S-8

As filed with the Securities and Exchange Commission on May 10, 2004

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)

Options Assumed by Cadence Design Systems, Inc.
originally granted under the
Neolinear, Inc. 2004 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
	Amount to be	Offering Price		Aggregate Offering		Amount of
Title of Securities to be Registered(1)	Registered(2)	per Share(3)		Price(3)		Registration Fee(3)
Common Stock, par value $0.01 per share	66,795 shares	$	3.56	$	237,790	$	30.13

(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 Neolinear, Inc. 2004 Stock Option 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 this offering under Rule 457(h) of the Securities Act of 1933, as amended, on the basis of the maximum offering price per share that such options may be exercised.

TABLE OF CONTENTS

PART I
PART II
	Item 3. Incorporation of Documents by Reference
EXPLANATORY NOTE REGARDING FINANCIAL STATEMENTS INCORPORATED BY REFERENCE INTO THIS REGISTRATION STATEMENT
	Item 4. Description of Securities
	Item 5. Interests of Named Experts and Counsel
	Item 6. Indemnification of Directors and Officers
	Item 7. Exemption from Registration Claimed
	Item 8. Exhibits
	Item 9. Undertakings
SIGNATURES
EXHIBIT INDEX
EXHIBIT 5.1
EXHIBIT 23.1
EXHIBIT 23.2
EXHIBIT 99.1

PART I

Information Required in the Section 10(a) Prospectus

     Pursuant to the instructions to Form S-8, Part I (Information Required in the Section 10(a) Prospectus) is not filed as part of this Registration Statement.

     The shares of common stock subject to options registered hereunder have been assumed by the Registrant pursuant to an Agreement and Plan of Merger, dated as of February 19, 2004, among the Registrant, Neolinear, Inc. a Delaware corporation, Project Hilton, Inc., a Delaware corporation and wholly-owned subsidiary of the Registrant, Mark Cipriano, as Stockholder Agent, and Thomas Beckley, as Earnout Stockholder Agent. These options were originally granted to directors, employees and consultants of Neolinear, Inc. under the Neolinear, Inc. 2004 Stock Option Plan.

PART II

Information Required in the Registration Statement

Item 3. Incorporation of Documents by Reference

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

(a)	The Registrant’s Annual Report on Form 10-K for the fiscal year ended January 3, 2004, including all material incorporated by reference therein;
(b)	The Registrant’s Current Report on Form 8-K filed with the Commission on April 22, 2004;
(c)	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
(d)	The description of the Registrant’s Preferred Share Purchase Rights set forth in Exhibit 4.02 to the Registrant’s Annual Report on Form 10-K405 filed with the Commission on March 27, 2000.

     All documents filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, 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, provided, however, that the Registrant is not incorporating any information furnished under either Item 9 or Item 12 of any current report on Form 8-K.

     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.

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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 the fiscal year 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, as amended (the “1933 Act”), permits the Registrant 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 1933 Act for any untrue statement of a material fact contained in the financial statements audited by Andersen or any omission of a material fact required to be stated therein. In addition, the ability of Andersen to satisfy any claims (including claims arising from Andersen’s provision of auditing and other services to the Registrant) may be limited as a practical matter due to the fact that Andersen is no longer a going concern.

Item 4. Description of Securities

     Not Applicable.

Item 5. Interests of Named Experts and Counsel

     Not Applicable.

Item 6. Indemnification of Directors and Officers

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

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

II-2

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

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

Item 7. Exemption from Registration Claimed

     Not Applicable.

Item 8. Exhibits

Exhibit
Number	Exhibit
4.1	Instruments Defining Rights of Stockholders. Reference is made to the Registrant’s Registration Statement on Form 8-A filed with the Commission on August 29, 1990 and Exhibit 4.02 to the Registrant’s Annual Report on Form 10-K405 filed with the Commission on March 27, 2000 incorporated by reference pursuant to Items 3(c) and (d).
5.1	Opinion and consent 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	Neolinear, Inc. 2004 Stock Option Plan

II-3

Item 9. Undertakings

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

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

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

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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 10th day of May, 2004.

