10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 3, 2010

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to           

Commission file number 0-15867

CADENCE DESIGN SYSTEMS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	77-0148231
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)
2655 Seely Avenue, Building 5, San Jose, California	95134
(Address of Principal Executive Offices)	(Zip Code)

(408) 943-1234
Registrant’s Telephone Number, including Area Code

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  X      No     

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  X      No     

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ X ] Accelerated filer [    ] Non-accelerated filer [    ] Smaller reporting company [    ]

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes          No  X   

On July 3, 2010, 266,244,189 shares of the registrant’s common stock, $0.01 par value, were outstanding.

CADENCE DESIGN SYSTEMS, INC.
INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets: July 3, 2010 and January 2, 2010		1
	Condensed Consolidated Statements of Operations: Three and Six Months Ended July 3, 2010 and July 4, 2009		2
	Condensed Consolidated Statements of Cash Flows: Six Months Ended July 3, 2010 and July 4, 2009		3
	Notes to Condensed Consolidated Financial Statements		4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		47
Item 4.	Controls and Procedures		50
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		51
Item 1A.	Risk Factors		52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		69
Item 3.	Defaults Upon Senior Securities		69
Item 4.	Reserved		69
Item 5.	Other Information		69
Item 6.	Exhibits		70
	Signatures		72
EX-2.01
EX-4.01
EX-10.01
EX-10.02
EX-10.03
EX-10.04
EX-10.05
EX-10.06
EX-10.07
EX-10.08
EX-10.09
EX-10.10
EX-10.11
EX-10.12
EX-10.13
EX-31.01
EX-31.02
EX-32.01
EX-32.02
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CADENCE DESIGN SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

ASSETS

	July 3,			January 2,
	2010			2010
Current Assets:
Cash and cash equivalents	$	475,603		$	569,115
Short-term investments		2,860			2,184
Receivables, net of allowances of $11,194 and $14,020, respectively		191,291			200,628
Inventories		23,874			24,165
Prepaid expenses and other		71,448			54,655
Total current assets		765,076			850,747
Property, plant and equipment, net of accumulated depreciation of $652,965 and $637,107, respectively		295,073			311,502
Goodwill		158,227			----
Acquired intangibles, net of accumulated amortization of $90,983 and $124,507, respectively		192,422			28,841
Installment contract receivables, net of allowances of $0 and $9,724, respectively		40,296			58,448
Other assets		244,661			161,049
Total Assets	$	1,695,755		$	1,410,587
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued liabilities	$	153,982		$	150,207
Current portion of deferred revenue		290,105			247,691
Total current liabilities		444,087			397,898
Long-Term Liabilities:
Long-term portion of deferred revenue		92,477			92,298
Convertible notes		541,767			436,012
Other long-term liabilities		454,744			376,006
Total long-term liabilities		1,088,988			904,316
Contingencies (Notes 8 and 13)
Stockholders’ Equity:
Common stock and capital in excess of par value		1,708,610			1,674,396
Treasury stock, at cost		(370,700	)		(431,310	)
Accumulated deficit		(1,215,391	)		(1,177,983	)
Accumulated other comprehensive income		40,161			43,270
Total stockholders’ equity		162,680			108,373
Total Liabilities and Stockholders’ Equity	$	1,695,755		$	1,410,587

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

1

CADENCE DESIGN SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)
(Unaudited)

	Three Months Ended						Six Months Ended
	July 3,			July 4,			July 3,			July 4,
	2010			2009			2010			2009
Revenue:
Product	$	117,066		$	101,840		$	219,832		$	189,363
Services		25,258			27,808			51,178			57,015
Maintenance		84,740			80,281			177,992			169,853
Total revenue		227,064			209,929			449,002			416,231
Costs and Expenses:
Cost of product		7,123			9,752			12,415			17,423
Cost of services		21,556			24,418			43,481			48,463
Cost of maintenance		10,481			11,857			21,879			24,318
Marketing and sales		71,513			71,431			146,275			146,321
Research and development		91,880			90,653			181,310			185,345
General and administrative		17,058			34,240			39,892			72,579
Amortization of acquired intangibles		2,551			2,828			5,242			5,968
Restructuring and other charges (credits)		(317	)		18,528			(1,391	)		18,008
Total costs and expenses		221,845			263,707			449,103			518,425
Income (loss) from operations		5,219			(53,778	)		(101	)		(102,194	)
Interest expense		(7,972	)		(7,266	)		(15,403	)		(14,314	)
Other income (expense), net		(3,100	)		(2,533	)		2,874			(8,682	)
Loss before provision (benefit) for income taxes		(5,853	)		(63,577	)		(12,630	)		(125,190	)
Provision (benefit) for income taxes		(54,460	)		10,780			(49,452	)		12,424
Net income (loss)	$	48,607		$	(74,357	)	$	36,822		$	(137,614	)
Basic net income (loss) per share	$	0.19		$	(0.29	)	$	0.14		$	(0.54	)
Diluted net income (loss) per share	$	0.18		$	(0.29	)	$	0.14		$	(0.54	)
Weighted average common shares outstanding – basic		262,163			256,883			262,380			255,592
Weighted average common shares outstanding – diluted		266,423			256,883			266,539			255,592

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

2

CADENCE DESIGN SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)

	Six Months Ended
	July 3,			July 4,
	2010			2009
Cash and Cash Equivalents at Beginning of Period	$	569,115		$	568,255
Cash Flows from Operating Activities:
Net income (loss)		36,822			(137,614	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		41,333			50,023
Amortization of debt discount and fees		11,301			10,244
Loss on extinguishment of debt		5,321			----
Stock-based compensation		20,807			29,235
Loss from equity method investments		73			231
(Gain) loss on investments, net		(6,935	)		7,991
Write-down of investment securities		1,500			4,606
Impairment of property, plant and equipment		427			3,695
Deferred income taxes		(69,266	)		(5,044	)
Proceeds from the sale of receivables, net		----			5,827
Provisions (recoveries) for losses (gains) on trade and installment contract receivables		(12,978	)		18,361
Other non-cash items		3,340			(9,038	)
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables		(25,384	)		43,134
Installment contract receivables		70,479			89,957
Inventories		(10,923	)		5,847
Prepaid expenses and other		(13,778	)		(125	)
Other assets		3,750			6,769
Accounts payable and accrued liabilities		6,026			(66,247	)
Deferred revenue		31,882			(58,364	)
Other long-term liabilities		1,904			3,518
Net cash provided by operating activities		95,701			3,006
Cash Flows from Investing Activities:
Proceeds from the sale of long-term investments		10,133			----
Purchases of property, plant and equipment		(18,765	)		(22,282	)
Purchases of software licenses		(2,517	)		(394	)
Investment in venture capital partnerships and equity investments		(500	)		(1,550	)
Cash paid in business combinations and asset acquisitions, net of cash acquired		(253,951	)		(4,896	)
Net cash used for investing activities		(265,600	)		(29,122	)
Cash Flows from Financing Activities:
Principal payments on receivable sale financing		(1,719	)		(796	)
Proceeds from issuance of 2015 Notes		350,000			----
Payment of Convertible Senior Notes		(187,150	)		----
Payment of 2015 Notes issuance costs		(9,800	)		----
Purchase of 2015 Notes Hedges		(76,635	)		----
Proceeds from termination of Convertible Senior Notes Hedges		280			----
Proceeds from sale of 2015 Warrants		37,450			----
Tax benefit from employee stock transactions		59			----
Proceeds from issuance of common stock		8,119			19,601
Stock received for payment of employee taxes on vesting of restricted stock		(4,114	)		(2,439	)
Purchases of treasury stock		(39,997	)		----
Net cash provided by financing activities		76,493			16,366
Effect of exchange rate changes on cash and cash equivalents		(106	)		(1,580	)
Decrease in cash and cash equivalents		(93,512	)		(11,330	)
Cash and Cash Equivalents at End of Period	$	475,603		$	556,925

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

3

CADENCE DESIGN SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION

The Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q have been prepared by Cadence Design Systems, Inc., or Cadence, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, Cadence believes that the disclosures contained in this Quarterly Report on Form 10-Q comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, for a Quarterly Report on Form 10-Q and are adequate to make the information presented not misleading. These Condensed Consolidated Financial Statements are meant to be, and should be, read in conjunction with the Consolidated Financial Statements and the Notes thereto included in Cadence’s Annual Report on Form 10-K for the fiscal year ended January 2, 2010.

The unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q reflect all adjustments (which include only normal, recurring adjustments and those items discussed in these Notes) that are, in the opinion of management, necessary to state fairly the results, financial position and cash flows for the periods and dates presented. The results for such periods are not necessarily indicative of the results to be expected for the full fiscal year.

Preparation of the Condensed Consolidated Financial Statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cadence adopted new disclosure requirements related to the fair value of Cadence’s financial instruments on the first day of fiscal 2010. This adoption did not have a material impact on Cadence’s consolidated financial position, results of operations or cash flows. See Note 5 for these disclosures.

Cadence has evaluated subsequent events through the date of issuance of the unaudited condensed consolidated financial statements.

NOTE 2. CONVERTIBLE NOTES

2.625% Cash Convertible Senior Notes Due 2015

In June 2010, Cadence issued $350.0 million principal amount of its 2.625% Cash Convertible Senior Notes Due 2015, or the 2015 Notes. The 2015 Notes have a stated interest rate of 2.625%, mature on June 1, 2015 and may be settled only in cash. The indenture for the 2015 Notes does not contain any financial covenants. Contractual interest payable on the 2015 Notes began accruing in June 2010 and is payable semi-annually each December 1st and June 1st. The initial purchasers’ transaction fees and expenses totaling $10.6 million were capitalized as deferred financing costs and will be amortized over the term of the 2015 Notes using the effective interest method. An aggregate of $187.2 million of the net proceeds was used to purchase $100.0 million principal amount of Cadence’s 1.375% Convertible Senior Notes Due December 15, 2011, or the 2011 Notes, and $100.0 million principal amount of its 1.500%

4

Convertible Senior Notes Due December 15, 2013, or the 2013 Notes, and collectively with the 2011 Notes, the Convertible Senior Notes. Cadence also used $40.0 million of the net proceeds to repurchase approximately 6.5 million shares of Cadence common stock.

Prior to March 1, 2015, holders may convert their 2015 Notes into cash upon the occurrence of one of the following events:

• The price of Cadence’s common stock reaches $9.81 during certain periods of time specified in the 2015 Notes;

• Specified corporate transactions occur; or

• The trading price of the 2015 Notes falls below 98% of the product of (i) the last reported sale price of Cadence’s common stock and (ii) the conversion rate on that date.

From March 1, 2015 and until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2015 Notes into cash at any time, regardless of the foregoing circumstances. Cadence may not redeem the 2015 Notes prior to maturity.

The initial cash conversion rate for the 2015 Notes is 132.5205 shares of Cadence common stock per $1,000 principal amount of 2015 Notes, equivalent to a cash conversion price of approximately $7.55 per share of Cadence common stock, with the amount due on conversion payable in cash. Upon cash conversion, a holder will receive the sum of the daily settlement amounts, calculated on a proportionate basis for each day, during a specified observation period following the cash conversion date.

If a fundamental change occurs prior to maturity and Cadence’s stock price is greater than $6.16 per share at that time, the cash conversion rate will increase by an additional amount of up to 29.8171 shares of Cadence’s common stock per $1,000 principal amount of 2015 Notes, which amount would be paid entirely in cash to each holder that elects to convert its 2015 Notes at that time. A fundamental change is any transaction or event (whether by means of an exchange offer, liquidation, tender offer, consolidation, merger, combination, reclassification, recapitalization or otherwise) in which more than 50% of Cadence’s common stock is exchanged for, converted into, acquired for or constitutes solely the right to receive, consideration. No fundamental change will have occurred if at least 90% of the consideration received consists of shares of common stock, or depositary receipts representing such shares, that are:

• Listed on, or immediately after the transaction or event will be listed on, a United States national securities exchange; or

• Approved, or immediately after the transaction or event will be approved, for quotation on a United States system of automated dissemination of quotations of securities prices similar to the NASDAQ National Market prior to its designation as a national securities exchange.

As of July 3, 2010, none of the conditions allowing the holders of the 2015 Notes to convert the 2015 Notes into cash had been met.

The cash conversion feature of the 2015 Notes, or the 2015 Notes Embedded Conversion Derivative, requires bifurcation from the 2015 Notes and the 2015 Notes Embedded Conversion Derivative is accounted for as a derivative liability, which is included in Other long-term liabilities in Cadence’s Condensed Consolidated Balance Sheet. The fair value of the 2015 Notes Embedded Conversion Derivative at the time of issuance of the 2015 Notes was $76.6 million, and was recorded as the original debt discount for purposes of accounting for the debt component of the 2015 Notes. This discount will be recognized as interest expense using the effective interest method over the term of the 2015 Notes. The estimated fair value of the 2015 Notes Embedded Conversion Derivative was $74.3 million as of July 3, 2010.

5

Concurrently with the issuance of the 2015 Notes, Cadence entered into hedge transactions, or the 2015 Notes Hedges, with various parties whereby Cadence has the option to receive the cash equivalent of approximately 46.4 million shares of Cadence’s common stock at a price of approximately $7.55 per share, subject to certain conversion rate adjustments in the 2015 Notes. These options expire on June 1, 2015 and must be settled in cash. The aggregate cost of the 2015 Notes Hedges was $76.6 million. The 2015 Notes Hedges are accounted for as derivative assets, and are included in Other assets in Cadence’s Condensed Consolidated Balance Sheet. The estimated fair value of the 2015 Notes Hedges was $74.3 million as of July 3, 2010.

The 2015 Notes Embedded Conversion Derivative and the 2015 Notes Hedges are adjusted to fair value each reporting period and unrealized gains and losses are reflected in Cadence’s Condensed Consolidated Statements of Operations. As the fair values of the 2015 Notes Embedded Conversion Derivative and the 2015 Notes Hedges are similar, there was no impact to Cadence’s Condensed Consolidated Statements of Operations relating to these adjustments to fair value during the three months ended July 3, 2010.

In separate transactions, Cadence also sold warrants, or the 2015 Warrants, to various parties for the purchase of up to approximately 46.4 million shares of Cadence’s common stock at a price of $10.78 per share in a private placement pursuant to Section 4(2) of the Securities Act of 1933, as amended, or the Securities Act. The warrants expire on various dates from September 2015 through December 2015 and must be settled in net shares. Cadence received $37.5 million in cash proceeds from the sale of the 2015 Warrants, which has been recorded as an increase in Stockholders’ equity. Changes in the fair value of these warrants will not be recognized in Cadence’s Condensed Consolidated Financial Statements as long as the instruments remain classified as equity. The warrants are included in diluted earnings per share to the extent the impact is dilutive.

The principal amount, unamortized debt discount and net carrying amount of the liability component of the 2015 Notes as of July 3, 2010 was as follows:

	As of
	July 3,
	2010
	(In thousands)
Principal amount of 2015 Notes	$	350,000
Unamortized debt discount of 2015 Notes		(76,043	)
Net Liability of 2015 Notes	$	273,957

The effective interest rate, contractual interest expense, amortization of debt discount and capitalized interest associated with the amortization of debt discount for the 2015 Notes for the three and six months ended July 3, 2010 and July 4, 2009 were as follows:

	Three and
	Six Months Ended
	July 3,			July 4,
	2010			2009
	(In thousands, except
	percentages)
Effective interest rate		8.1%			N/A
Contractual interest expense	$	427		$	----
Amortization of debt discount	$	592		$	----
Capitalized interest associated with the amortization of debt discount	$	(6	)	$	----

6

As of July 3, 2010, the if-converted value of the 2015 Notes does not exceed the principal amount of the 2015 Notes and the total fair value of the 2015 Notes was $340.8 million.

1.375% Convertible Senior Notes Due December 15, 2011 and 1.500% Convertible Senior Notes Due December 15, 2013

In December 2006, Cadence issued $250.0 million principal amount of its 2011 Notes and $250.0 million principal amount of its 2013 Notes. The indentures for the Convertible Senior Notes do not contain any financial covenants. Contractual interest payable on the Convertible Senior Notes began accruing in December 2006 and is payable semi-annually each December 15th and June 15th. In June 2010, Cadence repurchased $100.0 million principal amount of its 2011 Notes and $100.0 million principal amount of its 2013 Notes, resulting in a remaining principal balance of $150.0 million for the 2011 Notes and $150.0 million for the 2013 Notes.

Holders may convert their Convertible Senior Notes prior to maturity upon the occurrence of one of the following events:

• The price of Cadence’s common stock reaches $27.50 during certain periods of time specified in the Convertible Senior Notes;

• Specified corporate transactions occur; or

• The trading price of the Convertible Senior Notes falls below 98% of the product of (i) the last reported sale price of Cadence’s common stock and (ii) the conversion rate on that date.

From November 2, 2011, in the case of the 2011 Notes, and November 1, 2013, in the case of the 2013 Notes, and until the close of business on the scheduled trading day immediately preceding the maturity date, holders may convert their Convertible Senior Notes at any time, regardless of the foregoing circumstances. Cadence may not redeem the Convertible Senior Notes prior to maturity.

The initial conversion rate for the Convertible Senior Notes is 47.2813 shares of Cadence common stock per $1,000 principal amount of Convertible Senior Notes, equivalent to a conversion price of approximately $21.15 per share of Cadence common stock. Upon conversion, a holder will receive the sum of the daily settlement amounts, calculated on a proportionate basis for each day, during a specified observation period following the conversion date. The daily settlement amount during each date of the observation period consists of:

• Cash up to the principal amount of the note; and

• Cadence’s common stock to the extent that the conversion value exceeds the amount of cash paid upon conversion of the Convertible Senior Notes.

7

If a fundamental change occurs prior to maturity and Cadence’s stock price is greater than $18.00 per share at that time, the conversion rate will increase by an additional amount of up to $8.27 per share, which amount would be paid entirely in cash to each holder that elects to convert its Convertible Senior Notes at that time. A fundamental change is any transaction or event (whether by means of an exchange offer, liquidation, tender offer, consolidation, merger, combination, reclassification, recapitalization or otherwise) in which more than 50% of Cadence’s common stock is exchanged for, converted into, acquired for or constitutes solely the right to receive, consideration. No fundamental change will have occurred if at least 90% of the consideration received consists of shares of common stock, or depositary receipts representing such shares, that are:

• Listed on, or immediately after the transaction or event will be listed on, a United States national securities exchange; or

• Approved, or immediately after the transaction or event will be approved, for quotation on a United States system of automated dissemination of quotations of securities prices similar to the NASDAQ National Market prior to its designation as a national securities exchange.

As of July 3, 2010, none of the conditions allowing the holders of the Convertible Senior Notes to convert had been met.

In connection with the issuance of the 2015 Notes, an aggregate of $187.2 million of the net proceeds were used to purchase in the open market $100.0 million principal amount of the 2011 Notes and $100.0 million principal amount of the 2013 Notes. At settlement, the fair value of the liability component immediately prior to its extinguishment is measured first and the difference between the fair value of the aggregate consideration remitted to its holders and the fair value of the liability component immediately prior to its extinguishment is attributed to the reacquisition of the equity component. The components of the repurchase and related loss on early extinguishment of debt are as follows:

	2011 Notes			2013 Notes			Total
	(In thousands)
Principal amount repurchased	$	100,000		$	100,000		$	200,000
Amount allocated to:
Extinguishment of liability component	$	95,865		$	85,751		$	181,616
Extinguishment of equity component		2,285			3,249			5,534
Total cash paid for repurchase	$	98,150		$	89,000		$	187,150
Principal amount repurchased	$	100,000		$	100,000		$	200,000
Unamortized debt discount		(6,958	)		(15,036	)		(21,994	)
Extinguishment of liability component		(95,865	)		(85,751	)		(181,616	)
Related debt issuance costs		(676	)		(1,035	)		(1,711	)
Loss on early extinguishment of debt	$	(3,499	)	$	(1,822	)	$	(5,321	)

Concurrently with the issuance of the Convertible Senior Notes, Cadence entered into hedge transactions, or the Convertible Senior Notes Hedges, with various parties whereby Cadence had the option to purchase up to 23.6 million shares of Cadence’s common stock at a price of $21.15 per share, subject to adjustment. The aggregate cost of the Convertible Senior Notes Hedges was $119.8 million and has been recorded as a reduction to Stockholders’ equity. In connection with the purchase of a portion of the Convertible Senior Notes in June 2010, Cadence also sold a portion of the Convertible Senior Notes Hedges representing options to purchase approximately 9.5 million shares of Cadence’s common stock and received proceeds of $0.4 million. The estimated fair value of the remaining Convertible Senior Notes Hedges was $1.1 million as of July 3, 2010. These options expire on December 15, 2011, in the case of the 2011 Notes,

8

and December 15, 2013, in the case of the 2013 Notes, and must be settled in net shares. Subsequent changes in the fair value of the Convertible Senior Notes Hedges will not be recognized in Cadence’s Condensed Consolidated Financial Statements as long as the instruments remain classified as equity.

In separate transactions, Cadence also sold warrants, or the Convertible Senior Note Warrants, to various parties for the purchase of up to 23.6 million shares of Cadence’s common stock at a price of $31.50 per share in a private placement pursuant to Section 4(2) of the Securities Act of 1933, as amended, or the Securities Act. Cadence received $39.4 million in cash proceeds from the sale of the Convertible Senior Note Warrants, which has been recorded as an increase in Stockholders’ equity. In connection with the purchase of a portion of the Convertible Senior Notes in June 2010, Cadence also purchased a portion of the Convertible Senior Note Warrants, reducing the number of shares of Cadence common stock available for purchase by 9.5 million shares at a cost of $0.1 million. The Convertible Senior Note Warrants expire on various dates from February 2012 through April 2012 in the case of the 2011 Notes, and February 2014 through April 2014 in the case of the 2013 Notes, and must be settled in net shares. Changes in the fair value of the Convertible Senior Note Warrants will not be recognized in Cadence’s Condensed Consolidated Financial Statements as long as the instruments remain classified as equity. The remaining warrants are included in diluted earnings per share to the extent the impact is dilutive.

The carrying amount of the equity component of the Convertible Senior Notes and the principal amount, unamortized debt discount and net carrying amount of the liability component of the Convertible Senior Notes as of July 3, 2010 and January 2, 2010 were as follows:

	As of
	July 3,			January 2,
	2010			2010
	(In thousands)
Equity component of Convertible Senior Notes	$	111,459		$	116,993
Principal amount of Convertible Senior Notes	$	300,000		$	500,000
Unamortized debt discount of Convertible Senior Notes		(32,371	)		(64,166	)
Liability component of Convertible Senior Notes	$	267,629		$	435,834

The effective interest rate, contractual interest expense, amortization of debt discount and capitalized interest associated with the amortization of debt discount for the Convertible Senior Notes for the three and six months ended July 3, 2010 and July 4, 2009 were as follows:

	Three Months Ended						Six Months Ended
	July 3,			July 4,			July 3,			July 4,
	2010			2009			2010			2009
	(In thousands, except percentages)
Effective interest rate		6.3%			6.3%			6.3%			6.3%
Contractual interest expense	$	1,649		$	1,791		$	3,440		$	3,582
Amortization of debt discount	$	4,706		$	4,814		$	9,801		$	9,601
Capitalized interest associated with the amortization of debt discount	$	(47	)	$	(50	)	$	(97	)	$	(210	)

As of July 3, 2010, the if-converted value of the Convertible Senior Notes does not exceed the principal amount of the Convertible Senior Notes and the total fair value of the Convertible Senior Notes, including the equity component, was $281.5 million.

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NOTE 3. ACQUISITIONS

For each of the acquisitions described below, the results of operations and the estimated fair value of the assets acquired and liabilities assumed have been included in Cadence’s Condensed Consolidated Financial Statements from the date of the acquisition.

Denali Software, Inc.

In June 2010, Cadence acquired Denali Software, Inc., or Denali. Denali was a privately-held provider of electronic design automation software and intellectual property used in system-on-chip design and verification. Cadence acquired Denali to expand its solution portfolio to provide system component modeling and IP integration. The aggregate initial purchase price was $296.8 million, which was paid in cash. An additional $12.6 million of payments have been deferred and will be paid in cash if certain Denali shareholders remain employees of Cadence during the periods specified in the respective agreements. These amounts will be expensed in Cadence’s Condensed Consolidated Statements of Operations over the stated retention periods. The $152.2 million of goodwill recorded in connection with this acquisition is not expected to be deductible for income tax purposes. This acquisition does not include any contingent consideration that is subject to performance metrics, milestone achievement or other similar criteria.

The following table summarizes the allocation of the purchase price for Denali and the estimated amortization period for the acquired intangibles:

	(In thousands)
Current assets	$	59,398
Property, plant and equipment		347
Other assets		283
Acquired intangibles:
Existing technology (six to nine-year weighted-average useful lives)		65,700
Agreements and relationships (three to twelve-year weighted-average useful lives)		98,800
Tradenames / trademarks / patents (ten-year weighted-average useful life)		4,300
Goodwill		152,172
Total assets acquired		381,000
Current liabilities		(17,042	)
Long-term deferred tax liabilities (Note 8)		(67,153	)
Net assets acquired	$	296,805

Denali’s current assets, property, plant and equipment and other assets were reviewed and adjusted to their fair value on the date of acquisition, as necessary. Among the current assets acquired, $46.7 million was cash and cash equivalents and $11.1 million was trade receivables.

The fair values of Denali’s intangible assets were determined using the income approach with significant inputs that are not observable in the market. Key assumptions include the expected future cash flows, the timing of the expected future cash flows and the discount rates consistent with the level of risk.

Denali’s current liabilities were reviewed and adjusted to their fair value on the date of acquisition, as necessary. Included in net current liabilities is deferred revenue, which represents advance payments from customers. Cadence estimated its obligation related to the deferred revenue using the cost build-up approach. The cost build-up approach determines fair value by estimating the costs relating to supporting the obligation plus an assumed profit. The sum of the costs and assumed profit approximates the amount that Cadence would be required to pay a third party to assume the obligation. The estimated costs to fulfill the obligation were based on the projected cost structure to provide the contractual deliverables. As a result, Cadence recorded deferred revenue of $11.3 million, representing Cadence’s estimate of the fair value of the contractual obligations assumed.

The financial information in the table below summarizes the combined results of operations of Cadence and Denali, on a pro forma basis, as though the companies had been combined as of the beginning of the fiscal years of the periods presented. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 3, 2010 or January 4, 2009 or of results that may occur in the future.

	Three Months Ended					Six Months Ended
	July 3,		July 4,			July 3,		July 4,
	2010		2009			2010		2009
	(In thousands)
Total revenue	$	231,792	$	216,271		$	460,897	$	427,134
Net income (loss)	$	36,756	$	(84,495	)	$	11,508	$	(159,784	)

Because the increase in deferred tax liabilities from the intangible assets acquired with Denali provided a source of taxable income, Cadence released a corresponding amount of its deferred tax asset valuation allowance. The $66.7 million release of the valuation allowance was recognized as a Benefit for income taxes for the three and six months ended July 3, 2010. The pro forma net income (loss) presented above does not include this non-recurring Benefit for income taxes. The pro forma tax effects were calculated considering Cadence’s valuation allowance position on its United States losses and tax credits. See Note 8 for additional details of Cadence’s income taxes.

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Other Acquisition

During the six months ended July 3, 2010, Cadence acquired another company and recorded $3.9 million of Goodwill and $2.2 million of intangible assets. The $3.9 million of goodwill recorded in connection with this acquisition is not expected to be deductible for income tax purposes. Of the $2.2 million of intangible assets, $0.5 million was allocated to in-process research and development and is classified as an indefinite-lived intangible asset until the project is completed or abandoned. The remaining $1.7 million of intangible assets has a weighted average life of 5 years. The fair value of the intangible assets was determined using the income approach with significant inputs that are not observable in the market. Key assumptions include the expected future cash flows, the timing of the expected future cash flows and discount rates consistent with the level of risk.

This acquisition includes contingent consideration payments based on future financial measures of the acquired technology. Cadence makes estimates regarding the fair value of contingent consideration liabilities on the acquisition date and at the end of each reporting period until the contingency is resolved. Cadence estimates the fair value of these liabilities based on Cadence’s expectations as to the projected levels of business and Cadence’s assessment of the probability of achievement. Cadence believes that its estimates and assumptions are reasonable, but there is significant judgment involved. Changes in the fair value of contingent consideration liabilities subsequent to the acquisition are recorded in General and administrative expense in Cadence’s Condensed Consolidated Statements of Operations.

The contingent consideration arrangement requires payments of up to $4.0 million if certain financial measures are met during the three-year period subsequent to the consummation of the acquisition. This contingent consideration arrangement does not require continuing employment of the selling shareholders. The initial fair value of the contingent consideration arrangement of $0.8 million was determined using the income approach with significant inputs that are not observable in the market. Key assumptions include discount rates consistent with the level of risk of achievement and probability-adjusted revenue amounts. The expected outcomes were recorded at net present value. The fair value of this contingent consideration was $0.9 million as of July 3, 2010.

Acquisition-Related Contingent Consideration

Cadence accounts for business combinations with acquisition dates on or before January 3, 2009 under the purchase method in accordance with Statement of Financial Accounting Standard, or SFAS, No. 141, “Business Combinations,” and contingent consideration is added to Goodwill as it is paid. During the six months ended July 3, 2010, Cadence recorded $2.1 million of Goodwill in connection with acquisitions accounted for under SFAS No. 141. Cadence accounts for business combinations with acquisition dates after January 3, 2009 under the acquisition method in accordance with the Accounting Standards Codification and contingent consideration is recorded at fair value on the acquisition date as noted above.

In connection with Cadence’s acquisitions completed before July 3, 2010, Cadence may be obligated to pay up to an aggregate of $19.2 million in cash (including the up to $4.0 million in cash referred to in “Other Acquisition” above) during the next 33 months if certain defined performance goals are achieved in full, of which $11.0 million would be expensed in its Condensed Consolidated Statements of Operations.

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NOTE 4. GOODWILL AND ACQUIRED INTANGIBLES

Goodwill

The changes in the carrying amount of goodwill during the six months ended July 3, 2010 were as follows:

	Gross Carrying
	Amount
	(In thousands)
Balance as of January 2, 2010	$	----
Goodwill resulting from acquisitions during the period (Note 3)		156,103
Additions due to contingent consideration (Note 3)		2,124
Balance as of July 3, 2010	$	158,227

Acquired Intangibles, net

Acquired intangibles with finite lives as of July 3, 2010 were as follows, excluding intangibles that were fully amortized as of January 2, 2010:

	Gross Carrying		Accumulated			Acquired
	Amount		Amortization			Intangibles, net
	(In thousands)
Existing technology and backlog	$	91,800	$	(22,958	)	$	68,842
Agreements and relationships		134,822		(30,582	)		104,240
Distribution rights		30,100		(21,070	)		9,030
Tradenames, trademarks and patents		26,183		(16,373	)		9,810
Total acquired intangibles	$	282,905	$	(90,983	)	$	191,922
As of July 3, 2010, Cadence also had $0.5 million of in-process research and development intangibles that are expected to have an indefinite useful life until they are placed into service or the associated research and development efforts are abandoned.
Acquired intangibles with finite lives as of January 2, 2010 were as follows, excluding intangibles that were fully amortized as of January 3, 2009:
	Gross Carrying		Accumulated			Acquired
	Amount		Amortization			Intangibles, net
	(In thousands)
Existing technology and backlog	$	64,900	$	(61,332	)	$	3,568
Agreements and relationships		35,364		(27,905	)		7,459
Distribution rights		30,100		(19,565	)		10,535
Tradenames, trademarks and patents		22,984		(15,705	)		7,279
Total acquired intangibles	$	153,348	$	(124,507	)	$	28,841

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Amortization of acquired intangibles for the three and six months ended July 3, 2010 and July 4, 2009 was as follows:

	Three Months Ended				Six Months Ended
	July 3,		July 4,		July 3,		July 4,
	2010		2009		2010		2009
	(In thousands)
Cost of product	$	591	$	947	$	1,211	$	3,101
Cost of maintenance		----		1,045		1,045		2,090
Amortization of acquired intangibles		2,551		2,828		5,242		5,968
Total amortization of acquired intangibles	$	3,142	$	4,820	$	7,498	$	11,159

Amortization of costs from existing technology is included in Cost of product. Amortization of costs from acquired maintenance contracts is included in Cost of maintenance.

Estimated amortization expense for the following fiscal years and thereafter is as follows:

	(In thousands)
2010 — remaining period	$	13,462
2011		25,424
2012		23,391
2013		19,949
2014		17,206
Thereafter		92,490
Total estimated amortization expense	$	191,922

NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTS

Inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Cadence’s market assumptions. These two types of inputs have created the following fair-value hierarchy:

• Level 1 — Quoted prices for identical instruments in active markets;

• Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

• Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

This hierarchy requires Cadence to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. Cadence recognizes transfers between levels of this hierarchy based on the fair values of the respective financial instruments at the end of the reporting period in which the transfer occurred.

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On a quarterly basis, Cadence measures at fair value certain financial assets and liabilities. The fair value of financial assets and liabilities was determined using the following levels of inputs as of July 3, 2010:

	Fair Value Measurements as of July 3, 2010:
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents — Money market funds	$	363,740	$	363,740	$	----	$	----
Available-for-sale securities		2,655		2,655		----		----
Trading securities held in Non-Qualified Deferred Compensation Plan (NQDC)		27,751		27,751		----		----
2015 Notes Hedges		74,282		----		74,282		----
Foreign currency exchange contracts		132		----		132		----
Time deposits		204		204		----		----
Total Assets	$	468,764	$	394,350	$	74,414	$	----

	Total		Level 1		Level 2		Level 3
	(In thousands)
Liabilities
Acquisition-related contingent consideration	$	897	$	----	$	----	$	897
2015 Notes Embedded Conversion Derivative		74,282		----		74,282		----
Total Liabilities	$	75,179	$	----	$	74,282	$	897

The 2015 Notes Hedges, foreign currency forward exchange contracts and the 2015 Notes Embedded Conversion Derivative are classified as Level 2 because these assets and liabilities are not actively traded and are valued using standard pricing methodologies that use observable market data for all inputs.

The fair value of these financial assets and liabilities was determined using the following levels of inputs as of January 2, 2010:

	Fair Value Measurements as of January 2, 2010:
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents — Money market funds	$	446,335	$	446,335	$	----	$	----
Available-for-sale securities		1,951		1,951		----		----
Time deposits		233		233		----		----
Trading securities held in NQDC		31,403		31,403		----		----
Total Assets	$	479,922	$	479,922	$	----	$	----

	Total		Level 1		Level 2		Level 3
	(In thousands)
Liabilities
Foreign currency exchange contracts	$	478	$	----	$	478	$	----
Total Liabilities	$	478	$	----	$	478	$	----

Cadence acquired intangible assets of $171.0 million in connection with business combinations during the six months ended July 3, 2010. The fair value of these intangible assets was estimated using Level 3 inputs. See Note 3 for additional details of these business combinations and the key inputs used in the valuations.

Cadence recorded the initial fair value of contingent consideration liabilities in connection with a business combination during the six months ended July 3, 2010. This liability will be measured at fair value at the end of each reporting period. See Note 3 for additional details of this business combination and the key inputs used in the valuation.

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Cadence vacated certain facilities in connection with a restructuring plan and recorded lease losses of $0.5 million during the six months ended July 3, 2010, which are included in Restructuring and other charges (credits) in Cadence’s Condensed Consolidated Statement of Operations. The fair value of these lease losses was estimated using Level 2 inputs. See Note 6 for additional details on Cadence’s lease loss estimates.

NOTE 6. RESTRUCTURING AND OTHER CHARGES

During the second quarter of fiscal 2009, Cadence initiated a restructuring plan, or the 2009 Restructuring Plan, and during the fourth quarter of fiscal 2009, Cadence determined that it would initiate further actions under the 2009 Restructuring Plan. During fiscal 2008, Cadence initiated a restructuring plan, or the 2008 Restructuring Plan, and Cadence also initiated restructuring plans in each year from 2001 through 2005, which are referred to as the Other Restructuring Plans. Cadence initiated the 2009 Restructuring Plan, 2008 Restructuring Plan, and Other Restructuring Plans, collectively known as the Restructuring Plans, in an effort to operate more efficiently.

As of July 3, 2010, Cadence’s total amount accrued for the Restructuring Plans was $8.2 million, consisting of $5.6 million of estimated lease losses and $2.6 million of severance and severance-related benefits. The estimated lease losses will be adjusted in the future based on changes in the assumptions used to estimate the lease losses. The lease losses could be as high as $9.7 million and will be influenced by rental rates and the amount of time it takes to find suitable tenants to sublease the facilities. Of the $8.2 million accrued as of July 3, 2010, $3.6 million was included in Accounts payable and accrued liabilities and $4.6 million was included in Other long-term liabilities on Cadence’s Condensed Consolidated Balance Sheet.

Cadence regularly evaluates the adequacy of its lease loss, severance and related benefits accruals, and adjusts the balances based on actual costs incurred or changes in estimates and assumptions. Cadence may incur future charges to reflect actual costs incurred or for changes in estimates related to amounts previously recorded under the Restructuring Plans.

2009 Restructuring Plan

Cadence has recorded total costs associated with the 2009 Restructuring Plan of $33.8 million. These costs include severance payments, severance-related benefits and costs for outplacement services that were communicated to the affected employees before January 2, 2010, and estimated severance payments and related benefits that were both probable and estimable as of January 2, 2010 for employees notified after January 2, 2010.

Cadence recorded a net credit of $0.3 million during the three months ended July 3, 2010, and a net credit of $1.9 million during the six months ended July 3, 2010, due to severance and related benefits costs that were less than previously estimated. Cadence also recorded charges of $0.5 million related to facilities that Cadence vacated during the six months ended July 3, 2010 and $0.1 million for assets related to these vacated facilities.

Total severance and termination benefits of approximately $30.1 million were paid to employees before July 3, 2010. Approximately $2.5 million of severance and termination benefits will be paid after July 3, 2010, all of which is included in Accounts payable and accrued liabilities in Cadence’s Condensed Consolidated Balance Sheet as of July 3, 2010. Due to varying regulations in the jurisdictions and countries in which Cadence operates, Cadence expects substantially all termination benefits to be paid by April 3, 2011.

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The following table presents activity associated with the 2009 Restructuring Plan for the three months ended July 3, 2010:

	Severance
	and			Excess
	Benefits			Facilities			Other		Total
	(In thousands)
Balance, April 3, 2010	$	4,255		$	455		$	----	$	4,710
Restructuring and other charges (credits), net		(274	)		----			----		(274	)
Non-cash charges		----			4			----		4
Cash payments		(1,251	)		(65	)		----		(1,316	)
Effect of foreign currency translation		(222	)		----			----		(222	)
Balance, July 3, 2010	$	2,508		$	394		$	----	$	2,902

The following table presents activity associated with the 2009 Restructuring Plan for the six months ended July 3, 2010:

	Severance
	and			Excess
	Benefits			Facilities			Other			Total
	(In thousands)
Balance, January 2, 2010	$	18,638		$	----		$	----		$	18,638
Restructuring and other charges (credits), net		(1,853	)		455			82			(1,316	)
Non-cash charges (credits)		----			4			(82	)		(78	)
Cash payments		(13,758	)		(65	)		----			(13,823	)
Effect of foreign currency translation		(519	)		----			----			(519	)
Balance, July 3, 2010	$	2,508		$	394		$	----		$	2,902

2008 Restructuring Plan

The following table presents activity associated with the 2008 Restructuring Plan for the three months ended July 3, 2010:

	Severance
	and			Excess
	Benefits			Facilities			Other		Total
	(In thousands)
Balance, April 3, 2010	$	254		$	1,601		$	5	$	1,860
Restructuring and other charges (credits), net		(34	)		(26	)		----		(60	)
Non-cash charges		----			26			----		26
Cash payments		(151	)		(166	)		----		(317	)
Effect of foreign currency translation		(12	)		(5	)		----		(17	)
Balance, July 3, 2010	$	57		$	1,430		$	5	$	1,492

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The following table presents activity associated with the 2008 Restructuring Plan for the six months ended July 3, 2010:

	Severance
	and			Excess
	Benefits			Facilities			Other			Total
	(In thousands)
Balance, January 2, 2010	$	287		$	1,874		$	5		$	2,166
Restructuring and other charges (credits), net		(41	)		(26	)		(25	)		(92	)
Non-cash charges		----			39			25			64
Cash payments		(165	)		(358	)		----			(523	)
Effect of foreign currency translation		(24	)		(99	)		----			(123	)
Balance, July 3, 2010	$	57		$	1,430		$	5		$	1,492

Other Restructuring Plans

The following table presents activity associated with the Other Restructuring Plans for the three months ended July 3, 2010:

	Excess
	Facilities
	(In thousands)
Balance, April 3, 2010	$	4,125
Restructuring and other charges (credits), net		17
Non-cash charges		60
Cash payments		(275	)
Effect of foreign currency translation		(133	)
Balance, July 3, 2010	$	3,794

The following table presents activity associated with the Other Restructuring Plans for the six months ended July 3, 2010:

	Excess
	Facilities
	(In thousands)
Balance, January 2, 2010	$	4,648
Restructuring and other charges (credits), net		17
Non-cash charges		116
Cash payments		(586	)
Effect of foreign currency translation		(401	)
Balance, July 3, 2010	$	3,794

NOTE 7. ALLOWANCE FOR DOUBTFUL ACCOUNTS

Cadence analyzes the creditworthiness of its customers, historical experience, changes in customer demand, and the overall economic climate in the industries that Cadence serves, makes judgments as to its ability to collect outstanding receivables, and provides allowances for the portion of receivables when collection is not probable. Provisions are made based upon a specific review of customer receivables and are recorded in operating expenses. Receivables and Installment contract receivables are presented net of allowance for doubtful accounts of $11.2 million as of July 3, 2010 and $23.7 million as of January 2, 2010.

Cadence’s customers are primarily concentrated within the semiconductor sector, which was adversely affected by the 2008 and 2009 economic downturn. As of July 3, 2010, approximately one-third of Cadence’s total Receivables, net and Installment contract receivables, net were attributable to the ten customers with the largest balances of Receivables, net and Installment contract receivables, net. As of January 2, 2010, approximately half of Cadence’s total Receivables, net and Installment contract receivables, net were attributable to the ten customers with the largest balances of Receivables, net and Installment contract receivables, net.

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Cadence believes that its allowance for doubtful accounts is adequate, but Cadence will continue to monitor customer liquidity and other economic conditions, which may result in changes to Cadence’s estimates regarding its allowance for doubtful accounts. The adequacy of the allowance for doubtful accounts is evaluated by Cadence at least quarterly, and any adjustments to the allowance for doubtful accounts resulting from these evaluations could be material to Cadence’s Condensed Consolidated Financial Statements.

NOTE 8. INCOME TAXES

Because the increase in deferred tax liabilities from the intangible assets acquired with Denali provided a source of taxable income, Cadence released a corresponding amount of its deferred tax asset valuation allowance. The $66.7 million release of the valuation allowance was recognized as a Benefit for income taxes for the three and six months ended July 3, 2010. As a result, Cadence recognized a Benefit for income taxes of $54.5 million during the three months and $49.5 million during the six months ended July 3, 2010.

Internal Revenue Service Examinations

The Internal Revenue Service, or IRS, and other tax authorities regularly examine Cadence’s income tax returns. In July 2006, the IRS completed its field examination of Cadence’s federal income tax returns for the tax years 2000 through 2002 and issued a Revenue Agent’s Report, or RAR, in which the IRS proposed to assess an aggregate tax deficiency for the three-year period of approximately $324.0 million. In November 2006, the IRS revised the proposed aggregate tax deficiency for the three-year period to be approximately $318.0 million. The IRS is contesting Cadence’s qualification for deferred recognition of certain proceeds received from restitution and settlement in connection with litigation during the period. The proposed tax deficiency for this item is approximately $152.0 million. The remaining proposed tax deficiency of approximately $166.0 million is primarily related to proposed adjustments to Cadence’s transfer pricing arrangements with its foreign subsidiaries and to Cadence’s deductions for foreign trade income. Cadence has filed a timely protest with the IRS and is seeking resolution of the issues through the Appeals Office of the IRS, or the Appeals Office.

In May 2009, the IRS completed its field examination of Cadence’s federal income tax returns for the tax years 2003 through 2005 and issued a RAR, in which the IRS proposed to assess an aggregate deficiency for the three-year period of approximately $94.1 million. In August 2009, the IRS revised the proposed aggregate tax deficiency for the three-year period to approximately $60.7 million. The IRS is contesting Cadence’s transfer pricing arrangements with its foreign subsidiaries and deductions for foreign trade income. The IRS made similar claims against Cadence’s transfer pricing arrangements and deductions for foreign trade income in prior examinations. Cadence has filed a timely protest with the IRS and is seeking resolution of the issues through the Appeals Office.

Cadence believes that the proposed IRS adjustments are inconsistent with applicable tax laws and Cadence is vigorously challenging these proposed adjustments. The RAR is not a final Statutory Notice of Deficiency, but the IRS imposes interest on the proposed deficiencies until the matters are resolved. Interest

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is compounded daily at rates that are published by the IRS, are adjusted quarterly and have been at an annual rate between 4% and 10% since 2001.

The IRS is currently examining Cadence’s federal income tax returns for the tax years 2006 through 2008.

Unrecognized Tax Benefits

Cadence takes a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not the tax position will be sustained upon audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon effective settlement.

In March 2010, in a case between Xilinx, Inc. and the IRS, the U.S. Court of Appeals for the Ninth Circuit, or the Ninth Circuit, issued a decision affirming a U.S. Tax Court ruling that stock option compensation does not need to be included in the costs shared under a cost sharing arrangement. While Cadence was not a named party to the case, the Ninth Circuit’s decision impacts Cadence’s tax position for certain years prior to fiscal 2004. As a result of this decision by the Ninth Circuit, Cadence decreased its liability for unrecognized tax benefits and increased Common stock and capital in excess of par value by approximately $4.2 million during the six months ended July 3, 2010.

During the three months ended July 3, 2010, Cadence’s Benefit for income taxes included an increase in unrecognized tax benefits, penalties and interest of $7.4 million and current year interest expense related to unrecognized tax benefits of $2.9 million. Cadence’s Benefit for income taxes for the six months ended July 3, 2010 included an increase in unrecognized tax benefits, penalties and interest of $5.5 million and current year interest expense related to unrecognized tax benefits of $6.0 million.

Cadence believes that it is reasonably possible that the total amount of unrecognized tax benefits related to the IRS examination of its federal income tax returns for the tax years 2000 through 2002 could decrease during fiscal 2010 if Cadence is able to effectively settle the disputed issues with the Appeals Office. Cadence believes that the range of reasonably possible outcomes is a decrease in existing unrecognized tax benefits for the tax years 2000 through 2002 of as much as $244.0 million.

Cadence believes that it is reasonably possible that the total amount of unrecognized tax benefits related to the IRS examination of its federal income tax returns for the tax years 2003 through 2005 could decrease during fiscal 2010 if Cadence is able to effectively settle the disputed issues with the Appeals Office. Cadence cannot currently provide an estimate of the range of possible outcomes.

In addition, Cadence believes that it is reasonably possible that the total amounts of unrecognized tax benefits for its transfer pricing arrangements with its foreign subsidiaries could significantly increase or decrease during fiscal 2010 if the Appeals Office develops new settlement guidelines or adjusts its settlement positions that change Cadence’s measurement of the tax benefits to be recognized upon effective settlement with the IRS. Because of the uncertain impact of any potential settlement guidelines, Cadence cannot currently provide an estimate of the range of possible outcomes.

The calculation of Cadence’s Provision (benefit) for income taxes requires significant judgment and involves dealing with uncertainties in the application of complex tax laws and regulations. In determining the adequacy of the provision (benefit) for income taxes, Cadence regularly assesses the potential settlement outcomes resulting from income tax examinations. However, the final outcome of tax examinations,

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including the total amount payable or the timing of any such payments upon resolution of these issues, cannot be estimated with certainty. In addition, Cadence cannot be certain that such amount will not be materially different from the amount that is reflected in its historical income tax provisions and accruals. Should the IRS or other tax authorities assess additional taxes as a result of a current or a future examination, Cadence may be required to record charges to operations in future periods that could have a material impact on its results of operations, financial position or cash flows in the applicable period or periods.

NOTE 9. NET INCOME (LOSS) PER SHARE

Basic and diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding, less unvested restricted stock awards, during the period. None of Cadence’s outstanding grants of restricted stock contain nonforfeitable dividend rights. Diluted net income per share is impacted by equity instruments considered to be potential common shares, if dilutive, computed using the treasury stock method of accounting. In periods in which a net loss is recorded, potentially dilutive equity instruments would decrease the loss per share and therefore are not added to the weighted average shares outstanding for the diluted net loss per share calculation.

The calculation for basic and diluted net income (loss) per share for the three and six months ended July 3, 2010 and July 4, 2009 were as follows:

	Three Months Ended					Six Months Ended
	July 3,		July 4,			July 3,		July 4,
	2010		2009			2010		2009
	(In thousands, except per share amounts)
Net income (loss)	$	48,607	$	(74,357	)	$	36,822	$	(137,614	)
Weighted average common shares used to calculate basic net income (loss) per share		262,163		256,883			262,380		255,592
2023 Notes		11		----			11		----
Options		1,482		----			1,275		----
Restricted stock		2,522		----			2,658		----
Employee stock purchase plan (ESPP)		245		----			215		----
Weighted average common shares used to calculate diluted net income (loss) per share		266,423		256,883			266,539		255,592
Basic net income (loss) per share	$	0.19	$	(0.29	)	$	0.14	$	(0.54	)
Diluted net income (loss) per share	$	0.18	$	(0.29	)	$	0.14	$	(0.54	)

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The following table presents the potential shares of Cadence’s common stock outstanding for the three and six months ended July 3, 2010 and July 4, 2009 that were not included in the computation of diluted net income (loss) per share because the effect of including these shares would have been anti-dilutive:

	Three Months Ended				Six Months Ended
	July 3,		July 4,		July 3,		July 4,
	2010		2009		2010		2009
	(In thousands)
Options to purchase shares of common stock (various expiration dates through 2020)		22,209		38,606		23,441		38,606
Non-vested shares of restricted stock		2,156		10,540		3,460		10,540
Employee stock purchase plan (ESPP)		----		2,289		----		2,289
2023 Notes		----		11		----		11
Convertible Senior Note Warrants (various expiration dates through 2014)		14,184		23,640		14,184		23,640
2015 Warrants (various expiration dates through 2015)		46,382		----		46,382		----
Total potential common shares excluded		84,931		75,086		87,467		75,086

NOTE 10. ACCUMULATED DEFICIT

The changes in accumulated deficit for the three and six months ended July 3, 2010 were as follows:

	Three Months
	Ended
	(In thousands)
Balance as of April 3, 2010	$	(1,224,619	)
Net income		48,607
Re-issuance of treasury stock		(39,379	)
Balance as of July 3, 2010	$	(1,215,391	)
	Six Months
	Ended
	(In thousands)
Balance as of January 2, 2010	$	(1,177,983	)
Net income		36,822
Re-issuance of treasury stock		(74,230	)
Balance as of July 3, 2010	$	(1,215,391	)

When treasury stock is reissued at a price higher than its cost, the difference is recorded as a component of Capital in excess of par in the Condensed Consolidated Balance Sheets. When treasury stock is reissued at a price lower than its cost, the difference is recorded as a component of Capital in excess of par to the extent that there are gains to offset the losses. If there are no treasury stock gains in Capital in excess of par, the losses upon re-issuance of treasury stock are recorded as a component of Accumulated deficit in the Condensed Consolidated Balance Sheets.

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NOTE 11. STOCK REPURCHASE PROGRAMS

Cadence’s Board of Directors has authorized the following programs to repurchase shares of Cadence’s common stock in the open market, which remained in effect on July 3, 2010:

			Remaining
Authorization Date	Amount		Authorization
	(In thousands)
February 2008	$	500,000	$	314,389
August 2008	$	500,000		500,000
Total remaining authorization			$	814,389

The shares repurchased under Cadence’s stock repurchase programs and the total cost of repurchased shares during the three and six months ended July 3, 2010 and July 4, 2009 were as follows:

	Three and Six
	Months Ended
	July 3,		July 4,
	2010		2009
	(In thousands)
Shares repurchased		6,493		----
Total cost of repurchased shares	$	39,997	$	----

NOTE 12. OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) includes foreign currency translation gains and losses and unrealized gains and losses on available-for-sale marketable securities, net of related tax effects. These items have been excluded from net income and are reflected instead in Stockholders’ Equity. Cadence’s comprehensive income (loss) for the three and six months ended July 3, 2010 and July 4, 2009 was as follows:

	Three Months Ended						Six Months Ended
	July 3,			July 4,			July 3,			July 4,
	2010			2009			2010			2009
	(In thousands)
Net income (loss)	$	48,607		$	(74,357	)	$	36,822		$	(137,614	)
Foreign currency translation gain (loss), net of related tax effects		(5,117	)		3,970			(3,913	)		(1,369	)
Changes in unrealized holding gains (losses) on available-for-sale securities, net of reclassification adjustment for realized gains and losses, net of related tax effects		(314	)		1,825			704			1,626
Other		42			236			98			(36	)
Comprehensive income (loss)	$	43,218		$	(68,326	)	$	33,711		$	(137,393	)

NOTE 13. CONTINGENCIES

Legal Proceedings

From time to time, Cadence is involved in various disputes and litigation that arise in the ordinary course of business. These include disputes and lawsuits related to intellectual property, mergers and acquisitions, licensing, contracts, distribution arrangements and employee relations matters. At least quarterly, Cadence reviews the status of each significant matter and assesses its potential financial exposure. If the

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potential loss from any claim or legal proceeding is considered probable and the amount or the range of loss can be estimated, Cadence accrues a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on Cadence’s judgments using the best information available at the time. As additional information becomes available, Cadence reassesses the potential liability related to pending claims and litigation matters and may revise its estimates.

During fiscal 2008, three complaints were filed in the United States District Court for the Northern District of California, or District Court, all alleging violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, on behalf of a purported class of purchasers of Cadence’s common stock. The first such complaint was filed on October 29, 2008, captioned Hu v. Cadence Design Systems, Inc., Michael J. Fister, William Porter and Kevin S. Palatnik; the second such complaint was filed on November 4, 2008, captioned Vyas v. Cadence Design Systems, Inc., Michael J. Fister, and Kevin S. Palatnik; and the third such complaint was filed on November 21, 2008, captioned Collins v. Cadence Design Systems, Inc., Michael J. Fister, John B. Shoven, Kevin S. Palatnik and William Porter. On March 4, 2009, the District Court entered an order consolidating these three complaints and captioning the consolidated case “In re Cadence Design Systems, Inc. Securities Litigation.” The District Court also named a lead plaintiff and lead counsel for the consolidated litigation. The lead plaintiff filed its consolidated amended complaint on April 24, 2009, naming Cadence, Michael J. Fister, Kevin S. Palatnik, William Porter and Kevin Bushby as defendants, and alleging violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder, on behalf of a purported class of purchasers of Cadence’s common stock who traded Cadence’s common stock between April 23, 2008 and December 10, 2008, or the Alleged Class Period. The amended complaint alleged that Cadence and the individual defendants made statements during the Alleged Class Period regarding Cadence’s financial results that were false and misleading because Cadence had recognized revenue that should have been recognized in subsequent quarters. The amended complaint requested certification of the action as a class action, unspecified damages, interest and costs, and unspecified equitable relief. On June 8, 2009, Cadence and the other defendants filed a motion to dismiss the amended complaint. On September 11, 2009, the District Court held that the plaintiffs had failed to allege a valid claim under the relevant legal standards, and granted the defendants’ motion to dismiss the amended complaint. The District Court gave the plaintiffs leave to file another amended complaint, and the plaintiffs did so on October 13, 2009. The amended complaint filed on October 13, 2009 names the same defendants, asserts the same causes of action, and seeks the same relief as the earlier amended complaint. Cadence moved to dismiss the October 13, 2009 amended complaint. The District Court denied the motion to dismiss on March 2, 2010. On July 7, 2010, the parties agreed, and the District Court ordered, that the litigation be stayed in order to facilitate a mediation scheduled in late August 2010. If the mediation is unsuccessful and the litigation is not resolved through a negotiated settlement, Cadence plans to continue to vigorously defend these consolidated cases and any other securities lawsuits that may be filed.

During fiscal 2008, two derivative complaints were filed in Santa Clara County Superior Court, or Superior Court. The first was filed on November 20, 2008, and captioned Ury Priel, derivatively on behalf of nominal defendant Cadence Design Systems, Inc. v. John B. Shoven, Lip-Bu Tan, Alberto Sangiovanni-Vincentelli, Donald L. Lucas, Sr., Roger Siboni, George Scalise, Michael J. Fister, and Doe Defendants 1-15. The second was filed on December 1, 2008, and captioned Mark Levine, derivatively on behalf of nominal defendant Cadence Design Systems, Inc. v. John B. Shoven, Lip-Bu Tan, Alberto Sangiovanni-Vincentelli, Donald L. Lucas, Sr., Roger Siboni, George Scalise, Michael J. Fister, John Swainson and Doe Defendants 1-10. These complaints purport to bring suit derivatively, on behalf of Cadence, against certain of Cadence’s current and former directors for alleged breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment. Many of the allegations underlying these claims are similar or identical to the allegations in the consolidated securities class action lawsuits described

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above, and the claims also include allegations that the individual defendants approved compensation based on inflated financial results. The plaintiffs request unspecified damages, restitution, equitable relief and their reasonable attorneys’ fees, experts’ fees, costs and expenses on behalf of Cadence against the individual defendants. A motion to consolidate these complaints was granted on January 20, 2009, and the cases were captioned “In re Cadence Design Systems, Inc. Derivative Litigation.” The consolidated cases were then stayed by agreement of the parties. The plaintiffs filed a consolidated amended derivative complaint on June 1, 2010. The consolidated amended derivative complaint names as defendants Cadence (as a nominal defendant), James S. Miller, R.L. Smith McKeithen, John B. Shoven, Lip-Bu Tan, Alberto Sangiovanni-Vincentelli, Donald L. Lucas, Sr., Roger S. Siboni, George Scalise, Michael J. Fister, John A.C. Swainson, Kevin S. Palatnik, William Porter, and Kevin Bushby. The consolidated amended derivative complaint alleges purported causes of action for breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, and unjust enrichment (which is asserted against certain defendants). Many of the factual allegations of the consolidated amended derivative complaint are similar to those alleged in the First Amended Complaint in the securities class action case described above. In addition, the claims include allegations that the director defendants made inappropriate personnel decisions with respect to the former officers and that the former officers were unjustly enriched. The consolidated derivative complaint seeks unspecified monetary damages and equitable relief, disgorgement of profits and compensation, and costs and attorneys’ fees.

On April 28, 2010, a derivative complaint was filed in the District Court, captioned Walter Hamilton, derivatively on behalf of nominal defendant Cadence Design Systems, Inc. v. Michael J. Fister, William Porter, James S. Miller, Jr., Kevin Bushby, R.L. Smith McKeithen, Lip-Bu Tan, Alberto Sangiovanni-Vincentelli, John B. Shoven, Donald L. Lucas, George M. Scalise, Roger S. Siboni, John A.C. Swainson, and KPMG LLP. This complaint purports to bring suit derivatively, on behalf of Cadence, against certain of Cadence’s current and former officers and directors for breach of fiduciary duty, abuse of control, gross mismanagement, and waste of corporate assets, against the former executive defendants for unjust enrichment, and against Cadence’s independent auditors for professional negligence and breach of contract. Many of the allegations underlying these claims are similar or identical to the allegations in the consolidated securities class action lawsuits described above. In addition, the claims include allegations that the director defendants made inappropriate personnel decisions with respect to the former officers and that the former officers were unjustly enriched, as well as allegations that Cadence’s independent auditors performed allegedly inadequate audits. On June 28, 2010, the plaintiff dismissed Cadence’s independent auditors from the case, without prejudice.

The parties to the derivative cases pending in the Superior Court and the District Court agreed to participate in the mediation at the end of August, 2010 and to stay these derivative cases. If these derivative cases do not end in negotiated resolutions, Cadence will respond to the two derivative complaints appropriately.

In light of the preliminary status of these lawsuits, Cadence cannot predict the outcome of these matters. While the outcome of these litigation matters cannot be predicted with any certainty, management does not believe that the outcome of any current matters will have a material adverse effect on Cadence’s consolidated financial position, liquidity or results of operations.

Other Contingencies

Cadence provides its customers with a warranty on sales of hardware products, generally for a 90-day period. To date, Cadence has not incurred any significant costs related to warranty obligations.

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Cadence’s product license and services agreements typically include a limited indemnification provision for claims from third parties relating to Cadence’s intellectual property. If the potential loss from any indemnification claim is considered probable and the amount or the range of loss can be estimated, Cadence accrues a liability for the estimated loss. The indemnification is generally limited to the amount paid by the customer. To date, claims under such indemnification provisions have not been significant.

NOTE 14. STATEMENT OF CASH FLOWS

The supplemental cash flow information for the six months ended July 3, 2010 and July 4, 2009 is as follows:

							Six Months Ended
							July 3,			July 4,
							2010			2009
							(In thousands)
Cash Paid During the Period for:
Interest							$	3,594		$	3,594
Income taxes, including foreign withholding tax							$	7,052		$	5,989
NOTE 15. OTHER INCOME (EXPENSE), NET Cadence’s Other income (expense), net, for the three and six months ended July 3, 2010 and July 4, 2009 was as follows:
	Three Months Ended						Six Months Ended
	July 3,			July 4,			July 3,			July 4,
	2010			2009			2010			2009
	(In thousands)
Interest income	$	302		$	750		$	550		$	1,779
Gains on sale of non-marketable securities		242			----			4,756			----
Gains (losses) on trading securities in the non-qualified deferred compensation trust		1,102			(1,623	)		2,179			(7,991	)
Gains (losses) on foreign exchange		1,998			(901	)		2,190			2,423
Equity losses from investments		(46	)		(85	)		(73	)		(231	)
Write-down of investments		(1,500	)		(613	)		(1,500	)		(4,606	)
Loss on early extinguishment of debt (Note 2)		(5,321	)		----			(5,321	)		----
Other income (expense)		123			(61	)		93			(56	)
Total other income (expense), net	$	(3,100	)	$	(2,533	)	$	2,874		$	(8,682	)

During the six months ended July 3, 2010, Cadence recorded gains totaling $4.8 million for five cost method investments that were liquidated.

It is Cadence’s policy to review the fair value of its investment securities on a regular basis to determine whether its investments in these companies are other-than-temporarily impaired. This evaluation includes, but is not limited to, reviewing each company’s cash position, financing needs, earnings or revenue outlook, operational performance, management or ownership changes and competition. If Cadence believes the carrying value of an investment is in excess of its fair value, and this difference is other-than-temporary, it is Cadence’s policy to write down the investment to reduce its carrying value to fair value.

Cadence determined that certain of its non-marketable securities were other-than-temporarily impaired and Cadence wrote down the investments by $1.5 million during the three and six months ended July 3, 2010

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and $0.6 million during the three months ended July 4, 2009 and $4.6 million during the six months ended July 4, 2009.

NOTE 16. SEGMENT REPORTING

Segment reporting requires disclosures of certain information regarding reportable segments, products and services, geographic areas of operation and major customers. Segment reporting is based upon the “management approach”: how management organizes the company’s reportable segments for which separate financial information is (i) available and (ii) evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Cadence’s chief operating decision maker is its President and Chief Executive Officer, or CEO. Cadence’s CEO reviews Cadence’s consolidated results as one reportable segment. In making operating decisions, the CEO primarily considers consolidated financial information, accompanied by disaggregated information about revenues by geographic region.

Outside the United States, Cadence markets and supports its products and services primarily through its subsidiaries. Revenue is attributed to geography based on the country in which the product is used or services are delivered. Long-lived assets are attributed to geography based on the country where the assets are located.

The following table presents a summary of revenue by geography:

	Three Months Ended				Six Months Ended
	July 3,		July 4,		July 3,		July 4,
	2010		2009		2010		2009
	(In thousands)
Americas:
United States	$	94,648	$	93,935	$	177,297	$	175,950
Other Americas		8,352		5,420		13,495		9,971
Total Americas		103,000		99,355		190,792		185,921
Europe, Middle East and Africa:
Germany		22,706		10,711		36,882		23,195
Other Europe, Middle East and Africa		30,240		33,842		65,278		70,044
Total Europe, Middle East and Africa		52,946		44,553		102,160		93,239
Japan		31,822		36,149		82,875		75,377
Asia		39,296		29,872		73,175		61,694
Total	$	227,064	$	209,929	$	449,002	$	416,231

As of July 3, 2010, no single customer accounted for 10% or more of Cadence’s Receivables, net and Installment contract receivables, net. As of January 2, 2010, one customer accounted for 15% of Cadence’s Receivables, net and Installment contract receivables, net.

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The following table presents a summary of long-lived assets by geography:

	As of
	July 3,		January 2,
	2010		2010
	(In thousands)
Americas:
United States	$	267,634	$	282,002
Other Americas		13		25
Total Americas		267,647		282,027
Europe, Middle East and Africa:
Germany		767		1,060
Other Europe, Middle East and Africa		5,215		5,216
Total Europe, Middle East and Africa		5,982		6,276
Japan		3,953		5,130
Asia		17,491		18,069
Total	$	295,073	$	311,502

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto included in this Quarterly Report on Form 10-Q, or this Quarterly Report, and in conjunction with our Annual Report on Form 10-K for the fiscal year ended January 2, 2010. Certain of these statements, including, but not limited to, statements regarding the extent and timing of future revenues and expenses and customer demand, statements regarding the deployment of our products, statements regarding our reliance on third parties and other statements using words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “intends,” “may,” “plans,” “projects,” “should,” “will” and “would,” and words of similar import and the negatives thereof, constitute forward-looking statements. These statements are predictions based upon our current expectations about future events. Actual results could vary materially as a result of certain factors, including, but not limited to, those expressed in these statements. We refer you to the “Risk Factors,” “Results of Operations,” “Disclosures About Market Risk,” and “Liquidity and Capital Resources” sections contained in this Quarterly Report, and the risks discussed in our other Securities Exchange Commission, or SEC, filings, which identify important risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements.

We urge you to consider these factors carefully in evaluating the forward-looking statements contained in this Quarterly Report. All subsequent written or oral forward-looking statements attributable to our company or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements included in this Quarterly Report are made only as of the date of this Quarterly Report. We do not intend, and undertake no obligation, to update these forward-looking statements.

Overview

We develop electronic design automation, or EDA, software and hardware. We license software, sell or lease hardware technology, provide maintenance for our software and hardware and provide engineering and education services throughout the world to help manage and accelerate product development processes for electronics. Our customers use our products and services to design and develop complex integrated circuits, or ICs, and electronics systems.

We primarily generate revenue from licensing our EDA software, selling or leasing our hardware technology, providing maintenance for our software and hardware and providing engineering services. Substantially all of our revenue is generated from IC and electronics systems manufacturers and designers and is dependent upon their commencement of new design projects. As a result, our revenue is significantly influenced by our customers’ business outlook and investment in the introduction of new products and the improvement of existing products.

During 2008 and 2009, the semiconductor industry suffered as the overall macroeconomic environment deteriorated. Electronics companies faced financial challenges in 2008 and 2009 because consumer spending on electronics was adversely affected by increased unemployment, and corporate spending was restrained by the tightened credit market and the economic downturn. During 2009, semiconductor unit volumes decreased and average selling prices declined. These factors affect how electronics companies address traditional challenges of cost, quality, innovation and time-to-market associated with highly complex electronics systems and IC product development. Although estimates project moderate growth for the semiconductor industry in 2010, we believe that increased spending on EDA and other tools may grow more slowly than the semiconductor industry as a whole in 2010.

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Facing uncertainty and cost pressures in their own businesses or otherwise as a result of the overall economic downturn, some of our customers are continuing to wait to purchase our products and to seek purchasing terms and conditions that are less favorable to us, including lower prices and shorter contract duration. As a result of this trend, we have experienced low business levels and net losses in recent years. To enable us to keep our focus on the value of our technology and to assist with customer demands, we are continuing our transition to a license mix that will provide our customers with greater flexibility and will result in a substantial portion of our revenue being recognized ratably.

Our customers may also experience adverse changes in their businesses and, as a result, may delay or default on their payment obligations, file for bankruptcy or modify or cancel plans to license our products. If our customers are not successful in generating sufficient cash or are precluded from securing financing, they may not be able to pay, or may delay payment of, accounts receivable that are owed to us, although these obligations are generally not cancelable. Additionally, our customers may seek to renegotiate existing contractual commitments. Although we have not yet experienced a material level of defaults, any material payment default by our customers or significant reductions in existing contractual commitments could have a material adverse effect on our financial condition and operating results.

Product performance and size specifications of the mobile and other consumer electronics markets are requiring electronic systems to be smaller, consume less power and provide multiple functions in one system-on-chip, or SoC, or system-in-package, or SiP. The design challenge is also becoming more complex with each new generation of electronics because providers of EDA solutions are required to deliver products that address these technical challenges and improve the efficiency and productivity of the design process in a price-conscious environment.

With the addition of emerging nanometer design considerations to the already burgeoning set of traditional design tasks, complex SoC or IC design can no longer be accomplished using a collection of discrete design tools. What previously consisted of sequential design activities must be merged and accomplished nearly simultaneously without time-consuming data translation steps. We combine our design technologies into “platforms” addressing four major design activities: functional verification, digital IC design, custom IC design and system interconnect design. The four Cadence^® design platforms are branded as Incisive^® functional verification, Encounter^® digital IC design, Virtuoso^® custom design and Allegro^® system interconnect design. In addition, we augment these offerings with a set of design for manufacturing, or DFM, products that service both the digital and custom IC design flows. These four offerings, together with our DFM products, comprise our primary product lines.

We have identified certain items that management uses as performance indicators to manage our business, including revenue, certain elements of operating expenses and cash flow from operations, and we describe these items further below under the heading “Results of Operations” and “Liquidity and Capital Resources.”

Critical Accounting Estimates

In preparing our Condensed Consolidated Financial Statements, we make assumptions, judgments and estimates that can have a significant impact on our revenue, operating income (loss) and net income (loss), as well as on the value of certain assets and liabilities on our Condensed Consolidated Balance Sheets. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. At least quarterly, we evaluate our assumptions, judgments and estimates and make changes accordingly. Historically, our assumptions, judgments and estimates relative to our critical accounting estimates have not differed materially from actual results. For

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further information about our critical accounting estimates, see the discussion under the heading “Critical Accounting Estimates” in our Annual Report on Form 10-K for the fiscal year ended January 2, 2010.

Our critical accounting estimates for valuation of intangible assets, valuation of goodwill and financial instruments and fair value are described below. These assumptions, judgments and estimates became critical accounting estimates during the six months ended July 3, 2010.

Valuation of Intangible assets

When we acquire businesses, we allocate the purchase price to acquired tangible assets and liabilities and acquired identifiable intangible assets. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires us to make significant estimates in determining the fair values of these acquired assets and assumed liabilities, especially with respect to intangible assets. These estimates are based on information obtained from management of the acquired companies, our assessment of this information, and historical experience. These estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable, and if different estimates were used, the purchase price for the acquisition could be allocated to the acquired assets and liabilities differently from the allocation that we have made. In addition, unanticipated events and circumstances may occur that may affect the accuracy or validity of such estimates, and if such events occur, we may be required to record a charge against the value ascribed to an acquired asset or an increase in the amounts recorded for assumed liabilities.

We review for impairment long-lived assets, including certain identifiable intangibles, whenever events or changes in circumstances indicate that we will not be able to recover an asset’s carrying amount. In addition, we assess our long-lived assets for impairment if they are abandoned.

For long-lived assets to be held and used, including acquired intangibles, we initiate our review whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. Recoverability of an asset is measured by comparing its carrying amount to the expected future undiscounted cash flows expected to result from the use and eventual disposition of that asset, excluding future interest costs that would be recognized as an expense when incurred. Any impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair market value. Significant management judgment is required in:

• Identifying a triggering event that arises from a change in circumstances;

• Forecasting future operating results; and

• Estimating the proceeds from the disposition of long-lived or intangible assets.

In future periods, material impairment charges could be necessary should different conditions prevail or different judgments be made.

Valuation of Goodwill

Costs in excess of the fair value of tangible and other intangible assets acquired and liabilities assumed in a business combination are recorded as goodwill. Goodwill is not amortized, but instead is tested for impairment at least annually. We have evaluated goodwill on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable.

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Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. The fair values of the reporting units are estimated using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies’ data. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered to be impaired and a second step is performed to measure the amount of the impairment loss.

The preparation of the goodwill impairment analysis requires management to make significant estimates and assumptions with respect to the determination of fair values of reporting units and tangible and intangible assets. These estimates and assumptions, which include future values, are complex and often subjective and may differ significantly from period to period based on changes in the overall economic environment, changes in our industry and changes in our strategy or our internal forecasts. Estimates and assumptions with respect to the determination of the fair value of our reporting unit include:

• Control premium assigned to our market capitalization;

• Our operating forecasts;

• Revenue growth rates;

• Risk-commensurate discount rates and costs of capital; and

• Market multiples of revenue and earnings.

These estimates and assumptions, along with others, are used to estimate the fair value of our reporting unit as well as tangible and intangible assets. While we believe the estimates and assumptions we used are reasonable, different assumptions may materially impact the resulting fair value of the reporting unit, tangible assets and intangible assets, the amount of impairment we record in any given period and our results of operations.

Financial Instruments and Fair Value

Inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs have created the following fair-value hierarchy:

• Level 1 — Quoted prices for identical instruments in active markets;

• Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

• Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

This hierarchy requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. We recognize transfers between levels of this hierarchy based on the fair values of the respective financial instruments at the end of the reporting period in which the transfer occurred. Changes in fair value are recognized in earnings each period for financial instruments that are carried at fair value.

The types of instruments that trade in markets that are not considered to be active, but are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency are generally classified within Level 2 of the fair value hierarchy.

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In June 2010, we entered into hedge transactions, or the 2015 Notes Hedges, and recorded an embedded conversion derivative, or the 2015 Notes Embedded Conversion Derivative, concurrent with the issuance of the 2015 Notes. The fair values of these derivatives are determined using an option pricing model based on observable inputs, such as implied volatility of our common stock, risk-free interest rate and other factors, and as such are classified within Level 2 of the fair value hierarchy. See Note 2 to our Condensed Consolidated Financial Statements for additional details of these transactions.

Certain instruments are classified within Level 3 of the fair value hierarchy because they trade infrequently and therefore have little or no price transparency. For those instruments that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence. In the absence of such evidence, our best estimate is used.

Results of Operations

Financial results for the three and six months ended July 3, 2010, as compared to the three and six months ended July 4, 2009, reflect the following:

• Increased revenue recognized because of higher business levels due to the timing of contract renewals with existing customers and from contracts executed in prior quarters due to our continued transition to a ratable license mix, which began in the third quarter of fiscal 2008;

• A decrease in our bad debt expense due to the prior year period increase in our allowance for doubtful accounts as a result of our assessment of the increased risk of customer delays or defaults on payment obligations and the current year release of a portion of the reserve as a result of collections on certain receivables that were previously included in our allowance for doubtful accounts;

• Decreased costs throughout the company as a result of our restructuring plans and other expense reductions;

• The acquisition of Denali Software, Inc., or Denali, including an increase in deferred tax liabilities from the intangible assets acquired with Denali and the resulting benefit for income taxes because of the release of valuation allowance against our deferred tax assets; and

• The issuance of $350.0 million principal amount of our 2.625% Cash Convertible Senior Notes Due 2015, or the 2015 Notes, and the repurchase of $100.0 million principal amount of our 1.375% Convertible Senior Notes Due December 15, 2011, or the 2011 Notes, and $100.0 million principal amount of our 1.500% Convertible Senior Notes Due December 15, 2013, or the 2013 Notes, and collectively with the 2011 Notes, the Convertible Senior Notes.

Acquisition of Denali

In June 2010, we acquired Denali, a privately-held provider of electronic design automation software and intellectual property used in system-on-chip design and verification, for $296.8 million in cash. An additional $12.6 million of payments have been deferred and will be paid in cash if certain Denali shareholders remain employees of Cadence during the periods specified in the respective agreements. These amounts will be expensed in our Condensed Consolidated Statements of Operations over the stated retention periods. Denali’s product portfolio includes memory models, design IP and verification IP. We acquired Denali to expand our solution portfolio to provide system component modeling and IP integration. We expect that the acquisition of Denali will increase our costs more than our expected increase in revenue during the remainder of 2010.

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Revenue

We primarily generate revenue from licensing our EDA software, selling or leasing our hardware technology, providing maintenance for our software and hardware and providing engineering services. We principally use three license types: subscription, term and perpetual. The different license types provide a customer with different conditions of use for our products, such as:

• The right to access new technology;

• The duration of the license; and

• Payment timing.

The timing of our product revenue is significantly affected by the mix of orders executed in any given period. For some orders, such as subscription orders, product and maintenance revenue is recognized ratably over multiple periods. In addition, depending on the individual facts and circumstances of a particular order, we have some orders for which product and maintenance revenue is recognized as payments become due and some for which revenue is only recognized when payment is received. For other orders, all product revenue is recognized up-front in the same quarter in which the order is executed.

We seek to achieve a mix of orders with approximately 90% of the total value of all executed orders consisting of orders for which the revenue is recurring, or ratable in nature, with the balance of the orders made up of orders for which the product revenue is recognized up-front. During the three and six months ended July 3, 2010 and the three and six months ended July 4, 2009, approximately 90% of the total value of our executed orders was comprised of ratable revenue orders.

Customer decisions regarding these aspects of license transactions determine the license type, timing of revenue recognition and potential future business activity. For example, if a customer chooses a fixed duration of use, this will result in either a subscription or term license. A business implication of this decision is that, at the expiration of the license period, the customer must decide whether to continue using the technology and therefore renew the license agreement. Historically, larger customers generally used products from two or more of our five product groups and rarely completely terminated their relationship with us upon expiration of the license. See the discussion under the heading “Critical Accounting Estimates — Revenue Recognition” in our Annual Report on Form 10-K for additional descriptions of license types and timing of revenue recognition.

Although we believe that pricing volatility has not generally been a material component of the change in our revenue from period to period, we believe that the amount of revenue recognized in future periods will depend on, among other things, the:

• Competitiveness of our new technology;

• Timing of contract renewals with existing customers;

• Length of our sales cycle; and

• Size, duration, terms and type of:

• Contract renewals with existing customers;

• Additional sales to existing customers; and

• Sales to new customers.

The value and duration of contracts, and consequently product revenue recognized, is affected by the competitiveness of our products. Product revenue recognized in any period is also affected by the extent to which customers purchase subscription, term or perpetual licenses, and the extent to which contracts contain flexible payment terms.

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Revenue Mix

We analyze our software and hardware businesses by product group, combining revenues for both product and maintenance because of their interrelationship. We have formulated a design solution strategy that combines our design technologies in “platforms,” as described in the various product groups below.

Functional Verification: Products in this group, including the Incisive functional verification platform, are used to verify that the high level, logical representation of an IC design is functionally correct.

Digital IC Design: Products in this group, including the Encounter digital IC design platform, are used to accurately convert the high-level, logical representation of a digital IC into a detailed physical blueprint and then detailed design information showing how the IC will be physically implemented. This data is used for creation of the photomasks used to manufacture semiconductors.

Custom IC Design: Our custom design products, including the Virtuoso custom design platform, are used for ICs that must be designed at the transistor level, including analog, RF, memory, high performance digital blocks and standard cell libraries. Detailed design information showing how an IC will be physically implemented is used for creation of the photomasks used to manufacture semiconductors.

System Interconnect Design: This product group consists of our PCB and IC package design products, including the Allegro and OrCAD^® products. The Allegro system interconnect design platform enables consistent co-design of interconnects across ICs, IC packages and PCBs, while the OrCAD line focuses on cost-effective, entry-level PCB solutions.

Design for Manufacturing: Included in this product group are our physical verification and analysis products. These products are used to analyze and verify that the physical blueprint of the IC has been constructed correctly and can be manufactured successfully. Our strategy includes focusing on integrating DFM awareness into our core design platforms of Encounter digital IC design and Virtuoso custom design.

Revenue by Period

The following table shows our revenue for the three and six months ended July 3, 2010 and July 4, 2009 and the change in revenue between periods:

	Three Months Ended							Six Months Ended
	July 3,		July 4,					July 3,		July 4,
	2010		2009		Change			2010		2009		Change
	(In millions)
Product	$	117.1	$	101.8	$	15.3		$	219.8	$	189.4	$	30.4
Services		25.3		27.8		(2.5	)		51.2		57.0		(5.8	)
Maintenance		84.7		80.3		4.4			178.0		169.8		8.2
Total revenue	$	227.1	$	209.9	$	17.2		$	449.0	$	416.2	$	32.8

Product revenue increased during the three and six months ended July 3, 2010, as compared to the three and six months ended July 4, 2009, primarily because of higher business levels due to the timing of contract renewals with existing customers and from contracts executed in prior quarters due to our continued transition to a ratable license mix. Services revenue decreased during the three and six months ended July 3, 2010, as compared to the three and six months ended July 4, 2009, primarily because of lower business levels in the services business.

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Revenue by Product Group

The following table shows for the past five consecutive quarters the percentage of product and related maintenance revenue contributed by each of our five product groups, and Services and other:

	Three Months Ended
	July 3,		April 3,		January 2,		October 3,		July 4,
	2010		2010		2010		2009		2009
Functional Verification		26%		22%		22%		21%		23%
Digital IC Design		21%		21%		22%		19%		24%
Custom IC Design		26%		27%		28%		28%		25%
System Interconnect		10%		9%		11%		11%		10%
Design for Manufacturing		6%		9%		7%		9%		5%
Services and other		11%		12%		10%		12%		13%
Total		100%		100%		100%		100%		100%

As described under the heading “Critical Accounting Estimates” in our Annual Report on Form 10-K for the fiscal year ended January 2, 2010, certain of our licenses allow customers the ability to remix among software products. Additionally, we have licensed a combination of our products to customers with the actual product selection and number of licensed users to be determined at a later date. For these arrangements, we estimate the allocation of the revenue to product groups based upon the expected usage of our products by these customers. The actual usage of our products by these customers may differ and, if that proves to be the case, the revenue allocation in the above table would differ.

Although we believe the methodology of allocating revenue to product groups is reasonable, there can be no assurance that such allocated amounts reflect the amounts that would result if the customer had individually licensed each specific software solution at the outset of the arrangement.

Revenue by Geography

	Three Months Ended							Six Months Ended
	July 3,		July 4,					July 3,		July 4,
	2010		2009		Change			2010		2009		Change
	(In millions)
United States	$	94.7	$	93.9	$	0.8		$	177.3	$	175.9	$	1.4
Other Americas		8.4		5.4		3.0			13.5		10.0		3.5
Europe, Middle East and Africa		52.9		44.6		8.3			102.1		93.2		8.9
Japan		31.8		36.1		(4.3	)		82.9		75.4		7.5
Asia		39.3		29.9		9.4			73.2		61.7		11.5
Total revenue	$	227.1	$	209.9	$	17.2		$	449.0	$	416.2	$	32.8

The increase in revenue in Asia is primarily due to the economic growth in the Asia region, resulting in increased business levels and cash collections.

Revenue by Geography as a Percent of Total Revenue

	Three Months Ended				Six Months Ended
	July 3,		July 4,		July 3,		July 4,
	2010		2009		2010		2009
United States		42%		45%		40%		42%
Other Americas		4%		3%		3%		3%
Europe, Middle East and Africa		23%		21%		23%		22%
Japan		14%		17%		18%		18%
Asia		17%		14%		16%		15%
Total		100%		100%		100%		100%

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Most of our revenue is transacted in the United States dollar. However, certain revenue transactions are in foreign currencies, primarily the Japanese yen, and we recognize additional revenue in periods when the United States dollar weakens in value against the Japanese yen and reduced revenue in periods when the United States dollar strengthens against the Japanese yen. For an additional description of how changes in foreign exchange rates affect our Condensed Consolidated Financial Statements, see the discussion under the heading “Item 3. Quantitative and Qualitative Disclosures About Market Risk — Disclosures About Market Risk — Foreign Currency Risk.”

Stock-based Compensation Expense Summary

Stock-based compensation expense is reflected throughout our costs and expenses as follows:

	Three Months Ended				Six Months Ended
	July 3,		July 4,		July 3,		July 4,
	2010		2009		2010		2009
	(In millions)
Cost of product	$	----	$	----	$	0.1	$	0.1
Cost of services		0.5		1.1		1.0		1.8
Cost of maintenance		0.3		0.7		0.7		1.1
Marketing and sales		2.4		3.7		4.6		6.4
Research and development		4.5		8.0		8.9		14.4
General and administrative		2.7		3.0		5.5		5.4
Total	$	10.4	$	16.5	$	20.8	$	29.2

Stock-based compensation expense decreased by $6.1 million during the three months ended July 3, 2010, as compared to the three months ended July 4, 2009, and $8.4 million during the six months ended July 3, 2010, as compared to the six months ended July 4, 2009, due to the following:

• The decrease in the maximum purchase limits under our Employee Stock Purchase Plan, or ESPP, and a lower grant date fair value of purchase rights granted;

• A decrease in the number of equity awards, including restricted stock awards and restricted stock units, collectively referred to as restricted stock, and stock options;

• A decrease in stock bonuses; and

• A decrease in expense for restricted stock and stock options primarily due to lower grant date fair values because of a lower grant date stock price.

Cost of Revenue

	Three Months Ended							Six Months Ended
	July 3,		July 4,					July 3,		July 4,
	2010		2009		Change			2010		2009		Change
	(In millions)
Product	$	7.1	$	9.8	$	(2.7	)	$	12.4	$	17.4	$	(5.0	)
Services	$	21.6	$	24.4	$	(2.8	)	$	43.5	$	48.5	$	(5.0	)
Maintenance	$	10.5	$	11.9	$	(1.4	)	$	21.9	$	24.3	$	(2.4	)

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The following table shows cost of revenue as a percentage of related revenue for the three and six months ended July 3, 2010 and July 4, 2009:

	Three Months Ended				Six Months Ended
	July 3,		July 4,		July 3,		July 4,
	2010		2009		2010		2009
Product		6%		10%		6%		9%
Services		85%		88%		85%		85%
Maintenance		12%		15%		12%		14%

Cost of Product

Cost of product includes costs associated with the sale or lease of our hardware and licensing of our software products. Cost of product primarily includes the cost of employee salary, benefits and other employee-related costs, including stock-based compensation expense, amortization of acquired intangibles directly related to our products, the cost of technical documentation and royalties payable to third-party vendors. Cost of product associated with our hardware products also includes materials, assembly and overhead. These additional manufacturing costs make our cost of hardware product higher, as a percentage of revenue, than our cost of software product.

A summary of Cost of product is as follows:

	Three Months Ended				Six Months Ended
	July 3,		July 4,		July 3,		July 4,
	2010		2009		2010		2009
	(In millions)
Product related costs	$	6.5	$	8.9	$	11.2	$	14.3
Amortization of acquired intangibles		0.6		0.9		1.2		3.1
Total Cost of product	$	7.1	$	9.8	$	12.4	$	17.4

Product related costs decreased during the three and six months ended July 3, 2010, as compared to the three and six months ended July 4, 2009, primarily due to a decrease in hardware revenue. Amortization of acquired intangibles decreased during the three and six months ended July 3, 2010, as compared to the three and six months ended July 4, 2009 because certain acquired intangible assets became fully amortized.

Cost of product depends primarily upon the extent to which we acquire intangible assets, acquire licenses and incorporate third party technology in our products that are licensed or sold in any given period, and the actual mix of hardware and software product sales in any given period. We expect the Amortization of acquired intangibles component of Cost of product to increase by $1.2 million in future periods due to our acquisition of intangibles from Denali in June 2010.

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Cost of Services

Cost of services primarily includes employee salary, benefits and other employee-related costs, costs to maintain the infrastructure necessary to manage a services organization, and provisions for contract losses, if any. Cost of services decreased by $2.8 million during the three months ended July 3, 2010, as compared to the three months ended July 4, 2009, and $5.0 million during the six months ended July 3, 2010, as compared to the six months ended July 4, 2009, due to the following:

	Change
	Three Months			Six Months
	Ended			Ended
	(In millions)
Professional services	$	(1.3	)	$	(1.4	)
Salary, benefits and other employee-related costs		(0.5	)		(1.7	)
Other individually insignificant items		(1.0	)		(1.9	)
	$	(2.8	)	$	(5.0	)

Cost of Maintenance

Cost of maintenance includes the cost of customer services, such as telephonic and on-site support, employee salary, benefits and other employee-related costs, and documentation of maintenance updates, as well as amortization of intangible assets directly related to our maintenance contracts. There were no material fluctuations in these components of Cost of maintenance during the three and six months ended July 3, 2010, as compared to the three and six months ended July 4, 2009.

Operating Expenses

	Three Months Ended							Six Months Ended
	July 3,		July 4,					July 3,		July 4,
	2010		2009		Change			2010		2009		Change
	(In millions)
Marketing and sales	$	71.5	$	71.4	$	0.1		$	146.3	$	146.3	$	----
Research and development		91.9		90.7		1.2			181.3		185.3		(4.0	)
General and administrative		17.1		34.2		(17.1	)		39.9		72.6		(32.7	)
Total operating expenses	$	180.5	$	196.3	$	(15.8	)	$	367.5	$	404.2	$	(36.7	)

The decrease in our operating expenses for the three and six months ended July 3, 2010, as compared to the three and six months ended July 4, 2009, is primarily due to the decrease in bad debt expense. Bad debt expense decreased by $20.6 million during the three months ended July 3, 2010, as compared to the three months ended July 4, 2009, due to the prior year period increase in our allowance for doubtful accounts of $10.4 million as a result of our assessment of the increased risk of customer delays or defaults on payment obligations and the current year release of $10.2 million of the reserve as a result of collections on certain receivables that were previously included in our allowance for doubtful accounts.

Bad debt expense decreased by $33.4 million during the six months ended July 3, 2010, as compared to the six months ended July 4, 2009, due to the prior year period increase in our allowance for doubtful accounts of $20.7 million as a result of our assessment of the increased risk of customer delays or defaults on payment obligations and the current year release of $12.7 million of the reserve as a result of collections on certain receivables that were previously included in our allowance for doubtful accounts.

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The following table shows operating expenses as a percentage of total revenue for the three and six months ended July 3, 2010 and July 4, 2009:

	Three Months Ended				Six Months Ended
	July 3,		July 4,		July 3,		July 4,
	2010		2009		2010		2009
Marketing and sales		31%		34%		33%		35%
Research and development		40%		43%		40%		45%
General and administrative		8%		16%		9%		17%

Marketing and Sales

Marketing and sales expense increased by $0.1 million during the three months ended July 3, 2010, as compared to the three months ended July 4, 2009, but was substantially the same during the six months ended July 3, 2010, as compared to the six months ended July 4, 2009, due to the following:

	Change
	Three Months			Six Months
	Ended			Ended
	(In millions)
Depreciation	$	(1.9	)	$	(3.7	)
Stock-based compensation		(1.3	)		(1.8	)
Facilities and other infrastructure costs		0.1			(1.3	)
Professional services		1.0			1.1
Other discretionary spending		1.0			2.1
Salary, commissions, benefits and other employee-related costs		1.3			3.5
Other individually insignificant items		(0.1	)		0.1
	$	0.1		$	----

Research and Development

Research and development expense increased by $1.2 million during the three months ended July 3, 2010, as compared to the three months ended July 4, 2009, and decreased by $4.0 million during the six months ended July 3, 2010, as compared to the six months ended July 4, 2009, due to the following:

	Change
	Three Months			Six Months
	Ended			Ended
	(In millions)
Salary, benefits and other employee-related costs	$	5.1		$	5.0
Facilities and other infrastructure costs		1.1			(0.9	)
Professional services		(0.4	)		(0.9	)
Computer equipment lease costs and maintenance costs associated with third-party software		(1.2	)		(1.7	)
Stock-based compensation		(3.5	)		(5.5	)
Other individually insignificant items		0.1			----
	$	1.2		$	(4.0	)

We expect Research and development expense to increase in future periods due to our acquisition of Denali in June 2010.

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General and Administrative

General and administrative expense decreased by $17.1 million during the three months ended July 3, 2010, as compared to the three months ended July 4, 2009, and $32.7 million during the six months ended July 3, 2010, as compared to the six months ended July 4, 2009, due to the following:

	Change
	Three Months			Six Months
	Ended			Ended
	(In millions)
Bad debt expense	$	(20.6	)	$	(33.4	)
Facilities and other infrastructure costs		(0.6	)		(1.9	)
Impairment of property, plant, and equipment		----			(3.5	)
Professional services		2.1			0.9
Salary, benefits and other employee-related costs		2.5			5.3
Other individually insignificant items		(0.5	)		(0.1	)
	$	(17.1	)	$	(32.7	)

Bad debt expense decreased by $20.6 million during the three months ended July 3, 2010, as compared to the three months ended July 4, 2009, due to the prior year period increase in our allowance for doubtful accounts of $10.4 million as a result of our assessment of the increased risk of customer delays or defaults on payment obligations and the current year release of $10.2 million of the reserve as a result of collections on certain receivables that were previously included in our allowance for doubtful accounts.

Bad debt expense decreased by $33.4 million during the six months ended July 3, 2010, as compared to the six months ended July 4, 2009, due to the prior year period increase in our allowance for doubtful accounts of $20.7 million as a result of our assessment of the increased risk of customer delays or defaults on payment obligations and the current year release of $12.7 million of the reserve as a result of collections on certain receivables that were previously included in our allowance for doubtful accounts.

We expect General and administrative expense to increase during the second half of fiscal 2010 because we do not expect such releases of reserves during this period.

Amortization of Acquired Intangibles

	Three Months Ended							Six Months Ended
	July 3,		July 4,					July 3,		July 4,
	2010		2009		Change			2010		2009		Change
	(In millions)
Amortization of acquired intangibles	$	2.6	$	2.8	$	(0.2	)	$	5.2	$	6.0	$	(0.8	)

Amortization of acquired intangibles decreased by $0.2 million during the three months ended July 3, 2010, as compared to the three months ended July 4, 2009, and $0.8 million during the six months ended July 3, 2010, as compared to the six months ended July 4, 2009, due to net effect of certain assets becoming fully amortized and certain acquired assets beginning to amortize. We expect Amortization of acquired intangibles to increase by $1.7 million in future periods due to our acquisition of intangibles from Denali in June 2010.

Restructuring and Other Charges (Credits)

We have initiated multiple restructuring plans since 2001, including the 2009 Restructuring Plan, which includes restructuring activities initiated during the second quarter of fiscal 2009, as well as

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restructuring activities initiated during the fourth quarter of fiscal 2009. The $0.3 million credit to Restructuring and other charges (credits) during the three months ended July 3, 2010 was primarily due to certain severance and related benefits costs that were less than previously estimated.

The $1.4 million credit to Restructuring and other charges (credits) during the six months ended July 3, 2010 was primarily due to a $1.9 million credit for severance and related benefits costs that were less than previously estimated, offset by charges of $0.5 million related to facilities that we vacated during the six months ended July 3, 2010 and $0.1 million for assets related to these vacated facilities. See Note 6 to our Condensed Consolidated Financial Statements for additional details of these restructuring plans.

Because the restructuring charges and related benefits are derived from management’s estimates made during the formulation of the restructuring plans, based on then-currently available information, our restructuring plans may not achieve the benefits anticipated on the timetable or at the level contemplated. Demand for our products and services and, ultimately, our future financial performance, is difficult to predict with any degree of certainty and is especially difficult to predict in light of the current economic challenges and uncertainty. Accordingly, additional actions, including further restructuring of our operations, may be required in the future.

Interest Expense

The components of Interest expense for the three and six months ended July 3, 2010 and July 4, 2009 were as follows:

	Three Months Ended				Six Months Ended
	July 3,		July 4,		July 3,		July 4,
	2010		2009		2010		2009
	(In millions)
Contractual cash interest expense:
Convertible Senior Notes	$	1.7	$	1.8	$	3.5	$	3.6
2015 Notes		0.4		----		0.4		----
Amortization of debt discount:
Convertible Senior Notes		4.7		4.8		9.8		9.6
2015 Notes		0.6		----		0.6		----
Amortization of deferred financing costs:
Convertible Senior Notes		0.4		0.4		0.8		0.8
2015 Notes		0.1		----		0.1		----
Other interest expense		0.1		0.3		0.2		0.3
Total interest expense	$	8.0	$	7.3	$	15.4	$	14.3

We expect Interest expense to be approximately $20.9 million during the remainder of fiscal 2010 due to our issuance of the 2015 Notes. See Note 2 to our Condensed Consolidated Financial Statements for additional details of the 2015 Notes.

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Other Income (Expense), net

Other income (expense), net, for the three and six months ended July 3, 2010 and July 4, 2009 was as follows:

	Three Months Ended						Six Months Ended
	July 3,			July 4,			July 3,			July 4,
	2010			2009			2010			2009
	(In millions)
Interest income	$	0.3		$	0.8		$	0.5		$	1.8
Gains on sale of non-marketable securities		0.2			----			4.8			----
Gains (losses) on trading securities in the non-qualified deferred compensation trust		1.1			(1.6	)		2.2			(8.0	)
Gains (losses) on foreign exchange		2.0			(0.9	)		2.2			2.4
Equity losses from investments		----			(0.1	)		(0.1	)		(0.2	)
Write-down of investments		(1.5	)		(0.6	)		(1.5	)		(4.6	)
Loss on early extinguishment of debt		(5.3	)		----			(5.3	)		----
Other income (expense)		0.1			(0.1	)		0.1			(0.1	)
Total other income (expense), net	$	(3.1	)	$	(2.5	)	$	2.9		$	(8.7	)

During the six months ended July 3, 2010, we recorded gains totaling $4.8 million for five cost method investments that were liquidated.

We determined that certain of our non-marketable securities were other-than-temporarily impaired and we wrote down such investments by $1.5 million during the three and six months ended July 3, 2010, $0.6 million during the three months ended July 4, 2009 and $4.6 million during the six months ended July 4, 2009.

We repurchased a portion of our Convertible Senior Notes and recorded a loss for the early extinguishment of debt during the three and six months ended July 3, 2010. See Note 2 to our Condensed Consolidated Financial Statements for additional details of this loss.

Income Taxes

The following table presents the provision (benefit) for income taxes and the effective tax rate for the three and six months ended July 3, 2010 and July 4, 2009:

	Three Months Ended					Six Months Ended
	July 3,			July 4,		July 3,			July 4,
	2010			2009		2010			2009
	(In millions, except percentages)
Provision (benefit) for income taxes	$	(54.5	)	$	10.8	$	(49.5	)	$	12.4
Effective tax rate		930.5%			(17.0)%		391.5%			(9.9)%

Our benefit for income taxes for the three and six months ended July 3, 2010 is primarily because of the release of approximately $66.7 million of valuation allowance against our deferred tax assets due to the recognition of deferred tax liabilities related to the acquisition of intangibles with Denali, partially offset by tax expense related to increases in unrecognized tax benefits for tax positions taken during the period, taxes on certain of our foreign subsidiaries, and interest expense on our unrecognized tax benefits. Our positive effective tax rate for the three and six months ended July 3, 2010 is due to our benefit for income taxes while having Loss before provision (benefit) for income taxes for the three and six months ended July 3, 2010.

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We expect to recognize a benefit for income taxes for fiscal 2010, primarily due to the release of valuation allowance against our deferred tax asset because of the recognition of deferred tax liabilities related to the acquisition of intangibles with Denali. We also expect to have a Loss before provision (benefit) for income taxes for fiscal 2010.

The Internal Revenue Service, or IRS, and other tax authorities regularly examine our income tax returns and we have received Revenue Agent’s Reports, or RARs, indicating that the IRS has proposed to assess certain tax deficiencies. For further discussion regarding our income taxes, including the status of the IRS examinations and unrecognized tax benefits, see Note 8 to our Condensed Consolidated Financial Statements.

Liquidity and Capital Resources

	As of
	July 3,			January 2,
	2010			2010			Change
	(In millions)
Cash, cash equivalents and Short-term investments	$	478.5		$	571.3		$	(92.8	)
Net working capital	$	321.0		$	452.8		$	(131.8	)
	Six Months Ended
	July 3,			July 4,
	2010			2009			Change
	(In millions)
Cash provided by operating activities	$	95.7		$	3.0		$	92.7
Cash used for investing activities	$	(265.6	)	$	(29.1	)	$	(236.5	)
Cash provided by financing activities	$	76.5		$	16.4		$	60.1

Cash and Cash Equivalents and Short-term Investments

As of July 3, 2010, our principal sources of liquidity consisted of $478.5 million of Cash and cash equivalents and Short-term investments, as compared to $571.3 million as of January 2, 2010.

Our primary sources of cash in the six months ended July 3, 2010 were:

• Customer payments under software licenses and from the sale or lease of our hardware products;

• Customer payments for engineering services;

• Proceeds from the issuance of our 2015 Notes;

• Proceeds from the sale of our 2015 Warrants;

• Proceeds from the sale of long-term investments; and

• Cash received for common stock purchases under our employee stock purchase plan.

Our primary uses of cash in the six months ended July 3, 2010 were:

• Payments relating to salaries, benefits, other employee-related costs and other operating expenses, including our restructuring plans;

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• Payments to former shareholders of acquired businesses, net of cash acquired, including Denali;

• Repurchases of a portion of our Convertible Senior Notes;

• Payments made to purchase the 2015 Notes Hedges;

• Purchases of treasury stock; and

• Purchases of property, plant and equipment.

We expect that current cash and short-term investment balances and cash flows that are generated from operations will be sufficient to meet our working capital, other capital and liquidity requirements for at least the next 12 months.

Net Working Capital

Net working capital decreased by $131.8 million as of July 3, 2010, as compared to January 2, 2010, due to the following:

	Change
	(In millions)
Decrease in Cash and cash equivalents	$	(93.5	)
Increase in Current portion of deferred revenue		(42.4	)
Decrease in Receivables, net		(9.3	)
Increase in Prepaid expenses and other		16.8
Other individually insignificant items		(3.4	)
	$	(131.8	)

Cash Flows from Operating Activities

Net cash from operating activities increased by $92.7 million during the six months ended July 3, 2010, as compared to the six months ended July 4, 2009, due to the following:

	Change
	(In millions)
Net income (loss), net of non-cash related items	$	59.0
Changes in operating assets and liabilities, net of effect of acquired businesses		39.5
Proceeds from the sale of receivables, net		(5.8	)
	$	92.7

Cash flows from operating activities include Net income (loss), adjusted for certain non-cash charges, as well as changes in the balances of certain assets and liabilities. Our cash flows from operating activities are significantly influenced by business levels and the payment terms set forth in our license agreements. As a result of the challenging economic environment, our customers, who are primarily concentrated in the semiconductor sector, have experienced and may continue to experience adverse changes in their business and as a result, may delay purchasing our products and services or delay or default on their payment obligations. As of July 3, 2010, approximately one-third of our total Receivables, net and Installment contract receivables, net were attributable to the ten customers with the largest balances of Receivables, net and Installment contract receivables, net. As of January 2, 2010, approximately half of our total Receivables, net and Installment contract receivables, net were attributable to the ten customers with the largest balances of Receivables, net and Installment contract receivables, net. If our customers are not successful in generating sufficient cash or are precluded from securing financing, they may not be able to pay, or may delay payment of, accounts receivable that are owed to us, although these obligations are generally not cancelable. Our customers’ inability to fulfill payment obligations may adversely affect our cash flow. Additionally, our customers may seek to renegotiate pre-existing contractual commitments. Though we have not yet experienced a material

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level of defaults, any material payment default by our customers or significant reductions in existing contractual commitments would have a material adverse effect on our financial condition and operating results.

As of July 3, 2010, we had made payments in connection with the 2009 Restructuring Plan in the amount of $30.1 million and we expect to pay an additional amount of $2.9 million, of which $2.5 million is for termination benefits. We expect substantially all termination benefits related to the 2009 Restructuring Plan to be paid by January 1, 2011.

Cash Flows from Investing Activities

Our primary investing activities consisted of:

• Cash paid in business combinations and asset acquisitions, net of cash acquired;

• Purchases of property, plant and equipment; and

• Proceeds from the sale of long-term investments.

Net cash from investing activities decreased by $236.5 million during the six months ended July 3, 2010, as compared to the six months ended July 4, 2009, due to the following:

	Change
	(In millions)
Cash paid in business combinations and asset acquisitions, net of cash acquired	$	(249.1	)
Proceeds from the sale of long-term investments		10.1
Purchases of property, plant and equipment		3.5
Other individually insignificant items		(1.0	)
	$	(236.5	)

In connection with our acquisitions completed before July 3, 2010, we may be obligated to pay up to an aggregate of $19.2 million in cash during the next 33 months if certain defined performance goals are achieved in full, of which $11.0 million would be expensed in our Condensed Consolidated Statements of Operations.

Cash Flows from Financing Activities

In June 2010, we issued $350.0 million principal amount of the 2015 Notes. Concurrently with the issuance of the 2015 Notes, we entered into the 2015 Notes Hedges with various parties to reduce the potential cash outlay from the conversion of the 2015 Notes and intended to mitigate the negative effect such conversion may have on the price of our common stock. In separate transactions, we sold warrants, or the 2015 Warrants, to purchase our common stock at a price of $10.78 per share to various parties. We used an aggregate of $187.2 million of the net proceeds from the issuance of the 2015 Notes to purchase in the open market $100.0 million principal amount of our 2011 Notes and $100.0 million principal amount of our 2013 Notes, and we repurchased 6.5 million shares of our common stock at a cost of $40.0 million.

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Net cash from financing activities increased by $60.1 million during the six months ended July 3, 2010, as compared to the six months ended July 4, 2009, due to the following:

	Change
	(In millions)
Proceeds from issuance of 2015 Notes, net of initial purchasers’ fees	$	340.2
Proceeds from sale of 2015 Warrants		37.5
Proceeds from the issuance of common stock		(11.5	)
Purchases of treasury stock		(40.0	)
Purchase of 2015 Notes Hedges		(76.6	)
Repurchase of Convertible Senior Notes		(187.2	)
Other individually insignificant items		(2.3	)
	$	60.1

The decrease in Proceeds from the issuance of common stock during the six months ended July 3, 2010 as compared to the six months ended July 4, 2009 is primarily due to decreased purchase limits under our ESPP, which became effective during fiscal 2009.

When treasury stock is re-issued at a price higher than its cost, the difference is recorded as a component of Capital in excess of par in the Condensed Consolidated Balance Sheets. When treasury stock is re-issued at a price lower than its cost, the difference is recorded as a component of Capital in excess of par to the extent that there are gains to offset the losses. If there are no treasury stock gains in Capital in excess of par, the losses upon re-issuance of treasury stock are recorded as a component of Accumulated deficit in the Condensed Consolidated Balance Sheets. We recorded losses on the re-issuance of treasury stock of $74.2 million during the six months ended July 3, 2010, as compared to $164.6 million during the six months ended July 4, 2009.

As of July 3, 2010, we have $814.4 million remaining under the stock repurchase programs authorized by our Board of Directors.

Other Factors Affecting Liquidity and Capital Resources

Income Taxes

We provide for United States income taxes on earnings of our foreign subsidiaries unless the earnings are considered indefinitely invested outside the United States. As of January 2, 2010, we had recognized a deferred tax liability of $34.7 million related to $67.9 million of earnings from certain of our foreign subsidiaries that are not considered indefinitely reinvested outside the United States and for which we have previously made a provision for income tax. We repatriated $62.9 million of the $67.9 million during the six months ended July 3, 2010, which resulted in cash tax payments of approximately $1.9 million.

We intend to indefinitely reinvest approximately $79.0 million of undistributed earnings of our foreign subsidiaries as of January 2, 2010, to meet the working capital and long-term capital needs of our foreign subsidiaries. The unrecognized deferred tax liability for these indefinitely reinvested foreign earnings was approximately $35.3 million as of January 2, 2010.

During the three and six months ended July 3, 2010, we released $66.7 million of valuation allowance against our deferred tax assets due to the acquisition accounting for the Denali acquired intangibles. This release of the valuation allowance does not impact Cadence’s current or future cash position.

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The IRS and other tax authorities regularly examine our income tax returns and we have received RARs indicating that the IRS has proposed to assess certain tax deficiencies. For further discussion regarding our Income taxes and the status of the IRS examinations, see Note 8 to our Condensed Consolidated Financial Statements.

2.625% Cash Convertible Senior Notes Due 2015

In June 2010, we issued $350.0 million principal amount of the 2015 Notes. Concurrently with the issuance of the 2015 Notes, we entered into the 2015 Notes Hedges with various parties to reduce the potential cash outlay from the cash conversion of the 2015 Notes and intended to mitigate the negative effect such cash conversion may have on the price of our common stock. In separate transactions, we sold the 2015 Warrants to various parties. The 2015 Notes mature on June 1, 2015, and will be paid in cash at maturity. As of July 3, 2010, none of the conditions allowing the holders of the 2015 Notes to convert the 2015 Notes into cash had been met. For additional description of the 2015 Notes, including the hedge and warrants transactions, see Note 2 to our Condensed Consolidated Financial Statements.

1.375% Convertible Senior Notes Due December 15, 2011 and 1.500% Convertible Senior Notes Due December 15, 2013

In December 2006, we issued $250.0 million principal amount of the 2011 Notes and $250.0 million principal amount of the 2013 Notes. Concurrently with the issuance of the Convertible Senior Notes, we entered into hedge transactions, or the Convertible Senior Notes Hedges, with various parties to reduce the potential dilution from the conversion of the Convertible Senior Notes and intended to mitigate the negative effect such conversion may have on the price of our common stock. In separate transactions, we sold warrants, or the Convertible Senior Notes Warrants, to various parties. The 2011 Notes mature on December 15, 2011 and the 2013 Notes mature on December 15, 2013, and the principal amounts will be paid in cash at maturity. As of July 3, 2010, none of the conditions allowing the holders of the Convertible Senior Notes to convert had been met.

In connection with the issuance of the 2015 Notes, we used an aggregate of $187.2 million of the net proceeds to purchase in the open market $100.0 million principal amount of our 2011 Notes and $100.0 million principal amount of our 2013 Notes, resulting in a remaining principal balance of $150.0 million for the 2011 Notes and $150.0 million for the 2013 Notes. We also sold a portion of the Convertible Senior Notes Hedges and purchased a portion of the Convertible Senior Notes Warrants. For additional description of the Convertible Senior Notes, including the hedge and warrants transactions, see Note 2 to our Condensed Consolidated Financial Statements.

Additional Information

We entered into an employment agreement with John J. Bruggeman II, Cadence’s Senior Vice President and Chief Marketing Officer, effective August 3, 2010, or Employment Agreement. Mr. Bruggeman’s base salary, bonus participation, hiring bonus and equity grants pursuant to the Employment Agreement are consistent with the terms of Mr. Bruggeman’s offer letter, as previously described in the Definitive Proxy Statement filed with the SEC on March 26, 2010. The Employment Agreement also provides for the indemnification of Mr. Bruggeman pursuant to Cadence’s form of indemnification agreement, filed as Exhibit 10.01 to the Quarterly Report on Form 10-Q filed with the SEC on December 11, 2008.

Pursuant to the terms of the Employment Agreement, if Mr. Bruggeman’s employment is terminated by Cadence without “Cause” (as defined in the Employment Agreement) or if Mr. Bruggeman terminates his employment in connection with a “Constructive Termination,” Mr. Bruggeman will be entitled to the benefits provided for in the Executive Transition and Release Agreement attached to the Employment Agreement (the “Transition Agreement”) in exchange for his execution and delivery of the Transition Agreement.

The Transition Agreement provides for the employment of Mr. Bruggeman as a non-executive employee for up to one year after his termination with continued coverage under Cadence’s medical, dental and vision insurance plans, at Cadence’s expense, should Mr. Bruggeman elect COBRA coverage. In addition, the outstanding unvested options and incentive stock awards (other than any incentive stock awards subject to performance-based vesting criteria) held by Mr. Bruggeman on the date of his termination that would have vested over the succeeding 12 month period will immediately vest and, to the extent applicable, become exercisable. Incentive stock awards subject to performance-based vesting criteria will remain outstanding and continue to vest through the end of the applicable performance period, provided such performance period ends within 12 months following the date of termination and to the extent earned upon satisfaction of the performance-based vesting criteria. Upon the end of such performance period, such awards will immediately vest with respect to the portion thereof that would have vested over the 12 months following the date of termination and there will be no further vesting of such awards.

Provided Mr. Bruggeman does not resign from Cadence and executes and delivers a release of claims and Cadence does not terminate his employment during the term of the Transition Agreement, Mr. Bruggeman shall receive the following benefits pursuant to the Transition Agreement: (i) a monthly salary of $4,000 for a period of six months, commencing on the first pay date that is more than 30 days following the date that is six months after the commencement of the transition period, (ii) a lump-sum payment of 100% of his annual base salary (at the highest rate in effect during his employment as Senior Vice President and Chief Marketing Officer) on the 30th day following the date that is six months after the commencement of the transition period, and (iii) a lump-sum payment of 75% of his annual base salary (at the highest rate in effect during his employment as Senior Vice President and Chief Marketing Officer) on the 30th day following the date of his termination under the Transition Agreement. The Transition Agreement also requires Mr. Bruggeman to comply with non-solicitation and non-competition provisions in favor of Cadence and to release Cadence from all claims related to his employment and, subject to such limitations, does not otherwise preclude Mr. Bruggeman from accepting and holding full-time employment elsewhere.

If, within three months before or 13 months after a “Change in Control” (as defined in the Employment Agreement), Mr. Bruggeman’s employment is terminated without “Cause” or Mr. Bruggeman terminates his employment in connection with a “Constructive Termination,” then, in exchange for Mr. Bruggeman’s execution and delivery of the Transition Agreement, the payments described in clause (ii) of the paragraph above shall be 150% of his highest base salary instead of 100% of his highest base salary and the payments described in clause (iii) of the paragraph above shall be 112.5% of his highest annual base salary instead of 75% of his highest annual base salary, and all of Mr. Bruggeman’s outstanding stock options and incentive stock awards will immediately vest in full and become exercisable.

Mr. Bruggeman is not entitled to benefits under the Transition Agreement if his employment is terminated for “Cause,” or as a result of his “Permanent Disability” (each as defined in the Employment Agreement) or death or if he voluntarily terminates his employment (other than in connection with a “Constructive Termination”). However, if Mr. Bruggeman is terminated due to his death or “Permanent Disability,” and he or his estate executes and delivers a release agreement in the form attached to the Employment Agreement, the outstanding unvested options and stock awards held by Mr. Bruggeman on the date of his termination that would have vested over the succeeding 12 month period will immediately vest and, to the extent applicable, will become exercisable and remain exercisable for a 24 month period following his termination date (but no later than the original expiration period of the applicable award). In addition, if Mr. Bruggeman’s employment terminates on account of his “Permanent Disability” and Mr. Bruggeman elects COBRA continuation coverage, Cadence will pay Mr. Bruggeman’s COBRA premiums for 12 months following termination.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Risk

Most of our revenue, expenses and material business activity are transacted in the United States dollar. However, certain of our operations include transactions in foreign currencies and, therefore, we benefit from a weaker dollar, and in certain countries where we invoice customers in the local currency, we are adversely affected by a stronger dollar relative to major currencies worldwide. The primary effect of foreign currency transactions on our results of operations from a weakening United States dollar is an increase in revenue offset by a smaller increase in expenses. Conversely, the primary effect of foreign currency transactions on our results of operations from a strengthening United States dollar is a reduction in revenue offset by a smaller reduction in expenses.

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We enter into foreign currency forward exchange contracts with financial institutions to protect against currency exchange risks associated with existing assets and liabilities. A foreign currency forward exchange contract acts as a hedge by increasing in value when underlying assets decrease in value or underlying liabilities increase in value due to changes in foreign exchange rates. Conversely, a foreign currency forward exchange contract decreases in value when underlying assets increase in value or underlying liabilities decrease in value due to changes in foreign exchange rates. These forward contracts are not designated as accounting hedges and, therefore, the unrealized gains and losses are recognized in Other income (expense), net, in advance of the actual foreign currency cash flows with the fair value of these forward contracts being recorded as accrued liabilities or other current assets.

Our policy governing hedges of foreign currency risk does not allow us to use forward contracts for trading purposes. Our forward contracts generally have maturities of 90 days or less. The effectiveness of our hedging program depends on our ability to estimate future asset and liability exposures. We enter into currency forward exchange contracts based on estimated future asset and liability exposures. Recognized gains and losses with respect to our current hedging activities will ultimately depend on how accurately we are able to match the amount of currency forward exchange contracts with actual underlying asset and liability exposures.

The following table provides information, as of July 3, 2010, about our forward foreign currency contracts. The information is provided in United States dollar equivalent amounts. The table presents the notional amounts, at contract exchange rates, and the weighted average contractual foreign currency exchange rates expressed as units of the foreign currency per United States dollar, which in some cases may not be the market convention for quoting a particular currency. All of these forward contracts mature during July 2010.

			Weighted
			Average
	Notional		Contract
	Principal		Rate
	(In millions)
Forward Contracts:
Japanese yen	$	13.5		91.92
Chinese renminbi		12.0		6.82
Indian rupee		9.7		46.58
New Taiwan dollar		8.3		32.16
Hong Kong dollar		7.0		7.79
Israeli shekel		6.3		3.82
Canadian dollar		6.1		1.03
European union euro		5.8		0.81
Total	$	68.7
Estimated fair value	$	0.1

While we actively monitor our foreign currency risks, there can be no assurance that our foreign currency hedging activities will substantially offset the impact of fluctuations in currency exchange rates on our results of operations, cash flows and financial position.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our portfolio of Cash and cash equivalents. While we are exposed to interest rate fluctuations in many of the world’s leading industrialized countries, our interest income and expense is most sensitive to fluctuations in the general level

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of United States interest rates. In this regard, changes in United States interest rates affect the interest earned on our Cash and cash equivalents and the costs associated with foreign currency hedges.

We invest in high quality credit issuers and, by policy, limit the amount of our credit exposure to any one issuer. As part of our policy, our first priority is to reduce the risk of principal loss. Consequently, we seek to preserve our invested funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in only high quality credit securities that we believe to have low credit risk, and by positioning our portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. The short-term interest-bearing portfolio of Cash and cash equivalents includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity.

All highly liquid investments with a maturity of three months or less at the date of purchase are considered to be cash equivalents. Investments with maturities greater than three months are classified as available-for-sale and are considered to be short-term investments. The carrying value of our interest-bearing instruments approximated fair value as of July 3, 2010. The following table presents the carrying value and related weighted average interest rates for our interest-bearing instruments, which are all classified as Cash and cash equivalents on our Condensed Consolidated Balance Sheet as of July 3, 2010.

	Carrying		Average
	Value		Interest Rate
	(In millions)
Interest-Bearing Instruments:
Cash equivalents – variable rate	$	363.7	0.23%
Cash – variable rate		37.8	0.21%
Cash – fixed rate		27.1	0.36%
Total interest-bearing instruments	$	428.6	0.24%

Equity Price Risk

2.625% Cash Convertible Senior Notes Due 2015

In June 2010, we issued $350.0 million principal amount of our 2015 Notes to four initial purchasers in a private placement pursuant to Section 4(2) of the Securities Act for resale to qualified institutional buyers pursuant to Rule 144A of the Securities Act. Concurrently with the issuance of the 2015 Notes, we entered into the 2015 Notes Hedges with various parties to reduce the potential cash outlay from the cash conversion of the 2015 Notes and intended to mitigate the negative effect such cash conversion may have on the price of our common stock. In separate transactions, we sold the 2015 Warrants to various parties. The 2015 Notes mature on June 1, 2015, and will be paid in cash at maturity. As of July 3, 2010, none of the conditions allowing the holders of the 2015 Notes to convert had been met. For additional description of the 2015 Notes, including the hedge and warrants transactions, see Note 2 to our Condensed Consolidated Financial Statements.

1.375% Convertible Senior Notes Due December 15, 2011 and 1.500% Convertible Senior Notes Due December 15, 2013

In December 2006, we issued $250.0 million principal amount of our 2011 Notes and $250.0 million of our 2013 Notes to three initial purchasers in a private placement pursuant to Section 4(2) of the Securities Act for resale to qualified institutional buyers pursuant to Rule 144A of the Securities Act. Concurrently with the issuance of the Convertible Senior Notes, we entered into the Convertible Senior Notes Hedges with various parties to reduce the potential dilution from the conversion of the Convertible Senior Notes and

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intended to mitigate the negative effect such conversion may have on the price of our common stock. In separate transactions, we sold the Convertible Senior Notes Warrants to various parties. The 2011 Notes mature on December 15, 2011 and the 2013 Notes mature on December 15, 2013, and the principal amounts will be paid in cash at maturity. As of July 3, 2010, none of the conditions allowing the holders of the Convertible Senior Notes to convert had been met.

In connection with the issuance of the 2015 Notes, we used an aggregate of $187.2 million of the net proceeds to purchase in the open market $100.0 million principal amount of our 2011 Notes and $100.0 million principal amount of our 2013 Notes, resulting in a remaining principal balance of $150.0 million for the 2011 Notes and $150.0 million for the 2013 Notes. We also sold a portion of the Convertible Senior Notes Hedges and purchased a portion of the Convertible Senior Notes Warrants. For additional description of the Convertible Senior Notes, including the hedge and warrants transactions, see Note 2 to our Condensed Consolidated Financial Statements.

Investments

We have a portfolio of equity investments that includes marketable equity securities and non-marketable equity securities. Our equity investments are made primarily in connection with our strategic investment program. Under our strategic investment program, from time to time we make cash investments in companies with technologies that are potentially strategically important to us. See Note 6 to our Condensed Consolidated Financial Statements in our Annual Report on Form 10-K for additional details of these investments. Our investment in non-marketable equity securities had a carrying value of $8.8 million as of July 3, 2010 and $15.3 million as of January 2, 2010.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation required by Rule 13a-15 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, under the supervision and with the participation of our management, including the Chief Executive Officer, or CEO, and the Chief Financial Officer, or CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13-15(e) and 15d-15(e) under the Exchange Act) as of July 3, 2010.

The evaluation of our disclosure controls and procedures included a review of our processes and the effect on the information generated for use in this Quarterly Report on Form 10-Q. In the course of this evaluation, we sought to identify any material weaknesses in our disclosure controls and procedures, to determine whether we had identified any acts of fraud involving personnel who have a significant role in our disclosure controls and procedures, and to confirm that any necessary corrective action, including process improvements, was taken. This type of evaluation is done every fiscal quarter so that our conclusions concerning the effectiveness of these controls can be reported in our periodic reports filed with the SEC. The overall goals of these evaluation activities are to monitor our disclosure controls and procedures and to make modifications as necessary. We intend to maintain these disclosure controls and procedures, modifying them as circumstances warrant.

Based on their evaluation as of July 3, 2010, our CEO and CFO have concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended July 3, 2010 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Inherent Limitations on Effectiveness of Controls

Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. Internal control over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of internal control are met. Further, the design of internal control must reflect the fact that there are resource constraints, and the benefits of the control must be considered relative to their costs. While our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of their effectiveness, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Cadence have been detected.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

From time to time, we are involved in various disputes and litigation that arise in the ordinary course of business. These include disputes and lawsuits related to intellectual property, mergers and acquisitions, licensing, contracts, distribution arrangements and employee relations matters. At least quarterly, we review the status of each significant matter and assess its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount or the range of loss can be estimated, we accrue a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on our judgments using the best information available at the time. As additional information becomes available, we reassess the potential liability related to pending claims and litigation matters and may revise our estimates.

During fiscal 2008, three complaints were filed in the United States District Court for the Northern District of California, or District Court, all alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, on behalf of a purported class of purchasers of our common stock. In July 2010, the parties to these consolidated cases agreed to a mediation at the end of August 2010, and to stay the litigation. If the mediation does not end in a negotiated resolution, we intend to continue to vigorously defend these complaints and any other securities lawsuits that may be filed. See Note 13 to our Condensed Consolidated Financial Statements for additional details and the status of these complaints.

Also during fiscal 2008, two derivative complaints were filed in Santa Clara County Superior Court, or Superior Court. These complaints purport to bring suit derivatively, on behalf of Cadence, against certain of our current and former directors for alleged breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment. The parties to these cases agreed to a temporary stay of the proceedings. The plaintiffs filed a consolidated amended complaint on June 1, 2010. See Note 13 to our Condensed Consolidated Financial Statements for additional details and the status of these complaints.

On April 28, 2010, a derivative complaint was filed in the District Court against certain of our current and former directors and officers alleging breach of fiduciary duty, abuse of control, gross mismanagement, and waste of corporate assets against all the individual defendants, unjust enrichment against the former executive defendants, and against our independent auditors alleging professional negligence and breach of contract. See Note 13 to our Condensed Consolidated Financial Statements for additional details.

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The parties to the derivative cases pending in the Superior Court and the District Court agreed to a mediation at the end of August, 2010 and to stay their respective cases. If these derivative cases do not end in negotiated resolutions, we will respond to the two derivative complaints appropriately.

In light of the preliminary status of these lawsuits, we cannot predict the outcome of these matters. While the outcome of these litigation matters cannot be predicted with any certainty, we do not believe that the outcome of any current matters will have a material adverse effect on our consolidated financial position, liquidity or results of operations.

Item 1A.  Risk Factors

Our business faces many risks. Described below are what we believe to be the material risks that we face. If any of the events or circumstances described in the following risks actually occurs, our business, financial condition or results of operations could suffer. The descriptions below include any material changes to and supersede the description of the risk factors as previously disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended January 2, 2010 and filed with the SEC on February 26, 2010.

Risks Related to Our Business

We are subject to the cyclical nature of the integrated circuit and electronics systems industries, and any downturn in these industries may reduce our orders and revenue.

Purchases of our products and services are dependent upon the commencement of new design projects by IC manufacturers and electronics systems companies. The IC and electronics systems industries are cyclical and are characterized by constant and rapid technological change, rapid product obsolescence and price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand.

The IC and electronics systems industries experienced significant challenges in 2008 and 2009. The IC and electronic systems industries have also experienced significant downturns in connection with, or in anticipation of, maturing product cycles of both these industries’ and their customers’ products. The economic downturn in 2008 and 2009 was characterized by diminished product demand, production overcapacity, high inventory levels and accelerated erosion of average selling prices. Although estimates project moderate growth for the semiconductor industry in 2010, we believe that spending on EDA products and services may grow more slowly than the semiconductor industry as a whole in 2010. The economic downturn in the industries we serve has contributed to the reduction in our revenue in the past and could continue to adversely affect our business, operating results and financial condition.

We have experienced varied operating results, and our operating results for any particular fiscal period are affected by the timing of significant orders for our software products, fluctuations in customer preferences for license types and the timing of revenue recognition under those license types.

We have experienced, and may continue to experience, varied operating results. In particular, we incurred net losses during the first quarter of fiscal 2010 and the two most recent fiscal years, and we may incur a net loss during fiscal 2010. Various factors affect our operating results and some of them are not within our control. Our operating results for any period are affected by the timing of certain orders for our software products.

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Our operating results are also affected by the mix of license types executed in any given period. We license software using three different license types: subscription, term and perpetual. Product revenue associated with term and perpetual licenses is generally recognized at the beginning of the license period, whereas product revenue associated with subscription licenses is recognized over multiple periods during the term of the license. Revenue may also be deferred under term and perpetual licenses until payments become due and payable from customers with nonlinear payment terms or as cash is collected from customers with lower credit ratings. In addition, revenue is impacted by the timing of license renewals, the extent to which contracts contain flexible payment terms, changes in existing contractual arrangements with customers and the mix of license types (i.e., perpetual, term or subscription) for existing customers. These changes could have the effect of accelerating or delaying the recognition of revenue from the timing of recognition under the original contract. Our license mix has changed such that a substantial proportion of licenses require ratable revenue recognition, and we expect the change in license mix, combined with the slow growth in spending by our customers in the semiconductor sector, may make it difficult for us to increase our revenue in future fiscal periods.

We plan operating expense levels primarily based on forecasted revenue levels. These expenses and the impact of long-term commitments are relatively fixed in the short term. In addition, revenue levels are harder to forecast in a difficult economic environment. A shortfall in revenue could lead to operating results below expectations because we may not be able to quickly reduce these expenses in response to short-term business changes.

Since the majority of our contracts are generally executed in the final few weeks of a fiscal quarter, it is difficult to estimate with accuracy how much business will be executed before the end of each fiscal quarter. Due to the volume or complexity of transactions that we review at the very end of the quarter, or due to operational matters regarding particular agreements, we may not finish processing or ship products under some contracts that have been signed during that fiscal quarter, which means that the associated revenue cannot be recognized in that particular period.

The methods, estimates and judgments that we use in applying our accounting policies have a significant impact on our results of operations (see “Critical Accounting Estimates” under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”). Such methods, estimates and judgments are, by their nature, subject to substantial risks, uncertainties and assumptions, and factors may arise over time that lead us to change our methods, estimates and judgments. Changes in those methods, estimates and judgments could significantly affect our results of operations.

You should not view our historical results of operations as reliable indicators of our future performance. If our revenue, operating results or business outlook for future periods fall short of the levels expected by securities analysts or investors, the trading price of our common stock could decline.

Our operating results and revenue could be adversely affected by customer payment delays, customer bankruptcies and defaults or modifications of licenses or supplier modifications.

As a result of the challenging economic environment, our customers, who are primarily concentrated in the semiconductor sector, have experienced and may continue to experience adverse changes in their business and, as a result, may delay or default on their payment obligations, file for bankruptcy or modify or cancel plans to license our products, and our suppliers may significantly and quickly increase their prices or reduce their output. If our customers are not successful in generating sufficient cash or are precluded from securing financing, they may not be able to pay, or may delay payment of, accounts receivable that are owed to us, although these obligations are generally not cancelable. Our customers’ inability to fulfill payment obligations may adversely affect our revenue and cash flow. Additionally, our customers may seek to

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renegotiate pre-existing contractual commitments. Payment defaults by our customers or significant reductions in existing contractual commitments could have a material adverse effect on our financial condition and operating results. Because of the relatively high levels of volatility that continue to drive material fluctuations in asset prices, the capital and credit markets have contracted, and if we were to seek funding from the capital or credit markets in response to any material level of customer defaults, we may not be able to secure funding on terms acceptable to us or at all, which, may have a material negative impact on our business.

Our failure to respond quickly to technological developments could make our products uncompetitive and obsolete.

The industries in which we compete experience rapid technology developments, changes in industry standards and customer requirements and frequent new product introductions and improvements. Currently, the industries we serve are experiencing the following trends:

• Migration to nanometer design – the continuous shrinkage of the size of process features and other features, such as wires, transistors and contacts on ICs, due to the ongoing advances in the semiconductor manufacturing processes – represents a major challenge for participants in the semiconductor industry, from IC design and design automation to design of manufacturing equipment and the manufacturing process itself. Shrinkage of transistor length to such proportions is challenging the industry in the application of more complex physics and chemistry that is needed to realize advanced silicon devices. For EDA tools, models of each component’s electrical properties and behavior become more complex as do requisite analysis, design and verification capabilities. Novel design tools and methodologies must be invented quickly to remain competitive in the design of electronics in the smallest nanometer ranges.

• The challenges of nanometer design are leading some customers to work with older, less risky manufacturing processes that may reduce their need to upgrade or enhance their EDA products and design flows.

• The ability to design SoCs increases the complexity of managing a design that, at the lowest level, is represented by billions of shapes on the fabrication mask. In addition, SoCs typically incorporate microprocessors and digital signal processors that are programmed with software, requiring simultaneous design of the IC and the related software embedded on the IC.

• With the availability of seemingly endless gate capacity, there is an increase in design reuse, or the combining of off-the-shelf design IP with custom logic to create ICs. The unavailability of high-quality design IP that can be reliably incorporated into a customer’s design with our IC implementation products and services could reduce demand for our products and services.

• Increased technological capability of the Field-Programmable Gate Array, which is a programmable logic chip, creates an alternative to IC implementation for some electronics companies. This could reduce demand for our IC implementation products and services.

• A growing number of low-cost engineering services businesses could reduce the need for some IC companies to invest in EDA products.

If we are unable to respond quickly and successfully to these trends, we may lose our competitive position, and our products or technologies may become uncompetitive or obsolete. To compete successfully, we must develop or acquire new products and improve our existing products and processes on a schedule that keeps pace with technological developments and the requirements for products addressing a broad spectrum of designers and designer expertise in our industries. We must also be able to support a range of

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changing computer software, hardware platforms and customer preferences. We cannot guarantee that we will be successful in this effort.

