ASPEC TECHNOLOGY INC, S-1/A, 1998-04-01

ASPEC TECHNOLOGY INC
S-1/A, 1998-04-01
PREPACKAGED SOFTWARE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 1, 1998

REGISTRATION NO. 333-22913
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 3

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ASPEC TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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<S> <C> <C>
DELAWARE 7372 77-0298386
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</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:

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<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 2550 HANOVER STREET
650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94304
PALO ALTO, CA 94304 (650) 233-4500
(650) 493-9300
</TABLE>

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

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

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, 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. [ ]

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.

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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 REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED APRIL 1, 1998

PROSPECTUS

6,000,000 SHARES

ASPEC LOGO
COMMON STOCK

All of the 6,000,000 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 the factors
to be considered in determining the initial public offering price. The Company
has applied to have the Common Stock approved for quotation on the Nasdaq
National Market under the symbol ASPC.

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

THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING 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.

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

(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.

(2) Before deducting expenses payable by the Company estimated at $700,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
900,000 additional shares of Common Stock solely to cover over-allotments,
if any. If all such shares are purchased, the total Price to Public,
Underwriting Discount 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, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1998 at the office of the agent of
Hambrecht & Quist LLC in New York, New York.

HAMBRECHT & QUIST MERRILL LYNCH & CO.

, 1998
<PAGE> 3

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."

Aspec Technology(R) is a registered trademark of the Company. This
Prospectus also includes other trademarks of the Company and of other companies.
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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. The Common Stock offered hereby involves
a high degree of risk. See "Risk Factors." This Prospectus contains forward-
looking statements that involve risks and uncertainties. Actual results could
differ materially from those discussed in the 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 merchant semiconductor intellectual property
("SIP") solutions for high-performance, complex IC designs, including
system-on-a-chip ICs. Aspec's SIP consists of cell libraries, design tools,
design methodologies and related engineering services which, when used in
conjunction with EDA tools, simplify the process of designing complex ICs. The
Company believes that its SIP provides designers with quick access to cell
libraries at a lower cost than internally developed solutions. Aspec's SIP
includes its AdverPro design verification tool which manages the IC design
process, enabling EDA tools to exchange data while providing an accurate timing
function and helping to ensure compliance with proper design procedures. Aspec's
QuickPort design tool enables an IC designer to more rapidly and economically
port a design from one foundry to another to secure alternate sourcing and to
enable design reuse for next-generation process technologies. Aspec's SIP
currently supports a range of advanced, deep submicron process technologies at
leading semiconductor foundries, including Chartered Semiconductor, Hyundai
Electronics, IBM, LG Semicon, Samsung Electronics, Sanyo Electric, Taiwan
Semiconductor Manufacturing Corp. and United Microelectronics Corporation.

Improvements in semiconductor manufacturing technology have enabled the
design of complex ICs which integrate numerous silicon building blocks such as
microprocessors, memories, graphics and I/O functions on a single IC to create a
system-on-a-chip. Complex ICs are expected to proliferate as they enable a new
generation of electronic systems that are faster, smaller, cheaper, more
reliable and use lower power. The difficulties in designing increasingly complex
ICs coupled with market demands for the more rapid introduction of electronic
products has resulted in a significant and growing design gap. IC designers are
increasingly turning to merchant SIP suppliers to help meet their needs for the
more rapid design and development of complex ICs.

The Company's strategy is to expand its position as a leading independent
provider of merchant SIP solutions for the semiconductor industry. As part of
this strategy, Aspec is committed to establishing its SIP as an industry
standard by providing an open platform which supports most leading EDA tools and
process technologies at leading semiconductor foundries. The Company believes
that it has the broadest merchant SIP portfolio, and the Company intends to
increase its SIP portfolio through the addition of more complex functional
cores. Aspec also intends to broaden its SIP expertise by increasing its
capability to offer chip-level design services, specialized library development
services and collaborative engineering services.

Aspec's cell libraries and design tools run on UNIX workstations and
Windows NT-based PCs and currently support over 25 industry-standard EDA tools,
including those produced by Avant!, Cadence, Mentor Graphics and Synopsys
(including Viewlogic). The Company markets its products to customers primarily
through a direct sales force and through a limited number of independent
distributors. Aspec's products are used by ASIC and foundry companies, EDA
companies, electronic system companies and IC companies. The Company's current
customers include Acer, Advanced Micro Devices, Cadence Design Systems,
Chartered Semiconductor, CommQuest, Compaq, Hyundai Electronics, IBM, Matrox,
National Semiconductor, Nokia, Samsung Electronics, Sanyo Electric, United
Microelectronics Corporation and Vitesse.