CADENCE DESIGN SYSTEMS, INC.

By: /s/ H. Raymond Bingham
H. Raymond Bingham
President, Chief Executive Officer and Director

II-5

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 10, 2004
/s/ William Porter William Porter	Senior Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	May 10, 2004
/s/ Donald L. Lucas Donald L. Lucas	Chairman of the Board of Directors	May 10, 2004
/s/ Susan L. Bostrom Susan L. Bostrom	Director	May 10, 2004
/s/ Sean M. Maloney Sean M. Maloney	Director	May 10, 2004
/s/ Dr. Alberto Sangiovanni-Vincentelli Dr. Alberto Sangiovanni-Vincentelli	Director	May 10, 2004
/s/ George M. Scalise George M. Scalise	Director	May 10, 2004
/s/ Dr. John B. Shoven Dr. John B. Shoven	Director	May 10, 2004
/s/ Roger S. Siboni Roger S. Siboni	Director	May 10, 2004
/s/ Lip-Bu Tan Lip-Bu Tan	Director	May 10, 2004

II-6

EXHIBIT INDEX

Exhibit
Number	Exhibit
4.1	Instruments Defining Rights of Stockholders. Reference is made to the Registrant’s Registration Statement on Form 8-A filed with the Commission on August 29, 1990 and Exhibit 4.02 to the Registrant’s Annual Report on Form 10-K405 filed with the Commission on March 27, 2000 incorporated by reference pursuant to Items 3(c) and (d).
5.1	Opinion and consent 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	Neolinear, Inc. 2004 Stock Option Plan

EX-5.1

                                                                     EXHIBIT 5.1

                   [Letterhead of Gibson, Dunn & Crutcher LLP]


                                  May 10, 2004


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
"Company"), with respect to the proposed offering by the Company of up to 66,795
shares (the "Shares") of its common stock, $0.01 par value per share (the
"Common Stock"), subject to issuance by the Company upon exercise of options
granted under the Neolinear, Inc. 2004 Stock Option Plan (the "Plan"). The
options issuable under the Plan were assumed by the Company pursuant to the
terms of that certain Agreement and Plan of Merger, dated as of February 19,
2004, by and among the Company, Project Hilton, Inc., a Delaware corporation and
wholly owned subsidiary of the Company, Neolinear, Inc., a Delaware corporation,
Mark Cipriano, as Stockholder Agent, and Thomas Beckley, as Earnout Stockholder
Agent.

         We have examined the originals or certified copies of such corporate
records, certificates of officers of the Company 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
Company of the Shares has been duly authorized and (ii) when issued in
accordance with the terms of the Plan, the Shares 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 purpose
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
Cadence Design Systems, Inc.:

We consent to the incorporation by reference in the Registration Statement on
Form S-8 of Cadence Design Systems, Inc., to be filed on or about May 7, 2004,
of our report dated March 24, 2004, relating to the consolidated balance sheets
of Cadence Design Systems, Inc. and subsidiaries as of January 3, 2004 and
December 28, 2002, and the consolidated statement of operations, stockholders'
equity and comprehensive income, and cash flows for the years then ended, and
the Fiscal 2003 and Fiscal 2002 financial statement schedules, which report
appears in the January 3, 2004 annual report on Form 10-K of Cadence Design
Systems, Inc.

Our report dated March 24, 2004, contains an explanatory paragraph that states
that the Company's consolidated balance sheet as of December 28, 2002, and the
related consolidated statements of operations, stockholders' equity and
comprehensive income, and cash flows for the year then ended, have been
restated.

Our report also refers to our audit of the adjustments and revised disclosures
that were applied to restate the Company's Fiscal 2001 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 Fiscal 2001 consolidated financial statements of Cadence
Design Systems, Inc., other than with respect to such adjustments and revised
disclosures.

In addition, our report refers to the Company's adoption of Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets on
January 1, 2002.

/s/ KPMG

Mountain View, California
May 7, 2004

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 Item 3.

