
	 	 
	
Merger Events:

	 	Notwithstanding Section 12.1(b) of the Equity
Definitions, a “Merger Event” means the occurrence
of any event or condition set forth in Section 10.01 or
13.06 of the Indenture.
	 
	 	 
	Consequences of Merger Events:

	 	Notwithstanding Section 12.2 of the Equity
Definitions (and, for the avoidance of doubt, in lieu
of any adjustments or other consequences pursuant to
such section), upon the occurrence of a Merger
Event, the Calculation Agent shall make a
corresponding adjustment (in respect of any
adjustment on account of such Merger Event under
the Indenture) to the terms relevant to the exercise,
settlement or payment of the Transaction; provided
that such adjustment shall be made without regard to
any adjustment to the Conversion Rate pursuant to a
Make-Whole Fundamental Change Adjustment or a
Discretionary Adjustment; and provided further that
if, with respect to a Merger Event, the consideration
for the Shares includes (or, at the option of a holder
of Shares, may include) shares (or depositary receipts
with respect to shares) of an entity or person not
organized under the laws of the United States, any
State thereof or the District of Columbia,
Cancellation and Payment (Calculation Agent
Determination) shall apply.
	 
	 	 
	Notice of Merger Consideration and
Consequences:

	 	Upon the occurrence of a Merger Event that causes
the Shares to be converted into the right to receive
more than a single type of consideration (determined
based in part upon any form of stockholder election),
Counterparty shall reasonably promptly (but in any
event on or prior to the relevant merger date) notify
the Calculation Agent of (i) the type and amount of
consideration that a holder of Shares would have
been entitled to in the case of reclassifications,
consolidations, mergers, sales or transfers of assets or
other transactions that cause Shares to be converted
into the right to receive more than a single type of
consideration, (ii) the weighted average of the types
and amounts of consideration to be received by the
holders of Shares that affirmatively make such an
election, and (iii) the details of the adjustment to be
made under the Indenture in respect of such Merger
Event.
	 
	 	 
	Nationalization, Insolvency
or Delisting:

	 	Cancellation and Payment (Calculation Agent
Determination); provided that (i) Section 12.6(a)(iii)
of the Equity Definitions shall be amended to delete,
in the definition of the term “Delisting” the
parenthetical “(or will cease)” and (ii) in addition to
the provisions of Section 12.6(a)(iii) of the Equity
Definitions, it will also constitute a Delisting if the

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	 	Exchange is located in the United States and the
Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The
NASDAQ Global Select Market or The NASDAQ
Global Market (or their respective successors); if the
Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system,
such exchange or quotation system shall thereafter be
deemed to be the Exchange.
	 
	 	 
	Additional Disruption Events:
	 	 
	 
	 	 
	(a) Change in Law:

	 	Applicable; provided that Section 12.9(a)(ii) of the
Equity Definitions is hereby amended by (i) replacing
the phrase “the interpretation” in the third line thereof
with the phrase “or announcement or statement of the
interpretation” and (ii) replacing the word “Shares”
with the phrase “Hedge Positions” in clause (X)
thereof.
	 
	 	 
	(b) Failure to Deliver:

	 	Applicable
	 
	 	 
	(c) Insolvency Filing:

	 	Applicable
	 
	 	 
	(d) Hedging Disruption:

	 	Applicable; provided that Section 12.9(a)(v) of the
Equity Definitions is hereby amended by inserting
the following proviso at the end thereof: “provided
that such inability described in clause (A) or (B) shall
not constitute a “Hedging Disruption” unless (x) such
inability does not result from factors particular to
Hedging Party (such as Hedging Party“s
creditworthiness or financial position, or particular
actions or transactions undertaken by the Hedging
Party unrelated to the hedging of the Transaction)
and (y) such inability will result in continued
performance by the Hedging Party under the
Transaction being commercially unreasonable or
commercially impracticable”.
	 
	 	 
	Hedging Party:

	 	Dealer
	 
	 	 
	Determining Party:

	 	Dealer for all applicable Additional Disruption Events
	 
	 	 
	Non-Reliance:

	 	Applicable
	 
	 	 
	Agreements and Acknowledgments
Regarding Hedging Activities:

	 	Applicable
	 
	 	 
	Additional Acknowledgments:

	 	Applicable

9

 

	 	 	 

	3. Calculation Agent:

	 	Dealer. All determinations made by the Calculation
Agent shall be made in good faith and in a
commercially reasonable manner. Following any
determination or calculation by the Calculation Agent
hereunder, upon a written request by Counterparty,
the Calculation Agent will provide to Counterparty
by e-mail to the e-mail address provided by
Counterparty in such written request a report (in a
commonly used file format for the storage and
manipulation of financial data) displaying in
reasonable detail the basis for such determination or
calculation, including, where applicable, a
description of the methodology and data applied, it
being understood that the Calculation Agent shall not
be obligated to disclose any proprietary models used
by it for such determination or calculation.

     4. Account Details:

Dealer Payment Instructions:

Citibank, N.A.

Account Name: Morgan Stanley and Co.

Counterparty Payment Instructions:

To be provided by Counterparty.

     5. Offices:

The Office of Dealer for the Transaction is: New York

Morgan Stanley & Co. International plc

c/o Morgan Stanley & Co. Inc.

1585 Broadway, 5th Floor

New York, NY 10036

Attention:      Todd Bosch

The Office of Counterparty for the Transaction is:

Inapplicable. Counterparty is not a Multibranch Party.

     6. Notices: For purposes of this Confirmation:

	 	(a)	 	Address for notices or communications to Counterparty:

	 	To:  	 	Cadence Design Systems, Inc.

2655 Seely Avenue, Building 5

San Jose, California 95134
	 
	 	Attn:  	 	Office of the General Counsel
	 
	 	Facsimile:  	 	(408) 904-6946

	 	(b)	 	Address for notices or communications to Dealer:

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	 	To: 	 	 Morgan Stanley & Co. International plc

c/o Morgan Stanley & Co. Inc.

1585 Broadway, 5th Floor

New York, NY 10036
	 
	 	Attn: 	 	 Todd Bosch
	 
	 	With a copy to:  	 	Morgan Stanley & Co. International

c/o Morgan Stanley & Co.

1221 Avenue of the Americas, 34th Floor

New York, NY 10020
	 
	 	Attn: 	 	 Todd Bosch

     7. Representations, Warranties and Agreements:

     (a) In addition to the representations and warranties in the Agreement and those contained
elsewhere herein, Counterparty represents and warrants to and for the benefit of, and agrees with,
Dealer as follows:

     (i) On the Trade Date, none of Counterparty and its officers and directors is
aware of any material nonpublic information regarding Counterparty or the Shares. On the
Trade Date, all reports and other documents filed by Counterparty with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) when considered as a whole (with the more recent such reports and documents
deemed to amend inconsistent statements contained in any earlier such reports and
documents), do not contain any untrue statement of a material fact or any omission of a
material fact required to be stated therein or necessary to make the statements therein, in
the light of the circumstances in which they were made, not misleading.

     (ii) (A) On the Trade Date, the Shares or securities that are
convertible into, or
exchangeable or exercisable for Shares, are not, and shall not be, subject to a
“restricted period,” as such term is defined in Regulation M under the Exchange Act
(“Regulation M”) and
(B) Counterparty shall not engage in any “distribution,” as such term is defined in
Regulation M, other than a distribution meeting the requirements of the exceptions set
forth in sections 101(b)(10) and 102(b)(7) of Regulation M, until the second Exchange
Business Day immediately following the Trade Date.

     (iii) Without limiting the generality of Section 13.1 of the Equity Definitions,
Counterparty acknowledges that neither Dealer nor any of its affiliates is making any
representations or warranties or taking a position or expressing any view with respect to
the treatment of the Transaction under any accounting standards, including ASC Topic 260,
Earnings Per Share, ASC Topic 815, Derivatives and Hedging, ASC Topic 480, Distinguishing
Liabilities from Equity and ASC Topic 815-40, Derivatives and Hedging — Contracts in
Entity’s Own Equity
(or any successor issue statements).

     (iv) Without limiting the generality of Section 3(a)(iii) of the Agreement, the
Transaction will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.

     (v) Counterparty is not entering into this Confirmation to create actual or apparent
trading activity in the Shares (or any security convertible into or exchangeable for
Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any
security convertible into or exchangeable for Shares) or to otherwise violate the Exchange
Act.

11

 

     (vi) Counterparty is not, and after giving effect to the transactions contemplated hereby will
not be, required to register as, an “investment company” as such term is defined in the Investment
Company Act of 1940, as amended.

     (vii) On each of the Trade Date and the Premium Payment Date, Counterparty is not
“insolvent” (as such term is defined under Section 101(32) of the U.S. Bankruptcy Code (Title 11 of
the United States Code) (the “Bankruptcy Code”)) and Counterparty would be able to purchase a
number of Shares equal to the Number of Shares plus the “Number of Shares” under the Base Bond
Hedge Transaction Confirmation in compliance with the laws of the jurisdiction of Counterparty’s
incorporation.

     (viii) Counterparty understands no obligations of Dealer to it hereunder will be entitled
to the benefit of deposit insurance and that such obligations will not be guaranteed by any
governmental agency.

     (ix) No state or local (including non-U.S. jurisdictions) law, rule, regulation or
regulatory order applicable to the Shares would give rise to any reporting, consent, registration
or other requirement (including without limitation a requirement to obtain prior approval from any
person or entity) as a result of Dealer or its affiliates owning or holding (however defined)
Shares.

     (x) The representations and warranties of Counterparty set forth in Section 3 of the
Agreement and Section 1 of the Purchase Agreement, dated as of June 9, 2010, between J.P. Morgan
Securities Inc. and Morgan Stanley & Co. Incorporated, as representatives of the Initial Purchasers
party thereto, and Counterparty (the “Purchase Agreement”) are true and correct as of the Trade
Date and the Effective Date and are hereby deemed to be repeated to Dealer as if set forth herein.

     (b) Each of Dealer and Counterparty agrees and represents that it is an “eligible contract
participant” as defined in Section 1a(12) of the U.S. Commodity Exchange Act, as amended, and is
entering into the Transaction as principal (and not as agent or in any other capacity, fiduciary or
otherwise) and not for the benefit of any third party.

     (c) Each of Dealer and Counterparty acknowledges that the offer and sale of the
Transaction to it is intended to be exempt from registration under the Securities Act of 1933, as
amended (the “Securities Act”), by virtue of Section 4(2) thereof. Accordingly, Counterparty
represents and warrants to Dealer that (i) it has the financial ability to bear the economic risk
of its investment in the Transaction and is able to bear a total loss of its investment and its
investments in and liabilities in respect of the Transaction, which it understands are not readily
marketable, are not disproportionate to its net worth, and it is able to bear any loss in
connection with the Transaction, including the loss of its entire investment in the Transaction,
(ii) it is an “accredited investor” as that term is defined in Regulation D as promulgated under
the Securities Act, (iii) it is entering into the Transaction for its own account and without a
view to the distribution or resale thereof, (iv) the assignment, transfer or other disposition of
the Transaction has not been and will not be registered under the Securities Act or any state
securities laws and is restricted under this Confirmation, the Securities Act and state securities
laws, and (v) its financial condition is such that it has no need for liquidity with respect to its
investment in the Transaction and no need to dispose of any portion thereof to satisfy any existing
or contemplated undertaking or indebtedness and is capable of assessing the merits of and
understanding (on its own behalf or through independent professional advice), and understands and
accepts, the terms, conditions and risks of the Transaction.