Our stock price has been subject to significant fluctuations, and may continue to be subject to fluctuations.

The market price of our common stock has experienced significant fluctuations and may fluctuate or decline in the future, and as a result you could lose the value of your investment. The market price of our common stock may be affected by a number of factors, including, but not limited to:

• Announcements of our quarterly operating results and revenue and earnings forecasts that fail to meet or are inconsistent with earlier projections or the expectations of our securities analysts or investors;

• Changes in our orders, revenue or earnings estimates;

• Announcements of a restructuring plan;

• Changes in management;

• A gain or loss of a significant customer or market segment share;

• Announcements of new products or acquisitions of new technologies by us, our competitors or our customers; and

• Market conditions in the IC, electronics systems and semiconductor industries.

In addition, equity markets in general, and the equities of technology companies in particular, have experienced extreme price and volume fluctuations. Such price and volume fluctuations may adversely affect the market price of our common stock for reasons unrelated to our business or operating results.

Litigation could adversely affect our financial condition or operations.

We are currently, and in the future may be, involved in various disputes and litigation that arise in the ordinary course of business. These include disputes and lawsuits related to intellectual property, mergers and acquisitions, licensing, contracts, distribution arrangements and employee relations matters. We are also currently engaged in a consolidated securities class action lawsuit and shareholder derivative lawsuits. For information regarding the litigation matters in which we are currently engaged, please refer to the discussion under Item 1, “Legal Proceedings.” We cannot provide any assurances that the final outcome of these lawsuits or any other proceedings that may arise in the future will not have a material adverse effect on our business, operating results, financial condition or cash flows. Litigation can be time-consuming and expensive and could divert management’s time and attention from our business, which could have a material adverse effect on our revenues and operating results.

Our future revenue is dependent in part upon our installed customer base continuing to license or buy additional products, renew maintenance agreements and purchase additional services.

Our installed customer base has traditionally generated additional new license, service and maintenance revenues. In future periods, customers may not necessarily license or buy additional products or contract for additional services or maintenance. In some cases, maintenance is renewable annually at a customer’s option, and there are no mandatory payment obligations or obligations to license additional software. If our customers decide not to renew their maintenance agreements or license additional products or contract for additional services, or if they reduce the scope of the maintenance agreements, our revenue could decrease, which could have an adverse effect on our operating results. Our customers, many of which are large semiconductor companies, often have significant bargaining power in negotiations with us. Mergers or acquisitions of our customers can reduce the total level of purchases of our software and

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services, and in some cases, increase customers’ bargaining power in negotiations with their suppliers, including us.

We depend upon our management team and key employees, and our failure to attract, train, motivate and retain management and key employees may make us less competitive in our industries and therefore harm our results of operations.

Our business depends upon the efforts and abilities of our executive officers and other key employees, including key development personnel. From time to time, there may be changes in our management team resulting from the hiring and departure of executive officers, and as a result, we may experience disruption to our business that may harm our operating results and our relationships with our employees, customers and suppliers may be adversely affected. Competition for highly skilled executive officers and employees can be intense, particularly in geographic areas recognized as high technology centers such as the Silicon Valley area, where our principal offices are located, and the other locations where we maintain facilities. To attract, retain and motivate individuals with the requisite expertise, we may be required to grant large numbers of stock options or other stock-based incentive awards, which may be dilutive to existing stockholders and increase compensation expense, and pay significant base salaries and cash bonuses, which could harm our operating results. The high cost of training new employees, not fully utilizing these employees, or losing trained employees to competing employers could also reduce our operating margins and harm our business or operating results.

In addition, the NASDAQ Marketplace Rules require stockholder approval for new equity compensation plans and significant amendments to existing equity compensation plans, including increases in shares available for issuance under such plans, and prohibit NASDAQ member organizations from giving a proxy to vote on equity compensation plans unless the beneficial owner of the shares has given voting instructions. These regulations could make it more difficult for us to grant equity compensation to employees in the future. To the extent that these regulations make it more difficult or expensive to grant equity compensation to employees, we may incur increased compensation costs or find it difficult to attract, retain and motivate employees, which could materially and adversely affect our business.

We may not be able to effectively implement our restructuring plans, and our restructuring plans may not result in the benefits we have anticipated, possibly having a negative effect on our future operating results.

During fiscal 2008 and fiscal 2009, we initiated restructuring plans in an effort to decrease costs by reducing our workforce and by consolidating facilities. We may not be able to successfully complete and realize the expected benefits of our restructuring plans, such as improvements in operating margins and cash flows, in the restructuring periods contemplated. The restructuring plans have involved and may continue to involve higher costs or a longer timetable than we currently anticipate or may fail to improve our operating results as we anticipate. Our inability to realize these benefits may result in an inefficient business structure that could negatively impact our results of operations. Our restructuring plans have caused us and will cause us to incur substantial costs related to severance and other employee-related costs. Our restructuring plans may also subject us to litigation risks and expenses. In addition, our restructuring plans may have other consequences, such as attrition beyond our planned reduction in workforce, a negative impact on employee morale or our ability to attract highly skilled employees and our competitors may seek to gain a competitive advantage over us. The restructuring plans could also cause our remaining employees to leave or result in reduced productivity by our employees, and, in turn, this may affect our revenue and other operating results in the future.

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We may not receive significant revenue from our current research and development efforts for several years, if at all.

Developing EDA technology and integrating acquired technology into existing platforms is expensive, and these investments often require a long time to generate returns. Our strategy involves significant investments in research and development and related product opportunities. We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain and improve our competitive position. However, we cannot ensure that we will receive significant, if any, revenue from these investments.

The competition in our industries is substantial and we may not be able to continue to successfully compete in our industries.

The EDA industry and the commercial electronics engineering services industry are highly competitive. If we fail to compete successfully in these industries, it could seriously harm our business, operating results or financial condition. To compete in these industries, we must identify and develop or acquire innovative and cost-competitive EDA products, integrate them into platforms and market them in a timely manner. We must also gain industry acceptance for our engineering services and offer better strategic concepts, technical solutions, prices and response time, or a combination of these factors, than those of our competitors and the internal design departments of electronics manufacturers. We may not be able to compete successfully in these industries. Factors that could affect our ability to succeed include:

• The development by others of competitive EDA products or platforms and engineering services, possibly resulting in a shift of customer preferences away from our products and services and significantly decreased revenue;

• Decisions by electronics manufacturers to perform engineering services internally, rather than purchase these services from outside vendors due to budget constraints or excess engineering capacity;

• The challenges of developing (or acquiring externally-developed) technology solutions that are adequate and competitive in meeting the requirements of next-generation design challenges;

• The significant number of current and potential competitors in the EDA industry and the low cost of entry;

• Intense competition to attract acquisition targets, possibly making it more difficult for us to acquire companies or technologies at an acceptable price or at all; and

• The combination of or collaboration among many EDA companies to deliver more comprehensive offerings than they could individually.

We compete in the EDA products market with Synopsys, Inc., Magma Design Automation, Inc. and Mentor Graphics Corporation. We also compete with numerous smaller EDA companies, with manufacturers of electronic devices that have developed or have the capability to develop their own EDA products, and with numerous electronics design and consulting companies. Manufacturers of electronic devices may be reluctant to purchase engineering services from independent vendors such as us because they wish to promote their own internal design departments.

We may need to change our pricing models to compete successfully.

The highly competitive markets in which we compete can put pressure on us to reduce the prices of our products. If our competitors offer deep discounts on certain products in an effort to recapture or gain market segment share or to sell other software or hardware products, we may then need to lower our prices

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or offer other favorable terms to compete successfully. Any such changes would be likely to reduce our profit margins and could adversely affect our operating results. Any substantial changes to our prices and pricing policies could cause sales and software license revenues to decline or be delayed as our sales force implements and our customers adjust to the new pricing policies. Some of our competitors may bundle products for promotional purposes or as a long-term pricing strategy or provide guarantees of prices and product implementations. These practices could, over time, significantly constrain the prices that we can charge for our products. If we cannot offset price reductions with a corresponding increase in the number of sales or with lower spending, then the reduced license revenues resulting from lower prices could have an adverse effect on our results of operations.

We have acquired and expect to acquire other companies and businesses and may not realize the expected benefits of these acquisitions.

We have acquired and expect to acquire other companies and businesses in the future. While we expect to carefully analyze each potential acquisition before committing to the transaction, we may not consummate any particular transaction, but may nonetheless incur significant costs, or if a transaction is consummated, we may not be able to integrate and manage acquired products and businesses effectively. In addition, acquisitions involve a number of risks. If any of the following events occurs when we acquire another business, it could seriously harm our business, operating results or financial condition:

• Difficulties in combining previously separate businesses into a single unit;

• The substantial diversion of management’s attention from day-to-day business when evaluating and negotiating these transactions and integrating an acquired business;

• The discovery, after completion of the acquisition, of unanticipated liabilities assumed from the acquired business or of assets acquired, such that we cannot realize the anticipated value of the acquisition;

• The failure to realize anticipated benefits such as cost savings and revenue enhancements;

• The failure to retain key employees of the acquired business;

• Difficulties related to integrating the products of an acquired business in, for example, distribution, engineering and customer support areas;

• Unanticipated costs;

• Customer dissatisfaction with existing license agreements with us, possibly dissuading them from licensing or buying products acquired by us after the effective date of the license; and

• The failure to understand and compete effectively in markets where we have limited experience.

In a number of our previously completed acquisitions, we have agreed to make future payments, either in the form of employee bonuses or contingent purchase price payments based on the performance of the acquired businesses or the employees who joined us with the acquired businesses. We may continue to agree to contingent purchase price payments in connection with acquisitions in the future. The performance goals pursuant to which these future payments may be made generally relate to achievement by the acquired business or the employees who joined us with the acquired business of certain specified orders, revenue, run rate, product proliferation, product development or employee retention goals during a specified period following completion of the applicable acquisition. Future acquisitions may involve issuances of stock as full or partial payment of the purchase price for the acquired business, grants of incentive stock or options to employees of the acquired businesses (which may be dilutive to existing stockholders), expenditure of substantial cash resources or the incurrence of material amounts of debt.

The specific performance goal levels and amounts and timing of employee bonuses or contingent purchase price payments vary with each acquisition. While we expect to derive value from an acquisition in

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excess of such contingent payment obligations, our strategy may change and we may be required to make certain contingent payments without deriving the anticipated value.

We rely on our proprietary technology, as well as software and other intellectual property rights licensed to us by third parties, and we cannot assure you that the precautions taken to protect our rights will be adequate or that we will continue to be able to adequately secure such intellectual property rights from third parties.

Our success depends, in part, upon our proprietary technology. We generally rely on patents, copyrights, trademarks, trade secret laws, licenses and restrictive agreements to establish and protect our proprietary rights in technology and products. Despite the precautions we may take to protect our intellectual property, third parties have tried in the past, and may try in the future, to challenge, invalidate or circumvent these safeguards. The rights granted under our patents or attendant to our other intellectual property may not provide us with any competitive advantages. Patents may not be issued on any of our pending applications and our issued patents may not be sufficiently broad to protect our technology. Furthermore, the laws of foreign countries may not protect our proprietary rights in those countries to the same extent as applicable law protects these rights in the United States. The protection of our intellectual property may require the expenditure of significant financial and managerial resources. Moreover, the steps we take to protect our intellectual property may not adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights.

Many of our products include software or other intellectual property licensed from third parties. We may have to seek new or renew existing licenses for such software and other intellectual property in the future. Our engineering services business holds licenses to certain software and other intellectual property owned by third parties, including that of our competitors. Our failure to obtain software or other intellectual property licenses or other intellectual property rights that is necessary or helpful for our business on favorable terms, or the need to engage in litigation over these licenses or rights, could seriously harm our business, operating results or financial condition.

We could lose key technology or suffer serious harm to our business because of the infringement of our intellectual property rights by third parties or because of our infringement of the intellectual property rights of third parties.

There are numerous patents in the EDA industry and new patents are being issued at a rapid rate. It is not always practicable to determine in advance whether a product or any of its components infringes the patent rights of others. As a result, from time to time, we may be compelled to respond to or prosecute intellectual property infringement claims to protect our rights or defend a customer’s rights.

Intellectual property infringement claims, regardless of merit, could consume valuable management time, result in costly litigation, or cause product shipment delays, all of which could seriously harm our business, operating results or financial condition. In settling these claims, we may be required to enter into royalty or licensing agreements with the third parties claiming infringement. These royalty or licensing agreements, if available, may not have terms favorable to us. Being compelled to enter into a license agreement with unfavorable terms could seriously harm our business, operating results or financial condition. Any potential intellectual property litigation could compel us to do one or more of the following:

• Pay damages (including the potential for treble damages), license fees or royalties (including royalties for past periods) to the party claiming infringement;

• Stop licensing products or providing services that use the challenged intellectual property;

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• Obtain a license from the owner of the infringed intellectual property to sell or use the relevant technology, which license may not be available on reasonable terms, or at all; or

• Redesign the challenged technology, which could be time-consuming and costly, or not be accomplished.

If we were compelled to take any of these actions, our business or operating results may suffer.

If our security measures are breached and an unauthorized party obtains access to customer data, our information systems may be perceived as being unsecure and customers may curtail or stop their use of our products and services.

Our products and services involve the storage and transmission of customers’ proprietary information, and breaches of our security measures could expose us to a risk of loss or misuse of this information, litigation and potential liability. Because techniques used to obtain unauthorized access or to sabotage information systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventive measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose existing customers and our ability to obtain new customers.

The long sales cycle of our products and services makes the timing of our revenue difficult to predict and may cause our operating results to fluctuate unexpectedly.

Generally, we have a long sales cycle that can extend up to six months or longer. The complexity and expense associated with our business generally require a lengthy customer education, evaluation and approval process. Consequently, we may incur substantial expenses and devote significant management effort and expense to develop potential relationships that do not result in agreements or revenue and may prevent us from pursuing other opportunities.

In addition, sales of our products and services have been and may in the future be delayed if customers delay approval or commencement of projects because of:

• The timing of customers’ competitive evaluation processes; or

• Customers’ budgetary constraints and budget cycles.

Long sales cycles for acceleration and emulation hardware products subject us to a number of significant risks over which we have limited control, including insufficient, excess or obsolete inventory, variations in inventory valuation and fluctuations in quarterly operating results.

A significant portion of our contracts are executed in the final few weeks of a fiscal quarter. This makes it difficult to determine with accuracy how much business will be executed in each fiscal quarter. Also, because of the timing of large orders and our customers’ buying patterns, we may not learn of orders shortfalls, revenue shortfalls, earnings shortfalls or other failures to meet market expectations until late in a fiscal quarter. These factors may cause our operating results to fluctuate unexpectedly, which can cause significant fluctuations in the trading price of our common stock.

Our reported financial results may be adversely affected by changes in United States generally accepted accounting principles.

United States generally accepted accounting principles are subject to interpretation by the Financial Accounting Standards Board, or FASB, the American Institute of Certified Public Accountants, the SEC

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and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change. In addition, the SEC has announced a multi-year plan that could ultimately lead to the use of International Financial Reporting Standards by United States issuers in their SEC filings. Any such change could have a significant effect on our reported financial results.

The effect of foreign exchange rate fluctuations and other risks to our international operations may seriously harm our financial condition.

We have significant operations outside the United States. Our revenue from international operations as a percentage of total revenue was approximately 58% during the three months ended July 3, 2010 and 55% during the three months ended July 4, 2009. We expect that revenue from our international operations will continue to account for a significant portion of our total revenue. We also transact business in various foreign currencies, primarily the Japanese yen. The volatility of foreign currencies in certain regions, most notably the Japanese yen, European Union euro, British pound and Indian rupee have had, and may in the future have, a harmful effect on our revenue or operating results.

Fluctuations in the rate of exchange between the United States dollar and the currencies of other countries where we conduct business could seriously harm our business, operating results or financial condition. For example, when a foreign currency declines in value relative to the United States dollar, it takes more of the foreign currency to purchase the same amount of United States dollars than before the change. If we price our products and services in the foreign currency, we receive fewer United States dollars than we did before the change. If we price our products and services in United States dollars, the decrease in value of the local currency results in an increase in the price for our products and services compared to those products of our competitors that are priced in local currency. This could result in our prices being uncompetitive in markets where business is transacted in the local currency. On the other hand, when a foreign currency increases in value relative to the United States dollar, it takes more United States dollars to purchase the same amount of the foreign currency. As we use the foreign currency to pay for payroll costs and other operating expenses in our international operations, this results in an increase in operating expenses.

Exposure to foreign currency transaction risk can arise when transactions are conducted in a currency different from the functional currency of one of our subsidiaries. A subsidiary’s functional currency is generally the currency in which it primarily conducts its operations, including product pricing, expenses and borrowings. Although we attempt to reduce the impact of foreign currency fluctuations, significant exchange rate movements may hurt our results of operations as expressed in United States dollars.

Our international operations may also be subject to other risks, including:

• The adoption or expansion of government trade restrictions, including tariffs and other trade barriers;

• Limitations on repatriation of earnings;

• Limitations on the conversion of foreign currencies;

• Reduced protection of intellectual property rights in some countries;

• Recessions in foreign economies;

• Longer collection periods for receivables and greater difficulty in collecting accounts receivable;

• Difficulties in managing foreign operations;

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• Compliance with United States and foreign laws and regulations applicable to our worldwide operations;

• Political and economic instability;

• Unexpected changes in regulatory requirements; and

• United States and other governments’ licensing requirements for exports, which may lengthen the sales cycle or restrict or prohibit the sale or licensing of certain products.

We have offices throughout the world, including key research and development facilities outside of the United States. Our operations are dependent upon the connectivity of our operations throughout the world. Activities that interfere with our international connectivity, such as computer hacking or the introduction of a virus into our computer systems, could significantly interfere with our business operations.

Our operating results could be adversely affected as a result of changes in our effective tax rates.

Our future effective tax rates could be adversely affected by the following:

• Changes in tax laws or the interpretation of such tax laws, including potential United States and international tax reforms;

• Earnings being lower than anticipated in countries where we are taxed at lower rates as compared to the United States federal and state statutory tax rates;

• An increase in expenses not deductible for tax purposes, including certain stock-based compensation and impairment of goodwill;

• Changes in the valuation allowance against our deferred tax assets;

• Changes in judgment from the evaluation of new information that results in a recognition, derecognition, or change in measurement of a tax position taken in a prior period;

• Increases to interest expenses classified in the financial statements as income taxes;

• New accounting standards or interpretations of such standards;

• A change in our decision to indefinitely reinvest foreign earnings outside the United States; or

• Results of tax examinations by the IRS and state and foreign tax authorities.

Any significant change in our future effective tax rates could adversely impact our results of operations for future periods.

We have received examination reports from the IRS proposing deficiencies in certain of our tax returns, and the outcome of current and future tax examinations may have a material adverse effect on our results of operations and cash flows.

The IRS and other tax authorities regularly examine our income tax returns, and the IRS is currently examining our federal income tax returns for the tax years 2006 through 2008. In July 2006, the IRS completed its field examination of our federal income tax returns for the tax years 2000 through 2002 and issued a RAR in which the IRS proposed to assess an aggregate tax deficiency for the three-year period of approximately $324.0 million. In November 2006, the IRS revised the proposed aggregate tax deficiency for the three-year period to approximately $318.0 million. The IRS is contesting our qualification for deferred recognition of certain proceeds received from restitution and settlement in connection with litigation during the period. The proposed tax deficiency for this item is approximately $152.0 million. The remaining proposed tax deficiency of approximately $166.0 million is primarily related to proposed adjustments to our transfer pricing arrangements with foreign subsidiaries and to our deductions for foreign trade income. We have filed a timely protest with the IRS and are seeking resolution of the issues through the Appeals Office of the IRS, or the Appeals Office.

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In May 2009, the IRS completed its field examination of our federal income tax returns for the tax years 2003 through 2005 and issued a RAR, in which the IRS proposed to assess an aggregate deficiency for the three-year period of approximately $94.1 million. In August 2009, the IRS revised the proposed aggregate tax deficiency for the three-year period to approximately $60.7 million. The IRS is contesting our transfer pricing arrangements with our foreign subsidiaries and deductions for foreign trade income. The IRS made similar claims against our transfer pricing arrangements and deductions for foreign trade income in prior examinations and may make similar claims in its examinations of other tax years. We have filed a timely protest with the IRS and are seeking resolution of the issues through the Appeals Office.

We believe that the proposed IRS adjustments are inconsistent with applicable tax laws and we are vigorously challenging these proposed adjustments, although there can be no assurance that we will prevail. The RARs are not final Statutory Notices of Deficiency, but the IRS imposes interest on the proposed deficiencies until the matters are resolved. Interest is compounded daily at rates published and adjusted quarterly by the IRS and have been between 4% and 10% since 2001.

The calculation of our provision (benefit) for income taxes requires us to use significant judgment and involves dealing with uncertainties in the application of complex tax laws and regulations. In determining the adequacy of our provision (benefit) for income taxes, we regularly assess the potential settlement outcomes resulting from income tax examinations. However, the final outcome of tax examinations, including the total amount payable or the timing of any such payments upon resolution of these issues, cannot be estimated with certainty. In addition, we cannot be certain that such amount will not be materially different from the amount that is reflected in our historical income tax provisions and accruals. Should the IRS or other tax authorities assess additional taxes as a result of a current or a future examination, we may be required to record charges to operations in future periods that could have a material impact on the results of operations, financial position or cash flows in the applicable period or periods.

Forecasting our estimated annual effective tax rate is complex and subject to uncertainty, and material differences between forecasted and actual tax rates could have a material impact on our results of operations.

Forecasts of our income tax position and resultant effective tax rate are complex and subject to uncertainty because our income tax position for each year combines the effects of estimating our annual income or loss, the mix of profits and losses earned by us and our subsidiaries in tax jurisdictions with a broad range of income tax rates, as well as benefits from available deferred tax assets, the impact of various accounting rules and changes to these rules and results of tax audits. To forecast our global tax rate, pre-tax profits and losses by jurisdiction are estimated and tax expense by jurisdiction is calculated based on such estimates. Forecasts of annual income or loss that are near break-even will cause our estimated annual effective tax rate to be particularly sensitive to any changes to our estimates of tax expense. If our estimate of the pre-tax profit and losses, the mix of our profits and losses, our ability to use deferred tax assets, the results of tax audits, or effective tax rates by jurisdiction is different than those estimates, our actual tax rate could be materially different than forecasted, which could have a material impact on our results of operations.

Failure to obtain export licenses could harm our business by rendering us unable to ship products and transfer our technology outside of the United States.

We must comply with regulations of the United States and of certain other countries in shipping our software products and transferring our technology outside the United States and to foreign nationals. Although we have not had any significant difficulty complying with such regulations so far, any significant future difficulty in complying could harm our business, operating results or financial condition.

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Errors or defects in our products and services could expose us to liability and harm our reputation.

Our customers use our products and services in designing and developing products that involve a high degree of technological complexity, each of which has its own specifications. Because of the complexity of the systems and products with which we work, some of our products and designs can be adequately tested only when put to full use in the marketplace. As a result, our customers or their end users may discover errors or defects in our software or the systems we design, or the products or systems incorporating our design and intellectual property may not operate as expected. Errors or defects could result in:

• Loss of customers;

• Loss of market segment share;

• Failure to attract new customers or achieve market acceptance;

• Diversion of development resources to resolve the problem;

• Loss of or delay in revenue;

• Increased service costs; and

• Liability for damages.

If we become subject to unfair hiring claims, we could be prevented from hiring needed employees, incur liability for damages and incur substantial costs in defending ourselves.

Companies in our industry that lose employees to competitors frequently claim that these competitors have engaged in unfair hiring practices or that the employment of these persons would involve the disclosure or use of trade secrets. These claims could prevent us from hiring employees or cause us to incur liability for damages. We could also incur substantial costs in defending ourselves or our employees against these claims, regardless of their merits. Defending ourselves from these claims could also divert the attention of our management away from our operations.

Our business is subject to the risk of earthquakes.

Our corporate headquarters, including certain of our research and development operations and certain of our distribution facilities, is located in the Silicon Valley area of Northern California, a region known to experience seismic activity. If significant seismic activity were to occur, our operations may be interrupted, which would adversely impact our business and results of operations.

We maintain research and development and other facilities in parts of the world that are not as politically stable as the United States, and as a result we may face a higher risk of business interruption from acts of war or terrorism than businesses located only or primarily in the United States.

We maintain international research and development and other facilities, some of which are in parts of the world that are not as politically stable as the United States. Consequently, we may face a greater risk of business interruption as a result of terrorist acts or military conflicts than businesses located domestically. Furthermore, this potential harm is exacerbated given that damage to or disruptions at our international research and development facilities could have an adverse effect on our ability to develop new or improve existing products as compared to other businesses which may only have sales offices or other less critical operations abroad. We are not insured for losses or interruptions caused by acts of war or terrorism.

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Risks Related to Our Securities and Indebtedness

Our debt obligations expose us to risks that could adversely affect our business, operating results or financial condition, and could prevent us from fulfilling our obligations under such indebtedness.

We have a substantial level of debt. As of July 3, 2010, we had outstanding indebtedness with a principal balance of $650.2 million as follows:

• $350.0 million related to our 2015 Notes;

• $150.0 million related to our 2011 Notes;

• $150.0 million related to our 2013 Notes; and

• $0.2 million related to our Zero Coupon Zero Yield Senior Convertible Notes Due 2023, or the 2023 Notes.

The level of our current or future indebtedness, among other things, could:

• Make it difficult for us to satisfy our payment obligations on our debt as described below;

• Make us more vulnerable in the event of a downturn in our business;

• Reduce funds available for use in our operations or for developments or acquisitions of new technologies;

• Make it difficult for us to incur additional debt or obtain any necessary financing in the future for working capital, capital expenditures, debt service, acquisitions or general corporate purposes;

• Impose operating or financial covenants on us;

• Limit our flexibility in planning for or reacting to changes in our business; or

• Place us at a possible competitive disadvantage relative to less leveraged competitors and competitors that have greater access to capital resources.

While we are not currently a party to any loans that would prohibit us from making payment on our outstanding convertible notes, we are not prevented by the terms of the convertible notes from entering into other loans that could prohibit such payments. If we are prohibited from paying our outstanding indebtedness, we could try to obtain the consent of the lenders under those arrangements to make such payment, or we could attempt to refinance the borrowings that contain the restrictions. If we do not obtain the necessary consents or refinance the borrowings, we may be unable to satisfy our outstanding indebtedness. Any such failure would constitute an event of default under our indebtedness, which could, in turn, constitute a default under the terms of any other indebtedness then outstanding.

If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments, or if we fail to comply with the various requirements of our indebtedness, we would be in default, which would permit the holders of our indebtedness to accelerate the maturity of the indebtedness and could cause defaults under any other indebtedness as well.

Any default under our indebtedness could have a material adverse effect on our business, operating results and financial condition. In addition, a material default on our indebtedness could suspend our eligibility to register securities using certain registration statement forms under SEC guidelines that permit incorporation by reference of substantial information regarding us and potentially hindering our ability to raise capital through the issuance of our securities and will increase the costs of such registration to us.

65

On the first day of fiscal 2009, we retrospectively adopted new accounting principles as required by the “Debt with Conversion and Other Options” subtopic of the FASB Accounting Standards Codification, and adjusted all periods for which the Convertible Senior Notes were outstanding before the date of adoption. This adoption had an adverse effect on our operating results and financial condition, particularly with respect to interest expense ratios commonly referred to by lenders, and could potentially hinder our ability to raise capital through the issuance of debt or equity securities.

Conversion of the Convertible Senior Notes will dilute the ownership interests of existing stockholders.

The terms of the Convertible Senior Notes permit the holders to convert the Convertible Senior Notes into shares of our common stock. The terms of the Convertible Senior Notes stipulate a net share settlement, which upon conversion of the Convertible Senior Notes requires us to pay the principal amount in cash and the conversion premium, if any, in shares of our common stock based on a daily settlement amount, calculated on a proportionate basis for each day of the relevant 20 trading-day observation period. The initial conversion rate for the Convertible Senior Notes is 47.2813 shares of our common stock per $1,000 principal amount of Convertible Senior Notes, equivalent to a conversion price of approximately $21.15 per share of our common stock. The conversion price is subject to adjustment in some events but will not be adjusted for accrued interest, except in limited circumstances. The conversion of some or all of the Convertible Senior Notes will dilute the ownership interest of our existing stockholders. Any sales in the public market of the common stock issuable upon conversion could adversely affect prevailing market prices of our common stock.

Each $1,000 of principal of the Convertible Senior Notes is initially convertible into 47.2813 shares of our common stock, subject to adjustment upon the occurrence of specified events. Holders of the Convertible Senior Notes may convert their notes at their option on any day before the close of business on the scheduled trading day immediately preceding December 15, 2011 in the case of the 2011 Notes and December 15, 2013 in the case of the 2013 Notes, in each case only if:

• The price of our common stock reaches $27.50 during certain periods of time specified in the Convertible Senior Notes;

• Specified corporate transactions occur; or

• The trading price of the Convertible Senior Notes falls below 98% of the product of (i) the last reported sale price of our common stock and (ii) the conversion rate on that date.

From November 2, 2011, in the case of the 2011 Notes, and November 1, 2013, in the case of the 2013 Notes, and until the close of business on the scheduled trading day immediately preceding the maturity date of such Convertible Senior Notes, holders may convert their Convertible Senior Notes at any time, regardless of the foregoing circumstances. As of July 3, 2010, none of the conditions allowing holders of the Convertible Senior Notes to convert had been met.

Although the conversion price of the Convertible Senior Notes is currently $21.15 per share, we entered into hedge and separate warrant transactions concurrent with the issuance of the Convertible Senior Notes to reduce the potential dilution from the conversion of the Convertible Senior Notes. However, we cannot guarantee that such hedges and warrant instruments will fully mitigate the dilution. In addition, the existence of the Convertible Senior Notes may encourage short selling by market participants because the conversion of the Convertible Senior Notes could depress the price of our common stock.

66

At the option of the holders of the Convertible Senior Notes and the 2015 Notes, under certain circumstances we may be required to repurchase the Convertible Senior Notes in cash or shares of our common stock, or repurchase the 2015 Notes in cash.

Under the terms of the Convertible Senior Notes and the 2015 Notes, we may be required to repurchase the Convertible Senior Notes and the 2015 Notes following a “fundamental change” in our corporate ownership or structure, such as a change of control in which substantially all of the consideration does not consist of publicly traded securities, prior to maturity of the Convertible Senior Notes and the 2015 Notes. The repurchase price for the Convertible Senior Notes and the 2015 Notes in the event of a fundamental change must be paid solely in cash. This repayment obligation may have the effect of discouraging, delaying or preventing a takeover of our company that may otherwise be beneficial to investors.

Hedge and warrant transactions entered into in connection with the issuance of the Convertible Senior Notes and the 2015 Notes may affect the value of our common stock.

We entered into hedge transactions with various financial institutions, at the time of issuance of the Convertible Senior Notes and the 2015 Notes, with the objective of reducing the potential dilutive effect of issuing our common stock upon conversion of the Convertible Senior Notes and the potential cash outlay from the cash conversion of the 2015 Notes. We also entered into separate warrant transactions with the same financial institutions. In connection with our hedge and warrant transactions associated with the Convertible Senior Notes and the 2015 Notes, these financial institutions purchased our common stock in secondary market transactions and entered into various over-the-counter derivative transactions with respect to our common stock. These entities or their affiliates are likely to modify their hedge positions from time to time prior to conversion or maturity of the Convertible Senior Notes and the 2015 Notes by purchasing and selling shares of our common stock, other of our securities or other instruments they may wish to use in connection with such hedging. Any of these transactions and activities could adversely affect the value of our common stock and, as a result, the number of shares and the value of the common stock holders will receive upon conversion of the Convertible Senior Notes and the 2015 Notes. In addition, subject to movement in the price of our common stock, if the hedge transactions settle in our favor, we could be exposed to credit risk related to the other party with respect to the payment we are owed from such other party. If the financial institutions with which we entered into these hedge transactions were to fail or default, our ability to settle on these transactions could be harmed or delayed.

We are subject to the risk that the hedge participants cannot, or do not, fulfill their obligations under the convertible note hedge transactions.

Recent global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions. If any of the participants in the hedge transactions is unwilling or unable to perform its obligations for any reason, we would not be able to receive the benefit of such transaction. We cannot provide any assurances as to the financial stability or viability of any of the participants in the hedge transactions.

Rating agencies may provide unsolicited ratings on the Convertible Senior Notes and the 2015 Notes that could reduce the market value or liquidity of our common stock.

We have not requested a rating of the Convertible Senior Notes or the 2015 Notes from any rating agency and we do not anticipate that the Convertible Senior Notes or the 2015 Notes will be rated. However, if one or more rating agencies independently elects to rate the Convertible Senior Notes or the 2015 Notes and assigns the Convertible Senior Notes or the 2015 Notes a rating lower than the rating

67

expected by investors, or reduces such rating in the future, the market price or liquidity of the Convertible Senior Notes or the 2015 Notes, as the case may be, and our common stock could be harmed. Should a decline in the market price of the Convertible Senior Notes or the 2015 Notes result, as compared to the price of our common stock, this may trigger the right of the holders of the Convertible Senior Notes or the 2015 Notes to convert such notes into cash and shares of our common stock, as applicable.

Anti-takeover defenses in our certificate of incorporation and bylaws and certain provisions under Delaware law could prevent an acquisition of our company or limit the price that investors might be willing to pay for our common stock.

Our certificate of incorporation and bylaws and certain provisions of the Delaware General Corporation Law that apply to us could make it difficult for another company to acquire control of our company. For example:

• Our certificate of incorporation allows our Board of Directors to issue, at any time and without stockholder approval, preferred stock with such terms as it may determine. No shares of preferred stock are currently outstanding. However, the rights of holders of any of our preferred stock that may be issued in the future may be superior to the rights of holders of our common stock.

• Section 203 of the Delaware General Corporation Law generally prohibits a Delaware corporation from engaging in any business combination with a person owning 15% or more of its voting stock, or who is affiliated with the corporation and owned 15% or more of its voting stock at any time within three years prior to the proposed business combination, for a period of three years from the date the person became a 15% owner, unless specified conditions are met.

All or any one of these factors could limit the price that certain investors would be willing to pay for shares of our common stock and could allow our Board of Directors to resist, delay or prevent an acquisition of our company, even if a proposed transaction were favored by a majority of our independent stockholders.

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Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

          During fiscal 2008, our Board of Directors authorized two programs to repurchase shares of our common stock in the open market with a value of up to $1,000.0 million in the aggregate. The following table sets forth the repurchases we made during the three months ended July 3, 2010:

						Maximum Dollar
						Value of Shares that
					Total Number of	May Yet
	Total				Shares Purchased	Be Purchased Under
	Number of		Average		as Part of	Publicly Announced
	Shares		Price		Publicly Announced	Plan or Program *
Period	Purchased *		Per Share		Plan or Program	(In millions)
April 4, 2010 – May 8, 2010		3,439	$	7.11	----	$	854.4
May 9, 2010 – June 5, 2010		194,214	$	6.90	----	$	854.4
June 6, 2010 – July 3, 2010		6,602,056	$	6.16	6,493,100	$	814.4
Total		6,799,709	$	6.18	6,493,100

* Shares purchased that were not part of our publicly announced repurchase program represent the surrender of shares of restricted stock to pay income taxes due upon vesting, and do not reduce the dollar value that may yet be purchased under our publicly announced repurchase program.

Item 3.  Defaults Upon Senior Securities

     None.

Item 4.  Reserved

Item 5.  Other Information

     None.

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Item 6.  Exhibits

         (a) The following exhibits are filed herewith:

		Incorporated by Reference
Exhibit				Exhibit	Filing	Provided
Number	Exhibit Title	Form	File No.	No.	Date	Herewith
2.01	Agreement and Plan of Merger, dated as of May 12, 2010, among the Registrant, Denali Software, Inc., Eagle Subsidiary Corporation and Mark Gogolewski, as Shareholder Agent.					X
4.01	Indenture, dated as of June 15, 2010, between the Registrant and Deutsche Bank Trust Company Americas, as Trustee, including form of 2.625% Cash Convertible Senior Notes due 2015.					X
10.01	Convertible Note Hedge Confirmation, dated June 9, 2010, between the Registrant and JPMorgan Chase Bank, National Association, for the Registrant’s 2.625% Cash Convertible Senior Notes due 2015.					X
10.02	Convertible Note Hedge Confirmation, dated June 9, 2010, between the Registrant and Morgan Stanley & Co. International plc, for the Registrant’s 2.625% Cash Convertible Senior Notes due 2015.					X
10.03	Convertible Note Hedge Confirmation, dated June 9, 2010, between the Registrant and Deutsche Bank AG, London Branch, for the Registrant’s 2.625% Cash Convertible Senior Notes due 2015.					X
10.04	Additional Convertible Note Hedge Confirmation, dated June 18, 2010, between the Registrant and JPMorgan Chase Bank, National Association, for the Registrant’s 2.625% Cash Convertible Senior Notes due 2015.					X
10.05	Additional Convertible Note Hedge Confirmation, dated June 18, 2010, between the Registrant and Morgan Stanley & Co. International plc, for the Registrant’s 2.625% Cash Convertible Senior Notes due 2015.					X
10.06	Additional Convertible Note Hedge Confirmation, dated June 18, 2010, between the Registrant and Deutsche Bank AG, London Branch, for the Registrant’s 2.625% Cash Convertible Senior Notes due 2015.					X
10.07	Warrant Transaction Confirmation, dated June 9, 2010, between the Registrant and JPMorgan Chase Bank, National Association.					X
10.08	Warrant Transaction Confirmation, dated June 9, 2010, between the Registrant and Morgan Stanley & Co. Inc.					X

70

		Incorporated by Reference
Exhibit				Exhibit	Filing	Provided
Number	Exhibit Title	Form	File No.	No.	Date	Herewith
10.09	Warrant Transaction Confirmation, dated June 9, 2010, between the Registrant and Deutsche Bank AG, London Branch.					X
10.10	Additional Warrant Transaction Confirmation, dated June 18, 2010, between the Registrant and JPMorgan Chase Bank, National Association.					X
10.11	Additional Warrant Transaction Confirmation, dated June 18, 2010, between the Registrant and Morgan Stanley & Co. Inc.					X
10.12	Additional Warrant Transaction Confirmation, dated June 18, 2010, between the Registrant and Deutsche Bank AG, London Branch.					X
10.13	Employment Agreement, effective as of August 3, 2010, between the Registrant and John J. Bruggeman II.					X
31.01	Certification of the Registrant’s Chief Executive Officer, Lip-Bu Tan, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.					X
31.02	Certification of the Registrant’s Chief Financial Officer, Kevin S. Palatnik, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.					X
32.01	Certification of the Registrant’s Chief Executive Officer, Lip-Bu Tan, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
32.02	Certification of the Registrant’s Chief Financial Officer, Kevin S. Palatnik, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
101.INS	XBRL Instance Document.					X
101.SCH	XBRL Taxonomy Extension Schema Document.					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.					X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.					X

71

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CADENCE DESIGN SYSTEMS, INC. (Registrant)
DATE:	August 4, 2010	By:	/s/ Lip-Bu Tan
			Lip-Bu Tan
			President, Chief Executive Officer and Director
DATE:	August 4, 2010	By:	/s/ Kevin S. Palatnik
			Kevin S. Palatnik
			Senior Vice President and Chief Financial Officer

72

EXHIBIT INDEX

		Incorporated by Reference
Exhibit				Exhibit	Filing	Provided
Number	Exhibit Title	Form	File No.	No.	Date	Herewith
2.01	Agreement and Plan of Merger, dated as of May 12, 2010, among the Registrant, Denali Software, Inc., Eagle Subsidiary Corporation and Mark Gogolewski, as Shareholder Agent.					X
4.01	Indenture, dated as of June 15, 2010, between the Registrant and Deutsche Bank Trust Company Americas, as Trustee, including form of 2.625% Cash Convertible Senior Notes due 2015.					X
10.01	Convertible Note Hedge Confirmation, dated June 9, 2010, between the Registrant and JPMorgan Chase Bank, National Association, for the Registrant’s 2.625% Cash Convertible Senior Notes due 2015.					X
10.02	Convertible Note Hedge Confirmation, dated June 9, 2010, between the Registrant and Morgan Stanley & Co. International plc, for the Registrant’s 2.625% Cash Convertible Senior Notes due 2015.					X
10.03	Convertible Note Hedge Confirmation, dated June 9, 2010, between the Registrant and Deutsche Bank AG, London Branch, for the Registrant’s 2.625% Cash Convertible Senior Notes due 2015.					X
10.04	Additional Convertible Note Hedge Confirmation, dated June 18, 2010, between the Registrant and JPMorgan Chase Bank, National Association, for the Registrant’s 2.625% Cash Convertible Senior Notes due 2015.					X
10.05	Additional Convertible Note Hedge Confirmation, dated June 18, 2010, between the Registrant and Morgan Stanley & Co. International plc, for the Registrant’s 2.625% Cash Convertible Senior Notes due 2015.					X
10.06	Additional Convertible Note Hedge Confirmation, dated June 18, 2010, between the Registrant and Deutsche Bank AG, London Branch, for the Registrant’s 2.625% Cash Convertible Senior Notes due 2015.					X
10.07	Warrant Transaction Confirmation, dated June 9, 2010, between the Registrant and JPMorgan Chase Bank, National Association.					X
10.08	Warrant Transaction Confirmation, dated June 9, 2010, between the Registrant and Morgan Stanley & Co. Inc.					X

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		Incorporated by Reference
Exhibit				Exhibit	Filing	Provided
Number	Exhibit Title	Form	File No.	No.	Date	Herewith
10.09	Warrant Transaction Confirmation, dated June 9, 2010, between the Registrant and Deutsche Bank AG, London Branch.					X
10.10	Additional Warrant Transaction Confirmation, dated June 18, 2010, between the Registrant and JPMorgan Chase Bank, National Association.					X
10.11	Additional Warrant Transaction Confirmation, dated June 18, 2010, between the Registrant and Morgan Stanley & Co. Inc.					X
10.12	Additional Warrant Transaction Confirmation, dated June 18, 2010, between the Registrant and Deutsche Bank AG, London Branch.					X
10.13	Employment Agreement, effective as of August 3, 2010, between the Registrant and John J. Bruggeman II.					X
31.01	Certification of the Registrant’s Chief Executive Officer, Lip-Bu Tan, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.					X
31.02	Certification of the Registrant’s Chief Financial Officer, Kevin S. Palatnik, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.					X
32.01	Certification of the Registrant’s Chief Executive Officer, Lip-Bu Tan, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
32.02	Certification of the Registrant’s Chief Financial Officer, Kevin S. Palatnik, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
101.INS	XBRL Instance Document.					X
101.SCH	XBRL Taxonomy Extension Schema Document.					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.					X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.					X

74

EX-2.01

Exhibit 2.01

Agreement and Plan of Merger

Dated as of May 12, 2010

among

Cadence Design Systems, Inc.,

Denali Software, Inc.,

Eagle Subsidiary Corporation,

AND

Mark Gogolewski, as Shareholder Agent

TABLE OF CONTENTS

		Page
Article 1. THE MERGER			2
Section 1.1	The Merger		2
Section 1.2	Effective Time		2
Section 1.3	Closing of the Merger		2
Section 1.4	Effects of the Merger		2
Section 1.5	Articles of Incorporation and Bylaws		2
Section 1.6	Directors		3
Section 1.7	Officers		3
Section 1.8	Conversion of Shares		3
Section 1.9	Dissenters’ Rights		5
Section 1.10	Exchange of Certificates		5
Section 1.11	Stock Options and Restricted Shares		7
Section 1.12	Adjustment of Merger Consideration		9
Article 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY			10
Section 2.1	Organization and Qualification; Investments		10
Section 2.2	Capitalization of the Company and its Subsidiaries		11
Section 2.3	Authority Relative to this Agreement; Recommendation		13
Section 2.4	Financial Statements		13
Section 2.5	Information Supplied		14
Section 2.6	Consents and Approvals; Notices; No Violations		14
Section 2.7	No Default		15
Section 2.8	No Undisclosed Liabilities; Absence of Changes		15
Section 2.9	Litigation		16
Section 2.10	Compliance with Applicable Law		17
Section 2.11	Employee Benefit Plans; Labor Matters		17
Section 2.12	Environmental Laws and Regulations		20
Section 2.13	Taxes		21
Section 2.14	Intellectual Property		25
Section 2.15	Material Contracts		34
Section 2.16	Title to Properties; Absence of Liens and Encumbrances		36
Section 2.17	Insurance		37
Section 2.18	Certain Business Practices		37
Section 2.19	Warranties		38
Section 2.20	Suppliers and Customers		38
Section 2.21	Brokers		39
Section 2.22	Interested Party Transactions		39
Section 2.23	Dissenters’ Rights		39
Section 2.24	Company Transaction Expenses		39
Section 2.25	Spinoff		40

i 

TABLE OF CONTENTS
(Continued)

		Page
Article 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION			41
Section 3.1	Organization		41
Section 3.2	Authority Relative to this Agreement		42
Section 3.3	Information Supplied		42
Section 3.4	Consents and Approvals; No Violations		42
Section 3.5	Ownership and Operations of Acquisition Sub		43
Section 3.6	Availability of Funds		43
Section 3.7	Brokers		43
Article 4. COVENANTS			43
Section 4.1	Conduct of Business of the Company		43
Section 4.2	Information Statement		47
Section 4.3	Spinoff		48
Section 4.4	Other Potential Acquirors		48
Section 4.5	Approval of Shareholders		49
Section 4.6	Access to Information		49
Section 4.7	Certain Filings; Reasonable Efforts		50
Section 4.8	Company Employees and Consultants		51
Section 4.9	Public Announcements		51
Section 4.10	Notification of Certain Matters		51
Section 4.11	Company Disclosure Schedule		51
Section 4.12	Benefit Arrangements		52
Section 4.13	Termination of 401(k) Plan		52
Section 4.14	Termination of Company Investor Rights, Voting, Shareholder and Registration Rights Agreements		52
Section 4.15	Invention Assignment Agreement		52
Section 4.16	Intentionally Omitted		52
Section 4.17	Waiver of Company Stock Option and Company Restricted Share Acceleration		52
Section 4.18	Certain Tax Matters		53
Section 4.19	Audited Financial Statements		54
Section 4.20	Employee Indebtedness		54
Section 4.21	Data Room DVD-ROM		54
Section 4.22	Merger Consideration Allocation Spreadsheet		54
Section 4.23	Maintenance of Company’s Indemnification Obligations		55
Section 4.24	Treatment of Contracts		56

ii 

TABLE OF CONTENTS
(Continued)

		Page
Article 5. CONDITIONS TO CONSUMMATION OF THE MERGER			56
Section 5.1	Conditions to Each Party’s Obligations to Effect the Merger		56
Section 5.2	Conditions to the Obligations of the Company		56
Section 5.3	Conditions to the Obligations of Parent and Acquisition Sub		57
Article 6. TERMINATION			61
Section 6.1	Termination		61
Section 6.2	Effect of Termination		62
Article 7. INDEMNIFICATION; ESCROW			62
Section 7.1	General Survival		62
Section 7.2	Indemnification Generally		62
Section 7.3	Escrow Arrangements		65
Section 7.4	Shareholder Agent		66
Section 7.5	Third Party Claims		68
Section 7.6	Exclusive Remedy		69
Section 7.7	Parent’s Creditors; Solvency of Escrow Agent		70
Article 8. MISCELLANEOUS			71
Section 8.1	Entire Agreement		71
Section 8.2	Validity		71
Section 8.3	Notices		71
Section 8.4	Governing Law		72
Section 8.5	Descriptive Headings; Section References		72
Section 8.6	Parties in Interest		72
Section 8.7	Certain Definitions		72
Section 8.8	Personal Liability		75
Section 8.9	Specific Performance		75
Section 8.10	Counterparts		75
Section 8.11	Amendment		75
Section 8.12	Tax Withholding		75
Section 8.13	Fees and Expenses		75

iii 

TABLE OF EXHIBITS AND SCHEDULES

Exhibit A	Form of Spinoff Agreements
Exhibit B	Form of Agreement of Merger
Exhibit C	Form of Acknowledgement Agreement
Exhibit D	Form of FIRPTA Certificate
Exhibit E	Form of Escrow Agreement
Schedule I	Non-Competition Agreement Parties
Schedule II	Employment Agreement Parties
Schedule III	Certain Consent Persons
Schedule IV	Certain Employees
Schedule V	Treatment of Contracts
Schedule VI	Consulting Agreement Parties
Schedule VII	Certain Condition
Schedule VIII	Certain Indemnifiable Matters
Schedule IX	Permitted Expenses
Schedule X	Certain Expenses
Schedule XI	Certain Optionholders
Schedule XII	Certain Actions

Capitalization Schedule

TABLE OF CONTENTS
TO
COMPANY DISCLOSURE SCHEDULE

Schedule 2.2	Capitalization of the Company and its Subsidiaries
Schedule 2.4	Financial Statements
Schedule 2.6	Consents and Approvals; Notices; No Violation
Schedule 2.8	No Undisclosed Liabilities; Absence of Changes
Schedule 2.11	Employee Benefit Plans; Labor Matters
Schedule 2.13	Taxes
Schedule 2.14	Intellectual Property
Schedule 2.15	Material Contracts
Schedule 2.16	Title to Properties; Absence of Liens and Encumbrances
Schedule 2.17	Insurance
Schedule 2.20	Suppliers and Customers
Schedule 2.22	Interested Party Transactions
Schedule 4.1	Conduct of Business of the Company

iv 

TABLE OF DEFINED TERMS

	Cross Reference
Term	in Agreement	Page
1999 Plan	Section 2.2(a)(i)		12
2009 Plan	Section 2.2(a)(i)		12
Accelerated Options	Section 4.7(c)		53
Acknowledgement Agreement	Section 5.3(s)		60
Acquisition Sub	Preamble		1
Additional Expense Amount	Section 8.7(a)		74
affiliate	Section 8.7(b)		74
Agreement of Merger	Section 1.2		2
Agreement	Preamble		1
Anti-Corruption Laws	Section 2.18(b)		38
Articles of Incorporation	Section 1.5		2
Asset Contribution	Recitals		1
at will	Section 2.11(d)		18
Audit	Section 4.18(d)		54
Audited Financial Statements	Section 4.18(d)9		54
business day	Section 8.7(c)		74
Business	Section 2.14(a)(i)		25
capital stock	Section 8.7(d)		74
Capitalization Schedule	Section 2.2(a)(i)		12
Cash Adjustment Amount	Section 1.12		9
Cash Statement	Section 1.12		9
Certificate	Section 1.8(e)		5
CGCL	Recitals		1
Class A Common Stock	Section 2.2(a)(i)		11
Class B Common Stock	Section 2.2(a)(i)		11
Closing Date	Section 1.3		2
Closing	Section 1.3		2
Code	Section 1.8(d)		4
Company Balance Sheet Date	Section 2.4(a)		14
Company Balance Sheet	Section 2.4(a)		14
Company Board	Section 2.3		13
Company Cash	Section 1.12		9
Company Common Stock	Section 1.8(a)		3
Company Disclosure Schedule	Article 2		10
Company IPR	Section 2.14(a)(ii)		25
Company Licensed IPR	Section 2.14(a)(iii)		26
Company Permits	Section 2.10		17
Company Plans	Section 2.2(a)(i)		12
Company	Preamble		1
Company Registered IPR	Section 2.14(b)(i)		28

v 

TABLE OF DEFINED TERMS

	Cross Reference
Term	in Agreement	Page
Company Restricted Shares	Section 1.11(b)		8
Company Securities	Section 2.2(a)(i)		11
Company Software	Section 2.14(a)(iv)		26
Company Stock Options	Section 1.8(b)(iii)		3
Company Transaction Expenses	Section 2.24		40
Confidentiality Agreement	Section 4.6(c)		50
Contaminant	Section 2.14(c)(xii)		33
Contingent Worker	Section 2.11(m)		20
Contract	Section 2.15(a)		35
control	Section 8.7(e)		74
controlled by	Section 8.7(e)		74
controlling	Section 8.7(e)		74
Copyrights	Section 2.14(a)(vi)		26
D&O Tail Policy	Section 4.23(b)		55
Disabling Code	Section 2.14(c)(xii)		33
Dissenting Shareholder	Section 1.9		5
Dissenting Shares	Section 1.9		5
Due Date	Section 8.7(f)		74
Effective Time	Section 1.2		2
Electronic Equipment Transferred Assets	Section 4.3		48
Employee Indebtedness	Section 4.20		54
Employee Plans	Section 2.11(a)		18
Employment Agreements	Recitals		1
Environmental Laws	Section 2.12		21
ERISA Affiliate	Section 2.11(a)		18
ERISA	Section 2.11(a)		17
Escrow Agent	Section 7.2(h)		67
Escrow Agreement	Section 7.2(h)		67
Escrow Amount	Section 1.8(d)		4
Escrow Fund	Section 7.2(h)		67
Escrow Percentage	Section 1.8(d)		4
Escrow Period	Section 6.1(d)		62
Estimated Spinoff Taxes	Section 8.7(g)		74
Excluded Liabilities	Section 8.7(h)		74
FCPA	Section 2.18(b)		38
Final Date	Section 6.1(b)		61
Financial Statements	Section 2.4(a)		14
Fully Diluted Share Number	Section 1.8(b)(i)		3
GAAP	Section 2.4(a)		14
Governmental Entity	Section 2.6		15
Hazardous Substance	Section 2.12		21
HSR Act	Section 2.6		15

vi 

TABLE OF DEFINED TERMS

	Cross Reference
Term	in Agreement	Page
Inbound License Agreement	Section 2.14(a)(v)		26
incentive stock option	Section 2.13(b)(xvi)		24
include	Section 8.7(i)		75
including	Section 8.7(i)		75
Indemnification Claims	Section 7.3		67
Indemnifying Party	Section 7.2(a)		63
Independent Auditor	Section 2.4(c)		14
Information Statement	Section 4.2		47
Insurance Policies	Section 2.17		37
Intellectual Property Rights	Section 2.14(a)(vi)		26
Interested Party	Section 2.22(a)		39
IPR	Section 2.14(a)(vi)		26
IRS	Section 2.11(a)		18
knowledge	Section 8.7(j)		75
known	Section 8.7(j)		75
Lease Documents	Section 2.16(a)		37
leased employee	Section 2.11(m)		20
Lien	Section 8.7(k)		75
listed transaction	Section 2.13(b)(vii)		23
Losses	Section 7.2(a)		64
made available	Section 2.1(a)		10
Mask Works	Section 2.14(a)(vi)		26
Material Adverse Effect on Parent	Section 3.1(a)		42
Material Adverse Effect on the Company	Section 2.1(a)		10
Material Contract	Section 2.15(a)		35
Material Contracts	Section 2.15(a)		35
Merger Consideration Allocation Spreadsheet	Section 4.22		55
Merger Consideration	Section 1.8(b)(ii)		3
Merger	Section 1.1		2
Multiemployer Plan	Section 2.11(h)		19
Multiple Employer Plan	Section 2.11(h)		19
Non-Competition Agreements	Recitals		1
Nvelo Distribution	Recitals		1
Nvelo	Recitals		1
Open Source License	Section 2.14(a)(vii)		27
Open Source Software	Section 2.14(a)(viii)		27
Option Per Share Amount	Section 1.11(a)		7
Option Shares	Section 1.8(b)(iii)		3
Optionholder	Section 8.7(l)		75
Outbound License Agreement	Section 2.14(a)(ix)		27
parachute payments	Section 2.13(b)(xii)		24
Parent Indemnitees	Section 7.2(a)		62

vii 

TABLE OF DEFINED TERMS

	Cross Reference
Term	in Agreement	Page
Parent	Preamble		1
Patent Cross License	Section 2.25		41
Patents	Section 2.14(a)(vi)		26
Payment Agent	Section 1.10(a)		5
Per Share Amount	Section 1.8(b)(iv)		3
person	Section 8.7(m)		75
Product Offerings	Section 2.14(a)(x)		27
Products	Section 2.14(a)(x)		27
reportable transaction	Section 2.13(b)(vii)		23
Restricted Option Cash	Section 1.11(a)		8
Restricted Share Cash	Section 1.11(b)		8
Retained Business	Section 2.25(b)		41
S corporation	Section 2.13(b)(xvii)		25
Sabbatical Expense Amount	Section 8.7(n)		75
Section 2.8 Update	Section 4.7(c)		52
Securities Act	Section 2.2(a)(i)		11
Shareholder Agent Escrow Amount	Section 8.7(p)		75
Shareholder Agent Escrow Fund	Section 7.2(h)		67
Shareholder Agent Expenses	Section 7.4(e)		69
Shareholder Agent	Preamble		1
Shareholder Approval	Section 2.3		13
Shareholder	Section 8.7(o)		75
Shares	Section 1.8(b)(v)		4
Software	Section 2.14(a)(xi)		27
Special Losses	Section 7.2(h)		67
Spinoff Agreements	Recitals		1
Spinoff	Recitals		1
Spinoff Taxes	Section 8.7(q)		75
Standard Commercial Software	Section 2.14(a)(xii)		27
Standards Body	Section 2.14(c)(xiii)		33
subsidiaries	Section 8.7(r)		76
subsidiary	Section 8.7(r)		76
Survival Period	Section 7.1		62
Surviving Corporation	Section 1.1		2
Systems	Section 2.14(c)(xii)		33
Target Cash Amount	Section 1.12		9
Tax Claim	Section 2.13(b)(v)		23
Tax Law	Section 2.13(a)(ii)		22
Tax Period	Section 2.13(a)(iii)		22
Tax Return	Section 2.13(a)(iv)		22
Tax	Section 2.13(a)(i)		21
Taxes	Section 2.13(a)(i)		21

viii 

TABLE OF DEFINED TERMS

	Cross Reference
Term	in Agreement	Page
Third Party	Section 2.14(a)(xiii)		28
Third Party Acquisition	Section 4.4(b)		49
Third Party Claim	Section 7.5(a)		69
Third Party	Section 4.4(b)		49
Threshold	Section 7.2(c)		65
Trade Secrets	Section 2.14(a)(vi)		26
Trademarks	Section 2.14(a)(vi)		26
Transaction Agreements	Section 8.7(t)		76
Transferred Assets	Recitals		1
Transferred Business	Section 8.7(s)		76
Two Year Audited Net Income Amount	Section 5.2(d)		57
Two Year Audited Revenue Amount	Section 5.2(d)		57
Two Year Unaudited Net Income Amount	Section 5.2(d)		57
Two Year Unaudited Revenue Amount	Section 5.2(d)		57
under common control with	Section 8.7(e)		74
Unvested Options	Section 1.8(b)(iii)		3
Updated Capitalization Schedule	Section 5.3(m)		59

ix 

AGREEMENT AND PLAN OF MERGER

     THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of May 12, 2010, is by and among Denali Software, Inc., a California corporation (the “Company”), Cadence Design Systems, Inc., a Delaware corporation (“Parent”), Eagle Subsidiary Corporation, a California corporation and a wholly owned subsidiary of Parent (“Acquisition Sub”), and, solely with respect to Section 4.9 and Articles 7 and 8, Mark Gogolewski, a natural person, as agent for the shareholders of the Company (the “Shareholder Agent”).

     WHEREAS, the Boards of Directors of the Company, Parent and Acquisition Sub have each (i) determined that the Merger in accordance with this Agreement and the California General Corporation Law (the “CGCL”) is advisable, and in the best interests of their respective shareholders, and (ii) approved the Merger upon the terms and subject to the conditions set forth in this Agreement;

     WHEREAS, upon consummation of the Merger, Acquisition Sub will cease to exist, and the Company will become a wholly-owned subsidiary of Parent;

     WHEREAS, certain shareholders of the Company set forth on Schedule I and Nvelo have on the date hereof entered into non-competition and non-solicitation agreements (collectively, the “Non-Competition Agreements”), effective upon consummation of the Merger, as an inducement to Parent and Acquisition Sub to enter into this Agreement;

     WHEREAS, certain employees of the Company set forth on Schedule II have on the date hereof entered into employment agreements (collectively, the “Employment Agreements”), in each case, effective upon consummation of the Merger, as an inducement to Parent and Acquisition Sub to enter into this Agreement;

     WHEREAS, certain shareholders of the Company have on the date hereof delivered written shareholder consents to the Company, copies of which have been provided to the Parent, approving the transactions contemplated hereby and by the other Transaction Agreements; and

     WHEREAS, the Board of Directors of the Company has unanimously adopted by written consent in lieu of a meeting certain resolutions and prior to the Closing the Company will enter into that certain Contribution Agreement and other agreements (such resolutions, Contribution Agreement and other agreements, including all amendments, exhibits and schedules thereto, collectively, the “Spinoff Agreements”) in the forms attached hereto as Exhibit A, pursuant to which certain assets of the Company and its subsidiaries listed in Exhibit A to such Contribution Agreement (the “Transferred Assets”) will be sold (the “Asset Contribution”) to a newly formed subsidiary of the Company, Nvelo, Inc. (“Nvelo”), all of the outstanding equity interests of which will be distributed (the “Nvelo Distribution” and, together with the Asset Contribution, the “Spinoff”) to the Shareholders, effective before the Closing.

     NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, the Company, Parent, Acquisition Sub and the Shareholder Agent hereby agree as follows:

1

ARTICLE 1.

THE MERGER

     Section 1.1 The Merger. At the Effective Time and upon the terms and subject to the conditions of this Agreement and in accordance with the CGCL, Acquisition Sub shall be merged with and into the Company (the “Merger”). Following the Merger, the Company shall continue as the surviving corporation (the “Surviving Corporation”) and the separate corporate existence of Acquisition Sub shall cease. Parent, as the sole shareholder of Acquisition Sub, hereby approves the Merger and this Agreement.

     Section 1.2 Effective Time. Subject to the terms and conditions set forth in this Agreement, on the Closing Date, an Agreement of Merger substantially in the form of Exhibit B (the “Agreement of Merger”) shall be duly executed and acknowledged by the Company and Acquisition Sub and thereafter delivered to the Secretary of State of the State of California for filing in accordance with the CGCL. The Merger shall become effective at such time as a properly executed copy of the Agreement of Merger is duly filed with the Secretary of State of the State of California in accordance with Section 1103 of the CGCL or such later time as Parent and the Company may agree upon and as set forth in the Agreement of Merger (the time the Merger becomes effective being referred to herein as the “Effective Time”).

     Section 1.3 Closing of the Merger. The closing of the transactions contemplated by this Agreement (the “Closing”) will take place at a time and on a date (the “Closing Date”) to be specified by the parties, which date shall be no later than the third business day after satisfaction or waiver of the last to be satisfied or waived of the conditions set forth in Article 5 (other than those conditions that, by their terms, are to be satisfied or waived at the Closing, but subject to the fulfillment or waiver of those conditions), at the offices of Gibson, Dunn & Crutcher LLP, 1881 Page Mill Road, Palo Alto, California 94304, unless another time, date or place is agreed to by the parties hereto.

     Section 1.4 Effects of the Merger. The Merger shall have the effects set forth in Section 1107 of the CGCL. Without limiting the generality of the foregoing and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and Acquisition Sub shall vest in the Surviving Corporation, and all debts, liabilities and obligations of the Company and Acquisition Sub shall become the debts, liabilities and obligations of the Surviving Corporation.

     Section 1.5 Articles of Incorporation and Bylaws. The Articles of Incorporation of the Company as in effect immediately prior to the Effective Time (the “Articles of Incorporation”), shall at the Effective Time, without further action, be amended as set forth in Exhibit A to the Agreement of Merger, until further amended in accordance with applicable law. At the Effective Time, the Bylaws of Acquisition Sub in effect at the Effective Time shall, without further action, be the Bylaws of the Surviving Corporation except that all references to Acquisition Sub in the Bylaws of Acquisition Sub shall be deemed amended to refer to the Company. Thereafter, the Bylaws of the Surviving Corporation may be amended in accordance with their terms and as provided by applicable law.

2

     Section 1.6 Directors. Immediately after the Effective Time, the directors of Acquisition Sub at the Effective Time shall become the directors of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation until the earlier of such director’s resignation, removal or otherwise ceasing to be a director, or until such director’s successor is duly elected or appointed and qualified.

     Section 1.7 Officers. Immediately after the Effective Time, the officers of Acquisition Sub at the Effective Time shall become the officers of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation until the earlier of such officer’s resignation, removal or otherwise ceasing to be an officer, or until such officer’s successor is duly elected or appointed and qualified.

     Section 1.8 Conversion of Shares.

          (a) Conversion at Effective Time. At the Effective Time, by virtue of the Merger (and without any action on the part of Parent, Acquisition Sub, the Company or the Shareholders), subject to Sections 1.8(c) and 1.8(d) and, in the case of Company Restricted Shares, subject to Section 1.11(b), each share of Common Stock, no par value per share, of the Company (“Company Common Stock”) issued and outstanding at the Effective Time (excluding any Dissenting Shares or any Shares of Company Common Stock held in the treasury of the Company) shall be converted into the right to receive a cash amount equal to the Per Share Amount.

          (b) Certain Definitions. For purposes of this Agreement:

               (i) “Fully Diluted Share Number” means a number equal to the sum of (A) the number of Shares, plus (B) the Option Shares.

               (ii) “Merger Consideration” means the amount equal to $315,000,000 minus (x) the Cash Adjustment Amount, if any, and minus (y) the Sabbatical Expense Amount and the Additional Expense Amount;

               (iii) “Option Shares” means (x) the number of Shares of Company Common Stock that would be issuable upon the exercise in full of all options to purchase Company Common Stock (whether vested or unvested) (“Company Stock Options”) outstanding immediately prior to the Effective Time (including the Accelerated Options) minus (y) the number of Shares of Company Common Stock that would be issuable upon the exercise in full of all unvested Company Stock Options outstanding immediately prior to the Effective Time held by either (A) Company employees to whom Nvelo will make offers of employment in accordance with the Contribution Agreement or (B) Company employees that will not be offered employment by either Parent or Nvelo as of the Closing Date ((A) and (B), collectively, the “Unvested Options”).

               (iv) “Per Share Amount” means an amount equal to the quotient obtained by dividing (A) the Merger Consideration by (B) the Fully Diluted Share Number.

3

               (v) “Shares” means all shares of Company Common Stock issued and outstanding at the Effective Time (excluding any Shares of Company Common Stock held in the treasury of the Company, but including, for the avoidance of doubt, Company Restricted Shares).

          (c) Merger Consideration. Notwithstanding anything to the contrary in this Agreement, in no event shall Parent or any affiliate of Parent be obligated, pursuant to this Agreement, the Spinoff Agreements, the other Transaction Agreements or otherwise in connection with the Merger, the Spinoff or the transactions contemplated hereby or thereby, to pay to the holders of all equity interests of the Company (including shares of capital stock, options or any other securities convertible or exchangeable into equity of the Company) in respect of such equity interests, in the aggregate, more than the Merger Consideration. Any payments that would otherwise be owed to such persons in their capacity as holders of equity interests of the Company pursuant hereto that would cause the aggregate payments to such persons to be in excess of the Merger Consideration (and subject to Section 1.8(d) and Article 7) shall be deemed to be a Company Transaction Expense.

          (d) Escrow. Notwithstanding Sections 1.8(a) and 1.11, the Merger Consideration otherwise payable to Shareholders and Optionholders will be reduced by an aggregate amount equal to the sum of (x) $47,250,000 (or, if the Merger Consideration, as calculated as of the Closing Date, is less than $315,000,000, an amount equal to 15% of the Merger Consideration calculated as of the Closing Date) (the “Escrow Amount”), and such withheld amount will become part of the Escrow Fund established pursuant to Article 7 and (y) the Shareholder Agent Escrow Amount, and such withheld amount will become part of the Shareholder Agent Escrow Fund established pursuant to Article 7. The amount withheld from the Merger Consideration otherwise payable to a Shareholder or Optionholder and designated as part of the Escrow Fund will be proportionate to the amount payable with respect to such Shareholder’s Shares pursuant to Section 1.8(a) or 1.11(b) or such Optionholder’s Option Shares pursuant to Section 1.11(a) and shall be withheld (i) from the Per Share Amount of each Share equally across all Shares owned by such Shareholder, irrespective of whether any Share is or is not a Company Restricted Share (as defined below) and (ii) from the Option Per Share Amount of each Option Share equally across all Option Shares with respect to such Optionholder, irrespective of whether such Option Share is vested or unvested. Such amount and such Shareholder’s or Optionholder’s allocated percentage of the Escrow Fund and the Shareholder Agent Escrow Fund (each, a “Escrow Percentage”) is as set forth on the Merger Consideration Allocation Spreadsheet. Except as otherwise required pursuant to a determination within the meaning of Section 1313(a) of the Internal Revenue Code of 1986, as amended (the “Code”), Parent shall be treated as the owner of the Escrow Fund for all income tax purposes until a determination in accordance with Article 7 and the Escrow Agreement that the Shareholders and Optionholders are entitled to such amounts. The parties agree to treat the payment to any Parent Indemnitee of any amount of the Escrow Fund or the payment of any other indemnity claim to a Parent Indemnitee as an adjustment to the Merger Consideration unless otherwise required by law.

          (e) Exchange of Shares and Company Stock Options for Merger Consideration. At the Effective Time, each Share issued and outstanding at the Effective Time (excluding any Dissenting Shares) shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each certificate previously evidencing any such

4

Shares (a “Certificate”) shall thereafter represent the right to receive only the amount equal to the number of Shares represented by such Certificate multiplied by the Per Share Amount, subject to Sections 1.8(c) and 1.8(d) and, in the case of Company Restricted Shares, Section 1.11(b). The holders of Certificates shall cease to have any rights with respect to the Shares previously represented thereby, except as otherwise provided herein or by applicable law. At the Effective Time, each Company Stock Option issued and outstanding at the Effective Time shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each such Company Stock Option shall thereafter represent the right to receive only the amount equal to the number of Shares issuable upon exercise of such Company Stock Option multiplied by the Option Per Share Amount, subject to Sections 1.8(c) and 1.8(d) and Section 1.11(a).

          (f) Acquisition Sub Shares. At the Effective Time, each outstanding share of common stock, no par value, of Acquisition Sub shall be converted into one share of common stock, no par value, of the Surviving Corporation.

     Section 1.9 Dissenters’ Rights. Shares that have not been voted for approval of this Agreement or consented thereto in writing and with respect to which a demand for appraisal have been properly made in accordance with Chapter 13 of the CGCL (such Shares, “Dissenting Shares”), will not be converted into the right to receive that portion of the Merger Consideration otherwise payable with respect to such Shares after the Effective Time, but will instead be converted into the right to receive such consideration as may be determined to be due with respect to such Dissenting Shares pursuant to the laws of the State of California. If a holder of Dissenting Shares (a “Dissenting Shareholder”) withdraws such holder’s demand for such appraisal, fails to perfect a demand right to appraisal or otherwise becomes ineligible for such appraisal, then, as of the Effective Time or the occurrence of such event of withdrawal or ineligibility, whichever last occurs, such holder’s Dissenting Shares will cease to be Dissenting Shares and will be converted into the right to receive, and will be exchangeable for, that portion of the Merger Consideration into which such Dissenting Shares would have been converted pursuant to Section 1.8 or 1.11(b), as the case may be. Each Dissenting Shareholder who, pursuant to Chapter 13 of the CGCL, becomes entitled to payment of the value of the Dissenting Shares will receive payment therefor (but only after the value therefor has been agreed upon or finally determined pursuant to such provisions). The Company shall not, and shall cause each of its subsidiaries and representatives not to, except with the prior written consent of Parent or as may be required by such applicable law, make any payment with respect to, or settle or offer to settle, any such demands.

     Section 1.10 Exchange of Certificates.

          (a) Payment Agent. Prior to the Effective Time, Parent shall designate Wells Fargo Bank, N.A., or such other bank or trust company reasonably acceptable to the Company, to act as payment agent in connection with the Merger (the “Payment Agent”). Subject to the terms of Section 1.8(d) and Section 1.9, no more than one business day after the Effective Time, Parent will transfer to, or cause the Surviving Corporation to transfer to, and shall deposit with, the Payment Agent, an amount in cash equal to the aggregate amount of Merger Consideration (other than the Escrow Amount, the Shareholder Agent Escrow Amount and the Restricted Share Cash) payable to Shareholders under this Agreement.

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          (b) Letter of Transmittal. As soon as reasonably practicable after the Effective Time (and in any event within five (5) business days thereafter), Parent shall cause to be mailed or otherwise made available to (x) each holder of record of a Certificate(s) whose Shares were converted into the right to receive a portion of the Merger Consideration pursuant to Section 1.8(a) or 1.11(b) and (y) each holder of record of a Company Stock Option whose Option Shares were converted into the right to receive a portion of the Merger Consideration pursuant to Section 1.11(a): (i) a letter of transmittal in the form agreed to by the parties prior to the Effective Time (which shall specify that, in the case of Certificates, delivery shall be effected and risk of loss and title to the Certificates shall pass only upon delivery of the Certificates to the Payment Agent); and (ii) instructions for use in effecting the surrender of Certificates and Company Stock Options in exchange for a portion of the Merger Consideration. Upon surrender to the Payment Agent of a Certificate for cancellation together with such letter of transmittal duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor an amount of cash determined in accordance with Section 1.8 and 1.11 with respect to the number of Shares represented by such Certificate (less any applicable withholding Taxes) and the Certificate so surrendered shall forthwith be canceled. Upon delivery to the Payment Agent of a letter of transmittal duly executed, the holder of a Company Stock Option shall be entitled to receive in exchange therefor an amount of cash determined in accordance with Section 1.11(a) and Section 1.8 with respect to the number of Option Shares represented by such Company Stock Option (less any applicable withholding Taxes) and the Company Stock Option shall forthwith be canceled in exchange for such cash. As soon as reasonably practicable following delivery of a Certificate and a properly completed letter of transmittal as described above, or, in the case of Optionholders, a properly completed letter of transmittal as described above, the Payment Agent (in the case of a Shareholder) shall remit payment to such Shareholder, and the Parent or Surviving Corporation (in the case of an Optionholder) shall remit or cause to be remitted payment to such Optionholder, in each case, in accordance with the remittance instructions provided in the letter of transmittal. In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, cash may be paid to a transferee if the Certificate representing such Shares is presented to the Payment Agent accompanied by all documents required by Parent and the Payment Agent to evidence and effect such transfer. Until surrendered as contemplated by this Section 1.10, each Certificate or Company Stock Option shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender a portion of the Merger Consideration as contemplated by Section 1.8 and Section 1.11 and this Section 1.10. Notwithstanding the foregoing, Parent and the Payment Agent (at Parent’s direction) shall be entitled, but not obligated, to offset any outstanding amounts due and payable (including all principal, accrued but unpaid interest, and other amounts) under any promissory note or other instrument evidencing indebtedness of a Shareholder or Optionholder owed to the Company or Parent, or any of their respective affiliates, including any Employee Indebtedness to be repaid pursuant to Section 4.20, prior to distributing any portion of the Merger Consideration to such Shareholder or Optionholder.

          (c) Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, the Payment Agent shall issue in exchange therefor, upon the making of an affidavit (in a form satisfactory to the Payment Agent and Parent) of that fact by the record holder thereof, cash as may be required pursuant to this Agreement; provided, however, that the Payment Agent and Parent may, in either of their sole and absolute discretion, require the delivery of a suitable indemnity, or, if required by the Payment Agent, a suitable bond.

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          (d) No Further Registration. The portion of the Merger Consideration paid upon the surrender of Shares or Company Stock Options in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such Shares or Company Stock Options, subject to Article 7. From and after the Effective Time, there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Shares or Company Stock Options that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates or Company Stock Options are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article 1.

          (e) Termination of Payment Fund. At any time which is more than twelve (12 months after the Effective Time, Parent shall be entitled to require the Payment Agent to deliver to it any funds which had been deposited with the Payment Agent and have not been disbursed in accordance with this Article 1 (including, without limitation, interest and other income received by the Payment Agent in respect of the funds made available to it), and after the funds have been delivered to Parent, Shareholders and Optionholders entitled to payment in accordance with this Article 1 shall be entitled to look solely to Parent (subject to abandoned property, escheat or other similar applicable Laws) for payment of the Merger Consideration upon surrender of the certificates or other evidence of ownership of a Share or Company Stock Option held by them, without any interest thereon. Any Merger Consideration remaining unclaimed as of a date which is immediately prior to such time as such amounts would otherwise escheat to or become property of any government entity shall, to the extent permitted by applicable Law, become the property of Parent free and clear of any claims or interest of any person previously entitled thereto.

          (f) Escheat; Solvency of Payment Agent. Neither Parent nor the Surviving Corporation shall be liable to any holder of Shares or Company Stock Options for cash constituting Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. In addition, neither Parent nor the Surviving Corporation shall be liable to any holder of Shares or Company Stock Options for cash constituting Merger Consideration delivered to the Payment Agent in accordance with this Agreement that is not paid to such holder of Shares or Company Stock Options due to the Payment Agent not being able to pay its debts as they become due or being subject to a proceeding under bankruptcy, insolvency, or similar laws now or hereafter in effect relating to creditors’ rights generally or to general principles of equity.

     Section 1.11 Stock Options and Restricted Shares.

          (a) Stock Options. At the Effective Time, each Company Stock Option (other than Unvested Options) shall be exchanged for a right to receive a cash amount, for each Option Share underlying such Company Stock Option, equal to the Per Share Amount less the applicable per share exercise price for such Option Share (the “Option Per Share Amount”), subject to Section 1.8(c) and to the escrow provisions in Section 1.8(d). To the extent such Company Stock Option is unvested at the Effective Time, the Option Per Share Amount otherwise payable with respect to each Option Share underlying such unvested Company Stock Option shall be retained by Parent (and, to the extent provided in Section 1.8(d), held as part of the Escrow Fund) and be subject to forfeiture by the Optionholder on the same terms governing

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such Company Stock Option immediately prior to the Effective Time (such cash, until the vesting restrictions thereon lapse, is referred to herein as “Restricted Option Cash”). Restricted Option Cash shall be held by Parent until the portion of the Company Stock Option with respect to which such Retained Option Cash was retained is no longer subject to forfeiture by the Optionholder by reason of vesting of such Company Stock Option pursuant to the agreement governing the vesting of the applicable Company Stock Option immediately prior to the Closing and subject to Section 1.8(d) and Article 7. Any such Retained Option Cash that is held by Parent at a time when the Company Stock Option with respect to which such retained Restricted Option Cash was retained would have ceased to continue to vest (e.g., as a result of a termination of the Optionholder’s employment, consulting, independent contracting or other service relationship) shall be permanently retained by Parent. The parties acknowledge that Unvested Options will cease to vest and shall lapse as of the Effective Time and such persons will have no further rights with respect to such Unvested Options. Notwithstanding the foregoing, subject to Article 7, Parent shall promptly distribute to the Optionholder any amount of formerly Restricted Option Cash with respect to which the vesting restrictions have lapsed in accordance with the terms applicable to the Company Stock Option prior to the Merger upon the lapse of such restrictions, at times that are consistent with Parent’s payroll practices (but up to two payroll cycles after the vesting restrictions applicable to such particular distribution have lapsed), less any Escrow Amount attributable to such Shares. Any such Escrow Amount shall be part of the Escrow Fund and shall be distributed to the holder to the extent provided in Article 7 and the Escrow Agreement.

          (b) Restricted Shares. Each share of Company Common Stock subject to a right of repurchase by the Company (other than a right of first refusal) that is issued and outstanding at the Effective Time (“Company Restricted Shares”) shall be exchanged for a right to receive the Per Share Amount, which amount shall be retained by Parent (and, to the extent provided in Section 1.8(d), held as part of the Escrow Fund) and be subject to forfeiture by the Shareholder on the same terms governing such Company Restricted Shares immediately prior to the Effective Time (such cash, until the restrictions thereon lapse, is referred to herein as “Restricted Share Cash”). Restricted Share Cash that is held by Parent at a time when the Company Restricted Share with respect to which such Restricted Share Cash was retained would have ceased to continue to vest (e.g., as a result of a termination of the Shareholder’s employment, consulting, independent contracting or other service relationship) shall be permanently retained by Parent; provided, however, that upon forfeiture by a Shareholder of any Restricted Share Cash, Parent will pay to such Shareholder an amount equal to (i) the repurchase price, if any, in effect immediately prior to the Effective Time of the Company Restricted Shares with respect to which the Restricted Share Cash relates, multiplied by (ii) the number of Company Restricted Shares with respect to which such Restricted Share Cash is being retained. Restricted Share Cash shall be held by Parent until such cash is no longer subject to permanent retention by Parent. Notwithstanding the foregoing, subject to Article 7, Parent shall distribute to former holders of Company Restricted Shares any amount of formerly Restricted Share Cash with respect to which the restrictions have lapsed in accordance with the terms applicable to the Company Restricted Shares prior to the Merger as such Company Restricted Shares would have ceased to be subject to repurchase thereunder, at times that are consistent with Parent’s payroll practices (but up to two payroll cycles after the vesting restrictions applicable to such particular distribution have lapsed), less any Escrow Amount attributable to such Shares. Any such Escrow Amount shall be part of the Escrow Fund and shall be distributed to the holder to the extent

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provided in Article 7 and the Escrow Agreement. The parties agree that, with the exception of any amounts treated as imputed interest or as compensation, any distribution of the Escrow Amount to former holders of Company Restricted Shares shall be treated for income tax purposes as Merger Consideration paid in respect of such Company Restricted Shares.

          (c) Notices. Prior to the Effective Time, the Company shall deliver to the holders of Company Stock Options or Company Restricted Shares notices setting forth a summary of such holders’ rights pursuant to any agreement(s) governing such Company Stock Options or other agreement(s) covering the Company Restricted Shares, and confirming that the agreements evidencing the grants of such Company Stock Options or Company Restricted Shares, as the case may be, shall continue in effect on the same terms and conditions (subject to the adjustments provided in this Section 1.11 after giving effect to the Merger).

          (d) No Conversion into Equity of Parent. For the avoidance of doubt, no Company Stock Options or Company Restricted Shares shall be convertible or exchangeable for any common stock or other equity interests of Parent or any other person.

     Section 1.12 Adjustment of Merger Consideration. Pursuant to this Section 1.12 and Schedule IX, the Merger Consideration shall be decreased by the amount, if any, by which Company Cash is less than the Target Cash Amount (such adjustment, the “Cash Adjustment Amount”). For purposes hereof, the “Target Cash Amount” shall mean Fifty Million Dollars $50,000,000. “Company Cash” shall equal (x) the sum of (without duplication) (i) aggregate cash, cash equivalents and available-for-sale securities of the Company, (ii) aggregate exercise price of outstanding Company Stock Options as of the Closing Date, whether vested or unvested, including the Accelerated Options, but not including the aggregate exercise price attributable to the Unvested Options described in Section 1.8(b)(iii)(y), (iii) outstanding unpaid principal of, and accrued, but unpaid, interest on, Employee Indebtedness of the Company and (iv) any amounts approved in advance by Parent and paid by the Company prior to the Closing Date in respect of amounts listed on Schedule X, which Parent has agreed to bear pursuant to Section 8.13, in each of cases (i), (ii), (iii) and (iv), as of the open of business on the Closing Date, excluding any balance sheet items that are Transferred Assets minus (y) the Company Transaction Expenses listed on Schedule IX. On the Closing Date, the Company shall prepare and deliver to Parent a copy of the calculation of Company Cash, the Company Transaction Expenses and other items listed on Schedule IX, payable on or after the Effective Time, as updated through the Closing Date, and the Cash Adjustment Amount (the “Cash Statement”). All items set forth on the Cash Statement shall be calculated reasonably and in good faith by the Company on the Closing Date, evidenced by Company account balance statements, and on a basis consistent with the preparation of the audited consolidated balance sheet of the Company and its subsidiaries at December 31, 2009 referred to in Section 4.19. To the extent Company Cash exceeds the Target Cash Amount, any Company Transaction Expenses set forth in Schedule IX that exceed the aggregate amount of $2,655,000 or the amounts set forth in Schedule IX with respect to such items shall constitute the Cash Adjustment Amount.

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ARTICLE 2.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company hereby represents and warrants to each of Parent and Acquisition Sub, subject solely to the exceptions set forth in the Disclosure Schedule (the “Company Disclosure Schedule”) delivered on the date hereof by the Company to Parent in accordance with Section 4.11 (which exceptions shall specifically identify the Section, subsection, paragraph or clause of a single Section or subsection hereof, as applicable, to which such exception relates and be limited in their effect to such identified Sections, subsections, paragraphs or clauses; provided, however, that to the extent it is reasonably apparent on its face that any such exception would qualify any other Section, subsection, paragraph or clause of a representation or warranty herein, such exception shall be deemed disclosed and incorporated into each other Section, subsection, paragraph or clause of the Company Disclosure Schedule applicable to such Section, subsection, paragraph or clause), that:

     Section 2.1 Organization and Qualification; Investments.

          (a) Organization. The Company is duly organized, validly existing and in good standing under the laws of the state of California and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each subsidiary of the Company is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, except where such failure would not, individually or in the aggregate, have a Material Adverse Effect on the Company. Each of the Company and its subsidiaries has made available on Fenwick & West LLP’s datasite (“made available”) to Parent accurate and complete copies of its Articles of Incorporation and Bylaws (or similar governing documents), as currently in full force and effect. For purposes hereof, the term “Material Adverse Effect on the Company” means any circumstance involving, change in or effect on (or any circumstance, change or effect reasonably expected to have a prospective change in or effect on) the Company or any of its subsidiaries, taken as a whole, (i) that is, or is reasonably likely in the future to be, materially adverse to the operations, assets, liabilities (including contingent liabilities), earnings or other results of operations or the condition (financial or otherwise) of the Company and its subsidiaries, taken as a whole, excluding from the foregoing the effect, if any, of (A) changes in general economic or political conditions or changes generally affecting the industry in which the Company operates that do not disproportionally affect the Company and its subsidiaries, taken as a whole, as compared to the Company’s and its subsidiaries’ competitors, (B) changes resulting from or caused by acts of terrorism or war (whether or not declared) or natural disasters occurring after the date hereof, (C) changes caused by actions taken by the Company or its subsidiaries to comply with changes after the date of this Agreement in applicable law or any applicable accounting regulations or principles, including changes in GAAP, (D) changes that arise out of, result from or relate to the Merger or the announcement or consummation thereof, including any negative impact on relationships with employees of the Company or disruption in supplier, distributor, landlord, partner or similar relationships as a result of the announcement or pendency of the Merger, but only to the extent demonstrated by the Company to have been caused by such announcement or pendency and (E) any action or inaction expressly requested of

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the Company and its subsidiaries in writing by Parent or expressly required pursuant to this Agreement or (ii) that would reasonably be expected to prevent or materially delay the ability of the Company or any of its subsidiaries to consummate the transactions contemplated by this Agreement.

          (b) Qualifications. Each of the Company and its subsidiaries is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not, individually or in the aggregate, have a Material Adverse Effect on the Company.

     Section 2.2 Capitalization of the Company and its Subsidiaries.

          (a) Generally. (i) The authorized capital stock of the Company consists of 77,729,101 shares of Company Common Stock, of which 38,729,102 shares are designated as “Class A Common Stock” and 38,999,999 shares are designated as “Class B Common Stock.” There are 36,328,533 shares of Company Common Stock issued and outstanding, of which 36,328,533 shares are Class A Common Stock and no shares are Class B Common Stock. There are 2,127,984 shares of Class A Common Stock and 242,500 shares of Class B Common Stock that are issuable upon or otherwise deliverable in connection with the exercise of Company Stock Options, but which are not issued or outstanding. Except as set forth above, there are not outstanding any (W) shares of capital stock or other voting securities of the Company, (X) securities of the Company or any of its subsidiaries convertible into, or exchangeable or exercisable for, shares of capital stock or voting securities of the Company (including any convertible notes or other convertible debt instruments), (Y) options, warrants or other rights to acquire from the Company or any of its subsidiaries, and no obligations of the Company or any of its subsidiaries to issue, any capital stock, voting securities or securities convertible into or exchangeable or exercisable for capital stock or voting securities of the Company, or (Z) equity equivalent interests in the ownership or earnings of the Company or any of its subsidiaries or other similar rights. All of such outstanding Shares and Company Stock Options (collectively, the “Company Securities”) were issued in compliance with the Securities Act of 1933, as amended (the “Securities Act”), and applicable state securities laws. All of the outstanding shares of Company Common Stock have been, and the shares of Company Common Stock issuable upon exercise of the Company Stock Options when issued in accordance with the Company’s 1999 Equity Incentive Plan (the “1999 Plan”) and the Company’s 2009 Equity Incentive Plan (the “2009 Plan,” and together with the 1999 Plan, the “Company Plans”) will be, validly issued and fully paid, nonassessable and free of preemptive rights. There are no outstanding promissory notes evidencing indebtedness of the Company or outstanding promissory notes evidencing indebtedness owed to the Company. The Company has made available to Parent a true and complete list as of the date hereof (the “Capitalization Schedule”) of the names and holdings of all holders of outstanding Company Securities, and, with respect to each such holder, (A) an indication of the number and type of such Company Securities and whether, with respect to Company Stock Options and Company Restricted Shares, such Company Stock Options and Company Restricted Shares are vested or unvested, (B) the vesting schedule of each Company Stock Option and Company Restricted Share and the exercise price per share of each Company Stock Option, (C) the term of each such Company Stock Option, (D)

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whether such Company Stock Option is a nonqualified stock option or incentive stock option within the meaning of Section 422 of the Code, (E) any restrictions on exercise or sale of the Shares underlying such Company Stock Option, (F) the Company Restricted Shares with respect to which elections under Section 83(b) of the Code are in effect, and (G) the Company Restricted Shares that were issued to the holder thereof in exchange for Shares that were, at the time such Company Restricted Shares were issued to such holder, either transferable or not subject to substantial risk of forfeiture (within the meaning of Section 83 of the Code).

               (ii) All the outstanding capital stock of each of the Company’s subsidiaries is owned by the Company, directly or indirectly, free and clear of any Lien or any other limitation or restriction (including any restriction on the right to vote or sell the same except as may be provided by applicable law). There are no securities of the Company or any of its subsidiaries convertible into, or exchangeable or exercisable for, (X) any capital stock or other ownership or voting interests in or any other securities of any subsidiary of the Company or (Y) any options or other rights to acquire from the Company or any of its subsidiaries any such capital stock or other ownership interest, and there exists no other Contract, understanding, arrangement or obligation (whether or not contingent) providing for the issuance or sale, directly or indirectly, of any such capital stock.

               (iii) There are no outstanding rights or obligations to which the Company or any of its subsidiaries is a party or by which it is bound, obligating the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any Company Securities or any securities issued by any such subsidiary (other than the Company’s right to repurchase of unvested Company Common Stock from terminating service providers). Other than as set forth in the Capitalization Schedule, each Share that was issued subject to forfeiture, right of repurchase by the Company or other restriction is fully vested and there are no such restrictions outstanding with respect to such Shares. There are no shareholder agreements, voting trusts or other arrangements or understandings to which the Company or any of its subsidiaries is a party or by which it is bound, and to its knowledge there are no other agreements, voting trusts or other arrangements or understandings, relating to the voting or registration of any shares of capital stock or other voting securities of the Company or any of its subsidiaries or to the issuance of capital stock, options, warrants or any other rights to any person, including any sales representatives, consultants, contractors, employees, shareholders or distributors of the Company’s or any of its subsidiaries’ products. No Shares are owned by the Company.

          (b) Equity Interests. Except as set forth on Section 2.2(b) of the Disclosure Schedule, the Company does not directly or indirectly own any equity, partnership, membership or similar interest in, or any interest convertible into, exercisable for the purchase of or exchangeable for any such equity, partnership, membership or similar interest, and the Company is not under any current or prospective obligation to form or participate in, provide funds to, make any loan or capital contribution to, or other investment in, or assume any liability or obligation of, any other person. Neither the Company nor any of its subsidiaries is liable for any “earn-out” or similar payment under any merger agreement, asset purchase agreement, stock purchase agreement or other similar agreement for the acquisition of assets (including IPR), businesses or equity, partnership, membership or similar interests, or any interest convertible into, exercisable for the purchase of or exchangeable for any such equity, partnership, membership or similar interest, in any person, and there are no such “earn-out” or similar

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payment obligations under any existing Contract to which the Company or any subsidiary is a party that is capable of maturing or otherwise becoming payable on or after the date hereof.

          (c) Grant of Company Stock Options and Shares. Since April 5, 2010, none of the Company or any of its subsidiaries has granted to any employee of, or consultant to, the Company or any of its subsidiaries, or to any other person, any Company Stock Option or Shares.

     Section 2.3 Authority Relative to this Agreement; Recommendation. The Company has all necessary corporate power and authority to execute and deliver this Agreement, and each of the Company and its subsidiaries has all necessary corporate power and authority to execute and deliver the other Transaction Agreements to which it is a party, to perform its obligations under this Agreement and the other Transaction Agreements and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Agreements and the consummation of the transactions contemplated hereby and thereby (including the Merger) have been duly and validly (a) authorized unanimously by the Board of Directors of the Company (the “Company Board”) and (b) approved and adopted by the holders of at least 74.82% of the outstanding Company Common Stock voting together as a single class. All such Shareholder approvals referred to in this Section 2.3 (including the approval of the Merger) are referred to collectively herein as the “Shareholder Approval”). No other corporate proceedings on the part of the Company or any of its subsidiaries are necessary to authorize and adopt this Agreement or the other Transaction Agreements or to consummate the transactions contemplated hereby or thereby. This Agreement and the other Transaction Agreements have been duly and validly executed and delivered by the Company and each subsidiary of the Company that is a party thereto and constitute, assuming the due authorization, execution and delivery hereof and thereof by Parent and Acquisition Sub (to the extent a party to such agreement), valid, legal and binding agreements of the Company and each such subsidiary, enforceable against the Company and each such subsidiary in accordance with their terms, subject to any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors’ rights generally or to general principles of equity.

     Section 2.4 Financial Statements.

          (a) The Company has made available to Parent copies of consolidated financial statements (collectively, the “Financial Statements”) consisting of (i) an unaudited balance sheet of the Company and its subsidiaries at March 31, 2010 and the related statement of income for the three months ended March 31, 2010 and (ii) unaudited balance sheets of the Company and its subsidiaries at December 31, 2009 and 2008 and the related statements of income for the fiscal years then ended. The balance sheet of the Company and its subsidiaries at December 31, 2009 is referred to herein as the “Company Balance Sheet” and the date thereof is referred to herein as the “Company Balance Sheet Date.” The statement of income included in the Financial Statements does not contain any items of special or nonrecurring revenue or any other income not earned in the ordinary course of business except as expressly specified therein, and such Financial Statements include all adjustments, which consist only of normal recurring accruals, necessary for a fair presentation in all material respects. The Financial Statements and the Cash Statement have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) consistently applied and maintained throughout the periods

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indicated and fairly present in all material respects the financial condition of the Company and its subsidiaries at their respective dates and the results of its operations for the periods covered thereby (subject to normal year-end adjustments and except that unaudited financial statements do not contain all required footnotes). None of the Financial Statements or the Cash Statement contains, as of the date hereof, any untrue statement of a material fact or has omitted to state a material fact required to be stated or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

          (b) All accounts receivable of Company and its subsidiaries arose in the ordinary course of business, are bona fide, carried at values determined in accordance with GAAP consistently applied. No person has given the Company written or, to the knowledge of the Company, oral notice of any disputes regarding, and, no person has any Lien on, any of such accounts receivable and no agreement for material deduction or discount has been made with respect to any of such accounts receivable, and no written or, to the knowledge of the Company, oral request for any deduction or discount on any account receivable has been made.

          (c) The Company has engaged Mohler, Nixon & Williams, as the Company’s independent auditor (the “Independent Auditor”), to begin auditing the consolidated balance sheets of the Company and its subsidiaries at December 31, 2009 and 2008 and the related consolidated statements of income, cash flow and shareholders’ equity for the fiscal years then ended, with a view to completing such audit and issuing an audit report thereon prior to June 4, 2010, as contemplated by Section 4.19.

     Section 2.5 Information Supplied. None of the information included in the Information Statement, as amended prior to the date any Shareholder delivers any written consent requested thereby, at the date delivered to the Shareholders, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Company makes no representation or warranty regarding the accuracy or completeness of any information about Parent or Acquisition Sub contained in the Information Statement provided in writing by Parent or Acquisition Sub expressly for inclusion. The Information Statement, insofar as it relates to a solicitation of written consents from the Shareholders for adoption and approval of this Agreement, the other Transaction Agreements, or the transactions contemplated hereby and thereby, including the Merger and the Spinoff, complies in all material respects with the provisions of the CGCL.

     Section 2.6 Consents and Approvals; Notices; No Violations. Except for filings, permits, authorizations, consents and approvals as may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and similar merger notification laws or regulations of foreign Governmental Entities and the filing and recordation of the Agreement of Merger as required by the CGCL, no filing with or notice to, and no permit, authorization, consent or approval of, any United States or foreign court or tribunal, governmental or regulatory body, or administrative agency or authority (each, a “Governmental Entity”) is necessary for the execution and delivery by the Company and each of its subsidiaries of this Agreement and each other Transaction Agreement to which it is a party or the consummation by the Company and its subsidiaries of the transactions contemplated hereby and thereby. Neither the execution, delivery and performance of this Agreement and the other

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Transaction Agreements by the Company and its subsidiaries nor the consummation by the Company and its subsidiaries of the transactions contemplated hereby and thereby will (i) conflict with or result in any breach of any provision of the Articles of Incorporation or Bylaws (or similar governing documents) of the Company or any of its subsidiaries, (ii) result in a violation or breach of or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration or Lien) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which the Company or any of its subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties or assets may be bound, or (iii) violate any order, writ, injunction, decree, law, statute, rule or regulation applicable to the Company or any of its subsidiaries or any of their respective properties or assets, except, in the case of the foregoing clause (ii) or (iii), for violations, breaches or defaults that would not, individually or in the aggregate, be material to the Company or any of its subsidiaries, taken as a whole.

     Section 2.7 No Default. Neither the Company nor any of its subsidiaries is in breach, default or violation (and no event has occurred that with notice or the lapse of time or both would constitute a breach, default or violation) of any term, condition or provision of (i) its Articles of Incorporation or Bylaws (or similar governing documents), or (ii) any order, writ, injunction or decree of any Governmental Entity applicable to the Company or any of its subsidiaries or any of their respective properties or assets, except, in the case of foregoing clause (ii) , for violations, breaches or defaults that would not, individually or in the aggregate, result in any loss, expense, charge, assessment, levy, fine or other liability being imposed upon or incurred by the Company or any of its subsidiaries exceeding One Hundred Thousand Dollars ($100,000).

     Section 2.8 No Undisclosed Liabilities; Absence of Changes. Neither the Company nor any of its subsidiaries has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that would be required by GAAP to be reflected on a consolidated balance sheet of the Company and its subsidiaries (including the notes thereto), other than (i) liabilities and obligations (A) reflected on the Company Balance Sheet (including the notes thereto), (B) incurred in connection with the preparation, execution, delivery and performance of this Agreement and the other Transaction Agreements, and (C) incurred in the ordinary course of business consistent with past practices after the Balance Sheet Date and (ii) accounts payable or accrued salaries that have been incurred by the Company since the Balance Sheet Date in the ordinary course of business consistent with past practices. Without limiting the generality of the foregoing, except as set forth on Section 2.8 of the Company Disclosure Schedule, during the period between the Company Balance Sheet Date and the date hereof, each of the Company and its subsidiaries has conducted its business in all material respects in the ordinary and usual course of such business consistent with past practices, and there has not been any:

          (a) Material Adverse Effect on the Company;

          (b) damage, destruction or other casualty loss with respect to any asset or property owned, leased or otherwise used by the Company or any of its subsidiaries having a book value or fair market value exceeding One Hundred Thousand Dollars ($100,000), whether or not covered by insurance;

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          (c) declaration, setting aside or payment of any dividend, profit sharing distribution or other distribution in respect of the capital stock of the Company or any of its subsidiaries or any repurchase, redemption or other acquisition by the Company or any of its subsidiaries of any outstanding shares of capital stock or other securities of, or other ownership interests in, the Company or any of its subsidiaries;

          (d) except as provided in Section 1.2, amendment of any material term of any outstanding security of the Company or any of its subsidiaries;

          (e) incurrence, assumption or guarantee by the Company or any of its subsidiaries of any indebtedness for borrowed money other than in the ordinary course of business and in amounts and on terms consistent with past practices;

          (f) creation or assumption by the Company or any of its subsidiaries of any Lien on any asset having a book value or fair market value exceeding One Hundred Thousand Dollars ($100,000);

          (g) loan, advance or capital contribution made by the Company or any of its subsidiaries to, or investment in, any person other than (i) loans or advances to employees in connection with business-related travel and (ii) loans, advances or capital contributions to, or investments in, wholly-owned subsidiaries of the Company, and in each of cases (i) and (ii), made in the ordinary course of business consistent with past practices;

          (h) transaction or commitment made, or any contract or agreement entered into, by the Company or any of its subsidiaries relating to its assets or business (including the acquisition or disposition of any assets) or any relinquishment by the Company or any of its subsidiaries of any contract, agreement or other right, in either case, having a stated contract amount or otherwise potentially involving Company or subsidiary obligations or entitlements with a value exceeding One Hundred Thousand Dollars ($100,000);

          (i) change by the Company or any of its subsidiaries in any of its accounting principles, practices or methods; or

          (j) increase in the compensation or benefits (including the acceleration of vesting thereof) payable or that could become payable by the Company or any of its subsidiaries to (i) officers, directors or engineers of the Company or any of its subsidiaries or (ii) any other employee of, or consultant to, the Company or any of its subsidiaries whose annual cash compensation is One Hundred Thousand Dollars ($100,000) or more.

     Section 2.9 Litigation. There are no suits, claims, actions, proceedings or investigations pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries or any of its or its subsidiaries’ properties or assets before any Governmental Entity. Neither Company nor any of its subsidiaries is subject to any outstanding order, writ, injunction or decree of any Governmental Entity that would reasonably be expected to result, individually or in the aggregate, in any loss, expense, charge, assessment, levy, fine or other liability being imposed upon or incurred by the Company or any of its subsidiaries exceeding One Hundred Thousand Dollars ($100,000).

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     Section 2.10 Compliance with Applicable Law. Each of the Company and its subsidiaries currently holds, and has held at all times, all permits, licenses, variances, exemptions, orders and approvals of all Governmental Entities necessary for the lawful conduct of its business (collectively, the “Company Permits”), except for failures to hold such permits, licenses, variances, exemptions, orders and approvals that would not, individually or in the aggregate, result in any charge, assessment, levy, fine or other liability being imposed upon or incurred by the Company or any of its subsidiaries exceeding One Hundred Thousand Dollars ($100,000). Each of the Company and its subsidiaries is in compliance, and has been in compliance at all times, with the terms of the Company Permits held by it or to which it is subject, except where the failure so to comply would not, individually or in the aggregate, result in any charge, assessment, levy, fine or other liability being imposed upon or incurred by the Company or any of its subsidiaries exceeding One Hundred Thousand Dollars ($100,000). The business of the Company and each of its subsidiaries is being conducted, and has at all times been conducted, in compliance with all applicable laws, ordinances and regulations of the United States or any foreign country, or any political subdivision thereof, or of any Governmental Entity except for violations or possible violations of any United States or foreign laws, ordinances or regulations that do not and will not result, individually or in the aggregate, in any charge, assessment, levy, fine or other liability being imposed upon or incurred by the Company or any of its subsidiaries exceeding One Hundred Thousand Dollars ($100,000).

     Section 2.11 Employee Benefit Plans; Labor Matters.

          (a) Section 2.11(a) of the Company Disclosure Schedule lists as of the date hereof all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), and all bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, health, life, or disability insurance, dependent care, severance and other similar fringe or employee benefit plans, programs or arrangements and any current (or to the extent the Company or any subsidiary has any continuing obligations, former) employment or executive compensation or severance agreements written or otherwise maintained or contributed to for the benefit of or relating to any employee (or to the extent the Company or any subsidiary has any continuing obligations, former employee) of the Company or any subsidiary of the Company, any trade or business (whether or not incorporated) that is a member of a controlled group including the Company or any of its subsidiaries or that is under common control with the Company or any of its subsidiaries within the meaning of Section 414 of the Code (an “ERISA Affiliate”), as well as each plan with respect to which the Company or any of its subsidiaries or an ERISA Affiliate would incur liability under Section 4069 (if such plan has been or were terminated) or Section 4212(c) of ERISA (together the “Employee Plans”). The Company has made available to Parent a copy of each Employee Plan and, where applicable, (i) the two most recent annual reports on Form 5500 (including schedules) filed with the Internal Revenue Service (the “IRS”) for each Employee Plan where such report is required, (ii) the documents and instruments governing each such Employee Plan and related funding arrangement including participant agreements, (iii) the most recent summary plan description and any summaries of material modifications for each such Employee Plan, and (iv) the most recent favorable IRS determination letter for each Employee Plan that is intended to be qualified pursuant to Section 401(a) of the Code.

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          (b) No Employee Plan is subject to Title IV of ERISA or Section 412 of the Code, and neither the Company, nor any subsidiary of the Company, nor any ERISA Affiliate has incurred any liability (contingent or otherwise) with respect to any such Employee Plan or any other plan or arrangement subject to Title IV of ERISA. Each Employee Plan has been operated and maintained in all material respects in accordance with its terms and applicable law (including, without limitation, ERISA and the Code), and there has been no material violation of any reporting or disclosure requirement imposed by ERISA or the Code. Each Employee Plan intended to be qualified under Section 401(a) of the Code has received a determination letter from the IRS, and since the date of each most recent determination, there has, to the knowledge of the Company, been no event, condition or circumstance that has adversely affected or is reasonably likely to adversely affect such qualified status.

          (c) No fiduciary or party in interest of any Employee Plan has participated in, engaged in or been a party to any transaction that is prohibited under Section 4975 of the Code or Section 406 of ERISA and not exempt under Section 4975 of the Code or Section 408 of ERISA, respectively. With respect to any Employee Plan, (i) neither the Company, nor any subsidiary of the Company nor any of its ERISA Affiliates has had asserted against it any claim for Taxes under Chapter 43 of Subtitle D of the Code and Section 5000 of the Code, or for penalties under ERISA Section 502(c), 502 (i) or 502 (l), nor, to the knowledge of the Company, is there a basis for any such claim, and (ii) no officer, director or employee of the Company or any of its subsidiaries has committed a breach of any fiduciary responsibility or obligation imposed by Title I of ERISA. Other than routine claims for benefits, there is no claim or proceeding (including any audit or investigation) pending or, to the knowledge of the Company, threatened, involving any Employee Plan by any person, or by the IRS, the United States Department of Labor or any other Governmental Entity against such Employee Plan or the Company or any of its subsidiaries or any ERISA Affiliate; and no fact or circumstance exists that would make such a claim or proceeding likely to occur.

          (d) Section 2.11(d) of the Company Disclosure Schedule sets forth a list as of the date hereof of all (i) employment agreements with employees of the Company or any subsidiary of the Company (other than “at will” offer letters made available to Parent pursuant to which the Company and its subsidiaries have no liability and will not have any liability), (ii) agreements with consultants who are individuals obligating the Company or any of its subsidiaries to make annual cash payments in an amount exceeding One Hundred Thousand Dollars ($100,000) and any agreements pursuant to which any employee of the Company or any of its subsidiaries provides consulting or similar services to a third party, (iii) severance agreements or other agreements, arrangements or policies that contain post-employment liabilities or obligations, programs and policies of the Company or any of its subsidiaries with or relating to its respective employees, except such programs and policies required to be maintained by law, and (iv) plans, programs, agreements and other arrangements of the Company or any of its subsidiaries with or relating to its respective employees that contain change in control provisions whether or not listed in other parts of the Company Disclosure Schedule. The Company has made available to Parent copies of all such agreements, plans, programs and other arrangements.

          (e) Except as set forth in Section 2.11(e) of the Company Disclosure Schedule and except as contemplated by Section 1.11 of this Agreement, there will be no payment, accrual

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of additional benefits, acceleration of payments or vesting of any benefit under any Employee Plan or any other agreement or arrangement to which the Company or any of its subsidiaries is a party with any employees, consultants or service providers, and no employee, consultant, independent contractor, officer or director of the Company or any of its subsidiaries will become entitled to severance, termination allowance or similar payments, solely by reason of entering into or in connection with the transactions contemplated by this Agreement.

          (f) No Employee Plan that is a welfare benefit plan within the meaning of Section 3(1) of ERISA provides benefits to former employees of the Company or any of its subsidiaries or its ERISA Affiliates other than pursuant to Section 4980B of the Code or similar state laws. The Company, its subsidiaries and its ERISA Affiliates have complied in all material respects with the provisions of Part 6 of Title I of ERISA and Sections 4980B, 9801, 9802, 9811 and 9812 of the Code.

          (g) There are no controversies relating to any Employee Plan or other labor matters pending or, to the knowledge of the Company, threatened between the Company or any subsidiary of the Company and any of its respective employees. Neither Company nor any of its subsidiaries is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company or any subsidiary of the Company, and neither the Company nor any of its subsidiaries knows of any activities or proceedings of any labor union to organize any such employees. No strikes, work stoppage, material grievance, claim of unfair labor practice, or dispute against the Company or any of its subsidiaries has occurred, is pending or, to the knowledge of the Company, threatened, and to the knowledge of the Company there is no basis for any of the foregoing.

          (h) Neither the Company nor any of its subsidiaries nor any of its ERISA Affiliates sponsors or has ever sponsored, maintained, contributed to, or incurred an obligation to contribute to any Multiemployer Plan or to a Multiple Employer Plan, nor is it reasonably likely that there would be any liability to a Multiemployer Plan or Multiple Employer Plan pursuant to Title IV of ERISA. For these purposes, “Multiemployer Plan” means a multiemployer plan, as defined in Section 3(37) and 4001(a)(3) of ERISA, and “Multiple Employer Plan” means any Employee Benefit Plan sponsored by more than one employer, within the meaning of Sections 4063 or 4064 of ERISA or Section 413(c) of the Code.

          (i) In accordance with applicable law, each Employee Plan can be amended or terminated by the Company or a subsidiary of the Company at any time, without consent from any other person and without liability other than for benefits accrued as of the date of such amendment or termination (other than charges incurred as a result of such termination). The Company and its subsidiaries and their respective ERISA Affiliates have made full and timely payment of all amounts required to be contributed or paid as expenses or accrued such payments in accordance with normal procedures under the terms of each Employee Plan and applicable law.

          (j) To the knowledge of the Company, no employee, or group of employees, of the Company or any of its subsidiaries has any plans to terminate employment with the Company or any of its subsidiaries. Each of the Company and its subsidiaries has complied in all material respects with all laws relating to the employment of labor, including provisions

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thereof relating to wages, hours, equal opportunity and collective bargaining, and does not have any other material employee relations problems. All employees classified as exempt from the overtime provisions of state and federal law have been properly classified, as have all individuals classified as independent contractors. There are no wage and hour, wrongful termination or employment discrimination claims, complaints or charges pending against the Company or any of its subsidiaries, and, to the knowledge of the Company, there is no reasonable basis for any claim, complaint or charge against the Company or any of its subsidiaries by any employee or former employee of the Company or any of its subsidiaries who was terminated prior to the Effective Time and from whom the Company or such subsidiary did not obtain a release of claims that was effective and not subject to revocation at the Effective Time.

          (k) Each of the Company and its subsidiaries has paid in full to, or accrued for the benefit of, all employees all wages, salaries, commissions, bonuses, vacation pay, fringe benefit payments, sabbatical pay and all other direct and indirect compensation of any kind for all services performed by each of them in accordance with applicable law and the terms of the Employee Plans. Section 2.11(k) of the Company Disclosure Schedule sets forth a list of the names of each employee and the amount of sabbatical pay accrued for each as of June 7, 2010. Except as set forth on Section 2.11(k) of the Company Disclosure Schedule, no sabbatical pay or other similar payment is required to be accrued for any employee under applicable law, the terms of any Employee Plan or GAAP.

          (l) Neither the Company nor any of its subsidiaries has had or will have any liability as of the Effective Time to any employee or to any organization or any other person as a result of the termination of any employee leasing arrangement.

          (m) No “leased employee,” as that term is defined in Section 414(n) of the Code or any other person who is not classified as a common law employee of the Company or any of its subsidiaries, performs services for the Company or any of its subsidiaries or any ERISA Affiliate. No person who has been classified by the Company or any of its subsidiaries as an independent contractor or in any other non-employee classification (each a “Contingent Worker”) is eligible to participate in, nor does such person participate in, any Employee Plan subject to ERISA or any plan described in Section 423 of the Code and no retroactive participation in any Employee Plan would result due to reclassification of a Contingent Worker as a common law employee of the Company or any subsidiary of the Company. The exclusion of any Contingent Worker from any Employee Plan does not cause any Employee Plan which is intended to be qualified under Code Section 401(a) to lose such qualification, nor does the exclusion of any Contingent Worker violate the terms of any Employee Plan.

     Section 2.12 Environmental Laws and Regulations. (a) Each of the Company and its subsidiaries has been in compliance with all applicable United States federal, state, local and foreign laws and regulations relating to pollution or protection of human health or the environment (including ambient air, surface water, ground water, land surface or subsurface strata) (collectively, “Environmental Laws”), except for non-compliances that, individually or in the aggregate, would not result in any loss, expense, charge, assessment, levy, fine or other liability being imposed upon or incurred by the Company or any of its subsidiaries exceeding One Hundred Thousand Dollars ($100,000); (b) to the knowledge of the Company, there has been no disposal, release or threatened release of any substance, material or waste that is listed,

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classified or regulated in any concentration pursuant to any Environmental Law or which may be the subject of regulatory action by any Governmental Entity pursuant to any Environmental Law (a “Hazardous Substance”) on, under, in, from or about any property currently or formerly owned or operated by the Company or any of its subsidiaries, or otherwise related to the operations of the Company or any of its subsidiaries, that has resulted or may result in any loss, expense, charge, assessment, levy, fine or other liability being imposed upon or incurred by the Company or any of its subsidiaries exceeding One Hundred Thousand Dollars ($100,000); (c) neither the Company nor any of its subsidiaries has received any written notice, demand, letter, claim or request for information alleging violation by, or liability of, the Company or any of its subsidiaries under any Environmental Law, and there are no proceedings, actions, orders, decrees, injunctions or other written claims or, to the knowledge of the Company, any threatened actions or claims, relating to or otherwise alleging liability under any Environmental Law; (d) neither the Company nor any of its subsidiaries has entered into or agreed to, and is not subject to, any consent decree, order or settlement or other agreement in any judicial, administrative, arbitral or other similar forum relating to its compliance with or liability under any Environmental Law; and (e) neither the Company nor any of its subsidiaries has assumed or is required to make any expenditures, individually or in the aggregate, exceeding One Hundred Thousand Dollars ($100,000) pursuant to or to comply with any Environmental Law.

     Section 2.13 Taxes.

          (a) Definitions. For purposes of this Agreement:

               (i) “Tax” (including “Taxes”) means (A) all federal, state, local, foreign and other net income, gross income, gross receipts, net worth, sales, use, ad valorem, transfer, franchise, profits, transaction, title, capital, paid-up capital, registration, license, escheat, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, business and occupation, premium, property, real property, personal property, intangibles, inventory and merchandise, business privilege, federal highway use, commercial rent, production, windfall profits, alternative or add-on minimum, estimated, gains, social security, welfare, value added, environmental, workers’ compensation, customs, duties or other taxes, fees, levies, tariffs, imposts, assessments or charges of any kind whatsoever, (B) any interest, penalties, fines, additions to tax or additional amounts imposed by any Governmental Entity in connection with (i) any item described in clause (A) or (ii) the failure to comply with any requirement imposed with respect to any Tax Returns, (C) any liability for payment of amounts described in clause (A) or (B) whether as a result of transferee liability, of being a member of an affiliated, consolidated, combined or unitary group for any period, or otherwise through operation of law, and (D) any liability for the payment of amounts described in the foregoing clause (A), (B) or (C) as a result of any tax sharing, tax indemnity or tax allocation agreement or any other express or implied agreement to indemnify any other person.

               (ii) “Tax Law” means any domestic or foreign, federal, state or local statute, law, ordinance, rule, code, regulation, order, writ, injunction, judgment, decree or other requirement of any Governmental Entity relating to Taxes.

               (iii) “Tax Period” means any period prescribed by any Governmental Entity for which a Tax Return is required to be filed or a Tax is required to be paid.

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               (iv) “Tax Return” means any return, declaration, report, statement, information statement, election, notification or other written information or document filed or required to be filed with, or submitted to, a Governmental Entity with respect to Taxes, including any claims for refunds of Taxes and any schedules, attachments, amendments or supplements (filed or required to be filed) of any of the foregoing.

          (b) Tax Matters

               (i) Each of the Company and its subsidiaries has timely filed on or before the applicable Due Date with the appropriate Governmental Entity all Tax Returns it is required to have filed. All Tax Returns filed by the Company and its subsidiaries have been properly completed in compliance with applicable legal requirements and are true, correct and complete.

               (ii) Each of the Company and its subsidiaries has timely paid all Taxes that have become due or payable (whether or not shown on a Tax Return). The amount reflected as a liability for current taxes payable on the face of the most recent balance sheet (as opposed to in any notes thereto) included in the Financial Statements equals or exceeds all Taxes for which the Company and its subsidiaries are liable (whether or not shown on any Tax Return) that have accrued but are not yet due or payable as of the date thereof. The Company and its subsidiaries have not incurred any liability for Taxes since the date of the most recent balance sheet included in the Financial Statement other than (A) Spinoff Taxes and (B) Taxes accrued following such date in the ordinary course of business consistent with comparable amounts incurred in prior Tax Periods adjusted only for ordinary course changes in operating results of the Company and its subsidiaries.

               (iii) No claim has been made by a Governmental Entity in a jurisdiction where the Company or any of its subsidiaries does not file Tax Returns that the Company or any of such subsidiaries is or may be subject to taxation by that jurisdiction.

               (iv) The Company has previously made available to Parent true, correct and complete copies of (A) all Tax Returns filed by or on behalf of the Company or any of its subsidiaries for which the applicable statute of limitations has not expired, (B) all audit reports, letter rulings, technical advice memoranda and similar documents issued by a Governmental Entity relating to Taxes with respect to the Company or its subsidiaries and (C) all statements of deficiencies assessed against or agreed to by the Company or its subsidiaries. No election has been made with respect to Taxes of the Company or any of its subsidiaries that is not reflected in a Tax Return previously made available to Parent.

               (v) There is no current, pending or, to the knowledge of the Company, threatened, claim, demand, cause of action, suit, arbitration, inquiry, hearing, investigation, request for information or filings, audit, examination, disputes, proposed adjustment or proceeding (whether administrative, regulatory or otherwise, or whether oral or in writing) by any Governmental Entity with respect to Taxes relating to the Company or its subsidiaries (“Tax Claim”). Section 2.13(b)(v) of the Disclosure Schedule sets forth all deficiencies claimed, proposed or asserted or assessments that have been made against the Company or any of its subsidiaries as a result of any Tax Claim since January 1, 2005. All amounts set forth in Section

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2.13(b)(v) of the Disclosure Schedule have been fully paid or otherwise fully settled with no further amounts owed.

               (vi) Neither the Company nor any of its subsidiaries is or has been a party to or bound by any Tax indemnity agreement, Tax sharing agreement, Tax allocation agreement or similar contract, and neither the Company nor any of its subsidiaries is or has been a party to or bound by any offer in compromise, closing agreement, gain recognition agreement or other agreement with any Governmental Entity with respect to Taxes. No Tax ruling has been applied for or received by the Company or any of its subsidiaries.

               (vii) Neither the Company nor any of its subsidiaries has (A) engaged in a transaction that constitutes a “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(1) (or any analogous provision of state, foreign or local Tax Law), or a transaction that constitutes a “listed transaction” as such term is defined in Treasury Regulation Section 1.6011-4(b)(2), or (B) taken a reporting position on a Tax Return that, if not sustained, would be reasonably likely to give rise to a penalty for substantial understatement of federal income Tax under Section 6662 of the Code (or any similar provision of U.S. state, U.S. local or foreign Tax Law), without regard to any disclosure thereof.

               (viii) Neither the Company nor any of its subsidiaries is or has been a United States real property holding corporation within the meaning of Code Section 897(c)(2) during the applicable period specified in Code Section 897(c)(1)(A)(ii).

               (ix) Neither the Company nor any of its subsidiaries (i) has been a member of any affiliated group that filed, or was required to file, a consolidated federal income Tax Return or a member of a combined, consolidated or unitary group for state, local or foreign Tax purposes (other than any such group of which the Company was at all times the common parent corporation) and (ii) has, or will have, any liability for the Taxes of any other person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign Tax Law), as a transferee or successor, by Contract, operation of law or otherwise.

               (x) Neither the Company nor any of its subsidiaries has agreed to or is required to make any adjustment for any period after the Closing pursuant to Sections 481(a) or 263A of the Code (or any comparable provision of state, local or foreign Tax Law) by reason of a change in accounting method initiated by the Company or any of its subsidiaries, any transaction or event or otherwise, and the Company has no knowledge that the IRS has proposed any such adjustment or a change in any accounting method used by the Company or any of its subsidiaries. Each of the Company and its subsidiaries uses the accrual method of accounting for federal income tax purposes. Except as required by applicable Tax Law, neither the Company nor any of its subsidiaries has taken any action inconsistent with its practices in prior years with the intent to defer a liability for Taxes from a period prior to the Effective Time to a period following the Effective Time. Neither the Company nor any of its subsidiaries has disposed of any property in a transaction being accounted for under the installment method pursuant to Section 453 of the Code (or similar provisions of applicable Tax Law). Neither the Company nor any of its subsidiaries is required to recognize any income for tax purposes after the Closing Date as a result of any transaction that occurred prior to the Closing Date with the intent of receiving the cash prior to the Closing and deferring the Tax until following the Closing, other

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than transactions entered into in the ordinary course of business consistent with similar transactions entered into in prior Tax Periods.

               (xi) Neither the Company nor any of its subsidiaries is subject to or has filed any waiver or extension of the statute of limitations applicable to any Tax Return or the assessment or collection of any Tax.

               (xii) Neither the Company nor any of its subsidiaries is a party to any agreement, Contract, arrangement or plan that has resulted or would result, separately or in the aggregate, in connection with the transactions contemplated by this Agreement (either alone or in combination with any other events), in the payment of any “parachute payments” within the meaning of Section 280G of the Code.

               (xiii) All Taxes that the Company and its subsidiaries have been required to withhold or to collect for payment have been duly withheld and collected, and, to the extent required, have been timely paid to the appropriate Governmental Entity in compliance with all applicable legal requirements.

               (xiv) There are no Tax Liens on any assets of the Company or any of its subsidiaries, other than Liens for Taxes not yet due and payable.

               (xv) Neither the Company nor any of its subsidiaries has distributed stock of another person, or has had its stock distributed by another person, in a transaction that purported or intended to be governed in whole or in part by Section 355 or 361 of the Code other than the Spinoff.

               (xvi) Each Company Stock Option exercised (or that will be exercised) prior to the Closing Date and treated by the Company as an “incentive stock option” as such term is defined in Section 422 of the Code, qualified at all times for such treatment and was (or will be) held at the time of exercise by a person whose exercise of such Company Stock Option was (or will be) governed by Section 421(a) of the Code (determined without regard to Section 422(a)(1) of the Code).

               (xvii) Neither the Company nor any of its subsidiaries is a party to any joint venture, partnership or other arrangement or Contract that could be treated as a partnership for any applicable income Tax purposes. Section 2.13(b)(xx) of the Company Disclosure Schedule sets forth all elections pursuant to Treasury Regulation Section 301.7701-3 that have been made by any subsidiaries of the Company and by business entities in which the Company or any of its subsidiaries owns an equity interest. Neither the Company nor any of its subsidiaries has ever been an “S corporation” as that term is defined in the Code.

               (xviii) Neither the Company nor any of its subsidiaries has (i) ever been a personal holding company under Section 542 of the Code or (ii) participated in an international boycott within the meaning of Section 999 of the Code.

          (c) The fair market value of 100% of the interests in Nvelo to be distributed pursuant to the Nvelo Distribution, determined at the time of the Nvelo Distribution, does not exceed $1,000,000.00.

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          (d) Each Employee Plan that is a nonqualified deferred compensation plan (as defined under Section 409A of the Code) satisfies the applicable requirements of Sections 409A(a)(2),(3), and (4) of the Code, and has, since January 1, 2005, been operated in good faith compliance with Sections 409A(a)(2), (3), and (4) of the Code. Each Company Stock Option that was granted on or after January 1, 2005 and/or that vested on or after January 1, 2005 has an exercise price that is equal to or greater than the fair market value of the underlying equity as of the date such Company Stock Option was granted, as determined for purposes of Section 409A of the Code.

          (e) For purposes of this Section 2.13, where the context permits, each reference to the Company and its subsidiaries shall include a reference to any other person for whose Taxes the Company or any of its subsidiaries, as applicable, is or could be held liable under law.

          (f) The Nvelo Distribution will qualify for treatment as a tax-free distribution to the Shareholders pursuant to Sections 355 of the Code, but will be a taxable transaction to the Company by reason of Section 355(e) of the Code.

     Section 2.14 Intellectual Property.

          (a) Certain Definitions. For purposes of this Agreement:

               (i) “Business” means any and all of the business, operations and activities of the Company and its subsidiaries as previously or currently conducted and as currently proposed to be conducted by the Company and its subsidiaries, including those relating to the manufacture, use, sale, license, distribution, development, testing, marketing, support, maintenance and other exploitation of the Products and those relating to any business plans, development plans, project plans or product road maps of the Company and its subsidiaries;

               (ii) “Company IPR” means any and all IPR (A) that the Company and any of its subsidiaries purport to own or has held itself out as owning; (B) for which any application, certificate, registration or grant has been made or issued in the name of the Company or any subsidiary; (C) for which the Company or any subsidiary has obtained or recorded, or has the right to obtain or record, any assignment, grant or conveyance of any ownership rights to the Company or any subsidiary; (D) that was authored, conceived, developed, created, invented or reduced to practice by any employee in the course or scope of employment by the Company or any subsidiary; (E) that was authored, conceived, developed, created, invented or reduced to practice by any independent contractor of the Company or any subsidiary in the course of performing services for the Company or any subsidiary other than any Company Licensed IPR; (F) relates to the Business and was authored, conceived, developed, created, invented or reduced to practice by any founder of the Company or any subsidiary or other person involved in the formation of the Company or any subsidiary or development of any of the IPR, Products or plans for the Business, other than Company Licensed IPR; or (G) is used in or necessary for the conduct of the Business, other than Company Licensed IPR.

               (iii) “Company Licensed IPR” means any and all IPR that is licensed to the Company or any subsidiary of the Company pursuant to an Inbound License Agreement;

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               (iv) “Company Software” means all Software incorporated in any of the Products and all other Software used in connection with the design, development, testing and support of Products, other than Software licensed to the Company under the Inbound License Agreements;

               (v) “Inbound License Agreement” means any agreement granting to the Company or any of its subsidiaries any license, covenant not to sue or other right (in each case where such grant is currently in effect) under or with respect to any IPR or Software;

               (vi) “Intellectual Property Rights” or “IPR” means any and all rights throughout the world in, arising from or associated with any of the following, whether protected, created or arising under the laws of the United States or any other jurisdiction: (A) trade names, trademarks and service marks (registered and unregistered), domain names and other Internet addresses or identifiers, trade dress and similar rights and applications (including intent to use applications) to register any of the foregoing (collectively, “Trademarks”); (B) all classes or types of patents, including utility patents, utility models, design patents, provisional patents, invention certificates, and other government grants for the protection of inventions and all reexaminations, reissues, extensions, renewals, applications and rights to file applications for any of the foregoing (collectively, “Patents”); (C) copyrights, design rights, other rights in works of authorship and registrations and applications for any of the foregoing (collectively, “Copyrights”); (D) trade secrets and all other know-how, inventions, discoveries, improvements, concepts, ideas, methods, processes, designs, schematics, drawings, formulae, technical data, specifications, research and development information, technology, algorithms, models, methodologies, databases, designs and other information that derive economic value (actual or potential) from not being generally known to public (but excluding any Copyrights or Patents for any of the foregoing covered under (B) or (C) above) (collectively, “Trade Secrets”); (E) mask work and similar rights protecting integrated circuit or chip topographies or designs (collectively, “Mask Works”); (F) all rights in databases and data collections (including knowledge databases and customer information); (G) moral rights, publicity rights and any other proprietary, intellectual, industrial property or information rights of any kind not otherwise covered under (A) through (F) above; and (H) all goodwill associated with any of the foregoing;

               (vii) “Open Source License” means any license whose terms require the distribution of source code in connection with the distribution of the Software to which such license applies or that prohibit the licensee from charging a fee or otherwise limit the licensee’s freedom of action with regard to seeking compensation in connection with sublicensing or distributing the Software to which such license applies (whether in source code or executable code form), including the Artistic License, the Mozilla Public License, the GPL or the LGPL or any license that applies to “open source”, “freeware”, “shareware” or other freely available public Software.

               (viii) “Open Source Software” means any “open source”, “freeware”, “shareware” or other freely available public Software, including any Software that is licensed under the Artistic License, the Mozilla Public License, the GPL, the LGPL or any other Open Source License.

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               (ix) “Outbound License Agreement” means any agreement granting to any Third Party (other than the Company) any license, covenant not to sue or other right (in each case where such grant is currently in effect) under or with respect to any Company IPR or under which the Company grants, purports to grant or has any obligation to grant any license, covenant not to sue or other right under or with respect to any IPR or Software (in each case where such actual or purported grants or obligations are still in effect);

               (x) “Products” means: (A) any and all Software, product and service offerings of the Company and any of its subsidiaries, including those under development and any other subject matter that embodies or is protected by Company IPR that is licensed or otherwise made available to a customer of the Company or any of its subsidiaries; (B) all documentation associated with any of the foregoing; (C) all versions of any of the foregoing, including prior releases, alpha and beta test versions, new versions or portions thereof currently under development; and (D) all designs, packaging, displays, and training materials associated with any of the foregoing. Clauses (A), (B) and (C) are collectively referred to as “Product Offerings”

               (xi) “Software” means (A) computer software and code, including any and all software implementations of algorithms, models and methodologies, assemblers, scripts, macros, applets, compilers, source code and executable code; development tools, design tools and user interfaces, in any form or format, however fixed; (B) databases and compilations, including any and all data (including image and sound data), integrated circuit designs, databases, cells and libraries and collections of data, whether machine readable or otherwise; (C) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing; and (D) all documentation, including user manuals and training materials, relating to any of the foregoing;

               (xii) “Standard Commercial Software” means generally available standard commercial software applications used generally in the Company’s or any subsidiary’s internal business operations (and not incorporated into or distributed with Company Products or otherwise by the Company) pursuant to “shrink wrap” or “click through” licenses on terms that have not been negotiated, in each case, for aggregate fees no greater than five thousand dollars ($5,000) per copy or twenty-five thousand dollars ($25,000) in the aggregate; and

               (xiii) “Third Party” means, solely for purposes of this Section 2.14, any person other than the Company and any subsidiary of the Company.

          (b) Scheduled Intellectual Property Rights.

               (i) Company Registered IPR. Section 2.14(b)(i) of the Company Disclosure Schedule sets forth an accurate and complete list of any and all of the following Company IPR or IPR exclusively licensed to the Company or any of its subsidiaries: (A) Patents and Patent applications (including provisional applications); (B) registered Trademarks and applications for registration of Trademarks, including intent-to-use applications and other registrations or applications related to Trademarks; (C) registered Copyrights and applications for registration of Copyrights; (D) registered Mask Works and applications for Mask Works; and (E) other Company IPR that is the subject of any United States, international or foreign application, registration, certificate, filing, grant or other document issued, filed with or recorded

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by an Governmental Entity (collectively, (A) through (E), “Company Registered IPR”). For each item of Company Registered IPR, Section 2.14(b)(i) of the Company Disclosure Schedule sets forth (1) the title, application serial number, registration number, filing date, issue date (if issued) and other appropriate identifying information; (2) current status of such Company Registered IPR; and (3) an accurate and complete description of any and all ownership or exclusive license rights of the Company or any of its subsidiaries or any Third Party with respect to such Company Registered IPR, including joint ownership rights and rights of enforcement.

