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                                                                    EXHIBIT 10.3

                               TALITY CORPORATION

                           2000 EQUITY INCENTIVE PLAN

                             EFFECTIVE JULY 13, 2000

1.    PURPOSES.

      (a)   AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible participants may be given an opportunity to benefit from
increases in value of the Common Stock of Tality Corporation, a Delaware
corporation and through the granting of the following Stock Awards: (i)
statutory stock options, (ii) non-statutory stock options, (iii) stock
appreciation rights and (iv) restricted stock awards.

      (b)   GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.

2.    CERTAIN DEFINITIONS.

      (a)   "ADMINISTRATOR" means the Committee, and if no Committee is
appointed, the Board.

      (b)   "AFFILIATE" means any entity approved by the Board in which the
Company holds an ownership interest (by value or voting rights) of at least 50%,
or any other entity approved by the Board which has an ownership interest (by
value or voting rights) of at least 30% in the Company (a "Parent"), or any
other entity approved by the Board in which a Parent has an ownership interest
(by value or voting rights) of at least 50%; provided that with respect to any
ISO, the term Affiliate shall mean any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f), respectively, of the Code.

      (c)   "BOARD" means the Board of Directors of the Company.

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

      (e)   "COMMITTEE" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).

      (f)   "COMMON STOCK" means the Class A Common Stock of the Company.

      (g)   "COMPANY" means Tality Corporation, a Delaware corporation.

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      (h)   "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting or advisory services and who is
compensated for such services. However, the term "Consultant" shall not include
Directors or members of the Board of Directors of an Affiliate.

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

      (j)   "COVERED PARTICIPANT" means a Participant who is (or, in the
judgment of the Administrator, could reasonably be expected to become) a
"covered employee" defined in Section 162(m)(3) of the Code.

      (k)   "DIRECTOR" means a member of the Board of Directors of the Company.

      (l)   "EMPLOYEE" means any officer or employee of the Company or an
Affiliate.

      (m)   "EMPLOYER" means the Company and any other Affiliate that has
adopted the Plan with the Company's permission.

      (n)   "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

      (o)   "FAIR MARKET VALUE" means, as of any date, the average of the high
and low prices of the Common Stock, as reported on the NASDAQ National Market on
such date, or if such date is not a date on which the Common Stock is traded,
the first preceding trading date. In the absence of such market for the Common
Stock, the Fair Market Value shall be determined in good faith by the Board.

      (p)   "INCENTIVE STOCK OPTION" OR "ISO" means a statutory stock option
granted pursuant to the Plan that is intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.

      (q)   "INITIAL PUBLIC OFFERING" means the effectiveness of a registration
statement under the Securities Act covering any of the capital stock of the
Company and the completion of a sale of such stock thereunder, if as a result of
such sale (i) the issuer becomes a reporting company under Section 12(b) or
12(g) of the Exchange Act, and (ii) such stock is traded on the New York Stock
Exchange or the American Stock Exchange, or is quoted on the Nasdaq Stock Market
or is traded or quoted on any other national stock exchange or securities
system.

      (r)   "NON-QUALIFIED STOCK OPTION" OR "NQSO" means a stock option granted
pursuant to the Plan not intended to qualify as an ISO.

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      (s)   "OPTION" means an ISO or NQSO.

      (t)   "OPTION AGREEMENT" means a written agreement between an Employer and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

      (u)   "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.

      (v)   "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.

      (w)   "PLAN" means this Tality Corporation 2000 Equity Incentive Plan.

      (x)   "RESTRICTED STOCK AWARD" means a Stock Award as described in section
7(b) of the Plan.

      (y)   "SECURITIES ACT" means the Securities Act of 1933, as amended.

      (z)   "SHARES" means shares of Common Stock.

      (aa)  "STOCK APPRECIATION RIGHT" OR "SAR" means the right to receive an
amount equal to the excess of the Fair Market Value of a Share of Common Stock
(as determined on the date of exercise) over the exercise price of the related
Stock Award.

      (bb)  "STOCK AWARD" means any right granted under the Plan, including an
Option, a SAR and a Restricted Stock Award.

      (cc)  "STOCK AWARD AGREEMENT" means a written agreement between an
Employer and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

      (dd)  "TEN PERCENT OWNER" means a Participant who owns, directly or by
reason of the applicable attribution rules of Code Section 424(d), more than 10%
of the total combined voting power of all classes of capital stock of the
Company or its parent or subsidiary corporations, if any, as defined in Code
Sections 424(e) and (f).

3.    ADMINISTRATION.

      (a)   ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).

      (b)   POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

            (i)   To determine from time to time which Employees and/or
Consultants shall be eligible to receive Stock Awards under the Plan; when and
how each Stock Award shall be

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granted; what type or combination of types of Stock Award shall be granted; the
provisions of each Stock Award granted (which need not be identical), including
the time or times when a Stock Award shall become vested and/or free of any
restrictions; and the number of shares of Common Stock with respect to which a
Stock Award shall be granted to each such person. The Board furthermore may
delegate to one or more executive officers of the Company the authority to make
Stock Awards to Participants who are not executive officers of the Company (as
designated by the Company or otherwise covered as such under Rule 16b-3 of the
Exchange Act ("Rule 16b-3")) ("Executive Officers") or Covered Participants.
Awards made to the Executive Officers or Covered Participants shall be
determined by the Board or the Committee

            (ii)  To construe and interpret the Plan and Stock Awards 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 or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective;

            (iii) To amend the Plan or a Stock Award as provided in Section 12;
and

            (iv)  Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company that are not in conflict with the provisions of the Plan.

      (c)   DELEGATION TO COMMITTEE. The Board may delegate administration of
the Plan to a Committee or Committees of one (1) or more members of the Board,
and the term "Committee" shall apply to any person or persons to whom such
authority has been delegated. 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 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 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. For any Stock Award intended to
qualify as "performance-based compensation "under Code Section 162(m) or as an
exempt award under Rule 16b-3, the Committee shall consist of two or more
"outside directors" as defined for purposes of applying Code Section 162(m), and
two or more "non-employee directors" as defined in Rule 16b-3.

      (d)   EFFECT OF ADMINISTRATOR'S DECISION. All determinations,
interpretations and constructions made by the Administrator in good faith shall
not be subject to review by any person and shall be final, binding and
conclusive on all persons.

      (e)   INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee or
otherwise, the members of the Committee, and any executive officers to whom the
Committee has delegated any of its rights and responsibilities, shall be
indemnified by the Company against reasonable expenses incurred from their
administration of the Plan, including, without limitation, related

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attorneys' fees actually and reasonably incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal therein, and
against all reasonable amounts paid by them in settlement thereof or paid by
them in satisfaction of a judgment in any such action, suit or proceeding, if
such members acted in good faith and in a manner which they believed to be in,
and not opposed to, the best interests of the Employer.

4.    SHARES SUBJECT TO THE PLAN.

      (a)   SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock, and Sections 4(b) and 4(d) hereof, the
number of shares of Common Stock with respect to which Stock Awards may be
issued pursuant to the Plan shall not exceed in the aggregate 7,000,000 Shares.

      (b)   REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the number of shares of Common Stock with respect
to which the Stock Award was not exercised or settled shall revert to and again
become available for issuance under the Plan. If the Company repurchases any
unvested shares of Common Stock acquired pursuant to an Award, such repurchased
shares of Common Stock shall revert to and again become available for issuance
under the Plan.

      (c)   SOURCE OF SHARES. The shares of Common Stock subject to the Plan may
be unissued shares or reacquired shares, bought on the market or otherwise.

      (d)   EVERGREEN. The number of Shares reserved under Section 4(a) shall be
increased annually for four (4) years on each July 2, beginning on July 2, 2001
and ending on July 2, 2004, by 2,000,000 Shares per year.

      (e)   ANNUAL LIMIT. No Participant under the Plan shall be issued Stock
Awards, whether underlying Options or SARs, or as Restricted Stock Awards, for
more than 5,000,000 Shares in any calendar year.

      (f)   ISO LIMITS. Notwithstanding Sections 4(b) and 4(d), the maximum
number of Shares that may be acquired by Participants hereunder pursuant to ISOs
shall not exceed 7,000,000, subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock.

