ASPEC TECHNOLOGY INC, S-1, 1997-03-06

ASPEC TECHNOLOGY INC
S-1, 1997-03-06

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 6, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ASPEC TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------

<TABLE>
<S> <C> <C>
CALIFORNIA 7372 77-0298386
(STATE OR OTHER JURISDICTION OF PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

------------------------

830 EAST ARQUES AVENUE
SUNNYVALE, CALIFORNIA 94086
(408) 774-2199
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

CONRAD J. DELL'OCA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ASPEC TECHNOLOGY, INC.
830 EAST ARQUES AVENUE
SUNNYVALE, CALIFORNIA 94086
(408) 774-2199
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:

<TABLE>
<S> <C>
JEFFREY D. SAPER, ESQ. JORGE A. DEL CALVO, ESQ.
J. ROBERT SUFFOLETTA, ESQ. KATHARINE A. MARTIN, ESQ.
WILSON SONSINI GOODRICH & ROSATI PILLSBURY MADISON & SUTRO LLP
PROFESSIONAL CORPORATION 2700 SAND HILL ROAD
650 PAGE MILL ROAD MENLO PARK, CALIFORNIA 94025
PALO ALTO, CALIFORNIA 94304-1050 (415) 233-4500
(415) 493-9300
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(1)(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------
Common Stock, $0.001 par value.... 4,600,000 shares $12.00 $55,200,000 $16,728
==========================================================================================================
</TABLE>

(1) Includes up to 600,000 shares of Common Stock which may be purchased by the
Underwriters to cover over-allotments, if any.

(2) Estimated pursuant to Rule 457(a) solely for the purpose of calculating the
registration fee.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION

MARCH 6, 1997

4,000,000 Shares

LOGO
Common Stock

------------------

All of the 4,000,000 shares of Common Stock offered hereby are being sold
by Aspec Technology, Inc. ("Aspec" or the "Company"). Prior to this offering,
there has been no public market for the Common Stock of the Company. It is
currently estimated that the initial public offering price will be between
$10.00 and $12.00 per share. See "Underwriting" for a discussion of factors to
be considered in determining the initial public offering price. The Company has
applied to have its Common Stock approved for quotation on the Nasdaq National
Market under the symbol "ASPC."
------------------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Per Share........................ $ $ $
- --------------------------------------------------------------------------------------------------
Total(3)......................... $ $ $
==================================================================================================
</TABLE>

(1) See "Underwriting" for information relating to indemnification of the
Underwriters and other matters.

(2) Before deducting expenses payable by the Company estimated at $900,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
600,000 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent that the option is exercised, the Underwriters will
offer additional shares at the Price to Public shown above. If the option is
exercised in full, the total Price to Public, total Underwriting Discounts
and Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
------------------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1997.
ALEX. BROWN & SONS
INCORPORATED
HAMBRECHT & QUIST

WESSELS, ARNOLD & HENDERSON

THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 3

[A GRAPHICAL DIAGRAM APPEARS HERE THAT DEPICTS THE STEPS IN THE IC MANUFACTURING
PROCESS AND HOW EDA TOOLS AND DIT INTERACT WITH SUCH PROCESS.]

IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

ASPEC TECHNOLOGY(R) is a registered trademark of the Company. This
Prospectus includes other trade names and trademarks of the Company and of other
companies.

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Financial Statements and Notes
thereto, appearing elsewhere in this Prospectus. This Prospectus contains
forward-looking statements that involve risks and uncertainties. The Company's
actual results may differ materially from the results discussed in such forward-
looking statements. Factors that may cause such a difference include, but are
not limited to, those discussed in "Risk Factors."

THE COMPANY

Aspec is a leading provider of commercially available design implementation
technology ("DIT") solutions for integrated circuit ("IC") design. DIT consists
of libraries of electrical circuits, often called cell libraries, based on
proprietary architectures, and a design methodology, which together enable IC
designers to implement the physical design of an IC in silicon. Aspec's DIT
supports many leading electronic design automation ("EDA") tools and advanced
process technologies at leading semiconductor foundries. Aspec's DIT is designed
to: (i) facilitate the rapid design of complex, high-performance ICs in advanced
process technologies, (ii) provide an integrated design solution that increases
productivity, (iii) preserve existing EDA investments and (iv) allow customers
to access multiple foundries for cost control and alternate sourcing. Aspec's
DIT provides designers with quick access to accurate and complete cell libraries
at a lower cost than developing an equivalent internal solution. Aspec's DIT
includes its AdverPro design verification software which enables EDA tools to
exchange data while maintaining design intent, provides an accurate timing
function across EDA tools and helps to ensure compliance with proper design
procedures.

IC designers utilize various methods to meet their DIT requirements.
Application specific integrated circuit ("ASIC") vendors and IC companies
typically rely on internally developed DIT solutions while electronic systems
manufacturers such as PC companies rely on ASIC companies for their DIT.
However, it is becoming increasingly difficult for these methods to meet the
challenges of increased design complexity and increased time-to-market pressures
which confront IC designers. ASIC vendors and IC companies are also finding it
increasingly impracticable, costly and time consuming to develop and maintain
their own proprietary DIT. In addition, ASIC vendors and IC companies find it
increasingly difficult to allocate sufficient resources to DIT as more and more
resources are required for complex semiconductor design. Electronic systems
manufacturers are finding it desirable to control the intellectual property
content of their design in order to more rapidly adopt new process technologies
and effectively integrate the various steps in their design flows and,
consequently, to decrease the time-to-market for their products. Thus, these
companies are increasingly seeking a third-party solution to their DIT
requirements.

The Company's strategy is to expand its position as a leading provider of
commercial DIT solutions for the semiconductor industry. As part of this
strategy, the Company intends to establish its DIT as an industry standard by
providing an open solution that supports many leading EDA tools and process
technologies at leading semiconductor foundries. Aspec is rapidly developing new
versions of its products to support the most advanced EDA tools and emerging
deep submicron process technologies. To broaden its customer base, the Company
is targeting companies that are currently relying on internal resources or ASIC
vendors for their DIT requirements. Another key element of Aspec's strategy is
to cultivate long-term relationships with its customers, leading semiconductor
foundries and EDA tool companies. Aspec believes that relationships with key
industry participants will enhance its ability to establish its DIT as an
industry standard.

Aspec's suite of DIT products includes electrical circuit libraries, memory
compilers and AdverPro. The Company's products, which run on UNIX workstations
and Windows NT-based PCs, support over 30 industry standard EDA tools, including
those produced by Avant!, Cadence, Epic, Mentor, Synopsys and Viewlogic. The
Company sells its products through a direct sales force in North America, Japan
and Korea. In Asia and Europe, the Company markets its products primarily
through a limited number of independent representatives and distributors. By
supporting many of the world's leading semiconductor foundries and IC
manufacturers, the Company offers its customers a wide variety of manufacturing
sources. The Company's customers include Cadence, Compaq, IDT, Samsung, Sanyo
and Winbond.

Aspec Technology, Inc. was incorporated in California in December 1991 and
expects to reincorporate in Delaware in March 1997. The Company's executive
offices are located at 830 East Arques Avenue, Sunnyvale, CA 94086, and its
telephone number is (408) 774-2199.

3
<PAGE> 5

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered hereby....................... 4,000,000 shares
Common Stock to be outstanding after the
offering........................................ 26,720,234 shares(1)
Use of proceeds................................... For redemption of Series A Redeemable Preferred
Stock and general corporate purposes, including
working capital. See "Use of Proceeds."
Proposed Nasdaq National Market symbol............ ASPC
</TABLE>

SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................................................... $ -- $ 3,689 $ 4,659 $ 6,640 $15,265
------- ------- ------- ------- -------
Costs and expenses:
Cost of revenue................................................. 233 1,320 1,553 2,307 4,702
Research and development........................................ 42 230 289 445 921
Sales and marketing............................................. 94 196 624 1,387 3,526
General and administrative...................................... 512 545 827 1,093 1,994
------- ------- ------- ------- -------
Total costs and expenses.................................... 881 2,291 3,293 5,232 11,143
------- ------- ------- ------- -------
Income (loss) from operations..................................... (881) 1,398 1,366 1,408 4,122
Other income, net................................................. 6 17 17 56 310
------- ------- ------- ------- -------
Income (loss) before income taxes................................. (873) 1,415 1,383 1,464 4,432
Provision for income taxes........................................ -- 566 553 585 1,815
------- ------- ------- ------- -------
Net income (loss)................................................. (873) 849 830 879 2,617
Accretion of redeemable preferred stock(2)........................ -- -- -- -- 392
------- ------- ------- ------- -------
Income (loss) attributable to common stockholders................. $ (873) $ 849 $ 830 $ 879 $ 2,225
======= ======= ======= ======= =======
Net income (loss) per share(3).................................... $ (0.06) $ 0.03 $ 0.03 $ 0.03 $ 0.09
======= ======= ======= ======= =======
Shares used in per share computation(3)........................... 14,335 24,678 25,646 26,485 25,850
</TABLE>

<TABLE>
<CAPTION>
NOVEMBER 30, 1996
-------------------------
ACTUAL AS ADJUSTED(4)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and equivalents.................................................................. $ 6,341 $ 27,866
Working capital....................................................................... 3,704 25,229
Total assets.......................................................................... 15,760 37,285
Redeemable preferred stock............................................................ 13,345 --
Redeemable common stock............................................................... 7,116 --
Total stockholders' equity (deficiency)............................................... (14,063) 27,923
</TABLE>

- ---------------
(1) Excludes outstanding options to purchase 554,000 shares of Common Stock at
November 30, 1996 at a weighted average exercise price of $4.05 per share.
See "Management -- Compensation Plans" and Note 7 of Notes to Financial
Statements.

(2) See Note 6 of Notes to Financial Statements for an explanation of the
determination of the accretion amount.

(3) See Note 1 of Notes to Financial Statements for an explanation of the method
used to determine net income (loss) per share and the number of shares used
to compute per share amounts.

(4) Adjusted to reflect the sale by the Company of the 4,000,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$11.00 per share, after deducting underwriting discounts and commissions and
estimated offering expenses, and the application of the estimated net
proceeds therefrom. See "Use of Proceeds."

------------------------

Except as otherwise specified, all information in this Prospectus assumes
(i) the reincorporation of the Company in the State of Delaware prior to the
date of this Prospectus at which time the Company's Certificate of Incorporation
will provide for 5,000,000 shares of undesignated Preferred Stock, (ii) a
two-for-one split of the outstanding shares of Common Stock to be effected prior
to the date of this Prospectus, (iii) the redemption of all outstanding shares
of the Company's Series A Redeemable Preferred Stock from the proceeds of the
offering and (iv) no exercise of the Underwriters' over-allotment option.

4
<PAGE> 6

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered hereby. This Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ materially from the results discussed in such forward-looking
statements. Factors that may cause such a difference include, but are not
limited to, those discussed below.

Fluctuations in Future Operating Results; Dependence Upon Timely Project
Completion. The Company's operating results have fluctuated in the past and are
expected to fluctuate significantly from quarter to quarter and on an annual
basis in the future as a result of a number of factors including the size and
timing of customer orders; the Company's ability to achieve progress on
percentage of completion contracts; the length of the Company's sales cycle; the
timing of new product announcements and introductions by the Company and its
existing or future competitors; the Company's ability to develop, introduce and
market new products and product enhancements; market acceptance of the Company's
products; and general economic conditions. The Company's future operating
results are expected to fluctuate as a result of these and other factors, which
could have a material adverse effect on the Company's business, operating
results and financial condition. It is likely that in some future quarter the
Company's operating results will be below the expectations of public market
analysts and investors. In such event, the price of the Company's Common Stock
would likely decline, perhaps substantially.

A substantial majority of the Company's revenue is recognized on a
percentage of completion method based upon actual costs incurred. The completion
period typically ranges from three months to a year. Accordingly, revenue in any
quarter is dependent on progress towards completion of the project by the
Company. The Company has in the past experienced delays in the progress of
certain projects and there can be no assurance that such delays will not occur
with respect to future projects. Any delay or failure to achieve such progress
could result in damage to customer relationships and the Company's reputation,
diversion of engineering resources, or a delay in the market acceptance of the
Company's products, any of which could have a material adverse effect on the
Company's business, operating results and financial condition. In addition,
these contracts may generally be cancelled without cause, and if a customer
cancels or delays performance under any such contracts, the Company's business,
operating results and financial condition could be materially adversely
affected. A customer's license of the Company's products generally involves a
significant commitment of capital with the attendant delays frequently
associated with authorization procedures for substantial capital expenditures
within customer organizations. The Company plans to increase its operating
expenses in order to enhance certain of its existing products and to develop
additional cell libraries for emerging design processes. The Company also plans
to increase its sales and marketing expenses in an attempt to broaden its
customer base. These expenses will be based in part on the Company's
expectations of future revenue from product licenses. Accordingly, if the
Company does not realize its expected revenues, its business, operating results
and financial condition could be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Market Acceptance of Commercial DIT. The Company has promoted the adoption
of commercial DIT which, to date, has been accepted by only a limited number of
customers. The vast majority of the Company's potential customers currently rely
on one or more DITs which were developed internally or by ASIC vendors. The
Company's future growth, if any, will depend upon the extent to which the
Company's current and potential customers choose to implement commercial DIT
solutions in general and the Company's commercial DIT solution in particular.
The failure of the Company's DIT to achieve market acceptance would result in a
material adverse effect on the Company's business, operating results and
financial condition. Substantially all of the Company's revenues in fiscal 1993,
1994 and 1995 were derived from vertically integrated semiconductor companies
that licensed the Company's DIT so that they could enter the merchant ASIC
market.

5
<PAGE> 7

Commencing in fiscal 1996, the Company began to generate meaningful revenue from
licensing its products to fabless semiconductor companies and electronic systems
manufacturers. If the Company is not able to generate substantial revenue from
the licensing of its products to such companies, its business, operating results
and financial condition would be materially adversely affected.

Customer Concentration. The Company has been dependent on a relatively
small number of customers for a substantial portion of its annual revenue. In
fiscal 1995, Samsung Electronics Co., Ltd. ("Samsung"), National Semiconductor
Corporation ("NSC") and Yamaha Corporation ("Yamaha") accounted for 18.2%, 17.3%
and 15.1%, respectively, of the Company's revenue. In fiscal 1996, Asahi Glass
Co., Ltd. ("Asahi Glass") accounted for 10.5% of the Company's revenues, and the
Company's six largest customers accounted for 51.1% of the Company's revenue.
The Company anticipates that the majority of its revenue will be derived from a
relatively small number of customers through fiscal 1997. None of the Company's
customers has a written agreement with the Company that obligates it to license
additional products or to renew its maintenance agreement, and there can be no
assurance that any customer will purchase additional software licenses or renew
its maintenance agreement. The loss of one or more of the Company's major
customers, or reduced orders by one or more of such customers, could materially
adversely affect the Company's business, operating results and financial
condition. See "Business -- Customers."

Management of Growth. The Company's business has grown rapidly with
revenue increasing from $6.6 million in fiscal 1995 to $15.3 million in fiscal
1996. The growth of the Company's business and expansion of its customer base
has placed and is expected to continue to place a significant strain on the
Company's management and operations. Certain key members of the Company's
management, including its Executive Vice President, Worldwide Sales and
Marketing, and its Chief Financial Officer, joined the Company within the past
12 months. The Company's future success will depend on its ability to identify,
attract, hire and retain skilled employees and to hire replacements for
employees that leave the Company. In this regard, the Company is actively
recruiting a Vice President, Engineering and several additional engineering
personnel. The Company's failure to continue to expand its engineering
organization in a timely manner could result in delays in the progress on
percentage of completion contracts and the Company's research and development
efforts, either of which could have a material adverse effect on the Company's
business, operating results and financial condition.

The Company's expansion has also resulted in substantial growth in the
number of its employees and the burden placed upon its financial, accounting and
operating systems, resulting in increased responsibility for both existing and
new management personnel. For example, the number of employees at the Company
increased from 46 at the end of fiscal 1995 to 90 at the end of fiscal 1996. The
Company is in the process of hiring additional accounting and financial
personnel and in establishing and upgrading its financial and accounting systems
and procedures to support its growth. There can be no assurance that the Company
will be able to identify, attract and retain experienced accounting and
financial personnel. The Company's future operating results will depend on the
ability of its management and other key employees to implement and improve its
systems for operations, financial control and information management, and to
recruit, train and manage its employee base. In particular, the Company's
ability to effectively manage and support its growth will be substantially
dependent on its ability to improve its financial and management controls,
reporting and order entry systems and other procedures on a timely basis. The
Company also expects to increase its customer support operations to the extent
the installed base of the Company's products continues to grow. There can be no
assurance that the Company will be able to manage or continue to manage its
recent or any future growth successfully or to implement and maintain adequate
financial and management controls and procedures, and any inability to do so
would have a material adverse effect on the Company's business, operating
results and financial condition. The Company does not expect to sustain the
rates of revenue growth that it has experienced in the past, and there can be no
assurance that the Company will be able to maintain or improve its operating
results.

6
<PAGE> 8

Dependence Upon Continuous Product Development; Risk of Product
Delays. The Company's customers operate in the semiconductor industry, which is
subject to rapid technological change, frequent introductions of new products,
short product life cycles, changes in customer demands and requirements and
evolving industry standards. The introduction of products embodying new
technologies and the emergence of new industry standards can render existing
products obsolete and unmarketable. Accordingly, the Company's future success
will depend on its ability to continue to enhance its existing products and to
develop and introduce new products that satisfy increasingly sophisticated
customer requirements and that keep pace with product introductions by EDA tool
companies, emerging process technologies and other technological developments in
the semiconductor industry. Any failure by the Company to anticipate or respond
adequately to changes in technology or customer requirements, or any significant
delays in product development or introduction, would have a material adverse
effect on the Company's business, operating results and financial condition.
There can be no assurance that the Company will be successful in its product
development efforts, that the Company will not experience difficulties that
could delay or prevent the successful development, introduction and sale of new
or enhanced products or that such new or enhanced products will achieve market
acceptance. The Company has in the past experienced delays in the release dates
of certain of its products. If release dates of any new significant products or
product enhancements are delayed, the Company's business, operating results and
financial condition would be materially adversely affected. The Company could
also be exposed to litigation or claims from its customers in the event it does
not satisfy its delivery commitments. There can be no assurance that any such
claim will not have a material adverse effect on the Company's business,
operating results and financial condition. See "Business -- Research and
Development."

Dependence Upon Semiconductor and Electronics Industries. The Company is
dependent upon the semiconductor and electronics industries. Each of these
industries is characterized by rapid technological change, short product life
cycles, fluctuations in manufacturing capacity and pricing and gross margin
pressures. Each of these industries is highly cyclical and has periodically
experienced significant downturns, often in connection with or in anticipation
of declines in general economic conditions during which the number of new IC
design projects often decreases. Revenue from new licenses of the Company's
products are influenced by the level of design efforts by its customers, and
factors negatively affecting any of these industries could have a material
adverse effect on the Company's business, operating results and financial
condition. The Company's business, operating results and financial condition may
fluctuate in the future from period to period as a consequence of general
economic conditions in either the semiconductor or electronics industry.

Competition. The market for commercial DIT products is new and emerging,
and the Company has few direct competitors. The Company principally competes
with the engineering departments of potential customers that develop and
maintain internally developed DIT. Certain of the Company's other potential
customers rely on proprietary DIT developed and maintained by ASIC vendors.
Although the Company believes that none of its competitors offer a complete DIT
solution, the Company's current competitors with respect to one or more aspects
of its DIT solution include Cascade Design Automation (a subsidiary of Oki
Semiconductor Ltd.) ("Cascade"), Compass Design Automation (a subsidiary of VLSI
Technology, Inc.) ("Compass"), Silicon Architects (a subsidiary of Synopsys,
Inc.) ("Si-Arc") and VLSI Libraries. In addition, certain semiconductor
foundries currently offer or may in the future offer one or more elements of a
DIT solution. The Company does not offer EDA tools, and its products are
designed to be compatible with leading EDA tools. The Company expects that the
market for its products will become increasingly competitive in the future.
Among the Company's potential competitors are a number of large vertically
integrated semiconductor companies and numerous EDA software companies that may
develop products that compete with those of the Company. Increased competition
could eventually result in price reductions or reduced operating margins which
could materially adversely affect the Company's business, operating results and
financial condition. Many of the Company's potential competitors have
significantly greater financial, technical, marketing and other resources than
the Company. As a

7
<PAGE> 9

result, they may be able to respond more quickly to new or emerging technologies
and to changes in customer requirements, or to devote greater resources to the
development, promotion and sale of their products than can the Company. There
can be no assurance that the Company will be able to compete successfully
against current or future competitors or that competitive pressures will not
materially adversely affect the Company's business, operating results and
financial condition. See "Business -- Competition."

Risks Associated With International Operations. A significant portion of
the Company's revenue is derived from customers outside the United States, and
the Company anticipates that international revenue will continue to be
significant in the future. Specifically, revenue from customers outside the
United States accounted for 83.6%, 54.2% and 65.4% of revenue in fiscal 1994,
1995 and 1996, respectively. The Company intends to continue to expand its sales
and marketing activities in Asia and Europe. The Company's international
business involves a number of risks, including the impact of possible
recessionary environments in economies outside the United States, political and
economic instability, exchange rate fluctuations, longer receivables collection
periods and greater difficulty in accounts receivable collection from
distributors and customers, difficulty in managing distributors or sales
representatives, unexpected changes in regulatory requirements, reduced or
limited protection for intellectual property rights, export license
requirements, tariffs and other trade barriers and potentially adverse tax
consequences. There can be no assurance that the Company will be able to sustain
or increase revenue derived from international licensing and service or that the
foregoing factors will not have a material adverse effect on the Company's
business, operating results and financial condition. Although the Company prices
its products and services in United States dollars, currency exchange
fluctuations in countries in which the Company licenses its products could have
a material adverse effect on the Company's business, operating results and
financial condition by resulting in pricing that is not competitive with
products priced in local currencies. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business -- Sales and
Marketing."

Limited Protection of Proprietary Rights. The Company's success is
dependent on its ability to protect its proprietary technology. The Company
relies upon a combination of copyright, patent, trade secret and trademark laws
to protect its proprietary technology. The Company enters into confidentiality
agreements with its employees, distributors and customers and limits access to
and distribution of the source code to its software and other proprietary
information. There can be no assurance that the steps taken by the Company in
this regard will be adequate to prevent misappropriation of its technology or
that the Company's competitors will not independently develop technologies that
are substantially equivalent or superior to the Company's technology. Any such
misappropriation of the Company's technology or development of competitive
technologies could have a material adverse effect on the Company's business,
operating results and financial condition. Despite the Company's efforts to
protect its proprietary rights, there can be no assurance that the Company will
be able to protect its proprietary rights against unauthorized third party
copying or use. Attempts may be made to copy or reverse engineer aspects of the
Company's products or to obtain and use information that the Company regards as
proprietary. Policing the unauthorized use of the Company's products is
difficult and the Company could incur substantial costs in protecting and
enforcing its intellectual property rights. Litigation may be necessary in the
future to enforce the Company's intellectual property rights, to protect the
Company's trade secrets or to determine the validity and scope of the
proprietary rights of others. Such litigation could result in substantial costs
and diversion of resources and could have a material adverse effect on the
Company's business, operating results and financial condition.

8
<PAGE> 10

personnel rather than on its patents. The process of seeking patent protection
can be expensive and time consuming. There can be no assurance that patents will
issue from pending or future applications or that, if issued, such patents will
not be challenged, invalidated or circumvented, or that rights granted
thereunder will provide meaningful protection or other commercial advantage to
the Company. Moreover, there can be no assurance that any patent rights will be
upheld in the future or that the Company will be able to preserve any of its
other intellectual property rights. In addition, the laws of certain countries
in which the Company's products are distributed do not protect the Company's
products and intellectual property rights to the same extent as the laws of the
United States. Accordingly, effective trademark and patent protection may be
unavailable in certain foreign countries.

As is common in the software industry, the Company may from time to time
receive notices from third parties claiming infringement by the Company's
products of third-party proprietary rights. While the Company is not currently
subject to any such claim, the Company believes that its products could
increasingly be subject to such claims as the market for its products grows and
as more competitors enter the market. Any such claim, with or without merit,
could result in significant litigation costs and require the Company to enter
into royalty and licensing agreements, which could have a material adverse
effect on the Company's business, operating results and financial condition.
Such royalty and licensing agreements, if required, may not be available on
terms acceptable by the Company or at all. See "Business -- Proprietary Rights."

Potential for Software Defects. Complex software products such as those
offered by the Company may contain undetected errors or failures commonly
referred to as "bugs." There can be no assurance that, despite significant
testing by the Company and by current and potential customers, errors will not
be found in products or enhancements to existing products after commencement of
commercial shipments. Although the Company has not experienced material adverse
effects resulting from any such errors or defects to date, there can be no
assurance that errors or defects will not be discovered in the future,
potentially causing delays in product introduction and shipments or requiring
design modifications that could materially adversely affect the Company's
business, operating results and financial condition.

Dependence on Key Personnel. The Company's business depends in significant
part on the continued service of the Company's executive officers and other
senior management and key employees, including certain technical, managerial and
marketing personnel. The loss of the services of any of these individuals or
groups of individuals could have a material adverse effect on the Company's
business, operating results and financial condition. None of the Company's
executive officers has an employment agreement with the Company. The Company
believes that its future business results will also depend in significant part
upon its ability to identify, attract, motivate and retain additional highly
skilled technical, managerial and marketing personnel. Competition for such
personnel in the computer software industry is intense. There can be no
assurance the Company will be successful in identifying, attracting and
retaining such personnel, and the failure to do so could have a material adverse
effect on the Company's business, operating results and financial condition.

No Prior Market for the Shares; Expected Volatility of Share Price. Prior
to the offering, there has been no public market for the Company's Common Stock
and there can be no assurance that an active public market will develop upon
completion of the offering or, if it does develop, that such market will be
sustained. The initial public offering price of the Company's Common Stock will
be determined by negotiation between the Company and the Representatives of the
Underwriters. The market price of the shares of Common Stock is likely to be
highly volatile and may be significantly affected by factors such as actual or
anticipated fluctuations in the Company's operating results, the Company's
failure to meet or exceed published earnings estimates, changes in earnings
estimates or recommendations by securities analysts, announcements of
technological innovations, new products or new contracts by the Company or its
existing or potential competitors, developments with respect to patents,
copyrights or proprietary rights, conditions and trends in the EDA,
semiconductor or

9
<PAGE> 11

electronics industries, adoption of new accounting standards affecting the
software industry, general market conditions and other factors. In addition, the
stock market has from time to time experienced significant price and volume
fluctuations that have particularly affected the market prices for the common
stocks of technology companies which have often been unrelated to the operating
performance of such companies. These broad market fluctuations may materially
adversely affect the market price of the Company's Common Stock. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted against such
company. There can be no assurance that such litigation will not occur in the
future with respect to the Company. Such litigation could result in substantial
costs and a diversion of management's attention and resources, which could have
a material adverse effect upon the Company's business, operating results and
financial condition. See "Underwriting."

Control by Officers, Directors and Affiliated Entities. Upon completion of
the offering, the Company's executive officers, directors and venture capital
funds affiliated with such directors will beneficially own in the aggregate
approximately 60.9% of the issued and outstanding shares of Common Stock. Such
stockholders will have sufficient voting power to control the outcome of all
matters (including the election of directors and any merger, consolidation or
sale of all or substantially all of the Company's assets) submitted to the
stockholders for approval and may be deemed to have effective control over the
affairs and management of the Company. This controlling interest in the Company
may also have the effect of making certain transactions more difficult or
impossible, absent the support of such stockholders. Such transactions could
include a proxy contest, mergers involving the Company, tender offers and open
market purchase programs involving Common Stock that could give stockholders of
the Company the opportunity to realize a premium over the then prevailing market
price for their shares of Common Stock. See "Principal Stockholders."

Effect of Anti-takeover Provisions. The Company's Board of Directors has
the authority to issue up to 5,000,000 shares of Preferred Stock and to
determine the price, rights, preferences and privileges of such shares without
any further vote or action by the Company's stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any shares of Preferred Stock that may be issued in
the future. While the Company has no present intention to issue shares of
Preferred Stock, such issuance, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of the outstanding voting stock of the Company. In addition, such Preferred
Stock may have other rights, including economic rights senior to the Common
Stock, and, as a result, the issuance thereof could have a material adverse
effect on the market value of the Common Stock.

Shares Eligible for Future Sale. Sales of a substantial number of shares
of Common Stock in the public market following this offering could materially
adversely affect the market price for the Company's Common Stock. In addition to
the 4,000,000 shares of Common Stock offered hereby, as of the date of this
Prospectus (the "Effective Date") there will be 22,720,234 shares of Common
Stock outstanding (assuming no exercise of options after December 31, 1996), all
of which are "restricted" shares (the "Restricted Shares") under the Securities
Act of 1933, as amended (the "Securities Act"). Approximately
Restricted Shares will become eligible for sale 90 days after the Effective Date
pursuant to Rule 701 under the Securities Act. However, of these
shares will be subject to a right of repurchase in favor of the Company.
Approximately Restricted Shares will become eligible for sale 180 days
after the Effective Date upon expiration of certain lockup agreements with the
Company or the Underwriters and pursuant to Rules 144 and 701 under the
Securities Act, subject in certain cases to certain volume and other resale
restrictions under Rule 144. However, of these shares will be subject
to a right of repurchase in favor of the Company. The remaining shares
held by existing stockholders will become eligible for sale from time to time in
the future under Rule 144. Additionally, an aggregate of approximately
shares issuable upon the exercise of stock options will become eligible for sale
in the public market 180 days after the Effective Date upon expiration of lockup
agreements with the Company or

10
<PAGE> 12

the Underwriters and pursuant to a Registration Statement on Form S-8 which the
Company intends to file with the Securities and Exchange Commission
approximately 90 days after the Effective Date. In addition, holders of
approximately 4,800,000 shares of Common Stock have rights under certain
circumstances to require the Company to register their shares for future sale.
See "Shares Eligible for Future Sale."

As described above, the number of shares of Common Stock available for sale
in the public market is limited by restrictions under the Securities Act and
lockup agreements under which the holders of such shares have agreed not to sell
or otherwise dispose of any of their shares for a period of 180 days after the
date of this Prospectus without the prior written consent of Alex. Brown & Sons
Incorporated. However, Alex. Brown & Sons Incorporated, may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to lockup agreements. Alex. Brown & Sons Incorporated
currently has no plans to release any portion of the securities subject to
lockup agreements. When determining whether or not to release shares from the
lockup agreements, Alex. Brown & Sons Incorporated will consider, among other
factors, the stockholder's reasons for requesting the release, the number of
shares for which the release is being requested and market conditions at the
time.

Dilution. The initial public offering price is substantially higher than
the book value per share of the Common Stock. Investors purchasing shares of
Common Stock in the offering will incur immediate and substantial dilution of
$9.95 in net tangible book value per share of Common Stock (based upon an
assumed initial public offering price of $11.00 per share and after deducting
estimated underwriting discounts and commissions and offering expenses) from the
initial public offering price and will incur additional dilution upon the
exercise of outstanding stock options. See "Dilution."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 4,000,000 shares of
Common Stock offered by the Company hereby at an assumed initial public offering
price of $11.00 per share, after deducting underwriting discounts and
commissions and estimated offering expenses, are estimated to be $40.0 million
($46.2 million if the Underwriters' over-allotment option is exercised in full).
The Company will use approximately $18.5 million of the proceeds of the offering
to redeem all outstanding shares of the Company's Series A Redeemable Preferred
Stock. The Company intends to use the remaining net proceeds of the offering for
working capital and general corporate purposes. A portion of the net proceeds
may also be used for investments in or acquisitions of complementary businesses,
products or technologies, although no such transactions are currently under
negotiation. Pending such uses, the Company expects to invest the net proceeds
in interest-bearing securities.

DIVIDEND POLICY

The Company has never declared or paid cash dividends on its Common Stock.
The Company currently intends to retain any earnings for use in its business and
does not anticipate paying any cash dividends on its Common Stock in the
foreseeable future.

11
<PAGE> 13

CAPITALIZATION

The following table sets forth as of November 30, 1996: (i) the actual
capitalization of the Company; (ii) the capitalization of the Company on a pro
forma basis to reflect the termination of the redemption provisions of the
redeemable common stock upon the closing of the offering; and (iii) the
capitalization of the Company on an as adjusted basis to reflect the receipt by
the Company of approximately $21.5 million of net proceeds from the sale of the
4,000,000 shares of Common Stock offered by the Company hereby at an assumed
initial public offering price of $11.00 per share after deducting the
underwriting discounts and commissions and the estimated offering expenses and
the application of a portion of the net proceeds therefrom to redeem all
outstanding shares of Series A Redeemable Preferred Stock. See "Use of
Proceeds."

<TABLE>
<CAPTION>
NOVEMBER 30, 1996
----------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Series A redeemable preferred stock, $.001 par
value: 130,385 shares designated; shares
outstanding: 1996 -- 130,378; pro
forma -- 130,378; as adjusted -- none (actual
and pro forma liquidation value: $18,495,000)... $ 13,345 $ 13,345 $ --
-------- -------- -----
Redeemable common stock, $.001 par value; shares
outstanding: 1996 -- 4,778,804; pro forma and as
adjusted -- none................................ 7,116 -- --
-------- -------- -----
Stockholders' equity (deficiency):
Preferred stock, $.001 par value; 5,000,000
authorized (excluding Series A preferred
stock): none outstanding..................... -- -- --
Common stock, $.001 par value: 75,000,000 shares
authorized; shares outstanding: 1996 --
17,941,430; pro forma -- 22,720,234; as
adjusted -- 26,720,234(1).................... 3,344 10,460 50,480
Stockholder notes receivable.................... (648) (648) (648)
Deferred stock compensation..................... (476) (476) (476)
Retained earnings (deficit)..................... (16,283) (16,283) (21,433)
-------- -------- -----
Total stockholders' equity
(deficiency).......................... (14,063) (6,947) 27,923
-------- -------- -----
Total capitalization.................. $ 6,398 $ 6,398 $27,923
======== ======== =====
</TABLE>

- ---------------
(1) As of November 30, 1996, excludes (i) 554,000 shares of Common Stock
issuable upon exercise of outstanding options under the Company's 1996 Stock
Option Plan (the "Option Plan") at a weighted average exercise price of
$4.05 per share; (ii) 1,446,000 shares of Common Stock available for future
issuance under the Option Plan; (iii) 250,000 shares of Common Stock
available for future issuance under the Company's 1997 Director Option Plan
(the "Director Plan") and (iv) 500,000 shares of Common Stock available for
future issuance under the Company's 1997 Employee Stock Purchase Plan (the
"Purchase Plan"). In February 1997, the Company's Board of Directors
approved an amendment to the Option Plan to increase the number of shares
reserved for issuance thereunder by 2,500,000 shares. See Notes 7 and 11 of
Notes to Financial Statements.

12
<PAGE> 14

DILUTION

The pro forma net tangible book value of the Company at November 30, 1996
was a deficit of approximately $12.1 million, or $(0.53) per share of Common
Stock. "Pro forma net tangible book value" per share represents the amount of
total assets of the Company less total liabilities and the liquidation value of
the redeemable preferred stock, divided by the number of shares of Common Stock
outstanding. After giving effect to the sale by the Company of 4,000,000 shares
of Common Stock offered hereby (after deducting the underwriting discounts and
commissions and estimated offering expenses) at an assumed initial public
offering price of $11.00 per share, the pro forma net tangible book value of the
Company at November 30, 1996 would have been $27.9 million, or $1.05 per share.
This represents an immediate increase in net tangible book value of $1.58 per
share to existing stockholders and an immediate dilution of $9.95 per share to
new investors. The following table illustrates this per share dilution:

<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share.......................... $11.00
Pro forma net tangible book value per share as of November 30, 1996...... $(0.53)
Increase per share attributable to new investors....................... 1.58
------
Pro forma net tangible book value per share after the offering........... 1.05
------
Net tangible book value dilution per share to new investors.............. $ 9.95
======
</TABLE>

The following table summarizes, on a pro forma basis as of November 30,
1996, the differences in the total consideration paid and the average price per
share paid by the Company's existing stockholders and the new investors with
respect to the 4,000,000 shares of Common Stock to be sold by the Company. The
calculations in this table with respect to shares of Common Stock to be
purchased by new investors in the offering reflect an assumed initial public
offering price of $11.00 per share:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders........... 22,720,234 85.0% $10,460,000 19.2% $ 0.46
New investors................... 4,000,000 15.0 44,000,000 80.8 11.00
---------- ---- ----------- -----
Total................. 26,720,234 100.0% $54,460,000 100.0%
========== ==== =========== =====
</TABLE>

The foregoing computations exclude, as of November 30, 1996: (i) 554,000
shares of Common Stock issuable upon exercise of outstanding options under the
Option Plan at a weighted average exercise price of $4.05 per share; (ii)
1,446,000 shares of Common Stock available for future issuance under the Option
Plan; (iii) 250,000 shares of Common Stock available for future issuance under
the Director Plan and (iv) 500,000 shares of Common Stock available for future
issuance under the Purchase Plan. In February 1997, the Company's Board of
Directors approved an amendment to the Option Plan to increase the number of
shares reserved for issuance thereunder by 2,500,000 shares. See
"Management -- Director Compensation," "Management -- Compensation Plans" and
Notes 7 and 11 of Notes to Financial Statements.

13
<PAGE> 15

SELECTED FINANCIAL DATA

The following selected financial data of the Company are qualified by
reference to and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and with the
Financial Statements, related Notes and other financial information included
elsewhere in this Prospectus. The selected financial data set forth below for
each of the years ended November 30, 1994, 1995 and 1996 and with respect to the
Company's balance sheets as of November 30, 1995 and 1996 are derived from the
Financial Statements of the Company audited by Deloitte & Touche LLP,
independent auditors, which are included elsewhere in this Prospectus. The
selected financial data set forth below for the year ended November 30, 1993 and
with respect to the Company's balance sheet as of November 30, 1994 are derived
from the audited Financial Statements of the Company, which are not included
herein. The selected financial data set forth below for the year ended November
30, 1992 and with respect to the Company's balance sheets as of November 30,
1992 and 1993 are derived from the Company's unaudited financial statements,
which are not included herein. The unaudited financial statements have been
prepared by the Company on a basis consistent with the Company's audited
financial statements and include all adjustments, consisting only of normal
recurring adjustments, that management considers necessary for a fair
presentation of the information for the years presented.

<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-------------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenue............................................ $ -- $ 3,689 $ 4,659 $ 6,640 $15,265
------- ------ ------ ------ ------
Costs and expenses:
Cost of revenue.................................. 233 1,320 1,553 2,307 4,702
Research and development......................... 42 230 289 445 921
Sales and marketing.............................. 94 196 624 1,387 3,526
General and administrative....................... 512 545 827 1,093 1,994
------- ------ ------ ------ ------
Total costs and expenses.................... 881 2,291 3,293 5,232 11,143
------- ------ ------ ------ ------
Income (loss) from operations...................... (881) 1,398 1,366 1,408 4,122
Other income, net.................................. 6 17 17 56 310
------- ------ ------ ------ ------
Income (loss) before income taxes.................. (873) 1,415 1,383 1,464 4,432
Provision for income taxes......................... -- 566 553 585 1,815
------- ------ ------ ------ ------
Net income (loss).................................. (873) 849 830 879 2,617
Accretion of redeemable preferred stock(1)......... -- -- -- -- 392
------- ------ ------ ------ ------
Income (loss) attributable to common
stockholders..................................... $ (873) $ 849 $ 830 $ 879 $ 2,225
======= ====== ====== ====== ======
Net income (loss) per share(2)..................... $ (0.06) $ 0.03 $ 0.03 $ 0.03 $ 0.09
======= ====== ====== ====== ======
Shares used in per share computation(2)............ 14,335 24,678 25,646 26,485 25,850
</TABLE>

<TABLE>
<CAPTION>
NOVEMBER 30,
-----------------------------------------------------
1992 1993 1994 1995 1996
------ ------- ------ ------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and equivalents................................ $ 347 $ 347 $ 770 $2,317 $ 6,341
Working capital..................................... (1,108) (255) 420 944 3,704
Total assets........................................ 622 1,028 2,353 5,046 15,760
Redeemable preferred stock.......................... -- -- -- -- 13,345
Redeemable common stock............................. -- -- -- -- 7,116
Total stockholder's equity (deficiency)............. (833) 48 904 1,798 (14,063)
</TABLE>

- ---------------
(1) See Note 6 of Notes to Financial Statements for an explanation of the
determination of the accretion amount.

(2) See Note 1 of Notes to Financial Statements for an explanation of the method
used to determine earnings per share and the number of shares used to
compute per share amounts.

14
<PAGE> 16

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other parts of this Prospectus contain forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ materially from the results discussed in such forward-looking
statements. Factors that may cause such a difference include, but are not
limited to, those discussed in "Risk Factors."

OVERVIEW

Aspec was founded in December 1991 to develop, market and support a
commercial DIT. Through fiscal 1992, the Company was principally engaged in the
development of its first products and the establishment of customer
relationships. The Company recognized its initial revenue in fiscal 1993 as DIT
products were completed for customers designing gate array-based ASICs. In
fiscal 1993, 1994 and 1995, a substantial portion of the Company's revenue was
derived from the license of DIT products to vertically integrated semiconductor
manufacturers that were seeking to enter the merchant ASIC market. During these
years, the Company also expanded its development efforts. By fiscal 1996, the
Company had enhanced its DIT products for gate array-based ICs and had developed
DIT products for standard cell-based ICs supporting a number of foundry
processes. These developments allowed the Company to expand its customer base to
include other integrated semiconductor companies, fabless semiconductor
companies, electronics systems manufacturers and distributors that sell to such
entities.

Revenue consists primarily of license fees for the Company's DIT products
which are adapted for the specific process technology used by the customer. To a
lesser extent, the Company realizes revenue from service and maintenance fees.
Typically a customer licenses a bundle of products which is accompanied by
design methodology documentation and training. The license of the Company's
products typically involves a lengthy sales cycle of up to 12 months because the
license generally involves a significant commitment of capital by the customer
and because Aspec's DIT is either replacing a customer's proprietary DIT or
introducing an entirely new DIT. These DIT products are licensed to customers on
a per design basis, a per site basis or an enterprise basis. The price for a
typical bundle of products ranges from approximately $50,000 on a per design
basis to over $2.0 million on an enterprise basis.

Engineering efforts devoted to developing products for which revenue is
recognized on a percentage of completion basis are recognized as cost of
revenue. Engineering efforts devoted to developing the Company's core technology
and products not requiring adaptation are recognized as research and development
expense. As a result of its engineering efforts, the Company has developed a
substantial base of technology which the Company is able to reuse in other DIT
product offerings. The Company expects to continue to devote significant
resources to its various engineering efforts.

A significant portion of the Company's revenue is derived from customers
outside the United States, and the Company anticipates that international
revenue will continue to be significant in the future. Specifically, revenue
from customers outside the United States accounted for 83.6%, 54.2% and 65.4% of
revenue in fiscal 1994, 1995 and 1996, respectively. The Company's international
operations are subject to risks inherent in the conduct of international
business, including unexpected changes in regulatory requirements, exchange
rates, export license requirements, tariffs and other barriers, political and
economic instability, limited intellectual property protection, difficulties in
collecting payments due from distributors or customers, difficulties in managing
distributors or representatives, and potentially adverse tax consequences.
Although the Company prices its products and services in United States dollars,
currency exchange fluctuations in countries in which the Company licenses its
products could have a material adverse effect on the Company's business,
operating results or financial condition by resulting in pricing that is not
competitive with products

15
<PAGE> 17

priced in local currencies. To date, currency exchange fluctuations have not had
a material impact on the Company's financial results. See "Risk Factors -- Risks
Associated With International Operations."

In May and June 1996, the Company issued an aggregate of 130,378 shares of
its Series A Redeemable Preferred Stock. The aggregate liquidation and
redemption value of the Series A Redeemable Preferred Stock is approximately
$18.5 million. The Company is accreting the difference between the book value of
the Series A Redeemable Preferred Stock and its redemption value over the period
from the issuance date through the mandatory redemption dates resulting in
accretion of approximately $0.8 million per year. In addition, in connection
with the redemption of all outstanding shares of such Series A Redeemable
Preferred Stock from the proceeds of the offering, the difference between the
book value and the redemption value of approximately $5.0 million will be
recorded as accretion for preferred stock when determining income attributable
to common stockholders and earnings per share. This $5.0 million of accretion
will be recorded in the second quarter of fiscal 1997 when the offering is
completed. See Note 6 of Notes to Financial Statements.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain
statement of operations data of the Company expressed as a percentage of
revenue.

<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.......................................................... 100.0% 100.0% 100.0%
----- ----- -----
Costs and expenses:
Cost of revenue............................................... 33.3 34.7 30.8
Research and development...................................... 6.2 6.7 6.0
Sales and marketing........................................... 13.4 20.9 23.1
General and administrative.................................... 17.8 16.5 13.1
----- ----- -----
Total costs and expenses................................. 70.7 78.8 73.0
----- ----- -----
Income from operations........................................... 29.3 21.2 27.0
Interest income.................................................. 0.4 0.8 2.0
----- ----- -----
Income before income taxes....................................... 29.7 22.0 29.0
Provision for income taxes....................................... 11.9 8.8 11.9
----- ----- -----
Net income....................................................... 17.8% 13.2% 17.1%
===== ===== =====
</TABLE>

COMPARISON OF FISCAL 1994, 1995 AND 1996

Revenue. Revenue increased 42.5% from $4.7 million in fiscal 1994 to $6.6
million in fiscal 1995 as the Company expanded sales of gate array-based DIT
products and initiated sales of standard cell-based DIT products to new
customers. Revenue increased 129.9% from $6.6 million in fiscal 1995 to $15.3
million in fiscal 1996 as the Company continued to expand its sales of standard
cell and gate array DIT products to a broader customer base.

International revenue accounted for 83.6%, 54.2% and 65.4% of revenue in
fiscal 1994, 1995 and 1996, respectively. In fiscal 1994, Thesys Gesellschaft
fur Mikroelektronik mbH ("Thesys"), Sanyo Electric Co., Ltd. ("Sanyo"), Hyundai
Electronics Industries Co., Ltd. ("Hyundai") and Samsung accounted for 28.9%,
21.3%, 19.3% and 12.7% of revenue, respectively. In fiscal 1995, Samsung, NSC
and Yamaha accounted for 18.2%, 17.3% and 15.1% of revenue, respectively. In
fiscal 1996, Asahi Glass accounted for 10.5% of revenue, and the Company's six
largest customers

16
<PAGE> 18

accounted for 51.1% of the Company's revenue in fiscal 1996. The Company
anticipates that the majority of its revenue will be derived from a relatively
small number of customers through fiscal 1997.

Cost of Revenue. Cost of revenue primarily represents the costs of
personnel and other operating expenses incurred in the development and
production of DIT products to customer specifications. Cost of revenue increased
from $1.6 million in fiscal 1994 to $2.3 million in fiscal 1995 and $4.7 million
in fiscal 1996. Cost of revenue has fluctuated from 33.3% of revenue in fiscal
1994 to 34.7% of revenue in 1995 and 30.8% of revenue in fiscal 1996. The
reduction in cost of revenue as a percentage of revenue in fiscal 1996 reflects
increased revenue in the second half of the year from products that did not
require significant adaptation.

Research and Development. Research and development expense represents the
cost of engineering personnel and other operating expenses incurred in the
development and enhancement of the Company's core technology and products not
requiring significant adaptation. Research and development expense increased
from $289,000 in fiscal 1994 to $445,000 in fiscal 1995 and $921,000 in fiscal
1996. These increases primarily reflect increases in engineering personnel and
related expenses. As a percentage of revenue, research and development expense
fluctuated from 6.2% in fiscal 1994 to 6.7% in fiscal 1995 and 6.0% in fiscal
1996. The Company expects research and development expense to increase in
absolute dollars in future periods as the Company expands its engineering
efforts.

Sales and Marketing. Sales and marketing expense consists of salaries,
commissions paid to internal sales and marketing personnel and sales
representative promotional costs and related operating expenses. Sales and
marketing expense increased from $624,000 in fiscal 1994 to $1.4 million in
fiscal 1995 and $3.5 million in fiscal 1996. These increases primarily reflect
the increases in personnel required to support the Company's revenue growth and
increases in agent and sales representative commissions. Sales and marketing
expense fluctuated as a percentage of revenue from 13.4% in fiscal 1994 to 20.9%
in fiscal 1995 and 23.1% in fiscal 1996. The Company expects sales and marketing
expense to increase in absolute dollars in future periods as the Company expands
its sales and marketing efforts.

General and Administrative. General and administrative expense increased
from $827,000 in fiscal 1994 to $1.1 million in fiscal 1995 and $2.0 million in
fiscal 1996. The increases in general and administrative expense in each period
resulted primarily from the addition of new management and administrative
personnel and increased administrative costs to support the Company's growth. As
a percentage of revenue, general and administrative expense decreased from 17.8%
in fiscal 1994 to 16.5% in fiscal 1995 and 13.1% in fiscal 1996 as revenue
increased in each such period. The Company expects general and administrative
expense to increase in absolute dollars in future periods as the Company expands
its operations.

Provision for Income Taxes. The Company's tax rates of 40.0%, 40.0% and
41.0% in fiscal 1994, 1995 and 1996, respectively, approximate the combined
federal and state statutory income tax rates.

17
<PAGE> 19

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth selected statement of operations data for
each of the eight fiscal quarters ended November 30, 1996 as well as the
percentage of the Company's revenue represented by such data. This information
has been derived from the Company's unaudited quarterly financial statements.
The unaudited quarterly financial statements have been prepared on the same
basis as the audited financial statements contained herein and include all
adjustments, consisting only of normal recurring adjustments, that the Company
considers necessary for a fair presentation of such information when read in
conjunction with the Company's annual audited financial statements and notes
thereto appearing elsewhere in this Prospectus. The operating results for any
interim period are not necessarily indicative of results to be expected for any
future period.

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------
FEB. 28, MAY 31, AUG. 31, NOV. 30, FEB. 29, MAY 31, AUG. 31, NOV. 30,
1995 1995 1995 1995 1996 1996 1996 1996
-------- ------- -------- -------- -------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.......................... $1,021 $1,525 $1,553 $2,541 $2,518 $2,840 $4,570 $5,337
------ ------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Cost of revenue................ 513 527 573 694 784 1,000 1,357 1,561
Research and development....... 85 92 107 161 227 211 241 242
Sales and marketing............ 216 256 377 538 577 633 991 1,325
General and administrative..... 211 250 303 329 472 448 500 574
------ ------ ------ ------ ------ ------ ------ ------
Total costs and expenses... 1,025 1,125 1,360 1,722 2,060 2,292 3,089 3,702
------ ------ ------ ------ ------ ------ ------ ------
Income from operations........... (4) 400 193 819 458 548 1,481 1,635
Interest income.................. 4 17 18 17 21 19 199 71
------ ------ ------ ------ ------ ------ ------ ------
Income before income taxes....... -- 417 211 836 479 567 1,680 1,706
Provision for income taxes....... -- 167 84 334 197 232 689 697
------ ------ ------ ------ ------ ------ ------ ------
Net income....................... $ -- $ 250 $ 127 $ 502 $ 282 $ 335 $ 991 $1,009
====== ====== ====== ====== ====== ====== ====== ======

AS A PERCENTAGE OF REVENUE
------
Revenue.......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Cost of revenue................ 50.2 34.6 36.9 27.3 31.1 35.2 29.7 29.3
Research and development....... 8.3 6.0 6.9 6.3 9.0 7.4 5.3 4.5
Sales and marketing............ 21.2 16.8 24.3 21.2 22.9 22.3 21.7 24.8
General and administrative..... 20.7 16.4 19.5 13.0 18.8 15.8 10.9 10.8
------ ------ ------ ------ ------ ------ ------ ------
Total costs and expenses... 100.4 73.8 87.6 67.8 81.8 80.7 67.6 69.4
------ ------ ------ ------ ------ ------ ------ ------
Income from operations........... (0.4) 26.2 12.4 32.2 18.2 19.3 32.4 30.6
Other income, net................ 0.4 1.1 1.2 0.7 0.8 0.7 4.4 1.3
------ ------ ------ ------ ------ ------ ------ ------
Income before income taxes....... -- 27.3 13.6 32.9 19.0 20.0 36.8 31.9
Provision for income taxes....... -- 10.9 5.4 13.1 7.8 8.2 15.1 13.0
------ ------ ------ ------ ------ ------ ------ ------
Net income....................... --% 16.4% 8.2% 19.8% 11.2% 11.8% 21.7% 18.9%
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

The Company's revenue increased on a quarterly basis from the first quarter
of fiscal 1995 to the fourth quarter of fiscal 1996 except for a slight decrease
from the fourth quarter of fiscal 1995 to the first quarter of fiscal 1996. For
the eight quarter period, a substantial majority of the revenue was derived from
gate array products sold to merchant ASIC companies. The percentage of revenue
from semiconductor companies other than ASIC companies fluctuated during the
periods but in general, increased during the four quarters of fiscal 1996.
Revenue in the third quarter of fiscal 1996 increased from the second quarter of
fiscal 1996 because of increased revenue from gate array products sold to
merchant ASIC customers. Revenue continued to grow in the fourth quarter of
fiscal 1996 primarily because of increased revenue from standard cell products
sold to new customers.

18
<PAGE> 20

Cost of revenue increased on a quarterly basis from the first quarter of
fiscal 1995 to the fourth quarter of fiscal 1996. As a percentage of revenue,
cost of revenue has fluctuated over this period but generally has declined as a
percentage of revenue. The reduction in cost of revenue as a percentage of
revenue in the third and fourth quarters of fiscal 1996 reflects increased
revenue from products that did not require significant adaptation.

Research and development expense generally increased in absolute dollars
over the eight quarter period but fluctuated as a percentage of revenue. As a
percentage of revenue, research and development expenses declined in the third
and fourth quarter of fiscal 1996 due to rapid revenue growth.

Sales and marketing expense increased in each of the eight quarters as the
Company established a North American direct sales force and relationships with
distributors and sales representatives in North America and Asia. Selling and
marketing expense increased substantially in the third and fourth quarters of
fiscal 1996 due to commissions paid to sales representatives in Taiwan and
Singapore and increased commissions paid to employees in North America
associated with increased revenue in those periods.

General and administrative expense generally increased in absolute dollars
as the Company increased its administrative efforts to manage its growth and
decreased as a percentage of revenue due to more rapidly increasing revenue in
the quarters shown.

Interest income increased substantially in the third quarter of fiscal 1996
because of interest on the proceeds of sales of the Company's stock. Interest
income decreased in the fourth quarter of fiscal 1996 as the Company used funds
to repurchase common stock.

The Company's operating results have fluctuated in the past and are
expected to fluctuate significantly from quarter to quarter and on an annual
basis in the future as a result of a number of factors including the size and
timing of customer orders; the Company's ability to achieve progress on
percentage of completion contracts; the length of the Company's sales cycle;
timing of new product announcements and introductions by the Company and its
existing or future competitors; the Company's ability to develop, introduce and
market new products and product enhancements; market acceptance of the Company's
products; and general economic conditions. The Company's future operating
results are expected to fluctuate as a result of these and other factors, which
could have a material adverse effect on the Company's business, operating
results and financial condition. It is likely that in some future quarter the
Company's operating results will be below the expectations of public market
analysts and investors. In such event, the price of the Company's Common Stock
would likely decline, perhaps substantially.