     (d) Each of Dealer and Counterparty agrees and acknowledges that Dealer is a “financial
institution,” “swap participant” and “financial participant” within the meaning of Sections
101(22), 101(53C) and 101(22A) of the Bankruptcy Code. The parties hereto further agree and
acknowledge (A) that this Confirmation is (i) a “securities
contract,” as such term is defined in Section 741(7) of the Bankruptcy Code, with respect to
which each payment hereunder or in connection herewith is a “termination value,” “payment amount”
or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a
“settlement payment” within the meaning of Section 546 of the Bankruptcy Code, and (ii) a “swap
agreement,” as such term is defined in Section 101(53B) of the Bankruptcy Code, with respect to
which each payment hereunder or in connection herewith is a “termination value,” “payment amount”
or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy

12

 

Code and a “transfer” within the meaning of Section 546 of the Bankruptcy Code, and (B) that
Dealer is entitled to the protections afforded by, among other sections, Sections 362(b)(6),
362(b)(17), 362(b)(27), 362(o), 546(e), 546(g), 546(j), 548(d)(2), 555, 560 and 561 of the
Bankruptcy Code.

     (e) As a condition to the effectiveness of the Transaction, Counterparty shall deliver to
Dealer an opinion of counsel, dated as of the Trade Date and reasonably acceptable to Dealer in
form and substance, with respect to the matters set forth in Section 3(a) of the Agreement, subject
to customary assumptions, qualifications and exceptions.

     8. Other Provisions:

     (a) Right to Extend. Dealer may postpone any Exercise Date or Settlement Date or any
other date of valuation or payment by Dealer, with respect to some or all of the relevant Options
(in which event the Calculation Agent shall make appropriate adjustments to the Delivery
Obligation), if Dealer determines, in its reasonable discretion and based on advice of counsel,
that such extension is reasonably necessary or appropriate to preserve Dealer’s ability to conduct
its related hedging or hedge unwind activity hereunder in light of existing liquidity conditions in
the cash market, the stock borrow market or other relevant market or to enable Dealer to effect
purchases of Shares in connection with its related hedging, hedge unwind or settlement activity
hereunder in a manner that would, if Dealer were Counterparty or an affiliated purchaser of
Counterparty, be in compliance with applicable legal, regulatory or self-regulatory requirements,
or with generally applicable related policies and procedures applicable to Dealer and applied to
this Transaction in a non-discriminatory manner.

     (b) Additional Termination Events. The occurrence of (i) an “Event of Default” with respect to
Counterparty under the terms of the Convertible Securities as set forth in the Indenture, as a
result of which the Convertible Securities are declared immediately due and payable under the terms
of the Indenture or (ii) an Amendment Event shall be an Additional Termination Event with respect
to which the Transaction is the sole Affected Transaction and Counterparty is the sole Affected
Party, and Dealer shall be the party entitled to designate an Early Termination Date pursuant to
Section 6(b) of the Agreement and to determine the amount payable pursuant to Section 6(e) of the
Agreement.

     “Amendment Event” means that Counterparty amends, modifies, supplements or obtains a
waiver in respect of any term of the Indenture or the Convertible Securities governing the
principal amount, coupon, maturity, a repurchase obligation of Counterparty, a redemption right of
Counterparty, any term relating to conversion of the Convertible Securities (including changes to
the conversion price, conversion settlement dates or conversion conditions), or any term that would
require consent of each holder of the Convertible Securities affected thereby to amend, in each
case without the prior consent of Dealer.

     Counterparty shall promptly notify Dealer in writing of any repurchase and cancellation of
Convertible Securities and the number of Convertible Securities so repurchased and cancelled (any
such notice, a “Convertible Securities Repurchase Notice”). Notwithstanding anything to the
contrary in this Confirmation, the receipt by Dealer from Counterparty of any Convertible
Securities Repurchase Notice shall constitute an Additional Termination Event as provided in this
paragraph. Upon receipt of any such Convertible Securities Repurchase Notice, Dealer shall
designate in good faith a Scheduled Trading Day that is within a commercially reasonable period of
time following such Additional Termination Event as an Early Termination Date with respect to the
portion of the Transaction corresponding to a number of Options (the “Repurchase Options”) equal
to the lesser of (A) the number of Convertible Securities specified in such Convertible Securities
Repurchase Notice minus the number of Repurchase Options (as defined in the Base Convertible Bond
Hedge Transaction Confirmation), if any, that relate to such Convertible Securities and (B) the
Number of Options as of the date Dealer designates such Early Termination Date and, as of such
date, the Number of Options shall be reduced by the number of Repurchase Options. Any payment
hereunder with respect to such termination shall be calculated pursuant to Section 6 of the
Agreement as if (1) an Early Termination Date had been designated in respect of a Transaction
having terms identical to this Transaction and a Number of Options equal to the number of
Repurchase Options, (2) Counterparty were the sole Affected Party with respect to such Additional
Termination Event and (3) the terminated portion of the Transaction were the sole Affected
Transaction.

13

 

     (c) Disposition of Hedge Shares. Counterparty hereby agrees that if, in the good faith
reasonable judgment of Dealer, the Shares (the “Hedge Shares”) acquired by Dealer for the purpose
of hedging its obligations pursuant to the Transaction cannot be sold in the U.S. public market by
Dealer without registration under the Securities Act, Counterparty shall, at its election: (i) in
order to allow Dealer to sell the Hedge Shares in a registered offering, make available to Dealer
an effective registration statement under the Securities Act to cover the resale of such Hedge
Shares and (A) enter into an agreement, in form and substance reasonably satisfactory to Dealer,
substantially in the form of an underwriting agreement for underwritten follow-on offerings of
equity securities of companies of comparable size, maturity and lines of business, (B) provide
accountant’s “comfort” letters in customary form for underwritten follow-on offerings of equity
securities, (C) provide disclosure opinions of nationally recognized outside counsel to
Counterparty reasonably acceptable to Dealer, (D) provide other customary opinions, certificates
and closing documents customary in form for underwritten follow-on offerings of equity securities
of companies of comparable size, maturity and lines of business and (E) afford Dealer a reasonable
opportunity to conduct a “due diligence” investigation with respect to Counterparty customary in
scope for underwritten follow-on offerings of equity securities of companies of comparable size,
maturity and lines of business; provided, however, that if Dealer, in its sole commercially
reasonable discretion, is not satisfied with access to due diligence materials, the results of its
due diligence investigation, or the procedures and documentation for the registered offering
referred to above, then clause
(ii) or clause (iii) of this Section 8(c) shall apply at the election of Counterparty;
(ii) in order to allow Dealer to sell the Hedge Shares in a private placement, enter into a private
placement agreement substantially similar to private placement purchase agreements customary for
private placements of equity securities, in form and substance satisfactory to Dealer, including
customary representations, covenants, blue sky and other governmental filings and/or registrations,
indemnities to Dealer, due diligence rights (for Dealer or any designated buyer of the Hedge Shares
from Dealer), opinions and certificates and such other documentation as is customary for private
placement agreements, all reasonably acceptable to Dealer (in which case, the Calculation Agent
shall make any adjustments to the terms of the Transaction that are necessary, in its reasonable
judgment, to compensate Dealer for any discount from the public market price of the Shares incurred
on the sale of Hedge Shares in a private placement); or (iii) purchase the Hedge Shares from Dealer
at the VWAP Price on such Exchange Business Days, and in the amounts, requested by Dealer. “VWAP
Price” means, on any Exchange Business Day, the per Share volume-weighted average price as
displayed under the heading “Bloomberg VWAP” on Bloomberg Screen CDNS.Q <equity> AQR (or any
successor thereto) in respect of the period from 9:30 a.m. to 4:00 p.m. (New York City time) on
such Exchange Business Day (or if such volume-weighted average price is unavailable, the market
value of one Share on such Exchange Business Day, as determined by the Calculation Agent using a
volume-weighted method).

     (d) Repurchase and Conversion Rate Adjustment Notices. Counterparty shall, on (or prior
to) any day on which Counterparty effects any repurchase of Shares or consummates or otherwise
engages in any transaction or event (a “Conversion Rate Adjustment Event”) that would lead to an
increase in the Conversion Rate, give Dealer a written notice of such repurchase or Conversion Rate
Adjustment Event (a “Repurchase Notice”) on such day if, the number of outstanding Shares as
determined on such day is
(i) less than 209,303,000 (in the case of first such notice) or (ii) thereafter more than
38,531,000 less than the number of Shares included in the immediately preceding Repurchase Notice.
In the event that Counterparty fails to provide Dealer with a Repurchase Notice on the day and in
the manner specified in this Section 8(d) then, to the extent permitted by applicable law,
Counterparty agrees to indemnify and hold harmless Dealer, its affiliates and their respective
directors, officers, employees, agents and controlling persons (Dealer and each such person being
an “Indemnified Party”) from and against any and all losses, claims, damages and liabilities (or
actions in respect thereof), joint or several, to which such Indemnified Party is subject under
applicable securities laws, including without limitation, Section 16 of the Exchange Act or under
any state or federal law, regulation or regulatory order, as a result of such failure. Counterparty
shall be relieved from liability to the extent that the Indemnified Party fails promptly to notify
Counterparty of any action commenced against it in respect of which indemnity may be sought
hereunder to the extent Counterparty is materially prejudiced as a result thereof. If for any
reason the foregoing indemnification is unavailable to any Indemnified Party or insufficient in
respect of any losses, claims, damages or liabilities referred to in this paragraph, then
Counterparty, in lieu of indemnifying such Indemnified Party hereunder, shall contribute, to the
maximum extent permitted by law, to the amount paid

14

 

or payable by the Indemnified Party as a result of such loss, claim, damage or liability. In
addition, Counterparty will reimburse, within 30 days, upon written request, any Indemnified Party
for all reasonable expenses (including reasonable counsel fees and expenses) in connection with the
investigation of, preparation for or defense or settlement of any pending or threatened claim or
any action, suit or proceeding arising therefrom, whether or not such Indemnified Party is a party
thereto and whether or not such claim, action, suit or proceeding is initiated or brought by or on
behalf of Counterparty. This indemnity shall survive the completion of the Transaction contemplated
by this Confirmation and any assignment and delegation of the Transaction made pursuant to this
Confirmation or the Agreement shall inure to the benefit of any permitted assignee of Dealer.

