CADENCE DESIGN SYSTEMS, INC. 2002 DEFERRED COMPENSATION VENTURE INVESTMENT PLAN

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EXHIBIT 10.32

CADENCE DESIGN SYSTEMS, INC.

2002 DEFERRED COMPENSATION VENTURE INVESTMENT PLAN

CADENCE DESIGN SYSTEMS, INC., a Delaware corporation, hereby

establishes the Cadence Design Systems, Inc. 2002 Deferred Compensation Venture

Investment Plan, effective as of July 1, 2002, for the purpose of providing

certain deferred compensation benefits to a select group of management and

highly compensated executives of the Employer. The Plan is an unfunded deferred

compensation plan that is intended to qualify for the exemptions provided in

Sections 201, 301, and 401 of ERISA.

SECTION 1

DEFINITIONS

1. DEFINITIONS. As used in the Plan:

1.1 "ACCOUNT" shall mean, for each Participant, a separate

bookkeeping account established under the Plan and maintained by Employer in the

name of such Participant, that is:

(a) Increased by: (i) an amount equal to the Deferred

Compensation of such Participant; and (ii) allocations of Profit made in

accordance with Section 3.8;

(b) Decreased by: (i) an amount equal to the cash

distributed to such Participant pursuant to a distribution election made

pursuant to the Plan; (ii) the fair market value of any other property

distributed to such Participant pursuant to a distribution election made in

accordance with the Plan; and (iii) allocations of Loss made in accordance with

Section 3.8; and

of the Plan.

1.2 "AVAILABLE CAPITAL" shall mean, for each Participant, as of

the time of determination, such Participant's Deferred Compensation measured

from the Effective Date to the time of determination:

(a) increased by such Participant's deemed share of

Distributable Assets that the Committee has determined are available for

re-investment in accordance with Section 3.7(c), and assets transferred to the

Trust in accordance with Section 3.9 (each determined by the Committee in its

sole discretion and measured from the Effective Date to the time of

determination); and

(b) reduced by the aggregate Losses allocated to such

Participant's Account (other than Losses attributable to Portfolio Investments,

as determined by the Committee in its sole discretion) from the Effective Date

to the time of determination and further reduced by any assets transferred from

the Trust in accordance with Section 3.9;

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Investment acquired by the Partnership prior to the time of determination, the

product of (x) the cost basis of such Portfolio Investment as reported by the

Partnership, and (y) such Participant's Investment Percentage in respect of such

Portfolio Investment (or zero if such Participant has no Investment Percentage

in respect of such Portfolio Investment).

1.3 "BASE SALARY" for a given Plan Year means an Employee's

regular cash compensation payable during the Plan Year, excluding any bonuses,

commissions, overtime, incentive payments, non-monetary awards, compensation

deferred pursuant to all Section 125 (cafeteria) or Section 401(k) (savings)

plans of the Employer and other special compensation, and reduced by the tax

withholding obligations imposed on the Employer and any other withholding

requirements imposed by law with respect to such amounts.

1.4 "BENEFICIARY" shall mean the person entitled to receive a

Participant's deferred Compensation benefits in accordance with Section 4.1 in

the event of the Participant's death.

1.5 "BOARD" shall mean the Board of Directors of the Employer, as

constituted from time to time.

1.6 "CASH BONUS" shall mean amounts (if any) awarded under the

bonus plans or policies maintained by the Employer and any commissions earned on

sales.

1.7 "CHANGE OF CONTROL" shall have the meaning set forth in

Section 5.1.

1.8 "CODE" shall mean the Internal Revenue Code of 1986, as

amended from time to time, and the rules and regulations promulgated thereunder.

1.9 "COMMITTEE" shall mean the Compensation Committee of the Board

or any other committee designated by the Board to administer the Plan in

accordance with Section 8.1.

1.10 "COMPENSATION" shall mean the Base Salary, Cash Bonuses, and

Directors Fees described in Section 3.1.

1.11 "DEFERRAL ELECTION PERIOD" shall mean, during a Plan Year, a

semi-annual period (a) beginning on January 1 and ending at the close of

business on June 30, or (b) beginning on July 1 and ending at the close of

business on December 31.

1.12 "DEFERRED COMPENSATION" shall mean, for each Participant, the

aggregate amount of Compensation which is subject to a deferral election made in

accordance with Section 3.1 that actually would have been paid to such

Participant in the absence of such deferral election, calculated from the

Effective Date to the time of determination. "Deferred Compensation" in respect

of a Plan Year, shall mean, for each Participant, the aggregate amount of

Compensation which is subject to a deferral election made in accordance with

Section 3.1 that actually would have been paid to such Participant in the

absence of such deferral election, calculated from January 1 of such Plan Year

to the close of business on December 31 of such Plan Year.

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1.13 "DIRECTORS FEES" for a given Plan Year means the annual

retainer, meeting fees, any committee meeting fees, and consulting fees payable

to members of the Board for services during such year.

1.14 "DISTRIBUTABLE ASSETS" shall mean cash or Marketable

Securities distributed by the Partnership to the Trust.

