S-8

As filed with the Securities and Exchange Commission on May 22, 2003

Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-8

REGISTRATION STATEMENT
Under
The Securities Act of 1933

CADENCE DESIGN SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or Other Jurisdiction of Incorporation or Organization) 77-0148231
(I.R.S. Employer Identification No.)

2655 Seely Avenue, Building 5,
San Jose, California 95134
(Address of Principal Executive Offices) (Zip Code)

Cadence Design Systems, Inc.
1994 Deferred Compensation Plan
(Full titles of the Plans)

R.L. Smith McKeithen
Senior Vice President, General Counsel and Secretary
Cadence Design Systems, Inc.
2655 Seely Avenue, Building 5, San Jose, California 95134
(Name and Address of Agent for Service)
(408) 943-1234
(Telephone number, including area code, of agent for service)

Copies to:

Gregory J. Conklin, Esq.
Gibson, Dunn & Crutcher LLP
One Montgomery Street, 31st Floor
San Francisco, CA 94104
(415) 393-8200

CALCULATION OF REGISTRATION FEE

Title of Securities	Amount to be		Proposed Maximum			Proposed Maximum		Amount of
to be Registered	Registered(2)		Offering Price per Share(2)			Aggregate Offering Price		Registration Fee
Cadence Design	$	8,500,000		100	%	$	8,500,000	$	687.65
Systems, Inc.
1994 Deferred
Compensation Plan
Obligations (1)

(1)

The Cadence Design Systems, Inc. 1994 Deferred Compensation Plan Obligations are unsecured obligations of the Registrant and certain affiliated companies to pay deferred compensation in the future in accordance with the terms of the 1994 Cadence Design Systems, Inc. Deferred Compensation Plan. Pursuant to Rule 416(c) under the Securities and Exchange Act of 1933, this Registration Statement covers an indeterminate amount of interests to be offered or sold pursuant to the employee benefit plan described herein.

(2)

Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(o).

TABLE OF CONTENTS

PART I
PART II
	Item 3. Incorporation of Documents by Reference
	Item 4. Description of Securities
	Item 5. Interests of Named Experts and Counsel
	Item 6. Indemnification of Directors and Officers
	Item 7. Exemption from Registration Claimed
	Item 8. Exhibits
	Item 9. Undertakings
SIGNATURES
EXHIBIT INDEX
EXHIBIT 4.1
EXHIBIT 5.1
EXHIBIT 23.1
EXHIBIT 23.2

INTRODUCTION

               This Registration Statement on Form S-8 is filed by Cadence Design Systems, Inc., a Delaware corporation (the “Registrant”), relating to $8,500,000 of unsecured obligations of the Registrant to pay deferred compensation in the future (the “Obligations”) in accordance with the terms of the Cadence Design Systems, Inc. 1994 Deferred Compensation Plan (the “Plan”).

PART I

Information Required in the Section 10(a) Prospectus

          The information required in Part I of this Registration Statement is included in the prospectus for the Plan, which the Registrant has excluded from this Registration Statement in accordance with the instructions to Form S-8.

PART II

Information Required in the Registration Statement and Explanatory Note

Item 3. Incorporation of Documents by Reference

          The Registrant hereby incorporates by reference into this Registration Statement the following documents previously filed with the Securities and Exchange Commission (the “Commission”):

(a)	The Registrant’s Annual Report on Form 10-K for the fiscal year ended December 28, 2002, including all material incorporated by reference therein;
(b)	The Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2003, including all material incorporated by reference therein; and
(c)	The Registrant’s Current Reports on Form 8-K filed with the Commission on March 14, 2003 and April 15, 2003.

          All documents filed pursuant to Sections 13(a), 13(c), 14, and 15(d) of the 1934 Act, after the date of this Registration Statement and prior to the filing of a post-effective amendment that indicates that all securities offered hereby have been sold or that deregisters all securities then remaining unsold shall be deemed to be incorporated by reference into this Registration Statement and to be a part hereof from the date of filing of such documents.

          Any document and any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein, or in any other subsequently filed document that also is incorporated or deemed to be incorporated by reference herein, modifies or supersedes such document or statement. Any such document or statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement. Subject to the foregoing, all information appearing in this Registration Statement is qualified in its entirety by the information appearing in the documents incorporated by reference.

Item 4. Description of Securities

          $8,500,000 of Obligations are being registered under this Registration Statement to be offered to certain eligible highly-compensated employees and non-employee directors (“Participants”) of the Registrant pursuant to the Plan. The Obligations are general unsecured obligations of the Registrant to pay deferred compensation in the future in accordance with the terms of the Plan, and rank pari passu with other unsecured and unsubordinated indebtedness of the Registrant from time to time outstanding.

          The amount of compensation deferred by each Participant is based on semi-annual elections made by each Participant. Pursuant to any one election, the minimum amount that can be deferred is $2,500 and the maximum amount is (i) (A) 80% of an employee Participant’s base salary and (B) 100% of an employee Participant’s cash bonus, or (ii) 100% of a non-employee director Participant’s director’s fees, all paid in respect of the applicable semi-annual period. In addition, certain Participants selected by the compensation committee (the “Committee”) are permitted to defer receipt of gain from the exercise of qualifying options to acquire the common stock of the Registrant (“Qualifying Stock Option Gain”), provided that such options are exercised using a stock-for-stock exercise method. Deferred compensation is credited to a Participant’s “Account,” and deferred Qualifying Stock Option Gain is credited to a Participant’s “Stock Option Subaccount,” at the time such amounts otherwise would have been paid to the Participant. The Account and Stock Option Subaccount are bookkeeping entries only and are utilized solely as a device for the measurement and determination of the benefits to be paid to a Participant under the Plan.

          Obligations consist of an amount equal to each Participant’s Account balance under the Plan, which includes amounts credited to a Participant’s Stock Option Subaccount as well as other amounts credited as described below. Each Participant has the sole authority to designate the manner in which his Account balance is invested among certain hypothetical investment options available under the Plan, and his Account balance is credited with the actual financial performance or earnings generated by such investments. A Participant’s Stock Option Subaccount only is deemed to be invested in the common stock of the Registrant and only is credited with the actual financial performance of such common stock, including stock dividends. It is possible for the value of a Participant’s Account balance to decrease as a result of decreases in the value of the hypothetical investments or decreases in the value of the Registrant’s common stock, as applicable.

          Participants elect to receive distribution of their Account balance (i) upon reaching a specified age; (ii) upon passage of a specified number of years; (iii) upon termination of employment (or service); (iv) upon the earlier to occur of (A) termination of employment (or service) or (B) passage of a specified number of years or attainment of a specified age; or (v) upon the later to occur of (A) termination of employment (or service) or (B) passage of a specified number of years or attainment of a specified age; except that Participants make a separate distribution election as to their Stock Option Subaccount. Participants also make a distribution election to receive the balance of their Accounts in cash either in the form of a lump sum or in equal annual installments over five or ten years as the Participant designates; except that Participants make a separate election as to the timing of distributions from their Stock Option Subaccount, which are made only in the form of the common stock of the Registrant. A Participant may change his distribution elections by making new elections, which are effective as of the later of the date that is six months following the date the new elections are made, or the first day of the plan year following the plan year in which the new elections are made, and such new elections apply to the Participant’s entire Account; except that any changes to a Participant’s distribution elections as to his Stock Option Subaccount must be made separately. Payments are made to Participants based on their elections described above, provided that no payment is permitted to be made under the Plan to the extent that the receipt of such payment, when combined with the receipt of all other “applicable employee remuneration” (as defined in Section 162(m)(4) of the Internal Revenue Code of 1986, as amended (the “Code”)) would cause any remuneration received to be nondeductible by the Registrant under Code Section 162(m)(1). Any benefits not distributable according to a Participant’s elections as a result of this limitation instead are distributed to the Participant in subsequent years.

          If the Participant experiences a financial Hardship, as defined under the Plan, the Participant may petition the Committee to receive a partial or full payout from his Account balance, not to exceed the amount reasonably needed to satisfy the emergency. In order to receive a Hardship distribution, the Participant must show that the need cannot be satisfied by other resources reasonably available, including insurance proceeds. A Participant who receives a Hardship distribution is not eligible to defer additional amounts under the Plan until the second anniversary of the date of the Hardship distribution.

          If a Participant terminates employment (or service in the case of a non-employee director Participant) on account of death or Permanent Disability (as defined in the Plan) before distributions of his or her Account balance otherwise would occur, the Participant or his or her designated beneficiary is entitled to receive all amounts credited to the Account as of the date of termination. If a Participant terminates employment (or service) for any other

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reason before distribution of his or her Account balance otherwise would occur, distributions are made pursuant to such Participant’s elections unless the Committee decides, in its sole discretion, that payment is to be made as of the date of termination. In either case, payments are made in the form (lump sum or annual installments) designated by the Participant’s distribution election. Upon the death of a Participant prior to complete distribution of his entire Account balance, the unpaid balance is payable to the Participant’s beneficiary in the form elected by the Participant, or, at the request of the beneficiary and at the discretion of the Committee, in a lump sum. Notwithstanding any other provisions of the Plan, Participants’ Account balances are paid in a lump sum thirty days after any Change of Control, as defined in the Plan. With respect to any and all payouts of Account balances under the Plan, the Registrant has the right to withhold taxes as required by law.

          The Plan is administered by the Committee, whose determinations and decisions are conclusive and binding on all persons who at any time have or claim to have any interest whatever under the Plan. The Committee has the right to amend the Plan at any time provided that such amendment does not affect adversely benefits payable to a Participant without such Participant’s written consent. The Committee also has the right to terminate the Plan at any time and to direct lump sum payment of all Account balances under the Plan.

          A Participant’s Obligations cannot be transferred or assigned, nor be made subject to alienation, anticipation, encumbrance, garnishment, attachment, execution, or levy of any kind, whether voluntary or involuntary, nor subject to the debts, contracts, liabilities, engagements, or torts of the Registrant or any beneficiary of a Participant. Any attempt to alienate, anticipate, encumber, sell, transfer, assign, pledge, garnish, attach, or otherwise subject to legal or equitable process or encumber, or dispose of any Obligation is void.

Item 5. Interests of Named Experts and Counsel

          Not Applicable.

Item 6. Indemnification of Directors and Officers

          Section 145 of the Delaware General Corporation Law permits a corporation to indemnify any of its directors or officers who was or is a party or is threatened to be made a party to any third party proceeding by reason of the fact that such person was or is a director or officer of the corporation, against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit, or proceeding, if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that such person’s conduct was unlawful. In a derivative action, i.e., one by or in the right of a corporation, the corporation is permitted to indemnify any of its directors or officers against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made if such person shall have been adjudged liable to the corporation, unless and only to the extent that the court in which such action or suit was brought shall determine upon application that such person is fairly and reasonably entitled to indemnity for such expenses despite such adjudication of liability.