5.    ELIGIBILITY.

      (a)   ELIGIBILITY FOR SPECIFIC STOCK AWARDS. The Board may grant Stock
Awards only to Directors, Employees or Consultants as defined in Section 2
hereof. The Board may grant an additional Stock Award or Stock Awards to a
Director, Employee or a Consultant who has been granted a Stock Award previously
if he or she is otherwise eligible. However, only Employees of the Company or
any parent corporation or subsidiary corporation (as those terms are defined in
Code Section 424(e) and (f), respectively) shall be eligible to receive ISOs
under the Plan.

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      (b)   CONSULTANTS.

            (i)   A Consultant shall not be eligible for the grant of a Stock
Award if, at the time of grant, a Form S-8 Registration Statement under the
Securities Act ("Form S-8") is not available to register either the offer or the
sale of the Company's securities to such Consultant because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by the rules
governing the use of Form S-8, unless the Company determines both (i) that such
grant (A) shall be registered in another manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (B) does not require registration under
Rule 701 of the Securities Act, or any other applicable exemption, in order to
comply with the requirements of the Securities Act (if applicable), and (ii)
that such grant complies with the securities laws of all other relevant
jurisdictions.

            (ii)  Consultants shall not be eligible to receive ISOs under the
Plan.

      (c)   Notwithstanding any other provision of the Plan, the Board or the
Committee may impose such conditions on any Stock Award (including approval of
any Stock Award by the Board of Directors or Compensation Committee of the
Company), and the Board may amend the Plan in any such respects, as may be
required to satisfy the requirements of Rule 16b-3 under the Exchange Act, Code
Section 162(m), or Code Section 422.

6.    OPTION PROVISIONS.

      Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. Options may be granted by the
Company or an Employer directly to a Participant, or may be granted to a
Participant by an Affiliate by way of reassignment of options held by such
Affiliate to purchase Shares of Common Stock of the Company. The provisions of
separate Options need not be identical, but each Option shall state whether it
is intended to be an ISO or NQSO, and shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each
of the following provisions:

      (a)   TERM. The Board shall determine the term of each Option, which shall
not be greater than ten (10) years following the date granted, or five (5) years
for an ISO granted to a Ten Percent Owner. No Stock Award shall be granted later
than 10 years following the Effective Date (as defined in Section 14) of the
Plan.

      (b)   EXERCISE PRICE. The exercise price of each Option shall be not less
than one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Option on the date the Option is granted (one hundred ten percent
(110%) of Fair Market Value for ISOs granted to a Ten Percent Owner).
Notwithstanding the foregoing, an Option may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.

      (c)   NUMBER OF SHARES. Each Option shall state the number of Shares to
which it pertains.

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      (d)   ISOS. To the extent that the aggregate Fair Market Value (determined
as of the date of grant) of Common Stock with respect to which ISOs are
exercisable for the first time by any Optionholder in any calendar year (under
all plans of the Employer and its parent or subsidiary corporations) exceeds
$100,000, such Options shall be treated as NQSOs. In addition, no Options shall
be deemed ISOs hereunder unless the Plan is approved by the stockholders of the
Company within 12 months before or after the Effective Date.

      (e)   CONSIDERATION. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option or
subsequently (1) by delivery to the Company of other Common Stock, (2) according
to a deferred payment or other similar arrangement with the Optionholder or (3)
in any other form of legal consideration that may be acceptable to the Board.
Unless otherwise specifically provided in the Option, the purchase price of
Common Stock acquired pursuant to an Option that is paid by delivery to the
Company of other Common Stock acquired, directly or indirectly from the Company,
shall be paid only by shares of the Common Stock of the Company that have been
held for more than six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes). At
any time that the Company is incorporated in Delaware, payment of the Common
Stock's "par value," as defined in the Delaware General Corporation Law, shall
not be made by deferred payment. 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.

      In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

      (f)   TRANSFERABILITY. Unless otherwise provided in the Agreement, an
Option shall not be transferable by the Optionholder other than by will or by
the laws of descent and distribution or, except with respect to ISOs, a domestic
relations order; provided, however, that the designation of a beneficiary of an
Option by an Optionholder shall not be deemed a transfer prohibited by this
Section. Notwithstanding the foregoing, transfers of NQSOs may be made with the
prior approval of the Committee and on such terms and conditions as the
Committee in its sole discretion shall approve, to the following permitted
transferees: (a) in the case of a transfer without the payment of any
consideration, any "family member" as such term is defined in Section 1(a)(5) of
the General Instructions to Form S-8 under the Securities Act as in effect at
the time of such transfer, (b) to any person or entity described in clause (ii)
of Section 1(a)(5) of the General Instructions to Form S-8 under the Securities
Act as in effect at the time of such transfer, and (iii) upon an Optionholder's
death, Optionholder's executors, administrators, testamentary trustees, legatees
and beneficiaries. Further, no right or interest of any Optionholder in an
Option may be assigned in satisfaction of any lien, obligation, or liability of
the Optionholder. Except as provided in this Section, an Option shall be
exercisable, during the Optionholder's lifetime, only by such Optionholder (or
by his or her legal representative) and no Option shall be assigned, pledged, or
hypothecated in any way (whether by operation of law or

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otherwise) or be subject to execution, attachment, or similar process. Any
attempted transfer, assignment, pledge, hypothecation, or other disposition of
any Option or of any rights granted thereunder contrary to the provisions of
this Plan, or the levy of any attachment or similar process upon an Option,
shall be null and void.

      (g)   VESTING GENERALLY.

            (i)   The total number of Shares of Common Stock subject to an
Option may, but need not, vest and therefore become exercisable in periodic
installments that may, but need not, be equal. The Option may be subject to such
other terms and conditions on the time or times when it may be exercised (which
may be based on performance or other criteria) as the Board may deem
appropriate. The vesting provisions of individual Options may vary. Such
provisions may furthermore provide for accelerated vesting in the event the
Participant takes one or more actions and/or meets various performance criteria
within a stated period of time or by a date certain. The provisions of this
subsection 6(g) are subject to any Option provisions governing the minimum
number of Shares of Common Stock as to which an Option may be exercised.

            (ii)  Unless otherwise set forth in an Option Agreement, all Options
granted under the Plan to any Participant who holds, unvested at the date of
grant of such Options, options to purchase common stock of Cadence Design
Systems, Inc. ("Cadence Options") will remain unvested and unexercisable until
the date that is seven (7) years from the date of grant, at which time the
Option will become fully vested and exercisable unless earlier terminated in
accordance with the terms of the Option Agreement. However, unless otherwise set
forth in the Option Agreement, all Options granted to any Participant who holds,
at the date of grant of such Options, unvested Candence Options, and who
executes a Consent, Waiver and Release ("Consent") in the form as attached to
the applicable Option Agreement (if applicable), thereby surrendering such
Participant's unvested Cadence Options, on or before the thirtieth (30th) day
after the effective date of an Initial Public Offering (the "Consent Date"),
then the subject Option shall vest over four (4) years as follows:

<TABLE>
<CAPTION>
<S>                                                                    <C>
            One year from the Consent Date:                            1/4
            Each month thereafter over the subsequent three years:     1/48
</TABLE>

      (h)   TERMINATION OF CONTINUOUS SERVICE.

            (i)   FOR CAUSE. Except as otherwise provided in an Option
Agreement, if an Optionholder's Continuous Service if terminated for cause (as
hereinafter defined), all outstanding and unexercised Options shall immediately
be terminated as of the date such Optionholder is notified that his or her
Continuous Service is terminated for cause.

            (ii)  NOT FOR CAUSE. In the event an Optionholder's Continuous
Service terminates (other than for cause, or upon the Optionholder's death or
disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii)

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the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionholder does not exercise his or her Option
within the time specified in the Option Agreement, the Option shall terminate.

            (iii) DEFINITION OF CAUSE. The Company or an Affiliate shall have
"cause" to terminate the Continuous Service of an Optionholder upon any of the
following: (A) a material breach by an Optionholder of this Agreement or any
written confidentiality or trade secrets agreement entered into between
Optionholder and the Company or any Affiliate; (B) any act of theft,
misappropriation, embezzlement, intentional fraud or other violation of the law
or similar conduct by the Optionholder involving the Company or any Affiliate;
(C) a conviction or a plea of nolo contendere or the equivalent in respect of a
felony involving an act of dishonesty, moral turpitude, deceit or fraud by
Optionholder; (D) any damage of a material nature to the business or property of
the Company or any Affiliate caused by the Optionholder's willful or grossly
negligent conduct; (E) the willful failure by Optionholder to perform reasonable
duties, responsibilities or instructions from the Company's Board of Directors
or other officers or management of the Company or its Affiliates that the
Optionholder reports to, after fifteen (15) days written notice thereof; or (F)
any act of dishonesty or misconduct by Optionholder in connection with his or
her Continuous Service or otherwise. Notwithstanding the foregoing, any
definition of "cause" in a written agreement between an Optionholder and the
Company or an Affiliate, which contains a conflicting definition of "cause" for
termination and which is in effect at the time of such termination, shall
supersede the definition in this Plan with respect to such Optionholder.