               (ii) Inbound License Agreements. Section 2.14(b)(ii) of the Company Disclosure Schedule sets forth an accurate and complete list of any and all Inbound License Agreements, other than licenses for Standard Commercial Software. For each Inbound License Agreement, Section 2.14(b)(ii) of the Company Disclosure Schedule sets forth the title, parties and effective date of such Inbound License Agreement and any amendment thereof.

               (iii) Products. Section 2.14(b)(iii) of the Company Disclosure Schedule sets forth an accurate and complete list of all current Products (excluding the documentation described in clause (A) of Section 2.14(a)(vii) and the materials described in clause (D) of Section 2.14(a)(vii)) of the Company and its subsidiaries. For each Product Offering, Section 2.14(b)(iii) of the Company Disclosure Schedule sets forth a complete and accurate list of (A) any export licenses, export classification numbers, permits, certifications or other approvals of any Governmental Entity, university or industry testing lab or certification authority with respect to such Product Offerings; (B) any Company Licensed IPR used in such Product Offerings; and (C) operating system environments and hardware platforms supported by such Product Offerings.

               (iv) Other Company IPR. Section 2.14(b)(iv) of the Company Disclosure Schedule sets forth an accurate and complete list identifying all invention disclosures prepared since January 1, 2007 and, to the knowledge of the Company, prepared prior to that date, that constitute Company IPR and are not the subject of any Company Registered IPR listed pursuant to Section 2.14(b)(i).

               (v) Outbound License Agreements. (A) Section 2.14(b)(v) of the Company Disclosure Schedule sets forth a complete and accurate list of all Outbound License Agreements, excluding non-exclusive internal use licenses of executable code of Products granted by the Company or any of its subsidiaries to end user customers that have purchased or licensed Products for which the total amount payable to the Company or any of its subsidiaries did not exceed Two Hundred Fifty Thousand Dollars ($250,000). For each such Outbound License Agreement, Section 2.14(b)(v) of the Company Disclosure Schedule sets forth the title, parties and effective date of such Outbound License Agreement. (B) Each Third Party to which the Company or any subsidiary has distributed, licensed or otherwise made available any Product or Software has executed and delivered to the Company or a subsidiary of the Company a written license agreement or, in the case of any Product or Software made available solely in object code form, is legally bound by a “click-through agreement” setting forth the terms and conditions applicable to such Third Party’s use of such Product or Software, a complete and accurate copy of which agreement has been made available by the Company to Parent’s counsel prior to the date hereof and any amendment thereof.

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          (c) Intellectual Property Rights.

               (i) Ownership. The Company (or a subsidiary of the Company) owns exclusively all right, title and interest in and to all of the Company IPR free and clear of any and all Liens, and all such Company IPR is fully transferable, alienable and licenseable by the Company (or such subsidiary) and shall be fully transferable, alienable and licensable by the Surviving Corporation on and immediately after the Closing, and by Parent on and after any subsequent merger of the Surviving Corporation into Parent, in each case except as a result of any independent agreements or obligations of Parent. Upon the Closing, the Surviving Corporation shall succeed to all of the Company IPR and all of such rights shall be exercisable by the Surviving Corporation, and by Parent on and after any subsequent merger of the Surviving Corporation into Parent, to the same extent as by the Company (or a subsidiary of the Company) prior to the Closing, in each case except as a result of any independent agreements or obligations of Parent. The Company has not transferred ownership of, or granted any exclusive license with respect to, any Company IPR or IPR that was, at the time of transfer, owned by the Company or a subsidiary of the Company. No loss or expiration of any material Company IPR is pending or reasonably foreseeable (other than the expiration of Registered IP at the end of the applicable statutory term) or, to the knowledge of the Company, threatened. Section 2.14(c)(i) of the Company Disclosure Schedule sets forth, for all Company IPR that was acquired by the Company or any subsidiary of the Company from a third party (other than any individual consultant or contractor engaged by the Company or any subsidiary of the Company), (i) a general description of the work product, (ii) the identity of the third party from which such Company IPR was acquired and (iii) the name and date of the agreement under which such Company IPR was acquired.

               (ii) Company Licensed IPR. All of the Company’s and its subsidiaries’ rights and licenses under the Inbound License Agreements are valid and the Company’s and its subsidiaries’ rights and licenses are enforceable and are free and clear of any and all Liens (it being understood that no representation is made in this Section 2.14(c)(ii) as to the enforceability and validity of the underlying Company Licensed IPR that is licensed under the Inbound License Agreements). The Company Licensed IPR shall be exercisable by the Surviving Corporation on and after the Closing, and by Parent on and after any subsequent merger of the Surviving Corporation into Parent, to the same extent as by the Company and its subsidiaries prior to the Closing, except as a result of any independent agreements or obligations of Parent. No loss or expiration (other than the scheduled expiration under applicable law of Company Registered IPR and other than the scheduled expiration by its terms of an Inbound License Agreement listed in Section 2.14(b)(ii) of the Company Disclosure Schedule) of any material Intellectual Property Rights or Software licensed to the Company or its subsidiaries under any Inbound License Agreement is pending or reasonably foreseeable or, to the knowledge of the Company, threatened. No licensor or other Third Party under any Inbound License Agreement has any ownership or exclusive license rights in or with respect to any improvements, enhancements, modifications or derivative works made by or for the Company to the Intellectual Property Rights or Software licensed thereunder.

               (iii) No Challenges to Ownership or Licenses. Neither the Company nor any of its subsidiaries has received any written or, to the knowledge of the Company, oral notice or claim (A) challenging the Company’s or any subsidiary’s ownership of the Company

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IPR (in whole or in part) or Company Software or suggesting that any Third Party has any claim of legal or beneficial ownership with respect thereto; or (B) challenging any license, exclusivity or other rights of the Company or any subsidiary under any Inbound License Agreement, including any rights granted to Company or any subsidiary thereunder with respect to any Company Licensed IPR or Software. To the knowledge of the Company, there is no reasonable basis for any such challenge or claim that the Company or any subsidiary of the Company does not own the Company IPR or continue to hold and have the right to exercise all such license, exclusivity and other rights granted under any Inbound License Agreement.

               (iv) Company Registered IPR.

               (A) All Company Registered IPR has been: (1) registered or obtained in accordance with all applicable legal requirements, and is currently in full force and effect; or (2) in the case of patent applications and trademark registration applications, filed and is currently pending in accordance with all applicable legal requirements. The Company (or a subsidiary of the Company) is the exclusive owner and record holder of title of each item of Company Registered IPR by virtue of written assignments to the Company (or such subsidiary) that have been duly executed and properly and timely recorded with the applicable Governmental Entities. The Company (or such subsidiary) has timely paid all filing, examination, issuance, post registration and maintenance fees, annuities and the like associated with or required with respect to any of the Company Registered IPR.

               (B) To the knowledge of the Company, all Company Registered IPR is valid and enforceable. Neither the Company nor any of its subsidiaries has received any written or, to the knowledge of the Company, oral notice or claim challenging or questioning the validity or enforceability or alleging the misuse of any of the Company Registered IPR. Neither the Company nor any of its subsidiaries has taken any action or failed to take any action, which action or failure would reasonably be expected to result in the abandonment, cancellation, forfeiture, relinquishment, invalidation or unenforceability of any of the Company Registered IPR. Neither the Company nor any subsidiary of the Company has committed any illegal tying, illegal term extension, misuse, other illegal anti-competition activities, laches, estoppel, waiver, inequitable conduct in violation of 35 C.F.R. 1.56 or other law, in each case, that, if litigated, may result in the unenforceability or invalidity of any Company Registered IPR. All Trademarks that are Company Registered IPR have been continuously used in the form appearing in, and in connection with, the goods and services listed in their respective registration certificates and applications thereof, respectively.

               (C) No Company Registered IPR has been or is now involved in any interference, reissue, reexamination, entitlement action, opposition, cancellation, litigation, arbitration or similar proceeding and, to the knowledge of the Company, no such action is or has been threatened with respect to any of the Company Registered IPR and there is no Third Party IPR that, if an appropriate proceeding were commenced, would be interfering with or render invalid or unenforceable any Company Registered IPR.

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               (D) There are no actions that must be taken within one hundred twenty (120) days of the Closing Date, including the payment of any registration, maintenance or renewal fees or the filing of any responses to office actions, documents, applications or certificates for the purposes of obtaining, maintaining, perfecting or preserving or renewing any Company Registered IPR. Neither the Company nor any of its subsidiaries has claimed any status in the application for or registration of Company Registered IPR, including “small business status,” that would not be applicable to the Company, its subsidiaries or to the Surviving Corporation on or after the Closing Date, or to Parent after any subsequent merger of the Surviving Corporation into Parent.

               (v) Actions to Protect Intellectual Property Rights. Each of the Company and its subsidiaries has taken reasonable steps consistent with industry standards to protect its rights in the Company IPR and the Company Licensed IPR and maintain the confidentiality of all information that constitutes or at any time constituted a Trade Secret of the Company or a subsidiary of the Company (other than information that lost its status as a Trade Secret through the issuance by the Company of, or publication of, Patents or applications therefor). Without limiting the foregoing, (i) all current and former employees, consultants and contractors of the Company or any subsidiary of the Company have executed and delivered written proprietary information, confidentiality and assignment agreements substantially in the Company’s standard forms (which have previously been provided to Parent) and (ii) all IPR created or developed by any such current and former employees in the course or scope of their employment and all IPR created or developed by current or former consultants and contractors in the scope of their engagement by the Company or any subsidiary of the Company (including any inventions that are the subject of any Patents that are included in the Company Registered IPR) has been assigned to, and is vested exclusively in, the Company or a subsidiary of the Company pursuant to such written agreements.

               (vi) No Infringement or Unauthorized Use by the Company. None of the Products, nor any other activities or operations of the Company or any subsidiary, have infringed upon, misappropriated, violated, diluted or constituted the unauthorized use of, or do infringe upon, misappropriate, violate, dilute or constitute the unauthorized use of, any Intellectual Property Rights of any Third Party. Neither the Company nor any of its subsidiaries has received any written or, to the knowledge of the Company, oral notice or claim asserting or suggesting that any such infringement, misappropriation, violation, dilution, unauthorized use is or may be occurring or has or may have occurred, including any notice requesting or suggesting that the Company or any of its subsidiaries consider entering into a license of a patent owned by a Third Party, nor, to the knowledge of the Company, is there any reasonable basis thereof.

               (vii) No Infringement or Violations by Third Parties. To the knowledge of the Company, no Third Party is misappropriating, infringing, diluting, using without authorization or violating any Company IPR or any Company Licensed IPR exclusively licensed to the Company or any subsidiary.

               (viii) Software.

                    (A) The Company Software was either (1) developed by employees of the Company or its subsidiaries within the scope of their employment who

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have expressly assigned all their ownership rights therein to the Company or a subsidiary of the Company pursuant to written agreements; (2) developed by independent contractors who have expressly assigned all their ownership rights therein to the Company or a subsidiary of the Company pursuant to written agreements; or (3) otherwise acquired by the Company or a subsidiary of the Company from a Third Party pursuant to a written agreement in which all of their ownership rights therein were expressly assigned to the Company or a subsidiary of the Company.

                    (B) None of the Company Software incorporates any Software, other technology or IPR of any university or academic institution.

                    (C) Copies of the Company Software have been provided to and retained by Third Parties solely under non-exclusive license terms, and the Company or one of its subsidiaries has retained title to and ownership of all Intellectual Property Rights in copies, modifications and derivative works of the Company Software.

                    (D) No source code of any Company Software has been licensed or otherwise provided to any Third Party except as described in Section 2.14(c)(viii)(D) of the Company Disclosure Schedule and all such source code has been and remains safeguarded and protected as Trade Secrets of the Company or a subsidiary of the Company. For each agreement under which source code of any Company Software has been licensed or otherwise provided to any Third Party, if the source code that has been licensed or otherwise provided to any Third Party under such agreement is source code of Company Software other than the Company’s “Databahn” Design IP products, Section 2.14(c)(viii)(D) of the Company Disclosure Schedule identifies the specific Company Software and format thereof that has been licensed or otherwise provided to any Third Party in source code form under such agreement, other than as described in items #1-4 of Section 2.14(c)(viii)(D) of the Company Disclosure Schedule.

               (ix) No Orders or Decrees. No Product, Company IPR or Company Licensed IPR is subject to any outstanding order, judgment, decree, or stipulation restricting the use thereof by the Company or any of its subsidiaries or, in the case of any Intellectual Property Rights or Products licensed to others, restricting the sale, transfer, assignment or licensing thereof by the Company or any of its subsidiaries to any person or entity.

               (x) Open Source. (A) None of the Product Offerings, in whole or in part, incorporates, links with or is distributed with any Open Source Software. (B) Each of the Company and its subsidiaries has complied in all material respects with the terms of the Open Source Licenses applicable to any Open Source Software that the Company or any of its subsidiaries has used in its Business. (C) None of the Product Offerings is required to be distributed in source code form, is subject to restrictions on charging a fee in connection with its distribution, or is required to be licensed under any Open Source License as a result of intermingling, integration, linking or use by the Company or its subsidiaries of proprietary code contained in the Product Offerings with any Open Source Software and/or the distribution thereof.

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               (xi) Performance of Products. Each of the Product Offerings of the Company or its subsidiaries performs in all material respects, free of significant bugs or programming errors, in compliance with the functions, performance and other requirements described in any warranty, published specifications or end user documentation provided by the Company or any subsidiary of the Company to customers acquiring such Product Offerings.

               (xii) Disabling Code and Contaminants. The Company Software as provided by the Company or any subsidiary of the Company, and any software provided by a Third Party to the best of the Company’s knowledge, is free of any disabling codes or instructions (a “Disabling Code”), and any virus or other intentionally created, undocumented contaminant (a “Contaminant”) that may, or may be used to, access, modify, delete, damage or disable any Systems or that may result in material damage thereto. Each of the Company and its subsidiaries has taken reasonable steps and implemented reasonable procedures to ensure that its internal computer systems used in connection with the Business (consisting of hardware, software, databases or embedded control systems, “Systems”) are free from Disabling Codes and Contaminants. To the knowledge of the Company, the Software licensed by the Company or any of its subsidiaries from Third Parties is free of any Disabling Codes or Contaminants that may, or may be used to, access, modify, delete, damage or disable any of the Systems or that would reasonably be expected to result in material damage thereto. Each of the Company and its subsidiaries has taken reasonable steps to safeguard their respective Systems and restrict unauthorized access thereto. To the knowledge of the Company, there have been no unauthorized intrusions or breaches of the security of any Systems.

               (xiii) Standards Bodies and Obligations. Except as described in Section 2.1(c)(xiii) of the Company Disclosure Schedule, neither the Company nor any of its subsidiaries has contributed or licensed, or agreed to contribute or license, any Software or IPR to or through any standards body, standard setting organization, industry consortium, licensing pool, Governmental Entity, or other industry group or consortium (each, a “Standards Body”). Except as described in Section 2.1(c)(xiii) of the Company Disclosure Schedule, neither the Company nor any of its subsidiaries is a member of any Standards Body or has participated in the development or approval of any standards or specifications proposed or established by any Standards Body. Except as described in Section 2.1(c)(xiii) of the Company Disclosure Schedule, neither the Company nor any subsidiary of the Company has agreed to dedicate any Software or IPR to the public, to make generally available any licenses to any Software or IPR, or to make any licenses available on a royalty free basis or on fair, reasonable or non-discriminatory terms in connection with any Standards Body or otherwise.

               (xiv) Funding and Facilities. No funding or facilities of any Governmental Entity, or funding or facilities of a university, college, other educational or academic institution or research center, was used in the development of the Company Software or Company IPR. No current or former employee, consultant or independent contractor of the Company or any subsidiary of the Company, who was involved in, or who contributed to, the creation or development of any Company Software or Company IPR, has performed services for any Governmental Entity, a university, college, or other educational institution, or a research center, during a period of time during which such employee, consultant or independent contractor was also performing services for the Company or any subsidiary of the Company.

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               (xv) Restrictions on Employees. To the knowledge of the Company, no employee, consultant or independent contractor of the Company or any of its subsidiaries is obligated under any agreement, or subject to any judgment, decree or order of any court or administrative agency, or any other restriction, that would or may interfere with such employee, consultant or contractor carrying out his or her duties for the Company or any subsidiary of the Company or that would conflict with the conduct of the Business. To the knowledge of the Company, the Company and its subsidiaries are not utilizing, nor will it be necessary for the or any of its subsidiaries to utilize, any inventions of any employees, consultants or contractors of the Company or any subsidiary (or persons the Company currently intends to hire or engage) made, or any confidential information (including Trade Secrets) of any Third Party to which such employees, consultants or contractors were exposed, prior to their employment or engagement by the Company or any subsidiary of the Company.

               (xvi) Payments to Third Parties. Except as expressly set forth in the Inbound License Agreements, neither the Company nor any subsidiary of the Company is, and the Surviving Corporation, and Parent after any subsequent merger of the Surviving Corporation into Parent, shall not be, required to make or accrue any royalty or other payment to any Third Party in connection with any of the Product Offerings, under any Contract of the Company or any subsidiary of the Company.

               (xvii) No Violations by the Company. None of the Products, nor any other activities or operations of the Business, constitute unfair competition or trade practices under the laws of any jurisdiction or violate any other applicable law. Neither the Company nor any subsidiary of the Company has received any written or, to the knowledge of the Company, oral notice or claim asserting or suggesting that any such unfair competition or trade practices is or may be occurring or has or may have occurred, and, to the knowledge of the Company, there is not any reasonable basis therefor.

               (xviii) Export Compliance. Neither the Company nor any of its subsidiaries has exported or transmitted any Product, Software, IPR or other materials in connection with the Business or otherwise to any country or to any person to which such export or transmission is restricted by any applicable law, without first having obtained all necessary and appropriate United States and foreign government licenses or permits.

     Section 2.15 Material Contracts.

          (a) Section 2.15(a) of the Company Disclosure Schedule sets forth a complete and accurate list of all written or oral contracts, agreements, options, leases, licenses, sales and purchase orders, warranties, guarantees, commitments and other instruments of any kind (each a “Contract”), to which the Company or any subsidiary of the Company is a party or to which the Company or any subsidiary of the Company, or any of their respective assets or properties, is otherwise bound, as follows (each a “Material Contract” and, collectively with the Employee Plans, Inbound License Agreements and the Outbound License Agreements and any contract that would be responsive to Section 2.15(c), the “Material Contracts”): (i) each Contract of the Company or a subsidiary of the Company pursuant to which the Company or a subsidiary of the Company paid (or was purportedly obligated to pay) in excess of One Hundred Thousand Dollars ($100,000) in the twelve (12) month period ended December 31, 2009; (ii) each Contract

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that requires payment by the Company or any of its subsidiaries after December 31, 2009 of more than One Hundred Thousand Dollars ($100,000); (iii) each Contract with the Company’s top 25 customers in terms of revenue in each of the VIP, Design IP and Memory Models categories for the year ended December 31, 2009 and for the period from December 31, 2009 to the date hereof; (iv) each Contract of the Company or a subsidiary of the Company not listed pursuant to clause (iii) pursuant to which the Company or a subsidiary of the Company received (or was entitled to receive) in excess of Two Hundred and Fifty Thousand Dollars ($250,000) in the twelve (12) month period ended December 31, 2009 or requires payment to the Company or any subsidiary after December 31, 2009 in excess of Two Hundred and Fifty Thousand Dollars ($250,000); (v) each Contract that (A) contains any non-competition restrictions, including restrictions relating to the conduct of the business of the Company or any of its subsidiaries, the sale of the Company’s or any of its subsidiaries’ products or geographic restrictions, in any case that would, after the Effective Time, prohibit or restrict in any way Parent or any of its subsidiaries (including the Company or any of its subsidiaries) from conducting the business of the Company or any of its subsidiaries as presently conducted or (B) that would require any consent or other action by any person for, or will be subject to default, termination, repricing or other renegotiation, or cancellation because of, the transactions contemplated hereby or by the other Transaction Agreements; (vi) each Contract granting channel sales, resale or other distribution rights to Third Parties, other than license agreements pursuant to which the Company grants distribution rights to Third Parties for the sole purpose of permitting the Company IPR to be integrated into the Third Parties’ own products for resale; (vii) each Contract of the Company or any of its subsidiaries relating to, and evidences of, indebtedness for borrowed money or the deferred purchase price of property (whether incurred, assumed, guaranteed or secured by any asset); (viii) each partnership, joint venture or other similar Contract, arrangements or agreements, directly affecting the Company or any of its subsidiaries, other than Contracts for commercial relationships entered into in the ordinary course of business consistent with the Company’s past practice in which no joint ownership or similar equity or profit sharing arrangements are included; (ix) each Contract that requires the Company or any of its subsidiaries to grant “most favored customer” pricing to any other person; and (x) each Contract that results in any person holding a power of attorney from the Company or any of its subsidiaries or that relates to the Company or any of its subsidiaries.

          (b) Each Material Contract is a legal, valid and binding obligation of the Company or its subsidiary(ies) party thereto and, to the Company’s knowledge, each other person who is a party thereto, enforceable against the Company or such subsidiary and each such person in accordance with its terms, and neither the Company nor any of its subsidiaries nor, to the Company’s knowledge, any other party thereto is in material default thereunder.

          (c) Except as set forth in Section 2.15(c) of the Company Disclosure Schedule, neither the Company nor any of its subsidiaries is a party to or is otherwise bound by:

               (i) any fidelity or surety bond or completion bond;

               (ii) any Contract providing for liquidated damages upon failure of the Company or any subsidiary of the Company to meet performance or quality milestones;

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               (iii) any lease of personal property having a value individually in excess of One Hundred Thousand Dollars ($100,000);

               (iv) any Contract of indemnification or guaranty, other than an indemnification or guaranty included in a license of the Company’s products or services that the Company entered into before January 1, 2006, and did not amend or modify on or after that date;

               (v) any Contract relating to capital expenditures and involving future payments in excess of One Hundred Thousand Dollars ($100,000);

               (vi) any Contract relating to the disposition or acquisition of assets, property or any interest in any business enterprise outside the ordinary course of the business of the Company and its subsidiaries;

               (vii) any mortgage, indenture, loan or credit agreement, security agreement or other agreement or instrument relating to the borrowing of money or extension of credit;

               (viii) any Contract for the purchase of raw materials or services by the Company or any subsidiary of the Company, including any construction contract, involving payments since December 31, 2009 or in the future in excess of One Hundred Thousand Dollars ($100,000);

               (ix) any distribution, joint marketing or development agreement;

               (x) any agreement, covenant, obligation or other instrument providing for the payment of any dividends, profit sharing distributions or other distributions by the Company or any of its subsidiaries;

               (xi) any Contract with any Governmental Entity; or

               (xii) any other agreement involving any payments in the twelve (12) month period ended December 31, 2009 or in the future in excess of One Hundred Thousand Dollars ($100,000) that is not cancelable without penalty to the Company and its subsidiaries upon notice of thirty (30) days or less.

          (d) Neither this Agreement nor the consummation of the transactions contemplated hereby or by the other Transaction Agreements, including the assignment to Parent or any of its affiliates, by operation of law or otherwise, of any Contracts to which the Company or any of its subsidiaries is a party, will result in Parent or the Surviving Corporation granting to any third party any right to or with respect to any Intellectual Property Rights or Software owned by, or licensed to, Parent, except as a result of any independent agreements or obligations of Parent.

     Section 2.16 Title to Properties; Absence of Liens and Encumbrances.

          (a) Neither the Company nor any of its subsidiaries owns any real property, or has ever owned any real property. Section 2.16 of the Company Disclosure Schedule sets forth a

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complete and accurate list of all real property currently leased or subleased by the Company or any of its subsidiaries, the name of the lessor, the amount of any security deposit held by the lessor, and the date of the lease. True, correct and complete copies of the lease, sublease, assignment of the lease, and any guaranty given (including a letter of credit) for such real property (collectively, the “Lease Documents”) and each amendment to any of the foregoing have been made available to Parent. All such current leases and subleases are in full force and effect, are valid and effective in accordance with their respective terms, and there is not, under any of such leases or subleases, any existing material default or event of default (or event which, with notice or lapse of time, or both, would constitute a default) by the Company or any of its subsidiaries or, to the knowledge of the Company, by the other party to such lease or sublease, or person in the chain of title to such leased premises.

          (b) Each of the Company and its subsidiaries has good and valid title to, or, in the case of leased properties and assets, valid leasehold or subleasehold interests in, all of its properties and assets, tangible and intangible, real, personal and mixed, used or held for use in its business, free and clear of any Liens, except for such imperfections of title, if any, that do not materially interfere with the present value of the subject property. For purposes of this Section 2.16 only, the terms “property” and “assets” do not include Intellectual Property Rights.

     Section 2.17 Insurance. Section 2.17 of the Company Disclosure Schedule sets forth a complete and accurate list of all insurance Contracts entered into by the Company and any of its subsidiaries (collectively, the “Insurance Policies”). Each Insurance Policy is in full force and effect and is valid, outstanding and enforceable, and all premiums due thereon have been paid in full or, if such amounts are not yet due and payable, reserved by the Company or its applicable subsidiary on the Company’s Balance Sheet at March 31, 2010. None of the Insurance Policies will terminate or lapse (or be canceled or cancelable at the option of the insurer) by reason of the execution and delivery of, or consummation of any of the transactions contemplated by, this Agreement. Each of the Company and its subsidiaries has complied in all material respects with the provisions of each Insurance Policy under which it is the insured party. No insurer under any Insurance Policy has canceled or generally disclaimed liability in writing or, to the knowledge of the Company, orally under any such policy or, to the knowledge of the Company, indicated any intent in writing or, to the knowledge of the Company, orally to do so or not to renew any such policy. Each claim of the Company or any of its subsidiaries under the Insurance Policies for amounts exceeding One Hundred Thousand Dollars ($100,000) have been filed in a timely fashion.

     Section 2.18 Certain Business Practices.

          (a) None of the Company, its subsidiaries or any of their respective directors, officers, consultants, agents or employees has used any funds of the Company or any of its subsidiaries for contributions, gifts, entertainment or other expenses related to political activity or made any other payment on behalf of the Company or any subsidiary, in each case, in violation of any federal, state, local or foreign statute, law rule, regulation or ordinance.

          (b) The Company and each of its subsidiaries have at all times fully complied with, and are currently in full compliance with, the Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), any similar applicable law of any non-U.S. jurisdiction, and any applicable

37

law that prohibits providing a thing of value to improperly influence domestic government officials (collectively, the “Anti-Corruption Laws”).

          (c) Neither the Company nor any of its subsidiaries, nor, to the knowledge of the Company, any director, officer, employee, agent, distributor, consultant, affiliate, or other person acting on behalf of the Company or any of its subsidiaries, has taken any action, either directly or indirectly, that would result in a violation of the Anti-Corruption Laws, including, without limitation, making, offering, authorizing, or promising any payment, contribution, gift, entertainment, bribe, rebate, kickback, or any other thing of value, regardless of form or amount, to any (i) foreign or domestic government official or employee, (ii) employee of a foreign or domestic government-owned entity, (iii) foreign or domestic political party, political official, or candidate for political office, or (iv) any officer or employee of a public international organization, to obtain a competitive advantage, to receive favorable treatment in obtaining or retaining business, or to compensate for favorable treatment already secured.

          (d) Since January 1, 2005, each of the Company and its subsidiaries have at all times made and kept, and currently make and keep, books, records, and accounts, which, in reasonable detail, accurately and fairly reflect in all material respects the transactions and dispositions of the respective assets of the Company and such subsidiaries.

          (e) Neither the Company nor any of its subsidiaries, nor, to the knowledge of the Company, any director, officer, employee, agent, distributor, consultant, affiliate, or other person acting on behalf of the Company or any of its subsidiaries, is, or has been, under administrative, civil, or criminal investigation, indictment, information, suspension, debarment, or audit (other than a routine contract audit) by any party, in connection with alleged or possible violations of the Anti-Corruption Laws. Neither the Company nor any of its subsidiaries, nor, to the knowledge of the Company, any director, officer, employee, agent, distributor, consultant, affiliate, or other person acting on behalf of the Company or any of its subsidiaries, has received written or, to the knowledge of the Company, oral notice from, or made a voluntary disclosure to, the U.S. Department of Justice or the U.S. Securities and Exchange Commission regarding alleged or possible violations of the Anti-Corruption Laws.

     Section 2.19 Warranties. The Company has made available to Parent each written warranty or guaranty of each of the Company and its subsidiaries utilized with respect to their respective products or services. There have not been any material deviations from such warranties and guaranties, and neither the Company nor any of its subsidiaries, nor any of their respective salespeople, employees, distributors and agents is authorized to undertake obligations to any customer or to other third parties in excess of such warranties or guaranties. Neither the Company nor any of its subsidiaries has made any oral warranty or guaranty that modifies or amends such written warranties or guarantees or any oral warranty or guaranty in excess of the written warranties provided by the Company or any subsidiary of the Company to customers acquiring such products or services.

     Section 2.20 Suppliers and Customers. During the last twelve (12) months, neither the Company nor any of its subsidiaries has received any written notice of termination or written threat of termination or, to the knowledge of the Company, oral notice or threat, from any suppliers or any distributors or customers of the Company or any subsidiary of the Company,

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and the Company has not received any written information from any customer, distributor or supplier that such customer, distributor or supplier intends to materially decrease the amount of business that it does with the Company or any subsidiary of the Company.

     Section 2.21 Brokers. No broker, finder, investment banker or any other person is entitled to any finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or the other Transaction Agreements based upon arrangements made by or on behalf of the Company or any of its subsidiaries.

     Section 2.22 Interested Party Transactions.

          (a) No director, officer or other affiliate of the Company or a subsidiary of the Company (each, an “Interested Party”), has, has had or has a right to acquire or receive in the future, directly or indirectly, (i) an economic interest in any person which has furnished or sold, or furnishes or sells, services or products that the Company or a subsidiary of the Company furnishes or sells, or proposes to furnish or sell, (ii) an economic interest in any person that purchases from or sells or furnishes to, the Company or a subsidiary of the Company, any goods or services, (iii) a beneficial interest in any Contract included in Section 2.14 or 2.15 of the Company Disclosure Schedule, or (iv) any contractual or other arrangement with the Company or a subsidiary of the Company; provided, however, that ownership of no more than one percent (1%) of the outstanding voting stock of a publicly traded corporation shall not be deemed an “economic interest in any person” for purposes of this Section 2.22.

          (b) Without limiting subsection (a) above, there are no outstanding notes payable to, accounts receivable from or advances by the Company or any subsidiary of the Company to, and neither the Company nor any of its subsidiaries is otherwise a debtor or creditor of, or has any liability or other obligation of any nature to, any Interested Party of the Company or a subsidiary of the Company.

          (c) There are no committees or subcommittees of the Company Board, and no Interested Party has, in its capacity as a director of the Company or otherwise, voted on or participated in evaluating or determining whether to approve any matter before the Company Board in which such Interested Party had a direct or indirect personal pecuniary, economic or other similar interest.

     Section 2.23 Dissenters’ Rights. The Company has notified Parent and Acquisition Sub of any Dissenting Shareholders and neither the Company nor any subsidiary or representative of the Company has negotiated with such Dissenting Shareholders or made any payment with respect to any such Dissenting Shares or settled or offered or agreed to settle any claims relating to Dissenting Shares.

     Section 2.24 Company Transaction Expenses. Schedule IX sets forth the aggregate amount of all actual and estimated expenses listed separately for each vendor (including legal fees, investment bankers’ or other advisors’ fees, accounting fees, Shareholder Agent fees, and Escrow Agent and Payment Agent fees) incurred and/or paid, or to be incurred and/or paid, by each of the Company and its subsidiaries in connection with this Agreement and the other Transaction Agreements and the transactions contemplated hereby and thereby (including the

39

Merger and the Spinoff) (the “Company Transaction Expenses”). Company Transaction Expenses shall also include the other categories of expenses listed on Schedule IX, whether or not of a nature specifically described above. Except to the extent included in the amounts listed on Schedule IX, none of the legal fees incurred, paid or to be paid by the Company or any of its affiliates in connection with this Agreement or the other Transaction Agreements or the transactions contemplated hereby or thereby was the result of premium billing or otherwise a success fee.

     Section 2.25 Spinoff.

          (a) Nvelo is duly organized, validly existing and in good standing under the laws of the state of Delaware and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Nvelo has no subsidiaries and does not own any capital stock, membership interests or other equity interests in any other person. Each of the Company and its subsidiaries and Nvelo has or will have prior to the Effective Time all necessary corporate power and authority to execute and deliver the Spinoff Agreements to which it is a party, to perform its respective obligations under the Spinoff Agreements and to consummate the transactions contemplated thereby. The execution and delivery of the Spinoff Agreements and the consummation of the transactions contemplated thereby have been duly and validly (i) authorized unanimously by the Company Board and the board of directors of Nvelo and will be authorized unanimously by the board of directors of each subsidiary of the Company transferring Transferred Assets in the Spinoff that is a party thereto and (ii) approved and adopted by the holders of at least (x) 74.82% of the outstanding Company Common Stock voting together as a single class and (y) 74.82% of the outstanding shares of capital stock of Nvelo. No other corporate proceedings on the part of the Company, Nvelo or any of the Company’s subsidiaries are necessary to authorize and adopt the Spinoff Agreements or to consummate the transactions contemplated thereby. The Spinoff Agreements have been, or will be prior to the Effective Time, duly and validly executed and delivered by the Company, Nvelo and each of the Company’s subsidiaries that is a party thereto and constitute, assuming the due authorization, execution and delivery of the Spinoff Agreements to which Parent is a party by Parent, valid, legal and binding agreements of the Company, Nvelo and the applicable subsidiaries of the Company, enforceable against the Company, Nvelo and such subsidiaries in accordance with their terms, subject to any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors’ rights generally or to general principles of equity.

          (b) None of the Company IPR included in the Transferred Assets, directly or indirectly, is or has been accessed, modified, employed, executed, copied, distributed, exploited or otherwise used or utilized in any manner, or (except as provided under the patent cross license to be entered into in connection with the Contribution Agreement (the “Patent Cross License”)) will need to be so used or utilized in any manner, in connection with the operation of the Retained Business as it has been or is currently conducted or as currently proposed to be conducted after the Effective Time. Without limiting the generality of the foregoing, no Company Registered IPR, no Products, Company IPR that is embodied in or protects any Products and no other Company IPR, in each case, that is or has been accessed, modified, employed, executed, copied, distributed, exploited or otherwise used, utilized or held for use in any manner in connection with the Retained Business is included in the Transferred Assets and

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(except as provided under the Patent Cross License) no license, covenant not to sue, or other authorization to use or exploit any of the Transferred Assets is or shall be required in connection with the use or exploitation of the Products or any derivative works based thereon or the operation of the Retained Business as currently conducted or as currently proposed to be conducted after the Effective Time. Other than the Transferred Assets, no assets of the Company or any of its subsidiaries will be used by Nvelo in its businesses or otherwise, except as expressly permitted by the Spinoff Agreements. After the Spinoff, neither the Company nor any of its subsidiaries nor, after the Effective Time, Parent, will be required to incur any costs, fees, expenses or other liabilities in excess of One Hundred Thousand Dollars ($100,000) in order to continue to operate the Retained Business as currently conducted or as currently proposed to be conducted after the Effective Time, in each case, as a result of the Transferred Assets having been transferred to Nvelo and/or the Spinoff. For purposes of this Agreement, the “Retained Business” means all businesses, operations, activities and assets of the Company and its subsidiaries as conducted in the past, as currently conducted and as currently proposed to be conducted after the Effective Time that are not expressly included in the Transferred Assets.

          (c) All liabilities and obligations related to the Transferred Assets and the Transferred Business, whether arising before or after the Effective Time, will be assumed by Nvelo pursuant to the Spinoff Agreements, and following the Effective Time, no such liability or obligation will be the liability or obligation of Parent, the Surviving Corporation or any of their subsidiaries.

          (d) All securities issued in connection with the Nvelo Distribution, or any other aspect of the Spinoff, will be issued in compliance with the Securities Act of 1933, as amended, including the rules and regulations promulgated thereunder, and any applicable state or foreign securities laws or regulations, and no registration or qualification of such securities is required under federal, state or foreign securities laws or regulations.

          (e) Except for the Spinoff Agreements, there are no agreements between or among any or all of the Company, any subsidiary of the Company, Nvelo, any shareholder of the Company, any shareholder of Nvelo, or any of their respective affiliates or family members, in each case, relating to the Spinoff, Nvelo, or the granting or sale of any direct or indirect equity or other economic interest therein. Immediately after consummation of the Nvelo Distribution and until the Effective Time, each Shareholder will have the same proportional equity interest in Nvelo as they hold in the Company.

ARTICLE 3.

REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION

     Parent and Acquisition Sub hereby represent and warrant to the Company as follows:

     Section 3.1 Organization.

          (a) Parent is duly organized, validly existing and in good standing under the laws of the State of Delaware. Acquisition Sub is duly organized, validly existing and in good

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standing under the laws of the State of California. Each of Parent and Acquisition Sub has all requisite power and authority to own, lease and operate its properties and to carry on its businesses as now being conducted, except where such failure would not, individually or in the aggregate, have a Material Adverse Effect on Parent. Parent has heretofore delivered accurate and complete copies of the Articles of Incorporation and Bylaws, as currently in full force and effect, of Acquisition Sub. For purposes hereof, the term “Material Adverse Effect on Parent” means any circumstance involving, change in or effect on (or any such circumstance, change or effect involving a prospective change in or effect on) Parent or any of its subsidiaries that would reasonably be expected to prevent or materially delay Parent and Acquisition Sub from consummating the transactions contemplated by this Agreement.

          (b) Each of Parent and Acquisition Sub is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect on Parent.

     Section 3.2 Authority Relative to this Agreement. Each of Parent and Acquisition Sub has all necessary corporate power and authority to execute and deliver this Agreement and the other Transaction Agreements to which it is a party, to perform its obligations under this Agreement and the other Transaction Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Agreements to which Acquisition Sub is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized and adopted by the board of directors of Acquisition Sub and by Parent as the sole shareholder of Acquisition Sub. This Agreement and the other Transaction Agreements to which Parent or Acquisition Sub, as the case may be, is a party have been duly and validly executed and delivered by each of Parent and Acquisition Sub, as the case may be, and constitute, assuming the due authorization, execution and delivery hereof and thereof by the Company and any subsidiary of the Company that is a party thereto, valid, legal and binding agreements of each of Parent and Acquisition Sub, as the case may be, enforceable against each of Parent and Acquisition Sub, as the case may be, in accordance with their terms, subject to any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors’ rights generally or to general principles of equity.

     Section 3.3 Information Supplied. None of the information supplied in writing by Parent or Acquisition Sub specifically for inclusion in the Information Statement, on the date the Information Statement was mailed (or delivered) to Shareholders, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. Notwithstanding the foregoing, Parent makes no representation, warranty or covenant with respect to any information supplied or required to be supplied by the Company or any of its subsidiaries which is contained in or omitted from the Information Statement.

     Section 3.4 Consents and Approvals; No Violations. Except for filings, permits, authorizations, consents and approvals as may be required under the HSR Act and similar merger notification laws or regulations of foreign Governmental Entities and filings, permits,

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authorizations, consents and approvals as may be required under and other applicable requirements of the Securities Act, the Securities Exchange Act of 1934, as amended, state securities or blue sky laws, or regulations of foreign Governmental Entities and the filing and recordation of the Agreement of Merger as required by the CGCL, no filing with or notice to, and no permit, authorization, consent or approval of any Governmental Entity is necessary for the execution and delivery by Parent or Acquisition Sub of this Agreement or the other Transaction Agreements to which it is a party or the consummation by Parent or Acquisition Sub of the transactions contemplated hereby or thereby, except where the failure to obtain any such permits, authorizations, consents or approvals or to make such filings or give any such notice would not, individually or in the aggregate, have a Material Adverse Effect on Parent. Neither the execution, delivery and performance by Parent or Acquisition Sub of this Agreement or the other Transaction Agreements to which it is a party nor the consummation by Parent or Acquisition Sub of the transactions contemplated hereby or thereby will (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or Articles of Incorporation, as the case may be, or Bylaws (or similar governing documents) of Parent or Acquisition Sub, (ii) result in a violation or breach of or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration or Lien) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which Parent or Acquisition Sub or any of Parent’s other subsidiaries is a party or by which any of them or any of their respective properties or assets may be bound, or (iii) violate any order, writ, injunction, decree, law, statute, rule or regulation applicable to Parent or Acquisition Sub or any of Parent’s other subsidiaries or any of their respective properties or assets except, in the case of the foregoing clause (ii) or (iii), for violations, breaches or defaults that would not, individually or in the aggregate, have a Material Adverse Effect on Parent.

     Section 3.5 Ownership and Operations of Acquisition Sub. Parent owns beneficially and of record all of the outstanding capital stock of Acquisition Sub. Acquisition Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement and the other Transaction Agreements, has engaged in no other business activities and has conducted its operations only as contemplated hereby.

     Section 3.6 Availability of Funds. Parent has, and will have available to it at the times required by this Agreement, sufficient funds to pay the Merger Consideration when due and to consummate the transactions contemplated hereby.

     Section 3.7 Brokers. No broker, finder or investment banker is entitled to any finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or the other Transaction Agreements based upon arrangements made by or on behalf of Parent or Acquisition Sub.

ARTICLE 4.

COVENANTS

     Section 4.1 Conduct of Business of the Company. Except as contemplated by this Agreement, as consented to by Parent or as described in Section 4.1 of the Company Disclosure

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Schedule, during the period from the date hereof to the Effective Time, the Company will, and will cause each of its subsidiaries to, conduct its operations in the ordinary course of business consistent with past practices and, to the extent consistent therewith, with no less diligence and effort than would be applied in the absence of this Agreement, seek to preserve intact its current business organizations, keep available the services of its current directors, officers, employees, consultants and independent contractors and preserve its relationships with customers, suppliers and others having business dealings with it. Without limiting the generality of the foregoing, except as otherwise expressly provided in this Agreement or as described in Section 4.1 of the Company Disclosure Schedule, prior to the Effective Time, neither the Company nor any of its subsidiaries shall, without the prior consent of Parent, which consent shall not be unreasonably withheld or delayed:

          (a) amend its Articles of Incorporation or Bylaws (or other similar governing documents);

          (b) authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) any stock of any class or any other securities or equity equivalents (including any stock options or stock appreciation rights) or convertible or exchangeable securities, except for (i) the issuance and sale of Shares upon the exercise of Company Stock Options outstanding on the date hereof or (ii) the grant of Company Stock Options to newly hired employees in the ordinary course of business consistent with past practices;

          (c) split, combine or reclassify any shares of its capital stock, declare, set aside or pay any dividend, profit sharing distribution or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, make any other actual, constructive or deemed distribution in respect of its capital stock or otherwise make or undertake to make any payments to Shareholders in their capacities as such, or redeem or otherwise acquire any of its outstanding securities (other than (i) the repurchase of Restricted Company Shares and cancellation of Company Stock Options following termination of employment with or provision of services to the Company and (ii) the Nvelo Distribution);

          (d) except for the Merger, the Spinoff and the other transactions contemplated hereby and by the other Transaction Agreements, adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its subsidiaries, or otherwise alter the Company’s corporate structure or the corporate structure of any subsidiary or form any subsidiary;

          (e) (i) incur, assume or forgive any long-term or short-term loan or issue any debt securities, except for borrowings under existing lines of credit in the ordinary course of business consistent with past practices; (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person, except for the obligations of subsidiaries of the Company incurred in the ordinary course of business consistent with past practice; (iii) make any loans, advances or capital contributions to or investments in any other person (other than customary loans or advances to employees in each case in the ordinary course of business consistent with past practices); (iv) pledge or

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otherwise encumber shares of capital stock of the Company or any of its subsidiaries; or (v) mortgage or pledge any of its material assets or properties, tangible or intangible, or create or allow the creation or maintenance of any material Lien thereupon;

          (f) except as may be required by applicable law or this Agreement, enter into, adopt, amend or terminate any bonus, profit sharing, compensation, severance, termination, stock option, stock appreciation right, restricted stock, performance unit, stock equivalent, stock purchase agreement, pension, retirement, deferred compensation, employment, health, life, or disability insurance, dependent care, severance or other employee benefit plan, agreement, trust, fund or other arrangement for the benefit or welfare of any director, officer or employee in any manner, or increase in any manner the compensation or fringe benefits of any director, officer, employee or consultant or pay any benefit not required by any plan and arrangement as in effect on the date hereof (including the granting of stock appreciation rights or performance units) or fail to make full and timely payment of all amounts required to be contributed or paid as expenses under the terms of each Employee Plan and applicable law;

          (g) (i) acquire any corporation, partnership, limited liability company, other business organization or division thereof, (ii) acquire, sell, lease, license or dispose of any assets or property in any single transaction or series of related transactions, other than (A) in the ordinary course of business consistent with past practices, (B) to the extent expressly required by Material Contracts listed in Section 2.15 of the Company Disclosure Schedule in force on the date of this Agreement or (C) dispositions of obsolete tangible assets having a de minimis value, (iii) enter into any exclusive license, distribution, marketing, sales or other agreement, (iv) enter into a “development services” or other similar agreement, (v) enter into any agreement with “most favored customer” pricing, or (vi) acquire, sell, lease, license, transfer or otherwise dispose of any Intellectual Property Rights other than non-exclusive licenses or sales of its products in the ordinary course of business consistent with past practices and other than the transfer of the Transferred Assets in the Spinoff;

          (h) except as may be required as a result of a change in applicable law or in United States generally accepted accounting principles, change any of the accounting principles, practices or methods used by it;

          (i) revalue in any material respect any of its assets or properties, including writing down the value of inventory or writing off notes or accounts receivable, other than in the ordinary course of business consistent with past practices;

          (j) (i) acquire (by merger, consolidation or acquisition of stock or assets) any corporation, limited liability company, partnership or other person or division thereof or any equity interest therein; (ii) enter into any Contract that would constitute a Material Contract, Lease Document or Interested Party Contract, taken as a whole (other than agreements for the license or sale of its products and services in the ordinary course of business consistent with past practices and other than the transfer of the Transferred Assets in the Spinoff); (iii) amend, modify or waive any material right under any Material Contract of the Company or any of its subsidiaries, or amend or modify, or assume any new, material obligation, in each case, other than in the ordinary course of business consistent with past practices; (iv) modify its standard warranty terms for its products or services or amend or modify any product or service warranties

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in effect as of the date hereof in any material manner that is adverse to the Company or any of its subsidiaries; or (v) authorize any new capital expenditure or expenditures that exceed Two Hundred Fifty Thousand Dollars ($250,000) individually or in the aggregate;

          (k) commence any litigation or binding dispute resolution process or settle or compromise any pending or threatened suit, action or claim;

          (l) commence any material software or hardware development project or terminate any material software or hardware development project that is currently ongoing, in either case except pursuant to the terms of existing contracts with customers;

          (m) accelerate, or permit or otherwise enable the acceleration of, the vesting of any Company Stock Option or Restricted Company Shares in connection with, or as a result of the consummation of, this Agreement, the Merger, any of the transactions contemplated hereby or by the other Transaction Agreements, or otherwise;

          (n) allow any Insurance Policy to be amended or terminated, or to expire, without replacing such policy with a policy providing at least equal coverage, insuring comparable risks and issued by an insurance company financially comparable to the prior insurance company;

          (o) make, modify or rescind any material election relating to Taxes of the Company or any of its subsidiaries (other than elections made in the ordinary course of business consistent with past practices of the Company), adopt or change any accounting method in respect of Taxes, commence any Tax Claim, settle or compromise any Tax liability of the Company or any of its subsidiaries, enter into any closing or other agreement with any Governmental Entity with respect to Taxes, enter into any Tax allocation agreement, Tax sharing agreement, Tax indemnity agreement or otherwise enter into a Contract with respect to Taxes;

          (p) file or cause to be filed any amended Tax Return with respect to the Company or any of its subsidiaries, file or cause to be filed any claim for refund of Taxes paid by or on behalf of the Company or any of its subsidiaries, agree to an extension or waiver of a statute of limitations with respect to any claim, assessment or determination of Taxes or grant any power of attorney with respect to Taxes;

          (q) enter into any distribution, sponsorship, advertising or other similar Contract that may not be canceled without penalty by the Company or any of its subsidiaries upon notice of 30 days or less or which provide for payments by or to the Company or any of its subsidiaries in an amount in excess of Two Hundred Fifty Thousand Dollars ($250,000) over the term of the agreement;

          (r) (i) accelerate the collection of any accounts receivable, (ii) delay the payment of any account payable, or (iii) take any other action outside the ordinary course of business or inconsistent with past practices with the intent of avoiding a reduction or triggering an increase in the Merger Consideration pursuant to Section 1.12 (it being understood that any estimated Tax payments shall be made without taking into account the effect of the transactions described in this Agreement); or

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          (s) take or agree in writing or otherwise to take any of the actions described in Sections 4.1(a) through 4.1(r);

provided that nothing in this Section 4.1 shall prohibit the Company from incurring and paying the fees, costs and expenses set forth in Schedule IX, up to the maximum amounts set forth therein, or within the same nature and categories of expenses as are listed on Schedule IX, provided that any amount in excess of the maximum amounts set forth for each item in Schedule IX shall be deducted from the Merger Consideration as part of the Cash Adjustment Amount and specifically listed in the Cash Statement as provided in Section 1.12.

     Section 4.2 Information Statement. As soon as practicable (and in any event within 10 days) after the execution of this Agreement, the Company shall distribute to the Shareholders, in forms approved in advance by Parent, an information statement and other appropriate documents (such information statement and other documents, including any amendments or supplements thereto, in each case in the form or forms mailed or delivered to Shareholders, collectively, the “Information Statement”) in connection with the obtaining of: (i) written consents of the Shareholders in favor of the adoption and approval of this Agreement, the other Transaction Agreements and the transactions contemplated hereby and thereby (including the Merger and the Spinoff); (ii) waivers by the Shareholders of their dissenter’s rights in connection with the Merger; and (iii) written consents of the Shareholders to approve or disapprove, under Section 280G(b)(5)(A)(ii) of the Code, any compensation, benefit or amounts that may be deemed to result in an “excess parachute payment” (within the meaning of Section 280G(c) of the Code) to each person who is a “disqualified individual” with respect to the Company, within the meaning of Section 280G(c) of the Code, such that such compensation, benefit or amounts will not be payable or otherwise inure to the benefit of such person in a manner that will result in such amount being treated as such an “excess parachute payment.” Parent and the Company shall each use its commercially reasonable efforts to cause the Information Statement to comply in all material respects with applicable federal and state securities laws and other applicable legal requirements. Each of Parent and the Company agrees to, and the Company shall cause its subsidiaries to, provide promptly to the other such information concerning its business and financial statements and affairs as, in the reasonable judgment of the providing party or its counsel, may be required or appropriate for inclusion in the Information Statement, or in any amendments or supplements thereto, and to cause its counsel and auditors to cooperate with the other’s counsel and auditors in the preparation of the Information Statement. Without limiting the generality of the foregoing, the Company agrees to, and the Company shall cause its subsidiaries to include in the Information Statement a summary of the terms of the transactions contemplated by this Agreement and the other Transaction Agreements (including the Merger and the Spinoff), the valuation of the Transferred Assets and the owners of Nvelo. The Company will promptly advise Parent and Parent will promptly advise the Company in writing if at any time prior to the Effective Time either the Company or Parent shall obtain knowledge of any facts that might make it necessary or appropriate to amend or supplement the Information Statement in order to make the statements contained or incorporated by reference therein not misleading with respect to any material fact or comply with applicable law. The Information Statement shall (A) contain the unanimous recommendation of the Company Board that the Shareholders adopt and approve this Agreement, the other Transaction Agreements and the transactions contemplated hereby and thereby (including the Merger and the Spinoff) and the

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determination of the Company Board that the terms and conditions of the Merger and the Spinoff are advisable, and in the best interests of the Shareholders; (B) notify the Shareholders of the receipt by the Company of the votes or written consents of holders of Shares of Company Common Stock sufficient to adopt and approve the matters specified in clause (A) above; and (C) notify the shareholders of their appraisal rights under Chapter 13 of the CGCL. Anything to the contrary contained herein notwithstanding, the Company shall not include in the Information Statement any information with respect to Parent or its affiliates or associates, the form and content of which information shall not have been approved in writing (including by email) by Parent prior to such inclusion. Whenever any event occurs which is required to be set forth in an amendment or supplement to the Information Statement, the Company or Parent, as the case may be, will promptly inform the other of such occurrence and cooperate in preparing and mailing to Shareholders such amendment or supplement.

     Section 4.3 Spinoff. Prior to the Effective Time, the Company shall, and shall cause its subsidiaries, to effect the Spinoff in accordance with the Spinoff Agreements. Prior to the Effective Time, the Company shall not, and shall cause its subsidiaries not to, amend, modify or waive, or agree to amend, modify or waive in the future, any provision of any Spinoff Agreement, or to enter into any agreements (other than the Spinoff Agreements) relating to the Spinoff, in each case, without the prior written consent of Parent, which consent shall not be unreasonably withheld or delayed. Prior to the delivery to Nvelo of any computers or other electronic equipment, backup files, servers and the like included in the Transferred Assets (“Electronic Equipment Transferred Assets”), Parent shall make a copy of all data, IPR or other information on such Electronic Equipment Transferred Assets and shall wipe clean such Electronic Equipment Transferred Assets of all data, IPR or other information that is not specifically listed as a Transferred Asset in the Spinoff Agreements.

     Section 4.4 Other Potential Acquirors.

          (a) The Company, its affiliates and their respective officers and other employees, directors, holders of more than 5% of the outstanding Company Common Stock, representatives and agents shall immediately cease any and all discussions or negotiations with any persons with respect to any Third Party Acquisition. Neither the Company nor any of its affiliates shall, nor shall the Company or any of its affiliates authorize or permit any of its officers, directors, employees, holders of more than 5% of the outstanding Company Common Stock, representatives or agents to, directly or indirectly, encourage, solicit, participate in or initiate discussions or negotiations with or provide any non-public information to any person or group (other than Parent and Acquisition Sub or any designees of Parent and Acquisition Sub) concerning any Third Party Acquisition. The Company shall promptly, but in any event within 24 hours, notify Parent in writing in the event the Company, any of its affiliates, or any of their respective directors, officers, employees, holders of more than 5% of the outstanding Company Common Stock, agents and representatives receives any written or oral proposal or inquiry concerning a Third Party Acquisition, including the terms and conditions thereof and the identity of the person or group submitting such proposal, and shall advise Parent from time to time of the status and any material developments concerning the same. The Company and its subsidiaries shall not, and shall cause their officers, directors, employees and holders of more than 5% of the outstanding Company Common Stock not to release any person from, or waive any provision of, any confidentiality or standstill agreement to which the Company or any of its subsidiaries is a

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party. The Company Board shall not withdraw its recommendation of the transactions contemplated hereby or by the other Transaction Agreements or approve or recommend, or cause the Company or any of its subsidiaries to enter into any agreement with respect to, any Third Party Acquisition.

          (b) For purposes of this Agreement, “Third Party Acquisition” means any of the following: (i) the acquisition of the Company by merger or otherwise by any person (which includes a “person” as such term is defined in Section 13(d)(3) of the Exchange Act) other than Parent, Acquisition Sub or any affiliate thereof (a “Third Party”); (ii) the acquisition by a Third Party of any assets of the Company and its subsidiaries, other than the sale of its products in the ordinary course of business consistent with past practices and other than the sale of the Transferred Assets in the Spinoff pursuant to the terms hereof and the Spinoff Agreements; (iii) the acquisition by a Third Party of any equity interest in the Company or its subsidiaries other than pursuant to any outstanding Company Stock Options; (iv) the adoption by the Company of a plan of total or partial liquidation or the declaration or payment of an extraordinary dividend (other than the Nvelo Distribution); (v) the repurchase by the Company or any of its subsidiaries of more than ten percent (10%) of the outstanding Shares; and (vi) the acquisition by the Company or any of its subsidiaries by merger, purchase of stock or assets, joint venture or otherwise of a direct or indirect ownership interest or investment in any business whose annual revenues, net income or assets is equal or greater than ten percent (10%) of the annual revenues, net income or assets of the Company.

     Section 4.5 Approval of Shareholders. The Company shall take all actions reasonably necessary in accordance with the CGCL and its Articles of Incorporation and Bylaws to duly solicit the written consent from the Shareholders as promptly as practicable after the date hereof to adopt and approve this Agreement, the other Transaction Agreements and the transactions contemplated hereby and thereby (including the Merger and the Spinoff).

     Section 4.6 Access to Information.

          (a) Between the date hereof and the Effective Time, the Company will permit Parent and its authorized representatives reasonable access during regular business hours to all employees, plants, offices, warehouses and other facilities and to all books and records of the Company and its subsidiaries as Parent may reasonably request, and will cause its officers and those of its subsidiaries to furnish Parent with such financial and operating data and other information with respect to the business, properties and prospects of the Company and its subsidiaries as Parent may from time to time request.

          (b) Between the date hereof and the Effective Time, the Company shall furnish to Parent within two (2) business days following preparation thereof (and in any event within ten (10) business days after the end of each fiscal quarter) an unaudited balance sheet as of the end of such quarter and the related statements of income, shareholders’ equity (deficit) and cash flows for the quarter then ended. Except as disclosed on Section 2.4(a) of the Company Disclosure Schedule, all of such financial statements shall be prepared in accordance with GAAP in conformity with the practices consistently applied by the Company with respect to such financial statements; provided, however, that such financial statements are subject to normal year-end adjustments and lack footnotes. All the foregoing shall fairly present, in all material

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respects, the financial position of the Company and its subsidiaries as of the last day of the period then ended, provided, however, that such financial statements are subject to normal year-end adjustments and lack footnotes.

          (c) Each of the parties hereto will hold, and will cause its agents, representatives, consultants and advisers to hold, in confidence all documents and information furnished to it by or on behalf of another party to this Agreement in connection with the transactions contemplated by this Agreement pursuant to the terms of that certain Confidentiality Agreement, dated February 12, 2008, between the Company and Parent (the “Confidentiality Agreement”).

     Section 4.7 Certain Filings; Reasonable Efforts.

          (a) Subject to the terms and conditions herein provided, each of the parties hereto agrees to use reasonable best efforts to take or cause to be taken all action and to do or cause to be done all things reasonably necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement as soon as reasonably practicable, including using reasonable best efforts to do the following: (i) obtain consents of all third parties and Governmental Entities necessary, proper or advisable for the consummation of the transactions contemplated by this Agreement, including under the HSR Act and similar merger notification laws or regulations of foreign Governmental Entities; (ii) contest any legal proceeding relating to the Merger; and (iii) execute any additional instruments necessary to consummate the transactions contemplated hereby and by the other Transaction Agreements. Subject to the terms and conditions of this Agreement, the Company, Parent and Acquisition Sub agree to use reasonable best efforts to cause the Effective Time to occur as soon as practicable after the Shareholder vote or approval by written consent with respect to the Merger and the other transactions contemplated by this Agreement and the other Transaction Agreements.

          (b) Parent and the Company will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any analyses, appearances, presentations, letters, white papers, memoranda, briefs, arguments, opinions or proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to any other foreign, federal or state antitrust, competition, or fair trade law. In this regard, but without limitation, each party hereto shall promptly inform the other of any material communication between such party and the Federal Trade Commission, the Antitrust Division of the United States Department of Justice, or any other federal, foreign or state antitrust or competition Governmental Entity regarding the transactions contemplated herein.

          (c) Notwithstanding anything to the contrary contained in Section 4.7(a) or elsewhere in this Agreement, neither Parent nor Acquisition Sub shall have any obligation under this Agreement to divest or agree to divest (or cause any of its subsidiaries or the Surviving Corporation to divest or agree to divest) any of its respective businesses, product lines or assets, or to take or agree to take (or cause any of its subsidiaries or the Surviving Corporation to take or agree to take) any other action or agree (or cause any of its subsidiaries or the Surviving Corporation) to agree to any limitation or restriction on any of its respective businesses, product lines or assets.

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     Section 4.8 Company Employees and Consultants. The Company agrees to use commercially reasonable efforts to (i) encourage its and its subsidiaries’ employees to accept any offers of employment extended by Parent or any of its subsidiaries, and to encourage its and its subsidiaries’ employees to execute and deliver to Parent or such subsidiary of Parent its forms of nondisclosure agreement and proprietary information and invention assignment agreement and (ii) encourage the persons listed on Section 2 of Schedule VI to enter into and deliver to Parent or an applicable subsidiary of Parent a consulting agreement in form and substance satisfactory to Parent. Prior to the Effective Time, Parent shall make offers of employment to each of the employees of the Company set forth on Section 4 of Schedule IV. In addition, the Company agrees to take the actions set forth in Schedule XII.

     Section 4.9 Public Announcements. The initial press release with respect to the execution of this Agreement shall be a joint press release to be reasonably agreed upon by Parent and the Company. Thereafter (x) prior to the Closing, none of Parent, the Company or the Shareholder Agent shall, and the Company shall cause each of its affiliates and representatives not to and (y) after the Closing, the Shareholder Agent shall not, issue any press release or otherwise make any public statements with respect to the transactions contemplated by this Agreement or the other Transaction Agreements, including the Merger and the Spinoff, without the prior written consent of the other parties hereto (which consent shall not be unreasonably withheld or delayed), except as may be required by applicable law, in which case, the disclosing party shall provide such other parties with reasonable advance notice prior to making any such disclosure, and shall consult with such other parties regarding the form and content of such required disclosure.

     Section 4.10 Notification of Certain Matters. The Company shall give prompt notice to Parent and Acquisition Sub, and Parent and Acquisition Sub shall give prompt notice to the Company, of (i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which may have caused or could reasonably be expected to cause any representation or warranty of such party contained in this Agreement to be untrue or inaccurate in any material respect at or prior to the Effective Time and (ii) any failure of the Company, Parent or Acquisition Sub, as the case may be, to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it hereunder. At least 2 days prior to Closing, the Company shall deliver to Parent a schedule of exceptions to the representation and warranty set forth in Section 2.8 other than 2.8(a) (assuming for these purposes that such representation and warranty covers the period between the Company Balance Sheet Date and the date that is 2 days prior to the Closing) that have occurred after the date of this Agreement and prior to the Closing Date (the “Section 2.8 Update”). The delivery of any notice or the Section 2.8 Update pursuant to this Section 4.10 shall not (x) cure such breach or non-compliance or limit or otherwise affect the remedies available hereunder to the party receiving such notice or constitute an exception to the representations or warranties of any party or (y) in and of itself serve as evidence that the occurrence or nonoccurrence of such event resulted in any representation or warranty of such party contained in this Agreement to be untrue or inaccurate or that such party has not complied with or satisfied any covenant, condition or agreement.

     Section 4.11 Company Disclosure Schedule. The Company acknowledges and agrees that the Company Disclosure Schedule is the only operative document that modifies the

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representations and warranties identified therein regardless of any due diligence review undertaken by Parent.

     Section 4.12 Benefit Arrangements. To the extent permitted by applicable law, the employees of the Company or any subsidiary of the Company employed by Parent or any of its subsidiaries after the Effective Time shall be entitled to benefits that are substantially similar, in the aggregate, to benefits that are available or subsequently become available to Parent’s employees, and on a substantially similar basis with Parent’s similarly-situated employees.

     Section 4.13 Termination of 401(k) Plan. The Company agrees to adopt resolutions to terminate its 401(k) plan immediately prior to the Closing, upon the request of Parent, in its sole and absolute discretion, and Parent’s providing the Company with written notice of such election at least three (3) days before the Effective Time. In the event of such request, Parent shall receive from the Company evidence that the Company Board has adopted resolutions to terminate the 401(k) plan (the form and substance of which resolutions shall be subject to review and approval of Parent), effective as of the day immediately preceding the Closing Date but contingent on the Closing. In the event of such request, the Company shall also adopt resolutions to amend its 401(k) plan immediately prior to the Closing to eliminate all forms of distribution upon termination of such plan other than lump sum distribution.

     Section 4.14 Termination of Company Investor Rights, Voting, Shareholder and Registration Rights Agreements. The Company shall take all steps as may be necessary to ensure the termination immediately prior to the Closing of any voting agreement or shareholders agreement among the Shareholders, and all Company investor rights granted by the Company to its Shareholders and in effect prior to the Closing, including rights of co-sale, voting, registration, first refusal, board observation or information or operational covenants.

     Section 4.15 Invention Assignment Agreement. The Company shall, and shall cause each of its subsidiaries to, obtain prior to Closing the invention assignment and disclosure agreements required by Section 5.3(k).

     Section 4.16 Intentionally Omitted.

     Section 4.17 Waiver of Company Stock Option and Company Restricted Share Acceleration. The Company shall, and shall cause each of its subsidiaries to, take all commercially reasonable steps to ensure that, prior to the Closing, each employee of the Company or any subsidiary of the Company (other than those who have not received an offer of employment from Parent or Acquisition Sub) with rights to acceleration of vesting of any Company Stock Options or Company Restricted Shares in connection with or as a result of the execution and delivery of this Agreement or the other Transaction Agreements or the consummation of the transactions contemplated hereby and thereby (including the Merger and the Spinoff), shall have waived such rights to acceleration, except with respect to the options and employees set forth on Schedule XI (the “Accelerated Options”). In addition, except with respect to the Accelerated Options, the Company shall, and shall use its best efforts to cause each holder of Company Restricted Shares and/or Company Stock Options to, to the extent reasonably necessary or advisable, amend the Company Plans and any award agreements or other Contracts

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governing such Company Restricted Shares and/or Company Stock Options to permit treatment of them in the manner contemplated by Section 1.11. Immediately prior to the Effective Time, the Accelerated Options shall become vested to the extent set forth on Schedule XI.

     Section 4.18 Certain Tax Matters.

          (a) Cooperation and Assistance. Parent and the Shareholder Agent shall provide each other with such cooperation and assistance as may be reasonably requested in connection with the preparation of any Tax Return, any audit or other examination by any Governmental Entity, or any judicial or administrative proceedings relating to liability for which the Company or any of its subsidiaries are liable, and until the seventh (7th) anniversary of the Closing Date, each will retain and provide the others with any records or information which may be necessary for such Tax Return, audit, examination, proceedings or determination. Parent and the Shareholder Agent further agree, upon reasonable request and at the sole cost of the requesting person, to (i) use their reasonable efforts to obtain any certificate or other document from any Governmental Entity or any other person with respect to Taxes and (ii) take any other actions reasonably requested, in each case, as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, but not limited to, with respect to Taxes arising out of this Agreement).

          (b) Parent’s Use. Nothing in this Agreement shall be construed to require the Parent to make any payment to the Shareholders and Optionholders for Parent’s use of any Tax credit, Tax deduction, net operating loss or other Tax attribute of the Company or its subsidiaries.

          (c) Transfer Taxes. In no event shall Parent bear any Tax, including, but not limited to, share transfer Taxes and similar Taxes, imposed in connection with the Shareholders’ and Optionholders’ receipt of any payments payable pursuant to this Agreement to which such Shareholders and Optionholders are entitled.

          (d) Nvelo Distribution. Prior to or following the Closing, Parent may engage such professional tax advisors as it deems appropriate to determine whether the Spinoff qualifies for treatment as described in Section 2.13(f), and all reasonable fees and expenses of such advisors shall be treated as Spinoff Taxes. If Parent decides not to take the position that the Spinoff qualifies for such treatment (by not including the forms described in Treasury Regulation 1.355-5 in the Company’s income Tax Return for the year including the Spinoff, or by causing the Company to file information returns report the Spinoff as a dividend), it will give the Shareholder Agent not less than ten (10) days prior to filing such income Tax Return or filing such information returns. Parent will give the Shareholder Agent an opportunity to discuss such position with Parent before filing such income Tax Return. Moreover, if Parent determines prior to the Closing, after consultation with Shareholder Agent, not to take the position that the Spinoff qualifies for the treatment described in Section 2.13(f) and provides Shareholder Agent notice of such position five (5) days prior to the Closing, the Company shall cause to be paid prior to the Closing any Taxes required to be withheld from the Shareholders in connection with the Nvelo Distribution on the assumption that such distribution (and any payment of tax thereon by the Company) constitutes a taxable dividend to the Shareholders (and such withholding shall reduce Company Cash). If Parent determines that the Spinoff qualifies for the treatment

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described in Section 2.13(f), then Parent will treat the Nvelo Distribution as a tax-free distribution to the Shareholders pursuant to Sections 355 of the Code, but as a taxable transaction to the Company by reason of Section 355(e) of the Code except as otherwise required pursuant to a determination within the meaning of Section 1313(a). Parent shall not have any liability to any Shareholder or Optionholder or Nvelo for any position it takes with respect to the Tax treatment of the Spinoff, and nothing in this Section 4.18(d) shall serve to reduce Parent’s rights under Section 7.2(a)(vii) or Section 7.2(b).

     Section 4.19 Audited Financial Statements. The Company shall, and shall cause each of its subsidiaries to, use its commercially reasonable efforts to cause and permit the Independent Auditor (i) to complete its audit of the consolidated balance sheets of the Company and its subsidiaries at December 31, 2009 and 2008 and the related consolidated statements of income, cash flows and shareholders’ equity for the fiscal years then ended, all of which shall be prepared in accordance with GAAP and audited for compliance therewith in accordance with GAAP (the “Audited Financial Statements”) and (ii) to issue an independent auditors report the form of which conforms with the applicable requirements of the Public Company Accounting Oversight Board (which need not include, for the avoidance of doubt, a report or audit of internal control over financial reporting), in each of cases (i) and (ii), prior to June 4, 2010 (clauses (i) and (ii), the “Audit”).

     Section 4.20 Employee Indebtedness. The Company shall, and shall cause its subsidiaries to, cause all outstanding notes payable by, accounts receivable from, advances by the Company or any subsidiary of the Company to, or indebtedness owed to the Company or any subsidiary of the Company by, any current or former director, officer or employee (or any family member of a current or former director, officer or employee or any affiliate of a current or former director, officer, employee or family member) of the Company or any subsidiary of the Company (“Employee Indebtedness”) to be paid or repaid, including any and all principal and accrued interest thereon, to the Company or its applicable subsidiary, as the case may be, prior to the Closing.

     Section 4.21 Data Room DVD-ROM. Promptly following the date of this Agreement, the Company shall deliver to Parent, with a copy to the Shareholder Agent, one or more DVD-ROMs or other digital media evidencing the documents that were available for review by Parent and its representatives as of 10:00 p.m. on May 12, 2010 in the online data room established by the Company in connection with the transactions contemplated by this Agreement and the other Transaction Agreements, which shall indicate for each document the date that such document was uploaded to such data room. If any documents are added to such online data room following the date of this Agreement, then, at least two (2) days prior to the Closing Date, the Company shall deliver to Parent, with a copy to the Shareholder Agent, one or more DVD-ROMs or other digital media evidencing such documents that were available for review by Parent and its representatives as of such date, which shall indicate for each document the date that such document was uploaded to such data room.

     Section 4.22 Merger Consideration Allocation Spreadsheet. The Company shall prepare and deliver to Parent and the Shareholder Representative, no later than two (2) business days before the Closing Date, a spreadsheet (the “Merger Consideration Allocation Spreadsheet”) in the form provided by Parent prior to the Closing, reasonably acceptable to

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Parent, which spreadsheet shall be certified by an executive officer of the Company, dated as of the Closing Date and set forth all of the following information (in addition to the other required data and information specified therein), as of the Closing Date and immediately prior to the Effective Time: (i) the names of all the Company’s Shareholders and Optionholders and their respective addresses and, where available, taxpayer identification numbers; (ii) the number and kind of shares of Company Common Stock and Company Stock Options held by such persons and, with respect to shares of Company Common Stock, the respective certificate numbers; (iii) the calculation of the Per Share Amount and the Option Per Share Amount and the amount of each payable to each of the Company’s Shareholders and Optionholders; (iv) the amount of such Per Share Amounts and Option Per Share Amounts of each Shareholder and Optionholder to be withheld as part of the Escrow Fund in accordance with Section 1.8(d) and each Shareholder’s and Optionholder’s Escrow Percentage; and (v) any amounts to be withheld from payment to an unvested Optionholder or holder of Company Restricted Shares on the Closing Date in accordance with Section 1.11.

     Section 4.23 Maintenance of Company’s Indemnification Obligations.

          (a) From and after the Effective Time, Parent will fulfill and honor the obligations of the Company to its directors and officers pursuant to any indemnification provisions under the Company’s Articles of Incorporation or Bylaws as in effect on April 5, 2010; provided that in no event shall Parent or the Surviving Corporation be obligated to indemnify any person for any amounts payable by such person (i) pursuant to Article 7 hereof or (ii) as a result of any of the matters described in Section 7.2(a) or 7.2(b).

          (b) Prior to Closing, Parent shall purchase a tail policy in a form acceptable to the Company with respect to the termination of its present directors’ and officers’ liability insurance policy, which tail policy shall have coverage in an amount not less than the existing coverage and shall have other terms not materially less favorable to the insured persons than the directors’ and officers’ liability insurance coverage presently maintained by the Company (the “D&O Tail Policy”). Parent agrees to maintain, and shall cause the Surviving Corporation to maintain, the D&O Tail Policy until it expires in accordance with its terms; provided that the Company shall not purchase, and neither Parent nor the Surviving Corporation shall be obligated hereunder to maintain, any D&O Tail Policy the premiums of which exceed Twenty Five Thousand Dollars ($25,000) of the premiums of such present directors’ and officers’ liability insurance policy of the Company.

          (c) The provisions of this Section 4.23 are intended to be for the benefit of, and shall be enforceable by, each of the directors and executive officers of the Company, and their heirs.

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     Section 4.24 Treatment of Contracts. Parent and the Company shall cooperate in good faith prior to the Effective Time to reach a mutually agreeable treatment of each Contract listed on Schedule V. If Parent and the Company have not reached an agreement as to such mutually agreeable treatment with respect to any such Contract by June 1, 2010, the Company will terminate such Contract.

ARTICLE 5.

CONDITIONS TO CONSUMMATION OF THE MERGER

     Section 5.1 Conditions to Each Party’s Obligations to Effect the Merger. The respective obligations of each party hereto to effect the Merger are subject to the satisfaction at or prior to the Effective Time of each of the following conditions:

          (a) The waiting period (and any extension thereof) applicable to the Merger under the HSR Act shall have been terminated or shall have expired, and there shall not be pending or overtly threatened any action by a Governmental Entity to restrain or enjoin the Merger or any of the other transactions contemplated hereby or by the other Transaction Agreements pursuant to the HSR Act or any similar merger notification laws or regulations of foreign Governmental Entities;

          (b) No statute, rule, regulation, executive order, decree, ruling or injunction (other than as described in Section 5.1(a)) shall have been enacted, entered, promulgated or enforced by any Governmental Entity that prohibits, restrains, enjoins or restricts the consummation of the Merger; and

          (c) Any notices to, approvals from or other requirements of any Governmental Entity necessary to consummate the transactions contemplated hereby and by the other Transaction Agreements (other than as described in Section 5.1(a)) shall have been given, obtained or complied with, as applicable.

     Section 5.2 Conditions to the Obligations of the Company. The obligation of the Company to effect the Merger is subject to the satisfaction at or prior to the Effective Time of each of the following conditions:

          (a) The representations and warranties of Parent and Acquisition Sub contained in this Agreement shall be true and correct (i) at and as of the date hereof (except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date) in all material respects (not taking into account any “materiality” qualifications or dollar “thresholds” set forth in such representations and warranties) and (ii) at and as of the Closing Date with the same effect as if made on and as of the Closing Date (except to the extent such representations and warranties specifically related to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date), except as would not result in a Material Adverse Effect on Parent (not taking into account any “materiality” qualifications or dollar “thresholds” set forth in such representations and warranties) and, at the Closing, Parent

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and Acquisition Sub shall have delivered to the Company a certificate to the effect of clauses (i) and (ii) above, executed by an executive officer of Parent and Acquisition Sub;

          (b) Each of the covenants and obligations of Parent and Acquisition Sub to be performed at or before the Effective Time pursuant to this Agreement shall have been duly performed in all material respects at or before the Effective Time and, at the Closing, Parent and Acquisition Sub shall have delivered to the Company a certificate to that effect, executed by an executive officer of Parent and Acquisition Sub;

          (c) Each of Parent and Acquisition Sub shall have executed and delivered to the Company each Transaction Agreement to which it is a party; and

          (d) Except to the extent compliance by the Company with the provisions of Section 4.19 and the condition set forth in Section 5.3(t) is waived by Parent and Acquisition Sub (in their sole and absolute discretion) prior to completion of the Audit at a time at which all of the other conditions set forth in this Article 5 (other than those conditions that by their terms are to be satisfied or waived at the Closing) have been satisfied or waived, the Audited Financial Statements referred to in Section 4.19 shall not show both (i) that the sum of (A) the consolidated revenue of the Company and its subsidiaries for the year ended December 31, 2009 plus the consolidated revenue for the Company and its subsidiaries for the year ended December 31, 2008, each as shown on the Audited Financial Statements (the “Two Year Audited Revenue Amount”) is more than thirty (30%) percent higher than (B) the sum of the consolidated revenue of the Company and its subsidiaries for the year ended December 31, 2009 plus the consolidated revenue for the Company and its subsidiaries for the year ended December 31, 2008, each as shown on the Financial Statements (the “Two Year Unaudited Revenue Amount”) and (ii) that the sum of (A) the consolidated net income of the Company and its subsidiaries for the year ended December 31, 2009 plus the consolidated net income for the Company and its subsidiaries for the year ended December 31, 2008, each as shown on the Audited Financial Statements (the “Two Year Audited Net Income Amount”) is more than $6,000,000 higher than (B) the sum of the consolidated net income of the Company and its subsidiaries for the year ended December 31, 2009 plus the consolidated net income for the Company and its subsidiaries for the year ended December 31, 2008, each as shown on the Financial Statements (the “Two Year Unaudited Net Income Amount”).

     Section 5.3 Conditions to the Obligations of Parent and Acquisition Sub. The respective obligations of Parent and Acquisition Sub to effect the Merger are subject to the satisfaction at or prior to the Effective Time of each of the following conditions:

          (a) The representations and warranties of the Company contained in this Agreement shall be true and correct (i) at and as of the date hereof (except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date) in all material respects (not taking into account any “materiality” qualifications or dollar “thresholds” set forth in such representations and warranties or any disclosure contained in the Section 2.8 Update) and (ii) at and as of the Closing Date with the same effect as if made on and as of the Closing Date (except to the extent such representations and warranties specifically related to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date),

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except as would not result in a Material Adverse Effect on the Company (not taking into account any “materiality” qualifications or dollar “thresholds” set forth in such representations and warranties or any disclosure contained in the Section 2.8 Update) and, at the Closing, the Company shall have delivered to Parent and Acquisition Sub a certificate to the effect of clauses (i) and (ii) above, executed by an executive officer of the Company;

          (b) Each of the covenants and obligations of the Company to be performed at or before the Effective Time pursuant to this Agreement shall have been duly performed in all material respects at or before the Effective Time and, at the Closing, the Company shall have delivered to Parent and Acquisition Sub a certificate to that effect, executed by an executive officer of the Company;

          (c) There shall not have occurred a Material Adverse Effect on the Company;

          (d) Each of the Company and its subsidiaries shall have obtained (x) the consent or approval required under any Material Contract set forth on Schedule III to permit the succession by the Surviving Corporation or Nvelo, as the case may be, pursuant to the Merger or the Spinoff, respectively, to any obligation, right or interest of the Company or any of its subsidiaries under the agreements and instruments between such person, on the one hand, and the Company or such subsidiary, on the other hand, or (y) the termination of any Material Contract set forth on Schedule III as an agreement to be terminated;

          (e) Parent shall have received (i) an executed offer letter (including Parent’s standard form of employee proprietary information and inventions agreement), effective as of the Closing Date, from the percentage specified in Section 1 of Schedule IV of the employees of the Company and its subsidiaries named in Section 1 of Schedule IV, (ii) an executed offer letter on Parent’s standard form (including Parent’s standard form of employee proprietary information and inventions agreement) effective as of the Closing Date, from the number specified in Section 2 of Schedule IV of the employees of the Company and its subsidiaries named in Section 2 of Schedule IV and (iii) an executed offer letter on Parent’s standard form (including Parent’s standard form of employee proprietary information and inventions agreement and, with respect to the individuals listed on Section 3 of Schedule IV, the agreements set forth in Section 3 of Schedule IV), effective as of the Closing Date, from the percentage specified in Section 5 of Schedule IV of the employees of the Company and its subsidiaries to which Parent or a subsidiary of Parent makes an offer between the date hereof and the Closing Date, and each of such employees shall remain an employee in good standing (which for these purposes means such employee is not subject to termination by the Company or any of its subsidiaries under its employment policies in effect on the date of this Agreement) and shall not have notified the Company, any subsidiary of the Company or Parent of such employee’s intention not to continue his or her employment with the Surviving Corporation or Parent after the Effective Time or contested the validity of any of such letters or agreements;

          (f) The Company and each of its subsidiaries shall have executed and delivered to Parent each Transaction Agreement to which it is a party;

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          (g) No party (other than Parent and Acquisition Sub) to an Employment Agreement shall have breached, threatened to breach or questioned the validity of their respective Employment Agreement;

          (h) No party (other than Parent and Acquisition Sub) to a Non-Competition Agreement shall have breached, threatened to breach or questioned the validity of their respective Non-Competition Agreement;

          (i) Parent shall have received satisfactory evidence that the Company has given to holders of Company Securities such notice of the Merger and of the cancellation of Company Stock Options as of the Effective Time as is required by applicable law, the terms of the Company’s Articles of Incorporation and Bylaws and the Company Plans, as the case may be, and the longest of the notice periods required by the Articles of Incorporation, Bylaws, or Company Plans shall have expired or been waived;

          (j) The Shareholders and the Company shall have approved the termination of any shareholder, voting, registration or investor rights agreements of the Company, including those described in Section 4.14;

          (k) The Company and each of its applicable subsidiaries shall have entered into an invention assignment and disclosure agreement in a form acceptable to Parent with each director, employee or consultant of the Company or any of its subsidiaries as of the date hereof, and with each former director, employee or consultant of the Company or any of its subsidiaries that is named as an inventor in any Company Patent;

          (l) Parent shall have received evidence satisfactory to Parent that each employee and director of the Company and any of its subsidiaries has resigned from all director or officer positions held by such person with respect to the Company or any such subsidiary;

          (m) The Company has delivered to Parent a true and complete copy of the Merger Consideration Allocation Spreadsheet, as contemplated by Section 4.22, and the Company’s capitalization table at least 2 business days prior to the Closing Date, reflecting the number of Shares and Company Stock Options, and any other Company Securities, in each case outstanding as of the Effective Time (the “Updated Capitalization Schedule”). The Updated Capitalization Schedule shall include a true and complete list as of the Effective Time of all holders of outstanding Company Securities, an indication of whether Company Stock Options or Restricted Company Shares are vested or unvested, the vesting schedule of each Company Stock Option and Company Restricted Share, the exercise price per share and whether such option is a nonqualified stock option or incentive stock option. The Merger Consideration Allocation Spreadsheet and the Updated Capitalization Schedule shall be certified by an executive officer of the Company;

          (n) The Company shall have delivered to Parent a certificate at least two business days prior to Closing, signed by an executive officer of the Company, setting forth the amount of Company Transaction Expenses, as required by Section 8.13, the Cash Statement and the Section 2.8 Update;

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          (o) Each Shareholder or employee of the Company or a subsidiary of the Company with rights of acceleration with respect to Company Stock Options or Restricted Company Shares (other than those who have not received an offer of employment from Parent or Acquisition Sub) shall have waived all rights to such acceleration of vesting of their Company Stock Options or Restricted Company Shares;

          (p) The Company and each holder of Company Restricted Shares and/or Company Stock Options shall have, to the extent reasonably necessary or advisable, amended the Company Plans and any award agreements or other Contracts governing such Company Restricted Shares and/or Company Stock Options to permit treatment of them in the manner contemplated by Section 1.11;

          (q) Not more than 10% of the shares of Company Common Stock outstanding at the Effective Time shall be Dissenting Shares and no more than 10% of the shares of Company Common Stock shall have failed to give their written consent approving the Spinoff;

          (r) The Company, Nvelo and each applicable subsidiary of the Company shall have effected the Spinoff pursuant to the Spinoff Agreements, and the Company, Nvelo and each applicable subsidiary of the Company shall have complied in all respects with each and every provision of the Spinoff Agreements;

          (s) Parent shall have received a written agreement from Nvelo in the form of Exhibit C (the “Acknowledgement Agreement”), pursuant to which Nvelo agrees to be bound by the provisions of Article 7 applicable to it and the other items set forth in the Acknowledgement Agreement;

          (t) The Audit shall have been completed and Parent shall have received from the Company and the Independent Auditor a copy of the Audited Financial Statements referred to in Section 4.19 and a signed copy of the Independent Auditor’s audit report thereon described in Section 4.19, which audit report shall be unqualified, and the Audited Financial Statements shall not show either (i) that the Two Year Audited Revenue Amount is lower than the Two Year Unaudited Revenue Amount by more than ten (10) percent or (ii) that the Two Year Audited Net Income Amount is lower than the Two Year Unaudited Net Income Amount by more than $2,000,000;

          (u) The Company shall have delivered to the Parent (i) a properly executed Foreign Investment and Real Property Tax of 1980 notification letter which states that the Shares and the Company Stock Options do not constitute “United States real property interests” under Section 897(c) of the Code for purposes of satisfying Parent’s obligations under Treasury Regulation Section 1.1445-2(c)(3) and (ii) a form of notice to the IRS prepared in accordance with the requirements of Treasury Regulation Section 1.897-2(h)(2), each in substantially the form attached hereto as Exhibit D;

          (v) All Employee Indebtedness shall have been paid or repaid to the Company or its applicable subsidiary, as the case may be, in accordance with Section 4.20;

          (w) Parent shall have received, with respect to each Contract referred to in Section 4.24, evidence of either (x) the termination of such Contract, if required pursuant to

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Section 4.24, or (y) a written agreement with the applicable Third Party listed on Schedule V that reflects treatment of such Contract that is mutually agreeable to Parent and the Company;

          (x) The persons listed on Section 1 of Schedule VI shall have entered into consulting agreements with Parent or the Surviving Corporation with a term running until at least December 31, 2010, in each case, in form and substance reasonably satisfactory to Parent, which shall include retention by Parent of certain payments to such persons subject to the terms of the consulting agreement;

          (y) All shares of any subsidiary of the Company not directly owned by the Company or one of its subsidiaries shall have been transferred to Parent or Parent’s designee, effective at the Effective Time; and

          (z) The condition set forth on Schedule VII shall have been satisfied.

ARTICLE 6.

TERMINATION

     Section 6.1 Termination. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Closing whether before or after approval and adoption of this Agreement by the Shareholders:

          (a) by mutual consent of Parent, Acquisition Sub and the Company;

          (b) by Parent and Acquisition Sub or the Company if (i) any court or Governmental Entity of competent jurisdiction shall have issued a final order, decree or ruling, or taken any other final action, restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action is or shall have become nonappealable; or (ii) the Merger has not been consummated on or before August 13, 2010, which date shall automatically be extended to November 13, 2010 if all of the conditions set forth in Article 5 (other than those conditions that by their nature are satisfied at Closing, and other than the condition set forth in Section 5.1(a)) have been satisfied by August 13, 2010 (such date, as the same may be extended, the “Final Date”), provided, however that no party may terminate this Agreement pursuant to clause (ii) if such party’s failure to fulfill any of its obligations under this Agreement shall have been the reason that the Effective Time shall not have occurred on or before said date;

          (c) by the Company if (i) there shall have been a breach of any representation or warranty of Parent or Acquisition Sub set forth in this Agreement or if any such representation or warranty of Parent or Acquisition Sub shall have become untrue such that the condition set forth in Section 5.2(a) would be incapable of being satisfied by the Final Date, provided that the Company has not breached any of its representations and warranties or obligations hereunder in any material respect; or (ii) there shall have been a breach by Parent or Acquisition Sub of any of its covenants or agreements hereunder such that the condition set forth in Section 5.2(b) would be incapable of being satisfied by the Final Date, and Parent or Acquisition Sub, as the case may be, has not cured such breach within twenty (20) business days after notice by the Company thereof, provided that the Company has not breached any of its representations and warranties or obligations hereunder in any material respect; or

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          (d) by Parent and Acquisition Sub if (i) there shall have been a breach of any representation or warranty on the part of the Company set forth in this Agreement or if any such representation or warranty of the Company shall have become untrue such that the condition set forth in Section 5.3(a) would be incapable of being satisfied by the Final Date, provided that neither Parent nor Acquisition Sub has breached any of its representations and warranties or obligations hereunder in any material respect; or (ii) there shall have been a breach by the Company of any of its covenants or agreements hereunder such that the condition set forth in Section 5.3(b) would be incapable of being satisfied by the Final Date, and the Company has not cured such breach within twenty (20) business days after notice by Parent or Acquisition Sub thereof, provided that neither Parent nor Acquisition Sub has breached any of its representations and warranties or obligations hereunder in any material respect.

     Section 6.2 Effect of Termination. In the event of the termination and abandonment of this Agreement pursuant to Section 6.1, this Agreement shall forthwith become void and have no further effect without any liability on the part of any party hereto or any of its affiliates, directors, officers and shareholders other than pursuant to Sections 4.6(c) (and such provisions of Article 8 as would be relevant to effectuating such Section). Nothing contained in this Section 6.2 shall relieve any party from liability for any breach of this Agreement prior to such termination. Notwithstanding anything to the contrary herein, the Confidentiality Agreement shall survive any termination of this Agreement.

ARTICLE 7.

INDEMNIFICATION; ESCROW

     Section 7.1 General Survival. The parties agree that, regardless of any investigation made by Parent or Acquisition Sub, the representations and warranties of the Company contained in this Agreement shall survive the execution and delivery of this Agreement for a period beginning on the date hereof and ending at 5:00 p.m., Pacific time, (a) 18 months after the date on which the Effective Time occurs (the “Escrow Period”), or (b) with respect to any breach of the representations and warranties of the Company contained in Sections 2.2 (Capitalization of the Company), 2.3 (Authority Relative to this Agreement; Recommendation), 2.13 (Taxes), 2.21 (Brokers), 2.24 (Company Transaction Expenses) or 2.25 (Spinoff) or the matters covered in Sections 7.2(a)(ii), 7.2(a)(v), 7.2(a)(vi) and 7.2(a)(vii) and Section 7.2(b), 60 days after the last day of the longest applicable statute of limitations period for any third party claim relating thereto or, with respect to the matters covered in Section 7.2(a)(viii), three (3) years after the date on which the Effective Time occurs (each period described in this sentence, an applicable “Survival Period”).

     Section 7.2 Indemnification Generally.

          (a) Subject to Section 7.1, from and after the Effective Time, Parent and the Surviving Corporation, and their respective affiliates, officers, directors, stockholders, shareholders, representatives and agents (collectively, the “Parent Indemnitees”), shall be indemnified and held harmless by each Shareholder and Optionholder (“Indemnifying Party”) (severally in accordance with each such Shareholder’s and Optionholder’s proportional share of the Merger Consideration and not jointly) from and against and in respect of any and all Losses

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incurred by, resulting from, arising out of, relating to, imposed upon or incurred by Parent, Acquisition Sub, the Surviving Corporation or any other Parent Indemnitee by reason of:

               (i) any inaccuracy in or breach of any of the Company’s representations or warranties contained in this Agreement (as modified only by the Company Disclosure Schedule, provided that (x) no information disclosed in the Company Disclosure Schedule that would function as an exception to the representations and warranties contained in Section 2.13 (Taxes) shall be deemed to modify those representations and warranties for any purpose under this Article 7, provided, however, that the amount of Losses for any inaccuracy in or breach of Section 2.13 (Taxes) with respect to sales Tax will be net of sales Tax recovered by Parent or the Company following the Closing from Company customers), (y) no information disclosed in the Company Disclosure Schedule in respect of Section 83(b) elections that would function as an exception to the representations and warranties contained in Section 2.13 (Taxes) or Section 2.2 (Capitalization of the Company) shall be deemed to modify those representations and warranties for any purpose under this Article 7 and (z) no information disclosed in Section 2.14(b)(v)(B) of the Company Disclosure Schedule that would function as an exception to the representations and warranties shall be deemed to modify the representations and warranties for any purpose under this Article 7, in each case to the extent that the terms governing the license of such Company Software conflict with or are otherwise inconsistent with the Company’s standard licensing terms for the applicable Company Software;

               (ii) any breach of or failure to perform or comply with any covenant, undertaking or other agreement by the Company contained in this Agreement (which breach or failure to perform or comply occurs prior to the Closing);

               (iii) any misrepresentation or misstatement contained in the Capitalization Schedule, the Updated Capitalization Schedule, the Cash Statement, the Merger Consideration Allocation Spreadsheet or in any other written statement or certificate furnished to Parent, Acquisition Sub or any other Parent Indemnitee by or on behalf of the Company in connection with the transactions contemplated by this Agreement;

               (iv) any Company Transaction Expense (other than those set forth on Schedule IX that are taken into account in the calculation of the Cash Adjustment Amount) in excess of the amount of Company Transaction Expenses by which the Merger Consideration has been reduced in accordance with Sections 1.8(b)(ii) and 8.13;

               (v) payments to holders of Dissenting Shares in excess of the applicable Per Share Amount (calculated in accordance with Section 1.8(b)(iv), and subject to Sections 1.8(c) and 1.8(d));

               (vi) any Excluded Liabilities;

               (vii) any Spinoff Taxes (provided that the indemnity for Spinoff Taxes (but not Losses with respect thereto) shall be limited to the amount by which such Spinoff Taxes exceed Estimated Spinoff Taxes) and breach of any fiduciary duty by any director, officer or shareholder of the Company or any subsidiary of the Company in connection with the Spinoff or

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the approval of, entry into, or consummation of the transactions contemplated by, the Spinoff Agreements;

               (viii) the matters set forth on Schedule VIII(viii);

               (ix) the termination or amendment of any Contract listed on Schedule V, to the extent the Losses relating thereto exceed the amount included in Company Transaction Expenses with respect to such Contract;

               (x) the matters set forth on Schedule VIII(x); or

               (xi) the matters set forth on Schedule VIII(xi).

For purposes of this Agreement, the term “Losses” means any and all deficiencies, judgments, settlements, demands, claims, suits, actions or causes of action, assessments, liabilities, losses, damages (whether direct, indirect, incidental or consequential), interest, Taxes, fines, penalties, costs, expenses (including reasonable legal, accounting and other costs and expenses of professionals) incurred in connection with investigating, defending, settling or satisfying any and all demands, claims, actions, causes of action, suits, proceedings, assessments, judgments or appeals, and in seeking indemnification therefore, provided, however, that Losses shall not include punitive damages except to the extent resulting from a claim by a third party other than a Parent Indemnitee.

          (b) Subject to Section 7.1, from and after the Effective Time, the Parent Indemnitees shall be indemnified and held harmless, jointly and severally, by Nvelo from and against and in respect of any and all Losses incurred by, resulting from, arising out of, relating to, imposed upon or incurred by Parent, Acquisition Sub, the Surviving Corporation or any other Parent Indemnitee by reason of any inaccuracy in or breach of any of the Company’s representations or warranties contained in Section 2.25, and any Excluded Liabilities, any Spinoff Taxes (provided that the indemnity for Spinoff Taxes (but not Losses with respect thereto) shall be limited to the amount by which such Spinoff Taxes exceed Estimated Spinoff Taxes), and any breach of any fiduciary duty by any director, officer or shareholder of the Company or any subsidiary of the Company in connection with the Spinoff or the approval of, entry into, or consummation of the transactions contemplated by, the Spinoff Agreements.

          (c) No Parent Indemnitee shall be entitled to indemnification hereunder for any Losses arising from a breach of a representation or warranty of the Company until the aggregate amount of all Losses under all claims of all Parent Indemnitees for all such breaches shall exceed One Million Two Hundred Fifty Thousand Dollars ($1,250,000) (the “Threshold”), at which time all Losses incurred shall be subject to indemnification hereunder in full, including the amount of the Threshold; provided, however, that any Indemnification Claim for the matters set forth in Sections 7.2(a)(ii), 7.2(a)(v), 7.2(a)(vi), 7.2(a)(vii), 7.2(a)(ix) and 7.2(b), or with respect to the breach of any representation or warranty relating to the Cash Statement, or with respect to the breach of any representation or warranty contained in Sections 2.2 (Capitalization of the Company), 2.3 (Authority Relative to this Agreement; Recommendation), 2.13 (Taxes), 2.21 (Brokers), 2.24 (Company Transaction Expenses) or 2.25 (Spinoff) shall be indemnifiable in full without regard to the Threshold.

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          (d) The obligations of the Indemnifying Parties or, in the case of indemnification pursuant to Section 7.2(b), Nvelo under this Section 7.2 shall not be reduced, offset, eliminated or subject to contribution by reason of any action or inaction by the Company that contributed to any inaccuracy or breach giving rise to such obligation, it being understood that the Indemnifying Parties or, in the case of indemnification pursuant to Section 7.2(b), Nvelo, and not the Company or the Surviving Corporation, shall have the sole obligation for the indemnity obligations under this Section 7.2.

          (e) The amount of Losses payable by an Indemnifying Party under this Article 7 shall be reduced by any insurance proceeds actually received from an insurance carrier by the Indemnified Party with respect thereto (net of any applicable deductibles or similar costs or payments) pursuant to a policy of the Company in effect prior to the Effective Time. No Parent Indemnitee shall have any obligation to maintain any such policy after the Effective Time or seek out any recovery under any such policy.

          (f) For the avoidance of doubt, no Parent Indemnitee shall be entitled to recover pursuant to this Article 7 (i) from any Indemnifying Party any Loss to the extent such Parent Indemnitee has already received payment from Nvelo pursuant to this Article 7 for the same such Loss or (ii) from Nvelo any Loss to the extent such Parent Indemnitee has already received payment from one or more Indemnifying Parties pursuant to this Article 7 for the same such Loss.

          (g) With respect to Indemnification Claims in respect of sales Taxes, Parent shall follow Parent’s customary procedures related to seeking sales Taxes from Company customers.

          (h) Each Indemnification Claim shall be made only in accordance with this Article 7 and the Escrow Agreement.

     Section 7.3 Escrow Arrangements. At the Effective Time, Parent, the Shareholder Agent and the Escrow Agent shall enter into an escrow agreement, in substantially the form attached hereto as Exhibit E with such modifications and revisions as may be reasonably required by the Escrow Agent upon its review of such agreement following the date hereof (the “Escrow Agreement”), and Parent shall cause to be retained from the Merger Consideration and deposited with Wells Fargo Bank, N.A., or such other bank or trust company designated by Parent and reasonably acceptable to the Company, as escrow agent (the “Escrow Agent”), into such account(s) with the Escrow Agent as is established by the Escrow Agreement the amount set forth in Section 1.8(d)(x) (the “Escrow Fund”), such amount to be held and released by the Escrow Agent pursuant to the terms of the Escrow Agreement and this Agreement. At the Effective Time, the Shareholder Agent and an escrow agent, which shall be a bank or trust company designated by the Shareholder Agent and reasonably acceptable to Parent, shall enter into an escrow agreement, in form and substance reasonably acceptable to Parent and the Shareholder Agent, and Parent shall cause to be retained from the Merger Consideration and deposited with such escrow agent, as escrow agent, into such account(s) with the Escrow Agent as is established by such escrow agreement the amount set forth in Section 1.8(d)(y) (the “Shareholder Agent Escrow Fund”), such amount to be held and released by such escrow agent pursuant to the terms of the such escrow agreement and this Agreement. The Escrow Fund,

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together with all interest and other income thereon, shall be available to the Parent Indemnitees to satisfy their claims for indemnification by the Indemnifying Parties hereunder; provided that Parent may not recover amounts from the Escrow Fund unless and until Indemnification Claim(s) (as defined in the Escrow Agreement, “Indemnification Claims”), identifying Losses exceeding the Threshold or not subject to the Threshold have been delivered to the Escrow Agent and the Shareholder Agent, as provided in the Escrow Agreement, and the conditions in the Escrow Agreement for the disbursement of such amounts from the Escrow Fund to the Parent have been satisfied; in such case, Parent may recover from the Escrow Fund, first, and then in the case of any Losses arising from a breach of a representation or warranty contained in Sections 2.2 (Capitalization of the Company), 2.3 (Authority Relative to this Agreement; Recommendation), 2.13 (Taxes), 2.21 (Brokers), 2.24 (Company Transaction Expenses) or 2.25 (Spinoff) or based on Section 4.18 (to the extent treated as Special Losses therein), Sections 7.2(a)(ii), 7.2(a)(v), 7.2(a)(vi), 7.2(a)(vii), 7.2(a)(viii) or 7.2(b) (any such Losses, “Special Losses”), from the Indemnifying Parties and, in the case of Section 7.2(b), Nvelo, as provided in Section 7.6.

     Section 7.4 Shareholder Agent.

          (a) For purposes of this Agreement, immediately and automatically upon Shareholder Approval of this Agreement, and without any further action on the part of any Indemnifying Party, each Indemnifying Party shall be deemed to have consented to the appointment of Mark Gogolewski as his, her or its representative and the attorney-in-fact for and on behalf of each such Indemnifying Party, and the taking by the Shareholder Agent of any and all actions and the making of any decisions required or permitted to be taken by him or her under this Agreement and the Escrow Agreement, including the exercise of the power to (i) authorize delivery to Parent of the Escrow Fund, or any portion thereof, in satisfaction of Indemnification Claims; (ii) agree to, negotiate, enter into settlements and compromises of and comply with orders of courts and awards of arbitrators with respect to such Indemnification Claims; (iii) resolve any Indemnification Claims; and (iv) take all actions necessary in the judgment of the Shareholder Agent for the accomplishment of the foregoing and all of the other terms, conditions and limitations of this Agreement and the Escrow Agreement.

          (b) Accordingly, the Shareholder Agent shall have unlimited authority and power to act on behalf of each Indemnifying Party with respect to this Agreement and the Escrow Agreement and the disposition, settlement or other handling of all Indemnification Claims, or other rights or obligations arising from and taken pursuant to this Agreement and the Escrow Agreement. The Indemnifying Parties will be bound by all actions taken by the Shareholder Agent in connection with this Agreement and the Escrow Agreement, and Parent and the Escrow Agent shall be entitled to rely on any action or decision of the Shareholder Agent. Without limiting the generality of the foregoing, each decision, act, consent or instruction of the Shareholder Agent will constitute a decision of all the Indemnifying Parties with respect to whom a portion of the Escrow Fund is held by the Escrow Agent and will be final, binding and conclusive upon each of such Indemnifying Parties, and Parent and the Escrow Agent may rely upon any such decision, act, consent or instruction of the Shareholder Agent as being the decision, act, consent or instruction of each and every such Indemnifying Party. Each of Parent and the Escrow Agent is hereby relieved from any liability to any person for any acts done by it in accordance with such decision, act, consent or instruction of the Shareholder Agent.

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          (c) The Shareholder Agent will incur no liability with respect to any action taken or suffered by him or her in reliance upon any notice, direction, instruction, consent, statement or other document believed by him or her to be genuine and to have been signed by the proper person (and shall have no responsibility to determine the authenticity thereof), nor for any other action or inaction, except his or her own willful misconduct or gross negligence. In all questions arising under this Agreement or the Escrow Agreement, the Shareholder Agent may rely on the advice of counsel, and the Shareholder Agent will not be liable to anyone for anything done, omitted or suffered in good faith by the Shareholder Agent based on such advice. The Shareholder Agent will not be required to take any action involving any expense unless the payment of such expense is made or provided for in a manner satisfactory to him or her.

          (d) Subject to the terms of the Escrow Agreement, at any time, holders of a majority in interest of the Escrow Fund, determined at the Effective Time, may, and if the Shareholder Agent resigns, ceases to perform his or her duties in connection herewith or dies, holders of a majority in interest of the Escrow Fund, determined at the Effective Time, shall, appoint a new Shareholder Agent by written consent by sending to Parent and the Escrow Agent notice and a copy of the written consent appointing such new Shareholder Agent(s) signed by holders of a majority in interest of the Escrow Fund. Such appointment will be effective upon the later of the date indicated in the consent or the date such consent is received by Parent, the Escrow Agent and the Surviving Corporation.

          (e) The Indemnifying Parties on whose behalf the Shareholder Agent Escrow Amount was withheld from the Merger Consideration and included in the Stockholder Agent Escrow Fund pursuant to Section 1.8(d)(y), this Article 7 and the Escrow Agreement shall severally, in accordance with each such Indemnifying Party’s proportional share of the Merger Consideration, and not jointly indemnify the Shareholder Agent and hold the Shareholder Agent harmless from and against any loss, liability or expense of any nature incurred by such Shareholder Agent arising out of or in connection with the administration of its duties as Shareholder Agent, including reasonable legal fees and other costs and expenses of defending or preparing to defend against any claim or liability in the premises, unless such loss, liability or expense shall be caused by such Shareholder Agent’s willful misconduct or gross negligence (“Shareholder Agent Expenses”).

          (f) The Shareholder Agent Escrow Fund shall be available as a fund to satisfy the Shareholder Agent Expenses in accordance with the escrow agreement relating thereto between the Shareholder Agent and the escrow agent therefor. In the event the Shareholder Agent Escrow Amount shall be insufficient to satisfy the expenses of the Shareholder Agent and to the extent that any portion of the Escrow Fund is scheduled to be distributed to the Indemnifying Parties, the Shareholder Agent may recover out of such amount available for distribution and before any such distribution, the reasonable and documented legal fees and other professional service fee expenses incurred by the Shareholder Agent in performance of his or her duties hereunder. In order to make any such recovery, the Shareholder Agent shall deliver a written notice to Parent and the Escrow Agent in accordance with the applicable provisions of the Escrow Agreement, and, if required by law or the Escrow Agent, an accurately completed W-9 or W-8BEN. The Shareholder Agent shall also provide to Parent, with such written notice, an invoice showing the fees and expenses for the services performed.

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     Section 7.5 Third Party Claims.

          (a) If any third party shall notify Parent or any of its affiliates with respect to any claim (hereinafter referred to as a “Third Party Claim”), which Parent believes in good faith, may give rise to an Indemnification Claim by Parent against the Escrow Fund, then Parent shall as soon as reasonably practicable give notice to the Shareholder Agent and in any event within thirty (30) days after Parent has knowledge of any such Third Party Claim setting forth such material information with respect to the Third Party Claim as is reasonably available to Parent; provided, however, that no delay or failure on the part of Parent in notifying the Shareholder Agent shall relieve the Shareholder Agent and the Indemnifying Parties from their obligations hereunder unless the Shareholder Agent and the Indemnifying Parties are thereby materially prejudiced (and then solely to the extent of such material prejudice).

          (b) In case any Third Party Claim is asserted against Parent or any of its affiliates, the Shareholder Agent will be entitled, if the Shareholder Agent so elects by written notice delivered to Parent within thirty (30) days (or sooner if the nature of the Indemnification Claim so requires) after receiving Parent’s notice of such claim, to assume the defense thereof, at the sole expense of the Indemnifying Parties, independent of the Escrow Fund, with counsel reasonably satisfactory to Parent, so long as:

               (i) Parent has reasonably determined that Losses which may be incurred as a result of the Third Party Claim do not exceed either individually, or when aggregated with all other actual or anticipated Third Party Claims, the total dollar value of the Escrow Fund;

               (ii) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief; and

               (iii) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of Parent, likely to establish a precedential custom or practice materially adverse to the continuing business interests of Parent.

          (c) If the Shareholder Agent so assumes any such defense, the Shareholder Agent shall conduct the defense of the Third Party Claim actively and diligently. The Shareholder Agent shall not compromise or settle such Third Party Claim or consent to entry of any judgment in respect thereof without the prior written consent of Parent and/or any other Parent Indemnitees, as applicable, which consent shall not be unreasonably withheld or delayed.

          (d) In the event that the Shareholder Agent assumes the defense of the Third Party Claim in accordance with Section 7.5(b), Parent or any other Parent Indemnitee may retain separate counsel and participate in the defense of the Third Party Claim, but the fees and expenses of such counsel shall be at the expense of Parent unless Parent or such Parent Indemnitees shall reasonably determine that there is a conflict of interest between or among Parent or the Parent Indemnitees, on the one hand, and the Shareholder Agent and the Indemnifying Parties, on the other hand, with respect to such Third Party Claim, in which case the reasonable fees and expenses of such counsel will be paid out of the Escrow Fund. Parent will, at the Shareholders’ and Optionholders’ expense, cooperate in the defense of the Third Party

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Claim and will provide full access to documents, assets, properties, books and records reasonably requested by the Shareholder Agent and material to the claim and will make available all officers, directors and employees reasonably requested by the Shareholder Agent for investigation, depositions and trial.

          (e) If the Shareholder Agent fails or elects not to assume the defense of Parent or its affiliates against such Third Party Claim, which Shareholder Agent had the right to assume under Section 7.5(b), Parent or any other Parent Indemnitee shall have the right to undertake the defense and Parent shall not compromise or settle such Third Party Claim or consent to entry of any judgment in respect thereof without the prior written consent of Shareholder Agent, which consent shall not be unreasonably withheld or delayed. If the Shareholder Agent is not entitled to assume the defense of Parent or other Parent Indemnitees against such Third Party Claim pursuant to Section 7.5(b), Parent or the Parent Indemnitees shall have the right to undertake the defense, consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim in any manner it may deem appropriate (and Parent or Parent Indemnitees need not consult with, or obtain any consent from, the Shareholder Agent in connection therewith); provided, however, that, except with the written consent of the Shareholder Agent, no settlement of any such claim or consent to entry of any judgment with respect to such Third Party Claim shall alone be determinative of the validity of the Third Party Claim against the Escrow Fund or personally against the Indemnifying Parties, and that in any dispute related to a claim for indemnification hereunder by a Parent Indemnitee based on such settlement made or entry of judgment consented to by such Parent Indemnitee without the consent of the Shareholder Agent, the party prevailing shall be entitled, in addition to such other relief as may be granted, to such party’s attorneys’ fees and expenses in connection with such dispute. In each case, Parent or the Parent Indemnitees shall conduct the defense of the Third Party Claim actively and diligently, and the Shareholder Agent will cooperate with Parent or Parent Indemnitees, and the Shareholder Agent will use his or her best efforts to cause the Indemnifying Parties to cooperate in the defense of that claim and will provide full access to documents, assets, properties, books and records reasonably requested by Parent and material to the claim and will make available all individuals reasonably requested by Parent for investigation, depositions and trial.

          (f) Notwithstanding the foregoing, the Shareholder Agent shall not be entitled to control any claim relating to Taxes of the Parent or the Company for any period ending after the Closing Date and shall not be entitled to settle, either administratively or after the commencement of litigation, any claim for Taxes which could adversely affect the liability of Parent or the Surviving Corporation for Taxes for any period (or portion thereof) after the Closing Date, without the prior written consent of Parent.

     Section 7.6 Exclusive Remedy.

          (a) From and after the Effective Time, the Escrow Fund shall be the sole and exclusive remedy of the Parent Indemnitees for any Indemnification Claims arising under this Agreement, other than Special Losses, for which the Indemnifying Parties shall also be severally, in accordance with each such Indemnifying Party’s proportional share of the Merger Consideration, and not jointly liable for the amount of any such Losses that exceed the Escrow Fund and, in the case of Indemnification Claims pursuant to Section 7.2(b), Losses for which

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Nvelo shall also be jointly and severally liable in accordance with Section 7.6(d); provided, however, that nothing in this Agreement shall be deemed a waiver by any party of (i) any right to specific performance or injunctive relief or (ii) any right or remedy, including money damages in excess of the Escrow Fund and the Merger Consideration, arising by reason of any claim of fraud or willful misrepresentation with the respect to this Agreement.

          (b) Notwithstanding anything to the contrary herein, from and after the Effective Time, (i) for any Indemnification Claims arising from Special Losses (other than any Indemnification Claims described in clause (ii) below), the aggregate maximum indemnification obligations of each Shareholder and Optionholder (including for Indemnification Claims for matters referred to in 7.6(a)) shall be an amount equal to the amount of the Merger Consideration payable in respect of such Shareholder’s Shares or such Optionholders’ Company Stock Options, as the case may be and (ii) for any Indemnification Claims arising from the matters set forth in Section 7.2(a)(viii), together with any other Indemnification Claims that are subject to Section 7.6(a), the maximum aggregate indemnification obligations of each Shareholder and Optionholder shall be an amount equal to their pro rata share of the Escrow Amount; provided, however, that nothing in this Agreement shall be deemed a waiver by any party of any right or remedy, including money damages in excess of the Escrow Fund and the Merger Consideration, arising by reason of any claim of fraud or willful misrepresentation with respect to this Agreement.

          (c) Notwithstanding anything to the contrary herein, from and after the Effective Time, Parent shall satisfy its Indemnification Claims against the Indemnifying Parties from the Escrow Fund before seeking indemnification directly from any of the Indemnifying Parties.

          (d) Notwithstanding anything to the contrary herein, there shall be no indemnification threshold or indemnification cap or other limitation on Indemnification Claims against the Indemnifying Parties based on Section 7.2(a)(vi) or (vii) or Nvelo based on Section 7.2(b) or otherwise resulting from, arising out of or relating to any inaccuracy in or breach of any of the Company’s representations or warranties contained in Section 2.25, and any Excluded Liabilities, any Spinoff Taxes, any breach of any fiduciary duty by any director, officer or shareholder of the Company or any subsidiary of the Company in connection with the Spinoff or the approval of, entry into, or consummation of the transactions contemplated by, the Spinoff Agreements.

     Section 7.7 Parent’s Creditors; Solvency of Escrow Agent. The aggregate portion of the Escrow Fund attributable to and held in respect of holders of Company Stock Options and holders of Company Restricted Shares, and the aggregate amount of per-share payments to which such holders are entitled from the Escrow Fund, shall be subject to the claims of the Parent’s general creditors under applicable laws pertaining to creditors’ rights in the event that the Parent is unable to pay its debts as they become due or is subject to a pending proceeding as a debtor under United States federal bankruptcy law, and shall be subject to return to the Parent as provided in the Escrow Agreement. Any amounts that are not paid to such holders by reason of the immediately preceding sentence shall constitute a general unsecured claim of such holder against the Parent. In addition, neither Parent nor the Surviving Corporation shall be liable to any holder of Shares or Company Stock Options for cash constituting Merger Consideration

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delivered to the Escrow Agent in accordance with this Agreement and the Escrow Agreement that is not paid to such holder of Shares or Company Stock Options due to the Escrow Agent not being able to pay its debts as they become due or being subject to a proceeding under bankruptcy, insolvency, or similar laws now or hereafter in effect relating to creditors’ rights generally or to general principles of equity.

ARTICLE 8.

MISCELLANEOUS

     Section 8.1 Entire Agreement. This Agreement (including the Company Disclosure Schedule and the Exhibits hereto) constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements and understandings both written and oral between the parties with respect to the subject matter hereof.

     Section 8.2 Validity. If any provision of this Agreement or the application thereof to any person or circumstance is held invalid or unenforceable, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected thereby and to such extent the provisions of this Agreement are agreed to be severable.

     Section 8.3 Notices. All notices, requests, claims, consents, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt, or, in the case of a facsimile, upon confirmation of receipt) by delivery in person, by facsimile, by nationally recognized overnight courier or by registered or certified mail (postage prepaid, return receipt requested) to each other party as follows:

if to Parent or Acquisition Sub:
	Cadence Design Systems, Inc.
	2655 Seely Ave.
	San Jose California 95134 Facsimile: (408) 904-6946
	Attention: Office of the General Counsel
with a copy to:
	Gibson, Dunn & Crutcher LLP
	555 Mission Street
	San Francisco, CA 94105
	Facsimile: (415) 374-8400
	Attention: Stewart L. McDowell
if to Shareholder Agent to:
	Mark Gogolewski
	Facsimile: (650) 938-5200 (c/o William Schreiber)

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with a copy to:
	Fenwick & West LLP
	Silicon Valley Center
	801 California Street
	Mountain View, CA 94041
	Facsimile: (650) 938-5200
	Attention:  William R. Schreiber
	R. Gregory Roussel

or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above.

     Section 8.4 Governing Law.

          (a) This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to the principles of conflicts of law thereof.

          (b) Each of the parties hereto consents to the exclusive jurisdiction of any state or federal court located within the State of California, and irrevocably agrees that all actions or proceedings relating to this Agreement or the transactions contemplated hereby shall be litigated in one of such courts, and each of the parties waives any objection that it may have based on improper venue or forum non conveniens to the conduct of any such action or proceeding in any such court and waives personal service of any and all process upon it, and consent to all such service of process made in the manner set forth in Section 8.3. Nothing contained in this Section 8.4(b) shall affect the right of any party to serve legal process on any other party in any other manner permitted by law.

     Section 8.5 Descriptive Headings; Section References. The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. All references herein to Articles, Sections, subsections, paragraphs and clauses are references to Articles, Sections, subsections, paragraphs and clauses, respectively, of this Agreement unless specified otherwise.

     Section 8.6 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and its successors and permitted assigns and, except as expressly provided herein, including in Section 8.1, except for Section 4.23, nothing in this Agreement is intended to or shall confer upon any other person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement.

     Section 8.7 Certain Definitions. For the purposes of this Agreement the terms:

          (a) “Additional Expense Amount” means $200,000 in respect of the matter set forth in Section 2 of Schedule X.

          (b) “affiliate” means a person that, directly or indirectly, through one or more intermediaries controls, is controlled by or is under common control with the first-mentioned person;

72

          (c) “business day” means any day other than a Saturday, Sunday or national holiday;

          (d) “capital stock” means common stock, preferred stock, partnership interests, limited liability company interests or other ownership interests entitling the holder thereof to vote with respect to matters involving the issuer thereof;

          (e) “control,” including, with correlative meaning, the terms “controlling,” “controlled by” and “under common control with,” means, for purposes of the definition of “affiliate” set forth in Section 8.7(b), the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of such person, whether through the ownership of voting securities, by contract, or otherwise;

          (f) “Due Date” means the due date taking into account extensions of time to file in effect;

          (g) “Estimated Spinoff Taxes” means $350,000.

          (h) “Excluded Liabilities” means any Losses resulting from, arising out of or relating to the operation of the Transferred Business or the Transferred Assets, whether before or after the Effective Time, and any Taxes resulting from, arising out of or relating to the Spinoff (including the value ascribed to the Transferred Assets).

          (i) “include” or “including” means “include, without limitation” or “including, without limitation,” as the case may be, and the language following “include” or “including” shall not be deemed to set forth an exhaustive list;

          (j) “knowledge” or “known” means, with respect to any matter in question, the knowledge of such matter of, for the Company, each director of the Company and the following employees or officers of the Company: Sanjay Srivastava, Mark Gogolewski, Jiurong Cheng, Mary Oria, Charlene Eng, Keith Neve, David Lin, Dale Olstinske, Kevin Silver and Ken Sakamaki, and for Parent and Acquisition Sub, any executive officer of Parent. Any such individual will be deemed to have knowledge of a particular fact, circumstance, event or other matter if (A) such individual has actual knowledge of such fact, circumstance, event or other matter; or (B) such fact, circumstance, event or other matter is reflected in one or more documents (whether written or electronic, including e-mails sent to or by such individual) in, or that have been in, such individual’s possession, including personal files of such person;

          (k) “Lien” means, with respect to any asset (including any security), any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset; provided, however, that the term “Lien” shall not include (i) statutory liens for Taxes, which are not yet due and payable or are being contested in good faith by appropriate proceedings and disclosed in Section 2.13(b)(iii) of the Company Disclosure Schedule, (ii) statutory or common law liens to secure landlords, lessors or renters under leases or rental agreements confined to the premises rented, (iii) deposits or pledges made in connection with, or to secure payment of, workers’ compensation, unemployment insurance, old age pension or other social security programs mandated under applicable laws, (iv) statutory or common law liens in favor of carriers, warehousemen, mechanics and materialmen to secure claims for labor,

73

materials or supplies and other like liens, and (v) restrictions on transfer of securities imposed by applicable state and federal securities laws;

          (l) “Optionholder” means a holder of a Company Stock Option;

          (m) “person” means an individual, corporation, partnership, limited liability company, association, academic institution, trust, unincorporated organization or other legal entity, including any Governmental Entity;

          (n) “Sabbatical Expense Amount” means One Hundred Eighty Eight Thousand Dollars ($188,000);

          (o) “Shareholder” means any holder of Shares issued and outstanding immediately prior to the Effective Time;

          (p) “Shareholder Agent Escrow Amount” means $1,500,000;

          (q) “Spinoff Taxes” means any Taxes for which the Company or any of its subsidiaries or affiliates is or becomes liable in connection with the Spinoff, including as a result of the Spinoff failing to qualify as a transaction described in Section 355 of the Code (it being understood that the Spinoff will be taxable to the Company by reason of Section 355(e) of the Code), any and all professional fees incurred in connection with any of the foregoing, and net additional Taxes (taking into account any Tax benefit received by Parent) from the payment of Spinoff Taxes or such fees, if any resulting from the receipt of any indemnity payments with respect thereto pursuant to Article 7;

          (r) “subsidiary” or “subsidiaries” of the Company, Parent, the Surviving Corporation or any other person means any corporation, partnership, limited liability company, association, trust, unincorporated association or other legal entity of which the Company, Parent, the Surviving Corporation or any such other person, as the case may be (either alone or through or together with any other subsidiary), owns, directly or indirectly, more than fifty percent (50%) of the capital stock or other ownership interest the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity; and

          (s) “Transferred Business” means the business being transferred by the Company to Nvelo pursuant to the Spinoff Agreements, which is the business of (i) hardware-independent flash memory based firmware development, maintenance and support; (ii) flash controller hardware platform representing integration of flash controller, DDR controller, CPU and PCIe/SATA controller; and (iii) software application and driver development and support of the activities permitted under clauses (i) and (ii) above;

          (t) “Transaction Agreements” means this Agreement, the Spinoff Agreements, the Escrow Agreement, the Acknowledgement Agreement, the Non-Competition Agreements and the other ancillary agreements that are exhibits to or referred to in the preceding agreements.

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     Section 8.8 Personal Liability. Except as expressly set forth herein with respect to the Shareholders, this Agreement shall not create or be deemed to create or permit any personal liability or obligation on the part of any Shareholder or Parent or Acquisition Sub or any officer, director, employee, agent, stockholder, shareholder, representative or investor of any party hereto.

     Section 8.9 Specific Performance. The parties hereby acknowledge and agree that the failure of any party to perform its agreements and covenants hereunder, including its failure to take all actions as are necessary on its part to the consummation of the Merger, will cause irreparable injury to the other parties, for which damages, even if available, will not be an adequate remedy. Accordingly, each party hereby consents to the issuance of injunctive relief by any court of competent jurisdiction to compel performance of such party’s obligations and to the granting by any court of the remedy of specific performance of its obligations hereunder, including specific performance to compel the consummation of the Merger.

     Section 8.10 Counterparts. This Agreement may be executed by facsimile and in one or more counterparts, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement.

     Section 8.11 Amendment. This Agreement may be amended only by an instrument in writing signed by or on behalf of the parties hereto.

     Section 8.12 Tax Withholding. Notwithstanding anything herein to the contrary, all amounts payable pursuant to the terms of this Agreement shall be subject to applicable Tax withholding requirements, and the Parent, the Surviving Corporation, the Payment Agent and the Escrow Agent shall be entitled to deduct or withhold or cause to be withheld from amounts payable pursuant to this Agreement any amount they reasonably determine is required to be deducted or withheld under the Code, or any applicable provision of Tax Law. To the extent that amounts are so withheld, such amounts shall be treated for all purposes of this Agreement as having been paid to the persons with respect to whom such amounts were withheld.

     Section 8.13 Fees and Expenses. Except as expressly provided otherwise in this Agreement, each party shall bear its own expenses in connection with this Agreement and the transactions contemplated hereby, including the Company Transaction Expenses. The amount of Merger Consideration payable to the Shareholders at the Effective Time shall be reduced by the full amount of Company Transaction Expenses (other than those set forth on Schedule IX that are taken into account in the calculation of the Cash Adjustment Amount) and any additional amounts of Company Transaction Expenses in excess of such deduction are subject to Article 7. At least two business days prior to the Effective Time, the Company shall provide Parent with a statement of the Company Transaction Expenses incurred as of or prior to the Effective Time, including a copy of any invoices for such expenses requested by Parent and an indication of whether and to what extent each item of expense has been or will be paid prior to the Closing Date. Notwithstanding anything to the contrary herein, Parent shall pay the amounts listed in Section 1 of Schedule X, which shall not be counted as Company Transaction Expenses or a deduction against the cash of the Company for purposes of calculating the Cash Adjustment Amount. Parent shall also pay the Additional Expense Amount specified in Section 2 of Schedule X in accordance therewith.

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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed on its behalf as of the day and year first above written.

CADENCE DESIGN SYSTEMS, INC.
By:	/s/ Lip-Bu Tan
	Lip-Bu Tan
	President and Chief Executive Officer
By:	/s/ Nimish Modi
	Nimish Modi
	Sr. Vice President, Research and Development
EAGLE SUBSIDIARY CORPORATION
By:	/s/ James J. Cowie
	Name:	James J. Cowie
	Title:	Secretary

[Signature Page to Cadence/Denali Agreement and Plan of Merger]

DENALI SOFTWARE, INC.
By:	/s/ Sanjay Srivastava
	Name:	Sanjay Srivastava
	Title:	President & CEO
SHAREHOLDER AGENT
/s/ Mark Gogolewski
Name: Mark Gogolewski

[Signature Page to Cadence/Denali Agreement and Plan of Merger]

EX-4.01

Exhibit 4.01

CADENCE DESIGN SYSTEMS, INC.

as Issuer

and

DEUTSCHE BANK TRUST COMPANY AMERICAS

as Trustee

INDENTURE

Dated as of June 15, 2010

2.625% Cash Convertible Senior Notes due 2015

Table of Contents

		Page
ARTICLE 1
Definitions
Section 1.01.	Definitions		1
Section 1.02.	Incorporation by Reference of Trust Indenture Act		13
ARTICLE 2
Issue, Description, Execution, Registration and Exchange of Notes
Section 2.01.	Designation and Amount		13
Section 2.02.	Form of Notes		14
Section 2.03.	Date and Denomination of Notes; Payments of Interest		14
Section 2.04.	Execution, Authentication and Delivery of Notes		16
Section 2.05.	Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Depositary		17
Section 2.06.	Mutilated, Destroyed, Lost or Stolen Notes		22
Section 2.07.	Temporary Notes		23
Section 2.08.	Cancellation of Notes Paid, Converted, etc		23
Section 2.09.	CUSIP Numbers		23
Section 2.10.	Additional Notes, Repurchases		24
ARTICLE 3
Particular Covenants of the Company
Section 3.01.	Payment of Principal and Interest		24
Section 3.02.	Maintenance of Office or Agency		25
Section 3.03.	Appointments to Fill Vacancies in Trustee’s Office		25
Section 3.04.	Provisions as to Paying Agent		26
Section 3.05.	Existence		27
Section 3.06.	Rule 144A Information Requirement		27
Section 3.07.	Stay, Extension and Usury Laws		27
Section 3.08.	Compliance Certificate; Statements as to Defaults		27
Section 3.09.	Further Instruments and Acts		28
ARTICLE 4
Lists of Noteholders and Reports by the Company and the Trustee
Section 4.01.	Lists of Noteholders		28
Section 4.02.	Preservation and Disclosure of Lists		28
Section 4.03.	Reports by Trustee		29
Section 4.04.	Reports by Company		29

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		Page
ARTICLE 5
Defaults and Remedies
Section 5.01.	Events of Default		29
Section 5.02.	Additional Interest		32
Section 5.03.	Payments of Notes on Default; Suit Therefor		33
Section 5.04.	Application of Monies Collected by Trustee		35
Section 5.05.	Proceedings by Noteholders		36
Section 5.06.	Proceedings by Trustee		36
Section 5.07.	Remedies Cumulative and Continuing		37
Section 5.08.	Direction of Proceedings and Waiver of Defaults by Majority of Noteholders		37
Section 5.09.	Notice of Defaults		38
Section 5.10.	Undertaking to Pay Costs		38
ARTICLE 6
Concerning the Trustee
Section 6.01.	Duties and Responsibilities of Trustee		38
Section 6.02.	Reliance on Documents, Opinions, etc		40
Section 6.03.	No Responsibility for Recitals, etc		42
Section 6.04.	Trustee, Paying Agents, Conversion Agents or Registrar May Own Notes		42
Section 6.05.	Monies to be Held in Trust		43
Section 6.06.	Compensation and Expenses of Trustee		43
Section 6.07.	Officers’ Certificate as Evidence		44
Section 6.08.	Conflicting Interests of Trustee		44
Section 6.09.	Eligibility of Trustee		44
Section 6.10.	Resignation or Removal of Trustee		44
Section 6.11.	Acceptance by Successor Trustee		46
Section 6.12.	Succession by Merger, etc		46
Section 6.13.	Limitation on Rights of Trustee as Creditor		47
Section 6.14.	Trustee’s Application for Instructions from the Company		47
Section 6.15.	Authorization of Trustee to Take Other Action		47
ARTICLE 7
Concerning the Noteholders
Section 7.01.	Action by Noteholders		48
Section 7.02.	Proof of Execution by Noteholders		48
Section 7.03.	Who Are Deemed Absolute Owners		49
Section 7.04.	Company-owned Notes Disregarded		49
Section 7.05.	Revocation of Consents; Future Holders Bound		50

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ARTICLE 8
Noteholders’ Meetings
Section 8.01.	Purpose of Meetings		50
Section 8.02.	Call of Meetings by Trustee		50
Section 8.03.	Call of Meetings by Company or Noteholders		51
Section 8.04.	Qualifications for Voting		51
Section 8.05.	Regulations		51
Section 8.06.	Voting		52
Section 8.07.	No Delay of Rights by Meeting		52
ARTICLE 9
Supplemental Indentures
Section 9.01.	Supplemental Indentures Without Consent of Noteholders		53
Section 9.02.	Supplemental Indentures With Consent of Noteholders		54
Section 9.03.	Effect of Supplemental Indentures		55
Section 9.04.	Notation on Notes		55
Section 9.05.	Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee		56
ARTICLE 10
Consolidation, Merger, Sale, Conveyance and Lease
Section 10.01.	Company May Consolidate, etc. on Certain Terms		56
Section 10.02.	Successor Corporation to be Substituted		56
Section 10.03.	Officers’ Certificate and Opinion of Counsel to be Given to Trustee		57
ARTICLE 11
Satisfaction and Discharge of Indenture
Section 11.01.	Discharge of Indenture		57
Section 11.02.	Deposited Monies to be Held in Trust by Trustee		58
Section 11.03.	Paying Agent to Repay Monies Held		58
Section 11.04.	Return of Unclaimed Monies		58
Section 11.05.	Reinstatement		59
ARTICLE 12
Immunity of Incorporators, Stockholders, Officers and Directors
Section 12.01.	Indenture and Notes Solely Corporate Obligations		59
ARTICLE 13
Conversion of Notes
Section 13.01.	Conversion Privilege		59

iii

		Page
Section 13.02.	Adjustments to Cash Due Upon Conversion Upon a Make-Whole Fundamental Change		62
Section 13.03.	Conversion Procedure		64
Section 13.04.	Adjustment of Conversion Rate		66
Section 13.05.	Adjustments Of Prices		76
Section 13.06.	Effect of Reclassification, Consolidation, Merger or Sale		76
Section 13.07.	Responsibility of Trustee		77
Section 13.08.	Notice to Holders Prior to Certain Actions		78
Section 13.09.	Exchange in Lieu of Conversion		79
ARTICLE 14
Repurchase of Notes at Option of Holders
Section 14.01.	Repurchase at Option of Holders Upon a Fundamental Change		80
Section 14.02.	Covenant To Comply With Applicable Laws Upon Repurchase Of Notes		84
ARTICLE 15
Miscellaneous Provisions
Section 15.01.	Provisions Binding on Company’s Successors		84
Section 15.02.	Official Acts by Successor Corporation		85
Section 15.03.	Addresses for Notices, Etc		85
Section 15.04.	Governing Law		85
Section 15.05.	Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee		85
Section 15.06.	Legal Holidays		86
Section 15.07.	No Security Interest Created		86
Section 15.08.	Benefits of Indenture		86
Section 15.09.	Table of Contents, Headings, etc		86
Section 15.10.	Authenticating Agent		86
Section 15.11.	Execution in Counterparts		87
Section 15.12.	USA PATRIOT Act		87

iv

     INDENTURE dated as of June 15, 2010 between Cadence Design Systems, Inc., a Delaware corporation, as issuer (hereinafter sometimes called the “Company”, as more fully set forth in Section 1.01), and Deutsche Bank Trust Company Americas, a New York banking corporation, as trustee (hereinafter sometimes called the “Trustee”, as more fully set forth in Section 1.01).