EX-99.1

                                                                    EXHIBIT 99.1

                                 NEOLINEAR INC.
                             2004 STOCK OPTION PLAN

1.       PURPOSE OF THE PLAN.

         The purpose of the Neolinear, Inc. 2004 Stock Option Plan (the "Plan")
is to promote the interests of Neolinear, Inc. (the "Company"), its
subsidiaries and its stockholders by (i) attracting and retaining employees,
officers, directors, consultants and advisors of outstanding ability, (ii)
motivating such persons, by means of performance-related incentives, to achieve
long-range performance goals, and (iii) enabling such persons to participate in
the long-term growth and financial success of the Company and its subsidiaries.
The effective date of the Plan is February 3, 2004 ("Effective Date"). For
purposes of this Plan, "subsidiary" shall mean any company (whether a
corporation, partnership, joint venture or other form of entity) in which the
Company, or a corporation in which the Company owns a majority of the shares of
capital stock, directly or indirectly, owns an equity interest of more than
fifty percent (50%).

2.       ADMINISTRATION.

         (a)      Subject to the following paragraph, the Plan shall be
administered by the Company's Board of Directors (the "Board") or by a
Committee of the Board (the "Committee"). If the Board appoints a Committee,
such Committee shall be deemed to have been delegated the authority to
administer the Plan (unless the Board determines otherwise), and shall be
empowered to take all actions reserved to the Board under the Plan. The Board
is authorized to interpret the Plan, to prescribe, amend and rescind rules and
regulations to further the purposes of the Plan, and to make all other
determinations necessary for the administration of the Plan. All such actions
by the Board shall be conclusive, final and binding on all recipients of grants
hereunder ("participants").

         (b)      Any Committee to which Plan administration is delegated
shall consist solely of Board members who qualify as (i) "Non-Employee
Directors" as defined under Rule 16b-3 under the Security and Exchange Act of
1934 and (ii) "outside directors" as defined under Section 162(m) or any
successor provision of the Code and applicable Treasury regulations thereunder,
if and to the extent such qualification is necessary so that grants made under
the Plan or the exercise of rights thereunder will qualify for any tax or other
material benefit to participants or the Company and its subsidiaries under
applicable law.

3.       GRANTS.

         Grants under the Plan shall be in the form of non-qualified stock
options ("Options").

4.       SHARES SUBJECT TO THE PLAN.

         Subject to adjustment as provided in Section 9, the maximum aggregate
number of shares of Common Stock that may be subject to grants made under the
Plan is 610,000 shares. The Common Stock to be offered under the Plan shall be
authorized and unissued Common Stock or issued Common Stock that shall have
been reacquired by the Company and held in its treasury. The Common Stock
covered by any unexercised portion of terminated stock options granted under
the Plan may again be subject to new grants under the Plan. In the event the
purchase price of an Option is paid in whole or in part through the delivery of
Common Stock, only the net number of shares of Common Stock issuable in
connection with the exercise of the Option shall be counted against the number
of shares remaining available for grant under the Plan.


5.   PARTICIPANTS.

     The Board shall determine and designate from time to time those employees,
directors, consultants and advisors of the Company or its subsidiaries who
shall be granted Options under the Plan and the number of shares of Common
Stock to be covered by each such Option provided, that any such consultants or
advisors who receive grants under the Plan render bona fide services to the
Company or its subsidiaries that are not in connection with the offer or sale
of securities in a capital-raising transaction. In making its determinations,
the Board shall take into account the present and potential contributions of
the respective individuals to the success of the Company and its subsidiaries
and such other factors as the Board shall deem relevant in connection with
accomplishing the purposes of the Plan. Each grant shall be evidenced by a
written agreement or grant form ("Grant Agreement") as the Board shall approve
from time to time.

6.   FAIR MARKET VALUE.

     For all purposes under the Plan, the term "Fair Market Value" shall mean,
as of any applicable date, (i) if the principal securities market on which the
Common Stock is traded is a national securities exchange or The Nasdaq National
Market ("NNM"), the closing price of the Common Stock on such exchange or NNM,
as the case may be, or if no sale of the Common Stock shall have occurred on
such date, on the next preceding date on which there was a reported sale; (ii)
if the Common Stock is not traded on a national securities exchange or NNM, the
closing price on such date as reported by The Nasdaq SmallCap Market, or if no
sale of the Common Stock shall have occurred on such date, on the next
preceding date on which there was a reported sale; (iii) if the principal
securities market on which the Common Stock is traded is not a national
securities exchange, NNM or The Nasdaq SmallCap Market, the average of the bid
and asked prices reported by the National Quotation Bureau, Inc.; or (iv) if
the price of the Common Stock is not so reported, the Fair Market Value of the
Common Stock as determined in good faith by the Board.

