S-8

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

Registration No. 333-            

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933     

CADENCE DESIGN SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

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

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

1997 Nonstatutory Stock Incentive Plan
(formerly known as the 1997 Nonstatutory Stock Option Plan)
(Full title of the Plan)

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

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

CALCULATION OF REGISTRATION FEE

		Proposed Maximum		Proposed Maximum
Title of Securities	Amount to be	Offering Price		Aggregate		Amount of
to be Registered(1)	Registered(2)	per Share (3)		Offering Price(3)		Registration Fee(3)
Common Stock, par value $0.01 per share	10,000,000 shares	$	12.01	$	120,100,000	$	9,716.09

(1)	Includes, with respect to each share of Common Stock, Rights granted pursuant to the Registrant’s Amended and Restated Rights Agreement, dated as of February 1, 2000, between the Registrant and Mellon Investor Services, LLC, as Rights Agent. Until a triggering event thereunder, the Rights trade with, and cannot be separated from, the Common Stock.
(2)	This Registration Statement shall also cover any additional shares of Common Stock which become issuable under the 1997 Nonstatutory Stock Incentive Plan by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration which results in an increase in the number of the outstanding shares of Cadence Design Systems, Inc. Common Stock.
(3)	Calculated solely for purposes of calculating the amount of the registration fee under Rule 457(c). The price per share and aggregate offering price are based upon the average of the high and low sales price of Registrant’s Common Stock on May 15, 2003 as reported on the New York Stock Exchange.

TABLE OF CONTENTS

EXHIBIT 5.1

EXHIBIT 23.1

EXHIBIT 23.2

EXHIBIT 99.1

INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
PURSUANT TO GENERAL INSTRUCTION E OF FORM S-8

     This Registration Statement on Form S-8 is filed by Cadence Design Systems, Inc., a Delaware corporation (the “Registrant”), relating to 10,000,000 shares of its common stock, par value $0.01 per share (the “Common Stock”), issuable to eligible employees and consultants of the Registrant under the Registrant’s 1997 Nonstatutory Stock Incentive Plan, formerly known as the 1997 Nonstatutory Stock Option Plan (the “Plan”). On November 12, 1997, the Registrant filed with the Securities and Exchange Commission, Registration Statement on Form S-8 (Registration No. 333-40047) (the “Prior Registration Statement”) relating to shares of Common Stock issuable to eligible employees and consultants of the Registrant under the Plan. The Prior Registration Statement is currently effective. This Registration Statement relates to securities of the same class as those to which the Prior Registration Statement relates and is submitted in accordance with Section E of the General Instructions to Form S-8 regarding Registration of Additional Securities.

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

(a)	The Registrant’s Registration Statement on Form S-8 (File No. 333-40047) filed on November 12, 1997;
(b)	The Registrant’s Annual Report on Form 10-K for the fiscal year ended December 28, 2002, including all material incorporated by reference therein;
(c)	The Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2003, including all material incorporate by reference therein;
(d)	The Registrant’s Current Reports on Form 8-K filed with the Commission on March 14, 2003 and April 15, 2003;
(e)	The description of the Registrant’s Common Stock to be offered hereby contained in the Registrant’s Registration Statement on Form 8-A filed with the Commission on August 29, 1990; and
(f)	The description of the Registrant’s Preferred Share Purchase Rights set forth in Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 16, 1996.

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

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

II-1

List of Exhibits

Exhibit Number	Exhibit
5.1	Opinion of Gibson, Dunn & Crutcher LLP.
23.1	Independent Auditors’ Consent.
23.2	Consent of Arthur Andersen LLP, Independent Public Accountants.
23.3	Consent of Gibson, Dunn & Crutcher LLP (contained in Exhibit 5.1).
24.1	Power of Attorney (included on the signature pages to this Registration Statement on Form S-8).
99.1	1997 Nonstatutory Stock Incentive Plan.

II-2

EXPLANATORY NOTE REGARDING FINANCIAL STATEMENTS
INCORPORATED BY REFERENCE INTO THIS
REGISTRATION STATEMENT

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

II-3

SIGNATURES

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

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

II-4

POWER OF ATTORNEY

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

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

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

II-5

EXHIBIT INDEX

Exhibit Number	Exhibit
5.1	Opinion of Gibson, Dunn & Crutcher LLP.
23.1	Independent Auditors’ Consent.
23.2	Consent of Arthur Andersen LLP, Independent Public Accountants.
23.3	Consent of Gibson, Dunn & Crutcher LLP (contained in Exhibit 5.1).
24.1	Power of Attorney (included on the signature pages to this Registration Statement on Form S-8).
99.1	1997 Nonstatutory Stock Incentive Plan.