WITNESSETH:

     WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issue of its 2.625% Cash Convertible Senior Notes due 2015 (the “Notes”), initially in an aggregate principal amount not to exceed $300,000,000, and in order to provide the terms and conditions upon which the Notes are to be authenticated, issued and delivered, the Company has duly authorized the execution and delivery of this Indenture; and

     WHEREAS, the Notes, the certificate of authentication to be borne by the Notes, a Form of Assignment and Transfer, a Form of Fundamental Change Repurchase Notice and a Form of Notice of Conversion are to be substantially in the forms hereinafter provided for; and

     WHEREAS, all acts and things necessary to make the Notes, when executed by the Company and authenticated and delivered by the Trustee or a duly authorized authenticating agent, as in this Indenture provided, the valid, binding and legal obligations of the Company, and this Indenture a valid agreement according to its terms, have been done and performed, and the execution of this Indenture and the issue hereunder of the Notes have in all respects been duly authorized.

     NOW, THEREFORE, THIS INDENTURE WITNESSETH:

     That in order to declare the terms and conditions upon which the Notes are, and are to be, authenticated, issued and delivered, and in consideration of the premises and of the purchase and acceptance of the Notes by the holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective holders from time to time of the Notes (except as otherwise provided below), as follows:

ARTICLE 1
Definitions

     Section 1.01. Definitions.

     (a) The terms defined in this Section 1.01 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.01. All other terms used in this Indenture,

which are defined in the Trust Indenture Act or which are by reference therein defined in the Securities Act (except as herein otherwise expressly provided or unless the context otherwise requires) shall have the meanings assigned to such terms in said Trust Indenture Act and in said Securities Act as in force at the date of the execution of this Indenture. If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. The words “herein,” “hereof,” “hereunder,” and words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. The terms defined in this Article include the plural as well as the singular.

     “Additional Interest” means all additional interest then owing pursuant to Section 5.02.

     “Additional Notes” means any Notes (other than the Initial Notes) issued under this Indenture in accordance with Section 2.10 hereof, as part of the same series and with the same CUSIP number as the Initial Notes.

     “Adjustment Determination Date” shall have the meaning specified in Section 13.04(j).

     “Adjustment Event” shall have the meaning specified in Section 13.04(j).

     “Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control,” when used with respect to any specified Person means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

     “Beneficial Owner” and “Beneficial Ownership” means as determined in accordance with Rule 13d-3 under the Exchange Act.

     “Board of Directors” means the Board of Directors of the Company or, unless the context otherwise requires, a committee of such Board of Directors duly authorized to act for it hereunder.

     “Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors, or a duly authorized committee thereof (to the extent permitted by applicable law), and to be in full force and effect on the date of such certification, and delivered to the Trustee.

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     “Business Day” means any day, except a Saturday, Sunday or legal holiday on which banking institutions in The City of New York or the city in which the Corporate Trust Office is located are authorized or obligated by law or executive order to close.

     “Capital Lease” means a lease that, in accordance with accounting principles generally accepted in the United States of America, would be recorded as a capital lease on the balance sheet of the lessee.

     “Capital Stock” means, for any entity, any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock issued by that entity.

     “Cash Make-Whole Premium” shall have the meaning specified in Section 13.02.

     “Close of Business” means 5:00 p.m. (New York City time).

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Commission” means the Securities and Exchange Commission.

     “Common Stock” means, subject to Section 13.06, shares of common stock of the Company, par value $0.01 per share, at the date of this Indenture or shares of any class or classes resulting from any reclassification or reclassifications thereof and that have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and that are not subject to redemption by the Company; provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications.

     “Company” means Cadence Design Systems, Inc., a Delaware corporation, and subject to the provisions of Article 10 and Section 13.06, its successors and assigns.

     “Company Order” means a written order of the Company, signed by (a) the Company’s Chief Executive Officer, President, Executive or Senior Vice President, Managing Director or any Vice President (whether or not designated by a number or numbers or word or words added before or after the title “Vice President”) and (b) any such other officer designated in (a) or the Company’s Treasurer or Assistant Treasurer or Secretary or any Assistant Secretary, and delivered to the Trustee.

     “Conversion Agent” shall have the meaning specified in Section 3.02.

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     “Conversion Date” shall have the meaning specified in Section 13.03(c).

     “Conversion Obligation” shall have the meaning specified in Section 13.01(a).

     “Conversion Price” means, as of any date, $1,000 divided by the Conversion Rate as of such date.

     “Conversion Rate” shall have the meaning specified in Section 13.01(a).

     “Corporate Trust Office” or other similar term means the principal corporate trust office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office is, at the date as of which this Indenture is dated, located at 60 Wall Street — Mail Stop NYC60-2710, New York, New York 10005, Attention: Trust and Securities Services; Re: Cadence Design Systems, Inc., with a copy to:

Deutsche Bank Trust Company Americas
c/o Deutsche Bank National Trust Company
Trust & Securities Services
100 Plaza One, Mailstop JCY03-0699
Jersey City, New Jersey 07311
Attn: Corporates Team Deal Manager — Cadence Design Systems Inc.

Tel: 201-593-3543
Fax: 732-578-4635

     “Custodian” means Deutsche Bank Trust Company Americas, as custodian for The Depository Trust Company, with respect to the Notes in global form, or any successor entity thereto.

     “Daily Conversion Value” means, for each of the 35 consecutive Trading Days during the Observation Period, one thirty-fifth (1/35) of the product of (a) the applicable Conversion Rate on such day and (b) the Daily VWAP of the Common Stock (or the Reference Property pursuant to Section 13.06) on such day, as determined by the Company.

     “Daily VWAP” for the Common Stock means, for each of the 35 consecutive Trading Days during the Observation Period, the per share volume-weighted average price as displayed under the heading “Bloomberg VWAP” on Bloomberg (or any successor service) page CDNS.UQ <equity> AQR in respect of the period from 9:30 a.m. to 4:00 p.m. (New York City time) on such Trading Day (or if such volume-weighted average price is unavailable, the market value of one share of Common Stock on such Trading Day as determined by the Board of Directors in good faith using a volume-weighted method or by a nationally recognized independent investment banking firm retained for this purpose by the Company).

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     “Day” or “day” means a calendar day unless the context otherwise requires or as expressly stated.

     “Default” means any event that is, or after notice or passage of time, or both, would be, an Event of Default.

     “Defaulted Interest” shall have the meaning specified in Section 2.03.

     “Depositary” means, with respect to the Notes issuable or issued in whole or in part in global form, the person specified in Section 2.05(d) as the Depositary with respect to such Notes, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and thereafter, “Depositary” shall mean or include such successor.

     “Distributed Property” shall have the meaning specified in Section 13.04(c).

     “effective date” shall have the meaning specified in Section 13.04(f).

     “Event of Default” means, with respect to the Notes, any event specified in Section 5.01, continued for the period of time, if any, and after the giving of notice, if any, therein designated.

     “Ex-Dividend Date” means with respect to any issuance, dividend, or distribution on the Common Stock, the first date on which shares of Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such issuance, dividend or distribution from the Company, whether directly or indirectly by due bills or otherwise.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

     “Financial Institution” shall have the meaning specified in Section 13.10(a).

     “Form of Assignment and Transfer” shall mean the “Form of Assignment and Transfer” attached as Attachment 3 to the Form of Note.

     “Form of Fundamental Change Repurchase Notice” shall mean the “Form of Fundamental Change Repurchase Notice” attached as Attachment 2 to the Form of Note.

     “Form of Note” shall mean the “Form of Note” attached hereto as Exhibit A.

     “Form of Notice of Conversion” shall mean the “Form of Notice of Conversion” attached as Attachment 1 to the Form of Note.

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     “Fundamental Change” means the occurrence of any of the following: (1) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act other than the Company, its Subsidiaries and the Company and its Subsidiaries’ employee benefit plans, files a Schedule TO or any schedule, form or report under the Exchange Act, disclosing that such person or group has become the direct or indirect Beneficial Owner of our common equity representing more than 50% of the voting power of the common equity of the Company; (2) consummation of (A) any recapitalization, reclassification or change of the Common Stock (other than changes resulting from a subdivision or combination) as a result of which the Common Stock would be converted into, or exchanged for, stock, other securities, other property or assets or (B) any share exchange, consolidation or merger of the Company pursuant to which the Common Stock will be converted into cash, securities or other assets or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of the Company and the Subsidiaries, taken as a whole, to any Person other than the Company or any of its Subsidiaries; provided, however, that a transaction where (i) the Common Stock is not changed or exchanged except to the extent necessary to reflect a change in the Company’s jurisdiction of incorporation or (ii) the holders of more than 50% of all classes of the common equity of the Company immediately prior to such transaction own, directly or indirectly, more than 50% of the aggregate voting power of the common equity of the continuing or surviving corporation or transferee or the parent thereof immediately after such event shall not constitute a Fundamental Change; (3) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; or (4) the Common Stock (or other common stock constituting, in whole or in part, the Reference Property) ceases to be listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market, The NASDAQ Global Market (or any of their respective successors) or an alternate exchange of equivalent or greater liquidity with respect to the Common Stock (or other common stock constituting, in whole or in part, the Reference Property).

     Notwithstanding the foregoing, a transaction or transactions described in clause (2) above will not constitute a Fundamental Change, if at least 90% of the consideration received or to be received by holders of the Common Stock, excluding cash payments for fractional shares and cash payments made pursuant to dissenters’ appraisal rights, in connection with such transaction or transactions consists of shares of common stock that are listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their respective successors) or will be so listed or quoted when issued or exchanged in connection with such transaction or transactions and as a result of such transaction or transactions the value of such consideration determines the amount payable upon conversion of the notes, excluding cash payments for fractional shares and cash payments made pursuant to dissenters’ appraisal rights (subject to the provisions of Section 13.03).

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     “Fundamental Change Expiration Time” shall have the meaning specified in Section 14.01(a)(i).

     “Fundamental Change Repurchase Company Notice” shall have the meaning specified in Section 14.01(b).

     “Fundamental Change Repurchase Date” shall have the meaning specified in Section 14.01(a).

     “Fundamental Change Repurchase Notice” shall have the meaning specified in Section 14.01(a)(i).

     “Fundamental Change Repurchase Price” shall have the meaning specified in Section 14.01(a).

     “Global Note” shall have the meaning specified in Section 2.05(b).

     “Indebtedness” as applied to any Person, means (i) obligations, contingent or otherwise, for money borrowed (other than unamortized debt discount or premium); (ii) reimbursement and other obligations pertaining to letters of credit issued for the account of such Person; (iii) obligations under any swap, cap, collar, forward purchase contract, derivatives contract or other similar agreement pursuant to which such Person hedges risks related to interest rates, currency exchange rates, commodity prices, financial market conditions or other risks incurred by such Person in the operation of its business; (iv) obligations evidenced by bonds, debentures, promissory notes or other instruments or arrangements; (v) obligations as lessee under a Capital Lease; and (vi) obligations of such Person under any amendments, renewals, extensions, modifications and refundings of any such Indebtedness or obligations listed in clause (i), (ii), (iii), (iv) or (v) above. All Indebtedness of any type described in the immediately preceding sentence which is secured by a lien upon property owned by such Person, although such Person has not assumed or become liable for the payment of such Indebtedness, shall for all purposes be deemed to be Indebtedness of such Person. All Indebtedness for borrowed money incurred by any other Persons which is directly guaranteed as to payment of principal by such Person shall for all purposes be deemed to be Indebtedness of such Person, but no other contingent obligation of such Person in respect of Indebtedness incurred by any other Persons shall for any purpose be deemed to be Indebtedness of such Person.

     “Indenture” means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented.

     “Initial Notes” means Notes in an aggregate principal amount of $300,000,000, initially issued under this Indenture.

     “Initial Purchasers” means J.P. Morgan Securities Inc., Morgan Stanley & Co. Incorporated, Merrill, Lynch, Fenner & Smith Incorporated.

7

     “Interest” means (i) Regular Interest and (ii) Additional Interest, if any.

     “Interest Payment Date” means June 1 and December 1 of each year, beginning on December 1, 2010.

     “Last Reported Sale Price” means, with respect to the Common Stock or any other security for which a Last Reported Sale Price must be determined, on any date, the closing sale price per share of the Common Stock or unit of such other security (or, if no closing sale price is reported, the average of the closing bid and closing ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) on such date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock or such other security is traded. If the Common Stock or such other security is not listed for trading on a U.S. national or regional securities exchange on the relevant date, the Last Reported Sale Price shall be the closing quoted bid price per share of Common Stock or such other security in the over-the-counter market on the relevant date, as reported by Pink OTC Markets Inc. or a similar organization. In the absence of such quotation, the Last Reported Sale Price shall be the average of the mid-point of the closing bid and ask prices for the Common Stock or such other security on the relevant date from each of at least three nationally recognized independent investment banking firms (which may include any or all of the Initial Purchasers) selected from time to time by the Company for that purpose. The Last Reported Sale Price shall be determined without reference to extended or after hours trading.

     “Make-Whole Effective Date” shall have the meaning specified in Section 13.02(a).

     “Make-Whole Fundamental Change” shall have the meaning specified in Section 13.02(a).

     “Make-Whole Fundamental Change Notice” shall have the meaning specified in Section 13.02(b).

     “Make-Whole Fundamental Change Notice” shall have the meaning specified in Section 13.02(c).

     “Market Disruption Event” means the occurrence or existence for more than a one-half hour period in the aggregate on any Scheduled Trading Day for the Common Stock of any suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the stock exchange or otherwise) in the Common Stock or in any options, contracts or future contracts relating to the Common Stock, and such suspension or limitation occurs or exists at any time before 1:00 p.m. (New York City time) on such day.

     “Maturity Date” means June 1, 2015.

8

     “Measurement Period” shall have the meaning specified in Section 13.01(a)(i).

     “NASDAQ Global Select Market” shall mean the NASDAQ Global Select Market of The NASDAQ Stock Market, Inc. and any successor market or exchange.

     “National Securities Exchange” means a securities exchange that has registered with the Commission under Section 6 of the Exchange Act, or any successor provision.

     “Note” or “Notes” means any note or notes, as the case may be, authenticated and delivered under this Indenture.

     “Noteholder” or “Holder,” as applied to any Note, or other similar terms (but excluding the term “Beneficial Holder”), means any person in whose name at the time a particular Note is registered on the Note Register.

     “Note Register” shall have the meaning specified in Section 2.05(a).

     “Note Registrar” shall have the meaning specified in Section 2.05(a).

     “Notice of Conversion” shall have the meaning specified in Section 13.03(c).

     “Observation Period” means:

     (i) for Notes that are converted on or after the 40th Scheduled Trading Day prior to the Maturity Date, the 35 consecutive Trading Day period beginning on the 37th Scheduled Trading Day prior to the Maturity Date; and

     (ii) in all other instances, the 35 consecutive Trading Day period beginning on and including the third Trading Day after the related Conversion Date in respect of such Note.

     “Officers’ Certificate,” when used with respect to the Company, means a certificate delivered to the Trustee and signed by (a) one of the President, the Chief Executive Officer, any Executive or Senior Vice President, Managing Director or any Vice President (whether or not designated by a number or numbers or word added before or after the title “Vice President”) and (b) by any such other officer designated in (a) or by one of the Treasurer or any Assistant Treasurer, Secretary or any Assistant Secretary or Controller of the Company. Each such certificate shall include the statements provided for in Section 15.05 if and to the extent required by the provisions of such Section. One of the officers giving an Officers’ Certificate pursuant to Section 3.08 shall be the principal executive, financial or accounting officer of the Company.

     “Opening of Business” means 9:00 a.m. (New York City Time).

9

     “Opinion of Counsel” means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company, or other counsel acceptable to the Trustee, which is delivered to the Trustee. Each such opinion shall include the statements provided for in Section 15.05 if and to the extent required by the provisions of such Section.

     “outstanding,” when used with reference to Notes, shall, subject to the provisions of Section 7.04, mean, as of any particular time, all Notes authenticated and delivered by the Trustee under this Indenture, except:

     (i) Notes theretofore canceled by the Trustee or accepted by the Trustee for cancellation for the Holders of such Notes;

     (ii) Notes, or portions thereof, for the payment or repurchase of which monies in the necessary amount shall have been deposited in trust with the Trustee or with any Paying Agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent);

     (iii) Notes in lieu of which, or in substitution for which, other Notes shall have been authenticated and delivered pursuant to the terms of Section 2.06 unless proof satisfactory to the Trustee is presented that any such Notes are held by protected purchasers in whose hands such Notes are valid obligations of the Company; and

     (iv) Notes converted pursuant to Article 13.

     “Paying Agent” shall have the meaning specified in Section 3.02.

     “Person” means an individual, a corporation, a limited liability company, an association, a partnership, a joint venture, a joint stock company, a trust, an unincorporated organization or a government or an agency or a political subdivision thereof, including any syndicate or group that would be deemed to be a “person” under Section 13(d)(3) of the Exchange Act.

     “Predecessor Note” of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 2.06 in lieu of or in exchange for a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the lost, destroyed or stolen Note that it replaces.

     “Purchase Agreement” means that certain Purchase Agreement dated June 9, 2010 among the Company and the Initial Purchasers.

     “record date,” with respect to the payment of interest on any Interest Payment Date, shall have the meaning specified in Section 2.03.

10

     “Reference Property” shall have the meaning specified in Section 13.06(b).

     “Regular Interest” means interest which shall accrue on the Notes from June 15, 2010 at a rate of 2.625% per annum until the principal thereof is paid or made available for payment, payable semi-annually in arrears on each Interest Payment Date.

     “Reorganization Event” shall have the meaning specified in Section 13.06.

     “Resale Restriction Termination Date” shall have the meaning specified in Section 2.05.

     “Responsible Officer,” when used with respect to the Trustee, shall mean an officer of the Trustee in the Corporate Trust Office, having direct responsibility for the administration of this Indenture, and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

     “Restricted Securities” has the meaning specified in Section 2.05(e).

     “Rule 144” means Rule 144 under the Securities Act (including any successor rule thereto), as the same may be amended from time to time.

     “Rule 144A” means Rule 144A under the Securities Act (including any successor rule thereto), as the same may be amended from time to time.

     “Scheduled Trading Day” means a day that is scheduled to be a Trading Day on the primary U.S. National Securities Exchange or market on which the Common Stock is listed or admitted for trading. If the Common Stock is not so listed or admitted for trading, “Scheduled Trading Day” shall mean a Business Day.

     “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

     “Settlement Amount” means the sum of the Daily Conversion Values for each of the 35 Trading Days during the Observation Period.

     “Spin-Off” shall have the meaning specified in Section 13.04(c).

     “Significant Subsidiary” means such Subsidiary of the Company as meets the definition of “significant subsidiary” in Rule 1-02(w) of Regulation S-X promulgated by the Commission.

     “Stock Price” means the price paid (or deemed paid) per share of Common Stock in connection with a Make-Whole Fundamental Change pursuant

11

to which the Conversion Rate shall be increased to reflect the Cash Make-Whole Premium as set forth in Section 13.01(d) hereof, which shall be equal to (i) if holders of Common Stock receive only cash in a Make-Whole Fundamental Change described in clause (2) of the definition of Fundamental Change, the cash amount paid per share of Common Stock and (ii) in all other cases, the average of the Last Reported Sale Prices of the Common Stock over the 10 consecutive Trading Day period ending on, and including, the Scheduled Trading Day immediately preceding the Make-Whole Effective Date.

     “Subsidiary” means, with respect to any Person, any corporation, limited liability company, association, partnership or other business entity of which more than 50% of the total voting power of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, general partners or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries of such Person; or (iii) one or more Subsidiaries of such Person.

     “Successor Corporation” shall have the meaning specified in Section 10.01(a).

     “Trading Day” means a day during which (a) trading in the Common Stock generally occurs, (b) there is no Market Disruption Event and (c) a Last Reported Sale Price for the Common Stock (other than a Last Reported Sale Price referred to in the penultimate sentence of the definition of Last Reported Sale Price) is available for such day.

     “Trading Price” with respect to the Notes, on any date of determination, means the average of the secondary market bid quotations obtained by the Trustee for $2.0 million principal amount of Notes at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers selected by the Company (which may include any or all of the Initial Purchasers); provided that if three such bids cannot reasonably be obtained by the Trustee, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by the Trustee, that one bid shall be used. If the Trustee cannot reasonably obtain at least one bid for $2.0 million principal amount of Notes from a nationally recognized securities dealer, then the Trading Price per $1,000 principal amount of Notes will be deemed to be less than 98% of the product of the Last Reported Sale Price of the Common Stock (as provided to the Trustee by the Company) and the Conversion Rate.

     “Trigger Event” shall have the meaning specified in Section 13.04(c).

     “Trust Indenture Act” means the Trust Indenture Act of 1939, as amended, as it was in force at the date of execution of this Indenture; provided however, that in the event the Trust Indenture Act of 1939 is amended after the

12

date hereof, the term “Trust Indenture Act” shall mean, to the extent required by such amendment, the Trust Indenture Act of 1939, as so amended.

     “Trustee” means Deutsche Bank Trust Company Americas, and its successors and any corporation resulting from or surviving any consolidation or merger to which it or its successors may be a party and any successor trustee at the time serving as successor trustee hereunder.

     “USA PATRIOT Act” shall have the meaning specified in Section 15.12.

     “Valuation Period” shall have the meaning specified in Section 13.04(c).

     Section 1.02. Incorporation by Reference of Trust Indenture Act.

     This Indenture is subject to the mandatory provisions of the Trust Indenture Act, which are incorporated by reference in and made a part of this Indenture. The following Trust Indenture Act terms have the following meanings:

     “indenture securities” means the Notes.

     “indenture security holder” means a Noteholder or a Holder.

     “indenture trustee” or “institutional trustee” means the Trustee.

     “obligor” on the indenture securities means the Company and any other obligor on the indenture securities.

     All other terms in this Indenture that are defined by the Trust Indenture Act, defined by it by reference to another statute or defined by Commission rule have the meanings assigned to them by such definitions. If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Indenture by the Trust Indenture Act, such required provision shall control.

ARTICLE 2
Issue, Description, Execution, Registration and Exchange of Notes

     Section 2.01. Designation and Amount. The Notes shall be designated as the “2.625% Cash Convertible Senior Notes due 2015.” The aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is initially limited to $300,000,000, subject to Section 2.10 and except for Notes authenticated and delivered upon registration or transfer of, or in exchange for, or in lieu of other Notes pursuant to Section 2.05, Section 2.06, Section 9.04 and Section 13.03.

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     Section 2.02. Form of Notes. The Notes and the Trustee’s certificate of authentication to be borne by such Notes shall be substantially in the form set forth in Exhibit A.

     Any of the Notes may have such letters, numbers or other marks of identification and such notations, legends or endorsements as the officers executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any securities exchange or automated quotation system on which the Notes may be listed or designated for issuance, or to conform to usage, or to indicate any special limitations or restrictions to which any particular Notes are subject.

     Each Global Note shall represent such principal amount of the outstanding Notes as shall be specified therein and shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be increased or reduced to reflect repurchases, conversions, transfers or exchanges permitted hereby. Any endorsement of the Global Note to reflect the amount of any increase or decrease in the amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in such manner and upon instructions given by the Holder of such Notes in accordance with this Indenture. Payment of principal and accrued and unpaid interest on the Global Note shall be made to the Holder of such Note on the date of payment, unless a record date or other means of determining Holders eligible to receive payment is provided for herein.

     The terms and provisions contained in the Form of Note are incorporated herein and shall constitute, and are hereby expressly made, a part of this Indenture and to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby.

     Section 2.03. Date and Denomination of Notes; Payments of Interest. The Notes shall be issuable in registered form without coupons in denominations of $2,000 principal amount and multiples of $1,000 above that amount. Each Note shall be dated the date of its authentication and shall bear interest from the date specified on the face of the Form of Note. Interest on the Notes shall be computed on the basis of a 360-day year comprised of twelve 30-day months.

     The Person in whose name any Note (or its Predecessor Note) is registered on the Note Register at the Close of Business on any record date with respect to any Interest Payment Date shall be entitled to receive the Interest payable on such Interest Payment Date. Interest shall be payable at the office of the Company maintained by the Company for such purpose, which shall initially be the Corporate Trust Office. The Company shall pay Interest (i) on any Notes in

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certificated form by check mailed to the address of the Person entitled thereto as it appears in the Note Register (or upon written application by such Person to the Note Registrar not later than the relevant record date, by wire transfer in immediately available funds to such Person’s account within the United States, if such Person is entitled to Interest on an aggregate principal in excess of $1,000,000) or (ii) on any Global Note by wire transfer of immediately available funds to the account of the Depositary or its nominee. The term “record date” with respect to any Interest Payment Date shall mean the May 15 and November 15 preceding the applicable June 1 or December 1 Interest Payment Date, respectively.

     Any Interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”) shall forthwith cease to be payable to the Holder of such Note on the relevant record date by virtue of his having been such Holder, and such Defaulted Interest shall be paid by the Company, at its election in each case, as provided in clause (1) or (2) below:

     (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the Close of Business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment (which shall be not less than twenty-five (25) days after the receipt by the Trustee of such notice, unless the Trustee shall consent to an earlier date), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Company shall fix a special record date for the payment of such Defaulted Interest which shall be not more than fifteen (15) days and not less than ten (10) days prior to the date of the proposed payment, and not less than ten (10) days after the receipt by the Trustee of the notice of the proposed payment. The Company shall promptly notify the Trustee in writing of such special record date and the Trustee, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Note Register, not less than ten (10) days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the Close of Business on such special record date and shall no longer be payable pursuant to the following clause (2) of this Section 2.03.

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     (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Notes may be listed or designated for issuance, and upon such notice as may be required by such exchange or automated quotation system, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.

     Section 2.04. Execution, Authentication and Delivery of Notes. The Notes shall be signed in the name and on behalf of the Company by the manual or facsimile signature of its Chairman or Vice-Chairman of the Board of Directors, Chief Executive Officer, President, any of its Executive or Senior Vice Presidents, Managing Director, or any of its Vice Presidents (whether or not designated by a number or numbers or word or words added before or after the title “Vice President”).

     At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Notes executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Notes, and the Trustee in accordance with such Company Order shall authenticate and deliver such Notes, without any further action by the Company hereunder.

     Only such Notes as shall bear thereon a certificate of authentication substantially in the form set forth on the form of Note attached as Exhibit A hereto, manually executed by an authorized officer of the Trustee (or an authenticating agent appointed by the Trustee as provided by Section 15.10), shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee (or such an authenticating agent) upon any Note executed by the Company shall be conclusive evidence that the Note so authenticated has been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this Indenture.

     In case any officer of the Company who shall have signed any of the Notes shall cease to be such officer before the Notes so signed shall have been authenticated and delivered by the Trustee, or disposed of by the Company, such Notes nevertheless may be authenticated and delivered or disposed of as though the person who signed such Notes had not ceased to be such officer of the Company; and any Note may be signed on behalf of the Company by such persons as, at the actual date of the execution of such Note, shall be the proper officers of the Company, although at the date of the execution of this Indenture any such person was not such an officer.

     The Trustee shall have the right to decline to authenticate and deliver any Notes under this Section if the Trustee, being advised by counsel of national reputation, determines that such action may not lawfully be taken or if the Trustee

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in good faith shall determine that such action would expose the Trustee to personal liability to existing Noteholders.

     Section 2.05. Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Depositary.

     (a) The Company shall cause to be kept at the Corporate Trust Office a register (the register maintained in such office and in any other office or agency of the Company designated pursuant to Section 3.02 being herein sometimes collectively referred to as the “Note Register”) in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and transfers of Notes. Such register shall be in written form or in any form capable of being converted into written form within a reasonable period of time. The Trustee is hereby appointed “Note Registrar” for the purpose of registering Notes and transfers of Notes as herein provided. The Company may appoint one or more co-Note Registrars in accordance with Section 3.02.

     Upon surrender for registration of transfer of any Note to the Note Registrar or any co-Note Registrar, and satisfaction of the requirements for such transfer set forth in this Section 2.05, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denominations and of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture.

     Notes may be exchanged for other Notes of any authorized denominations and of a like aggregate principal amount, upon surrender of the Notes to be exchanged at any such office or agency maintained by the Company pursuant to Section 3.02. Whenever any Notes are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Notes the Noteholder making the exchange is entitled to receive, bearing registration numbers not contemporaneously outstanding.

     All Notes presented or surrendered for registration of transfer or for exchange, repurchase or conversion shall (if so required by the Company, the Trustee, the Note Registrar or any co-Note Registrar) be duly endorsed, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and duly executed, by the Noteholder thereof or his attorney-in-fact duly authorized in writing.

     No service charge shall be charged to the Noteholder for any exchange or registration of transfer of Notes, but the Company or the Trustee may require payment of a sum sufficient to cover any transfer tax or similar governmental charge required by law or permitted by the Indenture that may be imposed in connection therewith.

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     None of the Company, the Trustee, the Note Registrar or any co-Note Registrar shall be required to exchange or register a transfer of (a) any Notes surrendered for conversion or, if a portion of any Note is surrendered for conversion, such portion thereof surrendered for conversion or (b) any Notes, or a portion of any Note, surrendered for repurchase (and not withdrawn) except in accordance with Article 13 for conversion and Article 14 for repurchase hereof, respectively.

     All Notes issued upon any registration of transfer or exchange of Notes in accordance with this Indenture shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture as the Notes surrendered upon such registration of transfer or exchange.

     (b) So long as the Notes are eligible for book-entry settlement with the Depositary, unless otherwise required by law, all Notes shall be represented by one or more Notes in global form without interest coupons (each, a “Global Note”) registered in the name of the Depositary or the nominee of the Depositary. The transfer and exchange of beneficial interests in a Global Note, which does not involve the issuance of a definitive Note, shall be effected through the Depositary (but not the Trustee or the Custodian) in accordance with this Indenture (including the restrictions on transfer set forth herein) and the procedures of the Depositary therefor.

     (c) Any Global Note may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Indenture as may be required by the Custodian, the Depositary or by the Financial Industry Regulatory Authority, Inc. to comply with any applicable law or any regulation thereunder or with the rules and regulations of any securities exchange or automated quotation system upon which the Notes may be listed or admitted for trading or designated for issuance or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Notes are subject.

     Notwithstanding any other provisions of this Indenture, a Global Note may not be transferred as a whole or in part except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary.

     (d) The Depositary shall be a clearing agency registered under the Exchange Act. The Company initially appoints The Depository Trust Company to act as Depositary with respect to the Global Note. Initially, the Global Note shall be issued to the Depositary, registered in the name of Cede & Co., as the nominee of the Depositary, and deposited with the Trustee as Custodian for the Depositary.

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     If at any time the Depositary for a Global Note (i) notifies the Company that it is unwilling or unable to continue as Depositary for such Note or (ii) ceases to be registered as a clearing agency under the Exchange Act, the Company may appoint a successor Depositary with respect to such Global Note. If (1) a successor Depositary for such Global Note is not appointed by the Company within ninety (90) days after the Company receives such notice of the Depositary ceasing to be a registered clearing agency or (2) an Event of Default has occurred and is continuing and the Note Registrar has received a request from the owner of a beneficial interest in any Global Note for the issuance of Notes in definitive form in exchange for all or a portion of such interest, the Company will execute, and the Trustee, upon receipt of an Officers’ Certificate for the authentication and delivery of Notes, will authenticate and deliver Notes in definitive form in an aggregate principal amount equal to the principal amount of such interest in such Global Note, in exchange for such Global Note, and such Global Note shall be reduced by the aggregate principal amount of such interest so exchanged.

     Definitive Notes issued in exchange for all or a part of the Global Note pursuant to this Section 2.05(d) shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. Upon execution and authentication, the Trustee shall deliver such definitive Notes to the persons in whose names such definitive Notes are so registered.

     At such time as all interests in a Global Note have been converted, canceled, repurchased or transferred, such Global Note shall be, upon receipt thereof, canceled by the Trustee in accordance with standing procedures and instructions existing between the Depositary and the Custodian. At any time prior to such cancellation, if any interest in a Global Note is exchanged for definitive Notes, converted, canceled, repurchased or transferred to a transferee who receives definitive Notes therefor or any definitive Note is exchanged or transferred for part of such Global Note, the principal amount of such Global Note shall, in accordance with the standing procedures and instructions existing between the Depositary and the Custodian, be appropriately reduced or increased, as the case may be, and an endorsement shall be made on such Global Note, by the Trustee or the Custodian, at the direction of the Trustee, to reflect such reduction or increase.

     (e) Every Note that bears or is required under this Section 2.05(e) to bear the legend set forth in this Section 2.05(e) (the “Restricted Securities”) shall be subject to the restrictions on transfer set forth in this Section 2.05(e) (including those set forth in the legend below) unless such restrictions on transfer shall be waived by written consent of the Company, and the Holder of each such Restricted Security, by such Noteholder’s acceptance thereof, agrees to be bound by all such restrictions on transfer. As used in Section 2.05(e), the term “transfer” means any sale, pledge, loan, transfer or other disposition whatsoever of any Restricted Security or any interest therein.

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     Until the date (the “Resale Restriction Termination Date”) that is the later of (1) one year after the last date of original issuance of such Note, or such shorter period of time as permitted by Rule 144 under the Securities Act or any successor provision thereto, and (2) such later date, if any, as may be required by applicable law, any certificate evidencing such Note (and all securities issued in exchange therefor or substitution thereof) shall bear a legend in substantially the following form (unless such Note has been sold pursuant to a registration statement that has become or been declared effective under the Securities Act and that continues to be effective at the time of such transfer, or sold pursuant to the exemption from registration provided by Rule 144 or any similar provision then in force under the Securities Act, or unless otherwise agreed by the Company in writing, with written notice thereof to the Trustee):

     THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE ACQUIRER:

     (1) REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A “QUALIFIED INSTITUTIONAL BUYER” (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH SUCH ACCOUNT, AND

     (2) AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOT OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST HEREIN PRIOR TO THE DATE THAT IS THE LATER OF (X) ONE YEAR AFTER THE LAST ORIGINAL ISSUE DATE HEREOF OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THERETO, AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW, EXCEPT:

     (A) TO CADENCE DESIGN SYSTEMS, INC. (THE “COMPANY”) OR ANY SUBSIDIARY THEREOF, OR

     (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BECOME EFFECTIVE UNDER THE SECURITIES ACT, OR

     (C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, OR

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     (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT OR ANY SIMILAR PROVISION OF THE SECURITIES ACT.

     PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH (2)(D) ABOVE, THE COMPANY AND THE TRUSTEE RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

     No transfer of any Note prior to the Resale Restriction Termination Date will be registered by the Note Registrar unless the applicable box on the Form of Assignment and Transfer has been checked.

     Any Note (or security issued in exchange or substitution therefor) as to which such restrictions on transfer shall have expired in accordance with their terms or as to conditions for removal of the foregoing legend set forth therein have been satisfied may, upon surrender of such Note for exchange to the Note Registrar in accordance with the provisions of this Section 2.05, be exchanged for a new Note or Notes, of like tenor and aggregate principal amount, which shall not bear the restrictive legend required by this Section 2.05(e). If the Restricted Security surrendered for exchange is represented by a Global Note bearing the legend set forth in this Section 2.05(e), the principal amount of the legended Global Note shall be reduced by the appropriate principal amount and the principal amount of a Global Note without the legend set forth in this Section 2.05(e) shall be increased by an equal principal amount. If a Global Note without the legend set forth in this Section 2.05(e) is not then outstanding, the Company shall execute and the Trustee shall authenticate and deliver an unlegended Global Note to the Depositary. The Company shall promptly notify the Trustee upon the occurrence of the Resale Restriction Termination Date and promptly after a registration statement, if any, with respect to the Notes has been declared effective under the Securities Act.

     (f) Any Note that, prior to the Resale Restriction Termination Date, is purchased or owned by the Company or any Affiliate thereof may not be resold by the Company or such Affiliate unless registered under the Securities Act or resold pursuant to an exemption from the registration requirements of the Securities Act in a transaction which results in such Notes, no longer being “Restricted Securities” (as defined under Rule 144); provided, however, that this Section shall not apply to any Notes that have previously been sold pursuant to an effective registration statement or under Rule 144.

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     Section 2.06. Mutilated, Destroyed, Lost or Stolen Notes. In case any Note shall become mutilated or be destroyed, lost or stolen, the Company in its discretion may execute, and upon delivery by the Company of a Company Order the Trustee or an authenticating agent appointed by the Trustee shall authenticate and deliver, a new Note of like tenor (including the same date of issuance) and principal amount, bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Note, or in lieu of and in substitution for the Note so destroyed, lost or stolen. In every case the applicant for a substituted Note shall furnish to the Company, to the Trustee and, if applicable, to such authenticating agent such security or indemnity as may be required by them to save each of them harmless from any loss, liability, cost or expense caused by or connected with such substitution, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company, to the Trustee and, if applicable, to such authenticating agent evidence to their satisfaction of the destruction, loss or theft of such Note and of the ownership thereof.

     The Trustee or such authenticating agent may authenticate any such substituted Note and deliver the same upon the receipt of such security or indemnity as the Trustee, the Company and, if applicable, such authenticating agent may require. Upon the issuance of any substituted Note, the Company or the Trustee may require the payment by the Holder of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith.

     In case any Note which has matured or is about to mature or has been tendered for repurchase upon a Fundamental Change or for conversion into cash shall become mutilated or be destroyed, lost or stolen, the Company may, in its sole discretion, instead of issuing a substitute Note in exchange and substitution for the mutilated Note, or in lieu of a destroyed, lost or stolen Note, pay or authorize the payment of the amount otherwise due upon such repurchase or conversion (without surrender thereof except in the case of a mutilated Note), as the case may be, if the applicant for such payment shall furnish to the Company, to the Trustee and, if applicable, to any Paying Agent or Conversion Agent, such security or indemnity as may be required by them to save each of them harmless for any loss, liability, cost or expense caused by or connected with such payment in lieu of substitution, and, in every case of destruction, loss or theft, evidence satisfactory to the Company, the Trustee and, if applicable, any Paying Agent or Conversion Agent of the destruction, loss or theft of such Note and of the ownership thereof.

     Every substitute Note issued pursuant to the provisions of this Section 2.06 by virtue of the fact that any Note is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be found at any time, and shall be entitled to all the benefits of (but shall be subject to all the limitations set forth in) this Indenture equally and proportionately with any and all other Notes duly issued hereunder. To the extent permitted by law, all Notes shall be held and owned

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upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment or conversion or repurchase of mutilated, destroyed, lost or stolen Notes and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment or conversion of negotiable instruments or other securities without their surrender.

     Section 2.07. Temporary Notes. Pending the preparation of Notes in certificated form, the Company may execute and the Trustee or an authenticating agent appointed by the Trustee shall, upon delivery by the Company of a Company Order, authenticate and deliver temporary Notes (printed or lithographed). Temporary Notes shall be issuable in any authorized denomination, and substantially in the form of the Notes in certificated form but with such omissions, insertions and variations as may be appropriate for temporary Notes, all as may be determined by the Company. Every such temporary Note shall be executed by the Company and authenticated by the Trustee or such authenticating agent upon the same conditions and in substantially the same manner, and with the same effect, as the Notes in certificated form. Without unreasonable delay the Company will execute and deliver to the Trustee or such authenticating agent Notes in certificated form (other than any Global Note) and thereupon any or all temporary Notes (other than any Global Note) may be surrendered in exchange therefor, at each office or agency maintained by the Company pursuant to Section 3.02 and the Trustee or such authenticating agent shall authenticate and deliver in exchange for such temporary Notes an equal aggregate principal amount of Notes in certificated form. Such exchange shall be made by the Company at its own expense and without any charge therefor. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits and subject to the same limitations under this Indenture as Notes in certificated form authenticated and delivered hereunder.

     Section 2.08. Cancellation of Notes Paid, Converted, etc.. All Notes surrendered for the purpose of payment, repurchase, conversion, exchange or registration of transfer, shall, if surrendered to the Company or any Paying Agent or any Note Registrar or any Conversion Agent, be surrendered to the Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall be promptly canceled by it, and no Notes shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Trustee shall destroy canceled Notes in accordance with its customary procedures and, after such destruction, shall deliver a certificate of such destruction to the Company upon delivery by the Company of a Company Order. If the Company shall acquire any of the Notes, such acquisition shall not operate as satisfaction of the Indebtedness represented by such Notes unless and until the same are delivered to the Trustee for cancellation.

     Section 2.09. CUSIP Numbers. The Company in issuing the Notes may use “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices to Holders as a convenience to Holders of the Notes;

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provided, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or in such notice and that reliance may be placed only on the other identification numbers printed on the Notes. The Company will promptly notify the Trustee in writing of any change in the CUSIP numbers.

     Any Notes that are, when issued, Restricted Securities shall be issued with a restricted CUSIP number. Until such time as the Company notifies the Trustee to remove the restrictive legend specified in Section 2.05(e) from such Notes, the restricted CUSIP shall be the CUSIP number for such Notes. At such time as the Company notifies the Trustee to remove the restrictive legend specified in Section 2.05(e) from such Notes, such legend shall for all purposes of this Indenture and the Notes (including this Section 2.09) be deemed removed from any such Global Notes and an unrestricted CUSIP number shall be deemed to be the CUSIP number for such Notes.

     Section 2.10. Additional Notes, Repurchases. The Company may, without the consent of the Noteholders and notwithstanding Section 2.01, reopen the Notes and issue Additional Notes hereunder with the same terms (except for the date on which interest begins to accrue in respect of such Additional Notes) and with the same CUSIP number as the Initial Notes hereunder in an unlimited aggregate principal amount, which will form the same series with the Initial Notes, provided that no such Additional Notes may be issued unless fungible with the Initial Notes for U.S. federal income tax purposes. The Company may also from time to time repurchase Notes in tender offers, open market purchases or negotiated transactions without prior notice to Noteholders. Any Notes repurchased by the Company shall be cancelled pursuant to Section 2.08 (and, if not cancelled by the Company shall be deemed to be cancelled) and be deemed to be no longer outstanding under this Indenture.

ARTICLE 3
Particular Covenants of the Company

     Section 3.01. Payment of Principal and Interest. The Company covenants and agrees that it will cause to be paid the principal of and accrued and unpaid Interest on each of the Notes and if applicable, payment of the cash payable upon conversion of the Notes, at the places, at the respective times and in the manner provided herein and in the Notes. Each installment of accrued and unpaid Interest on the Notes due on any Interest Payment Date may be paid by mailing checks for the amount payable to or upon the written order of the Noteholders entitled thereto as they shall appear on the registry books of the Company, provided that, with respect to any Noteholder with an aggregate principal amount in excess of $1,000,000, at the application of such Holder in writing to the Note Registrar not later than the relevant record date accrued and unpaid Interest on such Holder’s Notes shall be paid by wire transfer in

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immediately available funds to such Holder’s account in the United States supplied by such Holder from time to time to the Trustee and Paying Agent (if different from Trustee); provided further that payment of accrued and unpaid Interest made to the Depositary shall be paid by wire transfer in immediately available funds in accordance with such wire transfer instructions and other procedures provided by the Depositary from time to time.

     Section 3.02. Maintenance of Office or Agency. The Company will maintain an office or agency where the Notes may be surrendered for registration of transfer or exchange or for presentation for payment or repurchase (“Paying Agent”) or for conversion (“Conversion Agent”) and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company may change the Paying Agent without prior notice to the Noteholders but with notice to the initial Paying Agent and the Company may act as Paying Agent. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency not designated or appointed by the Trustee. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office or the office or agency of the Trustee.

     The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The terms Paying Agent and Conversion Agent include any such additional or other offices or agencies, as applicable.

     The Company hereby initially designates the Trustee as the Paying Agent, Note Registrar, Custodian and Conversion Agent and the Corporate Trust Office and the office or agency of the Trustee in the Borough of Manhattan, The City of New York shall be considered as the initial office or agency of the Company for each of the aforesaid purposes.

     So long as the Trustee is the Note Registrar, the Trustee (and any successor Trustee, upon becoming Trustee) agrees to mail, or cause to be mailed, the notices set forth in Section 6.10(a), and any successor Trustee, upon becoming Trustee, agrees to mail or cause to be mailed, the notices set forth in the third paragraph of Section 6.11.

     Section 3.03. Appointments to Fill Vacancies in Trustee’s Office. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 6.10, a Trustee, so that there shall at all times be a Trustee hereunder.

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     Section 3.04. Provisions as to Paying Agent.

     (a) If the Company shall appoint a Paying Agent other than the Trustee or if the Trustee shall appoint such a Paying Agent, the Company will cause such Paying Agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 3.04,

     (i) that it will hold all sums held by it as such agent for the payment of the principal (including the Fundamental Change Repurchase Price, if applicable) of, and accrued and unpaid Interest on the Notes (whether such sums have been paid to it by the Company or by any other obligor on the Notes) in trust for the benefit of the Holders of the Notes;

     (ii) that it will give the Trustee notice of any failure by the Company (or by any other obligor on the Notes) to make any payment of the principal of, and accrued and unpaid Interest on the Notes when the same shall be due and payable; and

     (iii) that at any time during the continuance of an Event of Default, upon request of the Trustee, it will forthwith pay to the Trustee all sums so held in trust.

     The Company shall, on or before each due date of the principal (including the Fundamental Change Repurchase Price, if applicable) of, or accrued and unpaid Interest on the Notes, deposit with the Paying Agent a sum sufficient to pay such principal (including the Fundamental Change Repurchase Price, if applicable) or accrued and unpaid Interest and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee in writing of any failure to take such action, provided that if such deposit is made on the due date, such deposit must be received by the Paying Agent by 11:00 a.m., New York City time, on such date.

     (b) If the Company shall act as its own Paying Agent, it will, on or before each due date of the principal (including the Fundamental Change Repurchase Price, if applicable) of, and accrued and unpaid Interest on the Notes, set aside, segregate and hold in trust for the benefit of the Holders of the Notes a sum sufficient to pay such principal (including the Fundamental Change Repurchase Price, if applicable), accrued and unpaid Interest so becoming due and will notify the Trustee in writing of any failure to take such action and of any failure by the Company (or any other obligor under the Notes) to make any such payment on the Notes, when the same shall become due and payable.

     (c) Anything in this Section 3.04 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge of this Indenture, or for any other reason, pay or cause to be paid to the Trustee all sums held in trust by the Company or any Paying Agent hereunder as required by this Section 3.04, such sums to be held by the Trustee upon the trusts

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herein contained and upon such payment by the Company or any Paying Agent to the Trustee, the Company or such Paying Agent shall be released from all further liability with respect to such sums.

     (d) Anything in this Section 3.04 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 3.04 is subject to Section 11.03 and Section 11.04.

     Section 3.05. Existence. Subject to Article 10, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence.

     Section 3.06. Rule 144A Information Requirement. At any time the Company is not subject to Sections 13 or 15(d) of the Exchange Act, the Company shall, so long as any of the Notes shall, at such time, constitute “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, promptly provide to the Trustee and shall, upon written request, provide to any Noteholder, beneficial owner or prospective purchaser of such Notes the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act to facilitate the resale of such Notes pursuant to Rule 144A. The Company shall take such further action as any Holder or beneficial owner of such Notes may reasonably request to the extent from time to time required to enable such Noteholder or beneficial owner to sell such Notes in accordance with Rule 144A.

     Section 3.07. Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of, or Interest on, the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

     Section 3.08. Compliance Certificate; Statements as to Defaults. The Company shall deliver to the Trustee within 120 calendar days after the end of each fiscal year of the Company (beginning with the fiscal year ending on January 1, 2011) an Officers’ Certificate stating whether or not each signer thereof has knowledge of any Event of Default or Default by the Company under this Indenture during such fiscal year and, if so, specifying each such failure and the nature thereof.

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     In addition, the Company shall deliver to the Trustee, as soon as practicable and in any event within 60 days after the Company becomes aware of the occurrence of any Event of Default or Default, an Officers’ Certificate setting forth the details of such Event of Default or Default, its status and the action which the Company is taking or proposes to take with respect thereto.

     Section 3.09. Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.

ARTICLE 4
Lists of Noteholders and Reports by the Company and the Trustee

     Section 4.01. Lists of Noteholders. The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee, semi-annually, not more than fifteen (15) days after each May 15 and November 15 in each year beginning with November 15, 2010, and May 15, 2011, and at such other times as the Trustee may request in writing, within thirty (30) days after receipt by the Company of any such request (or such lesser time as the Trustee may reasonably request in order to enable it to timely provide any notice to be provided by it hereunder), a list in such form as the Trustee may reasonably require of the names and addresses of the Noteholders as of a date not more than fifteen (15) days (or such other date as the Trustee may reasonably request in order to so provide any such notices) prior to the time such information is furnished, except that no such list need be furnished so long as the Trustee is acting as Note Registrar.

     Section 4.02. Preservation and Disclosure of Lists.

     (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the Noteholders contained in the most recent list furnished to it as provided in Section 4.01 or maintained by the Trustee in its capacity as Note Registrar, if so acting. The Trustee may destroy any list furnished to it as provided in Section 4.01 upon receipt of a new list so furnished.

     (b) The rights of Noteholders to communicate with other Noteholders with respect to their rights under this Indenture or under the Notes and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act.

     (c) Every Noteholder, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Noteholders made pursuant to the Trust Indenture Act.

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     Section 4.03. Reports by Trustee.

     (a) Within sixty (60) days after May 1 of each year commencing with May 1, 2011, the Trustee shall transmit to Noteholders such reports dated as of May 1 of each year in which such reports are made concerning the Trustee and its actions under this Indenture as would be required under Sections 313(a) and (b) of the Trust Indenture Act (whether or not this Indenture is qualified thereunder) at the times and in the manner provided pursuant thereto.

     (b) A copy of such reports shall, at the time of such transmission to Noteholders, be filed by the Trustee with each stock exchange and automated quotation system upon which the Notes are listed, if any, and with the Company. The Company will notify the Trustee in writing within a reasonable time when the Notes are listed on any stock exchange or automated quotation system and when any such listing is discontinued.

     Section 4.04. Reports by Company.

     (a) The Company shall file with the Trustee within 15 days after the same are required to be filed with the Commission, copies of any documents or reports that the Company is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act (giving effect to any grace period provided by Rule 12b-25 under the Exchange Act). Any such document or report that the Company files with the Commission via the Commission’s Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system (or any successor thereto) shall be deemed to be filed with the Trustee for purposes of this Section 4.04 as of the time such documents are filed via the EDGAR system.

     (b) Delivery of such reports, information and documents to the Trustee is for informational purposes only, and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to conclusively rely exclusively on an Officers’ Certificate).

ARTICLE 5
Defaults and Remedies

     Section 5.01. Events of Default. The following events shall be events of default (each, an “Event of Default”) with respect to the Notes:

     (a) default in any payment of Interest on any Note when due and payable and the default continues for a period of 30 days;

     (b) default in the payment of principal of any Note when due and payable on the Maturity Date, upon required repurchase or upon declaration;

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     (c) failure by the Company to comply with its obligation to convert the Notes into cash, upon exercise of a holder’s conversion right;

     (d) failure by the Company to comply with its obligations under Section 10.01;

     (e) failure by the Company to issue a Fundamental Change Repurchase Company Notice in accordance with Section 14.01(b) when due or to provide a Make-Whole Fundamental Change Notice pursuant to Section 13.02(b).

     (f) failure by the Company for 60 days to comply with any of its other agreements (other than a covenant or warranty or Default in whose performance or whose breach is elsewhere in this Section specifically provided for) contained in the Notes or the Indenture after written notice of such Default from the Trustee at the written direction of the Holders of at least 25% in principal amount of the Notes then outstanding, or from the Holders of at least 25% in principal amount of the Notes then outstanding, has been received by the Company;

     (g) default by the Company or any Subsidiary of the Company in the payment of the principal or interest on any mortgage, agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced, any debt for money borrowed in excess of $50 million in the aggregate of the Company and/or any such Subsidiary (other than debt for borrowed money secured only by the real property to which the debt relates and which is non-recourse to the Company or its Subsidiaries), whether such debt now exists or shall hereafter be created, which default results in such debt becoming or being declared due and payable, and such acceleration shall not have been cured, waived, rescinded or annulled within 30 days after written notice of such acceleration has been received by the Company or such Subsidiary;

     (h) the Company shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to the Company or any of its Significant Subsidiaries or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of the Company or any of its Significant Subsidiaries or any substantial part of the property of the Company or any of its Significant Subsidiaries, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors; or

     (i) an involuntary case or other proceeding shall be commenced against the Company or any of its Significant Subsidiaries seeking liquidation, reorganization or other relief with respect to the Company or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of the Company or any of its Significant Subsidiaries or any substantial

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part of the property of the Company and its Significant Subsidiaries, taken as a whole, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of ninety (90) consecutive days.

     In case one or more Events of Default shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body), then, and in each and every such case (other than an Event of Default specified in Section 5.01(h) or Section 5.01(i) with respect to the Company), unless the principal of all of the Notes shall have already become due and payable, the Trustee may, by notice in writing to the Company, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding determined in accordance with Section 7.04 may, by notice in writing to the Company and to the Trustee, and the Trustee, upon the request of such Holders, by notice in writing to the Company shall, declare 100% of the principal of, and accrued and unpaid Interest on, all the Notes to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Indenture or in the Notes contained to the contrary notwithstanding. If an Event of Default specified in Section 5.01(h) or Section 5.01(i) occurs and is continuing with respect to the Company, the principal of all the Notes and accrued and unpaid Interest shall be immediately due and payable. This provision, however, is subject to the conditions that if, at any time after the principal of the Notes shall have been so declared due and payable, and before any judgment or decree for the payment of the monies due shall have been obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay installments of accrued and unpaid Interest upon all Notes and the principal of any and all Notes that shall have become due otherwise than by acceleration and amounts due to the Trustee pursuant to Section 6.06, and if (1) rescission and annulment of the declaration of acceleration would not conflict with any judgment or decree of a court of competent jurisdiction and (2) any and all Events of Defaults under this Indenture, other than the nonpayment of principal of and accrued and unpaid Interest on Notes that shall have become due solely by such acceleration, shall have been cured or waived pursuant to Section 5.08, then and in every such case the Holders of a majority in aggregate principal amount of the Notes then outstanding, by written notice to the Company and to the Trustee, may waive all Defaults or Events of Default with respect to the Notes and rescind and annul such declaration and its consequences and such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver or rescission and annulment shall extend to or shall affect any subsequent Default or Event of Default, or shall impair any right consequent thereon.

     In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned

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because of such waiver or rescission and annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Noteholders, and the Trustee shall, subject to any determination in such proceeding, be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Noteholders, and the Trustee shall continue as though no such proceeding had been instituted.

     Section 5.02. Additional Interest. (a) Notwithstanding anything in this Indenture or in the Notes to the contrary, to the extent the Company elects, the sole remedy for an Event of Default relating to the Company’s failure to comply with its obligations as set forth in Sections 3.06 and 4.04 shall, for the first 180 days after the occurrence of such an Event of Default, consist exclusively of the right to receive Additional Interest on the Notes at a rate equal to:

     i. 0.25% per annum of the principal amount of the Notes outstanding for each day during the 90-day period beginning on, and including, the occurrence of such an Event of Default during which such Event of Default is continuing; and

     ii. 0.50% per annum of the principal amount of the Notes outstanding for each day during the 90-day period beginning on, and including, the 91st day following, and including, the occurrence of such an Event of Default during which such Event of Default is continuing.

     Additional Interest payable pursuant to this Section 5.02(a) shall be in addition to, not in lieu of, any Additional Interest payable pursuant to Section 5.02(b) or Section 5.02(c). If the Company so elects to pay Additional Interest pursuant to this Section 5.02(a), such Additional Interest shall be payable in the same manner and on the same dates as Regular Interest on the Notes. On the 181st day after such Event of Default (if the Event of Default relating to the Company’s failure to comply with its obligations as set forth in Section 3.06 or Section 4.04, as applicable, is not cured or waived prior to such 181st day), the Notes will be subject to acceleration as provided in Section 5.01. In the event the Company does not elect to pay Additional Interest following an Event of Default in accordance with this Section 5.02(a), the Notes shall be subject to acceleration as provided in Section 5.01. Nothing contained in this Section 5.02 shall affect the rights of Noteholders in the event of the occurrence of any other Event of Default.

     In order to elect to pay Additional Interest as the sole remedy during the first 180 days after the occurrence of any Event of Default relating to the Company’s failure to comply with its obligations as set forth in Sections 3.06 and 4.04, the Company must notify all Noteholders, the Trustee and the Paying Agent of such election prior to the beginning of such 180-day period. Upon the failure to timely give such notice, the Notes shall be immediately subject to acceleration as provided in Section 5.01.

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     (b) If, at any time during the six-month period beginning on, and including, the date which is six months after the last date of original issuance of the Notes, the Company fails to timely file any document or report that it is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act, as applicable (after giving effect to all applicable grace periods thereunder and other than reports on Form 8-K), the Company shall pay Additional Interest on the Notes. Additional Interest will accrue on the Notes at the rate of 0.50% per annum of the principal amount of Notes outstanding for each day during such period for which such failure to file has occurred, ending on the date that is one year after the last original issuance date of such Notes. As used in this Section 5.02(b), documents or reports that the Company is required to “file” with the Commission pursuant to Section 13 or 15(d) of the Exchange Act does not include documents or reports that the Company furnishes to the Commission pursuant to Section 13 or 15(d) of the Exchange Act.

     (c) If, and for so long as, the legend on the Notes specified in Section 2.05(e) has not been removed or the Notes are not otherwise freely tradable by holders other than the Company’s Affiliates (without restrictions pursuant to the terms of this Indenture or the Notes) as of the 365th day after the last date of original issuance of the Notes, the Company shall pay Additional Interest on the Notes at a rate equal to 0.50% per annum of the principal amount of Notes outstanding until the Notes are freely tradable by Noteholders other than the Company’s Affiliates (without restrictions pursuant to the terms of this Indenture or the Notes).

     (d) Any Additional Interest payable pursuant to subsections (b) or (c) shall be payable in arrears on each Interest Payment Date following accrual in the same manner as Regular Interest on the Notes, and will be in addition to any Additional Interest that may accrue at the Company’s election as the sole remedy relating to the failure to comply with its reporting obligations pursuant to Section 5.02(a).

     (e) If Additional Interest is payable by the Company pursuant to this Section 5.02, the Company shall deliver to the Trustee an Officers’ Certificate to that effect stating (i) the amount of such Additional Interest that is payable and (ii) the date on which such Additional Interest is payable. Unless and until a Responsible Officer of the Trustee receives at the Corporate Trust Office such a certificate, the Trustee may assume without inquiry that no such Additional Interest is payable. If the Company has paid Additional Interest directly to the Persons entitled to it, the Company shall deliver to the Trustee an Officers’ Certificate setting forth the particulars of such payment.

     Section 5.03. Payments of Notes on Default; Suit Therefor. In the event that the Trustee has, either upon its own initiative or upon the request of the Holders of not less than 25% in aggregate principal amount of the Notes then outstanding, declared the principal of, and accrued and unpaid Interest on the Notes, to be due and payable immediately in accordance with Section 5.01, and

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the Company shall have failed forthwith to pay such amounts, the Trustee, in its own name and as trustee of an express trust, after being furnished suitable indemnity pursuant to Section 6.01, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid (including such further amounts as shall be sufficient to cover the costs and expenses of collection, including compensation to the Trustee, its agents, attorneys and counsel, and any expenses or liabilities incurred by the Trustee hereunder other than through its negligence or bad faith), and may prosecute any such action or proceeding to judgment or final degree, and may enforce any such judgment or final decree against the Company or any other obligor on the Notes and collect in the manner provided by law out of the property of the Company or any other obligor on the Notes wherever situated the monies adjudged or decreed to be payable.

     In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any Significant Subsidiary, as provided in Section 5.01(h) or Section 5.01(i), the Trustee, irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.03, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and accrued and unpaid Interest in respect of the Notes, and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents and to take such other actions as it may deem necessary or advisable in order to have the claims of the Trustee (including any claim for the compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Noteholders allowed in such judicial proceedings relative to the Company or any other obligor on the Notes, its or their creditors, or its or their property, and to collect and receive any monies or other property payable or deliverable on any such claims, and to distribute the same after the deduction of any amounts due the Trustee under Section 6.06; and any receiver, assignee or trustee in bankruptcy or reorganization, liquidator, custodian or similar official is hereby authorized by each of the Noteholders to make such payments to the Trustee, as administrative expenses, and, in the event that the Trustee shall consent to the making of such payments directly to the Noteholders, to pay to the Trustee any amount due it for compensation, expenses, advances and disbursements, including agents and counsel fees, and including any other amounts due to the Trustee under Section 6.06 hereof, incurred by it up to the date of such distribution. To the extent that such payment of compensation, expenses, advances and disbursements out of the estate in any such proceedings shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends, monies, securities and other property which the Holders of the Notes may be entitled to receive in such proceedings, whether in liquidation or under any plan of reorganization or arrangement or otherwise.

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     Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Noteholder or the rights of any Noteholder thereof, or to authorize the Trustee to vote in respect of the claim of any Noteholder in any such proceeding.

     All rights of action and of asserting claims under this Indenture, or under any of the Notes, may be enforced by the Trustee without the possession of any of the Notes, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes.

     In any proceedings brought by the Trustee (and in any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party) the Trustee shall be held to represent all the Holders of the Notes, and it shall not be necessary to make any Holders of the Notes parties to any such proceedings.

     Section 5.04. Application of Monies Collected by Trustee. Any monies collected by the Trustee pursuant to this Article 5 with respect to the Notes shall be applied in the order following, at the date or dates fixed by the Trustee for the distribution of such monies, upon presentation of the several Notes, and stamping thereon the payment, if only partially paid, and upon surrender thereof, if fully paid:

     First, to the payment of all amounts due the Trustee under Section 6.06;

     Second, in case the principal of the outstanding Notes shall not have become due and be unpaid, to the payment of Interest on the Notes in default in the order of the maturity of the installments of such Interest;

     Third, in case the principal of the outstanding Notes shall have become due, by declaration or otherwise, and be unpaid, to the payment of the whole amount (including, if applicable, payments in respect of the Conversion Obligation and Cash Make-Whole Premium) then owing and unpaid upon the Notes for principal and Interest, and in case such monies shall be insufficient to pay in full the whole amounts so due and unpaid upon the Notes, then to the payment of such principal and Interest without preference or priority of principal over Interest, or of Interest over principal or of any installment of Interest over any other installment of Interest, or of any Note over any other Note, ratably to the aggregate of such principal and accrued and unpaid Interest; and

     Fourth, to the payment of the remainder, if any, to the Company or any other Person lawfully entitled thereto.

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     Section 5.05. Proceedings by Noteholders. No Holder of any Note shall have any right by virtue of or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture, or for the appointment of a receiver, trustee, liquidator, custodian or other similar official, or for any other remedy hereunder, unless such Holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance thereof, as hereinbefore provided, and unless also the Holders of not less than 25% in aggregate principal amount of the Notes then outstanding shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such security or indemnity satisfactory to it against any loss, liability or expense to be incurred therein or thereby, and the Trustee for sixty (60) days after its receipt of such notice, request and offer of security or indemnity, shall have neglected or refused to institute any such action, suit or proceeding and no direction that, in the opinion of the Trustee, is inconsistent with such written request shall have been given to the Trustee by the Holders of a majority in principal amount of the Notes outstanding pursuant to Section 5.08; it being understood and intended, and being expressly covenanted by the taker and Holder of every Note with every other taker and Holder and the Trustee, that no one or more Holders shall have any right in any manner whatever by virtue of or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other Holder, or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all Holders (except as otherwise provided herein). For the protection and enforcement of this Section 5.05, each and every Holder and the Trustee shall be entitled to such relief as can be given either at law or in equity.

     Notwithstanding any other provision of this Indenture and any provision of any Note, the right of any Noteholder to receive payment of the principal of, and accrued and unpaid Interest on, such Note, or the Fundamental Change Repurchase Price, if applicable, on or after the respective due dates expressed in such Note, or the Fundamental Change Repurchase Date, or to institute suit for the enforcement of any such payment on or after such respective dates against the Company shall not be impaired or affected without the consent of such Noteholder.

     Anything in this Indenture or the Notes to the contrary notwithstanding, the Holder of any Note, without the consent of either the Trustee or the Holder of any other Note, in his own behalf and for his own benefit, may enforce, and may institute and maintain any proceeding suitable to enforce, his rights to payment of amounts due upon conversion as provided herein.

     Section 5.06. Proceedings by Trustee. In case of an Event of Default the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as are necessary to protect and enforce any of such rights, either by suit in equity or by action at law

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or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.

     Section 5.07. Remedies Cumulative and Continuing. Except as provided in the last paragraph of Section 2.06, all powers and remedies given by this Article 5 to the Trustee or to the Noteholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other power or remedy given hereunder or otherwise available to the Trustee or the Holders of the Notes, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or of any Holder of any of the Notes to exercise any right or power accruing upon any Default or Event of Default shall impair any such right or power, or shall be construed to be a waiver of any such default or any acquiescence therein; and, subject to the provisions of Section 5.05, every power and remedy given by this Article 5 or by law to the Trustee or to the Noteholders may be exercised from time to time, and as often as shall be deemed expedient by the Trustee or by the Noteholders.

     Section 5.08. Direction of Proceedings and Waiver of Defaults by Majority of Noteholders. The Holders of a majority in aggregate principal amount of the Notes at the time outstanding determined in accordance with Section 7.04 shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to Notes; provided, however, that (a) such direction shall not be in conflict with any rule of law or with this Indenture, and (b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. The Trustee may refuse to follow any direction that it determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. The Holders of a majority in aggregate principal amount of the Notes at the time outstanding determined in accordance with Section 7.04 may, on behalf of the Holders of all of the Notes waive any past Default or Event of Default hereunder and its consequences except (i) a Default in the payment of accrued and unpaid Interest on, or the principal of, the Notes when due which has not been cured pursuant to the provisions of Section 5.01, (ii) a failure by the Company to deliver cash upon conversion of the Notes, or (iii) a Default in respect of a covenant or provisions hereof which under Article 9 cannot be modified or amended without the consent of each Holder of an outstanding Note affected thereby. Upon any such waiver the Company, the Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Whenever any Default or Event of Default hereunder shall have been waived as permitted by this Section 5.08, said Default or Event of Default shall for all purposes of the Notes and this Indenture be deemed to have

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been cured and to be not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.

     Section 5.09. Notice of Defaults. The Trustee shall, within ninety (90) days after the occurrence and continuance of a Default of which a Responsible Officer has actual knowledge, mail to all Noteholders as the names and addresses of such Holders appear upon the Note Register, notice of all Defaults known to such Responsible Officer, unless such Defaults shall have been cured or waived before the giving of such notice; and provided that, except in the case of a Default in the payment of the principal of, and accrued and unpaid Interest on, any of the Notes, in any such event the Trustee shall be protected in withholding such notice if and so long as a committee of trust officers of the Trustee in good faith determine that the withholding of such notice is in the interests of the Noteholders.

     Section 5.10. Undertaking to Pay Costs. All parties to this Indenture agree, and each Holder of any Note by his acceptance thereof shall be deemed to have agreed, that any court may, in its discretion, require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided that the provisions of this Section 5.10 (to the extent permitted by law) shall not apply to any suit instituted by the Trustee, to any suit instituted by any Noteholder, or group of Noteholders, holding in the aggregate more than 10% in principal amount of the Notes at the time outstanding determined in accordance with Section 7.04, or to any suit instituted by any Noteholder for the enforcement of the payment of the principal of, and accrued and unpaid Interest on, any Note on or after the due date expressed in such Note or in the Indenture or to any suit for the enforcement of the payment of the Fundamental Change Repurchase Price on or after the Fundamental Change Repurchase Date or for payment of amounts due upon conversion in accordance with the provisions of Article 13.

ARTICLE 6
Concerning the Trustee

     Section 6.01. Duties and Responsibilities of Trustee. The Trustee, prior to the occurrence of an Event of Default and after the curing or waiver of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default has occurred (which has not been cured or waived) the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the

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same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs; provided that if an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under this Indenture at the request or direction of any of the Holders unless such Holders have provided to the Trustee indemnity or security against loss, liability or expense satisfactory to the Trustee.

     No provision of this Indenture shall be construed to relieve the Trustee from liability for its own grossly negligent action, its own grossly negligent failure to act or its own willful misconduct, except that

     (a) prior to the occurrence of an Event of Default and after the curing or waiving of all Events of Default which may have occurred:

     (i) the duties and obligations of the Trustee shall be determined solely by the express provisions of this Indenture and, to the extent it has been qualified thereunder, the Trust Indenture Act, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture and/or the Trust Indenture Act against the Trustee; and

     (ii) in the absence of bad faith and willful misconduct on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but, in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform on their face to the requirements of this Indenture;

     (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be established by a court of competent jurisdiction that the Trustee was grossly negligent in ascertaining the pertinent facts;

     (c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith and either (i) believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture, including in accordance with the direction from Holders of at least 25% in aggregate principal amount of the outstanding Notes pursuant to Sections 5.01, 5.03 and 5.05, or (ii) in accordance with the direction of the Holders of not less than a majority in principal amount of the Notes at the time outstanding determined as provided in Section 7.04 relating to the time, method and place of

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conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture;

     (d) whether or not therein provided, every provision of this Indenture relating to the conduct or affecting the liability of, or affording protection to, the Trustee shall be subject to the provisions of this Section;

     (e) the Trustee shall not be liable in respect of any payment (as to the correctness of amount, entitlement to receive or any other matters relating to payment) or notice effected by the Company or any Paying Agent or effected by the Trustee based upon information and/or calculations provided by the Company or any Paying Agent or any records maintained by any co-Note Registrar with respect to the Notes;

     (f) if any party fails to deliver a notice relating to an event the fact of which, pursuant to this Indenture, requires notice to be sent to the Trustee, the Trustee may conclusively rely on its failure to receive such notice as reason to act as if no such event occurred, unless such Responsible Officer of the Trustee had actual knowledge of such event;

     (g) in the absence of written investment direction from the Company, all cash received by the Trustee shall be placed in a non-interest bearing trust account. In no event shall the Trustee be liable for the selection of investments or for investment losses incurred thereon or for losses incurred as a result of the liquidation of any such investments prior to its stated maturity or the failure of the party directing such investments prior to its stated maturity or the failure of the party directing such investment to provide timely written investment direction, and the Trustee shall have no obligation to invest or reinvest any amounts held hereunder in the absence of such written investment direction from the Company; and

     (h) in the event that the Trustee is also acting as Custodian, Note Registrar, Paying Agent or Conversion Agent hereunder, the rights and protections afforded to the Trustee pursuant to this Article 6 shall also be afforded to it in its capacity as such.

     None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers.

     Section 6.02. Reliance on Documents, Opinions, etc. Except as otherwise provided in Section 6.01:

     (a) the Trustee may conclusively rely and shall be fully protected in acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, note or other paper or document believed by

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it in good faith to be genuine and to have been signed or presented by the proper party or parties;

     (b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers’ Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;

     (c) the Trustee may consult with counsel and require an Opinion of Counsel and any advice of such counsel or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;

     (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Noteholders pursuant to the provisions of this Indenture, unless such Noteholders shall have provided to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby;

     (e) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, note or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require indemnity satisfactory to the Trustee from the Noteholders against such expenses or liability as a condition to so proceeding; the reasonable expenses of every such examination shall be paid by the Company or, if paid by the Trustee or any predecessor Trustee, shall be repaid by the Company upon demand;

     (f) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, custodians, nominees or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent, custodian, nominee or attorney appointed by it with due care hereunder;

     (g) the permissive rights of the Trustee enumerated herein shall not be construed as duties;

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     (h) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon Officers’ Certificates or Opinions of Counsel furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform on their face to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein); and

     (i) the Trustee may request that the Company deliver an Officers’ Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers’ Certificate shall be signed by any person authorized to sign Officers’ Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.

     In no event shall the Trustee be liable for any consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action other than through the Trustee’s willful misconduct or gross negligence. The Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Notes, unless either (1) a Responsible Officer shall have actual knowledge of such Default or Event of Default or (2) written notice of such Default or Event of Default shall have been given to the Trustee by the Company or by any Holder of the Notes at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture.

     Section 6.03. No Responsibility for Recitals, etc. The recitals contained herein and in the Notes (except in the Trustee’s certificate of authentication) shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes. The Trustee shall not be accountable for the use or application by the Company of any Notes or the proceeds of any Notes authenticated and delivered by the Trustee in conformity with the provisions of this Indenture. The Trustee shall not be responsible or liable for any loss suffered in connection with any investment of funds made by it in accordance with this Indenture or at the direction of the Company. Except for information provided by the Trustee concerning the Trustee, the Trustee shall have no responsibility for any information in any offering memorandum, prospectus or other disclosure material distributed with respect to the Notes.

     Section 6.04. Trustee, Paying Agents, Conversion Agents or Registrar May Own Notes. The Trustee, any Paying Agent, any Conversion Agent or Note Registrar, in its individual or any other capacity, may become the owner or

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pledgee of Notes with the same rights it would have if it were not Trustee, Paying Agent, Conversion Agent or Note Registrar.

     Section 6.05. Monies to be Held in Trust. Subject to the provisions of Section 11.04, all monies received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as may be agreed from time to time by the Company and the Trustee.

     Section 6.06. Compensation and Expenses of Trustee. The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, compensation for all services rendered by it hereunder in any capacity (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) as mutually agreed to in writing between the Trustee and the Company, and the Company promptly will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances reasonably incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the compensation and the expenses and disbursements of its agents and counsel and of all persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its gross negligence, willful misconduct or bad faith. The Company also covenants and agrees to indemnify the Trustee in any capacity under this Indenture and any other document or transaction entered into in connection herewith and its agents and any authenticating agent for, and to hold them harmless against, any loss, liability or expense incurred without gross negligence, willful misconduct or bad faith on the part of the Trustee, its officers, directors, agents or employees, or such agent or authenticating agent, as the case may be, and arising out of or in connection with the acceptance or administration of this trust or in any other capacity hereunder, including the costs and expenses of defending themselves against any claim of liability in the premises. The obligations of the Company under this Section 6.06 to compensate or indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall be secured by a lien prior to that of the Notes upon all property and funds held or collected by the Trustee as such, except, subject to the effect of Section 5.04, funds held in trust herewith for the benefit of the Holders of particular Notes prior to the date of the accrual of such unpaid compensation or identifiable claim. The Trustee’s right to receive payment of any amounts due under this Section 6.06 shall not be subordinate to any other liability or Indebtedness of the Company. The obligation of the Company under this Section 6.06 shall survive the satisfaction and discharge of this Indenture and the earlier resignation or removal or the Trustee. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld or delayed. The indemnification provided in this Section 6.06 shall extend to the officers, directors, agents and employees of the Trustee.

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     When the Trustee and its agents and any authenticating agent incur expenses or render services after an Event of Default specified in Section 5.01(h) or Section 5.01(i) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any bankruptcy, insolvency or similar laws.

     Section 6.07. Officers’ Certificate as Evidence. Whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of gross negligence, willful misconduct, recklessness and bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers’ Certificate delivered to the Trustee, and such Officers’ Certificate, in the absence of gross negligence, willful misconduct, recklessness and bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof.

     Section 6.08. Conflicting Interests of Trustee. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture.

     Section 6.09. Eligibility of Trustee. There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.

     Section 6.10. Resignation or Removal of Trustee.

     (a) The Trustee may at any time resign by giving written notice of such resignation to the Company and by mailing notice thereof to the Noteholders at their addresses as they shall appear on the Note Register. Upon receiving such notice of resignation, the Company shall promptly, but in no event later than 60 days after such resignation or removal, appoint a successor Trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor Trustee. If no successor Trustee shall have been so appointed and have accepted appointment sixty (60) days after the retiring Trustee resigns or is removed, the resigning Trustee may petition any court of competent jurisdiction

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for the appointment of a successor Trustee, or any Noteholder who has been a bona fide Holder of a Note or Notes for at least six months may, subject to the provisions of Section 6.10, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Trustee.

     (b) (x) At any time at which no Default or Event of Default has occurred and is continuing or (y) in case at any time any of the following shall occur:

     (i) the Trustee shall fail to comply with Section 6.08 within a reasonable time after written request therefor by the Company or by any Noteholder who has been a bona fide Holder of a Note or Notes for at least six (6) months, or

     (ii) the Trustee shall cease to be eligible in accordance with the provisions of Section 6.09 and shall fail to resign after written request therefor by the Company or by any such Noteholder, or

     (iii) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case of (x) or (y), the Company may by a Board Resolution remove the Trustee and appoint a successor Trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor Trustee, or, subject to the provisions of this Section 6.10, any Noteholder who has been a bona fide Holder of a Note or Notes for at least six (6) months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor Trustee.

     (c) The Holders of a majority in aggregate principal amount of the Notes at the time outstanding, as determined in accordance with Section 7.04, may at any time remove the Trustee and nominate a successor Trustee which shall be deemed appointed as successor Trustee unless within ten (10) days after notice to the Company of such nomination the Company objects thereto, in which case the Trustee so removed or any Noteholder, upon the terms and conditions and otherwise as in Section 6.10(a) provided, may petition any court of competent jurisdiction for an appointment of a successor Trustee.

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     (d) Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section 6.10 shall become effective upon acceptance of appointment by the successor Trustee as provided in Section 6.11.

     Section 6.11. Acceptance by Successor Trustee. Any successor Trustee appointed as provided in Section 6.10 shall execute, acknowledge and deliver to the Company and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as Trustee herein; but, nevertheless, on the written request of the Company or of the successor Trustee, the Trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of Section 6.06, execute and deliver an instrument transferring to such successor Trustee all the rights and powers of the Trustee so ceasing to act. Upon request of any such successor Trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Trustee all such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a lien upon all property and funds held or collected by such Trustee as such, except for funds held in trust for the benefit of Holders of particular Notes, to secure any amounts then due it pursuant to the provisions of Section 6.06.

     No successor Trustee shall accept appointment as provided in this Section 6.11 unless at the time of such acceptance such successor Trustee shall be qualified under the provisions of Section 6.08 and be eligible under the provisions of Section 6.09.

     Upon acceptance of appointment by a successor Trustee as provided in this Section 6.11, each of the Company and the successor Trustee, at the written direction and at the expense of the Company shall mail or cause to be mailed notice of the succession of such Trustee hereunder to the Noteholders at their addresses as they shall appear on the Note Register. If the Company fails to mail such notice within ten (10) days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Company.

     Section 6.12. Succession by Merger, etc. Any corporation or other entity into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation or other entity resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation or other entity succeeding to all or substantially all of the corporate trust business of the Trustee (including the administration of this Indenture), shall be the successor to the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that in the case of any corporation or other entity succeeding to all or substantially all of

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the corporate trust business of the Trustee such corporation or other entity shall be qualified under the provisions of Section 6.08 and eligible under the provisions of Section 6.09.

     In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture, any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee or authenticating agent appointed by such predecessor Trustee, and deliver such Notes so authenticated, and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee or an authenticating agent appointed by such successor Trustee may authenticate such Notes either in the name of any predecessor Trustee hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Notes in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.

     Section 6.13. Limitation on Rights of Trustee as Creditor. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Notes), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of the claims against the Company (or any such other obligor).

     Section 6.14. Trustee’s Application for Instructions from the Company. Any application by the Trustee for written instructions from the Company (other than with regard to any action proposed to be taken or omitted to be taken by the Trustee that affects the rights of the Noteholders under this Indenture) may, at the option of the Trustee, set forth in writing any action proposed to be taken or omitted by the Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be effective. The Trustee shall not be liable for any action taken by, or omission of, the Trustee in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three (3) Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date), unless, prior to taking any such action (or the effective date in the case of any omission), the Trustee shall have received written instructions in response to such proposal specifying the action to be taken or omitted.

     Section 6.15. Authorization of Trustee to Take Other Action. The Trustee is hereby authorized and directed to enter into and take any actions or deliver such consents required by or requested under this Indenture and to take such other actions and enter into such other documents as directed by the Holders of a majority of outstanding aggregate principal amount of the Notes (except as expressly stated herein, including as set forth in Sections 5.01, 5.03 5.05 and

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Section 9.02). Subject to Section 9.02, if at any time any action by or the consent of the Trustee is required under this Indenture or any other document entered into by the Trustee at the direction of a majority of the Holders of outstanding aggregate principal amount of the Notes, such action or consent shall be taken or given by the Trustee upon the consent to such action by the Holders of a majority of outstanding aggregate principal amount of the Notes.

ARTICLE 7
Concerning the Noteholders

     Section 7.01. Action by Noteholders. Whenever in this Indenture it is provided that the Holders of a specified percentage in aggregate principal amount of the Notes may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action, the Holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by Noteholders in person or by agent or proxy appointed in writing, or (b) by the record of the Noteholders voting in favor thereof at any meeting of Noteholders duly called and held in accordance with the provisions of Article 8, or (c) by a combination of such instrument or instruments and any such record of such a meeting of Noteholders and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or such record are delivered to the Trustee and, where it is hereby expressly required, to the Company. Proof of execution of any such instrument or record or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. Whenever the Company or the Trustee solicits the taking of any action by the Noteholders, the Company or the Trustee may fix, but shall not be required to, in advance of such solicitation, a date as the record date for determining Noteholders entitled to take such action. The record date if one is selected shall be not more than fifteen (15) days prior to the date of commencement of solicitation of such action. Any request, demand, authorization, direction, notice, consent, waiver or other action by a Holder of any Note shall bind every future Holder of the same Note, and the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted, or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Note.

     Section 7.02. Proof of Execution by Noteholders. Subject to the provisions of Section 6.01, Section 6.02 and Section 8.05, proof of the execution of any instrument by a Noteholder or his agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The holding of Notes shall be proved by the Note Register or by a certificate of the Note

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Registrar. The record of any Noteholders’ meeting shall be proved in the manner provided in Section 8.06.

     Section 7.03. Who Are Deemed Absolute Owners. The Company, the Trustee, any authenticating agent, any Paying Agent, any Conversion Agent and any Note Registrar may deem the person in whose name such Note shall be registered upon the Note Register to be, and may treat such person as, the absolute owner of such Note (whether or not such Note shall be overdue and notwithstanding any notation of ownership or other writing thereon made by any Person other than the Company or any Note Registrar) for the purpose of receiving payment of or on account of the principal of, and accrued and unpaid Interest on, such Note, upon conversion of such Note and for all other purposes; and neither the Company nor the Trustee nor any Paying Agent nor any Conversion Agent nor any Note Registrar shall be affected by any notice to the contrary. All such payments so made to any Holder for the time being, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for monies payable upon any such Note. Notwithstanding anything to the contrary in this Indenture or the Notes, following an Event of Default, any Holder of a beneficial interest in a Global Note may directly enforce against the Company, without the consent, solicitation, proxy, authorization or any other action of the Depositary or any other person, such Holder’s right to exchange such beneficial interest for a Note in certificated form in accordance with the provisions of this Indenture.

     Section 7.04. Company-owned Notes Disregarded. In determining whether the Holders of the requisite aggregate principal amount of Notes have concurred in any direction, consent, waiver or other action under this Indenture, Notes that are owned by the Company or any other obligor on the Notes or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on such Notes shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent, waiver or other action, only Notes that a Responsible Officer knows are so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as outstanding for the purposes of this Section 7.04 if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s right to vote such Notes and that the pledgee is not the Company, any other obligor on the Notes or a person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Upon request of the Trustee, the Company shall furnish to the Trustee promptly an Officers’ Certificate listing and identifying all Notes, if any, known by the Company to be owned or held by or for the account of any of the above described persons; and, subject to Section 6.01, the Trustee shall be entitled to accept such Officers’ Certificate as

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conclusive evidence of the facts therein set forth and of the fact that all Notes not listed therein are outstanding for the purpose of any such determination.

     Section 7.05. Revocation of Consents; Future Holders Bound. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Notes specified in this Indenture in connection with such action, any Holder of a Note that is shown by the evidence to be included in the Notes the Holders of which have consented to such action may, by filing written notice with the Trustee at its Corporate Trust Office and upon proof of holding as provided in Section 7.02, revoke such action so far as concerns such Note. Except as aforesaid, any such action taken by the Holder of any Note shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Note and of any Notes issued in exchange or substitution therefor, irrespective of whether any notation in regard thereto is made upon such Note or any Note issued in exchange or substitution therefor.

ARTICLE 8
Noteholders’ Meetings

     Section 8.01. Purpose of Meetings. A meeting of Noteholders may be called at any time and from time to time pursuant to the provisions of this Article 8 for any of the following purposes:

     (a) to give any notice to the Company or to the Trustee or to give any directions to the Trustee permitted under this Indenture, or to consent to the waiving of any Default or Event of Default hereunder and its consequences, or to take any other action authorized to be taken by Noteholders pursuant to any of the provisions of Article 5;

     (b) to remove the Trustee and nominate a successor Trustee pursuant to the provisions of Article 6;

     (c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 9.02; or

     (d) to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of the Notes under any other provision of this Indenture or under applicable law.

     Section 8.02. Call of Meetings by Trustee. The Trustee may at any time call a meeting of Noteholders to take any action specified in Section 8.01, to be held at such time and at such place as the Trustee shall determine. Notice of every meeting of the Noteholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting and the establishment of any record date pursuant to Section 7.01, shall be mailed to

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Holders of such Notes at their addresses as they shall appear on the Note Register. Such notice shall also be mailed to the Company. Such notices shall be mailed not less than twenty (20) nor more than ninety (90) days prior to the date fixed for the meeting.

     Any meeting of Noteholders shall be valid without notice if the Holders of all Notes then outstanding are present in person or by proxy or if notice is waived before or after the meeting by the Holders of all Notes outstanding, and if the Company and the Trustee are either present by duly authorized representatives or have, before or after the meeting, waived notice.

     Section 8.03. Call of Meetings by Company or Noteholders. In case at any time the Company, pursuant to a resolution of its Board of Directors, or the Holders of at least 10% in aggregate principal amount of the Notes then outstanding, shall have requested the Trustee to call a meeting of Noteholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within twenty (20) days after receipt of such request, then the Company or such Noteholders may determine the time and the place for such meeting and may call such meeting to take any action authorized in Section 8.01, by mailing notice thereof as provided in Section 8.02.

     Section 8.04. Qualifications for Voting. To be entitled to vote at any meeting of Noteholders a person shall (a) be a Holder of one or more Notes on the record date pertaining to such meeting or (b) be a person appointed by an instrument in writing as proxy by a Holder of one or more Notes. The only persons who shall be entitled to be present or to speak at any meeting of Noteholders shall be the persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.

     Section 8.05. Regulations. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Noteholders, in regard to proof of the holding of Notes and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit.

     The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Noteholders as provided in Section 8.03, in which case the Company or the Noteholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Holders of a majority in principal amount of the Notes represented at the meeting and entitled to vote at the meeting.

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     Subject to the provisions of Section 7.04, at any meeting of Noteholders each Noteholder or proxyholder shall be entitled to one vote for each $1,000 principal amount of Notes held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Note challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Notes held by him or instruments in writing as aforesaid duly designating him as the proxy to vote on behalf of other Noteholders. Any meeting of Noteholders duly called pursuant to the provisions of Section 8.02 or Section 8.03 may be adjourned from time to time by the Holders of a majority of the aggregate principal amount of Notes represented at the meeting, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice.

     Section 8.06. Voting. The vote upon any resolution submitted to any meeting of Noteholders shall be by written ballot on which shall be subscribed the signatures of the Noteholders or of their representatives by proxy and the principal amount of the Notes held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Noteholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 8.02 or 8.03, as applicable. The record shall show the principal amount of the Notes voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting.

     Any record so signed and verified shall be conclusive evidence of the matters therein stated.

     Section 8.07. No Delay of Rights by Meeting. Nothing contained in this Article 8 shall be deemed or construed to authorize or permit, by reason of any call of a meeting of Noteholders or any rights expressly or impliedly conferred hereunder to make such call, any hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the Noteholders under any of the provisions of this Indenture or of the Notes.

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ARTICLE 9
Supplemental Indentures

     Section 9.01. Supplemental Indentures Without Consent of Noteholders. The Company, when authorized by the resolutions of the Board of Directors, and the Trustee, at the Company’s expense, may from time to time and at any time enter into an indenture or indentures supplemental hereto for one or more of the following purposes:

     (a) to cure any ambiguity, omission, defect or inconsistency that does not adversely affect the Holders to a material extent;

     (b) to provide for the assumption by a Successor Corporation of the obligations of the Company under the Indenture pursuant to Article 10;

     (c) to provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(A)(iv) and 163(f)(2)(B) of the Code, if then applicable);

     (d) to add guarantees with respect to the Notes;

     (e) to secure the Notes;

     (f) to add to the covenants of the Company for the benefit of the Holders or surrender any right or power of the Company;

     (g) to make any change that does not adversely affect the rights of any Holder;

     (h) to comply with any requirements of the Commission in connection with the qualification of the Indenture under the Trust Indenture Act;

     (i) to provide for a successor Trustee with respect to the Notes; or

     (j) conform the provisions of the Indenture to the “Description of Notes” in the preliminary offering memorandum for the Notes dated June 9, 2010, as supplemented by the related pricing term sheet.

     Upon the written request of the Company, accompanied by a Board Resolution authorizing the execution of such supplemental indenture, the Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Trustee shall not be obligated to enter into any supplemental indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

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     Any supplemental indenture authorized by the provisions of this Section 9.01 may be executed by the Company and the Trustee without the consent of the Holders of any of the Notes at the time outstanding.

     Section 9.02. Supplemental Indentures With Consent of Noteholders. With the consent (evidenced as provided in Article 7) of the Holders of at least a majority in aggregate principal amount of the Notes at the time outstanding (determined in accordance with Article 7 and including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), the Company, when authorized by the resolutions of the Board of Directors, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or any supplemental indenture or of modifying in any manner the rights of the Holders of the Notes; provided, however, that no such supplemental indenture shall, without the consent of each affected Noteholder:

     (a) reduce the percentage in aggregate principal amount of Notes the Holders of which must consent to an amendment;

     (b) reduce the rate or amount, or extend the stated time for payment, of Interest on any Note;

     (c) reduce the principal, or extend the Maturity Date, of any Note;

     (d) make any change that adversely affects the conversion rights of any Notes;

     (e) reduce the Fundamental Change Repurchase Price of any Note or amend or modify in any manner adverse to the Holders of the Notes the Company’s obligation to make such payments;

     (f) change the place or currency of payment of principal or Interest in respect of any Note;

     (g) impair the right of any Holder to receive payment of principal of (including the Fundamental Change Repurchase Price, if applicable), and Interest on, such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes;

     (h) change the ranking of the Notes in a manner adverse to any Holder; or

     (i) make any change in the provisions of this Article 9 that require each Holder’s consent or in the waiver provisions in Section 5.01 and Section 5.08.

in each case without the consent of each Holder of an outstanding Note affected.

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     Upon the written request of the Company, accompanied by a copy of the Board Resolutions authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Noteholders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee shall not be obligated to enter into such supplemental indenture.

     It shall not be necessary for the consent of the Noteholders under this Section 9.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. After an amendment under the Indenture becomes effective, the Company shall mail to the Holders a notice briefly describing such amendment. However, the failure to give such notice to all affected Holders, or any defect in the notice, will not impair or affect the validity of the amendment.

     Section 9.03. Effect of Supplemental Indentures. Any supplemental indenture executed pursuant to the provisions of this Article 9 shall comply with the Trust Indenture Act, as then in effect; provided that this Section 9.03 shall not require such supplemental indenture or the Trustee to be qualified under the Trust Indenture Act prior to the time such qualification is in fact required under the terms of the Trust Indenture Act, nor shall it constitute any admission or acknowledgment by any party to such supplemental indenture that any such qualification is required prior to the time such qualification is in fact required under the terms of the Trust Indenture Act. Upon the execution of any supplemental indenture pursuant to the provisions of this Article 9, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitation of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company, any other obligor hereunder and the Noteholders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

     Section 9.04. Notation on Notes. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article 9 may bear a notation in a form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may, at the Company’s expense, be prepared and executed by the Company, authenticated by the Trustee (or an authenticating agent duly appointed by the Trustee pursuant to Section 15.10) and delivered in exchange for the Notes then outstanding, upon surrender of such Notes then outstanding.

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     Section 9.05. Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee. The Trustee is entitled to receive, and will be fully protected in relying upon, an Opinion of Counsel and Officers’ Certificate stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article is authorized or permitted by this Indenture.

ARTICLE 10
Consolidation, Merger, Sale, Conveyance and Lease

     Section 10.01. Company May Consolidate, etc. on Certain Terms. Subject to the provisions of Section 10.02, the Company shall not consolidate with, merge with or into, or convey, transfer, lease or otherwise dispose of all or substantially all of its assets and properties to another Person, in a single transaction or a series of transactions, unless:

     (a) the resulting, surviving or transferee Person (the “Successor Corporation”) if not the Company shall be a corporation, organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Corporation (if not the Company) shall expressly assume, by supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes and this Indenture; and

     (b) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing.

     For purposes of this Section 10.01, the sale, lease, conveyance, assignment, transfer, or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company.

     Section 10.02. Successor Corporation to be Substituted. In case of any such consolidation, merger, conveyance, transfer, lease or other disposition and upon the assumption by the Successor Corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of, and accrued and unpaid Interest on, all of the Notes, the due and punctual payment of amounts due upon conversion of the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Company, such Successor Corporation shall succeed to and be substituted for the Company with the same effect as if the Successor Corporation had been named herein as the Company and thereafter, except in the case of a lease, the Company shall be relieved of all obligations under this Indenture and the Notes. Such Successor

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Corporation thereupon may cause to be signed, and may issue either in its own name or in the name of the Company any or all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such Successor Corporation instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver, or cause to be authenticated and delivered, any Notes which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Notes which such Successor Corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Notes so issued shall in all respects have the same legal rank and benefit under this Indenture as the Notes theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Notes had been issued at the date of the execution hereof. In the event of any such consolidation, merger, conveyance, transfer, lease or other disposition, the person named as the “Company” in the first paragraph of this Indenture or any successor which shall thereafter have become such in the manner prescribed in this Article 10 may be dissolved, wound up and liquidated at any time thereafter and such person shall be released from its liabilities as obligor and maker of the Notes and from its obligations under this Indenture.

     In case of any such consolidation, merger, conveyance, transfer, lease or other disposition, such changes in phraseology and form (but not in substance) may be made in the Notes thereafter to be issued as may be appropriate.

     Section 10.03. Officers’ Certificate and Opinion of Counsel to be Given to Trustee. No consolidation, merger, conveyance, transfer, lease or other disposition described in Section 10.01 shall be permitted unless the Trustee shall receive an Officers’ Certificate and an Opinion of Counsel as conclusive evidence that any such consolidation, merger, conveyance, transfer, lease or other disposition and any such assumption complies with the provisions of this Article 10.

ARTICLE 11
Satisfaction and Discharge of Indenture

     Section 11.01. Discharge of Indenture. When (a) the Company shall deliver to the Trustee for cancellation all Notes theretofore authenticated (other than any Notes that have been destroyed, lost or stolen and in lieu of or in substitution for which other Notes shall have been authenticated and delivered) and not theretofore canceled, or (b) all the Notes not theretofore canceled or delivered to the Trustee for cancellation shall have become due and payable, whether on the Maturity Date or on any earlier Fundamental Change Repurchase Date or upon conversion or otherwise, and the Company shall deposit with the Trustee, in trust, cash sufficient to pay at maturity all of the Notes (other than any

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Notes that shall have been mutilated, destroyed, lost or stolen and in lieu of or in substitution for which other Notes shall have been authenticated and delivered) not theretofore canceled or delivered to the Trustee for cancellation, including principal and accrued and unpaid Interest due thereon, and if the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect except as to (i) the right of holders to receive payments of principal of (including the Fundamental Change Repurchase Price, if applicable), and accrued and unpaid Interest and any unpaid Conversion Obligation on (including any Cash Make-Whole Premium, if applicable), the Notes and the other rights, duties and obligations of Noteholders, as beneficiaries hereof with respect to the amounts, if any, so deposited with the Trustee, (ii) the rights, obligations and immunities of the Trustee hereunder and (iii) the obligations of the Company under Section 6.06, and the Trustee, on written demand of the Company accompanied by an Officers’ Certificate and an Opinion of Counsel as required by Section 15.05 and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture; the Company, however, hereby agrees to reimburse the Trustee for any costs or expenses thereafter reasonably incurred by the Trustee and to compensate the Trustee for any services thereafter reasonably rendered by the Trustee in connection with this Indenture or the Notes.

     Section 11.02. Deposited Monies to be Held in Trust by Trustee. Subject to Section 11.04, all monies deposited with the Trustee pursuant to Section 11.01 shall be held in trust and applied by it to the payment, either directly or through any Paying Agent (including the Company if acting as its own Paying Agent), to the Holders of the particular Notes for the payment of which such monies have been deposited with the Trustee, of all sums due thereon for principal and accrued and unpaid Interest.

     Section 11.03. Paying Agent to Repay Monies Held. Upon the satisfaction and discharge of this Indenture, all monies then held by any Paying Agent of the Notes (other than the Trustee) shall, upon written request of the Company, be repaid to it or paid to the Trustee, and thereupon such Paying Agent shall be released from all further liability with respect to such monies.

     Section 11.04. Return of Unclaimed Monies. Subject to the requirements of applicable law, any monies deposited with or paid to the Trustee for payment of the principal of (including the Fundamental Change Repurchase Price, if applicable), or accrued and unpaid Interest on, Notes and not applied but remaining unclaimed by the Noteholders for two years after the date upon which the principal of, or such accrued and unpaid Interest or Fundamental Change Repurchase Price, if any, on, such Notes, as the case may be, shall have become due and payable, shall be repaid to the Company by the Trustee on written request and all liability of the Trustee shall thereupon cease with respect to such monies; and the Holder of any of the Notes shall thereafter look only to the Company for any payment which such Holder may be entitled to collect unless an applicable abandoned property law designates another person. The Trustee shall, promptly

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after such payment of the principal of (including the Fundamental Change Repurchase Price, if applicable), and any accrued and unpaid Interest on, Notes, as described in this Section 11.04 and upon written request of the Company, return to the Company any funds in excess of the amount required for such payment.

     Section 11.05. Reinstatement. If (i) the Trustee or the Paying Agent is unable to apply any money in accordance with Section 11.02 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application and (ii) the Holders of at least a majority in principal amount of the then outstanding Notes so request by written notice to the Trustee, the Company’s obligations under this Indenture shall be revived and reinstated as though no deposit had occurred pursuant to Section 11.01 until such time as the Trustee or the Paying Agent is permitted to apply all such money in accordance with Section 11.02; provided, however, that if the Company makes any payment of Interest, on, or principal of (including the Fundamental Change Repurchase Price, if applicable), any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Noteholders to receive such payment from the money held by the Trustee or Paying Agent.

ARTICLE 12
Immunity of Incorporators, Stockholders, Officers and Directors

     Section 12.01. Indenture and Notes Solely Corporate Obligations. No recourse for the payment of the principal of (including the Fundamental Change Repurchase Price, if applicable), or accrued and unpaid Interest, on, any Note, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture or in any Note, or because of the creation of any Indebtedness represented thereby, shall be had against any past, present or future incorporator, stockholder, employee, agent, officer or director or Subsidiary of the Company as such or of any Successor Corporation, either directly or through the Company or any Successor Corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Notes.

ARTICLE 13
Conversion of Notes

     Section 13.01. Conversion Privilege.

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     (a) Subject to the conditions described in clause (i), (ii), and (iii) below, and upon compliance with the provisions of this Article 13, a Noteholder shall have the right, at such Holder’s option, to convert all or any portion (if the portion to be converted is $1,000 principal amount or a multiple thereof) of such Note into cash at any time prior to the Close of Business on the Scheduled Trading Day immediately preceding March 1, 2015 at a rate (the “Conversion Rate”) of 132.5205 shares of Common Stock (subject to adjustment by the Company as provided in Section 13.04) per $1,000 principal amount Note into an amount of cash based on the sum of the Daily Conversion Values of such Notes for each of the 35 consecutive Trading Days during the relevant Observation Period (subject to the settlement provisions of Section 13.03, the “Conversion Obligation”) under the circumstances and during the periods set forth below. On and after March 1, 2015, regardless of the conditions described in clause (i), (ii), and (iii) below, and upon compliance with the provisions of this Article 13, a Noteholder shall have the right, at such Holder’s option, to convert all or any portion (if the portion to be converted is $1,000 principal amount or a multiple thereof) of such Note into cash at the Conversion Rate at any time prior to the Close of Business on the second Scheduled Trading Day immediately preceding the Maturity Date.

     (i) The Notes shall be convertible prior to the Close of Business on the Scheduled Trading Day immediately preceding March 1, 2015, during the ten (10) Business Day period after any five (5) consecutive Trading Day period (the “Measurement Period”) in which the Trading Price per $1,000 principal amount of Notes for each day of such Measurement Period was less than 98% of the product of the Last Reported Sale Price of the Common Stock on such date and the Conversion Rate on such date, all as determined by the Trustee. The Trustee shall have no obligation to determine the Trading Price of the Notes unless requested by the Company to do so in writing, and the Company shall have no obligation to make such request unless a Noteholder provides the Company with reasonable evidence that the Trading Price per $1,000 principal amount of Notes would be less than 98% of the product of (a) the then-applicable Conversion Rate of the Notes and (b) the Last Reported Sale Price of the Common Stock at such time, at which time the Company shall instruct the Trustee to determine the Trading Price of the Notes beginning on the next Trading Day and on each successive Trading Day until the Trading Price per $1,000 principal amount of Notes is greater than or equal to 98% of the product of (a) the then-applicable Conversion Rate of the Notes and (b) the Last Reported Sale Price of the Common Stock on such date. If the Trading Price condition set forth above has been met, the Company shall so notify the Noteholders. If, at any time after the Trading Price condition set forth above has been met, the Trading Price per $1,000 principal amount of Notes is greater than 98% of the product of (a) the then-applicable Conversion Rate of the Notes and (b) the Last Reported Sale Price on such date, the Company shall so notify the Noteholders.

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     (ii) The Notes shall be convertible prior to the Close of Business on the Scheduled Trading Day immediately preceding March 1, 2015 during any fiscal quarter (and only during such fiscal quarter) commencing after the fiscal quarter ending October 2, 2010, if the Last Reported Sale Price of the Common Stock for twenty (20) or more Trading Days in a period of thirty (30) consecutive Trading Days ending on the last Trading Day of the immediately preceding fiscal quarter exceeds 130% of the applicable Conversion Price in effect on each such applicable Trading Day.

     (iii) The Notes shall be convertible prior to the Close of Business on the Scheduled Trading Day immediately preceding March 1, 2015 as provided in Section 13.01(b), Section 13.01(c) and Section 13.01(d).

     (b) In the event that prior to the Close of Business on the Scheduled Trading Day immediately preceding March 1, 2015 the Company elects to:

     (i) distribute to all or substantially all holders of the Common Stock rights entitling them to purchase, for a period expiring within 60 days after the record date for such distribution, Common Stock at a price less than the Last Reported Sale Price of the Common Stock for the Trading Day immediately preceding the declaration date of such distribution; or

     (ii) distribute to all or substantially all holders of Common Stock, assets or debt securities of the Company or rights to purchase the Company’s securities, which distribution has a per share value (as reasonably determined by the Board of Directors) exceeding 10% of the Last Reported Sale Price of the Common Stock for the Trading Day immediately preceding the date of declaration of such distribution,

then, in either case, Holders may surrender the Notes for conversion into cash at any time on and after the date that the Company provides notice to Holders referred to in the next sentence until the earlier of the Close of Business on the Business Day immediately preceding the Ex-Dividend Date for such distribution or the date the Company announces that such distribution will not take place, even if the Notes are not otherwise convertible at such time. The Company shall notify Holders of any distribution referred to in either clause (i) or clause (ii) above and of the resulting conversion right at least twenty (20) Business Days prior to the Ex-Dividend Date for such distribution.

     (c) If the Company combines or consolidates with or merges with or into another Person or is a party to a binding share exchange or sells or conveys all or substantially all of its properties and assets in each case pursuant to which the Common Stock would be converted into cash, securities and/or other property, then Holders may surrender Notes for conversion into cash at any time from and

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after the date which is forty (40) Scheduled Trading Days prior to the anticipated effective date of the transaction until and including the date that is forty (40) Scheduled Trading Days after the effective date of such transaction (or, if earlier, the date the Company announces that such transaction will not take place); provided such transaction does not otherwise constitute a Fundamental Change or a Make-Whole Fundamental Change to which the provisions of Section 13.01(d) shall apply. The Company will notify Holders of Notes of the resulting conversion right at least forty (40) Scheduled Trading Days prior to the anticipated effective date of such transaction; provided, however that if the Company does not have knowledge of any such transaction at least forty (40) Scheduled Trading Days prior to the anticipated effective date of such transaction, the Company will notify Holders within one Business Day of the date upon which it receives notice, or otherwise becomes aware, of such transaction, but in no event later than the actual effective date of such transaction. The Board of Directors shall determine in good faith the anticipated effective date of the transaction, and such determination shall be conclusive and binding on the Holders.

     (d) If the Company is a party to any transaction or event that constitutes a Fundamental Change or a Make-Whole Fundamental Change, a Holder may surrender Notes for conversion into cash at any time from and after the date which is forty (40) Scheduled Trading Days prior to the anticipated effective date of such transaction or event until and including the later of (i) the date which is forty (40) Scheduled Trading Days after the effective date of such transaction or event (or, if earlier, the date the Company announces that such transaction or event will not take place) and (ii) if such transaction or event constitutes a Fundamental Change, the related Fundamental Change Repurchase Date. The Company shall give notice in writing to all record Noteholders and the Trustee of the Fundamental Change or Make-Whole Fundamental Change no later than forty (40) Scheduled Trading Days prior to the anticipated effective date of the Fundamental Change or the anticipated Make-Whole Effective Date, as applicable; provided, however that if the Company does not have knowledge of any such transaction or event at least forty (40) Scheduled Trading Days prior to the anticipated effective date of such Fundamental Change or the anticipated Make-Whole Effective Date, the Company will notify Holders within one Business Day of the date upon which it receives notice, or otherwise becomes aware, of such transaction or event, but in no event later than the actual effective date of such Fundamental Change or Make-Whole Effective Date, as applicable. The Board of Directors shall determine in good faith the anticipated effective date of the Fundamental Change or the anticipated Make-Whole Effective Date, and such determination shall be conclusive and binding on the Holders.

     Section 13.02. Adjustments to Cash Due Upon Conversion Upon a Make-Whole Fundamental Change.

     (a) General. If a Fundamental Change described in clause (1) or clause (2) of the definition thereof (determined after giving effect to any exceptions to or

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exclusions from such definition, a “Make-Whole Fundamental Change”) occurs and a Holder converts its Notes in connection with such Make-Whole Fundamental Change, the Company will, in the circumstances described in this Section 13.02, increase the Conversion Rate for such Notes by the number of shares of Common Stock (the “Cash Make-Whole Premium”) described in this Section 13.02. For purposes of this Section 13.02, a conversion of Notes will be deemed to be “in connection with” a Make-Whole Fundamental Change if the relevant Notice of Conversion is surrendered to the Conversion Agent during the period from, and including, the effective date of such Make-Whole Fundamental Change (the “Make-Whole Effective Date”) up to, and including, the Scheduled Trading Day immediately prior to the related Fundamental Change Repurchase Date.

     (b) Upon any conversion of Notes in connection with a Make-Whole Fundamental Change, the Company shall pay solely cash based on the Conversion Rate as increased to reflect the Cash Make-Whole Premium pursuant to the table set forth in (e) below in accordance with Section 13.03. If the Holders of Common Stock receive only cash in a Make-Whole Fundamental Change described in clause (2) of the definition of Fundamental Change (without regard to the proviso to such clause), the cash due upon conversion will be paid to Holders on the third Scheduled Trading Day following the relevant Conversion Date. Whenever any Make-Whole Fundamental Change occurs, on or prior to the fifth Business Day immediately following the Make-Whole Effective Date for such Make-Whole Fundamental Change, the Company will deliver to each Noteholder notice of such Make-Whole Fundamental Change and its Make-Whole Effective Date (a “Make-Whole Fundamental Change Notice”) and issue a press release containing the same.

     (c) The amount, if any, by which the Conversion Rate will be increased if a Noteholder converts a Note in connection with a Make-Whole Fundamental Change will be determined by reference to the table in (e) below and will be based on the Make-Whole Effective Date and the Stock Price for such Make-Whole Fundamental Change.

     (d) The Stock Prices set forth in the first row (i.e., the column headers) of the table set forth below will be adjusted on each date on which the Conversion Rate is adjusted pursuant to Section 13.04. The adjusted Stock Prices shall equal the Stock Prices in effect immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the Conversion Rate in effect immediately prior to the adjustment giving rise to the Stock Price adjustment, and the denominator of which is the Conversion Rate as so adjusted. The Cash Make-Whole Premium set forth in the table in (e) below shall be adjusted in the same manner and at the same time as the Conversion Rate as set forth in Section 13.04 (other than by operation of an adjustment to the Conversion Rate pursuant to this Section 13.02).

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     (e) The following table sets forth the amount, if any, by which the Conversion Rate will be increased for each Stock Price and Make-Whole Effective Date set forth below.

	Stock Price
Effective date	$6.16		$6.50		$7.00		$7.50		$8.00		$8.50		$9.00		$10.00		$15.00		$20.00		$30.00		$40.00
June 15, 2010		29.8171		26.3242		22.0480		18.6899		16.0231		13.8820		12.1448		9.5395		3.9891		2.1037		0.5864		0.0650
June 1, 2011		29.8171		25.6636		21.0543		17.4892		14.7067		12.5150		10.7719		8.2357		3.2903		1.7504		0.4910		0.0457
June 1, 2012		29.8171		25.6419		20.4163		16.4411		13.4030		11.0679		9.2616		6.7461		2.4788		1.3362		0.3788		0.0253
June 1, 2013		29.8171		24.7145		18.7807		14.3728		11.1106		8.7009		6.9206		4.6207		1.5265		0.8508		0.2439		0.0045
June 1, 2014		29.8171		22.7792		15.7637		10.7612		7.2950		4.9531		3.4088		1.7633		0.5132		0.2993		0.0871		0.0000
June 1, 2015		29.8171		21.3256		10.3366		0.8128		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000

     (f) If the exact Stock Prices and/or Make-Whole Effective Dates for a Make-Whole Fundamental Change are not set forth in the table above, then:

     (i) if the Stock Price is between two Stock Prices in the table or the Make-Whole Effective Date is between two Make-Whole Effective Dates in the table, then the Conversion Rate adjustment will be determined by a straight-line interpolation between the Conversion Rate adjustment set forth for the higher and lower Stock Prices and the earlier and later Make-Whole Effective Dates listed in the table, as applicable, based on a 365-day year;

     (ii) if the Stock Price is greater than $40.00 per share, subject to adjustment in the same manner and at the same time as the Stock Prices listed in the table, no adjustment to the Conversion Rate will be made; and

     (iii) if the Stock Price is less than $6.16 per share, subject to adjustment in the same manner and at the same time as the Stock Prices listed in the table, no adjustment to the Conversion Rate will be made.

Notwithstanding the foregoing, in no event will the Conversion Rate exceed 162.3376 shares of Common Stock per $1,000 principal amount of Notes, subject to adjustments in the same manner as the Conversion Rate as set forth in Section 13.04 hereof.

     Section 13.03. Conversion Procedure.

     (a) Subject to Section 13.03(b) and except as provided in Section 13.02(b), the Company will satisfy the Conversion Obligation with respect to each $1,000 principal amount of Notes tendered for conversion in cash, by delivering, on the third Scheduled Trading Day immediately following the last day of the related Observation Period, cash equal to the Settlement Amount. The

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Settlement Amount shall be determined by the Company promptly following the last day of the Observation Period.

     (b) Notwithstanding Section 13.03(a), if any information required in order to calculate the amount of cash payable upon conversion will not be available as of the applicable settlement date, the Company shall deliver the additional cash conversion consideration, if any, resulting from any such adjustment on the third Scheduled Trading Day after the earliest Trading Day on which such calculation can be made.

     (c) Before any Holder of a Note shall be entitled to convert the same as set forth above, such Holder shall (1) in the case of a Global Note, comply with the procedures of the Depositary in effect at that time and, if required, pay funds equal to interest payable on the next Interest Payment Date to which such Holder is not entitled as set forth in Section 13.03(g) and, if required, pay all taxes or duties, if any, and (2) in the case of a Note issued in certificated form, (A) complete and manually sign and deliver an irrevocable written notice to the Conversion Agent in the form on the reverse of such certificated Note (or a facsimile thereof) (a “Notice of Conversion”) at the office of the Conversion Agent and shall state in writing therein the principal amount of Notes to be converted, (B) surrender such Notes, duly endorsed to the Company or in blank (and accompanied by appropriate endorsement and transfer documents), at the office of the Conversion Agent, (C) if required, pay funds equal to Interest payable on the next Interest Payment Date to which such Holder is not entitled as set forth in Section 13.03(g), and (D) if required, pay all taxes or duties, if any. A Note shall be deemed to have been converted immediately prior to the Close of Business on the date (the “Conversion Date”) that the Holder has complied with the requirements set forth in this Section 13.03(c).

     No Notice of Conversion with respect to any Notes may be tendered by a Holder thereof if such Holder has also tendered a Fundamental Change Repurchase Notice and not validly withdrawn such Fundamental Change Repurchase Notice in accordance with the applicable provisions of Section 14.01, as the case may be.

     If more than one Note shall be surrendered for conversion at one time by the same Holder, the Conversion Obligation with respect to such Notes, if any, that shall be payable upon conversion shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof to the extent permitted thereby) so surrendered.

     (d) Delivery of the amounts owing in satisfaction of the Conversion Obligation shall be made by the Company in no event later than the date specified in Section 13.03(a), except to the extent specified in Section 13.03(b). The Company shall make such delivery by paying the cash amount owed to the Conversion Agent or to the Holder of the Note surrendered for conversion, or such Holder’s nominee or nominees.

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     (e) In case any Note shall be surrendered for partial conversion, the Company shall execute and the Trustee shall authenticate and deliver to or upon the written order of the Holder of the Note so surrendered, without charge to such Holder, a new Note or Notes in authorized denominations in an aggregate principal amount equal to the unconverted portion of the surrendered Notes.

     (f) Upon the conversion of an interest in a Global Note, the Trustee, or the Custodian at the direction of the Trustee, shall make a notation on such Global Note as to the reduction in the principal amount represented thereby. The Company shall notify the Trustee in writing of any conversion of Notes effected through any Conversion Agent other than the Trustee.

     (g) Upon conversion, a Noteholder will not receive any separate cash payment and the Conversion Rate shall not be adjusted for accrued and unpaid Interest. The Company’s payment in cash of the Settlement Amount as described above shall be deemed to satisfy in full its obligation to pay the principal amount of the Note and accrued and unpaid Interest, if any, to, but not including, the relevant Conversion Date. Notwithstanding the preceding sentence, if Notes are converted after the Close of Business on a regular record date, Holders of such Notes as of the Close of Business on such record date will receive the Interest payable on such Notes on the corresponding Interest Payment Date notwithstanding the conversion. Notes surrendered for conversion during the period from the Close of Business on any regular record date to the Opening of Business on the immediately following Interest Payment Date must be accompanied by payment of an amount equal to the Interest payable on the Notes so converted; provided, however, that no such payment need be made (i) in connection with a conversion following the last regular record date preceding the Maturity Date; (ii) if the Company has specified a Fundamental Change Repurchase Date that is after a record date and on or prior to the Business Day following the corresponding Interest Payment Date; or (iii) to the extent of any overdue Interest existing at the time of conversion with respect to such Notes. Except as described above, no payment or adjustment will be made for accrued Interest on converted Notes.

     Section 13.04. Adjustment of Conversion Rate. The Conversion Rate shall be adjusted from time to time by the Company as follows; except that no adjustment shall be made to the Conversion Rate if Holders participate (other than in the case of a share split or combination), at the same time and upon the same terms as holders of Common Stock and solely as a result of holding the Notes, in any of the transactions described in this Section 13.04 without having to convert their Notes as if such Holders held a number of shares of Common Stock equal to the applicable Conversion Rate, multiplied by the principal amount of Notes held by such Holders, divided by $1,000:

     (a) In case the Company shall exclusively issue shares of Common Stock as a dividend or distribution on all or substantially all shares of Common

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Stock or shall effect a share split or combination, the Conversion Rate shall be adjusted based on the following formula:

CR₁ = CR₀ x OS₁   OS₀

     where

CR₀       = the Conversion Rate in effect immediately prior to the Opening of Business on the Ex-Dividend Date for such dividend or distribution or immediately after the Opening of Business on the effective date of such share split or combination, as applicable;

CR₁       = the Conversion Rate in effect immediately after the Opening of Business on such Ex-Dividend Date or the effective date, as applicable;

OS₀       = the number of shares of Common Stock outstanding immediately prior to the Opening of Business on such Ex-Dividend Date or effective date, as applicable; and

OS₁       = the number of shares of Common Stock outstanding immediately after giving effect to such dividend, distribution, share split or combination, as applicable.

Any such adjustment shall become effective immediately after the Opening of Business on the Ex-Dividend Date for such dividend or distribution or immediately after the Opening of Business on the effective date of such share split or combination. If any dividend or distribution of the type described in this Section 13.04(a) is declared but not so paid or made, or the outstanding shares of Common Stock are not split or combined, as the case may be, the Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors determines not to pay such dividend or distribution, or split or combine the outstanding shares of Common Stock, as the case may be, to the Conversion Rate that would then be in effect if such dividend, distribution, split or combination had not been declared.

     (b) In case the Company shall issue to all or substantially all holders of its outstanding shares of Common Stock rights, options or warrants entitling them (for a period of not more than forty-five (45) calendar days after the announcement date of such issuance) to subscribe for or purchase shares of Common Stock at a price per share less than the average Last Reported Sale Prices of the Common Stock for the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement of such issuance, the Conversion Rate shall be increased based on the following formula:

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CR₁ = CR₀ x OS₀ + X   OS₀ + Y

     where

CR₀ =  the Conversion Rate in effect immediately prior to the Opening of Business on the Ex-Dividend Date for such event;

CR₁ =  the Conversion Rate in effect immediately after the opening of Business on the Ex-Dividend Date for such event;

OS₀ =  the number of shares of Common Stock outstanding immediately prior to the Opening of Business on such Ex-Dividend Date;

X =  the total number of shares of Common Stock issuable pursuant to such rights, options or warrants; and

Y =  the number of shares of Common Stock equal to the aggregate price payable to exercise or convert such rights, options or warrants divided by the average of the Last Reported Sale Prices of Common Stock over the 10 consecutive Trading Day period ending on the Trading Day immediately preceding the date of announcement of the issuance of such rights, options or warrants.

Any such increase shall be successively made whenever any such rights, option or warrants are issued and shall become effective immediately after the Opening of Business on the Ex-Dividend Date for such issuance. If such rights or warrants are not so issued, the Conversion Rate shall be decreased to be the Conversion Rate that would then be in effect if such Ex-Dividend Date for such issuance had not occurred. To the extent that such rights, options or warrants are not exercised prior to their expiration or termination, the Conversion Rate shall be decreased to the Conversion Rate that would then be in effect had the increase with respect to the issuance of such rights, options or warrants been made on the basis of delivery of only the number of shares of Common Stock actually delivered.

     In determining whether any rights, options or warrants entitle the holders to subscribe for or purchase shares of Common Stock at less than such average of Last Reported Sale Prices for the ten (10) consecutive Trading Day period ending on the Trading Day immediately preceding the date of announcement for such issuance, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received by the Company for such rights, options or warrants and any amount payable on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined in good faith by the Board of Directors.

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     (c) In case the Company shall, by dividend or otherwise, distribute to all or substantially all holders of its Common Stock shares of any class of Capital Stock of the Company, evidences of its Indebtedness or other assets or property of the Company (including rights, options and warrants to acquire Capital Stock or other securities of the Company but excluding dividends or distributions and rights, options or warrants as to which an adjustment was effected pursuant to Section 13.04(a), Section 13.04(b) or Section 13.04(e), dividends or distributions paid exclusively in cash as to which Section 13.04(d) shall apply, distributions as to which this paragraph (c) with respect to Spin-Offs shall apply) and dividends or distributions as to which Section 13.06(b) shall apply (any of such shares of Capital Stock, Indebtedness, or other assets or property hereinafter in this Section 13.04(c) called the “Distributed Property”), then, in each such case the Conversion Rate shall be increased based on the following formula:

CR₁ = CR₀ x SP₀   SP₀ - FMV

     where

CR₀ =  the Conversion Rate in effect immediately prior to the Opening of Business on the Ex-Dividend Date for such distribution;

CR₁ =  the Conversion Rate in effect immediately after the Opening of Business on such Ex-Dividend Date;

SP₀ =  the average of the Last Reported Sale Prices of the Common Stock over the 10 consecutive Trading Day period ending on the Trading Day immediately preceding the Ex-Dividend Date for such distribution; and

FMV =  the fair market value (as determined by the Board of Directors) of the Distributed Property distributed with respect to each outstanding share of Common Stock on the Ex-Dividend Date for such distribution.

Any such increase shall become effective immediately after the Opening of Business on the Ex-Dividend Date for such distribution; provided that if “FMV” is equal to or greater than “SP₀” as set forth above, in lieu of the foregoing increase, adequate provision shall be made so that each Noteholder shall have the right to receive, at the same time and upon the same terms as holders of Common Stock, in respect of each $1,000 principal amount of Notes, the amount and kind of Distributed Property such Holder would have received had such Holder owned a number of shares of Common Stock equal to the Conversion Rate in effect immediately prior to the Ex-Dividend Date for such distribution. If such distribution is not so paid or made, the Conversion Rate shall be decreased to be

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the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

     With respect to an adjustment pursuant to this Section 13.04(c) where there has been a payment of a dividend or other distribution on the Common Stock of shares of Capital Stock of any class or series, or similar equity interest, of or relating to a Subsidiary or other business unit of the Company where such Capital Stock or similar equity interest is listed or quoted (or will be listed or quoted upon consummation of such payment, dividend or distribution) on a National Securities Exchange, over-the-counter market or reasonably comparable U.S. equivalent (a “Spin-Off”), the Conversion Rate will be increased based on the following formula:

CR₁ = CR₀ x FMV₀ + MP₀   MP₀

     where

CR₀ =  the Conversion Rate in effect immediately prior to the end of the Valuation Period;

CR’ =  the Conversion Rate in effect immediately after the end of the Valuation Period;

FMV₀ =  the average of the Last Reported Sale Prices of the Capital Stock or similar equity interest distributed to holders of Common Stock applicable to one share of Common Stock over the first 10 consecutive Trading Day period after, and including, the Ex-Dividend Date of the Spin-Off (the “Valuation Period”); and

MP₀ =  the average of the Last Reported Sale Prices of Common Stock over the Valuation Period.

Any such adjustment shall occur on the last day of the Valuation Period; provided that in respect of any conversion during the Valuation Period (or, in respect of a conversion before the Ex-Dividend Date of any Spin-Off, any calculation of a Daily Conversion Value during the Valuation Period), references within this paragraph (c) with respect to 10 Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed between the Ex-Dividend Date of such Spin-Off and the Conversion Date (or the Trading Day of the applicable Observation Period for which the Daily Conversion Value is to be calculated) in determining the applicable Conversion Rate.

     Rights, options or warrants distributed by the Company to all Holders of Common Stock, entitling the holders thereof to subscribe for or purchase shares of the Company’s Capital Stock, including Common Stock (either initially or

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under certain circumstances), which rights, options or warrants, until the occurrence of a specified event or events (“Trigger Event”): (i) are deemed to be transferred with such shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in respect of future issuances of Common Stock, shall be deemed not to have been distributed for purposes of this Section 13.04 (and no adjustment to the Conversion Rate under this Section 13.04 will be required) until the occurrence of the earliest Trigger Event, whereupon such rights, options and warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the Conversion Rate shall be made under this Section 13.04(c). If any such right, option or warrant, including any such existing rights, options or warrants distributed prior to the date of this Indenture, are subject to events, upon the occurrence of which such rights, options or warrants become exercisable to purchase different securities, evidences of Indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the date of distribution and Ex-Dividend Date with respect to new rights, options or warrants with such rights (and a termination or expiration of the existing rights, options or warrants without exercise by any of the holders thereof). In addition, in the event of any distribution (or deemed distribution) of rights, options or warrants, or any Trigger Event or other event (of the type described in the preceding sentence) with respect thereto that was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Rate under this Section 13.04 was made, (1) in the case of any such rights, options or warrants that shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Rate shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase price received by a holder or holders of Common Stock with respect to such rights, options or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Stock as of the date of such redemption or repurchase, and (2) in the case of such rights, options or warrants that shall have expired or been terminated without exercise by any holders thereof, the Conversion Rate shall be readjusted as if such rights, options and warrants had not been issued.

     For purposes of this Section 13.04(c), Section 13.04(a) and Section 13.04(b), any dividend or distribution to which this Section 13.04(c) is applicable that also includes shares of Common Stock to which Section 13.04(a) applies or rights, options or warrants to subscribe for or purchase shares of Common Stock to which Section 13.04(b) applies, shall be deemed instead to be (1) a dividend or distribution of the evidences of Indebtedness, assets or shares of capital stock other than such shares of Common Stock or rights, options or warrants to which Section 13.04(b) applies (and any Conversion Rate adjustment required by this Section 13.04(c) with respect to such dividend or distribution shall then be made) immediately followed by (2) a dividend or distribution of such shares of Common Stock or such rights, options or warrants (and any further Conversion Rate adjustment required by Section 13.04(a) and Section 13.04(b) with respect to such

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dividend or distribution shall then be made), except (A) the Ex-Dividend Date of such dividend or distribution shall be substituted as “the Ex-Dividend Date” and “the Ex-Dividend for such dividend or distribution” or “the Ex-Dividend for such issuance” within the meaning of Section 13.04(a) and Section 13.04(b) and (B) any shares of Common Stock included in such dividend or distribution shall not be deemed “outstanding immediately prior to the Opening of Business on the Ex-Dividend Date for such dividend or distribution” within the meaning of Section 13.04(a).

     (d) In case the Company shall pay a dividend or make a distribution consisting exclusively of cash to all or substantially all holders of its Common Stock (but excluding distributions covered by Section 13.04(e)), the Conversion Rate shall be adjusted based on the following formula:

CR₁ = CR₀ x SP₀   SP₀ - C

     where

CR₀ =  the Conversion Rate in effect immediately prior to the Opening of Business on the Ex-Dividend Date for such dividend or distribution;

CR₁ =  the Conversion Rate in effect immediately after the Opening of Business on the Ex-Dividend Date for such dividend or distribution;

SP₀ =  the Last Reported Sale Price of the Common Stock on the Trading Day immediately preceding Ex-Dividend Date for such dividend or distribution; and

C =  the amount in cash per share the Company distributes to holders of Common Stock.

Any such adjustment shall become effective immediately after the Opening of Business on the Ex-Dividend Date for such dividend or distribution; provided that if “C” is equal to or greater than “SP₀” as set forth above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Noteholder shall have the right to receive, at the same time and upon the same terms as holders of Common Stock for each $1,000 principal amount of Notes, the amount of cash such Holder would have received had such Holder owned a number of shares of Common Stock equal to the Conversion Rate in effect immediately prior to Opening of Business on the Ex-Dividend Date for such dividend or distribution. If such dividend or distribution is not so paid or made, the Conversion Rate shall be immediately decreased to be the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

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     (e) In case the Company or any of its Subsidiaries makes a payment in respect of a tender offer or exchange offer for all or any portion of the Common Stock (subject to the tender offer rules of the Exchange Act then applicable), other than an odd-lot offer, to the extent that the cash and value of any other consideration included in the payment per share of Common Stock exceeds the Last Reported Sale Price of the Common Stock on the Trading Day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer under the Exchange Act (as it may be amended), the Conversion Rate shall be increased based on the following formula:

CR₁ = CR₀ x AC + (SP₁ x OS₁)   OS₀ x SP₁

     where

CR₀ =  the Conversion Rate in effect immediately prior to the Close of Business on the 10^th Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires;

CR₁ =  the Conversion Rate in effect immediately after the Close of Business on the 10^th Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires;

AC =  the aggregate value of all cash and any other consideration (as determined by the Board of Directors) paid or payable for shares of Common Stock purchased in such tender or exchange offer;

OS₀ =  the number of shares of Common Stock outstanding immediately prior to the date such tender or exchange offer expires (prior to giving effect to the purchase of all shares accepted for purchase or exchange in such tender offer or exchange offer);

OS₁ =  the number of shares of Common Stock outstanding immediately after the date such tender or exchange offer expires (after giving effect to the purchase of all shares accepted for purchase or exchange in such tender offer or exchange offer); and

SP₁ =  the average of the Last Reported Sale Prices of Common Stock over the 10 consecutive Trading Day period commencing on the Trading Day next succeeding the date such tender or exchange offer expires.

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Any such adjustment to the Conversion Rate will occur at the Close of Business on the 10th Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires; provided that in respect of any conversion (or, in respect of any conversion before the expiration date of such tender or exchange offer, any calculation of a Daily Conversion Value) within the 10 Trading Days immediately following, and including, the expiration date of any tender or exchange offer, references within this paragraph (e) to 10 Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed between the expiration date of such tender or exchange offer and the Conversion Date (or the Trading Day of the applicable Observation Period for which the Daily Conversion Value is to be calculated) in determining the applicable Conversion Rate.

     (f) As used in this Section 13.04, “effective date” means the first date on which the shares trade on the applicable exchange or in the applicable market, regular way, reflecting the transaction.

     (g) In addition to those required by clauses (a), (b), (c), (d), and (e) of this Section 13.04, and to the extent permitted by applicable law and subject to the applicable rules of the principal U.S. National Securities Exchange on which Common Stock is traded, the Company from time to time may increase the Conversion Rate by any amount for a period of at least 20 Business Days if the Board of Directors determines that such increase would be in the Company’s best interest. In addition, the Company may also (but is not required to) increase the Conversion Rate to avoid or diminish any income tax to holders of Common Stock or rights to purchase Common Stock in connection with any dividend or distribution of shares (or rights to acquire shares) or similar event. Whenever the Conversion Rate is increased pursuant to the preceding sentence, the Company shall mail to the Holder of each Note at his last address appearing on the Note Register provided for in Section 2.05 a notice of the increase at least fifteen (15) days prior to the date the increased Conversion Rate takes effect, and such notice shall state the increased Conversion Rate and the period during which it will be in effect.

     (h) All calculations and other determinations under this Article 13 shall be made by the Company and shall be made to the nearest cent or to the nearest one-ten thousandth (1/10,000) of a share, as the case may be. No adjustment shall be made for the Company’s issuance of Common Stock or convertible or exchangeable securities or rights to purchase Common Stock or convertible or exchangeable securities, other than as provided in this Section 13.04. No adjustment shall be made to the Conversion Rate unless such adjustment would require a change of at least 1% in the Conversion Rate then in effect at such time. The Company shall carry forward any adjustments that are less than 1% of the Conversion Rate and make such carried forward adjustments, regardless of whether the aggregate adjustment is less than 1%, (i) upon any subsequent adjustment, (ii) upon any Conversion Date and (iii) upon each Trading Day of any Observation Period. No adjustment to the Conversion Rate shall be made

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pursuant to Section 13.04(a)(other than an adjustment to the Conversion Rate for a share combination), Section 13.04(b), Section 13.04(c), Section 13.04(d) and Section 13.04(e) if the application of the applicable adjustment formula would result in a decrease in the Conversion Rate.