7.   GRANTS OF OPTIONS.

     (a)  Exercise Price of Options.  Nonqualified Options shall be granted at
an exercise price as determined in each case by the Board and in no event shall
be less than 100% of the Fair Market Value of the Common Stock as of the date
the Options are granted.

     (b)  Terms and Termination of Options.

          (1) The Board shall determine the term within which each Option may
be exercised, in whole or in part.

          (2) Unless otherwise determined by the Board, all rights to exercise
vested Options shall terminate on the first to occur of (i) the scheduled
expiration date as set forth in the applicable Grant Agreement, (ii) 90 days
following the date of termination of employment for any reason other than the
participant's death or permanent disability (as defined in Code Section
22(e)(3)), (iii) 1 year following the date of termination of employment or
provision of services by reason of the participant's death or permanent
disability (as defined in Code Section 22(e)(3)), or (iv) as may be otherwise
provided in the event of a Change of Control as defined in Section 10;
provided, however, that in the event that a participant ceases to be employed
by or to provide services to the Company or a subsidiary due to a termination
for "cause" (as defined in Section 7(b)(3)), all rights to exercise vested
Options held by such participant shall terminate immediately.


as of the date such participant ceases to be employed by or to provide services
to the Company or a subsidiary. Unless otherwise determined by the Board,
vesting of Options ceases immediately upon termination of employment for any
reason, and any portion of an Option that has not vested on or before the date
of such termination is forfeited on such date. For purposes of this Plan,
unless otherwise determined by the Board, an individual who ceases to be
employed by the Company or a subsidiary as the result of a business transaction
(other than a Change of Control as defined in Section 10), including without
limitation a sale of stock or assets, corporate reorganization, or spinoff,
shall be deemed to have incurred a termination of employment under (ii) above
without regard to whether such individual continues, following the closing of
such transaction, to be employed by or to perform services for any successor
entity or business.

          (3)   As used in this Plan, the term "cause" shall mean (i) "cause" as
defined in any applicable employment or services agreement between the Company
and a participant for purposes of determining whether a termination of such
agreement is for cause or (ii) in the absence of such agreement, a determination
by the Board that the participant has engaged in fraudulent, disloyal, or
criminal conduct injurious to the Company or any of its subsidiaries, including,
without limitation, embezzlement, theft, commission of a felony or dishonesty in
the course of his or her employment or service, the disclosure of trade secrets
or confidential information of the Company or its subsidiaries to persons not
entitled to receive such information, or breach of any noncompetition or
nonsolicitation covenant between the participant and the Company or a
subsidiary.

     (c)  Payment for Shares.  Full payment for shares purchased upon exercise
of Options granted under the Plan shall be made at the time the Options are
exercised in whole or in part. Payment of the purchase price shall be made in
cash or in such other form as the Board may approve, including, without
limitation, (i) by the participant's delivery to the Company of shares of Common
Stock that have been held by the participant for at least six months prior to
exercise of the Options, valued at Fair Market Value of such shares on the date
of exercise, (ii) if the Common Stock is publicly traded, pursuant to a cashless
exercise arrangement with a broker on such terms as the Board may determine; or
(iii) by any combination of such methods of payment. No shares of Common Stock
shall be issued to the participant until such payment has been made, and a
participant shall have none of the rights of a stockholder with respect to
Options held by such participant.

     (d)  Other Terms and Conditions.  The Board shall have the discretion to
determine terms and conditions, consistent with the Plan, which will be
applicable to Options, including, without limitation, performance-based criteria
for acceleration of the date on which certain Options shall become exercisable.
Options granted to the same or different participants, or at the same or
different times, need not contain similar provisions.