EX-5.1 3 f90462exv5w1.txt EXHIBIT 5.1 EXHIBIT 5.1 [Letterhead of Gibson, Dunn & Crutcher LLP] May 22, 2003 Cadence Design Systems, Inc. 2655 Seely Avenue, Building 5 San Jose, CA 95134 Re: Registration Statement on Form S-8 of Cadence Design Systems, Inc. Ladies and Gentlemen: We refer to the registration statement on Form S-8 (the "Registration Statement"), under the Securities Act of 1933, as amended (the "Securities Act"), filed by Cadence Design Systems, Inc., a Delaware corporation (the "Registrant"), with respect to the proposed offering by the Registrant of up to 10,000,000 shares (the "Shares") of its common stock, $0.01 par value per share (the "Common Stock"), subject to issuance by the Registrant under its 1997 Nonstatutory Stock Incentive Plan (the "Plan"). We have examined the originals or certified copies of such corporate records, certificates of officers of the Registrant and/or public officials and such other documents, and have made such other factual and legal investigations as we deemed relevant and necessary as the basis for the opinions set forth below. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as conformed or photostatic copies and the authenticity of the originals of such copies. Based on our examination mentioned above, subject to the assumptions stated above and relying on the statements of fact contained in the documents that we have examined, we are of the opinion that (i) the issuance by the Registrant of the Shares has been duly authorized and (ii) when issued in accordance with the terms of the Plan, the Shares are and will be duly and validly issued, fully paid and non-assessable shares of Common Stock. We are admitted to practice in the State of California, and are not admitted to practice in the State of Delaware. However, for the limited purposes of our opinions set forth above, we are generally familiar with the General Corporation Law of the State of Delaware (the "DGCL") as presently in effect and have made such inquiries as we consider necessary to render this opinion with respect to a Delaware corporation. This opinion letter is limited to the DGCL, as it presently exists and to the facts as they presently exist. We express no opinion with respect to the effect or applicability of the laws of any other jurisdiction. We assume no obligation to revise or supplement this opinion letter should the laws of such jurisdictions be changed after the date hereof by legislative action, judicial decision or otherwise. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the General Rules and Regulations of the Securities and Exchange Commission. Very truly yours, /s/ GIBSON, DUNN & CRUTCHER LLP EX-23.1 4 f90462exv23w1.txt EXHIBIT 23.1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT The Board of Directors and Stockholders Cadence Design Systems, Inc.: We consent to the incorporation by reference in the Registration Statement on Form S-8 of Cadence Design Systems, Inc., of our report dated January 21, 2003, except as to Note 20, which is as of February 5, 2003, relating to the consolidated balance sheet of Cadence Design Systems, Inc. and subsidiaries as of December 28, 2002, and the consolidated statements of income, stockholders' equity, and cash flows for the year then ended, and the 2002 financial statement schedule, which report appears in the December 28, 2002 annual report on Form 10-K of Cadence Design Systems, Inc. Our report refers to our audit of the adjustments and disclosures that were applied to revise the 2001 and 2000 consolidated financial statements as more fully described in Note 2 to the consolidated financial statements. However, we were not engaged to audit, review, or apply any procedures to the 2001 and 2000 consolidated financial statements of Cadence Design Systems, Inc., other than with respect to such adjustments and disclosures. /s/ KPMG LLP Mountain View, California May 21, 2003 EX-23.2 5 f90462exv23w2.txt EXHIBIT 23.2 EXHIBIT 23.2 CONSENT OF ARTHUR ANDERSEN LLP, INDEPENDENT PUBLIC ACCOUNTANTS The registrant was unable to obtain the written consent of Arthur Andersen LLP, to incorporate by reference its report dated March 11, 2002. See Explanatory Note. EX-99.1 6 f90462exv99w1.txt EXHIBIT 99.1 EXHIBIT 99.1 CADENCE DESIGN SYSTEMS, INC. 1997 NONSTATUTORY STOCK INCENTIVE PLAN 1. PURPOSES OF THE PLAN. (a) Amendment and Restatement. The Plan initially was established as the 1997 Non-Statutory Stock Option Plan and most recently was amended effective as of November 1, 2000. The Plan hereby is amended and restated in its entirety, effective upon adoption. (b) Specific Purposes. The purposes of this Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to the Employees and Consultants (as such terms are defined below) of the Company and its Affiliates, and to promote the success of the Company's business. 2. DEFINITIONS. As used herein, the following definitions shall apply: (a) "AFFILIATE" shall mean any parent corporation or subsidiary corporation, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f) respectively, of the Code, or such other parent corporation or subsidiary corporation designated by the Board. (b) "BOARD" shall mean the Committee, if one has been appointed, or the Board of Directors, if no Committee is appointed. (c) "BOARD OF DIRECTORS" shall mean the Board of Directors of the Company. (d) "CODE" shall mean the Internal Revenue Code of 1986, as amended. (e) "COMMITTEE" shall mean the Committee appointed by the Board of Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is appointed. (f) "COMMON STOCK" shall mean the Common Stock of the Company. (g) "COMPANY" shall mean CADENCE DESIGN SYSTEMS, INC., a Delaware corporation. (h) "CONSULTANT" shall mean any consultants, independent contractors or advisers to the Company or an Affiliate (provided that such persons render bona fide services not in connection with the offering and sale of securities in capital raising transactions). (i) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" shall mean the absence of any interruption or termination of service to the Company or an Affiliate, whether as an Employee or Consultant. The Board or the Chief Executive Officer of the Company may determine, in that party's sole discretion, whether Continuous Status as an Employee or Consultant shall be considered interrupted in the case of: (i) any leave of absence approved by the Board or the Chief Executive Officer of the Company, including sick leave, military leave, or any other personal leave; or (ii) transfers between the Company, Affiliates or their successors. (j) "EMPLOYEE" shall mean any person employed by the Company or by any Affiliate. (k) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. (l) "INCENTIVE STOCK" means shares of Common Stock granted to a Participant pursuant to Section 10 hereof. (m) "INCENTIVE STOCK AGREEMENT" means a written agreement between the Company and a holder of an award of Incentive Stock evidencing the terms and conditions of an individual Incentive Stock grant. Each Incentive Stock Agreement shall be subject to the terms and conditions of the Plan. (n) "NONSTATUTORY STOCK OPTION" shall mean an Option not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. (o) "OPTION" shall mean a nonstatutory stock option granted pursuant to the Plan. (p) "OPTION AGREEMENT" shall mean a written agreement between the Company and a Participant evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan. (q) "OPTIONED STOCK" shall mean the Common Stock subject to an Option. (r) "PARTICIPANT" shall mean an Employee or Consultant who receives a Stock Award. (s) "PLAN" shall mean this 1997 Nonstatutory Stock Incentive Plan. (t) "SHARE" shall mean a share of Common Stock, as adjusted in accordance with Section 12 of the Plan. (u) "STOCK AWARD" shall mean any right granted under the Plan, including an Option or Incentive Stock. 3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares which may be issued pursuant to the Plan is thirty million (30,000,000) shares of Common Stock. The Shares may be authorized, but unissued, or reacquired Common Stock. If a Stock Award should expire, become unexercisable or otherwise terminate for any reason without having vested or been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future grant under the Plan. 4. ADMINISTRATION OF THE PLAN. (a) Procedure. The Plan shall be administered by the Board of Directors. The Board of Directors may appoint a Committee consisting of not less than two members of the Board of Directors to administer the Plan on behalf of the Board of Directors, subject to such terms and conditions as the Board of Directors may prescribe. In such event, any references in the Plan to the Board of Directors shall be deemed to refer to the Committee. Once appointed, the Committee shall continue to serve until otherwise directed by the Board of Directors. From time to time the Board of Directors may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause), and appoint new members in substitution therefor, fill vacancies however caused and remove all members of the Committee, and thereafter directly administer the Plan. Notwithstanding anything in this Section 4 to the contrary, at any time the Board of Directors or the Committee may delegate to a committee of one or more members of the Board of Directors the authority to grant Stock Awards to all Employees and Consultants or any portion or class thereof. (b) Powers of the Board. Subject to the provisions of the Plan, the Board shall have such authority with regard to the Plan and the Stock Awards as determined by the Board of Directors, including the authority, in its discretion: (i) to grant Stock Awards under the Plan; (ii) to determine, upon review of relevant information and in accordance with Section 8(c) of the Plan, the fair