<SUBMISSION>
<ACCESSION-NUMBER>0000950134-04-006086
<TYPE>DEF 14A
<PUBLIC-DOCUMENT-COUNT>4
<PERIOD>20040615
<FILING-DATE>20040428
<EFFECTIVENESS-DATE>20040428
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>CADENCE DESIGN SYSTEMS INC
<CIK>0000813672
<ASSIGNED-SIC>7372
<IRS-NUMBER>770148231
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>0102
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>DEF 14A
<ACT>34
<FILE-NUMBER>001-10606
<FILM-NUMBER>04760007
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>2655 SEELY ROAD BLDG 5
<CITY>SAN JOSE
<STATE>CA
<ZIP>95134
<PHONE>4089431234
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>555 RIVER OAKS PARKWAY
<CITY>SAN JOSE
<STATE>CA
<ZIP>95134
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>ECAD INC /DE/
<DATE-CHANGED>19880609
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>f97592dedef14a.htm
<DESCRIPTION>DEFINITIVE NOTICE AND PROXY STATEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>def14a</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center"><FONT size="2"><B>SCHEDULE 14A INFORMATION</B></FONT>

<P align="center"><FONT size="2"><B>PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE<BR>
SECURITIES EXCHANGE ACT OF 1934</B></FONT>

<P align="center"><FONT size="2"><B>(AMENDMENT NO.___)</B></FONT>

<P><FONT size="2">Filed by the Registrant &#091;&nbsp;X&nbsp;&#093;
</FONT>
<P><FONT size="2">Filed by a Party other than the Registrant &#091;&nbsp;&nbsp;&nbsp;&#093;
</FONT>
<P><FONT size="2">Check the appropriate box:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="2%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="95%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&#091;&nbsp;&nbsp;&nbsp;&#093;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Preliminary Proxy Statement</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&#091;&nbsp;X&nbsp;&#093;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Definitive Proxy Statement</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&#091;&nbsp;&nbsp;&nbsp;&#093;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Confidential, for Use of the Commission Only (as permitted by Rule&nbsp;14a-6(e)(2))</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&#091;&nbsp;&nbsp;&nbsp;&#093;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Definitive Additional Materials</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&#091;&nbsp;&nbsp;&nbsp;&#093;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>&nbsp;</P>
<P>


<P align="center"><FONT size="4"><B>CADENCE DESIGN SYSTEMS, INC.</B></FONT>
<HR size="1" noshade>
<DIV align="center"><FONT size="2"><B>(Name of Registrant as Specified In Its Charter)</B></FONT></DIV>

<BR CLEAR="all">
<P align="center"><FONT size="3"><B>&nbsp;</B></FONT>
<HR size="1" noshade>
<DIV align="center"><FONT size="2"><B>(Name of Person(s) Filing Proxy Statement, if other than the Registrant)</B></FONT></DIV>

<P><FONT size="2">Payment of Filing Fee (Check the appropriate box):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="1%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="3%">&nbsp;</TD>
        <TD width="2%">&nbsp;</TD>
        <TD width="93%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&#091;&nbsp;X&nbsp;&#093;</FONT></TD>
        <TD align="left" valign="top" colspan="4"><FONT size="2">&nbsp;&nbsp;Fee not required.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&#091;&nbsp;&nbsp;&nbsp;&#093;</FONT></TD>

<TD align="left" valign="top" colspan="4"><FONT size="2">&nbsp;&nbsp;Fee computed on table below per Exchange Act Rules&nbsp;14a-6(i)(1) and 0-11.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(1)
</FONT></TD>
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" colspan="2"><FONT size="2">Title of each class of securities to which transaction applies:<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(2)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Aggregate number of securities to which transaction applies:<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(3)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule&nbsp;0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(4)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Proposed maximum aggregate value of transaction:<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(5)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Total fee paid:<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&#091;&nbsp;&nbsp;&nbsp;&#093;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" colspan="3"><FONT size="2">Fee paid previously with preliminary materials.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&#091;&nbsp;&nbsp;&nbsp;&#093;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top" colspan="3"><FONT size="2">Check box if any part of the fee is offset as provided by Exchange Act Rule&nbsp;0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(1)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Amount Previously Paid:<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(2)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Form, Schedule or Registration Statement No.:<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(3)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Filing Party:<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
        <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">
(4)
</FONT></TD>
        <TD><FONT size="2">&nbsp;</FONT></TD>
        <TD align="left" valign="top"><FONT size="2">Date Filed:<BR><BR>
        <HR size="1" noshade></FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2"></FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="4">CADENCE DESIGN SYSTEMS, INC.</FONT></B>

<DIV align="center">
<B><FONT size="2">2655 SEELY AVENUE</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">SAN JOSE, CALIFORNIA 95134</FONT></B>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B>NOTICE OF ANNUAL MEETING OF STOCKHOLDERS</B>

<DIV align="center">
<B>TO BE HELD ON JUNE&nbsp;15, 2004</B>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="left">
<FONT size="2">TO THE STOCKHOLDERS OF
</FONT>

<DIV align="left">
<FONT size="2">CADENCE DESIGN SYSTEMS, INC.:
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders of CADENCE DESIGN SYSTEMS, INC., a Delaware
corporation, will be held on June&nbsp;15, 2004, at
1:00&nbsp;p.m. Pacific time, at Cadence&#146;s principal
executive offices located at 2655 Seely Avenue, Building 5,
San&nbsp;Jose, California 95134 for the following purposes:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">1.&nbsp;To elect directors to serve until the
    2005 Annual Meeting of Stockholders and until their successors
    are elected and qualified.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">2.&nbsp;To approve the amendment and restatement
    of the 1987 Stock Option Plan, which will be renamed the 1987
    Stock Incentive Plan, to permit grants of restricted stock
    thereunder.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">3.&nbsp;To approve an amendment to the Amended
    and Restated Employee Stock Purchase Plan that will increase the
    number of shares of common stock reserved for issuance
    thereunder.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">4.&nbsp;To ratify the selection of KPMG LLP as
    independent auditors of Cadence for its fiscal year ending
    January&nbsp;1, 2005.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">5.&nbsp;To transact such other business as may
    properly come before the meeting or any adjournment or
    postponement thereof.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These items of business are more fully described
in the proxy statement accompanying this notice.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence&#146;s Board of Directors has fixed the
close of business on April&nbsp;23, 2004 as the record date for
the determination of stockholders entitled to notice of, and to
vote at, this Annual Meeting of Stockholders and at any
adjournment or postponement thereof.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">By Order of the Board of Directors
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <IMG src="f97592def9759201.gif" alt="-s- R.L. Smith McKeithen"></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">R.L. Smith McKeithen
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Secretary
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">San&nbsp;Jose, California
</FONT>

<DIV align="left">
<FONT size="2">April&nbsp;28, 2004
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND
THE MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED
PROXY AS PROMPTLY AS POSSIBLE TO ENSURE YOUR REPRESENTATION AT
THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN
IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF
YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR
SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND
YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN A PROXY ISSUED
IN YOUR NAME FROM THE RECORD HOLDER.
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">TABLE OF CONTENTS</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#101'>INFORMATION CONCERNING
    SOLICITATION AND VOTING</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#102'>CORPORATE GOVERNANCE</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#103'>CADENCE&#146;S BOARD OF
    DIRECTORS</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#104'>PROPOSAL&nbsp;1 ELECTION OF
    DIRECTORS</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#105'>PROPOSAL&nbsp;2 APPROVAL OF
    AMENDMENT AND RESTATEMENT OF THE 1987 STOCK OPTION PLAN</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#106'>PROPOSAL&nbsp;3 APPROVAL OF
    AMENDMENT TO THE AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE
    PLAN</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#107'>PROPOSAL&nbsp;4 RATIFICATION
    OF APPOINTMENT OF INDEPENDENT AUDITORS</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#108'>REPORT OF THE AUDIT
    COMMITTEE</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#109'>SECURITY OWNERSHIP OF
    CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#110'>REPORT OF THE COMPENSATION
    COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#111'>COMPENSATION OF EXECUTIVE
    OFFICERS</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#112'>EMPLOYMENT CONTRACTS,
    TERMINATION OF EMPLOYMENT AND CHANGE-OF-CONTROL AGREEMENTS</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#113'>EQUITY COMPENSATION PLAN
    INFORMATION</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#114'>PERFORMANCE MEASUREMENT
    COMPARISON</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#115'>CERTAIN TRANSACTIONS</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#116'>OTHER MATTERS</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">APPENDIX A AUDIT COMMITTEE CHARTER
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">APPENDIX B CADENCE DESIGN SYSTEMS, INC. 1987
    STOCK INCENTIVE PLAN
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">B-1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">APPENDIX C CADENCE DESIGN SYSTEMS, INC. AMENDED
    AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">C-1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="4">CADENCE DESIGN SYSTEMS, INC.</FONT></B>

<DIV align="center">
<B><FONT size="2">2655 SEELY AVENUE</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">SAN JOSE, CALIFORNIA 95134</FONT></B>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B>PROXY STATEMENT</B>

<DIV align="center">
<B>FOR ANNUAL MEETING OF STOCKHOLDERS</B>
</DIV>

<DIV align="center">
<B>JUNE&nbsp;15, 2004</B>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="left">
<A name='101'></A>

<!-- link1 "INFORMATION CONCERNING SOLICITATION AND VOTING" -->

<DIV align="center">
<B><FONT size="2">INFORMATION CONCERNING SOLICITATION AND
VOTING</FONT></B>
</DIV>

<P align="left">
<B><FONT size="2">GENERAL</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The enclosed proxy is solicited on behalf of the
Board of Directors of Cadence Design Systems, Inc., a Delaware
corporation, referred to in this proxy statement as Cadence, for
use at its Annual Meeting of Stockholders to be held on
June&nbsp;15, 2004, at 1:00&nbsp;p.m. Pacific time, or at any
adjournment or postponement thereof, for the purposes set forth
in this proxy statement and in the accompanying notice of annual
meeting. The annual meeting will be held at Cadence&#146;s
offices located at 2655 Seely Avenue, Building 5, San&nbsp;Jose,
California 95134. Cadence intends to mail this proxy statement
and accompanying proxy card on or about April&nbsp;28, 2004 to
all stockholders entitled to vote at the annual meeting.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An audio webcast of the annual meeting will also
be available on the investor relations page of Cadence&#146;s
website at www.cadence.com. The webcast will allow investors to
listen to the proceedings of the annual meeting, but
stockholders accessing the annual meeting using the Internet
will not be considered present at the annual meeting by virtue
of this access and will not be able to vote on matters presented
at the annual meeting or ask any questions of Cadence&#146;s
management. The webcast will begin promptly at 1:00&nbsp;p.m.
and may be accessed on Cadence&#146;s website for 30&nbsp;days
following the annual meeting.
</FONT>

<P align="left">
<B><FONT size="2">VOTING RIGHTS AND OUTSTANDING SHARES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Only holders of record of Cadence&#146;s
outstanding common stock, $0.01&nbsp;par value per share, at the
close of business on April&nbsp;23, 2004, referred to in this
proxy statement as the record date, will be entitled to notice
of and to vote at the annual meeting. At the close of business
on the record date, Cadence had approximately
273,446,465&nbsp;shares of common stock outstanding and entitled
to vote. Each holder of record of common stock outstanding on
the record date will be entitled to one vote for each share held
on all matters to be voted on at the annual meeting.
</FONT>

<P align="left">
<B><FONT size="2">QUORUM; ABSTENTIONS; BROKER
NON-VOTES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The presence in person or by proxy of a majority
of the shares of Cadence common stock outstanding and entitled
to vote on the record date is required for a quorum at the
annual meeting. Both abstentions and broker non-votes are
counted as present for purposes of determining the presence of a
quorum, but broker non-votes will not be counted towards the
tabulation of votes cast on proposals presented to stockholders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Broker non-votes&#148; include shares for
which a bank, broker or other nominee (i.e., record) holder has
not received voting instructions from the beneficial owner and
for which the nominee holder does not have discretionary power
to vote on a particular matter. Under the rules that govern
brokers who are record owners of shares that are held in
brokerage accounts for the beneficial owners of the shares,
brokers who do not receive voting instructions from their
clients have the discretion to vote uninstructed shares on
routine matters but have no discretion to vote them on
non-routine matters. The proposals to be voted upon at the
annual meeting include both routine matters, such as the
election of directors and the ratification of independent
</FONT>

<P align="center">

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">auditors, and non-routine matters, such as the
approval of the proposals regarding the 1987 Stock Option Plan
and the Amended and Restated Employee Stock Purchase Plan.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">VOTE REQUIRED</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The election of directors at the annual meeting
requires the affirmative vote of a plurality of the votes cast
at the annual meeting.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each other item to be voted on at the annual
meeting, including the amendment and restatement of the 1987
Stock Option Plan and the amendment to the Amended and Restated
Employee Stock Purchase Plan, requires the affirmative vote of a
majority of the shares present in person or represented by proxy
and entitled to vote at the annual meeting.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All votes will be tabulated by a representative
of the inspector of elections appointed for the annual meeting,
who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Mellon Investor Services LLC
has been appointed as the inspector of elections for the annual
meeting.
</FONT>

<P align="left">
<B><FONT size="2">REVOCABILITY OF PROXIES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any person giving a proxy pursuant to this
solicitation has the power to revoke it at any time before it is
voted. It may be revoked by filing a written notice of
revocation or a duly executed proxy bearing a later date with
the Cadence Corporate Secretary at Cadence&#146;s principal
executive offices, located at 2655 Seely Avenue, Building 5,
San&nbsp;Jose, California 95134, or it may be revoked by
attending the meeting and voting in person. Attendance at the
meeting will not, by itself, be sufficient to revoke a proxy.
Accessing the webcast of the annual meeting will not, by itself,
constitute attendance at the annual meeting and will not enable
a stockholder to revoke his, her or its proxy using the Internet.
</FONT>

<P align="left">
<B><FONT size="2">SOLICITATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence will bear the entire cost of soliciting
proxies, including the preparation, assembly, printing and
mailing of this proxy statement, the proxy card and any
additional information furnished to stockholders in connection
with the matters to be voted on at the annual meeting. Copies of
solicitation materials will be furnished to banks, brokerage
houses, fiduciaries and custodians holding shares of Cadence
common stock beneficially owned by others for forwarding to the
beneficial owners. Cadence will reimburse persons representing
beneficial owners of its common stock for their costs of
forwarding solicitation materials to the beneficial owners. The
solicitation of proxies through this proxy statement may be
supplemented by telephone, facsimile, use of the Internet, or
personal solicitation by directors, officers or other employees
of Cadence and by Georgeson Shareholder Communications, Inc.,
referred to in this proxy statement as Georgeson. Cadence has
retained Georgeson to solicit proxies for a fee of approximately
$7,500, plus a reasonable amount to cover expenses, and has
separately retained Georgeson to prepare a stockholder vote
analysis of certain proposals. No additional compensation will
be paid to directors, officers or other employees of Cadence or
its subsidiaries for their services in soliciting proxies.
</FONT>

<P align="left">
<B><FONT size="2">HOUSEHOLDING INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Securities and Exchange Commission, referred
to in this proxy statement as the SEC, has adopted rules that
allow companies and intermediaries, such as brokers, to deliver
a single copy of certain proxy materials to certain stockholders
who share the same address, a practice referred to as
&#147;householding.&#148; Some banks, brokers and other nominees
will be householding Cadence&#146;s proxy materials unless
contrary instructions are received from the affected
stockholders. Once you have received notice from your broker or
other nominee holder of your Cadence common stock that the
broker or other nominee holder will be householding proxy
materials to your address, householding will continue until you
are notified otherwise or until you revoke your consent. If, at
any time, you no longer wish to participate in householding and
would prefer to receive a separate proxy statement and annual
report, or if you are receiving multiple copies of the proxy
statement and annual report and wish to receive only one copy,
please notify your broker or other nominee holder of your
Cadence common stock. You may also request additional copies of
Cadence&#146;s annual report and/or proxy
</FONT>

<P align="center"><FONT size="2">2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">statement by writing to Cadence&#146;s Corporate
Secretary at 2655 Seely Avenue, Building 5, San&nbsp;Jose,
California 95134, or by calling Cadence&#146;s Investor
Relations Group at 1-877-236-5972. Additionally, copies of
Cadence&#146;s SEC filings and certain other submissions are
made available free of charge on the investor relations page of
Cadence&#146;s website at www.cadence.com as soon as practicable
after electronically filing or furnishing these documents with
the SEC.
</FONT>
</DIV>

<DIV align="left">
<A name='102'></A>
</DIV>

<!-- link1 "CORPORATE GOVERNANCE" -->

<P align="center">
<B><FONT size="2">CORPORATE GOVERNANCE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of the date of the mailing of this proxy
statement, Cadence&#146;s common stock is listed on the
New&nbsp;York Stock Exchange, which is referred to in this proxy
statement as the NYSE. Cadence also intends to apply for the
quotation of its common stock on the NASDAQ National
Market&#174;, which is referred to in this proxy statement as
NASDAQ, and currently expects the application process to be
completed by the date of the annual meeting. As a result,
Cadence will be, upon commencement of quotation on NASDAQ,
subject to the corporate governance and other requirements of
both the NYSE and NASDAQ.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence and its Board of Directors regularly
review and evaluate Cadence&#146;s corporate governance
practices. In light of the Sarbanes-Oxley Act of 2002, the
regulations promulgated under the Sarbanes-Oxley Act by the SEC,
and the new corporate governance listing standards of the NYSE
and NASDAQ, in July 2003, the Board approved revised Corporate
Governance Guidelines for the Board, a revised Code of Business
Conduct and a new charter for each of the Audit Committee, the
Compensation Committee and the Corporate Governance and
Nominating Committee. The guidelines, code and charters were
reviewed and updated following the SEC&#146;s approval of the
final NYSE and NASDAQ corporate governance listing standards in
November 2003. As a result, the Board approved amended Corporate
Governance Guidelines and charters for each of the Audit
Committee, the Compensation Committee and the Corporate
Governance and Nominating Committee in February 2004.
Cadence&#146;s corporate governance documents are posted on the
investor relations page of its website at www.cadence.com.
Printed copies of these documents are also available to
stockholders upon written request directed to Cadence&#146;s
Corporate Secretary at 2655 Seely Avenue, Building 5,
San&nbsp;Jose, California 95134.
</FONT>

<P align="left">
<B><FONT size="2">CORPORATE GOVERNANCE GUIDELINES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board of Directors of Cadence has adopted
Corporate Governance Guidelines for the Board, which guidelines
cover topics relating to the Board including, but not limited
to, the selection and composition of the Board, Board
leadership, compensation, responsibilities of directors, access
to senior management and outside advisors, meeting procedures
and committee matters. The Corporate Governance and Nominating
Committee periodically reviews the Corporate Governance
Guidelines, which may be amended by the Board at any time.
</FONT>

<P align="left">
<B><FONT size="2">CODE OF BUSINESS CONDUCT</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence adopted a Code of Business Conduct to
provide standards for ethical conduct in dealing with agents,
customers, suppliers, political entities and others. The Code of
Business Conduct applies to all Cadence directors, officers and
employees (and those of its subsidiaries), including
Cadence&#146;s Chief Executive Officer and Chief Financial
Officer. Compliance with the Code of Business Conduct is a
condition of continued service or employment. The Code of
Business Conduct covers topics including, but not limited to,
confidentiality of information, conflicts of interest,
compliance with federal and state securities laws, employment
practices, payment practices and compliance with other laws.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence&#146;s Legal Department assists
directors, officers and employees in complying with the Code of
Business Conduct. Each person subject to the Code of Business
Conduct has the responsibility to report any violations of the
Code, unethical business practices or suspected illegal
activities to the Legal Department or, in the event the report
concerns a Cadence executive officer, to the General Counsel or
to the Corporate Governance and Nominating Committee. A Cadence
director may satisfy the reporting obligation by making a report
to the Corporate Governance and Nominating Committee.
</FONT>

<P align="center"><FONT size="2">3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any waiver of a provision of the Code of Business
Conduct with respect to a director or executive officer may only
be made by the Board or its Corporate Governance and Nominating
Committee. Cadence will file with the SEC on Form&nbsp;8-K
amendments to the Code of Business Conduct and waivers of its
provisions made with respect to any director or executive
officer as required under applicable SEC rules.
</FONT>

<DIV align="left">
<A name='103'></A>
</DIV>

<!-- link1 "CADENCE&#146;S BOARD OF DIRECTORS" -->

<P align="center">
<B><FONT size="2">CADENCE&#146;S BOARD OF DIRECTORS</FONT></B>

<P align="left">
<B><FONT size="2">DIRECTOR INDEPENDENCE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence&#146;s Corporate Governance Guidelines
require that at least a majority of the Board of Directors be
&#147;independent directors&#148; within the meaning of the
corporate governance listing standards of the NYSE and NASDAQ.
To be &#147;independent&#148; a director must not have a
material relationship with Cadence, either directly or as a
partner, stockholder or officer of an organization that has a
relationship with Cadence. In addition, a director must not have
a relationship that, in the opinion of the Board, would
interfere with his or her exercise of independent judgment in
carrying out the responsibilities of a Cadence director. In
making these determinations, the Board considers all relevant
facts and circumstances and applies the following standards:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">A director who is employed by Cadence or any of
    its affiliates, or whose immediately family member is an
    executive officer of Cadence or any of its affiliates, is not
    independent until three years after the end of the employment
    relationship.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">A director who receives, or whose immediate
    family member receives, more than $60,000&nbsp;per year in
    payments from Cadence or any of its affiliates, other than
    compensation for Board or Board committee service, is not
    independent until three years after his or her receipt of such
    payments.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">A director who is, or whose immediate family
    member is, employed by or affiliated with a present or former
    internal or external auditor of Cadence is not independent until
    three years after the end of the employment, affiliation or
    auditing relationship.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">A director who is, or whose immediate family
    member is, a current partner of Cadence&#146;s outside auditor
    is not independent.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">A director who was, or whose immediate family
    member was, a partner or employee of Cadence&#146;s outside
    auditor who worked on Cadence&#146;s audit is not independent
    until three years after the end of the employment relationship.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">A director who is, or whose immediate family
    member is, employed as an executive officer of another company
    where any of Cadence&#146;s present executive officers serve on
    the compensation committee of the other company is not
    independent until three years after the end of the employment
    relationship.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">A director who is an executive officer or
    employee, or whose immediate family member is an executive
    officer, of a company that makes payments to, or receives
    payments from, Cadence for property or services in an amount
    exceeding the greater of $1&nbsp;million or 2% of the other
    company&#146;s consolidated gross revenues in any single fiscal
    year is not independent until three years after the payments are
    made or received.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">A director who is, or whose immediate family
    member is, a partner in, or a controlling stockholder or
    executive officer of, any organization to which Cadence made, or
    from which Cadence received, payments for property or services
    that exceed the greater of 5% of the recipient&#146;s
    consolidated gross revenues or $200,000, other than payments
    arising solely from investments in Cadence&#146;s securities or
    payments under non-discretionary charitable contribution
    matching programs, is not independent until three years after
    such payments are made or received.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board has determined that Ms.&nbsp;Bostrom,
Mr.&nbsp;Lucas, Mr.&nbsp;Maloney, Mr.&nbsp;Scalise,
Dr.&nbsp;Shoven, Mr.&nbsp;Siboni and Mr.&nbsp;Tan, who
constitute a majority of the Board, are &#147;independent
directors&#148; within the meaning of the corporate governance
listing standards of the NYSE and NASDAQ.
</FONT>

<P align="center"><FONT size="2">4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">BOARD MEETINGS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the fiscal year ended January&nbsp;3,
2004, Cadence&#146;s Board of Directors held eight meetings, in
addition to taking other actions by unanimous written consent in
lieu of a meeting. With the exception of Mr.&nbsp;Maloney, each
Board member attended more than 75% of the meetings of the
Board, and of the committees on which he or she served, that
were held during the period for which he or she was a director
or committee member during fiscal 2003. Cadence&#146;s Corporate
Governance Guidelines encourage directors to attend its annual
meetings of stockholders. Six of Cadence&#146;s eight directors
attended the 2003 Annual Meeting of Stockholders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under Cadence&#146;s Corporate Governance
Guidelines, Cadence&#146;s non-management directors meet at
regularly scheduled executive sessions without management. In
addition, Cadence&#146;s independent directors meet separately
at regularly scheduled sessions. As Chairman of the Board and as
a non-management and independent director, Mr.&nbsp;Lucas
presides over the meetings of the non-management directors and
the independent directors pursuant to Cadence&#146;s Corporate
Governance Guidelines.
</FONT>

<P align="left">
<B><FONT size="2">CONTACTING THE BOARD OF DIRECTORS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Stockholders interested in communicating directly
with the Board, the Chairman, or the non-management directors as
a group may do so by sending a letter to the Cadence Board of
Directors, c/o&nbsp;the Office of the Corporate Secretary,
Cadence Design Systems, Inc., 2655 Seely Avenue,
Building&nbsp;5, San&nbsp;Jose, California 95134. Inquiries and
other communications may be submitted anonymously and
confidentially. The Office of the Corporate Secretary will
review the correspondence and forward it to the Chairman of the
Board, Chairman of the Corporate Governance and Nominating
Committee, Audit Committee or to any individual director, group
of directors or Committee of the Board to whom the communication
is directed, as applicable, if the communication is relevant to
Cadence&#146;s business and financial operations, policies and
corporate philosophies.
</FONT>

<P align="left">
<B><FONT size="2">COMMITTEES OF THE BOARD OF DIRECTORS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board of Directors has the following standing
committees:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Audit Committee,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Compensation Committee,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Corporate Governance and Nominating
    Committee,&nbsp;and
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Venture Committee.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each of the Board committees has a written
charter approved by the Board. The charters of the Audit
Committee, the Compensation Committee and the Corporate
Governance and Nominating Committee are posted on the investor
relations page of Cadence&#146;s website at www.cadence.com and
the Audit Committee charter is attached to this proxy statement
as <U>Appendix&nbsp;A</U>. The members of the committees are
identified in the following table.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="46%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Corporate Governance</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Director</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Audit</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">and Nominating</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Venture</FONT></B></TD>
</TR>

<TR>
    <TD colspan="17"></TD>
</TR>

<TR>
    <TD colspan="17" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">H. Raymond Bingham
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2"><FONT face="wingdings">&#252;</FONT></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="17" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Susan L. Bostrom
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2"><FONT face="wingdings">&#252;</FONT></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="17" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Donald L. Lucas
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2"><FONT face="wingdings">&#252;</FONT></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Chair</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2"><FONT face="wingdings">&#252;</FONT></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Chair</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="17" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sean M. Maloney
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="17" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dr.&nbsp;Alberto Sangiovanni-Vincentelli
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="17" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">George M. Scalise
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2"><FONT face="wingdings">&#252;</FONT></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2"><FONT face="wingdings">&#252;</FONT></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="17" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dr.&nbsp;John B. Shoven
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2"><FONT face="wingdings">&#252;</FONT></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Chair</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="17" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Roger S. Siboni
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Chair</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2"><FONT face="wingdings">&#252;</FONT></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="17" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lip-Bu Tan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="17" align="left"><HR size="1" noshade></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><FONT size="2">Audit Committee</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board has determined that all members of the
Audit Committee are independent as defined in the NYSE and
NASDAQ corporate governance listing standards and
Rule&nbsp;10A-3 of the Securities Exchange Act of 1934, as
amended, which is referred to in this proxy statement as the
Exchange Act. The Board has also determined that each of
Mr.&nbsp;Lucas, Dr.&nbsp;Shoven and Mr.&nbsp;Siboni,
constituting all the members of the Audit Committee, is an
&#147;audit committee financial expert&#148; as defined by rules
promulgated by the SEC. In addition, the Board has determined
that each Audit Committee member is financially literate and is
able to read and understand fundamental financial statements as
required by the corporate governance listing standards of the
NYSE and NASDAQ. Pursuant to the Corporate Governance Guidelines
of the Board, the Board has determined that Mr.&nbsp;Lucas&#146;
service on the audit committees of three other public companies
does not limit his ability to effectively serve on
Cadence&#146;s Audit Committee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Audit Committee charter was most recently
amended in February 2004 and complies with the NYSE and NASDAQ
corporate governance listing standards. The duties and
responsibilities of the Audit Committee include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Appointing, retaining, compensating, evaluating,
    overseeing and terminating Cadence&#146;s independent auditors
    and evaluating the lead partner of the independent auditors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Pre-approving all audit and permissible non-audit
    services to be provided by the independent auditors and
    establishing policies and procedures for that pre-approval;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reviewing with the independent auditors their
    report regarding:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the internal quality controls of the independent
    auditors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any material issues raised by the review of the
    independent auditors&#146; internal quality controls or with
    respect to any audit carried out by the independent auditors in
    the preceding five years;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">all relationships between Cadence and the
    independent auditors;
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reviewing with the independent auditors the scope
    and results of the annual audit and Cadence&#146;s annual and
    quarterly financial statements, reports and disclosures;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reviewing with management Cadence&#146;s annual
    and quarterly financial statements, reports and disclosures, and
    recommending to the Board whether the financial statements
    should be included in Cadence&#146;s annual report on SEC
    Form&nbsp;10-K;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reviewing and discussing the adequacy and
    effectiveness of Cadence&#146;s internal controls and disclosure
    controls and procedures.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Audit Committee held eleven meetings during
fiscal 2003. See &#147;Report of the Audit Committee&#148; below
for more information.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><FONT size="2">Compensation Committee</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board has determined that all Compensation
Committee members are independent as defined in the NYSE and
NASDAQ corporate governance listing standards. In addition, all
Compensation Committee members are &#147;outside directors&#148;
within the meaning of Section&nbsp;162(m) of the Internal
Revenue Code, referred to in this proxy statement as the Code,
to allow Cadence a tax deduction for certain employee
compensation exceeding $1,000,000. All Compensation Committee
members are also &#147;outside directors&#148; within the
meaning of Exchange Act Rule&nbsp;16b-3 to exempt certain option
grants and similar transactions from the short swing profits
prohibition of Section&nbsp;16 of the Exchange Act.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Compensation Committee charter was most
recently amended in February 2004 and complies with the NYSE
corporate governance listing standards. There are no comparable
requirements under the NASDAQ listing standards. The duties and
responsibilities of the Compensation Committee include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reviewing and approving corporate goals and
    objectives relevant to the compensation of Cadence&#146;s CEO,
    evaluating the CEO&#146;s performance in light of those goals
    and objectives and determining and approving, either as a
    committee or together with the independent directors of the
    Board, the CEO&#146;s compensation;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Overseeing the evaluation of Cadence&#146;s
    management;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reporting to the Board, at least annually, on CEO
    succession planning;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reviewing compensation programs and determining
    the compensation of Cadence&#146;s executive officers;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Producing an annual report on executive
    compensation for inclusion in Cadence&#146;s proxy
    statement;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reviewing, administering and amending
    Cadence&#146;s general compensation plans including:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">stock option and stock purchase plans;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">benefit programs;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">bonus plans.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Compensation Committee held two meetings
during fiscal 2003. See &#147;Report of the Compensation
Committee of the Board of Directors on Executive
Compensation&#148; below for more information.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><FONT size="2">Corporate Governance and Nominating
    Committee</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board has determined that all Corporate
Governance and Nominating Committee members are independent as
defined in the NYSE and the NASDAQ corporate governance listing
standards.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Corporate Governance and Nominating Committee
charter was most recently amended in February 2004 and complies
with the NYSE corporate governance listing standards. There are
no comparable requirements under the NASDAQ listing standards.
The duties and responsibilities of the Corporate Governance and
Nominating Committee include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Determining any Board criteria for selecting new
    directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Interviewing and evaluating candidates for Board
    membership;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Evaluating director nominees recommended by
    stockholders;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Selecting or recommending that the Board select
    director nominees for election at the next annual meeting of
    stockholders;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reviewing Cadence&#146;s Corporate Governance
    Guidelines and Code of Business Conduct;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Overseeing the administration of Cadence&#146;s
    Code of Business Conduct and administering the Code of Business
    Conduct with respect to Cadence&#146;s directors and executive
    officers;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reviewing any related party transactions
    involving Cadence directors and executive officers;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Overseeing the annual evaluation of the Board and
    its committees.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Corporate Governance and Nominating Committee
employs a variety of methods to identify and evaluate director
nominees. The committee periodically assesses the appropriate
size of the Board, and whether any vacancies on the Board are
expected due to retirement or otherwise, and the need for
particular expertise on the Board. If vacancies are anticipated
or otherwise arise, the committee considers potential candidates
for director. Additionally, candidates may come to the attention
of the committee through current Board members, officers,
professional search firms, stockholders or other persons. These
candidates are evaluated at regular or special meetings of the
committee, and may be considered at any point during the year.
In connection with this evaluation, the Corporate Governance and
Nominating Committee determines whether to interview the
prospective nominee, and as warranted, one or more members of
the committee, and others as appropriate, interview prospective
nominees in person or by telephone. After completing this
evaluation and interview, the committee makes a recommendation
to the full Board as to the persons who should be nominated or
elected by the Board, and the Board determines whether to
reject, elect or nominate the candidate, as the case may be,
after considering the recommendation of the committee. The
Corporate Governance and Nominating Committee will consider
individuals recommended by stockholders for nomination as a
director pursuant to the provisions of Cadence&#146;s Bylaws
relating to stockholder nominations. A stockholder who wishes to
recommend a prospective nominee for the Board should notify
Cadence&#146;s Corporate Secretary or the Corporate Governance
and Nominating Committee in writing with the supporting material
required by Cadence&#146;s Bylaws and described under
&#147;Stockholder Proposals and Nominations&#148; below, and any
other material the stockholder considers necessary or
appropriate.
</FONT>