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

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THE OFFERING

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Common Stock offered by the Company.......... 6,000,000 shares
Common Stock to be outstanding after the
offering................................... 28,439,557 shares(1)
Use of proceeds.............................. Redemption of Series A Redeemable Preferred
Stock and for working capital and other
general corporate purposes.
Proposed Nasdaq National Market symbol....... ASPC
</TABLE>

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

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED NOVEMBER 30, FEBRUARY 28,
-------------------------------------------- ---------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME
DATA:
Revenue............................ $3,689 $4,659 $6,640 $15,265 $22,392 $5,678 $6,925
Income from operations............. 1,398 1,366 1,408 4,122 3,539 1,820 1,646
Net income......................... 849 830 879 2,617 2,227 1,145 1,001
Accretion of Redeemable Preferred
Stock(2)........................ -- -- -- 392 823 202 212
Income attributable to common
stockholders.................... $ 849 $ 830 $ 879 $ 2,225 $ 1,404 $ 943 $ 789
Diluted earnings per share(3)...... $ 0.05 $ 0.04 $ 0.04 $ 0.10 $ 0.06 $ 0.04 $ 0.04
Diluted average shares
outstanding(3).................. 18,468 19,407 20,172 22,396 22,532 22,974 22,222
</TABLE>

<TABLE>
<CAPTION>
FEBRUARY 28, 1998
-------------------------
ACTUAL AS ADJUSTED(4)
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<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital........................................... $ 5,930 $ 48,115
Total assets.............................................. 17,116 59,301
Redeemable Preferred Stock................................ 14,380 --
Redeemable Common Stock................................... 7,116 --
Total stockholders' equity (deficiency)................... (11,378) 52,303
</TABLE>

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

(1) Excludes outstanding options to purchase 2,275,190 shares of Common Stock at
February 28, 1998 at a weighted average exercise price of $7.43 per share.
See "Management -- Compensation Plans" and Note 7 of Notes to Consolidated
Financial Statements.

(2) In connection with the redemption of all outstanding shares of Series A
Redeemable Preferred Stock from the proceeds of the offering, as required by
the terms of such shares, the difference between the book value and the
redemption value of approximately $4.1 million will be recorded as accretion
of Preferred Stock when determining income attributable to common
stockholders and earnings per share. This charge is expected to be recorded
in the second quarter of fiscal 1998 when the offering is completed and,
together with the anticipated charge to in-process research and development
related to the proposed acquisition of SIS Microelectronics, Inc., will
result in a loss attributable to common stockholders and a loss per share in
that quarter. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 6 of Notes to Consolidated
Financial Statements.

(3) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in computing net earnings per share.

(4) As adjusted to reflect the 6,000,000 shares of Common Stock offered by the
Company hereby at an assumed public offering price of $11.00 per share,
after deducting underwriting discounts and commissions and estimated
offering expenses, and the application of the estimated proceeds therefrom.
See "Use of Proceeds" and "Capitalization."

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

Except as otherwise noted all information in this Prospectus assumes (i)
the redemption of all outstanding shares of the Series A Redeemable Preferred
Stock from the proceeds of the offering, (ii) the closing of the acquisition of
SIS Microelectronics, Inc. in exchange for the issuance of 400,000 shares of
Common Stock and (iii) no exercise of the Underwriters' over-allotment option.
See "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Description of Capital Stock,"
"Underwriting" and Notes to Consolidated Financial Statements.

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RISK FACTORS

This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed in
the forward-looking statements as a result of certain factors, including those
set forth below and elsewhere in this Prospectus. The following risk factors
should be considered carefully in addition to the other information in this
Prospectus before purchasing the shares of Common Stock offered hereby.

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 on a quarterly and 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 competitors; the
Company's ability to successfully develop, introduce and market new products and
product enhancements; market acceptance of the Company's products; the
cancellation or delay of orders from major customers; the Company's ability to
hire additional personnel; and general economic conditions. These and other
factors could have a material adverse effect on the Company's business,
operating results and financial condition. In addition, it is likely that in
some future quarter the Company's operating results may 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 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 a delay in the ability to bill for or collect payment for work
previously performed, 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 canceled 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."

Dependence on Emergence of Merchant SIP Market. The market for merchant SIP
is new and emerging. The Company's ability to achieve sustained revenue growth
and profitability in the future will depend on the continued development of this
market and, to a large extent, on the level of demand for complex ICs, including
system-on-a-chip designs. There can be no assurance that the merchant SIP market
will continue to develop or grow at a rate sufficient to support the Company's
business. If this market fails to grow or develops slower than expected, the
Company's business, operating results and financial condition would be
materially adversely affected. To date, the Company's SIP products have been
licensed only by a limited number of customers. Many of the Company's existing
and potential customers currently rely on SIP developed internally or offered by
other vendors. The Company's future growth will be dependent on the adoption of,
and increased reliance on, merchant SIP by both existing and potential
customers. Moreover, if the Company's
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products do not achieve broad market acceptance, the Company's business,
operating results and financial condition would be materially adversely
affected.