19
<PAGE> 21

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations to date with cash flow from
operations and through the private sale of equity securities. Net cash provided
by operating activities was $780,000, $2.1 million and $4.6 million in fiscal
1994, 1995 and 1996, respectively. Cash provided by operating activities
included net income of $830,000, $879,000 and $2.6 million in fiscal 1994, 1995
and 1996, respectively, increases in deferred revenue of $1.3 million and $3.0
million in fiscal 1995 and 1996, respectively, increases in accrued liabilities
of $293,000 and $1.3 million in fiscal 1995 and 1996, respectively, increases in
taxes payable of $424,000, $415,000 and $1.0 million in fiscal 1994, 1995 and
1996, respectively, offset in part by increased accounts receivable of $687,000,
$762,000 and $3.9 million in fiscal 1994, 1995 and 1996, respectively.

Cash used in investing activities resulted primarily from additions to
property and equipment. Purchases of property and equipment, consisting
primarily of computer equipment and software, were $376,000, $594,000 and $2.5
million in fiscal 1994, 1995 and 1996, respectively. The Company expects to
invest approximately $4.0 million in computer equipment and software in the next
twelve months.

Cash provided from financing activities was $1.9 million in fiscal 1996. In
fiscal 1996, the Company sold $13.0 million of its Series A redeemable preferred
stock, $2.0 million of common stock and $7.1 million of redeemable common stock.
In fiscal 1996, the Company repurchased $20.2 million of common stock from
certain founders. See "Certain Transactions."

As of November 30, 1996, the Company had working capital of $3.7 million
and cash and equivalents of $6.3 million. The Company has a bank line of credit
which provides for borrowings of up to $1.0 million through July 1, 1997. As of
November 30, 1996, the Company had no outstanding indebtedness under its line of
credit and no long-term commitments other than operating lease obligations.

The Company believes that the net proceeds from the offering, together with
existing cash balances and funds expected to be generated from operations, will
provide the Company with sufficient funds to finance its operations through at
least the next twelve months.

20
<PAGE> 22

BUSINESS

This Business section and other parts of this Prospectus contain
forward-looking statements that involve risks and uncertainties. The Company's
actual results may differ materially from the results discussed in such
forward-looking statements. Factors that may cause such a difference include,
but are not limited to, those discussed in "Risk Factors."

INTRODUCTION

Aspec is a leading provider of commercially available DIT solutions for IC
design. DIT consists of libraries of electrical circuits, often called cell
libraries, based on proprietary architectures, and a design methodology, which
together enable IC designers to implement the physical design of an IC in
silicon. Aspec's DIT supports many leading EDA tools and advanced process
technologies at leading semiconductor foundries. Aspec's DIT is designed to: (i)
facilitate the rapid design of complex, high-performance ICs in advanced process
technologies, (ii) provide an integrated design solution that increases
productivity, (iii) preserve existing EDA investments and (iv) allow customers
to access multiple foundries for cost control and alternate sourcing. Aspec's
DIT provides designers with quick access to accurate and complete cell libraries
at a lower cost than developing an equivalent internal solution. Aspec's DIT
includes its AdverPro design verification software which enables EDA tools to
exchange data while maintaining design intent, provides an accurate timing
function across EDA tools and helps to ensure compliance with proper design
procedures.

INDUSTRY BACKGROUND

Semiconductors have become a critical component of technology in numerous
electronic products manufactured today. Advances in semiconductor technology
have contributed to the rapid proliferation of personal computers, consumer
electronics, networking equipment, cellular telephones and other communications
devices, as well as a variety of medical, scientific and industrial instruments.
Moreover, complex electronics products continue to be introduced at rapid rates
while increasing worldwide competition continues to shorten product life cycles.
These developments have driven continued improvements in IC design methodologies
and manufacturing process technologies, enabling the design and fabrication of
smaller, faster, more complex ICs that are produced more rapidly and at a lower
cost per function. These trends have also resulted in a significant change in
the semiconductor industry as fewer IC companies are adopting a vertically
integrated approach to design and manufacturing and are instead relying on
third-party specialists for their EDA tools and semiconductor foundries for
their manufacturing needs.

The emergence of ASIC companies in the 1980s is a key example of
specialization in the semiconductor industry. Prior to this emergence,
semiconductor companies were typically vertically integrated and were
responsible for all aspects of the IC development process from design to
manufacturing. ASIC companies developed a new approach that allowed their
customers to define the functional logic of an IC while the ASIC company
performed the physical level design and manufactured the IC.

The ASIC design model relies upon EDA tools, captive wafer foundries and a
process for implementing the physical design in silicon. This process is known
as DIT. DIT consists of (i) a set of electrical circuit libraries, (ii) a common
design architecture upon which these libraries are based and (iii) an overall
design methodology. The circuit libraries define the physical and operating
parameters of the individual logic elements which are the core building blocks
of an IC. These libraries are based on a proprietary architecture that consists
of a set of circuit-level design rules which specify certain key operating and
physical characteristics of the individual electrical components which comprise
these logic elements. The quality of the architecture determines in large part
the circuit's operating performance and power consumption and its ability to
perform as expected when implemented in silicon. The design methodology is a set
of chip-level design guidelines and rules that determine how the circuit
libraries are used in conjunction with EDA tools

21
<PAGE> 23

to produce the IC design in silicon. The quality of the design methodology
substantially determines the IC designer's ability to successfully complete the
design and provide for successful manufacturing in a timely manner. The success
that ASIC companies experienced using DIT-based design models influenced
traditional IC companies to adopt a similar model. Today virtually every IC is
developed using EDA tools and DIT.

The following chart illustrates the IC design process and how DIT forms an
integral part of this process:

[A graphical diagram appears here that depicts the steps in the
IC manufacturing
process and how EDA tools and DIT interact with such process.]

Development of a DIT requires highly specialized expertise in IC design,
EDA tools and foundry processes and is complicated for a number of reasons.
First, each step in the IC design process requires at least one specialized EDA
tool, and a complex design typically requires more than ten different tools.
Each EDA tool uses the circuit libraries to perform its analysis. However, each
EDA tool utilizes the same base library in a different format and, therefore, a
design may require access to more than 30 different formats of libraries.
Additionally, each IC designer usually selects EDA tools from different vendors
to optimize the requirements of a specific design process. However, different
tools do not easily interface with each other. Thus, a DIT must also effectively
manage the interrelationship among multiple EDA tools.

In addition, DIT must be reconfigured for each semiconductor process
technology and also for each semiconductor manufacturer used by the IC designer.
For example, to migrate from a manufacturer's 0.5m to a 0.35m process, each
library must be reconfigured, which requires reoptimization of circuit size and
physical layout. This reconfiguration involves significant engineering resources
and time to complete. The reconfiguration process becomes especially complex for
deep submicron designs, which are required to satisfy the demands of smaller,
faster and more complex ICs.

IC designers utilize various methods to meet their DIT requirements. ASIC
vendors and IC companies typically rely on internally developed DIT solutions.
Electronic systems manufacturers such as PC companies rely on ASIC companies for
DIT. However, it is becoming increasingly difficult for these methods to meet
the challenges of increased design complexity and increased time-to-market
pressures which confront IC designers. ASIC vendors and IC companies are also
finding it increasingly impracticable, costly and time consuming to develop and
maintain their own proprietary DIT. In addition, ASIC vendors and IC companies
find it increasingly difficult to allocate sufficient resources to DIT as more
and more resources are required for complex semiconductor design. Electronic
systems manufacturers are finding it desirable to control the intellectual
property content of their designs, to more rapidly adopt new process
technologies and effectively integrate the various steps in their design flows
and, consequently, to decrease the time-to-market for their products. Thus,
these companies are increasingly seeking a third-party solution to their DIT
requirements.

ASPEC SOLUTION

Aspec is a leading provider of commercially available DIT solutions for IC
design. Aspec's DIT supports many leading EDA tools and advanced process
technologies at leading semiconductor foundries. Aspec's DIT is designed to: (i)
facilitate the rapid design of complex, high-performance ICs in advanced process
technologies, (ii) provide an integrated design solution that increases
productivity, (iii) preserve existing EDA investments and (iv) allow customers
to access multiple foundries for cost control and alternate sourcing. The
Company also believes its DIT enables IC

22
<PAGE> 24

companies to create high quality, reliable and high performance ICs while
reducing time-to-market and lowering production and design costs. Aspec's DIT
solution provides quick access to accurate and complete cell libraries at lower
cost than developing an equivalent internal solution. Aspec's DIT also includes
its AdverPro design verification software which enables EDA tools to exchange
data while maintaining design intent, provides an accurate timing function
across EDA tools and helps to ensure compliance with proper design procedures.
Aspec's DIT is also designed to facilitate the porting of circuit designs to
different foundries and process technologies quickly and at reduced cost, which
can be accomplished using Aspec's QuickPort software. The Company believes its
products provide the following benefits:

Access to Sophisticated Process Technology. Companies obtain access to
advanced process technology quickly and cost effectively by licensing Aspec's
DIT. By selecting a commercial solution, companies are able to dedicate more of
their internal engineering resources to semiconductor design. Aspec reconfigures
and optimizes its architecture and libraries for leading foundries and IC
manufacturers.

Control of Intellectual Property and Design. With Aspec's DIT, IC
designers can establish a standard DIT for all of their design processes and
maintain ownership of the intellectual property content of their designs.
Aspec's DIT also enables electronic systems manufacturers to exercise control
over their designs instead of relying on ASIC companies to control the design
process. This control is especially critical as the time-to-market for new
products continues to contract.

Support of Leading EDA Software Tools. Aspec's DIT supports many leading
third-party EDA tools including those from Avant! Corporation ("Avant!"),
Cadence Design Systems, Inc. ("Cadence"), Epic Design Technology, Inc. ("Epic"),
Mentor Graphics Corp. ("Mentor"), Synopsys Inc. ("Synopsys") and Viewlogic
Systems Inc. ("Viewlogic"). This open DIT structure enables EDA tools from
different vendors to interface with one another and permits an IC designer to
select the best tool for each step in the design process. Aspec's DIT also
enables an IC designer to exchange data between different design processes even
if different tools are used in each flow. By supporting a range of EDA tools,
Aspec enables an IC designer to preserve the substantial investment made to
acquire such tools.

Facilitation of Deep Submicron Design. Aspec's DIT helps ensure that EDA
tools and design processes work together to design complex deep submicron ICs.
As an integral part of its DIT, Aspec's AdverPro software provides the interface
that enables EDA tools to exchange data while maintaining design intent. As part
of this interface, AdverPro is designed to provide an accurate timing function
across EDA tools which is a critical requirement for deep submicron design.
Aspec's DIT is also designed to help to ensure compliance with proper design
procedures and enables the IC designer to develop a logic description which is
qualified for physical layout.

Design Portability. Aspec's DIT is designed to enable circuit designs to
be transferred from one process technology to another. The increasing demand for
semiconductor manufacturing capacity and access to advanced process technology
has created a strong demand for second sourcing alternatives. However, the
process of reconfiguring a design to a new manufacturing source requires many
weeks of engineering time. Aspec's QuickPort software can significantly reduce
this reconfiguration time by providing IC designers with the flexibility to port
their designs across multiple foundries and process technologies.

STRATEGY

The Company's objective is to expand its position as a leading provider of
commercial DIT solutions for the semiconductor industry. To achieve this
objective, the Company has adopted the following strategies:

Establish Aspec DIT as an Industry Standard. Aspec believes it was one of
the first companies to deliver commercial DIT solutions for the semiconductor
industry and is committed to establish-

23
<PAGE> 25

ing its DIT as an industry standard. Aspec's DIT provides an open solution by
supporting many leading EDA tools and process technologies at leading
semiconductor foundries. The Company's DIT allows its customers to complete
their designs rapidly and precisely, to preserve their existing investment in
EDA tools and to utilize cost-effectively multiple foundries. Aspec believes its
DIT is well-positioned to become an industry standard because many of its
existing and potential competitors are dedicated to one EDA tool supplier.

Maintain Technological Leadership. Aspec's goal is to maintain its
position as a leader in providing commercial DIT solutions by rapidly developing
new versions of its products to support the most advanced EDA tools and emerging
deep submicron process technologies. The Company is continuing to enhance its
DIT and to add functionality to its AdverPro software to meet the challenges of
new processes. Aspec is also developing selected specialized software tools that
enhance its DIT and is developing a process that facilitates the creation of
enhanced cell libraries. The Company intends to continue to recruit and retain
key technical personnel who have the experience and skills to strengthen Aspec's
position as the leader in commercial DIT development.

Broaden Customer Base. Aspec's goal is to expand its customer base by
leveraging the products and expertise it initially developed to meet the
requirements of vertically integrated semiconductor companies that were seeking
to enter the merchant ASIC market. Specifically, the Company is targeting its
sales and marketing efforts towards fabless semiconductor companies that have
historically relied on internal resources to meet their DIT needs. Due to the
increasing cost of such proprietary DITs and the shortening product life cycles
for their products, Aspec believes that these companies will increasingly seek a
third-party solution to their DIT requirements. Aspec is also targeting
electronic systems manufacturers that currently rely on ASIC vendors for DIT. By
utilizing Aspec's DIT, electronic systems manufacturers can more effectively
control the intellectual property content of their designs.

Promote Long-Term Commercial Relationships. A key element of Aspec's
strategy is to cultivate long-term relationships with its customers, leading
semiconductor foundries and EDA tool companies. Aspec believes that
relationships with key industry participants will enhance its ability to
establish its DIT as an industry standard. The Company emphasizes commercial and
technical discussions to receive feedback on products, support and market
requirements. The Company believes the breadth and quality of this information
is a valuable source of strategic direction and validation.

PRODUCTS AND SERVICES

Aspec markets a suite of DIT products on a per silicon process basis to its
customers. These products include electrical circuit libraries, memory compilers
and AdverPro. Typically a customer licenses a bundle of products which is
accompanied by design methodology documentation and training. These products are
also licensed separately. Aspec's DIT products include licenses for libraries
for logic functions based on gate array/embedded array or standard cell
architectures, input/output ("I/O") functions, compilers to automatically
generate memory blocks and software that ensures that various commercially
available EDA tools work together to accurately produce the IC design in
silicon. In addition, Aspec provides software that enables the portability of
designs as well as various design services and consulting to its DIT licensees
on a per project basis. The Company's products, which run on UNIX workstations
and Windows NT-based PCs, support over 30 industry standard EDA tools, including
those produced by Avant!, Cadence, Epic, Mentor, Synopsys and Viewlogic.

A description of the Company's principal products and services is provided
below:

HDA Libraries. High Density Array ("HDA") is Aspec's proprietary,
patented gate array/ embedded array architecture for silicon processes from
0.8m to 0.35m and smaller. Benchmarks have shown HDA to be 10% to 50%
denser than competitive offerings. In addition, various HDA circuit design
features enable designers to complete the layout of the design faster than
other

24
<PAGE> 26

gate array architectures. With an HDA license, the customer obtains access
to silicon process optimized libraries for commonly used logic functions,
such as Boolean logic.

HDC Libraries. High Density Cell ("HDC") is Aspec's proprietary
standard cell architecture for silicon processes from 0.6m to 0.5m.
Compared to other proprietary or commercially available standard cell
libraries, Aspec's HDC requires less interconnection (routing) overhead. As
a result, not only is an HDC-based IC smaller than competitive offerings,
it is also faster and requires less power. With an HDC license, the
customer obtains access to silicon process optimized libraries for commonly
used logic functions.

SSC Libraries. Super Standard Cell ("SSC") is Aspec's recently
introduced, proprietary standard cell architecture for deep submicron
processes from 0.35m and smaller. When using the same process technology,
SSC libraries will usually be 15% smaller than Aspec's HDC libraries. In
addition, ICs implemented in SSC libraries will consume less power and
yield higher performance, due to library features that are designed to take
advantage of silicon processes from 0.35m and smaller. With an SSC license,
the customer obtains access to silicon process optimized libraries for
commonly used logic functions.

I/O Circuit Libraries. Aspec offers a set of silicon process
optimized circuit libraries for commonly used I/O functions for silicon
processes from 0.8m to 0.35m and smaller. These I/O libraries enable Aspec
customers to provide interconnection to other ICs in the system. As these
interconnections have become more application specific, Aspec has developed
specialized I/O libraries for these interfaces.

Each of these cell and I/O libraries is licensed on a per silicon
process basis, and prices range from $100,000 to over $800,000.

Memory Compilers. Most IC designs contain large blocks of memory to
store data. Aspec offers various memory compilers which automate the
process of creating these memory blocks. As with all other libraries, the
memory compilers are optimized for each silicon process. Prices for memory
compilers range from $100,000 to $450,000.

EDA Design Kits. In the IC development process, the designer uses
many EDA tools. Each of these EDA tools requires that the HDA/HDC/SSC
libraries, I/O libraries and memory blocks be described in a way that is
understood by the EDA tools. Collectively, these different representations
are called EDA Design Kits. Aspec's design kits can support more than 30
different EDA tools. EDA design kits are typically licensed with cell and
I/O libraries. The price of each EDA design kit ranges from $10,000 to over
$250,000, depending upon how many EDA tools are supported.

AdverPro. Aspec's AdverPro software is designed to manage the design
process, provide an accurate timing function across EDA tools and help
ensure compliance with proper design procedures. AdverPro is sold as
licensed software, and its price ranges from $45,000 for a single user
license to over $1,000,000 for an enterprise license.

QuickPort. Aspec's QuickPort software is designed to enable an IC
company to economically and timely port a design developed in Aspec's DIT
from one silicon process to another. QuickPort also enables the transfer of
circuit designs from one IC to another by providing for the reuse of
designs developed in Aspec's DIT. QuickPort is sold as licensed software,
and its price ranges from $100,000 for a single user license to $500,000
for an enterprise license.

ASIC Design Service. Aspec maintains a design center to test the
functionality of its software and to assist customers that lack experience
in completing full circuit designs. These design services are offered on a
per project basis.

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<PAGE> 27

Foundry Processes Supported by Aspec

Aspec's DIT supports many of the world's leading semiconductor foundries,
including Chartered Semiconductor Manufacturing Ltd., International Business
Machines Corp. ("IBM"), Taiwan Semiconductor Manufacturing Corp. ("TSMC") and
United Microelectronics Corporation ("UMC"), thus offering its customers a wide
variety of manufacturing sources. Aspec's DIT products are generally licensed on
a per process technology basis and are available to support submicron processes
from 0.8m to 0.35m, depending on the foundry.

CUSTOMERS

Aspec's principal customers include vertically integrated semiconductor
companies, fabless semiconductor companies and semiconductor foundries. The
Company has been dependent on a relatively small number of customers for a
substantial portion of its annual revenue. In fiscal 1995, Samsung, NSC and
Yamaha accounted for 18.2%, 17.3% and 15.1%, respectively, of the Company's
revenue. In fiscal 1996, Asahi Glass accounted for 10.5% of the Company's
revenue, and the Company's six largest customers accounted for 51.1% of the
Company's revenue. The Company anticipates that the majority of its revenue will
be derived from a relatively small number of customers through fiscal 1997. None
of the Company's customers has a written agreement with the Company that
obligates it to license additional products or to renew its maintenance
agreement, and there can be no assurance that any customer will purchase
additional software licenses or renew its maintenance agreement. See "Risk
Factors -- Customer Concentration."

The following is a representative list of Aspec's customers, each of which
represented at least $100,000 of the Company's revenue in fiscal 1996.

<TABLE>
<S> <C>
ASIC COMPANIES IC COMPANIES
Asahi Glass Co., Ltd. Analog Devices, Inc.
Hyundai Electronics Industries Co., Ltd. Accton Technology Corp./Bridgecom
National Semiconductor Corporation Cirrus Logic, Inc.
Samsung Electronics Co., Ltd. CommQuest Technologies, Inc.
Sanyo Electric Co., Ltd. Integrated Circuit Systems, Inc.
Tritech Microelectronics International, Inc. Integrated Device Technology Corporation
Yamaha Corporation Media Reality Technologies, Inc.
PMC-Sierra, Inc.
EDA COMPANIES Siliconians, Inc.
TranSwitch Corp.
Cadence Design Systems, Inc. Welldo Strong Ltd./Beijing
Microelectronics
ELECTRONIC SYSTEMS MANUFACTURERS Institute
Acer Laboratories, Inc. Winbond Electronic Ltd.
Compaq Computer Corporation
</TABLE>

SALES AND MARKETING

The Company's current and potential customers are principally located in
North America, Asia, Japan and Korea. The Company markets its products in North
America, Japan and Korea primarily through its direct sales force. The Company
employs highly skilled engineers and technical sales persons capable of serving
the sophisticated needs of its customers. In addition to its direct sales and
marketing efforts, the Company participates in industry trade shows and seminars
to promote the adoption of its products. In Asia and Europe, the Company markets
its products primarily through a limited number of independent distributors that
license and service the Company's products in these markets. The Company also
supports these distributors with technical, sales and management personnel.

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<PAGE> 28

International revenue accounted for 83.6%, 54.2% and 65.4% of the revenue
in fiscal 1994, 1995 and 1996, respectively. The Company expects that
international revenue will continue to account for a significant portion of its
revenue in the future. The Company intends to continue to expand its sales and
marketing activities in Asia and Europe. The Company's international business
involves a number of risks, including the impact of possible recessionary
environments in economies outside the United States, political and economic
instability, exchange rate fluctuations, longer receivables collection periods
and greater difficulty in accounts receivable collection from distributors and
customers, difficulty in managing distributors or sales representatives,
unexpected changes in regulatory requirements, reduced or limited protection for
intellectual property rights, export license requirements, tariffs and other
trade barriers and potentially adverse tax consequences. There can be no
assurance that the Company will be able to sustain or increase revenue derived
from international licensing and service or that the foregoing factors will not
have a material adverse effect on the Company's business, operating results and
financial condition. Although the Company prices its products and services in
United States dollars, currency exchange fluctuations in countries in which the
Company licenses its products could have a material adverse effect on the
Company's business, operating results and financial condition by resulting in
pricing that is not competitive with products priced in local currencies. See
"Risk Factors -- Risks Associated With International Operations."

The Company licenses its software to customers under nonexclusive
agreements that do not transfer title and that restrict use of the products to
specified purposes. The Company offers customers the option of licensing its
products enterprise-wide or for use at a particular site or on designated
computers at specific sites. License fees are dependent on the type of license,
product mix and number of copies of each product subject to the license.

CUSTOMER SUPPORT

The Company provides customers with technical support as well as training
and consulting services. The Company believes that a high level of customer
service and support is important to the adoption and successful utilization of
its products. The Company's customers typically pay an additional fee for
maintenance agreements that entitle them to technical support and periodic
product upgrades. The Company also offers additional training and consulting
services on a fee basis. To address technical issues, the Company has
established a technical support group comprised of field and headquarters
applications engineers who understand the design methodologies of the Company's
customers. Through its technical support group, the Company provides customers
with software updates, documentation updates and assistance with problem
identification and resolution.

RESEARCH AND DEVELOPMENT

The Company believes that its future competitive position will depend in
large part on its ability to quickly and cost effectively develop new products,
maintain and enhance its current product line, maintain technological
competitiveness and meet an expanding range of customer requirements. During
fiscal 1994, 1995 and 1996, research and development expenses were $289,000,
$445,000 and $921,000, respectively. Aspec is committed to devoting significant
resources to research and development. To date, all software development costs
have been expensed as incurred. The Company's research and development efforts
are focused on continued development of proprietary cell architecture,
enhancements to existing software designs and support of additional design
flows.

The Company's customers operate in the semiconductor industry, which is
subject to rapid technological change, frequent introductions of new products,
short product life cycles, changes in customer demand and requirements and
evolving industry standards. The introduction of products embodying new
technologies and the emergence of new industry standards can render existing
products obsolete and unmarketable. Accordingly, the Company's future success
will depend on its ability to continue to enhance its existing products and to
develop and introduce new products that

27
<PAGE> 29

satisfy increasingly sophisticated customer requirements and that keep pace with
product introductions by EDA tool companies, emerging process technologies and
other technological developments in the semiconductor industry. Any failure by
the Company to anticipate or respond adequately to changes in technology or
customer requirements, or any significant delays in product development or
introduction, would have a material adverse effect on the Company's business,
operating results and financial condition. There can be no assurance that the
Company will be successful in its product development efforts, that the Company
will not experience difficulties that could delay or prevent the successful
development, introduction and sale of new or enhanced products or that such new
or enhanced products will achieve market acceptance. The Company has in the past
experienced delays in the release dates of certain of its products. If release
dates of any new significant products or product enhancements are delayed, the
Company's business, operating results and financial condition would be
materially adversely affected. The Company could also be exposed to litigation
or claims from its customers in the event it does not satisfy its delivery
commitments. There can be no assurance that any such claim will not have a
material adverse effect on the Company's business, operating results and
financial condition. See "Risk Factors -- Dependence Upon Continuous Product
Development; Risk of Product Delays."

COMPETITION

The market for commercial DIT products is new and emerging, and the Company
has few direct competitors. The Company principally competes with the
engineering departments of potential customers that develop and maintain
internally developed DIT. Certain of the Company's other potential customers
rely on proprietary DIT developed and maintained by ASIC vendors. Although the
Company believes that none of its competitors offer a complete DIT solution, the
Company's current competitors with respect to one or more aspects of its DIT
solution include Cascade, Compass, Si-Arc and VLSI Libraries. In addition,
certain semiconductor foundries currently offer or may in the future offer one
or more elements of a DIT solution. The Company does not offer EDA tools, and
its products are designed to be compatible with leading EDA tools. The Company
expects that the market for its products will become increasingly competitive in
the future. Among the Company's potential competitors are a number of large
vertically integrated semiconductor companies and numerous EDA software
companies that may develop products that compete with those of the Company.
Increased competition could eventually result in price reductions or reduced
operating margins which could materially adversely affect the Company's
business, operating results and financial condition. Many of the Company's
potential competitors have significantly greater financial, technical, marketing
and other resources than the Company. As a result, they may be able to respond
more quickly to new or emerging technologies and to changes in customer
requirements, or to devote greater resources to the development, promotion and
sale of their products than can the Company. There can be no assurance that the
Company will be able to compete successfully against current or future
competitors or that competitive pressures will not materially adversely affect
the Company's business, operating results and financial condition. The Company
believes the principal elements of competition in its market are the range of
EDA tools and process technologies supported, technological leadership, product
functionality, the level of technical support provided, software reliability and
price. The Company believes that it competes favorably with respect to each of
these factors. See "Risk Factors -- Competition."

PROPRIETARY RIGHTS

The Company's success is dependent on its ability to protect its
proprietary technology. The Company relies upon a combination of copyright,
patent, trade secret and trademark laws to protect its proprietary technology.
The Company enters into confidentiality agreements with its employees,
distributors and customers and limits access to and distribution of the source
code to its software and other proprietary information. There can be no
assurance that the steps taken by the Company in this regard will be adequate to
prevent misappropriation of its technology or that the Company's competitors
will not independently develop technologies that are substantially equivalent or

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<PAGE> 30

superior to the Company's technology. Any such misappropriation of the Company's
technology or development of competitive technologies could have a material
adverse effect on the Company's business, operating results and financial
condition. Despite the Company's efforts to protect its proprietary rights,
there can be no assurance that the Company will be able to protect its
proprietary rights against unauthorized third party copying or use, and attempts
may be made to copy or reverse engineer aspects of the Company's products or to
obtain and use information that the Company regards as proprietary. Policing the
unauthorized use of the Company's products is difficult and the Company could
incur substantial costs in protecting and enforcing its intellectual property
rights. Litigation may be necessary in the future to enforce the Company's
intellectual property rights, to protect the Company's trade secrets or to
determine the validity and scope of the proprietary rights of others. Such
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, operating
results and financial condition.

As of February 28, 1997, the Company held three U.S. patents which expire
from 2012 to 2013 and had six U.S. patent applications pending. The Company also
has 13 patent applications pending in various foreign jurisdictions. The Company
expects to continue to file patent applications where appropriate to protect its
proprietary technologies; however, the Company believes that its continued
success depends primarily on factors such as the technological skills and
innovation of its personnel rather than on its patents. The process of seeking
patent protection can be expensive and time consuming. There can be no assurance
that patents will issue from pending or future applications or that, if issued,
such patents will not be challenged, invalidated or circumvented, or that rights
granted thereunder will provide meaningful protection or other commercial
advantage to the Company. Moreover, there can be no assurance that any patent
rights will be upheld in the future or that the Company will be able to preserve
any of its other intellectual property rights. In addition, the laws of certain
countries in which the Company's products are licensed or distributed do not
protect the Company's products and intellectual property rights to the same
extent as the laws of the United States. Accordingly, effective trademark and
patent protection may be unavailable in certain foreign countries.

EMPLOYEES

As of November 30, 1996, the Company had 90 employees, including 51 in
operations, 12 in research and development, 18 in sales and marketing and 9 in
finance and administration. None of the Company's employees is represented by a
collective bargaining agreement, nor has the Company experienced any work
stoppage. The Company considers its relations with its employees to be good.

FACILITIES

The Company occupies approximately 29,000 square feet of office space in
Sunnyvale, California, pursuant to a lease which expires in November 2001. The
Company believes that its existing facility is adequate for its current needs
but that it may need to seek additional space in the future. The Company
believes that suitable additional or alternative space will be available in the
future on commercially reasonable terms as needed.

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<PAGE> 31

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information regarding the executive
officers and directors of the Company as of February 28, 1997:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Conrad J. Dell'Oca............... 55 President, Chief Executive Officer and Chairman of
the Board
Jai P. Shin...................... 54 Executive Vice President, Business Development and
Director
Perry G. Constantine............. 53 Executive Vice President, Worldwide Sales and
Marketing
Patrick Y. Yin................... 46 Senior Vice President, Engineering
James T. Lindstrom............... 50 Vice President, Finance and Administration and Chief
Financial Officer
Y.S. Fu(1)....................... 48 Director
Walter G. Kortschak(1)(2)........ 37 Director
Cheng Ming Lee................... 53 Director
Jeffrey D. Saper(2).............. 48 Director
</TABLE>

- ---------------
(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

Mr. Dell'Oca has served as President and a director of the Company since
January 1992 and as Chief Executive Officer of the Company since February 1992.
In addition, since February 1997, Mr. Dell'Oca has served as Chairman of the
Board. From May 1981 to 1991, Mr. Dell'Oca was Vice President, Research and
Development of LSI Logic Corporation ("LSI Logic"), a semiconductor
manufacturer. Mr. Dell'Oca received a B.A.Sc. and M.A.Sc. in Engineering Physics
and a Ph.D. in Electrical Engineering from the University of British Columbia.

Mr. Shin has served as Executive Vice President, Business Development of
the Company since November 1996. From January 1992 to February 1997, Mr. Shin
served as Vice President, Business Development of the Company, and from January
1992 to November 1996, Mr. Shin served as Chief Financial Officer of the
Company. From January 1986 to December 1989, Mr. Shin served as President of LSI
Logic Korea. Mr. Shin received a B.A. in Economics from San Jose State
University.

Mr. Constantine has served as Executive Vice President, Worldwide Sales and
Marketing of the Company since June 1996. From January 1993 to April 1996, Mr.
Constantine served as President and Chief Executive Officer of Redwood
Microsystems, Inc., a microfabrications company. From June 1990 to January 1993,
Mr. Constantine worked as an independent semiconductor industry analyst. From
March 1988 to June 1990, Mr. Constantine held a variety of positions at LSI
Logic, most recently serving as President and Chief Executive Officer of LSI
Logic Canada. Mr. Constantine received a B.S.E.E. from the Illinois Institute of
Technology.

Mr. Yin has served as Senior Vice President, Engineering of the Company
since February 1997. From January 1992 to February 1997, Mr. Yin served as Vice
President, Engineering. From July 1989 to November 1991, Mr. Yin served as
Design Group Manager of Chips and Technologies, Inc., a supplier of
semiconductor and software solutions. From October 1981 to July 1989, Mr. Yin
served as Director of Engineering of LSI Logic. Mr. Yin received an A.C.G.I. in
Electrical Engineering from the Imperial College of Science and Technology and a
B.Sc.E.E. from the University of London.

Mr. Lindstrom has served as Vice President, Finance and Administration and
Chief Financial Officer of the Company since November 1996. From August 1992 to
November 1996, Mr. Lindstrom served as Vice President, Finance and Chief
Financial Officer of Trident Microsystems, Inc., a

30
<PAGE> 32

semiconductor design company. From February 1990 to August 1992, he served as
Vice President, Finance and Chief Financial Officer of C-Cube Microsystems,
Inc., a semiconductor design company. Mr. Lindstrom received a B.S. in Finance
from the University of California, Berkeley and an M.B.A. from the University of
Southern California.

Mr. Fu has been a director of the Company since May 1996. Since January
1996, Mr. Fu has served as Partner of WK Technology. WK Technology manages a
number of venture capital funds, including WK Technology Fund, WK Technology
Fund II, WK Technology Fund III and WK Technology Fund IV, which are principal
stockholders of the Company. From April 1993 to December 1995, Mr. Fu served as
Senior Vice President, Worldwide OEM Division and Chairman of the Board of
Logitech Far East Ltd. ("Logitech Far East"), a computer hardware manufacturer.
From January 1992 to April 1993, Mr. Fu served as General Manager and Chairman
of the Board of Logitech Far East. From July 1986 to January 1992, Mr. Fu served
as General Manager of Logitech Far East.

Mr. Kortschak has been a director of the Company since May 1996. Mr.
Kortschak is a General Partner of Summit Partners, L.P., where he has been
employed since June 1989. Summit Partners and its affiliates manage a number of
venture capital funds, including Summit Ventures IV, L.P. and Summit Investors
III, L.P., which are principal stockholders of the Company. Mr. Kortschak also
serves as a director of Diamond Multimedia Systems, Inc., HMT Technology
Corporation, McAfee Associates, Inc., Mecon, Inc. and Simulation Sciences, Inc.

Mr. Lee has been a director of the Company since October 1996. Since
January 1997, Mr. Lee has served as President of Apex Venture Capital Corp., a
venture capital fund. Since February 1996, Mr. Lee has served as President of
Win Win Venture Capital Corp., a venture capital fund and principal stockholder
of the Company. Since January 1990, Mr. Lee has served as President of Fidelity
Venture Capital Corp., a venture capital fund. Since April 1987, Mr. Lee has
served as President of Taiwan Venture Capital Corp., a venture capital fund. Mr.
Lee also serves as a director of Award Software International Inc. and Taiwan
Opportunity Fund Limited.

Mr. Saper has been Secretary and a director of the Company since May 1996.
Mr. Saper has been a member of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, legal counsel to the Company, since 1980. Mr. Saper is also a
director of Diamond Multimedia Systems, Inc. and Unison Software, Inc.

All directors hold office until the next annual meeting of stockholders or
until their successors have been duly elected and qualified. Officers serve at
the discretion of the Board and are appointed annually. There are no family
relationships between any of the directors or executive officers of the Company.

BOARD COMMITTEES

The Compensation Committee of the Board of Directors consists of Messrs. Fu
and Kortschak. The Compensation Committee makes recommendations to the Board
concerning salaries and incentive compensation for the Company's executive
officers, directors and employees and administers the Company's Option Plan and
Purchase Plan.

The Audit Committee of the Board of Directors consists of Messrs. Kortschak
and Saper. The Audit Committee aids management in the establishment and
supervision of the Company's financial controls, evaluates the scope of the
annual audit, reviews audit results, consults with management and the Company's
independent auditors prior to the presentation of financial statements to
stockholders and, as appropriate, initiates inquiries into aspects of the
Company's financial affairs.

DIRECTOR COMPENSATION

Outside directors receive $5,000 per year for serving on the Board of
Directors, $1,500 for each regular meeting of the Board of Directors in which
they participate and $2,500 per year for serving as a member of the Audit or
Compensation Committee of the Board. Outside directors are also

31
<PAGE> 33

reimbursed for all reasonable expenses incurred by them in attending Board and
Committee meetings. In addition, outside directors are eligible to participate
in the Company's Director Plan, which was adopted in February 1997. For purposes
of director compensation and participation in the Director Plan, outside
directors are defined as directors who are not employees of the Company and are
not partners or members of any venture capital firm or institutional investor
which owns securities of the Company having more than five percent of the total
voting power of the Company. A total of 250,000 shares of Common Stock has been
reserved for issuance under the Director Plan. The Director Plan provides for
the grant of nonstatutory stock options to outside directors of the Company
pursuant to an automatic, nondiscretionary grant mechanism. The Director Plan
provides that each outside director, except for employee directors who become
outside directors, shall be granted a nonstatutory stock option to purchase
25,000 shares of Common Stock on the date upon which such person first becomes
an outside director (the "First Option"). Thereafter, each outside director
shall be automatically granted an option to purchase 5,000 shares of Common
Stock upon his or her reelection to the Board on the date of the Company's
annual meeting of stockholders of each year (a "Subsequent Option"), if on such
date such outside director shall have served on the Company's Board of Directors
for at least six (6) months. The Director Plan provides that each option shall
become exercisable as to 25% of the shares subject to the option on the day
before the date of the Company's annual meeting of stockholders of each year as
long as the optionee remains a director. The exercise price per share of all
options granted under the Director Plan shall be equal to the fair market value
of a share of the Company's Common Stock on the date of grant. Options granted
to Outside Directors under the Director Plan have a ten year term, but will
expire unless exercised within three months following the termination of an
Outside Director's status as a director. In the event of the merger or sale of
substantially all of the assets of the Company, all outstanding options shall be
assumed or substituted by the successor corporation, or if they are not assumed
or substituted, they shall become fully vested and exercisable. If not
terminated earlier, the Director Plan will have a term of ten years. Directors
are also eligible to receive stock options under the Option Plan. Pursuant to
the Director Plan, Mr. Saper was granted an option to purchase 25,000 shares at
an exercise price of $8.50 per share on February 25, 1997. See "Management --
Compensation Plans."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Board of Directors currently consists of
Messrs. Fu and Kortschak. Neither of these individuals were at any time since
the formation of the Company an executive officer or employee of the Company. No
executive officer of the Company serves as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.

EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS

The Company does not currently have any employment contract in effect with
its Chief Executive Officer or any other Named Executive Officer (as defined
below).

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<PAGE> 34

EXECUTIVE COMPENSATION

The following table sets forth a summary of the compensation paid by the
Company during the fiscal year ended November 30, 1996 to the Company's Chief
Executive Officer and the Company's three other most highly compensated
executive officers whose salary and bonus exceeds $100,000 (collectively, the
"Named Executive Officers") for services rendered in all capacities to the
Company.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------- OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS(1) COMPENSATION(2)(3) COMPENSATION(4)
- --------------------------------- -------- -------- ------------------ ---------------
<S> <C> <C> <C> <C>
Conrad J. Dell'Oca............... $174,372 $50,000 $103,070 $29,682
President, Chief Executive
Officer and Director
Jai P. Shin...................... 159,831 50,000 103,070 6,239
Executive Vice President,
Business Development and
Director
Patrick Y. Yin................... 151,161 50,000 55,500 3,130
Senior Vice President,
Engineering
Perry G. Constantine(5).......... 103,503 22,500 -- 1,612
Executive Vice President,
Worldwide Sales and Marketing
</TABLE>

- ---------------
(1) Includes bonus payments earned in fiscal 1996 but paid in fiscal 1997.

(2) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted in those cases where the aggregate amount of such
perquisites and other personal benefits constituted less than the lesser of
$50,000 or 10% of the total annual salary and bonus for the Named Executive
Officer for such year.

(3) Represents incentive payments based on revenue from certain contracts.
Includes incentive payments earned in fiscal 1996 but paid in fiscal 1997.

(4) Represents payments for life insurance and long-term disability insurance
premiums.

(5) Mr. Constantine joined the Company in 1996. Mr. Constantine's annual salary
is $215,000.

OPTION GRANTS IN LAST FISCAL YEAR

The Company did not grant stock options to any of the Named Executive
Officers during the fiscal year ended November 30, 1996. In addition, none of
the Named Executive Officers held options or exercised options during the fiscal
year ended November 30, 1996.

COMPENSATION PLANS

1996 Stock Option Plan

The Company's Option Plan was approved by the Board of Directors and the
stockholders in June 1996 and was amended in February 1997. The 1996 Plan
provides for the grant to employees of the Company (including officers and
employee directors) of incentive stock options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), and for the grant
of nonstatutory stock options to employees, directors and consultants of the
Company. The Option Plan is currently administered by the Compensation Committee
of the Board of Directors (the "Administrator"), which selects the optionees,
determines the number of shares to be subject to each option and determines the
exercise price of each option. The Option Plan authorizes the issuance of an
aggregate of up to 4,500,000 shares of Common Stock. The exercise price of all
incentive stock options granted under the Option Plan must be at least equal to
the fair market value

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<PAGE> 35

of the Common Stock on the date of grant. The exercise price of all nonstatutory
stock options granted under the Option Plan shall be determined by the
Administrator. With respect to any participant who owns stock possessing more
than 10% of the voting power of all classes of stock of the Company, the
exercise price of any incentive stock option granted must equal at least 110% of
the fair market value on the grant date and the maximum term of the incentive
stock option must not exceed five years. The term of all other options granted
under the Option Plan may not exceed ten years.

In the event of a merger of the Company with or into another corporation or
a sale of substantially all of the assets of the Company, the Option Plan
requires that each outstanding option be assumed or an equivalent option
substituted by the successor corporation; provided, however, that in the event
the successor corporation refuses to assume or substitute for the outstanding
options, such options will become fully vested and exercisable for a period of
fifteen days after notice from the Administrator. Unless terminated sooner, the
Option Plan will terminate ten years from its effective date. The Board has
authority to amend or terminate the Option Plan, provided that no such action
may impair the rights of the holder of any outstanding options without the
written consent of such holder.

1997 Employee Stock Purchase Plan

The Company's Purchase Plan was approved by the Board of Directors in
February 1997 and will become effective upon the closing of the offering. A
total of 500,000 shares of Common Stock has been reserved for issuance under the
Purchase Plan. The Purchase Plan is intended to qualify under Section 423 of the
Code. The Purchase Plan includes offering periods lasting six months with a new
offering period commencing every six months. The initial offering period will
commence on the date of the offering and end on the last business day on or
prior to September 30, 1997, and subsequent offering periods are initially
expected to be from October 1 to March 31 and April 1 to September 30 of each
year. Employees are eligible to participate if they are regularly employed by
the Company for at least twenty hours per week and more than five months in any
calendar year.

The Purchase Plan permits eligible employees to purchase Common Stock
through payroll deductions, which may not exceed 10% of an employee's base
compensation, including commissions, bonuses and overtime, at a price equal to
85% of the fair market value of the Common Stock at the beginning of each
offering period or the last date of the offering period, whichever is lower. In
the event of a merger of the Company into another corporation or a sale of
substantially all of the assets of the Company, the Purchase Plan provides that
the Board of Directors will shorten the offering period by setting a new
exercise date to occur before the proposed sale or merger. Unless terminated
sooner, the Purchase Plan will terminate ten years after its effective date. The
Board of Directors has authority to amend or terminate the Purchase Plan
provided no such action may adversely affect the rights of any participant.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Certificate of Incorporation limits the liability of
directors to the fullest extent permitted by the Delaware General Corporation
Law (the "Delaware Law"). Under the Delaware Law, a director's liability to a
company or its stockholders may not be limited with respect to (i) any breach of
his duty of loyalty to the Company or its stockholders, (ii) acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) unlawful payments or dividends or unlawful stock repurchases or
redemptions or (iv) transactions from which the director derived an improper
personal benefit.

The Company's Bylaws provide that the Company shall indemnify its officers
and directors and may indemnify its employees and other agents to the fullest
extent permitted under the Delaware Law. The Company has also entered into
agreements to indemnify its directors and executive officers, in addition to the
indemnification provided for in the Company's Bylaws. The Company

34
<PAGE> 36

believes that these provisions and agreements are necessary to attract and
retain qualified directors and executive officers. The Company's Bylaws also
permit it to secure insurance on behalf of any officer, director, employee or
other agent for any liability arising out of his or her actions, regardless of
whether the Delaware Law would permit indemnification. In addition, the Company
maintains directors' and officers' liability insurance.

There is no pending litigation or proceeding involving any director,
officer, employee or agent of the Company where indemnification will be required
or permitted. The Company is not aware of any pending or threatened litigation
or proceeding that might result in a claim for such indemnification.

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<PAGE> 37

CERTAIN TRANSACTIONS

In October 1996, the Company issued an aggregate of 508,260 shares of
Common Stock to investors for an aggregate purchase price of $2,160,105. The
investors included Win Win Venture Capital Corporation, which purchased 139,962
shares of Common Stock from the Company for an aggregate purchase price of
$594,839 and 560,038 shares of Common Stock from certain of the Company's
directors and officers for an aggregate purchase price of $2,380,162. In
connection with certain services rendered in connection with such transaction,
the Company paid $159,956 to Win Win Venture Capital Corporation. Cheng Ming
Lee, a director of the Company, is President of Win Win Venture Capital
Corporation.

In August 1996, the Company repurchased certain shares of the Company's
Common Stock held by certain directors and officers of the Company.
Specifically, the Company repurchased 1,194,696 shares of Common Stock from
Conrad J. Dell'Oca, President, Chief Executive Officer and Chairman of the
Board, for an aggregate purchase price of $5,049,980, 1,194,698 shares of Common
Stock from Jai P. Shin, Vice President, Business Development and director, for
an aggregate purchase price of $5,049,988 and 1,194,696 shares of Common Stock
from Patrick Y. Yin, Senior Vice President, Engineering, for an aggregate
purchase price of $5,049,980.

In May and June 1996, the Company issued an aggregate of 130,378 shares of
Series A Redeemable Preferred Stock to investors for an aggregate purchase price
of $13,037,800. The investors included entities associated with Summit Partners,
L.P., entities associated with WK Technology and Jeffrey D. Saper. The holders
of the Series A Redeemable Preferred Stock are entitled to receive cumulative
dividends from the Company at the rate of 6% per annum, compounded annually. The
Company must redeem 33 1/3% of the outstanding shares of Series A Redeemable
Preferred Stock on June 1, 2001, 50% of the outstanding shares of Series A
Redeemable Preferred Stock on June 1, 2002 and 100% of the outstanding shares of
Series A Redeemable Preferred Stock on June 1, 2003. In addition, the Company
must redeem the outstanding shares of Series A Redeemable Stock under certain
other conditions, including an initial public offering of the Company's Common
Stock to the extent the Company receives more than $20,000,000 of net cash
proceeds. Accordingly, a portion of the proceeds from the offering will be used
to redeem all of the outstanding shares of Series A Redeemable Preferred Stock.
See "Use of Proceeds." The Series A Redeemable Preferred Stock is not
convertible into Common Stock. Entities associated with Summit Partners, L.P.
purchased 64,544 shares of Series A Redeemable Preferred Stock for an aggregate
purchase price of $6,454,400. Walter G. Kortschak, a director of the Company, is
a general partner of Summit Partners, L.P. Entities associated with WK
Technology purchased 64,544 shares of Series A Redeemable Preferred Stock for an
aggregate purchase price of $6,454,400. Y.S. Fu, a director of the Company, is a
general partner of WK Technology. Jeffrey D. Saper, a director of the Company,
purchased 484 shares of Series A Redeemable Preferred Stock for an aggregate
purchase price of $48,400.

In May and June 1996, the Company also issued an aggregate of 4,778,804
shares of Common Stock to investors for an aggregate purchase price of
$7,162,205. The investors included entities associated with Summit Partners,
L.P., entities associated with WK Technology and Jeffrey D. Saper. Entities
associated with Summit Partners, L.P. purchased 2,365,714 shares of Common Stock
for an aggregate purchase price of $3,545,600, entities associated with WK
Technology purchased 2,365,714 shares of Common Stock for an aggregate purchase
price of $3,545,600 and Jeffrey D. Saper purchased 17,766 shares of Common Stock
for an aggregate purchase price of $26,627.

In April 1996, pursuant to the terms of a Restricted Stock Purchase
Agreement, the Company issued 650,000 shares of Common Stock to Perry G.
Constantine, Executive Vice President, Worldwide Sales and Marketing of the
Company, for an aggregate purchase price of $243,750. Mr. Constantine paid for
such shares with a promissory note. The promissory note is secured by the shares
of Common Stock purchased with such note and provides for full recourse in the
event such shares are not sufficient to secure the repayment. The promissory
note bears interest at the rate of 6.5% per annum and is due and payable four
years from the date of issuance. The largest amount of principal and interest
due on the promissory note since the note was issued and the amount outstanding
at November 30, 1996 was $253,517. In the event Mr. Constantine's employment
with the Company terminates, the Company has the right to repurchase the shares
purchased by Mr. Constantine at the original purchase price paid for such
shares. Such repurchase option lapses as to 25% of the shares in April 1997 and
as to 1/48 of the shares on a monthly basis thereafter through April 2000.

36
<PAGE> 38

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of November 30, 1996 and as
adjusted to reflect the sale of the shares of Common Stock offered hereby with
respect to (i) each person (or group of affiliated persons) known by the Company
to own beneficially more than 5% of the outstanding shares of Common Stock, (ii)
each of the Company's directors, (iii) each of the Named Executive Officers, and
(iv) all directors and executive officers as a group. Except as otherwise
indicated in the footnotes to the table, each of the stockholders has sole
voting and investment power with respect to the shares of beneficially owned by
such stockholders, subject to community property laws where applicable.

<TABLE>
<CAPTION>
PERCENT OF TOTAL
NUMBER OF ------------------------
SHARES BENEFICIALLY BEFORE THE AFTER THE
NAME OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- --------------------------------------------------- ------------------- ---------- ---------
<S> <C> <C> <C>
Conrad J. Dell'Oca (1)............................. 2,625,304 11.6% 9.8%
830 East Arques Avenue
Sunnyvale, California 94086
Summit Partners, L.P. (2).......................... 2,601,008 11.4 9.7
Walter G. Kortschak
499 Hamilton Avenue, Suite 200
Palo Alto, California 94301
WK Technology (3).................................. 2,601,008 11.4 9.7
Y.S. Fu
10th Floor, 115, Sec. 3
Ming Sheng E. Road
Taipei, Taiwan R.O.C.
Patrick Y.C. Yin (4)............................... 2,464,170 10.8 9.2
830 East Arques Avenue
Sunnyvale, California 94086
Yen C. Chang (5)................................... 2,446,570 10.8 9.2
830 East Arques Avenue
Sunnyvale, California 94086
Jai P. Shin (6).................................... 2,012,126 8.9 7.5
830 East Arques Avenue
Sunnyvale, California 94086
Cheng Ming Lee (7)................................. 700,000 3.1 2.6
Perry G. Constantine(8)............................ 650,000 2.9 2.4
Jeffrey D. Saper (9)............................... 176,046 * *
All directors and executive officers as a group (10
persons)......................................... 16,276,232 71.6 60.9
</TABLE>

- ---------------
* Less than 1%

(1) Shares held by Conrad J. Dell'Oca, Trustee of the Conrad J. and Nellie A.
Dell'Oca Family Trust dated July 15, 1980. Mr. Dell'Oca is a director of the
Company.

(2) Includes 2,490,724 shares held by Summit Ventures IV, L.P. ("Summit IV") and
110,284 shares held by Summit Investors III, L.P. ("Summit Investors III").
Mr. Kortschak is a director of the Company, is a general partner of Summit
Partners, L.P., the general partner of Summit IV and Summit Investors III.
Mr. Kortschak disclaims beneficial ownership of such shares held by Summit
IV and Summit Investors III, except to the extent of his pecuniary interest
therein.

(3) Includes 510,992 shares held by WK Technology Fund, 510,992 shares held by
WK Technology Fund II, 1,343,730 shares held by WK Technology III and
235,294 held by WK Technology Fund IV. Mr. Fu is a director of the Company
and a partner of WK Technology. Mr. Fu disclaims any beneficial ownership of
the shares held by WK Technology Fund, WK Technology Fund II,

37
<PAGE> 39

WK Technology Fund III and WK Technology Fund IV, except to the extent of
his proportionate partnership interests in the respective entities.

(4) Shares held by Patrick Y.C. Yin and Irene P.S. Yin, as Trustees of The Yin
Family Trust, Created on March 16, 1992.

(5) Shares held by Yen C. Chang & Lina W. Chang, as Trustees of The Chang Family
Trust, Created on December 12, 1994.

(6) Mr. Shin is a director of the Company.

(7) Includes 700,000 shares held by Win Win Venture Capital Corporation. Mr. Lee
is a director of the Company and President of Win Win Venture Corporation.
Mr. Lee disclaims any beneficial ownership of the shares held by Win Win
Venture Corporation, except to the extent of his proportionate partnership
interests in the respective entities.

(8) These shares are subject to a right of repurchase in favor of the Company in
the event that Mr. Constantine's employment with the Company terminates.
Such repurchase right expires as to 25% of the shares in April 1997 and as
to 1/48 of the shares on a monthly basis thereafter through April 2000.

(9) Includes 140,922 shares held by WS Investment Company 96-A, an investment
fund of Wilson Sonsini Goodrich & Rosati, Professional Corporation
("WSG&R"). Mr. Saper disclaims any beneficial ownership of the shares held
by WSG&R, except to the extent of his proportionate partnership interest
therein. Mr. Saper is Secretary and a director of the Company and a member
of WSG&R. Of the shares included in the table, 150,000 are subject to a
right of repurchase in favor of the Company in the event that Mr. Saper and
WSG&R cease to serve as legal counsel to the Company. Such repurchase right
expires as to 25% of the shares in April 1997 and as to 1/48 of the shares
on a monthly basis thereafter through April 2000.

38
<PAGE> 40

DESCRIPTION OF CAPITAL STOCK

After giving effect to the reincorporation of the Company in the State of
Delaware prior to the date of this Prospectus, the authorized capital stock of
the Company will consist of 75,000,000 shares of Common Stock, par value $0.001
per share, and 5,000,000 shares of Preferred Stock, par value $0.001 per share.
The following summary of certain provisions of the Common Stock and Preferred
Stock does not purport to be complete and is subject to, and qualified in its
entirety by, the provisions of the Company's Certificate of Incorporation, which
is included as an exhibit to the Registration Statement of which this Prospectus
is a part, and by the provisions of applicable law.

COMMON STOCK

As of November 30, 1996, there were 22,720,234 shares of Common Stock
outstanding held of record by approximately 130 stockholders. The holders of
Common Stock are entitled to one vote per share on all matters to be voted on by
the stockholders. Subject to preferences that may be applicable to outstanding
shares of Preferred Stock, if any, the holders of Common Stock are entitled to
receive ratably such dividends as may be declared from time to time by the Board
of Directors out of funds legally available therefor. In the event of the
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior liquidation rights of Preferred Stock, if any,
then outstanding. The Common Stock has no preemptive conversion rights or other
subscription rights. There are no redemption or sinking funds provisions
applicable to the Common Stock. All outstanding shares of Common Stock are fully
paid and non-assessable, and the shares of Common Stock to be outstanding upon
completion of the offering will be fully paid and non-assessable.

PREFERRED STOCK

The Company is authorized to issue 5,000,000 shares of undesignated
Preferred Stock. The Board of Directors will have the authority to issue the
undesignated Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued shares of undesignated Preferred Stock and to fix the number of shares
constituting any series in the designations of such series, without any further
vote or action by the stockholders. The Board of Directors, without stockholder
approval, can issue Preferred Stock with voting and conversion rights which
could adversely affect the voting power of the holders of Common Stock. The
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present plan
to issue Preferred Stock.

REGISTRATION RIGHTS

Under the terms of the Registration Agreement dated as of May 28, 1996, as
amended (the "Registration Agreement"), the holders of approximately 4,800,000
shares of Common Stock (the "Registrable Securities") will be entitled to
certain rights with respect to the registration of such shares of Common Stock
under the Securities Act. Under the Registration Agreement, if at any time after
this offering the Company proposes to register any of its Common Stock under the
Securities Act, certain holders of Registrable Securities are entitled to notice
of such registration and to include their Registrable Securities therein;
provided, among other conditions, that the underwriters have the right to limit
the number of shares included in any such registration. Beginning six months
after the closing of the offering, the holders of at least fifty-five percent
(55%) of the Registrable Securities have the right to require the Company, on
not more than four occasions, to file a registration statement under the
Securities Act in order to register all or any part of their Registrable
Securities. The Company may, in certain circumstances, defer such registration
and the underwriters have the right, subject to certain limitations, to limit
the number of shares included in such registrations. Further, the holders of
Registrable Securities may require the Company to register all or any portion of
their Registrable Securities on Form S-3, when such form becomes available to
the Company, subject to certain conditions and limitations.