<P align="center"><FONT size="2">7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">While the Board currently has no defined minimum
criteria for consideration or service as a director, the
Corporate Governance and Nominating Committee evaluates
prospective nominees against the standards and qualifications
set out in Cadence&#146;s Corporate Governance Guidelines and
other relevant factors as it deems appropriate, including the
current composition of the Board, and the need for particular
expertise, all with reference to issues of experience, judgment,
skills such as an understanding of electronic design and
semiconductor technologies, and other relevant characteristics,
all in the context of an assessment of the perceived needs of
the Board at that point in time and applicable law.
Specifically, at least a majority of directors on the Board must
be &#147;independent&#148; as defined in the NYSE and NASDAQ
corporate governance listing standards and as determined by the
Board.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Corporate Governance and Nominating Committee
held one meeting during fiscal 2003.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><FONT size="2">Venture Committee</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Venture Committee is comprised of
Messrs.&nbsp;Bingham and Lucas (Chairman). The Venture Committee
advises the Board and acts on behalf of Cadence in monitoring
the investments of Telos Venture Partners L.P. and Telos Venture
Partners&nbsp;II, L.P., which are venture capital funds in which
Cadence is a limited partner. The Venture Committee held four
meetings during fiscal 2003. See &#147;Components of 2003
Executive Compensation&nbsp;&#151; Venture Investments&#148; in
the Report of the Compensation Committee of the Board of
Directors on Executive Compensation below for more information.
</FONT>

<P align="left">
<B><FONT size="2">COMPENSATION OF DIRECTORS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2003, each non-employee director of Cadence,
other than the Chairman of the Board, received an annual
retainer of $40,000. Mr.&nbsp;Lucas was paid an annual retainer
of $120,000 for his service as Chairman of the Board. In
addition to the annual retainer, each director serving as the
chairman of a Board committee was paid an annual fee of $35,000
for such service. For the fiscal year ended January&nbsp;3,
2004, the total cash compensation paid to the current
non-employee directors, excluding the consulting fee paid to
Dr.&nbsp;Sangiovanni-Vincentelli described below, was $523,333,
which includes $14,583 earned by Mr.&nbsp;Siboni in 2002 but
paid in 2003. The Board members were also eligible for
reimbursement of their expenses incurred in connection with
attendance at Board meetings in accordance with Cadence policy.
Directors who are Cadence employees do not receive additional
compensation for service on the Board.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Effective January&nbsp;1, 2004, each non-employee
director, other than the Chairman of the Board, will receive an
annual retainer of $30,000, and the Chairman of the Board will
receive an annual retainer of $50,000. In addition to the annual
retainer, non-employee directors who serve as the Chairman of
the Audit Committee or the Venture Committee will receive an
annual fee of $40,000, and non-employee directors who serve as
the Chairman of the Compensation Committee or the Corporate
Governance and Nominating Committee will receive an annual fee
of $20,000. Non-employee directors will also be paid $2,000 for
each Board or committee meeting attended in person and $1,000
for each Board or committee meeting attended by telephone. No
additional compensation will be paid when the Board or a
committee acts by unanimous written consent in lieu of a
meeting. Non-employee directors will remain eligible for
reimbursement of their expenses incurred in connection with
attendance at Board meetings in accordance with Cadence policy.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each non-employee director also receives stock
option grants under Cadence&#146;s 1995&nbsp;Directors Stock
Option Plan, as amended, which is referred to in this proxy
statement as the Directors Plan. A &#147;non-employee
director&#148; is a Cadence director who is not otherwise an
employee of Cadence or an affiliate of Cadence. Only
non-employee directors are eligible to receive options under the
Directors Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Directors Plan, each non-employee
director is automatically granted an option upon joining the
Board to purchase the number of shares of Cadence common stock
equal to 6,250 multiplied by the number of full calendar
quarters between the date the director&#146;s service begins and
the next April 1st. A director is considered to have served the
entire calendar quarter if he or she becomes a director at any
time during the first half of the quarter. These initial grants
vest and become exercisable in full on the
March&nbsp;31st&nbsp;following the grant date and have an
exercise price equal to the fair market value of Cadence common
stock on the grant date.
</FONT>

<P align="center"><FONT size="2">8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, every April 1st, each non-employee
director is automatically granted an option to purchase
25,000&nbsp;shares of Cadence common stock and a non-employee
director serving as Chairman of the Board is automatically
granted an additional option to purchase 25,000&nbsp;shares of
common stock. These annual option grants vest and become
exercisable in full on the March&nbsp;31st following the grant
date and have an exercise price equal to the fair market value
of Cadence common stock on the grant date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2004, the Board amended the Directors
Plan to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Delete the automatic annual grant of an option to
    purchase 12,500&nbsp;shares of common stock to non-employee
    directors serving as chairman of one Board committee and as a
    member of at least one additional Board committee, but not
    serving as Chairman of the Board;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Delete the automatic grant of an option to
    purchase 33,750&nbsp;shares of common stock to non-employee
    directors on the date of his or her initial selection to serve
    on the Venture Committee;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Delete the automatic grant of an option to
    purchase 33,750&nbsp;shares of common stock to non-employee
    directors on the date of his or her initial selection to serve
    as the Chairman of the Venture Committee;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Delete the one-time grant of an option to
    purchase 101,250&nbsp;shares of common stock to a non-employee
    director who completes five years of service as Chairman of the
    Board.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of April&nbsp;23, 2004, 1,947,500 options
under the Directors Plan were outstanding at exercise prices
ranging from $8.56 to $34.31 per share, with a weighted average
exercise price of $18.68.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under Cadence&#146;s 2002 Deferred Compensation
Venture Investment Plan, directors may elect to defer receipt of
all or any portion of the compensation payable to them by
Cadence. Compensation deferred under this plan is invested in
Telos Venture Partners&nbsp;II, L.P., as further described above
and in the &#147;Report of the Compensation Committee of the
Board of Directors on Executive Compensation&#148; below. During
2003, no non-employee director deferred any compensation under
the 2002 Deferred Compensation Venture Investment Plan and the
following non-employee directors received cash and stock
distributions from the 2002 Deferred Compensation Venture
Investment Plan that were deferred and invested in
Cadence&#146;s 1994 Deferred Compensation Plan described below:
Mr.&nbsp;Lucas, $11,857; and Mr.&nbsp;Scalise, $2,442.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Directors may also elect to defer compensation
payable to them, including income realized upon the exercise of
stock options, under Cadence&#146;s 1994 Deferred Compensation
Plan. These deferred compensation payments are held in accounts
with values indexed to the performance of selected mutual funds,
employee self-directed accounts or money market accounts. In the
case of option gain deferral, the accounts are indexed to the
performance of Cadence common stock. In 2003, the following
amounts were deferred by non-employee directors:
Ms.&nbsp;Bostrom, $40,000; Dr.&nbsp;Sangiovanni-Vincentelli,
$48,750; Mr.&nbsp;Scalise, $40,000; Dr.&nbsp;Shoven, $75,000;
and Mr.&nbsp;Siboni, $89,583, of which $14,583 for
Mr.&nbsp;Siboni was earned in 2002 but paid in 2003. In
addition, Mr.&nbsp;Bingham deferred the income realized upon the
net exercise of 50,000 options otherwise scheduled to expire in
2003 pursuant to an election made in 2002 to defer this income.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2003, directors were given the opportunity to
elect to transfer amounts previously deferred under the 2002
Deferred Compensation Venture Investment Plan that had not
already been invested by Telos Venture Partners&nbsp;II, L.P. to
accounts maintained under the 1994 Deferred Compensation Plan.
The account transfers occurred in 2004. The following amounts
were transferred by non-employee directors: Mr.&nbsp;Lucas,
$376,750; and Mr.&nbsp;Scalise, $4,601.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, all non-employee directors may
participate in the Cadence Board of Directors Medical Plan.
Under the terms of this plan, Cadence pays 80% of the premiums
for participating directors and their dependents. Mr.&nbsp;Lucas
is the only director who currently maintains health insurance
coverage under this plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to a consulting agreement, in 2003,
Dr.&nbsp;Sangiovanni-Vincentelli was paid $267,917 by Cadence
for consulting services performed in 2003.
Dr.&nbsp;Sangiovanni-Vincentelli is also reimbursed for the
reasonable costs and expenses incurred in the performance of
work under the consulting agreement in accordance with Cadence
policy. However, the total payments received by
Dr.&nbsp;Sangiovanni-Vincentelli under the consulting agreement
may not exceed a certain pre-determined amount. The consulting
agreement also contains
</FONT>

<P align="center"><FONT size="2">9
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">confidentiality and non-solicitation provisions
in favor of Cadence. Dr.&nbsp;Sangiovanni-Vincentelli&#146;s
consulting services consisted of providing technical and
strategic advice to Cadence&#146;s CEO with respect to the
direction of Cadence, potential acquisitions, and organizational
and customer relations matters, serving as facilitator in
customer and partner meetings to discuss industry trends and
collaboration on technology and business issues, representing
Cadence in industry, technical and government events, and
participating in setting the direction of the Cadence Berkeley
Labs and of Cadence&#146;s research partnerships.
Dr.&nbsp;Sangiovanni-Vincentelli has provided consulting
services to Cadence, or one of its predecessor corporations,
since 1983, and is expected to render similar services in 2004.
Cadence does not have any comparable arrangements with other
consultants and, as a result, has no basis for comparing the
terms of Dr.&nbsp;Sangiovanni-Vincentelli&#146;s arrangement
with others.
</FONT>
</DIV>

<DIV align="left">
<A name='104'></A>
</DIV>

<!-- link1 "PROPOSAL 1 ELECTION OF DIRECTORS" -->

<P align="center">
<B><FONT size="2">PROPOSAL&nbsp;1</FONT></B>

<P align="center">
<B><FONT size="2">ELECTION OF DIRECTORS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Corporate Governance and Nominating Committee
of the Board has recommended, and the Board has nominated, the
nine nominees named below for election to Cadence&#146;s Board
of Directors. Each director elected at the annual meeting will
hold office until the 2005 Annual Meeting of Stockholders and
until his or her successor is elected and qualified, or until
the director&#146;s earlier death, resignation or removal. Each
nominee listed below is currently a Cadence director. Except for
Lip-Bu Tan, who joined the Board in February 2004, all of the
directors previously have been elected by Cadence&#146;s
stockholders.
</FONT>

<P align="left">
<B><FONT size="2">VOTE REQUIRED AND BOARD
RECOMMENDATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Shares represented by executed proxies will be
voted <B>FOR </B>the election of the nine nominees named below,
if authority to do so is not withheld. Directors are elected by
a plurality of the votes cast at the annual meeting. If any
nominee should be unavailable for election as a result of
unexpected circumstances, shares will be voted for the election
of any substitute nominee named by the Board. Each person
nominated for election has agreed to be named in this proxy
statement and to serve if elected, and Cadence has no reason to
believe that any nominee will be unable to serve.
</FONT>

<P align="center">
<B><FONT size="2">THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN
FAVOR OF</FONT></B>

<DIV align="center">
<B><FONT size="2">EACH NAMED NOMINEE.</FONT></B>
</DIV>

<P align="center"><FONT size="2">10
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">NOMINEES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The names of the nominees and certain information
about them, including term of service as a Cadence director and
age as of the 2004 Annual Meeting of Stockholders, are set forth
below:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="34%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name and</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Principal Occupation</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Business Experience and Directorships</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <B><FONT size="2">H. Raymond Bingham<BR>
    </FONT></B><FONT size="2">58 Years Old<BR>
    Director Since 1997<BR>
    President and Chief Executive Officer,<BR>
    Cadence Design Systems, Inc.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">H. Raymond Bingham has served as President and
    Chief Executive Officer of Cadence since May 1999. From 1993 to
    April 1999, Mr.&nbsp;Bingham served as Executive Vice President
    and Chief Financial Officer of Cadence. Prior to joining
    Cadence, Mr.&nbsp;Bingham was Executive Vice President and Chief
    Financial Officer of Red Lion Hotels, Inc. for eight years.
    Mr.&nbsp;Bingham also is a director of KLA-Tencor Corporation,
    Onyx Software Corporation and Oracle Corporation.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <B><FONT size="2">Susan L. Bostrom<BR>
    </FONT></B><FONT size="2">43 Years Old<BR>
    Director Since 2001<BR>
    Senior Vice President, Internet Business Solutions Group and
    Worldwide Government Affairs, Cisco Systems, Inc.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Susan L. Bostrom has served as Senior Vice
    President, Internet Business Solutions Group of Cisco Systems,
    Inc. since 1998 and was also given responsibility for Worldwide
    Government Affairs in October 2002. Ms.&nbsp;Bostrom joined
    Cisco as its Vice President of Applications and Services
    Marketing in 1997. Prior to joining Cisco, Ms. Bostrom served as
    Senior Vice President of Global Marketing and Strategic Planning
    at FTP Software Inc. from 1996 to 1997. From 1993 to 1996,
    Ms.&nbsp;Bostrom served as Director of Strategic Marketing at
    National Semiconductor Corporation. From 1986 to 1993,
    Ms.&nbsp;Bostrom worked at McKinsey and Company, a management
    consulting firm.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <B><FONT size="2">Donald L. Lucas<BR>
    </FONT></B><FONT size="2">74 Years Old<BR>
    Director Since 1988<BR>
    Chairman of the Board,<BR>
    Cadence Design Systems, Inc. and<BR>
    private venture capital investor
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Donald L. Lucas has served as Chairman of the
    Board of Cadence since 1988. From its inception in 1983 until
    1987, Mr.&nbsp;Lucas served as Chairman of the Board and a
    director of SDA Systems, Inc., a predecessor of Cadence.
    Mr.&nbsp;Lucas has been a private venture capital investor since
    1960. Mr.&nbsp;Lucas also serves as a director of Macromedia,
    Inc., Oracle Corporation and PDF Solutions, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <B><FONT size="2">Sean M. Maloney<BR>
    </FONT></B><FONT size="2">47&nbsp;Years Old<BR>
    Director Since 2002<BR>
    Executive Vice President,<BR>
    Intel Corporation and<BR>
    General Manager,<BR>
    Intel Communications Group
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Sean M. Maloney has served as Executive Vice
    President of Intel Corporation and General Manager of the Intel
    Communications Group since 2001. Prior to his current position,
    Mr.&nbsp;Maloney was Executive Vice President of Intel
    Corporation and Director of the Sales and Marketing Group.
    Mr.&nbsp;Maloney has been employed by Intel since 1982.
    Mr.&nbsp;Maloney is also a member of the Board of Directors of
    the U.S./China Business Council.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">11
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="34%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name and</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Principal Occupation</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Business Experience and Directorships</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <B><FONT size="2">Dr.&nbsp;Alberto Sangiovanni- Vincentelli<BR>
    </FONT></B><FONT size="2">56&nbsp;Years Old<BR>
    Director Since 1992<BR>
    Professor of Electrical Engineering and Computer Sciences,<BR>
    University of California, Berkeley
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Dr. Alberto Sangiovanni-Vincentelli serves as a
    consultant to Cadence providing services as Chief Technology
    Advisor of Cadence, and has served as a consultant to Cadence,
    or one of its predecessor corporations, since 1983.
    Dr.&nbsp;Sangiovanni-Vincentelli was a co-founder of SDA
    Systems, Inc., a predecessor of Cadence.
    Dr.&nbsp;Sangiovanni-Vincentelli has been a Professor of
    Electrical Engineering and Computer Sciences at the University
    of California, Berkeley since 1976, where he holds The Edgar
    L.&nbsp;&#38; Harold H. Buttner Chair of Electrical Engineering
    and also serves as Vice Chair for Industrial Relations for the
    department of Electrical Engineering and Computer Sciences. In
    1998, Dr.&nbsp;Sangiovanni-Vincentelli was elected to the
    National Academy of Engineering and, in 2001, was honored by the
    Electronic Design Automation Consortium with the Kaufman Award,
    honoring an individual who has contributed to creating or
    driving technological advances that have had measurable impact
    on the productivity of design engineers.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <B><FONT size="2">George M. Scalise<BR>
    </FONT></B><FONT size="2">70&nbsp;Years Old<BR>
    Director Since 1989<BR>
    President,<BR>
    Semiconductor Industry Association
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">George M. Scalise has served as President of the
    Semiconductor Industry Association, an association of
    semiconductor manufacturers and suppliers, since June 1997.
    Mr.&nbsp;Scalise served as Executive Vice President and Chief
    Administrative Officer of Apple Computer, Inc. from March 1996
    to May 1997. Mr.&nbsp;Scalise also served as Senior Vice
    President of Planning and Development and Chief Administrative
    Officer of National Semiconductor Corporation from 1991 to 1996.
    Mr.&nbsp;Scalise is the Chairman of the Federal Reserve Bank of
    San&nbsp;Francisco and currently serves on President George W.
    Bush&#146;s Council of Advisors on Science and Technology.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <B><FONT size="2">Dr.&nbsp;John B. Shoven<BR>
    </FONT></B><FONT size="2">57 Years Old<BR>
    Director Since 1992<BR>
    Professor of Economics,<BR>
    Stanford University
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Dr.&nbsp;John B. Shoven is currently the Charles
    R. Schwab Professor of Economics at Stanford University, where
    he has taught since 1973. Dr.&nbsp;Shoven has served as director
    of the Stanford Institute for Economics Policy Research since
    November 1999 to the present and from 1989 to 1993.
    Dr.&nbsp;Shoven also served as Chairman of the Economics
    Department at Stanford University from 1986 to 1989 and as Dean
    of the School of Humanities and Science from 1993 to 1998.
    Dr.&nbsp;Shoven serves as a director of Watson Wyatt&nbsp;&#38;
    Company Holdings and PalmSource, Inc. and is a member of the
    Mountain View Board of American Century Funds.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <B><FONT size="2">Roger S. Siboni<BR>
    </FONT></B><FONT size="2">49 Years Old<BR>
    Director Since 1999<BR>
    Chairman of the Board of Directors,<BR>
    E.piphany, Inc.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Roger S. Siboni is currently the Chairman of the
    Board of E.piphany, Inc., a software company which provides
    customer relationship management solutions. Mr.&nbsp;Siboni
    served as President and Chief Executive Officer of E.piphany,
    Inc. from August 1998 to July 2003. Prior to joining E.piphany,
    Mr.&nbsp;Siboni spent more than 20&nbsp;years at KPMG LLP, most
    recently as its Deputy Chairman and Chief Operating Officer.
    Mr.&nbsp;Siboni also serves as a director of FileNET, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <B><FONT size="2">Lip-Bu Tan<BR>
    </FONT></B><FONT size="2">44 Years Old<BR>
    Director Since 2004<BR>
    Chairman,<BR>
    Walden International
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Lip-Bu Tan is the founder and Chairman of Walden
    International, an international venture capital firm.
    Mr.&nbsp;Tan currently serves as a director of Centillium
    Communications, Inc., Creative Technology Ltd., Flextronics
    International Ltd., Integrated Silicon Solution, Inc., and SINA
    Corporation. Mr.&nbsp;Tan received an M.S. in Nuclear
    Engineering from the Massachusetts Institute of Technology, an
    MBA from the University of San&nbsp;Francisco, and a B.S. from
    Nanyang University in Singapore.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">12
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='105'></A>
</DIV>

<!-- link1 "PROPOSAL 2 APPROVAL OF AMENDMENT AND RESTATEMENT OF THE 1987 STOCK OPTION PLAN" -->

<P align="center">
<B><FONT size="2">PROPOSAL&nbsp;2</FONT></B>

<P align="center">
<B><FONT size="2">APPROVAL OF AMENDMENT AND RESTATEMENT OF THE
1987 STOCK OPTION PLAN</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1987 Stock Option Plan, which is referred to
in this proxy statement as the 1987 Plan, was adopted by the
Board in April 1987 and subsequently approved by Cadence&#146;s
stockholders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April 2004, the Compensation Committee
approved, subject to stockholder approval, the amendment and
restatement of the 1987 Plan to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">provide for the grant of incentive stock to
    eligible participants;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">limit the number of shares authorized for
    issuance as incentive stock awards under the 1987 Plan to
    3,000,000&nbsp;shares;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">limit the time-based vesting of such incentive
    stock to be for a period of not less than three years with a
    vesting schedule not more favorable, at any point in time, than
    what would become vested under a monthly <I>pro rata </I>vesting
    schedule (i.e., 1/36&nbsp;per month) over those three years;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">limit the performance-based vesting of such
    incentive stock to begin no sooner than one year after the grant
    date;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">change the name of the 1987 Plan to the
    &#147;1987 Stock Incentive Plan.&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 conditions, such as continued employment and/or certain
performance criteria, and other terms as the Board deems
appropriate, subject to the provisions of the 1987 Plan. The
proposed amendment and restatement does not increase the total
number of shares available for issuance under the 1987 Plan. As
of April&nbsp;23, 2004, 8,405,561&nbsp;shares of common stock
remained available for issuance under the 1987 Plan. The
3,000,000&nbsp;shares authorized for issuance as incentive stock
awards under the 1987 Plan represent approximately 1.1% of
Cadence&#146;s outstanding stock as of the record date.
</FONT>

<P align="left">
<B><FONT size="2">REASONS FOR THE PROPOSED AMENDMENT AND
RESTATEMENT</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence is seeking stockholder approval of the
amendment and restatement of the 1987 Plan to improve its
ability to attract, retain and motivate its executive officers
and to reduce the dilution to Cadence&#146;s stockholders
resulting from option grants. Upon stockholder approval, the
amended and restated 1987 Plan will permit the grant of
incentive stock. Cadence believes that a share of incentive
stock is more valuable than an option to purchase a share of
common stock; thus, Cadence expects that an incentive program
that includes awards of both options and incentive stock will
result in a lower aggregate number of shares being issued. This
approach is designed to lower dilution by reducing the number of
shares included in outstanding equity. As a result, Cadence
intends to selectively use incentive stock in its overall
approach to equity compensation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence believes that equity compensation aligns
the interests of employees and non-employee directors with the
interests of its other stockholders. Cadence has historically
awarded only stock options to its executives and non-employee
directors, and the company began to award incentive stock to
certain non-executive employees in 2003. Stockholder approval of
the proposed amendment and restatement of the 1987 Plan, as
described above, is a critical component in Cadence&#146;s
revised equity compensation policies and required for Cadence to
achieve the following goals:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><FONT size="2">An increased use of incentive stock to reduce
    reliance on stock options for employee equity
    compensation.</FONT></B><FONT size="2"> Cadence believes that a
    shift from use of only stock options to a mix of options and
    incentive stock will enhance retention of the key technical and
    business leaders who are critical to Cadence&#146;s success and
    growth. As discussed below, Cadence&#146;s experience with
    granting incentive stock to certain non-executive employees
    beginning in 2003 supports this form of compensation as an
    enhanced tool for employee retention. A greater use of incentive
    stock would (i)&nbsp;reduce Cadence&#146;s reliance on stock
    options, (ii)&nbsp;provide an important tool for retaining and
    motivating critical Cadence employees, and (iii)&nbsp;allow
    Cadence to maintain a competitive compensation program and
    improve retention without increasing the use of company cash.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">13
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><FONT size="2">A substantial reduction in Cadence&#146;s
    dilution, or &#147;overhang&#148;, from stock compensation plans
    to 20%.</FONT></B><FONT size="2"> Successful implementation of
    Cadence&#146;s revised equity compensation policies, of which
    the proposal to amend and restate the 1987 Plan is a critical
    component, is expected to result in a decrease in the dilution
    of outstanding Cadence equity. Cadence expects dilution to
    decrease from historical levels by at least one percentage point
    each year as it transitions from granting options only to a mix
    of options and incentive stock over the next several years.
    Through these measures, Cadence intends to reduce stockholder
    dilution from the current level of approximately 26.7% to
    approximately 20% over the next several years.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <B><FONT size="2">Cadence believes that the use of incentive
    stock will promote compensation and governance best
    practices.</FONT></B><FONT size="2"> Incentive stock promotes
    good governance because shares of incentive stock do not depend
    on repricing or reloading during a down market to maintain a
    portion of their value. Use of incentive stock will facilitate
    Cadence&#146;s ability to continue its conservative approach to
    annual grants of equity compensation as compared to other
    software companies as described under &#147;Overview of
    Cadence&#146;s Current Equity Compensation Overhang&#148; below.
    Furthermore, Cadence intends to award shares of incentive stock
    with meaningful vesting requirements that are based on
    achievement of performance criteria or, if vesting is
    time-based, with a vesting schedule for a period of not less
    than three years, providing recipients with a long-term stake in
    Cadence&#146;s success.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">It is important to note that with the proposed
amendment and restatement Cadence is not seeking to increase the
number of authorized shares available for grant under the 1987
Plan.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Incentive stock has become an increasingly
important tool to Cadence for retaining key employees. In 2003,
Cadence granted incentive stock awards on a selective basis to
fewer than 75 employees, of which approximately 82% had research
and development responsibilities considered essential to
Cadence&#146;s success. Turnover among these employees has been
well below both Cadence and industry levels. Cadence believes
that incentive stock provides more retention power per share
than options because the recipient loses the full value of a
share of stock, as well as the opportunity for future gains, by
leaving Cadence. However, because the 1987 Plan did not permit
incentive stock awards, no incentive stock has been awarded to
Cadence executive officers. Cadence believes that it is equally
important to have the ability to use incentive stock to retain
Cadence&#146;s executive officers. Cadence plans to grant
incentive stock to executive officers with specific limitations
on vesting. Subject to stockholder approval, the 1987 Plan
requires that if a grant has performance-based vesting
(i.e.,&nbsp;vesting tied to the achievement of specified goals),
it may not begin to vest until one year after the grant date, or
if a grant has time-based vesting, it may not fully vest over a
period less than three years with a vesting schedule not more
favorable, at any point in time, than what would be vested under
a monthly <I>pro rata </I>vesting schedule (i.e., 1/36&nbsp;per
month) over those three years. Cadence expects options to remain
the most common form of equity compensation for executive
officers, but in some cases, a portion or all of the equity
compensation granted to executive officers may consist of
incentive stock rather than options.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><FONT size="2">Overview of Cadence&#146;s Current Equity
    Compensation Overhang</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As discussed above, Cadence intends to use
incentive stock to assist in reducing its equity compensation
plan &#147;overhang&#148;, or calculated dilution. Cadence
calculates dilution according to the following formula:
</FONT>

<P align="center">
<FONT size="2">optioned shares granted but not yet exercised +
shares available for grant
</FONT>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<DIV align="center">
<FONT size="2">total shares outstanding + optioned shares
granted but not yet exercised + shares available for grant
</FONT>
</DIV>

<P align="left">
<FONT size="2">In 2003, Cadence issued $420&nbsp;million
principal amount of convertible notes due 2023, which are
convertible into Cadence common stock initially at a conversion
price of $15.65&nbsp;per share, which would result in an
aggregate of 26.8&nbsp;million shares issued upon conversion,
subject to adjustment upon the occurrence of certain events. In
connection with the convertible notes issuance, Cadence entered
into hedge transactions, including the acquisition of call
options for Cadence common stock. If the effect of the
convertible notes and hedge transactions are taken into account,
Cadence&#146;s current dilution on a fully diluted basis
decreases from approximately 26.7% to approximately 24.9%.
</FONT>

<P align="center"><FONT size="2">14
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following are important factors affecting
Cadence&#146;s current stockholder dilution:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In fiscal 2003, Cadence repurchased
    17.4&nbsp;million shares of its common stock though its stock
    repurchase program, and within the last five years, repurchased
    approximately 59.0&nbsp;million shares. These repurchases have
    reduced Cadence&#146;s total number of outstanding shares,
    causing the dilution percentage from equity compensation to be
    relatively higher than would be the case if no repurchases had
    occurred.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Included in Cadence&#146;s current option
    &#147;overhang&#148; are approximately 7.4&nbsp;million options
    assumed in connection with Cadence&#146;s acquisition of other
    companies.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Approximately 14.8&nbsp;million, or 21.7%, of
    Cadence&#146;s currently outstanding options have exercise
    prices greater than $20.00&nbsp;per share; the average trading
    price of Cadence&#146;s common stock during the 12&nbsp;months
    ended March&nbsp;31, 2004 was $14.41.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">According to the Radford Benchmark Report
    compiled by Radford Surveys, which annually summarizes
    compensation and stock plan data for approximately 960 high
    technology companies, referred to in this proxy statement as the
    Radford Report, Cadence&#146;s annual equity award rate has been
    consistently below that of the software industry over the last
    four years:
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="50%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="18%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="17%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="24%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="23%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cadence Grant Rate</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Software Sector Grant Rate</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.9%</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.5%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.9%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.1%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.4%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.5%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.0%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.5%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes incentive stock grants
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As prospects for the global economy improve,
enhanced retention of Cadence&#146;s most critical employees
becomes more important for Cadence. Accordingly, the Board seeks
approval of the proposal to amend and restate the 1987 Plan to
facilitate Cadence&#146;s ability to achieve the important
equity compensation goals described above.
</FONT>

<P align="left">
<B><FONT size="2">VOTE REQUIRED AND BOARD
RECOMMENDATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board recommends a vote <B>FOR </B>approval
of the amendment and restatement of the 1987 Plan. The
affirmative vote of a majority of the shares present in person
or represented by proxy and entitled to vote on the proposal is
required for approval of this proposal. Abstentions will be
treated as being present and entitled to vote on the proposal
and, therefore, will have the effect of votes against the
proposal. Broker non-votes will be treated as not being entitled
to vote on the proposal and, therefore, are not counted for
purposes of determining whether the proposal has been approved.
Unless marked to the contrary, proxies received will be voted
<B>FOR </B>approval of the amendment and restatement of the 1987
Plan.
</FONT>

<P align="center">
<B><FONT size="2">THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN
FAVOR OF PROPOSAL&nbsp;2.</FONT></B>

<P align="left">
<B><FONT size="2">SUMMARY OF THE 1987 PLAN</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following summary of the material provisions
of the 1987 Plan, as amended and restated, is qualified in its
entirety by the complete text of the 1987 Plan, as amended and
restated, a copy of which is attached as <U>Appendix&nbsp;B</U>
to this proxy statement.
</FONT>

<P align="left">
<B><FONT size="2">GENERAL</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1987 Plan provides for the grant of incentive
stock options, nonstatutory stock options and, subject to
stockholder approval, incentive stock awards. Incentive stock
options granted under the 1987 Plan are intended to qualify as
&#147;incentive stock options&#148; within the meaning of
Section&nbsp;422 of the Code. Nonstatutory
</FONT>

<P align="center"><FONT size="2">15
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">stock options granted under the 1987 Plan are
intended not to qualify as incentive stock options under the
Code. See &#147;Federal Income Tax Information&#148; below for a
discussion of the tax treatment of awards that may be granted
under the 1987 Plan.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">PURPOSE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1987 Plan was adopted to provide a means by
which employees of and consultants to Cadence and its affiliates
(including officers and directors who are also employees) could
be given an opportunity to purchase Cadence common stock or,
subject to stockholder approval, receive grants of incentive
stock subject to performance-based or time-based vesting to
attract and retain the services of persons most capable of
filling these positions, and to provide incentives for these
persons to exert maximum efforts for the success of Cadence and
its affiliates. See &#147;Reasons for the Proposed Amendment and
Restatement&#148; above.
</FONT>

<P align="left">
<B><FONT size="2">ADMINISTRATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1987&nbsp;Plan provides that the Board
administers the 1987&nbsp;Plan and has the final power to
interpret the 1987&nbsp;Plan, including the power to prescribe,
amend and rescind rules and regulations relating to the
1987&nbsp;Plan and to delegate administration of the
1987&nbsp;Plan as described below. The Board has the power to
determine which of the persons eligible under the 1987&nbsp;Plan
will be granted awards, the types of awards that will be
granted, when and how each award will be granted, the terms and
provisions of each award to be granted and the fair market value
of Cadence common stock in accordance with the provisions of the
1987&nbsp;Plan. While Cadence intends to continue the vesting
described under &#147;Option Provisions&#150;Option
Exercise&#148; below, the Board has the power to accelerate the
exercise date and vesting of any stock option granted under the
1987&nbsp;Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board may delegate the administration of the
1987&nbsp;Plan to a committee, such as Cadence&#146;s
Compensation Committee, consisting of two or more
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;Non-Employee Directors,&#148; which would
    include a director who receives no compensation from Cadence
    other than for service on the Board or who does not receive
    additional compensation which exceeds the limits specified in
    the definition of such term under Rule&nbsp;16b-3 of the
    Exchange Act and otherwise meets the requirements under
    Rule&nbsp;16b-3 for &#147;non-employee directors,&#148;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;Outside Directors,&#148; which would
    include a director who is neither a current or former officer
    nor a current employee of Cadence, and who receives no
    compensation from Cadence other than for service on the Board or
    who does not receive additional compensation which exceeds the
    limits specified under Section&nbsp;162(m) of the Code.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Once appointed, the committee will continue to
serve until otherwise directed by the Board. At any time, the
Board or the committee may delegate to a committee of one or
more members of the Board the authority to grant awards under
the 1987&nbsp;Plan. Members of the Board who are either eligible
for awards or have been granted awards may vote on any matters
affecting the administration of the 1987&nbsp;Plan or the grant
of any awards thereunder, but may not grant awards to
themselves. However, such members may be counted in determining
the existence of a quorum at a Board meeting during which action
is taken with respect to the granting of such awards.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board has delegated administration of the
1987&nbsp;Plan to the Compensation Committee of the Board.
However, increasing the shares authorized for issuance under the
1987&nbsp;Plan requires the approval of the full Board. As used
in this proxy statement solely with respect to the
1987&nbsp;Plan, the &#147;Board&#148; refers to any committee
the Board appoints to administer the 1987&nbsp;Plan as well as
to the Board itself.
</FONT>

<P align="left">
<B><FONT size="2">ELIGIBILITY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Incentive stock options may be granted under the
1987&nbsp;Plan only to Cadence employees or employees of its
affiliates. Employees of Cadence and its affiliates (including
officers and directors who are also Cadence employees or
employees of its affiliates) and consultants are eligible to
receive nonstatutory stock options and, subject to stockholder
approval, incentive stock awards under the 1987&nbsp;Plan. No
incentive stock option may be
</FONT>

<P align="center"><FONT size="2">16
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">granted under the 1987&nbsp;Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock
possessing more than 10% of the total combined voting power of
Cadence or any of its affiliates, such person being referred to
below as a 10%&nbsp;stockholder, unless the option exercise
price is at least 110% of the fair market value of the common
stock subject to the option on the grant date, and the term of
the option does not exceed five years from the grant date. In
addition, the aggregate fair market value, determined at the
time of grant, of the shares of common stock with respect to
which incentive stock options are exercisable for the first time
by an optionee during any calendar year, under all other plans
of Cadence and its affiliates, may not exceed $100,000.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No person may be granted awards under the
1987&nbsp;Plan covering more than an aggregate of
2,216,702&nbsp;shares of common stock in any calendar year. For
federal income tax purposes, the maximum compensation payable to
any employee under the 1987&nbsp;Plan during its term and awards
granted thereunder, is equal to the number of shares of common
stock with respect to which awards may be issued thereunder,
multiplied by the value of the shares on the date the
compensation for the award is measured which, for a nonstatutory
stock option, is generally the exercise date of the option and,
for an incentive stock award, is generally the vesting date of
the incentive stock award unless the participant makes an
election under Section&nbsp;83(b) of the Code, as explained
below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Almost all of Cadence&#146;s and its
subsidiaries&#146; approximately 4,800&nbsp;employees, including
Cadence&#146;s five executive officers, are eligible to receive
awards under the 1987&nbsp;Plan. Non-employee directors are not
eligible to receive awards under the 1987&nbsp;Plan.
</FONT>