1.15 "EFFECTIVE DATE" shall mean July 1, 2002.

1.16 "ELIGIBLE COMPENSATION" shall mean an Employee's projected

annual compensation from the Employer, determined by the Employer at or before

the beginning of the Plan Year, which may consist of salary, bonus, and/or

incentive payments, determined before any deductions under any qualified plan of

the Employer (including a Code Section 401(k) or 125 plan) and excluding any

special or non-recurring compensatory payments such as moving or relocation

bonuses or automobile allowances.

1.17 "EMPLOYEE" shall mean an employee of the Employer who (a) is a

U.S. citizen or is a lawful permanent resident of the U.S., within the meaning

of Code Section 7701(b)(1)(A)(i), (b) earns solely U.S. source income from the

Employer, and (c) is exclusively on the Employer's U.S. payroll system.

References to the term "Employee" herein shall include references to a

Non-Employee Director or Beneficiary where the context so requires.

1.18 "EMPLOYER" shall mean Cadence Design Systems, Inc., a Delaware

corporation, and any successor organization thereto (but not Subsidiaries or

affiliates of the Employer).

1.19 "EMPLOYER CONTRIBUTIONS" shall mean the Employer's

discretionary contribution, if any, pursuant to Section 3.1(d).

1.20 "EMPLOYER PLAN" shall mean a non-qualified deferred

compensation plan (other than the Plan) sponsored by the Employer that is

intended to qualify for the exemptions provided in Sections 201, 301, and 401 of

ERISA.

1.21 "ERISA" shall mean the Employee Retirement Income Security Act

of 1974, as amended, and the rules and regulations promulgated thereunder.

1.22 "GAAP" shall mean United States generally accept accounting

principles, consistently applied.

1.23 "GENERAL PARTNER" shall mean Telos Venture Management II, LLC,

a Delaware limited liability company.

1.24 "IDLE FUNDS INCOME" shall mean any income attributable to the

following short-term investments of cash: (i) debt securities issued or backed

by the United States or a State; (ii) investment grade rated commercial paper;

(iii) certificates or other evidences of deposit in any commercial bank holding

over $500 million in deposits; (iv) money market or similar mutual fund

interests; and (v) other highly liquid investments.

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1.25 "INCUMBENT DIRECTORS" shall mean directors who are either: (i)

directors of the Employer as of the Effective Date; or (ii) elected, or

nominated for election, to the Board with the affirmative votes of at least a

majority of the Incumbent Directors at the time of such election or nomination

(but shall not include an individual whose election or nomination is in

connection with an actual or threatened proxy contest relating to the election

of directors to the Employer).

1.26 "INSOLVENT" or "INSOLVENCY" shall have the meaning set forth

in Section 7 of the Trust Agreement.

1.27 "INVESTMENT PERCENTAGE" shall mean, for each Participant, a

fraction, expressed as a percentage, which is assigned by the Committee in

respect of each Portfolio Investment made by the Partnership during a Plan Year:

(x) the numerator of which equals the sum of (i) the

Available Capital of such Participant immediately following the close of

business on the last day of the preceding Plan Year, (ii) the Deferred

Compensation of such Participant in respect of such Plan Year, plus (iii) any

increase in the Available Capital of such Participant during such Plan Year by

operation of Section 1.2(b); and

(y) the denominator of which equals the sum of (i) the

Available Capital of all Participants immediately following the close of

business on the last day of the preceding Plan Year, (ii) the Deferred

Compensation of all Participants in respect of such Plan Year; plus (iii) any

increase in the Available Capital of all Participants during such Plan Year by

operation of Section 1.2(b).

At all times following the Partnership's acquisition of a Portfolio Investment,

the aggregate Investment Percentages for all of the Participants in respect of

such Portfolio Investment shall equal 100 percent.

1.28 "MARKETABLE SECURITIES" shall mean a Security that is freely

tradable by the holder thereof. For purposes of the preceding sentence, a

Security shall be deemed to be freely tradable if: (i) Securities equivalent to

such Security are generally traded on one or more established public markets;

(ii) such Security is not subject to "lockup" or other contractual restrictions,

and (iii) the Trust and/or each Participant receiving such Security is not

subject to restrictions and limitations on the transferability thereof under

Rule 144(e) (except for restrictions and limitations specifically applicable to

a particular Participant, such as restrictions applicable to a Participant that

is an affiliate of the issuer of such Security).

1.29 "NON-EMPLOYEE DIRECTOR" shall mean a director of the Employer

who is not otherwise an employee of the Employer.

1.30 "PARTICIPANT" shall mean an Employee or Non-Employee Director

who (i) has become a Participant in the Plan pursuant to Sections 3.3(a) through

(e), as applicable, and (ii) has not ceased to be a Participant pursuant to

Section 3.3(h).

1.31 "PARTNERSHIP" shall mean Telos Venture Partners II, L.P., a

Delaware limited partnership.