39
<PAGE> 41

ANTI-TAKEOVER EFFECTS OF DELAWARE LAW

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"). Section 203 prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless (i) prior to such date, the board of
directors of the corporation approves either the business combination or the
transaction that resulted in the stockholder becoming an interested stockholder,
(ii) upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owns at least 85%
of the outstanding voting stock, excluding certain shares held by employee
directors and employee stock plans, or (iii) on or after the consummation date
the business combination is approved by the board of directors and by the
affirmative vote of at least 66 2/3% of the outstanding voting stock that is not
owned by the interested stockholder. For purposes of Section 203, a "business
combination" includes, among other things, a merger, asset sale or other
transaction resulting in a financial benefit to the interested stockholder, and
an "interested stockholder" is generally a person who, together with affiliates
and associates, owns (or within three years, did own) 15% or more of the
corporation's voting stock.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C. Its telephone number is (415) 954-9512.

LISTING

The Company has applied to list its Common Stock on the Nasdaq National
Market under the trading symbol "ASPC."

40
<PAGE> 42

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the offering, there has been no public market for securities of
the Company. No prediction can be made as to the effect, if any, that market
sales of shares or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of substantial amounts
of Common Stock of the Company in the public market after the lapse of the
restrictions described below could adversely affect the prevailing market price
and the ability of the Company to raise equity capital in the future.

Upon completion of the offering, the Company will have 26,720,234 shares of
Common Stock outstanding, assuming no exercise of outstanding options after
November 30, 1996. Of this amount, the shares offered hereby and no
additional shares will be available for immediate sale in the public market as
of the date of this Prospectus. Approximately additional shares will be
available for sale in the public market 90 days after the date of this
Prospectus pursuant to Rule 701. However, of these shares will be
subject to a right of repurchase in favor of the Company in the event that the
stockholder's employment with the Company is terminated. Approximately
additional shares will be available for sale in the public market
following the expiration of the 180-day lockup agreements with the
Representatives of the Underwriters or the Company, subject in some cases to
compliance with the volume and other limitations of Rule 144. However, of
these shares will be subject to a right of repurchase possessed by the Company.
The remaining shares held by existing stockholders will become
eligible for sale from time to time in the future under Rule 144.

<TABLE>
<CAPTION>
DAYS AFTER DATE SHARES ELIGIBLE
OF THIS PROSPECTUS FOR SALE COMMENT
- ------------------------------ --------------- -----------------------------------------------
<S> <C> <C>
Upon Effectiveness............ Freely tradeable shares sold in offering and
shares saleable under Rule 144(k) that are not
subject to 180-day lockup
90 days....................... Saleable under Rule 701; not subject to
repurchase by the Company
180 days...................... Lockup released; shares saleable under Rules
144 and 701
Thereafter.................... Restricted securities held for two years or
less
</TABLE>

In general, under Rule 144 a person (or persons whose shares are
aggregated) who has beneficially owned shares for at least two years is entitled
to sell within any three-month period commencing 90 days after the date of this
Prospectus a number of shares that does not exceed the greater of (i) 1% of the
then outstanding shares of Common Stock (approximately shares immediately
after the Offering) or (ii) the average weekly trading volume during the four
calendar weeks preceding such sale, subject to the filing of a Form 144 with
respect to such sale. A person (or persons whose shares are aggregated) who is
not deemed to have been an affiliate of the Company at any time during the 90
days immediately preceding the sale who has beneficially owned his or her shares
for at least three years is entitled to sell such shares pursuant to Rule 144(k)
without regard to the limitations described above. Persons deemed to be
affiliates must always sell pursuant to Rule 144, even after the applicable
holding periods have been satisfied.

The Company is unable to estimate the number of shares that will be sold
under Rule 144, as this will depend on the market price for the Common Stock of
the Company, the personal circumstances of the sellers and other factors. Prior
to the offering, there has been no public market for the Common Stock, and there
can be no assurance that a significant public market for the Common Stock will
develop or be sustained after the offering. Any future sale of substantial
amounts of the Common Stock in the open market may adversely affect the market
price of the Common Stock offered hereby.

The Company, its directors, executive officers, stockholders with
registration rights and certain other stockholders have agreed pursuant to the
Underwriting Agreement and other agreements that

41
<PAGE> 43

they will not sell any Common Stock without the prior consent of Alex. Brown &
Sons Incorporated for a period of 180 days from the date of this Prospectus (the
"180-day Lockup Period"), except that the Company may, without such consent,
grant options and sell shares pursuant to the 1996 Plan, the Director Plan and
the Purchase Plan.

The Company intends to file a registration statement on Form S-8 under the
Securities Act to register approximately 5,250,000 shares of Common Stock
subject to options outstanding or reserved for issuance under the 1996 Plan, the
Director Plan and the Purchase Plan within 90 days after the date of this
Prospectus, thus permitting the resale of such shares by nonaffiliates in the
public market without restriction under the Securities Act.

Any employee or consultant to the Company who purchased his or her shares
pursuant to a written compensatory plan or contract is entitled to rely on the
resale provisions of Rule 701, which permits nonaffiliates to sell their Rule
701 shares without having to comply with the public information, holding period,
volume limitation or notice provisions of Rule 144 and permits affiliates to
sell their Rule 701 shares without having to comply with the Rule 144 holding
period restrictions, in each case commencing 90 days after the date of this
Prospectus.

In addition, after the offering, the holders of approximately 4,800,000
shares of Common Stock will be entitled to certain rights with respect to
registration of such shares under the Securities Act. Registration of such
shares under the Securities Act would result in such shares becoming freely
tradeable without restriction under the Securities Act (except for shares
purchased by affiliates of the Company) immediately upon the effectiveness of
such registration. See "Description of Capital Stock -- Registration Rights."

42
<PAGE> 44

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated, Hambrecht & Quist LLC and Wessels, Arnold &
Henderson, L.L.C., have severally agreed to purchase from the Company the
following respective numbers of shares of Common Stock at the initial public
offering price less the underwriting discounts and commissions set forth on the
cover page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ---------
<S> <C>
Alex. Brown & Sons Incorporated..................................................
Hambrecht & Quist LLC............................................................
Wessels, Arnold & Henderson, L.L.C. .............................................

---------
Total.................................................................. 4,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all shares of the Common Stock offered hereby if any
of such shares are purchased.

The Company has been advised by the Representatives of the Underwriters
that the Underwriters propose to offer the shares of Common Stock to the public
at the initial public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other
dealers. After the initial public offering, the offering price and other selling
terms may be changed by the Representatives of the Underwriters.

The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of this Prospectus, to purchase up to
additional shares of Common Stock at the public offering price less
the underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to , and the Company will be obligated,
pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the shares are being offered.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.

Stockholders of the Company, holding shares of Common Stock, have
agreed not to offer, sell or otherwise dispose of any of such Common Stock for a
period of 180 days after the effective date of this Prospectus without the prior
consent of the Representatives of the Underwriters (see "Shares Eligible for
Future Sale"), except that the Company may issue, and grant options to purchase,
shares of Common Stock under its current stock option and purchase plans and
other currently outstanding options.

43
<PAGE> 45

The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.

Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Common Stock will be determined by negotiation between the Company and the
Representatives of the Underwriters. Among the factors considered in such
negotiations will be prevailing market conditions, the results of operations of
the Company in recent periods, the market capitalizations, the price-earnings
ratios, the price-sales ratios, the market prices generally of securities and
stages of development of other companies that the Company and the
Representatives of the Underwriters believe to be comparable to the Company,
estimates of the business potential of the Company and its industry in general
and the present state of the Company's development and other factors deemed
relevant.

LEGAL MATTERS

The validity of the issuance of shares of Common Stock offered hereby will
be passed upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional
Corporation ("WSG&R"), Palo Alto, California. Pillsbury Madison & Sutro LLP,
Menlo Park, California, is acting as counsel for the Underwriters in connection
with certain legal matters relating to the shares of Common Stock offered
hereby. Jeffrey D. Saper, a member of WSG&R, is Secretary and a director of the
Company. Mr. Saper owns 35,124 shares of Common Stock and 484 shares of Series A
Redeemable Preferred Stock. On February 25, 1997, Mr. Saper was granted an
option to purchase 25,000 shares of Common Stock pursuant to the Director Plan.
As of the date of this Prospectus, certain members of WSG&R, and investment
partnerships of which such persons are partners, beneficially own 140,922 shares
of Common Stock and 161 shares of Series A Redeemable Preferred Stock. A portion
of the proceeds from the offering will be used to redeem all of the outstanding
Series A Redeemable Preferred Stock. See "Use of Proceeds."

EXPERTS

The financial statements as of November 30, 1995 and 1996 and for each of
the three years in the period ended November 30, 1996 included in this
Prospectus and the related financial statement schedule included elsewhere in
the Registration Statement have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein and elsewhere
in the Registration Statement, and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.

In December 1996, the Company appointed Deloitte & Touche LLP to replace
KPMG Peat Marwick LLP as its principal accountants. There were no disagreements
with the former accountants during the preceding two fiscal years or during any
subsequent interim period preceding their replacement on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures, which disagreements, if not resolved to the former
accountants' satisfaction, would have caused them to make reference to the
subject matter of the disagreement in connection with their reports. KMPG Peat
Marwick LLP issued an unqualified opinion on the financial statements as of
November 30, 1994 and 1995 and for the three years in the period ended November
30, 1995. The Company did not consult with Deloitte & Touche LLP on any
accounting or financial reporting matters in the two years prior to their
appointment. The change in accountants was approved by the Board of Directors.

44
<PAGE> 46

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 with respect to the shares of
Common Stock offered hereby, of which this Prospectus forms a part. In
accordance with the rules of the Commission, this Prospectus omits certain
information contained in the Registration Statement. For further information
with respect to the Company and the securities offered hereby, reference is made
to the Registration Statement and the exhibits and schedules filed therewith.
Statements contained in this Prospectus concerning the provisions of such
documents are necessarily summaries of such documents and each such statement is
qualified in its entirety by reference to the copy of the applicable document
filed with the Commission as an exhibit to the Registration Statement. The
Registration Statement, including exhibits and schedules thereto, may be
inspected without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at
the regional offices of the Commission located at Seven World Trade Center, 13th
Floor New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials may be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a World
Wide Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's Web site is http://www.sec.gov.

The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of the offering of the Company's Common Stock, the Company will become
subject to the informational requirements of the Exchange Act.

45
<PAGE> 47

ASPEC TECHNOLOGY, INC.
------------------

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Balance Sheets at November 30, 1995 and 1996.......................................... F-3
Statements of Income for the Years Ended November 30, 1994, 1995 and 1996............. F-4
Statements of Stockholders' Equity (Deficiency) for the Years Ended November 30, 1994,
1995 and 1996....................................................................... F-5
Statements of Cash Flows for the Years Ended November 30, 1994, 1995 and 1996......... F-6
Notes to Financial Statements......................................................... F-7
</TABLE>

F-1
<PAGE> 48

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Aspec Technology, Inc.:

We have audited the accompanying balance sheets of Aspec Technology, Inc.
as of November 30, 1995 and 1996, and the related statements of income,
stockholders' equity (deficiency) and cash flows for each of the three years in
the period ended November 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Aspec Technology, Inc. at November 30, 1995
and 1996, and the results of its operations and its cash flows for each of the
three years in the period ended November 30, 1996 in conformity with generally
accepted accounting principles.

San Jose, California
February 28, 1997
(March , 1997 as to Note 11)
------------------------

To the Board of Directors and Stockholders of
Aspec Technology, Inc.:

The financial statements included herein have been adjusted to give effect
to the two-for-one split of common stock, the increase in preferred shares
authorized and the Company's reincorporation in Delaware as described in Note 11
to the financial statements. The above report is in the form that will be signed
by Deloitte & Touche LLP upon the effectiveness of such events assuming that
from February 28, 1997 to the effective date of such events, no other events
shall have occurred that would affect the accompanying financial statements or
notes thereto.

/s/ Deloitte & Touche LLP
Deloitte & Touche LLP

San Jose, California
February 28, 1997

F-2
<PAGE> 49

ASPEC TECHNOLOGY, INC.

BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
NOVEMBER 30, PRO FORMA
------------------- NOVEMBER 30,
1995 1996 1996
------ -------- ------------
(UNAUDITED)
(NOTE 1)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents.................................. $2,317 $ 6,341
Accounts receivable (net of allowances of $300 in
1996).............................................. 1,792 5,741
Prepaid expenses...................................... -- 586
Deferred income taxes................................. 83 398
----- ------
Total current assets.......................... 4,192 13,066
Property and equipment -- net......................... 751 2,478
Other assets.......................................... 103 216
----- ------
Total......................................... $5,046 $ 15,760
===== ======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable...................................... $ 96 $ 941
Accrued liabilities................................... 668 1,937
Income taxes payable.................................. 1,086 2,050
Deferred revenue...................................... 1,398 4,434
----- ------
Total current liabilities..................... 3,248 9,362
----- ------
Commitments and contingencies (Note 5)
Series A redeemable preferred stock, $.001 par value:
130 shares designated; shares outstanding:
1995 -- none; 1996 -- 130; pro forma -- 130 (1996 and
pro forma liquidation value: $18,495)................. -- 13,345 $ 13,345
----- ------ ------
Redeemable common stock, $.001 par value; shares
outstanding: 1995 -- none; 1996 -- 4,779; pro forma --
none.................................................. -- 7,116 --
----- ------ ------
Stockholders' equity (deficiency):
Preferred stock, $.001 par value; 5,000 shares
authorized (excluding Series A preferred stock):
none outstanding................................... -- -- --
Common stock, $.001 par value: 75,000 shares
authorized; shares outstanding: 1995 -- 18,929;
1996 -- 17,941; pro forma -- 22,720................ 114 3,344 10,460
Stockholder notes receivable.......................... -- (648) (648)
Deferred stock compensation........................... -- (476) (476)
Retained earnings (deficit)........................... 1,684 (16,283) (16,283)
----- ------ ------
Total stockholders' equity (deficiency)............ 1,798 (14,063) (6,947)
----- ------ ------
Total......................................... 5,046 $ 15,760 $ 15,760
===== ====== ======
</TABLE>

See Notes to Financial Statements.

F-3
<PAGE> 50

ASPEC TECHNOLOGY, INC.

STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-----------------------------
1994 1995 1996
------ ------ -------
<S> <C> <C> <C>
Revenue....................................................... $4,659 $6,640 $15,265
----- ----- ------
Costs and expenses:
Cost of revenue............................................. 1,553 2,307 4,702
Research and development.................................... 289 445 921
Sales and marketing......................................... 624 1,387 3,526
General and administrative.................................. 827 1,093 1,994
----- ----- ------
Total costs and expenses............................ 3,293 5,232 11,143
----- ----- ------
Income from operations........................................ 1,366 1,408 4,122
Interest income............................................... 17 56 310
----- ----- ------
Income before income taxes.................................... 1,383 1,464 4,432
Provision for income taxes.................................... 553 585 1,815
----- ----- ------
Net income.................................................... 830 879 2,617
Accretion of redeemable preferred stock....................... -- -- 392
----- ----- ------
Income attributable to common stockholders.................... $ 830 $ 879 $ 2,225
===== ===== ======
Net income per share (Note 1)................................. $ 0.03 $ 0.03 $ 0.09
===== ===== ======
Shares used in per share computation.......................... 25,646 26,485 25,850
===== ===== ======
</TABLE>

See Notes to Financial Statements.

F-4
<PAGE> 51

ASPEC TECHNOLOGY, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(IN THOUSANDS)

<TABLE>
<CAPTION>
NON REDEEMABLE
COMMON STOCK STOCKHOLDER DEFERRED RETAINED TOTAL
--------------- NOTES STOCK EARNINGS STOCKHOLDERS'
SHARES AMOUNT RECEIVABLE COMPENSATION (DEFICIT) EQUITY
------ ------ ----------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 1,
1993.................... 18,357 $ 73 $ -- $ -- $ (25) $ 48
Issuance of common stock
under stock purchase
plan.................... 162 19 -- -- -- 19
Stock compensation
expense................. -- 7 -- -- -- 7
Net income................ -- -- -- -- 830 830
------ ------ ----- --- -------- --------
Balances, November 30,
1994.................... 18,519 99 -- -- 805 904
Issuance of common stock
under stock purchase
plan.................... 677 28 (28) -- -- --
Collection of stockholder
notes receivable........ -- -- 28 -- -- 28
Repurchase of common stock
from employee........... (267) (13) -- -- -- (13)
Net income................ -- -- -- -- 879 879
------ ------ ----- --- -------- --------
Balances, November 30,
1995.................... 18,929 114 -- -- 1,684 1,798
Sale of common stock (net
of costs of $260)....... 508 1,900 -- -- -- 1,900
Issuance of common stock
under stock purchase
plan.................... 3,293 1346 (648) (582) -- 116
Repurchase of common stock
from founders and
employees............... (4,789) (16) -- -- (20,192) (20,208)
Accretion of redeemable
preferred stock......... -- (392) (392)
Amortization of deferred
stock compensation...... -- -- -- 106 -- 106
Net income................ -- -- -- -- 2,617 2,617
------ ------ ----- --- -------- --------
Balances, November 30,
1996.................... 17,941 $3,344 $(648) $ (476) $(16,283) $ (14,063)
====== ====== ===== === ======== ========
</TABLE>

See Notes to Financial Statements.

F-5
<PAGE> 52

ASPEC TECHNOLOGY, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
------------------------
1994 1995 1996
----- ------ -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income....................................................... $ 830 $ 879 $ 2,617
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................. 204 313 736
Deferred income taxes......................................... 180 (230) (315)
Stock compensation expense.................................... 7 -- 106
Changes in assets and liabilities:
Accounts receivable......................................... (687) (762) (3,949)
Prepaid expenses and other assets........................... (8) (88) (699)
Accounts payable............................................ 28 11 845
Accrued liabilities......................................... -- 293 1,269
Income taxes payable........................................ 424 415 964
Deferred revenue............................................ (198) 1,295 3,036
----- ------ -------
Net cash provided by operating activities................ 780 2,126 4,610
----- ------ -------
Cash flows from investing activities --
Purchases of property and equipment.............................. (376) (594) (2,463)
----- ------ -------
Cash flows from financing activities:
Sale of common stock............................................. 19 -- 2,016
Sale of redeemable common stock.................................. -- -- 7,116
Sale of redeemable preferred stock............................... -- -- 12,953
Proceeds from borrowings......................................... -- 200 --
Repayment of borrowings.......................................... -- (200) --
Repurchase of common stock....................................... -- (13) (20,208)
Collection of stockholder notes receivable....................... -- 28 --
----- ------ -------
Net cash provided by financing activities................ 19 15 1,877
----- ------ -------
Net increase in cash and equivalents............................... 423 1,547 4,024
Cash and equivalents, beginning of year............................ 347 770 2,317
----- ------ -------
Cash and equivalents, end of year.................................. $ 770 $2,317 $ 6,341
===== ====== =======
Supplemental disclosure of cash flow information -- Cash paid for
income taxes..................................................... $ 188 $ 404 $ 1,166
===== ====== =======
Supplemental schedule of noncash investing and financing
activities:
Issuance of common stock for notes receivable.................... $ -- $ 28 $ 648
===== ====== =======
Accretion of redeemable preferred stock.......................... $ -- $ -- $ 392
===== ====== =======
</TABLE>

See Notes to Financial Statements.

F-6
<PAGE> 53

ASPEC TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1994, 1995 AND 1996

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Business -- Aspec Technology, Inc. (the Company) develops, markets and
supports a commercial design implementation technology for use in the
semiconductor industry. The Company's primary customers are vertically
integrated semiconductor companies, fabless semiconductor companies, electronics
systems manufacturers and distributors that sell to such entities in Asia, the
United States and Europe.

Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates,
and such differences may be material to the financial statements.

Cash Equivalents -- Cash equivalents consist of short-term highly liquid
debt investments with original maturities of 90 days or less.

Accounts Receivable -- At November 30, 1996, accounts receivable included
$121,000 of unbilled receivables (none in 1995).

Property and Equipment -- Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is provided using the
straight-line method over the estimated useful lives, generally three to five
years.

Software Development Costs -- Development costs incurred in the research
and development of new software products and enhancements to existing software
products are expensed as incurred until technological feasibility has been
established, at which time certain development costs required to attain general
production release would be capitalized. To date, the Company's software
development has essentially been completed concurrent with the establishment of
technological feasibility, and, accordingly, no costs have been capitalized.

Concentration of Credit Risk -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of cash
and equivalents and trade receivables. Cash equivalents consist primarily of
money market instruments carried at cost, which approximates fair market value.
Management believes the credit risk associated with such instruments is minimal.
The Company licenses its products to customers which are primarily designers and
manufacturers of integrated circuits. Management believes that risk of credit
loss is significantly reduced due to the diversity of its customers and their
dispersion across many geographic areas.

Revenue Recognition -- A substantial majority of the Company's license
revenue has been recognized on a percentage of completion basis based upon
actual costs incurred since Aspec's products typically involve levels of
adaptation or completion. License terms typically include a payment upon
execution of the agreement with further payments upon completion of milestones.
Revenue is recognized ratably as the work is performed on the project. Billings
in excess of revenue are recorded as deferred revenue, while revenue in excess
of billings is recorded as unbilled receivables. The time required to adapt a
product for a specific customer application generally ranges from three to
twelve months. License revenue for products not requiring adaptation is
recognized upon delivery and when collection is reasonably assured.

Revenue from software support and maintenance contracts is deferred and
recognized ratably over the term of the agreement, which is typically one year.
Royalty revenues are recognized in the period reported by the customer or when
cash is received.

F-7
<PAGE> 54

ASPEC TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Income Taxes -- The Company accounts for income taxes using the asset and
liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences of temporary differences between the financial statement
carrying amounts and the tax bases of assets and liabilities.

Effects of Recent Accounting Standard -- In October 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation. The new standard defines a
fair value method of accounting for stock options and other equity instruments.
The new standard permits companies to continue to account for equity
transactions with employees under existing accounting rules, but requires
disclosure in a note to the financial statements of the pro forma net income and
income per share as if the Company had applied the new method of accounting.
Commencing in fiscal 1997, the Company intends to follow the disclosure
alternative for its employee stock compensation plans. Adoption of the new
standard will have no effect on the Company's financial position or results of
operations.

Net Income Per Share -- Net income per share is based upon the weighted
average number of common and dilutive common equivalent shares (common stock
options, stock purchase rights and redeemable common stock) outstanding.
Pursuant to rules of the Securities and Exchange Commission, all common shares
issued and options and other rights granted to acquire shares of common stock at
a price less than the initial public offering price during the twelve month
period preceding the filing date (using the treasury stock method until shares
are issued) have been included in the computation of common and common
equivalent shares outstanding for all periods presented.

For the purposes of the net income per share computation, net income has
been reduced by the amount of the periodic accretion for redeemable preferred
stock (see Note 6).

Unaudited Pro Forma Information -- Upon the closing of the initial public
offering contemplated by this Prospectus, the redemption privileges of the
redeemable common stock will terminate. The pro forma amounts in the
accompanying balance sheet present the Company's stockholders' equity as if all
such redemption privileges had terminated as of November 30, 1996.

2. PROPERTY AND EQUIPMENT

Property and equipment consist of (in thousands):

<TABLE>
<CAPTION>
NOVEMBER 30,
------------------
1995 1996
------ -------
<S> <C> <C>
Computer equipment and software......................................... $1,335 $ 3,674
Office and other equipment.............................................. 119 243
------ -------
1,454 3,917
Less accumulated depreciation and amortization.......................... (703) (1,439)
------ -------
$ 751 $ 2,478
====== =======
</TABLE>

F-8
<PAGE> 55

ASPEC TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. ACCRUED LIABILITIES

Accrued liabilities consist of (in thousands):

<TABLE>
<CAPTION>
NOVEMBER 30,
---------------
1995 1996
---- ------
<S> <C> <C>
Accrued compensation and related benefits.................................. $652 $1,140
Accrued commissions to outside sales representatives....................... -- 484
Other...................................................................... 16 313
---- ------
$668 $1,937
==== ======
</TABLE>

4. LINE OF CREDIT

The Company has a $1,000,000 bank line of credit available through July 1,
1997. Borrowings under this line are collateralized by substantially all of the
Company's assets and bear interest at the prime rate published by the Wall
Street Journal (8.25% at November 30, 1996) plus 0.5%. As of November 30, 1996,
there were no borrowings outstanding under the line. The Company must maintain
compliance with certain current and net worth ratio covenants under this
agreement. As of November 30, 1996, the Company was in compliance with these
covenants.

5. LEASE COMMITMENTS

The Company leases its primary operating facility under an operating lease
agreement which expires in November 2001. Rent expense incurred under the
operating leases was approximately $100,000, $144,000 and $186,000 for the years
ended November 30, 1994, 1995 and 1996, respectively.

Future minimum lease commitments under this lease as of November 30, 1996
(including commitments under a new lease dated December 1, 1996) are as follows
(in thousands):

<TABLE>
<CAPTION>
YEAR ENDING
NOVEMBER 30,
- ------------------------------------------------------------------------------------
<S> <C>
1997.............................................................................. $ 407
1998.............................................................................. 411
1999.............................................................................. 400
2000.............................................................................. 418
2001.............................................................................. 435
------
Total minimum lease payments........................................................ $2,071
======
</TABLE>

6. REDEEMABLE STOCK

Redeemable Preferred Stock

During 1996, the Board of Directors authorized and designated 130,385
shares of Series A redeemable preferred stock. In May and June 1996, the Company
sold an aggregate of 130,378 shares of Series A redeemable preferred stock at
$100 per share, resulting in net proceeds of approximately $12,953,000. The
significant terms of the Series A redeemable preferred stock are as follows:

- In the event of liquidation, dissolution or winding up of the Company,
the redeemable preferred stockholders shall receive, per share, the
greater of (1) the initial issue price

F-9
<PAGE> 56

ASPEC TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

($100) plus all accrued but unpaid dividends or (2) $141.86, prior to any
distribution to be made to holders of the Company's common stock.

- Dividends shall accrue on a daily basis at the rate of 6% per annum on
the sum of the liquidation value plus all accrued but unpaid dividends.

- The redeemable preferred shares have no voting rights except that:

- The Series A preferred shareholders, voting as a class, shall be
entitled to elect two directors as long as the holders of record on
June 30, 1996 continue to hold 50% or more of the Series A preferred
shares (or to elect one director if the holders of record on June
30, 1996 continue to hold 25% to 50% of the Series A preferred
shares).

- So long as any Series A preferred shares remain outstanding, the
corporation shall not, without a vote of 55% of the outstanding
Series A preferred shares, issue securities with equity features
senior to Series A preferred stock, liquidate, change the Series A
preferred rights or merge or consolidate with another entity which
results in the Company's common stockholders immediately prior to
the transaction owning less than 66.7% of the common stock after the
transaction.

- The redeemable preferred shares are not convertible into common stock.

- The Company is obligated to redeem the corresponding percentage of
preferred shares on the following dates:

- In the event of an initial public offering (IPO), the Company shall apply
the net proceeds of the offering, less $20 million to be retained by the
Company, to the redemption of the Series A redeemable preferred shares at
the redemption value, which is, on a per share basis, greater of (1) the
original issue price plus all accrued but unpaid dividends or (2)
$141.86. In the event of a change in ownership prior to an IPO, the
Company shall redeem the Series A preferred stock at the redemption
value. The aggregate liquidation and redemption value as of November 30,
1996 was approximately $18,495,000. The Company is accreting the
difference between the book value of the preferred stock and its
redemption value over the period from the issuance date through the
mandatory redemption dates. In the event of an IPO resulting in a
redemption, the difference between the book value and the redemption
value will be considered as additional accretion for preferred stock in
the quarter of the IPO when determining income attributable to common
stockholders and earnings per share.

Redeemable Common Stock

During May and June 1996, the Company sold an aggregate of 4,778,804 shares
of redeemable common stock to the preferred stock investors for net proceeds of
approximately $7,116,000. Under a stockholder rights agreement, these investors
have a put option, exercisable at any time after the seventh anniversary of the
agreement, to require the Company to repurchase for cash all of the common
shares held by such investors at a price determined based upon the then market
value of the Company divided by the number of common shares outstanding. This
right terminates upon an IPO. The holders of these shares have certain
registration rights.

F-10
<PAGE> 57

ASPEC TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

7. STOCKHOLDERS' EQUITY

Repurchase of Common Stock

During August 1996, the Company repurchased an aggregate of 4,778,786
shares of common stock held by certain founders of the Company at $4.227 per
share for an aggregate purchase price of approximately $20,200,000.

Employee Stock Plans

Under the 1992 Employee Stock Purchase Plan (the 1992 Plan), 4,000,000
shares of the Company's common stock were reserved and available for issuance to
officers, directors, employees and consultants of the Company. The 1992 Plan
provides that the purchase or exercise price of the stock covered by the Plan
shall be no less than the fair value of the Company's common stock at the date
of the grant, as determined by the Board of Directors. The Board of Directors
also has the authority to set exercise dates (generally no longer than ten years
from the date of grant), payment terms and other provisions for each grant.
Stock purchase rights and options granted under the plan generally vest as to
25% of the shares on the first anniversary of the date of grant and thereafter
vest ratably over three years. Exercised shares that have not vested are subject
to repurchase at the original purchase price upon termination of employment. As
of November 30, 1996, there were no stock purchase rights outstanding under the
1992 Plan and in December 1996, the Company's Board of Directors determined not
to grant or issue any additional shares under the 1992 Plan.

In 1996, the Board of Directors adopted the 1996 Stock Option Plan (the
1996 Plan). Under this plan, 2,000,000 shares have been reserved for issuance to
directors, officers, employees and consultants to the Company at prices not less
than the fair market value for incentive options. These options generally expire
five to ten years from the date of grant. Incentive and nonstatutory options
normally vest and become exercisable at an annual rate of 25%.

A summary of activity of rights or options to acquire stock under the plans
is as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
RIGHTS OR
OPTIONS
OUTSTANDING EXERCISE PRICE
----------- --------------
<S> <C> <C>
Outstanding, December 1, 1993.................................. 637 $0.01 - $0.03
Granted........................................................ 1,379 0.03 - 0.25
Exercised...................................................... (162) 0.01 - 0.05
Canceled....................................................... (24) 0.01
------
Outstanding, November 30, 1994................................. 1,830 0.01 - 0.25
Granted........................................................ 538 0.25
Exercised...................................................... (677) 0.01 - 0.05
------
Outstanding, November 30, 1995................................. 1,691 0.05 - 0.25
Granted........................................................ 2,156 0.25 - 4.25
Exercised...................................................... (3,293) 0.05 - 0.38
------
Outstanding, November 30, 1996................................. 554 $0.25 - $4.25
======
</TABLE>

At November 30, 1996, the weighted average exercise price of options
outstanding was $4.05 and approximately 1,446,000 shares were available for
future grant under the 1996 Plan. As of November 30, 1996, 1,091,000 shares
exercised and outstanding under the 1992 Plan were subject to repurchase by the
Company at the original purchase price.

F-11
<PAGE> 58

ASPEC TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

In connection with certain issuances of stock purchase rights or options
under the Plans, the Company recorded stock compensation for the difference
between the deemed fair value for accounting purposes and the issuance or
exercise price. Such amounts are amortized to expense over the related vesting
periods.

8. INCOME TAXES

The provision for income taxes for the years ended November 30 consists of
(in thousands):

<TABLE>
<CAPTION>
1994 1995 1996
---- ----- ------
<S> <C> <C> <C>
Current:
Federal........................................................ $235 $ 556 $1,484
State.......................................................... 54 172 469
Foreign........................................................ 84 87 177
---- ----- ------
Total current.................................................... 373 815 2,130
---- ----- ------
Deferred:
Federal........................................................ 154 (197) (276)
State.......................................................... 26 (33) (39)
---- ----- ------
Total deferred................................................... 180 (230) (315)
---- ----- ------
Total provision for income taxes................................. $553 $ 585 $1,815
==== ===== ======
</TABLE>

The provisions for income taxes differs from the amounts computed by
applying the statutory federal income tax rate to income before taxes as a
result of the following (in thousands):

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ------
<S> <C> <C> <C>
Income tax expense................................................. $470 $498 $1,507
State income taxes, net of federal benefit......................... 53 87 266
Other.............................................................. 30 -- 42
---- ---- ------
Total provision for income taxes................................... $553 $585 $1,815
==== ==== ======
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred income tax assets and liabilities as of November 30 are
as follows (in thousands):

<TABLE>
<CAPTION>
1995 1996
--- ----
<S> <C> <C>
Deferred tax assets:
Reserves and accruals not currently deductible.............................. $ 7 $213
State taxes................................................................. 37 169
Depreciation and amortization............................................... 39 16
---- ----
Net deferred tax assets....................................................... $83 $398
==== ====
</TABLE>

9. MAJOR CUSTOMERS AND INTERNATIONAL SALES

In fiscal 1994, four customers accounted for 28.9%, 21.3%, 19.3% and 12.7%
of total revenue, respectively. In fiscal 1995, three customers accounted for
18.2%, 17.3% and 15.1% of total revenue, respectively. In fiscal 1996, one
customer accounted for 10.5% of revenue; furthermore, six customers accounted
for a total of 51.1% of total revenue.

International sales, principally to customers in Asia, accounted for
approximately 83.6%, 54.2% and 65.4% of total revenue for the years ended
November 30, 1994, 1995 and 1996, respectively.

F-12
<PAGE> 59

ASPEC TECHNOLOGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

10. EMPLOYEE BENEFIT PLAN

The Company has established a 401(k) tax-deferred savings plan. Employees
meeting the eligibility requirements, as defined, may contribute specified
percentages of their salaries. The Company has not contributed to the plan to
date.

11. SUBSEQUENT EVENTS

In February 1997, the Board of Directors approved the following, subject to
stockholder approval:

- The 1997 Employee Stock Purchase Plan, and reserved 500,000 shares of
common stock for sale to employees thereunder at a price no less than 85%
of the lower of the fair market value at the beginning of the six-month
offering period or the end of each such offering period.

- The 1997 Director Option Plan, and reserved 250,000 shares of common
stock for grants of options to each outside director. The Director Plan
provides for the automatic grant to outside directors of an option to
purchase 25,000 shares of Common Stock at the time the director joins the
board and an option to purchase 5,000 shares of Common Stock upon the
outside director's annual reelection to the Board.

- A two for one split of the outstanding shares of Common Stock.

- The Company's reincorporation in the state of Delaware, at which time the
authorized shares of preferred stock will be increased to 5,130,385
(including 130,385 designated as Series A Redeemable Preferred Stock).

On March , 1997, the stockholders of the Company approved the above
actions. All share and per share data in the accompanying financial statements
have been retroactively adjusted to reflect the stock split.

* * * * *

F-13
<PAGE> 60

======================================================

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
The Company........................... 3
Risk Factors.......................... 5
Use of Proceeds....................... 11
Dividend Policy....................... 11
Capitalization........................ 12
Dilution.............................. 13
Selected Financial Data............... 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 15
Business.............................. 21
Management............................ 30
Certain Transactions.................. 36
Principal Stockholders................ 37
Description of Capital Stock.......... 39
Shares Eligible for Future Sale....... 41
Underwriting.......................... 43
Legal Matters......................... 44
Experts............................... 44
Additional Information................ 45
Index to Financial Statements......... F-1
</TABLE>

----------------

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
4,000,000 SHARES

LOGO

COMMON STOCK

-------------------
PROSPECTUS
-------------------

ALEX. BROWN & SONS
INCORPORATED

HAMBRECHT & QUIST

WESSELS, ARNOLD &
HENDERSON

, 1997
======================================================
<PAGE> 61

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale of
the Common Stock being registered hereby. All amounts are estimates except the
SEC registration fee and the NASD filing fee.

<TABLE>
<CAPTION>
AMOUNT TO BE
PAID BY
REGISTRANT
------------
<S> <C>
SEC Registration Fee........................................................ $ 16,728
NASD Filing Fee............................................................. 6,020
Nasdaq National Market Listing Fee.......................................... 50,000
Printing.................................................................... 135,000
Legal Fees and Expenses..................................................... 325,000
Accounting Fees and Expenses................................................ 250,000
Blue Sky Fees and Expenses.................................................. 5,000
Transfer Agent and Registrar Fees........................................... 10,000
Miscellaneous............................................................... 102,252
--------
Total............................................................. $900,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law (the "Delaware Law")
authorizes a court to award, or a corporation's Board of Directors to grant,
indemnity to directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article Ten of the Registrant's Certificate
of Incorporation (Exhibit 3.1 hereto) and Article VI of the Registrant's Bylaws
(Exhibit 3.3 hereto) provide for indemnification of the Registrant's directors,
officers, employees and other agents to the maximum extent permitted by Delaware
Law. In addition, the Registrant has entered into Indemnification Agreements
(Exhibit 10.1 hereto) with its officers and directors. The Underwriting
Agreement (Exhibit 1.1) also provides for cross-indemnification among the
Company and the Underwriters with respect to certain matters, including matters
arising under the Securities Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since March 1, 1994, the Registrant has issued and sold the following
unregistered securities:

1. The Registrant has issued an aggregate of 4,081,000 shares of Common
Stock to employees and consultants of the Company pursuant to restricted
stock purchase agreements for an aggregate amount of $810,564.50.

2. On May 28, 1996 and June 14, 1996, the Registrant issued and sold an
aggregate of 130,378 shares of Series A Redeemable Preferred Stock and
4,778,804 shares of Common Stock to Summit Ventures IV, L.P., Summit
Investors III, L.P., WK Technology Fund, WK Technology Fund II, WK
Technology Fund III, WS Investment Company 96-A, Jeffrey D. Saper and
K&E Partners II pursuant to a Purchase Agreement for aggregate cash
consideration of $20,200,005.

3. On October 3, 1996, the Registrant issued and sold an aggregate of
508,260 shares of Common Stock to Winbond International Corp., Concord
V.C., Concord II, V.C., Wang Hsiu-Fong, Hantech V.C. Corp., Hwa Chuan
Co., Ltd., Golden Technology C.V. Investment Corp.,

II-1
<PAGE> 62

Lo-hou Chew, Chyong Ven Chang, Shao-Fu Chen, Chinatrust V.C. Co., Ltd.,
Pacific V.C. Co., Ltd., Win Win Venture Capital Corporation, Ai-Lin Chen
Tsai, Chen Chu Yin Yeh, Chiu-Hsiang Lin and Hung Tien Investment
Corporation pursuant to a Purchase Agreement for aggregate cash
consideration of $2,160,105.

There was no underwriter involved in connection with any transaction set
forth above. The issuances of the securities set forth in paragraph 1 of this
Item 15 were deemed to be exempt from registration under the Securities Act in
reliance upon Rule 701 promulgated thereunder. The other issuances set forth in
this Item 15 were deemed to be exempt from registration pursuant to Section 4(2)
of the Securities Act and Regulation D promulgated thereunder as a transaction
by an issuer not involving a public offering.

In all of such transactions, the recipients of securities represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof, and appropriate legends
were affixed to the securities issued.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ ---------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1* Agreement and Plan of Merger of Aspec Technology, Inc., a Delaware corporation,
and Aspec Technology, Inc., a California corporation.
3.1 Certificate of Incorporation of Registrant.
3.2 Bylaws of Registrant.
3.3 Form of Certificate of Amendment of the Certificate of Incorporation of
Registrant.
3.4 Form of Amended and Restated Certificate of Incorporation of Registrant.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1 Form of Indemnification Agreement.
10.2 1996 Stock Option Plan and form of Stock Option Agreement.
10.3 1997 Director Option Plan and form of Director Option Agreement.
10.4 1997 Employee Stock Purchase Plan and form of Subscription Agreement.
10.5 Registration Agreement dated May 28, 1996 among the Registrant and certain
stockholders of the Registrant, as amended October 3, 1996.
10.6 Lease Agreement by and between Wolfe Road Investments No. 3 and the Registrant
dated December 5, 1996.
10.7 Commercial Security Agreement dated March 24, 1994, Business Loan Agreement dated
July 18, 1996, Promissory Note dated July 18, 1996 and Disbursement Request and
Authorization dated July 18, 1996 between the Registrant and Commercial Bank of
Fremont.
11.1 Computation of Net Income Per Share.
16.1 Letter from KPMG Peat Marwick LLP to the Securities and Exhchange
Commission dated March 6, 1997.
23.1 Consent of Deloitte & Touche LLP.
23.2* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included
in Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
27.1 Financial Data Schedule.
</TABLE>

- ---------------
*To be supplied by amendment.

(b) Financial Statement Schedules

Schedule II -- Valuation and Qualifying Accounts

II-2
<PAGE> 63

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referenced in Item 14 of this Registration
Statement or otherwise, the Registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

II-3
<PAGE> 64

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Sunnyvale, State of
California, on March 6, 1997.

Aspec Technology, Inc.

By: /s/ CONRAD J. DELL'OCA
--------------------------------------
Conrad J. Dell'Oca
President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Conrad J. Dell'Oca and James T.
Lindstrom, and each of them individually, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign the
Registration Statement filed herewith and any or all amendments to said
Registration Statement (including post-effective amendments and registration
statements filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended and otherwise), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission granting unto said attorneys-in-fact and agents the full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the foregoing, as full to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his or her substitute, may
lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1933, on
March 6, 1997 this Registration Statement has been signed by the following
persons in the capacities indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>

/s/ CONRAD J. DELL'OCA Chairman of the Board, President and Chief
- --------------------------------------------- Executive Officer (Principal Executive
Conrad J. Dell'Oca Officer)

/s/ JAMES T. LINDSTROM Chief Financial Officer
- --------------------------------------------- (Principal Financial and Accounting Officer)
James T. Lindstrom

/s/ JAI P. SHIN Director
- ---------------------------------------------
Jai P. Shin
/s/ Y.S. FU Director
- ---------------------------------------------
Y.S. Fu

/s/ CHENG MING LEE Director
- ---------------------------------------------
Cheng Ming Lee

/s/ WALTER G. KORTSCHAK Director
- ---------------------------------------------
Walter Kortschak

/s/ JEFFREY D. SAPER Director
- ---------------------------------------------
Jeffrey D. Saper
</TABLE>

II-4
<PAGE> 65

SCHEDULE II

ASPEC TECHNOLOGY, INC.
------------------
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE
AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
OF PERIOD EXPENSES DEDUCTIONS(1) AT PERIOD
--------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
1994........................................... $ -- $ -- $ -- $ --
1995........................................... -- -- -- --
1996........................................... -- 300 -- 300
</TABLE>

- ---------------
(1) Write-off of accounts, net of recoveries.
<PAGE> 66

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------ --------------------------------------------------------------------------------
<C> <S> <C>
1.1* Form of Underwriting Agreement.
2.1* Agreement and Plan of Merger of Aspec Technology, Inc., a Delaware
corporation, and Aspec Technology, Inc., a California corporation.
3.1 Certificate of Incorporation of Registrant.
3.2 Bylaws of Registrant.
3.3 Form of Certificate of Amendment of the Certificate of Incorporation
of Registrant.
3.4 Form of Amended and Restated Certificate of Incorporation of
Registrant.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1 Form of Indemnification Agreement.
10.2 1996 Stock Option Plan and form of Stock Option Agreement.
10.3 1997 Director Option Plan and form of Director Option Agreement.
10.4 1997 Employee Stock Purchase Plan and form of Subscription
Agreement.
10.5 Registration Agreement dated May 28, 1996 among the Registrant and
certain stockholders Of the Registrant, as amended October 3, 1996.
10.6 Lease Agreement by and between Wolfe Road Investments No. 3 and the
Registrant dated December 5, 1996.
10.7 Commercial Security Agreement dated March 24, 1994, Business Loan
Agreement dated July 18, 1996, Promissory Note dated July 18, 1996
and Disbursement Request and Authorization dated July 18, 1996
between the Registrant and Commercial Bank of Fremont.
11.1 Computation of Net Income Per Share.
16.1 Letter from KPMG Peat Marwick LLP to the Securities and Exhchange
Commission dated March 6, 1997.
23.1 Consent of Deloitte & Touche LLP.
23.2* Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
27.1 Financial Data Schedule.
</TABLE>

- ---------------
*To be supplied by amendment.

<PAGE> 1
EXHIBIT 3.1

CERTIFICATE OF INCORPORATION OF
ASPEC TECHNOLOGY, INC.
(A DELAWARE CORPORATION)

Article I

The name of this Corporation is Aspec Technology, Inc. (the
"Corporation").

Article II

The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, Delaware 19801, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.

Article III

The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.

Article IV

This Corporation is authorized to issue two classes of shares to be
designated, respectively, Common Stock ("Common") and Preferred Stock
("Preferred"). The total number of shares of Common this Corporation shall have
authority to issue is 75,000,000 with a par value of $0.001 per share. The total
number of shares of Preferred this Corporation shall have authority to issue is
5,130,385 with a par value of $0.001 per share, 130,385 of which shares are
hereby designated as Series A Redeemable Preferred Stock (the "Series A
Preferred") and 5,000,000 of which shares shall be undesignated as to series.

Any Preferred not previously designated as to series may be issued from
time to time in one or more series pursuant to a resolution or resolutions
providing for such issue duly adopted by the Board of Directors (authority to do
so being hereby expressly vested in the Board), and such resolution or
resolutions shall also set forth the voting powers, full or limited or none, of
each such series of Preferred and shall fix the designations, preferences and
relative, participating, optional or other special rights and qualifications,
limitations or restrictions of each such series of Preferred. The Board of
Directors is authorized to alter the designation, rights, preferences,
privileges and restrictions granted to or imposed upon any wholly unissued
series of Preferred and, within the limits and restrictions stated in any
resolution or resolutions of the Board of Directors originally fixing the number
of shares constituting any

<PAGE> 2

series of Preferred, to increase or decrease (but not below the number of shares
of any such series then outstanding) the number of shares of any such series
subse quent to the issue of shares of that series.

The Corporation shall from time to time in accordance with the laws of
the State of Delaware increase the authorized amount of its Common Stock if at
any time the number of shares of Common Stock remaining unissued and available
for issuance shall not be sufficient to permit conversion, if applicable, of the
Preferred.

A description of the respective classes and series of stock and a
statement of the designations, preferences, voting powers, relative,
participating, optional or other special rights and privileges, and the
qualifications, limitations and restrictions of the Preferred and Common are as
follows:

Section 1. Dividends.

1A. General Obligation. When and as declared by the
Corporation's Board of Directors and to the extent permitted under the Delaware
General Corporation Law, the Corporation shall pay preferential dividends in
cash to the holders of the Series A Preferred as provided in this Section 1.
Dividends on each share of the Series A Preferred (a "Share") shall accrue on a
daily basis at the rate of 6% per annum (compounded annually) of the sum of the
Liquidation Value thereof plus all accumulated and unpaid dividends thereon from
and including the date of issuance of such Share to and including the first to
occur of the date on which the Liquidation Value of such Share (plus all accrued
and unpaid dividends thereon and any Liquidation Premium or Redemption Premium
payable with respect thereto) is paid to the holder thereof in connection with
the liquidation of the Corporation or the redemption of such Share by the
Corporation or the date on which such Share is otherwise acquired by the
Corporation. Such dividends shall accrue whether or not they have been declared
and whether or not there are profits, surplus or other funds of the Corporation
legally available for the payment of dividends, and such dividends shall be
cumulative such that (except as expressly permitted by Section 3 hereof) all
accrued and unpaid dividends shall be fully paid or declared with funds
irrevocably set apart for payment before any dividends, distributions,
redemptions or other payments may be made with respect to any Junior Securities.
The date on which the Corporation initially issues any Share shall be deemed to
be its "date of issuance" regardless of the number of times a transfer of such
Share is made on the stock records maintained by or for the Corporation and
regardless of the number of certificates which may be issued to evidence such
Share.

1B. Dividend Reference Dates. To the extent not paid on June 1
of each year, beginning June 1, 1997 (the "Dividend Reference Dates"), all
dividends which have accrued on each Share outstanding during the twelve-month
period ending upon each such Dividend Reference Date shall be accumulated and
shall remain accumulated dividends with respect to such Share until paid to the
holder thereof.

1C. Distribution of Partial Dividend Payments. Except as
otherwise provided herein, if at any time the Corporation pays less than the
total amount of dividends then accrued with respect to the Series A Preferred,
such payment shall be distributed pro rata among the holders thereof based upon
the aggregate accrued but unpaid dividends on the Shares held by each such
holder.

-2-
<PAGE> 3
Section 2. Liquidation. Upon any liquidation, dissolution or winding up
of the Corporation (whether voluntary or involuntary), each holder of Series A
Preferred shall be entitled to be paid, before any distribution or payment is
made upon any Junior Securities, an amount in cash equal to the aggregate
Liquidation Value of all Shares held by such holder (plus all accrued and unpaid
dividends thereon plus the Liquidation Premium per Share (if any) determined as
of the date of any such liquidation, dissolution or winding up of the
Corporation), and the holders of Series A Preferred shall not be entitled to any
further payment. If upon any such liquidation, dissolution or winding up of the
Corporation the Corporation's assets to be distributed among the holders of the
Series A Preferred are insufficient to permit payment to such holders of the
aggregate amount which they are entitled to be paid under this Section 2, then
the entire assets available to be distributed to the Corporation's stockholders
shall be distributed pro rata among such holders of Series A Preferred based
upon the aggregate Liquidation Value (plus all accrued and unpaid dividends) of
the Series A Preferred held by each such holder. Not less than 30 days prior to
the payment date stated therein, the Corporation shall mail written notice of
any such liquidation, dissolution or winding up to each record holder of Series
A Preferred, setting forth in reasonable detail the amount of proceeds to be
paid with respect to each Share in connection with such liquidation, dissolution
or winding up. Neither the consolidation or merger of the Corporation into or
with any other entity or entities (whether or not the Corporation is the
surviving entity), nor the sale or transfer by the Corporation of all or any
part of its assets, nor the reduction of the capital stock of the Corporation
nor any other form of recapitalization or reorganization affecting the
Corporation shall be deemed to be a liquidation, dissolution or winding up of
the Corporation within the meaning of this Section 2.

Section 3. Priority of Series A Preferred on Dividends and Redemptions.
So long as any Series A Preferred remains outstanding, without the prior written
consent of the holders of at least 55% of the then outstanding Shares of Series
A Preferred, the Corporation shall not, nor shall it permit any Subsidiary to,
redeem, purchase or otherwise acquire directly or indirectly any Junior
Securities, nor shall the Corporation directly or indirectly pay or declare any
dividend or make any distribution upon any Junior Securities (other than
dividends payable in shares of Common Stock issued upon the outstanding shares
of Common Stock), except that the Corporation may repurchase Common Stock from
former employees or consultants of the Corporation and its Subsidiaries upon
termination of employment or consultancy in accordance with arrangements
approved by the Corporation's Board of Directors so long as no Event of
Noncompliance is in existence immediately prior to or is otherwise caused by any
such repurchase (and in connection therewith each holder of Series A Preferred
shall be deemed to have consented, for purposes of the General Corporation Law
of Delaware, to distributions made by the Corporation with respect to such
repurchases).

Section 4. Redemptions.

4A. Scheduled Redemptions. The Corporation shall redeem the
corresponding percentage specified below of the outstanding Shares of Series A
Preferred on June 1 of each year, commencing in 2001 and ending in 2003 (the
"Scheduled Redemption Dates"), at a price per Share equal to the Liquidation
Value thereof (plus all accrued and unpaid dividends thereon):

-3-
<PAGE> 4
<TABLE>
<CAPTION>
Scheduled Redemption Date Specified Percentage
------------------------- --------------------
<S> <C>
June 1, 2001 33-1/3%
June 1, 2002 50%
June 1, 2003 100%
</TABLE>

4B. Special Redemptions. In the event of a Change in Ownership
(but only to the extent such Change in Ownership occurs prior to the
Corporation's initial Public Offering of Common Stock) or a Fundamental Change,
the Corporation shall, immediately prior to or contemporaneously with the
consummation of such Change in Ownership or Fundamental Change, redeem all of
the outstanding Series A Preferred at a price per Share equal to the Liquidation
Value thereof (plus all accrued and unpaid dividends thereon and plus the
Redemption Premium per Share (if any) determined as of the Redemption Date).

4C. Redemption With Proceeds of Public Offering. The Corporation
shall (subject, in the case of the Corporation's initial Public Offering, to the
consent of the underwriter(s) managing such Public Offering) apply the net cash
proceeds from any Public Offering remaining after deduction of all discounts,
underwriters' commissions and other reasonable legal, accounting, printing and
other expenses (and, in the case of the Corporation's initial Public Offering,
remaining after (i) application of $20,000,000 of such net cash proceeds to such
other corporate purposes as shall be determined by the Corporation and (ii)
subtracting an amount equal to any cash previously paid to the holders of the
Series A Preferred in connection with any dividend or redemption hereunder) to
redeem Shares of Series A Preferred at a price per Share equal to the
Liquidation Value thereof (plus all accrued and unpaid dividends thereon and
plus the Redemption Premium per Share (if any) determined as of the Redemption
Date). The Corporation shall send written notice of any redemption of Series A
Preferred pursuant to this paragraph 4C by reputable overnight courier service
(charges prepaid) to each record holder of Series A Preferred at least three
business days prior to the Corporation's expected receipt of such proceeds. Such
redemption shall take place on a date fixed by the Corporation, which date shall
be not more than five days after the Corporation's receipt of such proceeds.
Except as to the Shares so redeemed, redemptions of Shares pursuant to this
paragraph shall not relieve the Corporation of its obligation to redeem
outstanding Shares on the Scheduled Redemption Dates or pursuant to paragraph 4B
above.

4D. Optional Redemptions. The Corporation may at any time and
from time to time after June 30, 1997 redeem all or any portion of the Shares of
Series A Preferred then outstanding. Upon any such redemption, the Corporation
shall pay a price per Share equal to the Liquidation Value thereof (plus all
accrued and unpaid dividends thereon and plus the Redemption Premium per Share
(if any) determined as of the Redemption Date).

4E. Redemption Payments. For each Share which is to be redeemed
hereunder, the Corporation shall be obligated on the Redemption Date to pay to
the holder thereof (upon surrender by such holder at the Corporation's principal
office of the certificate representing such Share) an amount in immediately
available funds equal to the Liquidation Value of such Share (plus all accrued
and unpaid dividends thereon and any Redemption Premium payable with respect
thereto). If the funds of the

-4-
<PAGE> 5
Corporation legally available for redemption of Shares on any Redemption Date
are insufficient to redeem the total number of Shares to be redeemed on such
date, those funds which are legally available shall be used to redeem the
maximum possible number of Shares pro rata among the holders of the Shares to be
redeemed based upon the aggregate number of Shares held by each such holder. At
any time thereafter when additional funds of the Corporation are legally
available for the redemption of Shares, such funds shall immediately be used to
redeem the balance of the Shares which the Corporation has become obligated to
redeem on any Redemption Date but which it has not redeemed.

4F. Notice of Redemption. Except as otherwise provided in
paragraph 4C, the Corporation shall mail written notice of each redemption of
any Series A Preferred to each record holder thereof not more than 60 nor less
than 30 days prior to the date on which such redemption is to be made. In case
fewer than the total number of Shares represented by any certificate are
redeemed, a new certificate representing the number of unredeemed Shares shall
be issued to the holder thereof without cost to such holder within five business
days after surrender of the certificate representing the redeemed Shares.