     (e) Transfer and Assignment. Either party may transfer any of its rights or obligations
under the Transaction with the prior written consent of the non-transferring party; provided that
(i) Dealer may transfer or assign without any consent of Counterparty its rights and obligations
hereunder, with respect to a number of Options corresponding to its Excess Ownership Position (as
defined below) plus 1% of the number of Shares then outstanding, to any person, or any person whose
obligations would be guaranteed by a person, in either case, with a rating for its long term,
unsecured and unsubordinated indebtedness of A- or better by S&P, or A3 or better by Moody’s or, if
either S&P or Moody’s ceases to rate such debt, at least an equivalent rating or better by a
substitute agency rating mutually agreed by Counterparty and Dealer, (ii) Dealer may transfer or
assign without any consent of Counterparty its rights and obligations hereunder in whole or in part
to any parent of Dealer or any subsidiary of such parent (A) the obligations of which are
guaranteed by Dealer or any parent of Dealer or (B) with a rating by Moody’s or S&P for its
long-term, unsecured and unsubordinated debt that is equal to or greater than Dealer’s at the time
of such transfer or assignment and (iii) Counterparty may assign its rights and obligations
hereunder to the extent permitted in the next paragraph of this Section 8(e). If at any time at
which (1) the Equity Percentage exceeds 8.5%,
(2) the Option Equity Percentage exceeds 14.5% or (3) Dealer, Dealer Group (as defined below) or
any person whose ownership position would be aggregated with that of Dealer or Dealer Group
(Dealer, Dealer Group or any such person, a “Dealer Person”) under Section 203 of the Delaware
General Corporation Law (the “DGCL Takeover Statute”), or any state or federal bank holding company
or banking laws, or other federal, state or local regulations, regulatory orders or organizational
documents or contracts of Counterparty that are, in each case, applicable to ownership of Shares
(“Applicable Laws”), owns, beneficially owns, constructively owns, controls, holds the power to
vote or otherwise meets a relevant definition of ownership in excess of a number of Shares equal to
(x) the number of Shares that would give rise to reporting or registration obligations or other
requirements (including obtaining prior approval by a state or federal regulator) of a Dealer
Person under Applicable Laws (including, without limitation, “interested stockholder” or “acquiring
person” status under the DGCL Takeover Statute) and with respect to which such requirements have
not been met or the relevant approval has not been received minus (y) 1% of the number of Shares
outstanding on the date of determination (any such condition described in clause (1), (2) or (3),
an “Excess Ownership Position”), Dealer, in its commercially reasonable discretion, is unable to
effect a transfer or assignment to a third party after its commercially reasonable efforts on
pricing terms and within a time period reasonably acceptable to Dealer (the “Transfer Time Period”)
(it being understood that a period of at least one Exchange Business Day shall be considered
reasonable for this purpose (without prejudice to whether a shorter period of time would be
considered reasonable)) such that an Excess Ownership Position no longer exists, Dealer may
designate any Scheduled Trading Day as an Early Termination Date with respect to a portion (the
“Terminated Portion”) of the Transaction, such that an Excess Ownership Position no longer exists
following such partial termination; provided that, unless such Excess Ownership Position is the
result of a Conversion Rate Adjustment Event or a repurchase of Shares by Counterparty, Dealer
shall promptly notify Counterparty of its Excess Ownership Position and shall use its commercially
reasonable efforts to consult with Counterparty during the Transfer Time Period regarding potential
transfers or assignments to third parties prior to so designating an Early Termination Date. In
the event that Dealer so designates an Early Termination Date with respect to a portion of the
Transaction, a payment shall be made pursuant to Section 6 of the Agreement as if (i) an Early
Termination Date had been designated in respect of a Transaction having terms identical to the
Terminated Portion of the Transaction, (ii) Counterparty were the sole Affected Party with respect
to such partial termination, (iii) such portion of the Transaction were the only Terminated
Transaction and (iv) Dealer were the party entitled to designate an Early Termination Date pursuant
to Section 6(b) of the Agreement and to determine the amount payable pursuant to Section 6(e) of
the Agreement. The “Equity Percentage” as of any day is

15

 

the fraction, expressed as a percentage, (A) the numerator of which is the number of Shares that
Dealer and any of its affiliates subject to aggregation with Dealer for purposes of the “beneficial
ownership” test under Section 13 of the Exchange Act and all persons who may form a “group” (within
the meaning of Rule 13d-5(b)(1) under the Exchange Act) with Dealer (collectively, “Dealer Group”)
“beneficially own” (within the meaning of Section 13 of the Exchange Act) without duplication on
such day and (B) the denominator of which is the number of Shares outstanding on such day. The
“Option Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the
numerator of which is the sum of (1) the product of the Applicable Percentage, the Number of
Options and the Option Entitlement and (2) the aggregate number of Shares underlying any other call
option transaction sold by Dealer to Counterparty and (B) the denominator of which is the number of
Shares outstanding on such day.

     In addition, notwithstanding Section 10(c) of the Agreement, Dealer may change the Office
through which it books the Transaction or through which it receives or makes payments or deliveries
with respect to the Transaction without the consent of Counterparty.

     Counterparty may assign its rights and obligations hereunder and under the Agreement, in
whole or in part (any such Options so transferred or assigned, the “Transfer Options”), subject to
meeting any reasonable conditions that Dealer may impose including, but not limited to, the
following conditions:

     (A) With respect to any Transfer Options, Counterparty shall not be released
from its notice and indemnification obligations pursuant to Section 8(d) of this
Confirmation or any obligations under Section 2 (regarding Extraordinary Events) or 8(c)
of this Confirmation;

     (B) Any Transfer Options shall only be transferred or assigned to a third party that
is a U.S. person (as defined in the Internal Revenue Code of 1986, as amended);

     (C) Such transfer or assignment shall be effected on terms, including any
reasonable undertakings by such third party (including, but not limited to, undertakings
with respect to compliance with applicable securities laws in a manner that, in the
reasonable judgment of Dealer, will not expose Dealer to material risks under applicable
securities laws) and execution of any documentation and delivery of legal opinions with
respect to securities laws and other matters by such third party and Counterparty as are
requested and reasonably satisfactory to Dealer;

     (D) Dealer will not, as a result of such transfer and assignment, be required to pay
the transferee on any payment date an amount under Section 2(d)(i)(4) of the Agreement
greater than an amount that Dealer would have been required to pay to Counterparty in the
absence of such transfer and assignment;

     (E) An Event of Default, Potential Event of Default or Termination Event will not
occur as a result of such transfer and assignment;

     (F) Without limiting the generality of clause (B), Counterparty shall have caused
the transferee to make such Payee Tax Representations and to provide such tax
documentation as may be reasonably requested by Dealer to permit Dealer to determine that
results described in clauses (D) and (E) will not occur upon or after such transfer and
assignment; and

     (G) Counterparty shall be responsible for all reasonable costs and expenses,
including reasonable counsel fees, incurred by Dealer in connection with such transfer or
assignment.

     (f) Disclosure. Effective from the date of commencement of discussions concerning the
Transaction, Counterparty and each of its employees, representatives, or other agents may disclose
to any and all persons, without limitation of any kind, the tax treatment and tax structure of the
Transaction and all materials of any kind (including opinions or other tax analyses) that are
provided to Counterparty relating to such tax treatment and tax structure.

     (g) No Netting and Set-off. The provisions of Section 2(c) of the Agreement shall not
apply to the Transaction. Each party waives any and all rights it may have to set-off delivery or
payment obligations it owes to the other party under the Transaction against any delivery or
payment obligations

16

 

owed to it by the other party, whether arising under the Agreement, under any other agreement
between parties hereto, by operation of law or otherwise.

     (h) Early Unwind. In the event the sale by Counterparty of the Convertible Securities
issued pursuant to the over-allotment option exercised on the date hereof is not consummated
pursuant to the Purchase Agreement for any reason by the close of business in New York on the
Premium Payment Date (or such later date as agreed upon by the parties, which in no event shall be
later than June 29, 2010) (the Premium Payment Date or such later date being the “Early Unwind
Date”), the Transaction shall automatically terminate (the “Early Unwind”) on the Early Unwind Date
and the Transaction and all of the respective rights and obligations of Dealer and Counterparty
hereunder shall be cancelled and terminated and Counterparty shall pay to Dealer, other than in
cases involving a breach of the Purchase Agreement by Dealer or any affiliate of Dealer, an amount
in cash equal to the aggregate amount of costs and expenses relating to the unwinding of Dealer’s
hedging activities in respect of the Transaction (including market losses incurred in reselling any
Shares purchased by Dealer or its affiliates in connection with such hedging activities, unless
Counterparty agrees to purchase any such Shares at the cost at which Dealer purchased such Shares).
Following such termination, cancellation and payment, each party shall be released and discharged
by the other party from, and agrees not to make any claim against the other party with respect to,
any obligations or liabilities of either party arising out of, and to be performed in connection
with, the Transaction either prior to or after the Early Unwind Date. Dealer and Counterparty
represent and acknowledge to the other that upon an Early Unwind and following the payment referred
to above, all obligations with respect to the Transaction shall be deemed fully and finally
discharged.

     (i) Waiver of Trial by Jury. EACH PARTY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING RELATING TO THIS TRANSACTION. EACH PARTY (I) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF EITHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF SUCH A SUIT, ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER
AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THIS TRANSACTION,
AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS PROVIDED HEREIN.

     (j) Governing Law; Jurisdiction. THE AGREEMENT, THIS CONFIRMATION AND ALL
MATTERS ARISING IN CONNECTION WITH THE AGREEMENT AND THIS CONFIRMATION SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO
ITS CHOICE OF LAW DOCTRINE, OTHER THAN TITLE 14 OF THE NEW YORK GENERAL OBLIGATIONS LAW). THE
PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH
ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN, AND ANY CLAIM OF
INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.

     (k) Amendment. This Confirmation and the Agreement may not be modified, amended or
supplemented, except in a written instrument signed by Counterparty and Dealer.

     (l) Counterparts. This Confirmation may be executed in several counterparts, each of
which shall be deemed an original but all of which together shall constitute one and the same
instrument.

     (m) Designation by Dealer. Notwithstanding any other provision in this Confirmation to
the contrary requiring or allowing Dealer to make or receive any payment to or from Counterparty,
Dealer may designate any of its affiliates to make or receive any payment and otherwise to perform
Dealer’s obligations in respect of the Transaction and any such designee may assume such
obligations. Dealer shall be discharged of its obligations to Counterparty only to the extent of
any such performance by such affiliate.

17

 

     (n) Quarterly Valuations. Dealer hereby agrees, upon request by Counterparty, to provide or
cause its affiliate to provide to Counterparty, within five Exchange Business Days after the end of
the fiscal quarter of Counterparty during which Counterparty made such request, a valuation
estimate of the fair value of the Transaction as of Counterparty’s fiscal quarter end.

     (o) Credit Support Provider and Credit Support Document. Morgan Stanley (“Guarantor”)
shall be a Credit Support Provider with respect to Dealer and the guarantee of Dealer’s obligations
hereunder by Morgan Stanley shall be a Credit Support Document with respect to Dealer.

     (p) Agent of Dealer. Morgan Stanley & Co. Incorporated (“MS&CO”) is acting as agent for
both parties but does not guarantee the performance of either party. (i) Neither Dealer nor
Counterparty shall contact the other with respect to any matter relating to the Transaction without
the direct involvement of MS&CO; (ii) MS&CO, Dealer and Counterparty each hereby acknowledges that
any transactions by Dealer or MS&CO with respect to Shares will be undertaken by Dealer as
principal for its own account; (iii) all of the actions to be taken by Dealer and MS&CO in connection with the Transaction
shall be taken by Dealer or MS&CO independently and without any advance or subsequent consultation
with Counterparty; and (iv) MS&CO is hereby authorized to act as agent for Counterparty only to the
extent required to satisfy the requirements of Rule 15a-6 under the Exchange Act in respect of the
Transaction.

