Revision Date:January 17, 2006

Purpose

The Audit Committee (“Committee”) of Cadence Network, Inc. (“Company”), Board of Directors (“Board”) assists the Board in fulfilling its oversight responsibilities by discharging the Board’s responsibilities relating to the Company financial integrity. The Committee shall be directly responsible for the appointment, compensation and oversight of the work of any registered public accounting firm (“Auditors”) employed by the Company for the purpose of preparing or issuing an audit report or related work. The Committee will (a) assist Board oversight of (i) the integrity of the Financial Statements, (ii) the Company’s compliance with legal and regulatory requirements, including overseeing the Company’s legal, compliance and ethics programs, and (iii) the independent Auditor’s qualifications and independence. In performing its duties, the Committee will maintain effective working relationships with the Board, Management and the Auditors.

Membership

The members of the Committee are appointed by the Board and shall consist of not less than two members of the Board. The Board may remove a member from the Committee at any time with or without cause. The Committee shall perform activities consistent with this Charter, the Corporation’s Charter, Bylaws and governing law, as the Committee deems necessary or appropriate. To effectively perform his or her role, each Committee Member will be financially literate and obtain an understanding of the detailed responsibilities of Committee membership as well as the Company’s business, operations and risks. The Vice President of Finance will act as the Company liaison to the Committee.

Responsibilities

Internal Control

• Require that Management keep the Committee informed about fraud, illegal acts, deficiencies in internal control, and similar matters.
• Require that the Company maintain an internal control function and report to the Committee at each meeting on (i) the design and/or operation of the Company’s internal controls and (ii) any fraud involving management or other employees who have a significant role in the Company’s internal controls.
• Monitor whether internal control recommendations have been implemented by Management.
• Determine the extent to which Auditors review (i) computer systems and applications, (ii) the security of such systems and applications, and (iii) the contingency plan for processing financial information in the event of a systems breakdown.

Financial Reporting

• Meet with Management to review (i) annual financial statements and earnings including company’s disclosures, (ii) issues related thereto and (iii) the results of the Auditors’ annual audit or quarterly review, as the case may be, and make recommendations to the Board.
• Discuss with Management financial information or earnings guidance.
• Review with Management and the Company’s guidelines and policies with respect to risk assessment and risk management, including the risk of fraud and including the Company’s major financial risk exposures and the steps taken by Management to monitor and control these exposures.
• Discuss significant judgments made as to asset and liability valuations with Management.
• Review Management’s disposition of proposed audit adjustments identified by the Auditors.
• To gain insight into the fairness of the statements and disclosures, obtain views and where appropriate, explanations from Management and from the Auditors on whether: generally accepted accounting principles have been consistently applied; there are any significant or unusual events or transactions; the Company’s financial and operating controls are functioning effectively; and the financial statements contain adequate and appropriate disclosures.

External Audit

• Discuss the accounting treatments, policies and practices used by the Auditors and alternatives within GAAP with Management.
• Assess Auditors capabilities and qualifications, including internal quality control procedures and any material issues raised by that firm’s most recent internal quality control review, and determine the selection of the Auditors.
• Review and approve the scope of services and associated fee arrangements for both audit and non-audit services with the Auditors.
• Review the performance of the Auditors.
• Require that significant findings and recommendations made by the Auditors are received and discussed on a timely basis.

Other

• Review and evaluate the adequacy and efficacy of the Company’s regulatory compliance and ethics programs.
• Review material claims and litigation and legal and regulatory matters affecting the Company.
  
• The Committee shall review, discuss, and assess its own performance annually.
• The Committee shall review, discuss, and assess this charter, including the Committee’s role and responsibilities as outlined in this Charter, and shall recommend any proposed changes to the Board.
• As necessary, the Committee will meet periodically with outside advisors to insure that it is carrying out its duties in light of industry practices and standards.
• The Committee shall perform such other functions and have such other powers as may be necessary or convenient in the efficient discharge of the foregoing.
• The Committee will perform other oversight functions as requested by the full Board.

Authority

While the Committee has the responsibilities and the powers set forth in this Charter, it is not the duty of the Committee to plan or conduct internal control or other audits, or to ascertain the structure of internal controls or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of Management and the Auditors.

The Committee shall have full access to all books, records, facilities and personnel of the Company as deemed necessary or appropriate by any member of the Committee to discharge his or her responsibilities hereunder. The Committee may request any officer or employee of the corporation or its outside counsel or consultants to attend a meeting of the Committee or to meet with any members of the Committee. The Committee shall have the sole authority to retain and terminate special legal, compensation or other consultants to advise the Committee and the authority to approve their fees and other terms related to their retention. To the extent not otherwise inconsistent with its obligations and responsibilities, the committee may form subcommittees and delegate authority hereunder as it deems appropriate.

Meetings

Meetings will be held no less than two times per year. Meetings of the Committee may be held in person or telephone. Action may also be taken by the Committee without a meeting if all members thereof consent thereto in writing or by electronic transmission, and the writings or electronic transmission are filed with the minutes of the proceedings of the Committee.

The Committee shall keep separate minutes of their proceedings and actions. The Committee shall also report to the Board at the quarterly Board Meetings.