Management of Growth; Significant Anticipated Hiring Needs. The Company's
business has grown significantly with revenue increasing from $6.6 million in
fiscal 1995 to $15.3 million in fiscal 1996 to $22.4 million in fiscal 1997. 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. A number of key members of the Company's management,
including its Chief Operating Officer and Chief Financial Officer and its Vice
Presidents of Marketing, Business Development and Design Services, joined the
Company after January 1998, and certain other executive officers have joined the
Company during the past year. The Company's future success will depend on its
ability to integrate its new officers and 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 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. In this regard, the number of employees at the Company
increased from 46 at the end of fiscal 1995 to 121 at November 30, 1997. 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. Because experienced accounting and
financial personnel are in great demand, there can be no assurance that the
Company will be able to identify, attract and retain such 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 overall employee base. In particular, the Company's ability to effectively
manage and support any future 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 and to recruit additional personnel to
expand its design services capabilities. 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.

Risks Associated With SIS Microelectronics Acquisition; Other Potential
Acquisitions. As part of the Company's strategy to expand its engineering design
services capability, in March 1998, the Company entered into an agreement to
acquire SIS Microelectronics, Inc. ("SIS Microelectronics") in exchange for the
issuance of an aggregate of 400,000 shares of Common Stock. SIS Microelectronics
is an engineering design services company located in Longmont, Colorado, has
approximately 20 employees and recorded revenues of approximately $1.7 million
for its fiscal year ended December 31, 1997. The acquisition is expected to
close prior to the closing of this offering, will be accounted for using the
purchase method and is expected to result in a charge to in-process research and
development in excess of $2.5 million in the Company's fiscal quarter ended May
31, 1998. The Company has no prior experience with acquisitions and there can be
no assurance that the Company will be able to retain the key employees of SIS
Microelectronics or successfully integrate the operations of SIS
Microelectronics.

From time to time, the Company expects to evaluate other potential
acquisitions to build its SIP expertise. However, other than the proposed
acquisition of SIS Microelectronics, the Company has no present plans with
respect to any such acquisition. There can be no assurance that the Company will
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be able to identify attractive acquisition candidates, that it will be able to
successfully complete any such acquisition or integrate any acquired company
with its other operations.

Risks Associated with Engineering Services Business. One of the Company's
strategies is to increase its revenue from collaborative engineering services.
The engineering services business is subject to a number of risks, including
potential competition from numerous other engineering service companies and the
ability to attract and retain qualified engineering personnel. There can be no
assurance that the Company can successfully expand its collaborative engineering
services, and the failure to do so could have a material adverse effect on the
Company's business, operating results and financial condition.

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."

Customer Concentration; Dependence on Customers in Asia. 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, National
Semiconductor 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 51.8%
of the Company's revenue. In fiscal 1997, although no customer accounted for 10%
or more of revenue, seven customers located in Asia accounted for 37.1% of
revenue and seven domestic customers accounted for 30.5% of revenue. The Company
anticipates that the majority of its revenue will be derived from a relatively
small number of customers through at least fiscal 1998 and that sales to
customers in Asia will continue to account for a significant portion of the
Company's revenue. 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
license additional SIP products 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."

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 account for
a significant portion of its total revenue. Revenue from customers outside the
United States, substantially all of whom are located in Asia, accounted for
54.1%, 66.2% and 48.2% of revenue in fiscal 1995, 1996 and 1997, respectively.
Although the Company does not believe
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that it experienced any material adverse impact in revenue as a result of the
financial dislocations that occurred in certain Asian countries during 1997 and
1998, it has experienced a lengthening of the payment period for accounts
receivables from certain Asian-based customers. At February 28, 1998,
approximately 63.6% of the Company's accounts receivable (including unbilled
receivables) were from Asian-based customers. Although the Company currently
believes, based in part on continuing discussions with these customers, that its
existing accounting reserves are adequate given the estimated exposure related
to all of its accounts receivable, there can be no assurance that such
accounting reserves will prove to be adequate nor that present or future
dislocations in Asian countries or elsewhere or other factors will not have a
material adverse effect on the Company's ability to collect its accounts
receivable or on its business, operating results and financial condition.

The Company's international business involves a number of risks, including
the impact of possible recessionary environments in foreign economies, 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. Although the Company prices its products and services in United
States dollars, currency exchange fluctuations could have a material adverse
effect on the Company's business to the extent that the Company's pricing is not
competitive with products priced in local currencies. The Company does not
currently hedge against foreign currency fluctuations. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview" and "Business -- Sales, Marketing and Customer Support."

Export Control Matters. In May 1997, the Company was advised by the U.S.
Department of Commerce, Bureau of Export Administration (the "DOC") and the
United States Attorney's Office for the Northern District of California that an
investigation had been initiated with respect to the possible violation of U.S.
export laws by the Company and certain of its employees. In August 1997, the
Company was orally informed that the investigation had been closed, and no
action has been brought against the Company or, to the Company's knowledge, its
employees or former employees. The investigation and related diversion of
management time and attention and legal and other costs and expenses had a
material adverse impact on the Company's business and results of operations in
the second and third quarters of fiscal 1997. Although the Company engaged
special counsel with expertise in export matters and has taken steps to help
ensure compliance with export laws, there can be no assurance that the Company
will not be subject to the same or a similar investigation in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

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 is 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 the semiconductor or electronics industry.