4G. Determination of the Number of Each Holder's Shares to be
Redeemed. The number of Shares of Series A Preferred to be redeemed from each
holder thereof in redemptions hereunder shall be the number of Shares determined
by multiplying the total number of Shares to be redeemed times a fraction, the
numerator of which shall be the total number of Shares then held by such holder
and the denominator of which shall be the total number of Shares then
outstanding.

4H. Dividends After Redemption Date. No Share shall be entitled
to any dividends accruing after the date on which the Liquidation Value of such
Share (plus all accrued and unpaid dividends thereon and any premium payable
with respect thereto) is tendered to the holder of such Share by the
Corporation. On such date, all rights of the holder of such Share shall cease,
and such Share shall no longer be deemed to be issued and outstanding.

4I. Redeemed or Otherwise Acquired Shares. Any Shares which are
redeemed or otherwise acquired by the Corporation shall be canceled and retired
and shall not be reissued, sold or transferred.

4J. Other Redemptions or Acquisitions. The Corporation shall
not, nor shall it permit any Subsidiary to, redeem or otherwise acquire any
Shares of Series A Preferred, except as expressly authorized herein.

Section 5. Voting Rights.

5A. General. Except as otherwise provided in paragraphs 5B and
5C hereof and as otherwise required by applicable law, the Series A Preferred
shall have no voting rights. Notwithstanding the foregoing, each holder of
Series A Preferred shall be entitled to notice of all stockholders meetings at
the same time and in the same manner as notice is given to all stockholders
entitled to vote at such meetings.

-5-
<PAGE> 6
5B. Election of Directors. In the election of directors of the
Corporation, the holders of the outstanding Series A Preferred, voting
separately as a single class to the exclusion of all other classes and series of
the Corporation's capital stock and with each Share of Series A Preferred
entitled to one vote, shall be entitled to elect (i) two directors to serve on
the Corporation's Board of Directors so long as the holders of record of the
Series A Preferred on June 30, 1996 continue to hold of record not less than 50%
of the Shares of Series A Preferred held by such persons on June 30, 1996 and
(ii) one director to serve on the Corporation's Board of Directors so long as
the holders of record of the Series A Preferred on June 30, 1996 continue to
hold of record between 25% and 50% of the Shares of Series A Preferred held by
such persons on June 30, 1996 (with each such director elected pursuant to this
paragraph 5B serving until his successor is duly elected by the holders of the
Series A Preferred or until he is removed from office by the holders of the
Series A Preferred). If the holders of the Series A Preferred for any reason
fail to elect anyone to fill any of such directorships, such position shall
remain vacant until such time as the holders of the Series A Preferred elect a
director to fill such position and shall not be filled by resolution or vote of
the Corporation's Board of Directors or the Corporation's other stockholders.

5C. Protective Provisions. So long as any Series A Preferred
remains outstanding, the Corporation shall not, without the vote or written
consent of the holders of at least 55% of the Series A Preferred then
outstanding:

(i) merge or consolidate with any Person or permit any
Subsidiary to merge or consolidate with any Person (other than (a) a merger or
consolidation between or among Wholly-Owned Subsidiaries, (b) a merger which is
effected solely to change the state of incorporation of the Corporation and (c)
a merger in which the Corporation is the surviving corporation, the terms of the
Series A Preferred are not changed, the Series A Preferred is not exchanged for
cash, securities or other property, and after giving effect to such merger the
holders of the Corporation's Common Stock immediately prior to the merger shall
continue to own at least 66-2/3% of the Corporation's issued and outstanding
Common Stock);

(ii) authorize, issue or enter into any agreement providing for
the issuance (contingent or otherwise) of, (a) any notes or debt securities
containing equity features (including, without limitation, any notes or debt
securities convertible into or exchangeable for capital stock or other equity
securities, issued in connection with the issuance of capital stock or other
equity securities or containing profit participation features), other than
capital stock or other equity securities issued in connection with bank or
equipment lease financings, or (b) any capital stock or other equity securities
(or any securities convertible into or exchangeable for any capital stock or
other equity securities) which are senior to Common Stock with respect to the
payment of dividends, redemptions or distributions upon liquidation or
otherwise;

(iii) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including, without limitation, any
reorganization into a limited liability company, a partnership or any other
non-corporate entity which is treated as a partnership for federal income tax
purposes, but excluding any stock split, stock dividend, stock combination or
like event and any merger which is effected solely to change the state of
incorporation of the Corporation); or

-6-
<PAGE> 7
(iv) increase the number of authorized shares of the Series A
Preferred or alter, change or otherwise impair or materially adversely affect
the rights or the relative preferences and priorities of the holders of the
Series A Preferred.

Section 6. Events of Noncompliance.

6A. Definition. An Event of Noncompliance shall have occurred if:

(i) the Corporation fails to make any redemption payment with
respect to the Series A Preferred which it is required to make hereunder within
ten business days following the date such payment is required to be made,
whether or not such payment is legally permissible or is prohibited by any
agreement to which the Corporation is subject;

(ii) the Corporation fails to pay the full amount of the Put
Price (as defined in the Stockholders Agreement) in cash at the Put Closing (as
defined in the Stockholders Agreement) in accordance with the terms of the
Stockholders Agreement, whether or not such payment is legally permissible or is
prohibited by any agreement to which the Corporation is subject;

(iii) the Corporation breaches or otherwise fails to perform or
observe any covenant or agreement set forth in subparagraphs 4C(ii), 4C(iii),
4C(iv), 4C(v), 4C(vi), 4C(viii) or 4C(x) of the Purchase Agreement; or

(iv) the Corporation makes an assignment for the benefit of
creditors or admits in writing its inability to pay its debts generally as they
become due; or an order, judgment or decree is entered adjudicating the
Corporation bankrupt or insolvent; or any order for relief with respect to the
Corporation is entered under the Federal Bankruptcy Code; or the Corporation
petitions or applies to any tribunal for the appointment of a custodian,
trustee, receiver or liquidator of the Corporation or of any substantial part of
the assets of the Corporation or commences any proceeding relating to the
Corporation under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction; or any
such petition or application is filed, or any such proceeding is commenced,
against the Corporation and either (a) the Corporation by any act indicates its
approval thereof, consent thereto or acquiescence therein or (b) such petition,
application or proceeding is not dismissed within 60 days.

6B. Consequences of Events of Noncompliance.

(i) If an Event of Noncompliance of the type described in
subparagraph 6A(iii) has occurred and continued for a period of 30 days or any
other Event of Noncompliance (other than an Event of Noncompliance of the type
described in subparagraph 6A(iv)) has occurred, the holder or holders of at
least 55% of the Series A Preferred then outstanding may demand (by written
notice delivered to the Corporation) immediate redemption of all or any portion
of the Series A Preferred owned by such holder or holders at a price per Share
equal to the Liquidation Value thereof (plus all accrued and unpaid dividends
thereon and plus the Redemption Premium per Share (if any) determined as of the
Redemption Date). The Corporation shall give prompt written notice of such
election to the other

-7-
<PAGE> 8

holders of Series A Preferred (but in any event within five days after receipt
of the initial demand for redemption from the holders of at least 55% of the
Series A Preferred then outstanding), and each such other holder may demand
immediate redemption of all or any portion of such holder's Series A Preferred
by giving written notice thereof to the Corporation within seven days after
receipt of the Corporation's notice. The Corporation shall redeem all Series A
Preferred as to which rights under this paragraph have been exercised within 15
days after receipt of the initial demand for redemption from the holders of at
least 55% of the Series A Preferred then outstanding.

(ii) If an Event of Noncompliance of the type described in
subparagraph 6A(iv) has occurred, all of the Series A Preferred then outstanding
shall be subject to immediate redemption by the Corporation (without any action
on the part of the holders of the Series A Preferred) at a price per Share equal
to the Liquidation Value thereof (plus all accrued and unpaid dividends thereon
and plus the Redemption Premium per Share (if any) determined as of the
Redemption Date). The Corporation shall immediately redeem all Series A
Preferred upon the occurrence of such Event of Noncompliance.

(iii) If any Event of Noncompliance exists, each holder of Series
A Preferred shall also have any other rights which such holder is entitled to
under any contract or agreement at any time and any other rights which such
holder may have pursuant to applicable law.

Section 7. Registration of Transfer. The Corporation shall keep at its
principal office a register for the registration of Series A Preferred. Upon the
surrender of any certificate representing Series A Preferred at such place, the
Corporation shall, at the request of the record holder of such certificate and
subject to the provisions of Section 4 of the Purchase Agreement, execute and
deliver (at the Corporation's expense) a new certificate or certificates in
exchange therefor representing in the aggregate the number of Shares represented
by the surrendered certificate. Each such new certificate shall be registered in
such name and shall represent such number of Shares as is requested by the
holder of the surrendered certificate and shall be substantially identical in
form to the surrendered certificate, and dividends shall accrue on the Series A
Preferred represented by such new certificate from the date to which dividends
have been fully paid on such Series A Preferred represented by the surrendered
certificate.

Section 8. Replacement. Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing Shares of Series A Preferred, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the holder is a financial
institution or other institutional investor an indemnity from such entity in a
form reasonably satisfactory to the Corporation shall be satisfactory), or, in
the case of any such mutilation upon surrender of such certificate, the
Corporation shall (at its expense) execute and deliver in lieu of such
certificate a new certificate of like kind representing the number of Shares of
such class represented by such lost, stolen, destroyed or mutilated certificate
and dated the date of such lost, stolen, destroyed or mutilated certificate, and
dividends shall accrue on the Series A Preferred represented by such new
certificate from the date to which dividends have been fully paid on such lost,
stolen, destroyed or mutilated certificate.

-8-
<PAGE> 9
Section 9. Definitions.

"Change in Ownership" means any sale, transfer or issuance or
series of sales, transfers and/or issuances of shares of the Corporation's
capital stock by the Corporation or any holders thereof which results in any
Person or group of Persons (as the term "group" is used under the Securities
Exchange Act of 1934), other than the holders of record of Common Stock and
Series A Preferred as of June 30, 1996, owning capital stock of the Corporation
possessing the voting power (under ordinary circumstances) to elect a majority
of the Corporation's Board of Directors.

"Common Stock" means the Corporation's Common Stock and any
capital stock of any class of the Corporation hereafter authorized which is not
limited to a fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in the distribution
of assets upon any liquidation, dissolution or winding up of the Corporation.

"Fundamental Change" means (a) any sale or transfer of more than
33-1/3% of the assets of the Corporation and its Subsidiaries on a consolidated
basis (computed on the basis of the greater of book value, determined in
accordance with generally accepted accounting principles consistently applied,
or fair market value, determined by the Corporation's Board of Directors in its
reasonable good faith judgment) in any transaction or series of related
transactions (other than sales of inventory in the ordinary course of business)
and (b) any merger or consolidation to which the Corporation is a party, except
for a merger in which the Corporation is the surviving corporation, the terms of
the Series A Preferred are not changed, the Series A Preferred is not exchanged
for cash, securities or other property, and after giving effect to such merger
the holders of the Corporation's outstanding capital stock possessing the voting
power (under ordinary circumstances) to elect a majority of the Corporation's
Board of Directors immediately prior to the merger shall continue to own the
Corporation's outstanding capital stock possessing the voting power (under
ordinary circumstances) to elect a majority of the Corporation's Board of
Directors.

"Junior Securities" means any capital stock or other equity
securities of the Corporation, except for the Series A Preferred.

"Liquidation Premium" of any Share as of any particular date
shall be equal to the excess (if any) of (A) $141.86 over (B) the Liquidation
Value per Share of the Series A Preferred plus all accrued and unpaid dividends
thereon as of and including the date of the dissolution, liquidation or winding
up of the Corporation.

"Liquidation Value" of any Share as of any particular date shall
be equal to $100.

"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.

-9-
<PAGE> 10

"Public Offering" means any offering by the Corporation of its
capital stock or equity or debt securities to the public pursuant to an
effective registration statement under the Securities Act of 1933, as then in
effect, or any comparable statement under any similar federal statute then in
force.

"Purchase Agreement" means the Purchase Agreement, dated as of
May 28, 1996, by and among the Corporation and certain investors.

"Redemption Date" as to any Share means the applicable date
specified herein with respect to such redemption; provided that no such date
shall be a Redemption Date unless the Liquidation Value of such Share (plus all
accrued and unpaid dividends thereon and any required premium with respect
thereto) is actually tendered in full on such date, and if not so tendered in
full, the Redemption Date shall be the date on which such amount is fully
tendered.

"Redemption Premium" of any Share as of any particular date shall
be equal to the excess (if any) of (A) $141.86 over (B) the Liquidation Value
per Share of Series A Preferred plus all accrued and unpaid dividends thereon as
of and including the Redemption Date of the Series A Preferred.

"Stockholders Agreement" means the Stockholders Agreement as
defined in the Purchase Agreement.

"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control the managing general partner of such limited liability
company, partnership, association or other business entity.

"Wholly-Owned Subsidiary" means, with respect to any Person, a
Subsidiary of which all of the issued and outstanding capital stock or other
ownership interests are owned by such Person or another Wholly-Owned Subsidiary
of such Person.

Section 10. Amendment and Waiver. No amendment, modification or waiver
shall be binding or effective with respect to any provision of Sections 1 to 11
hereof without the prior written consent of the holders of at least 55% of the
Series A Preferred outstanding at the time such action is taken; provided that
no such action shall change (a) the rate at which or the manner in which
dividends on the Series A Preferred accrue or the times at which such dividends
become payable or the amount payable on redemption of the Series A Preferred or
upon liquidation of the Corporation or the times at which

-10-
<PAGE> 11
redemption of Series A Preferred is to occur, without the prior written
consent of the holders of at least 66-2/3% of the Series A Preferred then
outstanding or (b) the percentage required to approve any change described in
clause (a) above, without the prior written consent of the holders of at least
66-2/3% of the Series A Preferred then outstanding; and provided further that no
change in the terms hereof may be accomplished by merger or consolidation of the
Corporation with another corporation or entity unless the Corporation has
obtained the prior written consent of the holders of the applicable percentage
of the Series A Preferred then outstanding.

Section 11. Notices. Except as otherwise expressly provided hereunder,
all notices referred to herein shall be in writing and shall be delivered by
registered or certified mail, return receipt requested and postage prepaid, or
by reputable overnight courier service, charges prepaid, and shall be deemed to
have been given when so mailed or sent (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated in
writing by any such holder to the Corporation in accordance with this Section 11
prior to the date the Corporation attempted to give such notice to such holder).

Article V

The name and mailing address of the incorporator is as follows:

J. Robert Suffoletta
c/o Wilson, Sonsini, Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050

Article VI

The Corporation is to have perpetual existence.

Article VII

Section 1. The management of the business and the conduct of the
affairs of the Corporation shall be vested in the Board of Directors. The number
of directors which shall constitute the whole Board of Directors shall be fixed
in the manner designated in the Bylaws of the Corporation.

Section 2. In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to make, alter, amend
or repeal the Bylaws of the Corporation.

Section 3. Elections of directors need not be by written ballot unless
a stockholder demands election by written ballot at the meeting and before
voting begins or unless the Bylaws of the Corporation shall so provide.

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<PAGE> 12
Section 4. Until a Registration Statement regarding the sale of the
Common to the public is declared effective by the Securities and Exchange
Commission, stockholders shall be entitled to cumulative voting rights. At all
elections of directors of the Corporation, each holder of stock or of any class
or classes or of a series or series thereof shall be entitled to as many votes
as shall equal the number of votes which (except for this provision as to
cumulative voting) such stockholder would be entitled to cast for the election
of directors with respect to such stockholder's shares of stock multiplied by
the number of directors to be elected, and such stockholder may cast all of such
votes for a single director or may distribute them among the number of directors
to be voted for, or for any two or more of them as such stockholder may see fit.
As of the date that a Registration Statement regarding the sale of the Common to
the public is declared effective by the Securities and Exchange Commission, this
Article VII shall no longer be effective and may be deleted herefrom upon any
restatement of this Certificate of Incorporation.

Article VIII

Section 1. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be amended, a director of
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.

Section 2. The Corporation may indemnify to the fullest extent
permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he, his testator or intestate is or was a director,
officer, employee or agent of the Corporation or any predecessor of the
Corporation or serves or served at any other enterprise as a director, officer,
employee or agent at the request of the Corporation or any predecessor to the
Corporation.

Section 3. Neither any amendment nor repeal of this Article VIII, nor
the adoption of any provision of this Corporation's Certificate of Incorporation
inconsistent with this Article VIII, shall eliminate or reduce the effect of
this Article VIII, in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article VIII, would accrue
or arise, prior to such amendment, repeal or adoption of an inconsistent
provision.

Article IX

Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.

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<PAGE> 13

Article X

Vacancies created by newly created directorships, created in accordance
with the Bylaws of this Corporation, may be filled by the vote of a majority,
although less than a quorum, of the directors then in office, or by a sole
remaining director.

Article XI

Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided in
the Bylaws of the Corporation.

Article XII

The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.

I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purposes of forming a Corporation pursuant to the Corporation Law of the State
of Delaware, do make this certificate, hereby declaring and certifying, under
penalties of perjury, that this is my act and deed and the facts herein stated
are true, and accordingly have hereunto set my hand on February 10, 1997.

/s/ J. Robert Suffoletta
------------------------------
J. Robert Suffoletta

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<PAGE> 1
EXHIBIT 3.2

BYLAWS

ASPEC TECHNOLOGY, INC.
(A DELAWARE CORPORATION)

<PAGE> 2

BYLAWS OF

ASPEC TECHNOLOGY, INC.
(a Delaware corporation)

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - CORPORATE OFFICES..................................................1

1.1 REGISTERED OFFICE..................................................1
1.2 OTHER OFFICES......................................................1

ARTICLE II - MEETINGS OF STOCKHOLDERS..........................................1

2.1 PLACE OF MEETINGS..................................................1
2.2 ANNUAL MEETING.....................................................1
2.3 SPECIAL MEETING....................................................1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS...................................2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS....2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.......................3
2.7 QUORUM.............................................................3
2.8 ADJOURNED MEETING; NOTICE..........................................4
2.9 VOTING.............................................................4
2.10 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT..................4
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING............4
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING.........................5
2.13 PROXIES............................................................5
2.14 ORGANIZATION.......................................................5
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE..............................5
2.16 INSPECTORS OF ELECTION.............................................6

ARTICLE III - DIRECTORS........................................................6

3.1 POWERS.............................................................6
3.2 NUMBER OF DIRECTORS................................................7
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS...........................7
3.4 RESIGNATION AND VACANCIES..........................................7
3.5 REMOVAL OF DIRECTORS...............................................8
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE...........................8
3.7 FIRST MEETINGS.....................................................8
3.8 REGULAR MEETINGS...................................................8
3.9 SPECIAL MEETINGS; NOTICE...........................................8
3.10 QUORUM.............................................................9
3.11 WAIVER OF NOTICE...................................................9
3.12 ADJOURNMENT........................................................9
3.13 NOTICE OF ADJOURNMENT..............................................9
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING..................9
3.15 FEES AND COMPENSATION OF DIRECTORS.................................9
3.16 APPROVAL OF LOANS TO OFFICERS......................................9
3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION............10
</TABLE>

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<PAGE> 3

TABLE OF CONTENTS

(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IV - COMMITTEES......................................................10

4.1 COMMITTEES OF DIRECTORS..........................................10
4.2 MEETINGS AND ACTION OF COMMITTEES................................10
4.3 COMMITTEE MINUTES................................................10

ARTICLE V - OFFICERS.........................................................11

5.1 OFFICERS.........................................................11
5.2 ELECTION OF OFFICERS.............................................11
5.3 SUBORDINATE OFFICERS.............................................11
5.4 REMOVAL AND RESIGNATION OF OFFICERS..............................11
5.5 VACANCIES IN OFFICES.............................................12
5.6 CHAIRMAN OF THE BOARD............................................12
5.7 CHIEF EXECUTIVE OFFICER..........................................12
5.8 PRESIDENT........................................................12
5.9 VICE PRESIDENTS..................................................12
5.10 SECRETARY........................................................12
5.11 CHIEF FINANCIAL OFFICER..........................................13
5.12 ASSISTANT SECRETARY..............................................13
5.13 ADMINISTRATIVE OFFICERS..........................................13
5.14 AUTHORITY AND DUTIES OF OFFICERS.................................13

ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS..........................................14

6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS........................14
6.2 INDEMNIFICATION OF OTHERS........................................14
6.3 INSURANCE........................................................15

ARTICLE VII - RECORDS AND REPORTS............................................15

7.1 MAINTENANCE AND INSPECTION OF RECORDS............................15
7.2 INSPECTION BY DIRECTORS..........................................15
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.................................15
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS...................15
7.5 CERTIFICATION AND INSPECTION OF BYLAWS...........................16

ARTICLE VIII - GENERAL MATTERS...............................................16

8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING............16
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS........................16
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED...............16
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES.................16
8.5 SPECIAL DESIGNATION ON CERTIFICATES..............................17
</TABLE>

-ii-

<PAGE> 4
TABLE OF CONTENTS

(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.6 LOST CERTIFICATES.................................................17
8.7 TRANSFER AGENTS AND REGISTRARS....................................17
8.8 CONSTRUCTION; DEFINITIONS.........................................17

ARTICLE IX - AMENDMENTS.......................................................18

ARTICLE X - DISSOLUTION.......................................................18

ARTICLE XI - CUSTODIAN........................................................19

11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES.......................19
11.2 DUTIES OF CUSTODIAN...............................................19
</TABLE>

-iii-

<PAGE> 5

BYLAWS

ASPEC TECHNOLOGY, INC.
(a Delaware corporation)

ARTICLE I

CORPORATE OFFICES

1.1 REGISTERED OFFICE

The registered office of the corporation shall be fixed in the
certificate of incorporation of the corporation. The registered office of the
corporation may be changed in any manner permitted by Delaware law.

1.2 OTHER OFFICES

The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.

ARTICLE II

MEETINGS OF STOCKHOLDERS

2.1 PLACE OF MEETINGS

Meetings of stockholders shall be held at any place within or outside
the State of Delaware designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.

2.2 ANNUAL MEETING

The annual meeting of stockholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the first
Tuesday in April in each year at 9:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.

2.3 SPECIAL MEETING

A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more stockholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes of all shares of stock owned by
stockholders entitled to vote at that meeting.

If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, or the secretary of
the corporation. No business may be transacted at such special meeting otherwise
than specified in such notice. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.6 of

<PAGE> 6
these bylaws, that a meeting will be held at the time requested by the person or
persons calling the meeting, so long as that time is not less than thirty-five
(35) nor more than sixty (60) days after the receipt of the request. If the
notice is not given within twenty (20) days after receipt of the request, then
the person or persons requesting the meeting may give the notice. Nothing
contained in this paragraph of this Section 2.3 shall be construed as limiting,
fixing or affecting the time when a meeting of stockholders called by action of
the board of directors may be held.

2.4 NOTICE OF STOCKHOLDERS' MEETINGS

All notices of meetings of stockholders shall be sent or otherwise
given in accordance with Section 2.5 of these bylaws not less than ten (10) nor
more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date and hour of the meeting and (i) in the case of a special
meeting, the purpose or purposes for which the meeting is called (no business
other than that specified in the notice may be transacted) or (ii) in the case
of the annual meeting, those matters which the board of directors, at the time
of giving the notice, intends to present for action by the stockholders (but any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.

2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER
BUSINESS

(a) To be properly brought before an annual meeting or
special meeting, nominations for the election of directors or other business
must be (i) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the board of directors, (ii) otherwise properly
brought before the meeting by or at the direction of the board of directors or
(iii) otherwise properly brought before the meeting by a stockholder.

(b) For business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the corporation. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the corporation not less than one hundred twenty (120) calendar days
in advance of the date specified in the corporation's proxy statement released
to stockholders in connection with the previous year's annual meeting of
stockholders; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy state ment, notice by the stockholder to be timely must be
so received a reasonable time before the solicitation is made. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting: (i) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and address, as
they appear on the corporation's books, of the stockholder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the stockholder, (iv) any material interest of the
stockholder in such business and (v) any other information that is required to
be provided by the stockholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in his capacity as a
proponent to a stockholder proposal. Notwithstanding the foregoing, in order to
include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the Exchange
Act. Notwithstanding anything in these bylaws to the contrary, no business shall
be conducted at any annual meeting except in accordance with the procedures set
forth in this Section 2.5. The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this Section 2.5, and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.

(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 2.5. Such stockholder's notice
shall set forth (i) as to each person, if any, whom the stockholder proposes to

-2-

<PAGE> 7

nominate for election or re-election as a director: (A) the name, age, business
address and residence address of such person, (B) the principal occupation or
employment of such person, (C) the class and number of shares of the corporation
which are beneficially owned by such person, (D) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nominations are to be made by the stockholder and (E) any other information
relating to such person that is required to be disclosed in solicitations of
proxies for elections of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Exchange Act (including without limitation
such person's written consent to being named in the proxy statement, if any, as
a nominee and to serving as a director if elected); and (ii) as to such
stockholder giving notice, the information required to be provided pursuant to
paragraph (b) of this Section 2.5. At the request of the Board of Directors, any
person nominated by a stockholder for election as a director shall furnish to
the Secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrants, determine and declare at the
meeting that a nomination was not made in accordance with the procedures
prescribed by these bylaws, and if he should so determine, he shall so declare
at the meeting, and the defective nomination shall be disregarded.

2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE

Written notice of any meeting of stockholders shall be given either
personally or by United States mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication. If any notice addressed to a
stockholder at the address of that stockholder appearing on the books of the
corporation is returned to the corporation by the United States Postal Service
marked to indicate that the United States Postal Service is unable to deliver
the notice to the stockholder at that address, then all future notices or
reports shall be deemed to have been duly given without further mailing if the
same shall be available to the stockholder on written demand of the stockholder
at the principal executive office of the corporation for a period of one (1)
year from the date of the giving of the notice.

An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.

2.7 QUORUM

The holders of a majority in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman of
the meeting or (ii) the holders of a majority of the shares represented at the
meeting and entitled to vote thereat, present in person or represented by proxy,
shall have power to adjourn the meeting in accordance with Section 2.8 of these
bylaws.

When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the laws of the State of Delaware or
of the certificate of incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of the question.

If a quorum be initially present, the stockholders may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.

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2.8 ADJOURNED MEETING; NOTICE

Any stockholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by (i) the chairman of the
meeting or (ii) the vote of the holders of a majority of the shares represented
at that meeting and entitled to vote thereat, either in person or by proxy. In
the absence of a quorum, no other business may be transacted at that meeting
except as provided in Section 2.7 of these bylaws.

When a meeting is adjourned to another time and place, unless these
bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.

2.9 VOTING

The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.12 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements).

Except as may be otherwise provided in the certificate of incorporation
or these bylaws, each stockholder shall be entitled to one vote for each share
of capital stock held by such stockholder. Any stockholder entitled to vote on
any matter may vote part of the shares in favor of the proposal and refrain from
voting the remaining shares or, except when the matter is the election of
directors, may vote them against the proposal; but, if the stockholder fails to
specify the number of shares which the stockholder is voting affirmatively, it
will be conclusively presumed that the stockholder's approving vote is with
respect to all shares which the stockholder is entitled to vote.

2.10 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT

The transaction of any meeting of stockholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and notice,
if a quorum be present either in person or by proxy, and if, either before or
after the meeting, each person entitled to vote, who was not present in person
or by proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of stockholders. All such waivers, consents,
and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.

Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by law to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.

2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Any action required or permitted to be taken at any annual or special
meeting of stockholders may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing setting forth the action so
taken shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Such consents shall be delivered to the corporation by delivery to it
registered office in the state of Delaware, its principal place of business, or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.

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2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING

For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not precede the date upon which the resolution fixing the record
date is adopted by the board of directors and which shall not be more than sixty
(60) days nor less than ten (10) days before the date of any such meeting, and
in such event only stockholders of record on the date so fixed are entitled to
notice and to vote, notwithstanding any transfer of any shares on the books of
the corporation after the record date.

If the board of directors does not so fix a record date:

(a) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the business day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held; and

(b) the record date for determining stockholders entitled
to give consent to corporate action in writing without a meeting, (i) when no
prior action by the board is required, shall be the day on which the first
written consent is delivered to the Corporation as provided in Section 2.3(b) of
the General Corporation Law of Delaware, or (ii) when prior action by the board
is required, shall be at the close of business on the day on which the board
adopts the resolution relating to that action.

A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting
unless the board of directors fixes a new record date for the adjourned meeting,
but the board of directors shall fix a new record date if the meeting is
adjourned for more than thirty (30) days from the date set for the original
meeting.

The record date for any other purpose shall be as provided in Section
8.1 of these bylaws.

2.13 PROXIES

Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission, telefacsimile or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(e) of the General Corporation Law of
Delaware.

2.14 ORGANIZATION

The chief executive officer, or in the absence of the chief executive
officer, the president, or in the absence of the president, the chairman of the
board, or in the absence of the chairman, any vice president designated by the
chief executive officer, the president or the chairman, shall call the meeting
of the stockholders to order, and shall act as chairman of the meeting. In the
absence of the chief executive officer, the president, the chairman of the
board, and all of the vice presidents, the stockholders shall appoint a chairman
for such meeting. The chairman of any meeting of stockholders shall determine
the order of business and the procedures at the meeting, including such matters
as the regulation of the manner of voting and the conduct of business. The
secretary of the corporation shall act as secretary of all meetings of the
stockholders, but in the absence of the secretary at any meeting of the
stockholders, the chairman of the meeting may appoint any person to act as
secretary of the meeting.

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2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE

The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.

2.16 INSPECTORS OF ELECTION

Before any meeting of stockholders, the board of directors may appoint
an inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any stockholder or a stockholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The number
of inspectors shall be either one (1) or three (3). If inspectors are appointed
at a meeting pursuant to the request of one (1) or more stockholders or proxies,
then the holders of a majority of shares or their proxies present at the meeting
shall determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
then the chairman of the meeting may, and upon the request of any stockholder or
a stockholder's proxy shall, appoint a person to fill that vacancy.

Such inspectors shall:

(a) determine the number of shares outstanding and the
voting power of each, the number of shares represented at the meeting, the
existence of a quorum, and the authenticity, validity, and effect of proxies;

(b) receive votes, ballots or consents;

(d) count and tabulate all votes or consents;

(e) determine when the polls shall close;

(f) determine the result; and

(g) do any other acts that may be proper to conduct the
election or vote with fairness to all stockholders.

ARTICLE III

DIRECTORS

3.1 POWERS

Subject to the provisions of the General Corporation Law of Delaware
and to any limitations in the certificate of incorporation or these bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
board of directors.

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3.2 NUMBER OF DIRECTORS

The board of directors shall consist of six (6) members. The number of
directors may be changed by a resolution duly adopted by the board of directors,
by an amendment to this bylaw, duly adopted by the board of directors or by the
stockholders, or by a duly adopted amendment to the certificate of
incorporation. No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
If for any cause, the directors shall not have been elected at an annual
meeting, they may be elected as soon thereafter as convenient at a special
meeting of the stockholders called for that purpose in the manner provided in
these Bylaws.

3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS

Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Each director, including a director elected or appointed to fill
a vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.

3.4 RESIGNATION AND VACANCIES

Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.

Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the stockholders or by court order may be filled only by the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum). Each director so elected shall hold office
until the next annual meeting of the stockholders and until a successor has been
elected and qualified.

Unless otherwise provided in the certificate of incorporation or these
bylaws:

(i) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.

(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.

If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.

If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.

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3.5 REMOVAL OF DIRECTORS

Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that, if and so long as stockholders of the corporation are entitled to
cumulative voting, if less than the entire board is to be removed, no director
may be removed without cause if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the entire
board of directors.

3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE

Regular meetings of the board of directors may be held at any place
within or outside the State of Delaware that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of Delaware that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.

Any meeting of the board, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another; and all such participating
directors shall be deemed to be present in person at the meeting.

3.7 FIRST MEETINGS

The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the stockholders at
the annual meeting. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.

3.8 REGULAR MEETINGS

Regular meetings of the board of directors may be held without notice
at such time as shall from time to time be determined by the board of directors.
If any regular meeting day shall fall on a legal holiday, then the meeting shall
be held at the same time and place on the next succeeding full business day.

3.9 SPECIAL MEETINGS; NOTICE

Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.

Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
telecopy or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, telecopy or telegram, it shall be
delivered personally or by telephone or telecopy or to the telegraph company at
least forty-eight (48) hours before the time of the holding of the meeting. Any
oral notice given personally or by telephone may be communicated either to the
director or to a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose or the place of the meeting, if the meeting
is to be held at the principal executive office of the corporation.

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3.10 QUORUM

A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.12 of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of the
certificate of incorporation and applicable law.

A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the quorum for that meeting.

3.11 WAIVER OF NOTICE

Notice of a meeting need not be given to any director (i) who signs a
waiver of notice, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers shall be filed with the corporate
records or made part of the minutes of the meeting. A waiver of notice need not
specify the purpose of any regular or special meeting of the board of directors.

3.12 ADJOURNMENT

A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting of the board to another time and place.

3.13 NOTICE OF ADJOURNMENT

Notice of the time and place of holding an adjourned meeting of the
board need not be given unless the meeting is adjourned for more than
twenty-four (24) hours. If the meeting is adjourned for more than twenty-four
(24) hours, then notice of the time and place of the adjourned meeting shall be
given before the adjourned meeting takes place, in the manner specified in
Section 3.9 of these bylaws, to the directors who were not present at the time
of the adjournment.

3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board of directors.

3.15 FEES AND COMPENSATION OF DIRECTORS

Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.15 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.

3.16 APPROVAL OF LOANS TO OFFICERS

The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or any of its
subsidiaries, including any officer or employee who is a director of the
corporation or any of its subsidiaries, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.

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3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION

In the event only one director is required by these bylaws or the
certificate of incorporation, then any reference herein to notices, waivers,
consents, meetings or other actions by a majority or quorum of the directors
shall be deemed to refer to such notice, waiver, etc., by such sole director,
who shall have all the rights and duties and shall be entitled to exercise all
of the powers and shall assume all the responsibilities otherwise herein
described as given to the board of directors.

ARTICLE IV

COMMITTEES

4.1 COMMITTEES OF DIRECTORS

The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. Any
committee, to the extent provided in the resolution of the board, shall have and
may exercise all the powers and authority of the board, but no such committee
shall have the power or authority to (i) amend the certificate of incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the board
of directors as provided in Section 151(a) of the General Corporation Law of
Delaware, fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the corporation or a revocation
of a dissolution or (v) amend the bylaws of the corporation; and, unless the
board resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.

4.2 MEETINGS AND ACTION OF COMMITTEES

Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the following provisions of Article III of these
bylaws: Section 3.6 (place of meetings; meetings by telephone), Section 3.8
(regular meetings), Section 3.9 (special meetings; notice), Section 3.10
(quorum), Section 3.11 (waiver of notice), Section 3.12 (adjournment), Section
3.13 (notice of adjournment) and Section 3.14 (board action by written consent
without meeting), with such changes in the context of those bylaws as are
necessary to substitute the commit tee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the board of directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.

4.3 COMMITTEE MINUTES

Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.

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ARTICLE V

OFFICERS

5.1 OFFICERS

The Corporate Officers of the corporation shall be a president, a
secretary and a chief financial officer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more vice
presidents (however denominated), one or more assistant secretaries, one or more
assistant treasurers and such other officers as may be appointed in accordance
with the provisions of Section 5.3 of these bylaws. Any number of offices may be
held by the same person.

In addition to the Corporate Officers of the Company described above,
there may also be such Administrative Officers of the corporation as may be
designated and appointed from time to time by the president of the corporation
in accordance with the provisions of Section 5.12 of these bylaws.

5.2 ELECTION OF OFFICERS

The Corporate Officers of the corporation, except such officers as may
be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board of directors, subject to the rights,
if any, of an officer under any contract of employment, and shall hold their
respective offices for such terms as the board of directors may from time to
time determine.

5.3 SUBORDINATE OFFICERS

The board of directors may appoint, or may empower the president to
appoint, such other Corporate Officers as the business of the corporation may
require, each of whom shall hold office for such period, have such power and
authority, and perform such duties as are provided in these bylaws or as the
board of directors may from time to time determine.

The president may from time to time designate and appoint
Administrative Officers of the corporation in accordance with the provisions of
Section 5.12 of these bylaws.

5.4 REMOVAL AND RESIGNATION OF OFFICERS

Subject to the rights, if any, of a Corporate Officer under any
contract of employment, any Corporate Officer may be removed, either with or
without cause, by the board of directors at any regular or special meeting of
the board or, except in case of a Corporate Officer chosen by the board of
directors, by any Corporate Officer upon whom such power of removal may be
conferred by the board of directors.

Any Corporate Officer may resign at any time by giving written notice
to the corporation. Any resignation shall take effect at the date of the receipt
of that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the Corporate
Officer is a party.

Any Administrative Officer designated and appointed by the president
may be removed, either with or without cause, at any time by the president. Any
Administrative Officer may resign at any time by giving written notice to the
president or to the secretary of the corporation.

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5.5 VACANCIES IN OFFICES

A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.

5.6 CHAIRMAN OF THE BOARD

The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise such other
powers and perform such other duties as may from time to time be assigned to him
by the board of directors or as may be prescribed by these bylaws. If there is
no president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.

5.7 CHIEF EXECUTIVE OFFICER

Subject to such supervisory powers, if any, as may be given by
the board of directors to the chairman of the board, if there be such an
officer, the chief executive officer shall, subject to the control of the board
of directors, have general supervision, direction and control of the business
and the officers of the corporation. He or she shall preside at all meetings of
the stockholders and, in the absence or nonexistence of a chairman of the board,
at all meetings of the board of directors. He or she shall have the general
powers and duties of management usually vested in the office of a chief
executive officer of a corporation, and shall have such other powers and perform
such other duties as may be prescribed by the board of directors or these
bylaws.

5.8 PRESIDENT

Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board or the chief executive officer,
if there be such officers, the president shall be the chief executive officer of
the corporation and shall, subject to the control of the board of directors,
have general supervision, direction and control of the business and the officers
of the corporation. He or she shall preside at all meetings of the stockholders
and, in the absence or nonexistence of a chairman of the board and a chief
executive officer, at all meetings of the board of directors. He or she shall
have the general powers and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or these bylaws.

5.9 VICE PRESIDENTS

In the absence or disability of the president, and if there is no
chairman of the board or chief executive officer, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.

5.10 SECRETARY

The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of the board
of directors, committees of directors and stockholders. The minutes shall show
the time and place of each meeting, whether regular or special (and, if special,
how authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings and the proceedings thereof.

The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by

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<PAGE> 17

each, the number and date of certificates evidencing such shares and the number
and date of cancellation of every certificate surrendered for cancellation.

The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law or
by these bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.

5.11 CHIEF FINANCIAL OFFICER

The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable times
be open to inspection by any director for a purpose reasonably related to his
position as a director.

The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated by the board of directors. He or she shall disburse the funds of
the corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his or
her transactions as chief financial officer and of the financial condition of
the corporation, and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or these bylaws.

5.12 ASSISTANT SECRETARY

The assistant secretary, if any, or, if there is more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.

5.13 ADMINISTRATIVE OFFICERS

In addition to the Corporate Officers of the corporation as provided in
Section 5.1 of these bylaws and such subordinate Corporate Officers as may be
appointed in accordance with Section 5.3 of these bylaws, there may also be such
Administrative Officers of the corporation as may be designated and appointed
from time to time by the president of the corporation. Administrative Officers
shall perform such duties and have such powers as from time to time may be
determined by the president or the board of directors in order to assist the
Corporate Officers in the furtherance of their duties. In the performance of
such duties and the exercise of such powers, however, such Administrative
Officers shall have limited authority to act on behalf of the corporation as the
board of directors shall establish, including but not limited to limitations on
the dollar amount and on the scope of agreements or commitments that may be made
by such Administrative Officers on behalf of the corporation, which limitations
may not be exceeded by such individuals or altered by the president without
further approval by the board of directors.

5.14 AUTHORITY AND DUTIES OF OFFICERS

In addition to the foregoing powers, authority and duties, all officers
of the corporation shall respectively have such authority and powers and perform
such duties in the management of the business of the corporation as may be
designated from time to time by the board of directors.

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<PAGE> 18

ARTICLE VI

INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS

6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS

The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware as the same now exists or
may hereafter be amended, indemnify any person against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred in connection with any threatened, pending or completed
action, suit, or proceeding in which such person was or is a party or is
threatened to be made a party by reason of the fact that such person is or was a
director or officer of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation shall mean any person (i) who is or
was a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.

The corporation shall be required to indemnify a director or officer in
connection with an action, suit, or proceeding (or part thereof) initiated by
such director or officer only if the initiation of such action, suit, or
proceeding (or part thereof) by the director or officer was authorized by the
board of Directors of the corporation.

The corporation shall pay the expenses (including attorney's fees)
incurred by a director or officer of the corporation entitled to indemnification
hereunder in defending any action, suit or proceeding referred to in this
Section 6.1 in advance of its final disposition; provided, however, that payment
of expenses incurred by a director or officer of the corporation in advance of
the final disposition of such action, suit or proceeding shall be made only upon
receipt of an undertaking by the director or officer to repay all amounts
advanced if it should ultimately be determined that the director or officer is
not entitled to be indemnified under this Section 6.1 or otherwise.

The rights conferred on any person by this Article shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the corporation's Certificate of Incorporation,
these bylaws, agreement, vote of the stockholders or disinterested directors or
otherwise.

Any repeal or modification of the foregoing provisions of this Article
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.

6.2 INDEMNIFICATION OF OTHERS

The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit, or
proceeding, in which such person was or is a party or is threatened to be made a
party by reason of the fact that such person is or was an employee or agent of
the corporation. For purposes of this Section 6.2, an "employee" or "agent" of
the corporation (other than a director or officer) shall mean any person (i) who
is or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.

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<PAGE> 19

6.3 INSURANCE

The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.

ARTICLE VII

RECORDS AND REPORTS

7.1 MAINTENANCE AND INSPECTION OF RECORDS

The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records of its business and properties.

Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.

7.2 INSPECTION BY DIRECTORS

Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his or her position as a director.

7.3 ANNUAL STATEMENT TO STOCKHOLDERS

The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.

7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS

The chairman of the board, if any, the chief executive officer, if any,
the president, any vice president, the chief financial officer, the secretary or
any assistant secretary of this corporation, or any other person authorized by
the board of directors or the president or a vice president, is authorized to
vote, represent and exercise on behalf of this corporation all rights incident
to any and all shares of the stock of any other corporation or corporations
standing in the name of this corporation. The authority herein granted may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by such person having the
authority.

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<PAGE> 20

7.5 CERTIFICATION AND INSPECTION OF BYLAWS

The original or a copy of these bylaws, as amended or otherwise altered
to date, certified by the secretary, shall be kept at the corporation's
principal executive office and shall be open to inspection by the stockholders
of the corporation, at all reasonable times during office hours.

ARTICLE VIII

GENERAL MATTERS

8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING

For purposes of determining the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record date, which shall not
precede the date upon which the resolution fixing the record date is adopted and
which shall not be more than sixty (60) days before any such action. In that
case, only stockholders of record at the close of business on the date so fixed
are entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided by law.

If the board of directors does not so fix a record date, then the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board of directors adopts the
applicable resolution.

8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS

From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.

8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED

The board of directors, except as otherwise provided in these bylaws,
may authorize and empower any officer or officers, or agent or agents, to enter
into any contract or execute any instrument in the name of and on behalf of the
corporation; such power and authority may be general or confined to specific
instances. Unless so authorized or ratified by the board of directors or within
the agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.

8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES

The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and, upon request,
every holder of uncertificated shares, shall be entitled to have a certificate
signed by, or in the name of the corporation by, the chairman or vice-chairman
of the board of directors, or the president or vice-president, and by the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of such corporation representing the number of shares registered in certificate
form. Any or all of the signatures on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if he or she were such officer,
transfer agent or registrar at the date of issue.

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<PAGE> 21

Certificates for shares shall be of such form and device as the board
of directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; a summary statement or reference to the powers,
designations, preferences or other special rights of such stock and the
qualifications, limitations or restrictions of such preferences and/or rights,
if any; a statement or summary of liens, if any; a conspicuous notice of
restrictions upon transfer or registration of transfer, if any; a statement as
to any applicable voting trust agreement; if the shares be assessable, or, if
assessments are collectible by personal action, a plain statement of such facts.

Upon surrender to the secretary or transfer agent of the corporation of
a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.

The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.

8.5 SPECIAL DESIGNATION ON CERTIFICATES

If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences and the relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.

8.6 LOST CERTIFICATES

Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.

8.7 TRANSFER AGENTS AND REGISTRARS

The board of directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, each of which shall be an
incorporated bank or trust company -- either domestic or foreign, who shall be
appointed at such times and places as the requirements of the corporation may
necessitate and the board of directors may designate.

8.8 CONSTRUCTION; DEFINITIONS

Unless the context requires otherwise, the general provisions, rules of
construction and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of this
provision, as used in these bylaws, the singular number includes the plural, the
plural number includes the singular, and the term "person" includes both an
entity and a natural person.

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ARTICLE IX

AMENDMENTS

The original or other bylaws of the corporation may be adopted, amended
or repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.

Whenever an amendment or new bylaw is adopted, it shall be copied in
the book of bylaws with the original bylaws, in the appropriate place. If any
bylaw is repealed, the fact of repeal with the date of the meeting at which the
repeal was enacted or the filing of the operative written consent(s) shall be
stated in said book.

ARTICLE X

DISSOLUTION

If it should be deemed advisable in the judgment of the board of
directors of the corporation that the corporation should be dissolved, the
board, after the adoption of a resolution to that effect by a majority of the
whole board at any meeting called for that purpose, shall cause notice to be
mailed to each stockholder entitled to vote thereon of the adoption of the
resolution and of a meeting of stockholders to take action upon the resolution.

At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.

Whenever all the stockholders entitled to vote on a dissolution consent
in writing, either in person or by duly authorized attorney, to a dissolution,
no meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall have
attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.

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<PAGE> 23
ARTICLE XI

CUSTODIAN

11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES

The Court of Chancery, upon application of any stockholder, may appoint
one or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:

(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or

(ii) the business of the corporation is suffering or is threatened
with irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the board of directors cannot be obtained and the stockholders are unable to
terminate this division; or

(iii) the corporation has abandoned its business and has failed
within a reasonable time to take steps to dissolve, liquidate or distribute its
assets.

11.2 DUTIES OF CUSTODIAN

The custodian shall have all the powers and title of a receiver
appointed under Section 291 of the General Corporation Law of Delaware, but the
authority of the custodian shall be to continue the business of the corporation
and not to liquidate its affairs and distribute its assets, except when the
Court of Chancery otherwise orders and except in cases arising under Sections
226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.

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<PAGE> 24

CERTIFICATE OF ADOPTION OF BYLAWS

ASPEC TECHNOLOGY, INC.

Adoption by Incorporator

The undersigned person appointed in the Certificate of Incorporation as
the Incorporator of Aspec Technology, Inc. hereby adopts the foregoing bylaws,
comprising nineteen (19) pages, as the Bylaws of the corporation.

Executed this 11th day of February, 1997.

/s/ J. Robert Suffoletta
-----------------------------------
J. Robert Suffoletta
Incorporator

Certificate by Secretary of Adoption by Incorporator

The undersigned hereby certifies that he is the duly elected,
qualified, and acting Secretary of Aspec Technology, Inc. and that the foregoing
Bylaws, comprising nineteen (19) pages, were adopted as the Bylaws of the
corporation on February 11, 1997, by the person appointed in the Certificate of
Incorporation as the Incorporator of the corporation.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
affixed the corporate seal this 11th day of February, 1997.

/s/ Jeffrey D. Saper
-----------------------------------
Jeffrey D. Saper
Secretary

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<PAGE> 1
EXHIBIT 3.3

CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
ASPEC TECHNOLOGY, INC.

Aspec Technology, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), pursuant to the provisions of
the General Corporation Law of the State of Delaware (the "DGCL"), DOES HEREBY
CERTIFY as follows:

FIRST: The Certificate of Incorporation of the Corporation is hereby
amended by deleting the first paragraph of ARTICLE IV of the Certificate of
Incorporation in its present form and substituting therefore the new first
paragraph of ARTICLE IV as follows:

"This Corporation is authorized to issue two classes of shares
to be designated, respectively, Common Stock ("Common") and Preferred
Stock ("Preferred"). The total number of shares of Common this
Corporation shall have authority to issue is 75,000,000 with a par
value of $0.001 per share. The total number of shares of Preferred this
Corporation shall have authority to issue is 5,130,385 with a par value
of $0.001 per share, 130,385 of which shares are hereby designated as
Series A Redeemable Preferred Stock (the "Series A Preferred") and
5,000,000 of which shares shall initially be undesignated as to series.
Upon the filing of this Certificate of Amendment of the Certificate of
Incorporation, each share of Common Stock of the Corporation
outstanding immediately prior to such filing shall be reconstituted as
and converted into two shares of Common Stock."

SECOND: The amendment to the Certificate of Incorporation of the
Corporation set forth in this Certificate of Amendment has been duly adopted in
accordance with the provisions of Section 242 of the DGCL by (a) the Board of
Directors of the Corporation having duly adopted a resolution setting forth such
amendment and declaring its advisability and submitting it to the stockholders
of the Corporation for their approval, and (b) the stockholders of the
Corporation having duly adopted such amendment by vote of the holders of a
majority of the outstanding stock entitled to vote thereon at a special meeting
of stockholders called and held upon notice in accordance with Section 222 of
the DGCL.

IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this Certificate of Amendment to be signed by Conrad J.
Dell'Oca, its President and Chief Executive Officer, and attested by Jeffrey D.
Saper, its Secretary, on March __, 1997.

ASPEC TECHNOLOGY, INC.

By:
------------------------------------
Conrad J. Dell'Oca
President and Chief Executive Officer

ATTEST:

- -------------------------
Jeffrey D. Saper
Secretary

<PAGE> 1
EXHIBIT 3.4

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
ASPEC TECHNOLOGY, INC.
(A DELAWARE CORPORATION)

Aspec Technology, Inc., a corporation organized and existing under the
laws of the State of Delaware, does hereby certify:

1. The name of the corporation is Aspec Technology, Inc. (the
"Corporation"). The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on February 10, 1997.

2. The amendment and restatement herein set forth has been duly approved
by the Board of Directors of the Corporation and by the stockholders of the
Corporation pursuant to Sections 141, 228 and 242 of the General Corporation Law
of the State of Delaware ("Delaware Law"). Approval of this amendment and
restatement was approved by a written consent signed by less than all of the
stockholders of the Corporation pursuant to Section 228 of the Delaware Law, and
notice has been given in accordance with Section 228(d) of the Delaware Law to
those shareholders not signing such written consent.

3. The restatement herein set forth has been duly adopted pursuant to
Section 245 of the Delaware Law. This Amended and Restated Certificate of
Incorporation restates and integrates and amends the provisions of the
Corporation's Certificate of Incorporation.

4. The text of the Certificate of Incorporation is hereby amended and
restated to read in its entirety as follows:

"Article I

The name of this corporation is Aspec Technology, Inc. (the "Corporation").

Article II

The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.

Article III

The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.

<PAGE> 2

Article IV

This corporation is authorized to issue two classes of shares to be
designated respectively Common Stock and Preferred Stock. Each share of Common
Stock shall have a par value of $0.001 and each share of Preferred Stock shall
have a par value of $0.001. The total number of shares of Common Stock this
corporation shall have authority to issue is 75,000,000, and the total number of
shares of Preferred Stock this Corporation shall have authority to issue is
5,000,000.

The Preferred Stock initially shall be undesignated as to series. Any
Preferred Stock not previously designated as to series may be issued from time
to time in one or more series pursuant to a resolution or resolutions providing
for such issue duly adopted by the Board of Directors (authority to do so being
hereby expressly vested in the Board), and such resolution or resolutions shall
also set forth the voting powers, full or limited or none, of each such series
of Preferred Stock and shall fix the designations, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions of each such series of Preferred Stock. The Board of Direc tors
is authorized to alter the designation, rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock and, within the limits and restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting any series of Preferred Stock, to increase or decrease (but not
below the number of shares of any such series then outstanding) the number of
shares of any such series subsequent to the issue of shares of that series.

Each share of Preferred Stock issued by the Corporation, if reacquired by
the Corporation (whether by redemption, repurchase, conversion to Common Stock
or other means), shall upon such reacquisition resume the status of authorized
and unissued shares of Preferred Stock, undesignated as to series and available
for designation and issuance by the Corporation in accordance with the
immediately preceding paragraph.

The Corporation shall from time to time in accordance with the laws of the
State of Delaware increase the authorized amount of its Common Stock if at any
time the number of shares of Common Stock remaining unissued and available for
issuance shall not be sufficient to permit conversion, if applicable, of the
Preferred Stock.

Article V

The Corporation is to have perpetual existence.

Article VI

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<PAGE> 3

Section 2. In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to make, alter, amend
or repeal the Bylaws of the Corporation.

Section 4. At the election of directors of the Corporation, each holder
of Common Stock shall be entitled to one vote for each share held. No
stockholder will be permitted to cumulate votes at any election of directors.

Article VII

Section 3. Neither any amendment nor repeal of this Article VII, nor
the adoption of any provision of this Corporation's Certificate of Incorporation
inconsistent with this Article VII, shall eliminate or reduce the effect of this
Article VII, in respect of any matter occurring, or any action or proceeding
accruing or arising or that, but for this Article VII, would accrue or arise,
prior to such amendment, repeal or adoption of an inconsistent provision.

Article VIII

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<PAGE> 4

Article IX

Article X

Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided in
the Bylaws of the Corporation.

Article XI

IN WITNESS WHEREOF, Aspec Technology, Inc. has caused this Amended and
Restated Certificate of Incorporation to be signed by Conrad J. Dell'Oca, its
President and Chief Executive Officer and attested to by Jeffrey D. Saper, its
Secretary, on April __, 1997.

Aspec Technology, Inc.
A Delaware Corporation

By:
-------------------------------------
Conrad J. Dell'Oca,
President and Chief Executive Officer

ATTEST:

By:
--------------------------------
Jeffrey D. Saper
Secretary

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<PAGE> 1
EXHIBIT 10.1

ASPEC TECHNOLOGY, INC.

INDEMNIFICATION AGREEMENT

This INDEMNIFICATION AGREEMENT (the "Agreement") is made as of February
__, 1997, by and between Aspec Technology, Inc., a Delaware corporation (the
"Company"), and ("Indemnitee").

RECITALS

A. The Company desires to attract and retain qualified directors,
officers, employees and other agents, and to provide them with protection
against liability and expenses incurred while acting in that capacity;

B. The Certificate of Incorporation and Bylaws of the Company contain
provisions for indem nifying directors and officers of the Company, and the
Bylaws and Delaware law contemplate that separate contracts may be entered into
between the Company and its directors and officers, employees and other agents
with respect to their indemnification by the Company, which contracts may
provide greater protection than is afforded by the Certificate of Incorporation
and Bylaws;

C. The Company understands that Indemnitee has reservations about serving
or continuing to serve the Company without adequate protection against personal
liability arising from such service, and that it is also of critical importance
to Indemnitee that adequate provision be made for advancing costs and expenses
of legal defense; and

D. The Board of Directors and the stockholders of the Company have
approved as being in the best interests of the Company indemnity contracts
substantially in the form of this Agreement for directors and officers of the
Company and its subsidiaries and for certain other employees and agents of the
Company designated by the Board of Directors.