<P align="left">
<B><FONT size="2">STOCK SUBJECT TO THE 1987&nbsp;PLAN</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The proposed amendment and restatement does not
increase the total number of shares available for issuance under
the 1987&nbsp;Plan. As of April&nbsp;23, 2004,
8,405,561&nbsp;shares of common stock remained available for
issuance under the 1987&nbsp;Plan of the 73,370,100&nbsp;shares
authorized over the life of the plan, subject to the provisions
of the 1987&nbsp;Plan relating to adjustments upon changes in
common stock described below. Subject to stockholder approval,
up to 3,000,000 of those remaining shares would be issuable as
incentive stock awards. If any award granted under the
1987&nbsp;Plan expires, becomes unexercisable, is forfeited or
otherwise terminates, in whole or in part, without having been
exercised, the unpurchased or forfeited shares again become
available for issuance under the 1987&nbsp;Plan. However, for
purposes of Section&nbsp;162(m) of the Code, stock awards that
are cancelled, forfeited or treated as having been cancelled,
count against the maximum number of shares for which stock
awards may be granted to any person under the terms of the
1987&nbsp;Plan.
</FONT>

<P align="left">
<B><FONT size="2">OPTION PROVISIONS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following describes the permissible terms of
options granted under the 1987&nbsp;Plan. Individual option
grants may be more restrictive as to any or all of these
permissible terms.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Exercise
Price.</FONT></I></B><FONT size="2"> The exercise price of
options granted under the 1987&nbsp;Plan may not be less than
the fair market value of Cadence&#146;s common stock on the
grant date. In the case of an incentive stock option granted to
a 10% stockholder, the exercise price of the option may not be
less than 110% of the fair market value on the grant date. The
fair market value for purposes of the 1987&nbsp;Plan is the
average of the high and low prices of Cadence&#146;s common
stock on the grant date as reported by the NYSE.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Payment of Exercise
Price.</FONT></I></B><FONT size="2"> The exercise price of
options granted under the 1987&nbsp;Plan may be paid by cash,
check, promissory note, other shares of Cadence common stock
with a fair market value on the date of surrender equal to the
aggregate exercise price of the shares as to which the option is
being exercised, or any combination of these methods, or other
consideration and payment method permitted by applicable law. In
determining the type of consideration to accept, the Board
considers whether the acceptance of such consideration may be
reasonably expected to benefit Cadence. The particular forms of
consideration available to exercise a specific option are set
forth in the terms of the option agreement for that option.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Option
Exercise.</FONT></I></B><FONT size="2"> Options granted under
the 1987&nbsp;Plan become exercisable at the times and under the
conditions, including the achievement of performance or other
criteria with respect to Cadence and/or the
</FONT>

<P align="center"><FONT size="2">17
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">optionee, as determined by the Board. Shares
covered by a majority of currently outstanding options under the
1987&nbsp;Plan vest at the rate of 1/48 of the shares subject to
the option each month following the grant date. The remaining
outstanding options vest at a rate of 1/60 of the shares subject
to the option each month. Shares covered by options granted in
the future under the 1987&nbsp;Plan may be subject to different
vesting terms. The Board has the power to accelerate the time at
which an option may first be exercised or the time during which
an option will vest.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Term.</FONT></I></B><FONT size="2"> The
maximum term of options under the 1987&nbsp;Plan is ten years,
generally, and five years for options granted to a 10%
stockholder. Options granted under the 1987&nbsp;Plan generally
terminate 30&nbsp;days, or such longer period of time as
determined by the Board, after termination of the
optionee&#146;s employment or consulting relationship with
Cadence or one of its affiliates. However, if the optionee dies
while an employee of or consultant to Cadence or one of its
affiliates, the option may be exercised within three months
after the optionee&#146;s death, or such longer period of time
as determined by the Board, by the optionee&#146;s estate or by
a person who acquires the right to exercise the option by
bequest or inheritance, but only to the extent the right to
exercise would have accrued had the optionee continued living
three months after the date of death, or such longer period of
time as determined by the Board. If the optionee dies within one
month after termination of his or her employment or consulting
relationship with Cadence or one of its affiliates, the option
may be exercised within three months after the optionee&#146;s
death, or such longer period of time as determined by the Board,
by the optionee&#146;s estate or by a person who acquires the
right to exercise the option by bequest or inheritance, but only
to the extent the right to exercise had accrued at the date of
termination.
</FONT>

<P align="left">
<B><FONT size="2">INCENTIVE STOCK AWARD PROVISIONS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following describes the permissible terms of
incentive stock awards to be granted under the 1987&nbsp;Plan,
subject to stockholder approval.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Sales Price and Payment of Sales
Price.</FONT></I></B><FONT size="2"> The sales price, if any, at
which shares of incentive stock will be sold or awarded to a
participant under the 1987&nbsp;Plan will be determined by the
Board. The sales price may vary among participants and may be
below the fair market value of the shares of common stock on the
grant date. The Board also will determine the form of
consideration that may be used to pay the sales price, if any,
of shares of incentive stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Vesting.</FONT></I></B><FONT size="2"> The
grant, issuance, retention and vesting of shares of incentive
stock granted under the 1987&nbsp;Plan will be at the times and
in the installments as determined by the Board. The timing of
the grant, the issuance, the ability to retain shares and the
vesting of shares of incentive stock may be subject to continued
employment, the passage of time and/or the performance criteria
as the Board deems appropriate as described below. However, if
the vesting of the incentive stock is based solely on continued
employment, an award of incentive stock may not vest in full
sooner than three years after the grant date and may not have a
vesting schedule more favorable, at any point in time, than what
would become vested under a monthly <I>pro rata </I>vesting
schedule (i.e., 1/36&nbsp;per month) over those three years. If
vesting is also subject to the achievement of performance
criteria, the award may not begin to vest sooner than one year
after the grant date. The Board may accelerate the vesting of an
incentive stock award in the event of a participant&#146;s
termination of service as an employee or consultant, a change in
control of Cadence or a similar event, provided that, in the
case of incentive stock awards that are intended to qualify as
&#147;performance based compensation&#148; under
Section&nbsp;162(m) of the Code, the acceleration complies with
the regulations relating to Section&nbsp;162(m).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Qualifying Performance
Criteria.</FONT></I></B><FONT size="2"> Subject to stockholder
approval of the 1987&nbsp;Plan, the performance criteria for any
incentive stock award that is intended to satisfy the
requirements for &#147;performance-based compensation&#148;
under Section&nbsp;162(m) of the Code will be any one or more of
the following performance criteria as determined pursuant to an
objective formula, either individually, alternatively or in any
combination, applied either to Cadence as a whole or to a
Cadence business unit, segment or subsidiary, either
individually, alternatively or in any combination, and measured
over a performance period determined by the Board, on an
absolute basis or relative to a pre-established target, to
previous results or to a designated comparison group, in each
case as specified by the Board in the incentive stock award:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">cash flow (including measures of operating or
    free cash flow),
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">18
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">earnings per share (including measures of GAAP
    earnings per share or non-GAAP measures such as non-GAAP
    earnings per share or per share earnings before interest, taxes,
    depreciation and amortization),
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">return on equity,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">total stockholder return,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">return on capital,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">return on assets or net assets,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">revenue,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">income or net income (on either a GAAP basis or a
    non-GAAP basis),
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">operating income or net operating income,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">operating profit or net operating profit,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">operating margin,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">return on operating revenue,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">market share,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">bookings and segments of bookings such as net
    product bookings,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">market penetration,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">technology development or proliferation,&nbsp;or
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">customer loyalty or satisfaction as measured by a
    customer loyalty or satisfaction index determined by an
    independent consultant expert in measuring such matters.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board, in its discretion, may reduce the
number of shares granted, issued, retainable and/or vested under
an incentive stock award on account of either financial
performance or personal performance evaluations, despite the
satisfaction of any performance criteria. In addition, the Board
may appropriately adjust any evaluation of performance under a
qualifying performance criteria to exclude any of the following
events that occur during a performance period:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">asset write-downs,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">litigation or claim judgments or settlements,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the effect of changes in tax law, accounting
    principles or other laws and provisions affecting reported
    results,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">accruals for reorganization and restructuring
    programs, and
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any extraordinary non-recurring items as
    described in Accounting Principles Board Opinion No.&nbsp;30
    and/or in management&#146;s discussion and analysis of financial
    condition and results of operations in Cadence&#146;s annual
    report to stockholders for the applicable year.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">EFFECT OF CERTAIN CORPORATE EVENTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1987&nbsp;Plan provides that, in the event of
a dissolution or liquidation of Cadence, the proposed sale of
all or substantially all of the assets of Cadence, or the merger
of Cadence into another company, awards outstanding under the
1987&nbsp;Plan will terminate immediately before the corporate
transaction, unless the Board specifically provides otherwise.
In these instances, the Board may, in its sole discretion,
provide that the time during which outstanding awards may be
exercised or vested will be accelerated and the awards
terminated if not exercised during such time.
</FONT>

<P align="left">
<B><FONT size="2">ADJUSTMENT PROVISIONS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon an increase or decrease in the number of
issued shares of Cadence common stock resulting from a stock
split, the payment of a stock dividend or any other increase or
decrease effected without receipt of consideration by Cadence,
the number of shares authorized for issuance under the
1987&nbsp;Plan, and the number of shares covered by each
outstanding stock award and the price per share of common stock
covered by each outstanding stock award, will be proportionately
adjusted for any increase or decrease.
</FONT>

<P align="center"><FONT size="2">19
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">DURATION, AMENDMENT AND TERMINATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board may suspend or terminate the
1987&nbsp;Plan without stockholder approval or ratification at
any time or from time to time. Unless sooner terminated, the
1987&nbsp;Plan will terminate on May&nbsp;31, 2007. However, any
suspension or termination of the 1987&nbsp;Plan will not
adversely affect awards previously granted and awards will
remain in full force and effect, unless mutually agreed upon in
a writing signed by the participant and Cadence.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board may also amend the 1987&nbsp;Plan at
any time or from time to time. However, no amendment will be
effective unless approved by Cadence stockholders within
12&nbsp;months before or after its adoption by the Board if the
amendment would require stockholder approval to comply with
Rule&nbsp;16b-3 of the Exchange Act, Section&nbsp;422 of the
Code or any securities exchange or national market system
listing requirements. The Board may submit any other amendment
to the 1987&nbsp;Plan for stockholder approval, including, but
not limited to, amendments intended to satisfy the requirements
of Section&nbsp;162(m) of the Code regarding the exclusion of
performance-based compensation from the limitation on the
deductibility of compensation paid to certain employees. Any
amendment of the 1987&nbsp;Plan will not adversely affect awards
previously granted unless mutually agreed upon in a writing
signed by the participant and Cadence.
</FONT>

<P align="left">
<B><FONT size="2">RESTRICTIONS ON TRANSFER</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the 1987&nbsp;Plan, except as specifically
provided in a nonstatutory stock option, an option may not be
transferred by the optionee other than by will or by the laws of
descent and distribution and, during the lifetime of the
optionee, may be exercised only by the optionee. However, the
optionee may designate in writing a third party who may exercise
the option in the event of the optionee&#146;s death.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Shares of incentive stock awarded under the
1987&nbsp;Plan may be transferred only upon the terms and
conditions as determined by the Board and as set forth in the
incentive stock agreement, and only if the transferred incentive
stock remains subject to the terms of the incentive stock
agreement.
</FONT>

<P align="left">
<B><FONT size="2">FEDERAL INCOME TAX INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following is only a summary of the effect of
federal income taxation upon the participant and Cadence with
respect to the grant and exercise of awards under the
1987&nbsp;Plan, is not complete, does not discuss the income tax
laws of any state or foreign country in which a participant may
reside, and is subject to change. Participants in the
1987&nbsp;Plan should consult their own tax advisors regarding
the specific tax consequences to them of participating in the
1987&nbsp;Plan.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Incentive Stock Options</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although the 1987&nbsp;Plan permits grants of
incentive stock options, referred to as ISOs, Cadence has not
granted any options intended to be ISOs in the past several
years and does not intend to do so in the foreseeable future.
ISOs granted under the 1987&nbsp;Plan are intended to be
eligible for the favorable federal income tax treatment accorded
to &#147;incentive stock options&#148; under Section&nbsp;422 of
the Code. Generally, a participant does not recognize any
taxable income at the time of the grant of an ISO. In addition,
the participant will not recognize income for regular federal
income tax purposes at the time of the exercise of an ISO. The
IRS has recently announced that, until it issues further
guidance, an employee will not be subject to FICA or FUTA taxes
upon the exercise of an ISO. However, a participant may be
subject to alternative minimum tax upon the exercise of an ISO.
Cadence is not entitled to a deduction at the time of the grant
or the exercise of an ISO.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the participant holds the shares acquired
through the exercise of an ISO for at least one year from the
date of exercise and two years from the grant date, referred to
as the ISO holding period, the participant generally will
realize long-term capital gain or loss upon disposition of the
shares. This gain or loss will generally equal the difference
between the amount realized upon the disposition of the shares
and the exercise price of the shares.
</FONT>

<P align="center"><FONT size="2">20
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If a participant disposes of the shares acquired
through the exercise of an ISO before expiration of the ISO
holding period, referred to as a disqualifying disposition, the
participant will have:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">ordinary income equal to the lesser of
    (a)&nbsp;the amount by which the sales price of such shares
    exceeds the exercise price, and (b)&nbsp;the amount by which the
    fair market value of such shares on the date of exercise exceeds
    the exercise price;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">capital gain equal to the amount by which the
    sales price of such shares exceeds the fair market value of such
    shares on the date of exercise;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">capital loss equal to the amount by which the
    exercise price exceeds the sales price of such shares.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the event of a disqualifying disposition,
Cadence will be entitled to a deduction to the extent that the
participant realized ordinary income as a result of the
disqualifying disposition, subject to the requirement of
reasonableness, Section&nbsp;162(m) of the Code, and the
satisfaction of a tax reporting obligation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Nonstatutory Stock Options</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Options granted under the 1987&nbsp;Plan that are
not intended to qualify as incentive stock options are referred
to as nonstatutory stock options, or NSOs. A participant will
not recognize any taxable income when an NSO is granted. The
participant will generally recognize ordinary income upon the
exercise of an NSO equal to the amount by which the fair market
value of the shares on the exercise date exceeds the exercise
price. The ordinary income recognized by a participant will be
subject to applicable tax withholding, including applicable
income taxes, FICA, and FUTA.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the disposition of the shares acquired upon
exercise of an NSO, the participant will recognize gain or loss
equal to the difference between the amount realized on the
disposition and the sum of the exercise price plus the amount of
ordinary income recognized by the participant as a result of the
exercise of the NSO. Any gain or loss on the subsequent
disposition of shares acquired through the exercise of an NSO
will generally be treated as long-term or short-term capital
gain or loss, depending on whether the holding period for the
shares exceeds one year at the time of the disposition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence will generally be entitled to a deduction
to the extent a participant realizes ordinary income upon the
exercise of an NSO, subject to the requirement of
reasonableness, Section&nbsp;162(m) of the Code and the
satisfaction of a tax reporting obligation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Incentive Stock Awards</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The tax consequences to a participant who
receives an incentive stock award pursuant to the 1987&nbsp;Plan
will vary depending on whether or not the participant makes a
timely Section&nbsp;83(b) election under the Code with respect
to the unvested shares of incentive stock. The Board has the
discretion to establish, in accordance with the 1987&nbsp;Plan,
the terms of incentive stock awards, including whether or not
participants may make Section&nbsp;83(b) elections under the
Code. A participant who does not make a timely
Section&nbsp;83(b) election with respect to unvested shares of
incentive stock will not recognize any taxable income upon the
award of the shares. However, when the restrictions subsequently
lapse on the shares, the participant will recognize ordinary
income in the amount by which the fair market value of the
shares on the date the restrictions lapse with respect to those
shares exceeds the purchase price (if any) paid for the shares.
A participant who makes a timely Section&nbsp;83(b) election
with respect to unvested shares of incentive stock will be
required to recognize ordinary income in the year the incentive
stock award is granted equal to the amount by which the fair
market value of the shares on the award date exceeds the
purchase price (if any) paid for the shares. The fair market
value of the shares will be determined as if the shares were not
restricted. A participant who makes a Section&nbsp;83(b)
election for unvested shares of incentive stock will not
recognize any additional income when the restrictions on those
shares subsequently lapse.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence will generally be entitled to a deduction
equal to the amount of ordinary income recognized by a
participant in connection with the acquisition of shares of
Cadence common stock pursuant to an incentive
</FONT>

<P align="center"><FONT size="2">21
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">stock award. However, in the case of incentive
stock awards granted to certain officers of Cadence,
Cadence&#146;s deduction may be limited to $1,000,000&nbsp;per
person annually.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Potential Limitation on
    Deductions</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;162(m) of the Code denies a
deduction to any publicly-held corporation for compensation paid
to certain employees in a taxable year to the extent that
compensation exceeds $1,000,000 for such employee. It is
possible that compensation attributable to stock awards granted
under the 1987&nbsp;Plan, when combined with all other types of
compensation received by a Cadence covered employee, may cause
this limitation to be exceeded in any particular year. Certain
kinds of compensation, including qualified
&#147;performance-based compensation,&#148; are disregarded for
purposes of the deduction limitation of Section&nbsp;162(m).
Compensation attributable to stock awards will qualify as
performance-based compensation if the award is granted by a
compensation committee comprised solely of &#147;outside
directors&#148; and either: (i)&nbsp;the plan contains a
per-employee limit on the number of shares for which awards may
be granted during a specified period, the per-employee limit is
approved by the stockholders, and the exercise price of the
award is no less than the fair market value of the stock on the
grant date; or (ii)&nbsp;the award is granted (or exercisable)
only upon the achievement (as certified in writing by the
compensation committee) of an objective performance goal
established in writing by the compensation committee while the
outcome is substantially uncertain, such as the criteria listed
above under &#147;Incentive Stock Award Provisions&nbsp;&#151;
Qualifying Performance Criteria&#148;, and the plan is approved
by stockholders. Cadence believes that all options granted under
the 1987&nbsp;Plan to date satisfy these requirements and
qualify as &#147;performance-based compensation.&#148; Subject
to stockholder approval of the amendment and restatement of the
1987&nbsp;Plan, performance-based awards granted under the
1987&nbsp;Plan would also qualify as &#147;performance-based
compensation&#148; under Section&nbsp;162(m) of the Code.
</FONT>

<P align="left">
<B><FONT size="2">STOCK PRICE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On April&nbsp;23, 2004, the closing price of
Cadence common stock as reported by the NYSE was $14.15.
</FONT>

<P align="left">
<B><FONT size="2">PARTICIPATION IN THE 1987 PLAN</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of January&nbsp;3, 2004, over the 17-year life
of the 1987 Plan, options to purchase&nbsp;566,250&nbsp;shares
of Cadence common stock have been granted to
Dr.&nbsp;Sangiovanni-Vincentelli, who is the only current
director and director nominee who is not an executive officer
who has been granted options under the 1987 Plan, most recently
in February&nbsp;2002. Directors other than
Mr.&nbsp;Sangiovanni-Vincentelli, who is a consultant to
Cadence, and Mr.&nbsp;Bingham, who is Cadence&#146;s CEO, are
not eligible to receive grants under the 1987 Plan. As a group,
Cadence&#146;s current executive officers have been granted
options to purchase&nbsp;9,005,000&nbsp;shares over the life of
the 1987 Plan. The Named Executive Officers listed in the
Summary Compensation Table below have been granted options to
purchase the following aggregate number of shares over the life
of the 1987 Plan: Mr.&nbsp;Bingham, 5,750,000; Mr.&nbsp;Bushby,
750,000; Mr.&nbsp;Lev, 600,000; Mr.&nbsp;McKeithen, 835,000 and
Mr.&nbsp;Porter, 1,070,000. Of these options granted to
executive officers, 450,000 have terminated or been cancelled
and returned to the 1987 Plan. All other employees as a group
have been granted options to purchase 117,736,266&nbsp;shares
over the life of the 1987 Plan, which includes options that were
granted to former executive officers and other employees no
longer employed by Cadence. Of these 117,736,266 options,
53,711,966 have been exercised, 63,891,627 have been terminated
or cancelled and returned to the 1987 Plan, and options for
132,673&nbsp;shares are currently outstanding.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because the Board has the discretion to grant
awards under the 1987 Plan, it is not possible as of the date of
this proxy statement to determine future awards that will be
received by executive officers and other employees under the
1987 Plan.
</FONT>

<P align="center"><FONT size="2">22
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='106'></A>
</DIV>

<!-- link1 "PROPOSAL 3 APPROVAL OF AMENDMENT TO THE AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN" -->

<P align="center">
<B><FONT size="2">PROPOSAL&nbsp;3</FONT></B>

<P align="center">
<B><FONT size="2">APPROVAL OF AMENDMENT TO THE AMENDED AND
RESTATED EMPLOYEE</FONT></B>

<DIV align="center">
<B><FONT size="2">STOCK PURCHASE PLAN</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In November&nbsp;1998, Cadence&#146;s Board
adopted, and Cadence stockholders subsequently approved,
Cadence&#146;s Amended and Restated Employee Stock Purchase
Plan, referred to in this proxy statement as the Employee Plan,
which amended and restated the 1990 Employee Stock Purchase
Plan. Subsequent amendments approved by Cadence&#146;s Board and
stockholders increased the shares of common stock authorized for
issuance under the Employee Plan to 29,500,000&nbsp;shares.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In October 2003, the Board approved an amendment
to the Employee Plan to increase the number of shares of common
stock authorized for issuance by 9,000,000&nbsp;shares for a
total of 38,500,000&nbsp;shares authorized under the Employee
Plan, subject to stockholder approval.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of April&nbsp;23, 2004, 320,654&nbsp;shares of
common stock remained available under the Employee Plan. The
proposed increase in the number of shares authorized for
issuance under the Employee Plan represents approximately 3.3%
of Cadence&#146;s outstanding stock as of the record date.
</FONT>

<P align="left">
<B><FONT size="2">REASONS FOR THE PROPOSED AMENDMENT</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board adopted the amendment to the Employee
Plan to ensure that Cadence can continue to grant purchase
rights to its employees at levels determined appropriate by the
Board. The Employee Plan helps to attract and retain employees
because employee stock purchase plans are a common benefit
offered by software and other publicly-traded companies. In
2003, according to the Radford Report, 87% of publicly-traded
software companies offer an employee stock purchase plan as a
benefit to employees. In addition, approximately 73% of
Cadence&#146;s employees participate in the Employee Plan.
Cadence believes that the Employee Plan is a highly valued
benefit that is necessary for Cadence to offer to its employees
to compete with other companies to attract and retain employees.
The Employee Plan also provides eligible employees with the
opportunity to become Cadence stockholders and participate in
Cadence&#146;s success, which aligns the interests of
participating employees with those of stockholders.
</FONT>

<P align="left">
<B><FONT size="2">VOTE REQUIRED AND BOARD
RECOMMENDATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board of Directors recommends a vote <B>FOR
</B>approval of the amendment to the Employee Plan. The
affirmative vote of a majority of the shares present in person
or represented by proxy and entitled to vote on the proposal is
required for approval of the proposal. Abstentions will be
treated as being present and entitled to vote on the proposal
and, therefore, will have the effect of votes against the
proposal. Broker non-votes will be treated as not being entitled
to vote on the proposal and, therefore, are not counted for
purposes of determining whether the proposal has been approved.
Unless marked to the contrary, proxies received will be voted
<B>FOR </B>approval of the amendment to the Employee Plan.
</FONT>

<P align="center">
<B><FONT size="2">THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN
FAVOR OF PROPOSAL&nbsp;3.</FONT></B>

<P align="left">
<B><FONT size="2">SUMMARY OF THE EMPLOYEE PLAN</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following summary of the main features of the
Employee Plan, as amended, is qualified in its entirety by the
complete text of the Employee Plan, a copy of which is attached
as <U>Appendix&nbsp;C</U> to this proxy statement.
</FONT>

<P align="left">
<B><FONT size="2">PURPOSE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The purpose of the Employee Plan is to provide a
means by which employees of Cadence, and any parent or
subsidiary of Cadence designated by the Board, may be given an
opportunity to purchase Cadence common stock through payroll
deductions, to assist Cadence in retaining the services of its
employees, to secure and retain the services of new employees,
and to provide incentives for these persons to exert maximum
efforts for the success of Cadence.
</FONT>

<P align="center"><FONT size="2">23
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The rights to purchase common stock granted under
the Employee Plan are intended to qualify as options issued
under an &#147;employee stock purchase plan&#148; as that term
is defined in Section&nbsp;423(b) of the Code.
</FONT>

<P align="left">
<B><FONT size="2">ADMINISTRATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board administers the Employee Plan and has
the final power to construe and interpret both the Employee Plan
and the rights granted under it. The Board has the power,
subject to the provisions of the Employee Plan, to determine
when and how rights to purchase Cadence common stock will be
granted, the provisions of each offering of these rights (which
need not be identical), and whether employees of a parent or
subsidiary of Cadence will be eligible to participate in the
Employee Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board may delegate administration of the
Employee Plan to a committee comprised of not less than two
Board members. The Board has delegated administration of the
Employee Plan to the Compensation Committee. As used in this
proxy statement solely with respect to the Employee Plan, the
&#147;Board&#148; refers to any committee the Board appoints to
administer the Employee Plan as well as to the Board itself.
</FONT>

<P align="left">
<B><FONT size="2">STOCK SUBJECT TO EMPLOYEE PLAN</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since adoption of the Employee Plan in 1990, the
Board has reserved an aggregate of 29,500,000&nbsp;shares of
common stock for issuance under the Employee Plan. Upon
stockholder approval of this Proposal, an additional
9,000,000&nbsp;shares of common stock would be reserved for
issuance under the Employee Plan for an aggregate of 38,500,000
reserved shares, representing 14.1% of Cadence&#146;s
outstanding stock as of the record date. If rights granted under
the Employee Plan expire, lapse or otherwise terminate without
being exercised, the shares of common stock not purchased under
the rights again become available for issuance under the
Employee Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because benefits under the Employee Plan depend
on employees&#146; voluntary elections to participate and the
fair market value of Cadence&#146;s common stock at various
future dates, it is not possible as of the date of this proxy
statement to determine future benefits that will be received by
executive officers and other employees under the Employee Plan.
</FONT>

<P align="left">
<B><FONT size="2">OFFERINGS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board implements the Employee Plan by
offering participation rights to all eligible employees from
time to time for offering periods not to exceed 27&nbsp;months.
Currently, each offering is 24&nbsp;months long and is divided
into four shorter &#147;purchase periods,&#148; each
approximately six months long. A new offering begins on each
August 1st&nbsp;and February 1st. However, an eligible employee
may not participate in more than one offering at a time. Rights
granted under the Employee Plan are not transferable, except by
will or the laws of descent and distribution, and may be
exercised only by the person to whom the rights are granted or
by a beneficiary designated by the person to whom the rights are
granted.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If, during the 24&nbsp;months of an offering, the
fair market value of Cadence common stock is lower on the
purchase date than it was on the offering date, participants in
the offering may exercise their purchase rights at the lower
price on the purchase date and are automatically enrolled in a
new offering starting the next day (i.e., the next
February&nbsp;1st or August&nbsp;1st) rather than remaining in
the existing offering so that participants benefit from the
lower market price of Cadence common stock as the &#147;offering
date&#148; price for the next 24&nbsp;months of the offering
period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, if the terms of an offering would,
as a result of a change to applicable accounting standards,
generate a charge to earnings for Cadence, that offering will
terminate effective as of the day before the date the change to
accounting standards would otherwise first apply to the
offering, and that date will be the final purchase date for that
offering. A new offering may start on a date and on the terms as
may be provided by the Board.
</FONT>

<P align="center"><FONT size="2">24
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">ELIGIBILITY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any person who is employed at least 20&nbsp;hours
per week and five months per calendar year by Cadence, or any
parent or subsidiary of Cadence designated by the Board, is
eligible to participate in an offering if the employee was
employed by Cadence or the designated affiliate on the 15th day
of the month before the first day of the offering. Almost all of
Cadence&#146;s and its subsidiaries&#146; approximately 4,800
employees, including Cadence&#146;s five executive officers, are
eligible to participate in the Employee Plan. Non-employee
directors are not eligible to participate in the Employee Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">However, no employee is eligible to participate
in the Employee Plan if, immediately after the grant of purchase
rights, the employee would own, directly or indirectly, stock
possessing 5% or more of the total combined voting power or
value of all classes of stock of Cadence or of any Cadence
parent or subsidiary, including any stock which the employee may
purchase under outstanding rights and options. In addition, no
employee may accrue the right to purchase shares under the
Employee Plan and any other employee stock purchase plan of
Cadence and its affiliates at a rate that exceeds $25,000 worth
of common stock (determined at the fair market value of the
shares at the time the right is granted) for each calendar year
in which such right is outstanding at any time.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Rights granted in any offering under the Employee
Plan terminate immediately upon cessation of an employee&#146;s
employment for any reason, and Cadence will distribute to a
terminated employee all of his or her accumulated payroll
deductions, without interest.
</FONT>

<P align="left">
<B><FONT size="2">PARTICIPATION IN THE PLAN</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Eligible employees enroll in the Employee Plan by
delivering to Cadence, before the offering date for the
offering, an agreement authorizing payroll deductions of an
amount between 2% to 12% of the employees&#146; compensation (as
defined for the offering) during the purchase period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A participant may terminate payroll deductions
and withdraw from a given offering by delivering a notice of
withdrawal from the Employee Plan to Cadence. The participant
may elect to withdraw at any time prior to the 15th day of the
last month of a purchase period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon an employee&#146;s withdrawal from an
offering, Cadence will distribute to the employee his or her
accumulated payroll deductions, without interest, less any
accumulated deductions previously applied to the purchase of
common stock on the employee&#146;s behalf during the offering.
</FONT>

<P align="left">
<B><FONT size="2">PURCHASE PRICE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The purchase price at which shares of common
stock are sold in an offering under the Employee Plan is the
lower of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">85% of the fair market value of a share of common
    stock on the first day of the offering,&nbsp;or
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">85% of the fair market value of a share of common
    stock on the last day of the applicable purchase period.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">PURCHASE OF STOCK</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A participant accumulates the purchase price of
the shares by payroll deductions over the course of the
offering. At any time during the offering, a participant may
reduce or terminate his or her payroll deductions if the Board
has provided for such reduction or termination for that
offering. The Board may provide that an employee who first
becomes eligible to participate in the Employee Plan after an
offering has begun may participate in the Employee Plan, as of a
date specified during the purchase period. Cadence will credit
all payroll deductions made for a participant to the
participant&#146;s account under the Employee Plan and will
deposit the payroll deductions into the general funds of
Cadence. A participant may not make additional payments into his
or her account.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with offerings made under the
Employee Plan, the Board may specify a maximum number of shares
of common stock an employee may be granted the right to purchase
and the maximum number of
</FONT>

<P align="center"><FONT size="2">25
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">shares of common stock that may be purchased in
that offering by all participants. If the total number of shares
to be purchased upon exercise of rights granted in the offering
exceeds the maximum aggregate number of shares of common stock
available for the offering, the Board will make a <I>pro rata
</I>allocation of available shares in a uniform and equitable
manner. Unless the employee&#146;s participation is
discontinued, his or her right to purchase shares is exercised
automatically at the end of the purchase period at the
applicable price.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, if the purchase price of the shares
on any purchase date is less than 85% of the fair market value
of the shares on the offering date, then no more than 200% of
the number of shares that could have been purchased at a price
equal to 85% of the fair market value of the shares on the
offering date may be purchased by the participant on that
purchase date.
</FONT>

<P align="left">
<B><FONT size="2">DURATION, AMENDMENT AND TERMINATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board may suspend or terminate the Employee
Plan at any time. Unless terminated earlier, the Employee Plan
will terminate when all of the shares reserved shares for
issuance under the Employee Plan, as increased or adjusted from
time to time, have been issued.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board may amend the Employee Plan at any
time. Any amendment of the Employee Plan must be approved by the
stockholders within 12&nbsp;months before or after its adoption
by the Board to the extent stockholder approval is necessary for
the Employee Plan to satisfy Section&nbsp;423 of the Code,
Rule&nbsp;16b-3 under the Exchange Act or any NYSE, NASDAQ or
other applicable securities exchange listing requirements.
Currently, under the Code, stockholder approval must be obtained
if the amendment would, among other things:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">increase the number of shares of common stock
    reserved for issuance under the Employee Plan,&nbsp;or
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">modify the requirements relating to eligibility
    for participation in the Employee Plan.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Rights granted before any amendment or
termination of the Employee Plan will not be altered or impaired
by any amendment or termination of the Employee Plan without the
consent of the employee to whom such rights were granted.
</FONT>

<P align="left">
<B><FONT size="2">EFFECT OF CERTAIN CORPORATE EVENTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the event of a dissolution or liquidation of
Cadence, all offerings will terminate prior to the consummation
of the proposed transaction or, at the Board&#146;s discretion,
the exercise date of any offering will be accelerated so that
the outstanding rights may be exercised before or concurrent
with the proposed transaction. In the event of a proposed sale
of all or substantially all of the assets of Cadence, or the
merger of Cadence with or into another corporation where Cadence
is not the surviving corporation, all offerings will terminate
prior to the consummation of the proposed event, unless the
surviving corporation assumes the rights under the Employee Plan
or substitutes similar rights, or the Board, at its discretion,
provides that participants may exercise outstanding rights. If
the Board makes a right exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the
Board must notify participants that their rights under the
Employee Plan will be fully exercisable for a period of
20&nbsp;days from the date of such notice, or other period of
time as the Board determines.
</FONT>