          Article VII of the Registrant’s currently effective Certificate of Incorporation eliminates the personal liability of its directors for monetary damages for breach of fiduciary duty as a director, except for liability: (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the Delaware General Corporation Law; or (iv) for any transaction from which the director derived an improper personal benefit. In addition, as permitted by Section 145 of the Delaware General Corporation Law, the Bylaws of the Registrant provide that: (a) the Registrant is required to indemnify its directors and officers and persons serving in such capacities in other business entities (including, for example, subsidiaries of the Registrant) at the Registrant’s request (such directors, officers, and other persons are collectively, “Covered Persons”), to the fullest extent permitted by Delaware law, including those circumstances in which indemnification otherwise would be discretionary; (b) the Registrant is required to advance expenses, as incurred, to such Covered Persons in connection with defending a proceeding; (c) the indemnitee(s) of the Registrant have the right to bring suit, and to

3

be paid the expenses of prosecuting such suit if successful, to enforce the rights to indemnification or to advancement of expenses under the Bylaws; (d) the rights conferred in the Bylaws are not exclusive and the Registrant is authorized to enter into indemnification agreements with such directors, officers and employees; (e) the Registrant is required to maintain director and officer liability insurance to the extent reasonably available; and (f) the Registrant may not retroactively amend the Bylaws indemnification provision in a way that is adverse to such Covered Persons.

          The Registrant has entered into indemnity agreements with each of its executive officers and directors that provide the maximum indemnity allowed to officers and directors by Section 145 of the Delaware General Corporation Law and the Bylaws, as well as certain additional procedural protections. The Registrant also maintains a limited amount of director and officer insurance. The indemnification provision in the Bylaws, and the indemnity agreements entered into between the Registrant and its officers or directors, may be sufficiently broad to permit indemnification of the Registrant’s officers and directors for liability arising under the Securities Act of 1933, as amended (the “1933 Act”).

Item 7. Exemption from Registration Claimed

          Not Applicable.

Item 8. Exhibits

Exhibit Number	Exhibit
4.1	Cadence Design Systems, Inc. 1994 Deferred Compensation Plan.
5.1	Opinion of Gibson, Dunn & Crutcher LLP.
23.1	Independent Auditors’ Consent.
23.2	Consent of Arthur Andersen LLP, Independent Public Accountants.
23.3	Consent of Gibson, Dunn & Crutcher LLP (contained in Exhibit 5.1).
24.1	Power of Attorney (included on the signature pages to this Registration Statement on Form S-8).

Item 9. Undertakings

          A.     The undersigned Registrant hereby undertakes: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement (i) to include any prospectus required by Section 10(a)(3) of the 1933 Act; (ii) to reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference into this Registration Statement; (2) that for the purpose of determining any liability under the 1933 Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold upon the termination of the offering.

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          B.     The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the 1933 Act, each filing of the Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is incorporated by reference into this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

          C.     Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the indemnity provisions incorporated by reference in Item 6, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue.

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EXPLANATORY NOTE REGARDING CONSENT OF ARTHUR ANDERSEN LLP

          On March 22, 2002, the Registrant announced that it had appointed KPMG LLP to replace Arthur Andersen LLP (“Andersen”) as the Registrant’s independent auditors. The Registrant’s consolidated balance sheet as of December 29, 2001 and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two fiscal years in the period ended December 29, 2001, incorporated by reference in this Registration Statement, have been audited by Andersen, as stated in its report dated March 11, 2002, which is incorporated by reference herein. After reasonable efforts, the Registrant has been unable to obtain Andersen’s consent to the incorporation by reference into this Registration Statement of its report with respect to these financial statements. Under these circumstances, Rule 437a under the Securities Act of 1933 permits us to file this Registration Statement without a written consent from Andersen. The absence of such consent may limit recovery by investors on certain claims. In particular, and without limitation, investors will not be able to assert claims against Andersen under Section 11 of the Securities Act. In addition, the ability of Andersen to satisfy any claims (including claims arising from Andersen’s provision of auditing and other services to us) may be limited as a practical matter due to recent events regarding Andersen.

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SIGNATURES

          Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8, and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California, on this 21st day of May, 2003.

CADENCE DESIGN SYSTEMS, INC.
By:	/s/ H. Raymond Bingham
	H. Raymond Bingham
President, Chief Executive Officer and Director

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POWER OF ATTORNEY

          KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints H. Raymond Bingham, William Porter, and R.L. Smith McKeithen, and each of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

          Pursuant to the requirements of 1933 Act, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ H. Raymond Bingham    H. Raymond Bingham	President, Chief Executive Officer and Director (Principal Executive Officer)	May 21, 2003
/s/ William Porter    William Porter	Senior Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	May 21, 2003
/s/ Susan L. Bostrom    Susan L. Bostrom	Director	May 21, 2003
/s/ Dr. Leonard Y.W. Liu    Dr. Leonard Y. W. Liu	Director	May 20, 2003
/s/ Donald L. Lucas    Donald L. Lucas	Director	May 21, 2003
/s/ Sean M. Maloney    Sean M. Maloney	Director	May 21, 2003
/s/ Dr. Alberto Sangiovanni- Vincentelli    Dr. Alberto Sangiovanni-Vincentelli	Director	May 21, 2003
/s/ George M. Scalise    George M. Scalise	Director	May 21, 2003
/s/ Dr. John B. Shoven    Dr. John B. Shoven	Director	May 21, 2003
/s/ Roger S. Siboni    Roger S. Siboni	Director	May 21, 2003

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          Pursuant to the requirements of the 1933 Act, the Committee has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of San Jose, State of California, on this 21st day of May, 2003.

CADENCE DESIGN SYSTEMS, INC. 1994 DEFERRED COMPENSATION PLAN
By:	/s/ R.L. Smith McKeithen
	R.L. Smith McKeithen,
	on behalf of the Compensation Committee of the
	Board of Directors of Cadence Design Systems, Inc.,
	administrator of the Cadence Design Systems, Inc. 1994
	Deferred Compensation Plan

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EXHIBIT INDEX

Exhibit Number	Exhibit
4.1	Cadence Design Systems, Inc. 1994 Deferred Compensation Plan.
5.1	Opinion of Gibson, Dunn & Crutcher LLP.
23.1	Independent Auditors’ Consent.
23.2	Consent of Arthur Andersen LLP, Independent Public Accountants.
23.3	Consent of Gibson, Dunn & Crutcher LLP (contained in Exhibit 5.1).
24.1	Power of Attorney (included on the signature pages to this Registration Statement on Form S-8).

EX-4.1 3 f90460exv4w1.txt EXHIBIT 4.1 EXHIBIT 4.1 CADENCE DESIGN SYSTEMS, INC. 1994 DEFERRED COMPENSATION PLAN AMENDED AND RESTATED EFFECTIVE NOVEMBER 1, 2002 Cadence Design Systems, Inc., a Delaware Corporation (referred to hereafter as the "Employer") established effective October 1, 1994, and amended and restated effective October 1, 1996, and January 1, 2001, this Cadence Design Systems, Inc. 1994 Deferred Compensation Plan (the "Plan"), an unfunded plan for the purpose of providing deferred compensation for a select group of management, highly compensated executives, and directors. The Employer hereby amends and restates the Plan in its entirety effective November 1, 2002, to reflect prior and new amendments to the Plan. RECITALS WHEREAS, those employees or directors identified by the Compensation Committee of the Board of Directors of the Employer or any other committee designated by the Board of Directors of the Employer to administer this Plan in accordance with Section 8 hereof (hereinafter referred to as the "Committee") as eligible to participate in this Plan (each of whom are referred to hereafter as the "Employee" or collectively as the "Employees") are employed by Employer: WHEREAS, Employer previously adopted an unfunded deferred compensation plan and the Employees desire the Employer to continue to pay certain deferred compensation and/or related benefits to or for the benefit of Employees, or a designated Beneficiary or both; and WHEREAS, Employer believes it is in the best interest of Plan participants and beneficiaries to amend and restate the Plan: NOW, THEREFORE, the Employer hereby amends and restates the Plan effective as of November 1, 2002. 1 TABLE OF CONTENTS

Page ---- SECTION 1 DEFINITIONS.......................................................................................... 1 1.1 "Account...................................................................................... 1 1.2 "Beneficiary.................................................................................. 1 1.3 "Change in Control............................................................................ 1 1.4 "Code......................................................................................... 1 1.5 "Committee.................................................................................... 1 1.6 "Compensation................................................................................. 1 1.7 "Effective Date............................................................................... 1 1.8 "Eligible Compensation........................................................................ 1 1.9 "Eligible Stock Option........................................................................ 1 1.10 "Employee..................................................................................... 1 1.11 "Employer..................................................................................... 2 1.12 "Employer Contributions....................................................................... 2 1.13 "Hardship..................................................................................... 2 1.14 "Non-Employee Director........................................................................ 2 1.15 "Plan......................................................................................... 2 1.16 "Plan Year.................................................................................... 2 1.17 "Permanent Disability......................................................................... 2 1.18 "Qualifying Stock Option Gain................................................................. 2 1.19 "Stock........................................................................................ 2 1.20 "Stock-for-Stock.............................................................................. 2 1.21 "Stock Option Subaccount...................................................................... 3 1.22 "Subsidiary................................................................................... 3