Competition. Although the market for merchant SIP is new and emerging and
the Company has few direct competitors, the Company expects that the market for
its products will become increasingly competitive in the future. The Company's
current competitors include Artisan Components, Inc., Cascade Design Automation
(a subsidiary of Oki Semiconductor Ltd.), Compass Design Automation (a division
of Avant!), Mentor Graphics and Silicon Architects (a division of Synopsys).
Duet Technology, Inc., a design services company, recently announced an
agreement to acquire Cascade Design
8
<PAGE> 10

Automation. The Company also experiences significant indirect competition from
the engineering departments of potential customers that maintain and develop
internally developed SIP. Certain of the Company's other potential customers
rely on proprietary SIP developed and maintained by ASIC vendors. In addition,
certain semiconductor foundries currently offer or may in the future offer one
or more elements of a SIP solution. The Company's potential competitors also
include a number of large vertically integrated semiconductor companies and
numerous EDA software companies that may develop SIP products that compete with
those of the Company. To the extent the Company expands its capability to offer
design services, it could also experience competition from numerous small design
engineering firms and from large public companies that also offer such services.
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 "Business -- Competition."

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, 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, 1998, the Company held 5 U.S. patents which expire from
2012 to 2013 and had 3 U.S. patent applications pending. The Company also has 12
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 Company has
registered the trademarks Aspec Technology, ABOND, HDEA and Mastergen and has
one trademark application pending in the United States. The process of seeking
patent and trademark protection can be expensive and time consuming. There can
be no assurance that patents or trademarks will issue from pending or future
applications or that, if issued, such patents or trademarks will not be
challenged, invalidated or circumvented, or that rights granted thereunder
9
<PAGE> 11

will provide meaningful protection or other commercial advantage to the Company.
Moreover, there can be no assurance that any patent or trademark 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, copyright and patent protection
may be unavailable in certain foreign countries.

As is common in the technology 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 Product Defects. Complex products such as those offered by
the Company may contain undetected errors, defects or "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. The Company does
not presently maintain insurance with respect to potential damages due to errors
or defects in its products. 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. The Company is currently
engaged in a search for several additional engineering personnel. 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.

Year 2000 Compliance. Many currently installed computer systems and
software products are coded to accept only two digit entries in the date code
field. These date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, in less
than two years, computer systems and software used by many companies may need to
be upgraded to comply with such "Year 2000" requirements. Although the Company
has conducted an internal review of such matters and believes that its products
and internal systems are Year 2000 compliant, the Company believes that the
purchasing patterns of customers and potential customers may be affected by Year
2000 issues as companies expend significant resources to upgrade their current
software systems for Year 2000 compliance. These expenditures may result in
reduced funds available to purchase products such as those offered by the
Company, which could have a material adverse effect on the Company's business,
operating results and financial condition.

10
<PAGE> 12

No Prior Market for the Shares; Expected Volatility of Share Price. Prior
to the offering, there has been no public market for the 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 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
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 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 55.4% 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."

Benefits of the Offering to Current Stockholders. Immediately after the
closing of this offering, based upon shares outstanding as of February 28, 1998,
the existing stockholders of the Company will hold 22,039,557 shares of Common
Stock (excluding an aggregate of 400,000 shares of Common Stock to be issued in
connection with the acquisition of SIS Microelectronics), or approximately 78.6%
of the total number of shares of Common Stock then outstanding. The existing
stockholders of the Company paid an aggregate of approximately $10.3 million to
the Company for their shares of Common Stock. Assuming an initial public
offering price of $11.00 per share, the value of the shares held by such
existing stockholders would be approximately $242.4 million. This offering will
create a public market for the resale of shares held by these existing
stockholders. The existing holders of Common Stock will benefit from the
redemption of the Series A Redeemable Preferred Stock due to the termination of
the senior rights, preferences and privileges attributable to the Series A
Redeemable Preferred Stock. In addition, the holders of the Company's Series A
Redeemable Preferred Stock will benefit by having their shares of stock redeemed
using a portion of the proceeds of the offering.