     (i) Whenever the Conversion Rate is adjusted as herein provided, the Company shall promptly file with the Trustee and any Conversion Agent other than the Trustee an Officers’ Certificate setting forth the Conversion Rate after such adjustment and setting forth a brief statement of the facts requiring such adjustment. The Trustee and Conversion Agent may conclusively rely on the accuracy of the Conversion Rate adjustment provided by the Company. Unless and until a Responsible Officer of the Trustee shall have received such Officers’ Certificate, the Trustee shall not be deemed to have knowledge of any adjustment of the Conversion Rate and may assume without inquiry that the last Conversion Rate of which it has knowledge is still in effect. Promptly after delivery of such certificate, the Company shall prepare a notice of such adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and the date on which each adjustment became effective and shall mail such notice of such adjustment of the Conversion Rate to the Holder of each Note at his last address appearing on the Note Register provided for in Section 2.05 of this Indenture, within twenty (20) days after the effective date of such adjustment. Failure to deliver such notice shall not affect the legality or validity of any such adjustment.

     (j) In any case in which this Section 13.04 provides that an adjustment shall become effective immediately after (1) an Ex-Dividend Date for an event, (2) the date fixed for the determination of stockholders entitled to receive a dividend or distribution or the effective date of a share split or combination pursuant to Section 13.04(a), (3) a date fixed for the determination of stockholders entitled to receive rights or warrants pursuant to Section 13.04(b), or (4) the last date on which tenders or exchanges may be made pursuant to any tender or exchange offer pursuant to Section 13.04(e) (each an “Adjustment Determination Date”), the Company may elect to defer until the occurrence of the applicable Adjustment Event (as hereinafter defined) issuing to the Holder of any Note converted after such Adjustment Determination Date and before the occurrence of such Adjustment Event, the additional cash or other securities issuable upon such conversion by reason of the adjustment required by such Adjustment Event over and above the amounts deliverable upon such conversion before giving effect to such adjustment. For purposes of this Section 13.04(j), the term “Adjustment Event” shall mean:

     (i) in any case referred to in clause (1) hereof, the occurrence of such event,

     (ii) in any case referred to in clause (2) hereof, the date any such dividend or distribution is paid or made,

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     (iii) in any case referred to in clause (3) hereof, the date of expiration of such rights or warrants, and

     (iv) in any case referred to in clause (4) hereof, the date a sale or exchange of Common Stock pursuant to such tender or exchange offer is consummated and becomes irrevocable.

     (k) For purposes of this Section 13.04, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock.

     (l) For the avoidance of doubt, if a Holder converts Notes in connection with a Make-Whole Fundamental Change and the Make-whole Fundamental Change does not occur, the Holder will not be entitled to a Cash-Make-Whole Premium in connection with such conversion.

     Section 13.05. Adjustments Of Prices . Whenever any provision of this Indenture requires the Company to calculate the Last Reported Sale Prices, the Daily VWAPs or the Daily Conversion Values over a span of multiple days (including an Observation Period and the period for determining the Stock Price for purposes of a Make-Whole Fundamental Change), the Company shall make appropriate adjustments to each to account for any adjustment to the Conversion Rate that becomes effective, or any event requiring an adjustment to the Conversion Rate where the Ex-Dividend Date of the event occurs, at any time during the period from which such Last Reported Sale Prices, the Daily VWAPs or the Daily Conversion Values are to be calculated.

     Section 13.06. Effect of Reclassification, Consolidation, Merger or Sale.

     If any of the following events occur, namely (i) any recapitalization, reclassification or change of the outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), (ii) any consolidation, merger or combination involving the Company, (iii) any sale, lease or other transfer of all or substantially all of the property and assets of the Company and the Company’s Subsidiaries to a third party or (iv) any statutory share exchange, in each case as a result of which holders of Common Stock will receive cash, securities or other property or assets with respect to or in exchange for such Common Stock (any such event a “Reorganization Event”), then:

     (a) the Company or the successor or purchasing corporation, partnership, trust or limited liability company, as the case may be, shall execute with the Trustee a supplemental indenture (which shall comply with the Trust Indenture Act as in force at the date of execution of such supplemental indenture if such supplemental indenture is then required to so comply) permitted under Section 9.01(b) providing for the conversion and settlement of the Notes as set

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forth in this Indenture. Such supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article and the Trustee may conclusively rely on the determination by the Company of the equivalency of such adjustments.

     In the event the Company shall execute a supplemental indenture pursuant to this Section 13.06, the Company shall promptly file with the Trustee an Officers’ Certificate briefly stating the reasons therefor, the kind or amount of cash, securities or property or asset that will constitute the Reference Property after any such Reorganization Event, any adjustment to be made with respect thereto and that all conditions precedent have been complied with.

     (b) Subject to the provisions of Section 13.01, at and after the effective time of such Reorganization Event, upon conversion, the Settlement Amount shall continue to be paid solely in cash; provided, however, that the Daily VWAP will be calculated based on the value of a unit of the amount of shares of stock, other securities or other property or assets (including cash or any combination thereof) that a holder of one share of common stock immediately prior to such Reorganization Event would have owned or been entitled to receive upon the occurrence of such transaction (the “Reference Property”). For purposes of the foregoing, if the transaction causes Common Stock to be converted into, or exchanged for, the right to receive more than a single type of consideration (determined based in part upon any form of stockholder election), the Reference Property used to determine the amount of cash into which the Notes will be convertible will be deemed to be the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make such an election. The Company will notify Holders, the Trustee and the Conversion Agent (if other than the Trustee) of the weighted average as soon as practicable after such determination is made. The Company shall not become a party to any such transaction unless its terms are consistent with the preceding. None of the foregoing provisions shall affect the right of a Holder of Notes to convert its Notes in accordance with the provisions of Article 13 hereof prior to the effective date of such transaction.

     (c) The Company shall cause notice of the execution of such supplemental indenture to be mailed to each Noteholder, at his address appearing on the Note Register provided for in this Indenture, within twenty (20) days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental indenture.

     (d) The above provisions of this Section shall similarly apply to successive Reorganization Events.

     Section 13.07. Responsibility of Trustee. Notwithstanding any provision of this Indenture to the contrary, the Trustee and any other Conversion Agent shall not at any time be under any duty or responsibility to any Noteholder to determine the Conversion Rate or whether any facts exist which may require any

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adjustment of the Conversion Rate, or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. The Trustee and any other Conversion Agent shall not be accountable with respect to the validity or value (or the kind or amount) of any securities or of any property, which may at any time be issued or delivered upon the conversion of any Note; and the Trustee and any other Conversion Agent make no representations with respect thereto. Neither the Trustee nor any Conversion Agent shall be responsible for any failure of the Company to issue, transfer or deliver any stock certificates or other securities or property or cash upon the surrender of any Note for the purpose of conversion or to comply with any of the duties, responsibilities or covenants of the Company contained in this Article.

     Without limiting the generality of the foregoing, neither the Trustee nor any Conversion Agent shall be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture entered into pursuant to Section 13.06 after any event referred to in such Section 13.06 or to any adjustment to be made with respect thereto, but, subject to the provisions of Section 6.01, may accept as conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, the Officers’ Certificate (which the Company shall be obligated to file with the Trustee prior to the execution of any such supplemental indenture) with respect thereto.

     Section 13.08. Notice to Holders Prior to Certain Actions.

     In case:

     (a) the Company shall declare a dividend (or any other distribution) on its Common Stock that would require an adjustment in the Conversion Rate pursuant to Section 13.04; or

     (b) the Company shall authorize the granting to all or substantially all of the holders of its Common Stock of rights, options or warrants to subscribe for or purchase any share of any class or any other rights, options or warrants, or

     (c) of a Reorganization Event; or

     (d) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

the Company shall cause to be filed with the Trustee and to be mailed to each Noteholder at his address appearing on the Note Register, provided for in Section 2.05 of this Indenture, as promptly as possible but in any event at least twenty (20) days prior to the applicable date specified in clause (x) or (y) below, as the case may be, a notice stating (x) the date on which a record is to be taken for the purpose of such action by the Company or one of its Subsidiaries or, if a record is

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not to be taken, the date as of which the holders of Common Stock of record are to be determined for the purposes of such action by the Company or one of its Subsidiaries, or (y) the date on which such Reorganization Event, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such Reorganization Event, dissolution, liquidation or winding-up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such action by the Company or one of its Subsidiaries, Reorganization Event, dissolution, liquidation or winding-up.

     Section 13.09. Exchange in Lieu of Conversion. (a) Notwithstanding anything in this Indenture to the contrary, when a Holder surrenders Notes for conversion, the Company may, at its election, direct the Conversion Agent to surrender, on or prior to the second Business Day immediately following the applicable Conversion Date (assuming for purposes of this Section 13.10, and for the purpose of determining the related Observation Period, that the date such Holder surrenders such Notes for conversion is the Conversion Date for such Notes), such Notes to a financial institution designated by the Company (a “Financial Institution”) for exchange in lieu of conversion.

     (b) In order to accept any such Notes surrendered for conversion, the Financial Institution must agree to pay, in exchange for such Notes, cash equal to the consideration due upon conversion as provided in Section 13.03.

     (c) By the Close of Business on the second Business Day immediately following the applicable Conversion Date, the Company must notify the Holder surrendering Notes for conversion that it has directed the Financial Institution to make an exchange in lieu of conversion.

     (d) If the Financial Institution accepts any such Notes, it will deliver the appropriate amount of cash due upon conversion to the Conversion Agent and the Conversion Agent will pay such cash to the Holder on the third Scheduled Trading Day following the last Trading Day of the applicable Observation Period. Any Notes exchanged by such Financial Institution will remain outstanding.

     (e) If such Financial Institution agrees to accept any Notes for exchange but does not timely deliver the related cash consideration, or if such Financial Institution does not accept the Notes for exchange, the Company will, on the third Scheduled Trading Day immediately following the last day of the Observation Period, convert the Notes into cash pursuant to Section 13.03 (based on such assumed Conversion Date as described above).

     The Company’s designation of a Financial Institution to which the Notes may be submitted for exchange does not require the Financial Institution to accept any Notes (unless the Financial Institution has separately made an agreement with the Company). The Company may, but is not obligated to, enter into a separate

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agreement with the designated Financial Institution that would compensate it for any such transactions.

     Except as otherwise provided in the Indenture, the Company will be responsible for making all calculations called for under the Notes. These calculations include, but are not limited to, determinations of the Last Reported Sale Price of the Common Stock, accrued Interest payable on the Notes and the Conversion Rate of the Notes. The Company will make all these calculations in good faith and, absent manifest error, its calculations will be final and binding on Noteholders. The Company will provide a schedule of the Company’s calculations to each of the Trustee and the Conversion Agent, and each of the Trustee and Conversion Agent is entitled to rely conclusively upon the accuracy of its calculations without independent verification. The Trustee will forward the Company’s calculations to any Noteholder upon the request of that Noteholder.

ARTICLE 14
Repurchase of Notes at Option of Holders

     Section 14.01. Repurchase at Option of Holders Upon a Fundamental Change.

     (a) If a Fundamental Change occurs at any time, then each Noteholder shall have the right, at such Holder’s option, to require the Company to repurchase all of such Holder’s Notes or any portion of the principal amount thereof that is equal to $1,000 or a multiple of $1,000, for cash on the date (the “Fundamental Change Repurchase Date”) specified by the Company that is not less than twenty (20) days and not more than thirty five (35) days after the date of the Fundamental Change Repurchase Company Notice at a repurchase price equal to 100% of the principal amount thereof, together with accrued and unpaid Interest thereon to, but excluding, the Fundamental Change Repurchase Date (unless the Fundamental Change Repurchase Date is after a regular record date but on or prior to the corresponding Interest Payment Date) (the “Fundamental Change Repurchase Price”).

     Repurchases of Notes under this Section 14.01 shall be made, at the option of the Holder thereof, upon:

     (i) delivery to the Trustee (or other Paying Agent appointed by the Company) by a Holder of a duly completed notice (the “Fundamental Change Repurchase Notice”) in the form set forth on the reverse of the Note prior to the Close of Business on Business Day immediately preceding the Fundamental Change Repurchase Date (the “Fundamental Change Expiration Time”); and

     (ii) delivery or book-entry transfer of the Notes to be repurchased to the Trustee (or other Paying Agent appointed by the

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Company) prior to the Fundamental Change Expiration Time (together with all necessary endorsements) at the Corporate Trust Office of the Trustee (or other Paying Agent appointed by the Company), such delivery being a condition to receipt by the Holder of the Fundamental Change Repurchase Price therefor; provided that such Fundamental Change Repurchase Price shall be so paid pursuant to this Section 14.01 only if the Note so delivered to the Trustee (or other Paying Agent appointed by the Company) shall conform in all respects to the description thereof in the related Fundamental Change Repurchase Notice.

The Fundamental Change Repurchase Notice shall state:

     (A) if certificated, the certificate numbers of Notes to be delivered for repurchase;

     (B) the portion of the principal amount of Notes to be repurchased, which must be $1,000 or a multiple thereof, and

     (C) that the Notes are to be repurchased by the Company pursuant to the applicable provisions of the Notes and this Indenture;

     provided, however, that if the Notes are not in certificated form, the Fundamental Change Repurchase Notice must comply with appropriate procedures of the Depositary.

     Any purchase by the Company contemplated pursuant to the provisions of this Section 14.01 shall be consummated by the delivery of the consideration to be received by the Holder on the later of the Fundamental Change Repurchase Date and the time of the book-entry transfer or delivery of the Note surrendered for repurchase.

     The Trustee (or other Paying Agent appointed by the Company) shall promptly notify the Company of the receipt by it of any Fundamental Change Repurchase Notice or written notice of withdrawal thereof in accordance with the provisions of Section 14.01(d).

     Any Note that is to be repurchased only in part shall be surrendered to the Trustee (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Note without service charge, a new Note or Notes, containing identical terms and conditions, each in an authorized denomination such that the aggregate principal amount of such new Note or Notes is equal to the unrepurchased portion of the principal amount of the Note so surrendered, which portion must be no less than $2,000.

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     (b) On or before the 20^th day after the date on which any Fundamental Change occurs or is effective, the Company shall provide to all Holders of record of the Notes and the Trustee and Paying Agent a notice (the “Fundamental Change Repurchase Company Notice”) of the occurrence of such Fundamental Change and of the repurchase right at the option of the Holders arising as a result thereof. Such mailing shall be by first class mail. Simultaneously with providing such Fundamental Change Repurchase Company Notice, the Company shall publish a notice containing the information included therein in a newspaper of general circulation in The City of New York, or publish the information on the Company’s website or through such other public medium as the Company may use at such time.

     Each Fundamental Change Repurchase Company Notice shall specify:

     (i) the events causing the Fundamental Change;

     (ii) the date of the Fundamental Change;

     (iii) the Fundamental Change Repurchase Date and the last date on which a Holder may exercise the repurchase right;

     (iv) the Fundamental Change Repurchase Price;

     (v) the name and address of the Paying Agent and the Conversion Agent;

     (vi) the applicable Conversion Rate and any adjustments to the applicable Conversion Rate;

     (vii) that the Notes with respect to which a Fundamental Change Repurchase Notice has been delivered by a Holder may be converted only if the Holder withdraws the Fundamental Change Repurchase Notice in accordance with the terms of this Indenture;

     (viii) that the Holder must exercise the repurchase right before the Fundamental Change Expiration Time;

     (ix) that the Holder shall have the right to withdraw any Notes surrendered prior to the Fundamental Change Expiration Time, and

     (x) the procedures that Holders must follow to require the Company to repurchase their Notes.

     No failure of the Company to give the foregoing notices and no defect therein shall limit the Noteholders’ repurchase rights or affect the validity of the proceedings for the repurchase of the Notes pursuant to this Section 14.01.

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     (c) Notwithstanding the foregoing, no Notes may be repurchased by the Company at the option of the Holders upon a Fundamental Change if there has occurred and is continuing an Event of Default (except in the case of an Event of Default that is cured by the payment of the Fundamental Change Repurchase Price with respect to such Notes). The Paying Agent will promptly return to the respective Holders thereof any certificated Notes held by it during the acceleration of the Notes (except in the case of an acceleration resulting from a Default by the Company in the payment of the Fundamental Change Repurchase Price with respect to such Notes) and shall deem to be cancelled any instructions for book-entry transfer of the Notes in compliance with the procedures of the Depositary, in which case, upon such return or cancellation, as the case may be, the Fundamental Change Repurchase Notice with respect thereto shall be deemed to have been withdrawn.

     (d) A Fundamental Change Repurchase Notice may be withdrawn by means of a written notice of withdrawal delivered to the Paying Agent in accordance with the Fundamental Change Repurchase Company Notice at any time prior to the Close of Business on the Business Day immediately preceding the Fundamental Change Repurchase Date, specifying:

     (i) if certificated Notes have been issued, the certificate numbers of the withdrawn Notes,

     (ii) the principal amount of the Note with respect to which such notice of withdrawal is being submitted; provided that the principal amount of such Note, after giving effect to (x) such withdrawal and (y) the principal amount, if any, that remains subject to the original Fundamental Change Repurchase Notice is equal to $2,000 or a multiple of $1,000 in excess of that amount; and

     (iii) the principal amount, if any, of such Note that remains subject to the original Fundamental Change Repurchase Notice, which portion must be in principal amounts of $1,000 or a multiple of $1,000;

provided, however, that if the Notes are not in certificated form, the notice must comply with appropriate procedures of the Depositary.

     (e) On or prior to 11:00 a.m. (local time in The City of New York) on the Fundamental Change Repurchase Date, the Company will deposit with the Trustee (or other Paying Agent appointed by the Company or if the Company is acting as its own Paying Agent, set aside, segregate and hold in trust as provided in Section 6.05) an amount of money sufficient to pay the Fundamental Change Repurchase Price on all of the Notes to be repurchased. Subject to receipt of funds and/or Notes by the Trustee (or other Paying Agent appointed by the Company), payment for Notes surrendered for repurchase (and not withdrawn) prior to the Fundamental Change Expiration Time will be made on the later of (x) the Fundamental Change Repurchase Date with respect to such Note (provided

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the Holder has satisfied the conditions to the payment of the Fundamental Change Repurchase Price in Section 14.01) and (y) the time of book-entry transfer or the delivery of such Note to the Trustee (or other Paying Agent appointed by the Company) by the Holder thereof in the manner required by Section 14.01 by mailing checks for the amount payable to the Holders of such Notes entitled thereto as they shall appear in the Note Register, provided, however, that payments to the Depositary shall be made by wire transfer of immediately available funds to the account of the Depositary or its nominee. The Trustee shall, promptly after such payment and upon written demand by the Company, return to the Company any funds in excess of the Fundamental Change Repurchase Price.

     (f) If the Trustee (or other Paying Agent appointed by the Company) holds money sufficient to repurchase on the Fundamental Change Repurchase Date all the Notes or portions thereof that are to be purchased as of such Fundamental Change Repurchase Date, then on and after the Fundamental Change Repurchase Date (i) such Notes will cease to be outstanding, (ii) Interest will cease to accrue on such Notes, whether or not book-entry transfer of the Notes has been made or the Notes have been delivered to the Trustee or Paying Agent and (iii) all other rights of the Holders of such Notes will terminate, other than the right to receive the Fundamental Change Repurchase Price upon delivery of the Notes.

     Section 14.02. Covenant To Comply With Applicable Laws Upon Repurchase Of Notes. In connection with any repurchase offer pursuant to a Fundamental Change Repurchase Notice, the Company will, if required:

     (a) comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act;

     (b) file a Schedule TO or any successor or similar schedule; and

     (c) otherwise comply with all federal and state securities laws in connection with any offer by the Company to repurchase the Notes;

in each case, so as to permit the rights and obligations under this Article 14 to be exercised in the time and in the manner specified in this Article 14.

ARTICLE 15
Miscellaneous Provisions

     Section 15.01. Provisions Binding on Company’s Successors. All the covenants, stipulations, promises and agreements of the Company contained in this Indenture shall bind its successors and assigns whether so expressed or not.

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     Section 15.02. Official Acts by Successor Corporation. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by the Board of Directors or any committee thereof or any officer of the Company shall and may be done and performed with like force and effect by the like board, committee or officer of any Successor Corporation that shall at the time be the lawful sole successor of the Company.

     Section 15.03. Addresses for Notices, Etc. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Noteholders on the Company shall be deemed to have been sufficiently given or made for all purposes if given or served by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until another address is filed by the Company with the Trustee) to Cadence Design Systems, Inc., 2655 Seely Avenue, Building 5, San Jose, California 95134, Attention: General Counsel. Any notice, direction, request or demand hereunder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or served by being deposited postage prepaid by registered or certified mail in a post office letter box addressed to the Corporate Trust Office and such notice references the Notes and this Indenture.

     The Trustee, by notice to the Company, may designate additional or different addresses for subsequent notices or communications.

     Any notice or communication mailed to a Noteholder shall be mailed to him by first class mail, postage prepaid, at the address of such Noteholder as it appears on the Note Register and shall be sufficiently given to him if so mailed within the time prescribed.

     Failure to mail a notice or communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Noteholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

     Section 15.04. Governing Law. THIS INDENTURE AND EACH NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS ENTERED INTO AND TO BE PERFORMED THEREIN (WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

     Section 15.05. Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers’

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Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

     Each certificate or opinion provided for by or on behalf of the Company in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in such certificate or opinion is based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with.

     Section 15.06. Legal Holidays. In any case where any Interest Payment Date, Fundamental Change Repurchase Date, Conversion Date or Maturity Date is not a Business Day, then any action to be taken on such date need not be taken on such date, but may be taken on the next succeeding Business Day with the same force and effect as if taken on such date, and no Interest shall accrue for the period from and after such date to the next succeeding Business Day.

     Section 15.07. No Security Interest Created. Nothing in this Indenture or in the Notes, expressed or implied, shall be construed to constitute a security interest under the Uniform Commercial Code or similar legislation, as now or hereafter enacted and in effect, in any jurisdiction.

     Section 15.08. Benefits of Indenture. Nothing in this Indenture or in the Notes, expressed or implied, shall give to any person, other than the parties hereto, any Paying Agent, any Conversion Agent, any authenticating agent, any Note Registrar and any of their successors hereunder, and the Noteholders, any benefit or any legal or equitable right, remedy or claim under this Indenture.

     Section 15.09. Table of Contents, Headings, etc. The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

     Section 15.10. Authenticating Agent. The Trustee may appoint an authenticating agent which shall be authorized to act on its behalf and subject to its direction in the authentication and delivery of Notes in connection with the original issuance thereof and transfers and exchanges of Notes hereunder, including under Section 2.04, Section 2.05, Section 2.06 and Section 2.07, as fully to all intents and purposes as though the authenticating agent had been expressly authorized by this Indenture and those Sections to authenticate and deliver Notes.

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For all purposes of this Indenture, the authentication and delivery of Notes by the authenticating agent shall be deemed to be authentication and delivery of such Notes “by the Trustee” and a certificate of authentication executed on behalf of the Trustee by an authenticating agent shall be deemed to satisfy any requirement hereunder or in the Notes for the Trustee’s certificate of authentication. Such authenticating agent shall at all times be a person eligible to serve as trustee hereunder pursuant to Section 6.09.

     Any corporation into which any authenticating agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any authenticating agent shall be a party, or any corporation succeeding to the corporate trust business of any authenticating agent, shall be the successor of the authenticating agent hereunder, if such successor corporation is otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the parties hereto or the authenticating agent or such successor corporation.

     Any authenticating agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any authenticating agent by giving written notice of termination to such authenticating agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any authenticating agent shall cease to be eligible under this Section, the Trustee shall promptly appoint a successor authenticating agent (which may be the Trustee), shall give written notice of such appointment to the Company and shall mail notice of such appointment to all Noteholders as the names and addresses of such Holders appear on the Note Register.

     The Company agrees to pay to the authenticating agent from time to time reasonable compensation for its services although the Company may terminate the authenticating agent, if it determines such agent’s fees to be unreasonable.

     The provisions of Section 6.02, Section 6.03, Section 6.04, Section 7.03 and this Section 15.10 shall be applicable to any authenticating agent.

     Section 15.11. Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.

     Section 15.12. USA PATRIOT Act. The parties hereto acknowledge that in accordance with Section 326 of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (as amended, modified or supplemented from time to time, the “USA PATRIOT Act”), the Trustee, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with Deutsche Bank Trust Company Americas. The parties to this Indenture agree that

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they will provide the Trustee with such information as it may request in order for the Trustee to satisfy the requirements of the USA PATRIOT Act.

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     IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above.

CADENCE DESIGN SYSTEMS, INC.
By:	/s/ Kevin S. Palatnik
	Name:	Kevin S. Palatnik
	Title:	Senior Vice President and Chief Financial Officer
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee
By:	/s/ Cynthia J. Powell
	Name:	Cynthia J. Powell
	Title:	Vice President
By:	/s/ David Contino
	Name:	David Contino
	Title:	Vice President

EXHIBIT A

     THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE ACQUIRER:

     (1) REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A “QUALIFIED INSTITUTIONAL BUYER” (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH SUCH ACCOUNT, AND

     (2) AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOT OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST HEREIN PRIOR TO THE DATE THAT IS THE LATER OF (X) ONE YEAR AFTER THE LAST ORIGINAL ISSUE DATE HEREOF OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THERETO, AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW, EXCEPT:

     (A) TO CADENCE DESIGN SYSTEMS, INC. (THE “COMPANY”) OR ANY SUBSIDIARY THEREOF, OR

     (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BECOME EFFECTIVE UNDER THE SECURITIES ACT, OR

     (C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, OR

     (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT OR ANY SIMILAR PROVISION OF THE SECURITIES ACT.

     PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH (2)(D) ABOVE, THE COMPANY AND THE TRUSTEE RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE

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SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS NOTE MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A NOTE REGISTERED, AND NO TRANSFER OF THIS NOTE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (“DTC”), A NEW YORK CORPORATION, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

CADENCE DESIGN SYSTEMS, INC.

2.625% Cash Convertible Senior Notes due 2015

No.1 $300,000,000

CUSIP No. 127387 AG3
ISIN: US127387AG30

     Cadence Design Systems, Inc., a corporation duly organized and validly existing under the laws of the State of Delaware (herein called the “Company,” which term includes any successor corporation under the Indenture referred to on the reverse hereof), for value received hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of $300,000,000 or such other principal amount as shall be set forth on Schedule I hereto on June 1, 2015.

     This Note shall bear interest at the rate of 2.625% per year from June 15, 2010 or from the most recent date to which interest had been paid or provided. Interest is payable semi-annually in arrears on each June 1 and December 1, commencing December 1, 2010, to Holders of record at the Close of Business on the preceding May 15 and November 15, respectively. Interest payable on each

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Interest Payment Date shall equal the amount of interest accrued from and including the immediately preceding Interest Payment Date (or from and including June 15, 2010 if no interest has been paid hereon) to but excluding such Interest Payment Date.

     Payment of the principal of and Interest accrued on this Note shall be made at the office or agency of the Company maintained for that purpose, or, at the option of the Holder of this Note, at the Corporate Trust Office, in such lawful money of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts; provided, however, interest may be paid by check mailed to such Holder’s address as it appears in the Note Register; provided, further, however, that, with respect to any Noteholder with an aggregate principal amount in excess of $1,000,000, at the application of such Holder in writing to the Company, interest on such Holder’s Notes shall be paid by wire transfer in immediately available funds to such Holder’s account in the United States supplied by such Holder from time to time to the Trustee and Paying Agent (if different from the Trustee) not later than the applicable record date; provided that any payment to the Depositary or its nominee shall be paid by wire transfer in immediately available funds in accordance with the wire transfer instruction supplied by the Depositary or its nominee from time to time to the Trustee and Paying Agent (if different from Trustee).

     Reference is made to the further provisions of this Note set forth on the reverse hereof, including, without limitation, provisions giving the holder of this Note the right to convert this Note into cash on the terms and subject to the limitations referred to on the reverse hereof and as more fully specified in the Indenture. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.

     This Note shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of the State of New York applicable to contracts entered into and to be performed therein.

     This Note shall not be valid or become obligatory for any purpose until (a) this Note shall have been signed in the name and on behalf of the Company by the manual or facsimile signature of any officer of the Company authorized to do so under the Indenture and (b) the certificate of authentication hereon shall have been manually signed by the Trustee or a duly authorized authenticating agent under the Indenture.

[Remainder of page intentionally left blank]

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     IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.

CADENCE DESIGN SYSTEMS, INC.
By:
	Name:
	Title:
By:
	Name:
	Title:

TRUSTEE’S CERTIFICATE OF AUTHENTICATION DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee, certifies that this is one of the Notes described in the within-named Indenture.
By:
	Name:
	Authorized Officer:

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[FORM OF REVERSE OF NOTE]

CADENCE DESIGN SYSTEMS, INC.
2.625% Cash Convertible Senior Notes due 2015

     This Note is one of a duly authorized issue of Notes of the Company, designated as its 2.625% Cash Convertible Senior Notes due 2015 (herein called the “Notes”), issued under and pursuant to an Indenture dated as of June 15, 2015 (herein called the “Indenture”), between the Company and Deutsche Bank Trust Company Americas (herein called the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Notes. Additional Notes may be issued in an unlimited aggregate principal amount, subject to certain conditions specified in the Indenture.

     In the event of a deposit or withdrawal of an interest in this Note, including an exchange, transfer, repurchase or conversion of this Note in part only, the Trustee, as custodian of the Depositary, shall make an adjustment on its records to reflect such deposit or withdrawal in accordance with the rules and procedures of the Depositary.]

     Subject to certain limitations in the Indenture, at any time when the Company is not subject to Section 13 or 15(d) of the United States Securities Exchange Act of 1934, as amended, upon the request of a Holder of a Restricted Security, the Company will promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such Holder of Restricted Securities, or to a prospective purchaser of any such Note designated by any such Holder, to the extent required to permit compliance by any such Holder with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). “Rule 144A Information” shall be such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto).]

     In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of, and accrued and unpaid Interest on, all Notes, may be declared, and upon said declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture.

     Subject to the terms and conditions of the Indenture, the Company will make all payments and deliveries in respect of the Fundamental Change Repurchase Price and the principal amount on the Maturity Date, as the case may be, to the Holder who surrenders a Note to a Paying Agent to collect such payments in respect of the Note. The Company will pay all such cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts.

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     The Indenture contains provisions permitting the Company and the Trustee in certain circumstances, without the consent of the Holders of the Notes, and in other circumstances, with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding, evidenced as in the Indenture provided, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the Holders of the Notes; provided, however, that no such supplemental indenture shall make any of the changes set forth in Section 9.02 of the Indenture, without the consent of each Holder of an outstanding Note affected thereby. It is also provided in the Indenture that, prior to any declaration accelerating the maturity of the Notes, the Holders of a majority in aggregate principal amount of the Notes at the time outstanding may on behalf of the Holders of all of the Notes waive any past default or Event of Default under the Indenture and its consequences except as provided in the Indenture. Any such consent or waiver by the Holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Note and any Notes which may be issued in exchange or substitution hereof, irrespective of whether or not any notation thereof is made upon this Note or such other Notes.

     No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal (including the Fundamental Change Repurchase Price, if applicable) of, and accrued and unpaid Interest on, this Note, at the place, at the respective times, at the rate and in the lawful money herein prescribed.

     The Notes are issuable in registered form without coupons in denominations of $2,000 principal amount and multiples of $1,000 in excess thereof. At the office or agency of the Company referred to on the face hereof, and in the manner and subject to the limitations provided in the Indenture, without payment of any service charge but with payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration or exchange of Notes, Notes may be exchanged for a like aggregate principal amount of Notes of other authorized denominations.

     The Notes are not subject to redemption through the operation of any sinking fund.

     Upon the occurrence of a Fundamental Change, the Holder has the right, at such Holder’s option, to require the Company to repurchase all of such Holder’s Notes or any portion thereof (in principal amounts of $1,000 or multiples thereof) on the Fundamental Change Repurchase Date at a price equal to 100% of the principal amount of the Notes such Holder elects to require the Company to repurchase, together with accrued and unpaid Interest to but excluding the Fundamental Change Repurchase Date. The Company shall mail to

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all Holders of record of the Notes a notice of the occurrence of a Fundamental Change and of the repurchase right arising as a result thereof by the date specified in the Indenture.

     Subject to the provisions of the Indenture, the Holder hereof has the right, at its option, on and after March 1, 2015, or earlier upon the occurrence of certain conditions specified in the Indenture and prior to the Close of Business on the second Scheduled Trading Day immediately preceding the Maturity Date, to convert any Notes or portion thereof which is $1,000 or a multiple thereof, into cash at the Conversion Rate specified in the Indenture, as adjusted from time to time as provided in the Indenture, upon surrender of this Note, together with a Notice of Conversion, a form of which is attached to the Note, as provided in the Indenture and this Note, to the office of the Conversion Agent, and duly endorsed by, or accompanied by instruments of transfer in form satisfactory to the Company duly executed by, the Holder or by his duly authorized attorney. The initial Conversion Rate shall be equivalent to 132.5205 shares for each $1,000 principal amount of Notes.

     Upon due presentment for registration of transfer of this Note at the office or agency of the Company maintained for such purpose, a new Note or Notes of authorized denominations for an equal aggregate principal amount will be issued to the transferee in exchange thereof, subject to the limitations provided in the Indenture, without charge except for any tax, assessments or other governmental charge imposed in connection therewith.

     The Company, the Trustee, any authenticating agent, any Paying Agent, any Conversion Agent and any Note Registrar may deem and treat the Holder hereof as the absolute owner of this Note (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon), for the purpose of receiving payment hereof, or on account hereof, for the conversion hereof and for all other purposes, and neither the Company nor the Trustee nor any other authenticating agent nor any Paying Agent nor any other Conversion Agent nor any Note Registrar shall be affected by any notice to the contrary. All payments made to or upon the order of such registered Holder shall, to the extent of the sum or sums paid, satisfy and discharge liability for monies payable on this Note.

     No recourse for the payment of the principal of, or accrued and unpaid Interest on, this Note, or for any claim based hereon or otherwise in respect hereof, and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or any indenture supplemental thereto or in any Note, or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, agent, officer, director or subsidiary, as such, past, present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the

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acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released.

     Terms used in this Note and defined in the Indenture are used herein as therein defined.

     Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TENANT (=tenants by the entireties), JT TEN (joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform gift to Minors Act)

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ATTACHMENT 1

[FORM OF NOTICE OF CONVERSION]

To:  CADENCE DESIGN SYSTEMS, INC.
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Conversion Agent

     The undersigned registered owner of this Note hereby exercises the option to convert this Note, or the portion hereof (which is $1,000 principal amount or a multiple thereof) below designated, into cash in accordance with the terms of the Indenture referred to in this Note, and directs that the cash deliverable upon such conversion, together with any Notes representing any unconverted principal amount hereof, be issued and delivered to the registered holder hereof unless a different name has been indicated below. If any portion of this Note not converted is to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any amount required to be paid to the undersigned on account of interest accompanies this Note.

Dated: __________________

Signature(s)

Signature(s) must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, al in accordance with the Securities Exchange Act of 1934, as amended.

Signature Guarantee

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Principal amount to be converted (if less than all): $___,000

Social Security or Other Taxpayer
Identification Number:                                 

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ATTACHMENT 2

[FORM OF FUNDAMENTAL CHANGE REPURCHASE NOTICE]

To: Cadence Design Systems, Inc.

     The undersigned registered owner of this Note hereby acknowledges receipt of a notice from Cadence Design Systems, Inc. (the “Company”) as to the occurrence of a Fundamental Change with respect to the Company and requests and instructs the Company to repay the entire principal amount of this Note, or the portion thereof (which is $1,000 principal amount or a multiple thereof) below designated, in accordance with the terms of the Indenture referred to in this Note, to the registered holder hereof.

Dated: __________________

Signature(s)

Social Security or Other Taxpayer Identification Number Principal amount to be repaid (if less than all): $_,000

NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever.

ATTACHMENT 3

[FORM OF ASSIGNMENT AND TRANSFER]

     For value received ________________________ hereby sell(s) assign(s) and transfer(s) unto ___________________________ (Please insert social security or other Taxpayer Identification Number of assignee) the within Note, and hereby irrevocably constitutes and appoints _________________________________ attorney to transfer said Note on the books of the Company, with full power of substitution in the premises.

     In connection with any transfer of the Note prior to the Resale Restriction Termination Date, as defined in the Indenture governing such Note, the undersigned confirms that such Note is being transferred:

o  To Cadence Design Systems, Inc. or a subsidiary thereof; or

o  Pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or

o   Pursuant to and in compliance with Rule 144 under the Securities Act of 1933, as amended; or

o  Pursuant to a Registration Statement which has become effective under the Securities Act of 1933, as amended, and which continues to be effective at the time of transfer;

o  Pursuant to another available exemption from registration under the Securities Act of 1933, as amended.

and unless the Note has been transferred to Cadence Design Systems, Inc. or a subsidiary thereof, the undersigned confirms that such Note is not being transferred to an “affiliate” of the Company as defined in Rule 144 under the Securities Act of 1933, as amended.

     Unless one of the boxes is checked, the Note Registrar will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered holder thereof.

Dated: _____________________

Signature(s)

Signature(s) must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, al in accordance with the Securities Exchange Act of 1934, as amended.

Signature Guarantee

NOTICE: The signature on the Conversion Notice, the Option to Elect Redemption Upon a Fundamental Change, or the Assignment must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatsoever.

Schedule l

CADENCE DESIGN SYSTEMS, INC.
2.625% Cash Convertible Senior Notes Due 2015

No. 1

		Notation Explaining	Authorized Signature
		Principal Amount	of Trustee or
Date	Principal Amount	Recorded	Custodian

EX-10.01

Exhibit 10.01

To:	Cadence Design Systems, Inc.
	2655 Seely Avenue, Building 5
	San Jose, CA 95134
	Attention: Office of the General Counsel
From:	JPMorgan Chase Bank, National Association
	P.O. Box 161
	60 Victoria Embankment
	London EC4Y 0JP
	England
Re:	Base Convertible Bond Hedge Transaction
Date:	June 9, 2010

Dear Sir(s):

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

     1. This Confirmation is subject to, and incorporates, the definitions and provisions of the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc. (“ISDA”). Certain defined terms used herein have the meanings assigned to them in the Indenture to be dated as of the closing date of the initial issuance of the Convertible Securities described below between Counterparty and Deutsche Bank Trust Company Americas, as trustee (the “Indenture”), relating to the USD 300,000,000 principal amount of 2.625% cash convertible senior notes due June 1, 2015 (the “Convertible Securities”). In the event of any inconsistency between the terms defined in the Indenture and this Confirmation, this Confirmation shall govern. The parties acknowledge that this Confirmation is entered into on the date hereof with the understanding that (i) definitions set forth in the Indenture which are also defined herein by reference to the Indenture and (ii) sections of the Indenture that are referred to herein will conform to the descriptions thereof in the Offering Memorandum dated June 9, 2010 (the “Offering Memorandum”). If any such definitions in the Indenture or any such sections of the Indenture differ from the descriptions thereof in the Offering Memorandum, the descriptions thereof in the Offering Memorandum will govern for purposes of this Confirmation. The parties further acknowledge that the Indenture section numbers used herein are based on the draft of the Indenture last reviewed by Dealer as of the date of this Confirmation, and if any such section numbers are changed in the Indenture as executed, the parties will amend this Confirmation in good faith to preserve the intent of the parties. Subject to the foregoing, references to the Indenture herein are references to the Indenture as in effect on the date of its execution, and if the Indenture is amended, modified or supplemented following its execution, any such amendment, modification or supplement will be

JPMorgan Chase Bank, National Association
Organised under the laws of the United States as a National Banking Association
Main Office 1111 Polaris Parkway, Columbus, Ohio 43271
Registered as a branch in England & Wales branch No. BR000746
Registered Branch Office 125 London Wall, London EC2Y 5AJ
Authorised and regulated by the Financial Services Authority

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disregarded for purposes of this Confirmation (other than for purposes of Section 8(b) below) unless the parties agree otherwise in writing. The Transaction is subject to early unwind if the closing of the Convertible Securities is not consummated for any reason, as set forth below in Section 8(h).

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

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

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

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

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

General Terms:
Trade Date:	June 9, 2010
Effective Date:	The closing date of the initial issuance of the Convertible Securities.
Option Style:	Modified American, as described under “Procedures for Exercise” below.
Option Type:	Call
Seller:	Dealer
Buyer:	Counterparty
Shares:	The Common Stock of Counterparty, par value USD 0.01 per share (Ticker Symbol: “CDNS”).
Number of Options:	The number of Convertible Securities in denominations of USD 1,000 principal amount issued by Counterparty on the closing date for the initial issuance of the Convertible Securities excluding any Convertible Securities purchased by the Initial Purchasers (as defined in the Purchase Agreement) at their option pursuant to Section 2 of the Purchase

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	Agreement (as defined below). For the avoidance of doubt, the Number of Options outstanding shall be reduced by each exercise of Options hereunder.
Applicable Percentage:	60%
Option Entitlement:	As of any date, a number of Shares per Option equal to the “Conversion Rate” (as defined in the Indenture), but without regard to any adjustments to the Conversion Rate as set forth in Section 13.02 of the Indenture (a “Make-Whole Fundamental Change Adjustment”) or a discretionary adjustment as set forth in Section 13.04(g) of the Indenture (a “Discretionary Adjustment”).
Strike Price:	As of any date, an amount in USD, rounded to the nearest cent (with 0.5 cents being rounded upwards), equal to USD 1,000 divided by the Option Entitlement as of such date.
Number of Shares:	As of any date, the product of the Number of Options, the Option Entitlement and the Applicable Percentage.
Premium:	USD 38,939,760.00 (Premium per Option USD 129.80).
Premium Payment Date:	The Effective Date
Exchange:	NASDAQ Global Select Market
Related Exchange:	All Exchanges
Procedures for Exercise:
Exercise Dates:	Each Conversion Date.
Conversion Date:	Each “Conversion Date” (as defined in the Indenture) occurring during the Exercise Period for Convertible Securities, excluding Convertible Securities (“Exchanged Convertible Securities”) (i) with respect to which Counterparty has elected the “Exchange in Lieu of Conversion” option to designate a financial institution to deliver the consideration due upon any conversion of any Convertible Securities in exchange for such Convertible Securities and (ii) that have been accepted by the designated financial institution pursuant to Section 13.09 of the Indenture (such Convertible Securities, the “Relevant Convertible Securities” for such Conversion Date).
	If such designated financial institution fails to deliver the consideration due upon such conversion and, as a result, Counterparty is required to deliver such consideration pursuant to Section 13.09(e) of the Indenture, Counterparty shall, promptly following such failure, notify Dealer in writing of such failure and the number of Exchanged Convertible Securities affected by such failure (such notice, a “Failed Exchange Notice”). The receipt by Dealer of a

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	Failed Exchange Notice shall constitute an Additional Termination Event in respect of which Dealer shall designate an Exchange Business Day within a commercially reasonable period of time following receipt of such Failed Exchange Notice (which in no event shall be earlier than the related settlement date for the Exchanged Convertible Securities) as an Early Termination Date with respect to a portion of the Transaction corresponding to a number of Options (the “Cancelled Options”) equal to the lesser of (A) the number of such Exchanged Convertible Securities specified in such Failed Exchange Notice and (B) the Number of Options as of the date Dealer designates such Early Termination Date and, as of such date, the Number of Options shall be reduced by the number of Cancelled Options. Any payment hereunder with respect to such termination shall be calculated pursuant to Section 6 of the Agreement as if (1) an Early Termination Date had been designated in respect of a Transaction having terms identical to this Transaction and a Number of Options equal to the number of Cancelled Options, (2) Counterparty were the sole Affected Party with respect to such Additional Termination Event and (3) the terminated portion of the Transaction were the sole Affected Transaction.
Exercise Period:	The period from and excluding the Effective Date to and including the Expiration Date.
Expiration Date:	The earlier of (i) the last day on which any Convertible Securities remain outstanding and (ii) the “Maturity Date” (as defined in the Indenture).
Automatic Exercise on Conversion Dates:	Applicable; and means that on each Conversion Date, a number of Options equal to the number of Relevant Convertible Securities for such Conversion Date in denominations of USD 1,000 principal amount shall be automatically exercised, subject to “Notice of Exercise” below.
Notice Deadline:	In respect of any exercise of Options hereunder on any Conversion Date, 5:00 P.M., New York City time, on the Exchange Business Day prior to the first “Scheduled Trading Day” of the “Observation Period” (each as defined in the Indenture) with respect to the Relevant Convertible Securities for such Conversion Date; provided that in the case of any exercise of Options hereunder in connection with the conversion of any Relevant Convertible Securities on any Conversion Date occurring during the period beginning on, and including, March 1, 2015 and ending on, and including, the second “Scheduled Trading Day” (as defined in the Indenture) immediately preceding the Maturity Date

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	(such period, the “Final Convertibility Period”), the Notice Deadline shall be 5:30 P.M., New York City time, on the second “Scheduled Trading Day” immediately preceding the Maturity Date.
Notice of Exercise:	Notwithstanding anything to the contrary in the Equity Definitions, Dealer shall have no obligation to make any payment in respect of any exercise of Options hereunder unless Counterparty notifies Dealer in writing prior to the Notice Deadline in respect of such exercise of (i) the number of Options being exercised on such Exercise Date, (ii) the scheduled settlement date under the Indenture for the Relevant Convertible Securities for the Conversion Date corresponding to such Exercise Date, and (iii) the first “Scheduled Trading Day” (as defined in the Indenture) of the Observation Period; provided that, notwithstanding the foregoing, such notice (and the related Automatic Exercise of Options) shall be effective if given after the Notice Deadline but prior to 5:00 P.M., New York City time, on the fifth Exchange Business Day of such Observation Period, in which event the Calculation Agent shall have the right to adjust the Convertible Obligation (as defined below) as appropriate to reflect the additional costs (including, but not limited to, hedging mismatches and market losses) and reasonable expenses incurred by Dealer in connection with its hedging activities (including the unwinding of any hedge position) as a result of its not having received such notice prior to the Notice Deadline; provided, further, that in the case of any exercise of Options hereunder in connection with the conversion of any Relevant Convertible Securities on any Conversion Date occurring during the Final Convertibility Period, the contents of such notice shall be as set forth in clause (i) above. For the avoidance of doubt and subject to the first proviso in the immediately preceding sentence, if Counterparty fails to give such notice when due in respect of any exercise of Options hereunder, Dealer’s obligation to make any payment in respect of such exercise shall be permanently extinguished, and late notice shall not cure such failure.
Dealer’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of Giving Notice:	As specified in Section 6(b) below.
Settlement Terms:
Settlement Method:	Cash Settlement.
Settlement Date:	In respect of an Exercise Date occurring on a Conversion Date, the settlement date for the cash to

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	be paid in respect of the Relevant Convertible Securities converted on such Conversion Date pursuant to Section 13.03(a) or 13.02(b) of the Indenture, as the case may be; provided that the Settlement Date will not be prior to the Exchange Business Day immediately following the date Counterparty provides the Notice of Delivery Obligation prior to 5:00 P.M., New York City time.
Delivery Obligation:	In lieu of the obligations set forth in Section 8.1 of the Equity Definitions, and subject to “Notice of Exercise” above, in respect of an Exercise Date occurring on a Conversion Date, Dealer will pay to Counterparty, on the related Settlement Date, an amount of cash in USD equal to the product of (i) the Applicable Percentage and (ii) the aggregate amount of cash, if any, in excess of USD 1,000 per Convertible Security (in denominations of USD 1,000) that Counterparty would be obligated to pay to holder(s) of the Relevant Convertible Securities for such Conversion Date pursuant to Section 13.03(a) of the Indenture (the “Convertible Obligation”); provided that such obligation shall be determined excluding any cash that Counterparty is obligated to pay to holder(s) of the Relevant Convertible Securities as a result of any adjustments to the Conversion Rate pursuant to a Make-Whole Fundamental Change Adjustment or a Discretionary Adjustment and any interest payment that Counterparty is obligated to deliver to holder(s) of the Relevant Convertible Securities for such Conversion Date.
Notice of Delivery Obligation:	No later than 5:00 P.M., New York City time, on the Exchange Business Day immediately following the last day of the relevant Observation Period, Counterparty shall give Dealer notice of the final amount of cash comprising the Convertible Obligation; provided that, with respect to any Exercise Date occurring during the Final Convertibility Period, Counterparty may provide Dealer with a single notice of the aggregate amount of cash comprising the Convertible Obligations for all Exercise Dates occurring in such period (it being understood, for the avoidance of doubt, that the requirement of Counterparty to deliver such notice shall not limit Counterparty’s obligations with respect to Notice of Exercise).
Adjustments:
Method of Adjustment:	Notwithstanding Section 11.2 of the Equity Definitions (and, for the avoidance of doubt, in lieu of any adjustments pursuant to such section), upon the occurrence of any event or condition set forth in Section 13.05 or sub-sections (a) through (e) of Section 13.04 of the Indenture (each an “Adjustment

6

	Event”) and the Calculation Agent receiving notice of the adjustments to be made to the terms of the Indenture and the Convertible Securities in respect of such Adjustment Event pursuant to the succeeding sentence, the Calculation Agent shall make a corresponding adjustment (in respect of any such adjustment under the Indenture) to the terms relevant to the exercise, settlement or payment of the Transaction; provided that, in the case of any adjustment to the terms of the Indenture and the Convertible Securities that involves an exercise of discretion by Counterparty or its board of directors (including, without limitation, pursuant to Section 13.05 of the Indenture or in connection with any proportional adjustment or the determination of the fair value of any securities, property, rights or other assets), then in each such case, the Counterparty agrees to exercise such discretion in good faith and in a commercially reasonable manner and to promptly provide the Calculation Agent with any additional information it reasonably requests (in addition to any information required to be provided pursuant to the succeeding sentence) about the Counterparty’s calculations and methodology for such adjustment. Promptly upon the occurrence of any Adjustment Event, Counterparty shall notify the Calculation Agent of such Adjustment Event; and once the adjustments to be made to the terms of the Indenture and the Convertible Securities in respect of such Adjustment Event have been determined, Counterparty shall promptly (and in any event within five Exchange Business Days after such determination) notify the Calculation Agent in writing of the details of such adjustments.
Extraordinary Events:
Merger Events:	Notwithstanding Section 12.1(b) of the Equity Definitions, a “Merger Event” means the occurrence of any event or condition set forth in Section 10.01 or 13.06 of the Indenture.
Consequences of Merger Events:	Notwithstanding Section 12.2 of the Equity Definitions (and, for the avoidance of doubt, in lieu of any adjustments or other consequences pursuant to such section), upon the occurrence of a Merger Event, the Calculation Agent shall make a corresponding adjustment (in respect of any adjustment on account of such Merger Event under the Indenture) to the terms relevant to the exercise, settlement or payment of the Transaction; provided that such adjustment shall be made without regard to any adjustment to the Conversion Rate pursuant to a Make-Whole Fundamental Change Adjustment or a Discretionary Adjustment; and provided further that if, with respect to a Merger Event, the consideration for the Shares includes (or, at the option of a holder

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	of Shares, may include) shares (or depositary receipts with respect to shares) of an entity or person not organized under the laws of the United States, any State thereof or the District of Columbia, Cancellation and Payment (Calculation Agent Determination) shall apply.
Notice of Merger Consideration and Consequences:	Upon the occurrence of a Merger Event that causes the Shares to be converted into the right to receive more than a single type of consideration (determined based in part upon any form of stockholder election), Counterparty shall reasonably promptly (but in any event on or prior to the relevant merger date) notify the Calculation Agent of (i) the type and amount of consideration that a holder of Shares would have been entitled to in the case of reclassifications, consolidations, mergers, sales or transfers of assets or other transactions that cause Shares to be converted into the right to receive more than a single type of consideration, (ii) the weighted average of the types and amounts of consideration to be received by the holders of Shares that affirmatively make such an election, and (iii) the details of the adjustment to be made under the Indenture in respect of such Merger Event.
Nationalization, Insolvency or Delisting:	Cancellation and Payment (Calculation Agent Determination); provided that (i) Section 12.6(a)(iii) of the Equity Definitions shall be amended to delete, in the definition of the term “Delisting” the parenthetical “(or will cease)” and (ii) in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it will also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.
Additional Disruption Events:
(a) Change in Law:	Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof with the phrase “or announcement or statement of the interpretation” and (ii) replacing the word “Shares” with the phrase “Hedge Positions” in clause (X) thereof.
(b) Failure to Deliver:	Applicable
(c) Insolvency Filing:	Applicable

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(d) Hedging Disruption:	Applicable; provided that Section 12.9(a)(v) of the Equity Definitions is hereby amended by inserting the following proviso at the end thereof: “provided that such inability described in clause (A) or (B) shall not constitute a “Hedging Disruption” unless (x) such inability does not result from factors particular to Hedging Party (such as Hedging Party”s creditworthiness or financial position, or particular actions or transactions undertaken by the Hedging Party unrelated to the hedging of the Transaction) and (y) such inability will result in continued performance by the Hedging Party under the Transaction being commercially unreasonable or commercially impracticable”.
Hedging Party:	Dealer
Determining Party:	Dealer for all applicable Additional Disruption Events
Non-Reliance:	Applicable
Agreements and Acknowledgments Regarding Hedging Activities:	Applicable
Additional Acknowledgments:	Applicable
3. Calculation Agent:	Dealer. All determinations made by the Calculation Agent shall be made in good faith and in a commercially reasonable manner. Following any determination or calculation by the Calculation Agent hereunder, upon a written request by Counterparty, the Calculation Agent will provide to Counterparty by e-mail to the e-mail address provided by Counterparty in such written request a report (in a commonly used file format for the storage and manipulation of financial data) displaying in reasonable detail the basis for such determination or calculation, including, where applicable, a description of the methodology and data applied, it being understood that the Calculation Agent shall not be obligated to disclose any proprietary models used by it for such determination or calculation.

     4. Account Details:

Dealer Payment Instructions:

JPMORGAN CHASE BANK, N.A.
Beneficiary JPMorgan Chase Bank, N.A. New York
Ref: Derivatives

Counterparty Payment Instructions:

To be provided by Counterparty.

     5. Offices:

The Office of Dealer for the Transaction is: London

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JPMorgan Chase Bank, National Association
London Branch
P.O. Box 161
60 Victoria Embankment
London EC4Y 0JP
England

The Office of Counterparty for the Transaction is:

Inapplicable. Counterparty is not a Multibranch Party.

     6. Notices: For purposes of this Confirmation:

(a) Address for notices or communications to Counterparty:

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, California 95134
Attn:	Office of the General Counsel
Facsimile:	(408) 904-6946

(b) Address for notices or communications to Dealer:

To:	JPMorgan Chase Bank, National Association 4 New York Plaza, Floor 18 New York, NY 10004-2413
Attn:	Mariusz Kwasnik Operations Analyst, EDG Corporate Marketing

     7. Representations, Warranties and Agreements:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     8. Other Provisions:

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

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

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

     Counterparty shall promptly notify Dealer in writing of any repurchase and cancellation of Convertible Securities and the number of Convertible Securities so repurchased and cancelled (any such notice, a “Convertible Securities Repurchase Notice”). Notwithstanding anything to the contrary in this Confirmation, the receipt by Dealer from Counterparty of any Convertible Securities Repurchase Notice shall constitute an Additional Termination Event as provided in this paragraph. Upon receipt of any such Convertible Securities Repurchase Notice, Dealer shall designate in good faith a Scheduled Trading Day that is within a commercially reasonable period of time following such Additional Termination Event as an Early Termination Date with respect to the portion of the Transaction corresponding to a number of Options (the “Repurchase Options”) equal to the lesser of (A) the number of Convertible Securities

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specified in such Convertible Securities Repurchase Notice and (B) the Number of Options as of the date Dealer designates such Early Termination Date and, as of such date, the Number of Options shall be reduced by the number of Repurchase Options. Any payment hereunder with respect to such termination shall be calculated pursuant to Section 6 of the Agreement as if (1) an Early Termination Date had been designated in respect of a Transaction having terms identical to this Transaction and a Number of Options equal to the number of Repurchase Options, (2) Counterparty were the sole Affected Party with respect to such Additional Termination Event and (3) the terminated portion of the Transaction were the sole Affected Transaction.

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

     (d) Repurchase and Conversion Rate Adjustment Notices. Counterparty shall, on (or prior to) any day on which Counterparty effects any repurchase of Shares or consummates or otherwise engages in any transaction or event (a “Conversion Rate Adjustment Event”) that would lead to an increase in the Conversion Rate, give Dealer a written notice of such repurchase or Conversion Rate Adjustment Event (a “Repurchase Notice”) on such day if, the number of outstanding Shares as determined on such day is (i) less than 257,769,000 (in the case of first such notice) or (ii) thereafter more than 11,410,000 less than the number of Shares included in the immediately preceding Repurchase Notice. In the event that Counterparty fails to provide Dealer with a Repurchase Notice on the day and in the manner specified in this Section 8(d) then, to the extent permitted by applicable law, Counterparty agrees to indemnify and hold harmless Dealer, its affiliates and their respective directors, officers, employees, agents and controlling persons (Dealer and each such person being an “Indemnified Party”) from and against any and all losses,

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

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

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shall use its commercially reasonable efforts to consult with Counterparty during the Transfer Time Period regarding potential transfers or assignments to third parties prior to so designating an Early Termination Date. In the event that Dealer so designates an Early Termination Date with respect to a portion of the Transaction, a payment shall be made pursuant to Section 6 of the Agreement as if (i) an Early Termination Date had been designated in respect of a Transaction having terms identical to the Terminated Portion of the Transaction, (ii) Counterparty were the sole Affected Party with respect to such partial termination, (iii) such portion of the Transaction were the only Terminated Transaction and (iv) Dealer were the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement and to determine the amount payable pursuant to Section 6(e) of the Agreement. The “Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the number of Shares that Dealer and any of its affiliates subject to aggregation with Dealer for purposes of the “beneficial ownership” test under Section 13 of the Exchange Act and all persons who may form a “group” (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) with Dealer (collectively, “Dealer Group”) “beneficially own” (within the meaning of Section 13 of the Exchange Act) without duplication on such day and (B) the denominator of which is the number of Shares outstanding on such day. The “Option Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the sum of (1) the product of the Applicable Percentage, the Number of Options and the Option Entitlement and (2) the aggregate number of Shares underlying any other call option transaction sold by Dealer to Counterparty and (B) the denominator of which is the number of Shares outstanding on such day.

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

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

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

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

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

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

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

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

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

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

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

     (h) Early Unwind. In the event the sale by Counterparty of the Convertible Securities is not consummated pursuant to the Purchase Agreement for any reason by the close of business in New York on the Premium Payment Date (or such later date as agreed upon by the parties, which in no event shall be later than June 21, 2010) (the Premium Payment Date or such later date being the “Early Unwind Date”), the Transaction shall automatically terminate (the “Early Unwind”) on the Early Unwind Date and the Transaction and all of the respective rights and obligations of Dealer and Counterparty hereunder shall be cancelled and terminated and Counterparty shall pay to Dealer, other than in cases involving a breach of the Purchase Agreement by Dealer or any affiliate of Dealer, an amount in cash equal to the aggregate amount of costs and expenses relating to the unwinding of Dealer’s hedging activities in respect of the Transaction (including market losses incurred in reselling any Shares purchased by Dealer or its affiliates in connection with such hedging activities, unless Counterparty agrees to purchase any such Shares at the cost at which Dealer purchased such Shares). Following such termination, cancellation and payment, each party shall be released and discharged by the other party from, and agrees not to make any claim against the other party with respect to, any obligations or liabilities of either party arising out of, and to be performed in connection with, the Transaction either prior to or after the Early Unwind Date. Dealer and Counterparty represent and acknowledge to the other that upon an Early Unwind and following the payment referred to above, all obligations with respect to the Transaction shall be deemed fully and finally discharged.

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

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

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

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

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

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

     (o) Role of Agent. Each party agrees and acknowledges that (i) J.P. Morgan Securities Inc., an affiliate of Dealer (“JPMSI”), has acted solely as agent and not as principal with respect to this Transaction and (ii) JPMSI has no obligation or liability, by way of guaranty, endorsement or otherwise, in any manner in respect of this Transaction (including, if applicable, in respect of the settlement thereof). Each party agrees it will look solely to the other party (or any guarantor in respect thereof) for performance of such other party’s obligations under this Transaction.

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

Yours faithfully, J.P. MORGAN SECURITIES INC., as agent for JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
By:	/s/ Jason Wood
	Name:	Jason Wood
	Title:	Managing Director

Agreed and Accepted By: CADENCE DESIGN SYSTEMS, INC.
By:	/s/ Kevin S. Palatnik
	Name:	Kevin S. Palatnik
	Title:	Sr. Vice President & Chief Financial Officer

JPMorgan Chase Bank, National Association
Organised under the laws of the United States as a National Banking Association
Main Office 1111 Polaris Parkway, Columbus, Ohio 43271
Registered as a branch in England & Wales branch No. BR000746
Registered Branch Office 125 London Wall, London EC2Y 5AJ
Authorised and regulated by the Financial Services Authority

Signature Page to Base Bond Hedge
Confirmation

EX-10.02

Exhibit 10.02

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, CA 95134 Attention: Office of the General Counsel
From:	Morgan Stanley & Co. International plc c/o Morgan Stanley & Co. Inc. 1585 Broadway, 5th Floor New York, NY 10036
Re:	Base Convertible Bond Hedge Transaction
Ref. No:	6537190
Date:	June 9, 2010

Dear Sir(s):

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

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

     Each party is hereby advised, and each such party acknowledges, that the other party has engaged in, or refrained from engaging in, substantial financial transactions and has taken other material actions in

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reliance upon the parties’ entry into the Transaction to which this Confirmation relates on the terms and conditions set forth below.

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

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

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

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

General Terms:
Trade Date:	June 9, 2010
Effective Date:	The closing date of the initial issuance of the Convertible Securities.
Option Style:	Modified American, as described under “Procedures for Exercise” below.
Option Type:	Call
Seller:	Dealer
Buyer:	Counterparty
Shares:	The Common Stock of Counterparty, par value USD 0.01 per share (Ticker Symbol: “CDNS”).
Number of Options:	The number of Convertible Securities in denominations of USD 1,000 principal amount issued by Counterparty on the closing date for the initial issuance of the Convertible Securities excluding any Convertible Securities purchased by the Initial Purchasers (as defined in the Purchase Agreement) at their option pursuant to Section 2 of the Purchase Agreement (as defined below). For the avoidance of doubt, the Number of Options outstanding shall be reduced by each exercise of Options hereunder.
Applicable Percentage:	10%
Option Entitlement:	As of any date, a number of Shares per Option equal

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	to the “Conversion Rate” (as defined in the Indenture), but without regard to any adjustments to the Conversion Rate as set forth in Section 13.02 of the Indenture (a “Make-Whole Fundamental Change Adjustment”) or a discretionary adjustment as set forth in Section 13.04(g) of the Indenture (a “Discretionary Adjustment”).
Strike Price:	As of any date, an amount in USD, rounded to the nearest cent (with 0.5 cents being rounded upwards), equal to USD 1,000 divided by the Option Entitlement as of such date.
Number of Shares:	As of any date, the product of the Number of Options, the Option Entitlement and the Applicable Percentage.
Premium:	USD 6,489,960.00 (Premium per Option USD 21.63).
Premium Payment Date:	The Effective Date
Exchange:	NASDAQ Global Select Market
Related Exchange:	All Exchanges
Procedures for Exercise:
Exercise Dates:	Each Conversion Date.
Conversion Date:	Each “Conversion Date” (as defined in the Indenture) occurring during the Exercise Period for Convertible Securities, excluding Convertible Securities (“Exchanged Convertible Securities”) (i) with respect to which Counterparty has elected the “Exchange in Lieu of Conversion” option to designate a financial institution to deliver the consideration due upon any conversion of any Convertible Securities in exchange for such Convertible Securities and (ii) that have been accepted by the designated financial institution pursuant to Section 13.09 of the Indenture (such Convertible Securities, the “Relevant Convertible Securities” for such Conversion Date).
	If such designated financial institution fails to deliver the consideration due upon such conversion and, as a result, Counterparty is required to deliver such consideration pursuant to Section 13.09(e) of the Indenture, Counterparty shall, promptly following such failure, notify Dealer in writing of such failure and the number of Exchanged Convertible Securities affected by such failure (such notice, a “Failed Exchange Notice”). The receipt by Dealer of a Failed Exchange Notice shall constitute an Additional Termination Event in respect of which Dealer shall designate an Exchange Business Day within a commercially reasonable period of time following receipt of such Failed Exchange Notice (which in no event shall be earlier than the related

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	settlement date for the Exchanged Convertible Securities) as an Early Termination Date with respect to a portion of the Transaction corresponding to a number of Options (the “Cancelled Options”) equal to the lesser of (A) the number of such Exchanged Convertible Securities specified in such Failed Exchange Notice and (B) the Number of Options as of the date Dealer designates such Early Termination Date and, as of such date, the Number of Options shall be reduced by the number of Cancelled Options. Any payment hereunder with respect to such termination shall be calculated pursuant to Section 6 of the Agreement as if (1) an Early Termination Date had been designated in respect of a Transaction having terms identical to this Transaction and a Number of Options equal to the number of Cancelled Options, (2) Counterparty were the sole Affected Party with respect to such Additional Termination Event and (3) the terminated portion of the Transaction were the sole Affected Transaction.
Exercise Period:	The period from and excluding the Effective Date to and including the Expiration Date.
Expiration Date:	The earlier of (i) the last day on which any Convertible Securities remain outstanding and (ii) the “Maturity Date” (as defined in the Indenture).
Automatic Exercise on Conversion Dates:	Applicable; and means that on each Conversion Date, a number of Options equal to the number of Relevant Convertible Securities for such Conversion Date in denominations of USD 1,000 principal amount shall be automatically exercised, subject to “Notice of Exercise” below.
Notice Deadline:	In respect of any exercise of Options hereunder on any Conversion Date, 5:00 P.M., New York City time, on the Exchange Business Day prior to the first “Scheduled Trading Day” of the “Observation Period” (each as defined in the Indenture) with respect to the Relevant Convertible Securities for such Conversion Date; provided that in the case of any exercise of Options hereunder in connection with the conversion of any Relevant Convertible Securities on any Conversion Date occurring during the period beginning on, and including, March 1, 2015 and ending on, and including, the second “Scheduled Trading Day” (as defined in the Indenture) immediately preceding the Maturity Date (such period, the “Final Convertibility Period”), the Notice Deadline shall be 5:30 P.M., New York City time, on the second “Scheduled Trading Day” immediately preceding the Maturity Date.

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Notice of Exercise:	Notwithstanding anything to the contrary in the Equity Definitions, Dealer shall have no obligation to make any payment in respect of any exercise of Options hereunder unless Counterparty notifies Dealer in writing prior to the Notice Deadline in respect of such exercise of (i) the number of Options being exercised on such Exercise Date, (ii) the scheduled settlement date under the Indenture for the Relevant Convertible Securities for the Conversion Date corresponding to such Exercise Date, and (iii) the first “Scheduled Trading Day” (as defined in the Indenture) of the Observation Period; provided that, notwithstanding the foregoing, such notice (and the related Automatic Exercise of Options) shall be effective if given after the Notice Deadline but prior to 5:00 P.M., New York City time, on the fifth Exchange Business Day of such Observation Period, in which event the Calculation Agent shall have the right to adjust the Convertible Obligation (as defined below) as appropriate to reflect the additional costs (including, but not limited to, hedging mismatches and market losses) and reasonable expenses incurred by Dealer in connection with its hedging activities (including the unwinding of any hedge position) as a result of its not having received such notice prior to the Notice Deadline; provided, further, that in the case of any exercise of Options hereunder in connection with the conversion of any Relevant Convertible Securities on any Conversion Date occurring during the Final Convertibility Period, the contents of such notice shall be as set forth in clause (i) above. For the avoidance of doubt and subject to the first proviso in the immediately preceding sentence, if Counterparty fails to give such notice when due in respect of any exercise of Options hereunder, Dealer’s obligation to make any payment in respect of such exercise shall be permanently extinguished, and late notice shall not cure such failure.
Dealer’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of Giving Notice:	As specified in Section 6(b) below.
Settlement Terms:
Settlement Method:	Cash Settlement.
Settlement Date:	In respect of an Exercise Date occurring on a Conversion Date, the settlement date for the cash to be paid in respect of the Relevant Convertible Securities converted on such Conversion Date pursuant to Section 13.03(a) or 13.02(b) of the Indenture, as the case may be; provided that the Settlement Date will not be prior to the Exchange

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	Business Day immediately following the date Counterparty provides the Notice of Delivery Obligation prior to 5:00 P.M., New York City time.
Delivery Obligation:	In lieu of the obligations set forth in Section 8.1 of the Equity Definitions, and subject to “Notice of Exercise” above, in respect of an Exercise Date occurring on a Conversion Date, Dealer will pay to Counterparty, on the related Settlement Date, an amount of cash in USD equal to the product of (i) the Applicable Percentage and (ii) the aggregate amount of cash, if any, in excess of USD 1,000 per Convertible Security (in denominations of USD 1,000) that Counterparty would be obligated to pay to holder(s) of the Relevant Convertible Securities for such Conversion Date pursuant to Section 13.03(a) of the Indenture (the “Convertible Obligation”); provided that such obligation shall be determined excluding any cash that Counterparty is obligated to pay to holder(s) of the Relevant Convertible Securities as a result of any adjustments to the Conversion Rate pursuant to a Make-Whole Fundamental Change Adjustment or a Discretionary Adjustment and any interest payment that Counterparty is obligated to deliver to holder(s) of the Relevant Convertible Securities for such Conversion Date.
Notice of Delivery Obligation:	No later than 5:00 P.M., New York City time, on the Exchange Business Day immediately following the last day of the relevant Observation Period, Counterparty shall give Dealer notice of the final amount of cash comprising the Convertible Obligation; provided that, with respect to any Exercise Date occurring during the Final Convertibility Period, Counterparty may provide Dealer with a single notice of the aggregate amount of cash comprising the Convertible Obligations for all Exercise Dates occurring in such period (it being understood, for the avoidance of doubt, that the requirement of Counterparty to deliver such notice shall not limit Counterparty’s obligations with respect to Notice of Exercise).
Adjustments:
Method of Adjustment:	Notwithstanding Section 11.2 of the Equity Definitions (and, for the avoidance of doubt, in lieu of any adjustments pursuant to such section), upon the occurrence of any event or condition set forth in Section 13.05 or sub-sections (a) through (e) of Section 13.04 of the Indenture (each an “Adjustment Event”) and the Calculation Agent receiving notice of the adjustments to be made to the terms of the Indenture and the Convertible Securities in respect of such Adjustment Event pursuant to the succeeding sentence, the Calculation Agent shall make a

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	corresponding adjustment (in respect of any such adjustment under the Indenture) to the terms relevant to the exercise, settlement or payment of the Transaction; provided that, in the case of any adjustment to the terms of the Indenture and the Convertible Securities that involves an exercise of discretion by Counterparty or its board of directors (including, without limitation, pursuant to Section 13.05 of the Indenture or in connection with any proportional adjustment or the determination of the fair value of any securities, property, rights or other assets), then in each such case, the Counterparty agrees to exercise such discretion in good faith and in a commercially reasonable manner and to promptly provide the Calculation Agent with any additional information it reasonably requests (in addition to any information required to be provided pursuant to the succeeding sentence) about the Counterparty’s calculations and methodology for such adjustment. Promptly upon the occurrence of any Adjustment Event, Counterparty shall notify the Calculation Agent of such Adjustment Event; and once the adjustments to be made to the terms of the Indenture and the Convertible Securities in respect of such Adjustment Event have been determined, Counterparty shall promptly (and in any event within five Exchange Business Days after such determination) notify the Calculation Agent in writing of the details of such adjustments.
Extraordinary Events:
Merger Events:	Notwithstanding Section 12.1(b) of the Equity Definitions, a “Merger Event” means the occurrence of any event or condition set forth in Section 10.01 or 13.06 of the Indenture.
Consequences of Merger Events:	Notwithstanding Section 12.2 of the Equity Definitions (and, for the avoidance of doubt, in lieu of any adjustments or other consequences pursuant to such section), upon the occurrence of a Merger Event, the Calculation Agent shall make a corresponding adjustment (in respect of any adjustment on account of such Merger Event under the Indenture) to the terms relevant to the exercise, settlement or payment of the Transaction; provided that such adjustment shall be made without regard to any adjustment to the Conversion Rate pursuant to a Make-Whole Fundamental Change Adjustment or a Discretionary Adjustment; and provided further that if, with respect to a Merger Event, the consideration for the Shares includes (or, at the option of a holder of Shares, may include) shares (or depositary receipts with respect to shares) of an entity or person not organized under the laws of the United States, any State thereof or the District of Columbia, Cancellation and Payment (Calculation Agent

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	Determination) shall apply.
Notice of Merger Consideration and Consequences:	Upon the occurrence of a Merger Event that causes the Shares to be converted into the right to receive more than a single type of consideration (determined based in part upon any form of stockholder election), Counterparty shall reasonably promptly (but in any event on or prior to the relevant merger date) notify the Calculation Agent of (i) the type and amount of consideration that a holder of Shares would have been entitled to in the case of reclassifications, consolidations, mergers, sales or transfers of assets or other transactions that cause Shares to be converted into the right to receive more than a single type of consideration, (ii) the weighted average of the types and amounts of consideration to be received by the holders of Shares that affirmatively make such an election, and (iii) the details of the adjustment to be made under the Indenture in respect of such Merger Event.
Nationalization, Insolvency or Delisting:	Cancellation and Payment (Calculation Agent Determination); provided that (i) Section 12.6(a)(iii) of the Equity Definitions shall be amended to delete, in the definition of the term “Delisting” the parenthetical “(or will cease)” and (ii) in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it will also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.
Additional Disruption Events:
(a) Change in Law:	Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof with the phrase “or announcement or statement of the interpretation” and (ii) replacing the word “Shares” with the phrase “Hedge Positions” in clause (X) thereof.
(b) Failure to Deliver:	Applicable
(c) Insolvency Filing:	Applicable
(d) Hedging Disruption:	Applicable; provided that Section 12.9(a)(v) of the Equity Definitions is hereby amended by inserting the following proviso at the end thereof: “provided that such inability described in clause (A) or (B) shall not constitute a “Hedging Disruption” unless (x) such

8

	inability does not result from factors particular to Hedging Party (such as Hedging Party“s creditworthiness or financial position, or particular actions or transactions undertaken by the Hedging Party unrelated to the hedging of the Transaction) and (y) such inability will result in continued performance by the Hedging Party under the Transaction being commercially unreasonable or commercially impracticable”.
Hedging Party:	Dealer
Determining Party:	Dealer for all applicable Additional Disruption Events
Non-Reliance:	Applicable
Agreements and Acknowledgments Regarding Hedging Activities:	Applicable
Additional Acknowledgments:	Applicable
3. Calculation Agent:	Dealer. All determinations made by the Calculation Agent shall be made in good faith and in a commercially reasonable manner. Following any determination or calculation by the Calculation Agent hereunder, upon a written request by Counterparty, the Calculation Agent will provide to Counterparty by e-mail to the e-mail address provided by Counterparty in such written request a report (in a commonly used file format for the storage and manipulation of financial data) displaying in reasonable detail the basis for such determination or calculation, including, where applicable, a description of the methodology and data applied, it being understood that the Calculation Agent shall not be obligated to disclose any proprietary models used by it for such determination or calculation.

     4. Account Details:

Dealer Payment Instructions:

Citibank, N.A.
Account Name: Morgan Stanley and Co.

Counterparty Payment Instructions:

To be provided by Counterparty.

     5. Offices:

The Office of Dealer for the Transaction is: New York

Morgan Stanley & Co. International plc
c/o Morgan Stanley & Co. Inc.
1585 Broadway, 5^th Floor
New York, NY 10036

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Attention:  Todd Bosch

          The Office of Counterparty for the Transaction is:

               Inapplicable. Counterparty is not a Multibranch Party.

     6. Notices: For purposes of this Confirmation:

(a) Address for notices or communications to Counterparty:

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, California 95134
Attn:	Office of the General Counsel
Facsimile:	(408) 904-6946

(b) Address for notices or communications to Dealer:

To:	Morgan Stanley & Co. International plc
	c/o Morgan Stanley & Co. Inc. 1585 Broadway, 5th Floor New York, NY 10036
Attn:	Todd Bosch
With a copy to:	Morgan Stanley & Co. International c/o Morgan Stanley & Co. 1221 Avenue of the Americas, 34th Floor New York, NY 10020
Attn:	Todd Bosch

     7. Representations, Warranties and Agreements:

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

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

     (ii) (A) On the Trade Date, the Shares or securities that are convertible into, or exchangeable or exercisable for Shares, are not, and shall not be, subject to a “restricted period,” as such term is defined in Regulation M under the Exchange Act (“Regulation M”) and (B) Counterparty shall not engage in any “distribution,” as such term is defined in Regulation M,

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other than a distribution meeting the requirements of the exceptions set forth in sections 101(b)(10) and 102(b)(7) of Regulation M, until the second Exchange Business Day immediately following the Trade Date.

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

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

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

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

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

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

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

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

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

     (c) Each of Dealer and Counterparty acknowledges that the offer and sale of the Transaction to it is intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by virtue of Section 4(2) thereof. Accordingly, Counterparty represents and warrants to Dealer that (i) it has the financial ability to bear the economic risk of its investment in the Transaction and is able to bear a total loss of its investment and its investments in and liabilities in respect of the Transaction, which it understands are not readily marketable, are not disproportionate to its net worth, and it is able to bear any loss in connection with the Transaction, including the loss of its entire investment in the Transaction, (ii) it is an “accredited investor” as that term is defined in Regulation D as promulgated under the Securities Act, (iii) it is entering into the Transaction for its own account and without a view to

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the distribution or resale thereof, (iv) the assignment, transfer or other disposition of the Transaction has not been and will not be registered under the Securities Act or any state securities laws and is restricted under this Confirmation, the Securities Act and state securities laws, and (v) its financial condition is such that it has no need for liquidity with respect to its investment in the Transaction and no need to dispose of any portion thereof to satisfy any existing or contemplated undertaking or indebtedness and is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of the Transaction.

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

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

     8. Other Provisions:

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

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

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

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

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

     (d) Repurchase and Conversion Rate Adjustment Notices. Counterparty shall, on (or prior to) any day on which Counterparty effects any repurchase of Shares or consummates or otherwise engages

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in any transaction or event (a “Conversion Rate Adjustment Event”) that would lead to an increase in the Conversion Rate, give Dealer a written notice of such repurchase or Conversion Rate Adjustment Event (a “Repurchase Notice”) on such day if, the number of outstanding Shares as determined on such day is (i) less than 209,303,000 (in the case of first such notice) or (ii) thereafter more than 38,531,000 less than the number of Shares included in the immediately preceding Repurchase Notice. In the event that Counterparty fails to provide Dealer with a Repurchase Notice on the day and in the manner specified in this Section 8(d) then, to the extent permitted by applicable law, Counterparty agrees to indemnify and hold harmless Dealer, its affiliates and their respective directors, officers, employees, agents and controlling persons (Dealer and each such person being an “Indemnified Party”) from and against any and all losses, claims, damages and liabilities (or actions in respect thereof), joint or several, to which such Indemnified Party is subject under applicable securities laws, including without limitation, Section 16 of the Exchange Act or under any state or federal law, regulation or regulatory order, as a result of such failure. Counterparty shall be relieved from liability to the extent that the Indemnified Party fails promptly to notify Counterparty of any action commenced against it in respect of which indemnity may be sought hereunder to the extent Counterparty is materially prejudiced as a result thereof. If for any reason the foregoing indemnification is unavailable to any Indemnified Party or insufficient in respect of any losses, claims, damages or liabilities referred to in this paragraph, then Counterparty, in lieu of indemnifying such Indemnified Party hereunder, shall contribute, to the maximum extent permitted by law, to the amount paid or payable by the Indemnified Party as a result of such loss, claim, damage or liability. In addition, Counterparty will reimburse, within 30 days, upon written request, any Indemnified Party for all reasonable expenses (including reasonable counsel fees and expenses) in connection with the investigation of, preparation for or defense or settlement of any pending or threatened claim or any action, suit or proceeding arising therefrom, whether or not such Indemnified Party is a party thereto and whether or not such claim, action, suit or proceeding is initiated or brought by or on behalf of Counterparty. This indemnity shall survive the completion of the Transaction contemplated by this Confirmation and any assignment and delegation of the Transaction made pursuant to this Confirmation or the Agreement shall inure to the benefit of any permitted assignee of Dealer.

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

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

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

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

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

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

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

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

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

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

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

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

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

     (h) Early Unwind. In the event the sale by Counterparty of the Convertible Securities is not consummated pursuant to the Purchase Agreement for any reason by the close of business in New York on the Premium Payment Date (or such later date as agreed upon by the parties, which in no event shall be later than June 21, 2010) (the Premium Payment Date or such later date being the “Early Unwind Date”), the Transaction shall automatically terminate (the “Early Unwind”) on the Early Unwind Date and the Transaction and all of the respective rights and obligations of Dealer and Counterparty hereunder shall be cancelled and terminated and Counterparty shall pay to Dealer, other than in cases involving a breach of the Purchase Agreement by Dealer or any affiliate of Dealer, an amount in cash equal to the aggregate amount of costs and expenses relating to the unwinding of Dealer’s hedging activities in respect of the Transaction (including market losses incurred in reselling any Shares purchased by Dealer or its affiliates in connection with such hedging activities, unless Counterparty agrees to purchase any such Shares at the cost at which Dealer purchased such Shares). Following such termination, cancellation and payment, each party shall be released and discharged by the other party from, and agrees not to make any claim against the other party with respect to, any obligations or liabilities of either party arising out of, and to be performed in connection with, the Transaction either prior to or after the Early Unwind Date. Dealer and Counterparty represent and acknowledge to the other that upon an Early Unwind and following the payment referred to above, all obligations with respect to the Transaction shall be deemed fully and finally discharged.

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

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

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IN CONNECTION WITH ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN, AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.

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

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

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

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

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

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

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

Yours faithfully, MORGAN STANLEY & CO. INTERNATIONAL PLC
By:	/s/ Rajul Patel
	Name:	Rajul Patel
	Title:	Executive Director
MORGAN STANLEY & CO. INCORPORATED as Agent
By:	/s/ Serkan Savasoglu
	Name:	Serkan Savasoglu
	Title:	Managing Director

Agreed and Accepted By: CADENCE DESIGN SYSTEMS, INC.
By:	/s/ Kevin S. Palatnik
	Name:	Kevin S. Palatnik
	Title:	Sr. Vice President & Chief Financial Officer

Signature Page to Base Bond Hedge
Confirmation

EX-10.03

Exhibit 10.03

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, CA 95134 Attention: Office of the General Counsel
From:	Deutsche Bank AG, London Branch Winchester House 1 Great Winchester St, London EC2N 2DB
	c/o Deutsche Bank Securities Inc. 60 Wall Street New York, NY 10005
Re:	Base Convertible Bond Hedge Transaction
Ref. No:	386879
Date:	June 9, 2010

Dear Sir(s):

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

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

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

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

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

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

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

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

General Terms:
Trade Date:	June 9, 2010

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Effective Date:	The closing date of the initial issuance of the Convertible Securities.
Option Style:	Modified American, as described under “Procedures for Exercise” below.
Option Type:	Call
Seller:	Dealer
Buyer:	Counterparty
Shares:	The Common Stock of Counterparty, par value USD 0.01 per share (Ticker Symbol: “CDNS”).
Number of Options:	The number of Convertible Securities in denominations of USD 1,000 principal amount issued by Counterparty on the closing date for the initial issuance of the Convertible Securities excluding any Convertible Securities purchased by the Initial Purchasers (as defined in the Purchase Agreement) at their option pursuant to Section 2 of the Purchase Agreement (as defined below). For the avoidance of doubt, the Number of Options outstanding shall be reduced by each exercise of Options hereunder.
Applicable Percentage:	30%
Option Entitlement:	As of any date, a number of Shares per Option equal to the “Conversion Rate” (as defined in the Indenture), but without regard to any adjustments to the Conversion Rate as set forth in Section 13.02 of the Indenture (a “Make-Whole Fundamental Change Adjustment”) or a discretionary adjustment as set forth in Section 13.04(g) of the Indenture (a “Discretionary Adjustment”).
Strike Price:	As of any date, an amount in USD, rounded to the nearest cent (with 0.5 cents being rounded upwards), equal to USD 1,000 divided by the Option Entitlement as of such date.
Number of Shares:	As of any date, the product of the Number of Options, the Option Entitlement and the Applicable Percentage.
Premium:	USD 19,469,880.00 (Premium per Option USD 64.90).
Premium Payment Date:	The Effective Date
Exchange:	NASDAQ Global Select Market
Related Exchange:	All Exchanges
Procedures for Exercise:
Exercise Dates:	Each Conversion Date.
Conversion Date:	Each “Conversion Date” (as defined in the Indenture) occurring during the Exercise Period for Convertible Securities, excluding Convertible Securities (“Exchanged Convertible Securities”) (i) with

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	respect to which Counterparty has elected the “Exchange in Lieu of Conversion” option to designate a financial institution to deliver the consideration due upon any conversion of any Convertible Securities in exchange for such Convertible Securities and (ii) that have been accepted by the designated financial institution pursuant to Section 13.09 of the Indenture (such Convertible Securities, the “Relevant Convertible Securities” for such Conversion Date).
	If such designated financial institution fails to deliver the consideration due upon such conversion and, as a result, Counterparty is required to deliver such consideration pursuant to Section 13.09(e) of the Indenture, Counterparty shall, promptly following such failure, notify Dealer in writing of such failure and the number of Exchanged Convertible Securities affected by such failure (such notice, a “Failed Exchange Notice”). The receipt by Dealer of a Failed Exchange Notice shall constitute an Additional Termination Event in respect of which Dealer shall designate an Exchange Business Day within a commercially reasonable period of time following receipt of such Failed Exchange Notice (which in no event shall be earlier than the related settlement date for the Exchanged Convertible Securities) as an Early Termination Date with respect to a portion of the Transaction corresponding to a number of Options (the “Cancelled Options”) equal to the lesser of (A) the number of such Exchanged Convertible Securities specified in such Failed Exchange Notice and (B) the Number of Options as of the date Dealer designates such Early Termination Date and, as of such date, the Number of Options shall be reduced by the number of Cancelled Options. Any payment hereunder with respect to such termination shall be calculated pursuant to Section 6 of the Agreement as if (1) an Early Termination Date had been designated in respect of a Transaction having terms identical to this Transaction and a Number of Options equal to the number of Cancelled Options, (2) Counterparty were the sole Affected Party with respect to such Additional Termination Event and (3) the terminated portion of the Transaction were the sole Affected Transaction.
Exercise Period:	The period from and excluding the Effective Date to and including the Expiration Date.
Expiration Date:	The earlier of (i) the last day on which any Convertible Securities remain outstanding and (ii) the “Maturity Date” (as defined in the Indenture).
Automatic Exercise on Conversion Dates:	Applicable; and means that on each Conversion Date,

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	a number of Options equal to the number of Relevant Convertible Securities for such Conversion Date in denominations of USD 1,000 principal amount shall be automatically exercised, subject to “Notice of Exercise” below.
Notice Deadline:	In respect of any exercise of Options hereunder on any Conversion Date, 5:00 P.M., New York City time, on the Exchange Business Day prior to the first “Scheduled Trading Day” of the “Observation Period” (each as defined in the Indenture) with respect to the Relevant Convertible Securities for such Conversion Date; provided that in the case of any exercise of Options hereunder in connection with the conversion of any Relevant Convertible Securities on any Conversion Date occurring during the period beginning on, and including, March 1, 2015 and ending on, and including, the second “Scheduled Trading Day” (as defined in the Indenture) immediately preceding the Maturity Date (such period, the “Final Convertibility Period”), the Notice Deadline shall be 5:30 P.M., New York City time, on the second “Scheduled Trading Day” immediately preceding the Maturity Date.
Notice of Exercise:	Notwithstanding anything to the contrary in the Equity Definitions, Dealer shall have no obligation to make any payment in respect of any exercise of Options hereunder unless Counterparty notifies Dealer in writing prior to the Notice Deadline in respect of such exercise of (i) the number of Options being exercised on such Exercise Date, (ii) the scheduled settlement date under the Indenture for the Relevant Convertible Securities for the Conversion Date corresponding to such Exercise Date, and (iii) the first “Scheduled Trading Day” (as defined in the Indenture) of the Observation Period; provided that, notwithstanding the foregoing, such notice (and the related Automatic Exercise of Options) shall be effective if given after the Notice Deadline but prior to 5:00 P.M., New York City time, on the fifth Exchange Business Day of such Observation Period, in which event the Calculation Agent shall have the right to adjust the Convertible Obligation (as defined below) as appropriate to reflect the additional costs (including, but not limited to, hedging mismatches and market losses) and reasonable expenses incurred by Dealer in connection with its hedging activities (including the unwinding of any hedge position) as a result of its not having received such notice prior to the Notice Deadline; provided, further, that in the case of any exercise of Options hereunder in connection with the conversion of any Relevant Convertible Securities on any Conversion Date occurring during the Final Convertibility Period, the

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	contents of such notice shall be as set forth in clause (i) above. For the avoidance of doubt and subject to the first proviso in the immediately preceding sentence, if Counterparty fails to give such notice when due in respect of any exercise of Options hereunder, Dealer’s obligation to make any payment in respect of such exercise shall be permanently extinguished, and late notice shall not cure such failure.
Dealer’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of Giving Notice:	As specified in Section 6(b) below.
Settlement Terms:
Settlement Method:	Cash Settlement.
Settlement Date:	In respect of an Exercise Date occurring on a Conversion Date, the settlement date for the cash to be paid in respect of the Relevant Convertible Securities converted on such Conversion Date pursuant to Section 13.03(a) or 13.02(b) of the Indenture, as the case may be; provided that the Settlement Date will not be prior to the Exchange Business Day immediately following the date Counterparty provides the Notice of Delivery Obligation prior to 5:00 P.M., New York City time.
Delivery Obligation:	In lieu of the obligations set forth in Section 8.1 of the Equity Definitions, and subject to “Notice of Exercise” above, in respect of an Exercise Date occurring on a Conversion Date, Dealer will pay to Counterparty, on the related Settlement Date, an amount of cash in USD equal to the product of (i) the Applicable Percentage and (ii) the aggregate amount of cash, if any, in excess of USD 1,000 per Convertible Security (in denominations of USD 1,000) that Counterparty would be obligated to pay to holder(s) of the Relevant Convertible Securities for such Conversion Date pursuant to Section 13.03(a) of the Indenture (the “Convertible Obligation”); provided that such obligation shall be determined excluding any cash that Counterparty is obligated to pay to holder(s) of the Relevant Convertible Securities as a result of any adjustments to the Conversion Rate pursuant to a Make-Whole Fundamental Change Adjustment or a Discretionary Adjustment and any interest payment that Counterparty is obligated to deliver to holder(s) of the Relevant Convertible Securities for such Conversion Date.
Notice of Delivery Obligation:	No later than 5:00 P.M., New York City time, on the Exchange Business Day immediately following the last day of the relevant Observation Period,

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	Counterparty shall give Dealer notice of the final amount of cash comprising the Convertible Obligation; provided that, with respect to any Exercise Date occurring during the Final Convertibility Period, Counterparty may provide Dealer with a single notice of the aggregate amount of cash comprising the Convertible Obligations for all Exercise Dates occurring in such period (it being understood, for the avoidance of doubt, that the requirement of Counterparty to deliver such notice shall not limit Counterparty’s obligations with respect to Notice of Exercise).
Adjustments:
Method of Adjustment:	Notwithstanding Section 11.2 of the Equity Definitions (and, for the avoidance of doubt, in lieu of any adjustments pursuant to such section), upon the occurrence of any event or condition set forth in Section 13.05 or sub-sections (a) through (e) of Section 13.04 of the Indenture (each an “Adjustment Event”) and the Calculation Agent receiving notice of the adjustments to be made to the terms of the Indenture and the Convertible Securities in respect of such Adjustment Event pursuant to the succeeding sentence, the Calculation Agent shall make a corresponding adjustment (in respect of any such adjustment under the Indenture) to the terms relevant to the exercise, settlement or payment of the Transaction; provided that, in the case of any adjustment to the terms of the Indenture and the Convertible Securities that involves an exercise of discretion by Counterparty or its board of directors (including, without limitation, pursuant to Section 13.05 of the Indenture or in connection with any proportional adjustment or the determination of the fair value of any securities, property, rights or other assets), then in each such case, the Counterparty agrees to exercise such discretion in good faith and in a commercially reasonable manner and to promptly provide the Calculation Agent with any additional information it reasonably requests (in addition to any information required to be provided pursuant to the succeeding sentence) about the Counterparty’s calculations and methodology for such adjustment. Promptly upon the occurrence of any Adjustment Event, Counterparty shall notify the Calculation Agent of such Adjustment Event; and once the adjustments to be made to the terms of the Indenture and the Convertible Securities in respect of such Adjustment Event have been determined, Counterparty shall promptly (and in any event within five Exchange Business Days after such determination) notify the Calculation Agent in writing of the details of such adjustments.

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Extraordinary Events:
Merger Events:	Notwithstanding Section 12.1(b) of the Equity Definitions, a “Merger Event” means the occurrence of any event or condition set forth in Section 10.01 or 13.06 of the Indenture.
Consequences of Merger Events:	Notwithstanding Section 12.2 of the Equity Definitions (and, for the avoidance of doubt, in lieu of any adjustments or other consequences pursuant to such section), upon the occurrence of a Merger Event, the Calculation Agent shall make a corresponding adjustment (in respect of any adjustment on account of such Merger Event under the Indenture) to the terms relevant to the exercise, settlement or payment of the Transaction; provided that such adjustment shall be made without regard to any adjustment to the Conversion Rate pursuant to a Make-Whole Fundamental Change Adjustment or a Discretionary Adjustment; and provided further that if, with respect to a Merger Event, the consideration for the Shares includes (or, at the option of a holder of Shares, may include) shares (or depositary receipts with respect to shares) of an entity or person not organized under the laws of the United States, any State thereof or the District of Columbia, Cancellation and Payment (Calculation Agent Determination) shall apply.
Notice of Merger Consideration and Consequences:	Upon the occurrence of a Merger Event that causes the Shares to be converted into the right to receive more than a single type of consideration (determined based in part upon any form of stockholder election), Counterparty shall reasonably promptly (but in any event on or prior to the relevant merger date) notify the Calculation Agent of (i) the type and amount of consideration that a holder of Shares would have been entitled to in the case of reclassifications, consolidations, mergers, sales or transfers of assets or other transactions that cause Shares to be converted into the right to receive more than a single type of consideration, (ii) the weighted average of the types and amounts of consideration to be received by the holders of Shares that affirmatively make such an election, and (iii) the details of the adjustment to be made under the Indenture in respect of such Merger Event.
Nationalization, Insolvency or Delisting:	Cancellation and Payment (Calculation Agent Determination); provided that (i) Section 12.6(a)(iii) of the Equity Definitions shall be amended to delete, in the definition of the term “Delisting” the parenthetical “(or will cease)” and (ii) in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it will also constitute a Delisting if the

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	Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.
Additional Disruption Events:
(a) Change in Law:	Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof with the phrase “or announcement or statement of the interpretation” and (ii) replacing the word “Shares” with the phrase “Hedge Positions” in clause (X) thereof.
(b) Failure to Deliver:	Applicable
(c) Insolvency Filing:	Applicable
(d) Hedging Disruption:	Applicable; provided that Section 12.9(a)(v) of the Equity Definitions is hereby amended by inserting the following proviso at the end thereof: “provided that such inability described in clause (A) or (B) shall not constitute a “Hedging Disruption” unless (x) such inability does not result from factors particular to Hedging Party (such as Hedging Party’s creditworthiness or financial position, or particular actions or transactions undertaken by the Hedging Party unrelated to the hedging of the Transaction) and (y) such inability will result in continued performance by the Hedging Party under the Transaction being commercially unreasonable or commercially impracticable”.
Hedging Party:	Dealer
Determining Party:	Dealer for all applicable Additional Disruption Events
Non-Reliance:	Applicable
Agreements and Acknowledgments Regarding Hedging Activities:	Applicable
Additional Acknowledgments:	Applicable

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

     4. Account Details:

Dealer Payment Instructions:

Deutsche Bank AG, London Branch
The Bank of New York
Account Name: Deutsche Bank Securities, Inc.

Counterparty Payment Instructions:

To be provided by Counterparty.

     5. Offices:

The Office of Dealer for the Transaction is: London

Deutsche Bank AG, London Branch
Winchester house
1 Great Winchester St, London
EC2N 2DB

The Office of Counterparty for the Transaction is:

Inapplicable. Counterparty is not a Multibranch Party.

     6. Notices: For purposes of this Confirmation:

     (a) Address for notices or communications to Counterparty:

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, California 95134
Attn:	Office of the General Counsel
Facsimile:	(408) 904-6946

     (b) Address for notices or communications to Dealer:

To:	Deutsche Bank AG, London Branch c/o Deutsche Bank Securities Inc. 60 Wall Street New York, NY 10005
Attn:	Peter Barna

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With a copy to:	Deutsche Bank AG, London Branch c/o Deutsche Bank Securities Inc. 60 Wall Street New York, NY 10005
Attn:	Lars Kestner

     7. Representations, Warranties and Agreements:

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

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

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

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

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

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

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

     (vii) On each of the Trade Date and the Premium Payment Date, Counterparty is not “insolvent” (as such term is defined under Section 101(32) of the U.S. Bankruptcy Code (Title 11

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of the United States Code) (the “Bankruptcy Code”)) and Counterparty would be able to purchase a number of Shares equal to the Number of Shares in compliance with the laws of the jurisdiction of Counterparty’s incorporation.

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

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

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

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

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

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

     (e) As a condition to the effectiveness of the Transaction, Counterparty shall deliver to Dealer an opinion of counsel, dated as of the Trade Date and reasonably acceptable to Dealer in form and

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substance, with respect to the matters set forth in Section 3(a) of the Agreement, subject to customary assumptions, qualifications and exceptions.

     8. Other Provisions:

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

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

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

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

     (c) Disposition of Hedge Shares. Counterparty hereby agrees that if, in the good faith reasonable judgment of Dealer, the Shares (the “Hedge Shares”) acquired by Dealer for the purpose of hedging its obligations pursuant to the Transaction cannot be sold in the U.S. public market by Dealer without registration under the Securities Act, Counterparty shall, at its election: (i) in order to allow Dealer to sell the Hedge Shares in a registered offering, make available to Dealer an effective registration statement under the Securities Act to cover the resale of such Hedge Shares and (A) enter into an

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agreement, in form and substance reasonably satisfactory to Dealer, substantially in the form of an underwriting agreement for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business, (B) provide accountant’s “comfort” letters in customary form for underwritten follow-on offerings of equity securities, (C) provide disclosure opinions of nationally recognized outside counsel to Counterparty reasonably acceptable to Dealer, (D) provide other customary opinions, certificates and closing documents customary in form for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business and (E) afford Dealer a reasonable opportunity to conduct a “due diligence” investigation with respect to Counterparty customary in scope for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business; provided, however, that if Dealer, in its sole commercially reasonable discretion, is not satisfied with access to due diligence materials, the results of its due diligence investigation, or the procedures and documentation for the registered offering referred to above, then clause (ii) or clause (iii) of this Section 8(c) shall apply at the election of Counterparty; (ii) in order to allow Dealer to sell the Hedge Shares in a private placement, enter into a private placement agreement substantially similar to private placement purchase agreements customary for private placements of equity securities, in form and substance satisfactory to Dealer, including customary representations, covenants, blue sky and other governmental filings and/or registrations, indemnities to Dealer, due diligence rights (for Dealer or any designated buyer of the Hedge Shares from Dealer), opinions and certificates and such other documentation as is customary for private placement agreements, all reasonably acceptable to Dealer (in which case, the Calculation Agent shall make any adjustments to the terms of the Transaction that are necessary, in its reasonable judgment, to compensate Dealer for any discount from the public market price of the Shares incurred on the sale of Hedge Shares in a private placement); or (iii) purchase the Hedge Shares from Dealer at the VWAP Price on such Exchange Business Days, and in the amounts, requested by Dealer. “VWAP Price” means, on any Exchange Business Day, the per Share volume-weighted average price as displayed under the heading “Bloomberg VWAP” on Bloomberg Screen CDNS.Q <equity> AQR (or any successor thereto) in respect of the period from 9:30 a.m. to 4:00 p.m. (New York City time) on such Exchange Business Day (or if such volume-weighted average price is unavailable, the market value of one Share on such Exchange Business Day, as determined by the Calculation Agent using a volume-weighted method).

     (d) Repurchase and Conversion Rate Adjustment Notices. Counterparty shall, on (or prior to) any day on which Counterparty effects any repurchase of Shares or consummates or otherwise engages in any transaction or event (a “Conversion Rate Adjustment Event”) that would lead to an increase in the Conversion Rate, give Dealer a written notice of such repurchase or Conversion Rate Adjustment Event (a “Repurchase Notice”) on such day if, the number of outstanding Shares as determined on such day is (i) less than 246,360,000 (in the case of first such notice) or (ii) thereafter more than 20,035,000 less than the number of Shares included in the immediately preceding Repurchase Notice. In the event that Counterparty fails to provide Dealer with a Repurchase Notice on the day and in the manner specified in this Section 8(d) then, to the extent permitted by applicable law, Counterparty agrees to indemnify and hold harmless Dealer, its affiliates and their respective directors, officers, employees, agents and controlling persons (Dealer and each such person being an “Indemnified Party”) from and against any and all losses, claims, damages and liabilities (or actions in respect thereof), joint or several, to which such Indemnified Party is subject under applicable securities laws, including without limitation, Section 16 of the Exchange Act or under any state or federal law, regulation or regulatory order, as a result of such failure. Counterparty shall be relieved from liability to the extent that the Indemnified Party fails promptly to notify Counterparty of any action commenced against it in respect of which indemnity may be sought hereunder to the extent Counterparty is materially prejudiced as a result thereof. If for any reason the foregoing indemnification is unavailable to any Indemnified Party or insufficient in respect of any losses, claims, damages or liabilities referred to in this paragraph, then Counterparty, in lieu of indemnifying such Indemnified Party hereunder, shall contribute, to the maximum extent permitted by law, to the amount paid or payable by the Indemnified Party as a result of such loss, claim, damage or liability. In addition, Counterparty will reimburse, within 30 days, upon written request, any Indemnified Party for all reasonable expenses (including reasonable counsel fees and expenses) in connection with the investigation of, preparation for or defense or settlement of any pending or threatened claim or any action, suit or proceeding arising therefrom, whether or not such Indemnified Party is a party thereto and whether or not such claim, action, suit or proceeding is initiated or brought by or on behalf of Counterparty. This

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indemnity shall survive the completion of the Transaction contemplated by this Confirmation and any assignment and delegation of the Transaction made pursuant to this Confirmation or the Agreement shall inure to the benefit of any permitted assignee of Dealer.

     (e) Transfer and Assignment. Either party may transfer any of its rights or obligations under the Transaction with the prior written consent of the non-transferring party; provided that (i) Dealer may transfer or assign without any consent of Counterparty its rights and obligations hereunder, with respect to a number of Options corresponding to its Excess Ownership Position (as defined below) plus 1% of the number of Shares then outstanding, to any person, or any person whose obligations would be guaranteed by a person, in either case, with a rating for its long term, unsecured and unsubordinated indebtedness of A- or better by S&P, or A3 or better by Moody’s or, if either S&P or Moody’s ceases to rate such debt, at least an equivalent rating or better by a substitute agency rating mutually agreed by Counterparty and Dealer, (ii) Dealer may transfer or assign without any consent of Counterparty its rights and obligations hereunder in whole or in part to any parent of Dealer or any subsidiary of such parent (A) the obligations of which are guaranteed by Dealer or any parent of Dealer or (B) with a rating by Moody’s or S&P for its long-term, unsecured and unsubordinated debt that is equal to or greater than Dealer’s at the time of such transfer or assignment and (iii) Counterparty may assign its rights and obligations hereunder to the extent permitted in the next paragraph of this Section 8(e). If at any time at which (1) the Equity Percentage exceeds 8.5%, (2) the Option Equity Percentage exceeds 14.5% or (3) Dealer, Dealer Group (as defined below) or any person whose ownership position would be aggregated with that of Dealer or Dealer Group (Dealer, Dealer Group or any such person, a “Dealer Person”) under Section 203 of the Delaware General Corporation Law (the “DGCL Takeover Statute”), or any state or federal bank holding company or banking laws, or other federal, state or local regulations, regulatory orders or organizational documents or contracts of Counterparty that are, in each case, applicable to ownership of Shares (“Applicable Laws”), owns, beneficially owns, constructively owns, controls, holds the power to vote or otherwise meets a relevant definition of ownership in excess of a number of Shares equal to (x) the number of Shares that would give rise to reporting or registration obligations or other requirements (including obtaining prior approval by a state or federal regulator) of a Dealer Person under Applicable Laws (including, without limitation, “interested stockholder” or “acquiring person” status under the DGCL Takeover Statute) and with respect to which such requirements have not been met or the relevant approval has not been received minus (y) 1% of the number of Shares outstanding on the date of determination (any such condition described in clause (1), (2) or (3), an “Excess Ownership Position”), Dealer, in its commercially reasonable discretion, is unable to effect a transfer or assignment to a third party after its commercially reasonable efforts on pricing terms and within a time period reasonably acceptable to Dealer (the “Transfer Time Period”) (it being understood that a period of at least one Exchange Business Day shall be considered reasonable for this purpose (without prejudice to whether a shorter period of time would be considered reasonable)) such that an Excess Ownership Position no longer exists, Dealer may designate any Scheduled Trading Day as an Early Termination Date with respect to a portion (the “Terminated Portion”) of the Transaction, such that an Excess Ownership Position no longer exists following such partial termination; provided that, unless such Excess Ownership Position is the result of a Conversion Rate Adjustment Event or a repurchase of Shares by Counterparty, Dealer shall promptly notify Counterparty of its Excess Ownership Position and shall use its commercially reasonable efforts to consult with Counterparty during the Transfer Time Period regarding potential transfers or assignments to third parties prior to so designating an Early Termination Date. In the event that Dealer so designates an Early Termination Date with respect to a portion of the Transaction, a payment shall be made pursuant to Section 6 of the Agreement as if (i) an Early Termination Date had been designated in respect of a Transaction having terms identical to the Terminated Portion of the Transaction, (ii) Counterparty were the sole Affected Party with respect to such partial termination, (iii) such portion of the Transaction were the only Terminated Transaction and (iv) Dealer were the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement and to determine the amount payable pursuant to Section 6(e) of the Agreement. The “Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the number of Shares that Dealer and any of its affiliates subject to aggregation with Dealer for purposes of the “beneficial ownership” test under Section 13 of the Exchange Act and all persons who may form a “group” (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) with Dealer (collectively, “Dealer Group”) “beneficially own” (within the meaning of Section 13 of the Exchange Act) without duplication on such day and (B) the denominator of which is the number of Shares outstanding on such day. The “Option Equity Percentage” as of any

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day is the fraction, expressed as a percentage, (A) the numerator of which is the sum of (1) the product of the Applicable Percentage, the Number of Options and the Option Entitlement and (2) the aggregate number of Shares underlying any other call option transaction sold by Dealer to Counterparty and (B) the denominator of which is the number of Shares outstanding on such day.

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

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

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

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

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

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

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

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

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

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

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

     (h) Early Unwind. In the event the sale by Counterparty of the Convertible Securities is not consummated pursuant to the Purchase Agreement for any reason by the close of business in New York on the Premium Payment Date (or such later date as agreed upon by the parties, which in no event shall be later than June 21, 2010) (the Premium Payment Date or such later date being the “Early Unwind Date”),

16

the Transaction shall automatically terminate (the “Early Unwind”) on the Early Unwind Date and the Transaction and all of the respective rights and obligations of Dealer and Counterparty hereunder shall be cancelled and terminated and Counterparty shall pay to Dealer, other than in cases involving a breach of the Purchase Agreement by Dealer or any affiliate of Dealer, an amount in cash equal to the aggregate amount of costs and expenses relating to the unwinding of Dealer’s hedging activities in respect of the Transaction (including market losses incurred in reselling any Shares purchased by Dealer or its affiliates in connection with such hedging activities, unless Counterparty agrees to purchase any such Shares at the cost at which Dealer purchased such Shares). Following such termination, cancellation and payment, each party shall be released and discharged by the other party from, and agrees not to make any claim against the other party with respect to, any obligations or liabilities of either party arising out of, and to be performed in connection with, the Transaction either prior to or after the Early Unwind Date. Dealer and Counterparty represent and acknowledge to the other that upon an Early Unwind and following the payment referred to above, all obligations with respect to the Transaction shall be deemed fully and finally discharged.

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

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

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

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

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

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

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

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

     Dealer is regulated by the Financial Services Authority.

Yours faithfully, DEUTSCHE BANK AG, LONDON BRANCH
By:	/s/ Lars Kestner
	Name:	LARS KESTNER
	Title:	MANAGING DIRECTOR
By:	/s/ Michael Sanderson
	Name:	MICHAEL SANDERSON
	Title:	MANAGING DIRECTOR
DEUTSCHE BANK SECURITIES INC., acting solely as Agent in connection with the Transaction
By:	/s/ Lars Kestner
	Name:	LARS KESTNER
	Title:	MANAGING DIRECTOR
By:	/s/ Michael Sanderson
	Name:	MICHAEL SANDERSON
	Title:	MANAGING DIRECTOR

Confirmed and Acknowledged as of the date first above written: CADENCE DESIGN SYSTEMS, INC.
By:	/s/ Kevin S. Palatnik
	Name:	Kevin S. Palatnik
	Title:	Sr. Vice President & Chief Financial Officer

Chairman of the Supervisory Board: Clemens Börsig Management Board: Josef Ackermann (Chairman), Hugo Bänziger, Michael Cohrs, Jürgen Fitschen, Anshuman Jain, Stefan Krause, Hermann-Josef Lamberti, Rainer Neske	Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin — Federal Financial Supervising Authority) and regulated by the Financial Services Authority for the conduct of UK business; a member of the London Stock Exchange. Deutsche Bank AG is a joint stock corporation with limited liability incorporated in the Federal Republic of Germany HRB No. 30 000 District Court of Frankfurt am Main; Branch Registration in England and Wales BR000005; Registered address:
	Winchester House, 1 Great Winchester Street, London EC2N 2DB. Deutsche Bank Group online:
	http://www.deutsche-bank.com

Signature Page to Base Bond Hedge
Confirmation

EX-10.04

Exhibit 10.04

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, CA 95134 Attention: Office of the General Counsel
From:	JPMorgan Chase Bank, National Association P.O. Box 161 60 Victoria Embankment London EC4Y 0JP England
Re:	Additional Convertible Bond Hedge Transaction
Date:	June 18, 2010

Dear Sir(s):

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

     1. This Confirmation is subject to, and incorporates, the definitions and provisions of the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc. (“ISDA”). Certain defined terms used herein have the meanings assigned to them in the Indenture dated as of the closing date of the initial issuance of the Convertible Securities described below between Counterparty and Deutsche Bank Trust Company Americas, as trustee (the “Indenture”), relating to the USD 300,000,000 principal amount of 2.625% cash convertible senior notes due June 1, 2015 and the additional USD 50,000,000 principal amount of 2.625% cash convertible senior notes due June 1, 2015 issued pursuant to the over-allotment option exercised on the date hereof (the “Convertible Securities”). In the event of any inconsistency between the terms defined in the Indenture and this Confirmation, this Confirmation shall govern. The parties acknowledge that this Confirmation is entered into on the date hereof with the understanding that (i) definitions set forth in the Indenture which are also defined herein by reference to the Indenture and (ii) sections of the Indenture that are referred to herein will conform to the descriptions thereof in the Offering Memorandum dated June 9, 2010 (the “Offering Memorandum”). If any such definitions in the Indenture or any such sections of the Indenture differ from the descriptions thereof in the Offering Memorandum, the descriptions thereof in the Offering Memorandum will govern for purposes of this Confirmation. Subject to the foregoing, references to the Indenture herein are references to the Indenture as in effect on the date of its execution, and if the Indenture is amended, modified or supplemented following its execution, any such amendment, modification or supplement will be disregarded for purposes of this Confirmation (other than for purposes of Section 8(b) below) unless the parties agree otherwise in writing. The Transaction is subject to early unwind if the

JPMorgan Chase Bank, National Association
Organised under the laws of the United States as a National Banking Association
Main Office 1111 Polaris Parkway, Columbus, Ohio 43271
Registered as a branch in England & Wales branch No. BR000746
Registered Branch Office 125 London Wall, London EC2Y 5AJ
Authorised and regulated by the Financial Services Authority

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closing of the Convertible Securities is not consummated for any reason, as set forth below in Section 8(h).

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

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

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

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

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

General Terms:
Trade Date:	June 18, 2010
Effective Date:	The closing date of the Convertible Securities issued pursuant to the over-allotment option exercised on the date hereof.
Option Style:	Modified American, as described under “Procedures for Exercise” below.
Option Type:	Call
Seller:	Dealer
Buyer:	Counterparty
Shares:	The Common Stock of Counterparty, par value USD 0.01 per share (Ticker Symbol: “CDNS”).
Number of Options:	The number of Convertible Securities in denominations of USD 1,000 principal amount purchased by the Initial Purchasers (as defined in the Purchase Agreement) at their option exercised on the date hereof pursuant to the second paragraph of Section 2 of the Purchase Agreement (as defined below). For the avoidance of doubt, the Number of Options outstanding shall be reduced by each

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	exercise of Options hereunder.
Applicable Percentage:	60%
Option Entitlement:	As of any date, a number of Shares per Option equal to the “Conversion Rate” (as defined in the Indenture), but without regard to any adjustments to the Conversion Rate as set forth in Section 13.02 of the Indenture (a “Make-Whole Fundamental Change Adjustment”) or a discretionary adjustment as set forth in Section 13.04(g) of the Indenture (a “Discretionary Adjustment”).
Strike Price:	As of any date, an amount in USD, rounded to the nearest cent (with 0.5 cents being rounded upwards), equal to USD 1,000 divided by the Option Entitlement as of such date.
Number of Shares:	As of any date, the product of the Number of Options, the Option Entitlement and the Applicable Percentage.
Premium:	USD 7,041,000.00.
Premium Payment Date:	The Effective Date
Exchange:	NASDAQ Global Select Market
Related Exchange:	All Exchanges
Procedures for Exercise:
Exercise Dates:	Each Conversion Date.
Conversion Date:	Each “Conversion Date” (as defined in the Indenture) occurring during the Exercise Period for Convertible Securities, excluding (A) Convertible Securities (“Exchanged Convertible Securities”) (i) with respect to which Counterparty has elected the “Exchange in Lieu of Conversion” option to designate a financial institution to deliver the consideration due upon any conversion of any Convertible Securities in exchange for such Convertible Securities and (ii) that have been accepted by the designated financial institution pursuant to Section 13.09 of the Indenture and (B) Convertible Securities that are “Relevant Convertible Securities” under (and as defined in) the Base Convertible Bond Hedge Transaction dated June 9, 2010 between Dealer and Counterparty (the “Base Convertible Bond Hedge Transaction Confirmation”) (such Convertible Securities, the “Relevant Convertible Securities” for such Conversion Date). For the purpose of determining whether any Convertible Securities will be Relevant Convertible Securities hereunder or “Relevant Convertible Securities” under the Base Convertible Bond Hedge Transaction Confirmation, Convertible Securities that are converted pursuant to the Indenture shall be allocated first to the Base

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	Convertible Bond Hedge Transaction Confirmation until all Options thereunder are exercised or terminated.
	If such designated financial institution fails to deliver the consideration due upon such conversion and, as a result, Counterparty is required to deliver such consideration pursuant to Section 13.09(e) of the Indenture, Counterparty shall, promptly following such failure, notify Dealer in writing of such failure and the number of Exchanged Convertible Securities affected by such failure (such notice, a “Failed Exchange Notice”). The receipt by Dealer of a Failed Exchange Notice shall constitute an Additional Termination Event in respect of which Dealer shall designate an Exchange Business Day within a commercially reasonable period of time following receipt of such Failed Exchange Notice (which in no event shall be earlier than the related settlement date for the Exchanged Convertible Securities) as an Early Termination Date with respect to a portion of the Transaction corresponding to a number of Options (the “Cancelled Options”) equal to the lesser of (A) the number of such Exchanged Convertible Securities specified in such Failed Exchange Notice minus the number of Cancelled Options (as defined in the Base Convertible Bond Hedge Transaction Confirmation), if any, that relate to such Exchanged Convertible Securities and (B) the Number of Options as of the date Dealer designates such Early Termination Date and, as of such date, the Number of Options shall be reduced by the number of Cancelled Options. Any payment hereunder with respect to such termination shall be calculated pursuant to Section 6 of the Agreement as if (1) an Early Termination Date had been designated in respect of a Transaction having terms identical to this Transaction and a Number of Options equal to the number of Cancelled Options, (2) Counterparty were the sole Affected Party with respect to such Additional Termination Event and (3) the terminated portion of the Transaction were the sole Affected Transaction.
Exercise Period:	The period from and excluding the Effective Date to and including the Expiration Date.
Expiration Date:	The earlier of (i) the last day on which any Convertible Securities remain outstanding and (ii) the “Maturity Date” (as defined in the Indenture).
Automatic Exercise on Conversion Dates:	Applicable; and means that on each Conversion Date, a number of Options equal to the number of Relevant Convertible Securities for such Conversion Date in

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	denominations of USD1,000 principal amount shall be automatically exercised, subject to “Notice of Exercise” below.
Notice Deadline:	In respect of any exercise of Options hereunder on any Conversion Date, 5:00 P.M., New York City time, on the Exchange Business Day prior to the first “Scheduled Trading Day” of the “Observation Period” (each as defined in the Indenture) with respect to the Relevant Convertible Securities for such Conversion Date; provided that in the case of any exercise of Options hereunder in connection with the conversion of any Relevant Convertible Securities on any Conversion Date occurring during the period beginning on, and including, March 1, 2015 and ending on, and including, the second “Scheduled Trading Day” (as defined in the Indenture) immediately preceding the Maturity Date (such period, the “Final Convertibility Period”), the Notice Deadline shall be 5:30 P.M., New York City time, on the second “Scheduled Trading Day” immediately preceding the Maturity Date.
Notice of Exercise:	Notwithstanding anything to the contrary in the Equity Definitions, Dealer shall have no obligation to make any payment in respect of any exercise of Options hereunder unless Counterparty notifies Dealer in writing prior to the Notice Deadline in respect of such exercise of (i) the number of Options being exercised on such Exercise Date, (ii) the scheduled settlement date under the Indenture for the Relevant Convertible Securities for the Conversion Date corresponding to such Exercise Date, and (iii) the first “Scheduled Trading Day” (as defined in the Indenture) of the Observation Period; provided that, notwithstanding the foregoing, such notice (and the related Automatic Exercise of Options) shall be effective if given after the Notice Deadline but prior to 5:00 P.M., New York City time, on the fifth Exchange Business Day of such Observation Period, in which event the Calculation Agent shall have the right to adjust the Convertible Obligation (as defined below) as appropriate to reflect the additional costs (including, but not limited to, hedging mismatches and market losses) and reasonable expenses incurred by Dealer in connection with its hedging activities (including the unwinding of any hedge position) as a result of its not having received such notice prior to the Notice Deadline; provided, further, that in the case of any exercise of Options hereunder in connection with the conversion of any Relevant Convertible Securities on any Conversion Date occurring during the Final Convertibility Period, the contents of such notice shall be as set forth in clause (i) above; and provided, further, that any “Notice of

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	Exercise” delivered to Dealer pursuant to the Base Convertible Bond Hedge Transaction Confirmation shall be deemed to be a Notice of Exercise pursuant to this Confirmation and the terms of such Notice of Exercise shall apply, mutatis mutandis, to this Confirmation. For the avoidance of doubt and subject to the first proviso in the immediately preceding sentence, if Counterparty fails to give such notice when due in respect of any exercise of Options hereunder, Dealer’s obligation to make any payment in respect of such exercise shall be permanently extinguished, and late notice shall not cure such failure.
Dealer’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of Giving Notice:	As specified in Section 6(b) below.
Settlement Terms:
Settlement Method:	Cash Settlement.
Settlement Date:	In respect of an Exercise Date occurring on a Conversion Date, the settlement date for the cash to be paid in respect of the Relevant Convertible Securities converted on such Conversion Date pursuant to Section 13.03(a) or 13.02(b) of the Indenture, as the case may be; provided that the Settlement Date will not be prior to the Exchange Business Day immediately following the date Counterparty provides the Notice of Delivery Obligation prior to 5:00 P.M., New York City time.
Delivery Obligation:	In lieu of the obligations set forth in Section 8.1 of the Equity Definitions, and subject to “Notice of Exercise” above, in respect of an Exercise Date occurring on a Conversion Date, Dealer will pay to Counterparty, on the related Settlement Date, an amount of cash in USD equal to the product of (i) the Applicable Percentage and (ii) the aggregate amount of cash, if any, in excess of USD1,000 per Convertible Security (in denominations of USD1,000) that Counterparty would be obligated to pay to holder(s) of the Relevant Convertible Securities for such Conversion Date pursuant to Section 13.03(a) of the Indenture (the “Convertible Obligation”); provided that such obligation shall be determined excluding any cash that Counterparty is obligated to pay to holder(s) of the Relevant Convertible Securities as a result of any adjustments to the Conversion Rate pursuant to a Make-Whole Fundamental Change Adjustment or a Discretionary Adjustment and any interest payment that Counterparty is obligated to deliver to holder(s) of the Relevant Convertible Securities for such

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	Conversion Date.
Notice of Delivery Obligation:	No later than 5:00 P.M., New York City time, on the Exchange Business Day immediately following the last day of the relevant Observation Period, Counterparty shall give Dealer notice of the final amount of cash comprising the Convertible Obligation; provided that, with respect to any Exercise Date occurring during the Final Convertibility Period, Counterparty may provide Dealer with a single notice of the aggregate amount of cash comprising the Convertible Obligations for all Exercise Dates occurring in such period (it being understood, for the avoidance of doubt, that the requirement of Counterparty to deliver such notice shall not limit Counterparty’s obligations with respect to Notice of Exercise).
Adjustments:
Method of Adjustment:	Notwithstanding Section 11.2 of the Equity Definitions (and, for the avoidance of doubt, in lieu of any adjustments pursuant to such section), upon the occurrence of any event or condition set forth in Section 13.05 or sub-sections (a) through (e) of Section 13.04 of the Indenture (each an “Adjustment Event”) and the Calculation Agent receiving notice of the adjustments to be made to the terms of the Indenture and the Convertible Securities in respect of such Adjustment Event pursuant to the succeeding sentence, the Calculation Agent shall make a corresponding adjustment (in respect of any such adjustment under the Indenture) to the terms relevant to the exercise, settlement or payment of the Transaction; provided that, in the case of any adjustment to the terms of the Indenture and the Convertible Securities that involves an exercise of discretion by Counterparty or its board of directors (including, without limitation, pursuant to Section 13.05 of the Indenture or in connection with any proportional adjustment or the determination of the fair value of any securities, property, rights or other assets), then in each such case, the Counterparty agrees to exercise such discretion in good faith and in a commercially reasonable manner and to promptly provide the Calculation Agent with any additional information it reasonably requests (in addition to any information required to be provided pursuant to the succeeding sentence) about the Counterparty’s calculations and methodology for such adjustment. Promptly upon the occurrence of any Adjustment Event, Counterparty shall notify the Calculation Agent of such Adjustment Event; and once the adjustments to be made to the terms of the Indenture and the Convertible Securities in respect of such Adjustment Event have been determined,

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	Counterparty shall promptly (and in any event within five Exchange Business Days after such determination) notify the Calculation Agent in writing of the details of such adjustments.
Extraordinary Events:
Merger Events:	Notwithstanding Section 12.1(b) of the Equity Definitions, a “Merger Event” means the occurrence of any event or condition set forth in Section 10.01 or 13.06 of the Indenture.
Consequences of Merger Events:	Notwithstanding Section 12.2 of the Equity Definitions (and, for the avoidance of doubt, in lieu of any adjustments or other consequences pursuant to such section), upon the occurrence of a Merger Event, the Calculation Agent shall make a corresponding adjustment (in respect of any adjustment on account of such Merger Event under the Indenture) to the terms relevant to the exercise, settlement or payment of the Transaction; provided that such adjustment shall be made without regard to any adjustment to the Conversion Rate pursuant to a Make-Whole Fundamental Change Adjustment or a Discretionary Adjustment; and provided further that if, with respect to a Merger Event, the consideration for the Shares includes (or, at the option of a holder of Shares, may include) shares (or depositary receipts with respect to shares) of an entity or person not organized under the laws of the United States, any State thereof or the District of Columbia, Cancellation and Payment (Calculation Agent Determination) shall apply.
Notice of Merger Consideration and Consequences:	Upon the occurrence of a Merger Event that causes the Shares to be converted into the right to receive more than a single type of consideration (determined based in part upon any form of stockholder election), Counterparty shall reasonably promptly (but in any event on or prior to the relevant merger date) notify the Calculation Agent of (i) the type and amount of consideration that a holder of Shares would have been entitled to in the case of reclassifications, consolidations, mergers, sales or transfers of assets or other transactions that cause Shares to be converted into the right to receive more than a single type of consideration, (ii) the weighted average of the types and amounts of consideration to be received by the holders of Shares that affirmatively make such an election, and (iii) the details of the adjustment to be made under the Indenture in respect of such Merger Event.
Nationalization, Insolvency or Delisting:	Cancellation and Payment (Calculation Agent Determination); provided that (i) Section 12.6(a)(iii)

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	of the Equity Definitions shall be amended to delete, in the definition of the term “Delisting” the parenthetical “(or will cease)” and (ii) in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it will also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.
Additional Disruption Events:
(a) Change in Law:	Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof with the phrase “or announcement or statement of the interpretation” and (ii) replacing the word “Shares” with the phrase “Hedge Positions” in clause (X) thereof.
(b) Failure to Deliver:	Applicable
(c) Insolvency Filing:	Applicable
(d) Hedging Disruption:	Applicable; provided that Section 12.9(a)(v) of the Equity Definitions is hereby amended by inserting the following proviso at the end thereof: “provided that such inability described in clause (A) or (B) shall not constitute a “Hedging Disruption” unless (x) such inability does not result from factors particular to Hedging Party (such as Hedging Party”s creditworthiness or financial position, or particular actions or transactions undertaken by the Hedging Party unrelated to the hedging of the Transaction) and (y) such inability will result in continued performance by the Hedging Party under the Transaction being commercially unreasonable or commercially impracticable”.
Hedging Party:	Dealer
Determining Party:	Dealer for all applicable Additional Disruption Events
Non-Reliance:	Applicable
Agreements and Acknowledgments Regarding Hedging Activities:	Applicable
Additional Acknowledgments:	Applicable

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

     4. Account Details:

Dealer Payment Instructions:

JPMORGAN CHASE BANK, N.A.
Beneficiary JPMorgan Chase Bank, N.A. New York
Ref: Derivatives

Counterparty Payment Instructions:

To be provided by Counterparty.

     5. Offices:

The Office of Dealer for the Transaction is: London

JPMorgan Chase Bank, National Association
London Branch
P.O. Box 161
60 Victoria Embankment
London EC4Y 0JP
England

The Office of Counterparty for the Transaction is:

Inapplicable. Counterparty is not a Multibranch Party.

     6. Notices: For purposes of this Confirmation:

(a) Address for notices or communications to Counterparty:

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, California 95134
Attn:	Office of the General Counsel
Facsimile:	(408) 904-6946

(b) Address for notices or communications to Dealer:

To: JPMorgan Chase Bank, National Association
4 New York Plaza, Floor 18
New York, NY 10004-2413

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Attn: Mariusz Kwasnik
Operations Analyst, EDG Corporate Marketing

     7. Representations, Warranties and Agreements:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     8. Other Provisions:

     (a) Right to Extend. Dealer may postpone any Exercise Date or Settlement Date or any other date of valuation or payment by Dealer, with respect to some or all of the relevant Options (in which event

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

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

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

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

     (c) Disposition of Hedge Shares. Counterparty hereby agrees that if, in the good faith reasonable judgment of Dealer, the Shares (the “Hedge Shares”) acquired by Dealer for the purpose of hedging its obligations pursuant to the Transaction cannot be sold in the U.S. public market by Dealer without registration under the Securities Act, Counterparty shall, at its election: (i) in order to allow Dealer to sell the Hedge Shares in a registered offering, make available to Dealer an effective registration statement under the Securities Act to cover the resale of such Hedge Shares and (A) enter into an agreement, in form and substance reasonably satisfactory to Dealer, substantially in the form of an underwriting agreement for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business, (B) provide accountant’s “comfort” letters in customary form for underwritten follow-on offerings of equity securities, (C) provide disclosure opinions of nationally recognized outside counsel to Counterparty reasonably acceptable to Dealer, (D) provide other customary opinions, certificates and closing documents customary in form for underwritten follow-on offerings of

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equity securities of companies of comparable size, maturity and lines of business and (E) afford Dealer a reasonable opportunity to conduct a “due diligence” investigation with respect to Counterparty customary in scope for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business; provided, however, that if Dealer, in its sole commercially reasonable discretion, is not satisfied with access to due diligence materials, the results of its due diligence investigation, or the procedures and documentation for the registered offering referred to above, then clause (ii) or clause (iii) of this Section 8(c) shall apply at the election of Counterparty; (ii) in order to allow Dealer to sell the Hedge Shares in a private placement, enter into a private placement agreement substantially similar to private placement purchase agreements customary for private placements of equity securities, in form and substance satisfactory to Dealer, including customary representations, covenants, blue sky and other governmental filings and/or registrations, indemnities to Dealer, due diligence rights (for Dealer or any designated buyer of the Hedge Shares from Dealer), opinions and certificates and such other documentation as is customary for private placement agreements, all reasonably acceptable to Dealer (in which case, the Calculation Agent shall make any adjustments to the terms of the Transaction that are necessary, in its reasonable judgment, to compensate Dealer for any discount from the public market price of the Shares incurred on the sale of Hedge Shares in a private placement); or (iii) purchase the Hedge Shares from Dealer at the VWAP Price on such Exchange Business Days, and in the amounts, requested by Dealer. “VWAP Price” means, on any Exchange Business Day, the per Share volume-weighted average price as displayed under the heading “Bloomberg VWAP” on Bloomberg Screen CDNS.Q <equity> AQR (or any successor thereto) in respect of the period from 9:30 a.m. to 4:00 p.m. (New York City time) on such Exchange Business Day (or if such volume-weighted average price is unavailable, the market value of one Share on such Exchange Business Day, as determined by the Calculation Agent using a volume-weighted method).

     (d) Repurchase and Conversion Rate Adjustment Notices. Counterparty shall, on (or prior to) any day on which Counterparty effects any repurchase of Shares or consummates or otherwise engages in any transaction or event (a “Conversion Rate Adjustment Event”) that would lead to an increase in the Conversion Rate, give Dealer a written notice of such repurchase or Conversion Rate Adjustment Event (a “Repurchase Notice”) on such day if, the number of outstanding Shares as determined on such day is (i) less than 257,769,000 (in the case of first such notice) or (ii) thereafter more than 11,410,000 less than the number of Shares included in the immediately preceding Repurchase Notice. In the event that Counterparty fails to provide Dealer with a Repurchase Notice on the day and in the manner specified in this Section 8(d) then, to the extent permitted by applicable law, Counterparty agrees to indemnify and hold harmless Dealer, its affiliates and their respective directors, officers, employees, agents and controlling persons (Dealer and each such person being an “Indemnified Party”) from and against any and all losses, claims, damages and liabilities (or actions in respect thereof), joint or several, to which such Indemnified Party is subject under applicable securities laws, including without limitation, Section 16 of the Exchange Act or under any state or federal law, regulation or regulatory order, as a result of such failure. Counterparty shall be relieved from liability to the extent that the Indemnified Party fails promptly to notify Counterparty of any action commenced against it in respect of which indemnity may be sought hereunder to the extent Counterparty is materially prejudiced as a result thereof. If for any reason the foregoing indemnification is unavailable to any Indemnified Party or insufficient in respect of any losses, claims, damages or liabilities referred to in this paragraph, then Counterparty, in lieu of indemnifying such Indemnified Party hereunder, shall contribute, to the maximum extent permitted by law, to the amount paid or payable by the Indemnified Party as a result of such loss, claim, damage or liability. In addition, Counterparty will reimburse, within 30 days, upon written request, any Indemnified Party for all reasonable expenses (including reasonable counsel fees and expenses) in connection with the investigation of, preparation for or defense or settlement of any pending or threatened claim or any action, suit or proceeding arising therefrom, whether or not such Indemnified Party is a party thereto and whether or not such claim, action, suit or proceeding is initiated or brought by or on behalf of Counterparty. This indemnity shall survive the completion of the Transaction contemplated by this Confirmation and any assignment and delegation of the Transaction made pursuant to this Confirmation or the Agreement shall inure to the benefit of any permitted assignee of Dealer.