market value of the Common Stock; (iii) to determine the exercise price per share of Options to be granted, which exercise price shall be determined in accordance with Section 8(a) of the Plan; (iv) to determine the Employees or Consultants to whom, and the time or times at which, Stock Awards shall be granted and the number of Shares to be represented by each Stock Award, provided that no Stock Awards may be granted to persons who are neither Employees nor Consultants; (v) to interpret the Plan; (vi) to prescribe, amend and rescind rules and regulations relating to the Plan; (vii) to determine the terms and provisions of each Stock Award granted (which need not be identical) in accordance with the Plan, and, with the consent of the holder thereof with respect to any adverse change, modify or amend each Stock Award; (viii) to accelerate or defer (the latter with the consent of the Participant) the exercise date and vesting of any Stock Award; (ix) to authorize any person to execute on behalf of the Company any instrument required to effectuate the 2 grant of an Stock Award previously granted by the Board; and (x) to make all other determinations deemed necessary or advisable for the administration of the Plan. (c) Effect of Board's Decision. All decisions, determinations and interpretations of the Board shall be final and binding on all Participants and any other holders of any Stock Awards granted under the Plan. 5. ELIGIBILITY. Stock Awards may be granted only to Employees or Consultants as defined in Section 2 hereof. An Employee or Consultant who has been granted a Stock Award may, if he or she is otherwise eligible, be granted an additional Stock Award. Notwithstanding the foregoing, no Employee or Consultant who is an executive officer of the Company within the meaning of Section 16 of the Exchange Act, who is a member of the Board of Directors or who beneficially owns 10% or more of the Company's Common Stock shall be entitled to receive the grant of a Stock Award under the Plan. The Plan shall not confer upon any Participant any right with respect to continuation of employment or consultancy by the Company, nor shall it interfere in any way with the Participant's right or the Company's right to terminate the Participant's employment at any time or the Participant's consultancy pursuant to the terms of the Consultant's agreement with the Company. 6. TERM OF THE PLAN. The Plan shall become effective upon its adoption by the Board of Directors. It shall continue in effect until terminated under Section 16 of the Plan. 7. TERM OF OPTION. The term of each Option shall be ten (10) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement. 8. EXERCISE PRICE, CONSIDERATION AND VESTING. (a) Exercise Price. The per Share exercise price for the Shares to be issued pursuant to exercise of an Option shall be no less than 100% of the fair market value per Share on the date of grant. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner which substantially satisfies the provisions of Section 424(a) of the Code. (b) Fair Market Value. The fair market value shall be determined by the Board in its discretion; provided however, that where there is a public market for the Common Stock, the fair market value per Share shall be the average of the high and low prices of the Common Stock on the date of grant, as reported on the New York Stock Exchange. (c) Consideration. The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Board and may consist entirely of (i) cash or check; (ii) promissory note (except that payment of the common stock's "par value", as defined in the Delaware General Corporation Law, shall not be made by deferred payment); (iii) other shares of the Common Stock of the Company having a fair market value on the date of surrender equal to the aggregate exercise price of the Shares as to which the Option shall be exercised, including by delivering to the Company an attestation of ownership of owned and unencumbered shares of the Common Stock of the Company in a form approved by the Company; (iv) payment pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board which, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds; (v) any combination of such methods of payment; or (vi) such other consideration and method of payment for the issuance of Shares to the extent permitted under applicable law. In making its determination as to the type of consideration to accept, the Board shall consider if acceptance of such consideration may be reasonably expected to benefit the Company. (d) Vesting. The total number of Shares subject to an Option may, but need not, be allotted in periodic installments (which may, but need not, be equal). The Option Agreement may provide that, from time to time during each of such installment periods, the Option may become exercisable ("vest") with respect to some or all of the Shares allotted to that period, and may be exercised with respect to some or all of the Shares allotted to such period and/or any prior period as to which the Option became vested but was not fully exercised. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be 3 based on performance or other criteria) as the Board may deem appropriate. The provisions of this Section 8(d) are subject to any Option provisions governing the minimum number of Shares as to which an Option may be exercised. 9. EXERCISE OF OPTION. (a) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Board, including performance criteria with respect to the Company and/or the Participant, and as shall be permissible under the terms of the Plan. An Option may not be exercised for a fraction of a Share. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Board, consist of any consideration and method of payment allowable under Section 8(c) of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 12 of the Plan. Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. The Option may, but need not, include a provision whereby the Participant may elect at any time while an Employee or Consultant (or while an officer or director of the Company) to exercise the Option as to any part or all of the shares subject to the Option, subject to a repurchase right in favor of the Company on such terms as the Board shall establish. (b) Termination of Status as an Employee or Consultant. If a Participant ceases to serve as an Employee or Consultant for any reason other than death or disability, the Participant may, but only within three (3) months (or such other period of time as is determined by the Board) after the date the Participant ceases to be an Employee or Consultant, exercise the Option to the extent that the Participant was entitled to exercise it at the date of such termination. To the extent that the Participant was not entitled to exercise the Option at the date of such termination, or if the Participant does not exercise such Option (which the Participant was entitled to exercise) within the time specified herein, the Option shall terminate. (c) Death of Participant. In the event of the death of a Participant during the term of the Option who is at the time of his or her death an Employee or Consultant and who shall have been in Continuous Status as an Employee or Consultant since the date of grant of the Option, the Option may be exercised at any time within twelve (12) months (or such other period of time as is determined by the Board) following the date of death, by the Participant's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, to the extent that the Participant was entitled to exercise it at the date of such termination. To the extent that the Participant was not entitled to exercise the Option at the date of such termination, or if the Option is not exercised (to the extent the Participant was entitled to exercise) within the time specified herein, the Option shall terminate. (d) Disability of Participant. In the event of the disability of a Participant during the term of the Option who is at the time of his or her disability an Employee or Consultant and who shall have been in Continuous Status as an Employee or Consultant since the date of grant of the Option, the Participant (or the Participant's legal guardian or conservator) may, but only within twelve (12) months (or such other period of time as is determined by the Board) after the date the Participant ceases to be an Employee or Consultant on account of such disability, exercise the Option to the extent that the Participant was entitled to exercise it at the date of such termination. To the extent that the Participant was not entitled to exercise the Option at the date of such termination, or if the Participant does not exercise such Option (which the Participant was entitled to exercise) within the time specified herein, the Option shall terminate. 10. INCENTIVE STOCK. 