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

11
<PAGE> 13

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. The Company is also subject to Section 203 of the Delaware General
Corporation Law. See "Description of Capital 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 Common Stock. In addition to the
6,000,000 shares of Common Stock offered hereby, as of the date of this
Prospectus (the "Effective Date") there will be 22,439,557 shares of Common
Stock outstanding (assuming no exercise of options after February 28, 1998), all
of which are "restricted" shares (the "Restricted Shares") under the Securities
Act of 1933, as amended (the "Securities Act"). Approximately 111,000 Restricted
Shares will become eligible for sale immediately after the Effective Date
pursuant to Rule 144(k) under the Securities Act. Approximately 32,000
Restricted Shares will become eligible for sale prior to 90 days after the
Effective Date pursuant to Rule 144(k) under the Securities Act. However,
approximately 5,000 of these shares will be subject to a right of repurchase in
favor of the Company. Approximately 416,000 Restricted Shares will become
eligible for sale 90 days after the Effective Date, and approximately 21,453,000
Restricted Shares will become eligible for sale 180 days after the Effective
Date upon expiration of certain lockup agreements with the Company or the
Representatives of 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, approximately 290,000 of these shares will
be subject to a right of repurchase in favor of the Company. The remaining
approximately 428,000 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 365,000 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 the
Representatives of 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 4,779,000 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 Hambrecht & Quist
LLC. The Company has requested and the Representatives of the Underwriters have
agreed with the Company not to release any of such lockup restrictions prior to
the end of the 180-day period.

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
$9.13 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."

12
<PAGE> 14

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 6,000,000 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 $60.7 million
($69.9 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 Series A Redeemable Preferred Stock as
required by the terms of such shares. In connection with such redemption, the
difference between the book value and the redemption value of approximately $4.1
million will be recorded as accretion of Preferred Stock when determining income
attributable to common stockholders and earnings per share. This $4.1 million of
accretion will be recorded in the second quarter of fiscal 1998 when the
offering is completed and together with the anticipated charge to in-process
research and development related to the proposed acquisition of SIS
Microelectronics will result in a loss attributable to common stockholders and a
loss per share in that quarter. See Note 6 of Notes to Consolidated Financial
Statements. 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

To date, the Company has neither declared nor paid any cash dividends on
its shares of Common Stock. The Company currently intends to retain its earnings
for future growth and, therefore, does not anticipate paying any cash dividends
in the foreseeable future.

13
<PAGE> 15

CAPITALIZATION

The following table sets forth as of February 28, 1998 (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 $42.2 million of net proceeds from the sale of the
6,000,000 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>
FEBRUARY 28, 1998
------------------------------------
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:
actual -- 130,378; pro forma -- 130,378; as
adjusted -- none (actual and pro forma liquidation value:
$18,495,000)............................................. $ 14,380 $14,380 $ --
-------- ------- --------
Redeemable Common Stock, $.001 par value: shares
outstanding: actual -- 4,778,804; proforma and as
adjusted -- none......................................... 7,116 -- --
-------- ------- --------
Stockholders' equity (deficiency):
Preferred Stock, $.001 par value: 5,000,000 shares
authorized (including Series A Redeemable Preferred
Stock): shares outstanding: none...................... -- -- --
Common Stock, $.001 par value: 75,000,000 shares
authorized: shares outstanding: actual -- 17,260,753;
pro forma -- 22,039,557; as
adjusted -- 28,039,557(1)............................. 3,143 10,259 70,939
Stockholder notes receivable............................. (292) (292) (292)
Deferred stock compensation.............................. (139) (139) (139)
Retained earnings (deficit).............................. (14,090) (14,090) (18,205)
-------- ------- --------
Total stockholders' equity (deficiency)............. (11,378) (4,262) 52,303
-------- ------- --------
Total capitalization............................. $ 10,118 $10,118 $ 52,303
======== ======= ========
</TABLE>

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

(1) As of February 28, 1998, excludes (i) 2,250,190 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
$7.42 per share, (ii) 2,191,030 shares of Common Stock available for future
issuance under the Option Plan, (iii) 25,000 shares of Common Stock issuable
upon exercise of outstanding options under the Company's 1997 Director
Option Plan (the "Director Plan") at an exercise price of $8.50 per share,
(iv) 225,000 shares of Common Stock available for future issuance under the
Director Plan and (v) 500,000 shares of Common Stock available for future
issuance under the Company's 1997 Employee Stock Purchase Plan (the
"Purchase Plan"). See "Management -- Director Compensation,"
"-- Compensation Plans" and Note 7 of Notes to Consolidated Financial
Statements. The foregoing computations also exclude 400,000 shares of Common
Stock to be issued in connection with the acquisition of SIS
Microelectronics.