     (e) Transfer and Assignment. Either party may transfer any of its rights or obligations under the Transaction with the prior written consent of the non-transferring party; provided that (i) Dealer may

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transfer or assign without any consent of Counterparty its rights and obligations hereunder, with respect to a number of Options corresponding to its Excess Ownership Position (as defined below) plus 1% of the number of Shares then outstanding, to any person, or any person whose obligations would be guaranteed by a person, in either case, with a rating for its long term, unsecured and unsubordinated indebtedness of A- or better by S&P, or A3 or better by Moody’s or, if either S&P or Moody’s ceases to rate such debt, at least an equivalent rating or better by a substitute agency rating mutually agreed by Counterparty and Dealer, (ii) Dealer may transfer or assign without any consent of Counterparty its rights and obligations hereunder in whole or in part to any parent of Dealer or any subsidiary of such parent (A) the obligations of which are guaranteed by Dealer or any parent of Dealer or (B) with a rating by Moody’s or S&P for its long-term, unsecured and unsubordinated debt that is equal to or greater than Dealer’s at the time of such transfer or assignment and (iii) Counterparty may assign its rights and obligations hereunder to the extent permitted in the next paragraph of this Section 8(e). If at any time at which (1) the Equity Percentage exceeds 8.5%, (2) the Option Equity Percentage exceeds 14.5% or (3) Dealer, Dealer Group (as defined below) or any person whose ownership position would be aggregated with that of Dealer or Dealer Group (Dealer, Dealer Group or any such person, a “Dealer Person”) under Section 203 of the Delaware General Corporation Law (the “DGCL Takeover Statute”), or any state or federal bank holding company or banking laws, or other federal, state or local regulations, regulatory orders or organizational documents or contracts of Counterparty that are, in each case, applicable to ownership of Shares (“Applicable Laws”), owns, beneficially owns, constructively owns, controls, holds the power to vote or otherwise meets a relevant definition of ownership in excess of a number of Shares equal to (x) the number of Shares that would give rise to reporting or registration obligations or other requirements (including obtaining prior approval by a state or federal regulator) of a Dealer Person under Applicable Laws (including, without limitation, “interested stockholder” or “acquiring person” status under the DGCL Takeover Statute) and with respect to which such requirements have not been met or the relevant approval has not been received minus (y) 1% of the number of Shares outstanding on the date of determination (any such condition described in clause (1), (2) or (3), an “Excess Ownership Position”), Dealer, in its commercially reasonable discretion, is unable to effect a transfer or assignment to a third party after its commercially reasonable efforts on pricing terms and within a time period reasonably acceptable to Dealer (the “Transfer Time Period”) (it being understood that a period of at least one Exchange Business Day shall be considered reasonable for this purpose (without prejudice to whether a shorter period of time would be considered reasonable)) such that an Excess Ownership Position no longer exists, Dealer may designate any Scheduled Trading Day as an Early Termination Date with respect to a portion (the “Terminated Portion”) of the Transaction, such that an Excess Ownership Position no longer exists following such partial termination; provided that, unless such Excess Ownership Position is the result of a Conversion Rate Adjustment Event or a repurchase of Shares by Counterparty, Dealer shall promptly notify Counterparty of its Excess Ownership Position and shall use its commercially reasonable efforts to consult with Counterparty during the Transfer Time Period regarding potential transfers or assignments to third parties prior to so designating an Early Termination Date. In the event that Dealer so designates an Early Termination Date with respect to a portion of the Transaction, a payment shall be made pursuant to Section 6 of the Agreement as if (i) an Early Termination Date had been designated in respect of a Transaction having terms identical to the Terminated Portion of the Transaction, (ii) Counterparty were the sole Affected Party with respect to such partial termination, (iii) such portion of the Transaction were the only Terminated Transaction and (iv) Dealer were the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement and to determine the amount payable pursuant to Section 6(e) of the Agreement. The “Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the number of Shares that Dealer and any of its affiliates subject to aggregation with Dealer for purposes of the “beneficial ownership” test under Section 13 of the Exchange Act and all persons who may form a “group” (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) with Dealer (collectively, “Dealer Group”) “beneficially own” (within the meaning of Section 13 of the Exchange Act) without duplication on such day and (B) the denominator of which is the number of Shares outstanding on such day. The “Option Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the sum of (1) the product of the Applicable Percentage, the Number of Options and the Option Entitlement and (2) the aggregate number of Shares underlying any other call option transaction sold by Dealer to Counterparty and (B) the denominator of which is the number of Shares outstanding on such day.

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

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

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

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

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

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

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

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

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

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

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

     (h) Early Unwind. In the event the sale by Counterparty of the Convertible Securities issued pursuant to the over-allotment option exercised on the date hereof is not consummated pursuant to the Purchase Agreement for any reason by the close of business in New York on the Premium Payment Date (or such later date as agreed upon by the parties, which in no event shall be later than June 29, 2010) (the Premium Payment Date or such later date being the “Early Unwind Date”), the Transaction shall automatically terminate (the “Early Unwind”) on the Early Unwind Date and the Transaction and all of the respective rights and obligations of Dealer and Counterparty hereunder shall be cancelled and terminated and Counterparty shall pay to Dealer, other than in cases involving a breach of the Purchase Agreement by

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Dealer or any affiliate of Dealer, an amount in cash equal to the aggregate amount of costs and expenses relating to the unwinding of Dealer’s hedging activities in respect of the Transaction (including market losses incurred in reselling any Shares purchased by Dealer or its affiliates in connection with such hedging activities, unless Counterparty agrees to purchase any such Shares at the cost at which Dealer purchased such Shares). Following such termination, cancellation and payment, each party shall be released and discharged by the other party from, and agrees not to make any claim against the other party with respect to, any obligations or liabilities of either party arising out of, and to be performed in connection with, the Transaction either prior to or after the Early Unwind Date. Dealer and Counterparty represent and acknowledge to the other that upon an Early Unwind and following the payment referred to above, all obligations with respect to the Transaction shall be deemed fully and finally discharged.

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

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

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

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

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

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

     (o) Role of Agent. Each party agrees and acknowledges that (i) J.P. Morgan Securities Inc., an affiliate of Dealer (“JPMSI”), has acted solely as agent and not as principal with respect to this Transaction and (ii) JPMSI has no obligation or liability, by way of guaranty, endorsement or otherwise, in any manner in respect of this Transaction (including, if applicable, in respect of the settlement thereof). Each party agrees it will look solely to the other party (or any guarantor in respect thereof) for performance of such other party’s obligations under this Transaction.

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

Yours faithfully, J.P. MORGAN SECURITIES INC., as agent for JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
By:	/s/ James Rothschild
	Name:	James Rothschild
	Title:	Managing Director

Agreed and Accepted By: CADENCE DESIGN SYSTEMS, INC.
By:	/s/ Kevin S. Palatnik
	Name:	Kevin S. Palatnik
	Title:	Sr. Vice President & Chief Financial Officer

JPMorgan Chase Bank, National Association
Organised under the laws of the United States as a National Banking Association
Main Office 1111 Polaris Parkway, Columbus, Ohio 43271
Registered as a branch in England & Wales branch No. BR000746
Registered Branch Office 125 London Wall, London EC2Y 5AJ
Authorised and regulated by the Financial Services Authority

Signature Page to Additional Bond Hedge
Confirmation

EX-10.05

Exhibit 10.05

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, CA 95134 Attention: Office of the General Counsel
From:	Morgan Stanley & Co. International plc c/o Morgan Stanley & Co. Inc. 1585 Broadway, 5th Floor New York, NY 10036
Re:	Additional Convertible Bond Hedge Transaction
Ref. No:	6537190
Date:	June 18, 2010

Dear Sir(s):

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

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

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

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

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

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

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

General Terms:
Trade Date:	June 18, 2010
Effective Date:	The closing date of the Convertible Securities issued pursuant to the over-allotment option exercised on the date hereof.
Option Style:	Modified American, as described under “Procedures for Exercise” below.
Option Type:	Call
Seller:	Dealer
Buyer:	Counterparty
Shares:	The Common Stock of Counterparty, par value USD 0.01 per share (Ticker Symbol: “CDNS”).
Number of Options:	The number of Convertible Securities in denominations of USD 1,000 principal amount purchased by the Initial Purchasers (as defined in the Purchase Agreement) at their option exercised on the date hereof pursuant to the second paragraph of Section 2 of the Purchase Agreement (as defined below). For the avoidance of doubt, the Number of Options outstanding shall be reduced by each exercise of Options hereunder.
Applicable Percentage:	10%
Option Entitlement:	As of any date, a number of Shares per Option equal to the “Conversion Rate” (as defined in the Indenture), but without regard to any adjustments to the Conversion Rate as set forth in Section 13.02 of

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	the Indenture (a “Make-Whole Fundamental Change Adjustment”) or a discretionary adjustment as set forth in Section 13.04(g) of the Indenture (a “Discretionary Adjustment”).
Strike Price:	As of any date, an amount in USD, rounded to the nearest cent (with 0.5 cents being rounded upwards), equal to USD 1,000 divided by the Option Entitlement as of such date.
Number of Shares:	As of any date, the product of the Number of Options, the Option Entitlement and the Applicable Percentage.
Premium:	USD 1,173,500.00.
Premium Payment Date:	The Effective Date
Exchange:	NASDAQ Global Select Market
Related Exchange:	All Exchanges
Procedures for Exercise:
Exercise Dates:	Each Conversion Date.
Conversion Date:	Each “Conversion Date” (as defined in the Indenture) occurring during the Exercise Period for Convertible Securities, excluding (A) Convertible Securities (“Exchanged Convertible Securities”) (i) with respect to which Counterparty has elected the “Exchange in Lieu of Conversion” option to designate a financial institution to deliver the consideration due upon any conversion of any Convertible Securities in exchange for such Convertible Securities and (ii) that have been accepted by the designated financial institution pursuant to Section 13.09 of the Indenture and (B) Convertible Securities that are “Relevant Convertible Securities” under (and as defined in) the Base Convertible Bond Hedge Transaction dated June 9, 2010 (Ref. No. 6537190) between Dealer and Counterparty (the “Base Convertible Bond Hedge Transaction Confirmation”) (such Convertible Securities, the “Relevant Convertible Securities” for such Conversion Date). For the purpose of determining whether any Convertible Securities will be Relevant Convertible Securities hereunder or “Relevant Convertible Securities” under the Base Convertible Bond Hedge Transaction Confirmation, Convertible Securities that are converted pursuant to the Indenture shall be allocated first to the Base Convertible Bond Hedge Transaction Confirmation until all Options thereunder are exercised or terminated.
	If such designated financial institution fails to deliver the consideration due upon such conversion and, as a result, Counterparty is required to deliver such consideration pursuant to Section 13.09(e) of the

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	Indenture, Counterparty shall, promptly following such failure, notify Dealer in writing of such failure and the number of Exchanged Convertible Securities affected by such failure (such notice, a “Failed Exchange Notice”). The receipt by Dealer of a Failed Exchange Notice shall constitute an Additional Termination Event in respect of which Dealer shall designate an Exchange Business Day within a commercially reasonable period of time following receipt of such Failed Exchange Notice (which in no event shall be earlier than the related settlement date for the Exchanged Convertible Securities) as an Early Termination Date with respect to a portion of the Transaction corresponding to a number of Options (the “Cancelled Options”) equal to the lesser of (A) the number of such Exchanged Convertible Securities specified in such Failed Exchange Notice minus the number of Cancelled Options (as defined in the Base Convertible Bond Hedge Transaction Confirmation), if any, that relate to such Exchanged Convertible Securities and (B) the Number of Options as of the date Dealer designates such Early Termination Date and, as of such date, the Number of Options shall be reduced by the number of Cancelled Options. Any payment hereunder with respect to such termination shall be calculated pursuant to Section 6 of the Agreement as if (1) an Early Termination Date had been designated in respect of a Transaction having terms identical to this Transaction and a Number of Options equal to the number of Cancelled Options, (2) Counterparty were the sole Affected Party with respect to such Additional Termination Event and (3) the terminated portion of the Transaction were the sole Affected Transaction.
Exercise Period:	The period from and excluding the Effective Date to and including the Expiration Date.
Expiration Date:	The earlier of (i) the last day on which any Convertible Securities remain outstanding and (ii) the “Maturity Date” (as defined in the Indenture).
Automatic Exercise on Conversion Dates:	Applicable; and means that on each Conversion Date, a number of Options equal to the number of Relevant Convertible Securities for such Conversion Date in denominations of USD1,000 principal amount shall be automatically exercised, subject to “Notice of Exercise” below.
Notice Deadline:	In respect of any exercise of Options hereunder on any Conversion Date, 5:00 P.M., New York City time, on the Exchange Business Day prior to the first “Scheduled Trading Day” of the “Observation Period” (each as defined in the Indenture) with

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

Notice of Exercise:

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

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	hereunder, Dealer’s obligation to make any payment in respect of such exercise shall be permanently extinguished, and late notice shall not cure such failure.
Dealer’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of Giving Notice:	As specified in Section 6(b) below.
Settlement Terms:
Settlement Method:	Cash Settlement.
Settlement Date:	In respect of an Exercise Date occurring on a Conversion Date, the settlement date for the cash to be paid in respect of the Relevant Convertible Securities converted on such Conversion Date pursuant to Section 13.03(a) or 13.02(b) of the Indenture, as the case may be; provided that the Settlement Date will not be prior to the Exchange Business Day immediately following the date Counterparty provides the Notice of Delivery Obligation prior to 5:00 P.M., New York City time.
Delivery Obligation:	In lieu of the obligations set forth in Section 8.1 of the Equity Definitions, and subject to “Notice of Exercise” above, in respect of an Exercise Date occurring on a Conversion Date, Dealer will pay to Counterparty, on the related Settlement Date, an amount of cash in USD equal to the product of (i) the Applicable Percentage and (ii) the aggregate amount of cash, if any, in excess of USD1,000 per Convertible Security (in denominations of USD1,000) that Counterparty would be obligated to pay to holder(s) of the Relevant Convertible Securities for such Conversion Date pursuant to Section 13.03(a) of the Indenture (the “Convertible Obligation”); provided that such obligation shall be determined excluding any cash that Counterparty is obligated to pay to holder(s) of the Relevant Convertible Securities as a result of any adjustments to the Conversion Rate pursuant to a Make-Whole Fundamental Change Adjustment or a Discretionary Adjustment and any interest payment that Counterparty is obligated to deliver to holder(s) of the Relevant Convertible Securities for such Conversion Date.
Notice of Delivery Obligation:	No later than 5:00 P.M., New York City time, on the Exchange Business Day immediately following the last day of the relevant Observation Period, Counterparty shall give Dealer notice of the final amount of cash comprising the Convertible Obligation; provided that, with respect to any Exercise Date occurring during the Final Convertibility Period, Counterparty may provide

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	Dealer with a single notice of the aggregate amount of cash comprising the Convertible Obligations for all Exercise Dates occurring in such period (it being understood, for the avoidance of doubt, that the requirement of Counterparty to deliver such notice shall not limit Counterparty’s obligations with respect to Notice of Exercise).
Adjustments:
Method of Adjustment:	Notwithstanding Section 11.2 of the Equity Definitions (and, for the avoidance of doubt, in lieu of any adjustments pursuant to such section), upon the occurrence of any event or condition set forth in Section 13.05 or sub-sections (a) through (e) of Section 13.04 of the Indenture (each an “Adjustment Event”) and the Calculation Agent receiving notice of the adjustments to be made to the terms of the Indenture and the Convertible Securities in respect of such Adjustment Event pursuant to the succeeding sentence, the Calculation Agent shall make a corresponding adjustment (in respect of any such adjustment under the Indenture) to the terms relevant to the exercise, settlement or payment of the Transaction; provided that, in the case of any adjustment to the terms of the Indenture and the Convertible Securities that involves an exercise of discretion by Counterparty or its board of directors (including, without limitation, pursuant to Section 13.05 of the Indenture or in connection with any proportional adjustment or the determination of the fair value of any securities, property, rights or other assets), then in each such case, the Counterparty agrees to exercise such discretion in good faith and in a commercially reasonable manner and to promptly provide the Calculation Agent with any additional information it reasonably requests (in addition to any information required to be provided pursuant to the succeeding sentence) about the Counterparty’s calculations and methodology for such adjustment. Promptly upon the occurrence of any Adjustment Event, Counterparty shall notify the Calculation Agent of such Adjustment Event; and once the adjustments to be made to the terms of the Indenture and the Convertible Securities in respect of such Adjustment Event have been determined, Counterparty shall promptly (and in any event within five Exchange Business Days after such determination) notify the Calculation Agent in writing of the details of such adjustments.

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Extraordinary Events:
Merger Events:	Notwithstanding Section 12.1(b) of the Equity Definitions, a “Merger Event” means the occurrence of any event or condition set forth in Section 10.01 or 13.06 of the Indenture.
Consequences of Merger Events:	Notwithstanding Section 12.2 of the Equity Definitions (and, for the avoidance of doubt, in lieu of any adjustments or other consequences pursuant to such section), upon the occurrence of a Merger Event, the Calculation Agent shall make a corresponding adjustment (in respect of any adjustment on account of such Merger Event under the Indenture) to the terms relevant to the exercise, settlement or payment of the Transaction; provided that such adjustment shall be made without regard to any adjustment to the Conversion Rate pursuant to a Make-Whole Fundamental Change Adjustment or a Discretionary Adjustment; and provided further that if, with respect to a Merger Event, the consideration for the Shares includes (or, at the option of a holder of Shares, may include) shares (or depositary receipts with respect to shares) of an entity or person not organized under the laws of the United States, any State thereof or the District of Columbia, Cancellation and Payment (Calculation Agent Determination) shall apply.
Notice of Merger Consideration and Consequences:	Upon the occurrence of a Merger Event that causes the Shares to be converted into the right to receive more than a single type of consideration (determined based in part upon any form of stockholder election), Counterparty shall reasonably promptly (but in any event on or prior to the relevant merger date) notify the Calculation Agent of (i) the type and amount of consideration that a holder of Shares would have been entitled to in the case of reclassifications, consolidations, mergers, sales or transfers of assets or other transactions that cause Shares to be converted into the right to receive more than a single type of consideration, (ii) the weighted average of the types and amounts of consideration to be received by the holders of Shares that affirmatively make such an election, and (iii) the details of the adjustment to be made under the Indenture in respect of such Merger Event.
Nationalization, Insolvency or Delisting:	Cancellation and Payment (Calculation Agent Determination); provided that (i) Section 12.6(a)(iii) of the Equity Definitions shall be amended to delete, in the definition of the term “Delisting” the parenthetical “(or will cease)” and (ii) in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it will also constitute a Delisting if the

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	Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.
Additional Disruption Events:
(a) Change in Law:	Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof with the phrase “or announcement or statement of the interpretation” and (ii) replacing the word “Shares” with the phrase “Hedge Positions” in clause (X) thereof.
(b) Failure to Deliver:	Applicable
(c) Insolvency Filing:	Applicable
(d) Hedging Disruption:	Applicable; provided that Section 12.9(a)(v) of the Equity Definitions is hereby amended by inserting the following proviso at the end thereof: “provided that such inability described in clause (A) or (B) shall not constitute a “Hedging Disruption” unless (x) such inability does not result from factors particular to Hedging Party (such as Hedging Party“s creditworthiness or financial position, or particular actions or transactions undertaken by the Hedging Party unrelated to the hedging of the Transaction) and (y) such inability will result in continued performance by the Hedging Party under the Transaction being commercially unreasonable or commercially impracticable”.
Hedging Party:	Dealer
Determining Party:	Dealer for all applicable Additional Disruption Events
Non-Reliance:	Applicable
Agreements and Acknowledgments Regarding Hedging Activities:	Applicable
Additional Acknowledgments:	Applicable

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

     4. Account Details:

Dealer Payment Instructions:

Citibank, N.A.
Account Name: Morgan Stanley and Co.

Counterparty Payment Instructions:

To be provided by Counterparty.

     5. Offices:

The Office of Dealer for the Transaction is: New York

Morgan Stanley & Co. International plc
c/o Morgan Stanley & Co. Inc.
1585 Broadway, 5^th Floor
New York, NY 10036
Attention:      Todd Bosch

The Office of Counterparty for the Transaction is:

Inapplicable. Counterparty is not a Multibranch Party.

     6. Notices: For purposes of this Confirmation:

(a) Address for notices or communications to Counterparty:

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, California 95134
Attn:	Office of the General Counsel
Facsimile:	(408) 904-6946

(b) Address for notices or communications to Dealer:

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To:	Morgan Stanley & Co. International plc c/o Morgan Stanley & Co. Inc. 1585 Broadway, 5th Floor New York, NY 10036
Attn:	Todd Bosch
With a copy to:	Morgan Stanley & Co. International c/o Morgan Stanley & Co. 1221 Avenue of the Americas, 34th Floor New York, NY 10020
Attn:	Todd Bosch

     7. Representations, Warranties and Agreements:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     8. Other Provisions:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Yours faithfully, MORGAN STANLEY & CO. INTERNATIONAL PLC
By:	/s/ Rajul Patel
	Name:	Rajul Patel
	Title:	Executive Director
MORGAN STANLEY & CO. INCORPORATED as Agent
By:	/s/ Serkan Savasoglu
	Name:	Serkan Savasoglu
	Title:	Managing Director

Agreed and Accepted By: CADENCE DESIGN SYSTEMS, INC.
By:	/s/ Kevin S. Palatnik
	Name:	Kevin S. Palatnik
	Title:	Sr. Vice President & Chief Financial Officer

Signature Page to Additional Bond Hedge
Confirmation

EX-10.06

Exhibit 10.06

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, CA 95134 Attention: Office of the General Counsel
From:	Deutsche Bank AG, London Branch Winchester House 1 Great Winchester St, London EC2N 2DB
	c/o Deutsche Bank Securities Inc. 60 Wall Street New York, NY 10005
Re:	Additional Convertible Bond Hedge Transaction
Ref. No:	388068
Date:	June 18, 2010

Dear Sir(s):

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

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

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

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

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

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

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

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

General Terms:
Trade Date:	June 18, 2010
Effective Date:	The closing date of the Convertible Securities issued

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	pursuant to the over-allotment option exercised on the date hereof.
Option Style:	Modified American, as described under “Procedures for Exercise” below.
Option Type:	Call
Seller:	Dealer
Buyer:	Counterparty
Shares:	The Common Stock of Counterparty, par value USD 0.01 per share (Ticker Symbol: “CDNS”).
Number of Options:	The number of Convertible Securities in denominations of USD 1,000 principal amount purchased by the Initial Purchasers (as defined in the Purchase Agreement) at their option exercised on the date hereof pursuant to the second paragraph of Section 2 of the Purchase Agreement (as defined below). For the avoidance of doubt, the Number of Options outstanding shall be reduced by each exercise of Options hereunder.
Applicable Percentage:	30%
Option Entitlement:	As of any date, a number of Shares per Option equal to the “Conversion Rate” (as defined in the Indenture), but without regard to any adjustments to the Conversion Rate as set forth in Section 13.02 of the Indenture (a “Make-Whole Fundamental Change Adjustment”) or a discretionary adjustment as set forth in Section 13.04(g) of the Indenture (a “Discretionary Adjustment”).
Strike Price:	As of any date, an amount in USD, rounded to the nearest cent (with 0.5 cents being rounded upwards), equal to USD 1,000 divided by the Option Entitlement as of such date.
Number of Shares:	As of any date, the product of the Number of Options, the Option Entitlement and the Applicable Percentage.
Premium:	USD 3,520,500.00.
Premium Payment Date:	The Effective Date
Exchange:	NASDAQ Global Select Market
Related Exchange:	All Exchanges
Procedures for Exercise:
Exercise Dates:	Each Conversion Date.
Conversion Date:	Each “Conversion Date” (as defined in the Indenture) occurring during the Exercise Period for Convertible Securities, excluding (A) Convertible Securities (“Exchanged Convertible Securities”)(i)with respect to which Counterparty has elected the “Exchange in Lieu of Conversion” option to

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

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

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	Early Termination Date had been designated in respect of a Transaction having terms identical to this Transaction and a Number of Options equal to the number of Cancelled Options, (2) Counterparty were the sole Affected Party with respect to such Additional Termination Event and (3) the terminated portion of the Transaction were the sole Affected Transaction.
Exercise Period:	The period from and excluding the Effective Date to and including the Expiration Date.
Expiration Date:	The earlier of (i) the last day on which any Convertible Securities remain outstanding and (ii) the “Maturity Date” (as defined in the Indenture).
Automatic Exercise on Conversion Dates:	Applicable; and means that on each Conversion Date, a number of Options equal to the number of Relevant Convertible Securities for such Conversion Date in denominations of USD1,000 principal amount shall be automatically exercised, subject to “Notice of Exercise” below.
Notice Deadline:	In respect of any exercise of Options hereunder on any Conversion Date, 5:00 P.M., New York City time, on the Exchange Business Day prior to the first “Scheduled Trading Day” of the “Observation Period” (each as defined in the Indenture) with respect to the Relevant Convertible Securities for such Conversion Date; provided that in the case of any exercise of Options hereunder in connection with the conversion of any Relevant Convertible Securities on any Conversion Date occurring during the period beginning on, and including, March 1, 2015 and ending on, and including, the second “Scheduled Trading Day” (as defined in the Indenture) immediately preceding the Maturity Date (such period, the “Final Convertibility Period”), the Notice Deadline shall be 5:30 P.M., New York City time, on the second “Scheduled Trading Day” immediately preceding the Maturity Date.
Notice of Exercise:	Notwithstanding anything to the contrary in the Equity Definitions, Dealer shall have no obligation to make any payment in respect of any exercise of Options hereunder unless Counterparty notifies Dealer in writing prior to the Notice Deadline in respect of such exercise of (i) the number of Options being exercised on such Exercise Date, (ii) the scheduled settlement date under the Indenture for the
	Relevant Convertible Securities for the Conversion Date corresponding to such Exercise Date, and (iii) the first “Scheduled Trading Day” (as defined in the Indenture) of the Observation Period; provided that,

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	notwithstanding the foregoing, such notice (and the related Automatic Exercise of Options) shall be effective if given after the Notice Deadline but prior to 5:00 P.M., New York City time, on the fifth Exchange Business Day of such Observation Period, in which event the Calculation Agent shall have the right to adjust the Convertible Obligation (as defined below) as appropriate to reflect the additional costs (including, but not limited to, hedging mismatches and market losses) and reasonable expenses incurred by Dealer in connection with its hedging activities (including the unwinding of any hedge position) as a result of its not having received such notice prior to the Notice Deadline; provided, further, that in the case of any exercise of Options hereunder in connection with the conversion of any Relevant Convertible Securities on any Conversion Date occurring during the Final Convertibility Period, the contents of such notice shall be as set forth in clause (i) above; and provided, further, that any “Notice of Exercise” delivered to Dealer pursuant to the Base Convertible Bond Hedge Transaction Confirmation shall be deemed to be a Notice of Exercise pursuant to this Confirmation and the terms of such Notice of Exercise shall apply, mutatis mutandis, to this Confirmation. For the avoidance of doubt and subject to the first proviso in the immediately preceding sentence, if Counterparty fails to give such notice when due in respect of any exercise of Options hereunder, Dealer’s obligation to make any payment in respect of such exercise shall be permanently extinguished, and late notice shall not cure such failure.
Dealer’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of Giving Notice:	As specified in Section 6(b) below.
Settlement Terms:
Settlement Method:	Cash Settlement.
Settlement Date:	In respect of an Exercise Date occurring on a Conversion Date, the settlement date for the cash to be paid in respect of the Relevant Convertible Securities converted on such Conversion Date pursuant to Section 13.03(a) or 13.02(b) of the Indenture, as the case may be; provided that the Settlement Date will not be prior to the Exchange Business Day immediately following the date Counterparty provides the Notice of Delivery Obligation prior to 5:00 P.M., New York City time.
Delivery Obligation:	In lieu of the obligations set forth in Section 8.1 of the Equity Definitions, and subject to “Notice of

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	Exercise” above, in respect of an Exercise Date occurring on a Conversion Date, Dealer will pay to Counterparty, on the related Settlement Date, an amount of cash in USD equal to the product of (i) the Applicable Percentage and (ii) the aggregate amount of cash, if any, in excess of USD1,000 per Convertible Security (in denominations of USD1,000) that Counterparty would be obligated to pay to holder(s) of the Relevant Convertible Securities for such Conversion Date pursuant to Section 13.03(a) of the Indenture (the “Convertible Obligation”); provided that such obligation shall be determined excluding any cash that Counterparty is obligated to pay to holder(s) of the Relevant Convertible Securities as a result of any adjustments to the Conversion Rate pursuant to a Make-Whole Fundamental Change Adjustment or a Discretionary Adjustment and any interest payment that Counterparty is obligated to deliver to holder(s) of the Relevant Convertible Securities for such Conversion Date.
Notice of Delivery Obligation:	No later than 5:00 P.M., New York City time, on the Exchange Business Day immediately following the last day of the relevant Observation Period, Counterparty shall give Dealer notice of the final amount of cash comprising the Convertible Obligation; provided that, with respect to any Exercise Date occurring during the Final Convertibility Period, Counterparty may provide Dealer with a single notice of the aggregate amount of cash comprising the Convertible Obligations for all Exercise Dates occurring in such period (it being understood, for the avoidance of doubt, that the requirement of Counterparty to deliver such notice shall not limit Counterparty’s obligations with respect to Notice of Exercise).
Adjustments:
Method of Adjustment:	Notwithstanding Section 11.2 of the Equity Definitions (and, for the avoidance of doubt, in lieu of any adjustments pursuant to such section), upon the occurrence of any event or condition set forth in Section 13.05 or sub-sections (a) through (e) of Section 13.04 of the Indenture (each an “Adjustment Event”) and the Calculation Agent receiving notice of the adjustments to be made to the terms of the Indenture and the Convertible Securities in respect of such Adjustment Event pursuant to the succeeding sentence, the Calculation Agent shall make a corresponding adjustment (in respect of any such adjustment under the Indenture) to the terms relevant to the exercise, settlement or payment of the Transaction; provided that, in the case of any adjustment to the terms of the Indenture and the

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	Convertible Securities that involves an exercise of discretion by Counterparty or its board of directors (including, without limitation, pursuant to Section 13.05 of the Indenture or in connection with any proportional adjustment or the determination of the fair value of any securities, property, rights or other assets), then in each such case, the Counterparty agrees to exercise such discretion in good faith and in a commercially reasonable manner and to promptly provide the Calculation Agent with any additional information it reasonably requests (in addition to any information required to be provided pursuant to the succeeding sentence) about the Counterparty’s calculations and methodology for such adjustment. Promptly upon the occurrence of any Adjustment Event, Counterparty shall notify the Calculation Agent of such Adjustment Event; and once the adjustments to be made to the terms of the Indenture and the Convertible Securities in respect of such Adjustment Event have been determined, Counterparty shall promptly (and in any event within five Exchange Business Days after such determination) notify the Calculation Agent in writing of the details of such adjustments.
Extraordinary Events:
Merger Events:	Notwithstanding Section 12.1(b) of the Equity Definitions, a “Merger Event” means the occurrence of any event or condition set forth in Section 10.01 or 13.06 of the Indenture.
Consequences of Merger Events:	Notwithstanding Section 12.2 of the Equity Definitions (and, for the avoidance of doubt, in lieu of any adjustments or other consequences pursuant to such section), upon the occurrence of a Merger Event, the Calculation Agent shall make a corresponding adjustment (in respect of any adjustment on account of such Merger Event under the Indenture) to the terms relevant to the exercise, settlement or payment of the Transaction; provided that such adjustment shall be made without regard to any adjustment to the Conversion Rate pursuant to a Make-Whole Fundamental Change Adjustment or a Discretionary Adjustment; and provided further that if, with respect to a Merger Event, the consideration for the Shares includes (or, at the option of a holder of Shares, may include) shares (or depositary receipts with respect to shares) of an entity or person not organized under the laws of the United States, any State thereof or the District of Columbia, Cancellation and Payment (Calculation Agent Determination) shall apply.
Notice of Merger Consideration and Consequences:	Upon the occurrence of a Merger Event that causes the Shares to be converted into the right to receive

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	more than a single type of consideration (determined based in part upon any form of stockholder election), Counterparty shall reasonably promptly (but in any event on or prior to the relevant merger date) notify the Calculation Agent of (i) the type and amount of consideration that a holder of Shares would have been entitled to in the case of reclassifications, consolidations, mergers, sales or transfers of assets or other transactions that cause Shares to be converted into the right to receive more than a single type of consideration, (ii) the weighted average of the types and amounts of consideration to be received by the holders of Shares that affirmatively make such an election, and (iii) the details of the adjustment to be made under the Indenture in respect of such Merger Event.
Nationalization, Insolvency or Delisting:	Cancellation and Payment (Calculation Agent Determination); provided that (i) Section 12.6(a)(iii) of the Equity Definitions shall be amended to delete, in the definition of the term “Delisting” the parenthetical “(or will cease)” and (ii) in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it will also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.
Additional Disruption Events:
(a) Change in Law:	Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof with the phrase “or announcement or statement of the interpretation” and (ii) replacing the word “Shares” with the phrase “Hedge Positions” in clause (X) thereof.
(b) Failure to Deliver:	Applicable
(c) Insolvency Filing:	Applicable
(d) Hedging Disruption:	Applicable; provided that Section 12.9(a)(v) of the Equity Definitions is hereby amended by inserting the following proviso at the end thereof: “provided that such inability described in clause (A) or (B) shall not constitute a “Hedging Disruption” unless (x) such inability does not result from factors particular to Hedging Party (such as Hedging Party“s creditworthiness or financial position, or particular actions or transactions undertaken by the Hedging

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	Party unrelated to the hedging of the Transaction) and (y) such inability will result in continued performance by the Hedging Party under the Transaction being commercially unreasonable or commercially impracticable”.
Hedging Party:	Dealer
Determining Party:	Dealer for all applicable Additional Disruption Events
Non-Reliance:	Applicable
Agreements and Acknowledgments Regarding Hedging Activities:	Applicable
Additional Acknowledgments:	Applicable
3. Calculation Agent:

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

     4. Account Details:

     Dealer Payment Instructions:

Deutsche Bank AG, London Branch
The Bank of New York
Account Name: Deutsche Bank Securities, Inc.

Counterparty Payment Instructions:

To be provided by Counterparty.

     5. Offices:

     The Office of Dealer for the Transaction is: London

Deutsche Bank AG, London
Branch Winchester house
1 Great Winchester St, London
EC2N 2DB

     The Office of Counterparty for the Transaction is:

Inapplicable. Counterparty is not a Multibranch Party.

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     6. Notices: For purposes of this Confirmation:

(a) Address for notices or communications to Counterparty:

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, California 95134
Attn:	Office of the General Counsel
Facsimile:	(408) 904-6946

(b) Address for notices or communications to Dealer:

To:	Deutsche Bank AG, London Branch c/o Deutsche Bank Securities Inc. 60 Wall Street New York, NY 10005
Attn:	Peter Barna

With a copy to:	Deutsche Bank AG, London Branch c/o Deutsche Bank Securities Inc. 60 Wall Street New York, NY 10005
Attn:	Lars Kestner

     7. Representations, Warranties and Agreements:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     8. Other Provisions:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

16

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     Dealer is regulated by the Financial Services Authority.

Yours faithfully, DEUTSCHE BANK AG, LONDON BRANCH
By:	/s/ Lars Kestner
	Name:	Lars Kestner
	Title:	Managing Director
By:	/s/ Michael Sanderson
	Name:	Michael Sanderson
	Title:	Managing Director
DEUTSCHE BANK SECURITIES INC., acting solely as Agent in connection with the Transaction
By:	/s/ Lars Kestner
	Name:	Lars Kestner
	Title:	Managing Director
By:	/s/ Michael Sanderson
	Name:	Michael Sanderson
	Title:	Managing Director

Confirmed and Acknowledged as of the date first above written: CADENCE DESIGN SYSTEMS, INC.
By:	/s/ Kevin S. Palatnik
	Name:	Kevin S. Palatnik
	Title:	Sr. Vice President & Chief Financial Officer

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

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

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

Signature Page to Additional Bond Hedge
Confirmation

EX-10.07

Exhibit 10.07

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, CA 95134 Attention: Office of the General Counsel
From:	JPMorgan Chase Bank, National Association P.O. Box 161 60 Victoria Embankment London EC4Y 0JP England
Re:	Base Issuer Warrant Transaction
Date:	June 9, 2010

Dear Sir(s):

     The purpose of this communication (this “Confirmation”) is to set forth the terms and conditions of the above-referenced transaction entered into on the Trade Date specified below (the “Transaction”) between JPMorgan Chase Bank, National Association, London Branch (“Dealer”) and Cadence Design Systems, Inc. (“Issuer”). This communication constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below.

     1. This Confirmation is subject to, and incorporates, the definitions and provisions of the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc. (“ISDA”). For purposes of the Equity Definitions, each reference herein to a Warrant shall be deemed to be a reference to a Call Option or an Option, as the context requires.

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

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

JPMorgan Chase Bank, National Association
Organised under the laws of the United States as a National Banking Association
Main Office 1111 Polaris Parkway, Columbus, Ohio 43271
Registered as a branch in England & Wales branch No. BR000746
Registered Branch Office 125 London Wall, London EC2Y 5AJ
Authorised and regulated by the Financial Services Authority

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

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

     2. The Transaction is a Warrant Transaction, which shall be considered a Share Option Transaction for purposes of the Equity Definitions. The terms of the particular Transaction to which this Confirmation relates are as follows:

General Terms:
Trade Date:	June 9, 2010
Effective Date:	June 15, 2010, or such other date as agreed between the parties, subject to Section 8(k) below.
Components:	The Transaction will be divided into individual Components, each with the terms set forth in this Confirmation, and, in particular, with the Number of Warrants and Expiration Date set forth in this Confirmation. The payments and deliveries to be made upon settlement of the Transaction will be determined separately for each Component as if each Component were a separate Transaction under the Agreement.
Warrant Style:	European
Warrant Type:	Call
Seller:	Issuer
Buyer:	Dealer
Shares:	The Common Stock of Issuer, par value USD 0.01 per share (Ticker Symbol: “CDNS”).
Number of Warrants:	For each Component, as provided in Annex A to this Confirmation.
Warrant Entitlement:	One Share per Warrant
Strike Price:	USD 10.78
Premium:	USD 18,951,480.00
Premium Payment Date:	The Effective Date
Exchange:	NASDAQ Global Select Market
Related Exchange:	All Exchanges.
Procedures for Exercise:
In respect of any Component:

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Expiration Time:	Valuation Time
Expiration Date:	As provided in Annex A to this Confirmation (or, if such date is not a Scheduled Trading Day, the next following Scheduled Trading Day that is not already an Expiration Date for another Component); provided that if that date is a Disrupted Day, the Expiration Date for such Component shall be the first succeeding Scheduled Trading Day that is not a Disrupted Day and is not or is not deemed to be an Expiration Date in respect of any other Component of the Transaction hereunder; and provided further that if the Expiration Date has not occurred pursuant to the preceding proviso as of the Final Disruption Date, the Calculation Agent shall have the right to elect, in its sole discretion, that the Final Disruption Date shall be the Expiration Date for such Component (irrespective of whether such date is an Expiration Date in respect of any other Component for the Transaction). “Final Disruption Date” means December 21, 2015. Notwithstanding the foregoing and anything to the contrary in the Equity Definitions, if a Market Disruption Event occurs on any Expiration Date, the Calculation Agent may determine that such Expiration Date is a Disrupted Day only in part, in which case (i) the Calculation Agent shall make adjustments to the Number of Warrants for the relevant Component for which such day shall be the Expiration Date and shall designate the Scheduled Trading Day determined in the manner described in the immediately preceding sentence as the Expiration Date for the remaining Warrants for such Component and (ii) the VWAP Price for such Disrupted Day shall be determined by the Calculation Agent based on transactions in the Shares effected on such Disrupted Day taking into account the nature and duration of such Market Disruption Event on such day. Section 6.6 of the Equity Definitions shall not apply to any Valuation Date occurring on an Expiration Date.
Market Disruption Event:	Section 6.3(a) of the Equity Definitions is hereby amended by (A) deleting the words “during the one hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be,” in clause (ii) thereof and (B) replacing the words “or (iii) an Early Closure.” therein with “(iii) an Early Closure, or (iv) a Regulatory Disruption.”.
	Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the term “Scheduled Closing Time” in the fourth line thereof.
Regulatory Disruption:	Any event that Dealer, in its reasonable discretion based on advice of counsel, determines makes it

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	appropriate with regard to any legal, regulatory or self-regulatory requirements or generally applicable related policies and procedures applicable to Dealer and applied to the Transaction in a non-discriminatory manner, for Dealer to refrain from or decrease any market activity in connection with the Transaction.
Automatic Exercise:	Applicable; and means that the Number of Warrants for the corresponding Expiration Date will be deemed to be automatically exercised at the Expiration Time on such Expiration Date unless Dealer notifies Seller (by telephone or in writing) prior to the Expiration Time on such Expiration Date that it does not wish Automatic Exercise to occur, in which case Automatic Exercise will not apply to such Expiration Date.
Issuer’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of Giving Notice:	As provided in Section 6(a) below.
Valuation Terms:
In respect of any Component:
Valuation Time:	At the close of trading of the regular trading session on the Exchange; provided that if the regular trading session is extended, the Calculation Agent shall determine the Valuation Time in its reasonable discretion.
Valuation Date:	The Expiration Date.
Settlement Terms:
In respect of any Component:
Settlement Currency:	USD
Net Share Settlement:	On each Settlement Date, Issuer shall deliver to Dealer a number of Shares equal to the Number of Shares to be Delivered for such Settlement Date to the account specified by Dealer and cash in lieu of any fractional Share valued at the VWAP Price on the Valuation Date corresponding to such Settlement Date. If, in the reasonable judgment of Issuer or Dealer, based on advice of counsel, for any reason, the Shares deliverable upon Net Share Settlement would not be immediately freely transferable by Dealer under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), then Dealer may elect to either (x) accept delivery of such Shares notwithstanding any restriction on transfer or (y) have the provisions set forth in Section 8(b) below apply.

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	The Number of Shares to be Delivered shall be delivered by Issuer to Dealer no later than 5:00 p.m. (local time in New York City) on the relevant Settlement Date.
Number of Shares to be Delivered:	In respect of any Exercise Date, subject to the last sentence of Section 9.5 of the Equity Definitions, the product of (i) the number of Warrants exercised or deemed exercised on such Exercise Date, (ii) the Warrant Entitlement and (iii) (A) the excess of the VWAP Price on the Valuation Date occurring in respect of such Exercise Date over the Strike Price (or, if there is no such excess, zero) divided by (B) such VWAP Price.
VWAP Price:	For any Exchange Business Day, the volume weighted average price per Share for the regular trading session (including any extensions thereof) of the Exchange on such Exchange Business Day (without regard to pre-open or after hours trading outside of such regular trading session), as published by Bloomberg at 4:15 P.M., New York City time (or 15 minutes following the end of any extension of the regular trading session), on such Exchange Business Day, on Bloomberg page “CDNS.Q <Equity> AQR” (or any successor thereto) (or if such published volume weighted average price is unavailable or is manifestly incorrect, the market value of one Share on such Exchange Business Day, as reasonably determined by the Calculation Agent using a volume weighted method).
Other Applicable Provisions:	The provisions of Sections 9.1(c), 9.4, 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction; provided that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws that exist as a result of the fact that Issuer is the issuer of the Shares.
Adjustments:
In respect of any Component:
Method of Adjustment:	Calculation Agent Adjustment; provided that in respect of an Extraordinary Dividend, “Calculation Agent Adjustment” shall be as described in the provision below. For the avoidance of doubt, Calculation Agent Adjustment shall continue to apply until the obligations of the parties (including any obligations of Issuer pursuant to Section 8(e) below) under the Transaction have been satisfied in full.

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Extraordinary Dividend:	Any cash dividend or distribution on the Shares with an ex-dividend date occurring on or after the Trade Date and on or prior to the Expiration Date (or, if any Deficit Shares are owed pursuant to Section 8(e) below, such later date on which Issuer’s obligations under this Transaction have been satisfied in full).
Extraordinary Dividend Adjustment:	If at any time during the period from and including the Trade Date, to and including the Expiration Date for the Component with the latest Expiration Date (or, if any Deficit Shares are owed pursuant to Section 8(e) below, such later date on which Issuer’s obligations under this Transaction have been satisfied in full), an ex-dividend date for an Extraordinary Dividend occurs or is deemed to occur, then the Calculation Agent will make adjustments to any one or more of the Strike Price, the Number of Warrants, the Warrant Entitlement and/or any other variable relevant to the exercise, settlement, payment or other terms of the Transaction as it determines appropriate to account for the economic effect on the Transaction of such Extraordinary Dividend.
Extraordinary Events:
New Shares:	In the definition of New Shares in Section 12.1(i) of the Equity Definitions (A) the text in clause (i) thereof shall be deleted in its entirety and replaced with “publicly quoted, traded or listed on any of the New York Stock Exchange, The NASDAQ Global Market or The NASDAQ Global Select Market (or their respective successors)” and (B) the phrase “and (iii) of an entity or person organized under the laws of the United States, any State thereof or the District of Columbia that also becomes Issuer under the Transaction following such Merger Event or Tender Offer” shall be inserted at the end thereof.
Consequences of Merger Events:
(a) Share-for-Share:	Modified Calculation Agent Adjustment
(b) Share-for-Other:	Cancellation and Payment (Calculation Agent Determination)
(c) Share-for-Combined:	Cancellation and Payment (Calculation Agent Determination); provided that the Calculation Agent may elect Component Adjustment for all or part of the Transaction.
Tender Offer:	Applicable.
Consequences of Tender Offers:
(a) Share-for-Share:	Modified Calculation Agent Adjustment
(b) Share-for-Other:	Modified Calculation Agent Adjustment
(c) Share-for-Combined:	Modified Calculation Agent Adjustment

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Modified Calculation Agent Adjustment:	Upon the occurrence of any Merger Event pursuant to which the holders of Issuer’s Shares would be entitled to receive cash, securities or other property for their Shares and for which Modified Calculation Agent Adjustment would apply, if, as a result of such Merger Event, Issuer would be different from the issuer of the Shares under this Confirmation, then, on or prior to the effective date of such Merger Event, the Issuer and the issuer of the Shares under this Confirmation will enter into a supplemental confirmation as a condition precedent to the adjustments contemplated in Section 12.2(e)(i) of the Equity Definitions, with such supplemental confirmation containing representations, warranties and agreements relating to securities law and other issues as requested by Dealer that Dealer has determined, in its reasonable discretion, to be reasonably necessary or appropriate to allow Dealer to continue as a party to the Transaction, as adjusted under Section 12.2(e)(i) of the Equity Definitions, and to preserve its hedging or hedge unwind activities in connection with the Transaction in a manner compliant with applicable legal, regulatory or self-regulatory requirements, or with generally applicable related policies and procedures applicable to Dealer and applied to the Transaction in a non-discriminatory manner, and if such conditions are not met or if the Calculation Agent determines that no adjustment that it could make under Section 12.2(e)(i) of the Equity Definitions will produce a commercially reasonable result, then the consequences set forth in Section 12.2(e)(ii) of the Equity Definitions shall apply.
Nationalization, Insolvency or Delisting:	Cancellation and Payment (Calculation Agent Determination); provided that (i) Section 12.6(a)(iii) of the Equity Definitions shall be amended to delete, in the definition of the term “Delisting” the parenthetical “(or will cease)” and (ii) in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.
Additional Disruption Events:
(a) Change in Law:	Applicable; provided that Section 12.9(a)(ii) of the

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	Equity Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof with the phrase “or announcement or statement of the interpretation” and (ii) replacing the word “Shares” with the phrase “Hedge Positions” in clause (X) thereof.
(b) Failure to Deliver:	Not Applicable
(c) Insolvency Filing:	Applicable; provided that only Dealer shall have the right to terminate the Transaction upon an Insolvency Filing.
(d) Hedging Disruption:	Applicable; provided that (i) Section 12.9(a)(v) of the Equity Definitions is hereby amended by inserting the following two sentences at the end of such Section:
	“For the avoidance of doubt, the term “equity price risk” shall be deemed to include, but shall not be limited to, stock price and volatility risk. And, for the further avoidance of doubt, any such transactions or assets referred to in phrases (A) or (B) above must be available on commercially reasonable pricing terms.”
	(ii) Section 12.9(b)(iii) of the Equity Definitions is hereby amended by inserting in the third line thereof, after the words “to terminate the Transaction”, the words “or a portion of the Transaction affected by such Hedging Disruption”.
(e) Increased Cost of Hedging:	Applicable
(f) Loss of Stock Borrow:	Applicable
Maximum Stock Loan Rate:	2.00% per annum
(g) Increased Cost of Stock Borrow:	Applicable
Initial Stock Loan Rate:	0.25% per annum
Hedging Party:	Dealer for all applicable Additional Disruption Events.
Determining Party:	Dealer for all applicable Additional Disruption Events.
Non-Reliance:	Applicable
Agreements and Acknowledgments Regarding Hedging Activities:	Applicable
Additional Acknowledgments:	Applicable

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3. Calculation Agent:

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

     4. Account Details:

Dealer Payment Instructions:

JPMORGAN CHASE BANK, N.A.
Beneficiary JPMorgan Chase Bank, N.A. New York
Ref: Derivatives

Account for delivery of Shares to Dealer:

DTC 0060

Issuer Payment Instructions:

To be provided by Issuer.

     5. Offices:

The Office of Dealer for the Transaction is: London

JPMorgan Chase Bank, National Association
London Branch
P.O. Box 161
60 Victoria Embankment
London EC4Y 0JP
England

The Office of Issuer for the Transaction is:

Inapplicable. Issuer is not a Multibranch Party.

     6. Notices: For purposes of this Confirmation:

(a) Address for notices or communications to Issuer:

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, California 95134
Attn:	Office of the General Counsel
Facsimile:	(408) 904-6946

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(b) Address for notices or communications to Dealer:

To:	JPMorgan Chase Bank, National Association 4 New York Plaza, Floor 18 New York, NY 10004-2413
Attn:	Mariusz Kwasnik Operations Analyst, EDG Corporate Marketing

     7. Representations, Warranties and Agreements:

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

     (i) On the Trade Date, and as of the date of any election by Issuer of the Share Termination Alternative under (and as defined in) Section 8(a) below, none of Issuer and its officers and directors is aware of any material nonpublic information regarding Issuer or the Shares. On the Trade Date, all reports and other documents filed by Issuer with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), when considered as a whole (with the more recent such reports and documents deemed to amend inconsistent statements contained in any earlier such reports and documents), do not contain any untrue statement of a material fact or any omission of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading.

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

     (iii) Issuer is not entering into this Confirmation, and on the date of any election by Issuer of the Share Termination Alternative under Section 8(a) below, Issuer represents that it is not making such election, to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for Shares) or otherwise in violation of the Exchange Act.

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

     (v) Issuer shall not take any action to decrease the number of Available Shares below the Capped Number (each as defined below).

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

     (vii) (A) On the Trade Date and during the period starting on the first Expiration Date and ending on the last Expiration Date (the “Settlement Period”), the Shares or securities that are convertible into, or exchangeable or exercisable for Shares, are not, and shall not be, subject to a “restricted period,” as such term is defined in Regulation M under the Exchange Act (“Regulation M”) and (B) Issuer shall not engage in any “distribution,” as such term is defined in Regulation M

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until the second Exchange Business Day immediately following the Trade Date or Settlement Period, as applicable.

     (ix) Issuer agrees that it (A) will not during the Settlement Period make, or permit to be made, any public announcement (as defined in Rule 165(f) under the Securities Act) of any Merger Transaction or potential Merger Transaction unless such public announcement is made prior to the opening or after the close of the regular trading session on the Exchange for the Shares; (B) shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) notify Dealer following any such announcement that such announcement has been made; and (C) shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) provide Dealer with written notice specifying (i) Issuer’s average daily Rule 10b-18 Purchases (as defined in Rule 10b-18) during the three full calendar months immediately preceding the announcement date that were not effected through Dealer or its affiliates and (ii) the number of Shares purchased pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months preceding the announcement date. Such written notice shall be deemed to be a certification by Issuer to Dealer that such information is true and correct. In addition, Issuer shall promptly notify Dealer of the earlier to occur of the completion of such transaction and the completion of the vote by target shareholders. “Merger Transaction” means any merger, acquisition or similar transaction involving a recapitalization as contemplated by Rule 10b-18(a)(13)(iv) under the Exchange Act.

     (x) A number of Shares equal to the Capped Number have been reserved for issuance by all required corporate action of the Issuer. Any Shares issued or delivered in connection with the Transaction shall be duly authorized and, when delivered as contemplated hereby following the exercise of the Warrants in accordance with their terms and conditions, will be validly issued, fully paid and non-assessable, and the issuance or delivery thereof shall not be subject to any preemptive or similar rights and shall, upon issuance, be accepted for listing or quotation on the Exchange.

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

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

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

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

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

     (d) Each of Dealer and Issuer agrees and acknowledges that Dealer is a “financial institution,” “swap participant” and “financial participant” within the meaning of Sections 101(22), 101(53C) and 101(22A) of Title 11 of the United States Code (the “Bankruptcy Code”). The parties hereto further agree and acknowledge (A) that this Confirmation is (i) a “securities contract,” as such term is defined in Section 741(7) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “settlement payment” within the meaning of Section 546 of the Bankruptcy Code, and (ii) a “swap agreement,” as such term is defined in Section 101(53B) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “transfer” within the meaning of Section 546 of the Bankruptcy Code, and (B) that Dealer is entitled to the protections afforded by, among other sections, Sections 362(b)(6), 362(b)(17), 362(b)(27), 362(o), 546(e), 546(g), 546(j), 548(d)(2), 555, 560 and 561 of the Bankruptcy Code.

     (e) For the purposes of Section 3(f) of the Agreement, Dealer represents that, as of the time any payment is made after December 31, 2012, (i) if it is a “foreign financial institution” within the meaning of section 1471(d)(4) of the Internal Revenue Code of 1986 as amended (the “Code”), it meets the requirements of section 1471(b) of the Code and has not elected the application of section 1471(b)(3) of the Code, and (ii) if it is a “non-financial foreign entity” within the meaning of section 1472(d) of the Code, it meets the requirements of section 1472(b) of the Code, unless one or more of the exceptions of Code section 1472(c) are applicable with respect to such payment.

     (f) As a condition to effectiveness of the Transaction, Issuer shall deliver to Dealer an opinion of counsel, dated as of the Trade Date and reasonably acceptable to Dealer in form and substance, with respect to the matters set forth in Section 3(a) of the Agreement and Section 7(a)(x) hereof, subject to customary assumptions, qualifications and exceptions.

     8. Other Provisions:

     (a) Alternative Calculations and Payment on Early Termination and on Certain Extraordinary Events. If Issuer shall owe Dealer any amount pursuant to Section 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions (except in the event of a Tender Offer, Merger Event, Insolvency or Nationalization, in each case, in which the consideration or proceeds to be paid to holders of Shares consists solely of cash) or pursuant to Section 6(d)(ii) of the Agreement (except in the event of an Event of Default in which Issuer is the Defaulting Party or a Termination Event in which Issuer is the Affected Party that resulted from an event or events within Issuer’s control) (a “Payment Obligation”), Issuer shall have the right, in its sole discretion, to satisfy any such Payment Obligation by the Share Termination Alternative (as defined below) by giving irrevocable telephonic notice to Dealer, confirmed in writing within one Scheduled Trading Day, between the hours of 9:00 A.M. and 4:00 P.M., New York City time, on the Merger Date, Tender Offer Date, Announcement Date, Early Termination Date or other date the Transaction is cancelled or terminated, as applicable (“Notice of Share Termination”). Upon such Notice of Share Termination, the following provisions shall apply on the Scheduled Trading Day immediately following the Merger Date, the Tender Offer Date, Announcement Date, Early Termination Date or other date the Transaction is cancelled or terminated, as applicable:

Share Termination Alternative:	Applicable and means that Issuer shall deliver to Dealer the Share Termination Delivery Property on the date on which the Payment Obligation would otherwise be due pursuant to Section 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions or Section 6(d)(ii) of the Agreement, as applicable (the “Share Termination Payment Date”), in satisfaction of the Payment Obligation.
Share Termination Delivery Property:	A number of Share Termination Delivery Units, as calculated by the

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	Calculation Agent, equal to the Payment Obligation divided by the Share Termination Unit Price. The Calculation Agent shall adjust the Share Termination Delivery Property by replacing any fractional portion of the aggregate amount of a security therein with an amount of cash equal to the value of such fractional security based on the values used to calculate the Share Termination Unit Price.
Share Termination Unit Price:	The value of property contained in one Share Termination Delivery Unit on the date such Share Termination Delivery Units are to be delivered as Share Termination Delivery Property, as determined by the Calculation Agent in its discretion by commercially reasonable means and notified by the Calculation Agent to Issuer at the time of notification of the Payment Obligation.
Share Termination Delivery Unit:	In the case of a Termination Event, Event of Default, Delisting or Additional Disruption Event, one Share or, in the case of an Insolvency, Nationalization, Merger Event or Tender Offer, a Share or a unit consisting of the number or amount of each type of property received by a holder of one Share (without consideration of any requirement to pay cash or other consideration in lieu of fractional amounts of any securities) in such Insolvency, Nationalization, Merger Event or Tender Offer. If such Insolvency, Nationalization, Merger Event or Tender Offer involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash.
Failure to Deliver:	Applicable
Other Applicable Provisions:	If Share Termination Alternative is applicable, the provisions of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction, except that all references to “Shares” shall be read as references to “Share Termination Delivery Units”; provided that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws as a result of the fact that Issuer is the issuer of any Share Termination Delivery Units (or any security forming a part thereof). If, in the reasonable judgment of Issuer or Dealer, based on advice of counsel, for any reason, any securities comprising the Share Termination Delivery Units deliverable pursuant to this Section 8(a) would not be immediately freely transferable by Dealer under Rule 144 under the Securities Act, then Dealer may elect to either (x) permit delivery of such securities notwithstanding any restriction on transfer or (y) have the provisions set forth in Section 8(b) below apply.

     (b) Registration/Private Placement Procedures. (i) With respect to the Transaction, the following provisions shall apply to the extent provided for above opposite the caption “Net Share Settlement” in Section 2 or in paragraph (a) of this Section 8. If so applicable, then, at the election of Issuer by notice to Dealer within one Exchange Business Day after the relevant delivery obligation arises, but in any event at least one Exchange Business Day prior to the date on which such delivery obligation is due, either (A) all Shares or Share Termination Delivery Units, as the case may be, delivered by Issuer to Dealer shall be covered by an effective registration statement of Issuer for immediate resale by Dealer (such registration statement and the corresponding prospectus (the “Prospectus”) (including, without limitation, any sections describing the plan of distribution) in form and content commercially reasonably satisfactory to Dealer) or (B) Issuer shall deliver additional Shares or Share Termination Delivery Units, as the case may be, so that the value of such Shares or Share Termination Delivery Units, as determined by

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the Calculation Agent to reflect an appropriate liquidity discount, equals the value of the number of Shares or Share Termination Delivery Units that would otherwise be deliverable if such Shares or Share Termination Delivery Units were freely tradeable (without prospectus delivery) upon receipt by Dealer (such value, the “Freely Tradeable Value”); provided that, if requested by Dealer on or prior to the second Exchange Business Day prior to the first Exercise Date, any election to be made by Issuer described in this clause (B) shall be made with respect to Shares delivered on all Settlement Dates no later than one Exchange Business Day prior to the first Exercise Date, and the applicable procedures described below shall apply to all Shares delivered on the Settlement Dates on an aggregate basis. (For the avoidance of doubt, as used in this paragraph (b) only, the term “Issuer” shall mean the issuer of the relevant securities, as the context shall require.)

     (ii) If Issuer makes the election described in clause (b)(i)(A) above:

     (A) Dealer (or an affiliate of Dealer designated by Dealer) shall be afforded a reasonable opportunity to conduct a due diligence investigation with respect to Issuer that is customary in scope for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business and that yields results that are commercially reasonably satisfactory to Dealer or such affiliate, as the case may be, in its discretion; and

     (B) Dealer (or an affiliate of Dealer designated by Dealer) and Issuer shall enter into an agreement (a “Registration Agreement”) on commercially reasonable terms in connection with the public resale of such Shares or Share Termination Delivery Units, as the case may be, by Dealer or such affiliate substantially similar to underwriting agreements customary for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business, in form and substance commercially reasonably satisfactory to Dealer or such affiliate and Issuer, which Registration Agreement shall include, without limitation, provisions substantially similar to those contained in such underwriting agreements relating to the indemnification of, and contribution in connection with the liability of, Dealer and its affiliates and Issuer, shall provide for the payment by Issuer of all registration expenses in connection with such resale, including all registration costs and all fees and expenses of counsel for Dealer, and shall provide for the delivery of accountants’ “comfort letters” to Dealer or such affiliate with respect to the financial statements and certain financial information contained in or incorporated by reference into the Prospectus as are customarily requested in comfort letters covering follow-on offerings of equity securities of companies of comparable size, maturity and lines of business and the delivery of disclosure opinions of nationally recognized outside counsel to Issuer reasonably acceptable to Dealer.

     (iii) If Issuer makes the election described in clause (b)(i)(B) above:

     (A) Dealer (or an affiliate of Dealer designated by Dealer) and any potential institutional purchaser of any such Shares or Share Termination Delivery Units, as the case may be, from Dealer or such affiliate identified by Dealer shall be afforded a commercially reasonable opportunity to conduct a due diligence investigation in compliance with applicable law with respect to Issuer customary in scope for private placements of equity securities of companies of comparable size, maturity and lines of business (including, without limitation, the right to have made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them), subject to execution by such recipients of customary confidentiality agreements reasonably acceptable to Issuer;

     (B) Dealer (or an affiliate of Dealer designated by Dealer) and Issuer shall enter into an agreement (a “Private Placement Agreement”) on commercially reasonable terms in connection with the private placement of such Shares or Share Termination Delivery Units, as the case may be, by Issuer to Dealer or such affiliate and the private resale of such shares by Dealer or such affiliate, substantially similar to private placement purchase agreements customary for private placements of equity securities of companies of comparable size, maturity and lines of business, in form and substance commercially reasonably satisfactory to Dealer and Issuer, which Private Placement Agreement shall include, without limitation, provisions substantially similar to those contained in such private placement purchase agreements relating to the indemnification of,

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and contribution in connection with the liability of, Dealer and its affiliates and Issuer, shall provide for the payment by Issuer of all expenses in connection with such resale, including all fees and expenses of counsel for Dealer, shall contain representations, warranties and agreements of Issuer reasonably necessary or advisable to establish and maintain the availability of an exemption from the registration requirements of the Securities Act for such resales, and shall use reasonable best efforts to provide for the delivery of accountants’ “comfort letters” to Dealer or such affiliate with respect to the financial statements and certain financial information contained in or incorporated by reference into the offering memorandum prepared for the resale of such Shares as are customarily requested in comfort letters covering private placements of equity securities of companies of comparable size, maturity and lines of business and delivery of disclosure opinions of nationally recognized outside counsel to Issuer reasonably acceptable to Dealer;

     (C) Issuer agrees that any Shares or Share Termination Delivery Units so delivered to Dealer, (i) may be transferred by and among Dealer and its affiliates, and Issuer shall effect such transfer without any further action by Dealer and (ii) after the minimum “holding period” within the meaning of Rule 144(d) under the Securities Act has elapsed with respect to such Shares or any securities issued by Issuer comprising such Share Termination Delivery Units, Issuer shall promptly remove, or cause the transfer agent for such Shares or securities to remove, any legends referring to any such restrictions or requirements from such Shares or securities upon delivery by Dealer (or such affiliate of Dealer) to Issuer or such transfer agent of seller’s and broker’s representation letters customarily delivered by Dealer in connection with resales of restricted securities pursuant to Rule 144 under the Securities Act (if any), without any further requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document, any transfer tax stamps or payment of any other amount or any other action by Dealer (or such affiliate of Dealer); and

     (D) Issuer shall not take, or cause to be taken, any action that would make unavailable either the exemption pursuant to Section 4(2) of the Securities Act for the sale by Issuer to Dealer (or any affiliate designated by Dealer) of the Shares or Share Termination Delivery Units, as the case may be, or the exemption pursuant to Section 4(1) or Section 4(3) of the Securities Act for resales of the Shares or Share Termination Delivery Units, as the case may be, by Dealer (or any such affiliate of Dealer).

     (c) Make-whole Shares. If Issuer makes the election described in clause (i)(B) of paragraph (b) of this Section 8, then Dealer or its affiliates may sell (which sale shall be made in a commercially reasonable manner) such Shares or Share Termination Delivery Units, as the case may be, during a period (the “Resale Period”) commencing on the Exchange Business Day following delivery of such Shares or Share Termination Delivery Units, as the case may be, and ending on the Exchange Business Day on which Dealer or its affiliates completes the sale of all such Shares or Share Termination Delivery Units, as the case may be, or a sufficient number of Shares or Share Termination Delivery Units, as the case may be, so that the realized net proceeds of such sales exceed the Freely Tradeable Value. If any of such delivered Shares or Share Termination Delivery Units remain after such realized net proceeds exceed the Freely Tradeable Value, Dealer shall return such remaining Shares or Share Termination Delivery Units to Issuer. If the Freely Tradeable Value exceeds the realized net proceeds from such resale, Issuer shall transfer to Dealer by the open of the regular trading session on the Exchange on the Exchange Trading Day immediately following the last day of the Resale Period the amount of such excess (the “Additional Amount”) in cash or in a number of additional Shares or Share Termination Delivery Units, as the case may be (“Make-whole Shares”) in an amount that, based on the VWAP Price on the last day of the Resale Period (as if such day was the “Valuation Date” for purposes of computing such VWAP Price), has a dollar value equal to the Additional Amount. The Resale Period shall continue to enable the sale of the Make-whole Shares in the manner contemplated by this Section 8(c). This provision shall be applied successively until the Additional Amount is equal to zero, subject to Section 8(e).

     (d) Beneficial Ownership. Notwithstanding anything to the contrary in the Agreement or this Confirmation, in no event shall Dealer be entitled to receive, or shall be deemed to receive, any Shares if, immediately upon giving effect to such receipt of such Shares, (i) the “beneficial ownership” (within the meaning of Section 13 of the Exchange Act and the rules promulgated thereunder) of Shares by Dealer, any

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of its affiliates subject to aggregation with Dealer for purposes of the “beneficial ownership” test under Section 13 of the Exchange Act and all persons who may form a “group” (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) with Dealer with respect to “beneficial ownership” of any Shares (collectively, “Dealer Group”) would be equal to or greater than 8.5% or more of the outstanding Shares on the date of determination, (ii) the Warrant Equity Percentage exceeds 14.5% or (iii) Dealer, Dealer Group or any person whose ownership position would be aggregated with that of Dealer or Dealer Group (Dealer, Dealer Group or any such person, a “Dealer Person”) under Section 203 of the Delaware General Corporation Law (the “DGCL Takeover Statute”), or any state or federal bank holding company or banking laws, or other federal, state or local regulations, regulatory orders or organizational documents or contracts of Issuer that are, in each case, applicable to ownership of Shares (“Applicable Laws”), would own, beneficially own, constructively own, control, hold the power to vote or otherwise meet a relevant definition of ownership in excess of a number of Shares equal to (x) the number of Shares that would give rise to reporting or registration obligations or other requirements (including obtaining prior approval by a state or federal regulator) of a Dealer Person under Applicable Laws (including, without limitation, “interested stockholder” or “acquiring person” status under the DGCL Takeover Statute) and with respect to which such requirements have not been met or the relevant approval has not been received minus (y) 1.0% of the number of Shares outstanding on the date of determination (either such condition described in clause (i), (ii) or (iii), an “Excess Ownership Position”). The “Warrant Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the sum of (1) the product of the Number of Warrants and the Warrant Entitlement and (2) the aggregate number of Shares underlying any other call option transaction sold by Issuer to Dealer and (B) the denominator of which is the number of Shares outstanding on such day. If any delivery owed to Dealer hereunder is not made, in whole or in part, as a result of this provision, Issuer’s obligation to make such delivery shall not be extinguished and Issuer shall make such delivery as promptly as practicable after, but in no event later than one Exchange Business Day after, Dealer gives notice to Issuer that such delivery would not result in the existence of an Excess Ownership Position.

     (e) Limitations on Settlement by Issuer. Notwithstanding anything herein or in the Agreement to the contrary, in no event shall Issuer be required to deliver Shares in connection with the Transaction in excess of the product of two, the aggregate Number of Warrants for all Components at the time of delivery and the Warrant Entitlement at the time of delivery (such product, the “Capped Number”). Issuer represents and warrants to Dealer (which representation and warranty shall be deemed to be repeated on each day that the Transaction is outstanding) that the Capped Number is equal to or less than the number of authorized but unissued Shares of the Issuer that are not reserved for future issuance in connection with transactions in the Shares (other than the Transaction) on the date of the determination of the Capped Number (such Shares, the “Available Shares”). In the event Issuer shall not have delivered the full number of Shares otherwise deliverable as a result of this Section 8(e) (the resulting deficit, the “Deficit Shares”), Issuer shall be continually obligated to deliver Shares, from time to time until the full number of Deficit Shares have been delivered pursuant to this paragraph, when, and to the extent, that (A) Shares are repurchased, acquired or otherwise received by Issuer or any of its subsidiaries after the Trade Date (whether or not in exchange for cash, fair value or any other consideration), (B) authorized and unissued Shares reserved for issuance in respect of other transactions prior to such date which prior to the relevant date become no longer so reserved and (C) Issuer additionally authorizes any unissued Shares that are not reserved for other transactions (such events as set forth in clauses (A), (B) and (C) above, collectively, the “Share Issuance Events”). Issuer shall promptly notify Dealer of the occurrence of any of the Share Issuance Events (including the number of Shares subject to clause (A), (B) or (C) and the corresponding number of Shares to be delivered) and, as promptly as reasonably practicable, deliver such Shares thereafter.

     (f) Equity Rights. Dealer acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to the Transaction that are senior to the claims of common stockholders in the event of Issuer’s bankruptcy. For the avoidance of doubt, the parties agree that the preceding sentence shall not apply at any time other than during Issuer’s bankruptcy to any claim arising as a result of a breach by Issuer of any of its obligations under this Confirmation or the Agreement. For the avoidance of doubt, the parties acknowledge that the obligations of Issuer under this Confirmation are not secured by any

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collateral that would otherwise secure the obligations of Issuer herein under or pursuant to any other agreement.

     (g) Amendments to Equity Definitions. The following amendments shall be made to the Equity Definitions:

     (i) For the purposes of any adjustment under Section 11.2(c) of the Equity Definitions, the first sentence of Section 11.2(c) of the Equity Definitions, prior to clause (A) thereof, is hereby amended to read as follows: ‘(c) If “Calculation Agent Adjustment” is specified as the Method of Adjustment in the related Confirmation of a Share Option Transaction, then following the announcement or occurrence of any Potential Adjustment Event, the Calculation Agent will determine whether such Potential Adjustment Event has a material effect on the theoretical value of the relevant Shares or options on the Shares and, if so, will (i) make appropriate adjustment(s), if any, to any one or more of:’ and, the portion of such sentence immediately preceding clause (ii) thereof is hereby amended by deleting the words “diluting or concentrative” and the words “(provided that no adjustments will be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)” and replacing such latter phrase with the words “(and, for the avoidance of doubt, adjustments may be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)”;

     (ii) Sections 11.2(a) and 11.2(e)(vii) of the Equity Definitions are hereby amended by inserting at the end of each Section the phrase “or a material effect on the theoretical value of the Warrants;”

     (iii) Section 12.9(b)(iv) of the Equity Definitions is hereby amended by (A) deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)” following subsection (A) and (3) the phrase “in each case” in subsection (B); (B) replacing “will lend” with “lends” in subsection (B); and (C) deleting the phrase “neither the Non-Hedging Party nor the Lending Party lends Shares in the amount of the Hedging Shares or” in the penultimate sentence; and

     (v) Section 12.9(b)(v) of the Equity Definitions is hereby amended by (A) adding the word “or” immediately before subsection “(B)” and deleting the comma at the end of subsection (A); and (B)(1) deleting subsection (C) in its entirety, (2) deleting the word “or” immediately preceding subsection (C), (3) replacing in the penultimate sentence the words “either party” with “the Hedging Party” and (4) deleting clause (X) in the final sentence.

     (h) Transfer and Assignment. Dealer may transfer or assign its rights and obligations hereunder and under the Agreement, in whole or in part, at any time without the consent of Issuer.

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

     (j) Additional Termination Events. The occurrence of any of the following shall constitute an Additional Termination Event with respect to which the Transaction shall be the sole Affected Transaction and Issuer shall be the sole Affected Party and Dealer shall be the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement and to determine the amount payable pursuant to Section 6(e) of the Agreement; provided that with respect to any Additional Termination Event, Dealer may choose to treat part of the Transaction as the sole Affected Transaction, and, upon the termination of the Affected Transaction, a Transaction with terms identical to those set forth herein except with a Number of Warrants equal to the unaffected number of Warrants shall be treated for all purposes as the Transaction, which shall remain in full force and effect:

     (i) Dealer reasonably determines that it is advisable to terminate a portion of the Transaction (the “Affected Portion”) so that Dealer’s related hedging activities with respect thereto will comply with applicable securities laws, rules or regulations or generally applicable

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related policies and procedures of Dealer applied to the Transaction in a non-discriminatory manner (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by Dealer); provided that Dealer shall treat only the Affected Portion of the Transaction as the Affected Transaction; or

     (ii) at any time at which any Excess Ownership Position (as defined above) occurs, Dealer, in its reasonable discretion, is unable to effect a transfer or assignment to a third party of the Transaction or any other transaction between the parties after using its commercially reasonable efforts on pricing terms and within a time period reasonably acceptable to Dealer (the “Transfer Time Period”) (it being understood that a period of at least one Exchange Business Day shall be considered reasonable for this purpose (without prejudice to whether a shorter period of time would be considered reasonable)) such that an Excess Ownership Position no longer exists; provided that Dealer shall treat only that portion of the Transaction as the Affected Transaction as necessary so that such Excess Ownership Position no longer exists; and provided further that, unless such Excess Ownership Position is the result of a repurchase of Shares by Issuer or any other event or events within Issuer’s control, Dealer shall promptly notify Issuer of its Excess Ownership Position and shall use its commercially reasonable efforts to consult with Issuer during the Transfer Time Period regarding potential transfers or assignments to third parties prior to designating an Early Termination Date pursuant to this Section 8(j)(ii); or

     (iii) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act other than Issuer, its subsidiaries and its and their employee benefit plans, files a Schedule TO or any schedule, form or report under the Exchange Act, disclosing that such person or group has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of Issuer’s common equity representing more than 50% of the voting power of Issuer’s common equity; or

     (iv) consummation of (A) any recapitalization, reclassification or change of the Shares (other than changes resulting from a subdivision or combination) as a result of which the Shares would be converted into, or exchanged for, stock, other securities, other property or assets or (B) any share exchange, consolidation or merger of Issuer pursuant to which the Shares will be converted into cash, securities or other assets or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of Issuer and its subsidiaries, taken as a whole, to any person other than Issuer or one of Issuer’s subsidiaries; provided, however, that a transactions where (x) the Shares are not changed or exchanged except to the extent necessary to reflect a change in Issuer’s jurisdiction of incorporation or (y) the holders of more than 50% of all classes of Issuer’s common equity immediately prior to such transaction own, directly or indirectly, more than 50% of the aggregate voting power of the common equity of the continuing or surviving corporation or transferee or the parent thereof immediately after such event shall not constitute an Additional Termination Event; or

     (v) Issuer’s stockholders approve any plan or proposal for Issuer’s liquidation or dissolution; or

     (vi) the Shares (or any New Shares that would be deliverable by Issuer hereunder) cease to be listed on any of The New York Stock Exchange, The NASDAQ Global Select Market, The NASDAQ Global Market (or any of their respective successors) or an alternate exchange of equivalent or greater liquidity with respect to the Shares (or any such New Shares).

Notwithstanding the foregoing, a transaction or transactions described in clause (iv) above will not constitute an Additional Termination Event if at least 90% of the consideration received or to be received by holders of the Shares, excluding cash payments for fractional shares and cash payments made pursuant to dissenters’ appraisal rights, in connection with such transaction or transactions consists of shares of common stock that are listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their respective successors) or that will be so listed or quoted when issued or exchanged in connection with such transaction or transactions.

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     (k) Effectiveness. If, on or prior to the Effective Date, Dealer reasonably determines that it is advisable to cancel the Transaction because of concerns that Dealer’s related hedging activities could be viewed as not complying with applicable securities laws, rules or regulations, the Transaction shall be cancelled and shall not become effective, and neither party shall have any obligation to the other party in respect of the Transaction.

     (l) Extension of Settlement. Dealer may divide any Component into additional Components and designate the Expiration Date and the Number of Warrants for each such Component if Dealer determines, in its reasonable discretion, that such further division is necessary or advisable to preserve Dealer’s hedging or hedge unwind activity hereunder in light of existing liquidity conditions in the cash market or stock loan market or to enable Dealer to effect purchases of Shares in connection with its hedging, hedge unwind or settlement activity hereunder in a manner that would, if Dealer were Issuer or an affiliated purchaser of Issuer, be compliance with applicable legal, regulatory and self-regulatory requirements, or with related policies and procedures applicable to Dealer.

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

     (n) Delivery or Receipt of Cash. For the avoidance of doubt, other than receipt of the Premium by Issuer, nothing in this Confirmation shall be interpreted as requiring Issuer to cash settle this Transaction, except in circumstances where such cash settlement is within Issuer’s control (including, without limitation, where Issuer elects to deliver or receive cash, where Issuer fails timely to elect the Share Termination Alternative, or where Issuer is not able to effect a private placement settlement pursuant to Section 8(b)(i)(B) above due to the occurrence of events within its control) or in those circumstances in which holders of the Shares would also receive cash.

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

     (p) Designation by Dealer. Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities to or from Issuer, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such Shares or other securities and otherwise to perform Dealer’s obligations in respect of the Transaction and any such designee may assume such obligations. Dealer shall be discharged of its obligations to Issuer only to the extent of any such performance.

     (q) Strike Price Adjustment. Notwithstanding anything to the contrary in the Agreement, this Confirmation or the Equity Definitions (but without limiting Dealer’s right to adjust any variable relevant to the exercise, settlement, payment or other terms of the Transaction, other than the Strike Price and the Warrant Entitlement), in no event shall (i) the Warrant Entitlement be adjusted, or (ii) the Strike Price be adjusted to the extent that, after giving effect to such adjustment, the Strike Price would be less than USD 6.16, in each case, other than any such adjustment in connection with stock splits or similar changes to Issuer’s capitalization.

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

     (s) Share Deliveries. Issuer acknowledges and agrees that, to the extent the holder of this Warrant is not then an affiliate and has not been an affiliate for 90 days (it being understood that Dealer will not be considered an affiliate under this paragraph solely by reason of its receipt of Shares pursuant to this Transaction), and otherwise satisfies all holding period and other requirements of Rule 144 of the Securities Act applicable to it, any delivery of Shares or Share Termination Delivery Property hereunder at any time after 6 months from the Trade Date (or 1 year from the Trade Date if, at such time, informational requirements of Rule 144(c) are not satisfied with respect to Issuer) shall be eligible for resale under Rule 144 of the Securities Act and Issuer agrees to promptly remove, or cause the transfer agent for such Shares or Share Termination Delivery Property, to remove, any legends referring to any restrictions on resale

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under the Securities Act from the Shares or Share Termination Delivery Property. Issuer further agrees that any delivery of Shares or Share Termination Delivery Property prior to the date that is 6 months from the Trade Date (or 1 year from the Trade Date if, at such time, informational requirements of Rule 144(c) are not satisfied with respect to Issuer), may be transferred by and among Dealer and its affiliates and Issuer shall effect such transfer without any further action by Dealer. Notwithstanding anything to the contrary herein, Issuer agrees that any delivery of Shares or Share Termination Delivery Property shall be effected by book-entry transfer through the facilities of DTC, or any successor depositary, if at the time of delivery, such class of Shares or class of Share Termination Delivery Property is in book-entry form at DTC or such successor depositary. Notwithstanding anything to the contrary herein, to the extent the provisions of Rule 144 of the Securities Act or any successor rule are amended, or the applicable interpretation thereof by the Securities and Exchange Commission or any court change after the Trade Date, the agreements of Issuer herein shall be deemed modified to the extent necessary, in the opinion of outside counsel of Issuer, to comply with Rule 144 of the Securities Act, as in effect at the time of delivery of the relevant Shares or Share Termination Delivery Property.

     (t) Quarterly Valuations. Dealer hereby agrees, upon request by Issuer, to provide or cause its affiliate to provide to Issuer, within five Exchange Business Days after the end of the fiscal quarter of Issuer during which Issuer made such request, a valuation estimate of the fair value of the Transaction as of Issuer’s fiscal quarter end.

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

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

     (w) Role of Agent. Each party agrees and acknowledges that (i) J.P. Morgan Securities Inc., an affiliate of Dealer (“JPMSI”), has acted solely as agent and not as principal with respect to this Transaction and (ii) JPMSI has no obligation or liability, by way of guaranty, endorsement or otherwise, in any manner in respect of this Transaction (including, if applicable, in respect of the settlement thereof). Each party agrees it will look solely to the other party (or any guarantor in respect thereof) for performance of such other party’s obligations under this Transaction.

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

Yours faithfully, J.P. MORGAN SECURITIES INC., as agent for JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
By:	/s/ Jason Wood
	Name:	Jason Wood
	Title:	Managing Director

Agreed and Accepted By: CADENCE DESIGN SYSTEMS, INC.
By:	/s/ Kevin S. Palatnik
	Name:	Kevin S. Palatnik
	Title:	Sr. Vice President & Chief Financial Officer

JPMorgan Chase Bank, National Association
Organised under the laws of the United States as a National Banking Association
Main Office 1111 Polaris Parkway, Columbus, Ohio 43271
Registered as a branch in England & Wales branch No. BR000746
Registered Branch Office 125 London Wall, London EC2Y 5AJ
Authorised and regulated by the Financial Services Authority

Signature Page to Base Warrant
Confirmation

Annex A

For each Component of the Transaction, the Number of Warrants and Expiration Date is set forth below.

Component Number	Number of Warrants	Expiration Date
1	340,767	September 1, 2015
2	340,767	September 2, 2015
3	340,767	September 3, 2015
4	340,767	September 4, 2015
5	340,767	September 8, 2015
6	340,767	September 9, 2015
7	340,767	September 10, 2015
8	340,767	September 11, 2015
9	340,767	September 14, 2015
10	340,767	September 15, 2015
11	340,767	September 16, 2015
12	340,767	September 17, 2015
13	340,767	September 18, 2015
14	340,767	September 21, 2015
15	340,767	September 22, 2015
16	340,767	September 23, 2015
17	340,767	September 24, 2015
18	340,767	September 25, 2015
19	340,767	September 28, 2015
20	340,767	September 29, 2015
21	340,767	September 30, 2015
22	340,767	October 1, 2015
23	340,767	October 2, 2015
24	340,767	October 5, 2015
25	340,767	October 6, 2015
26	340,767	October 7, 2015
27	340,767	October 8, 2015
28	340,767	October 9, 2015
29	340,767	October 12, 2015
30	340,767	October 13, 2015
31	340,767	October 14, 2015
32	340,767	October 15, 2015
33	340,767	October 16, 2015
34	340,767	October 19, 2015
35	340,767	October 20, 2015
36	340,767	October 21, 2015
37	340,767	October 22, 2015
38	340,767	October 23, 2015
39	340,767	October 26, 2015
40	340,767	October 27, 2015
41	340,767	October 28, 2015
42	340,767	October 29, 2015
43	340,767	October 30, 2015
44	340,767	November 2, 2015
45	340,767	November 3, 2015
46	340,767	November 4, 2015
47	340,767	November 5, 2015
48	340,767	November 6, 2015
49	340,767	November 9, 2015

Annex A - 1

Component Number	Number of Warrants	Expiration Date
50	340,767	November 10, 2015
51	340,767	November 11, 2015
52	340,767	November 12, 2015
53	340,767	November 13, 2015
54	340,767	November 16, 2015
55	340,767	November 17, 2015
56	340,767	November 18, 2015
57	340,767	November 19, 2015
58	340,767	November 20, 2015
59	340,767	November 23, 2015
60	340,767	November 24, 2015
61	340,767	November 25, 2015
62	340,767	November 27, 2015
63	340,767	November 30, 2015
64	340,767	December 1, 2015
65	340,767	December 2, 2015
66	340,767	December 3, 2015
67	340,767	December 4, 2015
68	340,767	December 7, 2015
69	340,767	December 8, 2015
70	340,767	December 9, 2015

Annex A - 2

EX-10.08

Exhibit 10.08

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, CA 95134 Attention: Office of the General Counsel
From:	Morgan Stanley & Co. International plc c/o Morgan Stanley & Co. Inc. 1585 Broadway, 5th Floor New York, NY 10036
Re:	Base Issuer Warrant Transaction
Ref. No:	6537229
Date:	June 9, 2010

Dear Sir(s):

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

     1. This Confirmation is subject to, and incorporates, the definitions and provisions of the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc. (“ISDA”). For purposes of the Equity Definitions, each reference herein to a Warrant shall be deemed to be a reference to a Call Option or an Option, as the context requires.

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

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

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

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

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considered a Transaction under, or otherwise governed by, such existing or deemed ISDA Master Agreement.

     2. The Transaction is a Warrant Transaction, which shall be considered a Share Option Transaction for purposes of the Equity Definitions. The terms of the particular Transaction to which this Confirmation relates are as follows:

General Terms:
Trade Date:	June 9, 2010
Effective Date:	June 15, 2010, or such other date as agreed between the parties, subject to Section 8(k) below.
Components:	The Transaction will be divided into individual Components, each with the terms set forth in this Confirmation, and, in particular, with the Number of Warrants and Expiration Date set forth in this Confirmation. The payments and deliveries to be made upon settlement of the Transaction will be determined separately for each Component as if each Component were a separate Transaction under the Agreement.
Warrant Style:	European
Warrant Type:	Call
Seller:	Issuer
Buyer:	Dealer
Shares:	The Common Stock of Issuer, par value USD 0.01 per share (Ticker Symbol: “CDNS”).
Number of Warrants:	For each Component, as provided in Annex A to this Confirmation.
Warrant Entitlement:	One Share per Warrant
Strike Price:	USD 10.78
Premium:	USD 3,158,580.00
Premium Payment Date:	The Effective Date
Exchange:	NASDAQ Global Select Market
Related Exchange:	All Exchanges.
Procedures for Exercise:
In respect of any Component:
Expiration Time:	Valuation Time
Expiration Date:	As provided in Annex A to this Confirmation (or, if such date is not a Scheduled Trading Day, the next following Scheduled Trading Day that is not already an Expiration Date for another Component); provided that if that date is a Disrupted Day, the Expiration Date for such Component shall be the first succeeding Scheduled Trading Day that is not a Disrupted Day and is not or is not deemed to be an

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	Expiration Date in respect of any other Component of the Transaction hereunder; and provided further that if the Expiration Date has not occurred pursuant to the preceding proviso as of the Final Disruption Date, the Calculation Agent shall have the right to elect, in its sole discretion, that the Final Disruption Date shall be the Expiration Date for such Component (irrespective of whether such date is an Expiration Date in respect of any other Component for the Transaction). “Final Disruption Date” means December 21, 2015. Notwithstanding the foregoing and anything to the contrary in the Equity Definitions, if a Market Disruption Event occurs on any Expiration Date, the Calculation Agent may determine that such Expiration Date is a Disrupted Day only in part, in which case (i) the Calculation Agent shall make adjustments to the Number of Warrants for the relevant Component for which such day shall be the Expiration Date and shall designate the Scheduled Trading Day determined in the manner described in the immediately preceding sentence as the Expiration Date for the remaining Warrants for such Component and (ii) the VWAP Price for such Disrupted Day shall be determined by the Calculation Agent based on transactions in the Shares effected on such Disrupted Day taking into account the nature and duration of such Market Disruption Event on such day. Section 6.6 of the Equity Definitions shall not apply to any Valuation Date occurring on an Expiration Date.
Market Disruption Event:	Section 6.3(a) of the Equity Definitions is hereby amended by (A) deleting the words “during the one hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be,” in clause (ii) thereof and (B) replacing the words “or (iii) an Early Closure.” therein with “(iii) an Early Closure, or (iv) a Regulatory Disruption.”. Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the term “Scheduled Closing Time” in the fourth line thereof.
Regulatory Disruption:	Any event that Dealer, in its reasonable discretion based on advice of counsel, determines makes it appropriate with regard to any legal, regulatory or self-regulatory requirements or generally applicable related policies and procedures applicable to Dealer and applied to the Transaction in a non-discriminatory manner, for Dealer to refrain from or decrease any market activity in connection with the Transaction.
Automatic Exercise:	Applicable; and means that the Number of Warrants for the corresponding Expiration Date will be deemed

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	to be automatically exercised at the Expiration Time on such Expiration Date unless Dealer notifies Seller (by telephone or in writing) prior to the Expiration Time on such Expiration Date that it does not wish Automatic Exercise to occur, in which case Automatic Exercise will not apply to such Expiration Date.
Issuer’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of Giving Notice:	As provided in Section 6(a) below.
Valuation Terms:
In respect of any Component:
Valuation Time:	At the close of trading of the regular trading session on the Exchange; provided that if the regular trading session is extended, the Calculation Agent shall determine the Valuation Time in its reasonable discretion.
Valuation Date:	The Expiration Date.
Settlement Terms:
In respect of any Component:
Settlement Currency:	USD
Net Share Settlement:	On each Settlement Date, Issuer shall deliver to Dealer a number of Shares equal to the Number of Shares to be Delivered for such Settlement Date to the account specified by Dealer and cash in lieu of any fractional Share valued at the VWAP Price on the Valuation Date corresponding to such Settlement Date. If, in the reasonable judgment of Issuer or Dealer, based on advice of counsel, for any reason, the Shares deliverable upon Net Share Settlement would not be immediately freely transferable by Dealer under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), then Dealer may elect to either (x) accept delivery of such Shares notwithstanding any restriction on transfer or (y) have the provisions set forth in Section 8(b) below apply.
	The Number of Shares to be Delivered shall be delivered by Issuer to Dealer no later than 5:00 p.m. (local time in New York City) on the relevant Settlement Date.
Number of Shares to be Delivered:	In respect of any Exercise Date, subject to the last sentence of Section 9.5 of the Equity Definitions, the product of (i) the number of Warrants exercised or deemed exercised on such Exercise Date, (ii) the

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	Warrant Entitlement and (iii) (A) the excess of the VWAP Price on the Valuation Date occurring in respect of such Exercise Date over the Strike Price (or, if there is no such excess, zero) divided by (B) such VWAP Price.
VWAP Price:	For any Exchange Business Day, the volume weighted average price per Share for the regular trading session (including any extensions thereof) of the Exchange on such Exchange Business Day (without regard to pre-open or after hours trading outside of such regular trading session), as published by Bloomberg at 4:15 P.M., New York City time (or 15 minutes following the end of any extension of the regular trading session), on such Exchange Business Day, on Bloomberg page “CDNS.Q <Equity> AQR” (or any successor thereto) (or if such published volume weighted average price is unavailable or is manifestly incorrect, the market value of one Share on such Exchange Business Day, as reasonably determined by the Calculation Agent using a volume weighted method).
Other Applicable Provisions:	The provisions of Sections 9.1(c), 9.4, 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction; provided that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws that exist as a result of the fact that Issuer is the issuer of the Shares.
Adjustments:
In respect of any Component:
Method of Adjustment:	Calculation Agent Adjustment; provided that in respect of an Extraordinary Dividend, “Calculation Agent Adjustment” shall be as described in the provision below. For the avoidance of doubt, Calculation Agent Adjustment shall continue to apply until the obligations of the parties (including any obligations of Issuer pursuant to Section 8(e) below) under the Transaction have been satisfied in full.
Extraordinary Dividend:	Any cash dividend or distribution on the Shares with an ex-dividend date occurring on or after the Trade Date and on or prior to the Expiration Date (or, if any Deficit Shares are owed pursuant to Section 8(e) below, such later date on which Issuer’s obligations under this Transaction have been satisfied in full).
Extraordinary Dividend Adjustment:	If at any time during the period from and including the Trade Date, to and including the Expiration Date for the Component with the latest Expiration Date

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	(or, if any Deficit Shares are owed pursuant to Section 8(e) below, such later date on which Issuer’s obligations under this Transaction have been satisfied in full), an ex-dividend date for an Extraordinary Dividend occurs or is deemed to occur, then the Calculation Agent will make adjustments to any one or more of the Strike Price, the Number of Warrants, the Warrant Entitlement and/or any other variable relevant to the exercise, settlement, payment or other terms of the Transaction as it determines appropriate to account for the economic effect on the Transaction of such Extraordinary Dividend.
Extraordinary Events:
New Shares:	In the definition of New Shares in Section 12.1(i) of the Equity Definitions (A) the text in clause (i) thereof shall be deleted in its entirety and replaced with “publicly quoted, traded or listed on any of the New York Stock Exchange, The NASDAQ Global Market or The NASDAQ Global Select Market (or their respective successors)” and (B) the phrase “and (iii) of an entity or person organized under the laws of the United States, any State thereof or the District of Columbia that also becomes Issuer under the Transaction following such Merger Event or Tender Offer” shall be inserted at the end thereof.
Consequences of Merger Events:
(a) Share-for-Share:	Modified Calculation Agent Adjustment
(b) Share-for-Other:	Cancellation and Payment (Calculation Agent Determination)
(c) Share-for-Combined:	Cancellation and Payment (Calculation Agent Determination); provided that the Calculation Agent may elect Component Adjustment for all or part of the Transaction.
Tender Offer:	Applicable.
Consequences of Tender Offers:
(a) Share-for-Share:	Modified Calculation Agent Adjustment
(b) Share-for-Other:	Modified Calculation Agent Adjustment
(c) Share-for-Combined:	Modified Calculation Agent Adjustment
Modified Calculation Agent Adjustment:	Upon the occurrence of any Merger Event pursuant to which the holders of Issuer’s Shares would be entitled to receive cash, securities or other property for their Shares and for which Modified Calculation Agent Adjustment would apply, if, as a result of such Merger Event, Issuer would be different from the issuer of the Shares under this Confirmation, then, on or prior to the effective date of such Merger Event, the Issuer and the issuer of the Shares under this

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	confirmation as a condition precedent to the adjustments contemplated in Section 12.2(e)(i) of the Equity Definitions, with such supplemental confirmation containing representations, warranties and agreements relating to securities law and other issues as requested by Dealer that Dealer has determined, in its reasonable discretion, to be reasonably necessary or appropriate to allow Dealer to continue as a party to the Transaction, as adjusted under Section 12.2(e)(i) of the Equity Definitions, and to preserve its hedging or hedge unwind activities in connection with the Transaction in a manner compliant with applicable legal, regulatory or self-regulatory requirements, or with generally applicable related policies and procedures applicable to Dealer and applied to the Transaction in a non-discriminatory manner, and if such conditions are not met or if the Calculation Agent determines that no adjustment that it could make under Section 12.2(e)(i) of the Equity Definitions will produce a commercially reasonable result, then the consequences set forth in Section 12.2(e)(ii) of the Equity Definitions shall apply.
Nationalization, Insolvency or Delisting:	Cancellation and Payment (Calculation Agent Determination); provided that (i) Section 12.6(a)(iii) of the Equity Definitions shall be amended to delete, in the definition of the term “Delisting” the parenthetical “(or will cease)” and (ii) in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.
Additional Disruption Events:
(a) Change in Law:	Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof with the phrase “or announcement or statement of the interpretation” and (ii) replacing the word “Shares” with the phrase “Hedge Positions” in clause (X) thereof.
(b) Failure to Deliver:	Not Applicable
(c) Insolvency Filing:	Applicable; provided that only Dealer shall have the right to terminate the Transaction upon an Insolvency Filing.

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(d) Hedging Disruption:	Applicable; provided that
	(i) Section 12.9(a)(v) of the Equity Definitions is hereby amended by inserting the following two sentences at the end of such Section:
	“For the avoidance of doubt, the term “equity price risk” shall be deemed to include, but shall not be limited to, stock price and volatility risk. And, for the further avoidance of doubt, any such transactions or assets referred to in phrases (A) or (B) above must be available on commercially reasonable pricing terms.”
	(ii) Section 12.9(b)(iii) of the Equity Definitions is hereby amended by inserting in the third line thereof, after the words “to terminate the Transaction”, the words “or a portion of the Transaction affected by such Hedging Disruption”.
(e) Increased Cost of Hedging:	Applicable
(f) Loss of Stock Borrow:	Applicable
Maximum Stock Loan Rate:	2.00% per annum
(g) Increased Cost of Stock Borrow:	Applicable
Initial Stock Loan Rate:	0.25% per annum
Hedging Party:	Dealer for all applicable Additional Disruption Events.
Determining Party:	Dealer for all applicable Additional Disruption Events.
Non-Reliance:	Applicable
Agreements and Acknowledgments Regarding Hedging Activities:	Applicable
Additional Acknowledgments:	Applicable
3. Calculation Agent:	Dealer. All determinations made by the Calculation Agent shall be made in good faith and in a commercially reasonable manner. Following any determination or calculation by the Calculation Agent hereunder, upon a written request by Issuer, the Calculation Agent will provide to Issuer by e-mail to the e-mail address provided by Issuer in such written request a report (in a commonly used file format for the storage and manipulation of financial data) displaying in reasonable detail the basis for such determination or calculation, including, where applicable, a description of the methodology and data applied, it being understood that the Calculation Agent shall not be obligated to disclose any proprietary models used by it for such determination or calculation.

     4. Account Details:

          Dealer Payment Instructions:

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Citibank, N.A.
Account Name: Morgan Stanley and Co.

          Account for delivery of Shares to Dealer:

               To be provided by Dealer.

          Issuer Payment Instructions:

               To be provided by Issuer.

     5. Offices:

          The Office of Dealer for the Transaction is: New York

Morgan Stanley & Co. International plc
c/o Morgan Stanley & Co. Inc.
1585 Broadway, 5^th Floor
New York, NY 10036

Attention:   Todd Bosch

          The Office of Issuer for the Transaction is:

               Inapplicable. Issuer is not a Multibranch Party.

     6. Notices: For purposes of this Confirmation:

(a) Address for notices or communications to Issuer:

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, California 95134
Attn:	Office of the General Counsel

(b) Address for notices or communications to Dealer:

To:	Morgan Stanley & Co. International plc c/o Morgan Stanley & Co. Inc. 1585 Broadway, 5th Floor New York, NY 10036
Attn:	Todd Bosch
With a copy to:	Morgan Stanley & Co. International c/o Morgan Stanley & Co. 1221 Avenue of the Americas, 34th Floor New York, NY 10020
Attn:	Todd Bosch

     7. Representations, Warranties and Agreements:

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

     (i) On the Trade Date, and as of the date of any election by Issuer of the Share Termination Alternative under (and as defined in) Section 8(a) below, none of Issuer and its officers and directors is aware of any material nonpublic information regarding Issuer or the Shares. On the Trade Date, all reports and other documents filed by Issuer with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), when considered as a whole (with the more recent such reports and documents deemed to amend inconsistent statements contained in any earlier such reports and documents), do not contain any untrue statement of a material fact or any omission of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading.

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

     (iii) Issuer is not entering into this Confirmation, and on the date of any election by Issuer of the Share Termination Alternative under Section 8(a) below, Issuer represents that it is not making such election, to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for Shares) or otherwise in violation of the Exchange Act.

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

     (v) Issuer shall not take any action to decrease the number of Available Shares below the Capped Number (each as defined below).

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

     (vii) (A) On the Trade Date and during the period starting on the first Expiration Date and ending on the last Expiration Date (the “Settlement Period”), the Shares or securities that are convertible into, or exchangeable or exercisable for Shares, are not, and shall not be, subject to a “restricted period,” as such term is defined in Regulation M under the Exchange Act (“Regulation M”) and (B) Issuer shall not engage in any “distribution,” as such term is defined in Regulation M until the second Exchange Business Day immediately following the Trade Date or Settlement Period, as applicable.

     (ix) Issuer agrees that it (A) will not during the Settlement Period make, or permit to be made, any public announcement (as defined in Rule 165(f) under the Securities Act) of any Merger Transaction or potential Merger Transaction unless such public announcement is made prior to the opening or after the close of the regular trading session on the Exchange for the Shares; (B) shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) notify Dealer following any such announcement that such announcement has been made; and (C) shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) provide Dealer with written notice specifying (i) Issuer’s average daily Rule 10b-18 Purchases (as defined in Rule 10b-18) during the three full calendar months immediately preceding the announcement date that were not effected through Dealer or its

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affiliates and (ii) the number of Shares purchased pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months preceding the announcement date. Such written notice shall be deemed to be a certification by Issuer to Dealer that such information is true and correct. In addition, Issuer shall promptly notify Dealer of the earlier to occur of the completion of such transaction and the completion of the vote by target shareholders. “Merger Transaction” means any merger, acquisition or similar transaction involving a recapitalization as contemplated by Rule 10b-18(a)(13)(iv) under the Exchange Act.

     (x) A number of Shares equal to the Capped Number have been reserved for issuance by all required corporate action of the Issuer. Any Shares issued or delivered in connection with the Transaction shall be duly authorized and, when delivered as contemplated hereby following the exercise of the Warrants in accordance with their terms and conditions, will be validly issued, fully paid and non-assessable, and the issuance or delivery thereof shall not be subject to any preemptive or similar rights and shall, upon issuance, be accepted for listing or quotation on the Exchange.

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

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

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

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

     (d) Each of Dealer and Issuer agrees and acknowledges that Dealer is a “financial institution,” “swap participant” and “financial participant” within the meaning of Sections 101(22), 101(53C) and 101(22A) of Title 11 of the United States Code (the “Bankruptcy Code”). The parties hereto further agree and acknowledge (A) that this Confirmation is (i) a “securities contract,” as such term is defined in Section 741(7) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “settlement payment” within the meaning of Section 546 of the Bankruptcy Code, and (ii) a “swap agreement,” as such term is defined in Section 101(53B) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within

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

     (e) For the purposes of Section 3(f) of the Agreement, Dealer represents that, as of the time any payment is made after December 31, 2012, (i) if it is a “foreign financial institution” within the meaning of section 1471(d)(4) of the Internal Revenue Code of 1986 as amended (the “Code”), it meets the requirements of section 1471(b) of the Code and has not elected the application of section 1471(b)(3) of the Code, and (ii) if it is a “non-financial foreign entity” within the meaning of section 1472(d) of the Code, it meets the requirements of section 1472(b) of the Code, unless one or more of the exceptions of Code section 1472(c) are applicable with respect to such payment.

     (f) As a condition to effectiveness of the Transaction, Issuer shall deliver to Dealer an opinion of counsel, dated as of the Trade Date and reasonably acceptable to Dealer in form and substance, with respect to the matters set forth in Section 3(a) of the Agreement and Section 7(a)(x) hereof, subject to customary assumptions, qualifications and exceptions.

     8. Other Provisions:

     (a) Alternative Calculations and Payment on Early Termination and on Certain Extraordinary Events. If Issuer shall owe Dealer any amount pursuant to Section 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions (except in the event of a Tender Offer, Merger Event, Insolvency or Nationalization, in each case, in which the consideration or proceeds to be paid to holders of Shares consists solely of cash) or pursuant to Section 6(d)(ii) of the Agreement (except in the event of an Event of Default in which Issuer is the Defaulting Party or a Termination Event in which Issuer is the Affected Party that resulted from an event or events within Issuer’s control) (a “Payment Obligation”), Issuer shall have the right, in its sole discretion, to satisfy any such Payment Obligation by the Share Termination Alternative (as defined below) by giving irrevocable telephonic notice to Dealer, confirmed in writing within one Scheduled Trading Day, between the hours of 9:00 A.M. and 4:00 P.M., New York City time, on the Merger Date, Tender Offer Date, Announcement Date, Early Termination Date or other date the Transaction is cancelled or terminated, as applicable (“Notice of Share Termination”). Upon such Notice of Share Termination, the following provisions shall apply on the Scheduled Trading Day immediately following the Merger Date, the Tender Offer Date, Announcement Date, Early Termination Date or other date the Transaction is cancelled or terminated, as applicable:

Share Termination Alternative:	Applicable and means that Issuer shall deliver to Dealer the Share Termination Delivery Property on the date on which the Payment Obligation would otherwise be due pursuant to Section 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions or Section 6(d)(ii) of the Agreement, as applicable (the “Share Termination Payment Date”), in satisfaction of the Payment Obligation.
Share Termination Delivery Property:	A number of Share Termination Delivery Units, as calculated by the Calculation Agent, equal to the Payment Obligation divided by the Share Termination Unit Price. The Calculation Agent shall adjust the Share Termination Delivery Property by replacing any fractional portion of the aggregate amount of a security therein with an amount of cash equal to the value of such fractional security based on the values used to calculate the Share Termination Unit Price.
Share Termination Unit Price:	The value of property contained in one Share Termination Delivery Unit on the date such Share Termination Delivery Units are to be delivered as Share Termination Delivery Property, as determined by the Calculation Agent in its discretion by commercially reasonable means and notified by the Calculation Agent to Issuer at the time of notification of the Payment Obligation.

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Share Termination Delivery Unit:	In the case of a Termination Event, Event of Default, Delisting or Additional Disruption Event, one Share or, in the case of an Insolvency, Nationalization, Merger Event or Tender Offer, a Share or a unit consisting of the number or amount of each type of property received by a holder of one Share (without consideration of any requirement to pay cash or other consideration in lieu of fractional amounts of any securities) in such Insolvency, Nationalization, Merger Event or Tender Offer. If such Insolvency, Nationalization, Merger Event or Tender Offer involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash.
Failure to Deliver:	Applicable
Other Applicable Provisions:	If Share Termination Alternative is applicable, the provisions of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction, except that all references to “Shares” shall be read as references to “Share Termination Delivery Units”; provided that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws as a result of the fact that Issuer is the issuer of any Share Termination Delivery Units (or any security forming a part thereof). If, in the reasonable judgment of Issuer or Dealer, based on advice of counsel, for any reason, any securities comprising the Share Termination Delivery Units deliverable pursuant to this Section 8(a) would not be immediately freely transferable by Dealer under Rule 144 under the Securities Act, then Dealer may elect to either (x) permit delivery of such securities notwithstanding any restriction on transfer or (y) have the provisions set forth in Section 8(b) below apply.

     (b) Registration/Private Placement Procedures. (i) With respect to the Transaction, the following provisions shall apply to the extent provided for above opposite the caption “Net Share Settlement” in Section 2 or in paragraph (a) of this Section 8. If so applicable, then, at the election of Issuer by notice to Dealer within one Exchange Business Day after the relevant delivery obligation arises, but in any event at least one Exchange Business Day prior to the date on which such delivery obligation is due, either (A) all Shares or Share Termination Delivery Units, as the case may be, delivered by Issuer to Dealer shall be covered by an effective registration statement of Issuer for immediate resale by Dealer (such registration statement and the corresponding prospectus (the “Prospectus”) (including, without limitation, any sections describing the plan of distribution) in form and content commercially reasonably satisfactory to Dealer) or (B) Issuer shall deliver additional Shares or Share Termination Delivery Units, as the case may be, so that the value of such Shares or Share Termination Delivery Units, as determined by the Calculation Agent to reflect an appropriate liquidity discount, equals the value of the number of Shares or Share Termination Delivery Units that would otherwise be deliverable if such Shares or Share Termination Delivery Units were freely tradeable (without prospectus delivery) upon receipt by Dealer (such value, the “Freely Tradeable Value”); provided that, if requested by Dealer on or prior to the second Exchange Business Day prior to the first Exercise Date, any election to be made by Issuer described in this clause (B) shall be made with respect to Shares delivered on all Settlement Dates no later than one Exchange Business Day prior to the first Exercise Date, and the applicable procedures described below shall apply to all Shares delivered on the Settlement Dates on an aggregate basis. (For the avoidance of doubt, as used in this paragraph (b) only, the term “Issuer” shall mean the issuer of the relevant securities, as the context shall require.)

     (ii) If Issuer makes the election described in clause (b)(i)(A) above:

     (A) Dealer (or an affiliate of Dealer designated by Dealer) shall be afforded a reasonable opportunity to conduct a due diligence investigation with respect to Issuer that is

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customary in scope for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business and that yields results that are commercially reasonably satisfactory to Dealer or such affiliate, as the case may be, in its discretion; and

     (B) Dealer (or an affiliate of Dealer designated by Dealer) and Issuer shall enter into an agreement (a “Registration Agreement”) on commercially reasonable terms in connection with the public resale of such Shares or Share Termination Delivery Units, as the case may be, by Dealer or such affiliate substantially similar to underwriting agreements customary for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business, in form and substance commercially reasonably satisfactory to Dealer or such affiliate and Issuer, which Registration Agreement shall include, without limitation, provisions substantially similar to those contained in such underwriting agreements relating to the indemnification of, and contribution in connection with the liability of, Dealer and its affiliates and Issuer, shall provide for the payment by Issuer of all registration expenses in connection with such resale, including all registration costs and all fees and expenses of counsel for Dealer, and shall provide for the delivery of accountants’ “comfort letters” to Dealer or such affiliate with respect to the financial statements and certain financial information contained in or incorporated by reference into the Prospectus as are customarily requested in comfort letters covering follow-on offerings of equity securities of companies of comparable size, maturity and lines of business and the delivery of disclosure opinions of nationally recognized outside counsel to Issuer reasonably acceptable to Dealer.

     (iii) If Issuer makes the election described in clause (b)(i)(B) above:

     (A) Dealer (or an affiliate of Dealer designated by Dealer) and any potential institutional purchaser of any such Shares or Share Termination Delivery Units, as the case may be, from Dealer or such affiliate identified by Dealer shall be afforded a commercially reasonable opportunity to conduct a due diligence investigation in compliance with applicable law with respect to Issuer customary in scope for private placements of equity securities of companies of comparable size, maturity and lines of business (including, without limitation, the right to have made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them), subject to execution by such recipients of customary confidentiality agreements reasonably acceptable to Issuer;

     (B) Dealer (or an affiliate of Dealer designated by Dealer) and Issuer shall enter into an agreement (a “Private Placement Agreement”) on commercially reasonable terms in connection with the private placement of such Shares or Share Termination Delivery Units, as the case may be, by Issuer to Dealer or such affiliate and the private resale of such shares by Dealer or such affiliate, substantially similar to private placement purchase agreements customary for private placements of equity securities of companies of comparable size, maturity and lines of business, in form and substance commercially reasonably satisfactory to Dealer and Issuer, which Private Placement Agreement shall include, without limitation, provisions substantially similar to those contained in such private placement purchase agreements relating to the indemnification of, and contribution in connection with the liability of, Dealer and its affiliates and Issuer, shall provide for the payment by Issuer of all expenses in connection with such resale, including all fees and expenses of counsel for Dealer, shall contain representations, warranties and agreements of Issuer reasonably necessary or advisable to establish and maintain the availability of an exemption from the registration requirements of the Securities Act for such resales, and shall use reasonable best efforts to provide for the delivery of accountants’ “comfort letters” to Dealer or such affiliate with respect to the financial statements and certain financial information contained in or incorporated by reference into the offering memorandum prepared for the resale of such Shares as are customarily requested in comfort letters covering private placements of equity securities of companies of comparable size, maturity and lines of business and delivery of disclosure opinions of nationally recognized outside counsel to Issuer reasonably acceptable to Dealer;

     (C) Issuer agrees that any Shares or Share Termination Delivery Units so delivered to Dealer, (i) may be transferred by and among Dealer and its affiliates, and Issuer shall effect such transfer without any further action by Dealer and (ii) after the minimum “holding period”

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within the meaning of Rule 144(d) under the Securities Act has elapsed with respect to such Shares or any securities issued by Issuer comprising such Share Termination Delivery Units, Issuer shall promptly remove, or cause the transfer agent for such Shares or securities to remove, any legends referring to any such restrictions or requirements from such Shares or securities upon delivery by Dealer (or such affiliate of Dealer) to Issuer or such transfer agent of seller’s and broker’s representation letters customarily delivered by Dealer in connection with resales of restricted securities pursuant to Rule 144 under the Securities Act (if any), without any further requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document, any transfer tax stamps or payment of any other amount or any other action by Dealer (or such affiliate of Dealer); and

     (D) Issuer shall not take, or cause to be taken, any action that would make unavailable either the exemption pursuant to Section 4(2) of the Securities Act for the sale by Issuer to Dealer (or any affiliate designated by Dealer) of the Shares or Share Termination Delivery Units, as the case may be, or the exemption pursuant to Section 4(1) or Section 4(3) of the Securities Act for resales of the Shares or Share Termination Delivery Units, as the case may be, by Dealer (or any such affiliate of Dealer).

     (c) Make-whole Shares. If Issuer makes the election described in clause (i)(B) of paragraph (b) of this Section 8, then Dealer or its affiliates may sell (which sale shall be made in a commercially reasonable manner) such Shares or Share Termination Delivery Units, as the case may be, during a period (the “Resale Period”) commencing on the Exchange Business Day following delivery of such Shares or Share Termination Delivery Units, as the case may be, and ending on the Exchange Business Day on which Dealer or its affiliates completes the sale of all such Shares or Share Termination Delivery Units, as the case may be, or a sufficient number of Shares or Share Termination Delivery Units, as the case may be, so that the realized net proceeds of such sales exceed the Freely Tradeable Value. If any of such delivered Shares or Share Termination Delivery Units remain after such realized net proceeds exceed the Freely Tradeable Value, Dealer shall return such remaining Shares or Share Termination Delivery Units to Issuer. If the Freely Tradeable Value exceeds the realized net proceeds from such resale, Issuer shall transfer to Dealer by the open of the regular trading session on the Exchange on the Exchange Trading Day immediately following the last day of the Resale Period the amount of such excess (the “Additional Amount”) in cash or in a number of additional Shares or Share Termination Delivery Units, as the case may be (“Make-whole Shares”) in an amount that, based on the VWAP Price on the last day of the Resale Period (as if such day was the “Valuation Date” for purposes of computing such VWAP Price), has a dollar value equal to the Additional Amount. The Resale Period shall continue to enable the sale of the Make-whole Shares in the manner contemplated by this Section 8(c). This provision shall be applied successively until the Additional Amount is equal to zero, subject to Section 8(e).

     (d) Beneficial Ownership. Notwithstanding anything to the contrary in the Agreement or this Confirmation, in no event shall Dealer be entitled to receive, or shall be deemed to receive, any Shares if, immediately upon giving effect to such receipt of such Shares, (i) the “beneficial ownership” (within the meaning of Section 13 of the Exchange Act and the rules promulgated thereunder) of Shares by Dealer, any of its affiliates subject to aggregation with Dealer for purposes of the “beneficial ownership” test under Section 13 of the Exchange Act and all persons who may form a “group” (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) with Dealer with respect to “beneficial ownership” of any Shares (collectively, “Dealer Group”) would be equal to or greater than 8.5% or more of the outstanding Shares on the date of determination, (ii) the Warrant Equity Percentage exceeds 14.5% or (iii) Dealer, Dealer Group or any person whose ownership position would be aggregated with that of Dealer or Dealer Group (Dealer, Dealer Group or any such person, a “Dealer Person”) under Section 203 of the Delaware General Corporation Law (the “DGCL Takeover Statute”), or any state or federal bank holding company or banking laws, or other federal, state or local regulations, regulatory orders or organizational documents or contracts of Issuer that are, in each case, applicable to ownership of Shares (“Applicable Laws”), would own, beneficially own, constructively own, control, hold the power to vote or otherwise meet a relevant definition of ownership in excess of a number of Shares equal to (x) the number of Shares that would give rise to reporting or registration obligations or other requirements (including obtaining prior approval by a state or federal regulator) of a Dealer Person under Applicable Laws (including, without limitation, “interested stockholder” or “acquiring person” status under the DGCL Takeover Statute) and with respect

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to which such requirements have not been met or the relevant approval has not been received minus (y) 1.0% of the number of Shares outstanding on the date of determination (either such condition described in clause (i), (ii) or (iii), an “Excess Ownership Position”). The “Warrant Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the sum of (1) the product of the Number of Warrants and the Warrant Entitlement and (2) the aggregate number of Shares underlying any other call option transaction sold by Issuer to Dealer and (B) the denominator of which is the number of Shares outstanding on such day. If any delivery owed to Dealer hereunder is not made, in whole or in part, as a result of this provision, Issuer’s obligation to make such delivery shall not be extinguished and Issuer shall make such delivery as promptly as practicable after, but in no event later than one Exchange Business Day after, Dealer gives notice to Issuer that such delivery would not result in the existence of an Excess Ownership Position.

     (e) Limitations on Settlement by Issuer. Notwithstanding anything herein or in the Agreement to the contrary, in no event shall Issuer be required to deliver Shares in connection with the Transaction in excess of the product of two, the aggregate Number of Warrants for all Components at the time of delivery and the Warrant Entitlement at the time of delivery (such product, the “Capped Number”). Issuer represents and warrants to Dealer (which representation and warranty shall be deemed to be repeated on each day that the Transaction is outstanding) that the Capped Number is equal to or less than the number of authorized but unissued Shares of the Issuer that are not reserved for future issuance in connection with transactions in the Shares (other than the Transaction) on the date of the determination of the Capped Number (such Shares, the “Available Shares”). In the event Issuer shall not have delivered the full number of Shares otherwise deliverable as a result of this Section 8(e) (the resulting deficit, the “Deficit Shares”), Issuer shall be continually obligated to deliver Shares, from time to time until the full number of Deficit Shares have been delivered pursuant to this paragraph, when, and to the extent, that (A) Shares are repurchased, acquired or otherwise received by Issuer or any of its subsidiaries after the Trade Date (whether or not in exchange for cash, fair value or any other consideration), (B) authorized and unissued Shares reserved for issuance in respect of other transactions prior to such date which prior to the relevant date become no longer so reserved and (C) Issuer additionally authorizes any unissued Shares that are not reserved for other transactions (such events as set forth in clauses (A), (B) and (C) above, collectively, the “Share Issuance Events”). Issuer shall promptly notify Dealer of the occurrence of any of the Share Issuance Events (including the number of Shares subject to clause (A), (B) or (C) and the corresponding number of Shares to be delivered) and, as promptly as reasonably practicable, deliver such Shares thereafter.

     (f) Equity Rights. Dealer acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to the Transaction that are senior to the claims of common stockholders in the event of Issuer’s bankruptcy. For the avoidance of doubt, the parties agree that the preceding sentence shall not apply at any time other than during Issuer’s bankruptcy to any claim arising as a result of a breach by Issuer of any of its obligations under this Confirmation or the Agreement. For the avoidance of doubt, the parties acknowledge that the obligations of Issuer under this Confirmation are not secured by any collateral that would otherwise secure the obligations of Issuer herein under or pursuant to any other agreement.

     (g) Amendments to Equity Definitions. The following amendments shall be made to the Equity Definitions:

     (i) For the purposes of any adjustment under Section 11.2(c) of the Equity Definitions, the first sentence of Section 11.2(c) of the Equity Definitions, prior to clause (A) thereof, is hereby amended to read as follows: ‘(c) If “Calculation Agent Adjustment” is specified as the Method of Adjustment in the related Confirmation of a Share Option Transaction, then following the announcement or occurrence of any Potential Adjustment Event, the Calculation Agent will determine whether such Potential Adjustment Event has a material effect on the theoretical value of the relevant Shares or options on the Shares and, if so, will (i) make appropriate adjustment(s), if any, to any one or more of:’ and, the portion of such sentence immediately preceding clause (ii) thereof is hereby amended by deleting the words “diluting or concentrative” and the words “(provided that no adjustments will be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant

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Shares)” and replacing such latter phrase with the words “(and, for the avoidance of doubt, adjustments may be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)”;

     (ii) Sections 11.2(a) and 11.2(e)(vii) of the Equity Definitions are hereby amended by inserting at the end of each Section the phrase “or a material effect on the theoretical value of the Warrants;”

     (iii) Section 12.9(b)(iv) of the Equity Definitions is hereby amended by (A) deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)” following subsection (A) and (3) the phrase “in each case” in subsection (B); (B) replacing “will lend” with “lends” in subsection (B); and (C) deleting the phrase “neither the Non-Hedging Party nor the Lending Party lends Shares in the amount of the Hedging Shares or” in the penultimate sentence; and

     (v) Section 12.9(b)(v) of the Equity Definitions is hereby amended by (A) adding the word “or” immediately before subsection “(B)” and deleting the comma at the end of subsection (A); and (B)(1) deleting subsection (C) in its entirety, (2) deleting the word “or” immediately preceding subsection (C), (3) replacing in the penultimate sentence the words “either party” with “the Hedging Party” and (4) deleting clause (X) in the final sentence.

     (h) Transfer and Assignment. Dealer may transfer or assign its rights and obligations hereunder and under the Agreement, in whole or in part, at any time without the consent of Issuer.

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

     (j) Additional Termination Events. The occurrence of any of the following shall constitute an Additional Termination Event with respect to which the Transaction shall be the sole Affected Transaction and Issuer shall be the sole Affected Party and Dealer shall be the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement and to determine the amount payable pursuant to Section 6(e) of the Agreement; provided that with respect to any Additional Termination Event, Dealer may choose to treat part of the Transaction as the sole Affected Transaction, and, upon the termination of the Affected Transaction, a Transaction with terms identical to those set forth herein except with a Number of Warrants equal to the unaffected number of Warrants shall be treated for all purposes as the Transaction, which shall remain in full force and effect:

     (i) Dealer reasonably determines that it is advisable to terminate a portion of the Transaction (the “Affected Portion”) so that Dealer’s related hedging activities with respect thereto will comply with applicable securities laws, rules or regulations or generally applicable related policies and procedures of Dealer applied to the Transaction in a non-discriminatory manner (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by Dealer); provided that Dealer shall treat only the Affected Portion of the Transaction as the Affected Transaction; or

     (ii) at any time at which any Excess Ownership Position (as defined above) occurs, Dealer, in its reasonable discretion, is unable to effect a transfer or assignment to a third party of the Transaction or any other transaction between the parties after using its commercially reasonable efforts on pricing terms and within a time period reasonably acceptable to Dealer (the “Transfer Time Period”) (it being understood that a period of at least one Exchange Business Day shall be considered reasonable for this purpose (without prejudice to whether a shorter period of time would be considered reasonable)) such that an Excess Ownership Position no longer exists; provided that Dealer shall treat only that portion of the Transaction as the Affected Transaction as necessary so that such Excess Ownership Position no longer exists; and provided further that, unless such Excess Ownership Position is the result of a repurchase of Shares by Issuer or any other event or events within Issuer’s control, Dealer shall promptly notify Issuer of its Excess

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Ownership Position and shall use its commercially reasonable efforts to consult with Issuer during the Transfer Time Period regarding potential transfers or assignments to third parties prior to designating an Early Termination Date pursuant to this Section 8(j)(ii); or

     (iii) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act other than Issuer, its subsidiaries and its and their employee benefit plans, files a Schedule TO or any schedule, form or report under the Exchange Act, disclosing that such person or group has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of Issuer’s common equity representing more than 50% of the voting power of Issuer’s common equity; or

     (iv) consummation of (A) any recapitalization, reclassification or change of the Shares (other than changes resulting from a subdivision or combination) as a result of which the Shares would be converted into, or exchanged for, stock, other securities, other property or assets or (B) any share exchange, consolidation or merger of Issuer pursuant to which the Shares will be converted into cash, securities or other assets or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of Issuer and its subsidiaries, taken as a whole, to any person other than Issuer or one of Issuer’s subsidiaries; provided, however, that a transactions where (x) the Shares are not changed or exchanged except to the extent necessary to reflect a change in Issuer’s jurisdiction of incorporation or (y) the holders of more than 50% of all classes of Issuer’s common equity immediately prior to such transaction own, directly or indirectly, more than 50% of the aggregate voting power of the common equity of the continuing or surviving corporation or transferee or the parent thereof immediately after such event shall not constitute an Additional Termination Event; or

     (v) Issuer’s stockholders approve any plan or proposal for Issuer’s liquidation or dissolution; or

     (vi) the Shares (or any New Shares that would be deliverable by Issuer hereunder) cease to be listed on any of The New York Stock Exchange, The NASDAQ Global Select Market, The NASDAQ Global Market (or any of their respective successors) or an alternate exchange of equivalent or greater liquidity with respect to the Shares (or any such New Shares).

Notwithstanding the foregoing, a transaction or transactions described in clause (iv) above will not constitute an Additional Termination Event if at least 90% of the consideration received or to be received by holders of the Shares, excluding cash payments for fractional shares and cash payments made pursuant to dissenters’ appraisal rights, in connection with such transaction or transactions consists of shares of common stock that are listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their respective successors) or that will be so listed or quoted when issued or exchanged in connection with such transaction or transactions.

     (k) Effectiveness. If, on or prior to the Effective Date, Dealer reasonably determines that it is advisable to cancel the Transaction because of concerns that Dealer’s related hedging activities could be viewed as not complying with applicable securities laws, rules or regulations, the Transaction shall be cancelled and shall not become effective, and neither party shall have any obligation to the other party in respect of the Transaction.

     (l) Extension of Settlement. Dealer may divide any Component into additional Components and designate the Expiration Date and the Number of Warrants for each such Component if Dealer determines, in its reasonable discretion, that such further division is necessary or advisable to preserve Dealer’s hedging or hedge unwind activity hereunder in light of existing liquidity conditions in the cash market or stock loan market or to enable Dealer to effect purchases of Shares in connection with its hedging, hedge unwind or settlement activity hereunder in a manner that would, if Dealer were Issuer or an affiliated purchaser of Issuer, be compliance with applicable legal, regulatory and self-regulatory requirements, or with related policies and procedures applicable to Dealer.

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

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obligations it owes to the other party under the Transaction against any delivery or payment obligations owed to it by the other party, whether arising under the Agreement, under any other agreement between parties hereto, by operation of law or otherwise.

     (n) Delivery or Receipt of Cash. For the avoidance of doubt, other than receipt of the Premium by Issuer, nothing in this Confirmation shall be interpreted as requiring Issuer to cash settle this Transaction, except in circumstances where such cash settlement is within Issuer’s control (including, without limitation, where Issuer elects to deliver or receive cash, where Issuer fails timely to elect the Share Termination Alternative, or where Issuer is not able to effect a private placement settlement pursuant to Section 8(b)(i)(B) above due to the occurrence of events within its control) or in those circumstances in which holders of the Shares would also receive cash.

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

     (p) Designation by Dealer. Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities to or from Issuer, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such Shares or other securities and otherwise to perform Dealer’s obligations in respect of the Transaction and any such designee may assume such obligations. Dealer shall be discharged of its obligations to Issuer only to the extent of any such performance.

     (q) Strike Price Adjustment. Notwithstanding anything to the contrary in the Agreement, this Confirmation or the Equity Definitions (but without limiting Dealer’s right to adjust any variable relevant to the exercise, settlement, payment or other terms of the Transaction, other than the Strike Price and the Warrant Entitlement), in no event shall (i) the Warrant Entitlement be adjusted, or (ii) the Strike Price be adjusted to the extent that, after giving effect to such adjustment, the Strike Price would be less than USD 6.16, in each case, other than any such adjustment in connection with stock splits or similar changes to Issuer’s capitalization.

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

     (s) Share Deliveries. Issuer acknowledges and agrees that, to the extent the holder of this Warrant is not then an affiliate and has not been an affiliate for 90 days (it being understood that Dealer will not be considered an affiliate under this paragraph solely by reason of its receipt of Shares pursuant to this Transaction), and otherwise satisfies all holding period and other requirements of Rule 144 of the Securities Act applicable to it, any delivery of Shares or Share Termination Delivery Property hereunder at any time after 6 months from the Trade Date (or 1 year from the Trade Date if, at such time, informational requirements of Rule 144(c) are not satisfied with respect to Issuer) shall be eligible for resale under Rule 144 of the Securities Act and Issuer agrees to promptly remove, or cause the transfer agent for such Shares or Share Termination Delivery Property, to remove, any legends referring to any restrictions on resale under the Securities Act from the Shares or Share Termination Delivery Property. Issuer further agrees that any delivery of Shares or Share Termination Delivery Property prior to the date that is 6 months from the Trade Date (or 1 year from the Trade Date if, at such time, informational requirements of Rule 144(c) are not satisfied with respect to Issuer), may be transferred by and among Dealer and its affiliates and Issuer shall effect such transfer without any further action by Dealer. Notwithstanding anything to the contrary herein, Issuer agrees that any delivery of Shares or Share Termination Delivery Property shall be effected by book-entry transfer through the facilities of DTC, or any successor depositary, if at the time of delivery, such class of Shares or class of Share Termination Delivery Property is in book-entry form at DTC or such successor depositary. Notwithstanding anything to the contrary herein, to the extent the provisions of Rule 144 of the Securities Act or any successor rule are amended, or the applicable interpretation thereof by the Securities and Exchange Commission or any court change after the Trade Date, the agreements of Issuer herein shall be deemed modified to the extent necessary, in the opinion of outside counsel of Issuer, to comply with Rule 144 of the Securities Act, as in effect at the time of delivery of the relevant Shares or Share Termination Delivery Property.

     (t) Quarterly Valuations. Dealer hereby agrees, upon request by Issuer, to provide or cause its affiliate to provide to Issuer, within five Exchange Business Days after the end of the fiscal quarter of

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Issuer during which Issuer made such request, a valuation estimate of the fair value of the Transaction as of Issuer’s fiscal quarter end.

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

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

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

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

Yours faithfully, MORGAN STANLEY & CO. INTERNATIONAL PLC
By:	/s/ Rajul Patel
	Name:	Rajul Patel
	Title:	Executive Director
MORGAN STANLEY & CO. INCORPORATED as Agent
By:	/s/ Serkan Savasoglu
	Name:	Serkan Savasoglu
	Title:	Managing Director

Agreed and Accepted By: CADENCE DESIGN SYSTEMS, INC.
By:	/s/ Kevin S. Palatnik
	Name:	Kevin S. Palatnik
	Title:	Sr. Vice President & Chief Financial Officer

Signature Page to Base Warrant
Confirmation

Annex A

For each Component of the Transaction, the Number of Warrants and Expiration Date is set forth below.

Component Number	Number of Warrants	Expiration Date
1	56,794	September 1, 2015
2	56,794	September 2, 2015
3	56,794	September 3, 2015
4	56,794	September 4, 2015
5	56,794	September 8, 2015
6	56,794	September 9, 2015
7	56,794	September 10, 2015
8	56,794	September 11, 2015
9	56,794	September 14, 2015
10	56,794	September 15, 2015
11	56,794	September 16, 2015
12	56,794	September 17, 2015
13	56,794	September 18, 2015
14	56,794	September 21, 2015
15	56,794	September 22, 2015
16	56,794	September 23, 2015
17	56,794	September 24, 2015
18	56,794	September 25, 2015
19	56,794	September 28, 2015
20	56,794	September 29, 2015
21	56,794	September 30, 2015
22	56,794	October 1, 2015
23	56,794	October 2, 2015
24	56,794	October 5, 2015
25	56,794	October 6, 2015
26	56,794	October 7, 2015
27	56,794	October 8, 2015
28	56,794	October 9, 2015
29	56,794	October 12, 2015
30	56,794	October 13, 2015
31	56,794	October 14, 2015
32	56,794	October 15, 2015
33	56,794	October 16, 2015
34	56,794	October 19, 2015
35	56,794	October 20, 2015
36	56,795	October 21, 2015
37	56,795	October 22, 2015
38	56,795	October 23, 2015
39	56,795	October 26, 2015
40	56,795	October 27, 2015
41	56,795	October 28, 2015
42	56,795	October 29, 2015
43	56,795	October 30, 2015
44	56,795	November 2, 2015
45	56,795	November 3, 2015
46	56,795	November 4, 2015
47	56,795	November 5, 2015
48	56,795	November 6, 2015
49	56,795	November 9, 2015

Annex A - 1

Component Number	Number of Warrants	Expiration Date
50	56,795	November 10, 2015
51	56,795	November 11, 2015
52	56,795	November 12, 2015
53	56,795	November 13, 2015
54	56,795	November 16, 2015
55	56,795	November 17, 2015
56	56,795	November 18, 2015
57	56,795	November 19, 2015
58	56,795	November 20, 2015
59	56,795	November 23, 2015
60	56,795	November 24, 2015
61	56,795	November 25, 2015
62	56,795	November 27, 2015
63	56,795	November 30, 2015
64	56,795	December 1, 2015
65	56,795	December 2, 2015
66	56,795	December 3, 2015
67	56,795	December 4, 2015
68	56,795	December 7, 2015
69	56,795	December 8, 2015
70	56,795	December 9, 2015

Annex A - 2

EX-10.09

Exhibit 10.09

To:	Cadence Design Systems, Inc.
	2655 Seely Avenue, Building 5
	San Jose, CA 95134
	Attention: Office of the General Counsel
From:	Deutsche Bank AG, London Branch
	Winchester House
	1 Great Winchester St, London EC2N 2DB
	c/o Deutsche Bank Securities Inc.
	60 Wall Street New
	York, NY 10005
	Telephone: 212-250-2500
Re:	Base Issuer Warrant Transaction
Ref. No:	386875
Date:	June 9, 2010

Dear Sir(s):

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

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

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     1. This Confirmation is subject to, and incorporates, the definitions and provisions of the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc. (“ISDA”). For purposes of the Equity Definitions, each reference herein to a Warrant shall be deemed to be a reference to a Call Option or an Option, as the context requires.