<P align="left">
<B><FONT size="2">FEDERAL INCOME TAX INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following is only a summary of the effect of
federal income taxation upon the participant and Cadence with
respect to the grant and exercise of rights granted under the
Employee Plan, is not complete, does not discuss the income tax
laws of any state or foreign country in which a participant may
reside, and is subject to change. Participants in the Employee
Plan should consult their own tax advisors regarding the
specific tax consequences to them of participating in the
Employee Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Rights granted under the Employee Plan are
intended to qualify for favorable federal income tax treatment
associated with rights granted under an employee stock purchase
plan that qualifies under Section&nbsp;423 of the Code, which
requires stockholder approval of the Employee Plan and certain
amendments.
</FONT>

<P align="center"><FONT size="2">26
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A participant will be taxed on amounts withheld
for the purchase of shares of common stock under the Employee
Plan as if such amounts were actually received. No other income
will be taxable to a participant as a result of participating in
the Employee Plan until the disposition of the acquired shares,
and the effect of taxation will depend on the holding period of
the acquired shares.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the stock is disposed of more than two years
after the beginning of the offering period and more than one
year after the stock is transferred to the participant, then the
participant will recognize ordinary income equal to the lesser
of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the amount by which the fair market value of the
    stock at the time of such disposition exceeds the purchase
    price,&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the amount by which the fair market value of the
    stock as of the beginning of the offering period exceeds the
    purchase price determined as of the beginning of the offering
    period.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Any further gain or any loss will be taxed as a
long-term capital gain or loss. Generally, long-term capital
gains are currently subject to lower tax rates than ordinary
income. The deductibility of capital losses is limited.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the stock is sold or disposed of before the
expiration of either of the two holding periods described above,
then the amount by which the fair market value of the stock on
the purchase date exceeds the purchase price will be treated as
ordinary income at the time of disposition. The balance of any
gain will be treated as capital gain. Even if the stock is later
disposed of for less than its fair market value on the purchase
date, the same amount of ordinary income is attributed to the
participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of
the stock on the purchase date. Any capital gain or loss will be
short-term or long-term, depending on how long the stock has
been held. As mentioned above, the deductibility of capital
losses is limited, and thus a disposition of the stock, before
the expiration of the one and two-year holding periods described
above, for an amount less than the fair market value of the
stock on the purchase date could result in ordinary income (and
a tax liability) and a non-deductible capital loss.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are no federal income tax consequences to
Cadence by reason of the grant of rights or purchase of shares
under the Employee Plan. Cadence generally is entitled to a
deduction to the extent amounts are taxed as ordinary income to
a participant, subject to satisfying tax reporting obligations.
</FONT>

<DIV align="left">
<A name='107'></A>
</DIV>

<!-- link1 "PROPOSAL 4 RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS" -->

<P align="center">
<B><FONT size="2">PROPOSAL&nbsp;4</FONT></B>

<P align="center">
<B><FONT size="2">RATIFICATION OF APPOINTMENT OF INDEPENDENT
AUDITORS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On March&nbsp;22, 2002, the Board, based on the
selection and recommendation of the Audit Committee, decided not
to renew the engagement of Cadence&#146;s then current
independent auditors, Arthur Andersen LLP, and retained
KPMG&nbsp;LLP as independent auditors with respect to the audit
of Cadence&#146;s consolidated financial statements for its
fiscal year ended December&nbsp;28, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During Cadence&#146;s two most recent fiscal
years ended December&nbsp;29, 2001, and during the subsequent
interim period preceding the replacement of Arthur Andersen LLP
in March&nbsp;2002, there was no disagreement between Cadence
and Arthur Andersen LLP on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope
or procedure which, if not resolved to Arthur Andersen
LLP&#146;s satisfaction, would have caused Arthur Andersen LLP
to make reference to the subject matter of the disagreement in
connection with its reports. The audit reports of Arthur
Andersen LLP on the consolidated financial statements of Cadence
as of and for the last two fiscal years ended December&nbsp;29,
2001 did not contain any adverse opinion or disclaimer of
opinion, nor were these opinions qualified or modified as to
uncertainty, audit scope or accounting principles.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During Cadence&#146;s two most recent fiscal
years ended December&nbsp;29, 2001, and during the subsequent
interim period preceding the replacement of Arthur Andersen LLP
in March&nbsp;2002, Cadence did not consult with KPMG&nbsp;LLP
regarding the application of accounting principles to a
specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on Cadence&#146;s
financial statements.
</FONT>

<P align="center"><FONT size="2">27
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Audit Committee has selected KPMG&nbsp;LLP as
Cadence&#146;s independent auditors for the fiscal year ending
January&nbsp;1, 2005. Pursuant to the Audit Committee charter,
the Board has directed management to submit the selection of
independent auditors for ratification by the stockholders at the
annual meeting. KPMG&nbsp;LLP has audited Cadence&#146;s
financial statements since fiscal 2002. Representatives from
KPMG&nbsp;LLP are expected to be present at the annual meeting,
will have an opportunity to make a statement, if they so desire,
and will be available to respond to appropriate questions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Stockholder ratification of the selection of
KPMG&nbsp;LLP as Cadence&#146;s independent auditors is not
required by Cadence&#146;s Bylaws or otherwise. However, the
Board is submitting the selection of KPMG&nbsp;LLP to the
stockholders for ratification as a matter of good corporate
practice. If the stockholders fail to ratify the selection, the
Audit Committee will reconsider whether or not to retain
KPMG&nbsp;LLP. Even if the selection is ratified, the Audit
Committee, in its discretion, may direct the appointment of
different independent auditors at any time during the year, if
it determines that such a change would be in the best interests
of Cadence and its stockholders.
</FONT>

<P align="left">
<B><FONT size="2">VOTE REQUIRED AND BOARD
RECOMMENDATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board of Directors of Cadence recommends a
vote <B>FOR </B>ratification of the selection of KPMG&nbsp;LLP.
The affirmative vote of a majority of the shares present in
person or represented by proxy and entitled to vote on the
proposal is required for approval of this proposal. Abstentions
will be treated as being present and entitled to vote on the
proposal and, therefore, will have the effect of votes against
the proposal. Unless marked to the contrary, proxies received
will be voted <B>FOR </B>ratification of the selection of
KPMG&nbsp;LLP.
</FONT>

<P align="center">
<B><FONT size="2">THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN
FAVOR OF PROPOSAL&nbsp;4.</FONT></B>

<P align="left">
<A name='108'></A>

<!-- link1 "REPORT OF THE AUDIT COMMITTEE" -->

<P align="center">
<B><FONT size="2">REPORT OF THE AUDIT COMMITTEE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Audit Committee of the Board is comprised of
three non-employee directors of Cadence who are
&#147;independent&#148; as defined in the corporate governance
listing standards of the NYSE and NASDAQ and as defined under
the Exchange Act. During fiscal 2003, the Audit Committee was
comprised of Mr.&nbsp;Lucas as Chairman, Dr.&nbsp;Shoven and
Mr.&nbsp;Siboni until August&nbsp;1, 2003, when Mr.&nbsp;Siboni
was elected to replace Mr.&nbsp;Lucas as Chairman of the Audit
Committee. The Audit Committee met eleven times in 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Audit Committee operates under a charter,
which was most recently amended by the Board in
February&nbsp;2004. The amended Audit Committee charter is
attached to this Proxy Statement as <U>Appendix&nbsp;A</U> and
is posted on the investor relations page of Cadence&#146;s
website at www.cadence.com. As more fully described in its
charter, the Audit Committee appoints and retains the
independent auditors and oversees the quality and integrity of
Cadence&#146;s financial statements, Cadence&#146;s compliance
with legal and regulatory requirements, the independent
auditors&#146; qualifications and independence, and the
performance of Cadence&#146;s internal audit function, the
independent auditors and financial reporting processes on behalf
of the Board.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In this context, the Audit Committee has reviewed
and discussed the audited financial statements with
Cadence&#146;s management and independent auditors,
KPMG&nbsp;LLP. The Audit Committee has also discussed with
KPMG&nbsp;LLP the matters required to be discussed by Statement
on Auditing Standards No.&nbsp;61 (Communication with Audit
Committees). In addition, the Audit Committee has received from
KPMG&nbsp;LLP the written disclosures and the letter required by
Independence Standards Board Standard No.&nbsp;1 (Independence
Discussions with Audit Committees) and discussed with
KPMG&nbsp;LLP its independence from Cadence and its management.
The Audit Committee has also considered whether the provision of
other non-audit services by KPMG&nbsp;LLP to Cadence is
compatible with the auditors&#146; independence.
</FONT>

<P align="center"><FONT size="2">28
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In reliance on the reviews and discussions
referred to above, the Audit Committee recommended to the Board,
and the Board approved, the inclusion of the audited financial
statements in Cadence&#146;s Annual Report on Form&nbsp;10-K for
the year ended January&nbsp;3, 2004 for filing with the SEC.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">AUDIT COMMITTEE
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Roger S. Siboni, Chairman
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Donald L. Lucas
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">John B. Shoven
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The foregoing Audit Committee report is not
soliciting material, is not deemed filed with the SEC and is not
to be incorporated by reference in any filing of Cadence under
the Securities Act of 1933, as amended, referred to as the
Securities Act, or under the Exchange Act, whether made before
or after the date of this proxy statement and irrespective of
any general incorporation language in any such filing.
</FONT>

<P align="left">
<B><FONT size="2">FEES BILLED TO CADENCE BY KPMG LLP DURING
FISCAL 2003 AND 2002</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table presents fees incurred by
Cadence for professional services rendered by KPMG LLP for the
fiscal years ended January&nbsp;3, 2004 and December&nbsp;28,
2002.
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="55%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fiscal Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fiscal Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January&nbsp;3, 2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 28, 2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(In thousands)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Audit Fees(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,545</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,525</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Audit-Related Fees(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">238</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Audit and audit-related fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,783</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,525</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Tax Fees(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">689</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(4)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">289</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(5)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">All Other Fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,067</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(7)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,547</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes fees for the audit of Cadence&#146;s
    consolidated financial statements included in Cadence&#146;s
    Annual Report on Form&nbsp;10-K, fees for the review of the
    interim condensed consolidated financial statements included in
    Cadence&#146;s Quarterly Reports on Form&nbsp;10-Q, and fees for
    services that are normally provided by KPMG LLP in connection
    with statutory and regulatory filings or engagements. The amount
    for fiscal 2003 includes estimated fees of $1,482,000 not yet
    paid as of January&nbsp;3, 2004, which includes fees for
    services rendered in connection with Cadence&#146;s convertible
    debt offering and the SEC review of the Form&nbsp;S-3 filed in
    connection therewith, and fees for the restatement of
    Cadence&#146;s financial statements for prior periods.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes fees for assurance and related services
    that are reasonably related to the performance of the audit or
    review of Cadence&#146;s consolidated financial statements that
    are not reported under &#147;Audit Fees.&#148; For fiscal 2003,
    these services included planning regarding management assessment
    of internal controls required by Section&nbsp;404 of the
    Sarbanes-Oxley Act of 2002.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes fees for tax compliance, tax advice and
    tax planning.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Tax Fees for fiscal 2003 consisted of tax
    compliance fees of $60,071, tax planning and consulting fees of
    $611,652 for Cadence and tax preparation fees of $17,500 for a
    company that was acquired by Cadence for the period immediately
    prior to the acquisition.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Tax Fees for fiscal 2002 consisted of fees for
    tax consultation and international consulting services.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">29
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">All Other Fees for fiscal 2003 related to an
    information technology benchmarking study completed in 2002 for
    which KPMG LLP had been engaged to perform prior to its
    appointment as Cadence&#146;s independent auditors on
    March&nbsp;22, 2002.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">All Other Fees for fiscal 2002 related to an
    information technology benchmarking study, project management
    assistance for a third-party software implementation and
    assistance with documenting policies and procedures for a
    subsidiary that was proposed to be spun-off. KPMG LLP had been
    engaged to perform all of these services in 2002 prior to its
    appointment as Cadence&#146;s independent auditors.
    Approximately $591,000 of the fees billed in fiscal 2002 were
    billed prior to KPMG LLP&#146;s appointment as Cadence&#146;s
    independent auditors.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND
PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT AUDITORS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Audit Committee pre-approves all audit and
permissible non-audit services provided by KPMG LLP prior to the
engagement of KPMG LLP with respect to such services. Pursuant
to its pre-approval policy, the Audit Committee has pre-approved
tax compliance services, tax planning and related tax services,
and the following audit-related services:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Employee benefit plan audits;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Due diligence work for potential acquisitions or
    disposals;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Accounting consultations and audits in connection
    with acquisitions;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Attest services not required by statute or
    regulation;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Adoption of new accounting pronouncements or
    reporting requirements;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Accounting, internal control or regulatory
    consultations and assistance;&nbsp;and
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Review of information systems security and
    controls.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">However, engagements for these pre-approved
audit-related and tax services with an estimated cost of more
than $250,000 or that exceed the applicable budgeted amount for
the pre-approved services must be pre-approved on a case-by-case
basis by the Audit Committee or the Chairman of the Committee,
or, if the Chairman is unavailable, another member of the Audit
Committee. In addition, any proposed engagement of KPMG LLP for
services that are not pre-approved audit-related and tax
services as described above must also be pre-approved on a
case-by-case basis by the Audit Committee or the Chairman of the
Committee, or, if the Chairman is unavailable, another member of
the Audit Committee. The members to whom such authority is
delegated must report any approval decisions to the full Audit
Committee at its next scheduled meeting. None of the services
described in the table above were approved by the Audit
Committee under the <I>de&nbsp;minimis</I> exception provided by
Rule&nbsp;2-01(c)(7)(i)(C) of Regulation&nbsp;S-X.
</FONT>

<P align="center"><FONT size="2">30
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='109'></A>
</DIV>

<!-- link1 "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" -->

<P align="center">
<B><FONT size="2">SECURITY OWNERSHIP OF</FONT></B>

<DIV align="center">
<B><FONT size="2">CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth certain
information regarding the ownership of Cadence&#146;s common
stock as of April&nbsp;23, 2004, the record date, unless
otherwise indicated below, by:
</FONT>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">all those known by Cadence to be beneficial
    owners of more than five percent of its common stock;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">each of the executive officers named in the
    Summary Compensation Table presented below under
    &#147;Compensation of Executive Officers&nbsp;&#151; Summary of
    Compensation&#148;;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">all directors and director nominees;&nbsp;and
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">all current executive officers and directors of
    Cadence as a group.
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Beneficial Ownership(1)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Beneficial Owner</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital Group International, Inc.(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,373,770</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.82</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">11100 Santa Monica Blvd
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Los Angeles, CA 90025
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital Research and Management Company(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,490,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.32</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">333 South Hope Street
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Los Angeles, CA 90071
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">FMR Corp.(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,901,362</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.30</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">82 Devonshire Street
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Boston, MA 02109
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">OppenheimerFunds, Inc.(5)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,958,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.40</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Two World Financial Center
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">225 Liberty Street, 11th Floor
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">New&nbsp;York, NY 10281-1008
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">H. Raymond Bingham(6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,237,685</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.17</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Kevin Bushby(6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">723,180</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lavi A. Lev(6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">483,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">R.L. Smith McKeithen(6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">579,728</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">William Porter(6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">834,669</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Susan L. Bostrom(6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">78,125</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Donald L. Lucas(6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">477,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sean M. Maloney(6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alberto Sangiovanni-Vincentelli(6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">461,613</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">George M. Scalise(6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">285,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John B. Shoven(6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">443,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Roger S. Siboni(6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135,625</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lip-Bu Tan(6)(7)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">All current executive officers and directors as a
    group (13&nbsp;persons)(8)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,795,999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.77</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*</FONT></TD>
    <TD align="left">
    <FONT size="2">Less than 1%
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">This table is based upon information supplied by
    officers, directors and principal stockholders and Schedules 13G
    filed with the SEC. Unless otherwise indicated in the footnotes
    to this table and subject to community property laws where
    applicable, Cadence believes that each of the stockholders named
    in this table has sole voting and investment power with respect
    to the shares indicated as beneficially owned by such
    stockholder. Cadence has made an inquiry with each stockholder
    that is an entity as to the natural person(s) with voting and/or
    dispositive power with respect to the shares beneficially owned
    by such entity. Where the entity has identified such natural
    persons(s), Cadence has included the information in the
    applicable footnotes below. Beneficial ownership of greater than
    five percent of Cadence&#146;s outstanding common stock reflects
    ownership as of the most recent date indicated under filings
    with the SEC as noted below, while beneficial ownership of
    executive officers and directors is as of April&nbsp;23, 2004,
    the record
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">31
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT size="2">date. Applicable percentages are based on
    273,446,465&nbsp;shares of Cadence common stock outstanding on
    April&nbsp;23, 2004, adjusted as required by rules promulgated
    by the SEC.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Capital Group International, Inc., or CGI, filed
    an amended Schedule&nbsp;13G with the SEC on March&nbsp;11,
    2004, reporting that CGI beneficially owns
    23,695,450&nbsp;shares. CGI has sole investment power with
    respect to 23,695,450&nbsp;shares and sole voting power with
    respect to 19,405,244&nbsp;shares. The beneficial ownership of
    CGI assumes the conversion of $3,870,000 principal amount of the
    Cadence Design Systems, Inc. Zero Coupon Zero Yield Senior
    Convertible Notes due 2023, which are convertible into an
    aggregate of 247,210&nbsp;shares of Cadence common stock. CGI
    disclaims beneficial ownership of any shares of Cadence&#146;s
    common stock deemed to be beneficially owned by CGI.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Capital Research and Management Company, or CRMC,
    filed an amended Schedule&nbsp;13G with the SEC on
    February&nbsp;13, 2004, reporting that CRMC beneficially owns
    25,490,600&nbsp;shares for which it has sole investment power.
    CRMC disclaims beneficial ownership of any shares of
    Cadence&#146;s common stock deemed to be beneficially owned by
    CRMC.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">FMR Corp. filed an amended Schedule&nbsp;13G with
    the SEC on February&nbsp;17, 2004, indicating that FMR Corp.
    beneficially owns 30,901,362&nbsp;shares. FMR Corp. has sole
    investment power with respect to 30,901,362&nbsp;shares and sole
    voting power with respect to 7,297,923&nbsp;shares. Of the
    shares reported by FMR Corp., Edward C. Johnson 3d, as a result
    of his control over FMR Corp., is beneficial owner of
    30,901,362&nbsp;shares of which he has sole voting power with
    respect to 196,000&nbsp;shares and sole investment power with
    respect to 30,901,362&nbsp;shares. Of the shares reported by FMR
    Corp., Abigail P. Johnson, as a result of her control over FMR
    Corp., is the beneficial owner of 30,901,362&nbsp;shares for
    which she has sole investment power.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">OppenheimerFunds, Inc., or OFI, filed an amended
    Schedule&nbsp;13G with the SEC on February&nbsp;10, 2004,
    indicating that OFI beneficially owns 22,958,805&nbsp;shares for
    which it has shared investment power. Of the shares reported by
    OFI, Oppenheimer Global Fund, managed by OFI as its investment
    advisor, is the beneficial owner of and has sole voting power
    and shared investment power with respect to
    13,966,038&nbsp;shares. Bill Wilby, as Head Portfolio Manager,
    has voting and dispositive power with respect to the shares
    beneficially owned by OFI. OFI disclaims beneficial ownership of
    any shares of Cadence&#146;s common stock deemed to be
    beneficially owned by OFI.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes shares which certain executive officers
    and directors of Cadence have the right to acquire within
    60&nbsp;days after April&nbsp;23, 2004 upon exercise of
    outstanding options as follows:
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="85%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">H. Raymond Bingham
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top">
    <FONT size="2">3,189,583
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Kevin Bushby
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top">
    <FONT size="2">721,915
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lavi A. Lev
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top">
    <FONT size="2">483,124
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">R.L. Smith McKeithen
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top">
    <FONT size="2">564,999
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">William Porter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top">
    <FONT size="2">793,124
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Susan L. Bostrom
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top">
    <FONT size="2">78,125
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Donald L. Lucas
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top">
    <FONT size="2">397,500
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sean M. Maloney
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top">
    <FONT size="2">43,750
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alberto Sangiovanni-Vincentelli
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top">
    <FONT size="2">421,120
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">George M. Scalise
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top">
    <FONT size="2">275,000
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John B. Shoven
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top">
    <FONT size="2">428,750
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Roger S. Siboni
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top">
    <FONT size="2">135,625
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lip-Bu Tan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top">
    <FONT size="2">6,250
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 5,000&nbsp;shares for which Mr.&nbsp;Tan
    has shared voting and investment power, which are held under
    trust agreement for the benefit of Mr.&nbsp;Tan and his wife.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(8)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 7,538,865&nbsp;shares which all current
    executive officers and directors as a group have the right to
    acquire within 60&nbsp;days of April&nbsp;23, 2004, the record
    date, upon exercise of outstanding options.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">32
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='110'></A>
</DIV>

<!-- link1 "REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION" -->

<P align="center">
<B><FONT size="2">REPORT OF THE COMPENSATION COMMITTEE</FONT></B>

<DIV align="center">
<B><FONT size="2">OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Compensation Committee of the Board of
Directors is comprised of three non-employee directors of
Cadence who are &#147;independent&#148; as defined in the
corporate governance listing standards of the NYSE and NASDAQ.
During fiscal 2003, the Compensation Committee was comprised of
Dr.&nbsp;Shoven, Ms.&nbsp;Bostrom and Mr.&nbsp;Scalise until
August&nbsp;1, 2003, when Ms.&nbsp;Bostrom and Mr.&nbsp;Scalise
were re-elected to serve as members of the Compensation
Committee and Mr.&nbsp;Lucas was elected to replace
Dr.&nbsp;Shoven as a member and Chairman of the Compensation
Committee. The Compensation Committee met twice in fiscal 2003.
</FONT>

<P align="left">
<B><FONT size="2">ROLE OF THE COMPENSATION COMMITTEE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Compensation Committee acts on behalf of the
Board, as provided in its charter, to review and approve
corporate goals and objectives relevant to the compensation of
Cadence&#146;s CEO and other executive officers, evaluate the
CEO&#146;s performance in light of those goals and objectives
and determine and approve the CEO&#146;s and other executive
officers&#146; compensation. At or near the beginning of each
fiscal year, the Compensation Committee typically establishes
base salary levels and target bonuses for the CEO and other
executive officers of Cadence. In addition, the Compensation
Committee administers Cadence&#146;s equity incentive plans,
including the Senior Executive Bonus Plan, Cadence&#146;s stock
option plans and stock purchase plans, the 1994 Deferred
Compensation Plan, the 1996 Deferred Compensation Venture
Investment Plan and the 2002 Deferred Compensation Venture
Investment Plan.
</FONT>

<P align="left">
<B><FONT size="2">EXECUTIVE COMPENSATION PRINCIPLES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence&#146;s compensation program is designed
to attract, motivate and retain highly qualified individuals
necessary to achieve Cadence&#146;s business and financial
objectives. It does so by balancing short-term and long-term
financial objectives, building stockholder value and rewarding
individual and corporate performance. On that basis, the
Compensation Committee believes that executive officer
compensation should be greatly influenced by Cadence&#146;s
performance. Consistent with this philosophy, a designated
portion of the compensation of each executive officer is
contingent upon corporate performance and adjusted where
appropriate, based on an executive officer&#146;s performance
against personal performance objectives.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Compensation Committee also believes that
providing employees with an equity stake in Cadence is important
to encourage them to act in the interests of Cadence
stockholders. Long-term equity incentives for executive officers
are provided through grants of stock options and, subject to
stockholder approval of Proposal&nbsp;2 in this proxy statement,
incentive stock awards under Cadence&#146;s equity incentive
plans. The value of stock options generally can be realized by
an executive officer only if the price of Cadence&#146;s common
stock increases above its fair market value on the grant date
and the executive officer remains employed by Cadence for the
period required for the options to vest. Cadence&#146;s goal is
to have market-competitive equity incentive programs that
encourage employees to act as owners of the business. A guiding
principle also suggests that incentive compensation should be a
greater part of total compensation for more senior employees, as
an increased portion of compensation is payable based on
achievement of Cadence&#146;s performance goals.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence&#146;s compensation program is designed
to provide competitive levels of compensation. The base salaries
and incentive compensation of, and stock option grants to,
Cadence executive officers are determined in part by the
Compensation Committee&#146;s discretionary evaluation of a
number of factors including surveys of competitive salaries and
equity practices in the technology sector for similar positions,
as well as individual and corporate performance. The cash
compensation of Cadence&#146;s executive officers is compared to
equivalent data in the Radford Report and competitive market
compensation levels when determining base salary, target bonuses
and target total cash compensation. The equity compensation of
the executive officers is compared to equivalent data in the
iQuantic Equity Practices Survey, referred to in this proxy
statement as the iQuantic Survey, when determining stock option
grants. The iQuantic Survey collects detailed information on
equity practices from 150 high technology companies and includes
information on all employee levels.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The companies selected from the Radford Report
and the iQuantic Survey were chosen based upon their similarity
to Cadence in terms of product or industry, geography and
revenue levels. A significant percentage
</FONT>

<P align="center"><FONT size="2">33
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">of the companies in the Radford Report and
iQuantic Survey bases, for instance, had average sales that
closely approximate Cadence&#146;s revenue level. A portion of
the companies in the Standard&nbsp;&#38; Poor&#146;s Information
Technology Sector Index, referred to below as the S&#38;P TS
Index, which is used by Cadence in preparing the stock price
performance graph included in this proxy statement, was included
in the Radford Report and iQuantic Survey. Other S&#38;P TS
Index companies, however, were considered too large or of a
different business profile, and would have incorrectly increased
the market compensation comparisons used to evaluate executive
officer salaries. The additional companies in the Radford Report
and iQuantic Survey bases were believed to be relevant by
independent compensation consultants formerly retained by
Cadence because they compete for executive talent with Cadence,
notwithstanding the fact that they are not included in the
S&#38;P TS Index.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">COMPONENTS OF 2003 EXECUTIVE
COMPENSATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Base Compensation.</FONT></B><FONT size="2">
The Radford Report information, together with the CEO&#146;s
recommendation of base salary and target bonus for 2003 for each
executive officer other than the CEO, was presented to the
Compensation Committee in January 2003. The Committee reviewed
the recommendation of the CEO and the Radford Report data
outlined above and established a base salary effective
January&nbsp;1, 2003 for each executive officer. Salary
adjustments are based on a review of competitive salary data as
provided by the Radford Report, as well as on the performance of
each individual executive. The Compensation Committee focuses on
the range between the 50th and 75th percentile salary levels of
the comparison group, including those relevant companies in the
Radford Report, in its review of competitive salary data. The
differences between the responsibilities of each Cadence
executive officer and the most similar survey position are also
taken into account in determining the appropriate competitive
comparison salary level. The actual base salaries of the
executive officers are typically within the 50th to 75th
percentile of the competitive salary data, including those
relevant companies in the Radford Report, but may fall above or
below this range based on specific circumstances such as
performance and experience in the position. Specific discussion
of CEO compensation is included below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Incentive
Compensation.</FONT></B><FONT size="2"> The Compensation
Committee reviewed the Senior Executive Bonus Plan and the
Cadence performance objectives to be used for purposes of bonus
determination within the first 90&nbsp;days of fiscal 2003. The
Compensation Committee assigned a target bonus to each executive
officer, which target bonus was either a precise dollar figure
or a percentage of the executive officer&#146;s base salary. The
Compensation Committee also approved the performance objectives
to be used for bonus determination and the overall structure and
mechanics of the Senior Executive Bonus Plan. The relevant
performance objectives under the Senior Executive Bonus Plan
include, either individually or in combination, cash flow,
earnings per share, revenue, net income, return on equity,
capital, assets or operating revenue, operating profit or
margin, or any other objective measurable criteria tied to
Cadence&#146;s performance. For 2003, the annual incentive plan
established under the Senior Executive Bonus Plan required that
Cadence achieve 100% of the targeted level of earnings per share
before any payment under the plan could be made. Because this
target was not achieved, no bonuses were paid to executive
officers for fiscal 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Venture Investments.</FONT></B><FONT size="2">
Cadence maintains the 1996 Deferred Compensation Venture
Investment Plan, or the 1996 Venture Plan, and the 2002 Deferred
Compensation Venture Investment Plan, or the 2002 Venture Plan,
for its executive officers and directors, which permit
participants to defer payment of part of their salary and/or all
or part of any bonus or director fees. Through the 2002 Deferred
Compensation Venture Investment Trust, or Venture Trust, the
2002 Venture Plan uses all deferred amounts to purchase limited
partnership interests in Telos Venture Partners&nbsp;II, L.P.,
referred to in this proxy statement as Telos&nbsp;II. Prior to
January 2002, amounts were deferred under the 1996 Venture Plan
and were used to purchase limited partnership interests in Telos
Venture Partners, L.P., referred to in this proxy statement as
Telos&nbsp;I, which was closed to new investment in December
2001. Investment in Telos&nbsp;II is currently the only
investment option available to participants in the 2002 Venture
Plan, although in 2003 Cadence allowed participants to transfer
amounts previously deferred under the 2002 Venture Plan to the
1994 Deferred Compensation Plan, as described below. Telos I and
Telos&nbsp;II make venture capital investments in start-up and
growth-oriented businesses, with some emphasis on businesses in
the semiconductor and software industries.
</FONT>

<P align="center"><FONT size="2">34
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence and certain of its deferred compensation
trusts are the sole limited partners of Telos I and Cadence is
the sole limited partner of Telos&nbsp;II. Telos&nbsp;I and
Telos&nbsp;II are each managed by their general partner, Telos
Management, LLC, which is not affiliated with Cadence, but may
be removed by Cadence without cause at any time. The partnership
agreements governing Telos&nbsp;I and Telos&nbsp;II, which are
substantially the same, require Cadence to meet capital calls
principally for the purpose of funding investments that are
recommended by the general partner and approved by the Venture
Committee as consistent with the partnership&#146;s limitations
and stated purposes. For both partnerships, the advisory
committee is comprised solely of Mr.&nbsp;Bingham,
Cadence&#146;s President and CEO, and Mr.&nbsp;Lucas,
Cadence&#146;s Chairman of the Board. Distributions from
Telos&nbsp;I and Telos&nbsp;II may be in cash or stock and can
be reinvested in the 1994 Deferred Compensation Plan, which is
described above under &#147;Cadence&#146;s Board of
Directors&nbsp;&#151; Compensation of Directors&#148;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During fiscal 2003, the following executive
officers received cash and stock distributions from the Venture
Trust that were reinvested in the 1994 Deferred Compensation
Plan: Mr.&nbsp;Bingham, $25,215; Mr.&nbsp;McKeithen, $2,414; and
Mr.&nbsp;Porter, $4,304. Cadence&#146;s executive officers did
not defer any compensation payable in 2003 to invest in the
Venture Trust.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2003, executive officers were given the
opportunity to transfer amounts deferred under the 2002 Venture
Plan that had not been invested by Telos&nbsp;II to accounts
maintained under the 1994 Deferred Compensation Plan. The
elections were made in 2003 and the transfers occurred in 2004.
The following executive officers elected to transfer the
following amounts: Mr.&nbsp;Bingham, $426,878;
Mr.&nbsp;McKeithen, $119,365; and Mr.&nbsp;Porter, $302,719.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Stock Options.</FONT></B><FONT size="2"> Stock
options typically have been granted to an executive when the
executive joins Cadence, in connection with a significant change
in responsibilities and, occasionally, to achieve equity within
a peer group. The Compensation Committee also grants stock
options to executives to provide ongoing incentives. The number
of shares subject to each stock option granted is based on
anticipated future contribution and ability to impact corporate
and/or business unit results, past performance or consistency
within the executive&#146;s peer group. The iQuantic Survey data
was also used for general comparison purposes in determining
stock option grants to executives. In fiscal 2003, the
Compensation Committee, in its discretion, granted stock options
to all of the Named Executive Officers. The stock options
generally become exercisable over a four-year period and are
granted at a price that is equal to the fair market value of
Cadence&#146;s common stock on the grant date. The stock options
have a ten-year term.
</FONT>

<P align="left">
<B><FONT size="2">2003 CEO COMPENSATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Compensation for the CEO is determined through a
process similar to that discussed above for the other executive
officers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Mr.&nbsp;Bingham&#146;s base salary, target
bonus, performance objectives and schedule of adjustments to the
target bonus were established by the Compensation Committee
within the first 90&nbsp;days of fiscal 2003.
Mr.&nbsp;Bingham&#146;s base salary and target bonus were based
on the Compensation Committee&#146;s discretionary evaluation of
a number of factors, including the Radford Report. For fiscal
2003, the Compensation Committee established
Mr.&nbsp;Bingham&#146;s base salary at $850,032, the same level
as in the prior year. Mr.&nbsp;Bingham&#146;s employment
agreement provides for an annual target cash bonus equal to his
base salary each fiscal year. The annual incentive plan for 2003
established under Cadence&#146;s Senior Executive Bonus Plan
required that Cadence achieve 100% of the targeted level of
earnings per share before any payment under the plan could be
made. Because this target was not achieved, no bonus was paid to
Mr.&nbsp;Bingham for fiscal 2003. The Compensation Committee did
not adjust Mr.&nbsp;Bingham&#146;s base salary in 2003 as part
of a company-wide program to control costs and improve financial
performance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Mr.&nbsp;Bingham was granted a stock option on
February&nbsp;14, 2003 for 750,000&nbsp;shares of Cadence common
stock. With respect to the stock option grant, the Compensation
Committee, in determining the size of the award, took into
account market data from companies similar to Cadence, the
iQuantic Survey, and options previously awarded to
Mr.&nbsp;Bingham. The number of stock options granted to
Mr.&nbsp;Bingham was not related to
</FONT>

<P align="center"><FONT size="2">35
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">Cadence&#146;s performance although the value of
the stock options is dependent upon Cadence&#146;s performance
as measured by the price of Cadence common stock.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Mr.&nbsp;Bingham also participated in the 1994
Deferred Compensation Plan as described above in this report and
under &#147;Corporate Governance&nbsp;&#151; Board
Compensation.&#148;
</FONT>