14
<PAGE> 16

DILUTION

The pro forma net tangible book value of the Company as of February 28,
1998 was a deficit of approximately $8.4 million, or $0.38 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 Series A Redeemable Preferred Stock, divided by the number of shares of
Common Stock outstanding. Without taking into account any other changes in the
pro forma net tangible book value after February 28, 1998, other than to give
effect to the receipt by the Company of the net proceeds from the sale of
6,000,000 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 as of February 28, 1998 would have been
approximately $52.3 million, or $1.87 per share. This represents an immediate
increase in net tangible book value of $2.25 per share to existing stockholders
and an immediate dilution of $9.13 per share to new investors. The following
table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $11.00
Pro forma net tangible book value per share as of
February 28, 1998..................................... $(.38)
Increase per share attributable to new investors....... 2.25
-----
Pro forma net tangible book value per share after the
offering.................................................. 1.87
------
Net tangible book value dilution per share to new
investors................................................. $ 9.13
======
</TABLE>

The following table summarizes, on a pro forma basis as of February 28,
1998, the differences between the existing stockholders and the purchasers of
shares in the offering (at an assumed initial public offering price of $11.00
per share) with respect to the number of shares of Common Stock purchased from
the Company, the total consideration paid and the average price per share paid:

<TABLE>
<CAPTION>
AVERAGE PRICE
SHARES PURCHASED TOTAL CONSIDERATION PER SHARE
-------------------- -------------------- -------------
NUMBER PERCENT AMOUNT PERCENT
---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 22,039,557 78.6% 10,259,000 13.5% $ 0.47
New investors................. 6,000,000 21.4 66,000,000 86.5 $11.00
---------- ----- ---------- -----
Total............... 28,039,557 100.0% 76,259,000 100.0%
========== ===== ========== =====
</TABLE>

The foregoing computations exclude, as of February 28, 1998 (i) 2,250,190
shares of Common Stock issuable upon exercise of outstanding options under the
Option Plan at a weighted average exercise price of $7.42 per share, (ii)
2,191,030 shares of Common Stock available for future issuance under the Option
Plan, (iii) 25,000 shares of Common Stock issuable upon exercise of outstanding
options under the Director Plan at an exercise price of $8.50 per share, (iv)
225,000 shares of Common Stock available for future issuance under the Director
Plan and (v) 500,000 shares of Common Stock available for future issuance under
the Purchase Plan. See "Management -- Director Compensation," "-- Compensation
Plans" and Note 7 of Notes to Consolidated Financial Statements. The foregoing
computations also exclude 400,000 shares of Common Stock to be issued in
connection with the acquisition of SIS Microelectronics.

15
<PAGE> 17

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data of the Company should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and with the Consolidated 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, 1995, 1996 and 1997 and with respect to the Company's
balance sheets as of November 30, 1996 and 1997 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 years ended November 30, 1993 and 1994
and with respect to the Company's balance sheets as of November 30, 1994 and
1995 are derived from the audited Financial Statements of the Company, which are
not included herein. The selected financial data set forth below for the three
months ended February 28, 1997 and 1998 and with respect to the Company's
balance sheet as of November 30, 1993 and February 28, 1998 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 periods
presented. Operating results for the three months ended February 28, 1998 are
not necessarily indicative of the results that may be expected for any future
period.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED NOVEMBER 30, FEBRUARY 28,
------------------------------------------------- ----------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ -------- ------- ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenue.................................... $3,689 $4,659 $6,640 $ 15,265 $22,392 $5,678 $6,925
Cost of revenue............................ 1,320 1,553 2,307 4,702 8,763 1,650 2,709
------ ------ ------ -------- ------- ------ ------
Gross profit............................... 2,369 3,106 4,333 10,563 13,629 4,028 4,216
------ ------ ------ -------- ------- ------ ------
Operating expenses:
Research and development................. 230 289 445 921 1,190 298 431
Sales and marketing...................... 196 624 1,387 3,526 6,537 1,514 1,266
General and administrative............... 545 827 1,093 1,994 2,363 396 873
------ ------ ------ -------- ------- ------ ------
Total operating expenses............ 971 1,740 2,925 6,441 10,090 2,208 2,570
------ ------ ------ -------- ------- ------ ------
Income from operations..................... 1,398 1,366 1,408 4,122 3,539 1,820 1,646
Other income, net.......................... 17 17 56 310 173 89 22
------ ------ ------ -------- ------- ------ ------
Income before income taxes................. 1,415 1,383 1,464 4,432 3,712 1,909 1,668
Provision for income taxes................. 566 553 585 1,815 1,485 764 667
------ ------ ------ -------- ------- ------ ------
Net income................................. 849 830 879 2,617 2,227 1,145 1,001
Accretion of Redeemable Preferred
Stock(1)................................. -- -- -- 392 823 202 212
------ ------ ------ -------- ------- ------ ------
Income attributable to common
stockholders............................. $ 849 $ 830 $ 879 $ 2,225 $ 1,404 $ 943 $ 789
====== ====== ====== ======== ======= ====== ======
Diluted earnings per share(2).............. $ 0.05 $ 0.04 $ 0.04 $ 0.10 $ 0.06 $ 0.04 $ 0.04
====== ====== ====== ======== ======= ====== ======
Diluted average shares outstanding......... 18,468 19,407 20,172 22,396 22,532 22,974 22,222
</TABLE>