      (i)   EXTENSION OF TERMINATION DATE. Solely with respect to a NQSO, an
Optionholder's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionholder's Continuous Service (other
than upon the Optionholder's death or disability) would be prohibited at any
time solely because the issuance of shares of Common Stock would violate the
registration requirements under the Securities Act, then the Option shall
terminate on the expiration of a period of three (3) months after the
termination of the Optionholder's Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements.

      (j)   DISABILITY OF OPTIONHOLDER. Except as otherwise set forth in an
Option Agreement, in the event that an Optionholder's Continuous Service
terminates as a result of the Optionholder's disability, the Optionholder may
exercise his or her Option (to the extent that the Optionholder was entitled to
exercise such Option as of the date of termination), but only within such period
of time ending on the earlier of (i) the date twelve (12) months following such
termination (or such longer or shorter period specified in the Option Agreement
for termination upon disability) or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.

      (k)   DEATH OF OPTIONHOLDER. Except as otherwise set forth in an Option
Agreement, in the event (i) an Optionholder's Continuous Service terminates as a
result of the Optionholder's death or (ii) the Optionholder dies within the
period (if any) specified in the Option Agreement

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after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
Option upon the Optionholder's death pursuant to subsection 6(f), but only
within the period ending on the earlier of (1) the date twelve (12) months
following the date of death (or such longer or shorter period specified in the
Option Agreement for termination upon death) or (2) the expiration of the term
of such Option as set forth in the Option Agreement. If, after death, the Option
is not exercised within the time specified herein, the Option shall terminate.

      (l)   EARLY EXERCISE. The Option Agreement may, but need not, include a
provision whereby the Optionholder may elect at any time before the
Optionholder's Continuous Service terminates to exercise the Option as to any
part or all of the shares of Common Stock subject to the Option prior to the
full vesting of the Option. Any unvested shares of Common Stock so purchased
shall be subject to a repurchase option in favor of the Company or to any other
additional restrictions the Board determines to be appropriate.

      (m)   RE-LOAD OPTIONS.

            (i)   Without in any way limiting the authority of the Board to make
or not to make grants of Options hereunder, the Board shall have the authority
(but not an obligation) to include as part of any Option Agreement a provision
entitling the Optionholder to a further Option (a "Re-Load Option") in the event
the Optionholder exercises the Option evidenced by the Option Agreement, in
whole or in part, by surrendering other shares of Common Stock in accordance
with this Plan and the terms and conditions of the Option Agreement. Unless
otherwise specifically provided in the Option, the Optionholder shall not
surrender shares of Common Stock acquired, directly or indirectly from the
Company, unless such shares have been held for more than six (6) months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes).

            (ii)  Any such Re-Load Option shall (1) provide for a number of
shares of Common Stock equal to the number of shares of Common Stock surrendered
as part or all of the exercise price of such Option; (2) have an expiration date
which is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (3) have an exercise price which is equal
to one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option shall be subject to the same
exercise price and term provisions heretofore described for Options under the
Plan.

            (iii) There shall be no Re-Load Options granted with respect to a
Participant's exercise of a Re-Load Option. Any such Re-Load Option shall be
subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and shall be subject to such other terms and conditions as the
Board may determine which are not inconsistent with the express provisions of
the Plan regarding the terms of Options.

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7.    PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

      (a)   GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and
provisions of the Plan and applicable law, the Board, at any time and from time
to time, may grant freestanding Stock Appreciation Rights, Stock Appreciation
Rights in tandem with an Option, or Stock Appreciation Rights in addition to an
Option. Stock Appreciation Rights granted in tandem with an Option or in
addition to an Option may be granted at the time the Option is granted or at a
later time. No Stock Appreciation Rights granted under the Plan may be
exercisable after the expiration of ten years from the grant date.

            (i)   EXERCISE PRICE. The Exercise Price of each Stock Appreciation
Right shall be determined on the grant date by the Committee, subject to the
limitation that the Exercise Price shall not be less than 100% of Fair Market
Value on the grant date. However, Stock Appreciation Rights issued upon
assumption of, or in substitution for, stock appreciation rights of a company
with which the Company or an Affiliate participates in an acquisition,
separation or similar corporate transaction may be issued at an Exercise Price
less than 100% of the Fair Market Value.

            (ii)  EXERCISE. The Participant is entitled to receive an amount
equal to the excess of the Fair Market Value over the Exercise Price thereof on
the date of exercise of the Stock Appreciation Right.

            (iii) PAYMENT. Payment upon exercise of the Stock Appreciation Right
shall be made in the form of cash, Shares (valued at Fair Market Value on the
date of exercise), or a combination thereof, as determined in the sole and
complete discretion of the Committee. However, if any payment in the form of
Shares results in a fractional share, the payment for the fractional share shall
be made in cash.

      (b)   RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

            (i)   PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement.

            (ii)  CONSIDERATION. The purchase price of Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other similar arrangement with the Participant; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion; provided, however, that at any time that the Company is

                                       11
<PAGE>   12

incorporated in Delaware, then payment of the Common Stock's "par value," as
defined in the Delaware General Corporation Law, shall not be made by deferred
payment.

            (iii) VESTING. Shares of Common Stock acquired under the restricted
stock purchase agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be
determined by the Board.

            (iv)  TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the event
a Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the Shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.

            (v)   TRANSFERABILITY. Rights to acquire Shares of Common Stock
under the restricted stock purchase agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the
restricted stock purchase agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the restricted stock purchase
agreement remains subject to the terms of the restricted stock purchase
agreement.

8.    COVENANTS OF THE COMPANY.

      (a)   AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of Shares of Common Stock
required to satisfy such Stock Awards.

      (b)   SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell Shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. 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 Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.

9.    USE OF PROCEEDS FROM STOCK.

      Proceeds from the sale of Common Stock pursuant to Stock Awards shall be
used in any manner the Company deems appropriate.

10.   MISCELLANEOUS.

      (a)   ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time

                                       12
<PAGE>   13

during which it will vest, and such acceleration may be contingent upon the
happening of any event or the taking of any action as specified in the Board
within its complete discretion.

      (b)   STOCKHOLDER RIGHTS. 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 Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

      (c)   NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, or (ii) the service
of a Consultant pursuant to the terms of such Consultant's agreement with the
Company or an Affiliate.

      (d)   INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant'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) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, 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.

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

                                       13
<PAGE>   14

amount of tax required to be withheld by law; or (iii) delivering to the Company
owned and unencumbered Shares.

      (f)   ISSUANCES OF SECURITIES. Except as expressly provided herein or in
the applicable Stock Award Agreement, 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 subject to Stock Awards. Except as expressly
provided herein or in the applicable Stock Award Agreement, no adjustments shall
be made for dividends paid in cash or in property (including without limitation,
securities) of the Company.

      (g)   FRACTIONAL SHARES. No fractional Share shall be issued under the
Plan and the person exercising such right shall receive from the Employer cash
in lieu of such fractional share equal to the Fair Market Value thereof.

      (h)   NATURE OF PAYMENTS. All Stock Awards shall constitute a special
incentive payment to the Participant and shall not be taken into account in
computing the amount of salary or compensation of the Participant for the
purpose of determining any benefits under any pension, retirement,
profit-sharing, bonus, life insurance, or other benefit plan of the Employer or
under any agreement between the Employer and the Participant, unless such plan
or agreement specifically provides otherwise.

11.   ADJUSTMENTS UPON CHANGES IN STOCK.

      (a)   CAPITALIZATION ADJUSTMENTS. If any change is made in the Common
Stock subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to Section 4, and outstanding Stock Awards will be appropriately
adjusted in the class(es) and number of securities and price per share of Common
Stock subject to such outstanding Stock Awards. The Board shall make such
adjustments, and its determination shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as
a transaction "without receipt of consideration" by the Company.)