NOW, THEREFORE, in order to induce Indemnitee to serve or to continue to
serve as a director and/or officer of the Company, and in consideration of
Indemnitee's service to the Company, the parties agree as follows:

1. Contractual Indemnity. In addition to the indemnification provisions
of the Bylaws of the Company, the Company hereby agrees, subject to the
limitations of Sections 2 and 5 hereof:

(a) To indemnify, defend and hold Indemnitee harmless to the greatest
extent possible under applicable law from and against any and all judgments,
fines, penalties, amounts paid in settlement and any other amounts reasonably
incurred or suffered by Indemnitee (including attorneys' fees) in connection
with any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, including an action by or in
the right of the Company, to which Indemnitee is, was or at any time becomes a
party, or is threatened to be made a party, by reason of the fact that
Indemnitee is, was or at any time becomes a director, officer, employee or agent
of the Company or is or was serving or at any time serves at the request of the
Company as a director, officer, employee or

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<PAGE> 2
agent of another corporation, partnership, joint venture, trust or other
enterprise (collectively referred to hereafter as a "Claim"), whether or not
arising prior to the date of this Agreement.

(b) To pay any and all expenses reasonably incurred by Indemnitee in
defending any Claim or Claims (including reasonable attorneys' fees and other
reasonable costs of investigation and defense), as the same are incurred and in
advance of the final disposition of any such Claim or Claims, upon receipt of an
undertaking by or on behalf of Indemnitee to reimburse such amounts if it shall
be ultimately determined that Indemnitee (i) is not entitled to be indemnified
by the Company under this Agreement, and (ii) is not entitled to be indemnified
by the Company under the Certificate of Incorporation or the Bylaws of the
Company.

The termination of any action or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that (i) Indemnitee did not act in
good faith and in a manner which Indemnitee reasonably believed to be in the
best interests of the Company, or (ii) with respect to any criminal action or
proceeding, Indemnitee had reasonable cause to believe that Indemnitee's
conduct was unlawful.

2. Limitations on Contractual Indemnity. Indemnitee shall not be entitled
to indemnification or advancement of expenses under Section 1:

(a) if a court of competent jurisdiction, by final judgment or
decree, shall determine that (i) the Claim or Claims in respect of which
indemnity is sought arise from Indemnitee's fraudulent, dishonest or willful
misconduct, or (ii) such indemnity is not permitted under applicable law; or

(b) on account of any suit in which judgment is rendered for an
accounting of profits made from the purchase or sale by Indemnitee of securities
of the Company in violation of the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law; or

(c) for any acts or omissions or transactions from which a director
may not be relieved of liability under the Delaware General Corporation Law; or

(d) with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except (i) with respect to
proceedings brought in good faith to establish or enforce a right to
indemnification under this Agreement or any other statute or law, or (ii) at the
Company's discretion, in specific cases if the Board of Directors of the Company
has approved the initiation or bringing of such suit; or

(e) for expenses or liabilities of any type whatsoever (including,
but not limited to, judgments, fines, ERISA excise taxes or penalties, and
amounts paid in settlement) which have been paid directly to Indemnitee by an
insurance carrier under a policy of directors' and officers' liability insurance
maintained by the Company; or

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<PAGE> 3

(f) on account of any suit brought against Indemnitee for misuse or
misappropriation of non-public information, or otherwise involving Indemnitee's
status as an "insider" of the Company, in connection with any purchase or sale
by Indemnitee of securities of the Company.

3. Continuation of Contractual Indemnity. Subject to the termination
provisions of Section 11, all agreements and obligations of the Company
contained herein shall continue for so long as Indemnitee shall be subject to
any possible action, suit, proceeding or other assertion of a Claim or Claims.

4. Expenses; Indemnification Procedure. The Company shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action or proceeding referenced in
Section 1 hereof (but not amounts actually paid in settlement of any such action
or proceeding). Indemnitee hereby undertakes to repay such amounts advanced if,
and to the extent that, it shall ultimately be determined that Indemnitee is not
entitled to be indemnified by the Company as authorized hereby. The advances to
be made hereunder shall be paid by the Company to Indemnitee within twenty (20)
days following delivery of a written request therefor by Indemnitee to the
Company.

5. Notification and Defense of Claim. If any action, suit, proceeding or
other Claim is brought against Indemnitee in respect of which indemnity may be
sought under this Agreement:

(a) Indemnitee will promptly notify the Company in writing of the
commencement thereof, and the Company and any other indemnifying party similarly
notified will be entitled to parti cipate therein at its own expense or to
assume the defense thereof and to employ counsel reasonably satisfactory to
Indemnitee. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indemnitee). Notice shall be deemed received three (3) business days after the
date postmarked if sent by domestic certified or registered mail, properly
addressed; otherwise notice shall be deemed received when such notice shall
actually be received by the Company. Indemnitee shall have the right to employ
its own counsel in connection with any such Claim and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of Indemnitee unless (i) the Company shall not have assumed the defense
of the Claim and employed counsel for such defense, or (ii) the named parties to
any such action (including any impleaded parties) include both Indemnitee and
the Company, and Indemnitee shall have reasonably concluded that joint
representation is inappropriate under applicable standards of professional
conduct due to a material conflict of interest between Indemnitee and the
Company, in either of which events the reasonable fees and expenses of such
counsel to the Indemnitee shall be borne by the Company upon delivery to the
Company of the undertaking referred to in subparagraph (b) of Section 1.
However, in no event will the Company be obligated to pay the fees or expenses
of more than one firm of attorneys representing Indemnitee and any other agents
of the Company in connection with any one Claim or separate but substantially
similar or related Claims in the same jurisdiction arising out of the same
general allegations or circumstances.

(b) The Company shall not be liable to indemnify Indemnitee for any
amounts paid in settlement of any Claim effected without the Company's written
consent, and the Company shall not settle any Claim in a manner which would
impose any penalty or limitation on Indemnitee without Indemnitee's

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<PAGE> 4

written consent; provided, however, that neither the Company nor Indemnitee will
unreasonably withhold its consent to any proposed settlement and, provided
further, that if a claim is settled by the Indemnitee with the Company's written
consent, or if there be a final judgment or decree for the plaintiff in
connection with the Claim by a court of competent jurisdiction, the Company
shall indemnify and hold harmless Indemnitee from and against any and all
losses, costs, expenses and liabilities incurred by reason of such settlement or
judgment.

(c) Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within Indemnitee's
power.

(d) Any indemnification provided for in Section 1 shall be made no
later than forty-five (45) days after receipt of the written request of
Indemnitee. If a Claim under this Agreement, under any statute, or under any
provision of the Company's Certificate of Incorporation or Bylaws providing for
indemnification, is not paid in full by the Company within forty-five (45) days
after a written request for payment thereof has first been received by the
Company, Indemnitee may, but need not, at any time thereafter bring an action
against the Company to recover the unpaid amount of the claim and, subject to
Section 13 of this Agreement, Indemnitee shall also be entitled to be reimbursed
for the expenses (including attorneys' fees) of bringing such action. It shall
be a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in connection with any action or proceeding in advance of
its final disposition) that Indemnitee has not met the standards of conduct
which make it permissible under applicable law for the Company to indemnify
Indemnitee for the amount claimed but the burden of proving such defense shall
be on the Company, and Indemnitee shall be entitled to receive interim payments
of expenses pursuant to Subsection 4 unless and until such defense may be
finally adjudicated by court order or judgment from which no further right of
appeal exists. It is the parties' intention that if the Company contests
Indemnitee's right to indemnification, the question of Indemnitee's right to
indemnification shall be for the court to decide, and neither the failure of the
Company (including its Board of Directors, any committee or subgroup of the
Board of Directors, independent legal counsel, or its stockholders) to have made
a determination that indemnification of Indemnitee is proper in the
circumstances because Indemnitee has met the applicable standard of conduct
required by applicable law, nor an actual determination by the Company
(including its Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its stockholders) that Indemnitee has
not met such applicable standard of conduct, shall create a presumption that
Indemnitee has or has not met the applicable standard of conduct.

(e) If, at the time of the receipt of a notice of a Claim, the
Company has director and officer liability insurance in effect, the Company
shall give prompt notice of the commencement of such proceeding to the insurers
in accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable action to cause such
insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of
such proceeding in accordance with the terms of such policies.

6. Scope. Notwithstanding any other provision of this Agreement, the
Company hereby agrees to indemnify the Indemnitee against any Claim to the
fullest extent permitted by law, notwithstanding that such indemnification is
not specifically authorized by the other provisions of this Agreement, the

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<PAGE> 5

Company's Certificate of Incorporation, the Company's Bylaws or by statute. In
the event of any change, after the date of this Agreement, in any applicable
law, statute or rule which expands the right of a Delaware corporation to
indemnify a member of its board of directors, an officer or other corporate
agent, such changes shall be, ipso facto, within the purview of Indemnitee's
rights and Company's obligations, under this Agreement. In the event of any
change in any applicable law, statute, or rule which narrows the right of a
Delaware corporation to indemnify a member of its Board of Directors, an
officer, or other corporate agent, such changes, to the extent not otherwise
required by applicable law to be applied to this Agreement, shall have no effect
on this Agreement or the parties' rights and obligations hereunder.

7. Partial Indemnification. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines or penal ties actually or reasonably incurred by him
in the investigation, defense, appeal or settlement of any civil or criminal
action or proceeding, but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, fines or penalties to which Indemnitee is entitled.

8. Public Policy. Both the Company and Indemnitee acknowledge that in
certain instances, Federal law or applicable public policy may prohibit the
Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities and
Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.

9. Insurance. Although the Company may from time to time maintain
insurance for the purpose of indemnifying Indemnitee and other agents of the
Company against personal liability, including costs of legal defense, nothing in
this Agreement shall obligate the Company to do so.

10. No Restrictions. The rights and remedies of Indemnitee under this
Agreement shall not be deemed to exclude or impair any other rights or remedies
to which Indemnitee may be entitled under the Certificate of Incorporation or
Bylaws of the Company, or under any other agreement, provision of law or
otherwise, nor shall anything contained herein restrict the right of the Company
to indemnify Indemnitee in any proper case even though not specifically provided
for in this Agreement, nor shall anything contained herein restrict Indemnitee's
right to contribution as may be available under applicable law.

11. Termination. The Company may terminate this Agreement at any time upon
90 days written notice, but any such termination will not affect Claims relating
to events occurring prior to the effective date of termination.

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<PAGE> 6

12. Severability. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or enforceability
of the other provisions hereof.

13. Attorneys' Fees. In the event of any litigation or other action or
proceeding to enforce or interpret this Agreement, the prevailing party as
determined by the court shall be entitled to an award of its reasonable
attorneys' fees and other costs, in addition to such relief as may be awarded by
a court or other tribunal.

14. Further Assurances. The parties will do, execute and deliver, or will
cause to be done, executed and delivered, all such further acts, documents and
things as may be reasonably required for the purpose of giving effect to this
Agreement and the transactions contemplated hereby.

15. Acknowledgment. The Company expressly acknowledges that it has entered
into this Agreement and assumed the obligations imposed on the Company hereunder
in order to induce Indemnitee to serve or to continue to serve as an agent of
the Company, and acknowledges that Indemnitee is relying on this Agreement in
serving or continuing to serve in such capacity.

16. Construction of Certain Phrases.

(a) "Company": For purposes of this Agreement, references to the
"Company" shall also include, in addition to the resulting corporation in any
consolidation or merger to which Aspec Technology, Inc. is a party, any
constituent corporation (including any constituent of a constituent) absorbed in
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that if Indemnitee is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, Indemnitee
shall stand in the same position under the provisions of this Agreement with
respect to the resulting or surviving corporation as Indemnitee would have with
respect to such constituent corporation if its separate existence had continued.

(b) Benefit Plans: References to "fines" contained in this Agreement
shall include any excise taxes assessed on Indemnitee with respect to an
employee benefit plan; and references to "serving at the request of the Company"
shall include any service as a director, officer, employee or agent of the
Company which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants, or beneficiaries.

17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.

18. Notice. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with

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<PAGE> 7

postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.

19. Governing Law; Binding Effect; Amendment.

(a) This Agreement shall be interpreted and enforced in accordance
with the laws of the State of Delaware applicable to contracts entered into in
Delaware.

(b) This Agreement shall be binding upon Indemnitee and the Company,
their successors and assigns, and shall inure to the benefit of Indemnitee, his
heirs, personal representatives and assigns and to the benefit of the Company,
its successors and assigns.

(c) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both parties hereto.

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<PAGE> 8

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.

"Company"

ASPEC TECHNOLOGY, INC.
a Delaware corporation

830 East Arques Avenue
Sunnyvale, CA 94086

By:
-----------------------------------
Title:
--------------------------------

"Indemnitee"

-----------------------------------
(Signature of Indemnitee)

Address:

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<PAGE> 1
EXHIBIT 10.2

ASPEC TECHNOLOGY, INC.

1996 STOCK OPTION PLAN
(AS AMENDED AND RESTATED EFFECTIVE FEBRUARY 25, 1997)*

1. Purposes of the Plan. The purposes of this Stock Plan are:

- to attract and retain the best available personnel for
positions of substantial responsibility,

- to provide additional incentive to Employees, Directors
and Consultants, and

- to promote the success of the Company's business.

Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant.

2. Definitions. As used herein, the following definitions shall
apply:

(a) "Administrator" means the Board or any of its Committees
as shall be administering the Plan, in accordance with Section 4 of the Plan.

(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.

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

(e) "Committee" means a committee of Directors appointed by
the Board in accordance with Section 4 of the Plan.

(f) "Common Stock" means the common stock of the Company.

(g) "Company" means Aspec Technology, a California
corporation.

- --------
* On February 25, 1997, the Company's Board of Directors
approved a two-for-one split of the Company's Common Stock,
subject to shareholder approval. The share numbers set forth
herein have not been adjusted to reflect such stock split.

<PAGE> 2

(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services to such
entity.

(i) "Director" means a member of the Board.

(j) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.

(k) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety (90)
days, unless reemployment upon expiration of such leave is guaranteed by statute
or contract. If reemployment upon expiration of a leave of absence approved by
the Company is not so guaranteed, on the 181st day of such leave any Incentive
Stock Option held by the Optionee shall cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option. Neither service as a Director nor payment of a director's fee by the
Company shall be sufficient to constitute "employment" by the Company.

(l) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.

(m) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:

(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or

(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.

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<PAGE> 3

(n) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.

(o) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.

(p) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option grant. The
Notice of Grant is part of the Option Agreement.

(q) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

(r) "Option" means a stock option granted pursuant to the
Plan.

(s) "Option Agreement" means an agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.

(t) "Option Exchange Program" means a program whereby
outstanding Options are surrendered in exchange for Options with a lower
exercise price.

(u) "Optioned Stock" means the Common Stock subject to an
Option.

(v) "Optionee" means the holder of an outstanding Option
granted under the Plan.

(w) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

(x) "Plan" means this 1996 Stock Plan.

(y) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.

(z) "Section 16(b)" means Section 16(b) of the Exchange Act.

(aa) "Service Provider" means an Employee, Director or
Consultant.

(bb) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.

(cc) "Subsidiary" means a "subsidiary corporation", whether
now or hereafter existing, as defined in Section 424(f) of the Code.

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<PAGE> 4

3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 2,250,000 Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock.

If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.

4. Administration of the Plan.

(a) Procedure.

(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of Service
Providers.

(ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.

(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.

(iv) Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.

(b) Powers of the Administrator. Subject to the provisions
of the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:

(i) to determine the Fair Market Value;

(ii) to select the Service Providers to whom Options
may be granted hereunder;

(iii) to determine the number of shares of Common Stock
to be covered by each Option granted hereunder;

(iv) to approve forms of agreement for use under the
Plan;

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<PAGE> 5

(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option of the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;

(vi) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;

(vii) to institute an Option Exchange Program;

(viii) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;

(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;

(x) to modify or amend each Option (subject to
Section 15(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;

(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;

(xii) to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option previously
granted by the Administrator;

(xiii) to make all other determinations deemed necessary
or advisable for administering the Plan.

(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.

5. Eligibility. Nonstatutory Stock Options may be granted to
Service Providers. Incentive Stock Options may be granted only to Employees.

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<PAGE> 6

6. Limitations.

(a) Each Option shall be designated in the Option Agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.

(b) Neither the Plan nor any Option shall confer upon an
Optionee any right with respect to continuing the Optionee's relationship as a
Service Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without cause.

(i) No Service Provider shall be granted, in any
fiscal year of the Company, Options to purchase more than 250,000 Shares.

(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional
250,000 Shares which shall not count against the limit set forth in subsection
(i) above.

(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.

(iv) If an Option is cancelled in the same fiscal year
of the Company in which it was granted (other than in connection with a
transaction described in Section 13), the cancelled Option will be counted
against the limits set forth in subsections (i) and (ii) above. For this
purpose, if the exercise price of an Option is reduced, the transaction will be
treated as a cancellation of the Option and the grant of a new Option.

7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 15 of the Plan.

8. Term of Option. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the Option Agreement. Moreover, in the case of an Incentive Stock Option granted
to an Optionee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of

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<PAGE> 7

stock of the Company or any Parent or Subsidiary, the term of the Incentive
Stock Option shall be five (5) years from the date of grant or such shorter term
as may be provided in the Option Agreement.

9. Option Exercise Price and Consideration.

(a) Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.

(B) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.

(ii) In the case of a Nonstatutory Stock Option, the
per Share exercise price shall be determined by the Administrator. In the case
of a Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.

(b) Waiting Period and Exercise Dates. At the time an Option
is granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions which must be satisfied before
the Option may be exercised.

(c) Form of Consideration. The Administrator shall determine
the acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the Administrator
shall determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:

(i) cash;

(ii) check;

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<PAGE> 8

(iii) promissory note;

(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (B) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised;

(v) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;

(vi) a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;

(vii) any combination of the foregoing methods of
payment; or

(viii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.

10. Exercise of Option.

(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement. Unless the Administrator provides
otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.

An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.

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<PAGE> 9

Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.

(b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

(c) Disability of Optionee. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.

(d) Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.

(e) Buyout Provisions. The Administrator may at any time
offer to buy out for a payment in cash or Shares an Option previously granted
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.

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<PAGE> 10

11. Non-Transferability of Options. Unless determined otherwise by
the Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.

12. Adjustments Upon Changes in Capitalization, Dissolution, Merger
or Asset Sale.

(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.

(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.

(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option, the Optionee shall
fully vest in and have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or

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<PAGE> 11

electronically that the Option shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option shall
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger or
sale of assets, the option confers the right to purchase or receive, for each
Share of Optioned Stock subject to the Option immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.

13. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.

14. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.

(b) Shareholder Approval. The Company shall obtain
shareholder approval of any Plan amendment to the extent necessary and desirable
to comply with Applicable Laws.

(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.

15. Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares shall comply with Applicable Laws and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

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<PAGE> 12

(b) Investment Representations. As a condition to the
exercise of an Option, the Company may require the person exercising such Option
to represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.

16. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

18. Shareholder Approval. The Plan shall be subject to approval by
the shareholders of the Company within twelve (12) months after the date the
Plan is adopted. Such shareholder approval shall be obtained in the manner and
to the degree required under Applicable Laws.

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<PAGE> 13

ASPEC TECHNOLOGY, INC.

1996 STOCK OPTION PLAN

STOCK OPTION AGREEMENT

Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.

I. NOTICE OF STOCK OPTION GRANT

[Optionee's Name and Address]

You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:

Grant Number _________________________

Date of Grant _________________________

Vesting Commencement Date _________________________

Exercise Price per Share $________________________

Total Number of Shares Granted _________________________

Total Exercise Price $________________________

Type of Option: ___ Incentive Stock Option

___ Nonstatutory Stock Option

Term/Expiration Date: _________________________

Vesting Schedule:

This Option may be exercised, in whole or in part, in accordance with
the following schedule:

25% of the Shares subject to the Option shall vest twelve (12) months
after the Vesting Commencement Date, and 25% of the Shares subject to the Option
shall vest each year thereafter, subject to the Optionee continuing to be a
Service Provider on such dates.

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<PAGE> 14

Termination Period:

This Option may be exercised for three (3) months after Optionee ceases
to be a Service Provider. Upon the death or Disability of the Optionee, this
Option may be exercised for such longer period as provided in the Plan. In no
event shall this Option be exercised later than the Term/Expiration Date as
provided above.

II. AGREEMENT

1. Grant of Option. The Plan Administrator of the Company hereby
grants to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 15(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.

If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").

2. Exercise of Option.

(a) Right to Exercise. This Option is exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
the applicable provisions of the Plan and this Option Agreement.

(b) Method of Exercise. This Option is exercisable by
delivery of an exercise notice, in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised (the "Exercised
Shares"), and such other representations and agreements as may be required by
the Company pursuant to the provisions of the Plan. The Exercise Notice shall be
completed by the Optionee and delivered to Secretary of the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price
as to all Exercised Shares. This Option shall be deemed to be exercised upon
receipt by the Company of such fully executed Exercise Notice accompanied by
such aggregate Exercise Price.

No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.

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<PAGE> 15

3. Method of Payment. Payment of the aggregate Exercise Price shall
be by any of the following, or a combination thereof, at the election of the
Optionee:

(a) cash;

(b) check; or

(c) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan.

4. Non-Transferability of Option. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by the Optionee. The
terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

5. Term of Option. This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option Agreement.

6. Tax Consequences. Some of the federal tax consequences relating
to this Option, as of the date of this Option, are set forth below. THIS SUMMARY
IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.

(a) Exercising the Option.

(i) Nonstatutory Stock Option. The Optionee may incur
regular federal income tax liability upon exercise of a NSO. The Optionee will
be treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price. If
the Optionee is an Employee or a former Employee, the Company will be required
to withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

(ii) Incentive Stock Option. If this Option qualifies
as an ISO, the Optionee will have no regular federal income tax liability upon
its exercise, although the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price
will be treated as an adjustment to alternative minimum taxable income for
federal tax purposes and may subject the Optionee to alternative minimum tax in
the year of exercise. In the event that the Optionee ceases to be an Employee
but remains a Service Provider, any Incentive Stock Option of the

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<PAGE> 16

Optionee that remains unexercised shall cease to qualify as an Incentive Stock
Option and will be treated for tax purposes as a Nonstatutory Stock Option on
the date three (3) months and one (1) day following such change of status.

(b) Disposition of Shares.

(i) NSO. If the Optionee holds NSO Shares for at
least one year, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes.

(ii) ISO. If the Optionee holds ISO Shares for at
least one year after exercise and two years after the grant date, any gain
realized on disposition of the Shares will be treated as long-term capital gain
for federal income tax purposes. If the Optionee disposes of ISO Shares within
one year after exercise or two years after the grant date, any gain realized on
such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the lesser of (A) the
difference between the Fair Market Value of the Shares acquired on the date of
exercise and the aggregate Exercise Price, or (B) the difference between the
sale price of such Shares and the aggregate Exercise Price. Any additional gain
will be taxed as capital gain, short-term or long-term depending on the period
that the ISO Shares were held.

(c) Notice of Disqualifying Disposition of ISO Shares. If the
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.

7. Entire Agreement; Governing Law. The Plan is incorporated herein
by reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws, but not
the choice of law rules, of California.

8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS
EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND
NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL,

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<PAGE> 17

AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME,
WITH OR WITHOUT CAUSE.

By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.

OPTIONEE: ASPEC TECHNOLOGY, INC.

- ---------------------------------- ---------------------------------------
Signature By

- ---------------------------------- ---------------------------------------
Print Name Title

- ----------------------------------
Residence Address

- ----------------------------------

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<PAGE> 18

CONSENT OF SPOUSE

The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option Agreement. In consideration of
the Company's granting his or her spouse the right to purchase Shares as set
forth in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.

---------------------------------------
Spouse of Optionee

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<PAGE> 19

EXHIBIT A

1996 STOCK OPTION PLAN

EXERCISE NOTICE

Aspec Technology, Inc.
830 East Arques Avenue
Sunnyvale, CA 94086

Attention: Secretary

1. Exercise of Option. Effective as of today, ________________,
199__, the undersigned ("Purchaser") hereby elects to purchase ______________
shares (the "Shares") of the Common Stock of Aspec Technology, Inc. (the
"Company") under and pursuant to the 1996 Stock Option Plan (the "Plan") and
the Stock Option Agreement dated , 19___ (the "Option Agreement"). The purchase
price for the Shares shall be $ , as required by the Option Agreement.

2. Delivery of Payment. Purchaser herewith delivers to the Company
the full purchase price for the Shares.

3. Representations of Purchaser. Purchaser acknowledges that
Purchaser has received, read and understood the Plan and the Option Agreement
and agrees to abide by and be bound by their terms and conditions.

4. Rights as Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.

5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.

6. Entire Agreement; Governing Law. The Plan and Option Agreement
are incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing

<PAGE> 20

signed by the Company and Purchaser. This agreement is governed by the internal
substantive laws, but not the choice of law rules, of California.

Submitted by: Accepted by:

PURCHASER: ASPEC TECHNOLOGY, INC.

- ---------------------------------- -------------------------------------
Signature By

- ---------------------------------- -------------------------------------
Print Name Its

Address: Address:

_________________________________ Aspec Technology, Inc.
_________________________________ 830 East Arques Avenue
Sunnyvale, CA 94086

-------------------------------------
Date Received

-2-

<PAGE> 1
EXHIBIT 10.3

ASPEC TECHNOLOGY, INC.

1997 DIRECTOR OPTION PLAN*

1. Purposes of the Plan. The purposes of this 1996 Director
Option Plan are to attract and retain the best available personnel for service
as Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.

All options granted hereunder shall be nonstatutory stock
options.

2. Definitions. As used herein, the following definitions shall
apply:

(a) "Board" means the Board of Directors of the Company.

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

(d) "Company" means Aspec Technology, Inc., a California
corporation.

(e) "Director" means a member of the Board.

(f) "Employee" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and
of itself to constitute "employment" by the Company.

(g) "Exchange Act" means the Securities Exchange Act of
1934, as amended.

(h) "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:

(i) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;

(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the date of determination, as
reported in The Wall Street Journal or such other source as the Board deems
reliable, or;

- ---------------
* On February 25, 1997, the Company's Board of Directors approved
a two-for-one split of the Company's Common Stock, subject to shareholder
approval. The share numbers set forth herein have not been adjusted to reflect
such stock split.
<PAGE> 2
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Board.

(i) "Inside Director" means a Director who is an
Employee.

(j) "Option" means a stock option granted pursuant to the
Plan.

(k) "Optioned Stock" means the Common Stock subject to an
Option.

(l) "Optionee" means a Director who holds an Option.

(m) "Outside Director" means a Director who is (i) not an
Employee and (ii) not a partner nor a member of any venture capital firm or
institutional investor which owns securities of the Company having more than
five percent (5%) of the total voting power of the Company.

(n) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

(o) "Plan" means this 1997 Director Option Plan.

(p) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 10 of the Plan.

(q) "Subsidiary" means a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Internal
Revenue Code of 1986.

3. Stock Subject to the Plan. Subject to the provisions of
Section 10 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 125,000 Shares of Common Stock (the
"Pool"). The Shares may be authorized, but unissued, or reacquired Common
Stock.

If an Option expires or becomes unexercisable without having
been exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.

4. Administration and Grants of Options under the Plan.

(a) Procedure for Grants. All grants of Options to
Outside Directors under this Plan shall be automatic and nondiscretionary and
shall be made strictly in accordance with the following provisions:

-2-
<PAGE> 3
(i) No person shall have any discretion to select
which Outside Directors shall be granted Options or to determine the number of
Shares to be covered by Options granted to Outside Directors.

(ii) Each Outside Director shall be automatically
granted an Option to purchase 12,500 Shares (the "First Option") on the date on
which the later of the following events occurs: (A) the effective date of this
Plan, as determined in accordance with Section 6 hereof, or (B) the date on
which such person first becomes an Outside Director, whether through election
by the shareholders of the Company or appointment by the Board to fill a
vacancy; provided, however, that an Inside Director who ceases to be an Inside
Director but who remains a Director shall not receive a First Option.

(iii) Each Outside Director shall be automatically
granted an Option to purchase 2,500 Shares (a "Subsequent Option") on the date
of the annual meeting of shareholders of each year provided he or she is then
an Outside Director and if as of such date, he or she shall have served on the
Board for at least the preceding six (6) months.

(iv) Notwithstanding the provisions of subsections
(ii) and (iii) hereof, any exercise of an Option granted before the Company has
obtained shareholder approval of the Plan in accordance with Section 16 hereof
shall be conditioned upon obtaining such shareholder approval of the Plan in
accordance with Section 16 hereof.

(v) The terms of a First Option granted hereunder
shall be as follows:

(A) the term of the First Option shall
be ten (10) years.

(B) the First Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Sections 8 and 10 hereof.

(C) the exercise price per Share shall
be 100% of the Fair Market Value per Share on the date of grant of the First
Option. In the event that the date of grant of the First Option is not a
trading day, the exercise price per Share shall be the Fair Market Value on the
next trading day immediately following the date of grant of the First Option.

(D) subject to Section 10 hereof, the
First Option shall become exercisable as to 1/4th of the Shares subject to the
First Option on the day before the date of the annual meeting of shareholders of
each year, provided that the Optionee continues to serve as director on such
dates.

(vi) The terms of a Subsequent Option granted
hereunder shall be as follows:

(A) the term of the Subsequent Option
shall be ten (10) years.

-3-
<PAGE> 4
(B) the Subsequent Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Sections 8 and 10 hereof.

(C) the exercise price per Share shall
be 100% of the Fair Market Value per Share on the date of grant of the
Subsequent Option. In the event that the date of grant of the Subsequent
Option is not a trading day, the exercise price per Share shall be the Fair
Market Value on the next trading day immediately following the date of grant of
the Subsequent Option.

(D) subject to Section 10 hereof, the
Subsequent Option shall become exercisable as to as to 1/4th of the Shares
subject to the Subsequent Option on the day before the date of the annual
meeting of shareholders of each year, provided that the Optionee continues to
serve as a Director on such dates.

(vii) In the event that any Option granted under
the Plan would cause the number of Shares subject to outstanding Options plus
the number of Shares previously purchased under Options to exceed the Pool,
then the remaining Shares available for Option grant shall be granted under
Options to the Outside Directors on a pro rata basis. No further grants shall
be made until such time, if any, as additional Shares become available for
grant under the Plan through action of the Board or the shareholders to
increase the number of Shares which may be issued under the Plan or through
cancellation or expiration of Options previously granted hereunder.

5. Eligibility. Options may be granted only to Outside
Directors. All Options shall be automatically granted in accordance with the
terms set forth in Section 4 hereof.

The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate the Director's relationship with the
Company at any time.

6. Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board or its approval by the
shareholders of the Company as described in Section 16 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 11 of the Plan.

7. Form of Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method of
payment, shall consist of (i) cash, (ii) check, (iii) other shares which (x) in
the case of Shares acquired upon exercise of an Option, have been owned by the
Optionee for more than six (6) months on the date of surrender, and (y) have a
Fair Market Value on the date of surrender equal to the aggregate exercise
price of the Shares as to which said Option shall be exercised, (iv)
consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan, or (v) any combination
of the foregoing methods of payment.

-4-
<PAGE> 5
8. Exercise of Option.

(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may consist of any consideration and method of
payment allowable under Section 7 of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. A share certificate for the number of Shares so
acquired shall be issued to the Optionee as soon as practicable after exercise
of the Option. No adjustment shall be made for a dividend or other right for
which the record date is prior to the date the stock certificate is issued,
except as provided in Section 10 of the Plan.

Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

(b) Termination of Continuous Status as a Director.
Subject to Section 10 hereof, in the event an Optionee's status as a Director
terminates (other than upon the Optionee's death or total and permanent
disability (as defined in Section 22(e)(3) of the Code)), the Optionee may
exercise his or her Option, but only within three (3) months following the date
of such termination, and only to the extent that the Optionee was entitled to
exercise it on the date of such termination (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of such termination, and to the
extent that the Optionee does not exercise such Option (to the extent otherwise
so entitled) within the time specified herein, the Option shall terminate.

(c) Disability of Optionee. In the event Optionee's
status as a Director terminates as a result of total and permanent disability
(as defined in Section 22(e)(3) of the Code), the Optionee may exercise his or
her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration
of its ten (10) year term). To the extent that the Optionee was not entitled
to exercise an Option on the date of termination, or if he or she does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.

-5-
<PAGE> 6
(d) Death of Optionee. In the event of an Optionee's
death, the Optionee's estate or a person who acquired the right to exercise the
Option by bequest or inheritance may exercise the Option, but only within
twelve (12) months following the date of death, and only to the extent that the
Optionee was entitled to exercise it on the date of death (but in no event
later than the expiration of its ten (10) year term). To the extent that the
Optionee was not entitled to exercise an Option on the date of death, and to
the extent that the Optionee's estate or a person who acquired the right to
exercise such Option does not exercise such Option (to the extent otherwise so
entitled) within the time specified herein, the Option shall terminate.

9. Non-Transferability of Options. Unless otherwise determined
by the Board, the Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.

10. Adjustments Upon Changes in Capitalization, Dissolution,
Merger or Asset Sale.

(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding Option,
and the number of Shares issuable pursuant to the automatic grant provisions of
Section 4 hereof shall be proportionately adjusted for any increase or decrease
in the number of issued Shares resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock, or
any other increase or decrease in the number of issued Shares effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares subject to an Option.

(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, to the extent that an
Option has not been previously exercised, it shall terminate immediately prior
to the consummation of such proposed action.

(c) Merger or Asset Sale. In the event of a merger of
the Company with or into another corporation or the sale of substantially all
of the assets of the Company, outstanding Options may be assumed or equivalent
options may be substituted by the successor corporation or a Parent or
Subsidiary thereof (the "Successor Corporation"). If an Option is assumed or
substituted for, the Option or equivalent option shall continue to be
exercisable as provided in Section 4 hereof for so long as the Optionee serves
as a Director or a director of the Successor Corporation. Following such
assumption or substitution, if the Optionee's status as a Director or director
of the Successor Corporation, as applicable, is terminated other than upon a
voluntary resignation by the Optionee, the Option or option shall become fully
exercisable, including as to Shares for which it would not

-6-
<PAGE> 7
otherwise be exercisable. Thereafter, the Option or option shall remain
exercisable in accordance with Sections 8(b) through (d) above.

If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested
and exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.

For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger
or sale of assets by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares). If such consideration received in the merger or sale
of assets is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option,
for each Share of Optioned Stock subject to the Option, to be solely common
stock of the successor corporation or its Parent equal in fair market value to
the per share consideration received by holders of Common Stock in the merger
or sale of assets.

11. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time
amend, alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable
law, regulation or stock exchange rule, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.

(b) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Options already granted
and such Options shall remain in full force and effect as if this Plan had not
been amended or terminated.

12. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date determined in accordance with Section 4
hereof.

13. Conditions Upon Issuance of Shares. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, state securities laws, and the requirements of any
stock exchange upon which the Shares may

-7-
<PAGE> 8
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment
and without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.

Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not
have been obtained.

14. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.

15. Option Agreement. Options shall be evidenced by written
option agreements in such form as the Board shall approve.

16. Shareholder Approval. Continuance of the Plan shall be
subject to approval by the shareholders of the Company at or prior to the first
annual meeting of shareholders held subsequent to the granting of an Option
hereunder. Such shareholder approval shall be obtained in the degree and
manner required under applicable state and federal law and any stock exchange
rules.

-8-
<PAGE> 9
ASPEC TECHNOLOGY, INC.

1997 DIRECTOR OPTION PLAN

DIRECTOR OPTION AGREEMENT

Aspec Technology, Inc., a California corporation (the "Company"), has
granted to ______________________________________ (the "Optionee"), an option
to purchase a total of [__________________ (_________)] shares of the Company's
Common Stock (the "Optioned Stock"), at the price determined as provided
herein, and in all respects subject to the terms, definitions and provisions of
the Company's 1997 Director Option Plan (the "Plan") adopted by the Company
which is incorporated herein by reference. The terms defined in the Plan shall
have the same defined meanings herein.

17. Nature of the Option. This Option is a nonstatutory option
and is not intended to qualify for any special tax benefits to the Optionee.

18. Exercise Price. The exercise price is $_______ for each share
of Common Stock.

19. Exercise of Option. This Option shall be exercisable during
its term in accordance with the provisions of Section 8 of the Plan as follows:

(i) Right to Exercise.

(a) This Option shall become exercisable in
installments cumulatively with respect to 1/4th of the Shares subject to the
Option on the day before the date of the annual meeting of shareholders of each
year, provided that the Optionee continues to serve as a Director on such dates;
provided, however, that in no event shall any Option be exercisable prior to the
date the shareholders of the Company approve the Plan.

(b) This Option may not be exercised for a
fraction of a share.

(c) In the event of Optionee's death, disability
or other termination of service as a Director, the exercisability of the Option
is governed by Section 8 of the Plan.

(ii) Method of Exercise. This Option shall be exercisable
by written notice which shall state the election to exercise the Option and the
number of Shares in respect of which the Option is being exercised. Such
written notice, in the form attached hereto as Exhibit A, shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The written notice shall be accompanied by payment
of the exercise price.

<PAGE> 10
20. Method of Payment. Payment of the exercise price shall be by
any of the following, or a combination thereof, at the election of the
Optionee:

(i) cash;

(ii) check;

(iii) surrender of other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised; or

(iv) delivery of a properly executed exercise notice
together with such other documentation as the Company and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price.

21. Restrictions on Exercise. This Option may not be exercised if
the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.

22. Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by the
Optionee. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

23. Term of Option. This Option may not be exercised more than
ten (10) years from the date of grant of this Option, and may be exercised
during such period only in accordance with the Plan and the terms of this
Option.

24. Taxation Upon Exercise of Option. Optionee understands that,
upon exercise of this Option, he or she will recognize income for tax purposes
in an amount equal to the excess of the then Fair Market Value of the Shares
purchased over the exercise price paid for such Shares. Since the Optionee is
subject to Section 16(b) of the Securities Exchange Act of 1934, as amended,
under certain limited circumstances the measurement and timing of such income
(and the commencement of any capital gain holding period) may be deferred, and
the Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability of a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of
such Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date

-2-
<PAGE> 11
of exercise of the Option, to the extent not included in income as described
above, will be treated as capital gain or loss.

DATE OF GRANT: ______________

ASPEC TECHNOLOGY, INC.,
a California corporation

By: __________________________

Optionee acknowledges receipt of a copy of the Plan, a copy of which
is attached hereto, and represents that he or she is familiar with the terms
and provisions thereof, and hereby accepts this Option subject to all of the
terms and provisions thereof. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under the Plan.

Dated: _________________

______________________________
Optionee

-3-
<PAGE> 12
EXHIBIT A

DIRECTOR OPTION EXERCISE NOTICE

Aspec Technology, Inc.
830 East Arques Avenue
Sunnyvale, CA 94086

Attention: Corporate Secretary

1. Exercise of Option. The undersigned ("Optionee") hereby
elects to exercise Optionee's option to purchase ______ shares of the Common
Stock (the "Shares") of Aspec Technology, Inc. (the "Company") under and
pursuant to the Company's 1997 Director Option Plan and the Director Option
Agreement dated _______________ (the "Agreement").

2. Representations of Optionee. Optionee acknowledges that
Optionee has received, read and understood the Agreement.

3. Federal Restrictions on Transfer. Optionee understands that
the Shares must be held indefinitely unless they are registered under the
Securities Act of 1933, as amended (the "1933 Act"), or unless an exemption
from such registration is available, and that the certificate(s) representing
the Shares may bear a legend to that effect. Optionee understands that the
Company is under no obligation to register the Shares and that an exemption may
not be available or may not permit Optionee to transfer Shares in the amounts
or at the times proposed by Optionee.

4. Tax Consequences. Optionee understands that Optionee may
suffer adverse tax consequences as a result of Optionee's purchase or
disposition of the Shares. Optionee represents that Optionee has consulted
with any tax consultant(s) Optionee deems advisable in connection with the
purchase or disposition of the Shares and that Optionee is not relying on the
Company for any tax advice.

5. Delivery of Payment. Optionee herewith delivers to the
Company the aggregate purchase price for the Shares that Optionee has elected
to purchase and has made provision for the payment of any federal or state
withholding taxes required to be paid or withheld by the Company.

6. Entire Agreement. The Agreement is incorporated herein by
reference. This Exercise Notice and the Agreement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the
<PAGE> 13
subject matter hereof. This Exercise Notice and the Agreement are governed by
California law except for that body of law pertaining to conflict of laws.

Submitted by: Accepted by:

OPTIONEE: ASPEC TECHNOLOGY, INC.

By:
- ---------------------------------- -------------------------------------

Its:
-------------------------------------

Address:

- ----------------------------------

Dated: Dated:
--------------------------- -------------------------------------

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<PAGE> 1
EXHIBIT 10.4

ASPEC TECHNOLOGY, INC.

1997 EMPLOYEE STOCK PURCHASE PLAN*

1. Purpose. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended. The provisions of the Plan, accordingly, shall be construed so as to
extend and limit participation in a manner consistent with the requirements of
that section of the Code.

2. Definitions.

(a) "Board" shall mean the Board of Directors of the
Company.

(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended.

(d) "Company" shall mean Aspec Technology Inc. and any
Designated Subsidiary of the Company.

(e) "Compensation" shall mean all base straight time
gross earnings, sales commissions, profit sharing payments, payments for
overtime, shift premium, incentive compensation, incentive payments and bonuses,
but exclusive of other compensation.

(f) "Designated Subsidiary" shall mean any Subsidiary
which has been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.

(g) "Employee" shall mean any individual who is an
Employee of the Company for tax purposes whose customary employment with the
Company is at least twenty (20) hours per week and more than five (5) months in
any calendar year. For purposes of the Plan, the employment relationship shall
be treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.

(h) "Enrollment Date" shall mean the first day of each
Offering Period.

(i) "Exercise Date" shall mean the last day of each
Offering Period.

- --------------------
* On February 25, 1997, the Company's Board of Directors approved a two-for-one
split of the Company's Common Stock, subject to shareholder approval. The
share numbers set forth herein have not been adjusted to reflect such stock
split.

<PAGE> 2
(j) "Fair Market Value" shall mean, as of any date, the
value of Common Stock determined as follows:

(1) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;

(2) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable;

(3) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Board; or

(4) For purposes of the Enrollment Date of the
first Offering Period under the Plan, the Fair Market Value shall be the
initial price to the public as set forth in the final prospectus included
within the registration statement in Form S-1 filed with the Securities and
Exchange Commission for the initial public offering of the Company's Common
Stock (the "Registration Statement").

(k) "Offering Period" shall mean a period of
approximately six (6) months during which an option granted pursuant to the
Plan may be exercised, commencing on the first Trading Day on or after April 1
and terminating on the last Trading Day in the period ending the following
September 30, or commencing on the first Trading Day on or after October 1 and
terminating on the last Trading Day in the period ending the following March
31; provided, however, that the first Offering Period under the Plan shall
commence with the first Trading Day on or after the date on which the
Securities and Exchange Commission declares the Company's Registration
Statement effective and ending on the last Trading Day on or after September
30. The duration of Offering Periods may be changed pursuant to Section 4 of
this Plan.

(l) "Plan" shall mean this Employee Stock Purchase Plan.

(m) "Purchase Price" shall mean an amount equal to 85% of
the Fair Market Value of a share of Common Stock on the Enrollment Date or on
the Exercise Date, whichever is lower.

(n) "Reserves" shall mean the number of shares of Common
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for
issuance under the Plan but not yet placed under option.

-2-
<PAGE> 3
(o) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the
Company or a Subsidiary, whether or not such corporation now exists or is
hereafter organized or acquired by the Company or a Subsidiary.

(p) "Trading Day" shall mean a day on which national
stock exchanges and the Nasdaq System are open for trading.

3. Eligibility.

(a) Any Employee who shall be employed by the Company on
a given Enrollment Date shall be eligible to participate in the Plan.

(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other
person whose stock would be attributed to such Employee pursuant to Section
424(d) of the Code) would own capital stock of the Company and/or hold
outstanding options to purchase such stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of the capital stock
of the Company or of any Subsidiary, or (ii) to the extent that his or her
rights to purchase stock under all employee stock purchase plans of the Company
and its subsidiaries accrues at a rate which exceeds Twenty-Five Thousand
Dollars ($25,000) worth of stock (determined at the fair market value of the
shares at the time such option is granted) for each calendar year in which such
option is outstanding at any time.

4. Offering Periods. The Plan shall be implemented by
consecutive Offering Periods with a new Offering Period commencing on the first
Trading Day on or after April 1 and October 1 each year, or on such other date
as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or after
September 30. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without stockholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.

5. Participation.

(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Company's payroll
office prior to the applicable Enrollment Date.

(b) Payroll deductions for a participant shall commence
on the first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable,
unless sooner terminated by the participant as provided in Section 10 hereof.

-3-
<PAGE> 4
6. Payroll Deductions.

(a) At the time a participant files his or her
subscription agreement, he or she shall elect to have payroll deductions made
on each pay day during the Offering Period in an amount not exceeding ten
percent (10%) of the Compensation which he or she receives on each pay day
during the Offering Period.

(b) All payroll deductions made for a participant shall
be credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.

(c) A participant may discontinue his or her
participation in the Plan as provided in Section 10 hereof, or may increase or
decrease the rate of his or her payroll deductions during the Offering Period
by completing or filing with the Company a new subscription agreement
authorizing a change in payroll deduction rate. The Board may, in its
discretion, limit the number of participation rate changes during any Offering
Period. The change in rate shall be effective with the first full payroll
period following five (5) business days after the Company's receipt of the new
subscription agreement unless the Company elects to process a given change in
participation more quickly. A participant's subscription agreement shall
remain in effect for successive Offering Periods unless terminated as provided
in Section 10 hereof.

(d) Notwithstanding the foregoing, to the extent
necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof,
a participant's payroll deductions may be decreased to zero percent (0%) at any
time during an Offering Period. Payroll deductions shall recommence at the
rate provided in such participant's subscription agreement at the beginning of
the first Offering Period which is scheduled to end in the following calendar
year, unless terminated by the participant as provided in Section 10 hereof.

(e) At the time the option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued under the
Plan is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock.
At any time, the Company may, but shall not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by the Employee.

7. Grant of Option. On the Enrollment Date of each Offering
Period, each eligible Employee participating in such Offering Period shall be
granted an option to purchase on the Exercise Date of such Offering Period (at
the applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than
2,500 shares (subject to any adjustment pursuant to

-4-
<PAGE> 5
Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. Exercise of the option
shall occur as provided in Section 8 hereof, unless the participant has
withdrawn pursuant to Section 10 hereof. The Option shall expire on the last
day of the Offering Period.

8. Exercise of Option. Unless a participant withdraws from the
Plan as provided in Section 10 hereof, his or her option for the purchase of
shares shall be exercised automatically on the Exercise Date, and the maximum
number of full shares subject to option shall be purchased for such participant
at the applicable Purchase Price with the accumulated payroll deductions in his
or her account. No fractional shares shall be purchased; any payroll
deductions accumulated in a participant's account which are not sufficient to
purchase a full share shall be retained in the participant's account for the
subsequent Offering Period, subject to earlier withdrawal by the participant as
provided in Section 10 hereof. Any other monies left over in a participant's
account after the Exercise Date shall be returned to the participant. During a
participant's lifetime, a participant's option to purchase shares hereunder is
exercisable only by him or her.

9. Delivery. As promptly as practicable after each Exercise Date
on which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.

10. Withdrawal.

(a) A participant may withdraw all but not less than all
the payroll deductions credited to his or her account and not yet used to
exercise his or her option under the Plan at any time by giving written notice
to the Company in the form of Exhibit B to this Plan. All of the participant's
payroll deductions credited to his or her account shall be paid to such
participant promptly after receipt of notice of withdrawal and such
participant's option for the Offering Period shall be automatically terminated,
and no further payroll deductions for the purchase of shares shall be made for
such Offering Period. If a participant withdraws from an Offering Period,
payroll deductions shall not resume at the beginning of the succeeding Offering
Period unless the participant delivers to the Company a new subscription
agreement.

(b) A participant's withdrawal from an Offering Period
shall not have any effect upon his or her eligibility to participate in any
similar plan which may hereafter be adopted by the Company or in succeeding
Offering Periods which commence after the termination of the Offering Period
from which the participant withdraws.

11. Termination of Employment. Upon a participant's ceasing to be
an Employee for any reason, he or she shall be deemed to have elected to
withdraw from the Plan and the payroll deductions credited to such
participant's account during the Offering Period but not yet used to exercise
the option shall be returned to such participant or, in the case of his or her
death, to the person or persons entitled thereto under Section 15 hereof, and
such participant's option shall be automatically terminated. The preceding
sentence notwithstanding, a participant who receives payment in lieu of notice
of termination of employment shall be treated as continuing to be an

-5-
<PAGE> 6
Employee for the participant's customary number of hours per week of employment
during the period in which the participant is subject to such payment in lieu
of notice.

12. Interest. No interest shall accrue on the payroll deductions
of a participant in the Plan.

13. Stock.

(a) The maximum number of shares of the Company's Common
Stock which shall be made available for sale under the Plan shall be two
hundred fifty thousand (250,000) shares, subject to adjustment upon changes in
capitalization of the Company as provided in Section 19 hereof. If, on a given
Exercise Date, the number of shares with respect to which options are to be
exercised exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining available for
purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.

(b) The participant shall have no interest or voting
right in shares covered by his option until such option has been exercised.

(c) Shares to be delivered to a participant under the
Plan shall be registered in the name of the participant or in the name of the
participant and his or her spouse.

14. Administration. The Plan shall be administered by the Board
or a committee of members of the Board appointed by the Board. The Board or
its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the
full extent permitted by law, be final and binding upon all parties.

15. Designation of Beneficiary.

(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a
participant may file a written designation of a beneficiary who is to receive
any cash from the participant's account under the Plan in the event of such
participant's death prior to exercise of the option. If a participant is
married and the designated beneficiary is not the spouse, spousal consent shall
be required for such designation to be effective.

(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the

-6-
<PAGE> 7
Company, in its discretion, may deliver such shares and/or cash to the spouse
or to any one or more dependents or relatives of the participant, or if no
spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.

16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.

17. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose,
and the Company shall not be obligated to segregate such payroll deductions.

18. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.

19. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.

(a) Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the Reserves, the maximum number of
shares each participant may purchase per Offering Period (pursuant to Section
7), as well as the price per share and the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration". Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.

(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Offering Period shall
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board.

(c) Merger or Asset Sale. In the event of a proposed
sale of all or substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, the

-7-
<PAGE> 8
Offering Period then in progress shall be shortened by setting a new Exercise
Date (the "New Exercise Date"). The New Exercise Date shall be before the
date of the Company's proposed sale or merger. The Board shall notify each
participant in writing, at least ten (10) business days prior to the New
Exercise Date, that the Exercise Date for the participant's option has been
changed to the New Exercise Date and that the participant's option shall be
exercised automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Section 10
hereof.

20. Amendment or Termination.

(a) The Board of Directors of the Company may at any time
and for any reason terminate or amend the Plan. Except as provided in Section
19 hereof, no such termination can affect options previously granted, provided
that an Offering Period may be terminated by the Board of Directors on any
Exercise Date if the Board determines that the termination of the Plan is in
the best interests of the Company and its stockholders. Except as provided in
Section 19 hereof, no amendment may make any change in any option theretofore
granted which adversely affects the rights of any participant. To the extent
necessary to comply with Section 423 of the Code (or any other applicable law,
regulation or stock exchange rule), the Company shall obtain shareholder
approval in such a manner and to such a degree as required.

(b) Without stockholder consent and without regard to
whether any participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change the
Offering Periods, limit the frequency and/or number of changes in the amount
withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied
toward the purchase of Common Stock for each participant properly correspond
with amounts withheld from the participant's Compensation, and establish such
other limitations or procedures as the Board (or its committee) determines in
its sole discretion advisable which are consistent with the Plan.

21. Notices. All notices or other communications by a participant
to the Company under or in connection with the Plan shall be deemed to have
been duly given when received in the form specified by the Company at the
location, or by the person, designated by the Company for the receipt thereof.

22. Conditions Upon Issuance of Shares. Shares shall not be
issued with respect to an option unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.

-8-
<PAGE> 9
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.

23. Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its approval by
the stockholders of the Company. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 20 hereof.

-9-
<PAGE> 10
EXHIBIT A

ASPEC TECHNOLOGY, INC.

1997 EMPLOYEE STOCK PURCHASE PLAN

SUBSCRIPTION AGREEMENT

_____ Original Application Enrollment Date: __________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(is)

1. _____________________________________ hereby elects to participate in
the Aspec Technology, Inc. 1997 Employee Stock Purchase Plan (the
"Employee Stock Purchase Plan") and subscribes to purchase shares of
the Company's Common Stock in accordance with this Subscription
Agreement and the Employee Stock Purchase Plan.

2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (from 1 to 20%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)

3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.

4. I have received a copy of the complete Employee Stock Purchase Plan.
I understand that my participation in the Employee Stock Purchase Plan
is in all respects subject to the terms of the Plan. I understand
that my ability to exercise the option under this Subscription
Agreement is subject to stockholder approval of the Employee Stock
Purchase Plan.

5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse only):
__________________________________________.

6. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Enrollment Date (the first day of
the Offering Period during which I purchased such shares), I will be
treated for federal income tax purposes as having received ordinary
income at the time of such disposition in an amount equal to the
excess of the fair market value of the shares at the time such shares
were purchased by me over the price which I paid for the shares. I
hereby agree to notify the Company in writing within 30 days after the
date of any disposition of shares and I will make adequate provision
for Federal, state or other tax withholding obligations, if any, which
arise upon the disposition of the Common Stock. The
<PAGE> 11
Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by me. If I dispose of such shares
at any time after the expiration of the 2-year holding period, I
understand that I will be treated for federal income tax purposes as
having received income only at the time of such disposition, and that
such income will be taxed as ordinary income only to the extent of an
amount equal to the lesser of (1) the excess of the fair market value
of the shares at the time of such disposition over the purchase price
which I paid for the shares, or (2) 15% of the fair market value of
the shares on the first day of the Offering Period. The remainder of
the gain, if any, recognized on such disposition will be taxed as
capital gain.

7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase
Plan.

8. In the event of my death, I hereby designate the following as my
beneficiary(is) to receive all payments and shares due me under the
Employee Stock Purchase Plan:

NAME: (Please print) _____________________________________________________
(First) (Middle) (Last)

_________________________ ______________________________________________
Relationship
______________________________________________
(Address)

Employee's Social
Security Number: ______________________________________________

Employee's Address: ______________________________________________

______________________________________________

-2-
<PAGE> 12

I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.

Dated: _______________ _____________________________________________________
Signature of Employee

_____________________________________________________
Spouse's Signature (If beneficiary other than spouse)

-3-
<PAGE> 13
EXHIBIT B

ASPEC TECHNOLOGY, INC.

1997 EMPLOYEE STOCK PURCHASE PLAN

NOTICE OF WITHDRAWAL

The undersigned participant in the Offering Period of the Aspec
Technology, Inc. 1997 Employee Stock Purchase Plan which began on ___________
19____ (the "Enrollment Date") hereby notifies the Company that he or she
hereby withdraws from the Offering Period. He or she hereby directs the
Company to pay to the undersigned as promptly as practicable all the payroll
deductions credited to his or her account with respect to such Offering Period.
The undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to
participate in succeeding Offering Periods only by delivering to the Company a
new Subscription Agreement.

Name and Address of Participant:

__________________________________

Signature:

__________________________________

Date: ____________________________

<PAGE> 1
EXHIBIT 10.5

ASPEC TECHNOLOGY, INC.

FIRST AMENDMENT TO
REGISTRATION AGREEMENT

This First Amendment (the "AMENDMENT") to Registration Agreement is made as
of October 3, 1996 by and among Aspec Technology, Inc., a California corporation
(the "COMPANY"), the Investors (as defined below), the Founders (as defined
below) and the purchasers listed on Exhibit A attached hereto (the "NEW
INVESTORS").