<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------------------------------- FEBRUARY 28,
1993 1994 1995 1996 1997 1998
------ ------ ------ -------- ------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital............................ $ (255) $ 420 $ 944 $ 3,704 $ 4,505 $ 5,930
Total assets............................... 1,028 2,353 5,046 15,760 17,101 17,116
Redeemable Preferred Stock................. -- -- -- 13,345 14,168 14,380
Redeemable Common Stock.................... -- -- -- 7,116 7,116 7,116
Total stockholders' equity (deficiency).... 48 904 1,798 (14,063) (12,431) (11,378)
</TABLE>

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

(1) In connection with the redemption of all outstanding shares of Series A
Redeemable Preferred Stock from the proceeds of the offering, as required by
the terms of such shares, the difference between the book value and the
redemption value of approximately $4.1 million will be recorded as accretion
of Preferred Stock when determining income attributable to common
stockholders and earnings per share. This charge is expected to be recorded
in the second quarter of fiscal 1998 when the offering is completed and,
together with the anticipated charge to in-process research and development
related to the proposed acquisition of SIS Microelectronics, will result in
a loss attributable to common stockholders and a loss per share in that
quarter. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Note 6 of Notes to Consolidated Financial
Statements.

(2) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in computing earnings per share.

16
<PAGE> 18

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

The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Company's Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus. Except for
the historical information contained herein, the discussion in this Prospectus
contains certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this Prospectus. The Company's actual results could
differ materially from those discussed here. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors," as
well as those discussed elsewhere herein.

OVERVIEW

Aspec was founded in December 1991 to develop, market and support SIP to
enable customers to develop complex ICs. 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 SIP 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 SIP 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 SIP products for gate
array-based ICs and had developed SIP 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 SIP products.
A license is required for each foundry used by the customer as well as for each
process technology employed. The Company also realizes revenue from service and
maintenance fees. Typically a customer licenses a bundle of products which is
accompanied by 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 SIP is either replacing a customer's proprietary SIP or
introducing entirely new SIP. These SIP 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 $200,000 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 recorded as cost of revenue.
Engineering efforts devoted to developing the Company's core technology and
products not requiring adaptation are recorded as

17
<PAGE> 19

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 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 account for a significant portion of its total revenue.
Revenue from customers outside the United States, substantially all of whom are
located in Asia, accounted for 54.1%, 66.2% and 48.2% of revenue in fiscal 1995,
1996 and 1997, respectively. Although the Company does not believe that it
experienced any material adverse impact in revenue as a result of the financial
dislocations that occurred in certain Asian countries during 1997 and 1998, it
has experienced a lengthening of the payment period for accounts receivables
from certain Asian-based customers. At February 28, 1998, approximately 63.6% of
the Company's accounts receivable (including unbilled receivables) were from
Asian-based customers. Although the Company currently believes, based in part on
continuing discussions with these customers, that its existing accounting
reserves are adequate given the estimated exposure related to all of its
accounts receivable, there can be no assurance that such accounting reserves
will prove to be adequate nor that present or future dislocations in Asian
countries or elsewhere or other factors will not have a material adverse effect
on the Company's ability to collect its accounts receivable or on its business,
operating results and financial condition.

The Company's international business involves a number of risks, including
the impact of possible recessionary environments in foreign economies, 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. Although the Company prices its products and services in United
States dollars, currency exchange fluctuations could have a material adverse
effect on the Company's business to the extent that the Company's pricing is not
competitive with products priced in local currencies. The Company does not
currently hedge against foreign currency fluctuations. See "Risk
Factors -- Risks Associated With International Operations and
"Business -- Sales, Marketing and Customer Support."

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, as required by the terms of
such shares, the difference between the book value and the redemption value of
approximately $4.1 million will be recorded as accretion for Preferred Stock
when determining income attributable to common stockholders and earnings per
share. This $4.1 million of accretion will be recorded in the second quarter of
fiscal 1998 when the offering is completed and, together with the charge to
in-process research and development related to the proposed acquisition of SIS
Microelectronics, will result in a loss attributable to common stockholders and
a loss per share in that quarter. See Note 6 of Notes to Consolidated Financial
Statements.

As part of the Company's strategy to expand its engineering design services
capability, in March 1998, the Company entered into an agreement to acquire SIS
Microelectronics in exchange for the issuance of an aggregate of 400,000 shares
of Common Stock. SIS Microelectronics is an engineering design services company
located in Longmont, Colorado, has approximately 20 employees and recorded
revenues of approximately $1.7 million for its fiscal year ended December 31,
1997. The acquisition is expected to close prior to the closing of this
offering, will be accounted for using the purchase method and is expected to
result in a charge to in-process research and development in excess of $2.5
million in the Company's fiscal quarter ended May 31, 1998. The Company has no
prior
18
<PAGE> 20

experience with acquisitions and there can be no assurance that the Company will
be able to retain the key employees of SIS Microelectronics or successfully
integrate the operations of SIS Microelectronics. This charge, in addition to
the $4.1 million of accretion of the Series A Redeemable Preferred Stock, will
result in a loss attributable to common stockholders and a loss per share in the
second quarter of fiscal 1998. See "Risk Factors -- Risks Associated With SIS
Microelectronics Acquisition; Other Potential Acquisitions."