i 1.23 "Trust" or "Trust Agreement.................................................................... 3 1.24 "Trust Fund.................................................................................... 3 1.25 "Trustee....................................................................................... 3 SECTION 2 ELIGIBILITY........................................................................................... 3 2.1 Eligibility.................................................................................... 3 SECTION 3 DEFERRED COMPENSATION & QUALIFYING STOCK OPTION GAIN.................................................. 4 3.1 Deferred Compensation.......................................................................... 4 3.2 Deferred Qualifying Stock Option Gain.......................................................... 5 3.3 Payment of Account Balances.................................................................... 5 3.4 Election to Defer.............................................................................. 7 3.5 Distribution Election.......................................................................... 9 3.6 Payment Upon Change in Control................................................................. 9 3.7 Hardship....................................................................................... 9 3.8 Employee's Right Unsecured.................................................................... 10 3.9 Investment of Contribution.................................................................... 10 SECTION 4 DESIGNATION OF BENEFICIARY........................................................................... 11 4.1 Designation of Beneficiary.................................................................... 11 SECTION 5 CHANGE IN CONTROL.................................................................................... 11 5.1 Change in Control............................................................................. 11 SECTION 6 TRUST PROVISIONS..................................................................................... 13 6.1 Trust Agreement............................................................................... 13 SECTION 7 AMENDMENT, TERMINATION AND TRANSFERS BY COMMITTEE.................................................... 13 7.1 Amendment..................................................................................... 13 7.2 Termination................................................................................... 13 7.3 Transfers by Committee........................................................................ 13 ii SECTION 8 ADMINISTRATION....................................................................................... 14 8.1 Administration................................................................................ 14 8.2 Liability of Committee; Indemnification....................................................... 14 8.3 Expenses...................................................................................... 14 SECTION 9 GENERAL AND MISCELLANEOUS............................................................................ 14 9.1 Rights Against Employer....................................................................... 14 9.2 Assignment or Transfer........................................................................ 15 9.3 Severability.................................................................................. 15 9.4 Construction.................................................................................. 15 9.5 Governing Law................................................................................. 15 9.6 Payment Due to Incompetence................................................................... 15 9.7 Tax........................................................................................... 15 9.8 Attorney's Fees............................................................................... 16 9.9 Plan Binding on Successors/Assignees.......................................................... 16 iii SECTION 1 DEFINITIONS 1.1 "Account" shall mean the separate account(s) established under this Plan and the Trust for each participating Employee. Each Account shall include, as applicable, any Stock Option Subaccount of a participating Employee. Employer shall furnish each participant with a statement of his or her Account balance at least annually. 1.2 "Beneficiary" shall mean the Beneficiary designated by the Employee to receive Employee deterred compensation benefits in the event of his or her death. 1.3 "Change in Control" shall have the meaning set forth in Section 5.1 of the Plan. 1.4 "Code" shall mean the Internal Revenue Code of 1986 as amended from time to n me, and the rules and regulations promulgated thereunder. 1.5 "Committee" shall mean the Compensation Committee of the Board of Directors of the Employer or any other committee designated by the Board of Directors of the Employer to administer this Plan in accordance with Section 8 hereof. 1.6 "Compensation" shall, for the period on or before April 1, 1998, mean the base salary and cash bonuses described in Section 3.1. On or after April 1, 1998, "Compensation" shall mean the base salary, cash bonuses, and director fees described in Section 3.1. 1.7 "Effective Date" of the Plan shall mean October 1, 1994, unless otherwise specified by the Employer in a corporate resolution approving and adopting this Plan. The effective date of this amendment and restatement shall be November 1, 2002. 1.8 "Eligible Compensation" shall mean, for the period prior to April 1, 1998, projected annual compensation from the Employer, determined on an annual basis by the Employer at or before the beginning of the Plan Year, which may consist of salary, bonus, and/or incentive payments, determined before any deductions under any qualified plan of the Employer (including a Section 401(k) plan or a Section 125 plan) and excluding any special or nonrecurring compensatory payments such as moving or relocation bonuses or automobile allowances. Effective on and after April 1, 1998, the term shall mean projected annual compensation from the Employer determined on an annual basis by the Employer at or before the beginning of the Plan, which may consist of salary, bonus, and, and/or incentive payments, determined before any deductions under any qualified plan of the Employer (including a Section 401(k) plan or a Section 125 plan) and excluding any special or non-recurring compensatory payments such as moving or relocation bonuses or automobile allowances. 1.9 "Eligible Stock Option" shall mean one or more non-qualified stock options selected by the Committee in its sole discretion. 1.10 "Employee" shall, for the period before April 1, 1998, mean, each employee of Employer. Effective on or after April 1, 1998, the term shall also include each Non-Employee 1 Director. The term also shall include reference to an Employee's Beneficiary where the context so requires. 1.11 "Employer" shall mean Cadence Design Systems, Inc., a Delaware corporation, and any successor organization thereto, and any Subsidiaries, as defined in Section 7.3 of the Company. 1.12 "Employer Contributions" shall mean the Employer's discretionary contribution, if any, pursuant to Section 3.1(b) of the Plan. 1.13 "Hardship" shall have the meaning set forth in Section 3.7 of the Plan. 1.14 "Non-Employee Director" shall mean a member of Employer's Board of Directors who is not otherwise an employee of the Employer. 1.15 "Plan" shall mean the Cadence Design Systems, Inc. 1994 Deferred Compensation Plan, including any amendments thereto. 1.16 "Plan Year" shall mean the year beginning each January 1 and ending December 31; notwithstanding the foregoing, the initial Plan Year shall mean the period beginning with the Effective Date and ending on December 31, 1994. 1.17 "Permanent Disability" shall mean that the Employee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or otherwise meets the definition of "Permanent Disability" as set forth in the Employer's Long Term Disability Plan. An Employee will not he considered to have a Permanent Disability unless he or she furnishes proof of such condition sufficient to satisfy the Employer, in its sole discretion. 1.18 "Qualifying Stock Option Gain" shall mean an amount equal to the fair market value of shares (or share equivalent units) of Stock acquired upon exercise of one or more Eligible Stock Options using a Stock-for-Stock payment method, less the total stock purchase price paid to exercise the Eligible Stock Options, less amounts withheld pursuant to Section 9.7. All such amounts shall be calculated using the average of the high and low price of Stock on the date of exercise of such Eligible Stock Options, as reported on the New York Stock Exchange. 1.19 "Stock" shall mean Cadence Design Systems, Inc. common stock, $0.01 par value, or any other equity securities of Employer designated by the Committee. 1.20 "Stock-for-Stock" shall mean a payment method by which certain Employees, including Non-Employee Directors, exercise their Eligible Stock Options by paying the exercise price with Stock, as follows: the Employee delivers to Employer shares of Stock already owned by Employee for at least six (6) months as of the date of exercise (or, instead of delivering actual shares, Employee delivers "phantom shares" by delivering an affidavit of ownership of the already-owned Stock but does not deliver cash or any other property) having a fair market value equal to the exercise price of the Eligible Stock Options to be exercised. 2 1.21 "Stock Option Subaccount" shall mean (i) the sum of Qualifying Stock Option Gain deferred in accordance with Section 3.2 of this Plan, plus (ii) amounts credited or debited in accordance with Section 3.9(d) of this Plan, less (iii) all distributions made to the Employee or his or her beneficiary in accordance with Section 3.3(g) of this Plan. 1.22 "Subsidiary" shall mean any corporation (other than the Employer) in an unbroken chain of corporations or other entities beginning with the Employer, if each of the entities other than the last entity in the unbroken chain owns stock, partnership rights or other ownership interest possessing fifty (50) percent or more of the total combined voting power of all classes of stock, partnership rights or other ownership interest in one of the other entities in such chain. 1.23 "Trust" or "Trust Agreement" shall mean the Cadence Design Systems, Inc. 1994 Deferred Compensation Plan Rabbi Trust Agreement, including any amendments thereto, entered into between the Employer and the Trustee to carry out the provisions of the Plan. 1.24 "Trust Fund" shall mean the cash and other assets and/or properties held and administered by' Trustee pursuant to the Trust to carry out the provisions of the Plan. 1.25 "Trustee" shall mean the designated Trustee acting at any time under the Trust. SECTION 2 ELIGIBILITY 2.1 Eligibility. Eligibility to participate in the Plan shall be limited to Employees of the Employer who (a) have Eligible Compensation of at least $150,000 for the Plan Year, (b) are classified as officers, vice-presidents, directors, or an equivalent title, and (c) have been selected by the Committee to participate in the Plan. The Committee shall designate Employees who shall be covered by this Plan in a separate Acknowledgment (in the form attached hereto as Appendix 1) for each such Employee. Participation in the Plan shall commence as of the date such Acknowledgment is signed by the Employee and delivered to the Employer, provided that deferral of compensation under the Plan shall not commence until the Employee has complied with the election procedures set forth in Section 3.4. Notwithstanding the foregoing, participation by an Employee in the Plan does not make such Employee eligible automatically to defer Qualifying Stock Option Gain. Employees, including Non-Employee Directors, whose Stock Options are Eligible Stock Options and who are eligible to defer Qualifying Stock Option Gain under the Plan pursuant to Section 3.2, will be designated by the Committee in a separate Acknowledgement (in the form attached hereto as Appendix 2) for each such Employee. Nothing in the Plan or in the Acknowledgments should be construed to require any contributions to the Plan on behalf of the Employee by Employer. Notwithstanding the foregoing, Non-Employee Directors shall be eligible to participate in the Plan and shall be eligible to defer Qualifying Stock Option Gain under the Plan. A Non-Employee Director shall commence participation in the Plan as of the later of April 1, 1998, or the date the Non-Employee Director first becomes a Non-Employee Director, provided that 3 deferral of Compensation under the Plan shall not commence until the Non-Employee Director has complied with the election procedures set forth in Section 3.4. SECTION 3 DEFERRED COMPENSATION & QUALIFYING STOCK OPTION GAIN 3.1 Deferred Compensation. (a) Each participating Employee may elect, in accordance with Section 3.4 of this Plan, to defer semi-annually the receipt of a portion of the Compensation for active service otherwise payable to him or her by Employer during each semi-annual period or portion of a semi-annual period that the Employee shall be employed by the Employer. Any Compensation deferred by Employee pursuant to Section 3.4 shall be recorded by the Employer in an Account, maintained in the name of the Employee, which Account shall be credited with a dollar amount equal to the total amount of Compensation deferred during each semi-annual period under the Plan, together with earnings thereon credited in accordance with Section 3.9. The amount or percentage of Compensation that Employee elects to defer under Section 3.4 will remain constant for the semi-annual period and shall not be subject to change during such semi-annual period Effective April 1 1998, each such deferral election as to "base salary" or "director's fees" or discontinuance of a deferral election as to "base salary" or "director's fees" will continue in force for each successive year or semiannual period, as appropriate, until or unless suspended or modified by the filing of a subsequent election with the Employer by the Employee or Non-Employee Director in accordance with Section 3.4 of the Plan. Each deferral election as to an Employee's "cash bonus" shall continue in force only for the single semi-annual period in which it is paid, regardless of the period of time as to which it is awarded, and shall not apply to any successive semi-annual periods. Any deferral election with respect to a "cash bonus" must be made prior to the time the amount of the bonus is determined, prior to the end of the period of time as to which the bonus is awarded, and at a time that the amount of any such bonus remains substantially uncertain. All deferrals pursuant to this Section 3.1 shall be fully vested at all times. Effective April 1, 1998, deferral elections shall be subject to minimum dollar and maximum percentage amount limits as follows: (i) the minimum semi-annual deferral amount is $2,500 (prior to July 1, 1998, the minimum annual deferral amount was $5,000), which shall be withheld from the Employee's or Non-Employee Director's Compensation, and (ii) the maximum deferral percentage amount is 80% of the Employee's "base salary," 100% of the Employee's "cash bonus," and 100% of the Non-Employee Director's "director's fees." For purposes of the Plan, "base salary" for a given semi-annual period means an "Employee's regular compensation payable during the semi-annual period, excluding bonuses, commissions, overtime, incentive payments, non-monetary awards, compensation deferred pursuant to all Section 125 (cafeteria) or Section 401(k) (savings) plans of the Employer and other special compensation, and reduced by the tax withholding obligations imposed on the Employer and any other withholding requirements imposed by law with respect to such amounts. For purposes of the Plan, "cash bonus" shall mean amounts (if any) awarded under the bonus policies maintained by the Employer and any commissions earned on sales. For purposes of the Plan, "director's fees" for a given semi-annual period means the annual retainer, per meeting fees, committee meeting fees, and consulting fees payable during the semi-annual period. Except as otherwise expressly provided herein, this Section 3.1(a) is effective as of July 1, 1998. 