18

 

     Please confirm that the foregoing correctly sets forth the terms of the agreement between
Dealer and Counterparty with respect to the Transaction, by manually signing this Confirmation or
this page hereof as evidence of agreement to such terms and providing the other information
requested herein and returning an executed copy to us.

	 	 	 	 	 
	 	Yours faithfully,

MORGAN STANLEY & CO. INTERNATIONAL PLC

 	 
	 	By:  	/s/ Rajul Patel	 
	 	 	Name:  	Rajul Patel	 
	 	 	Title:  	Executive Director	 
	 
	 	MORGAN STANLEY & CO. INCORPORATED

as Agent

 	 
	 	By:  	/s/ Serkan Savasoglu 	 
	 	 	Name:  	Serkan Savasoglu 	 
	 	 	Title:  	Managing Director 	 
	 

	 	 	 	 	 
	Agreed and Accepted By:

CADENCE DESIGN SYSTEMS, INC.

 	 
	By:  	/s/ Kevin S. Palatnik	 
	 	Name:  	Kevin S. Palatnik	 
	 	Title:  	Sr. Vice President & Chief Financial Officer	 
	 

Signature Page to Additional Bond Hedge

Confirmationexv10w06

Exhibit 10.06

	To: 	 	Cadence Design Systems, Inc.

2655 Seely Avenue, Building 5

San Jose, CA 95134

Attention: Office of the General Counsel
	 
	From: 	 	Deutsche Bank AG, London Branch

Winchester House

1 Great Winchester St, London EC2N 2DB
	 
	 	 	c/o Deutsche Bank Securities Inc. 

60 Wall Street

New York, NY 10005 
	 
	Re: 	 	Additional Convertible Bond Hedge Transaction
	 
	Ref. No: 	 	388068
	 
	Date: 	 	June 18, 2010

Dear Sir(s):

     DEUTSCHE BANK AG, LONDON BRANCH IS NOT REGISTERED AS A BROKER DEALER UNDER THE U.S.
SECURITIES EXCHANGE ACT OF 1934. DEUTSCHE BANK SECURITIES INC. (“DBSI”) HAS ACTED SOLELY AS
AGENT IN CONNECTION WITH THE TRANSACTION AND HAS NO OBLIGATION, BY WAY OF ISSUANCE, ENDORSEMENT,
GUARANTEE OR OTHERWISE WITH RESPECT TO THE PERFORMANCE OF EITHER PARTY UNDER THE TRANSACTION. AS
SUCH, ALL DELIVERY OF FUNDS, ASSETS, NOTICES, DEMANDS AND COMMUNICATIONS OF ANY KIND RELATING TO
THIS TRANSACTION BETWEEN DEUTSCHE BANK AG, LONDON BRANCH, AND COUNTERPARTY SHALL BE TRANSMITTED
EXCLUSIVELY THROUGH DEUTSCHE BANK SECURITIES INC. DEUTSCHE BANK AG, LONDON BRANCH IS NOT A
MEMBER OF THE SECURITIES INVESTOR PROTECTION CORPORATION (SIPC).

     The purpose of this communication (this “Confirmation”) is to set forth the terms and
conditions of the above-referenced transaction entered into on the Trade Date specified below
(the “Transaction”) between Deutsche Bank AG, London Branch (“Dealer”) and Cadence Design
Systems, Inc. (“Counterparty”). This communication constitutes a “Confirmation” as referred to
in the ISDA Master Agreement specified below. This Confirmation shall replace any previous
agreements and serve as the final documentation for the Transaction.

1

 

     1. This Confirmation is subject to, and incorporates, the definitions and provisions of
the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the
International Swaps and Derivatives Association, Inc. (“ISDA”). Certain defined terms used herein
have the meanings assigned to them in the Indenture dated as of the closing date of the initial
issuance of the Convertible Securities described below between Counterparty and Deutsche Bank Trust
Company Americas, as trustee (the “Indenture”), relating to the USD 300,000,000 principal amount of
2.625% cash convertible senior notes due June 1, 2015 and the additional USD 50,000,000 principal
amount of 2.625% cash convertible senior notes due June 1, 2015 issued pursuant to the
over-allotment option exercised on the date hereof (the “Convertible Securities”). In the event of
any inconsistency between the terms defined in the Indenture and this Confirmation, this
Confirmation shall govern. The parties acknowledge that this Confirmation is entered into on the
date hereof with the understanding that (i) definitions set forth in the Indenture which are also
defined herein by reference to the Indenture and (ii) sections of the Indenture that are referred
to herein will conform to the descriptions thereof in the Offering Memorandum dated June 9, 2010
(the “Offering Memorandum”). If any such definitions in the Indenture or any such sections of the
Indenture differ from the descriptions thereof in the Offering Memorandum, the descriptions thereof
in the Offering Memorandum will govern for purposes of this Confirmation. Subject to the foregoing,
references to the Indenture herein are references to the Indenture as in effect on the date of its
execution, and if the Indenture is amended, modified or supplemented following its execution, any
such amendment, modification or supplement will be disregarded for purposes of this Confirmation
(other than for purposes of Section 8(b) below) unless the parties agree otherwise in writing. The
Transaction is subject to early unwind if the closing of the Convertible Securities is not
consummated for any reason, as set forth below in Section 8(h).

     Each party is hereby advised, and each such party acknowledges, that the other party has
engaged in, or refrained from engaging in, substantial financial transactions and has taken other
material actions in reliance upon the parties’ entry into the Transaction to which this
Confirmation relates on the terms and conditions set forth below.

     This Confirmation evidences a complete and binding agreement between Dealer and
Counterparty as to the terms of the Transaction to which this Confirmation relates. This
Confirmation shall be subject to an agreement (the “Agreement”) in the form of the 1992 ISDA Master
Agreement (Multicurrency—Cross Border) as if Dealer and Counterparty had executed an agreement in
such form on the date hereof (but without any Schedule except for (i) the election of Loss and
Second Method and US Dollars (“USD”) as the Termination Currency, (ii) the replacement of the word
“third” in the last line of Section 5(a)(i) of the Agreement with the word “second” and (iii) such
other elections as set forth in this Confirmation.

     All provisions contained in, or incorporated by reference to, the Agreement will govern
this Confirmation except as expressly modified herein. In the event of any inconsistency between
this Confirmation and either the Equity Definitions or the Agreement, this Confirmation shall
govern.

     The Transaction hereunder shall be the sole Transaction under the Agreement. If there exists
any ISDA Master Agreement between Dealer and Counterparty or any confirmation or other agreement
between Dealer and Counterparty pursuant to which an ISDA Master Agreement is deemed to exist
between Dealer and Counterparty, then notwithstanding anything to the contrary in such ISDA Master
Agreement, such confirmation or agreement or any other agreement to which Dealer and Counterparty
are parties, the Transaction shall not be considered a Transaction under, or otherwise governed by,
such existing or deemed ISDA Master Agreement.

	2.	 	The Transaction constitutes a Share Option Transaction for purposes of the
Equity
Definitions. The terms of the particular Transaction to which this Confirmation relates are as
follows:

	 	 	 

	General Terms:
	 	 
	 
	 	 
	Trade Date:

	 	June 18, 2010
	 
	 	 
	Effective Date:

	 	The closing date of the Convertible Securities issued

2

 

	 	 	 

	 

	 	pursuant to the over-allotment option exercised on
the date hereof.
	 
	 	 
	Option Style:

	 	Modified American, as described under “Procedures
for Exercise” below.
	 
	 	 
	Option Type:

	 	Call
	 
	 	 
	Seller:

	 	Dealer
	 
	 	 
	Buyer:

	 	Counterparty
	 
	 	 
	Shares:

	 	The Common Stock of Counterparty, par value USD
0.01 per share (Ticker Symbol: “CDNS”).
	 
	 	 
	Number of Options:

	 	The number of Convertible Securities in
denominations of USD 1,000 principal amount
purchased by the Initial Purchasers (as defined in the
Purchase Agreement) at their option exercised on the
date hereof pursuant to the second paragraph of
Section 2 of the Purchase Agreement (as defined
below). For the avoidance of doubt, the Number of
Options outstanding shall be reduced by each
exercise of Options hereunder.
	 
	 	 
	Applicable Percentage:

	 	30%
	 
	 	 
	Option Entitlement:

	 	As of any date, a number of Shares per Option equal
to the “Conversion Rate” (as defined in the
Indenture), but without regard to any adjustments to
the Conversion Rate as set forth in Section 13.02 of
the Indenture (a “Make-Whole Fundamental
Change Adjustment”) or a discretionary adjustment
as set forth in Section 13.04(g) of the Indenture (a
“Discretionary Adjustment”).
	 
	 	 
	Strike Price:

	 	As of any date, an amount in USD, rounded to the
nearest cent (with 0.5 cents being rounded upwards),
equal to USD 1,000 divided by the Option
Entitlement as of such date.
	 
	 	 
	Number of Shares:

	 	As of any date, the product of the Number of
Options, the Option Entitlement and the Applicable
Percentage.
	 
	 	 
	Premium:

	 	USD 3,520,500.00.
	 
	 	 
	Premium Payment Date:

	 	The Effective Date
	 
	 	 
	Exchange:

	 	NASDAQ Global Select Market
	 
	 	 
	Related Exchange:

	 	All Exchanges
	 
	 	 
	Procedures for Exercise:
	 	 
	 
	 	 
	Exercise Dates:

	 	Each Conversion Date.
	 
	 	 
	Conversion Date:

	 	Each “Conversion Date” (as defined in the Indenture)
occurring during the Exercise Period for Convertible
Securities, excluding (A) Convertible Securities
(“Exchanged Convertible Securities”)(i)with
respect to which Counterparty has elected the
“Exchange in Lieu of Conversion” option to

3

 

	 	 	 

	 

	 	designate a financial institution to deliver the consideration due upon any conversion of any
Convertible Securities in exchange for such Convertible Securities and (ii) that have been accepted
by the designated financial institution pursuant to Section 13.09 of the Indenture and (B)
Convertible Securities that are “Relevant Convertible Securities” under (and as defined in) the
Base Convertible Bond Hedge Transaction dated June 9, 2010 (Ref. No. 386879) between Dealer and
Counterparty (the “Base Convertible Bond Hedge Transaction Confirmation”) (such Convertible
Securities, the “Relevant Convertible Securities” for such Conversion Date). For the purpose of
determining whether any Convertible Securities will be Relevant Convertible Securities hereunder or
“Relevant Convertible Securities” under the Base Convertible Bond Hedge Transaction Confirmation,
Convertible Securities that are converted pursuant to the Indenture shall be allocated first to the
Base Convertible Bond Hedge Transaction Confirmation until all Options thereunder are exercised or
terminated.
	 