4 (a)General. Incentive Stock is an award or issuance of shares of Common Stock the grant, issuance, retention, vesting and/or transferability of which is subject during specified periods of time to such conditions (including continued employment or performance conditions) and terms as the Board deems appropriate. (b)Incentive Stock Agreement. Each Incentive Stock Agreement shall contain provisions regarding (a) the number of shares of Common Stock subject to such award or a formula for determining such, (b) the purchase price of the shares, if any, and the means of payment for the shares, (c) the performance criteria, if any, and level of achievement versus these criteria that shall determine the number of shares granted, issued, retainable and/or vested, (d) such terms and conditions on the grant, issuance, vesting and/or forfeiture of the shares as may be determined from time to time by the Board, (e) restrictions on the transferability of the shares and (f) such further terms and conditions in each case not inconsistent with this Plan as may be determined from time to time by the Board. Shares of Incentive Stock may be issued in the name of the Participant and held by the Participant or held by the Company, in each case as the Board may provide. (c)Sales Price. Subject to the requirements of applicable law, the Board shall determine the price, if any, at which shares of Incentive Stock shall be sold or awarded to a Participant, which may vary from time to time and among Participants and which may be below the Fair Market Value of such shares at the date of grant or issuance. (d)Share Vesting. The grant, issuance, retention and/or vesting of shares of Incentive Stock shall be at such time and in such installments as determined by the Board. The Board shall have the right to make the timing of the grant and/or the issuance, ability to retain and/or vesting of shares of Incentive Stock subject to continued employment, passage of time and/or such performance criteria as deemed appropriate by the Board. (e)Transferability. Shares of Incentive Stock shall be transferable by the Participant only upon such terms and conditions as are set forth in the Incentive Stock Agreement, as the Board shall determine in its discretion, so long as Incentive Stock awarded under the Incentive Stock Agreement remains subject to the terms of the Incentive Stock Agreement. (f)Discretionary Adjustments. Notwithstanding satisfaction of any performance goals, the number of shares granted, issued, retainable and/or vested under an award of Incentive Stock on account of either financial performance or personal performance evaluations may be reduced by the Board on the basis of such further considerations as the Board shall determine. 11. TRANSFERABILITY OF STOCK AWARDS. Except as otherwise expressly provided in the terms of the Option Agreement or Incentive Stock Agreement, a Stock Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. Notwithstanding the foregoing, the Participant may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Participant, shall thereafter be entitled to exercise the Stock Award. 12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. The number of Shares covered by each outstanding Stock Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Stock Awards have yet been granted or which have been returned to the Plan upon cancellation or expiration of a Stock Award, as well as the price per Share covered by each such outstanding Stock Award, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split or the payment of a stock dividend with respect to the Common Stock or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration". Such adjustments shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to a Stock Award. For purposes of the Plan, a "Change in Control" shall be deemed to occur upon the consummation of any one of the following events: (a) a sale of all or substantially all of the assets of the Company; (b) a merger or consolidation in which the Company is not the surviving corporation (other than a transaction the principal purpose of which is to change the state of the Company's incorporation or a transaction in which the voting securities of the 5 Company are exchanged for beneficial ownership of at least 50% of the voting securities of the controlling acquiring corporation); (c) a merger or consolidation in which the Company is the surviving corporation and less than 50% of the voting securities of the Company which are outstanding immediately after the consummation of such transaction are beneficially owned, directly or indirectly, by the persons who owned such voting securities immediately prior to such transaction; (d) any transaction or series of related transactions after which any person (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), other than any employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company, becomes the beneficial owner of voting securities of the Company representing 40% or more of the combined voting power of all of the voting securities of the Company; (e) during any period of two consecutive years, individuals who at the beginning of such period constitute the membership of the Company's Board of Directors ("Incumbent Directors") cease for any reason to have authority to cast at least a majority of the votes which all directors on the Board of Directors are entitled to cast, unless the election, or the nomination for election by the Company's stockholders, of a new director was approved by a vote of at least two-thirds of the votes entitled to be cast by the Incumbent Directors, in which case such director shall also be treated as an Incumbent Director in the future; or (f) the liquidation or dissolution of the Company. In the event of a Change in Control, then: (a) any surviving or acquiring corporation shall assume Stock Awards outstanding under the Plan or shall substitute similar awards (including an option to acquire the same consideration paid to stockholders in the transaction described in this Section 12 for those outstanding Options under the Plan), or (b) in the event any surviving or acquiring corporation refuses to assume such Stock Awards or to substitute similar awards for those outstanding under the Plan, (i) with respect to Stock Awards held by persons then performing services as Employees or Consultants, the vesting of such Stock Awards and the time during which such Stock Awards may be exercised shall be accelerated prior to such event and the Stock Awards terminated if not exercised after such acceleration and at or prior to such event, and (ii) with respect to any other Options outstanding under the Plan, such Options shall be terminated if not exercised prior to such event. Notwithstanding the foregoing, the Board shall at all times have the complete and sole discretion to accelerate the vesting and exercisability of some or all of the shares of Common Stock subject to any or all of then outstanding Stock Awards granted under the Plan and to establish the date as of which any such Stock Awards shall terminate (and all other terms and conditions relating to such termination.) 13. TIME OF GRANTING STOCK AWARDS. The date of grant of a Stock Award shall, for all purposes, be the date on which the Board makes the determination granting such Stock Award. Notice of the determination shall be given to each Employee or Consultant to whom a Stock Award is so granted within a reasonable time after the date of such grant. 14. WITHHOLDING. To the extent provided by the terms of an Option Agreement or Incentive Stock Agreement, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under a Stock Award by any of the following means (in addition to the Company's right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Stock Award, provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to the Company owned and unencumbered shares of Common Stock. 15. LIABILITY OF COMPANY. The Company and any Affiliate which is in existence or hereafter comes into existence shall not be liable to a Participant or other persons as to: (a)The Non-Issuance of Shares. The non-issuance or sale of shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company's counsel to be necessary to the lawful issuance and sale of any shares hereunder; or (b)Tax Consequences. Any tax consequence expected, but not realized, by any Participant or other person due to the receipt, exercise or settlement of any Stock Award granted hereunder. 16. AMENDMENT AND TERMINATION OF THE PLAN. 6 (a) Amendment and Termination. The Board may amend or terminate the Plan from time to time in such respects as the Board may deem advisable. (b) Effect of Amendment or Termination. Any such amendment or termination of the Plan shall not affect Stock Awards already granted, and such Stock Awards shall remain in full force and effect as if this Plan had not been amended or terminated unless mutually agreed otherwise between the Participant and the Board, which agreement must be in writing and signed by the Participant and the Company. 17. CONDITIONS UPON ISSUANCE OF SHARES. The Company may require any Participant, or any person to whom a Stock Award is transferred under Section 11, as a condition of exercising any such Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant's knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters, and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that such person is acquiring the Shares subject to the Stock Award for such person's own account and not with any present intention of selling or otherwise distributing the Shares. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (1) the issuance of the Shares upon the exercise of the Stock Award has been registered under a then currently effective registration statement under the Securities Act of 1933, as amended, or (2) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may require the Participant to provide such other representations, written assurances or information which the Company shall determine is necessary, desirable or appropriate to comply with applicable securities and other laws as a condition of granting a Stock Award to such Participant or permitting the Participant to exercise such Stock Award. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the shares. 18. RESERVATION OF SHARES. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. Inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 19. AWARD AGREEMENT. Options shall be evidenced by written Option Agreements and Incentive Stock shall be evidenced by written Incentive Stock Agreements in such form or forms as the Board or the Committee shall approve. 20. EFFECTIVE DATE. The amended and restated Plan shall become effective upon adoption. 7 -----END PRIVACY-ENHANCED MESSAGE-----