4 (b) Employer shall not be obligated to make any other contribution to the Plan on behalf of any Employee at any time. Employer may make Employer Contributions to the Plan on behalf of one or more Employees. Employer Contributions, if any, made to Accounts of Employees shall be determined in the sole and absolute discretion of the Employer, and may be made without regard to whether the Employee to whose Account such contribution is credited has made, or is making, contributions pursuant to Section 3.1(a). The Employer shall not be bound or obligated to apply any specific formula or basis for calculating the amount of any Employer Contributions and Employer shall have sole and absolute discretion as to the allocation of Employer Contributions among participating Employee Accounts. The use of any particular formula or basis for making an Employer Contribution in one year shall not bind or obligate the Employer to use such formula or basis in any other year. Employer Contributions may be subject to a substantial risk of forfeiture in accordance with the terms of a vesting schedule, which may be selected by the Employer in its sole and absolute discretion. (c) Amounts deferred under the Plan shall be calculated and withheld from the Employee's base salary and/or cash bonus after such compensation has been reduced to reflect salary reduction contributions to the Employer's Code Section 125 (cafeteria) and Code Section 401(k) (savings) plans, but before any reductions for contributions to the Code Section 423 (employee stock purchase) plan. (d) Effective April 1, 2000, the Committee in its sole discretion may direct the Trustee to accept the transfer of funds held in trust under the Cadence Design Systems, Inc. 1996 Deferred Compensation Venture Investment Trust Agreement ("Telos Trust"), for a participant in the Cadence Design Systems, Inc. 1996 Deferred Compensation Venture Investment Plan ("Telos Plan"), which is an unfunded nonqualified deferred compensation plan for a select group of management and highly compensated executives of the Company, in which case the transferred funds shall be held by the Trustee under and be subject to the terms of the Plan and invested and accounted for as directed by the Committee except as otherwise provided in Section 3.3(e). Such amounts transferred from the Telos Trust to the Trust ("Transferred Funds") may not be returned to the Telos Plan or Telos Trust. The transfer of such Transferred Funds shall not cause any of the participant's rights to a distribution under the Plan or the Telos Plan (including the Transferred Funds) to be a secured right to a distribution under either plan. 3.2 Deferred Qualifying Stock Option Gain. Eligible Employees, including Non-Employee Directors, designated by the Committee as described in Section 2.1 may elect, in accordance with Section 3.4(b) of this Plan, to defer the receipt of Qualifying Stock Option Gain upon the exercise of any Eligible Stock Option. Any Qualifying Stock Option Gain deferred by an Employee shall be recorded in a Stock Option Subaccount, maintained in the name of the Employee, which subaccount shall be credited with an amount of shares (or share equivalent units) of Stock equal to the total amount of Qualifying Stock Option Gain deferred, together with any earnings thereon credited in accordance with Section 3.9(d). 3.3 Payment of Account Balances. (a) Effective July 1, 1998, the Employee shall elect whether he or she will receive distribution of his or her Account, not including his or her Stock Option Subaccount, subject to tax withholding requirements, (i) upon reaching a specified age, (ii) upon passage of a 5 specified number of years, (iii) upon termination of employment of Employee with Employer, (iv) upon the earlier to occur of (A) termination of employment of Employee with Employer or (B) passage of a specified number of years or attainment of a specified age, or (v) upon the later to occur of (A) termination of employment of Employee with Employer or (B) passage of a specified number of years or attainment of a specified age, as elected by Employee in accordance with the form established by the Committee. Such form may permit an election among some or all of the alternatives listed in this Section 3.3(a), as determined in the Committee's sole discretion. A designation of the time of distribution shall be required as a condition of participation under this Plan. The Employee also shall elect to receive all amounts payable to him or her in a lump sum or in equal monthly installments over a designated period of five or ten years, pursuant to the provisions of Section 3.3(e). These elections shall be made in accordance with Section 3.5 of this Plan. (b) Distributions shall be made to the maximum extent allowable under the election made by Employee, except that no distribution shall be made to the extent that the receipt of such distribution, when combined with the receipt of all other "applicable employee remuneration" (as defined in Code Section 162(m)(4)) would cause any remuneration received by the Employee to be nondeductible by the Employer under Code Section 162(m)(1). The portion of any distributable amount that is not distributed by operation of this Section 3.3(b) shall be distributed in subsequent years in the manner elected by the Employee until the Employee's Account has been fully liquidated. The commencement date of the lump sum payment or the five- or ten-year period (whichever is applicable) shall be automatically extended, when necessary to satisfy the requirements of this subsection, for one-year periods until all Account balances have been distributed in the manner elected by the Employee. (c) Effective July 1, 1998, upon termination of Employee's employment with Employer by reason of death or Permanent Disability prior to the time when payment of Account balances otherwise would commence under the provisions of Section 3.3(a), Employee or Employee's designated Beneficiary will be entitled to receive all amounts credited to the Account of Employee as of the date of his or her death or Permanent Disability (notwithstanding any contrary election to receive distributions under the first sentence of Section 3.3(a)). Upon termination of Employee's employment with Employer by reason other than death or Permanent Disability prior to the date when payment of Account balances otherwise would commence under the provisions of Section 3.3(a), the Employer may, in the sole discretion of the Committee, distribute to Employee or Employee's designated Beneficiary all amounts credited to the Employee's Account as of the date of such termination (notwithstanding any contrary election to receive distributions under the first sentence of Section 3.3(a)). Said amounts shall be payable in the form determined pursuant to the provisions of Section 3.3(e). (d) Upon the death of Employee prior to complete distribution to him or her of the entire balance of his or her Account (and after the date of termination of employment with Employer), the balance of his or her Account on the date of death shall be payable to Employee's designated Beneficiary pursuant to Section 3.3(e). Effective July 1, 1998, notwithstanding any other provision of the Plan to the contrary, the Employee's designated Beneficiary may receive the distribution of the remaining portion of such deceased Employee's Account in the form of a lump sum if the Beneficiary requests such a distribution and the Committee, in its sole discretion, consents to such a distribution. 6 (e) The Employer shall distribute or direct distribution of the balance of amounts previously credited to Employee's Account, in a lump sum, or in monthly installments over a period of five (5) years or ten (10) years as Employee shall designate. A designation of the form of distribution shall be required as a condition of participation under this Plan. Distribution of the lump sum or the first installment shall be made or commence within ninety (90) days following the date specified in the first sentence of Section 3.3(a), or as otherwise provided in 3.3(c). Subsequent installments, if any, shall be made on the first day of each month following the last installment as determined by Employer. The amount of each installment shall be calculated by dividing the Account balance as of the date of the distribution by the number of installments remaining pursuant to the Employee's distribution election. Each such installment, if any, shall take into account earnings credited to the balance of the Account remaining unpaid. The Employee's distribution election shall be made on a form provided by Employer. Notwithstanding any provision herein to the contrary, effective April 1, 2000, Transferred Funds from the Telos Trust under the Telos Plan to the Trust for the benefit of a participant in the Telos Plan, shall be distributable under the Plan according to the terms of the elections permitted and made by the participant under the Telos Plan unless subsequently modified by the participant as permitted under this Plan. (f) Effective April 1, 1998, for purposes of this Section 3.3, reference to termination of employment shall also include termination of service as a Non-Employee Director of the Employer (except in the event such termination is due to becoming an Employee). (g) An Employee, including a Non-Employee Director, shall make a separate election to receive distributions from his or her Stock Option Subaccount, subject to tax withholding requirements. Upon termination of Employee's employment with Employer by reason of death or Permanent Disability prior to the time when payment of Employee's Stock Option Subaccount balance otherwise would commence pursuant to Employee's election, Employee or Employee's designated Beneficiary will be entitled to receive all amounts credited to the Stock Option Subaccount of Employee as of the date of his or her death or Permanent Disability (notwithstanding any contrary election to receive distributions pursuant to this Section 3.3(g)). Upon termination of Employee's employment with Employer by reason other than death or Permanent Disability prior to the date when payment of Employee's Stock Option Subaccount balance otherwise would commence pursuant to Employee's election, Employer may, in the sole discretion of the Committee, distribute to Employee or Employee's designated Beneficiary all amounts credited to Employee's Account as of the date of such termination (notwithstanding any contrary election to receive distributions pursuant to this Section 3.3(g)). All distributions from an Employee's Stock Option Subaccount shall be made in the form of Stock, except for distributions upon a Change in Control, to be made in a lump sum payment in accordance with Section 3.6. 3.4 Election to Defer. (a) Compensation. Each election of an Employee to defer Compensation as provided in Section 3.1 of this Plan shall be in writing, signed by the Employee, and delivered to Employer, together with all other documents required under the provisions of this Plan, within 7 such time as determined by the Committee and communicated to those Employees who are eligible to participate in the Plan. Such deferral elections must be delivered to Employer prior to the beginning of the Plan Year with respect to which the Compensation to be deferred is otherwise payable to Employee. Provided, however, that effective April 1, 1998, an Employee who is hired or promoted to a position of eligibility for participation in the Plan during a Plan Year (effective January 1, 2001, on or before the first business day of a semi annual period) or a Non-Employee Director who is elected to become a Non-Employee Director shall have thirty (30) days from the date of notification of eligibility for participation in the Plan in which to submit the required election documents for the then current semi-annual period. Any deferral election made by Employee shall be irrevocable with respect to any Compensation covered by such election, including Compensation payable in the semi-annual period in which the election suspending or modifying the prior deferral election is delivered to Employer. Notwithstanding the foregoing, with respect to cash bonuses payable to an Employee for the year ended December 31, 1996, but which will not be paid to the Employee until after January 1, 1997, the Employee may make a separate deferral election with respect to, or revise a previous deferral election with respect to, such cash bonuses until such time on or before December 31, 1996 as determined by the Committee, so long as at that time the amount of any such bonus has not yet been determined and remains substantially uncertain. The Employer shall withhold the amount or percentage of base salary specified to be deferred in equal amounts for each payroll period and shall withhold the amount or percentage of each cash bonus specified to be deferred at the time or times such bonus is or otherwise would be paid to the Employee. The election to defer Compensation shall be made on the form provided by Employer. Effective April 1, 1998, the Employer shall withhold the amount or percentage of director's fees specified to be deferred at the time or times such director's fees are or otherwise would be paid to the Non-Employee Director. Notwithstanding the foregoing, with respect to Compensation payable to a Non-Employee Director for the Plan Year ending December 31, 1998, but which will not be paid to the Non-Employee Director until after March 31, 1998, the Non-Employee Director may make a deferral election with respect to such Compensation until March 31, 1998. Notwithstanding any other provision of the Plan to the contrary, with respect to base salary and cash bonuses payable to an Employee for the six-month period from July 1, 1998 through December 31, 1998, prior to July 1, 1998, the Employee may revise a previous deferral election with respect to such base salary to increase (but not decrease) the amount or percentage of base salary to be deferred. Except as otherwise expressly provided herein, this Section 3.4(a) is effective as of July 1, 1998. (b) Qualifying Stock Option Gain. Notwithstanding any provision of Section 3.4(a) to the contrary, with respect to Qualifying Stock Option Gain to be deferred, (i) the Employee, including a Non-Employee Director, must make a separate deferral election on a separate deferral election form with respect to such Qualifying Stock Option Gain; (ii) such form must be timely delivered to the Vice President of Human Resources or his or her designee at least six (6) months before the date the Employee elects to exercise the Eligible Stock Option; (iii) the Eligible Stock Option must be exercised using an actual or phantom Stock-for-Stock payment method; and (iv) the Stock actually or constructively delivered by the Employee to exercise the Eligible Stock Option must have been owned by the Employee during the entire six (6) month period before its delivery. The amount of Qualifying Stock Option Gain permitted to be deferred also may be limited by other terms or conditions set forth in the stock option plan or 8 agreement under which the relevant stock option or options were granted. The Employee's Qualifying Stock Option Gain deferral election shall be made on a form provided by Employer. 