8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported): February 8, 2006

CADENCE DESIGN SYSTEMS, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware
(State or Other Jurisdiction
of Incorporation) 000-15867
(Commission File Number) 77-0148231
(I.R.S. Employer
Identification No.)

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

Registrant’s telephone number, including area code: (408) 943-1234

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 1.01. Entry into a Material Definitive Agreement.
	Item 9.01. Financial Statements and Exhibits.
SIGNATURES
EXHIBIT INDEX
EXHIBIT 10.1

Item 1.01. Entry into a Material Definitive Agreement.

Cadence Design Systems, Inc. Senior Executive Bonus Plan

     On February 8, 2006, the Compensation Committee of the Board of Directors (the “Compensation Committee”) of Cadence Design Systems, Inc. (“Cadence”) established the performance criteria and specific goals for the payment of bonuses to executive officers under the Senior Executive Bonus Plan (the “Bonus Plan”) for the first half of 2006. As set forth in the Bonus Plan, the Compensation Committee may select from a set of pre-determined performance criteria, including, but not limited to, earnings per share, return on equity, revenue, income or net income, and operating income or net operating income. For the first half of 2006, the Compensation Committee approved a minimum non-GAAP operating income target as the prerequisite for any payment under the Bonus Plan. The aggregate maximum amount payable to all eligible executive officers (i.e., the “bonus pool”) under the Bonus Plan is 5% of Cadence’s non-GAAP operating income for the first half of 2006. The maximum amount payable to any one executive officer is the lesser of $5 million or a pre-determined percentage of the aggregate bonus pool as designated by the Compensation Committee.

     The actual bonuses payable for the first half of 2006 (if any) will depend on the extent to which the goals relating to the performance criterion approved by the Compensation Committee (i.e., non-GAAP operating income) are achieved. In addition, the Compensation Committee may exercise discretion to reduce the bonuses that potentially would be payable to the executive officers under the terms of the Bonus Plan based on other factors, such as Cadence’s total revenue, net bookings, operating margin, or business group or individual goals.

     On February 8, 2006, the Compensation Committee increased the target bonus under the Bonus Plan for William Porter, Senior Vice President and Chief Financial Officer, and James S. Miller, Jr., Senior Vice President, Development, to 100% of base salary, or $450,000 for William Porter and $400,000 for James S. Miller, Jr.

Form of Incentive Stock Award Under Cadence’s 1987 Stock Incentive Plan

     On February 8, 2006, the Compensation Committee approved the form of Incentive Stock Award Agreement for grants of incentive stock under Cadence’s 1987 Stock Incentive Plan with performance-based vesting criteria.

Item 9.01. Financial Statements and Exhibits.

     (c) Exhibits

Exhibit	Description
10.1	Form of Incentive Stock Award Agreement for performance-based Incentive Stock Awards as currently in effect under the Cadence Design Systems, Inc. 1987 Stock Incentive Plan, as amended.

SIGNATURES

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

Dated: February 10, 2006

CADENCE DESIGN SYSTEMS, INC.
By:	/s/ R.L. Smith McKeithen
	R.L. Smith McKeithen
	Senior Vice President and General Counsel

EXHIBIT INDEX

Exhibit	Description
10.1	Form of Incentive Stock Award Agreement for performance-based Incentive Stock Awards as currently in effect under the Cadence Design Systems, Inc. 1987 Stock Incentive Plan, as amended.

EX-10.1

Exhibit 10.1

Cadence Design Systems, Inc.
Incentive Stock Award Agreement
1987 Stock Incentive Plan (“Plan”)

Cadence Design Systems, Inc. (the “Company”), pursuant to the Plan, hereby grants you an Incentive Stock Award as set forth below (the “Award”). This award is subject to the terms and conditions set forth in this Incentive Stock Award Agreement (this “Agreement”) and in the Plan attached hereto; provided, however, that in the event of a conflict between the terms of this Agreement and the terms of the Plan, the terms of this Agreement shall prevail. Capitalized terms that are not defined herein shall have the meanings set forth in the Plan.

Grantee:

ID Number:

Incentive Stock Award Number:

Date of Award:

Vesting Commencement Date:

Number of Shares Subject to Incentive Stock Award:

Vesting Schedule: One fourth of the Shares subject to the Award shall vest on each of the first four anniversaries of the Vesting Commencement Date, subject to the Company’s achievement of the performance goals set forth on Exhibit A attached hereto. If the performance goals for a particular year are not met, the related Shares will be forfeited.

No Section 83(b) Election. You acknowledge and agree that you will be taxed on Shares subject to this Award as they vest in accordance with the above schedule and that you will not make an election under Section 83(b) of the Internal Revenue Code of 1986, as amended, with respect to any shares granted under this Agreement. If you make such an election in violation of this Agreement then all unvested Shares shall immediately, upon discovery of the violation, be forfeited and you will indemnify and hold harmless the Company for any lost tax deductions or other adverse tax consequences suffered by the Company as a result of your violation.

Status of Award. From and after the Date of Award, Participant will be recorded as a stockholder of the Company with respect to the Shares subject to the Award (whether vested or unvested) and shall have all voting rights and rights to dividends and other distributions with respect to such Shares unless and until any such Shares are forfeited or transferred back to the Company.

Termination of Status as an Employee or Consultant. If you cease to serve as an Employee or Consultant for any reason, other than your death, the vesting of your Shares shall immediately cease on the effective date of termination of your status as an Employee or Consultant and all unvested Shares subject to this Award shall be forfeited by you and cancelled and surrendered to the Company without payment of any consideration.

Death of Participant. In the event of your death before all the shares have vested, if you shall have been in Continuous Status (as defined in the Plan) as an Employee or Consultant since the Date of Award, the number of shares scheduled to vest on the next vesting date shall be deemed to have vested immediately prior to your death.

Board Authority. Any question concerning the interpretation of this Agreement or the Plan, any adjustments required to be made under the Plan, and any controversy that may arise under the Plan or this Agreement shall be determined by the Company’s Board of Directors or a committee of directors designated by the Board pursuant to Section 4(a) of the Plan (including any subcommittee or other person(s) to whom the committee has delegated its authority) in its sole and absolute discretion. Such decision shall be final and binding.

Transfer Restrictions. Any sale, transfer, assignment, encumbrance, pledge, hypothecation, conveyance in trust, gift, transfer by bequest, devise or descent, or other transfer or disposition of any kind, whether voluntary or by operation of law, directly or indirectly, of unvested Shares shall be strictly prohibited and void.

Securities Law Compliance. The Company may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales or other subsequent transfers of any Shares issued as a result of or under this Award, including without limitation (i) restrictions under an insider trading policy, (ii) restrictions that may be necessary in the absence of an effective registration statement under the Securities Act of 1933, as amended, covering the Award and/or the Shares underlying the Award and (iii) restrictions as to the use of a specified brokerage firm or other agent for such resales or other transfers. Any sale of the Shares must also comply with other applicable laws and regulations governing the sale of such shares.

Acceptance. Your right to the Incentive Stock will be forfeited unless you deliver to the Stock Administration Department, Cadence Design Systems, Inc., 2655 Seely Avenue, San Jose, CA 95134, a counterpart of this Agreement duly executed by you, no later than _______________, unless you have received an extension from the Company in writing.

Cadence Design Systems, Inc.

By: ______________________

          Name

Title: ______________________

Date: ______________________

Acknowledged and Agreed

______________________

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Exhibit A

Performance-Based Vesting Criteria

Shares Vesting Performance Period Performance Goal

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