EX-5.1

                                                                     EXHIBIT 5.1

                   [Letterhead of Gibson, Dunn & Crutcher LLP]

                                  May 22, 2003

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

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

Ladies and Gentlemen:

                  We refer to the registration statement on Form S-8 (the
"Registration Statement"), under the Securities Act of 1933, as amended (the
"Securities Act"), filed by Cadence Design Systems, Inc., a Delaware corporation
(the "Registrant"), with respect to the proposed offering by the Registrant of
up to 10,000,000 shares (the "Shares") of its common stock, $0.01 par value per
share (the "Common Stock"), subject to issuance by the Registrant under its 1997
Nonstatutory Stock Incentive Plan (the "Plan").

                  We have examined the originals or certified copies of such
corporate records, certificates of officers of the Registrant and/or public
officials and such other documents, and have made such other factual and legal
investigations as we deemed relevant and necessary as the basis for the opinions
set forth below. In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as conformed
or photostatic copies and the authenticity of the originals of such copies.

                  Based on our examination mentioned above, subject to the
assumptions stated above and relying on the statements of fact contained in the
documents that we have examined, we are of the opinion that (i) the issuance by
the Registrant of the Shares has been duly authorized and (ii) when issued in
accordance with the terms of the Plan, the Shares are and will be duly and
validly issued, fully paid and non-assessable shares of Common Stock.

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

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

                                                Very truly yours,

                                                /s/ GIBSON, DUNN & CRUTCHER LLP

EX-23.1

                                                                    EXHIBIT 23.1

                          INDEPENDENT AUDITORS' CONSENT

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

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

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

/s/ KPMG LLP

Mountain View, California
May 21, 2003

EX-23.2

                                                                    EXHIBIT 23.2

         CONSENT OF ARTHUR ANDERSEN LLP, INDEPENDENT PUBLIC ACCOUNTANTS

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

EX-99.1

                                                                    EXHIBIT 99.1

                          CADENCE DESIGN SYSTEMS, INC.

                     1997 NONSTATUTORY STOCK INCENTIVE PLAN

      1. PURPOSES OF THE PLAN.


            (a) Amendment and Restatement. The Plan initially was established as
the 1997 Non-Statutory Stock Option Plan and most recently was amended effective
as of November 1, 2000. The Plan hereby is amended and restated in its entirety,
effective upon adoption.

            (b) Specific Purposes. The purposes of this Plan are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to the Employees and Consultants (as such terms
are defined below) of the Company and its Affiliates, and to promote the success
of the Company's business.

      2. DEFINITIONS. As used herein, the following definitions shall apply:


            (a) "AFFILIATE" shall mean any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code, or such other parent
corporation or subsidiary corporation designated by the Board.

            (b) "BOARD" shall mean the Committee, if one has been appointed, or
the Board of Directors, if no Committee is appointed.

            (c) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company.

            (d) "CODE" shall mean the Internal Revenue Code of 1986, as amended.

            (e) "COMMITTEE" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed.

            (f) "COMMON STOCK" shall mean the Common Stock of the Company.

            (g) "COMPANY" shall mean CADENCE DESIGN SYSTEMS, INC., a Delaware
corporation.

            (h) "CONSULTANT" shall mean any consultants, independent contractors
or advisers to the Company or an Affiliate (provided that such persons render
bona fide services not in connection with the offering and sale of securities in
capital raising transactions).