	 	 
	 

	 	If such designated financial institution fails to deliver the consideration due upon such
conversion and, as a result, Counterparty is required to deliver such consideration pursuant to
Section 13.09(e) of the Indenture, Counterparty shall, promptly following such failure, notify
Dealer in writing of such failure and the number of Exchanged Convertible Securities affected by
such failure (such notice, a “Failed Exchange Notice”). The receipt by Dealer of a Failed Exchange
Notice shall constitute an Additional Termination Event in respect of which Dealer shall designate
an Exchange Business Day within a commercially reasonable period of time following receipt of such
Failed Exchange Notice (which in no event shall be earlier than the related settlement date for the
Exchanged Convertible Securities) as an Early Termination Date with respect to a portion of the
Transaction corresponding to a number of Options (the “Cancelled Options”) equal to the lesser of
(A) the number of such Exchanged Convertible Securities specified in such Failed Exchange Notice
minus the number of Cancelled Options (as defined in the Base Convertible Bond Hedge Transaction
Confirmation), if any, that relate to such Exchanged Convertible Securities and (B) the Number of
Options as of the date Dealer designates such Early Termination Date and, as of such date, the
Number of Options shall be reduced by the number of Cancelled Options. Any payment hereunder with
respect to such termination shall be calculated pursuant to Section 6 of the Agreement as if (1) an

4

 

	 	 	 

	 

	 	Early Termination Date had been designated in
respect of a Transaction having terms identical to
this
Transaction and a Number of Options equal to the
number of Cancelled Options, (2) Counterparty were
the sole Affected Party with respect to
such
Additional Termination Event and (3) the
terminated
portion of the Transaction were the sole Affected
Transaction.
	 
	 	 
	Exercise Period:

	 	The period from and excluding the Effective Date to
and including the Expiration Date.
	 
	 	 
	Expiration Date:

	 	The earlier of (i) the last day on which any
Convertible Securities remain outstanding and (ii) the
“Maturity Date” (as defined in the Indenture).
	 
	 	 
	Automatic Exercise on
Conversion Dates:

	 	Applicable; and means that on each Conversion Date,
a number of Options equal to the number of Relevant
Convertible Securities for such Conversion Date in
denominations of USD1,000 principal amount shall
be automatically exercised, subject to “Notice of
Exercise” below.
	 
	 	 
	Notice Deadline:

	 	In respect of any exercise of Options hereunder on
any Conversion Date, 5:00 P.M., New York City
time, on the Exchange Business Day prior to the first
“Scheduled Trading Day” of the “Observation
Period” (each as defined in the Indenture) with
respect to the Relevant Convertible Securities for
such Conversion Date; provided that in the case of
any exercise of Options hereunder in connection with
the conversion of any Relevant Convertible
Securities on any Conversion Date occurring during
the period beginning on, and including, March 1,
2015 and ending on, and including, the
second
“Scheduled Trading Day” (as defined in the
Indenture) immediately preceding the Maturity
Date
(such period, the “Final Convertibility Period”),
the
Notice Deadline shall be 5:30 P.M., New York
City
time, on the second “Scheduled Trading Day”
immediately preceding the Maturity Date.
	 
	 	 
	Notice of Exercise:

	 	Notwithstanding anything to the contrary in the
Equity Definitions, Dealer shall have no
obligation to
make any payment in respect of any exercise of
Options hereunder unless Counterparty
notifies
Dealer in writing prior to the Notice Deadline in
respect of such exercise of (i) the number of
Options
being exercised on such Exercise Date,
(ii) the
scheduled settlement date under the Indenture for
the
	 

	 	Relevant Convertible Securities for the
Conversion
Date corresponding to such Exercise Date, and (iii)
the first “Scheduled Trading Day” (as defined in the
Indenture) of the Observation Period; provided
that,

5

 

	 	 	 

	 

	 	notwithstanding the foregoing, such notice (and the related Automatic Exercise of Options)
shall be effective if given after the Notice Deadline but prior to 5:00 P.M., New York City time,
on the fifth Exchange Business Day of such Observation Period, in which event the Calculation Agent
shall have the right to adjust the Convertible Obligation (as defined below) as appropriate to
reflect the additional costs (including, but not limited to, hedging mismatches and market losses)
and reasonable expenses incurred by Dealer in connection with its hedging activities (including the
unwinding of any hedge position) as a result of its not having received such notice prior to the
Notice Deadline; provided, further, that in the case of any exercise of Options hereunder in
connection with the conversion of any Relevant Convertible Securities on any Conversion Date
occurring during the Final Convertibility Period, the contents of such notice shall be as set forth
in clause
(i) above; and provided, further, that any “Notice of Exercise” delivered to Dealer pursuant
to the Base Convertible Bond Hedge Transaction Confirmation shall be deemed to be a Notice of
Exercise pursuant to this Confirmation and the terms of such Notice of Exercise shall apply,
mutatis mutandis, to this Confirmation. For the avoidance of doubt and subject to the first proviso
in the immediately preceding sentence, if Counterparty fails to give such notice when due in
respect of any exercise of Options hereunder, Dealer’s obligation to make any payment in respect of
such exercise shall be permanently extinguished, and late notice shall not cure such failure.
	 
	 	 
	Dealer’s Telephone Number
and Telex and/or Facsimile Number
and Contact Details for purpose of
Giving Notice:

	 	As specified in Section 6(b) below.
	 
	 	 
	Settlement Terms:
	 	 
	 
	 	 
	Settlement Method:

	 	Cash Settlement.
	 
	 	 
	Settlement Date:

	 	In respect of an Exercise Date occurring on a Conversion Date, the settlement date for
the cash to be paid in respect of the Relevant Convertible Securities converted on such Conversion
Date pursuant to Section 13.03(a) or 13.02(b) of the Indenture, as the case may be; provided that
the Settlement Date will not be prior to the Exchange Business Day immediately following the date
Counterparty provides the Notice of Delivery Obligation prior to 5:00 P.M., New York City time.
	 
	 	 
	Delivery Obligation:

	 	In lieu of the obligations set forth in Section 8.1 of the Equity Definitions, and subject to
“Notice of

6

 

	 	 	 

	 

	 	Exercise” above, in respect of an Exercise Date
occurring on a Conversion Date, Dealer will pay to
Counterparty, on the related Settlement Date, an
amount of cash in USD equal to the product of (i) the
Applicable Percentage and (ii) the aggregate amount
of cash, if any, in excess of USD1,000 per
Convertible Security (in denominations of
USD1,000) that Counterparty would be obligated to
pay to holder(s) of the Relevant Convertible
Securities for such Conversion Date pursuant to
Section 13.03(a) of the Indenture (the “Convertible
Obligation”); provided that such obligation shall be
determined excluding any cash that Counterparty is
obligated to pay to holder(s) of the Relevant
Convertible Securities as a result of any adjustments
to the Conversion Rate pursuant to a Make-Whole
Fundamental Change Adjustment or a Discretionary
Adjustment and any interest payment that
Counterparty is obligated to deliver to holder(s) of
the Relevant Convertible Securities for such
Conversion Date.
	 
	 	 
	Notice of Delivery Obligation:

	 	No later than 5:00 P.M., New York City time, on the
Exchange Business Day immediately following the
last day of the relevant Observation Period,
Counterparty shall give Dealer notice of the final
amount of cash comprising the Convertible
Obligation; provided that, with respect to any
Exercise Date occurring during the Final
Convertibility Period, Counterparty may provide
Dealer with a single notice of the aggregate amount
of cash comprising the Convertible Obligations for
all Exercise Dates occurring in such period (it being
understood, for the avoidance of doubt, that the
requirement of Counterparty to deliver such notice
shall not limit Counterparty’s obligations with
respect to Notice of Exercise).
	 
	 	 
	Adjustments:
	 	 
	 
	 	 
	Method of Adjustment:

	 	Notwithstanding Section 11.2 of the Equity
Definitions (and, for the avoidance of doubt, in lieu
of any adjustments pursuant to such section), upon
the occurrence of any event or condition set forth in
Section 13.05 or sub-sections (a) through (e) of
Section 13.04 of the Indenture (each an “Adjustment
Event”) and the Calculation Agent receiving notice
of the adjustments to be made to the terms of the
Indenture and the Convertible Securities in respect of
such Adjustment Event pursuant to the succeeding
sentence, the Calculation Agent shall make a
corresponding adjustment (in respect of any such
adjustment under the Indenture) to the terms relevant
to the exercise, settlement or payment of the
Transaction; provided that, in the case of any
adjustment to the terms of the Indenture and the

7

 

	 	 	 

	 

	 	Convertible Securities that involves an exercise of
discretion by Counterparty or its board of directors
(including, without limitation, pursuant to Section
13.05 of the Indenture or in connection with any
proportional adjustment or the determination of the
fair value of any securities, property, rights or other
assets), then in each such case, the Counterparty
agrees to exercise such discretion in good faith and in
a commercially reasonable manner and to promptly
provide the Calculation Agent with any additional
information it reasonably requests (in addition to any
information required to be provided pursuant to the
succeeding sentence) about the Counterparty’s
calculations and methodology for such adjustment.
Promptly upon the occurrence of any Adjustment
Event, Counterparty shall notify the Calculation
Agent of such Adjustment Event; and once the
adjustments to be made to the terms of the Indenture
and the Convertible Securities in respect of such
Adjustment Event have been determined,
Counterparty shall promptly (and in any event within
five Exchange Business Days after such
determination) notify the Calculation Agent in
writing of the details of such adjustments.
	 
	 	 
	Extraordinary Events:
	 	 
	 
	 	 
	Merger Events:

	 	Notwithstanding Section 12.1(b) of the Equity
Definitions, a “Merger Event” means the occurrence
of any event or condition set forth in Section 10.01 or
13.06 of the Indenture.
	 
	 	 
	Consequences of Merger Events:

	 	Notwithstanding Section 12.2 of the Equity
Definitions (and, for the avoidance of doubt, in lieu
of any adjustments or other consequences pursuant to
such section), upon the occurrence of a Merger
Event, the Calculation Agent shall make a
corresponding adjustment (in respect of any
adjustment on account of such Merger Event under
the Indenture) to the terms relevant to the exercise,
settlement or payment of the Transaction; provided
that such adjustment shall be made without regard to
any adjustment to the Conversion Rate pursuant to a
Make-Whole Fundamental Change Adjustment or a
Discretionary Adjustment; and provided further that
if, with respect to a Merger Event, the consideration
for the Shares includes (or, at the option of a holder
of Shares, may include) shares (or depositary receipts
with respect to shares) of an entity or person not
organized under the laws of the United States, any
State thereof or the District of Columbia,
Cancellation and Payment (Calculation Agent
Determination) shall apply.
	 
	 	 
	Notice of Merger Consideration and
Consequences:

	 	Upon the occurrence of a Merger Event that causes
the Shares to be converted into the right to receive

8

 

	 	 	 

	 

	 	more than a single type of consideration (determined
based in part upon any form of stockholder election),
Counterparty shall reasonably promptly (but in any
event on or prior to the relevant merger date) notify
the Calculation Agent of (i) the type and amount of
consideration that a holder of Shares would have
been entitled to in the case of reclassifications,
consolidations, mergers, sales or transfers of assets or
other transactions that cause Shares to be converted
into the right to receive more than a single type of
consideration, (ii) the weighted average of the types
and amounts of consideration to be received by the
holders of Shares that affirmatively make such an
election, and (iii) the details of the adjustment to be
made under the Indenture in respect of such Merger
Event.
	 