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1.32 "PERMANENT DISABILITY" shall mean that a Participant is unable

to engage in any substantial gainful activity by reason of any medically

determinable physical or mental impairment that can be expected to result in

death or otherwise meets the definition of "Permanent Disability" as set forth

in the Employer's Long Term Disability Plan. A Participant shall not be deemed

to have a Permanent Disability unless he or she furnishes proof of such

condition sufficient to satisfy the Committee, acting in its sole and absolute

discretion.

1.33 "PLAN" shall mean the Cadence Design Systems, Inc. 2002

Deferred Compensation Venture Investment Plan, as set forth herein and as

hereafter amended from time to time.

1.34 "PLAN YEAR" shall mean the calendar year beginning on January

1 and ending at the close of business on December 31; provided, however, that

the 2002 Plan Year shall be the period beginning on the Effective Date through

the close of business on December 31, 2002.

1.35 "PORTFOLIO INVESTMENT" shall mean any promissory note,

Security, or other interest in a corporation or other business entity which is

issued to the Partnership. Except as otherwise determined by the Committee

acting in its sole discretion, for purposes of determining a Participant's

Investment Percentage, each promissory note, Security or other interest in a

corporation or other entity which is issued to the Partnership at a specific

time shall be deemed to be a separate Portfolio Investment from any Security,

promissory note, or other interest in such corporation or business entity that

is issued at a subsequent time; provided, however, that in the event a Security

held by the Partnership is exchanged for another Security pursuant to a merger,

acquisition, reorganization, recapitalization or similar transaction, a

Participant's Investment Percentage applicable to such newly received Security

(immediately following receipt) shall equal the Participant's Investment

Percentage in respect of the Security exchanged therefor (as determined

immediately prior to such exchange).

1.36 "PROFITS AND LOSSES" shall mean, for any period, items of

deemed income and gain as well as items of deemed loss, expense and deduction,

determined in accordance with GAAP (as if Participants' Accounts were invested

to acquire Partnership interest or in any other manner specified by the

Committee, acting in its sole and absolute discretion); provided, however, that

Profits and Loss computed for each allocation period under Section 3.8 shall not

be determined by taking into account any unrealized gains and losses; and

provided, further, that Losses shall include all items of cost and expense

associated with the formation, operation, dissolution, winding-up, or

termination of the Plan and Trust.

1.37 "SECURITIES" shall mean equity, debt, synthetic securities of

any type, or any other evidence of ownership of an asset or entity.

1.38 "SUBSIDIARY" shall mean any corporation (other than the

Employer) in an unbroken chain of corporations or other entities beginning with

the Employer, if each of the entities other than the last entity in the unbroken

chain holds equity or other indicia of ownership representing fifty percent

(50%) or more of the total combined voting power of all classes of equity or

other indicia of ownership in one of the other entities in such chain.

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1.39 "TALITY" shall mean the entity formed under the name "Tality

Corporation," or any other name, to own and operate the electronics design

services group business of the Employer.

1.40 "TERMINATION DATE" shall have the meaning set forth in Section

3.3(h)(ii).

1.41 "TRUST" shall mean the cash and other assets and/or properties

held and administered by Trustee pursuant to the Trust Agreement to carry out

the provisions of the Plan.

1.42 "TRUST AGREEMENT" shall mean the Cadence Design Systems, Inc.

2002 Deferred Compensation Venture Investment Trust Agreement, including any

amendments thereto, entered into between the Employer and the Trustee to carry

out the provisions of the Plan.

1.43 "TRUSTEE" shall mean the designated Trustee acting at any time

under the Trust Agreement.

1.44 "1994 PLAN" shall mean the Cadence Design Systems, Inc. 1994

Deferred Compensation Plan, as amended from time to time.

1.45 "1996 PLAN" shall mean the Cadence Design Systems, Inc. 1996

Deferred Compensation Plan, as amended from time to time.

SECTION 2

ELIGIBILITY

2.1 ELIGIBILITY. Eligibility to participate in the Plan shall be

limited to (a) Employees who (i) have Eligible Compensation of at least $150,000

for the Plan Year, (ii) are classified as officers, vice-presidents, directors,

or an equivalent title, and (iii) have been selected to participate in the Plan

by the Committee acting in its sole and absolute discretion, and (b)

Non-Employee Directors who have been selected to participate in the Plan by the

Committee acting in its sole and absolute discretion. Participation in the Plan

shall commence as of the effective date of the eligible Employee's or

Non-Employee Director's enrollment form, which shall be completed and submitted

to the Employer in accordance with the provisions of Section 3.3. Nothing in the

Plan or in any administrative form used to administer the Plan or Trust shall be

construed to require any contributions to be made to the Plan on behalf of the

Participant by the Employer. The Committee has the discretion to end the

eligibility of one or more Participants at any time in the sole and absolute

discretion of the Committee.

SECTION 3

DEFERRAL OF COMPENSATION

3.1 DEFERRAL OF COMPENSATION.

(a) Each eligible Employee or Non-Employee Director may

elect, in accordance with Section 3.3, to defer the receipt of a portion of the

Base Salary or Directors Fees for active service otherwise payable to him or her

by the Employer during each Plan Year or portion of a Plan Year that the

Participant is in the employ or service of the Employer. Each eligible Employee

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