            (i) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" shall mean the
absence of any interruption or termination of service to the Company or an
Affiliate, whether as an Employee or Consultant. The Board or the Chief
Executive Officer of the Company may determine, in that party's sole discretion,
whether Continuous Status as an Employee or Consultant shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board or
the Chief Executive Officer of the Company, including sick leave, military
leave, or any other personal leave; or (ii) transfers between the Company,
Affiliates or their successors.

            (j) "EMPLOYEE" shall mean any person employed by the Company or by
any Affiliate.

            (k) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.

            (l) "INCENTIVE STOCK" means shares of Common Stock granted to a
Participant pursuant to Section 10 hereof.

            (m) "INCENTIVE STOCK AGREEMENT" means a written agreement between
the Company and a holder of an award of Incentive Stock evidencing the terms and
conditions of an individual Incentive Stock grant. Each Incentive Stock
Agreement shall be subject to the terms and conditions of the Plan.

            (n) "NONSTATUTORY STOCK OPTION" shall mean an Option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.

            (o) "OPTION" shall mean a nonstatutory stock option granted pursuant
to the Plan.

            (p) "OPTION AGREEMENT" shall mean a written agreement between the
Company and a Participant evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and conditions
of the Plan.

            (q) "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.

            (r) "PARTICIPANT" shall mean an Employee or Consultant who receives
a Stock Award.

            (s) "PLAN" shall mean this 1997 Nonstatutory Stock Incentive Plan.

            (t) "SHARE" shall mean a share of Common Stock, as adjusted in
accordance with Section 12 of the Plan.

            (u) "STOCK AWARD" shall mean any right granted under the Plan,
including an Option or Incentive Stock.

      3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be issued pursuant to
the Plan is thirty million (30,000,000) shares of Common Stock. The Shares may
be authorized, but unissued, or reacquired Common Stock. If a Stock Award should
expire, become unexercisable or otherwise terminate for any reason without
having vested or been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.

      4. ADMINISTRATION OF THE PLAN.


            (a) Procedure. The Plan shall be administered by the Board of
Directors. The Board of Directors may appoint a Committee consisting of not less
than two members of the Board of Directors to administer the Plan on behalf of
the Board of Directors, subject to such terms and conditions as the Board of
Directors may prescribe. In such event, any references in the Plan to the Board
of Directors shall be deemed to refer to the Committee. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board of
Directors. From time to time the Board of Directors may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause), and appoint new members in substitution therefor, fill vacancies
however caused and remove all members of the Committee, and thereafter directly
administer the Plan. Notwithstanding anything in this Section 4 to the contrary,
at any time the Board of Directors or the Committee may delegate to a committee
of one or more members of the Board of Directors the authority to grant Stock
Awards to all Employees and Consultants or any portion or class thereof.

            (b) Powers of the Board. Subject to the provisions of the Plan, the
Board shall have such authority with regard to the Plan and the Stock Awards as
determined by the Board of Directors, including the authority, in its
discretion: (i) to grant Stock Awards under the Plan; (ii) to determine, upon
review of relevant information and in accordance with Section 8(c) of the Plan,
the fair market value of the Common Stock; (iii) to determine the exercise price
per share of Options to be granted, which exercise price shall be determined in
accordance with Section 8(a) of the Plan; (iv) to determine the Employees or
Consultants to whom, and the time or times at which, Stock Awards shall be
granted and the number of Shares to be represented by each Stock Award, provided
that no Stock Awards may be granted to persons who are neither Employees nor
Consultants; (v) to interpret the Plan; (vi) to prescribe, amend and rescind
rules and regulations relating to the Plan; (vii) to determine the terms and
provisions of each Stock Award granted (which need not be identical) in
accordance with the Plan, and, with the consent of the holder thereof with
respect to any adverse change, modify or amend each Stock Award; (viii) to
accelerate or defer (the latter with the consent of the Participant) the
exercise date and vesting of any Stock Award; (ix) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the




                                       2

grant of an Stock Award previously granted by the Board; and (x) to make all
other determinations deemed necessary or advisable for the administration of the
Plan.

            (c) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Participants and
any other holders of any Stock Awards granted under the Plan.

      5. ELIGIBILITY. Stock Awards may be granted only to Employees or
Consultants as defined in Section 2 hereof. An Employee or Consultant who has
been granted a Stock Award may, if he or she is otherwise eligible, be granted
an additional Stock Award. Notwithstanding the foregoing, no Employee or
Consultant who is an executive officer of the Company within the meaning of
Section 16 of the Exchange Act, who is a member of the Board of Directors or who
beneficially owns 10% or more of the Company's Common Stock shall be entitled to
receive the grant of a Stock Award under the Plan.

            The Plan shall not confer upon any Participant any right with
respect to continuation of employment or consultancy by the Company, nor shall
it interfere in any way with the Participant's right or the Company's right to
terminate the Participant's employment at any time or the Participant's
consultancy pursuant to the terms of the Consultant's agreement with the
Company.

      6. TERM OF THE PLAN. The Plan shall become effective upon its adoption by
the Board of Directors. It shall continue in effect until terminated under
Section 16 of the Plan.

      7. TERM OF OPTION. The term of each Option shall be ten (10) years from
the date of grant thereof or such shorter term as may be provided in the Option
Agreement.

      8. EXERCISE PRICE, CONSIDERATION AND VESTING.


            (a) Exercise Price. The per Share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be no less than 100% of the
fair market value per Share on the date of grant. Notwithstanding the foregoing,
an Option may be granted with an exercise price lower than set forth above if
such Option is granted pursuant to an assumption or substitution for another
option in a manner which substantially satisfies the provisions of Section
424(a) of the Code.

            (b) Fair Market Value. The fair market value shall be determined by
the Board in its discretion; provided however, that where there is a public
market for the Common Stock, the fair market value per Share shall be the
average of the high and low prices of the Common Stock on the date of grant, as
reported on the New York Stock Exchange.