	 	 
	Nationalization, Insolvency
or Delisting:

	 	Cancellation and Payment (Calculation Agent
Determination); provided that (i) Section 12.6(a)(iii)
of the Equity Definitions shall be amended to delete,
in the definition of the term “Delisting” the
parenthetical “(or will cease)” and (ii) in addition to
the provisions of Section 12.6(a)(iii) of the Equity
Definitions, it will also constitute a Delisting if the
Exchange is located in the United States and the
Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The
NASDAQ Global Select Market or The NASDAQ
Global Market (or their respective successors); if the
Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system,
such exchange or quotation system shall thereafter be
deemed to be the Exchange.
	 
	 	 
	Additional Disruption Events:
	 	 
	 
	 	 
	(a) Change in Law:

	 	Applicable; provided that Section 12.9(a)(ii) of the
Equity Definitions is hereby amended by (i) replacing
the phrase “the interpretation” in the third line thereof
with the phrase “or announcement or statement of the
interpretation” and (ii) replacing the word “Shares”
with the phrase “Hedge Positions” in clause (X)
thereof.
	 
	 	 
	(b) Failure to Deliver:

	 	Applicable
	 
	 	 
	(c) Insolvency Filing:

	 	Applicable
	 
	 	 
	(d) Hedging Disruption:

	 	Applicable; provided that Section 12.9(a)(v) of the
Equity Definitions is hereby amended by inserting
the following proviso at the end thereof: “provided
that such inability described in clause (A) or (B) shall
not constitute a “Hedging Disruption” unless (x) such
inability does not result from factors particular to
Hedging Party (such as Hedging Party“s
creditworthiness or financial position, or particular
actions or transactions undertaken by the Hedging

9

 

	 	 	 

	 

	 	Party unrelated to the hedging of the Transaction)
and (y) such inability will result in continued
performance by the Hedging Party under the
Transaction being commercially unreasonable or
commercially impracticable”.
	 
	 	 
	Hedging Party:

	 	Dealer
	 
	 	 
	Determining Party:

	 	Dealer for all applicable Additional Disruption Events
	 
	 	 
	Non-Reliance:

	 	Applicable
	 
	 	 
	Agreements and Acknowledgments
Regarding Hedging Activities:

	 	Applicable
	 
	 	 
	Additional Acknowledgments:

	 	Applicable
	 
	     3. Calculation Agent:

	 	

          
Dealer. All determinations made by the Calculation
Agent shall be made in good faith and in a
commercially reasonable manner. Following any
determination or calculation by the Calculation Agent
hereunder, upon a written request by Counterparty,
the Calculation Agent will provide to Counterparty
by e-mail to the e-mail address provided by
Counterparty in such written request a report (in a
commonly used file format for the storage and
manipulation of financial data) displaying in
reasonable detail the basis for such determination or
calculation, including, where applicable, a
description of the methodology and data applied, it
being understood that the Calculation Agent shall not
be obligated to disclose any proprietary models used
by it for such determination or calculation.

     4. Account Details:

     Dealer Payment Instructions:

Deutsche Bank AG, London Branch

The Bank of New York

Account Name: Deutsche Bank Securities, Inc.

Counterparty Payment Instructions:

To be provided by Counterparty.

     5. Offices:

     The Office of Dealer for the Transaction is: London

Deutsche Bank AG, London

Branch Winchester house

1 Great Winchester St, London

EC2N 2DB

     The Office of Counterparty for the Transaction is:

Inapplicable. Counterparty is not a Multibranch Party.

10

 

     6. Notices: For purposes of this Confirmation:

	 	(a)	 	Address for notices or communications to Counterparty:

	 	To:	 	 Cadence Design Systems, Inc.

2655 Seely Avenue, Building 5

San Jose, California 95134
	 	Attn:	 	 Office of the General Counsel
	 	Facsimile:	 	 (408) 904-6946

	 	(b)	 	Address for notices or communications to Dealer:

	 	To:	 	 Deutsche Bank AG, London Branch

c/o Deutsche Bank Securities Inc.

60 Wall Street

New York, NY 10005
	 	Attn:	 	 Peter Barna

	 	With a copy to:	 	 Deutsche Bank AG, London Branch

c/o Deutsche Bank Securities Inc.

60 Wall Street

New York, NY 10005
	 	Attn:	 	 Lars Kestner

     7. Representations, Warranties and Agreements:

     (a) In addition to the representations and warranties in the Agreement and those contained
elsewhere herein, Counterparty represents and warrants to and for the benefit of, and agrees with,
Dealer as follows:

     (i) On the Trade Date, none of Counterparty and its officers and directors is
aware of any material nonpublic information regarding Counterparty or the Shares. On the
Trade Date, all reports and other documents filed by Counterparty with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) when considered as a whole (with the more recent such reports and documents
deemed to amend inconsistent statements contained in any earlier such reports and
documents), do not contain any untrue statement of a material fact or any omission of a
material fact required to be stated therein or necessary to make the statements therein, in
the light of the circumstances in which they were made, not misleading.

     (ii) (A) On the Trade Date, the Shares or securities that are
convertible into, or
exchangeable or exercisable for Shares, are not, and shall not be, subject to a
“restricted period,” as such term is defined in Regulation M under the Exchange Act
(“Regulation M”) and
(B) Counterparty shall not engage in any “distribution,” as such term is defined in
Regulation M, other than a distribution meeting the requirements of the exceptions set
forth in sections 101(b)(10) and 102(b)(7) of Regulation M, until the second Exchange
Business Day immediately following the Trade Date.

     (iii) Without limiting the generality of Section 13.1 of the Equity Definitions,
Counterparty acknowledges that neither Dealer nor any of its affiliates is making any
representations or warranties or taking a position or expressing any view with respect to
the treatment of the Transaction under any accounting standards, including ASC Topic 260,
Earnings

11

 

Per Share, ASC Topic 815, Derivatives and Hedging, ASC Topic 480, Distinguishing Liabilities
from Equity and ASC Topic 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity
(or any successor issue statements).

     (iv) Without limiting the generality of Section 3(a)(iii) of the Agreement, the Transaction
will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.

     (v) Counterparty is not entering into this Confirmation to create actual or apparent
trading activity in the Shares (or any security convertible into or exchangeable for Shares) or to
raise or depress or otherwise manipulate the price of the Shares (or any security convertible into
or exchangeable for Shares) or to otherwise violate the Exchange Act.

     (vi) Counterparty is not, and after giving effect to the transactions contemplated hereby
will not be, required to register as, an “investment company” as such term is defined in the
Investment Company Act of 1940, as amended.

     (vii) On each of the Trade Date and the Premium Payment Date, Counterparty is not
“insolvent” (as such term is defined under Section 101(32) of the U.S. Bankruptcy Code (Title 11 of
the United States Code) (the “Bankruptcy Code”)) and Counterparty would be able to purchase a
number of Shares equal to the Number of Shares plus the “Number of Shares” under the Base Bond
Hedge Transaction Confirmation in compliance with the laws of the jurisdiction of Counterparty’s
incorporation.

     (viii) Counterparty understands no obligations of Dealer to it hereunder will be entitled
to the benefit of deposit insurance and that such obligations will not be guaranteed by any
governmental agency.

     (ix) No state or local (including non-U.S. jurisdictions) law, rule, regulation or
regulatory order applicable to the Shares would give rise to any reporting, consent, registration
or other requirement (including without limitation a requirement to obtain prior approval from any
person or entity) as a result of Dealer or its affiliates owning or holding (however defined)
Shares.

     (x) The representations and warranties of Counterparty set forth in Section 3 of the
Agreement and Section 1 of the Purchase Agreement, dated as of June 9, 2010, between J.P. Morgan
Securities Inc. and Morgan Stanley & Co. Incorporated, as representatives of the Initial Purchasers
party thereto, and Counterparty (the “Purchase Agreement”) are true and correct as of the Trade
Date and the Effective Date and are hereby deemed to be repeated to Dealer as if set forth herein.

     (b) Each of Dealer and Counterparty agrees and represents that it is an “eligible contract
participant” as defined in Section 1a(12) of the U.S. Commodity Exchange Act, as amended, and is
entering into the Transaction as principal (and not as agent or in any other capacity, fiduciary or
otherwise) and not for the benefit of any third party.

     (c) Each of Dealer and Counterparty acknowledges that the offer and sale of the
Transaction to it is intended to be exempt from registration under the Securities Act of 1933, as
amended (the “Securities Act”), by virtue of Section 4(2) thereof. Accordingly, Counterparty
represents and warrants to Dealer that (i) it has the financial ability to bear the economic risk
of its investment in the Transaction and is able to bear a total loss of its investment and its
investments in and liabilities in respect of the Transaction, which it understands are not readily
marketable, are not disproportionate to its net worth, and it is able to bear any loss in
connection with the Transaction, including the loss of its entire investment in the Transaction,
(ii) it is an “accredited investor” as that term is defined in Regulation D as promulgated under
the Securities Act, (iii) it is entering into the Transaction for its own account and without a
view to the distribution or resale thereof, (iv) the assignment, transfer or other disposition of
the Transaction has not been and will not be registered under the Securities Act or any state
securities laws and is restricted under this Confirmation, the Securities Act and state securities
laws, and (v) its financial condition is such that it has no need for liquidity with respect to its
investment in the Transaction and no need to dispose of any portion thereof to satisfy any existing
or contemplated undertaking or indebtedness and is capable of

12

 

assessing the merits of and understanding (on its own behalf or through independent
professional advice), and understands and accepts, the terms, conditions and risks of the
Transaction.

     (d) Each of Dealer and Counterparty agrees and acknowledges that Dealer is a “financial
institution,” “swap participant” and “financial participant” within the meaning of Sections
101(22), 101(53C) and 101(22A) of the Bankruptcy Code. The parties hereto further agree and
acknowledge (A) that this Confirmation is (i) a “securities contract,” as such term is defined in
Section 741(7) of the Bankruptcy Code, with respect to which each payment hereunder or in
connection herewith is a “termination value,” “payment amount” or “other transfer obligation”
within the meaning of Section 362 of the Bankruptcy Code and a “settlement payment” within the
meaning of Section 546 of the Bankruptcy Code, and (ii) a “swap agreement,” as such term is defined
in Section 101(53B) of the Bankruptcy Code, with respect to which each payment hereunder or in
connection herewith is a “termination value,” “payment amount” or “other transfer obligation”
within the meaning of Section 362 of the Bankruptcy Code and a “transfer” within the meaning of
Section 546 of the Bankruptcy Code, and (B) that Dealer is entitled to the protections afforded by,
among other sections, Sections 362(b)(6), 362(b)(17), 362(b)(27), 362(o), 546(e), 546(g), 546(j),
548(d)(2), 555, 560 and 561 of the Bankruptcy Code.

     (e) As a condition to the effectiveness of the Transaction, Counterparty shall deliver to
Dealer an opinion of counsel, dated as of the Trade Date and reasonably acceptable to Dealer in
form and substance, with respect to the matters set forth in Section 3(a) of the Agreement, subject
to customary assumptions, qualifications and exceptions.