RECITALS

A. The Company, certain holders of the Company's Common Stock and Series
A Preferred Stock (the "INVESTORS") and Conrad J. Dell'Oca, Jai P. Shin, Patrick
Y. Yin and Yen C. Chang (collectively, the "FOUNDERS") are parties to that
certain Registration Agreement dated as of May 28, 1996 (the "REGISTRATION
AGREEMENT").

B. The Company proposes to sell an aggregate of 254,130 shares of its
Common Stock (the "COMMON SHARES") to the New Investors pursuant to that certain
Common Stock Purchase Agreement dated as of the date hereof (the "STOCK PURCHASE
AGREEMENT").

C. The Founders propose to sell an aggregate of 1,016,870 shares of the
Company's Common Stock (the "FOUNDERS SHARES") to the New Investors pursuant to
that certain Agreement for Purchase and Sale of Common Stock dated the date
hereof.

D. The Company, the Founders and the Investors desire that the Company
sell the Common Shares to the New Investors and that the Registration Agreement
be amended as set forth herein.

E. Pursuant to Section 1(g) of the Registration Agreement, the Company
may not grant further demand registration rights without the written consent of
at least 55% of the Investor Registrable Securities (as defined therein),
subject to certain limited exceptions.

F. Pursuant to Section 9(c) thereof, the Registration Agreement may be
amended upon the written consent of (i) the Company, (ii) the holders of at
least 55% of the Investor Registrable Securities (as defined therein) and (iii)
the holders of a majority of the Founder Registrable Securities (as defined
therein).

G. The Company, the Founders and Investors holding not less than the
minimum number of shares required to amend the Registration Agreement have
consented in writing to this Amendment.

<PAGE> 2

AGREEMENT

1. Amendment of Registration Agreement. The Registration Agreement is
hereby amended as follows:

(a) For all purposes of the Registration Agreement (as amended by
this Amendment), the term "Investor Registrable Securities" shall include the
Common Shares.

(b) As to the Common Shares, the term "Investors" shall include the
New Investors.

(c) For all purposes of the Registration Agreement (as amended by
this Amendment), the term "Founder Registrable Securities" shall include the
Founders Shares.

2. Governing Law. This Amendment and the legal relations among the
parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California. The parties hereto agree to submit to
the jurisdiction of the federal and state courts of the State of California with
respect to the breach or interpretation of this Amendment or the enforcement of
any and all rights, duties, liabilities, obligations, powers, and other
relations among the parties arising under this Amendment.

3. Entire Agreement. The Registration Agreement, as amended hereby,
constitutes the full and entire understanding and agreement among the parties
regarding the subject matter herein. Except as otherwise expressly provided in
the Registration Agreement, as amended hereby, the provisions hereof shall inure
to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto.

4. Full Force and Effect. Except as amended hereby, the Registration
Agreement shall remain in full force and effect.

5. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

-2-

<PAGE> 3

IN WITNESS WHEREOF, the undersigned have executed this First Amendment
to Registration Agreement as of the date set forth above.

COMPANY: ASPEC TECHNOLOGY, INC.

By: /s/ CONRAD J. DELL'OCA
-----------------------------------
Conrad J. Dell'Oca,
Chief Executive Officer

INVESTORS: SUMMIT VENTURES IV, L.P.

By Summit Partners IV, L.P.
Its General Partner

By Stamps, Woodsum & Co. IV
Its General Partner

By: /s/ WALTER G. KORTSCHAK
-----------------------------------

Its: General Partner
-----------------------------------

SUMMIT INVESTORS III, L.P.

By: /s/ WALTER G. KORTSCHAK
-----------------------------------
Its Authorized Signatory

WS INVESTMENT COMPANY 96-A

By: /s/ JEFFREY SAPER
-----------------------------------

Its:
-----------------------------------

/s/ JEFFREY SAPER
-----------------------------------
Jeffrey D. Saper

<PAGE> 4

K&E PARTNERS II

By: /s/ JACK S. LEVIN
-----------------------------------

Its: Managing Partner
-----------------------------------

WK TECHNOLOGY FUND

By: /s/ Y. S. FU
-----------------------------------

Its: Partner
-----------------------------------

WK TECHNOLOGY FUND II

By: /s/ Y. S. FU
-----------------------------------

Its: Partner
-----------------------------------

WK TECHNOLOGY FUND III

By: /s/ Y. S. FU
-----------------------------------

Its: Partner
-----------------------------------

WK TECHNOLOGY FUND IV

By: /s/ Y.S. FU
-----------------------------------

Its: Partner
-----------------------------------

/s/ CONRAD J. DELL'OCA
FOUNDERS: --------------------------------------
Conrad J. Dell'Oca

/s/ JAI P. SHIN
--------------------------------------
Jai P. Shin

<PAGE> 5

/s/ PATRICK Y. YIN
--------------------------------------
Patrick Y. Yin

/s/ YEN C. CHANG
--------------------------------------
Yen C. Chang

NEW INVESTORS: WINBOND INTERNATIONAL CORP.

By: /s/ DIP YUEN YANG
-----------------------------------

Its: President
-----------------------------------

CONCORD V.C.

By: /s/ [ILLEGIBLE]
-----------------------------------

Its: Chairman
-----------------------------------

CONCORD II V.C.

By: /s/ [ILLEGIBLE]
-----------------------------------

Its: Chairman
-----------------------------------

/s/ WANG HSIU-FONG
--------------------------------------
Wang Hsiu-Fong

HANTECH V.C. CORP.

By: /s/ [ILLEGIBLE]
-----------------------------------

Its: President
-----------------------------------

HWA CHUAN CO., LTD.

By: /s/ [ILLEGIBLE]
-----------------------------------

Its: Chairman
-----------------------------------

<PAGE> 6

GOLDEN TECHNOLOGY C.V.
INVESTMENT CORP.

By: /s/ LO-HOU CHEW
-----------------------------------

Its: President
-----------------------------------

LO-HOU CHEW
--------------------------------------
Lo-hou Chew

/s/ CHYONG WEN CHANG
--------------------------------------
Chyong Wen Chang

CDC VENTURE INVESTMENT (H.K.)
CORPORATION LIMITED

By:
-----------------------------------

Its:
-----------------------------------

/s/ SHAO-FU CHEN
--------------------------------------
Shao-Fu Chen

CHINATRUST V.C. CO., LTD.

By: /s/ PANE P. VANG
-----------------------------------

Its: President
-----------------------------------

PACIFIC V.C. CO., LTD.

By: /s/ PANE P. VANG
-----------------------------------

Its: President
-----------------------------------

<PAGE> 7
/s/ CHU YIN YEH, CHEN
--------------------------------------
Chu Yin Yeh, Chen

/s/ CHIU-HGIANG LIN
--------------------------------------
Chiu-Hgiang Lin

/s/ LIN CHANG, CHIN CHAN
--------------------------------------
Lin Chang, Chin Chan

WIN WIN VENTURE CAPITAL
CORPORATION

By: /s/ Cheng Ming Lee
-----------------------------------

Its: President
-----------------------------------

/s/ AI-LIN CHEN TSAI
--------------------------------------
Ai-Lin Chen Tsai

<PAGE> 8

EXHIBIT A

FIRST AMENDMENT TO REGISTRATION AGREEMENT

SCHEDULE OF NEW INVESTORS

Winbond International Corp.
Concord V.C.
Concord II V.C.
Wang Hsiu-Fong
HanTech V.C. Corp.
Hwa Chuan Co., Ltd.
Golden Technology C.V.
Investment Corp.
Lo-hou Chew
Chyong Ven Chang
CDC Venture Investment (H.K.)
Corporation Limited
Shao-Fu Chen
Chinatrust V.C. Co., Ltd.
Pacific V.C. Co., Ltd.
Taiwan United V.C. Corp.
Win Win V.C. Corp.
Ai-Lin Chen Tsai

<PAGE> 9

ASPEC TECHNOLOGY, INC.
REGISTRATION AGREEMENT

THIS AGREEMENT is made as of May 28, 1996, by and among Aspec
Technology, Inc., a California corporation (the "Company"), the parties listed
as Investors on the Schedule of Investors attached hereto (collectively, the
"Investors") and the parties listed as Founders on the Schedule of Founders
attached hereto (collectively, the "Founders").

The Company and the Investors are parties to a Purchase Agreement of
even date herewith (the "Purchase Agreement"). In order to induce the Investors
to enter into the Purchase Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the Closing under the Purchase Agreement.
Unless otherwise provided in this Agreement, capitalized terms used herein shall
have the meanings set forth in paragraph 8 hereof.

The parties hereto hereby agree as follows:

1. Demand Registrations.

(a) Requests for Registration. At any time after the Company has
completed a public offering of its Common Stock under the Securities Act (the
"IPO"), the holders of at least 55% of the Investor Registrable Securities may
request registration under the Securities Act of all or any portion of their
Investor Registrable Securities on Form S-1 or any similar long-form
registration ("Long-Form Registrations"), and the holders of at least 25% of the
Investor Registrable Securities may request registration under the Securities
Act of all or any portion of their Investor Registrable Securities on Form S-2
or S-3 or any similar short-form registration ("Short-Form Registrations") if
the Company is eligible to use any such short-form. All registrations requested
pursuant to this paragraph 1(a) are referred to herein as "Demand
Registrations." Each request for a Demand Registration shall specify the
approximate number of Investor Registrable Securities requested to be registered
and the anticipated per share price range for such offering. Within ten days
after receipt of any such request, the Company shall give written notice of such
requested registration to all other holders of Investor Registrable Securities
and, subject to paragraph 1(d) below, shall include in such registration all
Investor Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 15 days after the receipt of the
Company's notice.

(b) Long-Form Registrations. The holders of Investor Registrable
Securities shall be entitled to request (i) two Long-Form Registrations in which
the Company shall pay all Registration Expenses (the "Company-paid Long-Form
Registrations") and (ii) two Long-Form Registrations in which the holders of
Investor Registrable Securities shall pay their share of the Registration
Expenses as set forth in paragraph 5 hereof; provided that the aggregate
offering value of the Investor Registrable Securities requested to be registered
in any Long-Form Registration must equal at least $2,500,000. A registration
shall not count as one of the permitted Long-Form Registrations until it has
become effective, unless such registration was withdrawn prior to the

<PAGE> 10

effectiveness thereof at the written request of the holders of Investor
Registrable Securities initially requesting such registration, in which case
such withdrawn registration shall count as one of the permitted Company-paid
Long-Form Registrations hereunder unless the holders of Investor Registrable
Securities initially requesting such registration and the other holders electing
to participate therein pay all of the reasonable Registration Expenses in
connection with such withdrawn registration.

(c) Short-Form Registrations. In addition to the Long-Form
Registrations provided pursuant to paragraph 1(b), the holders of Investor
Registrable Securities shall be entitled to request (i) three Short-Form
Registrations in which the Company shall pay all Registration Expenses
("Company-paid Short-Form Registrations") and (ii) an unlimited number of
Short-Form Registrations in which the holders of Investor Registrable Securities
shall pay their share of the Registration Expenses as set forth in paragraph 5
hereof; provided that the aggregate offering value of the Investor Registrable
Securities requested to be registered in any Short-Form Registration must equal
at least $500,000. A registration shall not count as one of the permitted
Company-paid Short-Form Registrations until it has become effective, unless
such registration was withdrawn prior to the effectiveness thereof at the
written request of the holders of Investor Registrable Securities initially
requesting such registration, in which case such withdrawn registration shall
count as one of the permitted Company-paid Short-Form Registrations hereunder
unless the holders of Investor Registrable Securities initially requesting such
registration and the other holders electing to participate therein pay all of
the reasonable Registration Expenses in connection with such withdrawn
registration. Demand Registrations shall be Short-Form Registrations whenever
the Company is eligible to use any applicable short form. After the Company has
become subject to the reporting requirements of the Securities Exchange Act, the
Company shall use its best efforts to make Short-Form Registrations on Form S-3
available for the sale of Registrable Securities.

(d) Priority on Demand Registrations. The Company shall not include
in any Demand Registration any securities which are not Investor Registrable
Securities without the prior written consent of the holders of at least 55% of
the Investor Registrable Securities included in such registration. If a Demand
Registration is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the number of Investor Registrable
Securities and, if permitted hereunder, other securities requested to be
included in such offering exceeds the number of Investor Registrable Securities
and other securities, if any, which can be sold in an orderly manner in such
offering within a price range acceptable to the holders of at least 55% of the
Investor Registrable Securities initially requesting registration, the Company
shall include in such registration prior to the inclusion of any securities
which are not Investor Registrable Securities the number of Investor Registrable
Securities requested to be included which in the opinion of such underwriters
can be sold in an orderly manner within the price range of such offering, pro
rata among the respective holders thereof on the basis of the amount of Investor
Registrable Securities owned by each such holder. Unless otherwise approved by
the Company's board of directors, any Persons other than holders of Investor
Registrable Securities who participate in Demand Registrations which are not at
the Company's expense must pay their share of the Registration Expenses as
provided in paragraph 5 hereof.

- 2 -

<PAGE> 11

(e) Restrictions on Demand Registrations. The Company shall not be
obligated to effect any Demand Registration within 180 days after the effective
date of the Company's IPO or within 180 days after the effective date of a
previous Demand Registration or a previous registration in which the holders of
Investor Registrable Securities were given piggyback rights pursuant to
paragraph 2. The Company may postpone for up to 90 days (up to 60 days in the
case of clause (ii) below) the filing or the effectiveness of a registration
statement for a Demand Registration if the Company's board of directors
determines in its reasonable good faith judgment that such Demand Registration
would reasonably be expected to have (i) a material adverse effect on (or
require premature disclosure of) any proposal or plan by the Company or any of
its Subsidiaries to engage in any acquisition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer,
reorganization or similar transaction or (ii) a material adverse effect on the
Company's business or stock price; provided that in such event, the holders of
Investor Registrable Securities initially requesting such Demand Registration
shall be entitled to withdraw such request and, if such request is withdrawn,
such Demand Registration shall not count as one of the permitted Demand
Registrations hereunder and the Company shall pay all Registration Expenses in
connection with such registration. The Company may delay a Demand Registration
hereunder only once in any twelve-month period.

(f) Selection of Underwriters. The Company's board of directors shall
select the investment banker(s) and manager(s) to administer any Demand
Registration.

(g) Other Registration Rights. Except as provided in this Agreement,
the Company shall not grant to any Persons the right to request the Company to
register any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, without the prior written
consent of the holders of at least 55% of the Investor Registrable Securities;
provided that the Company may grant rights to other Persons to participate in
Piggyback Registrations so long as such rights are subordinate to the rights of
the holders of Investor Registrable Securities with respect to such Piggyback
Registrations.

2. Piggyback Registrations.

(a) Right to Piggyback. Whenever the Company proposes to register any
of its securities under the Securities Act (other than pursuant to a Demand
Registration or in connection with the Company's IPO) and the registration form
to be used may be used for the registration of Registrable Securities (a
"Piggyback Registration"), the Company shall give prompt written notice to all
holders of Registrable Securities of its intention to effect such a registration
and, subject to paragraphs 2(c) and 2(d) below, shall include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 20 days after the receipt
of the Company's notice. Notwithstanding the foregoing, the holders of Founder
Registrable Securities shall be entitled to participate in the Company's IPO in
accordance with the priorities established in clauses (i) and (iii) of paragraph
2(c) below so long as the estimated net proceeds to the Company from the sale of
shares in the offering as set forth in the registration statement for such
offering or otherwise communicated in writing to the Securities and Exchange
Commission prior to or at the time the registration statement is declared
effective (including any

- 3 -

<PAGE> 12

shares to be sold by the Company pursuant to a registration statement filed
under Rule 462) will enable the Company to redeem all of the Company's Series A
Redeemable Preferred Stock pursuant to paragraph 4C of Article III of the
Company's Articles of Incorporation and so long as the underwriter(s) managing
such offering consent to such participation.

(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.

(c) Priority on Primary Registrations. If a Piggyback Registration
(other than with respect to the Company's IPO) is an underwritten primary
registration on behalf of the Company, and the managing underwriters advise the
Company in writing that in their opinion the number of securities requested to
be included in such registration exceeds the number which can be sold in such
offering without adversely affecting the marketability of the offering, the
Company shall include in such registration (i) first, the securities the Company
proposes to sell, (ii) second, the Investor Registrable Securities requested to
be included in such registration, pro rata among the holders of such Investor
Registrable Securities on the basis of the number of shares owned by each such
holder, (iii) third, the Founder Registrable Securities requested to be included
in such registration, pro rata among the holders of such Founder Registrable
Securities on the basis of the number of shares owned by each such holder, and
(iv) fourth, other securities requested to be included in such registration.

(d) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company shall include
in such registration (i) first, the securities requested to be included therein
by the holders requesting such registration and the Investor Registrable
Securities requested to be included in such registration, pro rata among the
holders of such securities on the basis of the number of securities owned by
each such holder, (ii) second, the Founder Registrable Securities requested to
be included in such registration, pro rata among the holders of such Founder
Registrable Securities on the basis of the number of shares owned by each such
holder, and (iii) third, other securities requested to be included in such
registration.

(e) Other Registrations. If the Company has previously filed a
registration statement with respect to Investor Registrable Securities pursuant
to paragraph 1 or Registrable Securities pursuant to this paragraph 2, and if
such previous registration has not been withdrawn or abandoned, the Company
shall not file or cause to be effected any other registration of any of its
equity securities or securities convertible or exchangeable into or exercisable
for its equity securities under the Securities Act (except on Form S-8 or any
successor form), whether on its own behalf or at the request of any holder or
holders of such securities, until a period of at least 90 days has elapsed from
the effective date of such previous registration.

- 4 -

<PAGE> 13

3. Holdback Agreements.

(a) Each holder of Registrable Securities shall not effect any public
sale or distribution (including sales pursuant to Rule 144 promulgated under the
Securities Act) of equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities, during the
seven days prior to and the 180-day period beginning on the effective date of
the Company's IPO or during the seven days prior to and the 90-day period
beginning on the effective date of the Company's second registered public
offering of Common Stock, whether such public offering is pursuant to a Demand
Registration or otherwise (except as part of any such registration), unless the
underwriters managing the registered public offering otherwise agree in writing.
(b) The Company (i) shall not effect any public sale or distribution of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and the 180-day
period beginning on the effective date of the Company's IPO or during the seven
days prior to and the 90-day period beginning on the effective date of (A) the
second registered public offering of the Company's Common Stock and (B) any
underwritten Demand Registration (except as part of such registration or
pursuant to registrations on Form S-8 or any successor form), unless the
underwriters managing the registered public offering otherwise agree in writing,
and (ii) shall use its best efforts to cause each holder of at least 2% of its
Common Stock, or any securities convertible into or exchangeable or exercisable
for Common Stock, purchased from the Company at any time after the date of this
Agreement (other than in a registered public offering) to agree not to effect
any public sale or distribution (including sales pursuant to Rule 144
promulgated under the Securities Act) of any such securities during such period
(except as part of such registration, if otherwise permitted), unless the
underwriters managing the registered public offering otherwise agree in writing.

4. Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
terms of this Agreement and the intended method of disposition thereof, and
pursuant thereto the Company shall as expeditiously as possible:

(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective; provided
that before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company shall, if requested, furnish to the counsel
selected by the holders of at least 55% of the Investor Registrable Securities
covered by such registration statement copies of all such documents proposed to
be filed (excluding exhibits);

(b) notify each holder of Registrable Securities of the effectiveness
of each registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than 90 days and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
during such period in

- 5 -

<PAGE> 14
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;

(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;

(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller; provided that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction;

(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;

(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use its best
efforts to secure designation of all such Registrable Securities covered by such
registra tion statement as a NASDAQ "national market system security" within the
meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or, failing
that, to secure NASDAQ authorization for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such Registrable Securities
with the NASD;

(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;

(h) enter into such customary agreements (including underwriting
agreements in customary form) as the holders of at least 55% of the Investor
Registrable Securities being sold and the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such Registrable
Securities;

- 6 -
<PAGE> 15

(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent, so as to permit such Persons
to comply with their respective due diligence obligations under the Securities
Act;

(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and

(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order.

5. Registration Expenses.

(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses"), shall be borne as provided in this
Agreement, except that the Company shall, in any event, pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any liability insurance and
the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on the NASD automated quotation system. Notwithstanding the foregoing,
the holders of Registrable Securities (and not the Company) shall pay all
underwriting discounts and commissions with respect to the Registrable
Securities.

(b) In connection with each Company-paid Long-Form Registration, each
Company-paid Short-Form Registration and each Piggyback Registration, the
Company shall reimburse the holders of Investor Registrable Securities included
in such registration for the reason able fees and disbursements of one counsel
chosen by the holders of at least 55% of the Investor Registrable Securities
initially requesting such registration; provided that such fees and
disbursements shall not exceed $25,000 with respect to each Company-paid
Long-Form Registration or $15,000 with respect to each Company-paid Short-Form
Registration or Piggyback Registration.

- 7 -

<PAGE> 16

(c) To the extent Registration Expenses are not required to be paid
by the Company and unless otherwise approved by the Company's board of
directors, each holder of securities included in any registration hereunder
shall pay those Registration Expenses allocable to the registration of such
holder's securities so included or otherwise incurred by such holder, and any
Registration Expenses not so allocable shall be borne by all sellers of
securities included in such registration in proportion to the aggregate selling
price of the securities to be so registered.

6. Indemnification.

(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company shall indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities, except with respect to any information supplied by any
underwriter for use in such registration statement, prospectus or other offering
document and except that with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus, the
indemnity agreement contained in this paragraph shall not inure to the benefit
of the underwriter from whom the Person asserting any such losses, claims,
damages, liabilities or expenses purchased shares concerned (or to the benefit
of any person controlling such underwriter) to the extent that any such loss,
claim, damage, liability or expense of the underwriter or controlling person
results from an untrue statement or omission in the preliminary prospectus which
was corrected in the prospectus if a copy of the prospectus was not sent or
given to such Person as required by the Securities Act.

(b) In connection with any registration statement in which a holder
of Registrable Securities is participating, each such holder shall furnish to
the Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such holder; provided that the obligation to

- 8 -

<PAGE> 17

indemnify shall be individual, not joint and several, for each holder and shall
be limited to the net amount of proceeds received by such holder from the sale
of Registrable Securities pursuant to such registration statement.

(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder, except to the
extent such failure has prejudiced the indemnifying party) and (ii) unless in
such indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.

(d) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and shall survive the transfer of securities. The
indemnifying parties also agree to make such provisions, as are reasonably
requested by any indemnified party, for contribution to such party in the event
the indemnification provided hereunder is called for under the terms hereof but
is unavailable for any reason.

7. Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company (other than
representations and warranties regarding such holder and such holder's intended
method of distribution) or to undertake any indemnification obligations to the
Company with respect thereto, except as otherwise provided in paragraph 6
hereof.

8. Definitions.

(a) "Founder Registrable Securities" means (i) the Common Stock owned
of record by the Founders on the date hereof, (ii) any Common Stock issued or
issuable with respect to the securities referred to in clause (i) above by way
of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization and
(iii) any other shares of Common Stock held by Persons holding securities

- 9 -

<PAGE> 18

described in clauses (i) or (ii) above. As to any particular Founder Registrable
Securities, such securities shall cease to be Founder Registrable Securities
when they have been distributed to the public pursuant to an offering registered
under the Securities Act or sold to the public through a broker, dealer or
market maker in compliance with Rule 144 under the Securities Act (or any
similar rule then in force) or repurchased by the Company or any Subsidiary. In
addition, as to any particular Founder Registrable Securities held by any
Person, such securities shall cease to be Founder Registrable Securities when
the aggregate number of Founder Registrable Securities held by such Person does
not exceed one percent of the number of shares of Common Stock then outstanding
as shown by the most recent report or statement published by the Company and
such Person has held such securities at least two years.

(b) "Investor Registrable Securities" means (i) the Common Stock
issued pursuant to the Purchase Agreement, (ii) any Common Stock issued or
issuable with respect to the Common Stock referred to in clause (i) above by way
of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization and
(iii) any other shares of Common Stock held by Persons holding securities
described in clauses (i) or (ii) above. As to any particular Investor
Registrable Securities, such securities shall cease to be Investor Registrable
Securities when they have been distributed to the public pursuant to an offering
registered under the Securities Act or sold to the public through a broker,
dealer or market maker in compliance with Rule 144 under the Securities Act (or
any similar rule then in force) or repurchased by the Company or any Subsidiary.
In addition, as to any particular Investor Registrable Securities held by any
Person, such securities shall cease to be Investor Registrable Securities when
the aggregate number of Investor Registrable Securities held by such Person does
not exceed one percent of the number of shares of Common Stock then outstanding
as shown by the most recent report or statement published by the Company and
such Person has held such securities at least two years.

(c) "Registrable Securities" means, collectively, the Investor
Registrable Securities and the Founder Registrable Securities.

(d) Unless otherwise stated, other capitalized terms contained herein
have the meanings set forth in the Purchase Agreement.

9. Miscellaneous.

(a) No Inconsistent Agreements. Except in compliance with Section
9(c) hereof, the Company shall not hereafter enter into any agreement with
respect to its securities which is inconsistent with or violates the rights
granted to the holders of Registrable Securities in this Agreement.

(b) Remedies. Any Person having rights under any provision of this
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law

- 10 -

<PAGE> 19

or equity of competent jurisdiction (without posting any bond or other security)
for specific performance and for other injunctive relief in order to enforce or
prevent violation of the provisions of this Agreement.

(c) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of each of the Company and holders of at least 55% of the
Investor Registrable Securities and the holders of a majority of the Founder
Registrable Securities.

(d) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of such Registrable Securities.

(e) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.

(f) Counterparts. This Agreement may be executed simultaneously in
two or more counterparts (including by means of telecopied signature pages), any
one of which need not contain the signatures of more than one party, but all
such counterparts taken together shall constitute one and the same Agreement.

(g) Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.

(h) Governing Law. All issues and questions concerning the
construction, validity, interpretation and enforcement of this Agreement and the
schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of California, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of California or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California.

(i) Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable overnight courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each Investor at the address indicated on the
Schedule of Investors

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<PAGE> 20

attached hereto, to each Founder at the address indicated on the Schedule of
Founders attached hereto, and to the Company at the address indicated below:

Aspec Technology, Inc.
830 East Arques Avenue
Sunnyvale, California 94086
Telephone: (408) 774-2199
Telecopy: (408) 522-9450
Attention: President

with a copy to:

Jeffrey D. Saper, Esq.
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304
Telephone: (415) 493-9300
Telecopy: (415) 493-6811

or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party given
in accordance with this paragraph.

* * * * *

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<PAGE> 21

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

ASPEC TECHNOLOGY, INC.

By /s/ CONRAD J. DELL 'OCA
-----------------------------------

Its President & C.E.O.
-----------------------------------

SUMMIT VENTURES IV, L.P.

By Summit Partners IV, L.P.
Its General Partner

By Stamps, Woodsum & Co. IV
Its General Partner

By /s/ WALTER G. KORTSCHAK
-----------------------------------

Its General Partner
-----------------------------------

SUMMIT INVESTORS III, L.P.

By /s/ WALTER G. KORTSCHAK
------------------------------------
Its Authorized Signatory

WS INVESTMENT COMPANY 96-A

By /s/ JEFFREY SAPER
-----------------------------------

Its
-----------------------------------

/s/ JEFFREY D. SAPER
--------------------------------
Jeffrey D. Saper

K&E PARTNERS II

By /s/ JACK S. LEVIN
-----------------------------------

Its Managing Partner
-----------------------------------

- 13 -

<PAGE> 22

[SIGNATURE PAGE CONTINUED] /s/ CONRAD J. DELL'OCA
--------------------------------
Conrad J. Dell'Oca

/s/ JAI P. SHIN
--------------------------------
Jai P. Shin

/s/ PATRICK Y. YIN
--------------------------------
Patrick Y. Yin

/s/ YEN C. CHANG
--------------------------------
Yen C. Chang

WK TECHNOLOGY FUND

By /s/ Y.S. FU
-----------------------------------

Its Partner
-----------------------------------

WK TECHNOLOGY FUND II

By /s/ Y.S. FU
-----------------------------------

Its Partner
-----------------------------------

WK TECHNOLOGY FUND III

By /s/ Y.S. FU
-----------------------------------

Its Partner
-----------------------------------

WK TECHNOLOGY FUND IV

By /s/ Y.S. FU
-----------------------------------

Its Partner
-----------------------------------

- 14 -

<PAGE> 23

SCHEDULE OF INVESTORS

Summit Ventures IV, L.P.
499 Hamilton Avenue
Suite 200
Palo Alto, CA 94301
Attn.: Walter G. Kortschak
Summit Investors III, L.P.
499 Hamilton Avenue
Suite 200
Palo Alto, CA 94301
Attn.: Walter G. Kortschak
WK Technology Fund
10th Floor, 115, Sec. 3
Ming Sheng E. Road
Taipei, Taiwan R.O.C.
Attn: Ys Fu
WK Technology Fund II
10th Floor, 115, Sec. 3
Ming Sheng E. Road
Taipei, Taiwan R.O.C.
Attn: Ys Fu

WK Technology Fund III
10th Floor, 115, Sec. 3
Ming Sheng E. Road
Taipei, Taiwan R.O.C.
Attn: Ys Fu

WK Technology Fund IV
10th Floor, 115, Sec. 3
Ming Sheng E. Road
Taipei, Taiwan R.O.C.
Attn: Ys Fu

WS Investments 96-A
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304
Attn: Jeffrey D. Saper

Jeffrey D. Saper
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road

- 15 -

<PAGE> 24
Palo Alto, CA 94304

K&E Partners II
200 East Randolph Drive
Suite 5700
Chicago, IL 60601
Attn.: Jack S. Levin

- 16 -

<PAGE> 25

SCHEDULE OF FOUNDERS

Conrad J. Dell'Oca
Aspec Technology, Inc.
830 East Arques Avenue
Sunnyvale, CA 94086

Jai P. Shin
Aspec Technology, Inc.
830 East Arques Avenue
Sunnyvale, CA 94086

Patrick Y. Yin
Aspec Technology, Inc.
830 East Arques Avenue
Sunnyvale, CA 94086

Yen C. Chang
Aspec Technology, Inc.
830 East Arques Avenue
Sunnyvale, CA 94086

- 17 -

<PAGE> 1
EXHIBIT 10.6

LEASE AGREEMENT

THIS LEASE, executed in duplicate as of the 5th day of December, 1996 by and
between WOLFE ROAD INVESTMENTS NO. 3, a Partnership (hereinafter called
"Landlord"); and ASPEC TECHNOLOGY, INC., a California corporation (hereinafter
called "Tenant").

WITNESSETH:

1. PREMISES. Landlord hereby leases to Tenant and Tenant hereby hires
and takes from Landlord those certain premises (the "Premises") shown or
outlined in red on Exhibit "A," situated in Sunnyvale, County of Santa Clara,
State of California, and more particularly described as follows:

That approximate 29,000 sq. ft. industrial-office space commonly known
as 830 East Arques Avenue and/or 290 North Wolfe Road, Sunnyvale, CA
together with all interior improvements situated thereon, which space
and Premises is a portion of that approximate 48,500 sq. ft.
industrial-office building situated on an approximate 2.9 acre Parcel
of real property located on the southeasterly corner of Wolfe Road and
East Arques Avenue, Sunnyvale, CA (the "Building") also as shown or
partly shown on Exhibit "A." Such Premises is leased in "AS IS"
condition except as otherwise provided in section 37. "IMPROVEMENTS"
hereof.

The term "Premises" as used throughout this Lease is hereby defined to include
(i) any improvements now or hereafter installed therein or attached thereto,
and (ii) the reasonable non-exclusive use of sidewalks and driveways in front
of or adjacent to the Premises, and parking areas located on the parcel of land
on which the Building is situated, except such parking areas as may be leased
or reserved for exclusive use by other tenant(s). Tenant's such reasonable use
of parking areas shall not exceed that percent of the total parking areas which
is equal to the ratio which floor space of the Premises bears to floor space of
the entire Building. The leased area of the Premises shall be measured from
outside of exterior walls to outside of interior walls, and shall include any
covered entrances or egresses, and any covered or depressed loading areas Said
letting and hiring is upon and subject to the terms, covenants and conditions
hereinafter set forth and Tenant covenants as a material part of the
consideration for this Lease to perform and observe each and all of said terms,
covenants and conditions.

2. TERM. The term of this Lease shall be for a period of five (5) years
(unless sooner terminated as hereinafter provided), and (subject to Section 3.)
shall commence on the lst day of December, 1996 and end on the 30th day of
November, 2001.

3. POSSESSION. Anything herein to the contrary notwithstanding:

A. Possession of the Premises shall be deemed tendered and the
term of the Lease shall commence on December 1, 1996.

<PAGE> 2

B. Tenant shall have the right to occupy the southwesterly
approximate one-half of the space formerly occupied by Ando Corp. during the
period of time that Landlord is improving the northwesterly one-half thereof;
and after Landlord has finished improving the northwesterly one-half thereof,
Tenant shall move out of such southwesterly one-half into the northwesterly
one-half during the period that Landlord is improving such southwesterly
one-half of such space pursuant to the terms hereof.

4. USE. Tenant shall use the Premises only in conformance with
applicable governmental laws, regulations. rules and ordinances for the
purpose of general office. R&D, light manufacturing, storage and other legal
uses related thereto, and no other purpose. Tenant shall not do, keep or
permit to be done or kept in or about the Premises anything which is prohibited
by or will in any way increase the existing rate of or cause the cancellation
of any insurance covering the Premises or any of its contents; nor shall Tenant
sell or permit to be kept, used, leased or sold, in or about said Premises, any
article which may be prohibited by the standard form of fire insurance policies
or which will in any way obstruct or interfere with the rights or quiet
enjoyment of other occupants of the Premises or neighboring premises, or
injure, annoy or disturb them; and Tenant will not allow the Premises to be
used for any unlawful purpose, nor shall Tenant cause, maintain or permit any
nuisance in, on or about the Premises. No sale by auction shall be permitted
on the Premises without Landlord's prior written consent. Tenant shall not
place any loads upon the floors, walls, ceiling or roof which might endanger or
damage the structure; nor place or spill, nor suffer to be placed or spilled,
any harmful substances or Hazardous Materials in the drainage system of the
Building, nor on the Premises. the Building nor the Parcel of land. nor
overload any electrical, mechanical, plumbing, sprinkler, or other systems. No
waste materials or refuse shall be permitted to remain upon any part of the
Premises nor outside of the Building in which the Premises are a part, except
in trash container(s) placed inside exterior enclosures approved by Landlord
for that purpose, or inside of the Building proper where designated by
Landlord. No materials, supplies, equipment, finished products or
semi-finished products, raw materials or articles of any nature shall be stored
or permitted to remain on the roof (other than air conditioning units) nor
outside the Premises. Tenant shall not place anything or allow anything to be
placed near any window or door which may appear unsightly from outside the
Premises. No loudspeaker or other device, system or apparatus which can be
heard outside the Premises shall be used in or at the Premises without the
prior written consent of Landlord. Tenant shall not commit or suffer to be
committed any waste in or upon the Premises. Tenant covenants and agrees that
no diminution of light. air or view by any structure which may be hereafter
erected (whether or not by Landlord) nor use of the Building by other occupants
nor use of neighboring buildings or areas by others shall in any way affect
this Lease, entitle Tenant to any reduction of rent hereunder or result in any
liability of Landlord to Tenant. Tenant shall comply with any covenant,
condition or restriction affecting the Premises. The provisions of this
paragraph are for the benefit of Landlord only and shall not be construed to be
for the benefit of any other person, or occupant of the Premises.

5. RENT.

A. Basic Rent. Tenant agrees to pay to Landlord at such place as
Landlord may from time to time designate without deduction, offset, abatement,
prior notice, or demand, and Landlord

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<PAGE> 3

agrees to accept as Basic Rent for the leased Premises, the total sum of TWO
MILLION ONE THOUSAND & 00/100 Dollars ($2,001,000.00) in lawful money of the
United States of America, payable as follows:

The sum of $30,450.00 payable each month from December 1, 1996 through
November 30, 1997
The sum of $31,900.00 payable each month from December 1, 1997 through
November 30, 1998.
The sum of $33,350.00 payable each month from December 1, 1998 through
November 30, 1999.
The sum of $34,800.00 payable each month from December 1, 1999 through
November 30, 2000.
The sum of $36,250.00 payable each month from December 1, 2000 through
November 30, 2001.

B. Time for Payment. Full monthly Basic Rent is due in advance
on the first day of each calendar month. In the event that the term of this
Lease commences on a date other than the first day of a calendar month, then an
the date of commencement of such term Tenant shall pay to Landlord as Basic
Rent for the period from such date of commencement to the first day of the next
succeeding calendar month that proportion of the first month's Basic Rent due
hereunder which the number of days between such date of commencement and the
first day of the next succeeding calendar month bears to thirty (30). In the
event that the term of this Lease for any reason ends on a date other than the
last day of a calendar month then on the first day of the last partial calendar
month of such term Tenant shall pay to Landlord as Basic Rent for the period
from said first day of said last partial calendar month to and including the
last day of the term hereof that proportion of the monthly Basic Rent then due
hereunder which the number of days between said first day of said last partial
calendar month and the last day of the term hereof bears to thirty (30).

C. Late Charges and Interest. Notwithstanding any other
provision of this Lease, if Tenant is in default in the payment of any rent (as
set forth in this Section 5) when due, or any part thereof, Tenant acknowledges
that late payment by Tenant to Landlord of rent will cause Landlord to incur
costs which are extremely difficult and impracticable to fix Such costs
include, without limitation, processing and accounting charges, and late
charges that may be imposed on Landlord by the terms of any encumbrance and
note secured by any encumbrance covering the Premises. extraordinary interest
charges, penalties, collection costs, attorney(ies) and accountant(s) fees, and
the like. Therefore, if any rent due from Tenant under this Section 5. is not
received by Landlord within ten (10) days of when due, Tenant shall pay to
Landlord an additional sum of ten (10%) percent of the overdue rent as a late
charge. The parties agree that this late charge represents a fair and
reasonable estimate of the costs that Landlord will incur by reason of late
payment by Tenant. In addition to the above, Tenant shall pay to Landlord
simple interest on any rent or any other sums due hereunder which are from time
to time in default under the terms hereof, at a per annum rate of interest
equal to three (3%) percent above the prime rate of interest per annum as
periodically quoted by the Bank of America, which interest shall be prorated to
the period which such rent or other sums remain unpaid and in default.
Acceptance of any late charge or interest

-3-
<PAGE> 4
payment shall not constitute a waiver of Tenant's default with respect to the
overdue amount, nor prevent Landlord from exercising any of the other rights
and remedies available to Landlord.

D. Additional Rent. Within ten (10) days after receipt of
invoice(s) therefore, Tenant shall pay to Landlord or to Landlord's designated
agent or entity (in addition to Basic Rent and) as Additional Rent which shall
be solely calculated and determined by Landlord, the following:

(1) All Taxes relating to the Premises as set forth in
Section 11, and

(2) All insurance premiums relating to the Premises, as
set forth in Section 13, and

(3) All charges. costs, expenses and other amounts which
Tenant is required to pay hereunder, together with all interest, late charges,
costs and expenses, including without limitation reasonable attorneys' fees,
legal and accounting expenses, collection costs, and court costs, that may
accrue thereto or be incurred in the event of Tenant's default, refusal or
failure to pay such amounts, and all damages, reasonable costs and expenses
which Landlord may incur by reason of any default by Tenant or failure on
Tenant's part to comply with the terms of this Lease. In the event of failure
by Tenant to pay such Additional Rent in accordance with the terms hereof,
Landlord shall have all the rights and remedies with respect thereto as
Landlord has for nonpayment of Basic Rent.

E. The term "rent" shall include without limitation "Basic Rent" and
"Additional Rent."

6. SECURITY DEPOSIT. Concurrently with Tenant's execution of this Lease,
Tenant shall deposit with Landlord the additional sum of TWENTY FOUR THOUSAND
NINE HUNDRED TWO & 00/100 Dollars $24,902.00) to be added to the Security
Deposit held by Landlord under the terms of Section 6. of that certain Lease
Agreement dated as of April 15, 1994 by and between Wolfe Road Investments No.
3, Landlord, and Aspec Technology, Inc., Tenant. Such total Security Deposit
shall therefore be a sum equal to the last month's Basic Rent vis. THIRTY SIX
THOUSAND TWO HUNDRED FIFTY & 00/100 Dollars ($36,250.00). Said sum shall be
held by Landlord as a Security Deposit for the full and faithful performance by
Tenant of all of the terms, covenants, and conditions of this Lease to be kept
and performed by Tenant during the term hereof. If Tenant defaults with
respect to any provision of this Lease, including, without limitation, the
provisions relating to the payment of rent and any of the monetary sums due
hereunder, Landlord may (but shall not be required to) use, apply or retain all
or any part of this Security Deposit for the payment of any rent in default, or
for any amount which Landlord may spend by reason of Tenant's default, of to
compensate Landlord for any other loss, damage, liability or expense which
Landlord may suffer by reason of Tenant's default. If any portion of said
Security Deposit is so used, applied or retained, then Tenant shall, within ten
(10) days after written demand therefor, deposit cash with Landlord in the
amount sufficient to restore the Security Deposit to its original amount.
Tenant's failure to do so shall be a material breach of this Lease. Landlord
shall not be required to keep this Security Deposit separate from its general
funds, and Tenant shall not be entitled to interest on such Deposit. If Tenant
fully and faithfully performs and observes every provision of this Lease to be
performed and observed by Tenant, the Security Deposit or any then unused
balance thereof shall

-4-
<PAGE> 5
be returned to Tenant (or at Landlord's option, to the last assignee of
Tenant's interest hereunder) after the expiration of the Lease term and after
Tenant has vacated and surrendered the Premises in accordance with the terms
hereof. Tenant shall not have the right to apply this Security Deposit or any
part thereof toward the payment of any rent or sums due hereunder. In the
event of termination of Landlord's interest in this Lease, Landlord shall
transfer the unused balance of said Deposit to Landlord's successor in interest
whereupon Tenant hereby agrees to release Landlord from liability for the
return of such Deposit.

7. ACCEPTANCE AND SURRENDER OF PREMISES. By entry therein, Tenant
accepts the Premises as being in good and sanitary order, condition and repair
and accepts the Building and improvements included in the Premises in their
present condition and without representation or warranty by Landlord as to the
condition of such Building or as to the use of occupancy which may be made
thereof. Any exceptions to the foregoing must be by written agreement executed
by Landlord and Tenant. Tenant agrees on the last day of the Lease term, or on
the sooner termination of this Lease, to surrender the Premises promptly and
peaceably to Landlord in good condition and repair (damage by Acts of God,
fire, normal wear and tear excepted), including without limitation, all
interior walls freshly painted, or cleaned so that they appear freshly painted;
all tile floors cleaned and waxed; all carpets cleaned and shampooed; all
broken, marred, stained or nonconforming acoustical ceiling tiles replaced; all
windows washed inside and out, the air conditioning and heating systems
serviced by a reputable and licensed service firm, left in good operating
condition and repair as so certified to by such firm; the plumbing, electrical
and lighting systems left in good order and repair, including replacement of
any burned out, discolored or broken light bulbs, ballasts or lenses, the lawn,
shrubs and trees in good condition including the replacement of any dead or
damaged plantings; the sidewalk, driveways and parking areas in good order,
condition and repair, any damaged surface or other portion having been repaired
or replaced, together with all alterations, additions, and improvements which
may have been made in, to, or on the Premises (except moveable trade fixtures
installed at the expense of Tenant), provided that Tenant shall ascertain from
Landlord within thirty (30) days before the end of the term of this Lease
whether Landlord desires to have the Premises or any part(s) thereof restored
to their original condition and configuration as when the Premises was
delivered to Tenant, and if Landlord shall so desire, then Tenant shall so
restore said Premises or such perils) thereof prior to the termination of this
Lease at Tenant's sole cost and expense. Tenant shall, on or before the
termination of this Lease, remove all of Tenant's personal property and trade
fixtures from the Premises, and all property not so removed on or before the
end of the term or sooner termination of this Lease shall be deemed abandoned
by Tenant and title to same shall thereupon pass to Landlord without
compensation to Tenant. Landlord may, upon termination of this Lease, remove,
store and/or sell all moveable personal property and trade fixtures so
abandoned by Tenant, at Tenant's sole cost, and repair any damage caused by
such removal at Tenant's sole cost. If the Premises be not surrendered at the
end of the term or sooner termination of this Lease, then Tenant shall
indemnity Landlord against loss or liability resulting from the delay by Tenant
in so surrendering the Premises, including, without limitation, any claims made
by any succeeding tenant founded an such delay. No act or conduct of Landlord,
whether consisting of the acceptance of the keys to the Premises, or otherwise,
shall be deemed to be or constitute an acceptance of the surrender of the
Premises by Tenant prior to the expiration of the Term hereof, and acceptance
by Landlord of surrender by

-5-
<PAGE> 6
Tenant shall only flow from and must be evidenced by a written acknowledgment
of acceptance of surrender signed by Landlord. The voluntary or other
surrender of this Lease or the Premises by Tenant or a mutual cancellation of
this Lease shall not work as a merger and, at the option of Landlord, shall
either terminate all existing subleases or operate as an assignment or
attornment to Landlord of such subleases as Landlord may elect to retain.
After the expiration or earlier termination of this Lease, Tenant shall
execute, acknowledge and deliver to Landlord, within ten (10) days after
written demand from Landlord to Tenant, any quitclaim deed or other document
required by any reputable title company, licensed to operate in the State of
California, to remove the cloud or encumbrance created by this Lease from the
real property containing the Premises.

8. ALTERATIONS AND ADDITIONS. Tenant shall not make, or suffer to be
made, any alteration or addition to the Premises, or any part thereof, without
the express prior written detailed request to and consent of Landlord first
obtained by Tenant (which consent shall not be unreasonably withheld or
delayed). Any repairs, replacements, additions, or alterations to the Premises
shall be made at Tenant's sole cost and expense and shall become at once a part
of the Premises and belong to Landlord, except that Tenant shall retain title
to all moveable furniture and trade fixtures installed at Tenant's sole cost.
Landlord reserves the right to approve all contractors and mechanics proposed
by Tenant to make such alterations and additions. Unless otherwise expressly
provided by such written consent, all such repairs, replacements, alterations
and additions shall be of the same materials and shall conform to the same
design and building standards as existed in the Premises upon the date Tenant
first took possession thereof. All heating, plumbing, lighting, electrical,
air conditioning, partitioning, wall coverings, doors, glass, draperies, window
shades, ceilings, carpeting, and floor installations made by Tenant, together
with all property that has become an integral part of the Premises, shall not
be deemed trade fixtures. Tenant agrees that it will not proceed to make such
alterations or additions until ten (1 0) days after having received written
consent from Landlord to do so, in order that Landlord may post appropriate
notices to avoid any liability to contractors or material suppliers for payment
for Tenant's alterations and additions. Tenant will at all times permit such
notices to be posted and remain posted until the completion of work. Tenant
shall, if required by Landlord, secure at Tenant's own cost and expense, a
completion and lien indemnity bond (satisfactory to Landlord) for such work.
Tenant further covenants and agrees that any mechanics lien filed against the
Premises for work claimed to have been done for Tenant or materials claimed to
have been furnished to Tenant, will be paid or discharged by Tenant, by bond or
otherwise, within fifteen (15) days after the filing thereof, at the sole cost
and expense of Tenant.

9. TENANT MAINTENANCE. Tenant shall at all times and at its sole cost
and expense, keep, repair, replace and maintain the Premises (including
appurtenances) and every part thereof in good, clean and first-class condition;
including (without limitation) janitorial, garbage collection, all windows
(interior and exterior), window frames, plate glass and glazing (destroyed by
accident or act of third parties), truck doors, plumbing systems (such as water
and drain lines, sinks, toilets. faucets, drains, showers and water fountains),
electrical systems (such as panels, conduits, outlets, lighting fixtures,
lamps, bulbs, tubes and ballasts), heating and air conditioning systems (such
as compressors, fans, air handlers, ducts, mixing boxes, thermostats, time
clocks, boilers, heaters, supply and return grills) which shall at least
quarterly be fully serviced and repaired by a reputable

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and licensed HVAC service firm, (previously approved in writing by Landlord)
and a copy of each such service report shall be sent to Landlord immediately
after each such service; structural elements and interior surfaces of the
Premises, store fronts, roofs. roof membranes, down spouts, wall coverings,
window coverings, carpet, floor coverings, partitioning, ceilings, doors (both
interior and exterior), including closing mechanisms, latches, locks, skylights
(if any), fire extinguishing systems and equipment, elevators (if any) and all
other interior improvements of any nature whatsoever, all exterior improvements
including but not limited to sidewalks, driveways, parking lots, landscaping
areas, sprinkler systems, lighting, signs, fountains, waterways and drains.
Tenant agrees to provide carpet shields under all roiling personal property (it
requested by Landlord), and to be responsible for wear and tear of the carpet
caused by any roiling or other equipment if such wear and tear exceeds that
caused by normal foot traffic in surrounding areas, and areas of excessive wear
shall be replaced at Tenant's sole expense upon Lease termination. Tenant
hereby waives all rights under, and benefits of, Subsection 1. of Section 1932
and Section 1941 and 1942 of the California Civil Code and under any similar
law, statute or ordinance now or hereafter in effect. In the event any of the
above maintenance responsibilities jointly apply to Tenant and other tenant(s)
of Landlord where there is common usage with other tenant(s), such maintenance
responsibilities and charges shall be allocated to the Premises by square
footage or other equitable basis as calculated and determined by Landlord.

10. UTILITIES AND SERVICES. Tenant shall (within ten (10) days after
receiving an invoice therefor) pay directly to the entity or authority
providing and/or billing the same (or reimburse the entity paying for the same,
as the case may be), all charges for water, gas, electricity. telephone, telex
and other electronic communication service, sewer service, waste and refuse
collection, and any other utilities, materials or services furnished directly
or indirectly to, for the benefit of and/or used by Tenant on or about the
Premises during the term of this Lease, including without limitation any
temporary or permanent utility surcharge, Tenant's pro rate share of
landscaping, parking areas, roof and/or common area maintenance, and/or any
other charges hereinafter imposed. In the event any of the above charges also
apply jointly to other tenant(s) of Landlord where there is a common meter or
common usage with other tenant(s), Tenant shall allocate, adjust, reimburse
and/or pay such charges on a temporary or permanent basis (as the case may be)
directly to, from or with such other tenant(s), and Tenant shall seek and shall
be solely responsible for reimbursement directly from such other tenant(s) for
any such charges which may be reimbursable to Tenant. Failing such direct
allocation or adjustment, such charges may (at Landlord's option) be allocated
to the Premises by square footage or other equitable basis (for example a PG&E
usage survey payable at the expense of the tenants involved) as finally
calculated and determined solely by Landlord. The PG&E meters for PG&E service
for the Building are adjacent to Tenant's premises, and such meters and such
service for the Building shall be transferred to and be in Tenant's name during
the term of this Lease. In no event shall Landlord be liable for any such
charges, billings, payment, advancement of money for payment, or reimbursement
to or from others for or with respect to any of the above services, utilities,
materials, or charges, and Tenant shall not be entitled to any abatement or
reduction of rent by reason of any interruption or failure of utilities,
materials, or services to the Premises during the Lease term.

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11. TAXES.

A. Real Property Taxes. Tenant shall pay to Landlord all Real
Property Taxes relating to the Premises, which shall be considered as
Additional Rent payable in accordance with Section 5.D. of this Lease. In the
event the Premises leased hereunder consists of only a portion of the entire
parcel being taxed, Tenant shall pay to Landlord the proportionate share of
such Real Property Taxes allocated to the Premises during the term of this
Lease by square footage or other reasonable basis as calculated and determined
solely by Landlord. If the tax billing pertains entirely to the Premises, and
Landlord elects by written notice to Tenant to have Tenant pay such Real
Property Taxes directly to the Tax Collector, then in such event it shall be
the responsibility of Tenant to obtain all tax and assessment bills pertaining
to the Premises, and to pay (prior to delinquency) all Real Property Taxes
pertaining to the Premises, and all interest and penalties (if any) for
non-payment or late payment thereof. Failure to request or receive a bill for
taxes and/or assessments shall not alter or extinguish Tenant's responsibility
to pay the above. The term "Real Property Taxes." as used herein, shall mean
and include (i) all taxes, assessments, levies and other charges of any kind or
nature whatsoever, general and special, foreseen and unforeseen (including.
without limitation, all installments of principal and interest required to pay
any general or special assessments for public improvements, and any increases
resulting from reassessments caused by any change in ownership of the Premises
or otherwise) now or hereafter imposed by any governmental or quasi-
governmental authority or special district having the direct or indirect power
to tax or levy assessments, which are levied or assessed against, or with
respect to the value, occupancy, or use of all or any portion of the Premises
(as now constructed or as may at any time hereafter be constructed, altered, or
otherwise changed) or Landlord's interest therein: any improvements located
within the Premises (regardless of ownership); the fixtures, equipment and
other property of Landlord, real or personal, that are an integral part of and
located in the Premises; and landscaping areas, walkways, parking areas, public
utilities, or energy within the Premises, (ii) all charges, levies or fees
imposed by reason of environmental regulation or other governmental control of
the Premises, and (iii) all costs and fees (including reasonable attorneys'
fees) incurred by Landlord or Tenant in reasonably contesting any Real Property
Tax and in negotiating with public authorities as to any Real Property Tax. If
at any time during the term of this Lease the taxation or assessment of the
Premises prevailing as of the commencement date of this Lease shall be altered
so that in lieu of or in addition to any Real Property Tax described above
there shall be levied, assessed or imposed (whether by reason of a change in
the method of taxation or assessment, creation of a new tax or charge, or any
other cause) an alternate or additional tax or charge (i) on the value, use or
occupancy of the Premises or Landlord's interest therein or (ii) on or measured
by the gross receipts, income or rentals from the Premises, on Landlord's
business of leasing the Premises, or based on vehicular ownership, parking,
employment, production or the like, or computed in any manner with respect to
the operation of the Premises, then any such tax or charge, however designated,
shall be included within the meaning of the term "Real Property Taxes" for
purposes of this Lease. If any Real Property Tax is based in part upon
property or rents unrelated to the Premises, then only that part of such Real
Property Tax that is fairly allocable to the Premises shall be included within
the meaning of the term "Real Property Taxes." Notwithstanding the foregoing,
the term "Real Property Taxes" shall not include estate, inheritance, gift or
franchise

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taxes of Landlord or the federal or state net income tax imposed on Landlord's
income from all sources.

B. Taxes on Tenant's Property. Tenant shall be liable for and
shall pay directly to the appropriate authority prior to delinquency, all taxes
levied against or applicable to any personal property or trade fixtures owned
by Tenant or others and/or placed by Tenant in or about the Premises, during
the leased Term, and any interest or penalties applicable thereto (if any) for
non-payment or late payment.

12. TENANT'S INSURANCE. Tenant agrees, at Tenant's expense, to secure and
keep in force during the term of this Lease a policy of comprehensive general
liability insurance for personal injury (including death) and property damage
occurring in, on or about the Premises, including without limitation parking,
walkways and landscaped areas, in the minimum amount of $2,000,000 combined
single limit. Such insurance shall be primary and noncontributory with respect
to any insurance carried by Landlord. Such policy(ies) shall name Landlord as
additional insured(s), shall insure any liability of Landlord, contingent or
otherwise, with respect to acts or omissions of Tenant, its agents, employees
or invitees by any conduct or transactions of any of said persons in, about or
concerning the Premises, including (without limitation) any failure of Tenant
to observe or perform any of its obligations hereunder, and shall contain the
insurer's waiver of subrogation against Landlord, its agents, employees and
invitees. Such policy(ies) shall insure performance by Tenant of the indemnity
provisions of Section 14. hereof. Such policy(ies) shall be issued by an
insurance company licensed to transact business in the State of California and
rated no less than A12 by Best's, and shall provide that such insurance shall
not be canceled or materially amended, except upon ten (10) days prior written
notice to Landlord. Tenant shall at all times maintain a current copy or
detailed certificate of said policy(ies) with Landlord. Tenant shall at
Tenant's cost maintain policy(ies) of insurance in "all risk" form with a
sprinkler damage endorsement insuring the replacement value of all personal
property, inventory, trade fixtures, and leasehold improvements within the
Premises for the full replacement value thereof. The proceeds from any of such
policies shall be used for the repair or replacement of such items so insured.
Tenant shall also maintain policy(ies) of workmen's compensation insurance and
any other employee benefit insurance sufficient to comply with all laws.
Tenant shall, at his cost and expense, comply with any and all requirements,
pertaining to said Premises of any insurance organization or company, necessary
for the maintenance of reasonable fire and public liability insurance.