            (c) Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Board and may consist entirely of (i) cash or check; (ii)
promissory note (except that payment of the common stock's "par value", as
defined in the Delaware General Corporation Law, shall not be made by deferred
payment); (iii) other shares of the Common Stock of the Company having a fair
market value on the date of surrender equal to the aggregate exercise price of
the Shares as to which the Option shall be exercised, including by delivering to
the Company an attestation of ownership of owned and unencumbered shares of the
Common Stock of the Company in a form approved by the Company; (iv) payment
pursuant to a program developed under Regulation T as promulgated by the Federal
Reserve Board which, prior to the issuance of Common Stock, results in either
the receipt of cash (or check) by the Company or the receipt of irrevocable
instructions to pay the aggregate exercise price to the Company from the sales
proceeds; (v) any combination of such methods of payment; or (vi) such other
consideration and method of payment for the issuance of Shares to the extent
permitted under applicable law. In making its determination as to the type of
consideration to accept, the Board shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company.

            (d) Vesting. The total number of Shares subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that, from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the Shares allotted to that period, and may be
exercised with respect to some or all of the Shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be

                                       3

based on performance or other criteria) as the Board may deem appropriate. The
provisions of this Section 8(d) are subject to any Option provisions governing
the minimum number of Shares as to which an Option may be exercised.

      9. EXERCISE OF OPTION.


            (a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Participant, and as shall be permissible under the terms of
the Plan.

                An Option may not be exercised for a fraction of a Share.

                An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 12 of the Plan.

                Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

                The Option may, but need not, include a provision whereby the
Participant may elect at any time while an Employee or Consultant (or while an
officer or director of the Company) to exercise the Option as to any part or all
of the shares subject to the Option, subject to a repurchase right in favor of
the Company on such terms as the Board shall establish.

            (b) Termination of Status as an Employee or Consultant. If a
Participant ceases to serve as an Employee or Consultant for any reason other
than death or disability, the Participant may, but only within three (3) months
(or such other period of time as is determined by the Board) after the date the
Participant ceases to be an Employee or Consultant, exercise the Option to the
extent that the Participant was entitled to exercise it at the date of such
termination. To the extent that the Participant was not entitled to exercise the
Option at the date of such termination, or if the Participant does not exercise
such Option (which the Participant was entitled to exercise) within the time
specified herein, the Option shall terminate.

            (c) Death of Participant. In the event of the death of a Participant
during the term of the Option who is at the time of his or her death an Employee
or Consultant and who shall have been in Continuous Status as an Employee or
Consultant since the date of grant of the Option, the Option may be exercised at
any time within twelve (12) months (or such other period of time as is
determined by the Board) following the date of death, by the Participant's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, to the extent that the Participant was entitled to exercise it
at the date of such termination. To the extent that the Participant was not
entitled to exercise the Option at the date of such termination, or if the
Option is not exercised (to the extent the Participant was entitled to exercise)
within the time specified herein, the Option shall terminate.

               (d) Disability of Participant. In the event of the disability of
a Participant during the term of the Option who is at the time of his or her
disability an Employee or Consultant and who shall have been in Continuous
Status as an Employee or Consultant since the date of grant of the Option, the
Participant (or the Participant's legal guardian or conservator) may, but only
within twelve (12) months (or such other period of time as is determined by the
Board) after the date the Participant ceases to be an Employee or Consultant on
account of such disability, exercise the Option to the extent that the
Participant was entitled to exercise it at the date of such termination. To the
extent that the Participant was not entitled to exercise the Option at the date
of such termination, or if the Participant does not exercise such Option (which
the Participant was entitled to exercise) within the time specified herein, the
Option shall terminate.

      10. INCENTIVE STOCK.


                                       4

            (a)General. Incentive Stock is an award or issuance of shares of
Common Stock the grant, issuance, retention, vesting and/or transferability of
which is subject during specified periods of time to such conditions (including
continued employment or performance conditions) and terms as the Board deems
appropriate.

            (b)Incentive Stock Agreement. Each Incentive Stock Agreement shall
contain provisions regarding (a) the number of shares of Common Stock subject to
such award or a formula for determining such, (b) the purchase price of the
shares, if any, and the means of payment for the shares, (c) the performance
criteria, if any, and level of achievement versus these criteria that shall
determine the number of shares granted, issued, retainable and/or vested, (d)
such terms and conditions on the grant, issuance, vesting and/or forfeiture of
the shares as may be determined from time to time by the Board, (e) restrictions
on the transferability of the shares and (f) such further terms and conditions
in each case not inconsistent with this Plan as may be determined from time to
time by the Board. Shares of Incentive Stock may be issued in the name of the
Participant and held by the Participant or held by the Company, in each case as
the Board may provide.

            (c)Sales Price. Subject to the requirements of applicable law, the
Board shall determine the price, if any, at which shares of Incentive Stock
shall be sold or awarded to a Participant, which may vary from time to time and
among Participants and which may be below the Fair Market Value of such shares
at the date of grant or issuance.

            (d)Share Vesting. The grant, issuance, retention and/or vesting of
shares of Incentive Stock shall be at such time and in such installments as
determined by the Board. The Board shall have the right to make the timing of
the grant and/or the issuance, ability to retain and/or vesting of shares of
Incentive Stock subject to continued employment, passage of time and/or such
performance criteria as deemed appropriate by the Board.

            (e)Transferability. Shares of Incentive Stock shall be transferable
by the Participant only upon such terms and conditions as are set forth in the
Incentive Stock Agreement, as the Board shall determine in its discretion, so
long as Incentive Stock awarded under the Incentive Stock Agreement remains
subject to the terms of the Incentive Stock Agreement.

            (f)Discretionary Adjustments. Notwithstanding satisfaction of any
performance goals, the number of shares granted, issued, retainable and/or
vested under an award of Incentive Stock on account of either financial
performance or personal performance evaluations may be reduced by the Board on
the basis of such further considerations as the Board shall determine.

      11. TRANSFERABILITY OF STOCK AWARDS. Except as otherwise expressly
provided in the terms of the Option Agreement or Incentive Stock Agreement, a
Stock Award may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Participant, only
by the Participant. Notwithstanding the foregoing, the Participant may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Participant, shall
thereafter be entitled to exercise the Stock Award.