      (b)   CHANGE IN CONTROL.

            (i)   A "Change in Control" shall be deemed to occur upon the
consummation of any one of the following events: (a) a sale of all or
substantially all of the assets of the Company; (b) a merger or consolidation in
which the Company is not the surviving corporation (other than a transaction the
principal purpose of which is to change the state of the Company's incorporation
or a transaction in which the voting securities of the Company are exchanged for
beneficial ownership of at least a majority of the voting securities of the
controlling acquiring corporation); (c) a merger or consolidation in which the
Company is the surviving corporation

                                       14
<PAGE>   15

and less than a majority of the voting securities of the Company that are
outstanding immediately after the consummation of such transaction are
beneficially owned, directly or indirectly, by the persons who owned such voting
securities immediately prior to such transaction; (d) any transaction or series
of related transactions after which any person (as such term is used in Section
13(d)(3) of the Exchange Act), other than any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Affiliate, becomes the
beneficial owner of voting securities of the Company representing a majority of
the combined voting power of all of the voting securities of the Company;
provided, however, that so long as Cadence Design Systems, Inc., a Delaware
corporation, or its affiliates other than the Company (collectively, "Cadence"),
own any voting securities of the Company and no other Change in Control has
occurred, acquisition of any amount of voting securities of the Company by
Cadence or its Affiliates shall not constitute a "Change in Control" hereunder;
(e) during any period of two consecutive years, individuals who at the beginning
of such period constitute the membership of the Company's Board of Directors
("Incumbent Directors") cease for any reason to have authority to cast at least
a majority of the votes which all directors are entitled to cast, unless the
election, or the nomination for election by the Company's stockholders, of a new
Director was approved by a vote of at least two-thirds of the votes entitled to
be cast by the Incumbent Directors, in which case such Director shall also be
treated as an Incumbent Director in the future; or (f) the liquidation or
dissolution of the Company.

            (ii)  In the event of a Change in Control, then: (a) any surviving
or acquiring corporation shall assume Stock Awards outstanding under the Plan or
shall substitute similar Stock Awards (including an option to acquire the same
consideration paid to stockholders in the transaction described in this
subsection 11(b) for those outstanding under the Plan), or (b) in the event any
surviving or acquiring corporation refuses to assume such Stock Awards or to
substitute similar Stock Awards for those outstanding under the Plan, (i) with
respect to Stock Awards held by persons whose Continuous Service has not
terminated, the vesting both of such Stock Awards and of any shares of Common
Stock acquired pursuant to a Stock Award as well as the time during which such
Stock Awards may be exercised shall be accelerated prior to such event and the
Stock Awards terminated if not exercised after such acceleration and at or prior
to such event, and (ii) with respect to any other Stock Awards outstanding under
the Plan, if there is a successor corporation, such Stock Awards shall be
terminated if not exercised prior to such event.

      (c)   Notwithstanding anything else contained herein to the contrary, in
no event shall a Change in Control be deemed to occur solely by reason of (1) a
distribution to the direct and/or indirect stockholders of any Affiliate,
whether as dividend or otherwise, of all or any portion of the Shares held,
directly or indirectly, by such Affiliate; (2) a sale of all or any portion of
the Shares held, directly or indirectly, by any Affiliate in an underwritten
public offering (including, without limitation, a sale of securities of the
Company in an underwritten public offering); or (3) any Person (the "Subject
Person") acquiring beneficial ownership of more than the permitted amount of the
then outstanding voting securities as a result of the acquisition of

                                       15
<PAGE>   16

Shares by the Company or Affiliate which, by reducing the number of Shares then
outstanding, increases the percentage of Shares beneficially owned by the
Subject Person, provided that if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of Shares by the
Company or an Affiliate, and after such Share acquisition by the Company or an
Affiliate, the Subject Person becomes the beneficial owner of any additional
Shares which further increases the percentage of the then outstanding Shares
beneficially owned by the Subject Person, then a Change in Control shall occur.

      (d)   Notwithstanding the foregoing, any adjustments made pursuant to
subsection (a) above with respect to ISOs shall be made only after the
Administrator determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section 424(h) of the
Code). If the Administrator determines that such adjustments made with respect
to ISOs would constitute a modification of such ISOs, it may refrain from making
such adjustments, unless the holder of an ISO specifically requests in writing
that such adjustment be made and such writing indicates that the holder has full
knowledge of the consequences of such "modification" on his or her income tax
treatment with respect to the ISO.

12.   AMENDMENT OF THE PLAN AND STOCK AWARDS.

      (a)   AMENDMENT OF PLAN. The Plan may be amended by the Board, including,
without limitation, to the extent necessary to ensure the qualification of any
Award under Rule 16b-3 or Code Section 162(m), or any ISO under Code Section
422, and to the extent necessary to qualify the Shares issuable upon exercise of
any outstanding Stock Awards granted, or Stock Awards to be granted, under the
Plan for listing on any national securities exchange or quotation in any
national automated quotation system of securities dealers. Any amendment that
requires shareholder approval under applicable law or in order to ensure
favorable federal income tax treatment for any ISOs shall be subject to
obtaining such approval.

      (b)   NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.

      (c)   AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights of a Participant under any Stock Award shall not be impaired by
any such amendment unless (i) the Company requests the consent of the
Participant and (ii) the Participant consents in writing.

13.   TERMINATION OR SUSPENSION OF THE PLAN.

      (a)   PLAN TERM. The Plan shall terminate as of July 13, 2010, the date
that is ten (10) years following the earlier of the date the Plan was adopted by
the Company or approved by the shareholders of the Company. The Board may
furthermore suspend or terminate the Plan at any time.

      (b)   NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.

                                       16
<PAGE>   17

14.   EFFECTIVE DATE OF PLAN.

      The Plan shall become effective on July 13, 2000, the date on which it was
approved by the Board.

15.   GOVERNING LAW.

      The Plan shall be governed by laws of the state of Delaware. In the event
any provision of the Plan shall be held invalid, illegal or unenforceable, in
whole or in part, for any reason, such determination shall not affect the
validity, legality or enforceability of any remaining provision, portion of
provision or the Plan overall, which shall remain in full force and effect as if
the Plan had been absent the invalid, illegal or unenforceable provision or
portion thereof.

16.   CERTAIN PARTICIPANTS.

      All Stock Award Agreements with Participants subject to Section 16(b) of
the Exchange Act shall be deemed to include any such additional terms,
conditions, limitations and provisions as Rule 16b-3 requires, unless the
Administrator in its discretion determines that any such Stock Award should not
be governed by Rule 16b-3. To the extent any provision of the Plan or any action
by the Administrator fails to so comply with Rule 16b-3, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
Administrator. All performance-based Stock Awards to Covered Participants shall
be deemed to include any such additional terms, conditions, limitations and
provisions as are necessary to comply with the performance-based compensation
exception of Section 162(m) of the Code unless the Administrator in its
discretion determines that any such Award to a Covered Participant is not
intended to qualify for the exception for performance-based compensation under
Section 162(m). All Agreements awarding ISOs shall be deemed to include any such
additional terms conditions, limitations, and provisions as Code Section 422
requires unless the Administrator in its discretion determines that any such
Option is not intended or is no longer intended to qualify as an ISO.

17.   LISTING, REGISTRATION AND OTHER LEGAL COMPLIANCE.

      Notwithstanding any other provision of this Plan, no Stock Awards or
Shares of the Common Stock shall be required to be issued or granted under the
Plan unless legal counsel to the Company shall be satisfied that such issuance
or grant will be in compliance with all applicable federal and state securities
laws and regulations and any other applicable laws or regulations. The
Administrator may require, as a condition of any payment or share issuance, that
certain agreements, undertakings, representations, certificates, and/or
information, as the Administrator may deem necessary or advisable, be executed
or provided to the Company to assure compliance with all such applicable laws or
regulations. Any certificates for Shares of the Common Stock delivered under the
Plan may be subject to such legends, stock-transfer orders and such other
restrictions as the Administrator may deem advisable under the rules,
regulations, or other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Common Stock is then listed, the NASDAQ
National Market System, and any applicable federal or state securities law. In
addition, if, at any time specified herein (or in any Agreement or otherwise)
for (a) the making of any Stock Award, or the making of any

                                       17
<PAGE>   18

determination, (b) the issuance or other distribution of Common Stock, or (c)
the payment of amounts to or through a Participant with respect to any Stock
Award, any law, rule, regulation, or other requirement of any governmental
authority or agency shall require the Company or any Affiliate, or any
Participant (or any estate, designated beneficiary, or other legal
representative thereof) to take any action in connection with any such
determination, any such Shares to be issued or distributed, any such payment, or
the making of any such determination, as the case may be, shall be deferred
until such required action is taken.