     8. Other Provisions:

     (a) Right to Extend. Dealer may postpone any Exercise Date or Settlement Date or any
other date of valuation or payment by Dealer, with respect to some or all of the relevant Options
(in which event the Calculation Agent shall make appropriate adjustments to the Delivery
Obligation), if Dealer determines, in its reasonable discretion and based on advice of counsel,
that such extension is reasonably necessary or appropriate to preserve Dealer’s ability to conduct
its related hedging or hedge unwind activity hereunder in light of existing liquidity conditions in
the cash market, the stock borrow market or other relevant market or to enable Dealer to effect
purchases of Shares in connection with its related hedging, hedge unwind or settlement activity
hereunder in a manner that would, if Dealer were Counterparty or an affiliated purchaser of
Counterparty, be in compliance with applicable legal, regulatory or self-regulatory requirements,
or with generally applicable related policies and procedures applicable to Dealer and applied to
this Transaction in a non-discriminatory manner.

     (b) Additional Termination Events. The occurrence of (i) an “Event of Default” with respect to
Counterparty under the terms of the Convertible Securities as set forth in the Indenture, as a
result of which the Convertible Securities are declared immediately due and payable under the terms
of the Indenture or (ii) an Amendment Event shall be an Additional Termination Event with respect
to which the Transaction is the sole Affected Transaction and Counterparty is the sole Affected
Party, and Dealer shall be the party entitled to designate an Early Termination Date pursuant to
Section 6(b) of the Agreement and to determine the amount payable pursuant to Section 6(e) of the
Agreement.

     “Amendment Event” means that Counterparty amends, modifies, supplements or obtains a
waiver in respect of any term of the Indenture or the Convertible Securities governing the
principal amount, coupon, maturity, a repurchase obligation of Counterparty, a redemption right of
Counterparty, any term relating to conversion of the Convertible Securities (including changes to
the conversion price, conversion settlement dates or conversion conditions), or any term that would
require consent of each holder of the Convertible Securities affected thereby to amend, in each
case without the prior consent of Dealer.

     Counterparty shall promptly notify Dealer in writing of any repurchase and cancellation of
Convertible Securities and the number of Convertible Securities so repurchased and cancelled (any
such notice, a “Convertible Securities Repurchase Notice”). Notwithstanding anything to the
contrary in this Confirmation, the receipt by Dealer from Counterparty of any Convertible
Securities Repurchase Notice shall constitute an Additional Termination Event as provided in this
paragraph. Upon receipt of any such Convertible Securities Repurchase Notice, Dealer shall
designate in good faith a Scheduled Trading Day

13

 

that is within a commercially reasonable period of time following such Additional Termination
Event as an Early Termination Date with respect to the portion of the Transaction corresponding to
a number of Options (the “Repurchase Options”) equal to the lesser of (A) the number of
Convertible Securities specified in such Convertible Securities Repurchase Notice minus the number
of Repurchase Options (as defined in the Base Convertible Bond Hedge Transaction Confirmation), if
any, that relate to such Convertible Securities and (B) the Number of Options as of the date
Dealer designates such Early Termination Date and, as of such date, the Number of Options shall be
reduced by the number of Repurchase Options. Any payment hereunder with respect to such
termination shall be calculated pursuant to Section 6 of the Agreement as if (1) an Early
Termination Date had been designated in respect of a Transaction having terms identical to this
Transaction and a Number of Options equal to the number of Repurchase Options, (2) Counterparty
were the sole Affected Party with respect to such Additional Termination Event and (3) the
terminated portion of the Transaction were the sole Affected Transaction.

     (c) Disposition of Hedge Shares. Counterparty hereby agrees that if, in the good faith
reasonable judgment of Dealer, the Shares (the “Hedge Shares”) acquired by Dealer for the purpose
of hedging its obligations pursuant to the Transaction cannot be sold in the U.S. public market by
Dealer without registration under the Securities Act, Counterparty shall, at its election: (i) in
order to allow Dealer to sell the Hedge Shares in a registered offering, make available to Dealer
an effective registration statement under the Securities Act to cover the resale of such Hedge
Shares and (A) enter into an agreement, in form and substance reasonably satisfactory to Dealer,
substantially in the form of an underwriting agreement for underwritten follow-on offerings of
equity securities of companies of comparable size, maturity and lines of business, (B) provide
accountant’s “comfort” letters in customary form for underwritten follow-on offerings of equity
securities, (C) provide disclosure opinions of nationally recognized outside counsel to
Counterparty reasonably acceptable to Dealer, (D) provide other customary opinions, certificates
and closing documents customary in form for underwritten follow-on offerings of equity securities
of companies of comparable size, maturity and lines of business and (E) afford Dealer a reasonable
opportunity to conduct a “due diligence” investigation with respect to Counterparty customary in
scope for underwritten follow-on offerings of equity securities of companies of comparable size,
maturity and lines of business; provided, however, that if Dealer, in its sole commercially
reasonable discretion, is not satisfied with access to due diligence materials, the results of its
due diligence investigation, or the procedures and documentation for the registered offering
referred to above, then clause
(ii) or clause (iii) of this Section 8(c) shall apply at the election of Counterparty;
(ii) in order to allow Dealer to sell the Hedge Shares in a private placement, enter into a private
placement agreement substantially similar to private placement purchase agreements customary for
private placements of equity securities, in form and substance satisfactory to Dealer, including
customary representations, covenants, blue sky and other governmental filings and/or registrations,
indemnities to Dealer, due diligence rights (for Dealer or any designated buyer of the Hedge Shares
from Dealer), opinions and certificates and such other documentation as is customary for private
placement agreements, all reasonably acceptable to Dealer (in which case, the Calculation Agent
shall make any adjustments to the terms of the Transaction that are necessary, in its reasonable
judgment, to compensate Dealer for any discount from the public market price of the Shares incurred
on the sale of Hedge Shares in a private placement); or (iii) purchase the Hedge Shares from Dealer
at the VWAP Price on such Exchange Business Days, and in the amounts, requested by Dealer. “VWAP
Price” means, on any Exchange Business Day, the per Share volume-weighted average price as
displayed under the heading “Bloomberg VWAP” on Bloomberg Screen CDNS.Q <equity> AQR (or any
successor thereto) in respect of the period from 9:30 a.m. to 4:00 p.m. (New York City time) on
such Exchange Business Day (or if such volume-weighted average price is unavailable, the market
value of one Share on such Exchange Business Day, as determined by the Calculation Agent using a
volume-weighted method).

     (d) Repurchase and Conversion Rate Adjustment Notices. Counterparty shall, on (or prior
to) any day on which Counterparty effects any repurchase of Shares or consummates or otherwise
engages in any transaction or event (a “Conversion Rate Adjustment Event”) that would lead to an
increase in the Conversion Rate, give Dealer a written notice of such repurchase or Conversion Rate
Adjustment Event (a “Repurchase Notice”) on such day if, the number of outstanding Shares as
determined on such day is
(i) less than 246,360,000 (in the case of first such notice) or (ii) thereafter more than
20,035,000 less than

14

 

the number of Shares included in the immediately preceding Repurchase Notice. In the event
that Counterparty fails to provide Dealer with a Repurchase Notice on the day and in the manner
specified in this Section 8(d) then, to the extent permitted by applicable law, Counterparty agrees
to indemnify and hold harmless Dealer, its affiliates and their respective directors, officers,
employees, agents and controlling persons (Dealer and each such person being an “Indemnified
Party”) from and against any and all losses, claims, damages and liabilities (or actions in respect
thereof), joint or several, to which such Indemnified Party is subject under applicable securities
laws, including without limitation, Section 16 of the Exchange Act or under any state or federal
law, regulation or regulatory order, as a result of such failure. Counterparty shall be relieved
from liability to the extent that the Indemnified Party fails promptly to notify Counterparty of
any action commenced against it in respect of which indemnity may be sought hereunder to the extent
Counterparty is materially prejudiced as a result thereof. If for any reason the foregoing
indemnification is unavailable to any Indemnified Party or insufficient in respect of any losses,
claims, damages or liabilities referred to in this paragraph, then Counterparty, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute, to the maximum extent permitted by
law, to the amount paid or payable by the Indemnified Party as a result of such loss, claim, damage
or liability. In addition, Counterparty will reimburse, within 30 days, upon written request, any
Indemnified Party for all reasonable expenses (including reasonable counsel fees and expenses) in
connection with the investigation of, preparation for or defense or settlement of any pending or
threatened claim or any action, suit or proceeding arising therefrom, whether or not such
Indemnified Party is a party thereto and whether or not such claim, action, suit or proceeding is
initiated or brought by or on behalf of Counterparty. This indemnity shall survive the completion
of the Transaction contemplated by this Confirmation and any assignment and delegation of the
Transaction made pursuant to this Confirmation or the Agreement shall inure to the benefit of any
permitted assignee of Dealer.

     (e) Transfer and Assignment. Either party may transfer any of its rights or obligations
under the Transaction with the prior written consent of the non-transferring party; provided that
(i) Dealer may transfer or assign without any consent of Counterparty its rights and obligations
hereunder, with respect to a number of Options corresponding to its Excess Ownership Position (as
defined below) plus 1% of the number of Shares then outstanding, to any person, or any person whose
obligations would be guaranteed by a person, in either case, with a rating for its long term,
unsecured and unsubordinated indebtedness of A- or better by S&P, or A3 or better by Moody’s or, if
either S&P or Moody’s ceases to rate such debt, at least an equivalent rating or better by a
substitute agency rating mutually agreed by Counterparty and Dealer, (ii) Dealer may transfer or
assign without any consent of Counterparty its rights and obligations hereunder in whole or in part
to any parent of Dealer or any subsidiary of such parent (A) the obligations of which are
guaranteed by Dealer or any parent of Dealer or (B) with a rating by Moody’s or S&P for its
long-term, unsecured and unsubordinated debt that is equal to or greater than Dealer’s at the time
of such transfer or assignment and (iii) Counterparty may assign its rights and obligations
hereunder to the extent permitted in the next paragraph of this Section 8(e). If at any time at
which (1) the Equity Percentage exceeds 8.5%,
(2) the Option Equity Percentage exceeds 14.5% or (3) Dealer, Dealer Group (as defined below) or
any person whose ownership position would be aggregated with that of Dealer or Dealer Group
(Dealer, Dealer Group or any such person, a “Dealer Person”) under Section 203 of the Delaware
General Corporation Law (the “DGCL Takeover Statute”), or any state or federal bank holding company
or banking laws, or other federal, state or local regulations, regulatory orders or organizational
documents or contracts of Counterparty that are, in each case, applicable to ownership of Shares
(“Applicable Laws”), owns, beneficially owns, constructively owns, controls, holds the power to
vote or otherwise meets a relevant definition of ownership in excess of a number of Shares equal to
(x) the number of Shares that would give rise to reporting or registration obligations or other
requirements (including obtaining prior approval by a state or federal regulator) of a Dealer
Person under Applicable Laws (including, without limitation, “interested stockholder” or “acquiring
person” status under the DGCL Takeover Statute) and with respect to which such requirements have
not been met or the relevant approval has not been received minus (y) 1% of the number of Shares
outstanding on the date of determination (any such condition described in clause (1), (2) or (3),
an “Excess Ownership Position”), Dealer, in its commercially reasonable discretion, is unable to
effect a transfer or assignment to a third party after its commercially reasonable efforts on
pricing terms and within a time period reasonably acceptable to Dealer (the “Transfer Time Period”)
(it being understood that a period of at least one Exchange Business Day shall be considered
reasonable for this