3.5 Distribution Election. The initial distribution election of an Employee as provided in Section 3.3 of this Plan, including an election made pursuant to Section 3.3(g) of this Plan, shall be in writing, signed by the Employee, and delivered to Employer, together with all other documents required under the provisions of this Plan, within such period of time determined by the Committee and communicated to those Employees who are eligible to participate in the Plan. Such distribution elections must be delivered to the Employer prior to the beginning of the first Plan Year in which Employee is eligible to participate in the Plan, or, in the case of n distribution election pursuant to Section 3.3(g), prior to six months before the date of exercise of an Eligible Stock Option. Provided, however, that effective April 1, 1998, an Employee who is hired or promoted to a position of eligibility for participation in the Plan or a Non-Employee Director who is elected to become a Non-Employee Director during a Plan Year shall have thirty (30) days from the date of notification of eligibility for participation in the Plan in which to submit the required distribution election documents. If permitted by the Committee, an Employee may change the terms of his or her initial distribution election by making a new election, and any such new election will be effective as of the later of the date that is (a) six (6) months following the date the new election is made or (b) the first day of the Plan Year following the Plan Year in which the new election is made and such new election will apply to the Employee's entire Account, except for the Employee's Stock Option Subaccount. Any changes to an Employee's distribution election pursuant to Section 3.3(g) must be submitted on a separate form, and such changes will apply only to the Employee's Stock Option Subaccount. An Employee may not make a new election once distributions from the Plan have commenced or which would first become effective at a time when distributions from the Plan have commenced. Notwithstanding any other provisions of this Section 3.5, an Employee's distribution election shall be in the form established by the Committee in accordance with the terms of the Plan. 3.6 Payment Upon Change in Control. Notwithstanding any other provisions of this Plan (including without limitation Section 3.3), the aggregate balance credited to and held in the Employees' Accounts, including any Stock Option Subaccounts, shall be distributed to Employees in a lump sum on the thirtieth day following a Change in Control (except that distribution shall be on the sixtieth day in the case of a Change in Control under Section 5.1(a)), as defined in Section 5.1, unless the Committee, the Board of Directors of the Employer, or the 401(k)/NQDC Administrative Committee of the Employer (as each is composed immediately prior to such Change in Control), in the sole discretion of any of the foregoing, decides prior to that date that Employees' Accounts shall remain in the Plan. 3.7 Hardship. (a) An Employee may apply for distributions from his or her Account to the extent that the Employee demonstrates to the reasonable satisfaction of the Committee that he or she needs the funds due to Hardship. For purposes of this Section 3.7, a distribution is made on account of Hardship only if the distribution is made on account of an unforeseeable immediate and heavy emergency financial need of the Employee and is necessary to satisfy that emergency financial need. Whether an Employee has an immediate and heavy emergency financial need shall be determined by the Committee based on all relevant facts and circumstances, and shall 9 include, but not be limited to, the need to pay funeral expenses of a family member; the need to pay expenses for medical care for Employee, the Employee's spouse or any dependent of Employee resulting from sudden unexpected illness or accident; payments necessary to prevent the eviction of Employee from Employee's principal residence or foreclosure on the mortgage on that residence; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of Employee. A Hardship distribution shall not exceed the amount required to relieve the financial need of the Employee, nor shall a Hardship distribution be made if the need may be satisfied from other resources reasonably available to the Employee. For purposes of this paragraph, an Employee's resources shall be deemed to include those assets of the Employee's spouse and minor children that are reasonably available to the Employee. Prior to approving a Hardship distribution, Employer shall require the Employee to certify in writing that the Employee's financial need cannot reasonably be relieved: (i) through reimbursement or compensation by insurance or otherwise or (ii) by other distributions or nontaxable (at the time of the loan) loans from plans maintained by the Employer or by any other employer, or by borrowing from commercial sources on reasonable commercial terms, in an amount sufficient to satisfy the need. (b) Any Employee receiving a Hardship distribution under this section shall be ineligible to defer any additional compensation under the Plan until the first day of the Plan Year following the second anniversary of the date of the distribution. In addition, a new Election of Deferral must be submitted to the Employer as a condition of participation in the Plan. 3.8 Employee's Right Unsecured. The right of the Employee or his or her designated Beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Employer, and neither the Employee nor his or her designated Beneficiary shall have any rights in or against any amount credited to his or her Account or any other specific assets of the Employer, except as otherwise provided in the Trust. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between the Plan and the Employer or any other person. 3.9 Investment of Contribution. (a) The investment options available to each Employee shall be determined by the Employer and set forth in a separate written document, a copy of which shall be attached hereto and by this reference is incorporated herein. Each Employee shall have the sole and exclusive right to direct the Trustee as to the investment of his or her Accounts in accordance with policies arid procedures implemented by the Trustee. The right of an Employee to direct the investment of his or her Account into one or more of the available investment options shall not in any way be considered to alter the fact that an Account is a bookkeeping account only that measures the Employer's obligation to pay benefits hereunder, that the assets being invested at the direction of an Employee are assets of the Employer and that the Employee's rights under the Plan remain those of an unsecured, general creditor of the Employer. 10 Employer shall not be liable for any investment decision made by any Employee while such funds are held by the Trustee. (b) Accounts shall be credited with the actual financial performance or earnings generated by such investments directed by the Employee and made by the Trustee, until the Account has been fully distributed to the Employee or to the Employee's designated Beneficiary. (c) Notwithstanding any other provision in this Section 3.9 to the contrary, the Committee may determine not to take account of Employee's designated investments and determine to have the Employee's Account invested in any other manner as the Committee shall determine. (d) Notwithstanding any other provision in this Section 3.9 to the contrary, no investment options are available to an Employee with respect to amounts held in the Employee's Stock Option Subaccount. Such Stock Option Subaccount only shall be credited or debited with the actual financial performance or earnings generated by Stock. During the deferral period, dividend equivalents will be credited in the form of additional shares or share equivalent units of Stock to the Employee's Stock Option Subaccount. SECTION 4 DESIGNATION OF BENEFICIARY 4.1 Designation of Beneficiary. Employee may designate a Beneficiary or Beneficiaries to receive all amounts, if any, due hereunder to Employee but unpaid at the time of Employee's death by written notice thereof to Employer at any time prior to Employee's death and may revoke or change the Beneficiary designated therein without the Beneficiary's consent by written notice delivered to Employer at any time and from time to time prior to Employee's death. If Employee is married and a resident of a community property state, one half of any amount due hereunder which is the result of an amount contributed to the Plan during such marriage is the community property of the Employee's spouse and Employee may designate a Beneficiary or Beneficiaries to receive only the Employee's one-half interest. If Employee shall have failed to designate a Beneficiary, or if no such Beneficiary shall survive him or her, then such amount shall be paid to his or her estate. Designations of Beneficiaries shall be made on the form provided by Employer. SECTION 5 CHANGE IN CONTROL 5.1 Change in Control. For the purposes of this Plan, "Change in Control" means, the happening of any of the following: (a) The first public announcement or public acknowledgment (including without limitation, a report filed pursuant to Section 13(d) of the Securities Exchange Act of 1934 as amended (the "Exchange Act")) by the Employer that a "person," as such term is used in 11 Sections 13(d) and 14(d) of the Exchange Act (other than the Employer, a Subsidiary or an employee benefit plan of the Employer or a Subsidiary, or other controlled affiliate of the Employer, including any trustee of such plan acting as trustee), is or has become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act or comparable successor rule), directly or indirectly, of securities of the Employer representing fifty percent (50%) or more of the combined voting power of the Employer's then outstanding Common Stock entitled to vote in the election of directors, where such person's beneficial ownership of the Employer's Common Stock was not initiated by the Employer or approved by the Employer's Board of Directors; (b) The sale, lease or other disposition of all or substantially all of the assets of the Employer; (c) The merger or consolidation of the Employer with or into another corporation not initiated by the Employer, in which the Employer is not the surviving corporation and the stockholders of the Employer immediately prior to the merger or consolidation fail to possess direct or indirect beneficial ownership of more than eighty percent (80%) of the voting power of the securities of the surviving corporation (or if the surviving corporation is a controlled affiliate of another entity, then the required beneficial ownership shall be determined with respect to the securities of that entity which controls the surviving corporation and is not itself a controlled affiliate of any other entity) immediately following such transaction, or a reverse merger not initiated by the Employer, in which the Employer is the surviving corporation and the stockholders of the Employer immediately prior to the reverse merger fail to possess direct or indirect beneficial ownership of more than eighty percent (80%) of the securities of the Employer (or if the Employer is a controlled affiliate of another entity, then the required beneficial ownership shall be determined with respect to the securities of that entity which controls the Employer and is not itself a controlled affiliate of any other entity) immediately following the reverse merger. For purposes of this Section 5.1(c), any person who acquired securities of the Employer prior to the occurrence of a merger, reverse merger, or consolidation in contemplation of such transaction and who after such transaction possesses direct or indirect beneficial ownership of at least ten percent (10%) of the Common Stock of the Employer or the surviving corporation (or if the Employer or the surviving corporation is a controlled affiliate, then of the appropriate entity as determined above) immediately following such transaction shall not be included in the group of stockholders of the Employer immediately prior to such transaction; (d) A change in the composition of the Board of Directors of the Employer, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (i) are directors of the Employer as of the date hereof, or (ii) are elected, or nominated for election, to the Board of Directors of the Employer with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Employer); or (e) Any liquidation or dissolution of the Employer. 12 SECTION 6 TRUST PROVISIONS 6.1 Trust Agreement. The Employer may establish the Trust for the purpose of retaining assets, including deferred Qualifying Stock Option Gain, set aside by Employer pursuant to the Trust Agreement for payment of all or a portion of the amounts payable pursuant to the Plan. Any benefits not paid from the Trust shall be paid solely from Employer's general funds, and any benefits paid from the Trust shall be credited against and reduce by a corresponding amount the Employer's liability to Employees under the Plan. No special or separate fund, other than the Trust Agreement, shall be established and no other segregation of assets shall be made to assure the payment of any benefits hereunder. All Trust Funds shall be subject to the claims of general creditors of the Employer in the event the Employer is Insolvent as defined in Section 3 of the Trust Agreement. The obligations of the Employer to pay benefits tinder the Plan constitute an unfunded, unsecured promise to pay and Employees shall have no greater rights than general creditors of the Employer. SECTION 7 AMENDMENT, TERMINATION AND TRANSFERS BY COMMITTEE 7.1 Amendment. The Committee shall have the right to amend this Plan at any time and from time to time, including a retroactive amendment. Any such amendment shall come effective upon the date stated therein, and shall be binding on all Employees, except as otherwise provided in such amendment; provided, however, that said amendment shall not affect adversely benefits payable to an affected Employee without the Employee's written approval. 