<P align="left">
<B><FONT size="2">COMPLIANCE WITH SECTION&nbsp;162(m) OF THE
INTERNAL REVENUE CODE OF 1986</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Omnibus Budget Reconciliation Act of 1993
added Section&nbsp;162(m) to the Internal Revenue Code of 1986,
as amended. Section&nbsp;162(m) limits deductions for certain
executive compensation in excess of $1,000,000 in any given
year. Certain types of compensation are deductible only if
performance criteria are specified in detail and payments are
contingent on stockholder approval of the compensation
arrangement. Cadence attempts to structure compensation
arrangements to achieve deductibility under Section&nbsp;162(m),
unless the benefit of such deductibility is outweighed by the
need for flexibility or the attainment of other corporate
objectives. The Compensation Committee will continue to monitor
issues concerning the deductibility of executive compensation
and will take appropriate action if and when it is warranted.
Since corporate objectives may not always be consistent with the
requirements for full deductibility, the Compensation Committee
is prepared, if it deems appropriate, to enter into compensation
arrangements under which payments may not be deductible under
Section&nbsp;162(m). Thus, deductibility will not be the sole
factor used by the Compensation Committee in ascertaining
appropriate levels or modes of compensation. The Compensation
Committee believes that all compensation realized in fiscal 2003
by the executive officers is deductible under
Section&nbsp;162(m).
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">COMPENSATION COMMITTEE
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Donald L. Lucas, Chairman
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Susan L. Bostrom
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">George M. Scalise
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The foregoing Compensation Committee Report on
Executive Compensation will not be deemed to be incorporated by
reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act or
under the Exchange Act, except to the extent that Cadence
specifically incorporates this information by reference, and
will not otherwise be deemed filed under such Acts.
</FONT>

<P align="left">
<B><FONT size="2">COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No member of the Compensation Committee is, or
was during fiscal 2003, an officer or employee of Cadence or any
of its subsidiaries. No member of the Compensation Committee is,
or was during fiscal 2003, an executive officer of another
company whose board of directors has a comparable committee on
which one of Cadence&#146;s executive officers serves.
</FONT>

<P align="center"><FONT size="2">36
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='111'></A>
</DIV>

<!-- link1 "COMPENSATION OF EXECUTIVE OFFICERS SUMMARY OF COMPENSATION" -->

<P align="center">
<B><FONT size="2">COMPENSATION OF EXECUTIVE OFFICERS</FONT></B>

<DIV align="center">
<B><FONT size="2">SUMMARY OF COMPENSATION</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table shows, for fiscal years 2003,
2002 and 2001, compensation awarded or paid to, or earned by,
Cadence&#146;s five most highly compensated executive officers
at January&nbsp;3, 2004, including Cadence&#146;s Chief
Executive Officer, referred to in this proxy statement as the
Named Executive Officers:
</FONT>

<P align="center">
<B><FONT size="2">SUMMARY COMPENSATION TABLE</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="34%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Long Term</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Awards</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Annual Compensation(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">All Other</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Name and Principal Position</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Salary ($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Bonus ($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options (#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation(2)($)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">H. Raymond Bingham
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">850,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,460</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">President and
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">850,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">847,515</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,880</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Executive Officer
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">850,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,468,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,980</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="22"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Kevin Bushby
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">509,708</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">215,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President,
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">460,621</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">445,401</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">400,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">122,957</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Worldwide Field Operations
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">448,107</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">797,702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">189,070</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="22"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lavi A. Lev
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">400,015</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">400,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">256,840</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President and
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">350,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">236,977</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">350,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">251,344</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">General Manager,
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">335,429</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">330,625</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">928</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Implementation Division
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="22"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">R.L. Smith McKeithen
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">351,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,587</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President,
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">350,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">377,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,864</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">General Counsel and Secretary
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">349,847</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">455,602</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,964</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="22"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">William Porter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">400,015</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,840</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President and
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">400,015</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">190,831</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,036</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Financial Officer
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">400,015</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">465,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,636</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes amounts deferred pursuant to
    Section&nbsp;401(k) of the Code, Cadence&#146;s 1996 Deferred
    Compensation Venture Investment Plan, Cadence&#146;s 2002
    Deferred Compensation Venture Investment Plan, Cadence&#146;s
    1994 Deferred Compensation Plan and the Cadence UK Employee
    Benefit Trust 2002.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents Cadence&#146;s contributions to 401(k)
    savings plan for each executive, except Mr.&nbsp;Bushby in 2001,
    2002 and 2003, and Mr.&nbsp;Lev in 2001 and 2002, and term life
    insurance premiums paid by Cadence for each executive.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes for Mr.&nbsp;Bingham:
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In 2003, 401(k) contribution of $7,000 and term
    life insurance premium of $5,460.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In 2002, 401(k) contribution of $6,000 and term
    life insurance premium of $5,880.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In 2001, 401(k) contribution of $5,100 and term
    life insurance premium of $5,880.
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes for Mr.&nbsp;Bushby:
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In 2003, relocation allowance of $23,855, cost of
    living adjustments of $112,208, car allowance of $24,636,
    payments in lieu of a United Kingdom pension plan of $50,971,
    and term life insurance premium of $4,270.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In 2002, car allowance of $22,650, payments in
    lieu of a United Kingdom pension plan of $93,245, and term life
    insurance premium of $7,062.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In 2001, car allowance of $21,659, payments in
    lieu of a United Kingdom pension plan of $161,179, and term life
    insurance premium of $6,232.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">37
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2"> The payments made to Mr.&nbsp;Bushby in lieu of
a United Kingdom pension plan provide funding for a private
retirement plan for Mr.&nbsp;Bushby. The payments are made
directly to Mr.&nbsp;Bushby and are generally equivalent to the
amount that Cadence would contribute to a pension account for
Mr.&nbsp;Bushby if he participated in Cadence&#146;s United
Kingdom pension plan.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes for Mr.&nbsp;Lev:
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In 2003, $250,000 for partial forgiveness of a
    real estate loan, 401(k) contribution of $6,000, and term life
    insurance premium of $840.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In 2002, $250,000 for partial forgiveness of a
    real estate loan and term life insurance premium of $1,344.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In 2001, term life insurance premium of $928.
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes for Mr.&nbsp;McKeithen:
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In 2003, 401(k) contribution of $7,000 and term
    life insurance premium of $2,587.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In 2002, 401(k) contribution of $6,000 and term
    life insurance premium of $3,864.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In 2001, 401(k) contribution of $5,100 and term
    life insurance premium of $3,864.
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes for Mr.&nbsp;Porter:
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In 2003, 401(k) contribution of $6,000 and term
    life insurance premium of $840.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In 2002, 401(k) contribution of $1,500 and term
    life insurance premium of $1,536.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">In 2001, 401(k) contribution of $5,100 and term
    life insurance premium of $1,536.
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<B><FONT size="2">STOCK OPTION GRANTS AND EXERCISES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the fiscal year ended January&nbsp;3,
2004, Cadence granted options to its executive officers under
Cadence&#146;s stock option plans. The following tables show,
for fiscal 2003, certain information regarding options granted
to, exercised by, and held at year end by, the Named Executive
Officers.
</FONT>

<P align="center">
<B><FONT size="2">OPTION GRANTS IN LAST FISCAL YEAR</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="24%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Individual Grants</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Potential Realizable Value</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">at Assumed Annual Rates</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">% of Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">of Stock Price</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Appreciation for Option</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Granted to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Term(1)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Employees in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise or Base</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Expiration</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Granted (#)(2)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fiscal Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price ($/Sh)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">10% ($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">5% ($)</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">H. Raymond Bingham
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.109</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.735</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2/14/13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,636,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,591,717</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Kevin Bushby
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1/29/13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,610,477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">635,498</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.735</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2/14/13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,551,508</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">612,229</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lavi A. Lev
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.022</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1/29/13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,415,715</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">953,247</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.703</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.735</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2/14/13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,878,771</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,530,572</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">R.L. Smith McKeithen
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1/29/13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,610,477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">635,498</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">William Porter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.022</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1/29/13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,415,715</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">953,247</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Calculated on the assumption that the market
    value of the underlying stock increases at the stated values
    compounded annually for the term of the option.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">These option grants vest at the rate of 1/48 of
    the shares subject to the option each month following the grant
    date.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">38
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR, AND</FONT></B>

<DIV align="center">
<B><FONT size="2">FISCAL YEAR-END OPTION VALUES</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying Unexercised</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value of Unexercised</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options at 1/03/04</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">In-the-Money Options at</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares Acquired on</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable/</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1/03/04 Exercisable/</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise (#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Realized ($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unexercisable (#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unexercisable ($)(1)</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">H. Raymond Bingham
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">182,600</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(2)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,810,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,918,540/1,031,460</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,931,873/5,316,564</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Kevin Bushby
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">211,466</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">622,748/466,252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,206,408/2,126,067</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lavi A. Lev
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">267,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">395,416/614,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">788,344/3,380,156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">R.L. Smith McKeithen
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">180,806</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">510,623/186,877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,173,452/1,025,023</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">William Porter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">713,332/266,668</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,716,401/1,150,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The fair market value of Cadence common stock at
    January&nbsp;3, 2004 ($18.31) less the exercise price for the
    options.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">50,000 of these options were exercised prior to
    expiration in 2003 and the gain received upon the net exercise
    was deferred into an account under Cadence&#146;s 1994 Deferred
    Compensation Plan. Mr.&nbsp;Bingham now holds 40,986 common
    stock units, with no beneficial ownership of the shares of
    Cadence common stock to which the value of the units relates,
    under the 1994 Deferred Compensation Plan, which are to be paid
    out in shares of Cadence common stock in the future in
    accordance with his election.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left">
<A name='112'></A>
</DIV>

<!-- link1 "EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-OF-CONTROL AGREEMENTS" -->

<P align="center">
<B><FONT size="2">EMPLOYMENT CONTRACTS, TERMINATION OF
EMPLOYMENT</FONT></B>

<DIV align="center">
<B><FONT size="2">AND CHANGE-OF-CONTROL AGREEMENTS</FONT></B>
</DIV>

<P align="left">
<B><FONT size="2">EMPLOYMENT AGREEMENT WITH H. RAYMOND
BINGHAM</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Effective April&nbsp;26, 1999, Cadence entered
into an employment agreement, referred to as the Employment
Agreement, with Mr.&nbsp;Bingham, superseding employment
agreements entered into with Mr.&nbsp;Bingham in May 1993 and
November 1997. The Employment Agreement provides, among other
things, for Mr.&nbsp;Bingham&#146;s employment as President and
Chief Executive Officer at an initial base salary of
$700,000&nbsp;per year, which the Compensation Committee may
increase, and has increased, from time to time. Mr.&nbsp;Bingham
is also eligible to participate in Cadence&#146;s Senior
Executive Bonus Plan at an annual target bonus equal to his base
salary each year. In accordance with the Employment Agreement,
Mr.&nbsp;Bingham was granted a stock option for
850,000&nbsp;shares of common stock on May&nbsp;7, 1999. The
Employment Agreement also provides for Cadence&#146;s
indemnification of Mr.&nbsp;Bingham and receipt of such benefits
as the Board may, from time to time, determine to provide for
Cadence&#146;s key executives.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Employment Agreement,
Mr.&nbsp;Bingham&#146;s employment by Cadence terminates
immediately upon Mr.&nbsp;Bingham&#146;s receipt of a written
notice of termination by Cadence, upon Cadence&#146;s receipt of
written notice of termination by Mr.&nbsp;Bingham, or upon
Mr.&nbsp;Bingham&#146;s permanent disability or death. In the
event of termination of his employment other than
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for &#147;cause&#148;, such as
    Mr.&nbsp;Bingham&#146;s gross misconduct, fraud, or material
    breach,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">on account of Mr.&nbsp;Bingham&#146;s permanent
    disability,&nbsp;or
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">by Mr.&nbsp;Bingham&#146;s voluntary termination
    for other than &#147;good reason,&#148; which term includes an
    involuntary demotion, an involuntary reduction in compensation
    (including base compensation, fringe benefits or target bonus)
    of more than 10%, or an involuntary relocation of more than
    30&nbsp;miles,
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">the Employment Agreement provides that Cadence
will pay an amount equal to 180% of one year&#146;s base salary
and annual target bonus at the time of termination to
Mr.&nbsp;Bingham in one lump sum payment. Mr.&nbsp;Bingham would
also continue to receive all health, disability and life
insurance coverage for a 12-month period after termination of
his employment. Additionally, all of the unvested options held
by Mr.&nbsp;Bingham on the date of termination that would have
vested over the subsequent 30&nbsp;month period, except any
performance-based
</FONT>

<P align="center"><FONT size="2">39
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">options, will immediately vest and become
exercisable in full. The options will remain exercisable for the
period specified in the respective option agreements.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Should a change of control in the ownership of
Cadence occur, and Mr.&nbsp;Bingham&#146;s employment with
Cadence is terminated other than
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for cause,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">total disability or death,&nbsp;or
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">by a voluntary termination by Mr.&nbsp;Bingham,
    for other than good reason,
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">in each case, within 13&nbsp;months after a
change of control, then the Employment Agreement provides that
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Cadence will pay in one lump sum an amount equal
    to 250% of one year&#146;s base salary and annual target bonus
    for Mr.&nbsp;Bingham at the time of his termination, as in
    effect immediately before his termination,&nbsp;and
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">all unvested options held by Mr.&nbsp;Bingham on
    the date of a change of control will immediately vest and become
    exercisable in full and will remain exercisable for the period
    specified in the relevant option agreements.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Employment Agreement, &#147;change of
control&#148; means the occurrence of any of the following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the dissolution or liquidation of Cadence,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale, lease or other disposition of all or
    substantially all of Cadence&#146;s assets,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a merger or consolidation in which Cadence is not
    the survivor and the Cadence stockholders immediately before the
    merger or consolidation fail to possess ownership of more than
    80% of the voting power of the securities of the survivor,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a merger or consolidation in which Cadence is the
    survivor and the Cadence stockholders immediately before the
    merger or consolidation fail to possess ownership of more than
    80% of Cadence&#146;s securities,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any transaction or transactions after which any
    person, excluding any employee benefit plan, or related trust,
    sponsored or maintained by Cadence or its subsidiaries, becomes
    the beneficial owner of Cadence voting securities representing
    20% or more of the combined voting power of all of
    Cadence&#146;s voting securities,&nbsp;or
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if the individuals who, as of the date
    immediately following Cadence&#146;s 1999 Annual Meeting of
    Stockholders, are members of the Board, referred to as the
    Incumbent Board, cease for any reason to constitute at least 50%
    of the Board. If the election, or nomination for election by
    Cadence&#146;s stockholders, of any new director was approved by
    a vote of at least two-thirds of the Incumbent Board, such new
    director shall be considered to be a member of the Incumbent
    Board.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the severance and other benefits provided to
Mr.&nbsp;Bingham constitute &#147;parachute payments&#148;
subject to federal excise tax, then Mr.&nbsp;Bingham&#146;s
benefits under the change of control provisions of the
Employment Agreement will be payable either in full or as to
such lesser amount which would result in no excise tax,
whichever amount leaves Mr.&nbsp;Bingham with the greatest
amount of benefits on an after-tax basis.
</FONT>

<P align="left">
<B><FONT size="2">CHANGE-OF-CONTROL AGREEMENTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence has entered into a change-of-control
agreement with each of Messrs.&nbsp;Bushby, Lev, McKeithen and
Porter, who are referred to in this and the next paragraph as
the Executives. Under these agreements, &#147;change of
control&#148; means the occurrence of any of the following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a change in the beneficial ownership of more than
    50% of Cadence&#146;s then outstanding voting securities,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a merger or consolidation with another
    corporation, other than a merger or consolidation which would
    result in the voting securities of Cadence immediately before
    the merger or consolidation continuing to represent more than
    50% of the total voting securities after the merger or
    consolidation,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale or disposition of all or substantially
    all of Cadence&#146;s assets,&nbsp;or
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">if the individuals who, as of the date of the
    respective agreements, are members of the Board, referred to as
    the Incumbent Board, cease to constitute a majority of the Board
    within a two-year period. If the election, or nomination for
    election by Cadence&#146;s stockholders, of any new director was
    approved by a
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">40
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">majority of the Incumbent Board, such new
    director shall be considered to be a member of the Incumbent
    Board.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">If the Executive&#146;s employment with Cadence
is terminated within 13&nbsp;months after a change of control of
Cadence other than:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for cause, such as the Executive&#146;s gross
    misconduct, fraud or improper disclosure or use of confidential
    business information,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Executive&#146;s total and permanent
    disability or death,&nbsp;or
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">by a voluntary termination by the Executive for
    other than &#147;good reason,&#148; which includes an
    involuntary relocation of more than 50&nbsp;miles, a reduction
    in base salary and target bonus of more than 10% and a material
    reduction in the Executive&#146;s duties and responsibilities,
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">then Cadence will pay the Executive an amount
equal to one year of his base salary at the time of termination
in one lump sum payment. Cadence will also pay the
Executive&#146;s target bonus for the year of termination as in
effect immediately before the termination. Additionally, all
unvested Cadence options held by the Executive on the date of
the change of control will immediately vest and become
exercisable in full and will remain exercisable for the period
specified in the relevant option agreements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If any of the severance and other benefits
provided to an Executive constitute &#147;excess parachute
payments&#148; subject to federal excise tax, then the
Executive, in his sole discretion, may elect to reduce the
amounts payable under the change-of-control agreement or to have
any portion of the applicable options or incentive stock not
vest to avoid any &#147;excess parachute payment.&#148;
</FONT>

<DIV align="left">
<A name='113'></A>
</DIV>

<!-- link1 "EQUITY COMPENSATION PLAN INFORMATION" -->

<P align="center">
<B><FONT size="2">EQUITY COMPENSATION PLAN INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table provides information about
Cadence&#146;s equity compensation plans, including its option
plans and employee stock purchase plans, as of January&nbsp;3,
2004.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Securities</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Remaining Available for</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Future Issuance Under</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">to be Issued Upon</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise Price of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Equity Compensation</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Plans (Excluding</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding Options,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Securities Reflected</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Plan Category</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Warrants and Rights</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Warrants and Rights</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">in Column (a))</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(a)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(b)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(c)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity compensation plans approved by security
    holders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,095,127</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(1)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.78</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,239,665</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(2)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity compensation plans not approved by
    security holders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,473,875</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(3)(4)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.72</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,750,973</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(5)</FONT></TD>
</TR>

<TR>
    <TD colspan="14"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,569,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.88</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,990,638</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">This excludes purchase rights accruing under
    Cadence&#146;s Amended and Restated Employee Stock Purchase
    Plan, referred to as the Employee Plan, for which remaining
    available rights are included in column (c). Under the Employee
    Plan, each eligible employee may purchase shares of Cadence
    common stock at six-month intervals during 24-month offering
    periods at a purchase price per share equal to 85% of the lower
    of the fair market value of Cadence common stock on (i)&nbsp;the
    first day of the offering period, or (ii)&nbsp;the last day of
    the applicable purchase period.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">This includes 2,281,704&nbsp;shares available for
    issuance at the end of fiscal 2003 under the Employee Plan,
    excluding shares subject to the amendment proposed for
    stockholder approval at the 2004 annual stockholders meeting.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">This excludes an aggregate of
    7,782,418&nbsp;shares subject to options assumed in connection
    with acquisitions at a weighted average exercise price of $6.91.
    No additional options may be granted under the assumed plans.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">41
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">This excludes purchase rights accruing under
    Cadence&#146;s Non-Qualified Employee Stock Purchase Plan,
    referred to as the 2001 Non-Qualified ESPP, used for
    Cadence&#146;s non-U.S.&nbsp;employees and described below, for
    which shares remaining available for issuance are included in
    column (c).
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">This includes 588,298&nbsp;shares available for
    issuance under the 2001 Non-Qualified ESPP and
    1,639,959&nbsp;shares registered under Cadence&#146;s SPC Plan,
    based on an estimate of the number of shares to be issued
    pursuant to the SPC Plan after fiscal 2003 as described below.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence&#146;s 1993 Nonstatutory Stock Incentive
Plan, referred to as the 1993 Plan, provides for the issuance of
nonstatutory stock options and incentive stock to Cadence
employees and consultants who are not executive officers,
directors or beneficial owners of 10% or more of Cadence&#146;s
outstanding common stock. 1,536,286&nbsp;shares are subject to
unvested incentive stock grants and 200,851&nbsp;shares remain
available for grant of the 24,750,000&nbsp;shares reserved for
issuance under the 1993 Plan. The exercise price of options
granted under the 1993 Plan may not be less than the fair market
value of the stock on the grant date. Options to
purchase&nbsp;3,824,846&nbsp;shares were outstanding under the
1993 Plan as of the end of fiscal 2003 with a weighted average
exercise price of $13.88. Options granted under the 1993 Plan
generally become exercisable over a four-year period, with
one-fourth of the shares vesting one year from the vesting
commencement date, and the remaining shares vesting in 36 equal
monthly installments thereafter. Options granted under the 1993
Plan generally expire ten years from the grant date. Awards of
incentive stock granted under the 1993 Plan vest at the times
and in installments determined by the Board. The vesting of
incentive stock may be subject to continued employment, the
passage of time and/or performance criteria deemed appropriate
by the Board.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence&#146;s 1997 Nonstatutory Stock Incentive
Plan, referred to as the 1997 Plan, provides for the issuance of
nonstatutory stock options and incentive stock to Cadence
employees and consultants who are not executive officers,
directors or beneficial owners of 10% or more of Cadence common
stock. There are no shares subject to unvested incentive stock
grants and 8,827,633&nbsp;shares remain available for grant of
the 30,000,000&nbsp;shares reserved for issuance under the 1997
Plan. The exercise price of options granted under the 1997 Plan
may not be less than the fair market value of the stock on the
grant date. Options to purchase&nbsp;12,914,649&nbsp;shares were
outstanding under the 1997 Plan as of the end of fiscal 2003
with a weighted average exercise price of $15.08. Options
granted under the 1997 Plan generally become exercisable over
periods of up to five years, generally with one-fifth of the
shares vesting one year from the vesting commencement date with
respect to initial grants, and the remaining shares vesting in
48 equal monthly installments thereafter. Options under the 1997
Plan generally expire ten years from the grant date. Awards of
incentive stock granted under the 1997 Plan vest at the times
and in installments determined by the Board. The vesting of
incentive stock may be subject to continued employment, the
passage of time and/or performance criteria deemed appropriate
by the Board.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence&#146;s 2000 Nonstatutory Equity Incentive
Plan, referred to as the 2000 Plan, provides for the issuance of
nonstatutory stock options, incentive stock, stock bonuses and
rights to acquire restricted stock to its employees and
consultants who are not executive officers, directors or
beneficial owners of 10% or more of Cadence common stock.
Options to purchase&nbsp;34,734,380&nbsp;shares were outstanding
under the 2000 Plan as of the end of fiscal 2003 with a weighted
average exercise price of $16.16 and 13,494,232&nbsp;shares
remain available for grant of the 50,000,000 shares reserved for
issuance under the 2000 Plan. Options granted under the 2000
Plan have an exercise price not less than the fair market value
of the stock on the grant date and become exercisable over a
period of up to four years, generally with one-fourth of the
shares vesting one year from the vesting commencement date with
respect to initial grants, and the remaining shares vesting in
36 equal monthly installments thereafter. Options under the 2000
Plan generally expire ten years from the grant date. Awards of
incentive stock granted under the 2000 Plan vest at the times
and in installments determined by the Board. The vesting of
incentive stock may be subject to continued employment, the
passage of time and/or performance criteria deemed appropriate
by the Board.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under Cadence&#146;s 2001 Non-Qualified ESPP,
eligible employees, who are generally Cadence&#146;s
non-U.S.&nbsp;employees, may purchase shares of Cadence common
stock during offering periods (not to exceed 27&nbsp;months) and
on purchase dates as determined by the Board. The purchase price
of the shares is equal to 85% of the lower of the fair market
value of Cadence common stock on (i)&nbsp;the first day of the
offering period,
</FONT>

<P align="center"><FONT size="2">42
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">or (ii)&nbsp;the last day of the applicable
purchase period. As of the end of fiscal 2003,
588,298&nbsp;shares remained available for issuance of the
750,000&nbsp;shares authorized under the 2001 Non-Qualified ESPP.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence&#146;s SPC Plan provides for the issuance
of restricted shares of Cadence common stock to former employees
of Silicon Perspective Corporation, or SPC, who are now Cadence
employees, upon the satisfaction of certain performance-based
criteria, as payment of additional purchase consideration in
connection with Cadence&#146;s acquisition of SPC. Restricted
shares were first issued under the SPC Plan in February 2003 and
54.17% of these issued shares vested immediately. The remaining
45.83% vested in 11 equal monthly installments beginning in
February 2003 and became fully vested on December&nbsp;31, 2003.
The second issue date was April&nbsp;8, 2004, and these shares
were fully vested when issued. An aggregate of
1,491,293&nbsp;shares were issued under the SPC Plan.
</FONT>

<P align="center"><FONT size="2">43
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='114'></A>
</DIV>

<!-- link1 "PERFORMANCE MEASUREMENT COMPARISON" -->

<P align="center">
<B><FONT size="2">PERFORMANCE MEASUREMENT COMPARISON</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following graph shows the total stockholder
return of an investment of $100 in cash on December&nbsp;31,
1998 for:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Cadence&#146;s common stock,
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Standard&nbsp;&#38; Poor&#146;s 500 Composite
    Index (referred to as the S&#38;P 500),
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the NASDAQ Stock Market (U.S.),&nbsp;and
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Standard&nbsp;&#38; Poor&#146;s Information
    Technology Sector Index.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All values assume reinvestment of the full amount
of all dividends and are calculated as of December&nbsp;31 of
each year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Comparison is made to NASDAQ because NASDAQ is a
well-known index that is commonly associated with technology
firms such as Cadence. In addition, Cadence management uses
NASDAQ internally as a benchmark against which the performance
of Cadence common stock is measured.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This section of the proxy statement is not
soliciting material, is not deem filed with the SEC and is not
to be incorporated by reference in any filing of Cadence under
the Securities Act or the Exchange Act whether made before or
after the date of this proxy statement and irrespective of any
general incorporation language in any such filing.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="30%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">12/98</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">12/99</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">12/00</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">12/01</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">12/02</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">12/03</FONT></B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">CADENCE DESIGN SYSTEMS, INC.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80.67</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">92.44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73.68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61.38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">S&#38;P 500
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">121.04</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">110.02</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75.52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97.18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">NASDAQ STOCK MARKET (US)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">192.96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">128.98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">67.61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">87.61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">S&#38;P INFORMATION TECHNOLOGY SECTOR
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">178.74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">105.63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">78.31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72.16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<B><U><FONT size="2">CUMULATIVE TOTAL RETURN</FONT></U></B>

<P align="center">
<IMG src="f97592def9759200.gif" alt="(CUMULATIVE TOTAL RETURN LINE GRAPH)">
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">$100 invested on 12/31/98 in stock or
    index&nbsp;&#151; including reinvestment of dividends. Fiscal
    year ending December&nbsp;31.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Copyright&#169; 2002. Standard&nbsp;&#38;
Poor&#146;s, a division of The McGraw-Hill Companies, Inc. All
rights reserved. www.researchdatagroup.com/S&#38;P.htm
</FONT>

<P align="center"><FONT size="2">44
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='115'></A>
</DIV>

<!-- link1 "CERTAIN TRANSACTIONS" -->

<P align="center">
<B><FONT size="2">CERTAIN TRANSACTIONS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All transactions in fiscal 2003 between Cadence
and any executive officer or director who was an executive
officer or director at the time the transaction was entered into
were approved by a majority of the disinterested members of the
Board, or in the case of an executive officer, by the
Compensation Committee. These transactions are described under
&#147;Compensation of Directors,&#148; &#147;Employment
Contracts, Termination of Employment and Change-of-Control
Agreements.&#148; In addition, all &#147;related party
transactions,&#148; as defined in Item&nbsp;404 of
Regulation&nbsp;S-K promulgated by the SEC, are reviewed by the
Corporate Governance and Nominating Committee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to Mr.&nbsp;Lev&#146;s offer of
employment, in February 2001, Cadence extended to Mr.&nbsp;Lev
an interest-free real estate loan in the aggregate principal
amount of $500,000, maturing on February&nbsp;6, 2003. Pursuant
to the terms of the promissory note, dated February&nbsp;6,
2001, $250,000 of the loan was to be forgiven on each of the
first and second anniversary dates of the note, provided that
Mr.&nbsp;Lev had been continuously employed by Cadence during
those periods. On February&nbsp;6, 2002, $250,000 of the loan
was forgiven and on February&nbsp;6, 2003, the remaining
$250,000 was forgiven pursuant to the terms of the note.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On March&nbsp;1, 2003, 849 College Avenue, Inc.,
a subsidiary of Cadence, entered into a one year housing lease
with Mr.&nbsp;Bushby for residential property owned by the
subsidiary with aggregate annual rental payments of $90,000,
comprised of $7,500&nbsp;monthly rental payments, determined to
be the fair market value rental rate for the property by an
independent party. The lease can be extended by Mr.&nbsp;Bushby
for up to three one-year periods, and can be terminated by
either party upon 180&nbsp;days prior written notice.
Mr.&nbsp;Bushby also has an option to purchase the property at
any time during the lease, as extended, for a price equal to the
greater of the property&#146;s fair market value or the purchase
price originally paid by the Cadence subsidiary. In November
2003, in accordance with the terms of the lease, Mr.&nbsp;Bushby
extended the lease for an additional one-year period at the same
rental rate, which was determined by an independent appraiser
pursuant to the terms of the lease.
</FONT>

<P align="left">
<B><FONT size="2">INDEMNIFICATION AGREEMENTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cadence&#146;s Bylaws provide that Cadence will
indemnify its directors and officers to the fullest extent
permitted by the Delaware General Corporation Law.
Cadence&#146;s Bylaws also authorize the Board to cause Cadence
to enter into indemnification contracts with its directors,
officers and employees and to purchase insurance on behalf of
any person it is permitted to indemnify. Pursuant to these Bylaw
provisions, Cadence has entered into indemnity agreements with
each of its directors and executive officers, and has purchased
insurance on behalf of the directors and executive officers as
well.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each indemnity agreement provides, among other
things, that Cadence will indemnify each individual to the
extent provided in the agreement, for expenses, witness fees,
damages, judgments, fines and amounts paid in settlement and any
other amounts that the individual becomes legally obligated to
pay because of any claim or claims made against or by him or her
in connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, arbitral,
administrative or investigative, to which the individual is or
may be made a party by reason of his or her position as a
director, officer, employee or other agent of Cadence, and
otherwise as may be provided to the individual by Cadence under
the non-exclusivity provisions of the Delaware General
Corporation Law and Cadence&#146;s Bylaws.
</FONT>

<DIV align="left">
<A name='116'></A>
</DIV>

<!-- link1 "OTHER MATTERS" -->

<P align="center">
<B><FONT size="2">OTHER MATTERS</FONT></B>

<P align="left">
<B><FONT size="2">SECTION&nbsp;16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;16(a) of the Exchange Act requires
the directors and executive officers of Cadence, and persons who
own more than ten percent of a registered class of
Cadence&#146;s equity securities, to file with the SEC initial
reports of ownership and reports of changes in ownership of
common stock and other equity securities. Officers, directors
and greater than ten percent stockholders are required by SEC
regulation to furnish Cadence with copies of all
Section&nbsp;16(a) forms they file.
</FONT>

<P align="center"><FONT size="2">45
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To Cadence&#146;s knowledge, based solely on a
review of the copies of the reports furnished to us and written
representations that no other reports were required, all
Section&nbsp;16(a) filing requirements applicable to its
officers and directors and greater than ten percent beneficial
owners were complied with, except that a Form&nbsp;4
&#147;Statement of Changes in Beneficial Ownership&#148; for
Mr.&nbsp;Siboni for a transaction in April 2003 was amended and
filed on February&nbsp;2, 2004 to correct the number of shares
subject to an option granted to Mr.&nbsp;Siboni in April 2003,
and that a Form&nbsp;5 &#147;Annual Statement of Changes in
Beneficial Ownership&#148; for Mr.&nbsp;Bingham for the period
ended December&nbsp;31, 2003 was filed to report a previously
unreported gift of shares of Cadence common stock made by
Mr.&nbsp;Bingham in December 1998.
</FONT>

<P align="left">
<B><FONT size="2">STOCKHOLDER PROPOSALS AND
NOMINATIONS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">From time to time, Cadence stockholders submit
proposals that they believe should be voted upon at the annual
meeting or nominate persons for election to the Board of
Directors. Under Rule&nbsp;14a-8 of the Exchange Act, certain
stockholder proposals may be eligible for inclusion in
Cadence&#146;s proxy statement and form of proxy in connection
with the 2005 Annual Meeting of Stockholders. Stockholder
proposals must be submitted in writing to the Corporate
Secretary of Cadence no later than December&nbsp;2, 2004 to be
included in the proxy statement and form of proxy relating to
Cadence&#146;s 2005 Annual Meeting of Stockholders. The
submission of a stockholder proposal does not guarantee that it
will be included in Cadence&#146;s proxy statement and form of
proxy.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Alternatively, under Cadence&#146;s Bylaws, any
director nominations or proposals which the stockholder does not
seek to include in Cadence&#146;s proxy statement and form of
proxy pursuant to Rule&nbsp;14a-8 under the Exchange Act must be
submitted in writing to Cadence&#146;s Corporate Secretary no
later than March&nbsp;17, 2005, nor earlier than
February&nbsp;15, 2005, and must otherwise satisfy the
requirements of Cadence&#146;s Bylaws. If the date of the 2005
Annual Meeting of Stockholders changes by more than 30&nbsp;days
from the date of the anniversary of the 2004 Annual Meeting,
stockholder proposals or nominations must be submitted in
writing to Cadence&#146;s Corporate Secretary no later than ten
days following the first public announcement of the date of the
meeting. If the stockholder does not also comply with the
requirements of Rule&nbsp;14a-4 under the Exchange Act, Cadence
may exercise discretionary voting authority under proxies it
solicits to vote in accordance with its best judgment on any
such stockholder proposal or nomination submitted by a
stockholder.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A stockholder&#146;s notice must include:
(A)&nbsp;as to each person whom the stockholder proposes to
nominate for election as a director, all information relating to
the candidate that is required to be disclosed in proxy
solicitations for a contested election of directors, or is
otherwise required pursuant to Regulation&nbsp;14A under the
Exchange Act, accompanied by the candidate&#146;s written
consent to being named in the proxy statement as a nominee and
to serving as a director if elected; (B)&nbsp;as to any other
business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any,
on whose behalf the proposal is made; (C)&nbsp;as to the
stockholder giving the notice and the beneficial owner, if any,
on whose behalf the nomination or proposal is made (i)&nbsp;the
name and address of such stockholder, as they appear on
Cadence&#146;s books, and of such beneficial owner, and
(ii)&nbsp;the class and number of shares of Cadence common stock
owned beneficially and of record by such stockholder and such
beneficial owner; and (D)&nbsp;any other information required to
be provided by the stockholder pursuant to Regulation&nbsp;14A
under the Exchange Act as a proponent to a stockholder proposal.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Only candidates nominated in accordance with
these procedures set forth above are eligible to serve as
directors. Except as otherwise provided by law, the Chairman of
the meeting determines whether a nomination or any business
proposed to be brought before the meeting was made, or proposed,
as the case may be, in accordance with the procedures set forth
in Cadence&#146;s Bylaws and, if any proposed nomination or
business is not in compliance with the Bylaws, to declare that
such defective proposal or nomination shall not be presented for
stockholder action at the meeting.
</FONT>