15

 

purpose (without prejudice to whether a shorter period of time would be considered reasonable))
such that an Excess Ownership Position no longer exists, Dealer may designate any Scheduled Trading
Day as an Early Termination Date with respect to a portion (the “Terminated Portion”) of the
Transaction, such that an Excess Ownership Position no longer exists following such partial
termination; provided that, unless such Excess Ownership Position is the result of a Conversion
Rate Adjustment Event or a repurchase of Shares by Counterparty, Dealer shall promptly notify
Counterparty of its Excess Ownership Position and shall use its commercially reasonable efforts to
consult with Counterparty during the Transfer Time Period regarding potential transfers or
assignments to third parties prior to so designating an Early Termination Date. In the event that
Dealer so designates an Early Termination Date with respect to a portion of the Transaction, a
payment shall be made pursuant to Section 6 of the Agreement as if (i) an Early Termination Date
had been designated in respect of a Transaction having terms identical to the Terminated Portion of
the Transaction, (ii) Counterparty were the sole Affected Party with respect to such partial
termination, (iii) such portion of the Transaction were the only Terminated Transaction and (iv)
Dealer were the party entitled to designate an Early Termination Date pursuant to Section 6(b) of
the Agreement and to determine the amount payable pursuant to Section 6(e) of the Agreement. The
“Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of
which is the number of Shares that Dealer and any of its affiliates subject to aggregation with
Dealer for purposes of the “beneficial ownership” test under Section 13 of the Exchange Act and all
persons who may form a “group” (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) with
Dealer (collectively, “Dealer Group”) “beneficially own” (within the meaning of Section 13 of the
Exchange Act) without duplication on such day and (B) the denominator of which is the number of
Shares outstanding on such day. The “Option Equity Percentage” as of any day is the fraction,
expressed as a percentage, (A) the numerator of which is the sum of (1) the product of the
Applicable Percentage, the Number of Options and the Option Entitlement and (2) the aggregate
number of Shares underlying any other call option transaction sold by Dealer to Counterparty and
(B) the denominator of which is the number of Shares outstanding on such day.

     In addition, notwithstanding Section 10(c) of the Agreement, Dealer may change the Office
through which it books the Transaction or through which it receives or makes payments or deliveries
with respect to the Transaction without the consent of Counterparty.

     Counterparty may assign its rights and obligations hereunder and under the Agreement, in
whole or in part (any such Options so transferred or assigned, the “Transfer Options”), subject to
meeting any reasonable conditions that Dealer may impose including, but not limited to, the
following conditions:

     (A) With respect to any Transfer Options, Counterparty shall not be released
from its notice and indemnification obligations pursuant to Section 8(d) of this
Confirmation or any obligations under Section 2 (regarding Extraordinary Events) or 8(c)
of this Confirmation;

     (B) Any Transfer Options shall only be transferred or assigned to a third party that
is a U.S. person (as defined in the Internal Revenue Code of 1986, as amended);

     (C) Such transfer or assignment shall be effected on terms, including any
reasonable undertakings by such third party (including, but not limited to, undertakings
with respect to compliance with applicable securities laws in a manner that, in the
reasonable judgment of Dealer, will not expose Dealer to material risks under applicable
securities laws) and execution of any documentation and delivery of legal opinions with
respect to securities laws and other matters by such third party and Counterparty as are
requested and reasonably satisfactory to Dealer;

     (D) Dealer will not, as a result of such transfer and assignment, be required to pay
the transferee on any payment date an amount under Section 2(d)(i)(4) of the Agreement
greater than an amount that Dealer would have been required to pay to Counterparty in the
absence of such transfer and assignment;

     (E) An Event of Default, Potential Event of Default or Termination Event will not
occur as a result of such transfer and assignment;

     (F) Without limiting the generality of clause (B), Counterparty shall have caused
the transferee to make such Payee Tax Representations and to provide such tax
documentation as

16

 

may be reasonably requested by Dealer to permit Dealer to determine that results
described in clauses (D) and (E) will not occur upon or after such transfer and
assignment; and

     (G) Counterparty shall be responsible for all reasonable costs and expenses,
including reasonable counsel fees, incurred by Dealer in connection with such transfer or
assignment.

     (f) Disclosure. Effective from the date of commencement of discussions concerning the
Transaction, Counterparty and each of its employees, representatives, or other agents may disclose
to any and all persons, without limitation of any kind, the tax treatment and tax structure of the
Transaction and all materials of any kind (including opinions or other tax analyses) that are
provided to Counterparty relating to such tax treatment and tax structure.

     (g) No Netting and Set-off. The provisions of Section 2(c) of the Agreement shall not apply to
the Transaction. Each party waives any and all rights it may have to set-off delivery or payment
obligations it owes to the other party under the Transaction against any delivery or payment
obligations owed to it by the other party, whether arising under the Agreement, under any other
agreement between parties hereto, by operation of law or otherwise.

     (h) Early Unwind. In the event the sale by Counterparty of the Convertible Securities
issued pursuant to the over-allotment option exercised on the date hereof is not consummated
pursuant to the Purchase Agreement for any reason by the close of business in New York on the
Premium Payment Date (or such later date as agreed upon by the parties, which in no event shall be
later than June 29, 2010) (the Premium Payment Date or such later date being the “Early Unwind
Date”), the Transaction shall automatically terminate (the “Early Unwind”) on the Early Unwind Date
and the Transaction and all of the respective rights and obligations of Dealer and Counterparty
hereunder shall be cancelled and terminated and Counterparty shall pay to Dealer, other than in
cases involving a breach of the Purchase Agreement by Dealer or any affiliate of Dealer, an amount
in cash equal to the aggregate amount of costs and expenses relating to the unwinding of Dealer’s
hedging activities in respect of the Transaction (including market losses incurred in reselling any
Shares purchased by Dealer or its affiliates in connection with such hedging activities, unless
Counterparty agrees to purchase any such Shares at the cost at which Dealer purchased such Shares).
Following such termination, cancellation and payment, each party shall be released and discharged
by the other party from, and agrees not to make any claim against the other party with respect to,
any obligations or liabilities of either party arising out of, and to be performed in connection
with, the Transaction either prior to or after the Early Unwind Date. Dealer and Counterparty
represent and acknowledge to the other that upon an Early Unwind and following the payment referred
to above, all obligations with respect to the Transaction shall be deemed fully and finally
discharged.

     (i) Waiver of Trial by Jury. EACH PARTY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING RELATING TO THIS TRANSACTION. EACH PARTY (I) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF EITHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF SUCH A SUIT, ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER
AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THIS TRANSACTION,
AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS PROVIDED HEREIN.

     (j) Governing Law; Jurisdiction. THE AGREEMENT, THIS CONFIRMATION AND ALL
MATTERS ARISING IN CONNECTION WITH THE AGREEMENT AND THIS CONFIRMATION SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO
ITS CHOICE OF LAW DOCTRINE, OTHER THAN TITLE 14 OF THE NEW YORK GENERAL OBLIGATIONS LAW). THE
PARTIES HERETO IRREVOCABLY SUBMIT TO
THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH ALL MATTERS RELATING HERETO AND
WAIVE ANY

17

 

OBJECTION TO THE LAYING OF VENUE IN, AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO,
THESE COURTS.

     (k) Amendment. This Confirmation and the Agreement may not be modified, amended or
supplemented, except in a written instrument signed by Counterparty and Dealer.

     (l) Counterparts. This Confirmation may be executed in several counterparts, each of
which shall be deemed an original but all of which together shall constitute one and the same
instrument.

     (m) Designation by Dealer. Notwithstanding any other provision in this Confirmation to
the contrary requiring or allowing Dealer to make or receive any payment to or from Counterparty,
Dealer may designate any of its affiliates to make or receive any payment and otherwise to perform
Dealer’s obligations in respect of the Transaction and any such designee may assume such
obligations. Dealer shall be discharged of its obligations to Counterparty only to the extent of
any such performance by such affiliate.

     (n) Quarterly Valuations. Dealer hereby agrees, upon request by Counterparty, to provide or
cause its affiliate to provide to Counterparty, within five Exchange Business Days after the end of
the fiscal quarter of Counterparty during which Counterparty made such request, a valuation
estimate of the fair value of the Transaction as of Counterparty’s fiscal quarter end.

     (o) Method of Delivery. Whenever delivery of funds or other assets is required hereunder
by or to Counterparty, such delivery shall be effected through DBSI. In addition, all notices,
demands and communications of any kind relating to the Transaction between Deutsche and
Counterparty shall be transmitted exclusively through DBSI.

18

 

     Please confirm that the foregoing correctly sets forth the terms of our
agreement by sending to us a letter or telex substantially similar to this
facsimile, which letter or telex sets forth the material terms of the Transaction
to which this Confirmation relates and indicates your agreement to those terms.
Dealer will make the time of execution of the Transaction available upon request.

     Dealer is regulated by the Financial Services Authority.

	 	 	 	 	 
	 	Yours faithfully,

DEUTSCHE BANK AG, LONDON BRANCH

 	 
	 	By:  	/s/ Lars Kestner
 	 
	 	 	Name:  	Lars Kestner 	 
	 	 	Title:  	Managing Director 	 
	 	 	 
	 	By:  	                                      /s/ Michael Sanderson
 	 
	 	 	Name:  	Michael Sanderson 	 
	 	 	Title:  	Managing Director 	 
	 
	 	DEUTSCHE BANK SECURITIES INC.,

acting solely as Agent in connection with the Transaction

 	 
	 	By:  	/s/ Lars Kestner
 	 
	 	 	Name:  	Lars Kestner 	 
	 	 	Title:  	Managing Director 	 
	 	 	 
	 	By:  	                                      /s/ Michael Sanderson
 	 
	 	 	Name:  	Michael Sanderson 	 
	 	 	Title:  	Managing Director 	 
	 

	 	 	 	 	 
	Confirmed and Acknowledged as of the date first above written: 

CADENCE DESIGN SYSTEMS, INC.

 	 
	By:  	/s/ Kevin S. Palatnik
 	 
	 	Name:  	Kevin S. Palatnik	 
	 	Title:  	Sr. Vice President & Chief Financial Officer	 
	 

	 	 	 

	Chairman of the Supervisory
Board: Clemens Börsig Management
Board: Josef Ackermann
(Chairman), Hugo Bänziger,
Michael Cohrs, Jürgen Fitschen,
Anshuman Jain, Stefan Krause,
Hermann-Josef Lamberti, Rainer
Neske

	 	Deutsche Bank AG is authorised under
German Banking Law (competent
authority: BaFin — Federal Financial
Supervising Authority) and regulated
by the Financial Services Authority
for the conduct of UK business; a
member of the London Stock Exchange.
Deutsche Bank AG is a joint stock
corporation with limited liability
incorporated in the Federal Republic
of Germany HRB No. 30 000 District
Court of Frankfurt am Main; Branch
Registration in England and Wales
BR000005; Registered address:
	 

	 	Winchester House, 1 Great Winchester
Street, London EC2N 2DB. Deutsche
Bank Group online: http://www.deutsche-bank.com

Signature Page to Additional Bond Hedge

Confirmation

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