7.2 Termination. The Committee shall have the right to terminate this Plan at any time and direct the lump sum payments of all assets held by the Trust if the Employer is not Insolvent (as defined in Article 3 of the Trust Agreement) at that time. 7.3 Transfers by Committee. (a) In the event that an Employee transfers employment from the Employer to a Subsidiary, the Committee shall have the right, but no obligation, to direct the Trustee to transfer funds in an amount equal to the amount credited to such Employee's Account (the "Transferred Account") to a trust established under a Transferee Plan maintained by such Subsidiary. The Committee shall determine, in its sole discretion, whether such transfer shall be made and the timing of such transfer. Such transfer shall be made only if, and to the extent, approval of such transfer is obtained from the Trustee. No transfer shall be made unless the Subsidiary meets the requirements of subsection 7.3(b)(i) as of the date of the transfer. (b) Definitions. (i) For purposes of this Section 7.3, "Subsidiary" shall mean any corporation (other than the Employer) in an unbroken chain of corporations beginning with the Employer, if each of the corporations other than the last corporation in the 13 unbroken chain owns stock possessing fifty (50) percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. (ii) For purposes of this Section 7.3, "Transferee Plan" shall mean an unfunded, nonqualified deferred compensation plan described in Section 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974 ("ERISA"). (c) No transfer shall be made under this Section 7.3 unless the Employee for whose benefit the Transferred Account is held executes a written waiver of all of such Employee's rights and benefits under this Plan in such form as shall be acceptable to the Committee. SECTION 8 ADMINISTRATION 8.1 Administration. The Committee shall administer and interpret this Plan in accordance with the provisions of the Plan and the Trust Agreement. Any determination or decision by the Committee shall be conclusive and binding on all persons who at any time have or claim to have any interest whatever under this Plan. The Committee may employ legal counsel, consultants, actuaries and agents as it may deem desirable in the administration of the Plan and may rely on the opinion of such counsel or the computations of such consultant or other agent. The Committee shall have the authority to delegate some or all of the powers and responsibilities under the Plan and the Trust Agreement to such person or persons as it shall deem necessary, desirable or appropriate for administration of the Plan. 8.2 Liability of Committee; Indemnification. To the maximum extent not prohibited by law, no member of the Committee shall be liable to any person and in any event shall be indemnified by the Employer for any action taken or omitted in connection with the interpretation and administration of this Plan unless attributable to his or her own bad faith or willful misconduct. 8.3 Expenses. The costs of the establishment of the Plan and the adoption of the Plan by Employer, including but not limited to legal and accounting fees, shall be borne by Employer. The expenses of administering the Plan and the Trust shall be borne by the Trust unless the Employer elects in its sole discretion to pay some or all of those expenses; provided, however, that Employer shall bear, and shall not be reimbursed by, the Trust for any tax liability of Employer associated with the investment of assets by the Trust. SECTION 9 GENERAL AND MISCELLANEOUS 9.1 Rights Against Employer. Except as expressly provided by the Plan, the establishment of this Plan shall not be construed as giving to any Employee or to any person whomsoever, any legal, equitable or other rights against the Employer, or against its officers, 14 directors, agents or shareholders, or as giving to any Employee or Beneficiary any equity or other interest in the assets, business or shares of Employer stock or giving any Employee the right to be retained in the employment of the Employer. Neither this plan nor any action taken hereunder shall be construed as giving to any Employee the right to be retained in the employ of the Employer or as affecting the right of the Employer to dismiss any Employee. Any benefit payable under the Plan shall not be deemed salary or other compensation for the purpose of computing benefits under any employee benefit plan or other arrangement of the Employer for the benefit of its Employees. Nothing in the Plan or in any instrument executed pursuant thereto shall confer upon any Non-Employee Director any right to continue in the service of the Employer in any capacity or shall affect any right of the Employer, its Board of Directors or stockholders to remove any Non-Employee Director pursuant to the Employer's By-Laws and the provisions of the Delaware General Corporation Law. 9.2 Assignment or Transfer. No right, title or interest of any kind in the Plan shall be transferable or assignable by any Employee or Beneficiary or be subject to alienation, anticipation, encumbrance, garnishment, attachment, execution or levy of any kind, whether voluntary or involuntary, nor subject to the debts, contracts, liabilities, engagements, or torts of the Employee or Beneficiary. Any attempt to alienate, anticipate, encumber, sell, transfer, assign, pledge, garnish, attach or otherwise subject to legal or equitable process or encumber or dispose of any interest in the Plan shall be void. 9.3 Severability. If any provision of this Plan shall be declared illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of this Plan but shall be fully severable, and this Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein. 9.4 Construction. The article and section headings and numbers are included only for convenience of reference and are not to be taken as limiting or extending the meaning of any of the terms and provisions of this Plan. Whenever appropriate, words used in the singular shall include the plural or the plural may be read as the singular. When used herein, the masculine gender includes the feminine gender. 9.5 Governing Law. The validity and effect of this Plan and the rights and obligations of all persons affected hereby shall be construed and determined in accordance with the laws of the State of California unless superseded by federal law. 9.6 Payment Due to Incompetence. If the Committee receives evidence that an Employee or Beneficiary entitled to receive any payment under the Plan is physically or mentally incompetent to receive such payment, the Committee may, in its sole and absolute discretion, direct the payment to any other person or Trust which has been legally appointed by the courts or to any other person determined by the Employer to be a proper recipient on behalf of such person otherwise entitled to payment, or any of them, in such manner and proportion as the Employer may deem proper. Any such payment shall be in complete discharge of the Employer's obligations under this Plan. 9.7 Tax. The Employer may withhold from any benefits payable under this Plan, all federal, state, city or other taxes as shall be required pursuant to any law or governmental 15 regulation or ruling. In the case of an Employee's exercise of an Eligible Stock Option and election to defer Qualifying Stock Option Gain, Employer shall withhold from Employee's non-deferred Compensation and/or Qualifying Stock Option Gain, in a manner determined by Employer, Employee's share of FICA and other employment taxes on such deferred Qualifying Stock Option Gain. If necessary, the Committee may reduce the deferred Qualifying Stock Option Gain in order to comply with this Section 9.7. 9.8 Attorney's Fees. Employer shall pay the reasonable attorney's fees incurred by any Employee in an action brought against Employer to enforce Employee's rights under the Plan, provided that such fees shall only be payable in the event that the Employee prevails in such action. 9.9 Plan Binding on Successors/Assignees. This Plan shall be binding upon and inure to the benefit of the Employer and its successor and assigns and the Employee and the Employee's designee and estate. The Employer has caused its authorized officer to execute this amended and restated Plan this _____ day of _______________, 2002. CADENCE DESIGN SYSTEMS, INC. By: ________________________ Name: ________________________ Title: ________________________ 16 APPENDIX 1 ACKNOWLEDGMENT The undersigned Employee hereby acknowledges that Employer has selected him or her as a participant in the Cadence Design Systems, Inc. 1994 Deferred Compensation Plan, subject to all terms and conditions of the Plan, a copy of which has been received, read, and understood by the Employee in conjunction with executing this Acknowledgment. Employee acknowledges that he or she has had satisfactory opportunity to ask questions regarding his or her participation in the Plan and has received satisfactory answers to any questions asked. Employee also acknowledges that he or she has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of participation in the Plan. Employee understands that his or her participation in the Plan shall not begin until this Acknowledgment has been signed by Employee and returned to Employer. Dated: _______________________ Signed:______________________________ Employee Dated: _______________________ CADENCE DESIGN SYSTEMS, INC. Signed:______________________________ [Officer] 17 APPENDIX 2 ACKNOWLEDGMENT (FOR DEFERRAL OF QUALIFYING STOCK OPTION GAIN ONLY) The undersigned Employee hereby acknowledges that Employer has selected him or her as a participant in the portion of Cadence Design Systems, Inc. 1994 Deferred Compensation Plan pertaining to the deferral of Qualifying Stock Option Gain (as defined in the Plan document), subject to all terms and conditions of the Plan, a copy of which has been received, read, and understood by the Employee in conjunction with executing this Acknowledgment. Employee acknowledges that he or she has had satisfactory opportunity to ask questions regarding his or her participation in the portion of the Plan pertaining to the deferral of Qualifying Stock Option Gain and has received satisfactory answers to any questions asked. Employee also acknowledges that he or she has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of such participation in the Plan. Employee understands that his or her participation in the portion of the Plan pertaining to the deferral of Qualifying Stock Option Gain shall not begin until this Acknowledgment has been signed by Employee and returned to Employer. Dated: _______________________ Signed:______________________________ Employee Dated: _______________________ CADENCE DESIGN SYSTEMS, INC. Signed:______________________________ [Officer] 18 EX-5.1 4 f90460exv5w1.txt EXHIBIT 5.1 EXHIBIT 5.1 [Letterhead of Gibson, Dunn & Crutcher LLP] May 22, 2003 Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, CA 95134 Re: Registration Statement on Form S-8 of Cadence Design Systems, Inc. 1994 Deferred Compensation Plan Ladies and Gentlemen: We have examined the Registration Statement on Form S-8 (the "Registration Statement") to be filed by Cadence Design Systems, Inc., a Delaware corporation (the "Company") with the Securities and Exchange Commission in connection with the registration under the Securities Act of 1933, as amended (the "Securities Act") of $8,500,000 in deferred compensation obligations (the "Obligations"), which will represent unsecured obligations of the Company to pay deferred compensation in the future, pursuant to the Cadence Design Systems, Inc. 1994 Deferred Compensation Plan (the "Plan"). For purposes of rendering this opinion, we have made such legal and factual examinations as we have deemed necessary under the circumstances and, as part of such examination, we have examined, among other things, originals and copies, certified or otherwise identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary or appropriate. For the purposes of such examination, we have assumed the genuineness of all signatures on original documents and the conformity to original documents of all copies submitted to us. On the basis of and in reliance upon the foregoing, we are of the opinion that the Obligations, when issued in accordance with the provisions of the Plan, will be duly authorized and valid and binding obligations of the Company, subject, as to enforcement, to (i) bankruptcy, reorganization, insolvency, moratorium and other similar laws and court decisions of general application, including without limitation, statutory or other laws regarding fraudulent or preferential transfers, relating to, limiting or affecting the enforcement of creditor's rights generally, and (ii) the effect of general principles of equity upon the specific enforceability of any of the remedies, covenants or other provisions of the Plan and upon the availability of injunctive relief or other equitable remedies and the application of principles of equity (regardless of whether enforcement is considered in proceedings at law or in equity) as such principles relate to, limit or affect the enforcement of creditors' rights generally. We are admitted to practice in the State of California, and are not admitted to practice in the State of Delaware. However, for the limited purposes of our opinion set forth above, we are generally familiar with the General Corporation Law of the State of Delaware (the "DGCL") as presently in effect and have made such inquiries as we consider necessary to render this opinion with respect to a Delaware corporation. This opinion letter is limited to the laws of the State of California and, to the limited extent set forth above, the DGCL, as such laws presently exist and to the facts as they presently exist. We express no opinion with respect to the effect or applicability of the laws of any other jurisdiction. We assume no obligation to revise or supplement this opinion letter should the laws of such jurisdictions be changed after the date hereof by legislative action, judicial decision or otherwise. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the General Rules and Regulations of the Securities and Exchange Commission. Very truly yours, /s/ GIBSON, DUNN & CRUTCHER LLP EX-23.1 5 f90460exv23w1.txt EXHIBIT 23.1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT The Board of Directors and Stockholders Cadence Design Systems, Inc.: We consent to the incorporation by reference in the Registration Statement on Form S-8 of Cadence Design Systems, Inc., of our report dated January 21, 2003, except as to Note 20, which is as of February 5, 2003, relating to the consolidated balance sheet of Cadence Design Systems, Inc. and subsidiaries as of December 28, 2002, and the consolidated statements of income, stockholders' equity, and cash flows for the year then ended, and the 2002 financial statement schedule, which report appears in the December 28, 2002 annual report on Form 10-K of Cadence Design Systems, Inc. Our report refers to our audit of the adjustments and disclosures that were applied to revise the 2001 and 2000 consolidated financial statements as more fully described in Note 2 to the consolidated financial statements. However, we were not engaged to audit, review, or apply any procedures to the 2001 and 2000 consolidated financial statements of Cadence Design Systems, Inc., other than with respect to such adjustments and disclosures. /s/ KPMG LLP Mountain View, California May 21, 2003 EX-23.2 6 f90460exv23w2.txt EXHIBIT 23.2 EXHIBIT 23.2 CONSENT OF ARTHUR ANDERSEN LLP, INDEPENDENT PUBLIC ACCOUNTANTS The registrant was unable to obtain the written consent of Arthur Andersen LLP, to incorporate by reference its report dated March 11, 2002. See Explanatory Note. -----END PRIVACY-ENHANCED MESSAGE-----