<P align="center"><FONT size="2">46
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">OTHER MATTERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board of Directors knows of no other matters
that will be presented for consideration at the annual meeting
of stockholders. If any other matters are properly brought
before the meeting, it is the intention of the persons named in
the accompanying proxy to vote on such matters in accordance
with their best judgment.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">By Order of the Board of Directors
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <IMG src="f97592def9759202.gif" alt="-s- R.L. Smith McKeithen"></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">R.L. Smith McKeithen
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Secretary
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">April&nbsp;28, 2004
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A COPY OF CADENCE&#146;S ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED JANUARY&nbsp;3, 2004 HAS BEEN
DELIVERED PREVIOUSLY OR IS BEING DELIVERED WITH THIS PROXY
STATEMENT, BUT IS ALSO AVAILABLE WITHOUT CHARGE UPON WRITTEN
REQUEST TO: INVESTOR RELATIONS, CADENCE DESIGN SYSTEMS, INC.,
2655&nbsp;SEELY AVENUE, BUILDING&nbsp;5, SAN JOSE, CALIFORNIA
95134.
</FONT>

<P align="center"><FONT size="2">47
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">APPENDIX A</FONT></B>

<P align="center">
<B><FONT size="2">AUDIT COMMITTEE CHARTER</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">1.&nbsp;<I>Members.</I> The Audit Committee (the
&#147;Audit Committee&#148;) of Cadence Design Systems, Inc.
(the &#147;Company&#148;) shall consist of at least three
members, all of whom shall be &#147;independent&#148; directors,
as determined by the Board. The Board of Directors of the
Company (the &#147;Board&#148;) shall appoint the members and
the Chairman of the Audit Committee in accordance with the
Corporate Governance Guidelines of the Board.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For purposes hereof, &#147;independent&#148;
shall mean a director who meets the independence requirements
specified for audit committee members by the New York Stock
Exchange (&#147;NYSE&#148;) and the Nasdaq National Market
(&#147;Nasdaq&#148;).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each member of the Audit Committee must be
financially literate and at least one member of the Audit
Committee shall have accounting or related financial management
expertise, in each case as determined by the Board. Beginning in
2004, each year, prior to filing the Company&#146;s Annual
Report on Form&nbsp;10-K, the Board shall determine whether one
member of the Audit Committee is an &#147;audit committee
financial expert&#148; within the meaning of Item&nbsp;401(h)(2)
of Regulation&nbsp;S-K promulgated under the Securities Act of
1933, as amended.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">2.&nbsp;<I>Purposes.</I> The Audit
Committee&#146;s purposes shall be to (a)&nbsp;assist the Board
in its oversight of (i)&nbsp;the integrity of the Company&#146;s
financial statements, (ii)&nbsp;the Company&#146;s compliance
with legal and regulatory requirements, (iii)&nbsp;the
independent auditors&#146; qualifications and independence, and
(iv)&nbsp;the performance of the Company&#146;s internal audit
function, independent auditors and financial reporting
processes; and (b)&nbsp;prepare the report that Securities and
Exchange Commission rules require be included in the
Company&#146;s annual proxy statement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">3.&nbsp;<I>Duties and Responsibilities.</I> The
Audit Committee&#146;s duties and responsibilities shall be to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;Directly appoint, retain (subject to
    ratification by the Company&#146;s stockholders), compensate,
    evaluate, oversee and terminate the Company&#146;s independent
    auditors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;Establish policies and procedures for
    the engagement of the Company&#146;s independent auditors, which
    shall include pre-approval by the Audit Committee of all audit
    and permissible non-audit services to be provided by the
    independent auditors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(iii)&nbsp;Establish, no later than the date
    required by applicable law, including the listing standards of
    the NYSE and Nasdaq, procedures for the receipt, retention and
    treatment of complaints regarding accounting, internal
    accounting controls or auditing matters, which procedures shall
    include a system for the confidential, anonymous submission by
    Cadence employees regarding questionable accounting or auditing
    matters;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(iv)&nbsp;At least annually, obtain and review a
    report by the Company&#146;s independent auditors, which report
    shall describe: (a)&nbsp;the firm&#146;s internal quality
    control procedures; (b)&nbsp;any material issues raised by the
    most recent internal quality-control review, or peer review, of
    the firm, or by any inquiry or investigation by governmental or
    professional authorities, within the preceding five years,
    respecting one or more independent audits carried out by the
    firm, and any steps taken to deal with any such issues;
    (c)&nbsp;all relationships between the independent auditors and
    the Company; and (d)&nbsp;any other matters required to be
    included in a letter from the independent auditor pursuant to
    Independence Standards Board Standard No.&nbsp;1;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(v)&nbsp;Evaluate, at least annually, the
    independent auditors&#146; qualifications, performance and
    independence, which evaluation shall include a review and
    evaluation of the lead partner of the independent auditors and
    consideration of whether there should be rotation of the
    auditing firm. In making its evaluation, the Audit Committee
    should take into account the opinions of management and the
    Company&#146;s internal auditors and the report delivered
    pursuant to clause&nbsp;(iv);
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">A-1
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(vi)&nbsp;Review with the independent auditors
    their audit procedures, including the scope and timing of the
    audit, the results of the annual audit examination and any
    accompanying management letters, any audit problems or
    difficulties and management&#146;s response to such problems or
    difficulties. Such review shall include a review of any
    restrictions on the scope of the independent auditors&#146;
    activities or on access to requested information, and any
    significant disagreements with management;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(vii)&nbsp;Review and discuss with Company
    management and the independent auditors the Company&#146;s
    annual and quarterly financial statements and annual and
    quarterly reports on Forms&nbsp;10-K and 10-Q, including the
    Company&#146;s disclosures under &#147;Management&#146;s
    Discussion and Analysis of Financial Condition and Results of
    Operations&#148; and discuss with the independent auditors any
    other matters required to be discussed by Statement on Auditing
    Standards&nbsp;61;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(viii)&nbsp;Recommend to the Board based on the
    review and discussion described in paragraphs (v), (vi)&nbsp;and
    (vii)&nbsp;above, whether the financial statements should be
    included in the Company&#146;s annual report on Form&nbsp;10-K;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ix)&nbsp;Discuss, in a general manner, earnings
    press releases and financial information and earnings guidance
    to be provided to analysts and rating agencies;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(x)&nbsp;Review and discuss the Company&#146;s
    guidelines and policies with respect to risk assessment and risk
    management;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(xi)&nbsp;Review with Company management and the
    independent auditors any significant matters identified as a
    result of the independent auditors&#146; interim review
    procedures prior to the filing of each Form&nbsp;10-Q;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(xii)&nbsp;Set clear hiring policies for
    employees or former employees of the independent auditors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(xiii)&nbsp;Review material pending legal
    proceedings involving the Company and other contingent
    liabilities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(xiv)&nbsp;Review with the independent auditor
    the responsibilities, budget and staffing of Cadence&#146;s
    internal audit function;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(xv)&nbsp;Review and discuss the adequacy and
    effectiveness of the Company&#146;s internal controls and
    special audit steps adopted in light of any material control
    deficiencies, and review and discuss the Company&#146;s
    disclosure controls and procedures;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(xvi)&nbsp;Review major issues regarding
    accounting principles and financial statement presentations,
    including any significant changes in Cadence&#146;s selection or
    application of accounting principles;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(xvii)&nbsp;Review analyses prepared by Cadence
    management and/or the independent auditors setting forth
    significant financial reporting issues and judgments made in
    connection with the preparation of Cadence&#146;s financial
    statements, including analyses of the effects of alternative
    GAAP methods on the financial statements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(xviii)&nbsp;Review the potential effects of
    regulatory and accounting initiatives and proposals, as well as
    off-balance sheet structures, on the financial statements of
    Cadence;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(xix)&nbsp;Review with the Chief Executive
    Officer and the Chief Financial Officer the procedures conducted
    in preparation of such officers&#146; certifications pursuant to
    Section&nbsp;302 of the Sarbanes-Oxley Act of 2002 or any other
    certifications required by applicable law or regulation; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(xx)&nbsp;Consider the results of the annual
    performance evaluation of the Audit Committee.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">3.&nbsp;<I>Outside Advisors.</I> The Audit
Committee shall have the authority to retain such outside
counsel, accountants, experts and other advisors as it
determines appropriate to assist the Audit Committee in the
performance of its functions. The Company shall provide the
Audit Committee with appropriate funding, as determined by the
Audit Committee, for the payment of compensation to the
independent auditors of the Company and the outside counsel,
accountants, experts or other advisors employed by the Audit
Committee.
</FONT>

<P align="center"><FONT size="2">A-2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">4.&nbsp;<I>Meetings.</I> The Audit Committee
shall meet as often as its Chairman may deem necessary or
appropriate, but not less than four times each year, either in
person or by telephone. The Audit Committee shall meet
periodically in separate sessions with the independent auditors,
with management and with the internal auditors. The Audit
Committee shall report to the full Board at the next regular
Board meeting with respect to the Audit Committee&#146;s
meetings since the previous regular Board meeting. A majority of
the members of the Audit Committee shall constitute a quorum.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">5.&nbsp;<I>Revisions to Charter.</I> The Audit
Committee shall review the adequacy of this Audit Committee
Charter at least annually. The Audit Committee may amend or
modify this Audit Committee Charter at any time in accordance
with applicable law and regulations.
</FONT>

<P align="center"><FONT size="2">A-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">APPENDIX&nbsp;B</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">CADENCE DESIGN SYSTEMS, INC.</FONT></B>

<DIV align="center">
<B><FONT size="2">1987 STOCK INCENTIVE PLAN</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">1.&nbsp;<I>Purposes of the Plan.</I> The purposes
of this Stock Incentive Plan are to attract and retain the best
available personnel for positions of substantial responsibility,
to provide additional incentive to the employees of the Company
and any parent or subsidiary corporations, and to promote the
success of the Company&#146;s business. The Plan was initially
established as the 1987 Stock Option Plan, and was most recently
amended on September&nbsp;16, 1999. The Plan is hereby amended
and restated in its entirety, effective upon adoption by the
Company&#146;s stockholders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">2.&nbsp;<I>Definitions.</I> As used herein, the
following definitions shall apply:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;<I>&#147;Board&#148; </I>shall mean the
Committee, if one has been appointed, or the Board of Directors
of the Company, if no Committee is appointed.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;<I>&#147;Code&#148; </I>shall mean the
Internal Revenue Code of 1986, as amended.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;<I>&#147;Common Stock&#148; </I>shall
mean the Common Stock of the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(d)&nbsp;<I>&#147;Company&#148; </I>shall mean
<B>CADENCE DESIGN SYSTEMS, INC.</B>, a Delaware corporation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(e)&nbsp;<I>&#147;Committee&#148; </I>shall mean
the Committee appointed by the Board of Directors in accordance
with paragraph&nbsp;(a) of Section&nbsp;4 of the Plan, if one is
appointed.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(f)&nbsp;<I>&#147;Consultant&#148; </I>shall mean
any consultants, independent contractors or advisers (provided
that such persons render bona fide services not in connection
with the offering and sale of securities in capital raising
transactions) rendering services to the Company or a Parent or
Subsidiary.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(g)&nbsp;<I>&#147;Continuous Status as an
Employee or Consultant&#148; </I>shall mean the absence of any
interruption of termination of service, whether as an Employee
or Consultant. Continuous Status as an Employee or Consultant
shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(h)&nbsp;<I>&#147;Employee&#148; </I>shall mean
any person, including officers and directors, employed by the
Company or any Parent or Subsidiary of the Company. The payment
of a director&#146;s fee or other compensation paid solely on
account of service as a director by the Company shall not be
sufficient to constitute &#147;employment&#148; by the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(i)&nbsp;<I>&#147;Incentive Stock&#148; </I>means
shares of Common Stock granted to a Participant pursuant to
Section&nbsp;10 hereof.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(j)&nbsp;<I>&#147;Incentive Stock Agreement&#148;
</I>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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(k)&nbsp;<I>&#147;Incentive Stock Option&#148;
</I>shall mean an Option intended to qualify as an incentive
stock option within the meaning of Section&nbsp;422 of the
Internal Revenue Code of 1986, as amended.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(l)&nbsp;<I>&#147;Option&#148; </I>shall mean a
stock option granted pursuant to the Plan, which may be either
an Incentive Stock Option or a &#147;non-statutory stock
option,&#148; at the discretion of the Board and as reflected in
the terms of the Stock Option Agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(m)&nbsp;<I>&#147;Optioned Stock&#148; </I>shall
mean the Common Stock subject to an Option.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(n)&nbsp;<I>&#147;Parent&#148; </I>shall mean a
&#147;parent corporation,&#148; whether now or hereafter
existing, as defined in Section&nbsp;424(e) of the Internal
Revenue Code of 1986, as amended.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(o)&nbsp;<I>&#147;Participant&#148; </I>shall
mean an Employee or Consultant who receives a Stock Award.
</FONT>

<P align="center"><FONT size="2">B-1
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(p)&nbsp;<I>&#147;Plan&#148; </I>shall mean this
1987 Stock Incentive Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(q)&nbsp;<I>&#147;Qualifying Performance
Criteria&#148; </I>shall mean any one or more of the following
performance criteria as determined pursuant to an objective
formula, either individually, alternatively or in any
combination, applied to either the Company as a whole or to a
business unit, segment or Subsidiary, either individually,
alternatively or in any combination, and measured over a
performance period determined by the Board, on an absolute basis
or relative to a pre-established target, to previous results or
to a designated comparison group, in each case as specified by
the Board in the Stock Award: (a)&nbsp;cash flow (including
measures of operating or free cash flow), (b)&nbsp;earnings per
share (including measures of GAAP earnings per share or non-GAAP
measures such as non-GAAP earnings per-share or per-share
earnings before interest, taxes, depreciation and amortization),
(c)&nbsp;return on equity, (d)&nbsp;total stockholder return,
(e)&nbsp;return on capital, (f)&nbsp;return on assets or net
assets, (g)&nbsp;revenue, (h)&nbsp;income or net income (on a
GAAP basis or a non-GAAP basis), (i)&nbsp;operating income or
net operating income, (j)&nbsp;operating profit or net operating
profit, (k)&nbsp;operating margin, (l)&nbsp;return on operating
revenue, (m)&nbsp;market share, (n) bookings and segments of
bookings such as net product bookings, (o)&nbsp;market
penetration, (p)&nbsp;technology development or proliferation,
or (q)&nbsp;customer loyalty or satisfaction as measured by a
customer loyalty or satisfaction index determined by an
independent consultant expert in measuring such matters.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(r)&nbsp;<I>&#147;Rule&nbsp;16b-3&#148; </I>shall
mean Rule&nbsp;16b-3 of the Securities Exchange Act of 1934, as
amended, or any successor to Rule&nbsp;16b-3, as in effect when
discretion is being exercised with respect to the Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(s)&nbsp;<I>&#147;Share&#148; </I>shall mean a
share of Common Stock, as adjusted in accordance with
Section&nbsp;12 of the Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(t)&nbsp;<I>&#147;Stock Award&#148; </I>shall
mean any right granted under the Plan, including an Option or
Incentive Stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(u)&nbsp;<I>&#147;Stock Option Agreement&#148;
</I>means a written agreement between the Company and a holder
of an Option award evidencing the terms and conditions of an
individual Option grant. Each Stock Option Agreement shall be
subject to the terms and conditions of the Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(v)&nbsp;<I>&#147;Subsidiary&#148; </I>shall mean
a &#147;subsidiary corporation,&#148; whether now or hereafter
existing, as defined in Section&nbsp;424(f) of the Internal
Revenue Code of 1986, as amended.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">3.&nbsp;<I>Stock Subject to the Plan.</I>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;<I>Reserved Shares.</I> Subject to the
provisions of Sections&nbsp;3(b) and 12 of the Plan, the number
of shares reserved for issuance under the Plan is seventy-one
million three hundred seventy thousand one hundred (71,370,100)
shares of Common Stock; provided, however, that no more than
three million (3,000,000) shares of Common Stock authorized
under the Plan may be issued pursuant to Awards of Incentive
Stock. Shares issued under the Plan may be authorized, but
unissued, or reacquired Common Stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;<I>Unexercisable, Forfeited or
Terminated Awards.</I> If a Stock Award should expire, become
unexercisable, be forfeited or otherwise terminate for any
reason without having been exercised in full, the unpurchased or
forfeited Shares that were subject thereto shall, unless the
Plan shall have been terminated, become available for future
grant under the Plan, provided, however, that if a Stock Award
is canceled, forfeited or treated as having been canceled for
purposes of Section&nbsp;162(m) the canceled Stock Award shall
count against the maximum number of shares for which a Stock
Award may be granted to any person under the terms of the Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">4.&nbsp;<I>Administration of the Plan.</I>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;<I>Procedure.</I> The Board of Directors
of the Company shall administer the Plan. 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. The Committee shall
consist of two or more &#147;Non-Employee Directors&#148; (a
director who is receiving no compensation from the Company other
than for service on the Board of Directors or who does not
receive such additional compensation which exceeds the limits
specified in the definition of such term under Rule&nbsp;16b-3
and otherwise meets the requirement under Rule&nbsp;16b-3 for
&#147;non-employee directors&#148;) or
</FONT>

<P align="center"><FONT size="2">B-2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">&#147;Outside Directors&#148; (a director who is
not either a current or former officer of the Company nor a
current employee of the Company, and who is receiving no
compensation from the Company other than for service on the
Board of Directors or who does not receive such additional
compensation which exceeds the limits specified in the
definition of such term under Section&nbsp;162(m) of the Code).
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&nbsp;4 to the contrary,
at any time the Board or the Committee may delegate to a
committee of one or more members of the Board of Directors the
authority to grant Options to all Employees and Consultants or
any portion or class thereof. Members of the Board who are
either eligible for Options or have been granted Options may
vote on any matters affecting the administration of the Plan or
grant of any Options pursuant to the Plan, except that no such
member shall act upon the granting of an Option to himself, but
any such member may be counted in determining the existence of a
quorum at any meeting of the Board during which action is taken
with respect to the granting of Options to him.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;<I>Powers of the Board.</I> Subject to
the provisions of the Plan, the Board shall have the authority,
in its discretion: (i)&nbsp;to grant Stock Awards under the
Plan; (ii)&nbsp;to determine, upon review of relevant
information and in accordance with Section&nbsp;8(b) of the
Plan, the fair market value of the Common Stock; (iii)&nbsp;to
determine the exercise price per share of Options to be granted,
which exercise price shall be determined in accordance with
Section&nbsp;8(a) of the Plan; (iv)&nbsp;to determine the
Employees or Consultants to whom, and the time or times at
which, Stock Awards shall be granted, the number of shares to be
represented by each Stock Award, and the terms of such Stock
Awards; (v) to interpret the Plan; (vi)&nbsp;to prescribe, amend
and rescind rules and regulations relating to the Plan;
(vii)&nbsp;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)&nbsp;to accelerate or defer (the latter with the consent
of the Participant) the exercise date and vesting of any Option;
(ix)&nbsp;to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of a
Stock Award previously granted by the Board; and (x)&nbsp;to
make all other determinations deemed necessary or advisable for
the administration of the Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;<I>Effect of Board&#146;s Decision.</I>
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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">5.&nbsp;<I>Eligibility.</I> Stock Awards may be
granted only to Employees or Consultants as defined in
Section&nbsp;2 hereof. An Employee or Consultant who has been
granted a Stock Award may, if he is otherwise eligible, be
granted an additional Stock Award.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Incentive Stock Options may only be granted to
Employees. The aggregate fair market value (determined at the
time the Option is granted) of the stock with respect to which
Incentive Stock Options are exercisable for the first time by
such individual during any calendar year (under this Plan or
under any other incentive stock option plan of the Company or
any Parent or Subsidiary of the Company) shall not exceed
$100,000. To the extent that the grant of an Option exceeds this
limit, the portion of the Option that exceeds such limit shall
be treated as a non-statutory stock option.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 his right or the Company&#146;s right to terminate his
employment at any time or his consultancy pursuant to the terms
of the Consultant&#146;s agreement with the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No person shall be eligible to be granted Stock
Awards covering more than 2,216,702&nbsp;shares of Common Stock
in any calendar year. The foregoing limit shall be adjusted
pursuant to the provisions of Section&nbsp;12.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">6.&nbsp;<I>Term of the Plan.</I> The Plan became
effective upon its adoption by the Board of Directors.
Subsequently amended, the Plan shall continue in effect until
May&nbsp;21, 2007 unless sooner terminated under Section&nbsp;15
of the Plan.
</FONT>

<P align="center"><FONT size="2">B-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">7.&nbsp;<I>Term of Option; Vesting Provisions.</I>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;<I>Option Term.</I> The term of each
Option shall be ten (10)&nbsp;years from the date of grant
thereof or such shorter term as may be provided in the Stock
Option Agreement. However, in the case of an Incentive Stock
Option granted to an Employee who immediately before the
Incentive Stock Option is granted, owns stock representing more
than ten&nbsp;percent (10%) of the voting power of all classes
of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5)&nbsp;years from the
date of grant thereof or such shorter time as may be provided in
the Stock Option Agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;<I>Vesting Provisions.</I> The terms on
which each Option shall vest shall be determined by the Board in
its Discretion, and shall be set forth in Stock Option Agreement
relating to each such Option. Without limiting the discretion of
the Board, vesting provisions may include time-based vesting or
vesting based on achievement of performance or other criteria.
Performance criteria may, but need not, be based on Qualifying
Performance Criteria.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">8.&nbsp;<I>Option Exercise Price and
Consideration.</I>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;<I>Exercise Price.</I> The per Share
exercise price for the Shares to be issued pursuant to exercise
of an Option shall be such price as is determined by the Board,
but shall be subject to the following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;In the case of an Incentive Stock Option:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(1)&nbsp;Granted to an Employee who, immediately
    before the grant of such Incentive Stock Option, owns stock
    representing more than ten percent (10%) of the voting power of
    all classes of stock of the Company or any Parent or Subsidiary,
    the per Share exercise price shall be no less than 110% of the
    fair market value per Share on the date of grant.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(2)&nbsp;Granted to any Employee, the per Share
    exercise price shall be no less than 100% of the fair market
    value per Share on the date of grant.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;In the case of an Option granted on or
    after the effective date of registration of any class of equity
    security of the Company pursuant to Section&nbsp;12 of the
    Exchange Act and prior to six months after the termination of
    such registration, the per Share exercise price shall be not
    less than 100% of the fair market value per Share on the date of
    grant.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(iii)&nbsp;Notwithstanding the foregoing, an
    Option (whether an Incentive Stock Option or non-statutory stock
    option) may be granted with an exercise price lower than set
    forth in the preceding paragraphs if such Option is granted
    pursuant to an assumption or substitution for another option in
    a manner satisfying the provisions of Section&nbsp;424(a) of the
    Code.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;<I>Fair Market Value.</I> The fair
market value shall be determined by the Board in its discretion:
<I>provided however, </I>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&nbsp;York Stock Exchange.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;<I>Consideration.</I> 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 cash, check, promissory
note, other Shares of Common Stock having a fair market value on
the date of surrender equal to the aggregate exercise price of
the Shares as to which said option shall be exercised, or any
combination of such methods of payment, or 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">9.&nbsp;<I>Exercise of Option.</I>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;<I>Procedure for Exercise Rights as a
Shareholder.</I> 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.
</FONT>

<P align="center"><FONT size="2">B-4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An Option may not be exercised for a fraction of
a Share.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;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 shareholder 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&nbsp;12 of the Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Exercise of an Option in any manner shall result
in a decrease in the number of Shares that 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;<I>Termination of Status as an Employee
or Consultant.</I> If a Participant ceases to serve as an
Employee or Consultant, the Participant may, but only within
thirty (30)&nbsp;days (or such longer period of time as
determined by the Board) after the date Participant ceases to be
an Employee or Consultant of the Company, exercise the Option to
the extent that Participant was entitled to exercise it at the
date of such termination. To the extent that Participant was not
entitled to exercise the Option at the date of such termination,
or if Participant does not exercise such Option (which
Participant was entitled to exercise) within the time specified
herein, the Option shall terminate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;<I>Death of Participant.</I> In the
event of the death of a Participant:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;during the term of the Option who is at
    the time of Participant&#146;s death an Employee or Consultant
    of the Company 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 three
    (3)&nbsp;months (or such longer period of time as determined by
    the Board) following the date of death, by the
    Participant&#146;s estate or by a person who acquired the right
    to exercise the Option by bequest or inheritance, but only to
    the extent of the right to exercise that would have accrued had
    the Participant continued living three (3)&nbsp;months (or such
    longer period of time as determined by the Board) after the date
    of death;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;within one (1)&nbsp;month (or such
    longer period of time as determined by the Board) after the
    termination of Continuous Status as an Employee or Consultant,
    the Option may be exercised, at any time within three
    (3)&nbsp;months (or such longer period of time as determined by
    the Board) following the date of death, by the
    Participant&#146;s estate or by a person who acquired the right
    to exercise the Option by bequest or inheritance, but only to
    the extent of the right to exercise that had accrued at the date
    of termination.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">10.&nbsp;<I>Incentive Stock.</I>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;<I>General.</I> Incentive Stock is an
award or issuance of shares of Common Stock under the Plan, 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. The Board
may specify that the grant, vesting or retention of any or all
Incentive Stock is intended to satisfy the requirements for
&#147;performance-based compensation&#148; under
Section&nbsp;162(m) of the Code. To the extent that any
Incentive Stock is designated by the Board as
&#147;performance-based compensation&#148; under
Section&nbsp;162(m) of the Code, (i)&nbsp;the performance
criteria for the grant, vesting or retention of any such
Incentive Stock shall be a measure based on one or more
Qualifying Performance Criteria selected by the Board, specified
at the time the Incentive Stock is granted, and shall be a
preestablished goal under Treasury
Regulation&nbsp;Section&nbsp;1.162-27(e)(2)(i), (ii)&nbsp;the
Board shall certify the extent to which any Qualifying
Performance Criteria has been satisfied, and the amount payable
as a result thereof, prior to payment of any Incentive Stock
that is intended to satisfy the requirements for
&#147;performance-based
</FONT>

<P align="center"><FONT size="2">B-5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">compensation&#148; under Section&nbsp;162(m) of
the Code, and (iii)&nbsp;the award shall comply with all other
applicable requirements relating to &#147;performance based
compensation&#148; under Section&nbsp;162(m) of the Code and the
Treasury Regulations issued thereunder. To the extent a
performance-based award is not intended to satisfy the
requirements for &#147;performance-based compensation&#148;
under Section&nbsp;162(m) of the Code, the performance criteria
for the grant, vesting or retention of any such Incentive Stock
may be a measure based on one or more Qualifying Performance
Criteria selected by the Board, or any other criteria deemed
appropriate by the Board.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;<I>Incentive Stock Agreement.</I> Each
Incentive Stock Agreement shall contain provisions regarding
(i)&nbsp;the number of shares of Common Stock subject to such
award or a formula for determining such, (ii)&nbsp;the purchase
price of the shares, if any, and the means of payment for the
shares, (iii)&nbsp;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,
(iv)&nbsp;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, (v)&nbsp;restrictions on the
transferability of the shares and (vi)&nbsp;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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;<I>Sales Price.</I> 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 (as determined in Section&nbsp;8(b)) at the
date of grant or issuance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(d)&nbsp;<I>Share Vesting.</I> Except as set
forth herein, 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,
provided that, in no event shall an award of Incentive Stock
vest sooner than (i)&nbsp;three (3)&nbsp;years after the date of
grant, if the vesting of the Incentive Stock is based solely on
Continuous Status as an Employee or Consultant and the grant of
Incentive Stock is not a form of payment of earned incentive
compensation or other performance-based compensation, provided,
however, that notwithstanding the foregoing vesting limitations,
shares of Incentive Stock vesting under this paragraph
(i)&nbsp;may vest in installments so long as the vesting
schedule, at any point in time, is not more favorable than what
would be vested under a monthly pro rata installment schedule
(i.e., 1/36&nbsp;per month for 3&nbsp;years), or (ii)&nbsp;one
(1)&nbsp;year after the date of grant, if the vesting of
Incentive Stock is also subject to the attainment of performance
goals. Notwithstanding the foregoing, the Board may accelerate
vesting (in a Stock Award agreement or otherwise) of any Stock
Award in the event of a Participant&#146;s termination of
service as an Employee or Consultant, a change in control of the
Company or similar event, provided that, in the case of award of
Incentive Stock that is intended to qualify as &#147;performance
based compensation&#148; under Section&nbsp;162(m), such
acceleration shall comply with the requirements set forth in
Treasury Regulation&nbsp;Section&nbsp;1.162-27(e)(2)(iii).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(e)&nbsp;<I>Transferability.</I> 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(f)&nbsp;<I>Discretionary Adjustments.</I>
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, but may not be increased. In addition,
the Board may appropriately adjust any evaluation of performance
under a Qualifying Performance Criteria to exclude any of the
following events that occurs during a performance period:
(i)&nbsp;asset write-downs, (ii)&nbsp;litigation or claim
judgments or settlements, (iii)&nbsp;the effect of changes in
tax law, accounting principles or other such laws or provisions
affecting reported results, (iv)&nbsp;accruals for
reorganization and restructuring programs and (v)&nbsp;any
extraordinary non-recurring items as described in Accounting
Principles Board Opinion No.&nbsp;30 and/ or in
</FONT>

<P align="center"><FONT size="2">B-6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">management&#146;s discussion and analysis of
financial condition and results of operations appearing in the
Company&#146;s annual report to stockholders for the applicable
year.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">11.&nbsp;<I>Non-Transferability of Options.</I>
Except as otherwise expressly provided in the terms of an
individual Option which is a non-statutory stock option, the
Option 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 person to whom the Option is
granted 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 Option.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">12.&nbsp;<I>Adjustments upon Changes in
Capitalization or Merger.</I> Subject to any required action by
the stockholders of the Company, the number of shares of Common
Stock covered by each outstanding Stock Award, and the number of
shares of Common Stock 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, expiration, forfeiture or other termination of a
Stock Award, as well as the price per share of Common Stock
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; <I>provided, however, </I>that
conversion of any convertible securities of the Company shall
not be deemed to have been &#147;effected without receipt of
consideration.&#148; 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the event of the proposed dissolution or
liquidation of the Company, or in the event of a proposed sale
of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, the
Stock Award will terminate immediately prior to the consummation
of such proposed action, unless otherwise provided by the Board.
The Board may, in the exercise of its sole discretion in such
instances, declare that any Stock Award shall terminate as of a
date fixed by the Board and give each Participant the right to
exercise his Option as to all or any part of the Optioned Stock
or otherwise accelerate the vesting of such Stock Award. If the
Board, at its sole discretion, permits acceleration as to all or
any part of a Stock Award, the aggregate fair market value
(determined at the time Stock Award is granted) of stock with
respect to which Incentive Stock Options first become
exercisable in the year of such dissolution, liquidation, sale
of assets or merger cannot exceed $100,000. Any remaining
accelerated Incentive Stock Options shall be treated as
non-statutory stock options.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">13.&nbsp;<I>Miscellaneous.</I>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;<I>Additional Restrictions on Stock
Awards.</I> Either at the time a Stock Award is granted or by
subsequent action, the Board may, but need not, impose such
restrictions, conditions or limitations as it determines
appropriate as to the timing and manner of any resales by an
Participant or other subsequent transfers by an Participant of
any shares issued under an Option, including without limitation
(a)&nbsp;restrictions under an insider trading policy,
(b)&nbsp;restrictions designed to delay and/ or coordinate the
timing and manner of sales by Participants, and
(c)&nbsp;restrictions as to the use of a specified brokerage
firm for such resales or other transfers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;<I>Stockholder Rights.</I> No
Participant shall be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares of Common
Stock subject to such Option unless and until such Participant
has satisfied all requirements for exercise of the Option
pursuant to its terms.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;<I>Investment Assurances.</I> The
Company may require an Participant, as a condition of exercising
or acquiring Common Stock under any Stock Award, (i)&nbsp;to
give written assurances satisfactory to the Company as to the
Participant&#146;s knowledge and experience in financial and
business matters and/or to employ a
</FONT>

<P align="center"><FONT size="2">B-7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">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 the Stock Award; and (ii)&nbsp;to give
written assurances satisfactory to the Company stating that the
Participant is acquiring Common Stock subject to the Stock Award
for the Participant&#146;s own account and not with any present
intention of selling or otherwise distributing the Common Stock.
The foregoing requirements, and any assurances given pursuant to
such requirements, shall be inoperative if (1)&nbsp;the issuance
of the shares of Common Stock upon the exercise the Option or
acquisition of Common Stock under the Plan has been registered
under a then currently effective registration statement under
the Securities Act or (2)&nbsp;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, 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 Common Stock.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(d)&nbsp;<I>Withholding Obligations.</I> To the
extent provided by the terms of a Stock Option Agreement or
Incentive Stock Agreement, the Participant may satisfy any
federal, state or local tax withholding obligation relating to a
Stock Award by any of the following means (in addition to the
Company&#146;s right to withhold from any compensation paid to
the Participant by the Company) or by a combination of such
means: (i)&nbsp;tendering a cash payment; (ii)&nbsp;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 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)&nbsp;delivering to the Company owned and unencumbered
shares of Common Stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">14.&nbsp;<I>Time of Granting the Stock Award.</I>
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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">15.&nbsp;<I>Amendment and Termination of the
Plan.</I>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;<I>Amendment and Termination.</I> The
Board may amend or terminate the Plan from time to time in such
respects as the Board may deem advisable; provided that, no
amendment shall be effective unless approved by the stockholders
of the Company to the extent stockholder approval is necessary
for the Plan to satisfy the requirements of Section&nbsp;422 of
the Code, Rule&nbsp;16b-3 or any listing requirements of any
securities exchange or national market system on which the
Common Stock is traded.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;<I>Effect of Amendment or
Termination.</I> Any such amendment or termination of the Plan
shall not adversely 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">16.&nbsp;<I>Conditions Upon Issuance of
Shares.</I> Shares shall not be issued pursuant to a Stock Award
unless the exercise of the Option, if applicable, and the
issuance and delivery of such Shares pursuant the Stock Award
shall comply with all relevant provisions of the law, including
without limitation, the Securities Act of 1933, as amended; the
Securities Exchange Act of 1934, as amended; the rules and
regulations promulgated thereunder, and the requirements of any
stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the
Company with respect to such compliance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">17.&nbsp;<I>Liability of Company.</I> The Company
shall not be liable to an Participant or other persons as to 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">18.&nbsp;<I>Reservation of Shares.</I> 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.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Inability of the Company to obtain authority from
any regulatory body having jurisdiction, which authority is
deemed by the Company&#146;s counsel to be necessary to the
lawful issuance and sale of any Shares
</FONT>