13. REAL PROPERTY INSURANCE. Landlord shall purchase and keep in force
policy(ies) of insurance covering loss or damage to the Premises by reason of
fire (extended coverage), flood, and those perils included within the
classification of "all risks" insurance (with sprinkler damage and other
appropriate endorsements), which insurance shall be in the amount of the full
replacement value of the Premises as determined by insurance company appraisers
or Landlord's insurance broker, plus Landlord's liability insurance; plus
rental income insurance in the amount of one hundred (100%) percent of up to
twelve (12) months Basic Rent (plus sums paid during such period as Additional
Rent). Such coverage shall exclude routine maintenance and repairs and
incidental damage or destruction caused by accidents or vandalism for which
Tenant is responsible under Section 9. Tenant agrees to pay to Landlord as
Additional Rent in accordance with

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Section 5.D. of this Lease the cost of such insurance coverage; or if Tenant
does not lease the entire Building, then Tenant's proportionate share of the
cost of such insurance coverage which shall be allocated during the term of
this Lease to the Premises by building square footage or other equitable basis
as calculated and determined solely by Landlord or Landlord's insurance broker.
If such insurance cost is increased due to Tenant's particular use of the
Premises. Tenant agrees to pay to Landlord the full cost of such increase.
Tenant shall have no interest in nor any right to the proceeds of any insurance
procured by Landlord for or with respect to the Premises.

14. INDEMNIFICATION & MUTUAL WAIVER.

A. Release and Waiver of Subrogation. The parties hereto release
each other, and their respective agents and employees, from any liability for
injury to any person or damage to property that is caused by or results from
any risk insured against under any valid and collectible insurance policy
carried by either of the parties which contains a waiver of subrogation by the
insurer and is in force at the time of such injury or damage; subject to the
following limitations: (i) the foregoing provision shall not apply to the
commercial general liability insurance described by Sections 12. and 13., (ii)
such release shall apply to liability resulting from any risk insured against
or covered by self-insurance maintained or provided by Tenant to satisfy the
requirements of Section 12 to the extent permitted by this Lease. and (iii)
Tenant shall not be released from any such liability to the extent any damages
resulting from such injury or damage are not covered by the recovery obtained
by Landlord from such insurance, but only it the insurance in question permits
such partial release in connection with obtaining a waiver of subrogation from
the insurer. This release shall be in effect only so long as the applicable
insurance policy contains a clause to the effect that this release shall not
affect the right of the insured to recover under such policy. Each party shall
use reasonable efforts to cause each insurance policy obtained by it to provide
that the insurer waives all right of recovery by way of subrogation against the
other party and its agents and employees in connection with any injury or
damage covered by such policy. However, if any insurance policy cannot be
obtained with such a waiver of subrogation. or if such waiver of subrogation is
only available at additional cost and the party for whose benefit the waiver is
to be obtained does not pay such additional cost, then the party obtaining such
insurance shall notify the other party of that fact and thereupon shall be
relieved of the obligation to obtain such waiver of subrogation rights from the
insurer with respect to the particular insurance involved.

B. Indemnification of Landlord. Tenant shall hold harmless,
indemnity and defend Landlord, and its employees, agents, invitees and
contractors, with competent counsel reasonably satisfactory to Landlord, from
all liability, penalties, losses, damages, costs, expenses, causes of action,
claims and/or judgments arising by reason of any death, bodily injury, personal
injury or property damage resulting from (i) any cause or causes whatsoever
(other than the willful misconduct or gross negligence of Landlord of which
Landlord has had notice and a reasonable time to cure, but which Landlord has
failed to cure) occurring in or about or resulting from an occurrence in or
about the Premises during the Lease Term, (ii) the negligence or willful
misconduct of Tenant or its agents, employees, invitees and contractors,
wherever the same may occur, or (iii) any breach or default of Tenant
hereunder. The provisions of this Section 14.B. shall survive the expiration
or sooner termination of this Lease.

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C. Indemnification of Tenant. Landlord shall defend, indemnify
and hold harmless Tenant from any loss, liability, damage, cost and expense
arising from the negligence or willful misconduct of Landlord, and its
employees, agents and contractors with respect lo the Premises.

15. ASSIGNMENT, SUBLETTING & TRANSFERS.

Transfer By Tenant. The following provisions shall apply to any
assignment, subletting or other transfer by Tenant or any subtenant or
assignee or other successor in interest of the original Tenant (collectively
referred to in this Section 15. as "Tenant"):

A. Tenant shall not do any of the following (collectively
referred to herein as a "Transfer"), whether voluntarily, involuntarily or by
operation of law, without the prior written consent of Landlord, which consent
shall not be unreasonably withheld or delayed: (i) sublet all or any part of
the Premises or allow it to be sublet, occupied or used by any person or entity
other than Tenant; (ii) assign its interest in this Lease; (iii) mortgage or
encumber the Lease (or otherwise use the Lease as a security device) in any
manner; or (iv) materially amend or modify an assignment, sublease or other
transfer that has been previously approved by Landlord. Any Transfer so
approved by Landlord shall not be effective until Tenant has delivered to
Landlord an executed counterpart of the document evidencing the Transfer which
(i) is in a form reasonably approved by Landlord, (ii) contains the same terms
and conditions stated in Tenant's notice given to Landlord pursuant to Section
15.B., and (iii) in the case of an assignment of the Lease, contains the
agreement of the proposed transferee to assume all obligations of the Tenant
under this Lease arising after the effective date of such Transfer and to
remain jointly and severally liable therefor with Tenant. Any attempted
Transfer without Landlord's consent shall constitute an event of Tenant's
default hereunder and shall be voidable at Landlord's option. Landlord's
consent to any one Transfer shall not constitute a waiver of the provisions of
this Section 15. as to any subsequent Transfer or a consent to any subsequent
Transfer. No Transfer, even with the consent of Landlord, shall relieve Tenant
of its personal and primary obligation to pay the rent and to perform all of
the other obligations to be performed by Tenant hereunder. The acceptance of
rent by Landlord from any person or entity shall not be deemed to be a waiver
by Landlord of any provision of this Lease nor to be a consent to any Transfer.

B. At least thirty (30) days before a proposed Transfer is to
become effective, Tenant shall give Landlord written notice of the proposed
terms of such Transfer and request Landlord's approval, which notice shall
include the following: (i) the name and legal composition of the proposed
transferee; (ii) a current financial statement of the transferee, financial
statements of the transferee covering the preceding three years if the same
exist, and (if available) an audited financial statement of the transferee for
a period ending not more than one year prior to the proposed effective date of
the Transfer, all of which statements are prepared in accordance with generally
accepted accounting principles; (iii) the nature of the proposed transferee's
business to be carried on in the Premises; (iv) all consideration to be given
on account of the Transfer; and (v) a current financial statement of Tenant.
Tenant shall provide to Landlord such other information as may be reasonably
requested by Landlord within seven (7) days after Landlord's receipt of such
notice from Tenant. Landlord shall respond in writing to Tenant's request for
Landlord's consent to a Transfer

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within fifteen (15) days after receipt of Tenant's request together with said
required accompanying documentation and such other information requested by
Landlord. If Landlord fails to respond in writing within said fifteen (15) day
period, Landlord will be deemed to have withheld consent to such Transfer.
Tenant shall immediately notify Landlord of any material modification to the
proposed terms of such Transfer.

C. If Landlord consents to a Transfer proposed by Tenant, Tenant
may enter into such Transfer, and if Tenant does so, the following shall apply:

(1) Tenant shall not be released of its liability for all
of its obligations under the Lease.

(2) If Tenant assigns its interest in this Lease, then
Tenant shall pay to Landlord (in addition to all rent and other sums
otherwise payable under this Lease) all Subrent (as defined in Section
15.C.(5)) received by Tenant over and above (i) the assignee's agreement to
assume the obligations of Tenant under this Lease, and (ii) all Permitted
Transfer Costs related to such assignment. In the case of assignment, the
amount of Subrent owed to Landlord shall be paid to Landlord on the same basis,
whether periodic or in lump sum, that such Subrent is paid to Tenant by the
assignee.

(3) If Tenant sublets any part of the Premises, then
with respect to the spaces subleased, Tenant shall pay to Landlord (in addition
to all rent and other sums payable under this Lease) the positive difference,
if any, between (i) all Subrent paid by the subtenant to Tenant, less (ii) the
sum of all Basic Rent and Additional Rent allocable to the space sublet and all
Permitted Transfer Costs related to such sublease. Such amount shall be paid
to Landlord on the same basis, whether periodic or in lump sum, that such
Subrent is paid to Tenant by its subtenant. In calculating Landlord's share of
any periodic payments, all Permitted Transfer Costs shall be first recovered by
Tenant.

(4) Tenant's obligations under this Section 15.C. shall
survive any Transfer, and Tenant's failure to perform its obligations hereunder
shall be an event of Tenant's default hereunder. At the time Tenant makes any
payment to Landlord required by this Section 15.C., Tenant shall deliver an
itemized statement of the method by which the amount lo which Landlord is
entitled was calculated, certified by Tenant as true and correct. Landlord
shall have the right at reasonable intervals to inspect Tenant's books and
records relating to the payments due hereunder. Upon request therefor, Tenant
shall deliver to Landlord copies of all bills, invoices or other documents upon
which its calculations are based. Landlord may condition its approval of any
Transfer upon obtaining a certification from both Tenant and the proposed
transferee of all Subrent and other amounts that are to be paid to Tenant in
connection with such Transfer.

(5) As used in this Section 15.C., the term "Subrent"
shall mean any consideration of any kind received, or to be received, by Tenant
as a result of the Transfer, if such sums are related to Tenant's interest in
this Lease or in the Premises, including payments from or on behalf of the
transferee (in excess of the book value thereof) for Tenant's assets, fixtures,
leasehold

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improvements, inventory, accounts, goodwill, equipment, furniture, and general
intangibles. As used in this Section 15.C., the term "Permitted Transfer
Costs" shall mean (i) all reasonable leasing commissions paid to third parties
not affiliated with Tenant in order to obtain the Transfer in question, and
(ii) all reasonable attorneys' fees incurred by Tenant with respect to the
Transfer in question.

D. If Tenant is a corporation, the following shall be deemed a
voluntary assignment of Tenant's interest in this Lease: (i) any dissolution,
merger, consolidation, acquisition of a controlling interest in the corporation
stock of Tenant or acquisition of substantially all of the assets of Tenant, or
other reorganization of or affecting Tenant, whether or not Tenant is the
surviving corporation; and (ii) if the capital stock of Tenant is not publicly
traded, and the sale or transfer is to one person or entity (or to any group of
related persons or entities or persons acting in concert) of stock possessing
more than fifty (50%) percent of the total combined voting power of all classes
of Tenant's capital stock issued, outstanding and entitled to vote for the
election of directors. If Tenant is a partnership, any withdrawal or
substitution (whether voluntary, involuntary or by operation of law, and
whether occurring at one time or over a period of time) of any partner owning
twenty five (25%) percent or more (cumulatively) of any interest in the capital
or profits of the partnership, or the dissolution of the partnership, shall be
deemed a voluntary assignment of Tenant's interest in this Lease. Under any
such voluntary assignment, Tenant (and any assignee(s) or transferee(s)) shall
be and agree to be fully liable for all of the obligations of Tenant under this
Lease.

E. Notwithstanding anything contained in Section 15., so long as
Tenant otherwise complies with the provisions of Section 15., and the assignee,
sublessee or transferee (as the case may be) executes a written agreement
prepared by Landlord assuming all of Tenant's obligations under this Lease,
then Tenant may enter into any of the following transfers (a "Permitted
Transfer') without Landlord's prior written consent, and Landlord shall not be
entitled to terminate the Lease pursuant to Section 15.C. or to receive any
part of any Subrent resulting therefrom that would otherwise be due it pursuant
to Section 15.C.:

(1) Tenant may sublease all or part of the Premises or
assign its interest in this Lease to any corporation which controls, is
controlled by, or is under common control with the original Tenant to this
Lease by means of voting capital stock and equitable ownership interest of more
than fifty (50%) percent. so long as such corporation has a tangible net worth
(as defined below) at the time of such assignment at least equal to or greater
than the tangible net worth of Tenant immediately prior to such transaction.

(2) Tenant may assign its interest in the Lease to a
corporation which results from a merger, consolidation or other reorganization
in which Tenant is not the surviving corporation, so long as the surviving
corporation has a tangible net worth (as defined below) at the time of such
assignment that is equal to or greater than the tangible net worth of Tenant
immediately prior to such transaction.

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(3) Tenant may assign this Lease to a corporation which
purchases or otherwise acquires all or substantially all of the assets of
Tenant, so long as such acquiring corporation has a tangible net worth at the
time of such assignment that is equal to or greater than the tangible net worth
of Tenant immediately prior to such transaction.

For purposes of the foregoing, the term 'Tangible net worth" shall
mean net worth minus intangible assets including without limitation goodwill,
patents, copyrights and other intellectual property.

16. ABANDONMENT. Tenant shall not vacate, surrender or abandon the
Premises at any time during the term of this Lease; and if Tenant shall so
abandon. vacate or surrender said Premises, or be dispossessed by the process
of law, or otherwise, any personal property belonging to Tenant and left on the
Premises shall be deemed to be abandoned, at the option of Landlord.

17. DEFAULT BY TENANT. The failure by Tenant to perform or observe any
covenant or condition to be performed or observed by Tenant under the terms of
this Lease is a breach hereof, and shall constitute a default hereunder by
Tenant upon Tenant's failure to cure such breach (i) within five (5) days after
written notice from Landlord of Tenant's failure to pay any rent or other sum
due hereunder, or (ii) within ten (10) days after written notice from Landlord
of any other breach of this Lease. Upon the occurrence of any uncured breach
or default of this Lease by Tenant, Landlord shall, at its option, have and
exercise the following rights and remedies in addition to any other rights or
remedies available to Landlord it law, in equity, or contained in this Lease,
to-wit:

A. The right to terminate this Lease (i) by giving written notice
to Tenant in accordance with applicable law, or (ii) by judicial judgment of
such termination. Any such termination shall not relieve Tenant from the
payment of any sum(s) then due to Landlord of from any claim for damages or
rent previously accrued or then accruing against Tenant.
B. The rights and remedies provided for by the California Civil
Code Section 1951.2 which allow(s) Landlord (without limitation) to recover the
worth at the time of award of the amount by which the unpaid rent for the
balance of the term after the time of award exceeds the amount of rental loss
for the same period that Tenant proves could be reasonably avoided.

C. The rights and remedies provided by the California Civil Code
Section 1951.4 which allows Landlord to continue the Lease in effect and to
enforce all of its rights and remedies under this Lease, including the right to
recover rent as it becomes due, for so long as Landlord does not terminate
Tenant's right to possession.

D. The right and power of Landlord to enter the Premises and
remove therefrom all persons and property, to store such property in a public
warehouse or elsewhere at the cost of and for the account of Tenant, and to
sell such property and apply such proceeds therefrom pursuant to applicable
California law.

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E. The right and power of Landlord from time to time to re-lease
or sublet the Premises or any part thereof for such term (which may extend
beyond the term of this Lease) and at such rent and upon such other terms as
Landlord in its sole discretion may deem advisable, with the right to make
alterations and repairs to the Premises which are reasonably necessary to
re-let the same. Upon each subletting, rents received from such subletting
shall be applied as follows: first, to payment of indebtedness (other than
rent) due hereunder from Tenant to Landlord; second, to the payment of any
costs of such subletting including (without limitation) attorneys' fees and any
real estate commissions actually paid, and of such alterations and repairs:
third, to payment of rent due and unpaid hereunder; and the residue (if any)
shall be held by Landlord and applied in payment of future rent as the same
becomes due hereunder. If such rental received from such subletting during any
month is less than that to be paid during that month by Tenant hereunder, then
Tenant shall pay any such deficiency to Landlord. which deficiency shall be
calculated and paid monthly.

F. The right to have a receiver appointed for Tenant upon
application by Landlord, to take possession of the Premises and to apply any
rental collected from the Premises and to exercise all other rights and
remedies granted to Landlord pursuant to Subsection D. and E. above.

During any period of time that Tenant is in default under the terms of
this Lease, (i) Landlord shall have no obligation to grant any consent
requested by Tenant hereunder, and (ii) Tenant shall have no right to request.
exercise or enjoy any right or option granted to Tenant hereunder. No act by
Landlord or on behalf of Tenant or Landlord described in this Section 17. of
otherwise in this Lease, including (without limitation) appointment of a
receiver to protect Landlord's interest under this Lease, acts of maintenance
or renovation or preservation, efforts to relet the Premises, obtaining keys or
changing locks, no action or service of unlawful defamer, or taking possession
of the Premises, or other acts by Landlord shall be construed as an election on
Landlord's part to terminate this Lease and effect a surrender thereof unless a
written notice of such intention is given to Tenant; nor shall the same prevent
Landlord from electing at any time thereafter to terminate this Lease for such
previous uncured breach or default.

18. BANKRUPTCY. The commencement or filing of a bankruptcy, liquidation,
reorganization or insolvency action, or the filing of an answer therein, or an
assignment by Tenant for the benefit of creditors, or the appointment of a
trustee or receiver to take possession of the assets of Tenant, or any similar
action undertaken by or on behalf of Tenant, or the levy of an attachment or
execution upon the property or interest of Tenant which is not within five (5)
days satisfied or released, or the insolvency of Tenant, or any of the above
shall at Landlord's option, constitute a breach of this Lease by Tenant. If
the trustee or receiver appointed to serve during a bankruptcy, liquidation,
reorganization, insolvency or similar action elects to reject the unexpired
portion of this Lease, then the trustee or receiver shall notify Landlord in
writing of its election within thirty (30) days after such appointment. Within
thirty (30) days after any court approval of the assumption of this Lease, the
trustee or receiver shall cure all previous breaches and defaults under such
Lease and shall compensate Landlord for all actual pecuniary loss caused by the
same and shall provide adequate assurance of future performance under this
Lease to the reasonable satisfaction of Landlord. Nothing contained in this
Section shall affect the existing right of Landlord to refuse to accept an
assignment upon commencement of or in connection with such a bankruptcy.
liquidation,

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reorganization, or insolvency action or assignment or other similar act. In no
event shall the leasehold estate under this Lease, or any interest therein, be
assigned by voluntary or involuntary bankruptcy proceeding without the prior
written consent of Landlord. In no event shall this Lease or any rights or
privileges hereunder be an asset of Tenant under any bankruptcy, insolvency,
reorganization or other proceedings.

19. LANDLORD'S RIGHT TO PERFORM. All terms, covenants and conditions of
this Lease to be performed or observed by Tenant shall be performed or observed
by Tenant at Tenant's sole cost and expense and without any reduction of rent.
If Tenant shall fail to pay any sum of money required to be paid by it
hereunder, or shall fail to perform or observe any other term hereunder on its
part to be performed or observed, including without limitation those
obligations of Tenant contained in Section 9. Tenant Maintenance, Landlord may,
at its option, without prior notice to Tenant and without waiving or releasing
Tenant from any obligation of Tenant hereunder, thereafter make and continue to
make any such payment or perform or observe any such other term or act on
Tenant's part to be performed or observed. All sums so paid by Landlord and
all reasonably necessary costs of such performance or observation by Landlord
together with interest thereon shall be due and payable by Tenant to Landlord
from the date incurred, and with respect to the same Landlord shall have the
same rights and remedies against Tenant as in the case of nonpayment of rent
hereunder.

20. DEFAULT BY LANDLORD. Landlord shall not be in default hereunder
unless Landlord fails to perform obligations required of Landlord within a
reasonable time, but in no event earlier than thirty (30) days after written
notice by Tenant to Landlord and to the holder of any first mortgage or deed of
trust covering the Premises whose name and address shall have heretofore been
furnished to Tenant in writing, specifying wherein Landlord has failed to
perform such obligations provided, however, that if the nature of Landlord's
obligations is such that more than thirty (30) days are required for
performance, then Landlord shall not be in default if Landlord commences
performance within such thirty (30) day period and thereafter diligently
prosecutes the same to completion. Should Landlord fail to perform said
obligations as above provided, then the sole remedy of Tenant shall be the
performance of such obligations by Tenant with right of reimbursement from
Landlord for the reasonable value of performing the same, not exceeding the sum
actually expended by Tenant.

21. LAWS & REGULATIONS. Tenant, at its sole cost and expense, shall with
respect to its occupancy and use of the Premises, and otherwise. promptly
comply with all applicable laws, statutes, ordinances, permits, and
governmental rules, regulations, directions or requirements now or hereafter in
effect; with the requirements of any board of fire underwriters or other
similar body now or hereafter constituted; with any occupancy certificate,
direction or permit issued pursuant to law by any public officer, and with all
requirements of any insurance organization or company pertaining to the
Premises and necessary for the issuance or maintenance of reasonable insurance
coverage as provided for herein.

22. SIGNS. No sign, placard, picture, advertisement, name or notice shall
be inscribed, displayed, printed or affixed on or to any part of the outside of
the Premises or any exterior windows of the Premises without the prior written
consent of Landlord (which consent shall not be

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unreasonably withheld or delayed), and Landlord shall have the right to remove
the same without notice to and at the expense of Tenant. If Tenant is allowed
to display a sign on or about the Premises, then at Landlord's option upon
expiration or other sooner termination of this Lease, Tenant shall at Tenant's
sole cost both remove such sign, repair all damage caused thereby and restore
the appearance of the Premises to its condition prior to the placement of said
sign. All approved signs (or lettering on outside doors) shall be done at the
expense of Tenant by a person reasonably approved of by Landlord. Tenant shall
have the right to place a dignified painted sign on the main lobby windows (not
exceeding two (2') feet by four (4') feet) identifying the company, and one
sign identifying the company in the landscaping area in front of the Premises
(not to exceed three (3') feet by six (6') feet), subject to prior written
design and placement approval by Landlord and any approvals required by
applicable governmental authorities.

23. HAZARDOUS MATERIALS. Landlord and Tenant agree as follows with
respect to the existence or use of "Hazardous Materials" (as defined herein) on
the Premises:

A. Tenant, at its sole cost, shall comply with all Laws relating
to the storage, use and disposal of Hazardous Materials on the Premises. If
Tenant does store, use or dispose of any Hazardous Materials on the Premises,
Tenant shall notify Landlord in writing at least five (5) days prior to their
first appearance on the Premises. Tenant shall be solely responsible for and
shall defend, indemnify, and hold Landlord and its agents harmless from and
against all claims, costs and liabilities, including attorneys' fees and costs,
arising out of or in connection with such storage, use or disposal of Hazardous
Materials by Tenant, its agents, employees, or contractors.

B. If the presence of Hazardous Materials on the Premises caused
or permitted by Tenant, its agents, employees, invitees, contractors, or
subtenants results in contamination or deterioration of water or soil resulting
in a level of contamination greater than the safe levels established by any
governmental agency having jurisdiction over such contamination, Tenant shall
promptly and at its sole cost take any and all action necessary to investigate
and clean up such contamination. At any time prior to the expiration of the
Lease Term. Tenant may at its sole cost and expense (but only after receipt of
written consent from Landlord) conduct appropriate tests of water and soil and
to deliver to Landlord the results of such tests to demonstrate that no
contamination in excess of permitted levels has occurred as a result of
Tenant's use of the Premises. Tenant shall further be solely responsible for,
and shall defend, indemnify and hold Landlord and its agents harmless from and
against, all claims, costs and liabilities, including attorneys' fees and
costs, arising out of or in connection with any removal, clean-up and
restoration work and materials required hereunder to return the Premises to its
condition existing prior to the appearance of the Hazardous Materials caused or
permitted by Tenant, its agents, employees, contractors, or subtenants.

C. If Landlord has reasonable cause to believe that the Premises
have or may become contaminated by Hazardous Materials, Landlord may (at its
option) cause testing wells to be installed on the Premises, and may cause the
ground water to be tested to detect the presence of Hazardous Materials by the
use of such tests as are then customarily used for such purposes. If Tenant so
requests, Landlord shall supply Tenant with copies of such test results. The
cost of such

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tests and of the installation, maintenance, repair and replacement of such
wells shall be paid by Landlord, except that Tenant shall pay the cost thereof
if the presence of Hazardous Materials is detected and which is probably caused
by Tenant. its agents, employees or contractors. Tenant shall have the right
at any time during the Lease Term to conduct its own test of the ground water
underlying the Property by using such wells so long as each of the following
conditions are satisfied: (i) such tests are conducted by Tenant at its own
expense; (ii) it repairs any damages to such wells caused by such tests; and
(iii) it delivers copies of the results of such tests to Landlord.

D. It shall not be unreasonable for Landlord to withhold its
consent to any proposed Transfer pursuant to Section 15. if the proposed
transferee's anticipated use of the Premises involves the generation, storage,
use, treatment or disposal of Hazardous Material and which in Landlord's
reasonable opinion poses an unacceptable risk of contamination of the Premises.

E. As used herein, the term "Hazardous Material" means any
hazardous or toxic substance, materials or waste, the storage, use, or
disposition of which is or becomes regulated by any local governmental
authority, the State of California or the United States Government. The term
"Hazardous Material" includes, without limitation, any material or substance
which is (i) listed under Article 9 or defined as hazardous or extremely
hazardous pursuant to Article 11 of Title 22 of the California Administrative
Code, Division 4, Chapter 20, (ii) defined as a "hazardous waste" pursuant to
Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq. (42 U.S.C. Section 6903), (iii) defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U S.C. Section 9601 et seq. (42 U.S.C.
Section 960i), or (iv) is listed or defined as "hazardous waste", "hazardous
substance", or other similar designation by any regulatory scheme of the State
of California or the U.S. Government that is similar to the foregoing.

24. LIENS. Tenant shall keep the Premises (and appurtenances) free from
all liens arising out of any work performed for, materials furnished to. or
obligation incurred by Tenant. In the event that Tenant shall not, within ten
(10) days following the imposition of such lien, cause the same to be released
of record, Landlord shall have, in addition to all other remedies provided
herein and by law, the right, but not obligation, to cause the same to be
released by such means as it shall deem proper, including payment of the claim
giving rise to such lien. All sums paid by Landlord for such purpose, and all
expenses incurred by Landlord in connection therewith, shall be payable and
reimbursable to Landlord by Tenant on demand with interest accruing thereon at
three (3) percentage points over the prime rate of interest as quoted from time
to time by the Bank of America.

25. FINANCIAL STATEMENTS. At any time during the Lease Term Tenant
shall, upon fifteen (15) days' prior written notice from Landlord, provide
Tenant's most recent financial statement and financial statements covering the
twenty four (24) month period prior to the date of such most recent financial
statements to any existing Lender, potential Lender or buyer of the Premises.
Such statements shall be prepared in accordance with generally accepted
accounting principles and, if such is the normal practice of Tenant, shall be
audited by an independent certified public accountant.

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26. ENTRY BY LANDLORD. Landlord reserves, and shall at all reasonable
times have, the right to enter the Premises (including Landlord's employees,
contractors, agents and invitees) to inspect the same; to perform any services
to be provided by Landlord hereunder, to make repairs or provide any services
to adjacent tenant(s), to exhibit the Premises to prospective purchasers,
lenders, tenant(s), brokers or others, to place "For Lease" or "For Sale" signs
on the property, to post notices of non responsibility; to alter, improve or
repair the Premises or other parts of the Building; and to erect scaffolding
and other necessary structures in or near the Premises where reasonably
required by the character of the work to be performed; all without abatement of
rent, Landlord agrees that the business of Tenant shall be interfered with to
the least extent that is reasonably practical. Any such entry shall under no
circumstances be construed to be a forcible or unlawful entry into or a
detainer of the Premises or an eviction, actual or constructive of Tenant from
the Premises.

27. DESTRUCTION. In the event the Premises are destroyed in whole or in
part from any cause, other than from the fault of Tenant (its agents or
invitees), routine maintenance, repairs, incidental damage and/or destruction
caused from vandalism and/or accidents for which tenant is responsible under
Section 9., then:

A. If such destruction of the Premises is less than twenty five
(25%) percent of the replacement cost thereof and the restoration thereof can
reasonably be made within sixty (60) days under the laws of applicable
governmental authorities, and such destruction is caused by an event fully
covered by insurance provided for under Section 13. hereof, then Landlord shall
at its expense forthwith repair or rebuild the Premises,

B. If such destruction of the Premises is more than twenty five
(25%) percent of the replacement cost thereof, or the restoration thereof
cannot reasonably be made within sixty (60) days or cannot be made under all
laws and regulations of the applicable governmental authorities, or such
destruction is caused by an event not fully covered by such insurance, or the
Building is damaged or destroyed to an extent of more than forty (40%) percent
of the replacement cost thereof (regardless of whether or not there is any
damage to the Premises), then in any of such events Landlord may at its option
(i) repair and rebuild the Premises and/or Building, or (ii) terminate this
Lease.

Tenant shall be entitled to a reduction in rent while such rebuilding
is being made in the proportion that the area of the Premises rendered
untenantable by such damage (if any) bears to the total area of the Premises.
If Landlord does not complete such required rebuilding within one hundred
eighty (180) days following the date of such destruction (such period of time
to be extended for periods of Unavoidable Delay), then Tenant shall have the
right to terminate this Lease by giving fifteen (15) days prior written notice
to Landlord. Notwithstanding anything herein to the contrary, Landlord's
obligation to rebuild shall be limited to the Building and interior
improvements constructed by Landlord as they existed as of the commencement
date of the Lease and shall not include restoration of Tenant's trade fixtures,
equipment, merchandise, or any improvements, alterations or additions made by
Tenant to the Premises, which Tenant shall forthwith replace or fully repair at
Tenant's sole cost and expense (provided this Lease is not

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terminated according to the above provisions). Unless this Lease is terminated
pursuant to the foregoing provisions, this Lease shall remain in full force and
effect. Tenant hereby expressly waives the provisions of Section 1932,
Subdivision 2, and Section 1933, Subdivision 4 of the California Civil Code,
and the provisions of any statute or other law which may be in effect at the
time of the occurrence of such damage or destruction under which a lease is
automatically terminated or a lessee is given the right to terminate a lease
upon the occurrence of any such damage or destruction. In the event the damage
or destruction of the Premises or Building is caused in whole or in part by
Tenant, its agents, employees, invitees, or contractors, then Tenant shall be
responsible for the same and shall pay (without limitation) the insurance
deductible portion of Landlord's restoration costs. Only work during normal
straight time working hours is contemplated by this Section,

28. CONDEMNATION. If all or any part of the Premises shall be taken by
any public or quasi-public authority under the power of eminent domain (or
conveyance in lieu thereof) this Lease shall terminate as to any portion of the
Premises so taken or conveyed on the date when title vests in the condemnor.
Landlord shall be entitled to any and all payment(s), money(ies) and/or award
(herein called "Compensation") which may be paid or made in connection with
such taking or conveyance, and Tenant shall have no claim to such compensation
nor against Landlord or otherwise for the value of any unexpired term of this
Lease, and Tenant hereby irrevocably waives, relinquishes and assigns to
Landlord all rights to such compensation by reason of such taking or
conveyance. Notwithstanding the foregoing, any money(ies) specifically awarded
Tenant for loss of business, Tenant's personal properly, moving cost or loss of
goodwill, shall be and remain the property of Tenant. In the event of such a
partial taking or conveyance of the Premises, then if the portion of the
Premises taken or conveyed is so substantial that the Tenant can no longer
conduct its business, Tenant shall have the right to terminate this Lease upon
written notice delivered to Landlord within thirty (30) days after the date of
such taking or conveyance, and thereafter this Lease shall terminate on the
last day of the calendar month next following the month in which such notice is
given upon payment by Tenant of the rent from the date of such taking or
conveyance to the date of termination. If all or more than thirty five (35%)
percent of the Premises be so taken or conveyed, then either party may
terminate this Lease upon sixty (60) days prior written notice to the other.
If, however, neither Landlord nor Tenant shall so terminate this Lease, then
this Lease shall continue in full force and effect as to the part of the
Premises not so taken or conveyed, and the rent payable hereunder shall be
apportioned as of the date of such taking or conveyance so that thereafter such
rent shall be payable in the ratio that the value of the portion of the
Premises not so taken or conveyed bears to the total value of the Premises
immediately prior to such taking or conveyance, which value(s) shall be
determined by an MAI appraiser designated by Landlord.

29. SUBORDINATION AND MORTGAGES. In the event Landlord's title or
leasehold interest is now or hereafter encumbered by a deed of trust and/or
other related instruments ("Security Instruments") placed upon the land and
Buildings in which the Premises are located to secure a loan from a lender
("Lender") to Landlord, Tenant shall without any consideration whatsoever,
immediately upon the request of Landlord or Lender, execute in writing (i) an
agreement subordinating Tenant's rights under this Lease to the lien of such
'Security Instruments" or, if so requested (ii) an agreement that the lien of
Lender's Security Instruments shall remain

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subject to and subordinate to the rights of Tenant under this Lease. plus (in)
any releases or other documents incident thereto including, without limitation,
a current statement of Tenant's financial condition. In the event the interest
of Landlord in such land and Buildings is encumbered by a deed of trust, and
such interest is acquired by the Lender or any third party by reason of
foreclosure, then Tenant hereby agrees to attorn to the purchaser at any such
foreclosure and thereafter to recognize such purchaser as the Landlord under
this Lease. Notwithstanding any such subordination or foreclosure, the express
terms of this Lease shall not be modified, and Tenant's rights and possession
under this Lease shall not be disturbed provided that Tenant is not then in
default hereunder and so long as Tenant shall thereafter pay all rent and
observe and perform all of the provisions set forth in this Lease to be
observed and performed by Tenant.

30. ESTOPPEL CERTIFICATE. Tenant shall without any consideration
whatsoever, at any time (within ten (10) days after written notice from
Landlord) execute, acknowledge and deliver to Landlord a signed statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, staling the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance (if any), and (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults
on the part of the Landlord hereunder (or specifying such defaults, if any,
that are claimed). Any such statement may be relied upon by any prospective
purchaser or encumbrancer of the Premises, or others. Tenant's failure to
deliver such statement within such time shall not relieve Tenant of such
obligation, but such failure shall be deemed tantamount to a signed written
statement from Tenant certifying that this Lease is in full force and effect,
without modification except as may be represented by Landlord, and that there
are no uncured defaults in Landlord's performance hereunder, and that not more
than one month's rent has been paid in advance.

31. SALE BY LANDLORD. In the event of a sale, conveyance. assignment or
transfer of the Premises or any interest therein, by Landlord or any owner of
the reversion then constituting Landlord, then in such event Landlord or such
owner shall thereby be released from any further liability or obligation under
any of the terms, covenants or conditions (express or implied) of this Lease in
favor of Tenant; and in such event (as between Landlord or such owner and such
successor in interest) Tenant agrees thereafter to look solely to the successor
in interest of Landlord (or such owner) for further performance of all terms
and obligations of Landlord under this Lease. The terms of this Lease shall
not be affected by any of the above, and Tenant agrees to attorn to the
successor in interest of Landlord or such owner.

32. NOTICES. All notices, demands or requests, which are required to be
given by either party to the other hereunder shall be in writing, delivered
personally or by depositing the same in the United States certified or
registered mail. postage prepaid, and addressed: (i) to Tenant at the Premises,
and (ii) to Landlord at 555 Bryant Street, Suite 370, Palo Alto, CA 94301 or
such other address as Landlord may from time to time notify Tenant. Each
notice, demand and request referred to in this Section shall be conclusively
deemed received by the party to whom it is addressed on the date of such
personal service or within three (3) calendar days after such mailing. The
parties shall have the right to make one address change a year and no more, and
said change of residence must remain a California address.

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33. ATTORNEYS' FEES. In the event that either party should bring suit for
the possession of the Premises, for the recovery of any sum due under this
Lease, or because of the breach of any provision of this Lease, or for any
other relief against the other party hereunder, then all costs and expenses,
including reasonable attorneys' fees, incurred by the prevailing party therein
shall be paid by the other party.

34. HOLDING OVER. Any holding over by Tenant after expiration or other
termination of the term of this Lease shall only be with the express prior
written consent of Landlord delivered to Tenant and shall not constitute a
renewal or extension of the Lease or give Tenant any rights in or to the
Premises except as expressly provided in such written consent and this Lease.
Any holding over after the expiration or other termination of the term of this
Lease, with the express written consent of Landlord, shall be construed to be a
tenancy from month to month, on the same terms and conditions as herein
specified insofar as applicable except that the monthly Basic Rent shall be
increased to an amount equal to one hundred fifty (150%) percent of the monthly
Basic Rent payable during the last month of the Lease term.

35. GENERAL PROVISIONS.

A. Choice of Law; Severability. This Lease shall in all respects
be governed by, construed and enforced in accordance with the laws of the State
of California. If any provision(s) of this Lease (except for payment of rent)
shall be invalid, illegal or unenforceable for any reason whatsoever, all other
provisions hereof shall remain in full force and effect.

B. Time of Essence. Time is of the essence of this Lease and of
each and of all its provisions.

C. Interpretations. The language in all parts of this Lease shall
in all cases be construed as a whole according to its fair meaning, and not
strictly for or against either Landlord or Tenant. All parties hereto have
equally participated in the preparation of this Lease. The term "assign" shall
include the term "transfer." The Section headings of this Lease are for
convenience only, are not part of this Lease and shall have no effect upon the
construction or interpretation of any provision hereof. The plural shall
include the singular, and the singular the plural. One gender shall include
all genders. Each term and provision of this Lease performable by Tenant shall
be construed to be both a covenant and a condition for the exclusive benefit of
Landlord.

D. Entire Agreement & Amendments. This instrument, along with
any exhibits and schedules hereto, constitute the entire agreement between
Landlord and Tenant relative to the Premises. This agreement may be altered,
amended or revoked only by an instrument in writing signed by both Landlord and
Tenant. Landlord has made no commitments, representation(s) or warranties
whatsoever to Tenant (express or implied) except as may be expressly stated in
writing in this Lease instrument. Landlord and Tenant agree hereby that all
prior or contemporaneous oral agreements between the parties and their agents
or representatives relative to the Premises or the matters described in this
Agreement are merged in or revoked by this agreement.

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<PAGE> 23
E. Definition of Terms.

(1) The term "Landlord" or any pronoun used in place
thereof includes the Landlord at the time and/or any successors and assigns of
Landlord.

(2) The term "Tenant" or any pronoun used in place
thereof includes individuals, firms, associations, partnerships and
corporations, and their and each of their respective heirs, executors,
administrators, successors and permitted assigns, according to the context
hereof; and all parties who constitute Tenant shall be jointly and severally
liable for all obligations of Tenant hereunder.

(3) The term "person" or "entity" includes individuals,
firms, associations, partnerships, agencies, unions, corporations and
governmental bodies.

(4) The term "Unavoidable Delays" shall mean any delays
caused by Acts of God, acts of public agency, labor disputes, fires,
embargoes, acts of contractors, acts of Tenant, strikes, war, insurrection,
utilities, governmental bodies, adverse weather, unavailable materials and any
delays beyond Landlord's reasonable control.

(5) The term "Section" shall include the term "paragraph."

F. Examination of Lease. Submission of this instrument for
examination or signature to Tenant does not constitute a commitment or option
for a lease, and this instrument shall not be legally binding until its full
execution by both Landlord and Tenant,

G. Corporate Authority. If Tenant is a corporation (or a
partnership), each individual executing this Lease on behalf of said
corporation (or partnership) represents and warrants that he is duly authorized
to execute and deliver this Lease on behalf of said corporation (or
partnership) in accordance with the by-laws of said corporation (or in
accordance with the partnership agreement) and that this Lease is binding upon
said corporation (or partnership) in accordance with its terms. If Tenant is a
corporation, Tenant shall, within thirty (30) days after execution of this
Lease, deliver to Landlord a certified copy of the resolution of the Board of
Directors of said corporation authorizing or ratifying the execution of this
Lease.

H. Waiver. The waiver by Landlord of any breach of any term,
covenant or condition herein contained shall not be deemed to be a waiver of
such term, covenant or condition or any subsequent breach of the same or any
other term, covenant or condition therein contained. The subsequent acceptance
of rent hereunder by Landlord shall not be deemed to be a waiver of any
preceding breach by Tenant of any term, covenant or condition of this Lease,
other than the failure of Tenant to pay the particular rent payment so
accepted, regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such rent. No custom or practice which may develop
between the parties hereto during the term hereof shall be deemed a waiver of,
or in any way affect, the right of either party to insist upon performance and
observance by the other party in strict accordance with the terms hereof.

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I. Recording. Neither Landlord nor Tenant shall record this
Lease nor a short form memorandum hereof without the written consent of the
other.

J. Remedies. Each party may exercise all available remedies
cumulatively, or in the alternative. All remedies herein conferred upon
Landlord or Tenant shall be deemed cumulative and no one remedy shall be
exclusive of any other remedy herein conferred or created by law.

K. Impounding. If required in writing by Landlord's Lender, then
along with each monthly rent payment during the Lease term and any renewals
thereof, Tenant shall pay to Landlord a sum equal to 1/12th of the annual real
property taxes, assessments and insurance which Landlord estimates are payable
by Tenant hereunder, or which Tenant was obligated to pay during the previous
fiscal year pursuant to the terms hereof.

L. Benefit of Counsel. The advice of legal counsel has been
sought and obtained by each of the parties hereto prior to entering into this
Agreement.

M. Binding Effect. The provisions of this Lease shall inure to
the benefit of and bind the heirs, executors, administrators, successors and
permitted assigns of the respective parties hereto.

N. Execution & Counterparts. This Lease shall be executed in
duplicate originals, with both parties signing and executing each original, or
each party signing a separate counterpart original and delivering the same to
the other party. If this Agreement is executed in counterpart originals, all
executed counterparts shall constitute the Agreement which shall be binding
upon all parties hereto, notwithstanding that the signatures of all parties do
not appear on the same signature page.

36. EXHIBITS & SCHEDULES. The following exhibits and schedules to this
Lease are hereby incorporated herein and by this reference made a part hereof:

A. Schedule 1 - Additional Sections. Sections 37 through 39
hereof, both inclusive.
B. Exhibit A. The Leased Premises.

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day
and year first above written.

LANDLORD: TENANT
WOLFE ROAD INVESTMENTS NO. 3, ASPEC TECHNOLOGY, INC.,
a partnership a California corporation
555 Bryant Street 830 E. Arques Avenue
Palo Alto, CA 94301 Sunnyvale, CA 94086
By: \c\ Justin M. Jacobs, Jr. By: \c\ Conrad Dell'Oca
---------------------------- ----------------------------
Justin M. Jacobs, Jr. Conrad Dell'Oca
Title: Managing Partner Title: President

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Schedule 1
Additional Sections

To Lease Agreement Dated As Of November 20, 1996
By and Between
WOLFE ROAD INVESTMENTS NO.3 (Landlord)
and
ASPEC TECHNOLOGY, INC. (Tenant)

37. IMPROVEMENTS. Landlord agrees to do and provide to that part of the
Premises formerly leased and occupied by Ando Corp. the following improvements
at Landlord's sole cost and expense, and as shown on Exhibit "A."

A. Paint all interior walls off-white.
B. Reconfigure the interior walls and doors substantially as
shown on Exhibit "A."
C. Remove all unnecessary existing interior improvements below
drop ceiling level which are not shown on Exhibit "A."
D. Redecorate the northwesterly bathrooms to include new paint,
existing ceramic floor tile, new vanities, and recessed
lighting.
E. Relocate the northwesterly coffee bar as shown on Exhibit "A."
F. Relocate all electrical plugs, light switches, and fluorescent
lighting as may be required by code for normal office use.
G. Relocate all HVAC supply and return ducts as may be required
by code for normal office use.
H. Install new VCT floor tile in all areas marked VCT on Exhibit
"A."
I. Install new gray carpet in all areas marked "Carpet" on
Exhibit "A."
J. Install new 4" gray base in all areas where new VCT and new
carpet will be installed.
K. Patch ceiling tiles as may be required by the above
improvements, and adjust drop ceiling height where necessary.
L. Reconfigure ceiling fire sprinklers as required by code.

Landlord's obligation to provide existing improvements and to provide the above
improvements is specifically subject to any changes or other requirements of or
imposed by all applicable governmental body(ies), agency(ies) and/or
utility(ies) with respect to the same. Except for the above improvements, the
Premises is leased to Tenant in "As Is" condition, and any improvements to the
Premises not expressly shown or stated in this Lease to be furnished by
Landlord shall be made by Tenant at its sole cost and expense. Landlord does
not guarantee the accuracy of any Plans or Specifications supplied to Tenant.
If upon substantial completion of such interior improvements such improvements
do not conform exactly to such Plans and Specifications, but the general
appearance, structural integrity and Tenant's use and occupancy of the
Premises, Building and such improvements are not materially or unreasonably
affected by such deviation(s), it is agreed that the Tenant's obligation to pay
rent hereunder shall not be affected by such deviation(s), and in such event
Tenant agrees to accept the Premises, Building and such improvements as so
improved

<PAGE> 26

by Landlord. Landlord acting with due diligence shall have thirty (30) days
after such substantial completion and occupancy of the Premises by Tenant in
which lo correct Tenant's reasonably requested 'punch list."

38. FIRST RIGHTS OF REFUSAL. Provided that Tenant is not in default of
any of the terms and conditions of this Lease Agreement, Tenant shall have the
First Right of Refusal to expand into the adjacent approximate 9,000 sq. ft. of
space currently leased to Presidio Systems, Inc. and located at 810 E. Arques
Avenue, Sunnyvale, California (hereinafter referred to as "Expansion Space
#1"), upon the following terms and conditions:

Landlord agrees that in the event such Expansion Space #1 becomes
vacant and thereafter is proposed to be leased to a third party (other than
Presidio Systems, Inc.) that prior to executing a lease agreement with such
third party for said Expansion Space #1. Landlord shall offer said Expansion
Space #1 to Tenant in then "As Is" condition at the highest of the following
rents: (i) the rental which Landlord proposed to lease such Expansion Space #1
to such third party, (ii) the monthly rental payable by Tenant hereunder for
the remainder of the Lease Term, or (iii) the then market rent for such space.
Tenant shall have five (5) calendar days after receipt of written notice from
Landlord of such proposed lease to such third party in which to execute a lease
for the Expansion Space #1 in accordance with such highest rent and the
remaining terms and conditions of this Lease. In the event that Tenant fails
to so execute such a lease after receipt of such notice from Landlord, then all
rights under this paragraph shall terminate and become void.

Provided that Tenant is not in default of any of the terms and
conditions of this Lease Agreement, Tenant shall have the First Right of
Refusal to expand into the adjacent approximate 10,500 sq. ft. of space
currently leased to Computer Plus, Inc. and located at 295 Santa Ana Court,
Sunnyvale, California (hereinafter referred to as 'Expansion Space #2"), upon
the following terms and conditions:

Landlord agrees that in the event such Expansion Space #2 becomes
vacant and thereafter is proposed to be leased to a third party (other than
Computer Plus, Inc.) that prior to executing a lease agreement with such third
party for said Expansion Space #2. Landlord shall offer said Expansion Space
#2 to Tenant in then "As Is" condition at the highest of the following rents:
(i) the rental which Landlord proposed to lease such Expansion Space #2 to such
third party, (ii) the monthly rental payable by Tenant hereunder for the
remainder of the Lease Term. or (iii) the then market rent for such space.
Tenant shall have five (5) calendar days after receipt of written notice from
Landlord of such proposed lease to such third party in which to execute a lease
for the Expansion Space #2 in accordance with such highest rent and the
remaining terms and conditions of this Lease. In the event that Tenant fails
to so execute such a lease after receipt of such notice from Landlord, then all
rights under this paragraph shall terminate and become void.

39. PRIOR LEASE SUPERSEDED. This Lease hereby supersedes the prior lease
between the parties, dated as of April 15, 1994, in its entirety. including
each and every term and condition thereof.

[Architectural diagram of property appears here.]

<PAGE> 1
EXHIBIT 10.7
COMMERCIAL BANK OF FREMONT

COMMERCIAL SECURITY AGREEMENT

Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$300,000.00 03-24-1994 04-02-1995 14135 CL. 05 5007 LO155
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item

Borrower: Aspec Technology, Inc. Lender: Commercial Bank of Fremont
3901 Burton Drive 39510 Paseo Padre Parkway
Santa Clara, CA 95054 Fremont, CA 94538

===============================================================================

THIS COMMERCIAL SECURITY AGREEMENT is entered into between ASPEC TECHNOLOGY,
INC. (referred to below as "Grantor"); and Commercial Bank of Fremont (referred
to below as "Lender"). For valuable consideration, Grantor grants to Lender a
security interest in the Collateral to secure the Indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.

DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.

Agreement. The word "Agreement" means this Commercial Security
Agreement, as this Commercial Security Agreement may be amended or modified
from time to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.

Collateral. The word "Collateral" means the following described
property of Grantor, whether now owned for hereafter acquired, whether now
existing or hereafter arising, and wherever located:

All inventory, chattel paper, accounts, contract rights, equipment and
general intangibles.

In addition, the word "Collateral" includes all the following, whether
now owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:

(a) All attachments, accessions, accessories, tools, parts,
supplies, increases, and additions to and all replacements of and substitutions
for any property described above.

(b) All products and produce of any of the property described in
this Collateral section.
<PAGE> 2
(c) All account, contract rights, general intangibles,
instruments, rents, monies, payments, and all other rights, arising out of a
sale, lease or other disposition of any of the property described in this
Collateral section.

(d) All proceeds (including insurance proceeds from the sale,
destruction, loss, or other disposition of any of the property described in
this Collateral section.

(e) All records and data relating to any of the property described
in this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of Grantor's
right, title, and interest in and to all computer software required to utilize,
create, maintain, and process any such records or data on electronic media.

Event of Default. The words "Event of Default" mean and include any
of the Events of Default set forth below in the section titled "Events of
Default."

Grantor. The word "Grantor" means ASPEC TECHNOLOGY, INC., its
successors and assigns.

Guarantor. The word "Guarantor" means and includes without
limitation, each and all of the guarantors, sureties, and accommodation parties
in connection with the Indebtedness.

Indebtedness. The word "Indebtedness" means the indebtedness
evidenced by the Note, including all principal and interest, together with all
other indebtedness and costs and expenses for which Grantor is responsible
under this Agreement or under any of the Related Documents. In addition, the
word "Indebtedness" includes all other obligations, debts and liabilities, plus
interest thereon, of Grantor, or any one or more of them to Lender, as well as
all claims by Lender against Grantor, or any one or more of them, whether
existing now or later; whether they are voluntary or involuntary, due or not
due, direct or indirect, absolute or contingent, liquidated or unliquidated;
whether Grantor may be liable individually or jointly with others; whether
Grantor may be obligated as guarantor, surety, accommodation party or
otherwise; whether recovery upon such indebtedness may be or hereafter may
become barred by any statute of limitations; and whether such indebtedness may
be or hereafter may become otherwise unenforceable.

Lender. The word "Lender" means Commercial Bank of Fremont, its
successors and assigns.

Note. The word "Note" means the note or credit agreement dated March
24, 1994, in the principal amount of $300,000.00 from Grantor to Lender,
together with all renewals of, extensions of, modifications of, refinancing of,
consolidations of and substitutions for the note or credit Agreement.

Related Documents. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan agreements,
guaranties, security agreements, mortgages, deeds of trust, and all other
instruments, agreements and documents, whether now or hereafter existing,
executed in connection with the Indebtedness.

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<PAGE> 3

OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:

Perfection of Security Interest. Grantor agrees to execute such
financing statements and to take whatever other actions are requested by Lender
to perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the documents
evidencing or constituting the Collateral, and Grantor will note Lender's
interest upon any and all chattel paper if not delivered to Lender for
possession by Lender. Grantor hereby appoints Lender as its irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect or to continue the security interest granted in this Agreement. Lender
may at any time, and without further authorization from Grantor, file a carbon,
photographic or other reproduction of any financing statement or of this
Agreement for use as a financing statement. Grantor will reimburse Lender for
all expenses for the perfection and the continuation of the perfection of
Lender's security interest in the Collateral. Grantor promptly will notify
Lender before any change in Grantor's name including any change to the assumed
business names of Grantor. This is a continuing Security Agreement and will
continue in effect even though all or any part of the Indebtedness is paid in
full and even though for a period of time Grantor may not be indebted to
Lender.

No Violation. The execution and delivery of this Agreement will not
violate any law or Agreement governing Grantor or to which Grantor is a party,
and its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.

Enforceability of Collateral. To the extent the Collateral consists
of accounts, contract rights, chattel paper, or general intangibles, the
Collateral is enforceable in accordance with its terms, is genuine, and
complies with applicable laws concerning form, content and manner or
preparation and execution, and all persons appearing to be obligated on the
Collateral have authority and capacity to contract and are in fact obligated as
good and valid account representing an undisputed, bona fide indebtedness
incurred by the account debtor, for merchandise held subject to delivery
instructions or heretofore shipped or delivered pursuant to a contract of sale,
or for services theretofore performed by Grantor with or for the account
debtor; there shall be no setoffs or counterclaims against any such account;
and no Agreement under which any deductions or discounts may be claimed shall
have been made with the account debtor except those disclosed to Lender in
writing.

Location of the Collateral. Grantor, upon request of Lender, will
deliver to Lender in form satisfactory to Lender a schedule of real properties
and Collateral locations relating to Grantor's operations, including without
limitation the following: (a) all real property owned or being purchased by
Grantor; (b) all real property being rented or leased by Grantor; (c) all
storage facilities owned, rented, leased, or being used by Grantor; and (d) all
other properties where Collateral is or may be located. Except in the ordinary
course of its business, Grantor shall not remove the Collateral from its
existing locations without the prior written consent of Lender.

Removal of Collateral. Grantor shall keep the Collateral (or to the
ext ent the Collateral consists of intangible property such as accounts, the
records concerning the Collateral) at Grantor's address shown above, or at such
other locations as are acceptable to Lender. Except in the ordinary course of
its business, including the sales of inventory, Grantor shall not remove the
Collateral from

-3-
<PAGE> 4
its existing locations without the prior written consent of Lender. To the
extent that the Collateral consists of vehicles, or other titled property,
Grantor shall not take or permit any action which would require application for
certificates of title for the vehicles outside the State of California, without
the prior written consent of Lender.

Transactions Involving Collateral. Except for inventory sold or
accounts collected in the ordinary course of Grantor's business, Grantor shall
not sell, offer to sell, or otherwise transfer or dispose of the Collateral.
While Grantor is not in default under this Agreement, Grantor may sell
inventory, but only in the ordinary course of its business and only to buyers
who qualify as a buyer in the ordinary course of business. A sale in the
ordinary course of Grantor's business does not include a transfer in partial or
total satisfaction of a debt or any bulk sale. Grantor shall not pledge,
mortgage, encumber or otherwise permit the Collateral to be subject to any
lien, security interest, encumbrance, or charge, other than the security
interest provided for in this Agreement, without the prior written consent of
Lender. This includes security interests even if junior in right to the
security interests granted under this Agreement. Unless waived by Lender, all
proceeds from any disposition of the Collateral (for whatever reason) shall be
held in trust for Lender and shall not be commingled with any other funds;
provided however, this requirement shall not constitute consent by Lender to
any sale or other disposition. Upon receipt, Grantor shall immediately deliver
any such proceeds to Lender.