                                       18<PAGE>   1
                                                                    EXHIBIT 10.4

                               TALITY CORPORATION

                     2000 BROAD-BASED EQUITY INCENTIVE PLAN

                             EFFECTIVE JULY 13, 2000

1.    PURPOSES.

      (a)   AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible participants may be given an opportunity to benefit from
increases in value of the Common Stock of Tality Corporation, a Delaware
corporation through the granting of the following Stock Awards: (i) statutory
stock options, (ii) non-statutory stock options, (iii) stock appreciation rights
and (iv) restricted stock awards.

      (b)   GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.

2.    CERTAIN DEFINITIONS.

      (a)   "ADMINISTRATOR" means the Committee, and if no Committee is
appointed, the Board.

      (b)   "AFFILIATE" means any entity approved by the Board in which the
Company holds an ownership interest (by value or voting rights) of at least 50%,
or any other entity approved by the Board which has an ownership interest (by
value or voting rights) of at least 30% in the Company (a "Parent"), or any
other entity approved by the Board in which a Parent has an ownership interest
(by value or voting rights) of at least 50%; provided that with respect to any
ISO, the term Affiliate shall mean any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing, as those terms
are defined in Sections 424(e) and (f), respectively, of the Code.

      (c)   "BOARD" means the Board of Directors of the Company.

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

      (e)   "COMMITTEE" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).

      (f)   "COMMON STOCK" means the Class A Common Stock of the Company.

      (g)   "COMPANY" means Tality Corporation, a Delaware corporation.

                                       1
<PAGE>   2

      (h)   "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting or advisory services and who is
compensated for such services. However, the term "Consultant" shall not include
Directors or members of the Board of Directors of an Affiliate.

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

      (j)   "DIRECTOR" means a member of the Board of Directors of the Company.

      (k)   "EMPLOYEE" means any officer or employee of the Company or an
Affiliate.

      (l)   "EMPLOYER" means the Company and any other Affiliate that has
adopted the Plan with the Company's permission.

      (m)   "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

      (n)   "FAIR MARKET VALUE" means, as of any date, the average of the high
and low prices of the Common Stock, as reported on the NASDAQ National Market on
such date, or if such date is not a date on which the Common Stock is traded,
the first preceding trading date. In the absence of such market for the Common
Stock, the Fair Market Value shall be determined in good faith by the Board.

      (o)   "INCENTIVE STOCK OPTION" OR "ISO" means a statutory stock option
granted pursuant to the Plan that is intended to quality as an incentive stock
option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.

      (p)   "INITIAL PUBLIC OFFERING" means the effectiveness of a registration
statement under the Securities Act covering any of the capital stock of the
Company and the completion of a sale of such stock thereunder, if as a result of
such sale (i) the issuer becomes a reporting company under Section 12(b) or
12(g) of the Exchange Act, and (ii) such stock is traded on the New York Stock
Exchange or the American Stock Exchange, or is quoted on the Nasdaq Stock Market
or is traded or quoted on any other national stock exchange or securities
system.

      (q)   "NON-QUALIFIED STOCK OPTION" OR "NQSO" means a stock option granted
pursuant to the Plan not intended to qualify as an ISO.

      (r)   "OPTION" means an ISO or NQSO.

                                       2
<PAGE>   3

      (s)   "OPTION AGREEMENT" means a written agreement between an Employer and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

      (t)   "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.

      (u)   "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.

      (v)   "PLAN" means this Tality Corporation 2000 Broad-Based Equity
Incentive Plan.

      (w)   "RESTRICTED STOCK AWARD" means a Stock Award as described in section
7(b) of the Plan.

      (x)   "SECURITIES ACT" means the Securities Act of 1933, as amended.

      (y)   "SHARES" means shares of Common Stock.

      (z)   "STOCK APPRECIATION RIGHT" OR "SAR" means the right to receive an
amount equal to the excess of the Fair Market Value of a Share of Common Stock
(as determined on the date of exercise) over the exercise price of the related
Stock Award.

      (aa)  "STOCK AWARD" means any right granted under the Plan, including an
Option, a SAR and a Restricted Stock Award.

      (bb)  "STOCK AWARD AGREEMENT" means a written agreement between an
Employer and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

      (cc)  "TEN PERCENT OWNER" means a Participant who owns, directly or by
reason of the applicable attribution rules of Code Section 424(d), more than 10%
of the total combined voting power of all classes of capital stock of the
Company or its parent or subsidiary corporations, if any, as defined in Code
Sections 424(e) and (f).

3.    ADMINISTRATION.

      (a)   ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).

      (b)   POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

            (i)   To determine from time to time which Employees and/or
Consultants shall be eligible to receive Stock Awards under the Plan; when and
how each Stock Award shall be granted; what type or combination of types of
Stock Award shall be granted; the provisions of each Stock Award granted (which
need not be identical), including the time or times when a

                                       3
<PAGE>   4

Stock Award shall become vested and/or free of any restrictions; and the number
of shares of Common Stock with respect to which a Stock Award shall be granted
to each such person. The Board furthermore may delegate to one or more executive
officers of the Company the authority to make Stock Awards to Participants.

            (ii)  To construe and interpret the Plan and Stock Awards 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 or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective;

            (iii) To amend the Plan or a Stock Award as provided in Section 12;
and

            (iv)  Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company that are not in conflict with the provisions of the Plan.

      (c)   DELEGATION TO COMMITTEE. The Board may delegate administration of
the Plan to a Committee or Committees of one (1) or more members of the Board,
and the term "Committee" shall apply to any person or persons to whom such
authority has been delegated. 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 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 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. For any Stock Award intended to
qualify as "performance-based compensation" under Code Section 162(m) or as an
exempt award under Rule 16b-3 of the Exchange Act ("Rule 16b-3"), the Committee
shall consist of two or more "outside directors" as defined for purposes of
applying Code Section 162(m), and two or more "non-employee directors" as
defined in Rule 16b-3.

      (d)   EFFECT OF ADMINISTRATOR'S DECISION. All determinations,
interpretations and constructions made by the Administrator in good faith shall
not be subject to review by any person and shall be final, binding and
conclusive on all persons.

      (e)   INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee or
otherwise, the members of the Committee, and any executive officers to whom the
Committee has delegated any of its rights and responsibilities, shall be
indemnified by the Company against reasonable expenses incurred from their
administration of the Plan, including, without limitation, related attorneys'
fees actually and reasonably incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, and
against all reasonable amounts paid by them in settlement thereof or paid by
them in satisfaction of a judgment in any such action, suit or proceeding, if
such members acted in good faith and in a manner which they believed to be in,
and not opposed to, the best interests of the Employer.

                                       4
<PAGE>   5

4.    SHARES SUBJECT TO THE PLAN.

      (a)   SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock, and Sections 4(b) and 4(d) hereof, the
number of Shares of Common Stock with respect to which Stock Awards may be
issued pursuant to the Plan shall not exceed in the aggregate 8,000,000 Shares.

      (b)   REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the number of shares of Common Stock with respect
to which the Stock Award was not exercised or settled shall revert to and again
become available for issuance under the Plan. If the Company repurchases any
unvested shares of Common Stock acquired pursuant to an Award, such repurchased
shares of Common Stock shall revert to and again become available for issuance
under the Plan.

      (c)   SOURCE OF SHARES. The shares of Common Stock subject to the Plan may
be unissued shares or reacquired shares, bought on the market or otherwise.

      (d)   EVERGREEN. The number of Shares reserved hereunder pursuant to
Section 4(a) shall be increased annually for four (4) years on each July 2,
beginning on July 2, 2001 and ending on July 2, 2004, by 2,500,000 Shares each
year.

      (e)   ISO LIMITS. Notwithstanding Sections 4(b) and 4(d), the maximum
number of Shares that may be acquired by Participants hereunder pursuant to ISOs
shall not exceed 8,000,000, subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock.