8.   ADJUSTMENTS TO REFLECT CAPITAL CHANGES.

     The number and kind of shares subject to outstanding grants, the exercise
price applicable to Options previously granted, and the number and kind of
shares available subsequently to be granted under the Plan shall be
appropriately adjusted to reflect any stock dividend, stock split, combination
or exchange of shares or other change in capitalization with a similar
substantive effect upon the Plan or grants under the Plan. The Board shall have
the power and sole discretion to determine the nature and amount of the
adjustment to be made in each case. The adjustment so made shall be final and
binding on all participants.


9.       DEFINITION OF CHANGE OF CONTROL.

         For purposes of this Plan, a "Change of Control" shall mean the
occurrence of any of the following events:

         (a)      the acquisition (other than solely from the Company) by any
individual, entity or group (within the meaning of Section 13(d)(3) or Section
14(d)(2) of the Exchange Act), other than the Company or any subsidiary,
affiliate (within the meaning of Rule 144 under the Securities Act of 1933, as
amended) or employee benefit plan of the Company, of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than 50% of the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors (the
"Voting Securities"); or

         (b)      a reorganization, merger, consolidation, share exchange or
recapitalization of the Company (a "Business Combination"), other than a
Business Combination in which more than 50% of the combined voting power of the
outstanding voting securities of the surviving or resulting entity immediately
following the Business Combination is held by the persons who, immediately prior
to the Business Combination, were the holders of the Voting Securities; or

         (c)      a complete liquidation or dissolution of the Company, or a
sale of all or substantially all of the Company's assets.

10.      CONSEQUENCES OF A CHANGE OF CONTROL.

         (a)      As determined in its discretion by the Board, upon a Change
of Control, any or all of the following may occur with respect to any or all of
the then-outstanding Options; (i) such Options shall be assumed by the
Acquiring Corporation (as defined below) or parent thereof on terms approved by
the Board or replaced with a comparable option or right to purchase shares of
the capital stock, or equity equivalent instrument, of the Acquiring
Corporation or parent thereof, or other comparable rights, in each case on
terms approved by the Board (such assumed and comparable options and rights,
together, the "Replacement Options"); (ii) all or a specified percentage of the
outstanding Options which have been granted under the Plan and which are not
exercisable as of the effective date of the Change of Control shall
automatically accelerate and become exercisable immediately prior to the
effective date of the Change of Control; (iii) in lieu of the issuance of
Replacement Options, holders of outstanding Options which are exercisable
immediately prior to a Change of Control (including those that become
exercisable under this Section 10(a)) may be required to surrender them in
exchange for a payment by the Company, in cash or Common Stock as determined by
the Board, of an amount equal to the amount (if any) by which the then Fair
Market Value of Common Stock subject to unexercised Options exceeds the
exercise price of those Options, with such payment to take place as of the date
of the Change of Control or such other date as the Board may prescribe; or (iv)
Options which are not exercised prior to the date specified in a notice to
Participants in advance of the Change of Control shall be terminated. The term
"Acquiring Corporation" means the surviving, continuing, successor or
purchasing corporation, as the case may be.

         (b)      Any Options that are not assumed or replaced by Replacement
Options, exercised, or cashed out prior to or concurrent with a Change of
Control (including, without limitation, any Options that are not exercisable as
of the effective date of the Change of Control) will terminate effective upon
the Change of Control or at such other time as the Board deems appropriate,
unless otherwise expressly provided in any applicable Grant Agreement.

     (c)  Notwithstanding anything in the Plan to the contrary, in the event of
a Change of Control, no actions described in the Plan (including, without
limitation, actions described in subsections (a) and (b) above) shall be taken
if such action would make the Change of Control ineligible for desired
accounting or tax treatment if, in the absence of such actions, the Change of
Control would qualify for such treatment and the Company intends to use such
treatment with respect to such Change of Control.

11.  TRANSFERABILITY OF OPTIONS.

     Unless otherwise determined by the Board, Options granted under the Plan
shall not be transferable other than by will or the laws or descent and
distribution and are exercisable during a participant's lifetime only by the
participant.