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

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

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

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

     2. The Transaction is a Warrant Transaction, which shall be considered a Share Option Transaction for purposes of the Equity Definitions. The terms of the particular Transaction to which this Confirmation relates are as follows:

General Terms:

Trade Date:	June 9, 2010
Effective Date:	June 15, 2010, or such other date as agreed between the parties, subject to Section 8(k) below.
Components:	The Transaction will be divided into individual Components, each with the terms set forth in this Confirmation, and, in particular, with the Number of Warrants and Expiration Date set forth in this Confirmation. The payments and deliveries to be made upon settlement of the Transaction will be determined separately for each Component as if each Component were a separate Transaction under the Agreement.
Warrant Style:	European
Warrant Type:	Call
Seller:	Issuer
Buyer:	Dealer

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Shares:	The Common Stock of Issuer, par value USD 0.01 per share (Ticker Symbol: “CDNS”).
Number of Warrants:	For each Component, as provided in Annex A to this Confirmation.
Warrant Entitlement:	One Share per Warrant
Strike Price:	USD 10.78
Premium:	USD 9,475,740.00
Premium Payment Date:	The Effective Date
Exchange:	NASDAQ Global Select Market
Related Exchange:	All Exchanges.

Procedures for Exercise:

     In respect of any Component:

Expiration Time:

Valuation Time

Expiration Date:

As provided in Annex A to this Confirmation (or, if such date is not a Scheduled Trading Day, the next following Scheduled Trading Day that is not already an Expiration Date for another Component); provided that if that date is a Disrupted Day, the Expiration Date for such Component shall be the first succeeding Scheduled Trading Day that is not a Disrupted Day and is not or is not deemed to be an Expiration Date in respect of any other Component of the Transaction hereunder; and provided further that if the Expiration Date has not occurred pursuant to the preceding proviso as of the Final Disruption Date, the Calculation Agent shall have the right to elect, in its sole discretion, that the Final Disruption Date shall be the Expiration Date for such Component (irrespective of whether such date is an Expiration Date in respect of any other Component for the Transaction). “Final Disruption Date” means December 21, 2015. Notwithstanding the foregoing and anything to the contrary in the Equity Definitions, if a Market Disruption Event occurs on any Expiration Date, the Calculation Agent may determine that such Expiration Date is a Disrupted Day only in part, in which case (i) the Calculation Agent shall make adjustments to the Number of Warrants for the relevant Component for which such day shall be the Expiration Date and shall designate the Scheduled Trading Day determined in the manner described in the immediately preceding sentence as the Expiration Date for the remaining Warrants for such Component and (ii) the VWAP Price for such Disrupted Day shall be determined by the Calculation Agent based on transactions in the Shares effected on such Disrupted Day taking into account the nature and duration of such Market Disruption Event on such day. Section 6.6 of the Equity Definitions shall

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	not apply to any Valuation Date occurring on an Expiration Date.
Market Disruption Event:	Section 6.3(a) of the Equity Definitions is hereby amended by (A) deleting the words “during the one hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be,” in clause (ii) thereof and (B) replacing the words “or (iii) an Early Closure.” therein with “(iii) an Early Closure, or (iv) a Regulatory Disruption.”. Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the term “Scheduled Closing Time” in the fourth line thereof.
Regulatory Disruption:	Any event that Dealer, in its reasonable discretion based on advice of counsel, determines makes it appropriate with regard to any legal, regulatory or self-regulatory requirements or generally applicable related policies and procedures applicable to Dealer and applied to the Transaction in a non-discriminatory manner, for Dealer to refrain from or decrease any market activity in connection with the Transaction.
Automatic Exercise:	Applicable; and means that the Number of Warrants for the corresponding Expiration Date will be deemed to be automatically exercised at the Expiration Time on such Expiration Date unless Dealer notifies Seller (by telephone or in writing) prior to the Expiration Time on such Expiration Date that it does not wish Automatic Exercise to occur, in which case Automatic Exercise will not apply to such Expiration Date.
Issuer’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of Giving Notice:	As provided in Section 6(a) below.

Valuation Terms:

     In respect of any Component:

Valuation Time:	At the close of trading of the regular trading session on the Exchange; provided that if the regular trading session is extended, the Calculation Agent shall determine the Valuation Time in its reasonable discretion.
Valuation Date:	The Expiration Date.

Settlement Terms:

     In respect of any Component:

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Settlement Currency:	USD
Net Share Settlement:	On each Settlement Date, Issuer shall deliver to Dealer a number of Shares equal to the Number of Shares to be Delivered for such Settlement Date to the account specified by Dealer and cash in lieu of any fractional Share valued at the VWAP Price on the Valuation Date corresponding to such Settlement Date. If, in the reasonable judgment of Issuer or Dealer, based on advice of counsel, for any reason, the Shares deliverable upon Net Share Settlement would not be immediately freely transferable by Dealer under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), then Dealer may elect to either (x) accept delivery of such Shares notwithstanding any restriction on transfer or (y) have the provisions set forth in Section 8(b) below apply.
	The Number of Shares to be Delivered shall be delivered by Issuer to Dealer no later than 5:00 p.m. (local time in New York City) on the relevant Settlement Date.
Number of Shares to be Delivered:	In respect of any Exercise Date, subject to the last sentence of Section 9.5 of the Equity Definitions, the product of (i) the number of Warrants exercised or deemed exercised on such Exercise Date, (ii) the Warrant Entitlement and (iii) (A) the excess of the VWAP Price on the Valuation Date occurring in respect of such Exercise Date over the Strike Price (or, if there is no such excess, zero) divided by (B) such VWAP Price.
VWAP Price:	For any Exchange Business Day, the volume weighted average price per Share for the regular trading session (including any extensions thereof) of the Exchange on such Exchange Business Day (without regard to pre-open or after hours trading outside of such regular trading session), as published by Bloomberg at 4:15 P.M., New York City time (or 15 minutes following the end of any extension of the regular trading session), on such Exchange Business Day, on Bloomberg page “CDNS.Q <Equity> AQR” (or any successor thereto) (or if such published volume weighted average price is unavailable or is manifestly incorrect, the market value of one Share on such Exchange Business Day, as reasonably determined by the Calculation Agent using a volume weighted method).
Other Applicable Provisions:	The provisions of Sections 9.1(c), 9.4, 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction; provided that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions,

5

obligations, limitations or requirements under applicable securities laws that exist as a result of the fact that Issuer is the issuer of the Shares.

Adjustments:

     In respect of any Component:

Method of Adjustment:	Calculation Agent Adjustment; provided that in respect of an Extraordinary Dividend, “Calculation Agent Adjustment” shall be as described in the provision below. For the avoidance of doubt, Calculation Agent Adjustment shall continue to apply until the obligations of the parties (including any obligations of Issuer pursuant to Section 8(e) below) under the Transaction have been satisfied in full.
Extraordinary Dividend:	Any cash dividend or distribution on the Shares with an ex-dividend date occurring on or after the Trade Date and on or prior to the Expiration Date (or, if any Deficit Shares are owed pursuant to Section 8(e) below, such later date on which Issuer’s obligations under this Transaction have been satisfied in full).
Extraordinary Dividend Adjustment:	If at any time during the period from and including the Trade Date, to and including the Expiration Date for the Component with the latest Expiration Date (or, if any Deficit Shares are owed pursuant to Section 8(e) below, such later date on which Issuer’s obligations under this Transaction have been satisfied in full), an ex-dividend date for an Extraordinary Dividend occurs or is deemed to occur, then the Calculation Agent will make adjustments to any one or more of the Strike Price, the Number of Warrants, the Warrant Entitlement and/or any other variable relevant to the exercise, settlement, payment or other terms of the Transaction as it determines appropriate to account for the economic effect on the Transaction of such Extraordinary Dividend.

Extraordinary Events:

New Shares:

In the definition of New Shares in Section 12.1(i) of the Equity Definitions (A) the text in clause (i) thereof shall be deleted in its entirety and replaced with “publicly quoted, traded or listed on any of the New York Stock Exchange, The NASDAQ Global Market or The NASDAQ Global Select Market (or their respective successors)” and (B) the phrase “and (iii) of an entity or person organized under the laws of the United States, any State thereof or the District of Columbia that also becomes Issuer under the Transaction following such Merger Event or Tender Offer” shall be inserted at the end thereof.

Consequences of Merger Events:

(a) Share-for-Share: Modified Calculation Agent Adjustment

6

(b) Share-for-Other:	Cancellation and Payment (Calculation Agent Determination)
(c) Share-for-Combined:	Cancellation and Payment (Calculation Agent Determination); provided that the Calculation Agent may elect Component Adjustment for all or part of the Transaction.

Tender Offer:	Applicable.
Consequences of Tender Offers:

(a) Share-for-Share:	Modified Calculation Agent Adjustment
(b) Share-for-Other:	Modified Calculation Agent Adjustment
(c) Share-for-Combined:	Modified Calculation Agent Adjustment

Modified Calculation Agent Adjustment:

Upon the occurrence of any Merger Event pursuant to which the holders of Issuer’s Shares would be entitled to receive cash, securities or other property for their Shares and for which Modified Calculation Agent Adjustment would apply, if, as a result of such Merger Event, Issuer would be different from the issuer of the Shares under this Confirmation, then, on or prior to the effective date of such Merger Event, the Issuer and the issuer of the Shares under this Confirmation will enter into a supplemental confirmation as a condition precedent to the adjustments contemplated in Section 12.2(e)(i) of the Equity Definitions, with such supplemental confirmation containing representations, warranties and agreements relating to securities law and other issues as requested by Dealer that Dealer has determined, in its reasonable discretion, to be reasonably necessary or appropriate to allow Dealer to continue as a party to the Transaction, as adjusted under Section 12.2(e)(i) of the Equity Definitions, and to preserve its hedging or hedge unwind activities in connection with the Transaction in a manner compliant with applicable legal, regulatory or self-regulatory requirements, or with generally applicable related policies and procedures applicable to Dealer and applied to the Transaction in a non-discriminatory manner, and if such conditions are not met or if the Calculation Agent determines that no adjustment that it could make under Section 12.2(e)(i) of the Equity Definitions will produce a commercially reasonable result, then the consequences set forth in Section 12.2(e)(ii) of the Equity Definitions shall apply.

Nationalization, Insolvency or Delisting:

Cancellation and Payment (Calculation Agent Determination); provided that (i) Section 12.6(a)(iii) of the Equity Definitions shall be amended to delete, in the definition of the term “Delisting” the

7

parenthetical “(or will cease)” and (ii) in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.

Additional Disruption Events:

(a) Change in Law:	Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof with the phrase “or announcement or statement of the interpretation” and (ii) replacing the word “Shares” with the phrase “Hedge Positions” in clause (X) thereof.
(b) Failure to Deliver:	Not Applicable
(c) Insolvency Filing:	Applicable; provided that only Dealer shall have the right to terminate the Transaction upon an Insolvency Filing.
(d) Hedging Disruption:	Applicable; provided that
	(i) Section 12.9(a)(v) of the Equity Definitions is hereby amended by inserting the following two sentences at the end of such Section:
	“For the avoidance of doubt, the term “equity price risk” shall be deemed to include, but shall not be limited to, stock price and volatility risk. And, for the further avoidance of doubt, any such transactions or assets referred to in phrases (A) or (B) above must be available on commercially reasonable pricing terms.”
	(ii) Section 12.9(b)(iii) of the Equity Definitions is hereby amended by inserting in the third line thereof, after the words “to terminate the Transaction”, the words “or a portion of the Transaction affected by such Hedging Disruption”.
(e) Increased Cost of Hedging:	Applicable
(f) Loss of Stock Borrow:	Applicable
Maximum Stock Loan Rate:	2.00% per annum
(g) Increased Cost of Stock Borrow:	Applicable
Initial Stock Loan Rate:	0.25% per annum

Hedging Party: Dealer for all applicable Additional Disruption Events.

8

Determining Party:	Dealer for all applicable Additional Disruption Events.
Non-Reliance:	Applicable
Agreements and Acknowledgments Regarding Hedging Activities:	Applicable
Additional Acknowledgments:	Applicable
3. Calculation Agent:

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

4.	Account Details:
	Dealer Payment Instructions:

Deutsche Bank AG, London Branch
The Bank of New York
Account Name: Deutsche Bank Securities, Inc.

Account for delivery of Shares to Dealer:

To be provided by Dealer.

Issuer Payment Instructions:

To be provided by Issuer.

5.	Offices:
	The Office of Dealer for the Transaction is: London

Deutsche Bank AG, London Branch
Winchester house
1 Great Winchester St, London
EC2N 2DB

The Office of Issuer for the Transaction is:

Inapplicable. Issuer is not a Multibranch Party.

6. Notices: For purposes of this Confirmation:

(a) Address for notices or communications to Issuer:

9

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, California 95134
Attn:	Office of the General Counsel
Facsimile:	(408) 904-6946

(b) Address for notices or communications to Dealer:

To:	Deutsche Bank AG, London Branch c/o Deutsche Bank Securities Inc. 60 Wall Street New York, NY 10005
Attn:	Peter Barna
With a copy to:	Deutsche Bank AG, London Branch c/o Deutsche Bank Securities Inc. 60 Wall Street New York, NY 10005
Attn:	Lars Kestner

7. Representations, Warranties and Agreements:

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

     (i) On the Trade Date, and as of the date of any election by Issuer of the Share Termination Alternative under (and as defined in) Section 8(a) below, none of Issuer and its officers and directors is aware of any material nonpublic information regarding Issuer or the Shares. On the Trade Date, all reports and other documents filed by Issuer with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), when considered as a whole (with the more recent such reports and documents deemed to amend inconsistent statements contained in any earlier such reports and documents), do not contain any untrue statement of a material fact or any omission of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading.

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

     (iii) Issuer is not entering into this Confirmation, and on the date of any election by Issuer of the Share Termination Alternative under Section 8(a) below, Issuer represents that it is not making such election, to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for Shares) or otherwise in violation of the Exchange Act.

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

     (v) Issuer shall not take any action to decrease the number of Available Shares below the Capped Number (each as defined below).

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

     (vii) (A) On the Trade Date and during the period starting on the first Expiration Date and ending on the last Expiration Date (the “Settlement Period”), the Shares or securities that are convertible into, or exchangeable or exercisable for Shares, are not, and shall not be, subject to a “restricted period,” as such term is defined in Regulation M under the Exchange Act (“Regulation M”) and (B) Issuer shall not engage in any “distribution,” as such term is defined in Regulation M until the second Exchange Business Day immediately following the Trade Date or Settlement Period, as applicable.

     (ix) Issuer agrees that it (A) will not during the Settlement Period make, or permit to be made, any public announcement (as defined in Rule 165(f) under the Securities Act) of any Merger Transaction or potential Merger Transaction unless such public announcement is made prior to the opening or after the close of the regular trading session on the Exchange for the Shares; (B) shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) notify Dealer following any such announcement that such announcement has been made; and (C) shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) provide Dealer with written notice specifying (i) Issuer’s average daily Rule 10b-18 Purchases (as defined in Rule 10b-18) during the three full calendar months immediately preceding the announcement date that were not effected through Dealer or its affiliates and (ii) the number of Shares purchased pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months preceding the announcement date. Such written notice shall be deemed to be a certification by Issuer to Dealer that such information is true and correct. In addition, Issuer shall promptly notify Dealer of the earlier to occur of the completion of such transaction and the completion of the vote by target shareholders. “Merger Transaction” means any merger, acquisition or similar transaction involving a recapitalization as contemplated by Rule 10b-18(a)(13)(iv) under the Exchange Act.

     (x) A number of Shares equal to the Capped Number have been reserved for issuance by all required corporate action of the Issuer. Any Shares issued or delivered in connection with the Transaction shall be duly authorized and, when delivered as contemplated hereby following the exercise of the Warrants in accordance with their terms and conditions, will be validly issued, fully paid and non-assessable, and the issuance or delivery thereof shall not be subject to any preemptive or similar rights and shall, upon issuance, be accepted for listing or quotation on the Exchange.

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

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

     (b) Each of Dealer and Issuer agrees and represents that it is an “eligible contract participant” as defined in Section 1a(12) of the U.S. Commodity Exchange Act, as amended, and is entering into the

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Transaction as principal (and not as agent or in any other capacity, fiduciary or otherwise) and not for the benefit of any third party.

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

     (d) Each of Dealer and Issuer agrees and acknowledges that Dealer is a “financial institution,” “swap participant” and “financial participant” within the meaning of Sections 101(22), 101(53C) and 101(22A) of Title 11 of the United States Code (the “Bankruptcy Code”). The parties hereto further agree and acknowledge (A) that this Confirmation is (i) a “securities contract,” as such term is defined in Section 741(7) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “settlement payment” within the meaning of Section 546 of the Bankruptcy Code, and (ii) a “swap agreement,” as such term is defined in Section 101(53B) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “transfer” within the meaning of Section 546 of the Bankruptcy Code, and (B) that Dealer is entitled to the protections afforded by, among other sections, Sections 362(b)(6), 362(b)(17), 362(b)(27), 362(o), 546(e), 546(g), 546(j), 548(d)(2), 555, 560 and 561 of the Bankruptcy Code.

     (e) For the purposes of Section 3(f) of the Agreement, Dealer represents that, as of the time any payment is made after December 31, 2012, (i) if it is a “foreign financial institution” within the meaning of section 1471(d)(4) of the Internal Revenue Code of 1986 as amended (the “Code”), it meets the requirements of section 1471(b) of the Code and has not elected the application of section 1471(b)(3) of the Code, and (ii) if it is a “non-financial foreign entity” within the meaning of section 1472(d) of the Code, it meets the requirements of section 1472(b) of the Code, unless one or more of the exceptions of Code section 1472(c) are applicable with respect to such payment.

     (f) As a condition to effectiveness of the Transaction, Issuer shall deliver to Dealer an opinion of counsel, dated as of the Trade Date and reasonably acceptable to Dealer in form and substance, with respect to the matters set forth in Section 3(a) of the Agreement and Section 7(a)(x) hereof, subject to customary assumptions, qualifications and exceptions.

     8. Other Provisions:

     (a) Alternative Calculations and Payment on Early Termination and on Certain Extraordinary Events. If Issuer shall owe Dealer any amount pursuant to Section 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions (except in the event of a Tender Offer, Merger Event, Insolvency or Nationalization, in each case, in which the consideration or proceeds to be paid to holders of Shares consists solely of cash) or pursuant to Section 6(d)(ii) of the Agreement (except in the event of an Event of Default in which Issuer is the Defaulting Party or a Termination Event in which Issuer is the Affected Party that resulted from an event or events within Issuer’s control) (a “Payment Obligation”), Issuer shall have the right, in its sole discretion, to satisfy any such Payment Obligation by the Share Termination Alternative (as defined below) by giving irrevocable telephonic notice to Dealer, confirmed in writing

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within one Scheduled Trading Day, between the hours of 9:00 A.M. and 4:00 P.M., New York City time, on the Merger Date, Tender Offer Date, Announcement Date, Early Termination Date or other date the Transaction is cancelled or terminated, as applicable (“Notice of Share Termination”). Upon such Notice of Share Termination, the following provisions shall apply on the Scheduled Trading Day immediately following the Merger Date, the Tender Offer Date, Announcement Date, Early Termination Date or other date the Transaction is cancelled or terminated, as applicable:

Share Termination Alternative:	Applicable and means that Issuer shall deliver to Dealer the Share Termination Delivery Property on the date on which the Payment Obligation would otherwise be due pursuant to Section 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions or Section 6(d)(ii) of the Agreement, as applicable (the “Share Termination Payment Date”), in satisfaction of the Payment Obligation.
Share Termination Delivery Property:	A number of Share Termination Delivery Units, as calculated by the Calculation Agent, equal to the Payment Obligation divided by the Share Termination Unit Price. The Calculation Agent shall adjust the Share Termination Delivery Property by replacing any fractional portion of the aggregate amount of a security therein with an amount of cash equal to the value of such fractional security based on the values used to calculate the Share Termination Unit Price.
Share Termination Unit Price:	The value of property contained in one Share Termination Delivery Unit on the date such Share Termination Delivery Units are to be delivered as Share Termination Delivery Property, as determined by the Calculation Agent in its discretion by commercially reasonable means and notified by the Calculation Agent to Issuer at the time of notification of the Payment Obligation.
Share Termination Delivery Unit:	In the case of a Termination Event, Event of Default, Delisting or Additional Disruption Event, one Share or, in the case of an Insolvency, Nationalization, Merger Event or Tender Offer, a Share or a unit consisting of the number or amount of each type of property received by a holder of one Share (without consideration of any requirement to pay cash or other consideration in lieu of fractional amounts of any securities) in such Insolvency, Nationalization, Merger Event or Tender Offer. If such Insolvency, Nationalization, Merger Event or Tender Offer involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash.
Failure to Deliver:	Applicable
Other Applicable Provisions:	If Share Termination Alternative is applicable, the provisions of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction, except that all references to “Shares” shall be read as references to “Share Termination Delivery Units”; provided that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws as a result of the fact that Issuer is the issuer of any Share Termination Delivery Units (or any security forming a part thereof). If, in the reasonable judgment of Issuer or Dealer, based on advice of counsel, for any reason, any securities comprising the Share Termination Delivery Units deliverable pursuant to this Section 8(a) would not be immediately freely transferable by Dealer under Rule

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144 under the Securities Act, then Dealer may elect to either (x) permit delivery of such securities notwithstanding any restriction on transfer or (y) have the provisions set forth in Section 8(b) below apply.

     (b) Registration/Private Placement Procedures. (i) With respect to the Transaction, the following provisions shall apply to the extent provided for above opposite the caption “Net Share Settlement” in Section 2 or in paragraph (a) of this Section 8. If so applicable, then, at the election of Issuer by notice to Dealer within one Exchange Business Day after the relevant delivery obligation arises, but in any event at least one Exchange Business Day prior to the date on which such delivery obligation is due, either (A) all Shares or Share Termination Delivery Units, as the case may be, delivered by Issuer to Dealer shall be covered by an effective registration statement of Issuer for immediate resale by Dealer (such registration statement and the corresponding prospectus (the “Prospectus”) (including, without limitation, any sections describing the plan of distribution) in form and content commercially reasonably satisfactory to Dealer) or (B) Issuer shall deliver additional Shares or Share Termination Delivery Units, as the case may be, so that the value of such Shares or Share Termination Delivery Units, as determined by the Calculation Agent to reflect an appropriate liquidity discount, equals the value of the number of Shares or Share Termination Delivery Units that would otherwise be deliverable if such Shares or Share Termination Delivery Units were freely tradeable (without prospectus delivery) upon receipt by Dealer (such value, the “Freely Tradeable Value”); provided that, if requested by Dealer on or prior to the second Exchange Business Day prior to the first Exercise Date, any election to be made by Issuer described in this clause (B) shall be made with respect to Shares delivered on all Settlement Dates no later than one Exchange Business Day prior to the first Exercise Date, and the applicable procedures described below shall apply to all Shares delivered on the Settlement Dates on an aggregate basis. (For the avoidance of doubt, as used in this paragraph (b) only, the term “Issuer” shall mean the issuer of the relevant securities, as the context shall require.)

     (ii) If Issuer makes the election described in clause (b)(i)(A) above:

     (A) Dealer (or an affiliate of Dealer designated by Dealer) shall be afforded a reasonable opportunity to conduct a due diligence investigation with respect to Issuer that is customary in scope for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business and that yields results that are commercially reasonably satisfactory to Dealer or such affiliate, as the case may be, in its discretion; and

      (B) Dealer (or an affiliate of Dealer designated by Dealer) and Issuer shall enter into an agreement (a “Registration Agreement”) on commercially reasonable terms in connection with the public resale of such Shares or Share Termination Delivery Units, as the case may be, by Dealer or such affiliate substantially similar to underwriting agreements customary for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business, in form and substance commercially reasonably satisfactory to Dealer or such affiliate and Issuer, which Registration Agreement shall include, without limitation, provisions substantially similar to those contained in such underwriting agreements relating to the indemnification of, and contribution in connection with the liability of, Dealer and its affiliates and Issuer, shall provide for the payment by Issuer of all registration expenses in connection with such resale, including all registration costs and all fees and expenses of counsel for Dealer, and shall provide for the delivery of accountants’ “comfort letters” to Dealer or such affiliate with respect to the financial statements and certain financial information contained in or incorporated by reference into the Prospectus as are customarily requested in comfort letters covering follow-on offerings of equity securities of companies of comparable size, maturity and lines of business and the delivery of disclosure opinions of nationally recognized outside counsel to Issuer reasonably acceptable to Dealer.

     (iii) If Issuer makes the election described in clause (b)(i)(B) above:

     (A) Dealer (or an affiliate of Dealer designated by Dealer) and any potential institutional purchaser of any such Shares or Share Termination Delivery Units, as the case may be, from Dealer or such affiliate identified by Dealer shall be afforded a commercially reasonable opportunity to conduct a due diligence investigation in compliance with applicable law with

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respect to Issuer customary in scope for private placements of equity securities of companies of comparable size, maturity and lines of business (including, without limitation, the right to have made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them), subject to execution by such recipients of customary confidentiality agreements reasonably acceptable to Issuer;

     (B) Dealer (or an affiliate of Dealer designated by Dealer) and Issuer shall enter into an agreement (a “Private Placement Agreement”) on commercially reasonable terms in connection with the private placement of such Shares or Share Termination Delivery Units, as the case may be, by Issuer to Dealer or such affiliate and the private resale of such shares by Dealer or such affiliate, substantially similar to private placement purchase agreements customary for private placements of equity securities of companies of comparable size, maturity and lines of business, in form and substance commercially reasonably satisfactory to Dealer and Issuer, which Private Placement Agreement shall include, without limitation, provisions substantially similar to those contained in such private placement purchase agreements relating to the indemnification of, and contribution in connection with the liability of, Dealer and its affiliates and Issuer, shall provide for the payment by Issuer of all expenses in connection with such resale, including all fees and expenses of counsel for Dealer, shall contain representations, warranties and agreements of Issuer reasonably necessary or advisable to establish and maintain the availability of an exemption from the registration requirements of the Securities Act for such resales, and shall use reasonable best efforts to provide for the delivery of accountants’ “comfort letters” to Dealer or such affiliate with respect to the financial statements and certain financial information contained in or incorporated by reference into the offering memorandum prepared for the resale of such Shares as are customarily requested in comfort letters covering private placements of equity securities of companies of comparable size, maturity and lines of business and delivery of disclosure opinions of nationally recognized outside counsel to Issuer reasonably acceptable to Dealer;

     (C) Issuer agrees that any Shares or Share Termination Delivery Units so delivered to Dealer, (i) may be transferred by and among Dealer and its affiliates, and Issuer shall effect such transfer without any further action by Dealer and (ii) after the minimum “holding period” within the meaning of Rule 144(d) under the Securities Act has elapsed with respect to such Shares or any securities issued by Issuer comprising such Share Termination Delivery Units, Issuer shall promptly remove, or cause the transfer agent for such Shares or securities to remove, any legends referring to any such restrictions or requirements from such Shares or securities upon delivery by Dealer (or such affiliate of Dealer) to Issuer or such transfer agent of seller’s and broker’s representation letters customarily delivered by Dealer in connection with resales of restricted securities pursuant to Rule 144 under the Securities Act (if any), without any further requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document, any transfer tax stamps or payment of any other amount or any other action by Dealer (or such affiliate of Dealer); and

     (D) Issuer shall not take, or cause to be taken, any action that would make unavailable either the exemption pursuant to Section 4(2) of the Securities Act for the sale by Issuer to Dealer (or any affiliate designated by Dealer) of the Shares or Share Termination Delivery Units, as the case may be, or the exemption pursuant to Section 4(1) or Section 4(3) of the Securities Act for resales of the Shares or Share Termination Delivery Units, as the case may be, by Dealer (or any such affiliate of Dealer).

     (c) Make-whole Shares. If Issuer makes the election described in clause (i)(B) of paragraph (b) of this Section 8, then Dealer or its affiliates may sell (which sale shall be made in a commercially reasonable manner) such Shares or Share Termination Delivery Units, as the case may be, during a period (the “Resale Period”) commencing on the Exchange Business Day following delivery of such Shares or Share Termination Delivery Units, as the case may be, and ending on the Exchange Business Day on which Dealer or its affiliates completes the sale of all such Shares or Share Termination Delivery Units, as the case may be, or a sufficient number of Shares or Share Termination Delivery Units, as the case may be, so that the realized net proceeds of such sales exceed the Freely Tradeable Value. If any of such delivered Shares or Share Termination Delivery Units remain after such realized net proceeds exceed the Freely

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Tradeable Value, Dealer shall return such remaining Shares or Share Termination Delivery Units to Issuer. If the Freely Tradeable Value exceeds the realized net proceeds from such resale, Issuer shall transfer to Dealer by the open of the regular trading session on the Exchange on the Exchange Trading Day immediately following the last day of the Resale Period the amount of such excess (the “Additional Amount”) in cash or in a number of additional Shares or Share Termination Delivery Units, as the case may be (“Make-whole Shares”) in an amount that, based on the VWAP Price on the last day of the Resale Period (as if such day was the “Valuation Date” for purposes of computing such VWAP Price), has a dollar value equal to the Additional Amount. The Resale Period shall continue to enable the sale of the Make-whole Shares in the manner contemplated by this Section 8(c). This provision shall be applied successively until the Additional Amount is equal to zero, subject to Section 8(e).

     (d) Beneficial Ownership. Notwithstanding anything to the contrary in the Agreement or this Confirmation, in no event shall Dealer be entitled to receive, or shall be deemed to receive, any Shares if, immediately upon giving effect to such receipt of such Shares, (i) the “beneficial ownership” (within the meaning of Section 13 of the Exchange Act and the rules promulgated thereunder) of Shares by Dealer, any of its affiliates subject to aggregation with Dealer for purposes of the “beneficial ownership” test under Section 13 of the Exchange Act and all persons who may form a “group” (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) with Dealer with respect to “beneficial ownership” of any Shares (collectively, “Dealer Group”) would be equal to or greater than 8.5% or more of the outstanding Shares on the date of determination, (ii) the Warrant Equity Percentage exceeds 14.5% or (iii) Dealer, Dealer Group or any person whose ownership position would be aggregated with that of Dealer or Dealer Group (Dealer, Dealer Group or any such person, a “Dealer Person”) under Section 203 of the Delaware General Corporation Law (the “DGCL Takeover Statute”), or any state or federal bank holding company or banking laws, or other federal, state or local regulations, regulatory orders or organizational documents or contracts of Issuer that are, in each case, applicable to ownership of Shares (“Applicable Laws”), would own, beneficially own, constructively own, control, hold the power to vote or otherwise meet a relevant definition of ownership in excess of a number of Shares equal to (x) the number of Shares that would give rise to reporting or registration obligations or other requirements (including obtaining prior approval by a state or federal regulator) of a Dealer Person under Applicable Laws (including, without limitation, “interested stockholder” or “acquiring person” status under the DGCL Takeover Statute) and with respect to which such requirements have not been met or the relevant approval has not been received minus (y) 1.0% of the number of Shares outstanding on the date of determination (either such condition described in clause (i), (ii) or (iii), an “Excess Ownership Position”). The “Warrant Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the sum of (1) the product of the Number of Warrants and the Warrant Entitlement and (2) the aggregate number of Shares underlying any other call option transaction sold by Issuer to Dealer and (B) the denominator of which is the number of Shares outstanding on such day. If any delivery owed to Dealer hereunder is not made, in whole or in part, as a result of this provision, Issuer’s obligation to make such delivery shall not be extinguished and Issuer shall make such delivery as promptly as practicable after, but in no event later than one Exchange Business Day after, Dealer gives notice to Issuer that such delivery would not result in the existence of an Excess Ownership Position.

     (e) Limitations on Settlement by Issuer. Notwithstanding anything herein or in the Agreement to the contrary, in no event shall Issuer be required to deliver Shares in connection with the Transaction in excess of the product of two, the aggregate Number of Warrants for all Components at the time of delivery and the Warrant Entitlement at the time of delivery (such product, the “Capped Number”). Issuer represents and warrants to Dealer (which representation and warranty shall be deemed to be repeated on each day that the Transaction is outstanding) that the Capped Number is equal to or less than the number of authorized but unissued Shares of the Issuer that are not reserved for future issuance in connection with transactions in the Shares (other than the Transaction) on the date of the determination of the Capped Number (such Shares, the “Available Shares”). In the event Issuer shall not have delivered the full number of Shares otherwise deliverable as a result of this Section 8(e) (the resulting deficit, the “Deficit Shares”), Issuer shall be continually obligated to deliver Shares, from time to time until the full number of Deficit Shares have been delivered pursuant to this paragraph, when, and to the extent, that (A) Shares are repurchased, acquired or otherwise received by Issuer or any of its subsidiaries after the Trade Date (whether or not in exchange for cash, fair value or any other consideration), (B) authorized and

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unissued Shares reserved for issuance in respect of other transactions prior to such date which prior to the relevant date become no longer so reserved and (C) Issuer additionally authorizes any unissued Shares that are not reserved for other transactions (such events as set forth in clauses (A), (B) and (C) above, collectively, the “Share Issuance Events”). Issuer shall promptly notify Dealer of the occurrence of any of the Share Issuance Events (including the number of Shares subject to clause (A), (B) or (C) and the corresponding number of Shares to be delivered) and, as promptly as reasonably practicable, deliver such Shares thereafter.

     (f) Equity Rights. Dealer acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to the Transaction that are senior to the claims of common stockholders in the event of Issuer’s bankruptcy. For the avoidance of doubt, the parties agree that the preceding sentence shall not apply at any time other than during Issuer’s bankruptcy to any claim arising as a result of a breach by Issuer of any of its obligations under this Confirmation or the Agreement. For the avoidance of doubt, the parties acknowledge that the obligations of Issuer under this Confirmation are not secured by any collateral that would otherwise secure the obligations of Issuer herein under or pursuant to any other agreement.

     (g) Amendments to Equity Definitions. The following amendments shall be made to the Equity Definitions:

     (i) For the purposes of any adjustment under Section 11.2(c) of the Equity Definitions, the first sentence of Section 11.2(c) of the Equity Definitions, prior to clause (A) thereof, is hereby amended to read as follows: ‘(c) If “Calculation Agent Adjustment” is specified as the Method of Adjustment in the related Confirmation of a Share Option Transaction, then following the announcement or occurrence of any Potential Adjustment Event, the Calculation Agent will determine whether such Potential Adjustment Event has a material effect on the theoretical value of the relevant Shares or options on the Shares and, if so, will (i) make appropriate adjustment(s), if any, to any one or more of:’ and, the portion of such sentence immediately preceding clause (ii) thereof is hereby amended by deleting the words “diluting or concentrative” and the words “(provided that no adjustments will be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)” and replacing such latter phrase with the words “(and, for the avoidance of doubt, adjustments may be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)”;

     (ii) Sections 11.2(a) and 11.2(e)(vii) of the Equity Definitions are hereby amended by inserting at the end of each Section the phrase “or a material effect on the theoretical value of the Warrants;”

     (iii) Section 12.9(b)(iv) of the Equity Definitions is hereby amended by (A) deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)” following subsection (A) and (3) the phrase “in each case” in subsection (B); (B) replacing “will lend” with “lends” in subsection (B); and (C) deleting the phrase “neither the Non-Hedging Party nor the Lending Party lends Shares in the amount of the Hedging Shares or” in the penultimate sentence; and

     (v) Section 12.9(b)(v) of the Equity Definitions is hereby amended by (A) adding the word “or” immediately before subsection “(B)” and deleting the comma at the end of subsection (A); and (B)(1) deleting subsection (C) in its entirety, (2) deleting the word “or” immediately preceding subsection (C), (3) replacing in the penultimate sentence the words “either party” with “the Hedging Party” and (4) deleting clause (X) in the final sentence.

     (h) Transfer and Assignment. Dealer may transfer or assign its rights and obligations hereunder and under the Agreement, in whole or in part, at any time without the consent of Issuer.

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

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     (j) Additional Termination Events. The occurrence of any of the following shall constitute an Additional Termination Event with respect to which the Transaction shall be the sole Affected Transaction and Issuer shall be the sole Affected Party and Dealer shall be the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement and to determine the amount payable pursuant to Section 6(e) of the Agreement; provided that with respect to any Additional Termination Event, Dealer may choose to treat part of the Transaction as the sole Affected Transaction, and, upon the termination of the Affected Transaction, a Transaction with terms identical to those set forth herein except with a Number of Warrants equal to the unaffected number of Warrants shall be treated for all purposes as the Transaction, which shall remain in full force and effect:

     (i) Dealer reasonably determines that it is advisable to terminate a portion of the Transaction (the “Affected Portion”) so that Dealer’s related hedging activities with respect thereto will comply with applicable securities laws, rules or regulations or generally applicable related policies and procedures of Dealer applied to the Transaction in a non-discriminatory manner (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by Dealer); provided that Dealer shall treat only the Affected Portion of the Transaction as the Affected Transaction; or

     (ii) at any time at which any Excess Ownership Position (as defined above) occurs, Dealer, in its reasonable discretion, is unable to effect a transfer or assignment to a third party of the Transaction or any other transaction between the parties after using its commercially reasonable efforts on pricing terms and within a time period reasonably acceptable to Dealer (the “Transfer Time Period”) (it being understood that a period of at least one Exchange Business Day shall be considered reasonable for this purpose (without prejudice to whether a shorter period of time would be considered reasonable)) such that an Excess Ownership Position no longer exists; provided that Dealer shall treat only that portion of the Transaction as the Affected Transaction as necessary so that such Excess Ownership Position no longer exists; and provided further that, unless such Excess Ownership Position is the result of a repurchase of Shares by Issuer or any other event or events within Issuer’s control, Dealer shall promptly notify Issuer of its Excess Ownership Position and shall use its commercially reasonable efforts to consult with Issuer during the Transfer Time Period regarding potential transfers or assignments to third parties prior to designating an Early Termination Date pursuant to this Section 8(j)(ii); or

     (iii) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act other than Issuer, its subsidiaries and its and their employee benefit plans, files a Schedule TO or any schedule, form or report under the Exchange Act, disclosing that such person or group has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of Issuer’s common equity representing more than 50% of the voting power of Issuer’s common equity; or

     (iv) consummation of (A) any recapitalization, reclassification or change of the Shares (other than changes resulting from a subdivision or combination) as a result of which the Shares would be converted into, or exchanged for, stock, other securities, other property or assets or (B) any share exchange, consolidation or merger of Issuer pursuant to which the Shares will be converted into cash, securities or other assets or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of Issuer and its subsidiaries, taken as a whole, to any person other than Issuer or one of Issuer’s subsidiaries; provided, however, that a transactions where (x) the Shares are not changed or exchanged except to the extent necessary to reflect a change in Issuer’s jurisdiction of incorporation or (y) the holders of more than 50% of all classes of Issuer’s common equity immediately prior to such transaction own, directly or indirectly, more than 50% of the aggregate voting power of the common equity of the continuing or surviving corporation or transferee or the parent thereof immediately after such event shall not constitute an Additional Termination Event; or

     (v) Issuer’s stockholders approve any plan or proposal for Issuer’s liquidation or dissolution; or

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     (vi) the Shares (or any New Shares that would be deliverable by Issuer hereunder) cease to be listed on any of The New York Stock Exchange, The NASDAQ Global Select Market, The NASDAQ Global Market (or any of their respective successors) or an alternate exchange of equivalent or greater liquidity with respect to the Shares (or any such New Shares).

Notwithstanding the foregoing, a transaction or transactions described in clause (iv) above will not constitute an Additional Termination Event if at least 90% of the consideration received or to be received by holders of the Shares, excluding cash payments for fractional shares and cash payments made pursuant to dissenters’ appraisal rights, in connection with such transaction or transactions consists of shares of common stock that are listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their respective successors) or that will be so listed or quoted when issued or exchanged in connection with such transaction or transactions.

     (k) Effectiveness. If, on or prior to the Effective Date, Dealer reasonably determines that it is advisable to cancel the Transaction because of concerns that Dealer’s related hedging activities could be viewed as not complying with applicable securities laws, rules or regulations, the Transaction shall be cancelled and shall not become effective, and neither party shall have any obligation to the other party in respect of the Transaction.

     (l) Extension of Settlement. Dealer may divide any Component into additional Components and designate the Expiration Date and the Number of Warrants for each such Component if Dealer determines, in its reasonable discretion, that such further division is necessary or advisable to preserve Dealer’s hedging or hedge unwind activity hereunder in light of existing liquidity conditions in the cash market or stock loan market or to enable Dealer to effect purchases of Shares in connection with its hedging, hedge unwind or settlement activity hereunder in a manner that would, if Dealer were Issuer or an affiliated purchaser of Issuer, be compliance with applicable legal, regulatory and self-regulatory requirements, or with related policies and procedures applicable to Dealer.

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

     (n) Delivery or Receipt of Cash. For the avoidance of doubt, other than receipt of the Premium by Issuer, nothing in this Confirmation shall be interpreted as requiring Issuer to cash settle this Transaction, except in circumstances where such cash settlement is within Issuer’s control (including, without limitation, where Issuer elects to deliver or receive cash, where Issuer fails timely to elect the Share Termination Alternative, or where Issuer is not able to effect a private placement settlement pursuant to Section 8(b)(i)(B) above due to the occurrence of events within its control) or in those circumstances in which holders of the Shares would also receive cash.

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

     (p) Designation by Dealer. Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities to or from Issuer, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such Shares or other securities and otherwise to perform Dealer’s obligations in respect of the Transaction and any such designee may assume such obligations. Dealer shall be discharged of its obligations to Issuer only to the extent of any such performance.

     (q) Strike Price Adjustment. Notwithstanding anything to the contrary in the Agreement, this Confirmation or the Equity Definitions (but without limiting Dealer’s right to adjust any variable relevant to the exercise, settlement, payment or other terms of the Transaction, other than the Strike Price and the Warrant Entitlement), in no event shall (i) the Warrant Entitlement be adjusted, or (ii) the Strike Price be adjusted to the extent that, after giving effect to such adjustment, the Strike Price would be less than USD 6.16, in each case, other than any such adjustment in connection with stock splits or similar changes to Issuer’s capitalization.

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

     (s) Share Deliveries. Issuer acknowledges and agrees that, to the extent the holder of this Warrant is not then an affiliate and has not been an affiliate for 90 days (it being understood that Dealer will not be considered an affiliate under this paragraph solely by reason of its receipt of Shares pursuant to this Transaction), and otherwise satisfies all holding period and other requirements of Rule 144 of the Securities Act applicable to it, any delivery of Shares or Share Termination Delivery Property hereunder at any time after 6 months from the Trade Date (or 1 year from the Trade Date if, at such time, informational requirements of Rule 144(c) are not satisfied with respect to Issuer) shall be eligible for resale under Rule 144 of the Securities Act and Issuer agrees to promptly remove, or cause the transfer agent for such Shares or Share Termination Delivery Property, to remove, any legends referring to any restrictions on resale under the Securities Act from the Shares or Share Termination Delivery Property. Issuer further agrees that any delivery of Shares or Share Termination Delivery Property prior to the date that is 6 months from the Trade Date (or 1 year from the Trade Date if, at such time, informational requirements of Rule 144(c) are not satisfied with respect to Issuer), may be transferred by and among Dealer and its affiliates and Issuer shall effect such transfer without any further action by Dealer. Notwithstanding anything to the contrary herein, Issuer agrees that any delivery of Shares or Share Termination Delivery Property shall be effected by book-entry transfer through the facilities of DTC, or any successor depositary, if at the time of delivery, such class of Shares or class of Share Termination Delivery Property is in book-entry form at DTC or such successor depositary. Notwithstanding anything to the contrary herein, to the extent the provisions of Rule 144 of the Securities Act or any successor rule are amended, or the applicable interpretation thereof by the Securities and Exchange Commission or any court change after the Trade Date, the agreements of Issuer herein shall be deemed modified to the extent necessary, in the opinion of outside counsel of Issuer, to comply with Rule 144 of the Securities Act, as in effect at the time of delivery of the relevant Shares or Share Termination Delivery Property.

     (t) Quarterly Valuations. Dealer hereby agrees, upon request by Issuer, to provide or cause its affiliate to provide to Issuer, within five Exchange Business Days after the end of the fiscal quarter of Issuer during which Issuer made such request, a valuation estimate of the fair value of the Transaction as of Issuer’s fiscal quarter end.

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

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

     (w) Method of Delivery. Whenever delivery of funds or other assets is required hereunder by or to Issuer, such delivery shall be effected through DBSI. In addition, all notices, demands and

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communications of any kind relating to the Transaction between Deutsche and Issuer shall be transmitted exclusively through DBSI.

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

     Dealer is regulated by the Financial Services Authority.

Yours faithfully, DEUTSCHE BANK AG, LONDON BRANCH
By:	/s/ Lars Kestner
	Name:	Lars Kestner
	Title:	Managing Director
By:	/s/ Michael Sanderson
	Name:	Michael Sanderson
	Title:	Managing Director
DEUTSCHE BANK SECURITIES INC., acting solely as Agent in connection with the Transaction
By:	/s/ Lars Kestner
	Name:	Lars Kestner
	Title:	Managing Director
By:	/s/ Michael Sanderson
	Name:	Michael Sanderson
	Title:	Managing Director

Confirmed and Acknowledged as of the date first above written: CADENCE DESIGN SYSTEMS, INC.
By:	/s/ Kevin S. Palatnik
	Name:	Kevin S. Palatnik
	Title:	Sr. Vice President & Chief Financial Officer

Chairman of the Supervisory Board: Clemens Börsig Management Board: Josef Ackermann (Chairman), Hugo Bänziger, Michael Cohrs, Jürgen Fitschen, Anshuman Jain, Stefan Krause, Hermann-Josef Lamberti, Rainer Neske	Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin — Federal Financial Supervising Authority) and regulated by the Financial Services Authority for the conduct of UK business; a member of the London Stock Exchange. Deutsche Bank AG is a joint stock corporation with limited liability incorporated in the Federal Republic of Germany HRB No. 30 000 District Court of Frankfurt am Main; Branch Registration in England and Wales BR000005; Registered address:
	Winchester House, 1 Great Winchester Street, London EC2N 2DB. Deutsche Bank Group online:
	http://www.deutsche-bank.com

Signature Page to Base Warrant
Confirmation

Annex A

For each Component of the Transaction, the Number of Warrants and Expiration Date is set forth below.

Component Number	Number of Warrants	Expiration Date
1	170,383	September 1, 2015
2	170,383	September 2, 2015
3	170,383	September 3, 2015
4	170,383	September 4, 2015
5	170,383	September 8, 2015
6	170,383	September 9, 2015
7	170,383	September 10, 2015
8	170,383	September 11, 2015
9	170,383	September 14, 2015
10	170,383	September 15, 2015
11	170,383	September 16, 2015
12	170,383	September 17, 2015
13	170,383	September 18, 2015
14	170,383	September 21, 2015
15	170,383	September 22, 2015
16	170,383	September 23, 2015
17	170,383	September 24, 2015
18	170,383	September 25, 2015
19	170,383	September 28, 2015
20	170,383	September 29, 2015
21	170,383	September 30, 2015
22	170,383	October 1, 2015
23	170,383	October 2, 2015
24	170,383	October 5, 2015
25	170,383	October 6, 2015
26	170,383	October 7, 2015
27	170,383	October 8, 2015
28	170,383	October 9, 2015
29	170,383	October 12, 2015
30	170,383	October 13, 2015
31	170,383	October 14, 2015
32	170,383	October 15, 2015
33	170,383	October 16, 2015
34	170,383	October 19, 2015
35	170,383	October 20, 2015
36	170,384	October 21, 2015
37	170,384	October 22, 2015
38	170,384	October 23, 2015
39	170,384	October 26, 2015
40	170,384	October 27, 2015
41	170,384	October 28, 2015
42	170,384	October 29, 2015
43	170,384	October 30, 2015
44	170,384	November 2, 2015
45	170,384	November 3, 2015
46	170,384	November 4, 2015
47	170,384	November 5, 2015
48	170,384	November 6, 2015
49	170,384	November 9, 2015

Annex A - 1

Component Number	Number of Warrants	Expiration Date
50	170,384	November 10, 2015
51	170,384	November 11, 2015
52	170,384	November 12, 2015
53	170,384	November 13, 2015
54	170,384	November 16, 2015
55	170,384	November 17, 2015
56	170,384	November 18, 2015
57	170,384	November 19, 2015
58	170,384	November 20, 2015
59	170,384	November 23, 2015
60	170,384	November 24, 2015
61	170,384	November 25, 2015
62	170,384	November 27, 2015
63	170,384	November 30, 2015
64	170,384	December 1, 2015
65	170,384	December 2, 2015
66	170,384	December 3, 2015
67	170,384	December 4, 2015
68	170,384	December 7, 2015
69	170,384	December 8, 2015
70	170,384	December 9, 2015

Annex A - 2

EX-10.10

Exhibit 10.10

To:	Cadence Design Systems, Inc.
	2655 Seely Avenue, Building 5
	San Jose, CA 95134
	Attention: Office of the General Counsel
From:	JPMorgan Chase Bank, National Association
	P.O. Box 161
	60 Victoria Embankment
	London EC4Y 0JP
	England
Re:	Additional Issuer Warrant Transaction
Date:	June 18, 2010

Dear Sir(s):

     The purpose of this communication (this “Confirmation”) is to set forth the terms and conditions of the above-referenced transaction entered into on the Trade Date specified below (the “Transaction”) between JPMorgan Chase Bank, National Association, London Branch (“Dealer”) and Cadence Design Systems, Inc. (“Issuer”). This communication constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified below.

     1. This Confirmation is subject to, and incorporates, the definitions and provisions of the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc. (“ISDA”). For purposes of the Equity Definitions, each reference herein to a Warrant shall be deemed to be a reference to a Call Option or an Option, as the context requires.

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

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

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

JPMorgan Chase Bank, National Association
Organised under the laws of the United States as a National Banking Association
Main Office 1111 Polaris Parkway, Columbus, Ohio 43271
Registered as a branch in England & Wales branch No. BR000746
Registered Branch Office 125 London Wall, London EC2Y 5AJ
Authorised and regulated by the Financial Services Authority

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

     2. The Transaction is a Warrant Transaction, which shall be considered a Share Option Transaction for purposes of the Equity Definitions. The terms of the particular Transaction to which this Confirmation relates are as follows:

General Terms:

Trade Date:	June 18, 2010
Effective Date:	June 22, 2010, or such other date as agreed between the parties, subject to Section 8(k) below.
Components:	The Transaction will be divided into individual Components, each with the terms set forth in this Confirmation, and, in particular, with the Number of Warrants and Expiration Date set forth in this Confirmation. The payments and deliveries to be made upon settlement of the Transaction will be determined separately for each Component as if each Component were a separate Transaction under the Agreement.
Warrant Style:	European
Warrant Type:	Call
Seller:	Issuer
Buyer:	Dealer
Shares:	The Common Stock of Issuer, par value USD 0.01 per share (Ticker Symbol: “CDNS”).
Number of Warrants:	For each Component, as provided in Annex A to this Confirmation.
Warrant Entitlement:	One Share per Warrant
Strike Price:	USD 10.78
Premium:	USD 3,518,691.84
Premium Payment Date:	The Effective Date
Exchange:	NASDAQ Global Select Market
Related Exchange:	All Exchanges.
Procedures for Exercise:
In respect of any Component:
Expiration Time:	Valuation Time
Expiration Date:	As provided in Annex A to this Confirmation (or, if such date is not a Scheduled Trading Day, the next

2

	following Scheduled Trading Day that is not already an Expiration Date for another Component); provided that if that date is a Disrupted Day, the Expiration Date for such Component shall be the first succeeding Scheduled Trading Day that is not a Disrupted Day and is not or is not deemed to be an Expiration Date in respect of any other Component of the Transaction hereunder; and provided further that if the Expiration Date has not occurred pursuant to the preceding proviso as of the Final Disruption Date, the Calculation Agent shall have the right to elect, in its sole discretion, that the Final Disruption Date shall be the Expiration Date for such Component (irrespective of whether such date is an Expiration Date in respect of any other Component for the Transaction). “Final Disruption Date” means December 21, 2015. Notwithstanding the foregoing and anything to the contrary in the Equity Definitions, if a Market Disruption Event occurs on any Expiration Date, the Calculation Agent may determine that such Expiration Date is a Disrupted Day only in part, in which case (i) the Calculation Agent shall make adjustments to the Number of Warrants for the relevant Component for which such day shall be the Expiration Date and shall designate the Scheduled Trading Day determined in the manner described in the immediately preceding sentence as the Expiration Date for the remaining Warrants for such Component and (ii) the VWAP Price for such Disrupted Day shall be determined by the Calculation Agent based on transactions in the Shares effected on such Disrupted Day taking into account the nature and duration of such Market Disruption Event on such day. Section 6.6 of the Equity Definitions shall not apply to any Valuation Date occurring on an Expiration Date.
Market Disruption Event:	Section 6.3(a) of the Equity Definitions is hereby amended by (A) deleting the words “during the one hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be,” in clause (ii) thereof and (B) replacing the words “or (iii) an Early Closure.” therein with “(iii) an Early Closure, or (iv) a Regulatory Disruption.”.
	Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the term “Scheduled Closing Time” in the fourth line thereof.
Regulatory Disruption:	Any event that Dealer, in its reasonable discretion based on advice of counsel, determines makes it appropriate with regard to any legal, regulatory or self-regulatory requirements or generally applicable related policies and procedures applicable to Dealer

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	and applied to the Transaction in a non-discriminatory manner, for Dealer to refrain from or decrease any market activity in connection with the Transaction.
Automatic Exercise:	Applicable; and means that the Number of Warrants for the corresponding Expiration Date will be deemed to be automatically exercised at the Expiration Time on such Expiration Date unless Dealer notifies Seller (by telephone or in writing) prior to the Expiration Time on such Expiration Date that it does not wish Automatic Exercise to occur, in which case Automatic Exercise will not apply to such Expiration Date.
Issuer’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of Giving Notice:	As provided in Section 6(a) below.
Valuation Terms:
In respect of any Component:
Valuation Time:	At the close of trading of the regular trading session on the Exchange; provided that if the regular trading session is extended, the Calculation Agent shall determine the Valuation Time in its reasonable discretion.
Valuation Date:	The Expiration Date.
Settlement Terms:
In respect of any Component:
Settlement Currency:	USD
Net Share Settlement:	On each Settlement Date, Issuer shall deliver to Dealer a number of Shares equal to the Number of Shares to be Delivered for such Settlement Date to the account specified by Dealer and cash in lieu of any fractional Share valued at the VWAP Price on the Valuation Date corresponding to such Settlement Date. If, in the reasonable judgment of Issuer or Dealer, based on advice of counsel, for any reason, the Shares deliverable upon Net Share Settlement would not be immediately freely transferable by Dealer under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), then Dealer may elect to either (x) accept delivery of such Shares notwithstanding any restriction on transfer or (y) have the provisions set forth in Section 8(b) below apply.
	The Number of Shares to be Delivered shall be delivered by Issuer to Dealer no later than 5:00 p.m.

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	(local time in New York City) on the relevant Settlement Date.
Number of Shares to be Delivered:	In respect of any Exercise Date, subject to the last sentence of Section 9.5 of the Equity Definitions, the product of (i) the number of Warrants exercised or deemed exercised on such Exercise Date, (ii) the Warrant Entitlement and (iii) (A) the excess of the VWAP Price on the Valuation Date occurring in respect of such Exercise Date over the Strike Price (or, if there is no such excess, zero) divided by (B) such VWAP Price.
VWAP Price:	For any Exchange Business Day, the volume weighted average price per Share for the regular trading session (including any extensions thereof) of the Exchange on such Exchange Business Day (without regard to pre-open or after hours trading outside of such regular trading session), as published by Bloomberg at 4:15 P.M., New York City time (or 15 minutes following the end of any extension of the regular trading session), on such Exchange Business Day, on Bloomberg page “CDNS.Q <Equity> AQR” (or any successor thereto) (or if such published volume weighted average price is unavailable or is manifestly incorrect, the market value of one Share on such Exchange Business Day, as reasonably determined by the Calculation Agent using a volume weighted method).
Other Applicable Provisions:	The provisions of Sections 9.1(c), 9.4, 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction; provided that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws that exist as a result of the fact that Issuer is the issuer of the Shares.
Adjustments:
In respect of any Component:
Method of Adjustment:	Calculation Agent Adjustment; provided that in respect of an Extraordinary Dividend, “Calculation Agent Adjustment” shall be as described in the provision below. For the avoidance of doubt, Calculation Agent Adjustment shall continue to apply until the obligations of the parties (including any obligations of Issuer pursuant to Section 8(e) below) under the Transaction have been satisfied in full.
Extraordinary Dividend:	Any cash dividend or distribution on the Shares with an ex-dividend date occurring on or after the Trade Date and on or prior to the Expiration Date (or, if any

5

	Deficit Shares are owed pursuant to Section 8(e) below, such later date on which Issuer’s obligations under this Transaction have been satisfied in full).
Extraordinary Dividend Adjustment:	If at any time during the period from and including the Trade Date, to and including the Expiration Date for the Component with the latest Expiration Date (or, if any Deficit Shares are owed pursuant to Section 8(e) below, such later date on which Issuer’s obligations under this Transaction have been satisfied in full), an ex-dividend date for an Extraordinary Dividend occurs or is deemed to occur, then the Calculation Agent will make adjustments to any one or more of the Strike Price, the Number of Warrants, the Warrant Entitlement and/or any other variable relevant to the exercise, settlement, payment or other terms of the Transaction as it determines appropriate to account for the economic effect on the Transaction of such Extraordinary Dividend.
Extraordinary Events:
New Shares:	In the definition of New Shares in Section 12.1(i) of the Equity Definitions (A) the text in clause (i) thereof shall be deleted in its entirety and replaced with “publicly quoted, traded or listed on any of the New York Stock Exchange, The NASDAQ Global Market or The NASDAQ Global Select Market (or their respective successors)” and (B) the phrase “and (iii) of an entity or person organized under the laws of the United States, any State thereof or the District of Columbia that also becomes Issuer under the Transaction following such Merger Event or Tender Offer” shall be inserted at the end thereof.
Consequences of Merger Events:
(a) Share-for-Share:	Modified Calculation Agent Adjustment
(b) Share-for-Other:	Cancellation and Payment (Calculation Agent Determination)
(c) Share-for-Combined:	Cancellation and Payment (Calculation Agent Determination); provided that the Calculation Agent may elect Component Adjustment for all or part of the Transaction.
Tender Offer:	Applicable.
Consequences of Tender Offers:
(a) Share-for-Share:	Modified Calculation Agent Adjustment
(b) Share-for-Other:	Modified Calculation Agent Adjustment
(c) Share-for-Combined:	Modified Calculation Agent Adjustment
Modified Calculation Agent Adjustment:	Upon the occurrence of any Merger Event pursuant to which the holders of Issuer’s Shares would be

6

	entitled to receive cash, securities or other property for their Shares and for which Modified Calculation Agent Adjustment would apply, if, as a result of such Merger Event, Issuer would be different from the issuer of the Shares under this Confirmation, then, on or prior to the effective date of such Merger Event, the Issuer and the issuer of the Shares under this Confirmation will enter into a supplemental confirmation as a condition precedent to the adjustments contemplated in Section 12.2(e)(i) of the Equity Definitions, with such supplemental confirmation containing representations, warranties and agreements relating to securities law and other issues as requested by Dealer that Dealer has determined, in its reasonable discretion, to be reasonably necessary or appropriate to allow Dealer to continue as a party to the Transaction, as adjusted under Section 12.2(e)(i) of the Equity Definitions, and to preserve its hedging or hedge unwind activities in connection with the Transaction in a manner compliant with applicable legal, regulatory or self-regulatory requirements, or with generally applicable related policies and procedures applicable to Dealer and applied to the Transaction in a non-discriminatory manner, and if such conditions are not met or if the Calculation Agent determines that no adjustment that it could make under Section 12.2(e)(i) of the Equity Definitions will produce a commercially reasonable result, then the consequences set forth in Section 12.2(e)(ii) of the Equity Definitions shall apply.
Nationalization, Insolvency or Delisting:	Cancellation and Payment (Calculation Agent Determination); provided that (i) Section 12.6(a)(iii) of the Equity Definitions shall be amended to delete, in the definition of the term “Delisting” the parenthetical “(or will cease)” and (ii) in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.
Additional Disruption Events:
(a) Change in Law:	Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof with the phrase “or announcement or statement of the

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	interpretation” and (ii) replacing the word “Shares” with the phrase “Hedge Positions” in clause (X) thereof.
(b) Failure to Deliver:	Not Applicable
(c) Insolvency Filing:	Applicable; provided that only Dealer shall have the right to terminate the Transaction upon an Insolvency Filing.
(d) Hedging Disruption:	Applicable; provided that
	(i) Section 12.9(a)(v) of the Equity Definitions is hereby amended by inserting the following two sentences at the end of such Section:
	“For the avoidance of doubt, the term “equity price risk” shall be deemed to include, but shall not be limited to, stock price and volatility risk. And, for the further avoidance of doubt, any such transactions or assets referred to in phrases (A) or (B) above must be available on commercially reasonable pricing terms.”
	(ii) Section 12.9(b)(iii) of the Equity Definitions is hereby amended by inserting in the third line thereof, after the words “to terminate the Transaction”, the words “or a portion of the Transaction affected by such Hedging Disruption”.
(e) Increased Cost of Hedging:	Applicable
(f) Loss of Stock Borrow:	Applicable
Maximum Stock Loan Rate:	2.00% per annum
(g) Increased Cost of Stock Borrow:	Applicable
Initial Stock Loan Rate:	0.25% per annum
Hedging Party:	Dealer for all applicable Additional Disruption Events.
Determining Party:	Dealer for all applicable Additional Disruption Events.
Non-Reliance:	Applicable
Agreements and Acknowledgments Regarding Hedging Activities:	Applicable
Additional Acknowledgments:	Applicable

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     3. Calculation Agent:

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

     4. Account Details:

Dealer Payment Instructions:

JPMORGAN CHASE BANK, N.A.
Beneficiary JPMorgan Chase Bank, N.A. New York
Ref: Derivatives

Account for delivery of Shares to Dealer:

DTC 0060

Issuer Payment Instructions:

To be provided by Issuer.

     5. Offices:

The Office of Dealer for the Transaction is: London

JPMorgan Chase Bank, National Association
London Branch
P.O. Box 161
60 Victoria Embankment
London EC4Y 0JP
England

The Office of Issuer for the Transaction is:

Inapplicable. Issuer is not a Multibranch Party.

     6. Notices: For purposes of this Confirmation:

     (a) Address for notices or communications to Issuer:

To:	Cadence Design Systems, Inc.
	2655 Seely Avenue, Building 5
	San Jose, California 95134
Attn:	Office of the General Counsel
Facsimile:	(408) 904-6946

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(b) Address for notices or communications to Dealer:

To:	JPMorgan Chase Bank, National Association
	4 New York Plaza, Floor 18
	New York, NY 10004-2413
Attn:	Mariusz Kwasnik
	Operations Analyst, EDG Corporate Marketing

7. Representations, Warranties and Agreements:

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

     (i) On the Trade Date, and as of the date of any election by Issuer of the Share Termination Alternative under (and as defined in) Section 8(a) below, none of Issuer and its officers and directors is aware of any material nonpublic information regarding Issuer or the Shares. On the Trade Date, all reports and other documents filed by Issuer with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), when considered as a whole (with the more recent such reports and documents deemed to amend inconsistent statements contained in any earlier such reports and documents), do not contain any untrue statement of a material fact or any omission of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading.

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

     (iii) Issuer is not entering into this Confirmation, and on the date of any election by Issuer of the Share Termination Alternative under Section 8(a) below, Issuer represents that it is not making such election, to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for Shares) or otherwise in violation of the Exchange Act.

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

     (v) Issuer shall not take any action to decrease the number of Available Shares below the Capped Number (each as defined below).

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

     (vii) (A) On the Trade Date and during the period starting on the first Expiration Date and ending on the last Expiration Date (the “Settlement Period”), the Shares or securities that are convertible into, or exchangeable or exercisable for Shares, are not, and shall not be, subject to a “restricted period,” as such term is defined in Regulation M under the Exchange Act (“Regulation M”) and (B) Issuer shall not engage in any “distribution,” as such term is defined in Regulation M

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until the second Exchange Business Day immediately following the Trade Date or Settlement Period, as applicable.

     (ix) Issuer agrees that it (A) will not during the Settlement Period make, or permit to be made, any public announcement (as defined in Rule 165(f) under the Securities Act) of any Merger Transaction or potential Merger Transaction unless such public announcement is made prior to the opening or after the close of the regular trading session on the Exchange for the Shares; (B) shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) notify Dealer following any such announcement that such announcement has been made; and (C) shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) provide Dealer with written notice specifying (i) Issuer’s average daily Rule 10b-18 Purchases (as defined in Rule 10b-18) during the three full calendar months immediately preceding the announcement date that were not effected through Dealer or its affiliates and (ii) the number of Shares purchased pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months preceding the announcement date. Such written notice shall be deemed to be a certification by Issuer to Dealer that such information is true and correct. In addition, Issuer shall promptly notify Dealer of the earlier to occur of the completion of such transaction and the completion of the vote by target shareholders. “Merger Transaction” means any merger, acquisition or similar transaction involving a recapitalization as contemplated by Rule 10b-18(a)(13)(iv) under the Exchange Act.

     (x) A number of Shares equal to the Capped Number have been reserved for issuance by all required corporate action of the Issuer. Any Shares issued or delivered in connection with the Transaction shall be duly authorized and, when delivered as contemplated hereby following the exercise of the Warrants in accordance with their terms and conditions, will be validly issued, fully paid and non-assessable, and the issuance or delivery thereof shall not be subject to any preemptive or similar rights and shall, upon issuance, be accepted for listing or quotation on the Exchange.

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

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

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

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

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

     (d) Each of Dealer and Issuer agrees and acknowledges that Dealer is a “financial institution,” “swap participant” and “financial participant” within the meaning of Sections 101(22), 101(53C) and 101(22A) of Title 11 of the United States Code (the “Bankruptcy Code”). The parties hereto further agree and acknowledge (A) that this Confirmation is (i) a “securities contract,” as such term is defined in Section 741(7) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “settlement payment” within the meaning of Section 546 of the Bankruptcy Code, and (ii) a “swap agreement,” as such term is defined in Section 101(53B) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “transfer” within the meaning of Section 546 of the Bankruptcy Code, and (B) that Dealer is entitled to the protections afforded by, among other sections, Sections 362(b)(6), 362(b)(17), 362(b)(27), 362(o), 546(e), 546(g), 546(j), 548(d)(2), 555, 560 and 561 of the Bankruptcy Code.

     (e) For the purposes of Section 3(f) of the Agreement, Dealer represents that, as of the time any payment is made after December 31, 2012, (i) if it is a “foreign financial institution” within the meaning of section 1471(d)(4) of the Internal Revenue Code of 1986 as amended (the “Code”), it meets the requirements of section 1471(b) of the Code and has not elected the application of section 1471(b)(3) of the Code, and (ii) if it is a “non-financial foreign entity” within the meaning of section 1472(d) of the Code, it meets the requirements of section 1472(b) of the Code, unless one or more of the exceptions of Code section 1472(c) are applicable with respect to such payment.

     (f) As a condition to effectiveness of the Transaction, Issuer shall deliver to Dealer an opinion of counsel, dated as of the Trade Date and reasonably acceptable to Dealer in form and substance, with respect to the matters set forth in Section 3(a) of the Agreement and Section 7(a)(x) hereof, subject to customary assumptions, qualifications and exceptions.

8. Other Provisions:

     (a) Alternative Calculations and Payment on Early Termination and on Certain Extraordinary Events. If Issuer shall owe Dealer any amount pursuant to Section 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions (except in the event of a Tender Offer, Merger Event, Insolvency or Nationalization, in each case, in which the consideration or proceeds to be paid to holders of Shares consists solely of cash) or pursuant to Section 6(d)(ii) of the Agreement (except in the event of an Event of Default in which Issuer is the Defaulting Party or a Termination Event in which Issuer is the Affected Party that resulted from an event or events within Issuer’s control) (a “Payment Obligation”), Issuer shall have the right, in its sole discretion, to satisfy any such Payment Obligation by the Share Termination Alternative (as defined below) by giving irrevocable telephonic notice to Dealer, confirmed in writing within one Scheduled Trading Day, between the hours of 9:00 A.M. and 4:00 P.M., New York City time, on the Merger Date, Tender Offer Date, Announcement Date, Early Termination Date or other date the Transaction is cancelled or terminated, as applicable (“Notice of Share Termination”). Upon such Notice of Share Termination, the following provisions shall apply on the Scheduled Trading Day immediately following the Merger Date, the Tender Offer Date, Announcement Date, Early Termination Date or other date the Transaction is cancelled or terminated, as applicable:

Share Termination Alternative:	Applicable and means that Issuer shall deliver to Dealer the Share Termination Delivery Property on the date on which the Payment Obligation would otherwise be due pursuant to Section 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions or Section 6(d)(ii) of the Agreement, as applicable (the “Share Termination Payment Date”), in satisfaction of the Payment Obligation.
Share Termination Delivery Property:	A number of Share Termination Delivery Units, as calculated by the

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	Calculation Agent, equal to the Payment Obligation divided by the Share Termination Unit Price. The Calculation Agent shall adjust the Share Termination Delivery Property by replacing any fractional portion of the aggregate amount of a security therein with an amount of cash equal to the value of such fractional security based on the values used to calculate the Share Termination Unit Price.
Share Termination Unit Price:	The value of property contained in one Share Termination Delivery Unit on the date such Share Termination Delivery Units are to be delivered as Share Termination Delivery Property, as determined by the Calculation Agent in its discretion by commercially reasonable means and notified by the Calculation Agent to Issuer at the time of notification of the Payment Obligation.
Share Termination Delivery Unit:	In the case of a Termination Event, Event of Default, Delisting or Additional Disruption Event, one Share or, in the case of an Insolvency, Nationalization, Merger Event or Tender Offer, a Share or a unit consisting of the number or amount of each type of property received by a holder of one Share (without consideration of any requirement to pay cash or other consideration in lieu of fractional amounts of any securities) in such Insolvency, Nationalization, Merger Event or Tender Offer. If such Insolvency, Nationalization, Merger Event or Tender Offer involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash.
Failure to Deliver:	Applicable
Other Applicable Provisions:	If Share Termination Alternative is applicable, the provisions of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction, except that all references to “Shares” shall be read as references to “Share Termination Delivery Units”; provided that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws as a result of the fact that Issuer is the issuer of any Share Termination Delivery Units (or any security forming a part thereof). If, in the reasonable judgment of Issuer or Dealer, based on advice of counsel, for any reason, any securities comprising the Share Termination Delivery Units deliverable pursuant to this Section 8(a) would not be immediately freely transferable by Dealer under Rule 144 under the Securities Act, then Dealer may elect to either (x) permit delivery of such securities notwithstanding any restriction on transfer or (y) have the provisions set forth in Section 8(b) below apply.

     (b) Registration/Private Placement Procedures. (i) With respect to the Transaction, the following provisions shall apply to the extent provided for above opposite the caption “Net Share Settlement” in Section 2 or in paragraph (a) of this Section 8. If so applicable, then, at the election of Issuer by notice to Dealer within one Exchange Business Day after the relevant delivery obligation arises, but in any event at least one Exchange Business Day prior to the date on which such delivery obligation is due, either (A) all Shares or Share Termination Delivery Units, as the case may be, delivered by Issuer to Dealer shall be covered by an effective registration statement of Issuer for immediate resale by Dealer (such registration statement and the corresponding prospectus (the “Prospectus”) (including, without limitation, any sections describing the plan of distribution) in form and content commercially reasonably satisfactory to Dealer) or (B) Issuer shall deliver additional Shares or Share Termination Delivery Units, as the case may be, so that the value of such Shares or Share Termination Delivery Units, as determined by

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the Calculation Agent to reflect an appropriate liquidity discount, equals the value of the number of Shares or Share Termination Delivery Units that would otherwise be deliverable if such Shares or Share Termination Delivery Units were freely tradeable (without prospectus delivery) upon receipt by Dealer (such value, the “Freely Tradeable Value”); provided that, if requested by Dealer on or prior to the second Exchange Business Day prior to the first Exercise Date, any election to be made by Issuer described in this clause (B) shall be made with respect to Shares delivered on all Settlement Dates no later than one Exchange Business Day prior to the first Exercise Date, and the applicable procedures described below shall apply to all Shares delivered on the Settlement Dates on an aggregate basis. (For the avoidance of doubt, as used in this paragraph (b) only, the term “Issuer” shall mean the issuer of the relevant securities, as the context shall require.)

     (ii) If Issuer makes the election described in clause (b)(i)(A) above:

     (A) Dealer (or an affiliate of Dealer designated by Dealer) shall be afforded a reasonable opportunity to conduct a due diligence investigation with respect to Issuer that is customary in scope for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business and that yields results that are commercially reasonably satisfactory to Dealer or such affiliate, as the case may be, in its discretion; and

     (B) Dealer (or an affiliate of Dealer designated by Dealer) and Issuer shall enter into an agreement (a “Registration Agreement”) on commercially reasonable terms in connection with the public resale of such Shares or Share Termination Delivery Units, as the case may be, by Dealer or such affiliate substantially similar to underwriting agreements customary for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business, in form and substance commercially reasonably satisfactory to Dealer or such affiliate and Issuer, which Registration Agreement shall include, without limitation, provisions substantially similar to those contained in such underwriting agreements relating to the indemnification of, and contribution in connection with the liability of, Dealer and its affiliates and Issuer, shall provide for the payment by Issuer of all registration expenses in connection with such resale, including all registration costs and all fees and expenses of counsel for Dealer, and shall provide for the delivery of accountants’ “comfort letters” to Dealer or such affiliate with respect to the financial statements and certain financial information contained in or incorporated by reference into the Prospectus as are customarily requested in comfort letters covering follow-on offerings of equity securities of companies of comparable size, maturity and lines of business and the delivery of disclosure opinions of nationally recognized outside counsel to Issuer reasonably acceptable to Dealer.

     (iii) If Issuer makes the election described in clause (b)(i)(B) above:

     (A) Dealer (or an affiliate of Dealer designated by Dealer) and any potential institutional purchaser of any such Shares or Share Termination Delivery Units, as the case may be, from Dealer or such affiliate identified by Dealer shall be afforded a commercially reasonable opportunity to conduct a due diligence investigation in compliance with applicable law with respect to Issuer customary in scope for private placements of equity securities of companies of comparable size, maturity and lines of business (including, without limitation, the right to have made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them), subject to execution by such recipients of customary confidentiality agreements reasonably acceptable to Issuer;

     (B) Dealer (or an affiliate of Dealer designated by Dealer) and Issuer shall enter into an agreement (a “Private Placement Agreement”) on commercially reasonable terms in connection with the private placement of such Shares or Share Termination Delivery Units, as the case may be, by Issuer to Dealer or such affiliate and the private resale of such shares by Dealer or such affiliate, substantially similar to private placement purchase agreements customary for private placements of equity securities of companies of comparable size, maturity and lines of business, in form and substance commercially reasonably satisfactory to Dealer and Issuer, which Private Placement Agreement shall include, without limitation, provisions substantially similar to those contained in such private placement purchase agreements relating to the indemnification of,

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and contribution in connection with the liability of, Dealer and its affiliates and Issuer, shall provide for the payment by Issuer of all expenses in connection with such resale, including all fees and expenses of counsel for Dealer, shall contain representations, warranties and agreements of Issuer reasonably necessary or advisable to establish and maintain the availability of an exemption from the registration requirements of the Securities Act for such resales, and shall use reasonable best efforts to provide for the delivery of accountants’ “comfort letters” to Dealer or such affiliate with respect to the financial statements and certain financial information contained in or incorporated by reference into the offering memorandum prepared for the resale of such Shares as are customarily requested in comfort letters covering private placements of equity securities of companies of comparable size, maturity and lines of business and delivery of disclosure opinions of nationally recognized outside counsel to Issuer reasonably acceptable to Dealer;

     (C) Issuer agrees that any Shares or Share Termination Delivery Units so delivered to Dealer, (i) may be transferred by and among Dealer and its affiliates, and Issuer shall effect such transfer without any further action by Dealer and (ii) after the minimum “holding period” within the meaning of Rule 144(d) under the Securities Act has elapsed with respect to such Shares or any securities issued by Issuer comprising such Share Termination Delivery Units, Issuer shall promptly remove, or cause the transfer agent for such Shares or securities to remove, any legends referring to any such restrictions or requirements from such Shares or securities upon delivery by Dealer (or such affiliate of Dealer) to Issuer or such transfer agent of seller’s and broker’s representation letters customarily delivered by Dealer in connection with resales of restricted securities pursuant to Rule 144 under the Securities Act (if any), without any further requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document, any transfer tax stamps or payment of any other amount or any other action by Dealer (or such affiliate of Dealer); and

     (D) Issuer shall not take, or cause to be taken, any action that would make unavailable either the exemption pursuant to Section 4(2) of the Securities Act for the sale by Issuer to Dealer (or any affiliate designated by Dealer) of the Shares or Share Termination Delivery Units, as the case may be, or the exemption pursuant to Section 4(1) or Section 4(3) of the Securities Act for resales of the Shares or Share Termination Delivery Units, as the case may be, by Dealer (or any such affiliate of Dealer).

     (c) Make-whole Shares. If Issuer makes the election described in clause (i)(B) of paragraph (b) of this Section 8, then Dealer or its affiliates may sell (which sale shall be made in a commercially reasonable manner) such Shares or Share Termination Delivery Units, as the case may be, during a period (the “Resale Period”) commencing on the Exchange Business Day following delivery of such Shares or Share Termination Delivery Units, as the case may be, and ending on the Exchange Business Day on which Dealer or its affiliates completes the sale of all such Shares or Share Termination Delivery Units, as the case may be, or a sufficient number of Shares or Share Termination Delivery Units, as the case may be, so that the realized net proceeds of such sales exceed the Freely Tradeable Value. If any of such delivered Shares or Share Termination Delivery Units remain after such realized net proceeds exceed the Freely Tradeable Value, Dealer shall return such remaining Shares or Share Termination Delivery Units to Issuer. If the Freely Tradeable Value exceeds the realized net proceeds from such resale, Issuer shall transfer to Dealer by the open of the regular trading session on the Exchange on the Exchange Trading Day immediately following the last day of the Resale Period the amount of such excess (the “Additional Amount”) in cash or in a number of additional Shares or Share Termination Delivery Units, as the case may be (“Make-whole Shares”) in an amount that, based on the VWAP Price on the last day of the Resale Period (as if such day was the “Valuation Date” for purposes of computing such VWAP Price), has a dollar value equal to the Additional Amount. The Resale Period shall continue to enable the sale of the Make-whole Shares in the manner contemplated by this Section 8(c). This provision shall be applied successively until the Additional Amount is equal to zero, subject to Section 8(e).

     (d) Beneficial Ownership. Notwithstanding anything to the contrary in the Agreement or this Confirmation, in no event shall Dealer be entitled to receive, or shall be deemed to receive, any Shares if, immediately upon giving effect to such receipt of such Shares and after taking into account any Shares deliverable to Dealer under the Base Issuer Warrant Transaction between the parties hereto, entered into on

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June 9, 2010 (the “Base Warrant Transaction”), (i) the “beneficial ownership” (within the meaning of Section 13 of the Exchange Act and the rules promulgated thereunder) of Shares by Dealer, any of its affiliates subject to aggregation with Dealer for purposes of the “beneficial ownership” test under Section 13 of the Exchange Act and all persons who may form a “group” (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) with Dealer with respect to “beneficial ownership” of any Shares (collectively, “Dealer Group”) would be equal to or greater than 8.5% or more of the outstanding Shares on the date of determination, (ii) the Warrant Equity Percentage exceeds 14.5% or (iii) Dealer, Dealer Group or any person whose ownership position would be aggregated with that of Dealer or Dealer Group (Dealer, Dealer Group or any such person, a “Dealer Person”) under Section 203 of the Delaware General Corporation Law (the “DGCL Takeover Statute”), or any state or federal bank holding company or banking laws, or other federal, state or local regulations, regulatory orders or organizational documents or contracts of Issuer that are, in each case, applicable to ownership of Shares (“Applicable Laws”), would own, beneficially own, constructively own, control, hold the power to vote or otherwise meet a relevant definition of ownership in excess of a number of Shares equal to (x) the number of Shares that would give rise to reporting or registration obligations or other requirements (including obtaining prior approval by a state or federal regulator) of a Dealer Person under Applicable Laws (including, without limitation, “interested stockholder” or “acquiring person” status under the DGCL Takeover Statute) and with respect to which such requirements have not been met or the relevant approval has not been received minus (y) 1.0% of the number of Shares outstanding on the date of determination (either such condition described in clause (i), (ii) or (iii), an “Excess Ownership Position”). The “Warrant Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the sum of (1) the product of the Number of Warrants and the Warrant Entitlement and (2) the aggregate number of Shares underlying any other call option transaction sold by Issuer to Dealer and (B) the denominator of which is the number of Shares outstanding on such day. If any delivery owed to Dealer hereunder is not made, in whole or in part, as a result of this provision, Issuer’s obligation to make such delivery shall not be extinguished and Issuer shall make such delivery as promptly as practicable after, but in no event later than one Exchange Business Day after, Dealer gives notice to Issuer that such delivery would not result in the existence of an Excess Ownership Position.

     (e) Limitations on Settlement by Issuer. Notwithstanding anything herein or in the Agreement to the contrary, in no event shall Issuer be required to deliver Shares in connection with the Transaction in excess of the product of two, the aggregate Number of Warrants for all Components at the time of delivery and the Warrant Entitlement at the time of delivery (such product, the “Capped Number”). Issuer represents and warrants to Dealer (which representation and warranty shall be deemed to be repeated on each day that the Transaction is outstanding) that the Capped Number is equal to or less than the number of authorized but unissued Shares of the Issuer that are not reserved for future issuance in connection with transactions in the Shares (other than the Transaction) on the date of the determination of the Capped Number (such Shares, the “Available Shares”). In the event Issuer shall not have delivered the full number of Shares otherwise deliverable as a result of this Section 8(e) (the resulting deficit, the “Deficit Shares”), Issuer shall be continually obligated to deliver Shares, from time to time until the full number of Deficit Shares have been delivered pursuant to this paragraph, when, and to the extent, that (A) Shares are repurchased, acquired or otherwise received by Issuer or any of its subsidiaries after the Trade Date (whether or not in exchange for cash, fair value or any other consideration), (B) authorized and unissued Shares reserved for issuance in respect of other transactions prior to such date which prior to the relevant date become no longer so reserved and (C) Issuer additionally authorizes any unissued Shares that are not reserved for other transactions (such events as set forth in clauses (A), (B) and (C) above, collectively, the “Share Issuance Events”). Issuer shall promptly notify Dealer of the occurrence of any of the Share Issuance Events (including the number of Shares subject to clause (A), (B) or (C) and the corresponding number of Shares to be delivered) and, as promptly as reasonably practicable, deliver such Shares thereafter.

     (f) Equity Rights. Dealer acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to the Transaction that are senior to the claims of common stockholders in the event of Issuer’s bankruptcy. For the avoidance of doubt, the parties agree that the preceding sentence shall not apply at any time other than during Issuer’s bankruptcy to any claim arising as a result of a breach

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by Issuer of any of its obligations under this Confirmation or the Agreement. For the avoidance of doubt, the parties acknowledge that the obligations of Issuer under this Confirmation are not secured by any collateral that would otherwise secure the obligations of Issuer herein under or pursuant to any other agreement.

     (g) Amendments to Equity Definitions. The following amendments shall be made to the Equity Definitions:

     (i) For the purposes of any adjustment under Section 11.2(c) of the Equity Definitions, the first sentence of Section 11.2(c) of the Equity Definitions, prior to clause (A) thereof, is hereby amended to read as follows: ‘(c) If “Calculation Agent Adjustment” is specified as the Method of Adjustment in the related Confirmation of a Share Option Transaction, then following the announcement or occurrence of any Potential Adjustment Event, the Calculation Agent will determine whether such Potential Adjustment Event has a material effect on the theoretical value of the relevant Shares or options on the Shares and, if so, will (i) make appropriate adjustment(s), if any, to any one or more of:’ and, the portion of such sentence immediately preceding clause (ii) thereof is hereby amended by deleting the words “diluting or concentrative” and the words “(provided that no adjustments will be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)” and replacing such latter phrase with the words “(and, for the avoidance of doubt, adjustments may be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)”;

     (ii) Sections 11.2(a) and 11.2(e)(vii) of the Equity Definitions are hereby amended by inserting at the end of each Section the phrase “or a material effect on the theoretical value of the Warrants;”

     (iii) Section 12.9(b)(iv) of the Equity Definitions is hereby amended by (A) deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)” following subsection (A) and (3) the phrase “in each case” in subsection (B); (B) replacing “will lend” with “lends” in subsection (B); and (C) deleting the phrase “neither the Non-Hedging Party nor the Lending Party lends Shares in the amount of the Hedging Shares or” in the penultimate sentence; and

     (v) Section 12.9(b)(v) of the Equity Definitions is hereby amended by (A) adding the word “or” immediately before subsection “(B)” and deleting the comma at the end of subsection (A); and (B)(1) deleting subsection (C) in its entirety, (2) deleting the word “or” immediately preceding subsection (C), (3) replacing in the penultimate sentence the words “either party” with “the Hedging Party” and (4) deleting clause (X) in the final sentence.

     (h) Transfer and Assignment. Dealer may transfer or assign its rights and obligations hereunder and under the Agreement, in whole or in part, at any time without the consent of Issuer.

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

     (j) Additional Termination Events. The occurrence of any of the following shall constitute an Additional Termination Event with respect to which the Transaction shall be the sole Affected Transaction and Issuer shall be the sole Affected Party and Dealer shall be the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement and to determine the amount payable pursuant to Section 6(e) of the Agreement; provided that with respect to any Additional Termination Event, Dealer may choose to treat part of the Transaction as the sole Affected Transaction, and, upon the termination of the Affected Transaction, a Transaction with terms identical to those set forth herein except with a Number of Warrants equal to the unaffected number of Warrants shall be treated for all purposes as the Transaction, which shall remain in full force and effect:

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     (i) Dealer reasonably determines that it is advisable to terminate a portion of the Transaction (the “Affected Portion”) so that Dealer’s related hedging activities with respect thereto will comply with applicable securities laws, rules or regulations or generally applicable related policies and procedures of Dealer applied to the Transaction in a non-discriminatory manner (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by Dealer); provided that Dealer shall treat only the Affected Portion of the Transaction as the Affected Transaction; or

     (ii) at any time at which any Excess Ownership Position (as defined above) occurs, Dealer, in its reasonable discretion, is unable to effect a transfer or assignment to a third party of the Transaction or any other transaction between the parties after using its commercially reasonable efforts on pricing terms and within a time period reasonably acceptable to Dealer (the “Transfer Time Period”) (it being understood that a period of at least one Exchange Business Day shall be considered reasonable for this purpose (without prejudice to whether a shorter period of time would be considered reasonable)) such that an Excess Ownership Position no longer exists; provided that Dealer shall treat only that portion of the Transaction as the Affected Transaction as necessary so that such Excess Ownership Position no longer exists; and provided further that, unless such Excess Ownership Position is the result of a repurchase of Shares by Issuer or any other event or events within Issuer’s control, Dealer shall promptly notify Issuer of its Excess Ownership Position and shall use its commercially reasonable efforts to consult with Issuer during the Transfer Time Period regarding potential transfers or assignments to third parties prior to designating an Early Termination Date pursuant to this Section 8(j)(ii); or

     (iii) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act other than Issuer, its subsidiaries and its and their employee benefit plans, files a Schedule TO or any schedule, form or report under the Exchange Act, disclosing that such person or group has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of Issuer’s common equity representing more than 50% of the voting power of Issuer’s common equity; or

     (iv) consummation of (A) any recapitalization, reclassification or change of the Shares (other than changes resulting from a subdivision or combination) as a result of which the Shares would be converted into, or exchanged for, stock, other securities, other property or assets or (B) any share exchange, consolidation or merger of Issuer pursuant to which the Shares will be converted into cash, securities or other assets or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of Issuer and its subsidiaries, taken as a whole, to any person other than Issuer or one of Issuer’s subsidiaries; provided, however, that a transactions where (x) the Shares are not changed or exchanged except to the extent necessary to reflect a change in Issuer’s jurisdiction of incorporation or (y) the holders of more than 50% of all classes of Issuer’s common equity immediately prior to such transaction own, directly or indirectly, more than 50% of the aggregate voting power of the common equity of the continuing or surviving corporation or transferee or the parent thereof immediately after such event shall not constitute an Additional Termination Event; or

     (v) Issuer’s stockholders approve any plan or proposal for Issuer’s liquidation or dissolution; or

     (vi) the Shares (or any New Shares that would be deliverable by Issuer hereunder) cease to be listed on any of The New York Stock Exchange, The NASDAQ Global Select Market, The NASDAQ Global Market (or any of their respective successors) or an alternate exchange of equivalent or greater liquidity with respect to the Shares (or any such New Shares).

Notwithstanding the foregoing, a transaction or transactions described in clause (iv) above will not constitute an Additional Termination Event if at least 90% of the consideration received or to be received by holders of the Shares, excluding cash payments for fractional shares and cash payments made pursuant to dissenters’ appraisal rights, in connection with such transaction or transactions consists of shares of

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common stock that are listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their respective successors) or that will be so listed or quoted when issued or exchanged in connection with such transaction or transactions.

     (k) Effectiveness. If, on or prior to the Effective Date, Dealer reasonably determines that it is advisable to cancel the Transaction because of concerns that Dealer’s related hedging activities could be viewed as not complying with applicable securities laws, rules or regulations, the Transaction shall be cancelled and shall not become effective, and neither party shall have any obligation to the other party in respect of the Transaction.

     (l) Extension of Settlement. Dealer may divide any Component into additional Components and designate the Expiration Date and the Number of Warrants for each such Component if Dealer determines, in its reasonable discretion, that such further division is necessary or advisable to preserve Dealer’s hedging or hedge unwind activity hereunder in light of existing liquidity conditions in the cash market or stock loan market or to enable Dealer to effect purchases of Shares in connection with its hedging, hedge unwind or settlement activity hereunder in a manner that would, if Dealer were Issuer or an affiliated purchaser of Issuer, be compliance with applicable legal, regulatory and self-regulatory requirements, or with related policies and procedures applicable to Dealer.

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

     (n) Delivery or Receipt of Cash. For the avoidance of doubt, other than receipt of the Premium by Issuer, nothing in this Confirmation shall be interpreted as requiring Issuer to cash settle this Transaction, except in circumstances where such cash settlement is within Issuer’s control (including, without limitation, where Issuer elects to deliver or receive cash, where Issuer fails timely to elect the Share Termination Alternative, or where Issuer is not able to effect a private placement settlement pursuant to Section 8(b)(i)(B) above due to the occurrence of events within its control) or in those circumstances in which holders of the Shares would also receive cash.

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

     (p) Designation by Dealer. Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities to or from Issuer, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such Shares or other securities and otherwise to perform Dealer’s obligations in respect of the Transaction and any such designee may assume such obligations. Dealer shall be discharged of its obligations to Issuer only to the extent of any such performance.

     (q) Strike Price Adjustment. Notwithstanding anything to the contrary in the Agreement, this Confirmation or the Equity Definitions (but without limiting Dealer’s right to adjust any variable relevant to the exercise, settlement, payment or other terms of the Transaction, other than the Strike Price and the Warrant Entitlement), in no event shall (i) the Warrant Entitlement be adjusted, or (ii) the Strike Price be adjusted to the extent that, after giving effect to such adjustment, the Strike Price would be less than USD 6.42, in each case, other than any such adjustment in connection with stock splits or similar changes to Issuer’s capitalization.

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

     (s) Share Deliveries. Issuer acknowledges and agrees that, to the extent the holder of this Warrant is not then an affiliate and has not been an affiliate for 90 days (it being understood that Dealer will not be considered an affiliate under this paragraph solely by reason of its receipt of Shares pursuant to this Transaction and under the Base Warrant Transaction), and otherwise satisfies all holding period and other requirements of Rule 144 of the Securities Act applicable to it, any delivery of Shares or Share

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Termination Delivery Property hereunder at any time after 6 months from the Trade Date (or 1 year from the Trade Date if, at such time, informational requirements of Rule 144(c) are not satisfied with respect to Issuer) shall be eligible for resale under Rule 144 of the Securities Act and Issuer agrees to promptly remove, or cause the transfer agent for such Shares or Share Termination Delivery Property, to remove, any legends referring to any restrictions on resale under the Securities Act from the Shares or Share Termination Delivery Property. Issuer further agrees that any delivery of Shares or Share Termination Delivery Property prior to the date that is 6 months from the Trade Date (or 1 year from the Trade Date if, at such time, informational requirements of Rule 144(c) are not satisfied with respect to Issuer), may be transferred by and among Dealer and its affiliates and Issuer shall effect such transfer without any further action by Dealer. Notwithstanding anything to the contrary herein, Issuer agrees that any delivery of Shares or Share Termination Delivery Property shall be effected by book-entry transfer through the facilities of DTC, or any successor depositary, if at the time of delivery, such class of Shares or class of Share Termination Delivery Property is in book-entry form at DTC or such successor depositary. Notwithstanding anything to the contrary herein, to the extent the provisions of Rule 144 of the Securities Act or any successor rule are amended, or the applicable interpretation thereof by the Securities and Exchange Commission or any court change after the Trade Date, the agreements of Issuer herein shall be deemed modified to the extent necessary, in the opinion of outside counsel of Issuer, to comply with Rule 144 of the Securities Act, as in effect at the time of delivery of the relevant Shares or Share Termination Delivery Property.

     (t) Quarterly Valuations. Dealer hereby agrees, upon request by Issuer, to provide or cause its affiliate to provide to Issuer, within five Exchange Business Days after the end of the fiscal quarter of Issuer during which Issuer made such request, a valuation estimate of the fair value of the Transaction as of Issuer’s fiscal quarter end.

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

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

     (w) Role of Agent. Each party agrees and acknowledges that (i) J.P. Morgan Securities Inc., an affiliate of Dealer (“JPMSI”), has acted solely as agent and not as principal with respect to this Transaction and (ii) JPMSI has no obligation or liability, by way of guaranty, endorsement or otherwise, in any manner in respect of this Transaction (including, if applicable, in respect of the settlement thereof). Each party agrees it will look solely to the other party (or any guarantor in respect thereof) for performance of such other party’s obligations under this Transaction.

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

Yours faithfully, J.P. MORGAN SECURITIES INC., as agent for JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
By:	/s/ James Rothschild
	Name:	James Rothschild
	Title:	Managing Director

Agreed and Accepted By: CADENCE DESIGN SYSTEMS, INC.
By:	/s/ Kevin S. Palatnik
	Name:	Kevin S. Palatnik
	Title:	Sr. Vice President & Chief Financial Officer

JPMorgan Chase Bank, National Association
Organised under the laws of the United States as a National Banking Association
Main Office 1111 Polaris Parkway, Columbus, Ohio 43271
Registered as a branch in England & Wales branch No. BR000746
Registered Branch Office 125 London Wall, London EC2Y 5AJ
Authorised and regulated by the Financial Services Authority

Signature Page to Additional Warrant
Confirmation

Annex A

For each Component of the Transaction, the Number of Warrants and Expiration Date is set forth below.

Component Number	Number of Warrants	Expiration Date
1	56,794	September 1, 2015
2	56,794	September 2, 2015
3	56,794	September 3, 2015
4	56,794	September 4, 2015
5	56,794	September 8, 2015
6	56,794	September 9, 2015
7	56,794	September 10, 2015
8	56,794	September 11, 2015
9	56,794	September 14, 2015
10	56,794	September 15, 2015
11	56,794	September 16, 2015
12	56,794	September 17, 2015
13	56,794	September 18, 2015
14	56,794	September 21, 2015
15	56,794	September 22, 2015
16	56,794	September 23, 2015
17	56,794	September 24, 2015
18	56,794	September 25, 2015
19	56,794	September 28, 2015
20	56,794	September 29, 2015
21	56,794	September 30, 2015
22	56,794	October 1, 2015
23	56,794	October 2, 2015
24	56,794	October 5, 2015
25	56,794	October 6, 2015
26	56,794	October 7, 2015
27	56,794	October 8, 2015
28	56,794	October 9, 2015
29	56,794	October 12, 2015
30	56,794	October 13, 2015
31	56,794	October 14, 2015
32	56,794	October 15, 2015
33	56,794	October 16, 2015
34	56,794	October 19, 2015
35	56,794	October 20, 2015
36	56,795	October 21, 2015
37	56,795	October 22, 2015
38	56,795	October 23, 2015
39	56,795	October 26, 2015
40	56,795	October 27, 2015
41	56,795	October 28, 2015
42	56,795	October 29, 2015
43	56,795	October 30, 2015
44	56,795	November 2, 2015
45	56,795	November 3, 2015
46	56,795	November 4, 2015
47	56,795	November 5, 2015
48	56,795	November 6, 2015
49	56,795	November 9, 2015

Annex A - 1

Component Number	Number of Warrants	Expiration Date
50	56,795	November 10, 2015
51	56,795	November 11, 2015
52	56,795	November 12, 2015
53	56,795	November 13, 2015
54	56,795	November 16, 2015
55	56,795	November 17, 2015
56	56,795	November 18, 2015
57	56,795	November 19, 2015
58	56,795	November 20, 2015
59	56,795	November 23, 2015
60	56,795	November 24, 2015
61	56,795	November 25, 2015
62	56,795	November 27, 2015
63	56,795	November 30, 2015
64	56,795	December 1, 2015
65	56,795	December 2, 2015
66	56,795	December 3, 2015
67	56,795	December 4, 2015
68	56,795	December 7, 2015
69	56,795	December 8, 2015
70	56,795	December 9, 2015

Annex A - 2

EX-10.11

Exhibit 10.11

To:	Cadence Design Systems, Inc.
	2655 Seely Avenue, Building 5
	San Jose, CA 95134
	Attention: Office of the General Counsel
From:	Morgan Stanley & Co. International plc
	c/o Morgan Stanley & Co. Inc.
	1585 Broadway, 5th Floor
	New York, NY 10036
Re:	Additional Issuer Warrant Transaction
Ref. No:	6537229
Date:	June 18, 2010

Dear Sir(s):

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

     1. This Confirmation is subject to, and incorporates, the definitions and provisions of the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc. (“ISDA”). For purposes of the Equity Definitions, each reference herein to a Warrant shall be deemed to be a reference to a Call Option or an Option, as the context requires.

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

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

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

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

1

     2. The Transaction is a Warrant Transaction, which shall be considered a Share Option Transaction for purposes of the Equity Definitions. The terms of the particular Transaction to which this Confirmation relates are as follows:

General Terms:
Trade Date:	June 18, 2010
Effective Date:	June 22, 2010, or such other date as agreed between the parties, subject to Section 8(k) below.
Components:	The Transaction will be divided into individual Components, each with the terms set forth in this Confirmation, and, in particular, with the Number of Warrants and Expiration Date set forth in this Confirmation. The payments and deliveries to be made upon settlement of the Transaction will be determined separately for each Component as if each Component were a separate Transaction under the Agreement.
Warrant Style:	European
Warrant Type:	Call
Seller:	Issuer
Buyer:	Dealer
Shares:	The Common Stock of Issuer, par value USD 0.01 per share (Ticker Symbol: “CDNS”).
Number of Warrants:	For each Component, as provided in Annex A to this Confirmation.
Warrant Entitlement:	One Share per Warrant
Strike Price:	USD 10.78
Premium:	USD 586,448.64
Premium Payment Date:	The Effective Date
Exchange:	NASDAQ Global Select Market
Related Exchange:	All Exchanges.
Procedures for Exercise:
In respect of any Component:
Expiration Time:	Valuation Time
Expiration Date:	As provided in Annex A to this Confirmation (or, if such date is not a Scheduled Trading Day, the next following Scheduled Trading Day that is not already an Expiration Date for another Component); provided that if that date is a Disrupted Day, the Expiration Date for such Component shall be the first succeeding Scheduled Trading Day that is not a Disrupted Day and is not or is not deemed to be an Expiration Date in respect of any other Component of the Transaction hereunder; and provided further that if the Expiration Date has not occurred pursuant to

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	the preceding proviso as of the Final Disruption Date, the Calculation Agent shall have the right to elect, in its sole discretion, that the Final Disruption Date shall be the Expiration Date for such Component (irrespective of whether such date is an Expiration Date in respect of any other Component for the Transaction). “Final Disruption Date” means December 21, 2015. Notwithstanding the foregoing and anything to the contrary in the Equity Definitions, if a Market Disruption Event occurs on any Expiration Date, the Calculation Agent may determine that such Expiration Date is a Disrupted Day only in part, in which case (i) the Calculation Agent shall make adjustments to the Number of Warrants for the relevant Component for which such day shall be the Expiration Date and shall designate the Scheduled Trading Day determined in the manner described in the immediately preceding sentence as the Expiration Date for the remaining Warrants for such Component and (ii) the VWAP Price for such Disrupted Day shall be determined by the Calculation Agent based on transactions in the Shares effected on such Disrupted Day taking into account the nature and duration of such Market Disruption Event on such day. Section 6.6 of the Equity Definitions shall not apply to any Valuation Date occurring on an Expiration Date.
Market Disruption Event:	Section 6.3(a) of the Equity Definitions is hereby amended by (A) deleting the words “during the one hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be,” in clause (ii) thereof and (B) replacing the words “or (iii) an Early Closure.” therein with “(iii) an Early Closure, or (iv) a Regulatory Disruption.”.
	Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the term “Scheduled Closing Time” in the fourth line thereof.
Regulatory Disruption:	Any event that Dealer, in its reasonable discretion based on advice of counsel, determines makes it appropriate with regard to any legal, regulatory or self-regulatory requirements or generally applicable related policies and procedures applicable to Dealer and applied to the Transaction in a non-discriminatory manner, for Dealer to refrain from or decrease any market activity in connection with the Transaction.
Automatic Exercise:	Applicable; and means that the Number of Warrants for the corresponding Expiration Date will be deemed to be automatically exercised at the Expiration Time on such Expiration Date unless Dealer notifies Seller (by telephone or in writing) prior to the Expiration

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	Time on such Expiration Date that it does not wish Automatic Exercise to occur, in which case Automatic Exercise will not apply to such Expiration Date.
Issuer’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of Giving Notice:	As provided in Section 6(a) below.
Valuation Terms:
In respect of any Component:
Valuation Time:	At the close of trading of the regular trading session on the Exchange; provided that if the regular trading session is extended, the Calculation Agent shall determine the Valuation Time in its reasonable discretion.
Valuation Date:	The Expiration Date.
Settlement Terms:
In respect of any Component:
Settlement Currency:	USD
Net Share Settlement:	On each Settlement Date, Issuer shall deliver to Dealer a number of Shares equal to the Number of Shares to be Delivered for such Settlement Date to the account specified by Dealer and cash in lieu of any fractional Share valued at the VWAP Price on the Valuation Date corresponding to such Settlement Date. If, in the reasonable judgment of Issuer or Dealer, based on advice of counsel, for any reason, the Shares deliverable upon Net Share Settlement would not be immediately freely transferable by Dealer under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), then Dealer may elect to either (x) accept delivery of such Shares notwithstanding any restriction on transfer or (y) have the provisions set forth in Section 8(b) below apply.
	The Number of Shares to be Delivered shall be delivered by Issuer to Dealer no later than 5:00 p.m. (local time in New York City) on the relevant Settlement Date.
Number of Shares to be Delivered:	In respect of any Exercise Date, subject to the last sentence of Section 9.5 of the Equity Definitions, the product of (i) the number of Warrants exercised or deemed exercised on such Exercise Date, (ii) the Warrant Entitlement and (iii) (A) the excess of the VWAP Price on the Valuation Date occurring in respect of such Exercise Date over the Strike Price

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	(or, if there is no such excess, zero) divided by (B) such VWAP Price.
VWAP Price:	For any Exchange Business Day, the volume weighted average price per Share for the regular trading session (including any extensions thereof) of the Exchange on such Exchange Business Day (without regard to pre-open or after hours trading outside of such regular trading session), as published by Bloomberg at 4:15 P.M., New York City time (or 15 minutes following the end of any extension of the regular trading session), on such Exchange Business Day, on Bloomberg page “CDNS.Q <Equity> AQR” (or any successor thereto) (or if such published volume weighted average price is unavailable or is manifestly incorrect, the market value of one Share on such Exchange Business Day, as reasonably determined by the Calculation Agent using a volume weighted method).
Other Applicable Provisions:	The provisions of Sections 9.1(c), 9.4, 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction; provided that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws that exist as a result of the fact that Issuer is the issuer of the Shares.
Adjustments:
In respect of any Component:
Method of Adjustment:	Calculation Agent Adjustment; provided that in respect of an Extraordinary Dividend, “Calculation Agent Adjustment” shall be as described in the provision below. For the avoidance of doubt, Calculation Agent Adjustment shall continue to apply until the obligations of the parties (including any obligations of Issuer pursuant to Section 8(e) below) under the Transaction have been satisfied in full.
Extraordinary Dividend:	Any cash dividend or distribution on the Shares with an ex-dividend date occurring on or after the Trade Date and on or prior to the Expiration Date (or, if any Deficit Shares are owed pursuant to Section 8(e) below, such later date on which Issuer’s obligations under this Transaction have been satisfied in full).
Extraordinary Dividend Adjustment:	If at any time during the period from and including the Trade Date, to and including the Expiration Date for the Component with the latest Expiration Date (or, if any Deficit Shares are owed pursuant to Section 8(e) below, such later date on which Issuer’s obligations under this Transaction have been satisfied

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	in full), an ex-dividend date for an Extraordinary Dividend occurs or is deemed to occur, then the Calculation Agent will make adjustments to any one or more of the Strike Price, the Number of Warrants, the Warrant Entitlement and/or any other variable relevant to the exercise, settlement, payment or other terms of the Transaction as it determines appropriate to account for the economic effect on the Transaction of such Extraordinary Dividend.
Extraordinary Events:
New Shares:	In the definition of New Shares in Section 12.1(i) of the Equity Definitions (A) the text in clause (i) thereof shall be deleted in its entirety and replaced with “publicly quoted, traded or listed on any of the New York Stock Exchange, The NASDAQ Global Market or The NASDAQ Global Select Market (or their respective successors)” and (B) the phrase “and (iii) of an entity or person organized under the laws of the United States, any State thereof or the District of Columbia that also becomes Issuer under the Transaction following such Merger Event or Tender Offer” shall be inserted at the end thereof.
Consequences of Merger Events:
(a) Share-for-Share:	Modified Calculation Agent Adjustment
(b) Share-for-Other:	Cancellation and Payment (Calculation Agent Determination)
(c) Share-for-Combined:	Cancellation and Payment (Calculation Agent Determination); provided that the Calculation Agent may elect Component Adjustment for all or part of the Transaction.
Tender Offer:	Applicable.
Consequences of Tender Offers:
(a) Share-for-Share:	Modified Calculation Agent Adjustment
(b) Share-for-Other:	Modified Calculation Agent Adjustment
(c) Share-for-Combined:	Modified Calculation Agent Adjustment
Modified Calculation Agent Adjustment:	Upon the occurrence of any Merger Event pursuant to which the holders of Issuer’s Shares would be entitled to receive cash, securities or other property for their Shares and for which Modified Calculation Agent Adjustment would apply, if, as a result of such Merger Event, Issuer would be different from the issuer of the Shares under this Confirmation, then, on or prior to the effective date of such Merger Event, the Issuer and the issuer of the Shares under this Confirmation will enter into a supplemental confirmation as a condition precedent to the adjustments contemplated in Section 12.2(e)(i) of the

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	Equity Definitions, with such supplemental confirmation containing representations, warranties and agreements relating to securities law and other issues as requested by Dealer that Dealer has determined, in its reasonable discretion, to be reasonably necessary or appropriate to allow Dealer to continue as a party to the Transaction, as adjusted under Section 12.2(e)(i) of the Equity Definitions, and to preserve its hedging or hedge unwind activities in connection with the Transaction in a manner compliant with applicable legal, regulatory or self-regulatory requirements, or with generally applicable related policies and procedures applicable to Dealer and applied to the Transaction in a non-discriminatory manner, and if such conditions are not met or if the Calculation Agent determines that no adjustment that it could make under Section 12.2(e)(i) of the Equity Definitions will produce a commercially reasonable result, then the consequences set forth in Section 12.2(e)(ii) of the Equity Definitions shall apply.
Nationalization, Insolvency or Delisting:	Cancellation and Payment (Calculation Agent Determination); provided that (i) Section 12.6(a)(iii) of the Equity Definitions shall be amended to delete, in the definition of the term “Delisting” the parenthetical “(or will cease)” and (ii) in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.
Additional Disruption Events:
(a) Change in Law:	Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof with the phrase “or announcement or statement of the interpretation” and (ii) replacing the word “Shares” with the phrase “Hedge Positions” in clause (X) thereof.
(b) Failure to Deliver:	Not Applicable
(c) Insolvency Filing:	Applicable; provided that only Dealer shall have the right to terminate the Transaction upon an Insolvency Filing.
(d) Hedging Disruption:	Applicable; provided that
	(i) Section 12.9(a)(v) of the Equity Definitions is

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	hereby amended by inserting the following two sentences at the end of such Section:
	“For the avoidance of doubt, the term “equity price risk” shall be deemed to include, but shall not be limited to, stock price and volatility risk. And, for the further avoidance of doubt, any such transactions or assets referred to in phrases (A) or (B) above must be available on commercially reasonable pricing terms.”
	(ii) Section 12.9(b)(iii) of the Equity Definitions is hereby amended by inserting in the third line thereof, after the words “to terminate the Transaction”, the words “or a portion of the Transaction affected by such Hedging Disruption”.
(e) Increased Cost of Hedging:	Applicable
(f) Loss of Stock Borrow:	Applicable
Maximum Stock Loan Rate:	2.00% per annum
(g) Increased Cost of Stock Borrow:	Applicable
Initial Stock Loan Rate:	0.25% per annum
Hedging Party:	Dealer for all applicable Additional Disruption Events.
Determining Party:	Dealer for all applicable Additional Disruption Events.
Non-Reliance:	Applicable
Agreements and Acknowledgments Regarding Hedging Activities:	Applicable
Additional Acknowledgments:	Applicable

3. Calculation Agent:

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

4. Account Details:

     Dealer Payment Instructions:

Citibank, N.A.

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Account Name: Morgan Stanley and Co.

Account for delivery of Shares to Dealer:

To be provided by Dealer.

Issuer Payment Instructions:

To be provided by Issuer.

     5. Offices:

The Office of Dealer for the Transaction is: New York

Morgan Stanley & Co. International plc
c/o Morgan Stanley & Co. Inc.
1585 Broadway, 5^th Floor
New York, NY 10036

Attention:   Todd Bosch

The Office of Issuer for the Transaction is:

Inapplicable. Issuer is not a Multibranch Party.

     6. Notices: For purposes of this Confirmation:

(a) Address for notices or communications to Issuer:

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, California 95134
Attn:	Office of the General Counsel
Facsimile:	(408) 904-6946

(b) Address for notices or communications to Dealer:

To:	Morgan Stanley & Co. International plc c/o Morgan Stanley & Co. Inc. 1585 Broadway, 5th Floor New York, NY 10036
Attn:	Todd Bosch

With a copy to:	Morgan Stanley & Co. International c/o Morgan Stanley & Co. 1221 Avenue of the Americas, 34th Floor New York, NY 10020
Attn:	Todd Bosch

     7. Representations, Warranties and Agreements:

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

     (i) On the Trade Date, and as of the date of any election by Issuer of the Share Termination Alternative under (and as defined in) Section 8(a) below, none of Issuer and its officers and directors is aware of any material nonpublic information regarding Issuer or the Shares. On the Trade Date, all reports and other documents filed by Issuer with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), when considered as a whole (with the more recent such reports and documents deemed to amend inconsistent statements contained in any earlier such reports and documents), do not contain any untrue statement of a material fact or any omission of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading.

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

     (iii) Issuer is not entering into this Confirmation, and on the date of any election by Issuer of the Share Termination Alternative under Section 8(a) below, Issuer represents that it is not making such election, to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for Shares) or otherwise in violation of the Exchange Act.

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

     (v) Issuer shall not take any action to decrease the number of Available Shares below the Capped Number (each as defined below).

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

     (vii) (A) On the Trade Date and during the period starting on the first Expiration Date and ending on the last Expiration Date (the “Settlement Period”), the Shares or securities that are convertible into, or exchangeable or exercisable for Shares, are not, and shall not be, subject to a “restricted period,” as such term is defined in Regulation M under the Exchange Act (“Regulation M”) and (B) Issuer shall not engage in any “distribution,” as such term is defined in Regulation M until the second Exchange Business Day immediately following the Trade Date or Settlement Period, as applicable.

     (ix) Issuer agrees that it (A) will not during the Settlement Period make, or permit to be made, any public announcement (as defined in Rule 165(f) under the Securities Act) of any Merger Transaction or potential Merger Transaction unless such public announcement is made prior to the opening or after the close of the regular trading session on the Exchange for the Shares; (B) shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) notify Dealer following any such announcement that such announcement has been made; and (C) shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) provide Dealer with written notice specifying (i) Issuer’s average daily Rule 10b-18 Purchases (as defined in Rule 10b-18) during the three full calendar months immediately preceding the announcement date that were not effected through Dealer or its

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affiliates and (ii) the number of Shares purchased pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months preceding the announcement date. Such written notice shall be deemed to be a certification by Issuer to Dealer that such information is true and correct. In addition, Issuer shall promptly notify Dealer of the earlier to occur of the completion of such transaction and the completion of the vote by target shareholders. “Merger Transaction” means any merger, acquisition or similar transaction involving a recapitalization as contemplated by Rule 10b-18(a)(13)(iv) under the Exchange Act.

     (x) A number of Shares equal to the Capped Number have been reserved for issuance by all required corporate action of the Issuer. Any Shares issued or delivered in connection with the Transaction shall be duly authorized and, when delivered as contemplated hereby following the exercise of the Warrants in accordance with their terms and conditions, will be validly issued, fully paid and non-assessable, and the issuance or delivery thereof shall not be subject to any preemptive or similar rights and shall, upon issuance, be accepted for listing or quotation on the Exchange.

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

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

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

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

     (d) Each of Dealer and Issuer agrees and acknowledges that Dealer is a “financial institution,” “swap participant” and “financial participant” within the meaning of Sections 101(22), 101(53C) and 101(22A) of Title 11 of the United States Code (the “Bankruptcy Code”). The parties hereto further agree and acknowledge (A) that this Confirmation is (i) a “securities contract,” as such term is defined in Section 741(7) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “settlement payment” within the meaning of Section 546 of the Bankruptcy Code, and (ii) a “swap agreement,” as such term is defined in Section 101(53B) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within

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

     (e) For the purposes of Section 3(f) of the Agreement, Dealer represents that, as of the time any payment is made after December 31, 2012, (i) if it is a “foreign financial institution” within the meaning of section 1471(d)(4) of the Internal Revenue Code of 1986 as amended (the “Code”), it meets the requirements of section 1471(b) of the Code and has not elected the application of section 1471(b)(3) of the Code, and (ii) if it is a “non-financial foreign entity” within the meaning of section 1472(d) of the Code, it meets the requirements of section 1472(b) of the Code, unless one or more of the exceptions of Code section 1472(c) are applicable with respect to such payment.

     (f) As a condition to effectiveness of the Transaction, Issuer shall deliver to Dealer an opinion of counsel, dated as of the Trade Date and reasonably acceptable to Dealer in form and substance, with respect to the matters set forth in Section 3(a) of the Agreement and Section 7(a)(x) hereof, subject to customary assumptions, qualifications and exceptions.

8. Other Provisions:

     (a) Alternative Calculations and Payment on Early Termination and on Certain Extraordinary Events. If Issuer shall owe Dealer any amount pursuant to Section 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions (except in the event of a Tender Offer, Merger Event, Insolvency or Nationalization, in each case, in which the consideration or proceeds to be paid to holders of Shares consists solely of cash) or pursuant to Section 6(d)(ii) of the Agreement (except in the event of an Event of Default in which Issuer is the Defaulting Party or a Termination Event in which Issuer is the Affected Party that resulted from an event or events within Issuer’s control) (a “Payment Obligation”), Issuer shall have the right, in its sole discretion, to satisfy any such Payment Obligation by the Share Termination Alternative (as defined below) by giving irrevocable telephonic notice to Dealer, confirmed in writing within one Scheduled Trading Day, between the hours of 9:00 A.M. and 4:00 P.M., New York City time, on the Merger Date, Tender Offer Date, Announcement Date, Early Termination Date or other date the Transaction is cancelled or terminated, as applicable (“Notice of Share Termination”). Upon such Notice of Share Termination, the following provisions shall apply on the Scheduled Trading Day immediately following the Merger Date, the Tender Offer Date, Announcement Date, Early Termination Date or other date the Transaction is cancelled or terminated, as applicable:

Share Termination Alternative:	Applicable and means that Issuer shall deliver to Dealer the Share Termination Delivery Property on the date on which the Payment Obligation would otherwise be due pursuant to Section 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions or Section 6(d)(ii) of the Agreement, as applicable (the “Share Termination Payment Date”), in satisfaction of the Payment Obligation.
Share Termination Delivery Property:	A number of Share Termination Delivery Units, as calculated by the Calculation Agent, equal to the Payment Obligation divided by the Share Termination Unit Price. The Calculation Agent shall adjust the Share Termination Delivery Property by replacing any fractional portion of the aggregate amount of a security therein with an amount of cash equal to the value of such fractional security based on the values used to calculate the Share Termination Unit Price.
Share Termination Unit Price:	The value of property contained in one Share Termination Delivery Unit on the date such Share Termination Delivery Units are to be delivered as Share Termination Delivery Property, as determined by the Calculation Agent in its discretion by commercially reasonable means and notified by the Calculation Agent to Issuer at the time of notification of the Payment Obligation.

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Share Termination Delivery Unit:	In the case of a Termination Event, Event of Default, Delisting or Additional Disruption Event, one Share or, in the case of an Insolvency, Nationalization, Merger Event or Tender Offer, a Share or a unit consisting of the number or amount of each type of property received by a holder of one Share (without consideration of any requirement to pay cash or other consideration in lieu of fractional amounts of any securities) in such Insolvency, Nationalization, Merger Event or Tender Offer. If such Insolvency, Nationalization, Merger Event or Tender Offer involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash.
Failure to Deliver:	Applicable
Other Applicable Provisions:	If Share Termination Alternative is applicable, the provisions of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction, except that all references to “Shares” shall be read as references to “Share Termination Delivery Units”; provided that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws as a result of the fact that Issuer is the issuer of any Share Termination Delivery Units (or any security forming a part thereof). If, in the reasonable judgment of Issuer or Dealer, based on advice of counsel, for any reason, any securities comprising the Share Termination Delivery Units deliverable pursuant to this Section 8(a) would not be immediately freely transferable by Dealer under Rule 144 under the Securities Act, then Dealer may elect to either (x) permit delivery of such securities notwithstanding any restriction on transfer or (y) have the provisions set forth in Section 8(b) below apply.

     (b) Registration/Private Placement Procedures. (i) With respect to the Transaction, the following provisions shall apply to the extent provided for above opposite the caption “Net Share Settlement” in Section 2 or in paragraph (a) of this Section 8. If so applicable, then, at the election of Issuer by notice to Dealer within one Exchange Business Day after the relevant delivery obligation arises, but in any event at least one Exchange Business Day prior to the date on which such delivery obligation is due, either (A) all Shares or Share Termination Delivery Units, as the case may be, delivered by Issuer to Dealer shall be covered by an effective registration statement of Issuer for immediate resale by Dealer (such registration statement and the corresponding prospectus (the “Prospectus”) (including, without limitation, any sections describing the plan of distribution) in form and content commercially reasonably satisfactory to Dealer) or (B) Issuer shall deliver additional Shares or Share Termination Delivery Units, as the case may be, so that the value of such Shares or Share Termination Delivery Units, as determined by the Calculation Agent to reflect an appropriate liquidity discount, equals the value of the number of Shares or Share Termination Delivery Units that would otherwise be deliverable if such Shares or Share Termination Delivery Units were freely tradeable (without prospectus delivery) upon receipt by Dealer (such value, the “Freely Tradeable Value”); provided that, if requested by Dealer on or prior to the second Exchange Business Day prior to the first Exercise Date, any election to be made by Issuer described in this clause (B) shall be made with respect to Shares delivered on all Settlement Dates no later than one Exchange Business Day prior to the first Exercise Date, and the applicable procedures described below shall apply to all Shares delivered on the Settlement Dates on an aggregate basis. (For the avoidance of doubt, as used in this paragraph (b) only, the term “Issuer” shall mean the issuer of the relevant securities, as the context shall require.)

     (ii) If Issuer makes the election described in clause (b)(i)(A) above:

     (A) Dealer (or an affiliate of Dealer designated by Dealer) shall be afforded a reasonable opportunity to conduct a due diligence investigation with respect to Issuer that is

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customary in scope for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business and that yields results that are commercially reasonably satisfactory to Dealer or such affiliate, as the case may be, in its discretion; and

     (B) Dealer (or an affiliate of Dealer designated by Dealer) and Issuer shall enter into an agreement (a “Registration Agreement”) on commercially reasonable terms in connection with the public resale of such Shares or Share Termination Delivery Units, as the case may be, by Dealer or such affiliate substantially similar to underwriting agreements customary for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business, in form and substance commercially reasonably satisfactory to Dealer or such affiliate and Issuer, which Registration Agreement shall include, without limitation, provisions substantially similar to those contained in such underwriting agreements relating to the indemnification of, and contribution in connection with the liability of, Dealer and its affiliates and Issuer, shall provide for the payment by Issuer of all registration expenses in connection with such resale, including all registration costs and all fees and expenses of counsel for Dealer, and shall provide for the delivery of accountants’ “comfort letters” to Dealer or such affiliate with respect to the financial statements and certain financial information contained in or incorporated by reference into the Prospectus as are customarily requested in comfort letters covering follow-on offerings of equity securities of companies of comparable size, maturity and lines of business and the delivery of disclosure opinions of nationally recognized outside counsel to Issuer reasonably acceptable to Dealer.

     (iii) If Issuer makes the election described in clause (b)(i)(B) above:

     (A) Dealer (or an affiliate of Dealer designated by Dealer) and any potential institutional purchaser of any such Shares or Share Termination Delivery Units, as the case may be, from Dealer or such affiliate identified by Dealer shall be afforded a commercially reasonable opportunity to conduct a due diligence investigation in compliance with applicable law with respect to Issuer customary in scope for private placements of equity securities of companies of comparable size, maturity and lines of business (including, without limitation, the right to have made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them), subject to execution by such recipients of customary confidentiality agreements reasonably acceptable to Issuer;

     (B) Dealer (or an affiliate of Dealer designated by Dealer) and Issuer shall enter into an agreement (a “Private Placement Agreement”) on commercially reasonable terms in connection with the private placement of such Shares or Share Termination Delivery Units, as the case may be, by Issuer to Dealer or such affiliate and the private resale of such shares by Dealer or such affiliate, substantially similar to private placement purchase agreements customary for private placements of equity securities of companies of comparable size, maturity and lines of business, in form and substance commercially reasonably satisfactory to Dealer and Issuer, which Private Placement Agreement shall include, without limitation, provisions substantially similar to those contained in such private placement purchase agreements relating to the indemnification of, and contribution in connection with the liability of, Dealer and its affiliates and Issuer, shall provide for the payment by Issuer of all expenses in connection with such resale, including all fees and expenses of counsel for Dealer, shall contain representations, warranties and agreements of Issuer reasonably necessary or advisable to establish and maintain the availability of an exemption from the registration requirements of the Securities Act for such resales, and shall use reasonable best efforts to provide for the delivery of accountants’ “comfort letters” to Dealer or such affiliate with respect to the financial statements and certain financial information contained in or incorporated by reference into the offering memorandum prepared for the resale of such Shares as are customarily requested in comfort letters covering private placements of equity securities of companies of comparable size, maturity and lines of business and delivery of disclosure opinions of nationally recognized outside counsel to Issuer reasonably acceptable to Dealer;

     (C) Issuer agrees that any Shares or Share Termination Delivery Units so delivered to Dealer, (i) may be transferred by and among Dealer and its affiliates, and Issuer shall effect such transfer without any further action by Dealer and (ii) after the minimum “holding period”

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within the meaning of Rule 144(d) under the Securities Act has elapsed with respect to such Shares or any securities issued by Issuer comprising such Share Termination Delivery Units, Issuer shall promptly remove, or cause the transfer agent for such Shares or securities to remove, any legends referring to any such restrictions or requirements from such Shares or securities upon delivery by Dealer (or such affiliate of Dealer) to Issuer or such transfer agent of seller’s and broker’s representation letters customarily delivered by Dealer in connection with resales of restricted securities pursuant to Rule 144 under the Securities Act (if any), without any further requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document, any transfer tax stamps or payment of any other amount or any other action by Dealer (or such affiliate of Dealer); and

     (D) Issuer shall not take, or cause to be taken, any action that would make unavailable either the exemption pursuant to Section 4(2) of the Securities Act for the sale by Issuer to Dealer (or any affiliate designated by Dealer) of the Shares or Share Termination Delivery Units, as the case may be, or the exemption pursuant to Section 4(1) or Section 4(3) of the Securities Act for resales of the Shares or Share Termination Delivery Units, as the case may be, by Dealer (or any such affiliate of Dealer).

     (c) Make-whole Shares. If Issuer makes the election described in clause (i)(B) of paragraph (b) of this Section 8, then Dealer or its affiliates may sell (which sale shall be made in a commercially reasonable manner) such Shares or Share Termination Delivery Units, as the case may be, during a period (the “Resale Period”) commencing on the Exchange Business Day following delivery of such Shares or Share Termination Delivery Units, as the case may be, and ending on the Exchange Business Day on which Dealer or its affiliates completes the sale of all such Shares or Share Termination Delivery Units, as the case may be, or a sufficient number of Shares or Share Termination Delivery Units, as the case may be, so that the realized net proceeds of such sales exceed the Freely Tradeable Value. If any of such delivered Shares or Share Termination Delivery Units remain after such realized net proceeds exceed the Freely Tradeable Value, Dealer shall return such remaining Shares or Share Termination Delivery Units to Issuer. If the Freely Tradeable Value exceeds the realized net proceeds from such resale, Issuer shall transfer to Dealer by the open of the regular trading session on the Exchange on the Exchange Trading Day immediately following the last day of the Resale Period the amount of such excess (the “Additional Amount”) in cash or in a number of additional Shares or Share Termination Delivery Units, as the case may be (“Make-whole Shares”) in an amount that, based on the VWAP Price on the last day of the Resale Period (as if such day was the “Valuation Date” for purposes of computing such VWAP Price), has a dollar value equal to the Additional Amount. The Resale Period shall continue to enable the sale of the Make-whole Shares in the manner contemplated by this Section 8(c). This provision shall be applied successively until the Additional Amount is equal to zero, subject to Section 8(e).

     (d) Beneficial Ownership. Notwithstanding anything to the contrary in the Agreement or this Confirmation, in no event shall Dealer be entitled to receive, or shall be deemed to receive, any Shares if, immediately upon giving effect to such receipt of such Shares and after taking into account any Shares deliverable to Dealer under the Base Issuer Warrant Transaction between the parties hereto, entered into on June 9, 2010 (Ref. No. 6537229) (the “Base Warrant Transaction”), (i) the “beneficial ownership” (within the meaning of Section 13 of the Exchange Act and the rules promulgated thereunder) of Shares by Dealer, any of its affiliates subject to aggregation with Dealer for purposes of the “beneficial ownership” test under Section 13 of the Exchange Act and all persons who may form a “group” (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) with Dealer with respect to “beneficial ownership” of any Shares (collectively, “Dealer Group”) would be equal to or greater than 8.5% or more of the outstanding Shares on the date of determination, (ii) the Warrant Equity Percentage exceeds 14.5% or (iii) Dealer, Dealer Group or any person whose ownership position would be aggregated with that of Dealer or Dealer Group (Dealer, Dealer Group or any such person, a “Dealer Person”) under Section 203 of the Delaware General Corporation Law (the “DGCL Takeover Statute”), or any state or federal bank holding company or banking laws, or other federal, state or local regulations, regulatory orders or organizational documents or contracts of Issuer that are, in each case, applicable to ownership of Shares (“Applicable Laws”), would own, beneficially own, constructively own, control, hold the power to vote or otherwise meet a relevant definition of ownership in excess of a number of Shares equal to (x) the number of Shares that would give rise to reporting or registration obligations or other requirements (including obtaining prior approval by a

15

state or federal regulator) of a Dealer Person under Applicable Laws (including, without limitation, “interested stockholder” or “acquiring person” status under the DGCL Takeover Statute) and with respect to which such requirements have not been met or the relevant approval has not been received minus (y) 1.0% of the number of Shares outstanding on the date of determination (either such condition described in clause (i), (ii) or (iii), an “Excess Ownership Position”). The “Warrant Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the sum of (1) the product of the Number of Warrants and the Warrant Entitlement and (2) the aggregate number of Shares underlying any other call option transaction sold by Issuer to Dealer and (B) the denominator of which is the number of Shares outstanding on such day. If any delivery owed to Dealer hereunder is not made, in whole or in part, as a result of this provision, Issuer’s obligation to make such delivery shall not be extinguished and Issuer shall make such delivery as promptly as practicable after, but in no event later than one Exchange Business Day after, Dealer gives notice to Issuer that such delivery would not result in the existence of an Excess Ownership Position.

     (e) Limitations on Settlement by Issuer. Notwithstanding anything herein or in the Agreement to the contrary, in no event shall Issuer be required to deliver Shares in connection with the Transaction in excess of the product of two, the aggregate Number of Warrants for all Components at the time of delivery and the Warrant Entitlement at the time of delivery (such product, the “Capped Number”). Issuer represents and warrants to Dealer (which representation and warranty shall be deemed to be repeated on each day that the Transaction is outstanding) that the Capped Number is equal to or less than the number of authorized but unissued Shares of the Issuer that are not reserved for future issuance in connection with transactions in the Shares (other than the Transaction) on the date of the determination of the Capped Number (such Shares, the “Available Shares”). In the event Issuer shall not have delivered the full number of Shares otherwise deliverable as a result of this Section 8(e) (the resulting deficit, the “Deficit Shares”), Issuer shall be continually obligated to deliver Shares, from time to time until the full number of Deficit Shares have been delivered pursuant to this paragraph, when, and to the extent, that (A) Shares are repurchased, acquired or otherwise received by Issuer or any of its subsidiaries after the Trade Date (whether or not in exchange for cash, fair value or any other consideration), (B) authorized and unissued Shares reserved for issuance in respect of other transactions prior to such date which prior to the relevant date become no longer so reserved and (C) Issuer additionally authorizes any unissued Shares that are not reserved for other transactions (such events as set forth in clauses (A), (B) and (C) above, collectively, the “Share Issuance Events”). Issuer shall promptly notify Dealer of the occurrence of any of the Share Issuance Events (including the number of Shares subject to clause (A), (B) or (C) and the corresponding number of Shares to be delivered) and, as promptly as reasonably practicable, deliver such Shares thereafter.