<P align="center"><FONT size="2">B-8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">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.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">19.&nbsp;<I>Stock Award Agreement.</I> Stock
Awards shall be evidenced by written award agreements in such
form as the Board shall approve.
</FONT>

<P align="center"><FONT size="2">B-9
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<FONT size="2"> <B>APPENDIX&nbsp;C</B>
</FONT>
</DIV>

<P align="center">
<B><FONT size="2">CADENCE DESIGN SYSTEMS, INC.</FONT></B>

<DIV align="center">
<B><FONT size="2">AMENDED AND RESTATED</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">EMPLOYEE STOCK PURCHASE PLAN</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">1.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Purpose.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;The Plan initially was established
effective as of January&nbsp;30, 1990 (the &#147;Initial
Plan&#148;) and has been amended subsequently from time to time.
The Initial Plan hereby is amended and restated in its entirety
as the Amended and Restated Employee Stock Purchase Plan
effective as of the date of its adoption. The terms of the
Initial Plan shall remain in effect and apply to all Rights
granted pursuant to the Initial Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;The purpose of the Plan is to provide a
means by which Employees of the Company and certain designated
Affiliates may be given an opportunity to purchase Shares of the
Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;The Company, by means of the Plan, seeks
to retain the services of such Employees, to secure and retain
the services of new Employees and to provide incentives for such
persons to exert maximum efforts for the success of the Company
and its Affiliates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(d)&nbsp;The Company intends that the Rights to
purchase Shares granted under the Plan be considered options
issued under an &#147;employee stock purchase plan,&#148; as
that term is defined in Section&nbsp;423(b) of the Code.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">2.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Definitions.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;<I>&#147;Affiliate&#148; </I>means any
parent corporation or subsidiary corporation, whether now or
hereafter existing, as those terms are defined in
Sections&nbsp;424(e) and (f), respectively, of the Code.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;<I>&#147;Board&#148; </I>means the Board
of Directors of the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;<I>&#147;Code&#148; </I>means the United
States Internal Revenue Code of 1986, as amended.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(d)&nbsp;<I>&#147;Committee&#148; </I>means a
committee of the Board appointed by the Board in accordance with
subsection&nbsp;3(c) of the Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(e)&nbsp;<I>&#147;Company&#148;</I> means Cadence
Design Systems, Inc., a Delaware corporation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(f)&nbsp;<I>&#147;Director&#148; </I>means a
member of the Board.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(g)&nbsp;<I>&#147;Eligible Employee&#148;
</I>means an Employee who meets the requirements set forth in
the Offering Memorandum for eligibility to participate in the
Offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(h)&nbsp;<I>&#147;Employee&#148; </I>means any
person, including Officers and Directors, employed by the
Company or an Affiliate of the Company. Neither service as a
Director nor payment of a director&#146;s fee shall be
sufficient to constitute &#147;employment&#148; by the Company
or the Affiliate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(i)&nbsp;<I>&#147;Employee Stock Purchase
Plan&#148; </I>means a plan that grants rights intended to be
options issued under an &#147;employee stock purchase
plan,&#148; as that term is defined in Section&nbsp;423(b) of
the Code.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(j)&nbsp;<I>&#147;Exchange Act&#148; </I>means
the United States Securities Exchange Act of 1934, as amended.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(k)&nbsp;<I>&#147;Fair Market Value&#148;
</I>means the value of a security, as determined in good faith
by the Board. If the security is listed on the New&nbsp;York
Stock Exchange or any other established stock exchange or traded
on the Nasdaq National Market or the Nasdaq SmallCap Market, the
Fair Market Value of the security shall be the closing sales
price (rounded up where necessary to the nearest whole cent) for
such security (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or, in the event that the
security is traded on more than one such exchange or market, the
exchange or market with the greatest volume of trading in the
relevant security of the Company) on the trading day occurring
on or closest to the relevant
</FONT>

<P align="center"><FONT size="2">C-1
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">determination date, as reported in <I>The Wall
Street Journal </I>or such other source as the Board deems
reliable, and on the date as determined more precisely in the
Offering Memorandum.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(l)&nbsp;<I>&#147;Non-Employee Director&#148;
</I>means a Director who either (i)&nbsp;is not a current
Employee or Officer of the Company or its parent or subsidiary,
does not receive compensation (directly or indirectly) from the
Company or its parent or subsidiary for services rendered as a
consultant or in any capacity other than as a Director (except
for an amount as to which disclosure would not be required under
Item&nbsp;404(a) of Regulation&nbsp;S-K promulgated pursuant to
the Securities Act (&#147;Regulation&nbsp;S-K&#148;)), does not
possess an interest in any other transaction as to which
disclosure would be required under Item&nbsp;404(a) of
Regulation&nbsp;S-K, and is not engaged in a business
relationship as to which disclosure would be required under
Item&nbsp;404(b) of Regulation&nbsp;S-K; or (ii)&nbsp;is
otherwise considered a &#147;non-employee director&#148; for
purposes of Rule&nbsp;16b-3.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(m)&nbsp;<I>&#147;Offering&#148; </I>means the
grant of Rights to purchase Shares under the Plan to Eligible
Employees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(n)&nbsp;<I>&#147;Offering Date&#148; </I>means a
date selected by the Board for an Offering to commence.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(o)&nbsp;<I>&#147;Offering Memorandum&#148;
</I>means a memorandum describing the terms of the then current
or otherwise relevant Offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(p)&nbsp;<I>&#147;Outside Director&#148;
</I>means a Director who either (i)&nbsp;is not a current
employee of the Company or an &#147;affiliated corporation&#148;
(within the meaning of the Treasury regulations promulgated
under Section&nbsp;162(m) of the Code), is not a former employee
of the Company or an &#147;affiliated corporation&#148;
receiving compensation for prior services (other than benefits
under a tax qualified pension plan), was not an officer of the
Company or an &#147;affiliated corporation&#148; at any time,
and is not currently receiving direct or indirect remuneration
from the Company or an &#147;affiliated corporation&#148; for
services in any capacity other than as a Director, or
(ii)&nbsp;is otherwise considered an &#147;outside
director&#148; for purposes of Section&nbsp;162(m) of the Code.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(q)&nbsp;<I>&#147;Participant&#148; </I>means an
Eligible Employee who holds an outstanding Right granted
pursuant to the Plan or, if applicable, such other person who
holds an outstanding Right granted under the Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(r)&nbsp;<I>&#147;Plan&#148; </I>means this
Amended and Restated Employee Stock Purchase Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(s)&nbsp;<I>&#147;Purchase Date&#148; </I>means
one or more dates established by the Board during an Offering on
which Rights granted under the Plan shall be exercised and
purchases of Shares carried out in accordance with such Offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(t)&nbsp;<I>&#147;Right&#148; </I>means an option
to purchase Shares granted pursuant to the Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(u)&nbsp;<I>&#147;Rule&nbsp;16b-3&#148; </I>means
Rule&nbsp;16b-3 of the Exchange Act or any successor to
Rule&nbsp;16b-3 as in effect with respect to the Company at the
time discretion is being exercised regarding the Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(v)&nbsp;<I>&#147;Securities Act&#148; </I>means
the United States Securities Act of 1933, as amended.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(w)&nbsp;<I>&#147;Share&#148; </I>means a share
of the common stock of the Company.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">3.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Administration.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;The Board shall administer the Plan
unless and until the Board delegates administration to a
Committee, as provided in subsection&nbsp;3(c). Whether or not
the Board has delegated administration, the Board shall have the
final power to determine all questions of policy and expediency
that may arise in the administration of the Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;The Board (or the Committee) shall have
the power, subject to, and within the limitations of, the
express provisions of the Plan:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;To determine when and how Rights to
    purchase Shares shall be granted and the provisions of each
    Offering of such Rights (which need not be identical).
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;To designate from time to time which
    Affiliates of the Company shall be eligible to participate in
    the Plan.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">C-2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(iii)&nbsp;To construe and interpret the Plan and
    Rights granted under it, and to establish, amend and revoke
    rules and regulations for its administration. The Board, in the
    exercise of this power, may correct any defect, omission or
    inconsistency in the Plan, in a manner and to the extent it
    shall deem necessary or expedient to make the Plan fully
    effective.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(iv)&nbsp;To amend the Plan as provided in
    Section&nbsp;14.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(v)&nbsp;Generally, to exercise such powers and
    to perform such acts as it deems necessary or expedient to
    promote the best interests of the Company and its Affiliates and
    to carry out the intent that the Plan be treated as an Employee
    Stock Purchase Plan.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;The Board may delegate administration of
the Plan to a Committee of the Board composed of two (2)&nbsp;or
more members, all of the members of which Committee may be, in
the discretion of the Board, Non-Employee Directors and/or
Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by
the Board, including the power to delegate to a subcommittee of
two (2)&nbsp;or more Outside Directors any of the administrative
powers the Committee is authorized to exercise (and references
in this Plan to the Board shall thereafter be to the Committee
or such a subcommittee), subject, however, to such resolutions,
not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish
the Committee at any time and revest in the Board the
administration of the Plan.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">4.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Shares Subject to the Plan.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;Subject to the provisions of
Section&nbsp;13 relating to adjustments upon changes in
securities, the Shares that may be sold pursuant to Rights
granted under the Plan shall not exceed in the aggregate Thirty
Eight Million Five Hundred Thousand (38,500,000) Shares. If any
Right granted under the Plan shall for any reason terminate
without having been exercised, the Shares not purchased under
such Right shall again become available for the Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;The Shares subject to the Plan may be
unissued Shares or Shares that have been bought on the open
market at prevailing market prices or otherwise.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">5.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Grant of Rights; Offering.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;The Board may from time to time grant or
provide for the grant of Rights to purchase Shares of the
Company under the Plan to Eligible Employees in an Offering on
one or more Offering Dates selected by the Board. Each Offering
shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate, which shall
comply with the requirements of Section&nbsp;423(b)(5) of the
Code that all Employees granted Rights to purchase Shares under
the Plan shall have the same rights and privileges. The terms
and conditions of an Offering shall be incorporated by reference
into the Plan and treated as part of the Plan. The provisions of
separate Offerings need not be identical, but each Offering
shall include (through incorporation of the provisions of this
Plan by reference in the Offering Memorandum or otherwise) the
period during which the Offering shall be effective, which
period shall not exceed twenty-seven (27)&nbsp;months beginning
with the Offering Date, and the substance of the provisions
contained in Sections&nbsp;6 through 9, inclusive.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;If a Participant has more than one Right
outstanding under the Plan, unless he or she otherwise indicates
in agreements or notices delivered hereunder: (i)&nbsp;each
agreement or notice delivered by that Participant will be deemed
to apply to all of his or her Rights under the Plan, and
(ii)&nbsp;an earlier-granted Right (or a Right with a lower
exercise price, if two Rights have identical grant dates) will
be exercised to the fullest possible extent before a
later-granted Right (or a Right with a higher exercise price if
two Rights have identical grant dates) will be exercised.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">6.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Eligibility.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;Rights may be granted only to Employees
of the Company or, as the Board may designate as provided in
subsection&nbsp;3(b), to Employees of an Affiliate. Except as
provided in subsection&nbsp;6(b), an
</FONT>

<P align="center"><FONT size="2">C-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">Employee shall not be eligible to be granted
Rights under the Plan unless, on the Offering Date, such
Employee has been in the employ of the Company or the Affiliate,
as the case may be, for such continuous period preceding such
grant as the Board may require, but in no event shall the
required period of continuous employment be equal to or greater
than two (2)&nbsp;years.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;The Board may provide that each person
who, during the course of an Offering, first becomes an Eligible
Employee will, on a date or dates specified in the Offering
which coincides with the day on which such person becomes an
Eligible Employee or which occurs thereafter, receive a Right
under that Offering, which Right shall thereafter be deemed to
be a part of that Offering. Such Right shall have the same
characteristics as any Rights originally granted under that
Offering, as described herein, except that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;the date on which such Right is granted
    shall be the &#147;Offering Date&#148; of such Right for all
    purposes, including determination of the exercise price of such
    Right;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;the period of the Offering with respect
    to such Right shall begin on its Offering Date and end
    coincident with the end of such Offering;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(iii)&nbsp;the Board may provide that if such
    person first becomes an Eligible Employee within a specified
    period of time before the end of the Offering, he or she will
    not receive any Right under that Offering.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;No Employee shall be eligible for the
grant of any Rights under the Plan if, immediately after any
such Rights are granted, such Employee owns stock possessing
five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or of any
Affiliate. For purposes of this subsection&nbsp;6(c), the rules
of Section&nbsp;424(d) of the Code shall apply in determining
the stock ownership of any Employee, and stock which such
Employee may purchase under all outstanding rights and options
shall be treated as stock owned by such Employee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(d)&nbsp;An Eligible Employee may be granted
Rights under the Plan only if such Rights, together with any
other Rights granted under all Employee Stock Purchase Plans of
the Company and any Affiliates, as specified by
Section&nbsp;423(b)(8) of the Code, do not permit such Eligible
Employee&#146;s rights to purchase Shares of the Company or any
Affiliate to accrue at a rate which exceeds twenty five thousand
dollars ($25,000) of the fair market value of such Shares
(determined at the time such Rights are granted) for each
calendar year in which such Rights are outstanding at any time.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(e)&nbsp;The Board may provide in an Offering
that Employees who are highly compensated employees within the
meaning of Section&nbsp;423(b)(4)(D) of the Code shall not be
eligible to participate.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">7.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Rights; Purchase Price.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;On each Offering Date, each Eligible
Employee, pursuant to an Offering made under the Plan, shall be
granted the Right to purchase up to the number of Shares
purchasable either:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;with a percentage designated by the
    Board not exceeding fifteen percent (15%) of such
    Employee&#146;s Earnings (as defined by the Board in each
    Offering) during the period which begins on the Offering Date
    (or such later date as the Board determines for a particular
    Offering) and ends on the date stated in the Offering, which
    date shall be no later than the end of the Offering;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;with a maximum dollar amount designated
    by the Board that, as the Board determines for a particular
    Offering, (1)&nbsp;shall be withheld, in whole or in part, from
    such Employee&#146;s Earnings (as defined by the Board in each
    Offering) during the period which begins on the Offering Date
    (or such later date as the Board determines for a particular
    Offering) and ends on the date stated in the Offering, which
    date shall be no later than the end of the Offering and/or
    (2)&nbsp;shall be contributed, in whole or in part, by such
    Employee during such period.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;The Board shall establish one or more
Purchase Dates during an Offering on which Rights granted under
the Plan shall be exercised and purchases of Shares carried out
in accordance with such Offering.
</FONT>

<P align="center"><FONT size="2">C-4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;In connection with each Offering made
under the Plan, the Board may specify a maximum amount of Shares
that may be purchased by any Participant as well as a maximum
aggregate amount of Shares that may be purchased by all
Participants pursuant to such Offering. In addition, in
connection with each Offering that contains more than one
Purchase Date, the Board may specify a maximum aggregate amount
of Shares which may be purchased by all Participants on any
given Purchase Date under the Offering. If the aggregate
purchase of Shares upon exercise of Rights granted under the
Offering would exceed any such maximum aggregate amount, the
Board shall make a pro rata allocation of the Shares available
in as nearly a uniform manner as shall be practicable and as it
shall deem to be equitable.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(d)&nbsp;The purchase price of Shares acquired
pursuant to Rights granted under the Plan shall be not less than
the lesser of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;an amount equal to eighty-five percent
    (85%) of the fair market value of the Shares on the Offering
    Date;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;an amount equal to eighty-five percent
    (85%) of the fair market value of the Shares on the Purchase
    Date.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">8.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Participation; Withdrawal;
    Termination.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;An Eligible Employee may become a
Participant in the Plan pursuant to an Offering by delivering a
participation agreement to the Company within the time specified
in the Offering Memorandum, in such form as the Company
provides. Each such agreement shall authorize payroll deductions
of up to the maximum percentage specified by the Board of such
Employee&#146;s Earnings during the Offering (as defined in each
Offering). The payroll deductions made for each Participant
shall be credited to a bookkeeping account for such Participant
under the Plan and either may be deposited with the general
funds of the Company or may be deposited in a separate account
in the name of, and for the benefit of, such Participant with a
financial institution designated by the Company. To the extent
provided in the Offering, a Participant may reduce (including to
zero) or increase such payroll deductions. To the extent
provided in the Offering, a Participant may begin such payroll
deductions after the beginning of the Offering. A Participant
may make additional payments into his or her account only if
specifically provided for in the Offering and only if the
Participant has not already had the maximum permitted amount
withheld during the Offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;At any time during an Offering, a
Participant may terminate his or her payroll deductions under
the Plan and withdraw from the Offering by delivering to the
Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to
the end of the Offering except as provided by the Board in the
Offering. Upon such withdrawal from the Offering by a
Participant, the Company shall distribute to such Participant
all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire Shares
for the Participant) under the Offering, without interest unless
otherwise specified in the Offering, and such Participant&#146;s
interest in that Offering shall be automatically terminated. A
Participant&#146;s withdrawal from an Offering will have no
effect upon such Participant&#146;s eligibility to participate
in any other Offerings under the Plan but such Participant will
be required to deliver a new participation agreement in order to
participate in subsequent Offerings under the Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;Rights granted pursuant to any Offering
under the Plan shall terminate immediately upon cessation of any
participating Employee&#146;s employment with the Company and
its designated Affiliates for any reason (subject to any
post-employment participation period required by law) or other
lack of eligibility. The Company shall distribute to such
terminated Employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have
been used to acquire Shares for the terminated Employee) under
the Offering, without interest unless otherwise specified in the
Offering. If the accumulated payroll deductions have been
deposited with the Company&#146;s general funds, then the
distribution shall be made from the general funds of the
Company, without interest. If the accumulated payroll deductions
have been deposited in a separate account with a financial
institution as provided in subsection&nbsp;8(a), then the
distribution shall be made from the separate account, without
interest unless otherwise specified in the Offering.
</FONT>

<P align="center"><FONT size="2">C-5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(d)&nbsp;Rights granted under the Plan shall not
be transferable by a Participant otherwise than by will or the
laws of descent and distribution, or by a beneficiary
designation as provided in Section&nbsp;15 and, otherwise during
his or her lifetime, shall be exercisable only by the person to
whom such Rights are granted.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">9.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Exercise.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;On each Purchase Date specified therefor
in the relevant Offering, each Participant&#146;s accumulated
payroll deductions and other additional payments specifically
provided for in the Offering (without any increase for interest)
will be applied to the purchase of Shares up to the maximum
amount of Shares permitted pursuant to the terms of the Plan and
the applicable Offering, at the purchase price specified in the
Offering. No fractional Shares shall be issued upon the exercise
of Rights granted under the Plan unless specifically provided
for in the Offering and permitted by law.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;Unless otherwise specifically provided
in the Offering, the amount, if any, of accumulated payroll
deductions remaining in any Participant&#146;s account after the
purchase of Shares that is equal to the amount required to
purchase one or more whole Shares on the final Purchase Date of
the Offering shall be distributed in full to the Participant at
the end of the Offering, without interest. If the accumulated
payroll deductions have been deposited with the Company&#146;s
general funds, then the distribution shall be made from the
general funds of the Company, without interest. If the
accumulated payroll deductions have been deposited in a separate
account with a financial institution as provided in
subsection&nbsp;8(a), then the distribution shall be made from
the separate account, without interest unless otherwise
specified in the Offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;The amount, if any, of accumulated
payroll deductions remaining in any Participant&#146;s account
after the purchase of Shares that is less than the amount
required to purchase one whole Share on the final Purchase Date
of the Offering shall be carried forward, without interest, into
the next Offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(d)&nbsp;No Rights granted under the Plan may be
exercised to any extent unless the Shares to be issued upon such
exercise under the Plan (including Rights granted thereunder)
are covered by an effective registration statement pursuant to
the Securities Act and the Plan is in material compliance with
all applicable state, foreign and other securities and other
laws applicable to the Plan. If on a Purchase Date in any
Offering hereunder the Plan is not so registered or in such
compliance, no Rights granted under the Plan or any Offering
shall be exercised on such Purchase Date, and the Purchase Date
shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the
Purchase Date shall not be delayed more than twelve
(12)&nbsp;months and the Purchase Date shall in no event be more
than twenty-seven (27)&nbsp;months from the Offering Date. If,
on the Purchase Date of any Offering hereunder, as delayed to
the maximum extent permissible, the Plan is not registered and
in such compliance, no Rights granted under the Plan or any
Offering shall be exercised and all payroll deductions
accumulated during the Offering (reduced to the extent, if any,
such deductions have been used to acquire Shares) shall be
distributed to the Participants, without interest unless
otherwise specified in the Offering. If the accumulated payroll
deductions have been deposited with the Company&#146;s general
funds, then the distribution shall be made from the general
funds of the Company, without interest. If the accumulated
payroll deductions have been deposited in a separate account
with a financial institution as provided in
subsection&nbsp;8(a), then the distribution shall be made from
the separate account, without interest unless otherwise
specified in the Offering.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">10.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Covenants of the Company.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;During the terms of the Rights granted
under the Plan, the Company shall ensure that the amount of
Shares required to satisfy such Rights are available.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;The Company shall seek to obtain from
each federal, state, foreign or other regulatory commission or
agency having jurisdiction over the Plan such authority as may
be required to issue and sell Shares upon exercise of the Rights
granted under the Plan. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission
or agency the authority which counsel for the Company deems
necessary for the lawful issuance and sale of Shares under the
Plan, the Company shall be relieved from any liability for
failure to issue and sell Shares upon exercise of such Rights
unless and until such authority is obtained.
</FONT>

<P align="center"><FONT size="2">C-6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">11.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Use of Proceeds from Shares.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Proceeds from the sale of Shares pursuant to
Rights granted under the Plan shall constitute general funds of
the Company.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">12.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Rights as a Stockholder and
    Employee.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;A Participant shall not be deemed to be
the holder of, or to have any of the rights of a holder with
respect to, Shares subject to Rights granted under the Plan
unless and until the Participant&#146;s Shares acquired upon
exercise of Rights under the Plan are recorded in the books of
the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;Neither the Plan nor the grant of any
Right thereunder shall confer any right on any Employee to
remain in the employ of the Company or any Affiliate or restrict
the right of the Company or any Affiliate to terminate such
Employee&#146;s employment.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">13.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Adjustments upon Changes in
    Securities.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;Subject to any required action by the
stockholders of the Company, the number of Shares covered by
each Right under the Plan that has not yet been exercised and
the number of Shares that have been authorized for issuance
under the Plan but have not yet been placed under a Right
(collectively, the &#147;Reserves&#148;), as well as the price
per Share covered by each Right under the Plan that has not yet
been exercised, shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting
from a stock split or the payment of stock dividend (but only on
the Common Stock) or any other increase or decrease in the
number of Shares 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 &#147;effected without receipt of consideration.&#148;
Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issue 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 subject to a Right.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;In the event of the proposed dissolution
or liquidation of the Company, any and all Offerings shall
terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may,
in the exercise of its sole discretion in such instances,
declare that the Rights under the Plan shall terminate as of a
date fixed by the Board and give each Participant the right to
exercise his or her Right. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation or a
parent or subsidiary of such successor corporation when the
Company is not the surviving corporation, any and all Offerings
shall terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The
Board may, in the exercise of its sole discretion in such
instances, and in lieu of assumption or substitution of the
Rights, provide that each Participant shall have the right to
exercise his or her Right. If the Board makes a Right
exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Board shall notify the
Participant that the Right shall be fully exercisable for a
period of twenty (20)&nbsp;days from the date of such notice (or
such other period of time as the Board shall determine), and the
Right shall terminate upon the expiration of such period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;The Board may, if it so determines in
the exercise of its sole discretion, also make provision for
adjusting the Reserves, as well as the price per Share covered
by each outstanding Right, in the event that the Company effects
one or more reorganizations, recapitalizations, rights offering,
or other increases or reductions of outstanding Shares, and in
the event of the Company being consolidated with or merged into
any other corporation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">14.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Amendment of the Plan.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;The Board at any time, and from time to
time, may amend the Plan. However, except as provided in
Section&nbsp;13 relating to adjustments upon changes in
securities and except as to minor amendments to benefit
</FONT>

<P align="center"><FONT size="2">C-7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">the administration of the Plan, to take account
of a change in legislation or to obtain or maintain favorable
tax, exchange control or regulatory treatment for Participants
or the Company or any Affiliate, no amendment shall be effective
unless approved by the stockholders of the Company to the extent
stockholder approval is necessary for the Plan to satisfy the
requirements of Section&nbsp;423 of the Code, Rule&nbsp;16b-3
under the Exchange Act or any Nasdaq or other securities
exchange listing requirements. Currently under the Code,
stockholder approval within twelve (12)&nbsp;months before or
after the adoption of the amendment is required where the
amendment will:
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;Increase the amount of Shares reserved
    for Rights under the Plan;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;Modify the provisions as to eligibility
    for participation in the Plan to the extent such modification
    requires stockholder approval in order for the Plan to obtain
    employee stock purchase plan treatment under Section&nbsp;423 of
    the Code;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(iii)&nbsp;Modify the Plan in any other way if
    such modification requires stockholder approval in order for the
    Plan to obtain employee stock purchase plan treatment under
    Section&nbsp;423 of the Code.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems
necessary or advisable to provide Employees with the maximum
benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to
Employee Stock Purchase Plans and/or to bring the Plan and/or
Rights granted under it into compliance therewith.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;Rights and obligations under any Rights
granted before amendment of the Plan shall not be impaired by
any amendment of the Plan without the consent of the person to
whom such Rights were granted, or except as necessary to comply
with any laws or governmental regulations, or except as
necessary to ensure that the Plan and/or Rights granted under
the Plan comply with the requirements of Section&nbsp;423 of the
Code.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">15.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Designation of Beneficiary.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;A Participant may file a written
designation of a beneficiary who is to receive any Shares and/or
cash, if any, from the Participant&#146;s account under the Plan
in the event of such Participant&#146;s death subsequent to the
end of an Offering but prior to delivery to the Participant of
such Shares and cash. In addition, a Participant may file a
written designation of a beneficiary who is to receive any cash
from the Participant&#146;s account under the Plan in the event
of such Participant&#146;s death during an Offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;The Participant may change such
designation of beneficiary at any time by written notice. In the
event of the death of a Participant and in the absence of a
beneficiary validly designated under the Plan who is living at
the time of such Participant&#146;s death, the Company shall
deliver such Shares and/or cash to the executor or administrator
of the estate of the Participant, or if no such executor or
administrator has been appointed (to the knowledge of the
Company), the Company, in its sole discretion, may deliver such
Shares and/or cash to the spouse or to any one or more
dependents or relatives of the Participant, or if no spouse,
dependent or relative is known to the Company, then to such
other person as the Company may designate.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">16.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Termination or Suspension of the
    Plan.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;The Board in its discretion may suspend
or terminate the Plan at any time. Unless sooner terminated, the
Plan shall terminate at the time that all of the Shares subject
to the Plan&#146;s reserve, as increased and/or adjusted from
time to time, have been issued under the terms of the Plan. No
Rights may be granted under the Plan while the Plan is suspended
or after it is terminated.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;Rights and obligations under any Rights
granted while the Plan is in effect shall not be impaired by
suspension or termination of the Plan, except as expressly
provided in the Plan or with the consent of the person to whom
such Rights were granted, or except as necessary to comply with
any laws or governmental regulation, or except as necessary to
ensure that the Plan and/or Rights granted under the Plan comply
with the requirements of Section&nbsp;423 of the Code.
</FONT>

<P align="center"><FONT size="2">C-8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">17.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Effective Date of Plan.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Plan shall become effective upon adoption by
the Board.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">18.&nbsp;</FONT></B></TD>
    <TD>
    <B><FONT size="2">Reorganization of Cadence Design Foundry
    Business.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Nothing in this Plan shall be construed to
restrict the ability of the Company to effect the transactions,
amendments and termination described in Section&nbsp;A.2. of
that certain Plan of Reorganization for Cadence Design Foundry
Business, adopted by the Board on October&nbsp;30, 2002, and the
Plan shall hereby deemed to be amended in accordance therewith;
provided that such transactions shall be effected in a manner
consistent with applicable law.
</FONT>

<P align="center"><FONT size="2">C-9
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 12pt"><B>PROXY</B>

<P align="center" style="font-size: 12pt"><B>Cadence Design Systems, Inc.</B>

<DIV align="center" style="font-size: 10pt"><B>PROXY FOR ANNUAL MEETING OF STOCKHOLDERS<BR>
JUNE 15, 2004</B></DIV>

<P align="left" style="font-size: 9pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby appoints H. Raymond Bingham, William Porter and R.L.
Smith McKeithen, or any of them, each with power of substitution, to attend and
to represent the undersigned at the 2004 Annual Meeting of Stockholders of
Cadence Design Systems, Inc., to be held at Cadence Design Systems, Inc., 2655
Seely Avenue, Building 5, San Jose, California, on June&nbsp;15, 2004 at 1:00 p.m.
Pacific time and any continuation or adjournment thereof, and to vote the
number of shares of common stock of Cadence the undersigned would be entitled
to vote if personally present at the meeting in accordance with the
instructions set forth on this proxy card. Any proxy heretofore given by the
undersigned with respect to such shares of common stock is hereby revoked.

<P align="left" style="font-size: 9pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CADENCE.</B>

<P align="center" style="font-size: 9pt"><B>THE SHARES WILL BE VOTED AS DIRECTED ON THE REVERSE. IN THE ABSENCE OF DIRECTION, THIS PROXY
WILL BE VOTED <u>FOR</u> THE NINE NOMINEES FOR ELECTION AND <u>FOR</u> PROPOSALS 2, 3 AND 4. IF ANY OTHER
MATTERS ARE PROPERLY BROUGHT<BR> BEFORE THE ANNUAL MEETING, PROXIES WILL BE VOTED ON THESE
MATTERS AS THE PROXIES NAMED ABOVE MAY<BR> DETERMINE IN THEIR SOLE DISCRETION.</B>

<P align="center" style="font-size: 9pt"><I>(Continued and to be signed on reverse side)</I>

<P align="center" style="font-size: 10pt"><B>Address Change/Comments </B><FONT style="font-size:8pt"><B>(Mark the corresponding box on the reverse side)</B></FONT>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 8pt"><HR align="center" size="1" noshade width="100%">

<DIV align="center" style="font-size: 18pt"><font face="webdings">5</font> <FONT style="vertical-align: -1pt; font-size:9pt"><B>Fold and detach here</B></FONT> <font face="webdings">5</font></DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>CADENCE DESIGN SYSTEMS, INC.</B>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="15%"></TD>
    <TD width="1%"></TD>
    <TD width="4%"></TD>

    <TD width="55%"></TD>
    <TD width="5%"></TD>
    <TD width="15%"></TD>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">

    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
&nbsp;</DIV></TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="top">&nbsp;</TD>

    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD nowrap align="left" valign="top">Mark Here<BR>
for Address<BR>
Change or<BR>
Comments
</TD>

    <TD align="left" valign="top"><FONT size="6" face="Wingdings">&#111;</FONT></TD>

    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</tr>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" valign="top" align="left"><B>PLEASE SEE REVERSE SIDE</B></TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD nowrap align="left" valign="top">Please mark vote<BR>
in the following<BR>
manner using<BR>
dark ink only:</TD>

<TD align="left" valign="bottom"><FONT size="6" face="Wingdings">&#120;</FONT></TD>

    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</tr>


<!-- End Table Body -->
</TABLE>
</DIV>

<P><DIV style="position: relative; float: left; margin-right: 1%; width: 45%">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">FOR</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">WITHHOLD</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">FOR ALL</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">ALL</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">ALL</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">EXCEPT</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 8pt">

    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1. Election of Directors
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT size="6" face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT size="6" face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT size="6" face="Wingdings">&#111;</FONT></TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 8pt"><I>Nominees:</I>

<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="60%"></TD>
    <TD width="1%"></TD>
    <TD width="39%"></TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">01 H. Raymond Bingham
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">02 Susan L. Bostrom</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">03 Donald L. Lucas
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">04 Sean M. Maloney</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">05 Alberto Sangiovanni-Vincentelli
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">06 George M. Scalise</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">07 John B. Shoven
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">08 Roger S. Siboni</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">09 Lip-Bu Tan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 9pt">(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee&#146;s name in the space provided below.)


<P align="left" style="font-size: 8pt"><HR align="left" size="1" noshade width="90%">
<FONT style="font-size: 9pt"><I>(Except nominees written above)</I></FONT>

</DIV>

<P>&nbsp;
<DIV style="position: relative; float: right; margin-left: 1%; width: 52%">
<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR><TD>&nbsp;</TD></TR>
<TR style="font-size: 8pt" valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">FOR</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">AGAINST</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">ABSTAIN</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Approval of Amendment and Restatement of the Cadence Design Systems, Inc.
1987 Stock Option Plan.
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT size="6" face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT size="6" face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT size="6" face="Wingdings">&#111;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Approval of Amendment to the Cadence Design Systems, Inc. Amended and
Restated Employee Stock Purchase Plan.
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT size="6" face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT size="6" face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT size="6" face="Wingdings">&#111;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ratification of selection of KPMG LLP as independent auditors of Cadence
for its fiscal year ending January&nbsp;1, 2005.
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT size="6" face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT size="6" face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT size="6" face="Wingdings">&#111;</FONT></TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">&nbsp;

<P align="left" style="font-size: 9pt">Authority is hereby given to the proxies identified on the front of this card
to vote in their discretion upon such other business as may properly come
before the meeting or any adjournment thereof.