5.    ELIGIBILITY.

      (a)   ELIGIBILITY FOR SPECIFIC STOCK AWARDS. The Board may grant Stock
Awards only to Employees or Consultants as defined in Section 2 hereof. The
Board may grant an additional Stock Award or Stock Awards to an Employee or
Consultant who has been granted a Stock Award previously if he or she is
otherwise eligible. However, only Employees of the Company or any parent
corporation or subsidiary corporation (as those terms are defined in Code
Sections 424(e) and (f), respectively) shall be eligible to receive ISOs under
the Plan. Notwithstanding any other provision hereof, directors and officers of
the Company shall not be eligible for Stock Awards under the Plan.

      (b)   CONSULTANTS.

            (i)   A Consultant shall not be eligible for the grant of a Stock
Award if, at the time of grant, a Form S-8 Registration Statement under the
Securities Act ("Form S-8") is not available to register either the offer or the
sale of the Company's securities to such Consultant because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by the rules
governing the use of Form S-8, unless the Company determines both (i) that such
grant (A) shall be registered in

                                       5
<PAGE>   6

another manner under the Securities Act (e.g., on a Form S-3 Registration
Statement) or (B) does not require registration under Rule 701 of the Securities
Act, or any other applicable exemption, in order to comply with the requirements
of the Securities Act (if applicable), and (ii) that such grant complies with
the securities laws of all other relevant jurisdictions.

            (ii)  Consultants shall not be eligible to receive ISOs under the
Plan.

      (c)   Notwithstanding any other provision of the Plan, the Board or the
Committee may impose such conditions on any Stock Award (including approval of
any Stock Award by the Board of Directors or Compensation Committee of the
Company), and the Board may amend the Plan in any such respects, as may be
required to satisfy the requirements of Code Section 422.

6.    OPTION PROVISIONS.

      Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. Options may be granted by the
Company or an Employer directly to a Participant, or may be granted to a
Participant by an Affiliate by way of reassignment of options held by such
Affiliate to purchase Shares of Common Stock of the Company. The provisions of
separate Options need not be identical, but each Option shall state whether it
is intended to be an ISO or NQSO, and shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each
of the following provisions:

      (a)   TERM. The Board shall determine the term of each Option, which shall
not be greater than ten (10) years following the date granted, or five (5) years
for an ISO granted to a Ten Percent Owner. No Stock Award shall be granted later
than 10 years following the Effective Date (as defined in Section 14) of the
Plan.

      (b)   EXERCISE PRICE. The exercise price of each Option shall be not less
than one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Option on the date the Option is granted (one hundred ten percent
(110%) of Fair Market Value for ISOs granted to a Ten Percent Owner).
Notwithstanding the foregoing, an Option may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.

      (c)   NUMBER OF SHARES. Each Option shall state the number of Shares to
which it pertains.

      (d)   ISOs. To the extent that the aggregate Fair Market Value (determined
as of the date of grant) of Common Stock with respect to which ISOs are
exercisable for the first time by any Optionholder in any calendar year (under
all plans of the Employer and its parent or subsidiary corporations) exceeds
$100,000, such Options shall be treated as NQSOs. In addition, no Options shall
be deemed ISOs hereunder unless the Plan is approved by the stockholders of the
Company within 12 months before or after the Effective Date.

                                       6
<PAGE>   7

      (e)   CONSIDERATION. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option or
subsequently (1) by delivery to the Company of other Common Stock, (2) according
to a deferred payment or other similar arrangement with the Optionholder or (3)
in any other form of legal consideration that may be acceptable to the Board.
Unless otherwise specifically provided in the Option, the purchase price of
Common Stock acquired pursuant to an Option that is paid by delivery to the
Company of other Common Stock acquired, directly or indirectly from the Company,
shall be paid only by shares of the Common Stock of the Company that have been
held for more than six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes). At
any time that the Company is incorporated in Delaware, payment of the Common
Stock's "par value," as defined in the Delaware General Corporation Law, shall
not be made by deferred payment. 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.

      In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

      (f)   TRANSFERABILITY. Unless otherwise provided in the Option Agreement,
an Option shall not be transferable by the Optionholder other than by will or by
the laws of descent and distribution or, except with respect to ISOs, a domestic
relations order; provided, however, that the designation of a beneficiary of an
Option by an Optionholder shall not be deemed a transfer prohibited by this
Section. Notwithstanding the foregoing, transfers of NQSOs may be made with the
prior approval of the Committee and on such terms and conditions as the
Committee in its sole discretion shall approve, to the following permitted
transferees: (a) in the case of a transfer without the payment of any
consideration, any "family member" as such term is defined in Section 1(a)(5) of
the General Instructions to Form S-8 under the Securities Act as in effect at
the time of such transfer, (b) to any person or entity described in clause (ii)
of Section 1(a)(5) of the General Instructions to Form S-8 under the Securities
Act as in effect at the time of such transfer, and (iii) upon an Optionholder's
death, Optionholder's executors, administrators, testamentary trustees, legatees
and beneficiaries. Further, no right or interest of any Optionholder in an
Option may be assigned in satisfaction of any lien, obligation, or liability of
the Optionholder. Except as provided in this Section, an Option shall be
exercisable, during the Optionholder's lifetime, only by such Optionholder (or
by his or her legal representative) and no Option shall be assigned, pledged, or
hypothecated in any way (whether by operation of law or otherwise) or be subject
to execution, attachment, or similar process. Any attempted transfer,
assignment, pledge, hypothecation, or other disposition of any Option or of any
rights granted thereunder contrary to the provisions of this Plan, or the levy
of any attachment or similar process upon an Option, shall be null and void.

                                       7
<PAGE>   8

      (g)   VESTING GENERALLY.

            (i)   The total number of Shares of Common Stock subject to an
Option may, but need not, vest and therefore become exercisable in periodic
installments that may, but need not, be equal. The Option may be subject to such
other terms and conditions on the time or times when it may be exercised (which
may be based on performance or other criteria) as the Board may deem
appropriate. The vesting provisions of individual Options may vary. Such
provisions may furthermore provide for accelerated vesting in the event the
Participant takes one or more actions and/or meets various performance criteria
within a stated period of time or by a date certain. The provisions of this
subsection 6(g) are subject to any Option provisions governing the minimum
number of Shares of Common Stock as to which an Option may be exercised.

            (ii)  Unless otherwise set forth in an Option Agreement, all Options
granted under the Plan to any Participant who holds, unvested at the date of
grant of such Options, options to purchase common stock of Cadence Design
Systems, Inc. ("Cadence Options") will remain unvested and unexercisable until
the date that is seven (7) years from the date of grant, at which time the
Option will become fully vested and exercisable unless earlier terminated in
accordance with the terms of the Option Agreement. However, unless otherwise set
forth in the Option Agreement, all Options granted to any Participant who holds,
at the date of grant of such Options, unvested Cadence Options, and who executes
a Consent, Waiver and Release ("Consent") in the form as attached to the
applicable Option Agreement (if applicable), thereby surrendering such
Participant's unvested Cadence Options, on or before the thirtieth (30th) day
after the effective date of an Initial Public Offering (the "Consent Date"),
shall vest over four (4) years as follows:

<TABLE>
<CAPTION>
<S>                                                                    <C>
            One year from the Consent Date:                            1/4
            Each month thereafter over the subsequent three years:     1/48
</TABLE>

      (h)   TERMINATION OF CONTINUOUS SERVICE.

            (i)   FOR CAUSE. Except as otherwise provided in an Option
Agreement, if an Optionholder's Continuous Service if terminated for cause (as
hereinafter defined), all outstanding and unexercised Options shall immediately
be terminated as of the date such Optionholder is notified that his or her
Continuous Service is terminated for cause.

            (ii)  NOT FOR CAUSE. In the event an Optionholder's Continuous
Service terminates (other than for cause, or upon the Optionholder's death or
disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionholder does not exercise his
or her Option within the time specified in the Option Agreement, the Option
shall terminate.