     (f) Equity Rights. Dealer acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to the Transaction that are senior to the claims of common stockholders in the event of Issuer’s bankruptcy. For the avoidance of doubt, the parties agree that the preceding sentence shall not apply at any time other than during Issuer’s bankruptcy to any claim arising as a result of a breach by Issuer of any of its obligations under this Confirmation or the Agreement. For the avoidance of doubt, the parties acknowledge that the obligations of Issuer under this Confirmation are not secured by any collateral that would otherwise secure the obligations of Issuer herein under or pursuant to any other agreement.

     (g) Amendments to Equity Definitions. The following amendments shall be made to the Equity Definitions:

     (i) For the purposes of any adjustment under Section 11.2(c) of the Equity Definitions, the first sentence of Section 11.2(c) of the Equity Definitions, prior to clause (A) thereof, is hereby amended to read as follows: ‘(c) If “Calculation Agent Adjustment” is specified as the Method of Adjustment in the related Confirmation of a Share Option Transaction, then following the announcement or occurrence of any Potential Adjustment Event, the Calculation Agent will determine whether such Potential Adjustment Event has a material effect on the theoretical value of the relevant Shares or options on the Shares and, if so, will (i) make appropriate adjustment(s), if any, to any one or more of:’ and, the portion of such sentence immediately preceding clause (ii) thereof is hereby amended by deleting the words “diluting or

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concentrative” and the words “(provided that no adjustments will be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)” and replacing such latter phrase with the words “(and, for the avoidance of doubt, adjustments may be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)”;

     (ii) Sections 11.2(a) and 11.2(e)(vii) of the Equity Definitions are hereby amended by inserting at the end of each Section the phrase “or a material effect on the theoretical value of the Warrants;”

     (iii) Section 12.9(b)(iv) of the Equity Definitions is hereby amended by (A) deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)” following subsection (A) and (3) the phrase “in each case” in subsection (B); (B) replacing “will lend” with “lends” in subsection (B); and (C) deleting the phrase “neither the Non-Hedging Party nor the Lending Party lends Shares in the amount of the Hedging Shares or” in the penultimate sentence; and

     (v) Section 12.9(b)(v) of the Equity Definitions is hereby amended by (A) adding the word “or” immediately before subsection “(B)” and deleting the comma at the end of subsection (A); and (B)(1) deleting subsection (C) in its entirety, (2) deleting the word “or” immediately preceding subsection (C), (3) replacing in the penultimate sentence the words “either party” with “the Hedging Party” and (4) deleting clause (X) in the final sentence.

     (h) Transfer and Assignment. Dealer may transfer or assign its rights and obligations hereunder and under the Agreement, in whole or in part, at any time without the consent of Issuer.

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

     (j) Additional Termination Events. The occurrence of any of the following shall constitute an Additional Termination Event with respect to which the Transaction shall be the sole Affected Transaction and Issuer shall be the sole Affected Party and Dealer shall be the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement and to determine the amount payable pursuant to Section 6(e) of the Agreement; provided that with respect to any Additional Termination Event, Dealer may choose to treat part of the Transaction as the sole Affected Transaction, and, upon the termination of the Affected Transaction, a Transaction with terms identical to those set forth herein except with a Number of Warrants equal to the unaffected number of Warrants shall be treated for all purposes as the Transaction, which shall remain in full force and effect:

     (i) Dealer reasonably determines that it is advisable to terminate a portion of the Transaction (the “Affected Portion”) so that Dealer’s related hedging activities with respect thereto will comply with applicable securities laws, rules or regulations or generally applicable related policies and procedures of Dealer applied to the Transaction in a non-discriminatory manner (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by Dealer); provided that Dealer shall treat only the Affected Portion of the Transaction as the Affected Transaction; or

     (ii) at any time at which any Excess Ownership Position (as defined above) occurs, Dealer, in its reasonable discretion, is unable to effect a transfer or assignment to a third party of the Transaction or any other transaction between the parties after using its commercially reasonable efforts on pricing terms and within a time period reasonably acceptable to Dealer (the “Transfer Time Period”) (it being understood that a period of at least one Exchange Business Day shall be considered reasonable for this purpose (without prejudice to whether a shorter period of time would be considered reasonable)) such that an Excess Ownership Position no longer exists; provided that Dealer shall treat only that portion of the Transaction as the Affected Transaction as necessary so that such Excess Ownership Position no longer exists; and provided further that,

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unless such Excess Ownership Position is the result of a repurchase of Shares by Issuer or any other event or events within Issuer’s control, Dealer shall promptly notify Issuer of its Excess Ownership Position and shall use its commercially reasonable efforts to consult with Issuer during the Transfer Time Period regarding potential transfers or assignments to third parties prior to designating an Early Termination Date pursuant to this Section 8(j)(ii); or

     (iii) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act other than Issuer, its subsidiaries and its and their employee benefit plans, files a Schedule TO or any schedule, form or report under the Exchange Act, disclosing that such person or group has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of Issuer’s common equity representing more than 50% of the voting power of Issuer’s common equity; or

     (iv) consummation of (A) any recapitalization, reclassification or change of the Shares (other than changes resulting from a subdivision or combination) as a result of which the Shares would be converted into, or exchanged for, stock, other securities, other property or assets or (B) any share exchange, consolidation or merger of Issuer pursuant to which the Shares will be converted into cash, securities or other assets or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of Issuer and its subsidiaries, taken as a whole, to any person other than Issuer or one of Issuer’s subsidiaries; provided, however, that a transactions where (x) the Shares are not changed or exchanged except to the extent necessary to reflect a change in Issuer’s jurisdiction of incorporation or (y) the holders of more than 50% of all classes of Issuer’s common equity immediately prior to such transaction own, directly or indirectly, more than 50% of the aggregate voting power of the common equity of the continuing or surviving corporation or transferee or the parent thereof immediately after such event shall not constitute an Additional Termination Event; or

     (v) Issuer’s stockholders approve any plan or proposal for Issuer’s liquidation or dissolution; or

     (vi) the Shares (or any New Shares that would be deliverable by Issuer hereunder) cease to be listed on any of The New York Stock Exchange, The NASDAQ Global Select Market, The NASDAQ Global Market (or any of their respective successors) or an alternate exchange of equivalent or greater liquidity with respect to the Shares (or any such New Shares).

Notwithstanding the foregoing, a transaction or transactions described in clause (iv) above will not constitute an Additional Termination Event if at least 90% of the consideration received or to be received by holders of the Shares, excluding cash payments for fractional shares and cash payments made pursuant to dissenters’ appraisal rights, in connection with such transaction or transactions consists of shares of common stock that are listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their respective successors) or that will be so listed or quoted when issued or exchanged in connection with such transaction or transactions.

     (k) Effectiveness. If, on or prior to the Effective Date, Dealer reasonably determines that it is advisable to cancel the Transaction because of concerns that Dealer’s related hedging activities could be viewed as not complying with applicable securities laws, rules or regulations, the Transaction shall be cancelled and shall not become effective, and neither party shall have any obligation to the other party in respect of the Transaction.

     (l) Extension of Settlement. Dealer may divide any Component into additional Components and designate the Expiration Date and the Number of Warrants for each such Component if Dealer determines, in its reasonable discretion, that such further division is necessary or advisable to preserve Dealer’s hedging or hedge unwind activity hereunder in light of existing liquidity conditions in the cash market or stock loan market or to enable Dealer to effect purchases of Shares in connection with its hedging, hedge unwind or settlement activity hereunder in a manner that would, if Dealer were Issuer or an affiliated purchaser of Issuer, be compliance with applicable legal, regulatory and self-regulatory requirements, or with related policies and procedures applicable to Dealer.

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

     (n) Delivery or Receipt of Cash. For the avoidance of doubt, other than receipt of the Premium by Issuer, nothing in this Confirmation shall be interpreted as requiring Issuer to cash settle this Transaction, except in circumstances where such cash settlement is within Issuer’s control (including, without limitation, where Issuer elects to deliver or receive cash, where Issuer fails timely to elect the Share Termination Alternative, or where Issuer is not able to effect a private placement settlement pursuant to Section 8(b)(i)(B) above due to the occurrence of events within its control) or in those circumstances in which holders of the Shares would also receive cash.

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

     (p) Designation by Dealer. Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities to or from Issuer, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such Shares or other securities and otherwise to perform Dealer’s obligations in respect of the Transaction and any such designee may assume such obligations. Dealer shall be discharged of its obligations to Issuer only to the extent of any such performance.

     (q) Strike Price Adjustment. Notwithstanding anything to the contrary in the Agreement, this Confirmation or the Equity Definitions (but without limiting Dealer’s right to adjust any variable relevant to the exercise, settlement, payment or other terms of the Transaction, other than the Strike Price and the Warrant Entitlement), in no event shall (i) the Warrant Entitlement be adjusted, or (ii) the Strike Price be adjusted to the extent that, after giving effect to such adjustment, the Strike Price would be less than USD 6.42, in each case, other than any such adjustment in connection with stock splits or similar changes to Issuer’s capitalization.

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

     (s) Share Deliveries. Issuer acknowledges and agrees that, to the extent the holder of this Warrant is not then an affiliate and has not been an affiliate for 90 days (it being understood that Dealer will not be considered an affiliate under this paragraph solely by reason of its receipt of Shares pursuant to this Transaction and under the Base Warrant Transaction), and otherwise satisfies all holding period and other requirements of Rule 144 of the Securities Act applicable to it, any delivery of Shares or Share Termination Delivery Property hereunder at any time after 6 months from the Trade Date (or 1 year from the Trade Date if, at such time, informational requirements of Rule 144(c) are not satisfied with respect to Issuer) shall be eligible for resale under Rule 144 of the Securities Act and Issuer agrees to promptly remove, or cause the transfer agent for such Shares or Share Termination Delivery Property, to remove, any legends referring to any restrictions on resale under the Securities Act from the Shares or Share Termination Delivery Property. Issuer further agrees that any delivery of Shares or Share Termination Delivery Property prior to the date that is 6 months from the Trade Date (or 1 year from the Trade Date if, at such time, informational requirements of Rule 144(c) are not satisfied with respect to Issuer), may be transferred by and among Dealer and its affiliates and Issuer shall effect such transfer without any further action by Dealer. Notwithstanding anything to the contrary herein, Issuer agrees that any delivery of Shares or Share Termination Delivery Property shall be effected by book-entry transfer through the facilities of DTC, or any successor depositary, if at the time of delivery, such class of Shares or class of Share Termination Delivery Property is in book-entry form at DTC or such successor depositary. Notwithstanding anything to the contrary herein, to the extent the provisions of Rule 144 of the Securities Act or any successor rule are amended, or the applicable interpretation thereof by the Securities and Exchange Commission or any court change after the Trade Date, the agreements of Issuer herein shall be deemed modified to the extent necessary, in the opinion of outside counsel of Issuer, to comply with Rule

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144 of the Securities Act, as in effect at the time of delivery of the relevant Shares or Share Termination Delivery Property.

     (t) Quarterly Valuations. Dealer hereby agrees, upon request by Issuer, to provide or cause its affiliate to provide to Issuer, within five Exchange Business Days after the end of the fiscal quarter of Issuer during which Issuer made such request, a valuation estimate of the fair value of the Transaction as of Issuer’s fiscal quarter end.

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

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

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

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

Yours faithfully, MORGAN STANLEY & CO. INTERNATIONAL PLC
By:	/s/ Rajul Patel
	Name:	Rajul Patel
	Title:
MORGAN STANLEY & CO. INCORPORATED as Agent
By:	/s/ Serkan Savasoglu
	Name:	Serkan Savasoglu
	Title:	Managing Director

Agreed and Accepted By: CADENCE DESIGN SYSTEMS, INC.
By:	/s/ Kevin S. Palatnik
	Name:	Kevin S. Palatnik
	Title:	Sr. Vice President & Chief Financial Officer

Signature Page to Additional Warrant
Confirmation

Annex A

For each Component of the Transaction, the Number of Warrants and Expiration Date is set forth below.

Component Number	Number of Warrants	Expiration Date
1	9,465	September 1, 2015
2	9,465	September 2, 2015
3	9,465	September 3, 2015
4	9,465	September 4, 2015
5	9,465	September 8, 2015
6	9,465	September 9, 2015
7	9,465	September 10, 2015
8	9,465	September 11, 2015
9	9,465	September 14, 2015
10	9,465	September 15, 2015
11	9,465	September 16, 2015
12	9,465	September 17, 2015
13	9,465	September 18, 2015
14	9,465	September 21, 2015
15	9,465	September 22, 2015
16	9,465	September 23, 2015
17	9,465	September 24, 2015
18	9,466	September 25, 2015
19	9,466	September 28, 2015
20	9,466	September 29, 2015
21	9,466	September 30, 2015
22	9,466	October 1, 2015
23	9,466	October 2, 2015
24	9,466	October 5, 2015
25	9,466	October 6, 2015
26	9,466	October 7, 2015
27	9,466	October 8, 2015
28	9,466	October 9, 2015
29	9,466	October 12, 2015
30	9,466	October 13, 2015
31	9,466	October 14, 2015
32	9,466	October 15, 2015
33	9,466	October 16, 2015
34	9,466	October 19, 2015
35	9,466	October 20, 2015
36	9,466	October 21, 2015
37	9,466	October 22, 2015
38	9,466	October 23, 2015
39	9,466	October 26, 2015
40	9,466	October 27, 2015
41	9,466	October 28, 2015
42	9,466	October 29, 2015
43	9,466	October 30, 2015
44	9,466	November 2, 2015
45	9,466	November 3, 2015
46	9,466	November 4, 2015
47	9,466	November 5, 2015
48	9,466	November 6, 2015
49	9,466	November 9, 2015

Annex A - 1

Component Number	Number of Warrants	Expiration Date
50	9,466	November 10, 2015
51	9,466	November 11, 2015
52	9,466	November 12, 2015
53	9,466	November 13, 2015
54	9,466	November 16, 2015
55	9,466	November 17, 2015
56	9,466	November 18, 2015
57	9,466	November 19, 2015
58	9,466	November 20, 2015
59	9,466	November 23, 2015
60	9,466	November 24, 2015
61	9,466	November 25, 2015
62	9,466	November 27, 2015
63	9,466	November 30, 2015
64	9,466	December 1, 2015
65	9,466	December 2, 2015
66	9,466	December 3, 2015
67	9,466	December 4, 2015
68	9,466	December 7, 2015
69	9,466	December 8, 2015
70	9,466	December 9, 2015

Annex A - 2

EX-10.12

Exhibit 10.12

To:	Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, CA 95134 Attention: Office of the General Counsel
From:	Deutsche Bank AG, London Branch Winchester House 1 Great Winchester St, London EC2N 2DB
	c/o Deutsche Bank Securities Inc. 60 Wall Street New York, NY 10005 Telephone: 212-250-2500
Re:	Additional Issuer Warrant Transaction
Ref. No:	388069
Date:	June 18, 2010

Dear Sir(s):

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

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

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     1. This Confirmation is subject to, and incorporates, the definitions and provisions of the 2002 ISDA Equity Derivatives Definitions (the “Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc. (“ISDA”). For purposes of the Equity Definitions, each reference herein to a Warrant shall be deemed to be a reference to a Call Option or an Option, as the context requires.

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

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

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

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

     2. The Transaction is a Warrant Transaction, which shall be considered a Share Option Transaction for purposes of the Equity Definitions. The terms of the particular Transaction to which this Confirmation relates are as follows:

General Terms:
Trade Date:	June 18, 2010
Effective Date:	June 22, 2010, or such other date as agreed between the parties, subject to Section 8(k) below.
Components:	The Transaction will be divided into individual Components, each with the terms set forth in this Confirmation, and, in particular, with the Number of Warrants and Expiration Date set forth in this Confirmation. The payments and deliveries to be made upon settlement of the Transaction will be determined separately for each Component as if each Component were a separate Transaction under the Agreement.
Warrant Style:	European
Warrant Type:	Call
Seller:	Issuer
Buyer:	Dealer

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Shares:	The Common Stock of Issuer, par value USD 0.01 per share (Ticker Symbol: “CDNS”).
Number of Warrants:	For each Component, as provided in Annex A to this Confirmation.
Warrant Entitlement:	One Share per Warrant
Strike Price:	USD 10.78
Premium:	USD 1,759,345.92
Premium Payment Date:	The Effective Date
Exchange:	NASDAQ Global Select Market
Related Exchange:	All Exchanges.
Procedures for Exercise:
In respect of any Component:
Expiration Time:	Valuation Time
Expiration Date:	As provided in Annex A to this Confirmation (or, if such date is not a Scheduled Trading Day, the next following Scheduled Trading Day that is not already an Expiration Date for another Component); provided that if that date is a Disrupted Day, the Expiration Date for such Component shall be the first succeeding Scheduled Trading Day that is not a Disrupted Day and is not or is not deemed to be an Expiration Date in respect of any other Component of the Transaction hereunder; and provided further that if the Expiration Date has not occurred pursuant to the preceding proviso as of the Final Disruption Date, the Calculation Agent shall have the right to elect, in its sole discretion, that the Final Disruption Date shall be the Expiration Date for such Component (irrespective of whether such date is an Expiration Date in respect of any other Component for the Transaction). “Final Disruption Date” means December 21, 2015. Notwithstanding the foregoing and anything to the contrary in the Equity Definitions, if a Market Disruption Event occurs on any Expiration Date, the Calculation Agent may determine that such Expiration Date is a Disrupted Day only in part, in which case (i) the Calculation Agent shall make adjustments to the Number of Warrants for the relevant Component for which such day shall be the Expiration Date and shall designate the Scheduled Trading Day determined in the manner described in the immediately preceding sentence as the Expiration Date for the remaining Warrants for such Component and (ii) the VWAP Price for such Disrupted Day shall be determined by the Calculation Agent based on transactions in the Shares effected on such Disrupted Day taking into account the nature and duration of such Market Disruption Event on such day. Section 6.6 of the Equity Definitions shall

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	not apply to any Valuation Date occurring on an Expiration Date.
Market Disruption Event:	Section 6.3(a) of the Equity Definitions is hereby amended by (A) deleting the words “during the one hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be,” in clause (ii) thereof and (B) replacing the words “or (iii) an Early Closure.” therein with “(iii) an Early Closure, or (iv) a Regulatory Disruption.”.
	Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the term “Scheduled Closing Time” in the fourth line thereof.
Regulatory Disruption:	Any event that Dealer, in its reasonable discretion based on advice of counsel, determines makes it appropriate with regard to any legal, regulatory or self-regulatory requirements or generally applicable related policies and procedures applicable to Dealer and applied to the Transaction in a non-discriminatory manner, for Dealer to refrain from or decrease any market activity in connection with the Transaction.
Automatic Exercise:	Applicable; and means that the Number of Warrants for the corresponding Expiration Date will be deemed to be automatically exercised at the Expiration Time on such Expiration Date unless Dealer notifies Seller (by telephone or in writing) prior to the Expiration Time on such Expiration Date that it does not wish Automatic Exercise to occur, in which case Automatic Exercise will not apply to such Expiration Date.
Issuer’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of Giving Notice:	As provided in Section 6(a) below.
Valuation Terms:
In respect of any Component:
Valuation Time:	At the close of trading of the regular trading session on the Exchange; provided that if the regular trading session is extended, the Calculation Agent shall determine the Valuation Time in its reasonable discretion.
Valuation Date:	The Expiration Date.
Settlement Terms:
In respect of any Component:

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Settlement Currency:	USD
Net Share Settlement:	On each Settlement Date, Issuer shall deliver to Dealer a number of Shares equal to the Number of Shares to be Delivered for such Settlement Date to the account specified by Dealer and cash in lieu of any fractional Share valued at the VWAP Price on the Valuation Date corresponding to such Settlement Date. If, in the reasonable judgment of Issuer or Dealer, based on advice of counsel, for any reason, the Shares deliverable upon Net Share Settlement would not be immediately freely transferable by Dealer under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), then Dealer may elect to either (x) accept delivery of such Shares notwithstanding any restriction on transfer or (y) have the provisions set forth in Section 8(b) below apply.
	The Number of Shares to be Delivered shall be delivered by Issuer to Dealer no later than 5:00 p.m. (local time in New York City) on the relevant Settlement Date.
Number of Shares to be Delivered:	In respect of any Exercise Date, subject to the last sentence of Section 9.5 of the Equity Definitions, the product of (i) the number of Warrants exercised or deemed exercised on such Exercise Date, (ii) the Warrant Entitlement and (iii) (A) the excess of the VWAP Price on the Valuation Date occurring in respect of such Exercise Date over the Strike Price (or, if there is no such excess, zero) divided by (B) such VWAP Price.
VWAP Price:	For any Exchange Business Day, the volume weighted average price per Share for the regular trading session (including any extensions thereof) of the Exchange on such Exchange Business Day (without regard to pre-open or after hours trading outside of such regular trading session), as published by Bloomberg at 4:15 P.M., New York City time (or 15 minutes following the end of any extension of the regular trading session), on such Exchange Business Day, on Bloomberg page “CDNS.Q <Equity> AQR” (or any successor thereto) (or if such published volume weighted average price is unavailable or is manifestly incorrect, the market value of one Share on such Exchange Business Day, as reasonably determined by the Calculation Agent using a volume weighted method).
Other Applicable Provisions:	The provisions of Sections 9.1(c), 9.4, 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction; provided that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any

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	representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws that exist as a result of the fact that Issuer is the issuer of the Shares.
Adjustments:
In respect of any Component:
Method of Adjustment:	Calculation Agent Adjustment; provided that in respect of an Extraordinary Dividend, “Calculation Agent Adjustment” shall be as described in the provision below. For the avoidance of doubt, Calculation Agent Adjustment shall continue to apply until the obligations of the parties (including any obligations of Issuer pursuant to Section 8(e) below) under the Transaction have been satisfied in full.
Extraordinary Dividend:	Any cash dividend or distribution on the Shares with an ex-dividend date occurring on or after the Trade Date and on or prior to the Expiration Date (or, if any Deficit Shares are owed pursuant to Section 8(e) below, such later date on which Issuer’s obligations under this Transaction have been satisfied in full).
Extraordinary Dividend Adjustment:	If at any time during the period from and including the Trade Date, to and including the Expiration Date for the Component with the latest Expiration Date (or, if any Deficit Shares are owed pursuant to Section 8(e) below, such later date on which Issuer’s obligations under this Transaction have been satisfied in full), an ex-dividend date for an Extraordinary Dividend occurs or is deemed to occur, then the Calculation Agent will make adjustments to any one or more of the Strike Price, the Number of Warrants, the Warrant Entitlement and/or any other variable relevant to the exercise, settlement, payment or other terms of the Transaction as it determines appropriate to account for the economic effect on the Transaction of such Extraordinary Dividend.
Extraordinary Events:
New Shares:	In the definition of New Shares in Section 12.1(i) of the Equity Definitions (A) the text in clause (i) thereof shall be deleted in its entirety and replaced with “publicly quoted, traded or listed on any of the New York Stock Exchange, The NASDAQ Global Market or The NASDAQ Global Select Market (or their respective successors)” and (B) the phrase “and (iii) of an entity or person organized under the laws of the United States, any State thereof or the District of Columbia that also becomes Issuer under the Transaction following such Merger Event or Tender Offer” shall be inserted at the end thereof.
Consequences of Merger Events:

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(a) Share-for-Share:	Modified Calculation Agent Adjustment
(b) Share-for-Other:	Cancellation and Payment (Calculation Agent Determination)
(c) Share-for-Combined:	Cancellation and Payment (Calculation Agent Determination); provided that the Calculation Agent may elect Component Adjustment for all or part of the Transaction.
Tender Offer:	Applicable.
Consequences of Tender Offers:
(a) Share-for-Share:	Modified Calculation Agent Adjustment
(b) Share-for-Other:	Modified Calculation Agent Adjustment
(c) Share-for-Combined:	Modified Calculation Agent Adjustment
Modified Calculation Agent Adjustment:	Upon the occurrence of any Merger Event pursuant to which the holders of Issuer’s Shares would be entitled to receive cash, securities or other property for their Shares and for which Modified Calculation Agent Adjustment would apply, if, as a result of such Merger Event, Issuer would be different from the issuer of the Shares under this Confirmation, then, on or prior to the effective date of such Merger Event, the Issuer and the issuer of the Shares under this Confirmation will enter into a supplemental confirmation as a condition precedent to the adjustments contemplated in Section 12.2(e)(i) of the Equity Definitions, with such supplemental confirmation containing representations, warranties and agreements relating to securities law and other issues as requested by Dealer that Dealer has determined, in its reasonable discretion, to be reasonably necessary or appropriate to allow Dealer to continue as a party to the Transaction, as adjusted under Section 12.2(e)(i) of the Equity Definitions, and to preserve its hedging or hedge unwind activities in connection with the Transaction in a manner compliant with applicable legal, regulatory or self-regulatory requirements, or with generally applicable related policies and procedures applicable to Dealer and applied to the Transaction in a non-discriminatory manner, and if such conditions are not met or if the Calculation Agent determines that no adjustment that it could make under Section 12.2(e)(i) of the Equity Definitions will produce a commercially reasonable result, then the consequences set forth in Section 12.2(e)(ii) of the Equity Definitions shall apply.
Nationalization, Insolvency or Delisting:	Cancellation and Payment (Calculation Agent Determination); provided that (i) Section 12.6(a)(iii)

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	of the Equity Definitions shall be amended to delete, in the definition of the term “Delisting” the parenthetical “(or will cease)” and (ii) in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.
Additional Disruption Events:
(a) Change in Law:	Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof with the phrase “or announcement or statement of the interpretation” and (ii) replacing the word “Shares” with the phrase “Hedge Positions” in clause (X) thereof.
(b) Failure to Deliver:	Not Applicable
(c) Insolvency Filing:	Applicable; provided that only Dealer shall have the right to terminate the Transaction upon an Insolvency Filing.
(d) Hedging Disruption:	Applicable; provided that
	(i) Section 12.9(a)(v) of the Equity Definitions is hereby amended by inserting the following two sentences at the end of such Section:
	“For the avoidance of doubt, the term “equity price risk” shall be deemed to include, but shall not be limited to, stock price and volatility risk. And, for the further avoidance of doubt, any such transactions or assets referred to in phrases (A) or (B) above must be available on commercially reasonable pricing terms.”
	(ii) Section 12.9(b)(iii) of the Equity Definitions is hereby amended by inserting in the third line thereof, after the words “to terminate the Transaction”, the words “or a portion of the Transaction affected by such Hedging Disruption”.
(e) Increased Cost of Hedging:	Applicable
(f) Loss of Stock Borrow:	Applicable
Maximum Stock Loan Rate:	2.00% per annum
(g) Increased Cost of Stock Borrow:	Applicable
Initial Stock Loan Rate:	0.25% per annum

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Hedging Party:	Dealer for all applicable Additional Disruption Events.
Determining Party:	Dealer for all applicable Additional Disruption Events.
Non-Reliance:	Applicable
Agreements and Acknowledgments Regarding Hedging Activities:	Applicable
Additional Acknowledgments:	Applicable

     3. Calculation Agent:

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

     4. Account Details:

Dealer Payment Instructions:

Deutsche Bank AG, London Branch
The Bank of New York
Account Name: Deutsche Bank Securities, Inc.

     Account for delivery of Shares to Dealer:

To be provided by Dealer.

     Issuer Payment Instructions:

To be provided by Issuer.

     5. Offices:

     The Office of Dealer for the Transaction is: London

Deutsche Bank AG, London Branch
Winchester house
1 Great Winchester St, London
EC2N 2DB

     The Office of Issuer for the Transaction is:

Inapplicable. Issuer is not a Multibranch Party.

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     6. Notices: For purposes of this Confirmation:

(a) Address for notices or communications to Issuer:

To:	Cadence Design Systems, Inc.
	2655 Seely Avenue, Building 5
	San Jose, California 95134
Attn:	Office of the General Counsel
Facsimile:	(408) 904-6946

(b) Address for notices or communications to Dealer:

To:	Deutsche Bank AG, London Branch
	c/o Deutsche Bank Securities Inc.
	60 Wall Street
	New York, NY 10005
Attn:	Peter Barna
With a copy to:	Deutsche Bank AG, London Branch
	c/o Deutsche Bank Securities Inc.
	60 Wall Street
	New York, NY 10005
Attn:	Lars Kestner

     7. Representations, Warranties and Agreements:

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

     (i) On the Trade Date, and as of the date of any election by Issuer of the Share Termination Alternative under (and as defined in) Section 8(a) below, none of Issuer and its officers and directors is aware of any material nonpublic information regarding Issuer or the Shares. On the Trade Date, all reports and other documents filed by Issuer with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), when considered as a whole (with the more recent such reports and documents deemed to amend inconsistent statements contained in any earlier such reports and documents), do not contain any untrue statement of a material fact or any omission of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading.

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

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     (iii) Issuer is not entering into this Confirmation, and on the date of any election by Issuer of the Share Termination Alternative under Section 8(a) below, Issuer represents that it is not making such election, to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for Shares) or otherwise in violation of the Exchange Act.

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

     (v) Issuer shall not take any action to decrease the number of Available Shares below the Capped Number (each as defined below).

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

     (vii) (A) On the Trade Date and during the period starting on the first Expiration Date and ending on the last Expiration Date (the “Settlement Period”), the Shares or securities that are convertible into, or exchangeable or exercisable for Shares, are not, and shall not be, subject to a “restricted period,” as such term is defined in Regulation M under the Exchange Act (“Regulation M”) and (B) Issuer shall not engage in any “distribution,” as such term is defined in Regulation M until the second Exchange Business Day immediately following the Trade Date or Settlement Period, as applicable.

     (ix) Issuer agrees that it (A) will not during the Settlement Period make, or permit to be made, any public announcement (as defined in Rule 165(f) under the Securities Act) of any Merger Transaction or potential Merger Transaction unless such public announcement is made prior to the opening or after the close of the regular trading session on the Exchange for the Shares; (B) shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) notify Dealer following any such announcement that such announcement has been made; and (C) shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) provide Dealer with written notice specifying (i) Issuer’s average daily Rule 10b-18 Purchases (as defined in Rule 10b-18) during the three full calendar months immediately preceding the announcement date that were not effected through Dealer or its affiliates and (ii) the number of Shares purchased pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months preceding the announcement date. Such written notice shall be deemed to be a certification by Issuer to Dealer that such information is true and correct. In addition, Issuer shall promptly notify Dealer of the earlier to occur of the completion of such transaction and the completion of the vote by target shareholders. “Merger Transaction” means any merger, acquisition or similar transaction involving a recapitalization as contemplated by Rule 10b-18(a)(13)(iv) under the Exchange Act.

     (x) A number of Shares equal to the Capped Number have been reserved for issuance by all required corporate action of the Issuer. Any Shares issued or delivered in connection with the Transaction shall be duly authorized and, when delivered as contemplated hereby following the exercise of the Warrants in accordance with their terms and conditions, will be validly issued, fully paid and non-assessable, and the issuance or delivery thereof shall not be subject to any preemptive or similar rights and shall, upon issuance, be accepted for listing or quotation on the Exchange.

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

     (xii) The representations and warranties of Issuer set forth in Section 3 of the Agreement and Section 1 of the Purchase Agreement dated as of June 9, 2010 between Issuer and

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J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated as representatives of the initial purchasers party thereto (the “Purchase Agreement”) are true and correct as of the Trade Date and the Effective Date and are hereby deemed to be repeated to Dealer as if set forth herein.

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

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

     (d) Each of Dealer and Issuer agrees and acknowledges that Dealer is a “financial institution,” “swap participant” and “financial participant” within the meaning of Sections 101(22), 101(53C) and 101(22A) of Title 11 of the United States Code (the “Bankruptcy Code”). The parties hereto further agree and acknowledge (A) that this Confirmation is (i) a “securities contract,” as such term is defined in Section 741(7) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “settlement payment” within the meaning of Section 546 of the Bankruptcy Code, and (ii) a “swap agreement,” as such term is defined in Section 101(53B) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “transfer” within the meaning of Section 546 of the Bankruptcy Code, and (B) that Dealer is entitled to the protections afforded by, among other sections, Sections 362(b)(6), 362(b)(17), 362(b)(27), 362(o), 546(e), 546(g), 546(j), 548(d)(2), 555, 560 and 561 of the Bankruptcy Code.

     (e) For the purposes of Section 3(f) of the Agreement, Dealer represents that, as of the time any payment is made after December 31, 2012, (i) if it is a “foreign financial institution” within the meaning of section 1471(d)(4) of the Internal Revenue Code of 1986 as amended (the “Code”), it meets the requirements of section 1471(b) of the Code and has not elected the application of section 1471(b)(3) of the Code, and (ii) if it is a “non-financial foreign entity” within the meaning of section 1472(d) of the Code, it meets the requirements of section 1472(b) of the Code, unless one or more of the exceptions of Code section 1472(c) are applicable with respect to such payment.

     (f) As a condition to effectiveness of the Transaction, Issuer shall deliver to Dealer an opinion of counsel, dated as of the Trade Date and reasonably acceptable to Dealer in form and substance, with respect to the matters set forth in Section 3(a) of the Agreement and Section 7(a)(x) hereof, subject to customary assumptions, qualifications and exceptions.

     8. Other Provisions:

     (a) Alternative Calculations and Payment on Early Termination and on Certain Extraordinary Events. If Issuer shall owe Dealer any amount pursuant to Section 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions (except in the event of a Tender Offer, Merger Event, Insolvency or

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Nationalization, in each case, in which the consideration or proceeds to be paid to holders of Shares consists solely of cash) or pursuant to Section 6(d)(ii) of the Agreement (except in the event of an Event of Default in which Issuer is the Defaulting Party or a Termination Event in which Issuer is the Affected Party that resulted from an event or events within Issuer’s control) (a “Payment Obligation”), Issuer shall have the right, in its sole discretion, to satisfy any such Payment Obligation by the Share Termination Alternative (as defined below) by giving irrevocable telephonic notice to Dealer, confirmed in writing within one Scheduled Trading Day, between the hours of 9:00 A.M. and 4:00 P.M., New York City time, on the Merger Date, Tender Offer Date, Announcement Date, Early Termination Date or other date the Transaction is cancelled or terminated, as applicable (“Notice of Share Termination”). Upon such Notice of Share Termination, the following provisions shall apply on the Scheduled Trading Day immediately following the Merger Date, the Tender Offer Date, Announcement Date, Early Termination Date or other date the Transaction is cancelled or terminated, as applicable:

Share Termination Alternative:	Applicable and means that Issuer shall deliver to Dealer the Share Termination Delivery Property on the date on which the Payment Obligation would otherwise be due pursuant to Section 12.2, 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions or Section 6(d)(ii) of the Agreement, as applicable (the “Share Termination Payment Date”), in satisfaction of the Payment Obligation.
Share Termination Delivery Property:	A number of Share Termination Delivery Units, as calculated by the Calculation Agent, equal to the Payment Obligation divided by the Share Termination Unit Price. The Calculation Agent shall adjust the Share Termination Delivery Property by replacing any fractional portion of the aggregate amount of a security therein with an amount of cash equal to the value of such fractional security based on the values used to calculate the Share Termination Unit Price.
Share Termination Unit Price:	The value of property contained in one Share Termination Delivery Unit on the date such Share Termination Delivery Units are to be delivered as Share Termination Delivery Property, as determined by the Calculation Agent in its discretion by commercially reasonable means and notified by the Calculation Agent to Issuer at the time of notification of the Payment Obligation.
Share Termination Delivery Unit:	In the case of a Termination Event, Event of Default, Delisting or Additional Disruption Event, one Share or, in the case of an Insolvency, Nationalization, Merger Event or Tender Offer, a Share or a unit consisting of the number or amount of each type of property received by a holder of one Share (without consideration of any requirement to pay cash or other consideration in lieu of fractional amounts of any securities) in such Insolvency, Nationalization, Merger Event or Tender Offer. If such Insolvency, Nationalization, Merger Event or Tender Offer involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash.
Failure to Deliver:	Applicable
Other Applicable Provisions:	If Share Termination Alternative is applicable, the provisions of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction, except that all references to “Shares” shall be read as references to “Share Termination Delivery Units”; provided that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under

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applicable securities laws as a result of the fact that Issuer is the issuer of any Share Termination Delivery Units (or any security forming a part thereof). If, in the reasonable judgment of Issuer or Dealer, based on advice of counsel, for any reason, any securities comprising the Share Termination Delivery Units deliverable pursuant to this Section 8(a) would not be immediately freely transferable by Dealer under Rule 144 under the Securities Act, then Dealer may elect to either (x) permit delivery of such securities notwithstanding any restriction on transfer or (y) have the provisions set forth in Section 8(b) below apply.

     (b) Registration/Private Placement Procedures. (i) With respect to the Transaction, the following provisions shall apply to the extent provided for above opposite the caption “Net Share Settlement” in Section 2 or in paragraph (a) of this Section 8. If so applicable, then, at the election of Issuer by notice to Dealer within one Exchange Business Day after the relevant delivery obligation arises, but in any event at least one Exchange Business Day prior to the date on which such delivery obligation is due, either (A) all Shares or Share Termination Delivery Units, as the case may be, delivered by Issuer to Dealer shall be covered by an effective registration statement of Issuer for immediate resale by Dealer (such registration statement and the corresponding prospectus (the “Prospectus”) (including, without limitation, any sections describing the plan of distribution) in form and content commercially reasonably satisfactory to Dealer) or (B) Issuer shall deliver additional Shares or Share Termination Delivery Units, as the case may be, so that the value of such Shares or Share Termination Delivery Units, as determined by the Calculation Agent to reflect an appropriate liquidity discount, equals the value of the number of Shares or Share Termination Delivery Units that would otherwise be deliverable if such Shares or Share Termination Delivery Units were freely tradeable (without prospectus delivery) upon receipt by Dealer (such value, the “Freely Tradeable Value”); provided that, if requested by Dealer on or prior to the second Exchange Business Day prior to the first Exercise Date, any election to be made by Issuer described in this clause (B) shall be made with respect to Shares delivered on all Settlement Dates no later than one Exchange Business Day prior to the first Exercise Date, and the applicable procedures described below shall apply to all Shares delivered on the Settlement Dates on an aggregate basis. (For the avoidance of doubt, as used in this paragraph (b) only, the term “Issuer” shall mean the issuer of the relevant securities, as the context shall require.)

     (ii) If Issuer makes the election described in clause (b)(i)(A) above:

     (A) Dealer (or an affiliate of Dealer designated by Dealer) shall be afforded a reasonable opportunity to conduct a due diligence investigation with respect to Issuer that is customary in scope for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business and that yields results that are commercially reasonably satisfactory to Dealer or such affiliate, as the case may be, in its discretion; and

     (B) Dealer (or an affiliate of Dealer designated by Dealer) and Issuer shall enter into an agreement (a “Registration Agreement”) on commercially reasonable terms in connection with the public resale of such Shares or Share Termination Delivery Units, as the case may be, by Dealer or such affiliate substantially similar to underwriting agreements customary for underwritten follow-on offerings of equity securities of companies of comparable size, maturity and lines of business, in form and substance commercially reasonably satisfactory to Dealer or such affiliate and Issuer, which Registration Agreement shall include, without limitation, provisions substantially similar to those contained in such underwriting agreements relating to the indemnification of, and contribution in connection with the liability of, Dealer and its affiliates and Issuer, shall provide for the payment by Issuer of all registration expenses in connection with such resale, including all registration costs and all fees and expenses of counsel for Dealer, and shall provide for the delivery of accountants’ “comfort letters” to Dealer or such affiliate with respect to the financial statements and certain financial information contained in or incorporated by reference into the Prospectus as are customarily requested in comfort letters covering follow-on offerings of equity securities of companies of comparable size, maturity and lines of business and the delivery of disclosure opinions of nationally recognized outside counsel to Issuer reasonably acceptable to Dealer.

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     (iii) If Issuer makes the election described in clause (b)(i)(B) above:

     (A) Dealer (or an affiliate of Dealer designated by Dealer) and any potential institutional purchaser of any such Shares or Share Termination Delivery Units, as the case may be, from Dealer or such affiliate identified by Dealer shall be afforded a commercially reasonable opportunity to conduct a due diligence investigation in compliance with applicable law with respect to Issuer customary in scope for private placements of equity securities of companies of comparable size, maturity and lines of business (including, without limitation, the right to have made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them), subject to execution by such recipients of customary confidentiality agreements reasonably acceptable to Issuer;

     (B) Dealer (or an affiliate of Dealer designated by Dealer) and Issuer shall enter into an agreement (a “Private Placement Agreement”) on commercially reasonable terms in connection with the private placement of such Shares or Share Termination Delivery Units, as the case may be, by Issuer to Dealer or such affiliate and the private resale of such shares by Dealer or such affiliate, substantially similar to private placement purchase agreements customary for private placements of equity securities of companies of comparable size, maturity and lines of business, in form and substance commercially reasonably satisfactory to Dealer and Issuer, which Private Placement Agreement shall include, without limitation, provisions substantially similar to those contained in such private placement purchase agreements relating to the indemnification of, and contribution in connection with the liability of, Dealer and its affiliates and Issuer, shall provide for the payment by Issuer of all expenses in connection with such resale, including all fees and expenses of counsel for Dealer, shall contain representations, warranties and agreements of Issuer reasonably necessary or advisable to establish and maintain the availability of an exemption from the registration requirements of the Securities Act for such resales, and shall use reasonable best efforts to provide for the delivery of accountants’ “comfort letters” to Dealer or such affiliate with respect to the financial statements and certain financial information contained in or incorporated by reference into the offering memorandum prepared for the resale of such Shares as are customarily requested in comfort letters covering private placements of equity securities of companies of comparable size, maturity and lines of business and delivery of disclosure opinions of nationally recognized outside counsel to Issuer reasonably acceptable to Dealer;

     (C) Issuer agrees that any Shares or Share Termination Delivery Units so delivered to Dealer, (i) may be transferred by and among Dealer and its affiliates, and Issuer shall effect such transfer without any further action by Dealer and (ii) after the minimum “holding period” within the meaning of Rule 144(d) under the Securities Act has elapsed with respect to such Shares or any securities issued by Issuer comprising such Share Termination Delivery Units, Issuer shall promptly remove, or cause the transfer agent for such Shares or securities to remove, any legends referring to any such restrictions or requirements from such Shares or securities upon delivery by Dealer (or such affiliate of Dealer) to Issuer or such transfer agent of seller’s and broker’s representation letters customarily delivered by Dealer in connection with resales of restricted securities pursuant to Rule 144 under the Securities Act (if any), without any further requirement for the delivery of any certificate, consent, agreement, opinion of counsel, notice or any other document, any transfer tax stamps or payment of any other amount or any other action by Dealer (or such affiliate of Dealer); and

     (D) Issuer shall not take, or cause to be taken, any action that would make unavailable either the exemption pursuant to Section 4(2) of the Securities Act for the sale by Issuer to Dealer (or any affiliate designated by Dealer) of the Shares or Share Termination Delivery Units, as the case may be, or the exemption pursuant to Section 4(1) or Section 4(3) of the Securities Act for resales of the Shares or Share Termination Delivery Units, as the case may be, by Dealer (or any such affiliate of Dealer).

     (c) Make-whole Shares. If Issuer makes the election described in clause (i)(B) of paragraph (b) of this Section 8, then Dealer or its affiliates may sell (which sale shall be made in a commercially reasonable manner) such Shares or Share Termination Delivery Units, as the case may be, during a period

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(the “Resale Period”) commencing on the Exchange Business Day following delivery of such Shares or Share Termination Delivery Units, as the case may be, and ending on the Exchange Business Day on which Dealer or its affiliates completes the sale of all such Shares or Share Termination Delivery Units, as the case may be, or a sufficient number of Shares or Share Termination Delivery Units, as the case may be, so that the realized net proceeds of such sales exceed the Freely Tradeable Value. If any of such delivered Shares or Share Termination Delivery Units remain after such realized net proceeds exceed the Freely Tradeable Value, Dealer shall return such remaining Shares or Share Termination Delivery Units to Issuer. If the Freely Tradeable Value exceeds the realized net proceeds from such resale, Issuer shall transfer to Dealer by the open of the regular trading session on the Exchange on the Exchange Trading Day immediately following the last day of the Resale Period the amount of such excess (the “Additional Amount”) in cash or in a number of additional Shares or Share Termination Delivery Units, as the case may be (“Make-whole Shares”) in an amount that, based on the VWAP Price on the last day of the Resale Period (as if such day was the “Valuation Date” for purposes of computing such VWAP Price), has a dollar value equal to the Additional Amount. The Resale Period shall continue to enable the sale of the Make-whole Shares in the manner contemplated by this Section 8(c). This provision shall be applied successively until the Additional Amount is equal to zero, subject to Section 8(e).

     (d) Beneficial Ownership. Notwithstanding anything to the contrary in the Agreement or this Confirmation, in no event shall Dealer be entitled to receive, or shall be deemed to receive, any Shares if, immediately upon giving effect to such receipt of such Shares and after taking into account any Shares deliverable to Dealer under the Base Issuer Warrant Transaction between the parties hereto, entered into on June 9, 2010 (Ref. No. 386875) (the “Base Warrant Transaction”), (i) the “beneficial ownership” (within the meaning of Section 13 of the Exchange Act and the rules promulgated thereunder) of Shares by Dealer, any of its affiliates subject to aggregation with Dealer for purposes of the “beneficial ownership” test under Section 13 of the Exchange Act and all persons who may form a “group” (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) with Dealer with respect to “beneficial ownership” of any Shares (collectively, “Dealer Group”) would be equal to or greater than 8.5% or more of the outstanding Shares on the date of determination, (ii) the Warrant Equity Percentage exceeds 14.5% or (iii) Dealer, Dealer Group or any person whose ownership position would be aggregated with that of Dealer or Dealer Group (Dealer, Dealer Group or any such person, a “Dealer Person”) under Section 203 of the Delaware General Corporation Law (the “DGCL Takeover Statute”), or any state or federal bank holding company or banking laws, or other federal, state or local regulations, regulatory orders or organizational documents or contracts of Issuer that are, in each case, applicable to ownership of Shares (“Applicable Laws”), would own, beneficially own, constructively own, control, hold the power to vote or otherwise meet a relevant definition of ownership in excess of a number of Shares equal to (x) the number of Shares that would give rise to reporting or registration obligations or other requirements (including obtaining prior approval by a state or federal regulator) of a Dealer Person under Applicable Laws (including, without limitation, “interested stockholder” or “acquiring person” status under the DGCL Takeover Statute) and with respect to which such requirements have not been met or the relevant approval has not been received minus (y) 1.0% of the number of Shares outstanding on the date of determination (either such condition described in clause (i), (ii) or (iii), an “Excess Ownership Position”). The “Warrant Equity Percentage” as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the sum of (1) the product of the Number of Warrants and the Warrant Entitlement and (2) the aggregate number of Shares underlying any other call option transaction sold by Issuer to Dealer and (B) the denominator of which is the number of Shares outstanding on such day. If any delivery owed to Dealer hereunder is not made, in whole or in part, as a result of this provision, Issuer’s obligation to make such delivery shall not be extinguished and Issuer shall make such delivery as promptly as practicable after, but in no event later than one Exchange Business Day after, Dealer gives notice to Issuer that such delivery would not result in the existence of an Excess Ownership Position.

     (e) Limitations on Settlement by Issuer. Notwithstanding anything herein or in the Agreement to the contrary, in no event shall Issuer be required to deliver Shares in connection with the Transaction in excess of the product of two, the aggregate Number of Warrants for all Components at the time of delivery and the Warrant Entitlement at the time of delivery (such product, the “Capped Number”). Issuer represents and warrants to Dealer (which representation and warranty shall be deemed to be repeated on each day that the Transaction is outstanding) that the Capped Number is equal to or less

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than the number of authorized but unissued Shares of the Issuer that are not reserved for future issuance in connection with transactions in the Shares (other than the Transaction) on the date of the determination of the Capped Number (such Shares, the “Available Shares”). In the event Issuer shall not have delivered the full number of Shares otherwise deliverable as a result of this Section 8(e) (the resulting deficit, the “Deficit Shares”), Issuer shall be continually obligated to deliver Shares, from time to time until the full number of Deficit Shares have been delivered pursuant to this paragraph, when, and to the extent, that (A) Shares are repurchased, acquired or otherwise received by Issuer or any of its subsidiaries after the Trade Date (whether or not in exchange for cash, fair value or any other consideration), (B) authorized and unissued Shares reserved for issuance in respect of other transactions prior to such date which prior to the relevant date become no longer so reserved and (C) Issuer additionally authorizes any unissued Shares that are not reserved for other transactions (such events as set forth in clauses (A), (B) and (C) above, collectively, the “Share Issuance Events”). Issuer shall promptly notify Dealer of the occurrence of any of the Share Issuance Events (including the number of Shares subject to clause (A), (B) or (C) and the corresponding number of Shares to be delivered) and, as promptly as reasonably practicable, deliver such Shares thereafter.

     (f) Equity Rights. Dealer acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to the Transaction that are senior to the claims of common stockholders in the event of Issuer’s bankruptcy. For the avoidance of doubt, the parties agree that the preceding sentence shall not apply at any time other than during Issuer’s bankruptcy to any claim arising as a result of a breach by Issuer of any of its obligations under this Confirmation or the Agreement. For the avoidance of doubt, the parties acknowledge that the obligations of Issuer under this Confirmation are not secured by any collateral that would otherwise secure the obligations of Issuer herein under or pursuant to any other agreement.

     (g) Amendments to Equity Definitions. The following amendments shall be made to the Equity Definitions:

     (i) For the purposes of any adjustment under Section 11.2(c) of the Equity Definitions, the first sentence of Section 11.2(c) of the Equity Definitions, prior to clause (A) thereof, is hereby amended to read as follows: ‘(c) If “Calculation Agent Adjustment” is specified as the Method of Adjustment in the related Confirmation of a Share Option Transaction, then following the announcement or occurrence of any Potential Adjustment Event, the Calculation Agent will determine whether such Potential Adjustment Event has a material effect on the theoretical value of the relevant Shares or options on the Shares and, if so, will (i) make appropriate adjustment(s), if any, to any one or more of:’ and, the portion of such sentence immediately preceding clause (ii) thereof is hereby amended by deleting the words “diluting or concentrative” and the words “(provided that no adjustments will be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)” and replacing such latter phrase with the words “(and, for the avoidance of doubt, adjustments may be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Shares)”;

     (ii) Sections 11.2(a) and 11.2(e)(vii) of the Equity Definitions are hereby amended by inserting at the end of each Section the phrase “or a material effect on the theoretical value of the Warrants;”

     (iii) Section 12.9(b)(iv) of the Equity Definitions is hereby amended by (A) deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)” following subsection (A) and (3) the phrase “in each case” in subsection (B); (B) replacing “will lend” with “lends” in subsection (B); and (C) deleting the phrase “neither the Non-Hedging Party nor the Lending Party lends Shares in the amount of the Hedging Shares or” in the penultimate sentence; and

     (v) Section 12.9(b)(v) of the Equity Definitions is hereby amended by (A) adding the word “or” immediately before subsection “(B)” and deleting the comma at the end of subsection (A); and (B)(1) deleting subsection (C) in its entirety, (2) deleting the word “or”

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immediately preceding subsection (C), (3) replacing in the penultimate sentence the words “either party” with “the Hedging Party” and (4) deleting clause (X) in the final sentence.

     (h) Transfer and Assignment. Dealer may transfer or assign its rights and obligations hereunder and under the Agreement, in whole or in part, at any time without the consent of Issuer.

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

     (j) Additional Termination Events. The occurrence of any of the following shall constitute an Additional Termination Event with respect to which the Transaction shall be the sole Affected Transaction and Issuer shall be the sole Affected Party and Dealer shall be the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement and to determine the amount payable pursuant to Section 6(e) of the Agreement; provided that with respect to any Additional Termination Event, Dealer may choose to treat part of the Transaction as the sole Affected Transaction, and, upon the termination of the Affected Transaction, a Transaction with terms identical to those set forth herein except with a Number of Warrants equal to the unaffected number of Warrants shall be treated for all purposes as the Transaction, which shall remain in full force and effect:

     (i) Dealer reasonably determines that it is advisable to terminate a portion of the Transaction (the “Affected Portion”) so that Dealer’s related hedging activities with respect thereto will comply with applicable securities laws, rules or regulations or generally applicable related policies and procedures of Dealer applied to the Transaction in a non-discriminatory manner (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by Dealer); provided that Dealer shall treat only the Affected Portion of the Transaction as the Affected Transaction; or

     (ii) at any time at which any Excess Ownership Position (as defined above) occurs, Dealer, in its reasonable discretion, is unable to effect a transfer or assignment to a third party of the Transaction or any other transaction between the parties after using its commercially reasonable efforts on pricing terms and within a time period reasonably acceptable to Dealer (the “Transfer Time Period”) (it being understood that a period of at least one Exchange Business Day shall be considered reasonable for this purpose (without prejudice to whether a shorter period of time would be considered reasonable)) such that an Excess Ownership Position no longer exists; provided that Dealer shall treat only that portion of the Transaction as the Affected Transaction as necessary so that such Excess Ownership Position no longer exists; and provided further that, unless such Excess Ownership Position is the result of a repurchase of Shares by Issuer or any other event or events within Issuer’s control, Dealer shall promptly notify Issuer of its Excess Ownership Position and shall use its commercially reasonable efforts to consult with Issuer during the Transfer Time Period regarding potential transfers or assignments to third parties prior to designating an Early Termination Date pursuant to this Section 8(j)(ii); or

     (iii) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act other than Issuer, its subsidiaries and its and their employee benefit plans, files a Schedule TO or any schedule, form or report under the Exchange Act, disclosing that such person or group has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of Issuer’s common equity representing more than 50% of the voting power of Issuer’s common equity; or

     (iv) consummation of (A) any recapitalization, reclassification or change of the Shares (other than changes resulting from a subdivision or combination) as a result of which the Shares would be converted into, or exchanged for, stock, other securities, other property or assets or (B) any share exchange, consolidation or merger of Issuer pursuant to which the Shares will be converted into cash, securities or other assets or any sale, lease or other transfer in one transaction

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or a series of transactions of all or substantially all of the consolidated assets of Issuer and its subsidiaries, taken as a whole, to any person other than Issuer or one of Issuer’s subsidiaries; provided, however, that a transactions where (x) the Shares are not changed or exchanged except to the extent necessary to reflect a change in Issuer’s jurisdiction of incorporation or (y) the holders of more than 50% of all classes of Issuer’s common equity immediately prior to such transaction own, directly or indirectly, more than 50% of the aggregate voting power of the common equity of the continuing or surviving corporation or transferee or the parent thereof immediately after such event shall not constitute an Additional Termination Event; or

     (v) Issuer’s stockholders approve any plan or proposal for Issuer’s liquidation or dissolution; or

     (vi) the Shares (or any New Shares that would be deliverable by Issuer hereunder) cease to be listed on any of The New York Stock Exchange, The NASDAQ Global Select Market, The NASDAQ Global Market (or any of their respective successors) or an alternate exchange of equivalent or greater liquidity with respect to the Shares (or any such New Shares).

Notwithstanding the foregoing, a transaction or transactions described in clause (iv) above will not constitute an Additional Termination Event if at least 90% of the consideration received or to be received by holders of the Shares, excluding cash payments for fractional shares and cash payments made pursuant to dissenters’ appraisal rights, in connection with such transaction or transactions consists of shares of common stock that are listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their respective successors) or that will be so listed or quoted when issued or exchanged in connection with such transaction or transactions.

     (k) Effectiveness. If, on or prior to the Effective Date, Dealer reasonably determines that it is advisable to cancel the Transaction because of concerns that Dealer’s related hedging activities could be viewed as not complying with applicable securities laws, rules or regulations, the Transaction shall be cancelled and shall not become effective, and neither party shall have any obligation to the other party in respect of the Transaction.

     (l) Extension of Settlement. Dealer may divide any Component into additional Components and designate the Expiration Date and the Number of Warrants for each such Component if Dealer determines, in its reasonable discretion, that such further division is necessary or advisable to preserve Dealer’s hedging or hedge unwind activity hereunder in light of existing liquidity conditions in the cash market or stock loan market or to enable Dealer to effect purchases of Shares in connection with its hedging, hedge unwind or settlement activity hereunder in a manner that would, if Dealer were Issuer or an affiliated purchaser of Issuer, be compliance with applicable legal, regulatory and self-regulatory requirements, or with related policies and procedures applicable to Dealer.

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

     (n) Delivery or Receipt of Cash. For the avoidance of doubt, other than receipt of the Premium by Issuer, nothing in this Confirmation shall be interpreted as requiring Issuer to cash settle this Transaction, except in circumstances where such cash settlement is within Issuer’s control (including, without limitation, where Issuer elects to deliver or receive cash, where Issuer fails timely to elect the Share Termination Alternative, or where Issuer is not able to effect a private placement settlement pursuant to Section 8(b)(i)(B) above due to the occurrence of events within its control) or in those circumstances in which holders of the Shares would also receive cash.

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

     (p) Designation by Dealer. Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities to

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or from Issuer, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such Shares or other securities and otherwise to perform Dealer’s obligations in respect of the Transaction and any such designee may assume such obligations. Dealer shall be discharged of its obligations to Issuer only to the extent of any such performance.

     (q) Strike Price Adjustment. Notwithstanding anything to the contrary in the Agreement, this Confirmation or the Equity Definitions (but without limiting Dealer’s right to adjust any variable relevant to the exercise, settlement, payment or other terms of the Transaction, other than the Strike Price and the Warrant Entitlement), in no event shall (i) the Warrant Entitlement be adjusted, or (ii) the Strike Price be adjusted to the extent that, after giving effect to such adjustment, the Strike Price would be less than USD 6.42, in each case, other than any such adjustment in connection with stock splits or similar changes to Issuer’s capitalization.

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

     (s) Share Deliveries. Issuer acknowledges and agrees that, to the extent the holder of this Warrant is not then an affiliate and has not been an affiliate for 90 days (it being understood that Dealer will not be considered an affiliate under this paragraph solely by reason of its receipt of Shares pursuant to this Transaction and under the Base Warrant Transaction), and otherwise satisfies all holding period and other requirements of Rule 144 of the Securities Act applicable to it, any delivery of Shares or Share Termination Delivery Property hereunder at any time after 6 months from the Trade Date (or 1 year from the Trade Date if, at such time, informational requirements of Rule 144(c) are not satisfied with respect to Issuer) shall be eligible for resale under Rule 144 of the Securities Act and Issuer agrees to promptly remove, or cause the transfer agent for such Shares or Share Termination Delivery Property, to remove, any legends referring to any restrictions on resale under the Securities Act from the Shares or Share Termination Delivery Property. Issuer further agrees that any delivery of Shares or Share Termination Delivery Property prior to the date that is 6 months from the Trade Date (or 1 year from the Trade Date if, at such time, informational requirements of Rule 144(c) are not satisfied with respect to Issuer), may be transferred by and among Dealer and its affiliates and Issuer shall effect such transfer without any further action by Dealer. Notwithstanding anything to the contrary herein, Issuer agrees that any delivery of Shares or Share Termination Delivery Property shall be effected by book-entry transfer through the facilities of DTC, or any successor depositary, if at the time of delivery, such class of Shares or class of Share Termination Delivery Property is in book-entry form at DTC or such successor depositary. Notwithstanding anything to the contrary herein, to the extent the provisions of Rule 144 of the Securities Act or any successor rule are amended, or the applicable interpretation thereof by the Securities and Exchange Commission or any court change after the Trade Date, the agreements of Issuer herein shall be deemed modified to the extent necessary, in the opinion of outside counsel of Issuer, to comply with Rule 144 of the Securities Act, as in effect at the time of delivery of the relevant Shares or Share Termination Delivery Property.

     (t) Quarterly Valuations. Dealer hereby agrees, upon request by Issuer, to provide or cause its affiliate to provide to Issuer, within five Exchange Business Days after the end of the fiscal quarter of Issuer during which Issuer made such request, a valuation estimate of the fair value of the Transaction as of Issuer’s fiscal quarter end.

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

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

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

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

     Dealer is regulated by the Financial Services Authority.

Yours faithfully, DEUTSCHE BANK AG, LONDON BRANCH
By:	/s/ Lars Kestner
	Name:	Lars Kestner
	Title:	Managing Director
By:	/s/ Michael Sanderson
	Name:	Michael Sanderson
	Title:	Managing Director
DEUTSCHE BANK SECURITIES INC., acting solely as Agent in connection with the Transaction
By:	/s/ Lars Kestner
	Name:	Lars Kestner
	Title:	Managing Director
By:	/s/ Michael Sanderson
	Name:	Michael Sanderson
	Title:	Managing Director

Confirmed and Acknowledged as of the date first above written: CADENCE DESIGN SYSTEMS, INC.
By:	/s/ Kevin S. Palatnik
	Name:	Kevin S. Palatnik
	Title:	Sr. Vice President & Chief Financial Officer

Chairman of the Supervisory Board: Clemens Börsig Management Board: Josef Ackermann (Chairman), Hugo Bänziger, Michael Cohrs, Jürgen Fitschen, Anshuman Jain, Stefan Krause, Hermann-Josef Lamberti, Rainer Neske	Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin — Federal Financial Supervising Authority) and regulated by the Financial Services Authority for the conduct of UK business; a member of the London Stock Exchange. Deutsche Bank AG is a joint stock corporation with limited liability incorporated in the Federal Republic of Germany HRB No. 30 000 District Court of Frankfurt am Main; Branch Registration in England and Wales BR000005; Registered address:
	Winchester House, 1 Great Winchester Street, London EC2N 2DB. Deutsche Bank Group online:
	http://www.deutsche-bank.com

Signature Page to Additional Warrant
Confirmation

Annex A

For each Component of the Transaction, the Number of Warrants and Expiration Date is set forth below.

Component Number	Number of Warrants	Expiration Date
1	28,397	September 1, 2015
2	28,397	September 2, 2015
3	28,397	September 3, 2015
4	28,397	September 4, 2015
5	28,397	September 8, 2015
6	28,397	September 9, 2015
7	28,397	September 10, 2015
8	28,397	September 11, 2015
9	28,397	September 14, 2015
10	28,397	September 15, 2015
11	28,397	September 16, 2015
12	28,397	September 17, 2015
13	28,397	September 18, 2015
14	28,397	September 21, 2015
15	28,397	September 22, 2015
16	28,397	September 23, 2015
17	28,397	September 24, 2015
18	28,397	September 25, 2015
19	28,397	September 28, 2015
20	28,397	September 29, 2015
21	28,397	September 30, 2015
22	28,397	October 1, 2015
23	28,397	October 2, 2015
24	28,397	October 5, 2015
25	28,397	October 6, 2015
26	28,397	October 7, 2015
27	28,397	October 8, 2015
28	28,397	October 9, 2015
29	28,397	October 12, 2015
30	28,397	October 13, 2015
31	28,397	October 14, 2015
32	28,397	October 15, 2015
33	28,397	October 16, 2015
34	28,397	October 19, 2015
35	28,397	October 20, 2015
36	28,397	October 21, 2015
37	28,397	October 22, 2015
38	28,397	October 23, 2015
39	28,397	October 26, 2015
40	28,397	October 27, 2015
41	28,397	October 28, 2015
42	28,397	October 29, 2015
43	28,397	October 30, 2015
44	28,397	November 2, 2015
45	28,397	November 3, 2015
46	28,397	November 4, 2015
47	28,397	November 5, 2015
48	28,397	November 6, 2015
49	28,397	November 9, 2015

Annex A-1

Component Number	Number of Warrants	Expiration Date
50	28,397	November 10, 2015
51	28,397	November 11, 2015
52	28,397	November 12, 2015
53	28,398	November 13, 2015
54	28,398	November 16, 2015
55	28,398	November 17, 2015
56	28,398	November 18, 2015
57	28,398	November 19, 2015
58	28,398	November 20, 2015
59	28,398	November 23, 2015
60	28,398	November 24, 2015
61	28,398	November 25, 2015
62	28,398	November 27, 2015
63	28,398	November 30, 2015
64	28,398	December 1, 2015
65	28,398	December 2, 2015
66	28,398	December 3, 2015
67	28,398	December 4, 2015
68	28,398	December 7, 2015
69	28,398	December 8, 2015
70	28,398	December 9, 2015

Annex A-2

EX-10.13

Exhibit 10.13

CADENCE DESIGN SYSTEMS, INC.
EMPLOYMENT AGREEMENT
WITH JOHN J. BRUGGEMAN II

     THIS AGREEMENT (this “Agreement”), made effective as of August 3, 2010 (the “Effective Date”), between CADENCE DESIGN SYSTEMS, INC., a Delaware corporation (the “Company”), and JOHN J. BRUGGEMAN II (“Executive”), supersedes any previous employment agreement between the parties.

     WHEREAS, Executive is currently employed by the Company as Senior Vice President and Chief Marketing Officer; and

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

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

1. TERM AND DUTIES.

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

     1.2. SERVICES.

          (a) Executive shall continue to have the title of Senior Vice President and Chief Marketing Officer. Executive’s duties will be assigned to Executive by the Company’s Chief Executive Officer (“CEO”), or such other persons as may be specified by the CEO.

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

     1.3. NO CONFLICTING SERVICES. During his employment with the Company, Executive agrees to devote his full productive time and best efforts to the performance of Executive’s duties hereunder. Executive further agrees, as a condition to the performance by the Company of each and all of its obligations hereunder, that so long as Executive is employed by the Company or receiving compensation or any other consideration from the Company, he will not directly or indirectly render services of any nature to, otherwise become employed by, serve on the board of directors of, or otherwise participate or engage in any other business except as expressly authorized under the Company’s Code of Business Conduct. Nothing herein contained shall be deemed to preclude Executive from having outside personal investments and

involvement with appropriate community activities, or from devoting a reasonable amount of time to such matters, provided that they shall in no manner interfere with or derogate from Executive’s work for the Company and that they comply with the Company’s Code of Business Conduct.

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

2. COMPENSATION.

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

     2.1. BASE SALARY. As of the Effective Date, the Company shall pay Executive a base salary of Three Hundred Fifty Thousand Dollars ($350,000) per year (“Base Salary”), payable in installments in accordance with the Company’s customary payroll practices, less such deductions and withholdings required by law or authorized by Executive. The Board of Directors of the Company (the “Board”) or the Compensation Committee of the Board (the “Compensation Committee”) shall review the amount of the Base Salary from time to time, but no less frequently than annually.

     2.2. BONUS. Executive shall participate in the Company’s Senior Executive Bonus Plan or its successor, as amended from time to time (the “Bonus Plan”) at an annual target bonus of seventy five percent (75%) of Executive’s Base Salary (the “Target Bonus”) pursuant to the terms of such Bonus Plan (the criteria for earning a bonus thereunder are set annually by the Compensation Committee). The Board or the Compensation Committee shall review the amount of the Target Bonus from time to time, but no less frequently than annually.

     2.2A. HIRING BONUS. Upon the commencement of his employment with the Company, Executive received a one-time hiring bonus in the amount of $40,000 (forty thousand dollars), subject to Executive’s continuing employment with the Company for at least twenty-four (24) months after August 26, 2009 (the “Commencement Date”). If Executive terminates his employment prior to August 26, 2011, a portion or all of the hiring bonus will become immediately due and payable to Cadence according to the following schedule:

Termination Date	Hiring Bonus to Be Returned
August 27, 2009 – August 26, 2010		100	%
August 27, 2010 – February 26, 2011		70	%
February 27, 2011 – August 26, 2011		40	%
After August 26, 2011		0	%

     2.3. EQUITY GRANTS. Executive has previously been granted stock options and incentive stock awards by the Company which remain in full force and effect in accordance with the terms of the plan(s) and agreements documenting such grants. Executive shall be eligible to receive additional grants of either restricted stock or stock options, or both, as the Compensation

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Committee may determine from time to time. All stock options shall be granted at not less than one hundred percent (100%) of the fair market value of the Company’s common stock on the date of grant. Any awards shall vest in accordance with the Company’s vesting plan(s) and policy for additional grants to executive officers of the Company in effect on the date of the grant by the Compensation Committee, and shall contain such other terms and conditions as shall be set forth in the agreement documenting the grant and the plan(s) under which such awards are granted.

     2.4. INDEMNIFICATION. In the event Executive is made, or threatened to be made, a party to any legal action or proceeding, whether civil or criminal, by reason of the fact that Executive is or was a director or officer of the Company or serves or served any other corporation, limited liability company, partnership, joint venture or other entity in any capacity at the Company’s request, Executive shall be indemnified by the Company, and the Company shall pay Executive’s related expenses when and as incurred, all to the fullest extent not prohibited by law, as more fully described in and subject to the terms of the form of Indemnity Agreement attached hereto as Exhibit A.

3. EXPENSES AND BENEFITS.

     3.1. REASONABLE AND NECESSARY BUSINESS EXPENSES. In addition to the compensation provided for in Section 2 hereof, the Company shall reimburse Executive for all reasonable, customary and necessary expenses incurred in the performance of Executive’s duties hereunder, incurred in compliance with the Company’s applicable policies. Executive shall first account for such expenses by submitting a statement itemizing such expenses prepared in accordance with the policy set by the Company for reimbursement of such expenses. The amount, nature and extent of reimbursement for such expenses shall always be subject to the control, supervision and direction of the Chief Financial Officer, the CEO and the Board, or such other persons as may be specified from time to time by the CEO.

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

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

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

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

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Company than making a Loan, then the Company need not make or maintain a Loan or provide a substitute for it.

4. TERMINATION OF EMPLOYMENT.

     4.1. GENERAL. Executive’s employment by the Company under this Agreement shall terminate immediately upon delivery to Executive of written notice of termination by the Company subject to any cure period specified below, upon the Company’s receipt of written notice of termination by Executive at least thirty (30) days before the specified effective date of such termination, or upon Executive’s death or Permanent Disability (as defined in Section 4.4 hereof). In the event of such termination, except where Executive is terminated for Cause (as defined in Section 4.2 hereof) or as the result of a Permanent Disability or death, or where Executive voluntarily terminates his employment other than as a Constructive Termination (as defined in Section 4.3 hereof), and upon execution by Executive at or about the effective date of such termination of the Executive Transition and Release Agreement, in the form attached hereto as Exhibit B (the “Transition Agreement”), the Company shall provide Executive with the benefits as set forth in the Transition Agreement.

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

     4.3. CONSTRUCTIVE TERMINATION. Notwithstanding anything in this Section 4 to the contrary, Executive may, upon at least thirty (30) days’ written notice to the Company, voluntarily end his employment upon or within ninety (90) days following the occurrence of an event constituting a Constructive Termination and be eligible to receive the benefits set forth in the Transition Agreement in exchange for executing and delivering that agreement in accordance with Section 9.3 hereof. For purposes of this Agreement, “Constructive Termination” shall mean:

          (a) The Company removes Executive from his position as Senior Vice President and Chief Marketing Officer and ceases to identify Executive as an executive officer for purposes of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), after written notice delivered to the Company of such change and the Company’s failure to cure such change, if curable, within thirty (30) days following delivery of such notice;

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

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

          (d) a relocation of office by more than thirty (30) miles, unless Executive consents in writing to such relocation;

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

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

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

     In the event of an event or circumstance constituting Constructive Termination, the Company may notify Executive at any time prior to expiration of the cure period that it will not cure the circumstance, in which case the cure period shall end immediately upon such notification.

     4.4. PERMANENT DISABILITY. For purposes of this Agreement, “Permanent Disability” shall mean any medically determinable physical or mental impairment that can reasonably be expected to result in death or that has lasted or can reasonably be expected to last for a continuous period of not less than twelve (12) months and that renders Executive unable to perform effectively all of the essential functions of his position pursuant to this Agreement, with or without reasonable accommodation.

     4.5. CHANGE IN CONTROL.

          (a) Should there occur a Change in Control (as defined below) and if within three (3) months prior to or thirteen (13) months following the Change in Control either (i) Executive’s employment under this Agreement is terminated without Cause or (ii) Executive resigns his employment as a result of an event constituting a Constructive Termination, then, in exchange for executing and delivering the Transition Agreement, and subject to the terms of the Transition Agreement except as otherwise provided in this Section 4.5(a), Executive shall be entitled to all of the benefits set forth therein, except that (1) in addition to the amount of the payment described in paragraph 5(a) of the Transition Agreement, Executive shall be entitled to an additional amount equal to fifty percent (50%) of Executive’s annual Base Salary at the highest annual Base Salary rate in effect at any time during the term of this Agreement (the “Highest Base Salary”), which amount shall be paid at the same time as the payment under such paragraph 5(a); (2) in addition to the amount of the payment described in paragraph 6(a) of the Transition Agreement, Executive shall be entitled to an additional amount equal to thirty seven and one half percent (37.5%) of Executive’s Highest Base Salary; and (3) in lieu of the acceleration described in paragraph 4(a) of the form of Transition Agreement attached hereto, all unvested equity compensation awards (including stock options, restricted stock, and restricted stock units) that are outstanding and held by Executive on the Transition Commencement Date shall immediately vest and become exercisable in full on the Transition Commencement Date, provided, that, if Executive’s termination of employment without Cause or by reason of

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Constructive Termination occurs within three months prior to a Change in Control, any unvested equity compensation awards that do not vest on the Transition Commencement Date shall vest in full immediately prior to the effective time of the Change in Control. Any acceleration of vesting pursuant to this Section 4.5(a) shall have no effect on any other provisions of the equity compensation awards or the plans governing such awards.

          (b) For purposes of this Section 4.5, a Change in Control shall be deemed to occur upon the consummation of any one of the following events:

(i)	any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities or any “person” acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person) ownership of securities of the Company representing thirty percent (30%) or more of the total voting power; or
(ii)	during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
(iii)	the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80% of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or
(iv)	the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company’s assets.

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4.6. TERMINATION FOR CAUSE, VOLUNTARY TERMINATION, OR TERMINATION ON ACCOUNT OF DEATH OR PERMANENT DISABILITY.

          (a) In the event Executive’s employment is terminated for Cause or Executive voluntarily terminates his employment with the Company other than in connection with a Constructive Termination, then Executive will be paid only (i) any earned but unpaid Base Salary and any outstanding expense reimbursements submitted and approved pursuant to Section 3.1 hereof, and (ii) other unpaid vested amounts or benefits under the Company compensation, incentive and benefit plans in which Executive participates, in each case under this clause (ii) as of the effective date of such termination; and

          (b) In the event Executive’s employment is terminated on account of death or Permanent Disability, then, in addition to all amounts payable pursuant to Section 4.6(a), upon execution by Executive or Executive’s representative or a representative of Executive’s estate, as soon as reasonably practicable but in no event later than one hundred eighty (180) days following the date of Executive’s termination of employment, of the Release Agreement, in the form attached hereto as Exhibit C, and such Release Agreement becoming effective, the Company shall provide Executive or his estate, as the case may be, the following benefits to which Executive would not otherwise be entitled: (i) all unvested equity compensation awards (including stock options, restricted stock and restricted stock units) outstanding and held by Executive on the date of his termination that would have vested over the twelve (12) months following the date of termination had Executive continued in employment under his Employment Agreement during that period shall immediately vest and become exercisable in full on the date of such termination, such equity compensation awards and all previously vested equity compensation awards shall remain exercisable for twenty-four (24) months from the date of such termination (but not later than the expiration of the term of the applicable equity compensation award), and there shall be no further vesting of any equity compensation awards thereafter; provided that this acceleration will have no effect on any other provisions of the awards; and (ii) solely in the event of termination on account of Permanent Disability, if Executive elects to continue coverage under Cadence’s medical, dental and vision insurance plans pursuant to COBRA, Cadence will pay Executive’s COBRA premiums for twelve (12) months following such termination. In the event that Executive performs full-time or part-time employment or consulting services during the 12-month period following his termination on account of Permanent Disability without the written consent of the Company, then all equity compensation awards the vesting of which had been accelerated pursuant to the preceding sentence shall be forfeited and Executive shall return to the Company all stock obtained or on which restrictions terminated upon such vesting and the proceeds from the sale of any such stock, and all stock, net of exercise price, obtained upon the exercise of options that vested pursuant to the preceding sentence and the proceeds, net of exercise price, from the sale of any such stock.

          (c) In the event Executive’s employment is terminated for Cause, or on account of death or Permanent Disability, or Executive voluntarily terminates his employment with the Company other than in connection with a Constructive Termination, Executive shall not become a party to the Transition Agreement and shall not be bound by any of the terms and provisions thereof.

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5. EXCISE TAX.

     In the event that any benefits payable to Executive pursuant to the Transition Agreement (“Termination Benefits”) (i) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), or any comparable successor provisions, and (ii) but for this Section 5 would be subject to the excise tax imposed by Section 4999 of the Code, or any comparable successor provisions (the “Excise Tax”), then Executive’s Termination Benefits hereunder shall be either (a) provided to Executive in full, or (b) provided to Executive as to such lesser extent which would result in no portion of such benefits being subject to the Excise Tax, whichever of the foregoing amounts, when taking into account applicable federal, state, local and foreign income and employment taxes, the Excise Tax, and any other applicable taxes, results in the receipt by Executive, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under the Excise Tax and Executive shall have no right to Termination Benefits in excess of the amount so determined. Unless the Company and Executive otherwise agree in writing, any determination required under this Section 5 shall be made in writing in good faith by a nationally recognized accounting firm selected by the Company (the “Accountants”). In the event of a reduction of benefits hereunder, Executive shall be given the choice of which benefits to reduce. If Executive does not provide written identification to the Company of which benefits he chooses to reduce within ten (10) days after written notice of the Accountants’ determination, and Executive has not disputed the Accountants’ determination, then the Company shall select the benefits to be reduced. For purposes of making the calculations required by this Section 5, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code, and other applicable legal authority. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 5. The Company shall bear the cost of all fees the Accountants charge in connection with any calculations contemplated by this Section 5.

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6. DISPUTE RESOLUTION.

          (a) Each of the parties expressly agrees that, to the extent permitted by applicable law and to the extent that the enforceability of this Agreement is not thereby impaired, any and all disputes, controversies or claims between Executive and the Company arising under this Agreement, except those arising under Section 6(d) hereof or under the Proprietary Information Agreement (as defined in Section 8 hereof), shall be determined exclusively by final and binding arbitration before a single arbitrator in accordance with the JAMS Arbitration Rules and Procedures, or successor rules then in effect, and that judgment upon the award of the arbitrator may be rendered in any court of competent jurisdiction. This includes, without limitation, any and all disputes, controversies, and/or claims arising out of or concerning Executive’s employment by the Company or the termination of his employment or this Agreement, and includes, without limitation, claims by Executive against directors, officers or employees of the Company, whether arising under theories of liability or damages based on contract, tort or statute, to the full extent permitted by law. As a material part of this agreement to arbitrate claims, the parties expressly waive all rights to a jury trial in court on all statutory or other claims. This Section 6 does not purport to limit either party’s ability to recover any remedies provided for by statute, including attorneys’ fees.

          (b) The arbitration shall be held in the San Jose, California metropolitan area, and shall be administered by JAMS or, in the event JAMS does not then conduct arbitration proceedings, a similarly reputable arbitration administrator. Under such proceeding, the parties shall select a mutually acceptable, neutral arbitrator from among the JAMS panel of arbitrators. Except as provided herein, the Federal Arbitration Act shall govern the interpretation and enforcement of such arbitration proceeding. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the State of California, or federal law, if California law is preempted, and the arbitrator is without jurisdiction to apply any different substantive law. The parties agree that they will be allowed to engage in adequate discovery, the scope of which will be determined by the arbitrator, consistent with the nature of the claims in dispute. The arbitrator shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The arbitrator shall render an award that shall include a written statement of opinion setting forth the arbitrator’s findings of fact and conclusions of law. Judgment upon the award may be entered in any court having jurisdiction thereof. The parties intend this arbitration provision to be valid, enforceable, irrevocable and construed as broadly as possible.

          (c) The Company shall be responsible for payment of the arbitrator’s fees as well as all administrative fees associated with the arbitration. The parties shall be responsible for their own attorneys’ fees and costs (including expert fees and costs), except that if any party prevails on a statutory claim that entitles the prevailing party to reasonable attorneys’ fees (with or without expert fees) as part of the costs, the arbitrator may award reasonable attorneys’ fees (with or without expert fees) to the prevailing party in accord with such statute.

          (d) The parties agree, however, that damages would be an inadequate remedy for the Company in the event of a breach or threatened breach of Section 1.3 of this Agreement or any provision of the Proprietary Information Agreement (as defined in Section 8 hereof). In the event of any such breach or threatened breach, Cadence may, either with or without

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pursuing any potential damage remedies, obtain from a court of competent jurisdiction, and enforce, an injunction prohibiting Executive from violating Section 1.3 of this Agreement or any provision of the Proprietary Information Agreement (as defined in Section 8 hereof) and requiring Executive to comply with the terms of those agreements.

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

     Following his termination of full-time employment for any reason (other than death), Executive shall provide the Company with reasonable cooperation in all matters relating to the winding up of his pending work on behalf of the Company and the orderly transfer of any such pending work to other employees of the Company as may be designated by the Company. Such cooperation shall be provided by Executive at mutually-convenient times. Executive also agrees to participate as a witness in any litigation or regulatory proceeding to which the Company or any of its affiliates is a party at the request of the Company upon delivery to Executive of reasonable advance notice. With respect to the cooperation/participation described in the preceding sentences, the Company will reimburse Executive for all reasonable and documented expenses incurred by Executive in the course of such cooperation/participation. Furthermore, Executive agrees to return to the Company all property of the Company, including all hard and soft copies of records, documents, materials and files relating to confidential, proprietary or sensitive company information in his possession or control, as well as all other company-owned property in his possession or control, at the time of the termination of his full-time employment, except to the extent that the Company determines that retention of any of such property is necessary, desirable or convenient in order to permit Executive to satisfy his obligations under this Section 7 or under the Transition Agreement, after which time Executive shall promptly return all such retained company property.

8. PROPRIETARY INFORMATION AGREEMENT.

     The Executive has, before the Effective Date, executed and delivered to the Company an Employee Proprietary Information and Inventions Agreement, dated July 30, 2009 (the “Proprietary Information Agreement”).

9. GENERAL.

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

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

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     9.3. NOTICES. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be considered effective either (a) upon personal service, or (b) upon delivery by facsimile and depositing such notice in the U.S. Mail, postage prepaid, return receipt requested and, if addressed to the Company, in care of the CEO at the Company’s principal corporate address, and, if addressed to Executive, at his most recent address shown on the Company’s corporate records or at any other address that Executive may specify in any appropriate notice to the Company, or (c) upon only depositing such notice in the U.S. Mail as described in clause (b) of this paragraph, or (d) upon delivery by email, if addressed to the Company to generalcounsel@cadence.com and if addressed to Executive to such email address as Executive may specify by notice to the Company.

     9.4. COUNTERPARTS. This Agreement may be executed by facsimile and in any number of counterparts, each of which shall be deemed an original and all of which taken together constitute one and the same instrument and in making proof hereof it shall not be necessary to produce or account for more than one such counterpart.

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

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

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

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

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

     9.10. FORMER EMPLOYERS. Executive represents and warrants to the Company that he is not subject to any employment, confidentiality or other agreement or restriction that would prevent him from fully satisfying his duties under this Agreement or that would be violated if he did so. Without the Company’s prior written approval, Executive will not:

(a)	disclose any proprietary information belonging to a former employer or other entity without its written permission;
(b)	contact any former employer’s customers or employees to solicit their business or employment on behalf of the Company in violation of Executive’s existing obligations to his former employer; or
(c)	distribute announcements about or otherwise publicize Executive’s employment with the Company.

     Executive shall indemnify and hold the Company harmless from any liabilities, including reasonable defense costs, it may incur because he is alleged to have broken any of these promises or improperly revealed or used such proprietary information or to have threatened to do so, or if a former employer challenges Executive’s entering into this Agreement or rendering services pursuant to it.

     9.11. DEPARTMENT OF HOMELAND SECURITY VERIFICATION REQUIREMENT. If Executive has not already done so, he will timely file all documents required by the Department of Homeland Security to verify his identity and his lawful employment in the United States. Notwithstanding any other provision of this Agreement, if Executive fails to meet any such requirements promptly after receiving a written request from the Company to do so, his employment will terminate immediately upon notice from the Company and he will not be entitled to any compensation from the Company of any type.

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

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     9.13. TAXES AND OTHER WITHHOLDINGS. Notwithstanding any other provision of this Agreement, the Company may withhold from amounts payable hereunder all federal, state, local and foreign taxes and other amounts that are required to be withheld by applicable laws or regulations, and the withholding of any amount shall be treated as payment thereof for purposes of determining whether Executive has been paid amounts to which he is entitled.

     9.14. TAX MATTERS. Notwithstanding anything in this Agreement or the Transition Agreement to the contrary, to the extent that the Company in good faith determines that any payment resulting from Executive’s termination of employment provided for in this Agreement or the Transition Agreement constitutes a “deferral of compensation” and that the Executive is a “specified employee,” both within the meaning of Section 409A of the Code, no such amounts shall be payable to Executive pursuant to this Agreement or the Transition Agreement prior to the earliest of (a) Executive’s death following the Termination Date (as such term is defined in the Transition Agreement) or (b) the date that is six months following the date of Executive’s “separation from service” with the Company (within the meaning of Section 409A of the Code). In addition, with regard to any provision herein or in the Transition Agreement that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A of the Code, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be deemed to be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect and (iii) such payments shall be made on or before the last day of Executive’s taxable year following the taxable year in which the expense occurred.

     IN WITNESS WHEREOF, the parties have executed this Agreement on this 3^rd day of August 2010.

CADENCE DESIGN SYSTEMS, INC.		EXECUTIVE
By:	/s/ Lip-Bu Tan	/s/ John J. Bruggeman II
	Lip-Bu Tan	John J. Bruggeman II
	President and Chief Executive Officer

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EXHIBIT A

INDEMNITY AGREEMENT

INDEMNITY AGREEMENT

     This Indemnity Agreement (this “Agreement”), dated as of August 26, 2009, is made by and between Cadence Design Systems, Inc., a Delaware corporation (the “Company”), and John J. Bruggeman, Senior Vice President and Chief Marketing Officer of the Company (the “Indemnitee”).

RECITALS

     A. The Company is aware that competent and experienced persons are increasingly reluctant to serve as directors or officers of corporations unless they are protected by comprehensive liability insurance and indemnification, due to increased exposure to litigation costs and risks resulting from their service to such corporations;

     B. Plaintiffs often seek damages in such large amounts and the costs of litigation may be so substantial (whether or not the case is meritorious), that the defense and/or settlement of such litigation is often beyond the personal resources of officers and directors;

     C. The Company believes that its directors and officers and the directors and officers of its subsidiaries should be able to serve as such, and in such other capacities as the Company may request, as the case may be, free from undue concern about the risk of large judgments and other expenses that may be incurred as a result of the good faith performance of their duties to the Company or its subsidiaries;

     D. The Company recognizes that the long period of time that may elapse before the trial or other disposition of legal proceedings may extend beyond the normal time for retirement for such director or officer, with the result that the Indemnitee, after retirement or in the event of the Indemnitee’s death, the Indemnitee’s spouse, heirs, executors or administrators, may be faced with limited ability and undue hardship in maintaining an adequate defense, which may discourage such director or officer from serving in that position;

     E. Based upon their experience as business managers, the Board of Directors of the Company (the “Board”) has concluded that, to retain and attract talented and experienced individuals to serve as directors and certain officers of the Company and its subsidiaries and to encourage such individuals to take the business risks necessary for the success of the Company and its subsidiaries, it is necessary, and in the best interests of the Company and its stockholders, for the Company to contractually indemnify such individuals, and to assume for itself maximum liability for claims against such persons in connection with their service;

     F. The Company desires and has requested the Indemnitee to serve or continue to serve as a director and/or an officer of the Company and/or the subsidiaries of

the Company, free from undue concern for claims for damages arising out of or related to such services to the Company and/or the subsidiaries of the Company; and

     G. The Indemnitee is willing to serve, or to continue to serve, the Company and/or the subsidiaries of the Company provided that the Indemnitee is furnished the indemnity provided for herein.

AGREEMENT

     NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

     1. Definitions.

          (a) Change in Control. For purposes of this Agreement, a “change in control” shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under Securities Exchange Act of 1934, as amended), directly or indirectly, of securities of the Company representing 20% or more of the total voting power represented by the Company’s then outstanding voting securities; or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80% of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company’s assets.

          (b) Covered Person. For purposes of this Agreement, a “covered person” shall include the Indemnitee and any heir, executor, administrator or other legal representative of the Indemnitee following the Indemnitee’s death or incapacity.

          (c) Disinterested Directors. For purposes of this Agreement, “disinterested directors” mean any director of the Company who is not or was not a party

to the proceeding in respect of which indemnification is being sought by a covered person.

          (d) Expenses. For purposes of this Agreement, “expenses” include all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements and other out-of-pocket costs) actually and reasonably incurred by a covered person in connection with either the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification or advancement under this Agreement, Section 145 of the Delaware General Corporation Law or otherwise.

          (e) Independent Legal Counsel. For purposes of this Agreement, “independent legal counsel” means a law firm or a member of a law firm that neither is presently nor in the past five years has been retained to represent (i) the Company or a covered person in any matter material to either such party, or (ii) any other party to the proceeding giving rise to a claim for indemnification or advancement hereunder. “Independent legal counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or the covered person in an action to determine such covered person’s right to indemnification or advancement under this Agreement.

          (f) Proceeding. For purposes of this Agreement, “proceeding” means any threatened, pending or completed action, suit or other proceeding, whether civil, criminal, administrative, legislative, investigative or of any other type whatsoever, and including any of the foregoing commenced by or on behalf of the Company, derivatively or otherwise.

          (g) Subsidiary. For purposes of this Agreement, “subsidiary” means any corporation of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company, and one or more other subsidiaries, or by one or more other subsidiaries.

     2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve the Company and/or its subsidiaries in the Indemnitee’s present capacity, so long as the Indemnitee is duly appointed or elected or until such time as the Indemnitee tenders a written resignation; provided, however, that nothing contained in this Agreement is intended to create any right to continued employment or other form of service for the Company or its subsidiaries by Indemnitee.

     3. Maintenance of Liability Insurance.

          (a) The Company hereby covenants and agrees that, so long as the Indemnitee shall continue to serve as an officer or director of the Company or any of its subsidiaries, and thereafter so long as the Indemnitee shall be subject to any possible proceeding by reason of such service, the Company, subject to Section 3(b), shall use reasonable efforts to obtain and maintain in full force and effect directors’ and officers’

liability insurance (“D&O Insurance”) in reasonable amounts from established and reputable insurers.

          (b) Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain D&O Insurance if the Company determines in good faith that such insurance is not reasonably available, the premium costs for such insurance are disproportionate to the amount of coverage provided, the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or the Indemnitee is covered by similar insurance maintained by a subsidiary of the Company.

     4. Mandatory Indemnification.

          (a) Right to Indemnification. In the event a covered person was or is made a party or is threatened to be made a party to or is involved in any proceeding, by reason of the fact that the Indemnitee is or was a director, officer, employee or agent of the Company (including any subsidiary or affiliate thereof or any constituent corporation or any of the foregoing absorbed in any merger) or is or was serving at the request of the Company (including such subsidiary, affiliate or constituent corporation) as a director, officer, employee or agent of another corporation, or of a partnership, joint venture, trust or other entity, including service with respect to employee benefit plans, such person shall be indemnified and held harmless by the Company to the fullest extent permitted by applicable law and the Company’s Bylaws, against all expenses, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, forfeitures, ERISA excise and other taxes and penalties, and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such person in connection therewith. Such indemnification shall continue after the Indemnitee has ceased to serve in such capacity and shall inure to the benefit of the Indemnitee’s heirs, executors, administrators and other legal representatives; provided, however, that except for a proceeding pursuant to Section 7, the Company shall indemnify any such person in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board.

          (b) Exception for Amounts Covered by Insurance. Notwithstanding the foregoing, the Company shall not be obligated to indemnify a covered person for expenses or liabilities of any type whatsoever (including, but not limited to, attorneys’ fees, judgments, fines, forfeitures, ERISA excise and other taxes and penalties, and amounts paid or to be paid in settlement) which have been paid directly to such person or a third party on the covered person’s behalf by D&O Insurance.

          (c) Partial Indemnification; Successful Defense. If a covered person is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses or liabilities of any type whatsoever (including, but not limited to, attorneys’ fees, judgments, fines, forfeitures, ERISA excise and other taxes and penalties, and amounts paid or to be paid in settlement) incurred by the covered person in the investigation, defense, settlement or appeal of a proceeding, but not entitled, however, to indemnification for the total amount thereof, the Company shall nevertheless indemnify such person for such total amount, except as to the portion thereof to which the

covered person is not entitled by applicable law, the Company’s Bylaws or this Agreement. Notwithstanding any other provision of this Agreement, to the extent that a covered person has been successful, on the merits or otherwise, in whole or in part, in the defense of a proceeding, or in the defense of any claim, issue or matter therein, including, without limitation, the dismissal of any action without prejudice, the covered person shall be indemnified against the total amount of any expenses actually and reasonably incurred or suffered by such person in connection therewith.

     5. Mandatory Advancement of Expenses. The Company shall pay all expenses incurred by a covered person in advance of the final disposition of a proceeding as they are incurred; provided, however, that if the Delaware General Corporation Law then so requires, the payment of such expenses incurred in advance of the final disposition of such proceeding shall be made only upon delivery to the Company of an undertaking, by or on behalf of such covered person, to repay all amounts so advanced if it should be determined ultimately, after a final adjudication (including all appeals), that such person is not entitled to the payment of such expenses by the Company.

     6. Notice and Procedures for Obtaining Indemnification and Advancement.

          (a) Promptly after receipt by a covered person of notice of the commencement of or the threat of commencement of any proceeding, such person shall, if such person believes that indemnification or advancement with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat of commencement thereof; provided, however, that the failure to notify the Company shall not relieve the Company of any liability it may have to such covered person under this Agreement.

          (b) Upon written request by a covered person for indemnification pursuant to Section 4(a), the entitlement of such covered person to indemnification, to the extent not provided pursuant to the terms of this Agreement, shall be determined and such indemnification shall be paid in full within sixty (60) days after a written request for indemnification has been received by the Company. Such request shall include documentation or information which is necessary for such determination and which is reasonably available to the covered person. Upon making a request for indemnification, a covered person shall be presumed to be entitled to indemnification hereunder and the Company shall have the burden of proving that the covered person is not entitled to be indemnified. If the person or persons empowered to make such determination pursuant to Section 6(c) fail to make the requested determination with respect to indemnification within sixty (60) days after a written request for indemnification has been received by the Company, a requisite determination of entitlement to indemnification shall be deemed to have been made and the covered person shall be absolutely entitled to such indemnification, absent actual and material fraud in the request for indemnification.

          (c) The determination of entitlement to indemnification pursuant to Section 6(b) shall be made by the following person or persons who shall be empowered to make such determination: (i) the Board, by a majority vote of disinterested directors, whether or not such majority constitutes a quorum; (ii) a committee of disinterested

directors designated by a majority vote of such directors, whether or not such majority constitutes a quorum; (iii) if there are no disinterested directors, or if the disinterested directors so direct, by independent legal counsel in a written opinion to the Board, a copy of which shall be delivered to the covered person; or (iv) the stockholders of the Company. If a change in control has occurred and results in individuals who were directors prior to the circumstances giving rise to the change in control ceasing for any reason to constitute a majority of the Board, such determination shall be made by independent legal counsel of a reputable national law firm in a written opinion, and such independent counsel shall render its written opinion to the Company and to the covered person. The Company agrees to pay the reasonable fees of such independent legal counsel and to indemnify fully such independent legal counsel against any and all expenses (including attorneys’ fees), claims, liabilities, loss and damages arising out of or relating to this Agreement or the engagement of such independent legal counsel pursuant hereto. The independent legal counsel shall be selected by the Board and approved by the covered person; provided, however, that if a change in control has occurred, such independent legal counsel shall be selected by the covered person and approved by the Company (such approval not to be unreasonably withheld or delayed).

          (d) Expenses incurred by a covered person in advance of the final disposition of a proceeding shall be paid by the Company at the request of the covered person, each such payment of expenses to be made within twenty (20) days after a written request for such payment has been received by the Company. Such request shall reasonably evidence the expenses incurred by the covered person and, to the extent required pursuant to Section 5, shall include or be accompanied by an undertaking by or on behalf of such covered person, to repay all amounts so advanced if it should be determined ultimately, after a final adjudication (including all appeals), that such person is not entitled to the payment of such expenses by the Company.

          (e) Any expenses incurred by a covered person in connection with a request for indemnification or advancement of expenses hereunder, under any other agreement, any provision of the Company’s Bylaws or any D&O insurance, shall be borne by the Company.

          (f) If, at the time of the receipt of a notice of the commencement of a proceeding, the Company has D&O Insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the covered person, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

          (g) In the event the Company shall be obligated to advance the expenses for any proceeding against the covered person, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by the covered person (such approval not to be unreasonably withheld or delayed), upon the delivery to the covered person of written notice of its election so to do. After delivery of such notice, approval of such counsel by the covered person and the retention of such

counsel by the Company, the Company shall not be liable to the covered person under this Agreement for any fees of counsel subsequently incurred by the covered person with respect to the same proceeding, provided that (i) the covered person shall have the right to employ separate counsel in any such proceeding at the covered person’s expense; and (ii) if (A) the employment of counsel by the covered person has been previously authorized by the Company, (B) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, or (C) a conflict of interest exists requiring the covered person to retain separate counsel, as reasonably determined by legal counsel for the Company and the covered person, the fees and expenses of the covered person’s counsel shall be at the expense of the Company. If the Company has assumed the defense of a proceeding, the Company shall not be liable to indemnify a covered person under this Agreement for any amounts paid in settlement of any proceeding effected without the Company’s written consent; provided, however, that if a change in control has occurred, the Company shall be liable for indemnification for amounts paid in settlement if independent legal counsel has approved the settlement. The Company shall not settle any proceeding in any manner that would impose any penalty or limitation on, or disclosure obligation with respect to, a covered person without the covered person’s written consent. Neither the Company nor a covered person shall unreasonably withhold or delay its consent to any proposed settlement.

     7. Right of Covered Person to Bring Suit. If (a) indemnification is not paid in full by the Company within sixty (60) days after a written request for indemnification has been received by the Company pursuant to Section 6(b); (b) a determination is made pursuant to Section 6(c) that a covered person is not entitled to indemnification; or (c) a written request for an advancement of expenses is not paid in full by the Company within twenty (20) days after a written request for such payment has been received by the Company pursuant to Section 6(d), the covered person may at any time thereafter bring suit against the Company to recover the unpaid amount of any claim for indemnification or advancement. If successful in whole or in part in any such suit, or in a suit brought by the Company to recover an advancement of expenses pursuant to the terms of an undertaking, the covered person shall be entitled to be paid also the expense of prosecuting or defending such suit. In any suit brought by a covered person to enforce a right to indemnification hereunder (but not in a suit brought by a covered person to enforce a right to an advancement of expenses) it shall be a defense that indemnification is not permitted by applicable law. Further, in any suit by the Company to recover an advancement of expenses pursuant to the terms of an undertaking, the Company shall be entitled to recover such expenses upon a final adjudication (including all appeals) that indemnification is not permitted by applicable law. Neither the failure of the Company (including the Board, a committee thereof, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the covered person is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Company (including the Board, a committee thereof, independent legal counsel or its stockholders) that the Indemnitee has not met the applicable standard of conduct, shall create a presumption that the covered person is not entitled to indemnification or, in the case of such a suit brought by a covered person, be a defense to such suit. If a determination is made or deemed to have

been made pursuant to the terms of Section 6 that a covered person is entitled to indemnification, the Company shall be bound by such determination and shall be precluded from asserting that such determination has not been made or that the procedure by which such determination was made is not valid, binding and enforceable. In any suit brought by a covered person to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Company to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the covered person is not entitled to be indemnified, or to such advancement of expenses, shall be on the Company.

     8. Limitation of Actions and Release of Claims. No proceeding shall be brought and no cause of action shall be asserted by or on behalf of the Company or any of its subsidiaries against the Indemnitee, the Indemnitee’s spouse, heirs, estate, executors or administrators after the expiration of one year from the act or omission of the Indemnitee upon which such proceeding is based; however, in a case where the Indemnitee fraudulently conceals the facts underlying such cause of action, no proceeding shall be brought and no cause of action shall be asserted after the expiration of one year from the earlier of (a) the date the Company or any subsidiary of the Company discovers such facts, or (b) the date the Company or any subsidiary of the Company could have discovered such facts by the exercise of reasonable diligence. Any claim or cause of action of the Company or any subsidiary of the Company, including claims predicated upon the negligent act or omission of the Indemnitee, shall be extinguished and deemed released unless asserted by filing of a legal action within such period. This Section 8 shall not apply to any cause of action which has accrued on the date hereof and of which the Indemnitee is aware on the date hereof, but as to which the Company or any of its subsidiaries has no actual knowledge apart from the Indemnitee’s knowledge.

     9. Non-exclusivity. The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights which the Indemnitee or any covered person may have under any provision of law, the Company’s Certificate of Incorporation or Bylaws, the vote of the Company’s disinterested directors or stockholders, other agreements, or otherwise, both as to acts or omissions in the Indemnitee’s official capacity and to acts or omissions in another capacity while occupying the Indemnitee’s position as an officer, director or employee of the Company and/or its subsidiaries, and the Indemnitee’s right hereunder shall continue after the Indemnitee has ceased to serve the Company or any of its subsidiaries and shall inure to the benefit of any heir, executor, administrator or other legal representative of the Indemnitee. Notwithstanding the foregoing, this Agreement shall supersede and replace any prior indemnification agreements entered into between the Company and the Indemnitee, and any such prior agreements shall be terminated upon execution of this Agreement.

     10. Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification and advancement to the Indemnitee to the fullest extent now or hereafter permitted by law.

     11. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of the Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to Section 10 hereof.

     12. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.

     13. Successors and Assigns. The terms of this Agreement shall bind, and shall inure to the benefit of, the successors and assigns of the parties hereto.

     14. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (a) upon receipt, if delivered by hand, or (b) on the third business day after the mailing date, if mailed by certified or registered mail with postage prepaid. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice.

     15. Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware.

     16. Consent to Jurisdiction. The Company and the Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement.

[Remainder of Page Left Intentionally Blank]

     The parties hereto have entered into this Indemnity Agreement effective as of the date first above written.

CADENCE DESIGN SYSTEMS, INC.
By:	/s/ James J. Cowie
	Name:	James J. Cowie
	Title:	Sr. Vice President, General Counsel
Address:		2655 Seely Avenue, Building 5 San Jose, California 95134 Attention: Office of the General Counsel
INDEMNITEE
By:	/s/ John J. Bruggeman
	Name:	John J. Bruggeman
	Title:	Senior Vice President and Chief Marketing Officer

EXHIBIT B

EXECUTIVE TRANSITION AND RELEASE AGREEMENT

EXECUTIVE TRANSITION AND RELEASE AGREEMENT

     This Executive Transition and Release Agreement (this “Agreement”) is entered into between John J. Bruggeman II (“Executive”) and Cadence Design Systems, Inc. (“Cadence” or the “Company”).

     1. TRANSITION COMMENCEMENT DATE. As of <<Transition Commencement Date>> (the “Transition Commencement Date”), Executive will no longer hold the position of Senior Vice President and Chief Marketing Officer and will be relieved of all of Executive’s authority and responsibilities in that position. Executive will be paid (a) any earned but unpaid base salary for his services as an officer of the Company prior to the Transition Commencement Date and any outstanding expense reimbursements submitted and approved pursuant to Section 3.1 of Executive’s Employment Agreement with the Company dated as of [August                     , 2010] (the “Employment Agreement”); and (b) other unpaid vested amounts or benefits under the compensation, incentive and benefit plans of the Company in which Executive participates, in each case under this clause (b) as of the Transition Commencement Date. The payment of the foregoing amounts shall be made to Executive by no later than the next regular payroll date following the Transition Commencement Date. As of the first day of the month following the Transition Commencement Date, Executive will no longer participate in Cadence’s medical, dental, and vision insurance plans (unless Executive elects to continue coverage pursuant to COBRA), and will not be eligible for a bonus for any services rendered after that date.

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

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

          b. the date on which Cadence terminates Executive’s employment due to a material breach by Executive of Executive’s duties or obligations under this Agreement after written notice delivered to Executive identifying such breach and his failure to cure such breach, if curable, within thirty (30) days following delivery of such notice; and

          c. one year from the Transition Commencement Date.

     3. DUTIES AND OBLIGATIONS DURING THE TRANSITION PERIOD AND AFTERWARDS.

          a. During the Transition Period, Executive will assume the position of<<New Position Title>>. In this position, Executive will render those services requested by Cadence’s <<Management Representative>> on an as-needed basis at mutually-convenient times. Executive’s time rendering those services shall not exceed twenty (20) hours per month. Except as otherwise provided in paragraph 3(b) of this Agreement, Executive’s obligations hereunder will not preclude Executive from accepting and holding full-time employment elsewhere. Neither party expects that Executive will resume employment with Cadence in the future at a

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level that exceeds the level set forth in this Section 3(a) and it is the parties’ intent that Executive will have experienced a “separation from service” as defined in Section 409A of the Code as of the Transition Commencement Date.

          b. As a Cadence <<New position>>, as well as in other positions Executive may have held with Cadence, Executive has obtained extensive and valuable knowledge and information concerning Cadence’s business (including confidential information relating to Cadence and its operations, intellectual property, assets, contracts, customers, personnel, plans, marketing plans, research and development plans and prospects). Executive acknowledges and agrees that it would be virtually impossible for Executive to work as an employee, consultant or advisor in any business in which Cadence engages on the Transition Commencement Date, including the electronic design automation (“EDA”) industry, without inevitably disclosing confidential and proprietary information belonging to Cadence. Accordingly, during the Transition Period, Executive will not, directly or indirectly, provide services, whether as an employee, consultant, independent contractor, agent, sole proprietor, partner, joint venturer, corporate officer or director, on behalf of any corporation, limited liability company, partnership, or other entity or person or successor thereto that (i) is engaged in any business in which Cadence or any of its affiliates is engaged on the Transition Commencement Date or has been engaged at any time during the 12-month period immediately preceding the Transition Commencement Date, whether in the EDA industry or otherwise, anywhere in the world (a “Cadence Business”), or (ii) produces, markets, distributes or sells any products, directly or indirectly through intermediaries, that are competitive with Cadence or any of its affiliates. As used in this paragraph, the term “EDA industry” means the research, design or development of electronic design automation software, electronic design verification, emulation hardware and related products, such products containing hardware, software and both hardware and/or software products, designs or solutions for, and all intellectual property embodied in the foregoing, or in commercial electronic design and/or maintenance services, such services including all intellectual property embodied in the foregoing. If, during the Transition Period, Executive receives an offer of employment or consulting from any person or entity that engages in whole or in part in a Cadence Business, then Executive must first obtain written approval from Cadence’s CEO before accepting said offer.

          c. During the Transition Period, Executive will be prohibited, to the fullest extent allowed by applicable law, and except with the written advance approval of Cadence’s CEO (or his successor(s)), from voluntarily or involuntarily, for any reason whatsoever, directly or indirectly, individually or on behalf of persons or entities not now parties to this Agreement: (i) encouraging, inducing, attempting to induce, recruiting, attempting to recruit, soliciting or attempting to solicit or participating in any way in hiring or retaining for employment, contractor or consulting opportunities anyone who is employed at that time, or was employed during the previous one year, by Cadence or any Cadence affiliate; (ii) interfering or attempting to interfere with the relationship or prospective relationship of Cadence or any Cadence affiliate with any former, present or future client, customer, joint venture partner, or financial backer of Cadence or any Cadence affiliate; or (iii) soliciting, diverting or accepting business, in any line or area of business engaged in by Cadence or any Cadence affiliate, from any former or present client, customer or joint venture partner of Cadence or any Cadence affiliate (other than on behalf of Cadence), except that Executive may solicit or accept business, in a line of business engaged in by Cadence or a Cadence affiliate, from a former or present client, if and only if Executive had

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previously provided consulting services in such line of business, to such client, prior to ever being employed by Cadence, but in no event may Executive violate paragraph 3(b) hereof. The restrictions contained in subparagraph (i) of this paragraph 3(c) shall also be in effect for a period of one year following the Termination Date. This paragraph 3(c) does not alter any of the obligations the Executive may have under the Employee Proprietary Information and Inventions Agreement, dated July 30, 2009.

          d. Executive will fully cooperate with Cadence in all matters relating to his employment, including the winding up of work performed in Executive’s prior position and the orderly transition of such work to other Cadence employees.

          e. Executive will not make any statement, written or oral, that disparages Cadence or any of its affiliates, or any of Cadence’s or its affiliates’ products, services, policies, business practices, employees, executives, officers, or directors, past, present or future. Similarly, Cadence agrees to instruct its executive officers and members of the Company’s Board of Directors not to make any statement, written or oral, that disparages Executive. The restrictions described in this paragraph shall not apply to any truthful statements made in response to a subpoena or other compulsory legal process.

          f. Notwithstanding paragraph 10 hereof, the parties agree that damages would be an inadequate remedy for Cadence in the event of a breach or threatened breach by Executive of paragraph 3(b) or 3(c), or for Cadence or Executive in the event of a breach or threatened breach of paragraph 3(e). In the event of any such breach or threatened breach, the non-breaching party may, either with or without pursuing any potential damage remedies, obtain from a court of competent jurisdiction, and enforce, an injunction prohibiting the other party from violating this Agreement and requiring the other party to comply with the terms of this Agreement.

     4. TRANSITION COMPENSATION AND BENEFITS. In consideration of Executive’s execution of the release of claims in this Agreement and as compensation for Executive’s services during the Transition Period, Cadence will provide the following payments and benefits to Executive (to which Executive would not otherwise be entitled), after Executive has returned to the Company all hard and soft copies of records, documents, materials and files in his possession or control, which contain or relate to confidential, proprietary or sensitive information obtained by Executive in conjunction with his employment with the Company, as well as all other Company-owned property, except to the extent retained pursuant to Section 7 of the Employment Agreement:

          a. all of the unvested equity compensation awards (including stock options, restricted stock and restricted stock units) that are not performance-based within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), that are outstanding and held by Executive on the Transition Commencement Date and that would have vested over the twelve (12) months following the Transition Commencement Date had Executive continued to serve as an executive of the Company pursuant to his Employment Agreement, shall immediately vest and become exercisable in full on the Effective Date of this Agreement, and there shall be no further vesting of those equity compensation awards during or after the Transition Period, notwithstanding any provision in any equity compensation award to the contrary, except as otherwise provided by paragraph 7 hereof. Provided Executive continues in

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employment under this Agreement through the end of the applicable performance period, unvested equity compensation awards that are performance-based within the meaning of Section 162(m) of the Code and that are outstanding and held by Executive on the Transition Commencement Date shall continue to vest though the end of the applicable performance period provided any such performance period ends within twelve (12) months following the Transition Commencement Date, but only to the extent justified by the satisfaction of the performance goals prescribed for such equity awards. Upon the conclusion of the performance period, such awards shall immediately vest to the extent they would have vested over the twelve (12) months following the Transition Commencement Date had Executive continued to serve as an executive of the Company pursuant to his Employment Agreement, and there shall be no further vesting of such awards during or after the Transition Period except as otherwise provided by paragraph 7 hereof. Any acceleration pursuant to this paragraph 4(a) will have no effect on any other provisions of the stock awards;

          b. Executive’s employment pursuant to this Agreement shall be considered a continuation of employee status and continuous service for all purposes under any equity compensation awards previously granted to Executive by the Company and outstanding on the Transition Commencement Date; and

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

Except as so provided or as otherwise set forth in paragraphs 5 and 7 hereof, Executive will receive no other compensation or benefits from Cadence in consideration of Executive’s services during the Transition Period.

     5. FIRST TERMINATION PAYMENT AND BENEFITS. Provided that Executive does not resign from employment with Cadence under this Agreement and Cadence does not terminate Executive’s employment with Cadence pursuant to paragraph 2(b) due to a material breach by Executive of Executive’s duties under this Agreement, and in consideration for, and subject to, Executive’s execution and acceptance of and adherence to this Agreement and Executive’s further execution and delivery of a Release of Claims in the form of Attachment 1 hereto on a date that is at least six months after the Transition Commencement Date, and as compensation for Executive’s services during the Transition Period, Cadence will provide to Executive the following termination payment, to which Executive would not otherwise be entitled, in each case, so long as the revocation period of the Release of Claims (as defined in that document) has expired prior to the date of payment:

          a. a lump-sum payment of $___ [amount equal to 100% of Executive’s annual Base Salary at the highest rate in effect during Executive’s employment with the Company], less applicable tax deductions and withholdings, payable on the thirtieth (30th) day following the date that is six months after the Transition Commencement Date; and

          b. for a period of six months, a monthly salary of $4,000 less applicable tax withholdings and deductions, payable in accordance with Cadence’s regular payroll schedule, commencing on the first pay date that is more than thirty (30) days following the date that is six months after the Transition Commencement Date.

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     6. SECOND TERMINATION PAYMENT AND BENEFITS; REFUND OF PAYMENTS.

          a. Provided that Executive does not resign from employment with Cadence under this Agreement and Cadence does not terminate Executive’s employment with Cadence pursuant to paragraph 2(b) due to a material breach by Executive of Executive’s duties under this Agreement, on the thirtieth (30th) day following the Termination Date, and in consideration for, and subject to, Executive’s execution and acceptance of and adherence to this Agreement and Executive’s further execution of a Release of Claims in the form of Attachment 2 to this Agreement, Cadence will provide to Executive the following termination payment, to which Executive would not otherwise be entitled, so long as the revocation period of the Release of Claims (as defined in that document) has expired prior to the date of payment:

               i. a lump-sum payment of $                     [amount equal to 75% of Executive’s annual Base Salary at the highest rate in effect during Executive’s employment with the Company], less applicable tax deductions and withholdings.

          b. If the Company should terminate Executive’s employment with the Company due to a breach by Executive of Executive’s duties or obligations under this Agreement, Executive shall promptly refund to the Company any and all amounts theretofore paid to Executive pursuant to paragraph 5(a), with interest on any such amount of eight percent per annum, compounded monthly.

          c. Notwithstanding anything in this Agreement to the contrary, to the extent that the Company in good faith determines that any payment resulting from Executive’s termination of employment provided for in this Agreement constitutes a “deferral of compensation” and that Executive is a “specified employee”, both within the meaning of Section 409A of the Code, no such amounts shall be payable to Executive pursuant to the Agreement prior to the earlier of (1) Executive’s death following the Transition Commencement Date or (2) the date that is six months following the date of Executive’s “separation from service” with the Company (within the meaning of Section 409A of the Code).

     7. CHANGE IN CONTROL. If this Agreement is executed by Executive in connection with his termination without Cause (as defined in the Employment Agreement) or Constructive Termination (as defined in the Employment Agreement) occurring within thirteen (13) months following a Change in Control (as defined in the Employment Agreement) or if a Change in Control occurs within three (3) months following his termination without Cause or Constructive Termination, in which case the Company shall promptly notify Executive of the occurrence of such Change in Control, then:

          a. Section 4.5(a)(3) of the Employment Agreement shall apply in lieu of paragraph 4(a) of this Agreement; and

          b. Sections 4.5(a)(1) and 4.5(a)(2)of the Employment Agreement shall apply addition to paragraphs 5(a) and 6(a) of this Agreement.

For the avoidance of doubt, if this Agreement has already been executed by Executive and Cadence and within three (3) months following the Transition Commencement Date a Change in

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Control occurs (a “Post-Termination Timely Change in Control”), then paragraphs 7(a) and 7(b) of this Agreement shall take effect immediately upon the effectiveness of the Post-Termination Timely Change in Control.

     8. GENERAL RELEASE OF CLAIMS.

          a. Executive hereby irrevocably, fully and finally releases Cadence, its parent, subsidiaries, affiliates, directors, officers, agents and employees (“Releasees”) from all causes of action, claims, suits, demands or other obligations or liabilities, whether known or unknown, suspected or unsuspected, that Executive ever had or now has as of the time that Executive signs this Agreement which relate to his hiring, his employment with the Company, the termination of his employment with the Company and claims asserted in shareholder derivative actions or shareholder class actions against the Company and its officers and Board of Directors, to the extent those derivative or class actions relate to the period during which Executive was employed by the Company. The claims released include, but are not limited to, any claims arising from or related to Executive’s employment with Cadence, such as claims arising under (as amended) Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1974, the Americans with Disabilities Act, the Equal Pay Act, the Fair Labor Standards Act, the California Fair Employment and Housing Act, the California Labor Code, the Employee Retirement Income Security Act of 1974 (except for any vested right Executive has to benefits under an ERISA plan), the state and federal Worker Adjustment and Retraining Notification Act, and the California Business and Professions Code; any other local, state, federal, or foreign law governing employment; and the common law of contract and tort. In no event, however, shall any claims, causes of action, suits, demands or other obligations or liabilities be released pursuant to the foregoing if and to the extent they relate to:

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

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

               iii. claims related to Executive’s COBRA rights;

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

               v. any other rights or claims that Executive has or may have that cannot, as a matter of law, be waived.

          b. Executive represents and warrants that he has not filed any claim, charge or complaint against any of the Releasees based upon any of the matters released above.

          c. Executive acknowledges that the payments provided in this Agreement constitute adequate consideration for the release set forth in this paragraph 8.

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          d. Executive intends that this release of claims cover all claims described above, whether or not known to Executive. Executive further recognizes the risk that, subsequent to the execution of this Agreement, Executive may incur loss, damage or injury which Executive attributes to the claims encompassed by this release. Executive expressly assumes this risk by signing this Agreement and voluntarily and specifically waives any rights conferred by California Civil Code section 1542 which provides as follows:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

          e. Executive represents and warrants that there has been no assignment or other transfer of any interest in any claim by Executive that is covered by this release.

     9. REVIEW OF AGREEMENT; REVOCATION OF ACCEPTANCE. Executive has been given at least 21 days in which to review and consider this Agreement, although Executive is free to accept this Agreement anytime within that 21-day period. Executive is advised to consult with an attorney about the Agreement. If Executive accepts this Agreement, Executive will have an additional 7 days from the date that Executive signs this Agreement to revoke that acceptance, which Executive may effect by means of a written notice sent to the CEO. If this 7-day period expires without a timely revocation, this Agreement will become final and effective on the eighth day following the date of Executive’s signature, which eighth day will be the “Effective Date” of this Agreement.

     10. ARBITRATION. Subject to paragraph 3(f) hereof, all claims, disputes, questions, or controversies arising out of or relating to this Agreement, including without limitation the construction or application of any of the terms, provisions, or conditions of this Agreement, will be resolved exclusively in final and binding arbitration in accordance with the Arbitration Rules and Procedures, or successor rules then in effect, of Judicial Arbitration & Mediation Services, Inc. (“JAMS”). The arbitration will be held in the San Jose, California, metropolitan area, and will be conducted and administered by JAMS or, in the event JAMS does not then conduct arbitration proceedings, a similarly reputable arbitration administrator. Executive and Cadence will select a mutually acceptable, neutral arbitrator from among the JAMS panel of arbitrators. Except as provided by this Agreement, the Federal Arbitration Act will govern the administration of the arbitration proceedings. The arbitrator will apply the substantive law (and the law of remedies, if applicable) of the State of California, or federal law, if California law is preempted, and the arbitrator is without jurisdiction to apply any different substantive law. Executive and Cadence will each be allowed to engage in adequate discovery, the scope of which will be determined by the arbitrator consistent with the nature of the claim[s] in dispute. The arbitrator will have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and will apply the standards governing such motions under the Federal Rules of Civil Procedure. The arbitrator will render a written award and supporting opinion that will set forth the arbitrator’s findings of fact and conclusions of law. Judgment upon the award may be entered in any court of competent jurisdiction. Cadence will pay the arbitrator’s fees, as well as all administrative fees, associated with the arbitration. Each party will be responsible for paying its own attorneys’ fees and costs (including expert witness fees and costs, if any). However, in the event a party prevails at arbitration on a statutory claim that

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entitles the prevailing party to reasonable attorneys’ fees as part of the costs, then the arbitrator may award those fees to the prevailing party in accordance with that statute.

     11. NO ADMISSION OF LIABILITY. Nothing in this Agreement will constitute or be construed in any way as an admission of any liability or wrongdoing whatsoever by Cadence or Executive.

     12. INTEGRATED AGREEMENT. This Agreement is intended by the parties to be a complete and final expression of their rights and duties respecting the subject matter of this Agreement. Except as expressly provided herein, nothing in this Agreement is intended to negate Executive’s agreement to abide by Cadence’s policies while serving as a Cadence employee, including but not limited to Cadence’s Employee Handbook, Sexual Harassment Policy and Code of Business Conduct, or Executive’s continuing obligations under Executive’s Employee Proprietary Information and Inventions Agreement, or any other agreement governing the disclosure and/or use of proprietary information, which Executive signed while working with Cadence or its predecessors; nor to waive any of Executive’s obligations under state and federal trade secret laws.

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

     14. TAXES AND OTHER WITHHOLDINGS. Notwithstanding any other provision of this Agreement, the Company may withhold from amounts payable hereunder all federal, state, local and foreign taxes and other amounts that are required to be withheld by applicable laws or regulations, and the withholding of any amount shall be treated as payment thereof for purposes of determining whether Executive has been paid amounts to which he is entitled.

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

     16. MODIFICATION. This Agreement may not be modified unless such modification is embodied in writing, signed by the party against whom the modification is to be enforced. Notwithstanding anything herein or in the Employment Agreement to the contrary, the Company may, in its sole discretion, amend this Agreement (which amendment shall be effective upon its adoption or at such other time designated by the Company) at any time prior to a Change in Control as may be necessary to avoid the imposition of the additional tax under Section 409A(a)(1)(B) of the Code; provided, however, that any such amendment shall not materially reduce the benefits provided to Executive pursuant to this Agreement without the Executive’s consent.

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

     18. SEVERABILITY. In the event that any part of this Agreement is found to be void or unenforceable, all other provisions of the Agreement will remain in full force and effect.

     19. GOVERNING LAW. This Agreement will be governed and enforced in accordance with the laws of the State of California, without regard to its conflict of laws principles.

EXECUTION OF AGREEMENT

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

Dated:	Dated:
JOHN J. BRUGGEMAN II	CADENCE DESIGN SYSTEMS, INC.
	By:

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ATTACHMENT 1

RELEASE OF CLAIMS

          1. For valuable consideration, I irrevocably, fully and finally release Cadence, its parent, subsidiaries, affiliates, directors, officers, agents and employees (“Releasees”) from all causes of action, claims, suits, demands or other obligations or liabilities, whether known or unknown, suspected or unsuspected, that I ever had or now have as of the time that I sign this Agreement which relate to my hiring or employment with the Company, the termination of my employment with the Company and claims asserted in shareholder derivative actions or shareholder class actions against the Company and its officers and Board of Directors, to the extent those derivative or class actions relate to the period during my employment with the Company. The claims released include, but are not limited to, any claims arising from or related to my employment with Cadence, such as claims arising under (as amended) Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1974, the Americans with Disabilities Act, the Equal Pay Act, the Fair Labor Standards Act, the California Fair Employment and Housing Act, the California Labor Code, the Employee Retirement Income and Security Act of 1974 (except for any vested right I have to benefits under an ERISA plan), the state and federal Worker Adjustment and Retraining Notification Act, and the California Business and Professions Code; any other local, state, federal, or foreign law governing employment; and the common law of contract and tort. In no event, however, shall any claims, causes of action, suits, demands or other obligations or liabilities be released pursuant to the foregoing if and to the extent they relate to:

               i. any amounts or benefits which I am or become entitled to receive pursuant to the provisions of my Executive Transition and Release Agreement with Cadence or pursuant to the provisions designated in Section 9.9 of my Employment Agreement with Cadence to survive the termination of my full-time employment;

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

               iii. claims related to my COBRA rights;

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

               v. any other rights or claims that I have or may have that cannot, as a matter of law, be waived.

     2. I intend that this Release cover all claims described above, whether or not known to me. I further recognize the risk that, subsequent to the execution of this Release, I may incur loss, damage or injury which I attribute to the claims encompassed by this Release. I expressly assume this risk by signing this Release and voluntarily and specifically waive any rights conferred by California Civil Code section 1542 which provides as follows:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if

1

known by him or her must have materially affected his or her settlement with the debtor.

     3. I represent and warrant that there has been no assignment or other transfer of any interest in any claim by me that is covered by this Release.

     4. I acknowledge that Cadence has given me 21 days in which to consider this Release and advised me to consult an attorney about it. I further acknowledge that once I execute this Release, I will have an additional 7 days in which to revoke my acceptance of this Release by means of a written notice of revocation given to the General Counsel and the executive overseeing Human Resources. This Release will not be final and effective until the expiration of this revocation period.

Dated:
	Print Name
	Sign Name

2

ATTACHMENT 2

RELEASE OF CLAIMS

          1. For valuable consideration, I irrevocably, fully and finally release Cadence, its parent, subsidiaries, affiliates, directors, officers, agents and employees (“Releasees”) from all causes of action, claims, suits, demands or other obligations or liabilities, whether known or unknown, suspected or unsuspected, that I ever had or now have as of the time that I sign this Agreement which relate to my hiring or employment with the Company, the termination of my employment with the Company and claims asserted in shareholder derivative actions or shareholder class actions against the Company and its officers and Board of Directors, to the extent those derivative or class actions relate to the period during my employment with the Company. The claims released include, but are not limited to, any claims arising from or related to my employment with Cadence, such as claims arising under (as amended) Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1974, the Americans with Disabilities Act, the Equal Pay Act, the Fair Labor Standards Act, the California Fair Employment and Housing Act, the California Labor Code, the Employee Retirement Income and Security Act of 1974 (except for any vested right I have to benefits under an ERISA plan), the state and federal Worker Adjustment and Retraining Notification Act, and the California Business and Professions Code; any other local, state, federal, or foreign law governing employment; and the common law of contract and tort. In no event, however, shall any claims, causes of action, suits, demands or other obligations or liabilities be released pursuant to the foregoing if and to the extent they relate to:

               i. any amounts or benefits which I am or become entitled to receive pursuant to the provisions of my Executive Transition and Release Agreement with Cadence or pursuant to the provisions designated in Section 9.9 of my Employment Agreement with Cadence to survive the termination of my full-time employment;

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

               iii. claims related to my COBRA rights;

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

               v. any other rights or claims that I have or may have that cannot, as a matter of law, be waived.

     2. I intend that this Release cover all claims described above, whether or not known to me. I further recognize the risk that, subsequent to the execution of this Release, I may incur loss, damage or injury which I attribute to the claims encompassed by this Release. I expressly assume this risk by signing this Release and voluntarily and specifically waive any rights conferred by California Civil Code section 1542 which provides as follows:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if

1

known by him or her must have materially affected his or her settlement with the debtor.

     3. I represent and warrant that there has been no assignment or other transfer of any interest in any claim by me that is covered by this Release.

     4. I acknowledge that Cadence has given me 21 days in which to consider this Release and advised me to consult an attorney about it. I further acknowledge that once I execute this Release, I will have an additional 7 days in which to revoke my acceptance of this Release by means of a written notice of revocation given to the General Counsel and the executive overseeing Human Resources. This Release will not be final and effective until the expiration of this revocation period.

Dated:
	Print Name
	Sign Name

2

EXHIBIT C

RELEASE AGREEMENT

(DEATH or PERMANENT DISABILITY)

RELEASE AGREEMENT

     1. GENERAL RELEASE OF CLAIMS.

          a. John J. Bruggeman II or, in the event of his incapacity due to Permanent Disability as defined in his Employment Agreement, his legal representative acting on his behalf, or, in the event of his death, his estate (all of which are hereafter referred to as “Executive” as the context requires), hereby irrevocably, fully and finally releases Cadence, its parent, subsidiaries, affiliates, directors, officers, agents and employees (“Releasees”) from all causes of action, claims, suits, demands or other obligations or liabilities, whether known or unknown, suspected or unsuspected, that Executive ever had or now has as of the time that Executive signs this Release Agreement which relate to his hiring or his employment with the Company, the termination of his employment with the Company, and claims asserted in shareholder derivative actions or shareholder class actions against the Company and its officers and Board of Directors, to the extent those derivative or class actions relate to the period during which Executive was employed by the Company. The claims released include, but are not limited to, any claims arising from or related to Executive’s employment with Cadence, such as claims arising under (as amended) Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1974, the Americans with Disabilities Act, the Equal Pay Act, the Fair Labor Standards Act, the California Fair Employment and Housing Act, the California Labor Code, the Employee Retirement Income Security Act of 1974 (except for any vested right Executive has to benefits under an ERISA plan), the state and federal Worker Adjustment and Retraining Notification Act, and the California Business and Professions Code; any other local, state, federal, or foreign law governing employment; and the common law of contract and tort. In no event, however, shall any claims, causes of action, suits, demands or other obligations or liabilities be released pursuant to the foregoing if and to the extent they relate to:

               i. any amounts or benefits which Executive is or becomes entitled to receive pursuant to the provisions of this Release Agreement, pursuant to Section 4.6(b) of Executive’s Employment Agreement with Cadence, or pursuant to the provisions designated in Section 9.9 of that agreement to survive the termination of Executive’s full-time employment;

ii.	claims for workers’ compensation benefits under any of the Company’s workers’ compensation insurance policies or funds;
iii.	claims related to Executive’s COBRA rights;
iv.	any rights that Executive has or may have to be indemnified by Cadence pursuant to any contract, statute, or common law principle; and
v.	any other rights or claims that Executive has or may have that cannot, as a matter of law, be waived.

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          b. Executive represents and warrants that he has not filed any claim, charge or complaint against any of the Releasees based upon any of the matters released above.

          c. Executive acknowledges that the payments and benefits described in paragraph 1(a)(i) constitute adequate consideration for this release.

          d. Executive intends that this release of claims cover all claims, whether or not known to Executive. Executive further recognizes the risk that, subsequent to the execution of this Release Agreement, Executive may incur loss, damage or injury which Executive attributes to the claims encompassed by this release. Executive expressly assumes this risk by signing this Release Agreement and voluntarily and specifically waives any rights conferred by California Civil Code section 1542 which provides as follows:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

          e. Executive represents and warrants that there has been no assignment or other transfer of any interest in any claim by Executive that is covered by this release.

          f. The undersigned represents that he is the individual executive, his legal representative or the executor or administrator of his estate, and that he or it is authorized to bind the individual executive or his estate, as applicable.

     2. REVIEW OF RELEASE AGREEMENT; REVOCATION OF ACCEPTANCE. Executive has been given at least 21 days in which to review and consider this Release Agreement, although Executive is free to accept this Release Agreement anytime within that 21-day period. Executive is advised to consult with an attorney about the Release Agreement. If Executive accepts this Release Agreement, Executive will have an additional 7 days from the date that Executive signs this Release Agreement to revoke that acceptance, which Executive may effect by means of a written notice sent to the CEO. If this 7-day period expires without a timely revocation, this Release Agreement will become final and effective on the eighth day following the date of Executive’s signature, which eighth day will be the “Effective Date” of this Release Agreement.

      The undersigned has executed this Release Agreement on this ___day of                                            ,                       .

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EX-31.01

Exhibit 31.01

CERTIFICATIONS

I, Lip-Bu Tan, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Cadence Design Systems, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2010

By:	/s/ Lip-Bu Tan Lip-Bu Tan
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.02

Exhibit 31.02

CERTIFICATIONS

I, Kevin S. Palatnik, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Cadence Design Systems, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2010

By:	/s/ Kevin S. Palatnik Kevin S. Palatnik
	Senior Vice President and Chief Financial Officer
	(Principal Accounting and Financial Officer)

EX-32.01

Exhibit 32.01

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended July 3, 2010 of Cadence Design Systems, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lip-Bu Tan, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Lip-Bu Tan Lip-Bu Tan

President and Chief Executive Officer

(Principal Executive Officer)

Date: August 4, 2010

     A signed original of this written statement required by Section 906 has been provided to Cadence Design Systems, Inc. and will be retained by Cadence and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.02

Exhibit 32.02

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended July 3, 2010 of Cadence Design Systems, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin S. Palatnik, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Kevin S. Palatnik Kevin S. Palatnik

Senior Vice President and Chief Financial Officer

(Principal Accounting and Financial Officer)

Date: August 4, 2010

     A signed original of this written statement required by Section 906 has been provided to Cadence Design Systems, Inc. and will be retained by Cadence and furnished to the Securities and Exchange Commission or its staff upon request.