EX-4.1

                                                                     EXHIBIT 4.1

                          CADENCE DESIGN SYSTEMS, INC.
                         1994 DEFERRED COMPENSATION PLAN
                              AMENDED AND RESTATED
                           EFFECTIVE NOVEMBER 1, 2002

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

                                    RECITALS

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

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

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

         NOW, THEREFORE, the Employer hereby amends and restates the Plan
effective as of November 1, 2002.

                                       1



                                TABLE OF CONTENTS



                                                                                                                  Page
                                                                                                                  ----
                                                                                                               
SECTION 1  DEFINITIONS..........................................................................................    1

         1.1      "Account......................................................................................    1

         1.2      "Beneficiary..................................................................................    1

         1.3      "Change in Control............................................................................    1

         1.4      "Code.........................................................................................    1

         1.5      "Committee....................................................................................    1

         1.6      "Compensation.................................................................................    1

         1.7      "Effective Date...............................................................................    1

         1.8      "Eligible Compensation........................................................................    1

         1.9      "Eligible Stock Option........................................................................    1

         1.10     "Employee.....................................................................................    1

         1.11     "Employer.....................................................................................    2

         1.12     "Employer Contributions.......................................................................    2

         1.13     "Hardship.....................................................................................    2

         1.14     "Non-Employee Director........................................................................    2

         1.15     "Plan.........................................................................................    2

         1.16     "Plan Year....................................................................................    2

         1.17     "Permanent Disability.........................................................................    2

         1.18     "Qualifying Stock Option Gain.................................................................    2

         1.19     "Stock........................................................................................    2

         1.20     "Stock-for-Stock..............................................................................    2

         1.21     "Stock Option Subaccount......................................................................    3

         1.22     "Subsidiary...................................................................................    3


                                       i



                                                                                                                
         1.23     "Trust" or "Trust Agreement....................................................................   3

         1.24     "Trust Fund....................................................................................   3

         1.25     "Trustee.......................................................................................   3

SECTION 2  ELIGIBILITY...........................................................................................   3

         2.1      Eligibility....................................................................................   3

SECTION 3  DEFERRED COMPENSATION & QUALIFYING STOCK OPTION GAIN..................................................   4

         3.1      Deferred Compensation..........................................................................   4

         3.2      Deferred Qualifying Stock Option Gain..........................................................   5

         3.3      Payment of Account Balances....................................................................   5

         3.4      Election to Defer..............................................................................   7

         3.5      Distribution Election..........................................................................   9

         3.6      Payment Upon Change in Control.................................................................   9

         3.7      Hardship.......................................................................................   9

         3.8      Employee's Right Unsecured....................................................................   10

         3.9      Investment of Contribution....................................................................   10

SECTION 4  DESIGNATION OF BENEFICIARY...........................................................................   11

         4.1      Designation of Beneficiary....................................................................   11

SECTION 5  CHANGE IN CONTROL....................................................................................   11

         5.1      Change in Control.............................................................................   11

SECTION 6  TRUST PROVISIONS.....................................................................................   13

         6.1      Trust Agreement...............................................................................   13

SECTION 7  AMENDMENT, TERMINATION AND TRANSFERS BY COMMITTEE....................................................   13

         7.1      Amendment.....................................................................................   13

         7.2      Termination...................................................................................   13

         7.3      Transfers by Committee........................................................................   13



                                       ii



                                                                                                                
SECTION 8  ADMINISTRATION.......................................................................................   14

         8.1      Administration................................................................................   14

         8.2      Liability of Committee; Indemnification.......................................................   14

         8.3      Expenses......................................................................................   14

SECTION 9  GENERAL AND MISCELLANEOUS............................................................................   14

         9.1      Rights Against Employer.......................................................................   14

         9.2      Assignment or Transfer........................................................................   15

         9.3      Severability..................................................................................   15

         9.4      Construction..................................................................................   15

         9.5      Governing Law.................................................................................   15

         9.6      Payment Due to Incompetence...................................................................   15

         9.7      Tax...........................................................................................   15

         9.8      Attorney's Fees...............................................................................   16

         9.9      Plan Binding on Successors/Assignees..........................................................   16



                                      iii



                                    SECTION 1

                                   DEFINITIONS

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

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

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

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

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

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

         1.7      "Effective Date" of the Plan shall mean October 1, 1994,
unless otherwise specified by the Employer in a corporate resolution approving
and adopting this Plan. The effective date of this amendment and restatement
shall be November 1, 2002.

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

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

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

                                       1



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

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

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

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

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

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

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

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

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

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

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

                                       2



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

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

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

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

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

                                    SECTION 2

                                   ELIGIBILITY

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

         Notwithstanding the foregoing, Non-Employee Directors shall be eligible
to participate in the Plan and shall be eligible to defer Qualifying Stock
Option Gain under the Plan. A Non-Employee Director shall commence participation
in the Plan as of the later of April 1, 1998, or the date the Non-Employee
Director first becomes a Non-Employee Director, provided that

                                       3



deferral of Compensation under the Plan shall not commence until the
Non-Employee Director has complied with the election procedures set forth in
Section 3.4.

                                    SECTION 3

              DEFERRED COMPENSATION & QUALIFYING STOCK OPTION GAIN

         3.1      Deferred Compensation.

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

                                       4



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

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

                  (d)      Effective April 1, 2000, the Committee in its sole
discretion may direct the Trustee to accept the transfer of funds held in trust
under the Cadence Design Systems, Inc. 1996 Deferred Compensation Venture
Investment Trust Agreement ("Telos Trust"), for a participant in the Cadence
Design Systems, Inc. 1996 Deferred Compensation Venture Investment Plan ("Telos
Plan"), which is an unfunded nonqualified deferred compensation plan for a
select group of management and highly compensated executives of the Company, in
which case the transferred funds shall be held by the Trustee under and be
subject to the terms of the Plan and invested and accounted for as directed by
the Committee except as otherwise provided in Section 3.3(e). Such amounts
transferred from the Telos Trust to the Trust ("Transferred Funds") may not be
returned to the Telos Plan or Telos Trust. The transfer of such Transferred
Funds shall not cause any of the participant's rights to a distribution under
the Plan or the Telos Plan (including the Transferred Funds) to be a secured
right to a distribution under either plan.

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

         3.3      Payment of Account Balances.

                  (a)      Effective July 1, 1998, the Employee shall elect
whether he or she will receive distribution of his or her Account, not including
his or her Stock Option Subaccount, subject to tax withholding requirements, (i)
upon reaching a specified age, (ii) upon passage of a

                                       5



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

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

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

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

                                       6



                  (e)      The Employer shall distribute or direct distribution
of the balance of amounts previously credited to Employee's Account, in a lump
sum, or in monthly installments over a period of five (5) years or ten (10)
years as Employee shall designate. A designation of the form of distribution
shall be required as a condition of participation under this Plan. Distribution
of the lump sum or the first installment shall be made or commence within ninety
(90) days following the date specified in the first sentence of Section 3.3(a),
or as otherwise provided in 3.3(c). Subsequent installments, if any, shall be
made on the first day of each month following the last installment as determined
by Employer. The amount of each installment shall be calculated by dividing the
Account balance as of the date of the distribution by the number of installments
remaining pursuant to the Employee's distribution election. Each such
installment, if any, shall take into account earnings credited to the balance of
the Account remaining unpaid. The Employee's distribution election shall be made
on a form provided by Employer.