Title. Grantor represents and warrants to Lender that it holds good
and marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than those
which reflect the security interest created by this Agreement or to which
Lender has specifically consented. Grantor shall defend Lender's rights in the
Collateral against the claims and demands of all other persons.

Collateral Schedules and Locations. As often as Lender shall require,
and insofar as the Collateral consists of accounts and general intangibles,
Grantor shall deliver to Lender schedules of such Collateral, including such
information as Lender may require, including without limitation names and
addresses of account debtors and agings of accounts and general intangibles.
Insofar as the Collateral consists of inventory and equipment, Grantor shall
deliver to Lender, as often as Lender shall require, such lists, descriptions,
and designations of such Collateral as Lender may require to identify the
nature, extent, and location of such Collateral. Such information shall be
submitted for Grantor and each of its subsidiaries or related companies.

Maintenance and Inspection of Collateral. Grantor shall maintain all
tangible Collateral in good condition and repair. Grantor will not commit or
permit damage to or destruction of the Collateral or any part of the
Collateral. Lender and its designated representatives and agents shall have
the right at all reasonable times to examine, inspect, and audit the Collateral
wherever located. Grantor shall immediately notify Lender of all cases
involving the return, rejection, repossession, loss or damage of or to any
Collateral; of any request for credit or adjustment or of any other dispute
arising with respect to the Collateral; and generally of all happenings and
events affecting the Collateral or the value or the amount of the Collateral.

-4-
<PAGE> 5

Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use of operation, upon this
Agreement, upon any promissory note or notes evidencing the Indebtedness, or
upon any of the other Related Documents. Grantor may withhold any such payment
or may elect to contest any lien if Grantor is in good faith conducting an
appropriate proceeding to contest the obligation to pay and so long as Lender's
interest in the Collateral is not jeopardized in Lender's sole opinion. If the
Collateral is subjected to a lien which is not discharged within fifteen (15)
days, Grantor shall deposit with Lender cash, a sufficient corporate surety
bond or other security satisfactory to Lender in an amount adequate to provide
for the discharge of the lien plus any interest, costs, attorneys' fees or
other charges that could accrue as a result of foreclosure or sale of the
Collateral. In any contest Grantor shall defend itself and Lender and shall
satisfy any final adverse judgment before enforcement against the Collateral.
Grantor shall name Lender as an additional obligee under any surety bond
furnished in the contest proceedings.

Compliance with Governmental Requirements. Grantor shall comply
promptly with all laws, ordinances and regulations of all governmental
authorities applicable to the production, disposition, or use of the
Collateral. Grantor may contest in good faith any such law, ordinance or
regulation and withhold compliance during any proceeding, including appropriate
appeals, so long as Lender's interest in the Collateral, in Lender's opinion,
is not jeopardized.

Hazardous Substances. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this Agreement remains
a lien on the Collateral, used for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of any
hazardous waste or substance, as those terms are defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq., Chapters 6.5
through 7.7 of Division 20 of the California Health and Safety Code, Section
25100, et seq., or other applicable state or Federal laws, rules or regulations
adopted pursuant to any of the foregoing. The terms "hazardous waste" and
"hazardous substance" shall also include, without limitation, petroleum and
petroleum by-products or any fraction thereof and asbestos. The
representations and warranties contained herein are based on Grantor's due
diligence in investigating the Collateral for hazardous wastes and substances.
Grantor hereby (a) releases and waives any future claims against Lender for
indemnity or contribution in the event Grantor becomes liable for cleanup or
other costs under any such laws, and (b) agrees to indemnify and hold harmless
Lender against any and all claims and losses resulting from a breach of this
provision of this Agreement. This obligation to indemnify shall survive the
payment of the Indebtedness and the satisfaction of this Agreement.

Maintenance of Casualty Insurance. Grantor shall procure and maintain
all risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with respect
to the Collateral, in form amounts coverages and basis reasonably acceptable to
Lender and issued by a company or companies reasonably acceptable to Lender.
Grantor, upon request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled

-5-
<PAGE> 6
or diminished without at least ten (10) days' prior written notice to Lender
and not including any disclaimer of the insurer's liability for failure to give
such a notice. In connection with all policies covering assets in which Lender
holds or is offered a security interest, Grantor will provide Lender with such
loss payable or other endorsements as Lender may require. In no event shall
the insurance be in an amount less than the amount agreed upon in the Agreement
to Provide Insurance. If Grantor at any time fails to obtain or maintain any
insurance as required under this Agreement, Lender may (but shall not be
obligated to) obtain such insurance as Lender deems appropriate, including if
it so chooses "single interest insurance," which will cover only Lender's
interest in the Collateral.

Application of Insurance Proceeds. Grantor shall promptly notify
Lender of any loss or damage to the Collateral. Lender may make proof of loss
if Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender consents
to repair or replacement of the damaged or destroyed Collateral, Lender shall,
upon satisfactory proof of expenditure, pay or reimburse Grantor from the
proceeds for the reasonable cost of repair or restoration. If Lender does not
consent to repair or replacement of the Collateral, Lender shall retain a
sufficient amount of the proceeds to pay all of the Indebtedness, and shall pay
the balance to Grantor. Any proceeds which have not been disbursed within six
(6) months after their receipt and which Grantor has not committed to the
repair or restoration of the Collateral shall be used to prepay the
Indebtedness.

Insurance Reserves. Lender may require Grantor to maintain with
Lender reserves for payment of insurance premiums, which reserves shall be
created by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due date,
amounts at least equal to the insurance premiums to be paid. If fifteen (15)
days before payment is due, the reserve fund are insufficient, Grantor shall
upon demand pay any deficiency to Lender. The reserve funds shall be held by
Lender as a general deposit and shall constitute a non-interest-bearing account
which Lender may satisfy by payment of the insurance premiums required to be
paid by Grantor as they become due. Lender does not hold the reserve funds in
trust for Grantor, and Lender is not the agent of Grantor for payment of the
insurance premiums required to be paid by Grantor. The responsibility for the
payment of premiums shall remain Grantor's sole responsibility.

Insurance Reports. Grantor, upon request of Lender, shall furnish to
Lender reports on each existing policy of insurance showing such information as
Lender may reasonably request including the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the property
insured; (e) the then current value on the basis of which insurance has been
obtained and the manner of determining that value; and (f) the expiration date
of the policy. In addition, Grantor shall upon request by Lender (however not
more often than annually) have an independent appraiser satisfactory to Lender
determine, as applicable, the cash value or replacement cost of the Collateral.

GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and
except as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by

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<PAGE> 7
Lender is required by law to perfect Lender's security interest in such
Collateral. Until otherwise notified by Lender, Grantor may collect any of the
Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as
Lender, in Lender's sole discretion, shall deem appropriate under the
circumstances, but failure to honor any request by Grantor shall not of itself
be deemed to be a failure to exercise reasonable care. Lender shall not be
required to take any steps necessary to preserve any rights in the Collateral
against prior parties, nor to protect, preserve or maintain any security
interest given to secure the Collateral.

EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without
limitation all taxes, liens, security interests, encumbrances, and other
claims, at any time levied or placed on the Collateral. Lender also may (but
shall not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender
for such purposes will then bear interest at the rate charged under the Note
from the date incurred or paid by Lender to the date of repayment by Grantor.
All such expenses shall become a part of the indebtedness and, at lender's
option, will (a) be payable on demand, (b) be added to the balance of the Note
and be apportioned among and be payable with any installment payments to become
due during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will
be due and payable at the Note's maturity. This Agreement also will secure
payment of these amounts. Such right shall be in addition to all other rights
and remedies to which Lender may be entitled upon the occurrence of an Event of
Default.

EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:

Default on Indebtedness. Failure of Grantor to make any payment when
due on the Indebtedness.

Other Defaults. Failure of Grantor to comply with or to perform any
other term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or in any other Agreement between Lender and
Grantor.

False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Grantor under this Agreement is false or
misleading in any material respect, either now or at the time made or
furnished.

Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral documents to create a valid and perfected security interest or lien)
at any time and for any reason.

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<PAGE> 8
Insolvency. The dissolution or termination of Grantor's existence as
a going business, the insolvency of Grantor, the appointment of a receiver for
any part of Grantor's property, any assignment for the benefit of creditors, or
the commencement of any proceeding under any bankruptcy or insolvency laws by
or against Grantor.

Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help, repossession
or any other method, by any creditor of Grantor or by any governmental agency
against the Collateral or any other collateral securing the Indebtedness. This
includes a garnishment of any of Grantor's deposit accounts with Lender.

Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor dies or
becomes incompetent.

Insecurity. Lender, in good faith, deems itself insecure.

RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a
secured party under the California Uniform Commercial Code. In addition and
without limitation, Lender may exercise any one or more of the following rights
and remedies.

Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.

Assemble Collateral. Lender may require Grantor to deliver to Lender
all or any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If the
Collateral contains other goods not covered by this Agreement at the time of
repossession, Grantor agrees Lender may take such other goods, provided that
Lender makes reasonable efforts to return them to Grantor after repossession.

Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in its own
name or that of Grantor. Lender may sell the Collateral at public auction or
private sale. Unless the Collateral threatens to decline speedily in value or
is of a type customarily sold on a recognized market, Lender will give Grantor
reasonable notice of the time after which any private sale or any other
intended disposition of the Collateral is to be made. The requirements of
reasonable notice shall be met if such notice is given at least ten (10) days,
or such lesser time as required by state law, before the time of the sale or
disposition. All expenses relating to the disposition of the Collateral,
including without limitation the expenses of retaking, holding, insuring,
preparing for sale and selling the Collateral, shall become a part of the
Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.

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<PAGE> 9
Appoint Receiver. To the extent permitted by applicable law, Lender
shall have the following rights and remedies regarding the appointment of a
receiver: (a) Lender may have a receiver appointed as a matter of right, (b)
the receiver may be an employee of Lender and may serve without bond, and (c)
all fees of the receiver and his or her attorney shall become part of the
Indebtedness secured by the Agreement and shall be payable on demand, with
interest at the note rate from date of expenditure until repaid.

Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any Collateral
into its own name or that of its nominee and receive the payments, rents,
income, and revenues therefrom and hold the same as security for the
Indebtedness or apply it to payment of the Indebtedness in such order of
preference as Lender may determine. Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel paper,
choses in action, or similar property, Lender may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as
Lender may determine, whether or not Indebtedness or Collateral is then due.
For these purposes, Lender may, on behalf of and in the name of Grantor,
receive, open and dispose of mail addressed to Grantor; change any address to
which mail and payments are to be sent; and endorse notes, checks, drafts,
money orders, documents of title, instruments and items pertaining to payment,
shipment, or storage of any Collateral. To facilitate collection, Lender may
notify account debtors and obligors on any Collateral to make payments directly
to Lender.

Obtain Deficiency. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Grantor for any deficiency
remaining on the Indebtedness due to Lender after application of all amounts
received from the exercise of the rights provided in this Agreement. Grantor
shall be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.

Other Rights and Remedies. Lender shall have all the rights and
remedies of a secured creditor under the provisions of the Uniform Commercial
Code, as may be amended from time to time. In addition, Lender shall have and
may exercise any or all other rights and remedies it may have available at law,
in equity, or otherwise.

Cumulative Remedies. All of Lender's rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any other writing,
shall be cumulative and may be exercised singularly or concurrently. Election
by Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an obligation
of Grantor under this Agreement, after Grantor's failure to perform, shall not
affect Lender's right to declare a default and to exercise its remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:

-9-
<PAGE> 10
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and Agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.

Applicable Law. This Agreement has been delivered to Lender and
accepted by Lender in the State of California. If there is a lawsuit, Grantor
agrees upon Lender's request to submit to the jurisdiction of the courts of
Alameda County, State of California. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.

Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Agreement.
Lender may pay someone else to help enforce this Agreement, and Grantor shall
pay the costs and expense of such enforcement. Costs and expenses include
Lender's attorneys' fees and legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings (and
including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Grantor also
shall pay all court costs and such additional fees as may be directed by the
court.

Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Agreement.

Multiple Parties; Corporate Authority. All obligations of Grantor
under this Agreement shall be joint and several, and all references to Grantor
shall mean each and every Grantor. This means that each of the persons signing
below is responsible for all obligations in this Agreement.

Notices. All notices required to be given under this Agreement shall
be given in writing and shall be effective when actually delivered or when
deposited with a nationally recognized overnight courier or deposited in the
United States mail, first class, postage prepaid, addressed to the party to
whom the notice is to be given at the address shown above. Any party may
change its address for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of the notice is to
change the party's address. To the extent permitted by applicable law, if
there is more than one Grantor, notice to any Grantor will constitute notice to
all Grantors. For notice purposes, Grantor agrees to keep Lender informed at
all times of Grantor's current address(es).

Power of Attorney. Grantor hereby appoints Lender as its true and
lawful attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover all
sums of money or other property which may now or hereafter become due, owing or
payable from the Collateral; (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment for
the Collateral; (c) to settle or compromise any and all claims arising under
the Collateral, and, in the place and stead of Grantor, to execute and deliver
its release and settlement for the claim; and (d) to file any claim or claims
or to take any action or institute or take part in any proceedings, either in
its own name or in the name of Grantor, or otherwise, which in the discretion
of Lender may seem to be necessary or advisable. This

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<PAGE> 11
power is given as security for the Indebtedness, and the authority hereby
conferred is and shall be irrevocable and shall remain in full force and effect
until renounced by Lender.

Preference Payments. Any monies Lender pays because of an asserted
preference claim in Borrower's bankruptcy will become a part of the
Indebtedness and, at Lender's option, shall be payable by Borrower as provided
above in the "EXPENDITURES BY LENDER" paragraph.

Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any such
offending provision shall be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this Agreement in
all other respects shall remain valid and enforceable.

Success Interests. Subject to the limitations set forth above on
transfer of the Collateral, this AGREEMENT shall be binding upon and inure to
the benefit of the parties, their successors and assigns.

1. Waiver. Lender shall not be deemed to have waived
any rights under this Agreement unless such waiver is given in
writing and signed by Lender. No delay or omission on the
part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender
of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender's right otherwise to demand
strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course
of dealing between Lender and Grantor, shall constitute a
waiver of any of Lender's rights or of any of Grantor's
obligations as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the
granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where
such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.

Waiver of Co-obligor's Rights. If more than one person is obligated
for the Indebtedness, Borrower irrevocably waives, disclaims and relinquishes
all claims against such other person which Borrower has or would otherwise have
by virtue of payment of the Indebtedness or any part thereof, specifically
including but not limited to all rights of Indemnity, contribution or
exoneration.

GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MARCH 24,
1994.

GRANTOR:

ASPEC TECHNOLOGY, INC.

By: \c\ Conrad J. Dell'Oca
----------------------------------------------
Conrad J. Dell'Oca, President/Secretary

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<PAGE> 12
COMMERCIAL BANK OF FREMONT

BUSINESS LOAN AGREEMENT

<TABLE>
<CAPTION>
Principal Loan Date Maturity Loan No. Cal Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,000,000.00 07/18/96 07/01/97 14135 CL. 05 5007 102584 LO155
</TABLE>

References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any loan or item.

BORROWER: ASPEC TECHNOLOGY, INC. LENDER: Commercial Bank of Fremont
830 E. ARQUES AVENUE 39510 Paseo Padre Parkway
SUNNYVALE, CA 94086 Fremont, CA 94538

================================================================================

THIS BUSINESS LOAN AGREEMENT between ASPEC TECHNOLOGY, INC.
("Borrower") and Commercial Bank of Fremont ("Lender") is made and executed on
the following terms and conditions. Borrower has received prior commercial
loans from Lender or has applied to Lender for a commercial loan or loans and
other financial accommodations, including those which may be described on any
exhibit or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations
from Lender to Borrower, are referred to in this Agreement individually as the
"Loan" and collectively as the "Loans." Borrower understands and agrees that:
(a) in granting, renewing, or extending any Loan, Lender is relying upon
Borrower's representations, warranties, and agreements, as set forth in this
Agreement; (b) the granting, renewing, or extending of any Loan by lender at
all times shall be subject to Lender's sole judgement and discretion; and (c)
all such Loans shall be and shall remain subject to the following terms and
conditions of this Agreement.

TERMS. This Agreement shall be effective as of July 18, 1996, and
shall continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.

DEFINITIONS. The following words shall have the following meaning
when used in this Agreement. Terms not otherwise defined in this Agreement
shall have the meanings attributed to such terms in the Uniform Commercial
Code. All references to dollar amount shall mean amounts in lawful money of
the United States of America.

AGREEMENT. The word "Agreement" means this Business Loan Agreement,
at this Business Loan Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this
Business Loan Agreement from time to time.

BORROWER. The word "Borrower" means ASPEC TECHNOLOGY, INC. The word
"Borrower" also includes, as applicable, all subsidiaries and
affiliates of Borrower as provided below in the paragraph titled
"Subsidiaries and Affiliates."

CERCLA. The word "CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.

CASH FLOW. The words "Cash Flow" mean net income after taxes, and
exclusive of extraordinary gains and income, plus depreciation and
amortization.

COLLATERAL. The word "Collateral" means and includes without
limitation all property and assets granted as collateral security for
a Loan, whether real or personal property, whether granted directly or
indirectly, whether granted now or in the future, and whether granted
in the form of a security interest, mortgage, deed of trust,
assignment, pledge, chattel mortgage, chattel trust, factor's lien,
equipment trust, conditional sale, trust receipt, lien, charge, lien
or title retention

<PAGE> 13
contract, lease or consignment intended as a security device, or any
other security or lien interest whatsoever, whether created by law,
contact or otherwise.

DEBT. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.

ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.

EVENT OF DEFAULT. The words "Event of Default" mean and include
without limitation any of the Events of Default set forth below in the
section titled "EVENTS OF DEFAULT."

GRANTOR. The word "Grantor" means and includes without limitation
each and all of the persons or entitles granting a Security Interest
in any Collateral for the Indebtedness, including without limitation
all Borrowers granting such a Security Interest.

GUARANTOR. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.

INDEBTEDNESS. The word Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well
as all claims by Lender against Borrower, or any one or more of them;
whether now or hereafter existing, voluntary or involuntary, due or
not due, absolute or contingent, liquidated or unliquidated; whether
Borrower may be liable individually or jointly with others; whether
Borrower may be obligated as a guarantor, surety, or otherwise;
whether recovery upon such Indebtedness may be or hereafter may become
barred by any statute of limitations; and whether such Indebtedness
may be or hereafter may become otherwise unenforceable.

LENDER. The word "Lender" means Commercial Bank of Fremont, its
successors and assigns.

LIQUID ASSETS. The words "Liquid Assets" mean Borrower's cash on hand
plus Borrower's readily marketable securities.

LOAN. The word "Loan" or "Loans" means and includes without
limitation any and all commercial loans and financial accommodations
from Lender to Borrower, whether now or hereafter existing, and
however evidenced, including without limitation those loans and
financial accommodations described herein or described on any exhibit
or schedule attached to this Agreement from time to time.

NOTE. The word "Note" means and includes without limitation
Borrower's promissory note or notes, if any, evidencing Borrower's
Loan obligations in favor of Lender, as well as any substitute,
replacement or refinancing note or notes therefor.

PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and
security interests securing Indebtedness owned by borrower to Lender;
(b) liens for taxes, assessments, or similar charges either not yet
due or being contested in good faith; (c) liens of materialmen,
mechanics, warehousemen, or carriers, or other like liens arising in
the ordinary course of business and securing obligations which are not
yet delinquent; (d) purchase money liens or purchase money security
interests upon or in any property acquired or held by Borrower in the
ordinary course of business in secure indebtedness outstanding on the
date of this Agreement or permitted to be incurred under the paragraph
of this Agreement titled "Indebtedness or Lines"; (e) liens and
security interest which, as of the date of this Agreement, have been
disclosed to and approved by the Lender in writing; and (f) those
liens and security interests which in the aggregate constitute an
immaterial and insignificant monetary amount with respect to the net
value of Borrower's assets.

RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust,

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<PAGE> 14
and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.

SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract,
or otherwise, evidencing, governing, representing, or creating a
Security Interest.

SECURITY INTEREST. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the
form of a lien, charge, mortgage, deed of trust, assignment, pledge,
chattel mortgage, chattel trust, factor's lien, equipment trust,
conditional sale, trust receipt, lien or title retention contract,
lease or consignment intended as a security device, or any other
security or lien interest whatsoever, whether created by law,
contract, or otherwise.

SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.

SUBORDINATED DEBT. The words "Subordinated Debt" mean indebtedness
and liabilities of Borrower which have been subordinated by written
agreement to indebtedness owned by Borrower to Lender in form and
substance acceptable to Lender.

TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's
total assets excluding all intangible assets (i.e., goodwill,
trademarks, patents, copyrights, organizational expense, and similar
intangible items, but including leaseholds and leasehold improvements)
less total Debt.

WORKING CAPITAL. The words "Working Capital" mens Borrower's current
assets, excluding prepaid expenses, less Borrower's current
liabilities.

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the
initial Loan Advance and each subsequent Loan Advance under this Agreement
shall be subject to the fulfillment to Lender's satisfaction of all of the
conditions set forth in this Agreement and in the Related Documents.

LOAN DOCUMENTS. Borrower shall provide to Lender in form satisfactory
to Lender the following documents for the Loan: (a) the Note, (b)
Security Agreements granting to Lender security interests in the
Collateral, (c) Financing Statements perfecting Lender's Security
Interests; (d) evidence of insurance as required below; and (e) any
other documents required under this Agreement or by Lender or its
counsel.

BORROWER'S AUTHORIZATION. Borrower shall have provided inform and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and
the Related Documents, and such other authorizations and other
documents and instruments as Lender or its counsel, in their sole
discretion, may require.

PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as
specified in this Agreement or any Related Document.

REPRESENTATIONS AND WARRANTIES. The representations and warranties
set forth in this Agreement, in the Related Documents, and in any
document or certificate delivered to Lender under this Agreement are
true and correct.

NO EVENT OF DEFAULT. There shall not exist at the time of any advance
a condition which would constitute an Event of Default under this
Agreement.

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Lender, as of the date of this Agreement, as of the date of each disbursement
of Loan proceeds, as of the ate of any renewal, extension or modification of
any Loan, and at all times any Indebtedness exists:

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<PAGE> 15
ORGANIZATION. Borrower is a corporation which is duly organized,
validly existing, an din good standing under the laws of the State of
California and is validly existing and in good standing in all states
in which Borrower is doing business. Borrower has the full power and
authority to own its properties and to transact the businesses in
which it is presently engaged in presently proposes to engage.
Borrower also is duly qualified as a foreign corporation and is in
good standing in all states in which the failure to so qualify would
have material adverse effect on its businesses or financial condition.

AUTHORIZATION. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be
executed, delivered or performed by Borrower, have been duly
authorized by all necessary action by Borrower; do not require the
consent or approval of any other person, regulatory authority or
governmental body; and do not conflict with, result in a violation of,
or constitute a default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or other
instrument binding upon Borrower or (b) any law, governmental
regulation, court decree, or order applicable to Borrower.

FINANCIAL INFORMATION. Each financial statement of Borrower supplied
to Lender truly and completely disclosed Borrower's financial
condition as of the date of the statement, and there has been no
material adverse change in Borrower's financial condition subsequent
to the date of the most recent financial statement supplied to Lender.
Borrower has no material contingent obligations except as disclosed in
such financial statements.

LEGAL EFFECT. This Agreement constitutes, and an instrument or
agreement required hereunder to be given by Borrower when delivered
will constitute, legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective
terms.

PROPERTIES. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for taxes
not presently due and payable, Borrower owns and has good title to all
of Borrower's properties free and clear of all Securities Interests,
and has not executed and security documents or financing statements
relating to such properties. All of Borrower's properties are titled
in Borrower's legal name, and Borrower has not used, or filed a
financing statement under, any other name for at least the last five
(5) years.

HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as sued
in this Agreement, shall have the same meanings as set forth int he
"CERCLA," "SARA," the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq. Chapters 6.5 through 7.7 of
Division 20 of the California health and Safety Code, Section 26100,
et seq., or other applicable state or Federal laws, rules, or
regulations adopted pursuant to any of the foregoing. Except as
disclosed to and acknowledged by Lender in writing, Borrower
represents and warrants that: (a) During the period of Borrower's
ownership of the properties, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or substance by any person on, under,
about or from any of the properties. (b) Borrower has no knowledge
of, or reason to believe that there has been (i) any use, generation,
manufacture, storage, treatment, disposal, release, or threatened
release of any hazardous waste or substance on, under, about or from
the properties by any prior owners or occupants of any of the
properties, or (ii) any actual or threatened litigation or claims of
any kind by any person relating to such matters. (c) Neither Borrower
nor any tenant, contractor, agent or other authorized user of any of
the properties shall use, generate, manufacture, store, treat, dispose
of, or release any hazardous waste or substance on, under, about or
from any of the properties; and an such activity shall be conducted in
compliance with all applicable federal, state, and local laws,
regulations and ordinances, including without limitation those laws,
regulations and ordinances described above. Borrower authorizes
Lender and its agents to enter upon the properties to make such
inspections and test as Lender may deem appropriate to determine
compliance of the properties with this section of the Agreement. Any
inspections or tests made by lender shall be at Borrower's expense and
for Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to
any other person. The representations and warranties contained herein
are based on Borrower's due diligence in investigating the properties
for hazardous waste and hazardous substances. Borrower hereby (a)
releases and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or other
costs under any such laws, and (b) agrees to indemnify and hold
harmless Lender

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<PAGE> 16
against any and all claims, loses, liabilities, damages, penalties,
and expenses which Lender may directly or indirectly sustain or suffer
resulting from a breach of this section of the Agreement or as a
consequence of any use, generation, manufacture, storage, disposal,
release or threatened release occurring prior to Borrower's ownership
or interest in the properties, whether or not the same was or should
have been known to Borrower. The provisions of this section of the
Agreement, including the obligation to indemnify, shall survive the
payment of the Indebtedness and the determination or expiration of
this Agreement and shall not be affected by Lender's acquisition of
any interest in any of the properties, whether by foreclosure or
otherwise.

LITIGATION AND CLAIMS. No litigation, claim, investigation,
administrative proceeding or similar action (including those of unpaid
taxes) against Borrower is pending or threatened, and no other event
has occurred which may materially adversely affect Borrower's
financial condition or properties, other than litigation, claims, or
other events, if any that have been disclosed to and acknowledged by
Lender in writing.

TAXES. To the best of Borrower's knowledge, all tax returns and
reports of Borrower that are or were required to be filed, have been
filed, and all taxes, assessments and other governmental charges have
bene paid in full, except those presently being or to be contested by
Borrower in good faith in the ordinary course of business and for
which adequate reserves have been provided.

LIEN PRIORITY. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
Interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrower's Loan and Note, that would be prior or
that may in any way be superior to Lender's Security Interests and
rights in and to such Collateral.

BINDING EFFECT. This Agreement, the Note, all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note
and all of the Related documents are binding upon Borrower as well as
upon Borrower's successors, representatives and assigns, and are
leally enforceable in accordance with their respective terms.

COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.

EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which
borrower may have any liability complies in all material respects with
all applicable requirements of law and regulations, and (i) no
Reportable Event nor Prohibited Transaction (as defined in ERISA) has
occurred with respect to any such plan, (ii) Borrower has not
withdrawn from any such plan or initiated steps to do so, (iii) no
steps have been taken to terminate any such plan, and (iv) there are
no unfunded liabilities other than those previously disclosed to
Lender in writing.

LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of
business, or Borrower's Chief executive office, if Borrower has more
than one place of business, is located 830 E. ARQUES AVENUE,
SUNNYVALE, CA 94086. Unless Borrower has designated otherwise in
writing this location is also the office or offices where Borrower
keeps its records concerning the Collateral.

INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender
will be, true and accurate in every material respect on the date as of
which such information is dated or certified; and none of such
information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading.

SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and
agrees that Lender, without independent investigation, is relying upon
the above representations and warranties in extending Loan Advances to
Borrower. Borrower further agrees that the foregoing representations
and warranties shall be continuing in nature and shall remain in full
force and effect until such time as Borrower's indebtedness shall be
paid in full, or until this Agreement shall be terminated in the
manner provided above, whichever is the last to occur.

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<PAGE> 17
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender
that, while this Agreement is in effect, Borrower will:

LITIGATION. Promptly inform Lender in writing of (a) all material
adverse changes in Borrower's financial condition, and (b) all
existing and all threatened litigation, claims, investigations,
administrative proceedings or similar actions affecting Borrower or
any Guarantor which could materially affect the financial condition of
Borrower or the financial condition of any Guarantor.

FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent
basis, and permit Lender to examine and audit Borrower's books and
records at all reasonable times.

FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but
in no event later than ninety (90) days after the end of each fiscal
year, Borrower's balance sheet and income statement for the year
ended, reviewed by a certified public accountant satisfactory to
Lender, and, as soon as available, but in no event later than
forty-five (45) days after the end of each fiscal quarter, Borrower's
balance sheet and profit and loss statement for the period ended,
prepare and certified as correct to the best knowledge and belief by
Borrower's chief financial officer or other or person acceptable to
Lender. All financial reports required to be provided under this
Agreement shall be prepared in accordance with generally accepted
accounting principles, applied on a consistent basis, and certified by
Borrower as being true and correct.

ADDITIONAL INFORMATION. Furnish such additional information and
statements, lists of assets and liabilities, ages of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and
other reports with respect to Borrower's financial condition and
business operations as Lender may request from time to time.

FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants
and ratios:

NET WORTH RATIO. Maintain a ratio of Current Assets to Current
Liabilities in excess of 1.00 TO 1.00. Except as provided above, all
computations made to determine compliance with the requirements
contained in this paragraph shall be made in accordance with generally
accepted accounting principles, applied on a consistent basis, and
certified by Borrower as being true and correct.

INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect
to Borrower's properties and operations, in form, amounts, coverages
and with insurance companies reasonably acceptable to Lender.
Borrower, upon request of Lender, will deliver to Lender form time to
time the policies or certificates of insurance in form satisfactory to
Lender, including stipulations that coverages will not be canceled or
diminished without at least ten (10) days' prior written notice to
Lender. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any
way by any act, omission or default of Borrower or any other person.
In connection with all policies covering assets in which Lender holds
or is offered a security interest for the Loans, Borrower will provide
Lender with such loss payable or other endorsements as Lender may
require.

INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports
on each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the name of
the insurer; (b) the risks insured; (c) the amount of the policy; (d) the
properties insured; (e) the then current property values on the basis of which
insurance has been obtained, and the manner of determining those values; and (f)
the expiration date of the policy. In addition, upon request of Lender (however
not more often than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral. The cost of such appraisal shall be paid by
Borrower.

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<PAGE> 18

OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and
any other party and notify Lender immediately in writing of any
default in connection with any other such agreements.

LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.

TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every
kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower's properties, income, or profits. Provided however,
Borrower will not be required to pay and discharge any such
assessment, tax, charge, levy, lien or claim so long as (a) the
legality of the same shall be contested in good faith by appropriate
proceedings, and (b) Borrower shall have established on its books
adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will furnish
to Lender evidence of payment of the assessments, taxes, charges,
levies, liens and claims and will authorized the appropriate
governmental official to deliver to Lender at any time a written
statement of any assessments, taxes, charges, levies, liens and claims
against Borrower's properties, income, or profits.

PERFORMANCE. Perform and comply with all terms, conditions, and
provisions set forth in this Agreement and in the Related Documents in
a timely manner, and promptly notify Lender if Borrower learns of the
occurrence of any event which constitutes an Event of Default under
this Agreement or under any of the Related Documents.

OPERATIONS. Maintain executive and management personnel with
substantially the same qualifications and experience as the present
executive and management personnel; provide written notice to Lender
of any change in executive and management personnel; conduct its
business affairs in a reasonable and prudent manner and in compliance
with all applicable federal, state and municipal laws, ordinances,
rules and regulations respecting its properties, charters, businesses
and operations, including without limitation, compliance with the
Americans With Disabilities Act and with all minimum funding standards
and other requirements of ERISA and other laws applicable to
Borrower's employee benefit plans.

INSPECTION. Permit employee or agents of Lender at any reasonable
time to inspect any and all Collateral for the Loan or Loans and
borrower's other properties and to examine or audit Borrower's books,
accounts, and records and to make copies and memoranda of Borrower's
books, accounts, and records. If Borrower now at any time hereafter
maintains any records (including without limitation computer generated
records and computer software programs of other generation of such
records) in the possession of a third party, Borrower, upon request of
Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of
any records it may request, all at Borrower's expense.

COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide
Lender at lest annually and at the time of each disbursement of Loan
proceeds with a certificate executed by Borrower's chief financial
officer, or other officer or person acceptable to Lender, certifying
that the representations and warranties set forth in this Agreement
are true and correct as of the date of the certificate and further
certifying that, as of the date of the certificate, no Event of
Default exists under this Agreement.

ENVIRONMENT COMPLIANCE AND REPORTS. Borrower shall comply in all
respect with all environmental protection federal, state and local
laws, statutes, regulations and ordinances; not cause or permit to
exist, as a result of an intentional or unintentional action or
omission on its part or on the part of any third party, on property
owed and/or occupied by Borrower, any environmental activity where
damage may result to the environment, unless such environmental
activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, sate or local governmental
authorities; shall furnish to Lender promptly and in any event within
thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's

-7-
<PAGE> 19
part in connection with any environmental activity whether or not
there is damage to the environmental and/or other natural resources.

ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure
the Loans and to perfect all Security Interests.

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that
while this Agreement is in effect, Borrower shall not, without the prior
written consent of Lender:

INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the
normal course of business and indebtedness to Lender contemplated by
this Agreement, create, incur or assume indebtedness for borrowed
money, including capital leases, (b) except as allowed as a Permitted
Lien, sell, transfer, mortgage, assign, pledge, lease, grant a
security interest in, or encumber any of Borrower's assets, or (c)
sell with recourse any of Borrower's accounts, except to Lender.

CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (b) cease operations, liquidate, mortgage, transfer, acquire
or consolidate with any other entity, change ownership, change its
name, dissolve or transfer or sel collateral out of the ordinary
course of business, (c) pay any dividend son Borrower's stock (other
than dividends payable in its stock), provided, however, that
notwithstanding the foregoing, but only so long as no Event of Default
has occurred and is continuing or would result from the payment of
dividends, if Borrower is a "Subchapter S Corporation" (as defined in
he Internal Revenue Code of 1986, as amended), Borrower may pay cash
dividends on its stock to its shareholders from time to time in
amounts necessary to enable the shareholders to pay income taxes and
make estimated income tax payments to satisfy their liabilities under
federal and state law which arise solely from their status as
Shareholders of a Subchapter S Corporation because of their ownership
of shares of stock of Borrower, or (d) purchase or retire any of
Borrower's outstanding shares or alter or amend Borrower's capital
structure.

LOAN, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance
money or assets, (b) purchase, create acquire any interest in an other
enterprise or entity, or (c) incur any obligation as surety or
guarantor other than in the ordinary course of business.

CESSATION OF ADVANCES. If Lender has made any commitment to make any
Loan to Borrower, whether under this Agreement or under any agreement, lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(b) Borrower or any Guarantor is in default under the terms of this Agreement
or any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
fills a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or
any other loan with Lender; or (e) Lender in good faith deems itself insecure,
even though no Event of Default shall occurred.

ZERO BALANCE REQUIREMENTS. Notwithstanding the above, Borrower agrees
to maintain a zero ($0.00) outstanding principal balance on Note #14135 for a
thirty (30) consecutive day period prior to maturity.

COVENANTS. (1) Borrower agrees to provide the following: Annual tax
return due within 90 days of fiscal year end. (2) Company to provide evidence
and adequate accrue and maintain current quarterly tax payments. (3) Each
advance to be evidenced by a signed contract and a list of current accounts
receivable and payable agings. (4) Borrower agrees to maintain the majority of
deposit accounts at Commercial Bank of Fremont.

EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement.

DEFAULT ON INDEBTEDNESS. Failure to Borrower or any payment when due
on the Loans.

-8-
<PAGE> 20
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or
to perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or
failure of Borrower to comply with or to perform any other term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.

DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower's
property or Borrower's or any Grantor's ability to repay the Loans or
perform their respective obligations under this Agreement or any of
the Related Documents.

FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under
this Agreement or the Related Documents is false or misleading in any
material respect at the time made or furnished, or becomes false or
misleading at any time thereafter.

DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any Security Agreement to create a valid and perfected Security
Interest) at any time and for any reason.

INSOLVENCY. The dissolution or termination of Borrower's existence as
a going business, the insolvency of Borrower, the appointment of a
receiver for any part of borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the
commencement of any proceeding under any bankruptcy or insolvency laws
by or against Borrower.

CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the
Indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender.

EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of,
or liability under, any Guaranty of the Indebtedness.

CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.

ADVERSE CHANGE. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.

INSECURITY. Lender, in good faith, deems itself insecure.

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur,
except where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option,
all Indebtedness immediately will become due any payable, all without notice of
any kind to Borrower, except that in the case of an Event of Default of the
type described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's
rights and remedies shall be cumulative and may be exercised singularly or
concurrently. election by Lender to pursue any remedy shall not exclude
pursuit of any other remedy, and an election to make expenditures or to take
action to perform an obligation of Borrower or of any Grantor shall not affect
Lender's right to declare a default and to exercise its rights and remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are
a part of this Agreement:

-9-
<PAGE> 21
AMENDMENTS. This Agreement, together with any Related documents,
constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Agreement. No alteration of or
amendment to this Agreement shall be effective unless given in writing
and signed by the party or parties sought to be charged or bound by
the alteration or amendment.

APPLICABLE LAW. This Agreement has been delivered to Lender and
accepted by Lender in the State of California. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of
the courts of Alameda County, the State of California. This Agreement
shall be governed by and construed in accordance with the laws of the
State of California.

CAPTION HEADINGS. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.

MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Borrower
under this Agreement shall be joint and several, and all references to
Borrower shall mean each and every Borrower. This means that each of
the Borrowers signing below is responsible for all obligations in this
Agreement.

CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to
Lender's sale or transfer, whether now or later, of one or more
participation interests in the Loans to one or more purchasers,
whether related or unrelated to Lender. Lender may provide, without
any limitation whatsoever, to any one or more purchasers, or potential
purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower
hereby waives any rights to privacy it may have with respect to such
matters. Borrower additionally waives any and all notices of sale of
participation interests, as well as all notices of any repurchase of
such participation interests. Borrower also agrees that the
purchasers of any such participation interests will be considered as
the absolute owners of such interests in the Loans and will have all
the rights granted under the participation agreement or agreements
governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or
later against Lender or against any purchaser of such a participation
interest and unconditionally agrees that either Lender or such
purchaser may enforce Borrower's obligation under the Loans
irrespective of the failure or insolvency of any holder of any
interest in the Loans. borrower further agrees that the purchaser of
any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have
against Lender.

COSTS AND EXPENSES. Borrower agrees to pay upon demand all of
Lender's expenses, including without limitation attorneys' fees,
incurred in connection with the preparation, execution, enforcement,
modification and collection of this Agreement or in connection with
the Loans made pursuant to this Agreement. Lender may pay someone
else to help collect the Loans and to enforce this Agreement, and
Borrower will pay that amount. This includes, subject to any limits
under applicable law, Lender's attorneys' fees and Lender's legal
expenses, whether or not there is a lawsuit, including attorneys' fees
for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Borrower also will pay any court
costs, in addition to all other sums provided by law.

NOTICES. All notices required to be given under this Agreement shall
be given in writing, may be sent by telefacsimile, and shall be
effective when actually delivered or when deposited with a nationally
recognized overnight courier or deposited in the United States mail,
first class, postage prepaid, addressed to the party to whom the
notice is to be given at the address shown above. Any party may
change its address for notices under this Agreement by giving formal
written notice to the other parties, specifying that the purpose of
the notice is to change the party's address. To the extent permitted
by applicable law, if there is more than one Borrower, notice to any
Borrower will constitute notice to all Borrowers. For notice
purposes, Borrower will keep Lender informed at all times of
Borrower's current address(es).

SEVERABILITY. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to any
person or circumstance, such finding shall not render that provision
invalid or unenforceable as to any other persons or circumstances. If
feasible, any such offending provision shall be deemed to be modified
to be within the

-10-
<PAGE> 22
limits of enforceability or validity; however, if the offending
provision cannot be so modified, it shall be stricken and all other
provisions of this Agreement in all other respects shall remain valid
and enforceable.

SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of
any provisions of this Agreement makes it appropriate, including
without limitation any representation, warranty or covenant, the word
"Borrower" as used herein shall include all subsidiaries and
affiliates of Borrower. Notwithstanding the foregoing however, under
no circumstances shall this Agreement be construed to require Lender
to make any Loan or other financial accommodation to any subsidiary or
affiliate of Borrower.

SURVIVAL. All warranties, representations, and covenants made by
Borrower in this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement shall be
considered to have been relied upon by Lender and will survive the
making of the Loan and delivery to Lender of the Related Documents,
regardless of any investigation made by Lender or on Lender's behalf.

TIME IS OF THE ESSENCE. Time is of the essence in the performance of
this Agreement.

WAIVER. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender is exercising any
right shall operate as a waiver of such right or any other right. A
waiver by Lender of a provision of this Agreement shall not reproduce
or constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
Agreement. No prior waiver by Lender, nor any course of dealing
between Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender's rights or of any obligations of
Borrower or of any Grantor as to any future transactions. Whenever
the consent of Lender is required under this Agreement, the granting
of such consent by Lender in any instance shall not constitute
continuing consent in subsequent instances where such consent is
required, and in all cases such consent may be granted or withheld in
the sole discretion of Lender.

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS
LOAN AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS
OF JULY 18, 1996.

BORROWER:

ASPEC TECHNOLOGY, INC.

By: \c\ Jai P. Shin
---------------------------------------
JAI P. SHIN, CHIEF FINANCIAL OFFICER

LENDER:

Commercial Bank of Fremont

By: \c\ Leland Ong
---------------------------------------
Authorized Officer

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<PAGE> 23
COMMERCIAL BANK OF FREMONT

PROMISSORY NOTE

References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any loan or item.

BORROWER: ASPEC TECHNOLOGY, INC. LENDER: Commercial Bank of Fremont
830 E. ARQUES AVENUE 39510 Paseo Padre Parkway
SUNNYVALE, CA 94086 Fremont, CA 94538

================================================================================

Principal Amount: Initial Rate: Date of Note:
1,000,000.00 8.750% July 18, 1996

PROMISE TO PAY. ASPEC TECHNOLOGY, INC. ("Borrower") promises to pay
to Commercial Bank of Fremont ("Lender"), or order, in lawful money of the
United States of America, the principal amount of One Million & 00/100 Dollars
($1,000,000.00) or so much as may be outstanding, together with interest on the
unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.

PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL
OUTSTANDING PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON JULY 1, 1997. IN
ADDITION, BORROWER WILL PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID INTEREST
BEGINNING AUGUST 1, 1996, AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE ON THE
SAME DAY OF EACH MONTH AFTER THAT. Interest on this Note is computed on a
365/365 simple interest basis; that is, by applying the ratio of the annual
interest rate over the number of days in a year, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal
balance is outstanding. Borrower will pay Lender at Lender's address shown
above or at such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be applied first
to accrued unpaid interest, then to principal, and nay remaining amount to any
unpaid collection costs and late charges.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to
change from time to time based on changes in an independent index which is the
Wall Street Journal Prime--Highest Tiered Rate (the "Index"). The Index is not
necessarily the lowest rate charged by Lender on its loans. If the Index
becomes unavailable during the term of this loan, Lender may designate a
substitute index after notice to Borrower. Lender will tell Borrower the
current Index rate upon Borrower's request. Borrower understands that Lender
may make loans base on other rates as well. The interest rate change will not
occur more than often than each day prime changes. THE INDEX CURRENT IS 8.250%
PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF
THIS NOTE WILL BE AT A RATE OF 0.500 PERCENTAGE POINTS OVER THE INDEX,
RESULTING IN AN INITIAL RATE OF 8.750% PER ANNUM. NOTICE: Under no
circumstances will the interest rate on this Note be more than the maximum rate
allowed by applicable law.

PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan
fees and other prepaid finance charges are earned fully as of the date of the
loan and will not be subject to refund upon early payment (whether voluntary or
as a result of default), except as otherwise required by law. In any event,
even upon full prepayment of this Note, Borrower understands that Lender is
entitled to a MINIMUM INTEREST CHARGE OF $100.00. Other than Borrower's
obligation to pay any minimum interest charge, Borrower may pay without penalty
all or a portion of the amount owed earlier than it is due. Early payments
will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's
obligation to continue to make payments of accrued unpaid interest. Rather,
they will reduce the principal balance due.
<PAGE> 24
LATE CHARGE. If a payment is 15 DAYS OR MORE LATE, Borrower will be
charged 5.000% OF THE UNPAID PORTION OF THE REGULARLY SCHEDULE PAYMENT OR
$15.00, WHICHEVER IS GREATER.

DEFAULT. Borrower will be in default if any of the following happens:
(a) Borrower fails to make any payment when due. (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition contained
in this Note or any agreement related to this Note, or in any other agreement
or loan Borrower has with Lender. (c) Borrower defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that my materially
affect any of Borrowers property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related Documents.
(d) Any representation or statement made or furnished to Lender by Borrower or
on Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished. (e) Borrower becomes insolvent, a receiver
is appointed for any part of Borrower's property, Borrower makes an assignment
for the benefit of creditors, or any proceeding is commenced either by Borrower
or against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's accounts
with Lender. (g) Any guarantor dies or any of the other events described in
this default section occurs with respect to any guarantor of this Note. (h) A
material adverse change occurs in Borrower's financial condition, or Lender
believes the prospect of payment or performance of the Indebtedness is
impaired. (i) Lender in good faith deems itself insecure.

LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon Borrower's
failure to pay all amounts declared due pursuant to this section, including
failure to pay upon final maturity, lender, at its option, may also, if
permitted under applicable law, increase the variable interest rate on this
Note to 5.500 percentage points over the Index. Lender may hire or pay someone
else to help collect this Note if Borrower does not pay. Borrower also will
pay Lender that amount. This includes, subject to any limits under applicable
law, Lender's attorneys' fees and Lender's legal expenses whether or not there
is lawsuit, including attorney's fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
Borrower also will pay any court costs, in addition to all other sums provided
by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE
STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S
REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF ALAMEDA COUNTY, THE
STATE OF CALIFORNIA. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.

COLLATERAL. This Note is secured by all inventory, chattel paper,
accounts, contract rights, equipment and general intangibles a evidenced by a
Commercial Security Agreement dated March 24, 1994.

LINE OF CREDIT. This note evidences a revolving line of credit.
Advances under this Note, as well as directions for payment from Borrower's
accounts, may be requested orally or in writing by Borrower or as provided in
this paragraph. Lender may, but need not, require that all oral requests be
confirmed in writing. The following party or parties are authorized as
provided in this paragraph to request advances under the line of credit until
Lender receives from Borrower at Lender's address shown above written notice of
revocation of their authority: CONRAD J. DELL'OCA, PRESIDENT/SECRETARY; AND
JAI P. SHIN, CHIEF FINANCIAL OFFICER. ADVANCES TO BE DEPOSITED INTO CHECKING
ACCOUNT #1-090771. Borrower agrees to be liable for all sums either: (a)
advanced in accordance with the instructions of an authorized person or (b)
credited to any of Borrower's accounts with Lender. The unpaid principal
balance owing on this Note at any time may be evidenced by endorsements on this
Note or by Lender's internal records, including daily computer point-outs.
Lender will have no obligation to advance funds under this Note if: (a)
Borrower or any guarantor is in default under the terms of this Note or any
agreement that Borrower or any guarantor has with Lender, including any
agreements made in connection with the signing of this Note; (b) Borrower o any
guarantor ceases doing business or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; (d) Borrower has applied
funds provide pursuant to this Note for purposes other than those authorized by
Lender; or (e) Lender in good faith deems itself insecure under this Note or
any other agreement between Lender and Borrower.

BUSINESS LOAN AGREEMENT. This Note is subject to the terms and
conditions of a Business Loan Agreement dated July 18, 1996.

-2-
<PAGE> 25
PRIOR NOTE. The Promissory Note from ASPEC Technology, Inc. to Lender
dated April 20, 1995.

GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its
rights or remedies under this Note without losing them. Borrower and any other
person who signs, guarantees or endorses this Note, to the extent allowed by
law, waive any applicable statute of limitations, presentment, demand for
payment, protest and notice of dishonor. Upon any change in the terms of this
Note, and unless otherwise expressly stated in writing, no party who signs this
Note, wether as maker, guarantor, accommodation maker or endorser, shall be
released from liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan, or release any party
or guarantor or collateral; or impair, fail to realize upon or perfect Lender's
security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE NOTE.

BORROWER:

ASPEC TECHNOLOGY, INC.

By: \c\ Jai P. Shin
---------------------------------------
JAI P. SHIN, CHIEF FINANCIAL OFFICER

-3-
<PAGE> 26
COMMERCIAL BANK OF FREMONT

DISBURSEMENT REQUEST AND AUTHORIZATION

References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any loan or item.

BORROWER: ASPEC TECHNOLOGY, INC. LENDER: Commercial Bank of Fremont
830 E. ARQUES AVENUE 39510 Paseo Padre Parkway
SUNNYVALE, CA 94086 Fremont, CA 94538

================================================================================

LOAN TYPE. This is a Variable Rate (0.500% over Wall Street Journal
Prime--Highest Tiered Rate, making an initial rate of 8.750%), Revolving Line
of Credit Loan to a Corporation for $1,000,000.00 due on July 1, 1997. This is
a secured renewal of the following described indebtedness: The Promissory Note
from ASPEC Technology, Inc. to Lender dated April 20, 1995.

PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:

[ ] Personal, Family, or Household Purposes or Personal
Investment.

[x] Business (including Real Estate Investment).

SPECIFIC PURPOSE. The specific purposes of this loan is: to renew
and increase existing Line of Credit.

DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds
will be disbursed until all of Lender's conditions for making the loan have
been satisfied. Please disburse the loan proceeds of $1,000,000.00 as follows:

<TABLE>
<S> <C>
Undisbursed Funds: $1,000,000.00
Amount paid on Borrower's account: 0.00

----------------------

Note Principal: $1,000,000.00
</TABLE>

CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed
the following charges:

<TABLE>
<S> <C>
Prepaid Finance Charges Paid in Cash: $1,500.00
$1,500.00 Loan Fees

-----------------
Total Charges Paid in Cash: $1,500.00
</TABLE>

FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZED, BORROWER REPRESENTS
AND WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT
AND THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED JULY 18, 1996.

BORROWER:

ASPEC TECHNOLOGY, INC.

By: \c\ Jai P. Shin
---------------------------------------
JAI P. SHIN, CHIEF FINANCIAL OFFICER

<PAGE> 27
IN TESTIMONY WHEREOF, I HAVE HEREUNTO SET MY HAND ON JULY 18, 1996 AND
ATTEST THAT THE SIGNATURES SET OPPOSITE THE NAMES LISTED ABOVE ARE THEIR
GENUINE SIGNATURES.

CERTIFIED TO AND ATTESTED BY:

X \c\ Jai P. Shin
----------------------------------

X
----------------------------------

NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, it is advisable to have
this certificate signed by a second Officer or Director of the Corporation.

-2-

<PAGE> 1

EXHIBIT 11.1

ASPEC TECHNOLOGY, INC.
------------------
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
---------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Net income...................................................... $830 $879 $2,617
Accretion of redeemable preferred stock......................... -- -- 392
------- ------- -------
Income attributable to common stockholders...................... $830 $879 $2,225
======= ======= =======
Weighted average common shares outstanding...................... 18,460 18,912 21,917
Weighted average common share equivalents related to stock
purchase rights and options................................... 986 1,373 581
Common shares issued, purchase rights and stock options granted
(using the treasury stock method assuming an initial public
offering price of $11.00) between March 1996 and the initial
public offering included pursuant to Securities and Exchange
Commission rules.............................................. 6,200 6,200 3,352
------- ------- -------
Shares used in per share computation............................ 25,646 26,485 25,850
======= ======= =======
Net income per share............................................ $0.03 $0.03 $0.09
======= ======= =======
</TABLE>

<PAGE> 1
EXHIBIT 16.1

Securities and Exchange Commission March 6, 1997
Washington, D.C. 20549

Ladies and Gentlemen:

We were previously principal accountants for Aspec Technology, Inc. and, under
the date of April 26, 1996, except as to Note 8, which is as of May 4, 1996, we
reported on the balance sheets of Aspec Technology, Inc. as of November 30,
1994 and 1995, and the related statements of income, shareholders' equity and
cash flows for each of the years in the three-year period ended November 30,
1995. In December 1996, our appointment as principal accountants was
terminated. We have read Aspec Technology, Inc.'s statements included in the
second paragraph under the heading "Experts" on page 44 of Aspec Technology,
Inc.'s registration statement dated March 6, 1997, on Form S-1, and we agree
with such statements in that paragraph, except that we are not in a position to
agree or disagree with Aspec Technology Inc.'s statements that the Company did
not consult with Deloitte & Touche LLP on any accounting or financial matters
in the two years prior to their appointment or that the change in accountants
was approved by the Board of Directors.

Very truly yours,

/s/ KPMG PEAT MARWICK

<PAGE> 1
Exhibit 23.1

INDEPENDENT AUDITOR'S CONSENT AND REPORT ON SCHEDULE

To the Board of Directors and Stockholders of
Aspec Technology, Inc.

We consent to the use in this Registration Statement relating to 4,000,000
shares of Common Stock of Aspec technology, Inc. on Form S-1 of our report dated
February 28, 1997 (March __, 1997 as to Note 11), appearing in the Prospectus,
which is a part of this Registration Statement, and to the references to us
under the headings "Selected Financial Data" and "Experts" in such Prospectus.

Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of Aspec Technology, Inc.,
"Valuation and Qualifying Accounts." This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

San Jose, California
______________, 1997

--------------------

To the Board of Directors and Stockholders of
Aspec Technology, Inc.:

The financial statements included herein have been adjusted to give effect to
the two-for-one split of common stock, the increase in preferred shares
authorized and the Company's reincorporation in Delaware, all as described in
Note 11 to the financial statements. The above independent auditors' consent and
report on schedule is in the form that will be signed by Deloitte & Touche LLP
upon the effectiveness of such events assuming that from February 28, 1997 to
the effective date of such events, no other events shall have occurred that
would affect the accompanying financial statements or notes thereto.

Deloitte & Touche LLP
San Jose, California
March 5, 1997

<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> NOV-30-1995
<PERIOD-END> NOV-30-1996
<EXCHANGE-RATE> 1,000
<CASH> 6,341
<SECURITIES> 0
<RECEIVABLES> 5,741
<ALLOWANCES> 300
<INVENTORY> 0
<CURRENT-ASSETS> 13,066
<PP&E> 3,917
<DEPRECIATION> 1939
<TOTAL-ASSETS> 15,760
<CURRENT-LIABILITIES> 9,362
<BONDS> 0
13,345
0
<COMMON> 10,460
<OTHER-SE> (17,407)
<TOTAL-LIABILITY-AND-EQUITY> 15,760
<SALES> 15,265
<TOTAL-REVENUES> 15,265
<CGS> 4,702
<TOTAL-COSTS> 4,702
<OTHER-EXPENSES> 6,441
<LOSS-PROVISION> 300
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,432
<INCOME-TAX> 1,815
<INCOME-CONTINUING> 2,617
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,617
<EPS-PRIMARY> .09
<EPS-DILUTED> .09

</TABLE>