                                       8
<PAGE>   9

            (iii) DEFINITION OF CAUSE. The Company or an Affiliate shall have
"cause" to terminate the Continuous Service of an Optionholder upon any of the
following: (A) a material breach by an Optionholder of this Agreement or any
written confidentiality or trade secrets agreement entered into between
Optionholder and the Company or such Affiliate; (B) any act of theft,
misappropriation, embezzlement, intentional fraud or other violation of the law
or similar conduct by the Optionholder involving the Company or any Affiliate;
(C) a conviction or a plea of nolo contendere or the equivalent in respect of a
felony involving an act of dishonesty, moral turpitude, deceit or fraud by
Optionholder; (D) any damage of a material nature to the business or property of
the Company or any Affiliate caused by the Optionholder's willful or grossly
negligent conduct; (E) the willful failure by Optionholder to perform reasonable
duties, responsibilities or instructions from the Company's Board of Directors
or other officers or management of the Company or its Affiliates that the
Optionholder reports to, after fifteen (15) days written notice thereof; or (F)
any act of dishonesty or misconduct by Optionholder in connection with his or
her Continuous Service or otherwise. Notwithstanding the foregoing, any
definition of "cause" in a written agreement between an Optionholder and the
Company or an Affiliate, which contains a conflicting definition of "cause" for
termination and which is in effect at the time of such termination, shall
supersede the definition in this Plan with respect to such Optionholder.

      (i)   EXTENSION OF TERMINATION DATE. Solely with respect to a NQSO, an
Optionholder's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionholder's Continuous Service (other
than upon the Optionholder's death or disability) would be prohibited at any
time solely because the issuance of shares of Common Stock would violate the
registration requirements under the Securities Act, then the Option shall
terminate on the expiration of a period of three (3) months after the
termination of the Optionholder's Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements.

      (j)   DISABILITY OF OPTIONHOLDER. Except as otherwise set forth in an
Option Agreement, in the event that an Optionholder's Continuous Service
terminates as a result of the Optionholder's disability, the Optionholder may
exercise his or her Option (to the extent that the Optionholder was entitled to
exercise such Option as of the date of termination), but only within such period
of time ending on the earlier of (i) the date twelve (12) months following such
termination (or such longer or shorter period specified in the Option Agreement
for termination upon disability) or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.

      (k)   DEATH OF OPTIONHOLDER. Except as otherwise set forth in an Option
Agreement, in the event (i) an Optionholder's Continuous Service terminates as a
result of the Optionholder's death or (ii) the Optionholder dies within the
period (if any) specified in the Option Agreement after the termination of the
Optionholder's Continuous Service for a reason other than death, then the Option
may be exercised (to the extent the Optionholder was entitled to exercise such
Option as of the date of death) by the Optionholder's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the Option

                                       9
<PAGE>   10

upon the Optionholder's death pursuant to subsection 6(f), but only within the
period ending on the earlier of (1) the date twelve (12) months following the
date of death (or such longer or shorter period specified in the Option
Agreement for termination upon death) or (2) the expiration of the term of such
Option as set forth in the Option Agreement. If, after death, the Option is not
exercised within the time specified herein, the Option shall terminate.

      (l)   EARLY EXERCISE. The Option Agreement may, but need not, include a
provision whereby the Optionholder may elect at any time before the
Optionholder's Continuous Service terminates to exercise the Option as to any
part or all of the shares of Common Stock subject to the Option prior to the
full vesting of the Option. Any unvested shares of Common Stock so purchased
shall be subject to a repurchase option in favor of the Company or to any other
additional restrictions the Board determines to be appropriate.

      (m)   RE-LOAD OPTIONS.

            (i)   Without in any way limiting the authority of the Board to make
or not to make grants of Options hereunder, the Board shall have the authority
(but not an obligation) to include as part of any Option Agreement a provision
entitling the Optionholder to a further Option (a "Re-Load Option") in the event
the Optionholder exercises the Option evidenced by the Option Agreement, in
whole or in part, by surrendering other shares of Common Stock in accordance
with this Plan and the terms and conditions of the Option Agreement. Unless
otherwise specifically provided in the Option, the Optionholder shall not
surrender shares of Common Stock acquired, directly or indirectly from the
Company, unless such shares have been held for more than six (6) months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes).

            (ii)  Any such Re-Load Option shall (1) provide for a number of
shares of Common Stock equal to the number of shares of Common Stock surrendered
as part or all of the exercise price of such Option; (2) have an expiration date
which is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (3) have an exercise price which is equal
to one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option shall be subject to the same
exercise price and term provisions heretofore described for Options under the
Plan.

            (iii) There shall be no Re-Load Options granted with respect to a
Participant's exercise of a Re-Load Option. Any Re-Load Option shall be subject
to the availability of sufficient shares of Common Stock under subsection 4(a)
and shall be subject to such other terms and conditions as the Board may
determine which are not inconsistent with the express provisions of the Plan
regarding the terms of Options.

7.    PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

      (a)   GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and
provisions of the Plan and applicable law, the Board, at any time and from time
to time, may grant freestanding Stock Appreciation Rights, Stock Appreciation
Rights in tandem with an Option, or Stock

                                       10
<PAGE>   11

Appreciation Rights in addition to an Option. Stock Appreciation Rights granted
in tandem with an Option or in addition to an Option may be granted at the time
the Option is granted or at a later time. No Stock Appreciation Rights granted
under the Plan may be exercisable after the expiration of ten years from the
grant date.

            (i)   EXERCISE PRICE. The Exercise Price of each Stock Appreciation
Right shall be determined on the grant date by the Committee, subject to the
limitation that the Exercise Price shall not be less than 100% of Fair Market
Value on the grant date. However, Stock Appreciation Rights issued upon
assumption of, or in substitution for, stock appreciation rights of a company
with which the Company or an Affiliate participates in an acquisition,
separation or similar corporate transaction may be issued at an Exercise Price
less than 100% of the Fair Market Value.

            (ii)  EXERCISE. The Participant is entitled to receive an amount
equal to the excess of the Fair Market Value over the Exercise Price thereof on
the date of exercise of the Stock Appreciation Right.

            (iii) PAYMENT. Payment upon exercise of the Stock Appreciation Right
shall be made in the form of cash, Shares (valued at Fair Market Value on the
date of exercise), or a combination thereof, as determined in the sole and
complete discretion of the Committee. However, if any payment in the form of
Shares results in a fractional share, the payment for the fractional share shall
be made in cash.

      (b)   RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

            (i)   PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement.

            (ii)  CONSIDERATION. The purchase price of Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other similar arrangement with the Participant; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock's "par value," as
defined in the Delaware General Corporation Law, shall not be made by deferred
payment.

            (iii) VESTING. Shares of Common Stock acquired under the restricted
stock purchase agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be
determined by the Board.

                                       11
<PAGE>   12

            (iv)  TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the event
a Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the Shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.

            (v)   TRANSFERABILITY. Rights to acquire Shares of Common Stock
under the restricted stock purchase agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the
restricted stock purchase agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the restricted stock purchase
agreement remains subject to the terms of the restricted stock purchase
agreement.

8.    COVENANTS OF THE COMPANY.

      (a)   AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of Shares of Common Stock
required to satisfy such Stock Awards.

      (b)   SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell Shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. 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 Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.

9.    USE OF PROCEEDS FROM STOCK.

      Proceeds from the sale of Common Stock pursuant to Stock Awards shall be
used in any manner the Company deems appropriate.

10.   MISCELLANEOUS.

      (a)   ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest,
and such acceleration may be contingent upon the happening of any event or the
taking of any action as specified in the Board within its complete discretion.

      (b)   STOCKHOLDER RIGHTS. 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 Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

                                       12
<PAGE>   13

      (c)   NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, or (ii) the service
of a Consultant pursuant to the terms of such Consultant's agreement with the
Company or an Affiliate.

      (d)   INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant'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) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, 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.

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

      (f)   ISSUANCES OF SECURITIES. Except as expressly provided herein or in
the applicable Stock Award Agreement, 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 subject to Stock Awards. Except as expressly
provided herein or in the applicable Stock Award Agreement, no

                                       13
<PAGE>   14

adjustments shall be made for dividends paid in cash or in property (including
without limitation, securities) of the Company.

      (g)   FRACTIONAL SHARES. No fractional Share shall be issued under the
Plan and the person exercising such right shall receive from the Employer cash
in lieu of such fractional share equal to the Fair Market Value thereof.

      (h)   NATURE OF PAYMENTS. All Stock Awards shall constitute a special
incentive payment to the Participant and shall not be taken into account in
computing the amount of salary or compensation of the Participant for the
purpose of determining any benefits under any pension, retirement,
profit-sharing, bonus, life insurance, or other benefit plan of the Employer or
under any agreement between the Employer and the Participant, unless such plan
or agreement specifically provides otherwise.