                  Notwithstanding any provision herein to the contrary,
effective April 1, 2000, Transferred Funds from the Telos Trust under the Telos
Plan to the Trust for the benefit of a participant in the Telos Plan, shall be
distributable under the Plan according to the terms of the elections permitted
and made by the participant under the Telos Plan unless subsequently modified by
the participant as permitted under this Plan.

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

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

         3.4      Election to Defer.

                  (a)      Compensation. Each election of an Employee to defer
Compensation as provided in Section 3.1 of this Plan shall be in writing, signed
by the Employee, and delivered to Employer, together with all other documents
required under the provisions of this Plan, within

                                       7



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

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

                                       8



agreement under which the relevant stock option or options were granted. The
Employee's Qualifying Stock Option Gain deferral election shall be made on a
form provided by Employer.

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

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

         3.7      Hardship.

                  (a)      An Employee may apply for distributions from his or
her Account to the extent that the Employee demonstrates to the reasonable
satisfaction of the Committee that he or she needs the funds due to Hardship.
For purposes of this Section 3.7, a distribution is made on account of Hardship
only if the distribution is made on account of an unforeseeable immediate and
heavy emergency financial need of the Employee and is necessary to satisfy that
emergency financial need. Whether an Employee has an immediate and heavy
emergency financial need shall be determined by the Committee based on all
relevant facts and circumstances, and shall

                                       9



include, but not be limited to, the need to pay funeral expenses of a family
member; the need to pay expenses for medical care for Employee, the Employee's
spouse or any dependent of Employee resulting from sudden unexpected illness or
accident; payments necessary to prevent the eviction of Employee from Employee's
principal residence or foreclosure on the mortgage on that residence; or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of Employee. A Hardship distribution shall not exceed
the amount required to relieve the financial need of the Employee, nor shall a
Hardship distribution be made if the need may be satisfied from other resources
reasonably available to the Employee. For purposes of this paragraph, an
Employee's resources shall be deemed to include those assets of the Employee's
spouse and minor children that are reasonably available to the Employee. Prior
to approving a Hardship distribution, Employer shall require the Employee to
certify in writing that the Employee's financial need cannot reasonably be
relieved:

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

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

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

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

         3.9      Investment of Contribution.

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

                                       10



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

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

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

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

                                    SECTION 4

                           DESIGNATION OF BENEFICIARY

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

                                    SECTION 5

                                CHANGE IN CONTROL

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

                  (a)      The first public announcement or public
acknowledgment (including without limitation, a report filed pursuant to Section
13(d) of the Securities Exchange Act of 1934 as amended (the "Exchange Act")) by
the Employer that a "person," as such term is used in

                                       11



Sections 13(d) and 14(d) of the Exchange Act (other than the Employer, a
Subsidiary or an employee benefit plan of the Employer or a Subsidiary, or other
controlled affiliate of the Employer, including any trustee of such plan acting
as trustee), is or has become the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act or comparable successor rule), directly or indirectly, of
securities of the Employer representing fifty percent (50%) or more of the
combined voting power of the Employer's then outstanding Common Stock entitled
to vote in the election of directors, where such person's beneficial ownership
of the Employer's Common Stock was not initiated by the Employer or approved by
the Employer's Board of Directors;

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

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

                  (d)      A change in the composition of the Board of Directors
of the Employer, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean directors who either (i)
are directors of the Employer as of the date hereof, or (ii) are elected, or
nominated for election, to the Board of Directors of the Employer with the
affirmative votes of at least a majority of the Incumbent Directors at the time
of such election or nomination (but shall not include an individual whose
election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Employer); or

                  (e)      Any liquidation or dissolution of the Employer.

                                       12



                                    SECTION 6

                                TRUST PROVISIONS

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

                                    SECTION 7

                AMENDMENT, TERMINATION AND TRANSFERS BY COMMITTEE

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

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

         7.3      Transfers by Committee.

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

                  (b)      Definitions.

                           (i)      For purposes of this Section 7.3,
         "Subsidiary" shall mean any corporation (other than the Employer) in an
         unbroken chain of corporations beginning with the Employer, if each of
         the corporations other than the last corporation in the

                                       13



         unbroken chain owns stock possessing fifty (50) percent or more of the
         total combined voting power of all classes of stock in one of the other
         corporations in such chain.

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

                  (c)      No transfer shall be made under this Section 7.3
unless the Employee for whose benefit the Transferred Account is held executes a
written waiver of all of such Employee's rights and benefits under this Plan in
such form as shall be acceptable to the Committee.

                                    SECTION 8

                                 ADMINISTRATION

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

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

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

                                    SECTION 9

                            GENERAL AND MISCELLANEOUS

         9.1      Rights Against Employer. Except as expressly provided by the
Plan, the establishment of this Plan shall not be construed as giving to any
Employee or to any person whomsoever, any legal, equitable or other rights
against the Employer, or against its officers,

                                       14



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

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

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

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

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

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

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

                                       15



regulation or ruling. In the case of an Employee's exercise of an Eligible Stock
Option and election to defer Qualifying Stock Option Gain, Employer shall
withhold from Employee's non-deferred Compensation and/or Qualifying Stock
Option Gain, in a manner determined by Employer, Employee's share of FICA and
other employment taxes on such deferred Qualifying Stock Option Gain. If
necessary, the Committee may reduce the deferred Qualifying Stock Option Gain in
order to comply with this Section 9.7.

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

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

         The Employer has caused its authorized officer to execute this amended
and restated Plan this _____ day of _______________, 2002.

                                                CADENCE DESIGN SYSTEMS, INC.

                                                By:     ________________________
                                                Name:   ________________________
                                                Title:  ________________________

                                       16



                                   APPENDIX 1

                                 ACKNOWLEDGMENT

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

Dated: _______________________             Signed:______________________________
                                                            Employee
Dated: _______________________
                                           CADENCE DESIGN SYSTEMS, INC.

                                           Signed:______________________________
                                                           [Officer]

                                       17



                                   APPENDIX 2

                                 ACKNOWLEDGMENT

               (FOR DEFERRAL OF QUALIFYING STOCK OPTION GAIN ONLY)

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

Dated: _______________________             Signed:______________________________
                                                            Employee
Dated: _______________________
                                           CADENCE DESIGN SYSTEMS, INC.

                                           Signed:______________________________
                                                            [Officer]

                                       18

EX-5.1

                                                                     EXHIBIT 5.1

                   [Letterhead of Gibson, Dunn & Crutcher LLP]

                                  May 22, 2003

Cadence Design Systems, Inc.
2655 Seely Avenue, Building 5
San Jose, CA 95134

         Re:      Registration Statement on Form S-8
                  of Cadence Design Systems, Inc.
                  1994 Deferred Compensation Plan

Ladies and Gentlemen:

         We have examined the Registration Statement on Form S-8 (the
"Registration Statement") to be filed by Cadence Design Systems, Inc., a
Delaware corporation (the "Company") with the Securities and Exchange Commission
in connection with the registration under the Securities Act of 1933, as amended
(the "Securities Act") of $8,500,000 in deferred compensation obligations (the
"Obligations"), which will represent unsecured obligations of the Company to pay
deferred compensation in the future, pursuant to the Cadence Design Systems,
Inc. 1994 Deferred Compensation Plan (the "Plan").

         For purposes of rendering this opinion, we have made such legal and
factual examinations as we have deemed necessary under the circumstances and, as
part of such examination, we have examined, among other things, originals and
copies, certified or otherwise identified to our satisfaction, of such
documents, corporate records and other instruments as we have deemed necessary
or appropriate. For the purposes of such examination, we have assumed the
genuineness of all signatures on original documents and the conformity to
original documents of all copies submitted to us.

         On the basis of and in reliance upon the foregoing, we are of the
opinion that the Obligations, when issued in accordance with the provisions of
the Plan, will be duly authorized and valid and binding obligations of the
Company, subject, as to enforcement, to (i) bankruptcy, reorganization,
insolvency, moratorium and other similar laws and court decisions of general
application, including without limitation, statutory or other laws regarding
fraudulent or preferential transfers, relating to, limiting or affecting the
enforcement of creditor's rights generally, and (ii) the effect of general
principles of equity upon the specific enforceability of any of the remedies,
covenants or other provisions of the Plan and upon the availability of
injunctive relief or other equitable remedies and the application of principles
of equity (regardless of whether enforcement is considered in proceedings at law
or in equity) as such principles relate to, limit or affect the enforcement of
creditors' rights generally.

         We are admitted to practice in the State of California, and are not
admitted to practice in the State of Delaware. However, for the limited purposes
of our opinion set forth above, we are generally familiar with the General
Corporation Law of the State of Delaware (the "DGCL") as presently in effect and
have made such inquiries as we consider necessary to render this opinion with
respect to a Delaware corporation. This opinion letter is limited to the laws of
the State of California and, to the limited extent set forth above, the DGCL, as
such laws presently exist and to the facts as they presently exist. We express
no opinion with respect to the effect or applicability of the laws of any other
jurisdiction. We assume no obligation to revise or supplement this opinion
letter should the laws of such jurisdictions be changed after the date hereof by
legislative action, judicial decision or otherwise.

         We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are
within the category of persons whose consent is required under Section 7 of the
Securities Act or the General Rules and Regulations of the Securities and
Exchange Commission.

                                                 Very truly yours,

                                                 /s/ GIBSON, DUNN & CRUTCHER LLP

EX-23.1

                                                                    EXHIBIT 23.1

                          INDEPENDENT AUDITORS' CONSENT

The Board of Directors and Stockholders
Cadence Design Systems, Inc.:

We consent to the incorporation by reference in the Registration Statement on
Form S-8 of Cadence Design Systems, Inc., of our report dated January 21, 2003,
except as to Note 20, which is as of February 5, 2003, relating to the
consolidated balance sheet of Cadence Design Systems, Inc. and subsidiaries as
of December 28, 2002, and the consolidated statements of income, stockholders'
equity, and cash flows for the year then ended, and the 2002 financial statement
schedule, which report appears in the December 28, 2002 annual report on Form
10-K of Cadence Design Systems, Inc.

Our report refers to our audit of the adjustments and disclosures that were
applied to revise the 2001 and 2000 consolidated financial statements as more
fully described in Note 2 to the consolidated financial statements. However, we
were not engaged to audit, review, or apply any procedures to the 2001 and 2000
consolidated financial statements of Cadence Design Systems, Inc., other than
with respect to such adjustments and disclosures.

/s/ KPMG LLP

Mountain View, California
May 21, 2003

EX-23.2

                                                                    EXHIBIT 23.2

         CONSENT OF ARTHUR ANDERSEN LLP, INDEPENDENT PUBLIC ACCOUNTANTS

The registrant was unable to obtain the written consent of Arthur Andersen LLP,
to incorporate by reference its report dated March 11, 2002. See Explanatory
Note.