      12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. The number of
Shares covered by each outstanding Stock Award, and the number of Shares which
have been authorized for issuance under the Plan but as to which no Stock Awards
have yet been granted or which have been returned to the Plan upon cancellation
or expiration of a Stock Award, as well as the price per Share covered by each
such outstanding Stock Award, shall be proportionately adjusted for any increase
or decrease in the number of issued shares of Common Stock resulting from a
stock split or the payment of a stock dividend with respect to the Common Stock
or any other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration". Such adjustments shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to a Stock Award.

      For purposes of the Plan, a "Change in Control" shall be deemed to occur
upon the consummation of any one of the following events: (a) a sale of all or
substantially all of the assets of the Company; (b) a merger or consolidation in
which the Company is not the surviving corporation (other than a transaction the
principal purpose of which is to change the state of the Company's incorporation
or a transaction in which the voting securities of the

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Company are exchanged for beneficial ownership of at least 50% of the voting
securities of the controlling acquiring corporation); (c) a merger or
consolidation in which the Company is the surviving corporation and less than
50% of the voting securities of the Company which are outstanding immediately
after the consummation of such transaction are beneficially owned, directly or
indirectly, by the persons who owned such voting securities immediately prior to
such transaction; (d) any transaction or series of related transactions after
which any person (as such term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended), other than any employee benefit plan (or
related trust) sponsored or maintained by the Company or any subsidiary of the
Company, becomes the beneficial owner of voting securities of the Company
representing 40% or more of the combined voting power of all of the voting
securities of the Company; (e) during any period of two consecutive years,
individuals who at the beginning of such period constitute the membership of the
Company's Board of Directors ("Incumbent Directors") cease for any reason to
have authority to cast at least a majority of the votes which all directors on
the Board of Directors are entitled to cast, unless the election, or the
nomination for election by the Company's stockholders, of a new director was
approved by a vote of at least two-thirds of the votes entitled to be cast by
the Incumbent Directors, in which case such director shall also be treated as an
Incumbent Director in the future; or (f) the liquidation or dissolution of the
Company.

      In the event of a Change in Control, then: (a) any surviving or acquiring
corporation shall assume Stock Awards outstanding under the Plan or shall
substitute similar awards (including an option to acquire the same consideration
paid to stockholders in the transaction described in this Section 12 for those
outstanding Options under the Plan), or (b) in the event any surviving or
acquiring corporation refuses to assume such Stock Awards or to substitute
similar awards for those outstanding under the Plan, (i) with respect to Stock
Awards held by persons then performing services as Employees or Consultants, the
vesting of such Stock Awards and the time during which such Stock Awards may be
exercised shall be accelerated prior to such event and the Stock Awards
terminated if not exercised after such acceleration and at or prior to such
event, and (ii) with respect to any other Options outstanding under the Plan,
such Options shall be terminated if not exercised prior to such event.

      Notwithstanding the foregoing, the Board shall at all times have the
complete and sole discretion to accelerate the vesting and exercisability of
some or all of the shares of Common Stock subject to any or all of then
outstanding Stock Awards granted under the Plan and to establish the date as of
which any such Stock Awards shall terminate (and all other terms and conditions
relating to such termination.)

      13. TIME OF GRANTING STOCK AWARDS. The date of grant of a Stock Award
shall, for all purposes, be the date on which the Board makes the determination
granting such Stock Award. Notice of the determination shall be given to each
Employee or Consultant to whom a Stock Award is so granted within a reasonable
time after the date of such grant.

      14. WITHHOLDING. To the extent provided by the terms of an Option
Agreement or Incentive Stock Agreement, the Participant may satisfy any federal,
state or local tax withholding obligation relating to the exercise or
acquisition of Common Stock under a Stock Award by any of the following means
(in addition to the Company's right to withhold from any compensation paid to
the Participant by the Company) or by a combination of such means: (i) tendering
a cash payment; (ii) authorizing the Company to withhold shares of Common Stock
from the shares of Common Stock otherwise issuable to the Participant as a
result of the exercise or acquisition of Common Stock under the Stock Award,
provided, however, that no shares of Common Stock are withheld with a value
exceeding the minimum amount of tax required to be withheld by law; or (iii)
delivering to the Company owned and unencumbered shares of Common Stock.

      15. LIABILITY OF COMPANY. The Company and any Affiliate which is in
existence or hereafter comes into existence shall not be liable to a Participant
or other persons as to:

            (a)The Non-Issuance of Shares. The non-issuance or sale of shares as
to which the Company has been unable to obtain from any regulatory body having
jurisdiction the authority deemed by the Company's counsel to be necessary to
the lawful issuance and sale of any shares hereunder; or

            (b)Tax Consequences. Any tax consequence expected, but not realized,
by any Participant or other person due to the receipt, exercise or settlement of
any Stock Award granted hereunder.

      16. AMENDMENT AND TERMINATION OF THE PLAN.


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            (a) Amendment and Termination. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable.

            (b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Stock Awards already granted, and such
Stock Awards shall remain in full force and effect as if this Plan had not been
amended or terminated unless mutually agreed otherwise between the Participant
and the Board, which agreement must be in writing and signed by the Participant
and the Company.

      17. CONDITIONS UPON ISSUANCE OF SHARES. The Company may require any
Participant, or any person to whom a Stock Award is transferred under Section
11, as a condition of exercising any such Stock Award, (i) to give written
assurances satisfactory to the Company as to the Participant's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that such person is acquiring the Shares
subject to the Stock Award for such person's own account and not with any
present intention of selling or otherwise distributing the Shares. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (1) the issuance of the Shares upon the exercise of the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act of 1933, as amended, or (2) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may require the Participant to provide such other
representations, written assurances or information which the Company shall
determine is necessary, desirable or appropriate to comply with applicable
securities and other laws as a condition of granting a Stock Award to such
Participant or permitting the Participant to exercise such Stock Award. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the shares.

      18. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

      Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.

      19. AWARD AGREEMENT. Options shall be evidenced by written Option
Agreements and Incentive Stock shall be evidenced by written Incentive Stock
Agreements in such form or forms as the Board or the Committee shall approve.

      20. EFFECTIVE DATE. The amended and restated Plan shall become effective
upon adoption.





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