12.  WITHHOLDING.

     The Company shall have the right to deduct any taxes required by law to be
withheld in respect of grants under the Plan from amounts paid to a participant
in cash as salary, bonus or other compensation. In the Board's discretion, a
participant may be permitted to elect to have withheld from the shares
otherwise issuable to the participant, or to tender to the Company, a number of
shares of Common Stock the aggregate Fair Market Value of which does not exceed
the minimum required withholding rate for federal (including FICA), state and
local tax liabilities. Any such election must be in a form and manner
prescribed by the Board.

13.  CONSTRUCTION OF THE PLAN.

     The validity, construction, interpretation, administration and effect of
the Plan and of its rules and regulations, and rights relating to the Plan,
shall be determined solely by the Board. Any determination by the Board shall
be final and binding on all participants. The Plan shall be governed in
accordance with the laws of the State of Delaware, without regard to the
conflict of law provisions of such laws.

14.  NO RIGHT TO GRANT; NO RIGHT TO EMPLOYMENT.

     No person shall have any claim of right to be granted an Option under the
Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any employee any right to be retained in the employ of the Company or
any of its subsidiaries or as giving any consultant, advisor or director of the
Company or any of its subsidiaries any right to continue to serve in such
capacity.

15.  GRANTS NOT INCLUDABLE FOR BENEFIT PURPOSES.

     Income recognized by a participant pursuant to the provisions of the Plan
shall not be included in the determination of benefits under any employee
pension benefit plan (as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974) or group insurance or other benefit
plans applicable to the participant which are maintained by the Company or any
of its subsidiaries, except as may be specifically provided under the terms of
such plans or determined by resolution of the Board.





16.      NO STRICT CONSTRUCTION.

         No rule of strict construction shall be implied against the Company,
the Board or any other person in the interpretation of any of the terms of the
Plan, any grant made under the Plan or any rule or procedure established by the
Board.

17.      CAPTIONS.

         All Section headings used in the Plan are for convenience only, do not
constitute a part of the Plan, and shall not be deemed to limit, characterize
or affect in any way any provisions of the Plan, and all provisions of the Plan
shall be construed as if no captions had been used in the Plan.

18.      SEVERABILITY.

         Whenever possible, each provision in the Plan and every grant under
the Plan shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of the Plan or any grant under the Plan
shall be held to be prohibited by or invalid under applicable law, then such
provision shall be deemed amended to accomplish the objectives of the provision
as originally written to the fullest extent permitted by law, and all other
provisions of the Plan and every other grant under the Plan shall remain in
full force and effect.

19.      LEGENDS.

         All certificates for Common Stock delivered under the Plan shall be
subject to such transfer and other restrictions as may be provided under the
Plan or the applicable Grant Agreement or as the Board may deem advisable under
the rules, regulations and other requirements of the Securities and Exchange
Commission, any stock exchange or quotation system upon which the Common Stock
is then listed or quoted and any applicable federal or state securities laws,
and the Board may cause a legend or legends to be put on any such certificates
to make appropriate references to such restrictions.

20.      AMENDMENT.

         The Board may, by resolution, amend or revise the Plan, except that
such action shall not be effective without stockholder approval if such
stockholder approval is required to maintain the compliance of the Plan and/or
grants made to directors, executive officers or other persons with Rule 16b-3
promulgated under the Exchange Act or any successor rule. The Board may not
modify any Options previously granted under the Plan in a manner adverse to the
holders thereof without the consent of such holders, except in accordance with
the provisions of Section 8, 10 or 21.

21.      MODIFICATION FOR GRANTS OUTSIDE THE U.S.

         The Board may, without amending the Plan, determine the terms and
conditions applicable to grants of Options to participants who are foreign
nationals or employed outside the United States in a manner otherwise
inconsistent with the Plan if the Board deems such terms and conditions
necessary in order to recognize differences in local law or regulations, tax
policies or customs.


22.  EFFECTIVE DATE; TERMINATION OF PLAN.

     The Plan's Effective Date is February 3, 2004. The Plan shall terminate on
February 2, 2014, unless it is earlier terminated by the Board. Termination of
the Plan shall not affect previous grants under the Plan.