</DIV>
<BR clear="all"><BR>

<P align="left" style="font-size: 10pt">&nbsp;


<P align="left" style="font-size: 10pt">&nbsp;


<P align="left" style="font-size: 9pt">The undersigned hereby acknowledges receipt of: (a)&nbsp;Notice of Annual Meeting of
Stockholders of Cadence, (b)&nbsp;accompanying Proxy Statement, and (c)&nbsp;Annual
Report on Form 10-K for the fiscal year ended January&nbsp;3, 2004.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Signature</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Signature</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Dated:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top"><B>, 2004</B></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><HR align="center" size="1" noshade>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><HR align="center" size="1" noshade>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><HR align="center" size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 8pt"><B>Please sign exactly as your name appears on your stock certificate.</B></DIV>

<DIV align="center" style="font-size: 10pt"><HR align="center" size="1" noshade width="100%"></DIV>

<DIV align="center" style="font-size: 18pt"><font face="webdings">5</font> <FONT style="vertical-align: -1pt; font-size:9pt"><B>Fold and detach here</B></FONT> <font face="webdings">5</font></DIV>

<P align="center" style="font-size: 12pt"><BR><B>YOUR VOTE IS IMPORTANT!</B>

<P align="center" style="font-size: 12pt"><B>PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT<BR>
IN THE ENCLOSED ENVELOPE.</B>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>2
<FILENAME>f97592def9759201.gif
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 f97592def9759201.gif
M1TE&.#EAZ@`B`/?_````````,P``9@``F0``S```_P`S```S,P`S9@`SF0`S
MS``S_P!F``!F,P!F9@!FF0!FS`!F_P"9``"9,P"99@"9F0"9S`"9_P#,``#,
M,P#,9@#,F0#,S`#,_P#_``#_,P#_9@#_F0#_S`#__S,``#,`,S,`9C,`F3,`
MS#,`_S,S`#,S,S,S9C,SF3,SS#,S_S-F`#-F,S-F9C-FF3-FS#-F_S.9`#.9
M,S.99C.9F3.9S#.9_S/,`#/,,S/,9C/,F3/,S#/,_S/_`#/_,S/_9C/_F3/_
MS#/__V8``&8`,V8`9F8`F68`S&8`_V8S`&8S,V8S9F8SF68SS&8S_V9F`&9F
M,V9F9F9FF69FS&9F_V:9`&:9,V:99F:9F6:9S&:9_V;,`&;,,V;,9F;,F6;,
MS&;,_V;_`&;_,V;_9F;_F6;_S&;__YD``)D`,YD`9ID`F9D`S)D`_YDS`)DS
M,YDS9IDSF9DSS)DS_YEF`)EF,YEF9IEFF9EFS)EF_YF9`)F9,YF99IF9F9F9
MS)F9_YG,`)G,,YG,9IG,F9G,S)G,_YG_`)G_,YG_9IG_F9G_S)G__\P``,P`
M,\P`9LP`F<P`S,P`_\PS`,PS,\PS9LPSF<PSS,PS_\QF`,QF,\QF9LQFF<QF
MS,QF_\R9`,R9,\R99LR9F<R9S,R9_\S,`,S,,\S,9LS,F<S,S,S,_\S_`,S_
M,\S_9LS_F<S_S,S___\``/\`,_\`9O\`F?\`S/\`__\S`/\S,_\S9O\SF?\S
MS/\S__]F`/]F,_]F9O]FF?]FS/]F__^9`/^9,_^99O^9F?^9S/^9___,`/_,
M,__,9O_,F?_,S/_,____`/__,___9O__F?__S/___P``````````````````
M````````````````````````````````````````````````````````````
M````````````````````````````````````````````````````````````
M`````````````````````"P`````Z@`B```(_P"O"1Q(4""K%:P**ES(L*'#
MAQ`C2IQ(L:+%BQ@S,F1E904`*QI#BAQ)LJ3)DR&M`%C)<@7*EQ@YPIQ)L^9&
M`"L\NO0(TJ;/@AX__AR:,2'1:QZ1`C":]&C-@RR-.IWJD.=1G"I[7E-)%2:K
ME2I==AT+=*74GSAQ%A1*%J.5LU^7KFS;-BY;HD'AWBWI\2S*KUKC0O5+]ZC*
ME6*/?DTLD*M$JP^#:GW9])K@Q85GYJR:=NG4N64?@WUXV#/,K`/-7@.=^:_:
MA7%7H'8ZF^#>AD$!/+0[&27KODH)3^S=FB!PA8=98?ZLNZ!*X655<WY]FJW5
MY1<=O[3R=C=$[,9Q)O\\;MAT>(BYB1>T6Q-T6(&L+U(O"54ZP[#=&58>&+OQ
M[:'SI<;80KD-2*!]VPFU7&T6?05=1D$A]!U+`1IT6W(6&OC3<\B9IQ!4ATWH
MX4N@J0:>197M5Q%@B%'4W68*[0>5A`*1=Y6&*A(DF(VP(4B2=!P>QV-%;+UG
MD(:-^97;@Q<!QM]H`S%(%(<*_6?A4B=^".5)TLUE9)8NFC9??`-%&)Z/(J6(
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M'*50`A.*;*_.*N5A6"67])^RSP[8*+KP$3=JPD\B*5/-\\E+9,!BRD6K;<V%
MO!6:+,,Y:(>2'M9J2?+NU_!:I=JG+F"QH;IJHJB6=I;0^PKU&G#C?MP3@S,2
M!C.<82.V%X8H<7=8R"P_[;"2XCG<H6#:4?QD@.6F_[IT1,]9];3!RZ;F67W_
ME88CG17+!JR1R9:&&)\=7NFFU2T"9>"O"3G&6W2]L>?<WQ"IC9/<'-VYEUVF
M!VM6CF?/.719/>4T&7<2<41A?C%7B1"W'8)4GW#_T<R58'<I3=C;<Y+>$*AF
M$EDJ[A$[S#&";!_8>=:(Y8:IQWR"1;S,?3]/8:LP`IT8Z^-]E!Y#F7_(NT5`
MCNP[D_AI??!9K]XDEI%*0TQ"..*V^LR/(^EADI6HMYL".@1NO7$;?]ZFP)1I
M9'XQ(9SUL%(P6H7K5R8BS?=:\K,RE3`F4GG72"!7'(6%S2_,JXC;'-@6!0'O
A)0YJX:).J$.5Y42`/0RB#`[#)L1DB:^(2)0(!GL8$``[
`
end

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>3
<FILENAME>f97592def9759200.gif
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 f97592def9759200.gif
M1TE&.#EA_@%X`??_````````,P``9@``F0``S```_P`S```S,P`S9@`SF0`S
MS``S_P!F``!F,P!F9@!FF0!FS`!F_P"9``"9,P"99@"9F0"9S`"9_P#,``#,
M,P#,9@#,F0#,S`#,_P#_``#_,P#_9@#_F0#_S`#__S,``#,`,S,`9C,`F3,`
MS#,`_S,S`#,S,S,S9C,SF3,SS#,S_S-F`#-F,S-F9C-FF3-FS#-F_S.9`#.9
M,S.99C.9F3.9S#.9_S/,`#/,,S/,9C/,F3/,S#/,_S/_`#/_,S/_9C/_F3/_
MS#/__V8``&8`,V8`9F8`F68`S&8`_V8S`&8S,V8S9F8SF68SS&8S_V9F`&9F
M,V9F9F9FF69FS&9F_V:9`&:9,V:99F:9F6:9S&:9_V;,`&;,,V;,9F;,F6;,
MS&;,_V;_`&;_,V;_9F;_F6;_S&;__YD``)D`,YD`9ID`F9D`S)D`_YDS`)DS
M,YDS9IDSF9DSS)DS_YEF`)EF,YEF9IEFF9EFS)EF_YF9`)F9,YF99IF9F9F9
MS)F9_YG,`)G,,YG,9IG,F9G,S)G,_YG_`)G_,YG_9IG_F9G_S)G__\P``,P`
M,\P`9LP`F<P`S,P`_\PS`,PS,\PS9LPSF<PSS,PS_\QF`,QF,\QF9LQFF<QF
MS,QF_\R9`,R9,\R99LR9F<R9S,R9_\S,`,S,,\S,9LS,F<S,S,S,_\S_`,S_
M,\S_9LS_F<S_S,S___\``/\`,_\`9O\`F?\`S/\`__\S`/\S,_\S9O\SF?\S
MS/\S__]F`/]F,_]F9O]FF?]FS/]F__^9`/^9,_^99O^9F?^9S/^9___,`/_,
M,__,9O_,F?_,S/_,____`/__,___9O__F?__S/___P``````````````````
M````````````````````````````````````````````````````````````
M````````````````````````````````````````````````````````````
M`````````````````````"P`````_@%X`0`(_P"O"1Q(L*#!@P@3*ES(L*'#
MAQ`C2IQ(L:+%BQ@S:MS(L:/'CR!#BAQ)LJ3)DRA3JES)LB5!5@``6!&X(B8`
M@3`!L'+)LZ?/GT"#"AVZDM4*FCMO$E2JE*C3IU"C2IU*]2*KG=>LS%RA56#7
MK#.KBAU+MJS9LR!A"I1IY>;7KVCCRIU+M^[3%2NP#M3Z-JQ7*S5M"AY,N+#A
MPX@3*U[,N+'CQY`C2YY,N;+ERY@S:][,6?#$O`.O_C6*U"!<NZA3JUXMM^E#
MP'R3:CUZC2O@@Z=9Z][-N[=+UPY9\;6"E3C!W'O]^E[.O+ESB\!+(G].O;KU
MYM%)3K_.O;OWUBJW?_\?3[X\T>PCQ9M?S[Z]2?0BU;N?3[]^1?@AY=O?S[__
MTO#*^2?@@/SA!Y)^!":H('<&?H3@@A!&Z%N#'CTHX848VD5A1Q9FZ.&'9&W(
M48<@EFBB4R)N1.*)++;X&X`NQBCC4"EJM.*,..:X48T9W:CCCT!&Q"-&/@9I
MY)$'#7E1D4@V>:22%C'IY)0Z0EF1E%1F&:.5%&&IY9<F<CF1EV"6F:&8$I%I
MYIH0HAF1FFS&.:";$,$IYYW[T?E:@'CV6:*>#MGIYZ#F`=J0H(0FZIVA#"&J
MZ*/5,;J0HY!6RIRD"E%JZ::[89J0IIR&FIJG"($JZJESD8H;GZBVNBB,KL;_
M^IVJIK$JZZW8P8KKKL[16I"IO`8;E*_'V2KLL1KJBNRRJ!&;'+/0)IL2L-%6
M.Y*2-8&6$U;;KFKMMV8-J>U13*UE;JW@IBO6D'ZQ]5=?Z*HK;U16VA;6<'_%
M.^^^-%($TTQ]P9N<O3MI5;!Q!H-U\,(*-YSPPPA'S##$$TOLL,447USQQAIW
MG/''&(?,,<@CB^RQR22?7/+**K><\LLHQ\PRS#/+[++--#L\)&DXT987SZ#]
M:BR_1*\T)%M=V>;S;-Y^*!RU1??&+KY@%5OJT`FV)9A>4<^IK(0Y#<9UU_TY
MFV^&6@^&-=GMF5WUF86MS?9Z;D/=7&!JS^U?W7+[_Y?VUGJ7_;6$>,=$6^!Y
M#BXA8`!PA1/B]O'M8=`OZ00Y?9)CV!9"/%_>MN(*BN:Y@)F/;CITH)\HT^GC
ME;Z@6L&YS?I3KBMH.5C#\34[W:G[O1=NNQ?ZM.[I]=T?J[;>%OQS,A$V-H?&
M\Q>6<+\?]._RO6JME>'Q1<_>ZL?1U+A7V+>NM5<Q=:^@\N'C5=M1WI>O6_--
MI9]?_.6)?EQ-`S6^=N?R8PW]^N<INS&G+?;*5D/<%T`!GB\K]CL0_N8#D[%5
ML"'/:V!=Z,<X\$EP0)LSR`5%>#L-,N]OXU,?Z3*80NN5<%(FU-#P)O@F&JZ'
M@0D9X4+X%\-4]:X_.%1(3?\R:)H>^G!:-J0.$=M"1(/PT(B\J1T%7X@3*N[P
M<`S1'Q37]</RL"\T5F1($#,5QBU"18K]N=YGL)BI)IKQ/%V<SQB%Q,8W'A$E
M!D0+J^88$9C442%NM*-/E*(URGV0/G-\HD5TN!!&"E(H-R','U64Q.5$QY$5
MP23G)OG(GC0N)CL)3""C5$DEEM%?I^SD5&S2+@]6J)3.42-'-*G*5480@K!L
M&GNT2!-.7F2(#VEA+7\#RH'4))?Z,H\C^;@11392=L,LB$UHDQ-D"JT]N6$F
M1[0931H5,FTJK`\32\+-;@+E)H5+)9&LJ1M:?J2<!8&G.3O2E(053YD!<B=(
MA/G_3';.,R%0\LOPGJ7+\8R1GR7QXS_A.!'870-I-&%:,K\3('E^1)\+-=J8
M(N@:H#TOCV2Q:%K461``9I2>]S%F3`!V+SZ!5"S.+`I)"2+2DT($2O5$BL#^
M0K";U>RG/@UJSAIWL+;D[*@XVQY7@(I4IB;5J5`5ZE.E&M6F4O6J5LTJRG!:
MJYT2M#LAK.(H3S).F[:$J]?PZ$//=4WOZ$^6/P$F1`QIUI0*9ZS_05_0NC71
M[]3T)'^-:5TEXA97AM.@ON3)7_TYS\(RMJ^Q=,U?53+9P:+.J"9YZ;#\4E:H
M3-8XEA42+C/[V*H(=*8]4>A<41M:<V%6.J4="T:#`M=#_^&UM6M]K79BNZ[$
M#F6VN*5(80536LWVQ'&]+`MP2WK;P0Z7E8<]X.$J^Y/E@K&Y9D5C;T0G6+%T
M-CB^#:UVEV/=N[`VN`P9[W;/Z]GP6@^]THRC74)8V[A4%J&X5:]J;D?=]DH$
M=D_#;BWURYK^1H6ZA7-O-`FL&@-'1;6K'8R"!RQ?N>CENZFI[T(,(][1PG9"
M,RFO6<IK&-[NSK&D[<UM1'P6ZW+8LBC^L"4G;&'4IO.6V?7P;I?CX+)@F'.2
M%+`@8[QCW82EQQ2AL4?DVLC`Y(7)-B7R/0M\E.YJQ["45;)7A/Q&*4>W65=A
MKT;"=EPM=QB%Q36Q2UBL$;RI6?^(9DXKEXWXW)5^V2X:3JC8RHS*.<>0P601
M#9+3=&.N&,Z>)X%P']\,.4"+I8*#?HA1&G?CV_'%)CCQ<^P83><*FY9Q)J%>
M6L-B&%^&S3::!K*?.<TV1S]:S(LV'-=02-Q#;4\I=QTSK-<2YP"ZFBIL#H[V
M4BWL:2+ZO[NN36,]+17B)+LA,B'VE20:&X@$^Y^_;B]^HQ28IUSZT*.$\J@E
M+>W39=O;D68<<C^-%?^!EJ9LQ#$9RSTZ7-MYRG,9-`)9+<&T40Z'A7S(NA])
M2$SC.RX_EG3"4P-:8_^-WG]>BTT@#MFQ&%K(PEDIQ:G20<$H>>-S&ZX"[_QJ
M,0^[.R7_9DL@KVWNVD1;WM!#.)8_51R0AZLPHT[;=AQJQDCF[7[V#:^Z^2V5
ML/T\-`&SN=[H-QB24Z6<0V_;80!Y:Y6GM>?WYJN#B(Z1G'#.*P/'9A7=I?#;
MX.7=)IRX2A]KW#KEKI@OT9K25Z.<2=-5X'BS30.5I$6XY+J@9\0Y3D[N.Z'=
MVU^S:>GRL.47I:65*W=_FU1>K/$$V8LOU,R6M#NH=],=#7P>'1?@G6)TS[@H
MXS/_U"EG`S[O<7TY;2=LEQ0/EOJ-GBBTAOF)&(=V.$O:R?)1-(:\SL4QT7Y[
M_1-:3[5:5915.MK,Q^I4HT_]Z5L,^-8OF:'3ES%15K_YX)=^__@?!OSQ9]]E
M2A(8\MEJ-5L21GNOMP[AT\/*CO>Z/4:?.T?2WR[7LO3V0_%\.R$<V=)[)V)W
M@?1L2(="^O<<"585_`=&_+5ML9=%A\%&'62`[I$[Q/,:AT="*O)^$8)Z>[9*
MM*9T%>@1J!=VWR-X?:1Y(E%Z]Z:!XK12+S9YM'9_DQ)_VA$8-+@H+KA1J8<1
MSX<^_B-.]U(P)6:"]O-`A\0;*\B#YQ&$77),8_-%?72!2'=HZY&!TC1U.+A2
M`0=TS9&!#5ATN><F&3=P+'@@D5<=0W>&*,%T:D>&SW%K*1AJK&>#I?:#=6*%
M+;%O\M>&I@$X5,%!W.-TY!6'JO%M$/]%0(11>V2W2`48B)6H8L=4)\YSB.>C
M/8KH''@HA9E4=:@&4$%(@/ZC:<.F@%6H>W,1=4)"A;3S0*)DA^.!BDN%AAUW
M;)0DAI1H<#P1;71QB<@FBRCR0-5DB^9AAD'AB!V84,S8)1]8%/-7%4]#/E%R
M@_3";-41A=3H;[S($K=&B%D$@VOFB6C(A1JAC6?$C=P1C1>UAU;W%*@HC!&!
M%T?($Z(F:K0%?VVV.C<FBNGECF[U3;\2-SNH<WD8:_F(06P!B*FECFLV@'XX
M)GI1.`(YD$BT(,R8>_E$BN&(<#XX2GJQAE*(BZR&>N4V:9F2D=!&D%U82(6A
M-/4GA_KX3;?_17@S5&V918X=@7H5^5\NF1'G1D'/]XS4D8&V`D`(B#PLT9#T
M9(\]XI/@L9%H@Y#D@9)C,T?H&#[B6("J:&7KU"G)H7\+.5]8&9.^^#BX88Y9
MT1,=E$/H`8]=AX5D^3<ZN(,>XI'TH96EHE<``Q3<@G8?:'?^!!@VZ4D/16G3
M&'-7*8+[@8>&E'MY^9/#EC9_9TW\R#R+N16LV)+_5(\(<X&)B4$YN''_HHH<
M.)0(X7.R=G#SY(AQLX:E*48E.&80YU*'^'BUIHPG56F<U9@M(8.5N9BY642K
ME&MV]XG#=!5\N3]#B!+`&27I@9QA:#DC]X0G)8/3]#P(.)Q@F";;_Z8B&5<<
MN[F)OKE0DU9JI0*59+6:(9E%<U=(%[:;*SB?K,DO'CEIR2.<!Q:=-I(M=92?
M!E&4;\2=TY.)U@.14Q%;L*B;JP239I2&+Z&@(N26M"66`>J>\+F;5EE7:>B$
M75F(5*D2FZF"(TH7!CJA,]E5QW1X!L-[(S$\%A16(0&4M5D2*VI&-^9&_%DL
MW/*:#9,1Z<0U?Q>/E=<HJ^FA>$2@^[*><-=D0TB;B`:C00E![Q=;.'I3QLA0
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MLNC7=3Z3%.SW50[_>Z-U^BO`0V@5.RL]8JI:U[`W&X,YBXTZ^QHC^3F].K0X
M.W-.V:KJ6BB6RK3@95@[&9]@%[7?,[546[7X(ZD%PK5=Z[58>G19D:^)L[1C
M2Q)VAY!@2R`[NK;^\GQ:2SIB*[<>*$D>$K=X"ZAF*R%\V[>:")D8$KB"^ZB$
M>R&&>[B-0J@1LKB,^R1W&[E!`KF4"R26>[E5,KF:FR.9V[DS\KF@NR6<.[JD
MJ[:FRR:BF[JJ4[JLV[JH^[I@LKJR^R&T6[MGXKJXN[>ZN[N%V[N^"[C`&[QM
M,KS$:SO&>[QPF[S*:[>QV[R5R[S0&[;/.[V;6[W6BR.WF[V"@[W<>[K(__J]
MT>N]XLLBVUN^F".]Z,L[Y+N^("(IVW&6[MLK[R11\0IL@9:_CZ:_UA@B*CBS
MY(I[9!&M.VM:`SP6!%R@KP2P#-QL!XS`$!S!!CP6AN)5\M@9&)S!&KS!'-S!
M'OS!(!S"(HP9"RQY\WLJY7+"K1*T*MS"+OS",!S#,CS#-+PF?5=WHU:27-<4
MR4@^?)6=*7'#+Y'#2)>C/`RC:16ET)1I13S$1_I2?H?$(_>C6;)N*>O#D!=*
M%Q?$/*1660$TM4&1*V'%Z_?%6?QXB,G%N`;`;UDN+-D2R+6RR!5B9WS%TP)Z
M;*P[21-*"<P\K:=XY&),:V7"T(AKQ0$P85K&;O\S@XI'@`-898\<Q/1UR%_<
M%QEW5N!C>\HV+O_:@]-#R<Z6?$>6H_2!'*`Q$[9W=I\I>Y5#$X\74=HB.Z9<
M,(.\5IJ<$L`!._!#>TM,R#R#RLEG3*69&[I<R_6SRFA3=^Z#,)#G%I#';Y(5
M-/=":<3QHBMQ&D;A,\:\S2H1S>8I,+V<L99C')J<S=>L''AAGK?\RE3B=T%S
M.-03R#7['L*\%P.(%?`S>.<<&GL%S.:RSB?1%)1C'%X<SHW7>&QU$T:1HW`Q
MT*$4R0"-)%\!0*/\Q6',SK@,=K'1+GH,>>*8H%[9%2+]?]VLT3%J3/9KT/"*
MC2-M4E8)&R>-QJ?\S%G_\A8>QRT**JC3,GBQ,6LZ'(C37'\J-5WC69TY9S"S
MIARO]Q5B<Y'C\S<I.9@]W<2#1\HU?-58G=5:O=5<W=5>_=5@'=9B/=9D7=9F
M?=9HG=9JO=9LW=9N_=9P'==R/==T7=<'-,)XG==ZO==\W==^_==XK;YV#:?M
M.]AD6=B&+4""G=B)BMB,/2J+[1]ABG3%@LVY4S`EJ<,"==F577><G7.AD=0_
M73UQQUFC/=D[Z9S#(<:4S=,YQ-I&.Z2/&]E1A*A7M#T723E(8VF7EQ2'\Q5G
M-TXP?6R[71R]?;:X_3;_`ABTT5G``=/C/%T`D[(4:53$,=RCZ=0F'48B74+V
M_S8;Q8ERM-TIMOTI`G4XD^@:A,0G^3C2_$S(>74NR%%/)%U"(OU$P$'?I<$S
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MT?Z'%!6N'.IMLY?>P!(NX28\X20-Y9(NK(&>X`*TX`N*STEQD?Y\M@U<3ZNS
MT*5!X7O1W/ET.Z0!W)D7Z1)7.3@=WR,$0`+^+.F\5K_^1Q:^F!'5,\(+Z)AC
MZ@O:ICQW&QZW%WFCW@EJJFBV%--$[;6VG@P[;+M,[27E@SY>JX;EZK76W>?B
M[35[[&&%CO)[Y:1^J9++[*![X*TS[X_]E/J^[R5M[_Z.%E@>\,/2[P1/SP!_
M\/Z;\`I??.';\(?]\'LIPP-O2JHHI#2%7S<M-'X7(,1*<`;?8*Z(0=3TW"3M
MZVQD+[TT3O\2:;X6\JBA<]/_9L_[<]'E;N8G2DV([,I1!O,:8GH--8GQ-',\
MC$5WGGS!CFT^[Q046K:.881-%W=`_#Z.$R`;3^UOWG])OVP,OQ[<*63HS%FT
MX9X4@N9YWL#F5/',H:9N>F%H*E8W_RN4K/,6K6P]W_7Y<Q@"MMQ8^)!]'[$2
MI<H#*!,N+S]J[QM:_O%`VC1H-S23/6['@>]D<_@0KU%X7_GM>/F87ZF:O_FP
M.JJ>K]B='_KGM/2D?Q&4?_K78OJJ+URLW_JL+/$7@N8;%=\VRNX2]X$V6K9\
M@ON1R/O'(:0"/=`5;NW:#EVUG,YHENWQ9.;83.XT%;JOCQ9%*HWHW3\-C<\<
M#G;8_]]XTY7RVO]5.,1`<9S"6`C@])WIR4Y(M,[@N&'D`/O.2FWE&S3]9E%H
MLQ<T:]PY/`P05JY=`S!PX`I6UU@A7#&054&#!!,:A*A0X$`K%Q]&)*BPH4%6
M"0LNY'C-RHJ/"RLRG-C18,:.)#%>+%F1(T2;,"F"I#G09DF@084.)5K4Z%&D
M28W^5-ITIE.H4:5.I0K`ZE6K+9-FE`D1)H")**UHS2GP:T*=+WN*U6KR8MJ9
M<"D^;.O6JY6*!4_N-(A0(EBU09E:]!D1+EN@8ZDN9MS8,=#!CTO*E5S9\E&\
M%3._M.H3ZV?.FCMSA+E"(,Z#-#-F+1P8HFFWI'O:!?PTMO_AC+-]FOZ(^ZM+
MF!L]7_T(@'?HJQ$'ZRPKFS7NR]&E2X\<G?)T[-F+?KY:URCSF*!#@D2M]B%6
MCQQA.VPI_/;>B*;ACG\]FRM#ERNP7K0)N[[MFA+C#SKVR)--.P035*JZRZY3
M\$'L].,.*IU4NF8]B>!KS::",`2L-@#P,JPWEVZ3R,`23X2(+NA"/$TAS8IK
MT2'`'%R.OY;\PHC$GQR$\$<$&;3,1R"+;.P\K+S[CB;]4BQ-/AU=Q$LDZ![*
M2#\2+X2RI;2L7&TB+Z-\B4281.P(KO*>BM$D^;CBBR-6-'(1)8P.VE*AB10S
M<D_MA*R,2#X#I3`W)8T:SZ&Q>HK_$]&><E-L49[4$DA'GF8[5-+)&C6LO80@
M-4LKQ10U:],X'>52,-Q.912DB?P4]-6H7'T,4%AKM?567(>B=2A(<_5U005W
M_7588HO5+DNED#5VV=80%)99:*.5=EIJHY/5L6>KU79;;KO=]MK&LO5V7'++
M-7=/<!D3]UQVVW7WW:G276Q=>.NU]]YZY:6*7GS[]?=?:O6=BE^`"S;XX%H%
MEHI@A!MV^.'L%(Z*88@;U!/.BWW+&$^,.'6+4$PE32OCBR$ME=!+/X[T)8V#
M<_1B-PMDN5>3*O4X4TOA*EFWBF\*EN>>DVHS-V6/FC/+A4ZJ2TH,;S/.-5-A
MS`U$1S_L_\W*OOPJU<52:9P:K=J</$D^-J,.\R,T30K[-2C1ME3*VL2:<L>^
M@`XZQ>PH[EDWNXE*JT>S=..00./>>O&F]M*,;32U:7)1N<!.I)'-O#*-'/*^
MT.I)KR8+T_#"P!$W\/.5.BWZ;KRQT[MBOBDD42LK!QL\\H+NPOOS"ZF$FC^=
M?GNSS"P1<K39R^6Z+NWA.PH[/9V#9S$B,&LO]&Z)!T4=.>ZRUWY[[>.S:F.5
M.KV)Z$8'W.NKX8T_S='B2$KZ(K]"_#UTC56T?,?T><X,O;.4#U!G^YCI8SEZ
MVO4@\S,#-J5U4HE3V.BR$)H1!&2$.TC7I$2_W7W)?\D[VOQ,%/\7@9"$*2,;
MV@<O=Z80-J1V_RN?<]32M.H!+(8*[%L"$S,9J#3'-OII2W7`XQ'?H6@N8D.A
M7LS2ILH]Q3T^Z5KN1J@:2Y$(-LB#WT::=CY%_00LE/K@#/WEQ:W4T(:DP:%3
MZ%1!D*1$?I@34+/P<KCX].:,S1D)G?J7&C?"3XX-^=L33XC']'311)UY'HOD
M<D8MP2A/:R3>&%,WG=5![&6YF9A5N*@V^2W/AP.B"!P-<Q7'C<@E\N-*3F0$
MH/T9CC/WPR0H,?*]$QIQE1ZQY")=V4J:J,0T-`,COGJ)&3$Z4IC#K-@OET1,
M9":3>@A49C.=:3!C%B62SZ1F-8L53;]`!=.:V^0FM+"I*VUV4YSCQ-4WA3)-
M<J93G=,Q9U#VQSUXQE.>\Z1G/>UY3WSF4Y_[Y&<__?E/@`94H`,EJ#P#`@`[
`
end

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>4
<FILENAME>f97592def9759202.gif
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 f97592def9759202.gif
M1TE&.#EAZ@`B`/?_````````,P``9@``F0``S```_P`S```S,P`S9@`SF0`S
MS``S_P!F``!F,P!F9@!FF0!FS`!F_P"9``"9,P"99@"9F0"9S`"9_P#,``#,
M,P#,9@#,F0#,S`#,_P#_``#_,P#_9@#_F0#_S`#__S,``#,`,S,`9C,`F3,`
MS#,`_S,S`#,S,S,S9C,SF3,SS#,S_S-F`#-F,S-F9C-FF3-FS#-F_S.9`#.9
M,S.99C.9F3.9S#.9_S/,`#/,,S/,9C/,F3/,S#/,_S/_`#/_,S/_9C/_F3/_
MS#/__V8``&8`,V8`9F8`F68`S&8`_V8S`&8S,V8S9F8SF68SS&8S_V9F`&9F
M,V9F9F9FF69FS&9F_V:9`&:9,V:99F:9F6:9S&:9_V;,`&;,,V;,9F;,F6;,
MS&;,_V;_`&;_,V;_9F;_F6;_S&;__YD``)D`,YD`9ID`F9D`S)D`_YDS`)DS
M,YDS9IDSF9DSS)DS_YEF`)EF,YEF9IEFF9EFS)EF_YF9`)F9,YF99IF9F9F9
MS)F9_YG,`)G,,YG,9IG,F9G,S)G,_YG_`)G_,YG_9IG_F9G_S)G__\P``,P`
M,\P`9LP`F<P`S,P`_\PS`,PS,\PS9LPSF<PSS,PS_\QF`,QF,\QF9LQFF<QF
MS,QF_\R9`,R9,\R99LR9F<R9S,R9_\S,`,S,,\S,9LS,F<S,S,S,_\S_`,S_
M,\S_9LS_F<S_S,S___\``/\`,_\`9O\`F?\`S/\`__\S`/\S,_\S9O\SF?\S
MS/\S__]F`/]F,_]F9O]FF?]FS/]F__^9`/^9,_^99O^9F?^9S/^9___,`/_,
M,__,9O_,F?_,S/_,____`/__,___9O__F?__S/___P``````````````````
M````````````````````````````````````````````````````````````
M````````````````````````````````````````````````````````````
M`````````````````````"P`````Z@`B```(_P"O"1Q(4""K%:P**ES(L*'#
MAQ`C2IQ(L:+%BQ@S,F1E904`*QI#BAQ)LJ3)DR&M`%C)<@7*EQ@YPIQ)L^9&
M`"L\NO0(TJ;/@AX__AR:,2'1:QZ1`C":]&C-@RR-.IWJD.=1G"I[7E-)%2:K
ME2I==AT+=*74GSAQ%A1*%J.5LU^7KFS;-BY;HD'AWBWI\2S*KUKC0O5+]ZC*
ME6*/?DTLD*M$JP^#:GW9])K@Q85GYJR:=NG4N64?@WUXV#/,K`/-7@.=^:_:
MA7%7H'8ZF^#>AD$!/+0[&27KODH)3^S=FB!PA8=98?ZLNZ!*X655<WY]FJW5
MY1<=O[3R=C=$[,9Q)O\\;MAT>(BYB1>T6Q-T6(&L+U(O"54ZP[#=&58>&+OQ
M[:'SI<;80KD-2*!]VPFU7&T6?05=1D$A]!U+`1IT6W(6&OC3<\B9IQ!4ATWH
MX4N@J0:>197M5Q%@B%'4W68*[0>5A`*1=Y6&*A(DF(VP(4B2=!P>QV-%;+UG
MD(:-^97;@Q<!QM]H`S%(%(<*_6?A4B=^".5)TLUE9)8NFC9??`-%&)Z/(J6(
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M'*50`A.*;*_.*N5A6"67])^RSP[8*+KP$3=JPD\B*5/-\\E+9,!BRD6K;<V%
MO!6:+,,Y:(>2'M9J2?+NU_!:I=JG+F"QH;IJHJB6=I;0^PKU&G#C?MP3@S,2
M!C.<82.V%X8H<7=8R"P_[;"2XCG<H6#:4?QD@.6F_[IT1,]9];3!RZ;F67W_
ME88CG17+!JR1R9:&&)\=7NFFU2T"9>"O"3G&6W2]L>?<WQ"IC9/<'-VYEUVF
M!VM6CF?/.719/>4T&7<2<41A?C%7B1"W'8)4GW#_T<R58'<I3=C;<Y+>$*AF
M$EDJ[A$[S#&";!_8>=:(Y8:IQWR"1;S,?3]/8:LP`IT8Z^-]E!Y#F7_(NT5`
MCNP[D_AI??!9K]XDEI%*0TQ"..*V^LR/(^EADI6HMYL".@1NO7$;?]ZFP)1I
M9'XQ(9SUL%(P6H7K5R8BS?=:\K,RE3`F4GG72"!7'(6%S2_,JXC;'-@6!0'O
A)0YJX:).J$.5Y42`/0RB#`[#)L1DB:^(2)0(!GL8$``[
`
end

</TEXT>
</DOCUMENT>
</SUBMISSION>