11.   ADJUSTMENTS UPON CHANGES IN STOCK.

      (a)   CAPITALIZATION ADJUSTMENTS. If any change is made in the Common
Stock subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to Section 4, and outstanding Stock Awards will be appropriately
adjusted in the class(es) and number of securities and price per share of Common
Stock subject to such outstanding Stock Awards. The Board shall make such
adjustments, and its determination shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as
a transaction "without receipt of consideration" by the Company.)

      (b)   CHANGE IN CONTROL.

            (i)   A "Change in Control" shall be deemed to occur upon the
consummation of any one of the following events: (a) a sale of all or
substantially all of the assets of the Company; (b) a merger or consolidation in
which the Company is not the surviving corporation (other than a transaction the
principal purpose of which is to change the state of the Company's
incorporation, or a transaction in which the voting securities of the Company
are exchanged for beneficial ownership of at least a majority of the voting
securities of the controlling acquiring corporation); (c) a merger or
consolidation in which the Company is the surviving corporation and less than a
majority of the voting securities of the Company that are outstanding
immediately after the consummation of such transaction are beneficially owned,
directly or indirectly, by the persons who owned such voting securities
immediately prior to such transaction; (d) any transaction or series of related
transactions after which any person (as such term is used in Section 13(d)(3) of
the Exchange Act), other than any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Affiliate, becomes the beneficial
owner of voting securities of the Company representing a majority of the
combined voting power of all of the voting securities of the Company; provided,
however, that so long as Cadence Design

                                       14
<PAGE>   15

Systems, Inc., a Delaware corporation, or its affiliates other than the Company
(collectively, "Cadence"), own any voting securities of the Company and no other
Change in Control has occurred, acquisition of any amount of voting securities
of the Company by Cadence or its Affiliates shall not constitute a "Change in
Control" hereunder; (e) during any period of two consecutive years, individuals
who at the beginning of such period constitute the membership of the Company's
Board of Directors ("Incumbent Directors") cease for any reason to have
authority to cast at least a majority of the votes which all Directors are
entitled to cast, unless the election, or the nomination for election by the
Company's stockholders, of a new Director was approved by a vote of at least
two-thirds of the votes entitled to be cast by the Incumbent Directors, in which
case such director shall also be treated as an Incumbent Director in the future;
or (f) the liquidation or dissolution of the Company.

            (ii)  In the event of a Change in Control, then: (a) any surviving
or acquiring corporation shall assume Stock Awards outstanding under the Plan or
shall substitute similar Stock Awards (including an option to acquire the same
consideration paid to stockholders in the transaction described in this
subsection 11(b) for those outstanding under the Plan), or (b) in the event any
surviving or acquiring corporation refuses to assume such Stock Awards or to
substitute similar Stock Awards for those outstanding under the Plan, (i) with
respect to Stock Awards held by persons whose Continuous Service has not
terminated, the vesting both of such Stock Awards and of any shares of Common
Stock acquired pursuant to a Stock Award as well as the time during which such
Stock Awards may be exercised shall be accelerated prior to such event and the
Stock Awards terminated if not exercised after such acceleration and at or prior
to such event, and (ii) with respect to any other Stock Awards outstanding under
the Plan, if there is a successor corporation, such Stock Awards shall be
terminated if not exercised prior to such event.

      (c)   Notwithstanding anything else contained herein to the contrary, in
no event shall a Change in Control be deemed to occur solely by reason of (1) a
distribution to the direct and/or indirect stockholders of any Affiliate,
whether as dividend or otherwise, of all or any portion of the Shares held,
directly or indirectly, by such Affiliate; (2) a sale of all or any portion of
the Shares held, directly or indirectly, by any Affiliate in an underwritten
public offering (including, without limitation, a sale of securities of the
Company in an underwritten public offering); or (3) any Person (the "Subject
Person") acquiring beneficial ownership of more than the permitted amount of the
then outstanding voting securities as a result of the acquisition of Shares by
the Company or Affiliate which, by reducing the number of Shares then
outstanding, increases the percentage of Shares beneficially owned by the
Subject Person, provided that if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of Shares by the
Company or an Affiliate, and after such Share acquisition by the Company or an
Affiliate, the Subject Person becomes the beneficial owner of any additional
Shares which further increases the percentage of the then outstanding Shares
beneficially owned by the Subject Person, then a Change in Control shall occur.

      (d)   Notwithstanding the foregoing, any adjustments made pursuant to
subsection (a) above with respect to ISOs shall be made only after the
Administrator determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section

                                       15
<PAGE>   16

424(h) of the Code). If the Administrator determines that such adjustments made
with respect to ISOs would constitute a modification of such ISOs, it may
refrain from making such adjustments, unless the holder of an ISO specifically
requests in writing that such adjustment be made and such writing indicates that
the holder has full knowledge of the consequences of such "modification" on his
or her income tax treatment with respect to the ISO.

12.   AMENDMENT OF THE PLAN AND STOCK AWARDS.

      (a)   AMENDMENT OF PLAN. The Plan may be amended by the Board, including,
without limitation, to the extent necessary to ensure the qualification of any
ISO under Code Section 422, and to the extent necessary to qualify the Shares
issuable upon exercise of any outstanding Stock Awards granted, or Stock Awards
to be granted, under the Plan for listing on any national securities exchange or
quotation in any national automated quotation system of securities dealers. Any
amendment that requires shareholder approval under applicable law or in order to
ensure favorable federal income tax treatment for any ISOs may, at the
discretion of the Administrator, be made subject to obtaining such approval.

      (b)   NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.

      (c)   AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights of a Participant under any Stock Award shall not be impaired by
any such amendment unless (i) the Company requests the consent of the
Participant and (ii) the Participant consents in writing.

13.   TERMINATION OR SUSPENSION OF THE PLAN.

      (a)   PLAN TERM. The Plan shall terminate as of July 13, 2010, the date
that is ten (10) years following the earlier of the date the Plan was adopted by
the Company or approved by the shareholders of the Company. The Board may
furthermore suspend or terminate the Plan at any time.

      (b)   NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.

14.   EFFECTIVE DATE OF PLAN.

      The Plan shall become effective on July 13, 2000, the date on which it was
approved by the Board.

15.   GOVERNING LAW.

      The Plan shall be governed by the laws of the state of Delaware. In the
event any provision of the Plan shall be held invalid, illegal or unenforceable,
in whole or in part, for any

                                       16
<PAGE>   17

reason, such determination shall not affect the validity, legality or
enforceability of any remaining provision, portion of provision or the Plan
overall, which shall remain in full force and effect as if the Plan had been
absent the invalid, illegal or unenforceable provision or portion thereof.

16.   CERTAIN PARTICIPANTS.

      All Agreements awarding ISOs shall be deemed to include any such
additional terms conditions, limitations, and provisions as Code Section 422
requires unless the Administrator in its discretion determines that any such
Option is not intended or is no longer intended to qualify as an ISO.

17.   LISTING, REGISTRATION AND OTHER LEGAL COMPLIANCE.

      Notwithstanding any other provision of this Plan, no Stock Awards or
Shares of the Common Stock shall be required to be issued or granted under the
Plan unless legal counsel to the Company shall be satisfied that such issuance
or grant will be in compliance with all applicable federal and state securities
laws and regulations and any other applicable laws or regulations. The
Administrator may require, as a condition of any payment or share issuance, that
certain agreements, undertakings, representations, certificates, and/or
information, as the Administrator may deem necessary or advisable, be executed
or provided to the Company to assure compliance with all such applicable laws or
regulations. Any certificates for Shares of the Common Stock delivered under the
Plan may be subject to such legends, stock-transfer orders and such other
restrictions as the Administrator may deem advisable under the rules,
regulations, or other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Common Stock is then listed, the NASDAQ
National Market System, and any applicable federal or state securities law. In
addition, if, at any time specified herein (or in any Agreement or otherwise)
for (a) the making of any Stock Award, or the making of any determination, (b)
the issuance or other distribution of Common Stock, or (c) the payment of
amounts to or through a Participant with respect to any Stock Award, any law,
rule, regulation, or other requirement of any governmental authority or agency
shall require the Company or any Affiliate, or any Participant (or any estate,
designated beneficiary, or other legal representative thereof) to take any
action in connection with any such determination, any such Shares to be issued
or distributed, any such payment, or the making of any such determination, as
the case may be, shall be deferred until such required action is taken.

                                       17

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