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
PERCENTAGE OF REVENUE
-----------------------------------------
THREE MONTHS
FISCAL YEAR ENDED ENDED
NOVEMBER 30, FEBRUARY 28,
----------------------- --------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenue............................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue.................................... 34.7 30.8 39.1 29.1 39.1
----- ----- ----- ----- -----
Gross profit....................................... 65.3 69.2 60.9 70.9 60.9
----- ----- ----- ----- -----
Operating expenses:
Research and development......................... 6.7 6.0 5.3 5.2 6.2
Sales and marketing.............................. 20.9 23.1 29.2 26.7 18.3
General and administrative....................... 16.5 13.1 10.6 7.0 12.6
----- ----- ----- ----- -----
Total operating expenses...................... 44.1 42.2 45.1 38.9 37.1
----- ----- ----- ----- -----
Income from operations............................. 21.2 27.0 15.8 32.0 23.8
Interest income.................................... 0.8 2.0 0.8 1.6 .3
----- ----- ----- ----- -----
Income before income taxes......................... 22.0 29.0 16.6 33.6 24.1
Provision for income taxes......................... 8.8 11.9 6.7 13.4 9.6
----- ----- ----- ----- -----
Net income......................................... 13.2% 17.1% 9.9% 20.2% 14.5%
===== ===== ===== ===== =====
</TABLE>

COMPARISON OF THREE MONTHS ENDED FEBRUARY 28, 1997 AND FEBRUARY 28, 1998

Revenue. Revenue increased 22.0% from $5.7 million in the first quarter of
fiscal 1997 to $6.9 million in the first quarter of fiscal 1998 primarily from
increased revenue from previously developed SIP products sold to new customers.

Cost of revenue. Cost of revenue primarily represents the costs of
personnel and other operating expenses incurred in the development and
production of SIP products to customer specifications. Cost of revenue increased
64.2% from $1.7 million in the first quarter of fiscal 1997 to $2.7 million in
the first quarter of fiscal 1998. The incremental cost reflects an increase in
engineering personnel and related expenses to support additional work related to
customer funded development programs. As a percentage of revenue, cost of
revenue increased from 29.1% in the first quarter of fiscal 1997 to 39.1% in the
first quarter of fiscal 1998 due to expenses increasing at a faster rate than
revenue.

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 adaption. Research and development expense increased from
$0.3 million in the first quarter of fiscal 1997 to $0.4 million in the first
quarter of fiscal 1998. The incremental cost reflects an increase in engineering
personnel and related expenses to support additional development work not funded
by customers. As a percentage of

19
<PAGE> 21

revenue, research and development expense increased from 5.2% in the first
quarter of fiscal 1997 to 6.2% in the first quarter of fiscal 1998 as the
Company expanded its engineering efforts. The Company expects research and
development expense to increase in absolute dollars in future periods as the
Company continues to expand its engineering efforts. The expected increase in
the Company's research and development expense could have a material adverse
effect on the Company's business, operating results and financial condition if
the Company's revenue does not also increase.

Sales and marketing. Sales and marketing expense consists of salaries,
commissions paid to internal sales and marketing personnel and sales
representatives, promotional costs and related operating expenses. Sales and
marketing expense decreased from $1.5 million in the first quarter of fiscal
1997 to $1.3 million in the first quarter of fiscal 1998 primarily due to lower
travel, advertising and promotional expenses. As a percentage of revenue, sales
and marketing expense decreased from 26.7% in the first quarter of fiscal 1997
to 18.3% in the first quarter of fiscal 1998 as sales and marketing expense
decreased while revenue increased over the periods. The Company expects sales
and marketing expense to increase in absolute dollars in future periods as the
Company expands its sales and marketing efforts. The expected increase in the
Company's sales and marketing expense could have a material adverse effect on
the Company's business, operating results and financial condition if the
Company's revenue does not also increase.

General and administrative. General and administrative expense increased
from $0.4 million in the first quarter of fiscal 1997 to $0.9 million in the
first quarter of fiscal 1998 primarily due to an increase in the accounts
receivable reserve of $0.4 million in the first quarter of 1998. As a percentage
of revenue, general and administrative expense increased from 7.0% in the first
quarter of fiscal 1997 to 12.6% in the first quarter of fiscal 1998. The Company
expects general and administrative expense to increase in absolute dollars in
future periods as the Company expands its operations and operates as a public
company. The expected increase in the Company's general and administrative
expense could have a material adverse effect on the Company's business,
operating results and financial condition if the Company's revenue does not also
increase.

COMPARISON OF FISCAL 1995, 1996 AND 1997

Revenue. Revenue increased 129.9% from $6.6 million in fiscal 1995 to $15.3
million in fiscal 1996 as the Company expanded its sales of SIP products to a
broader customer base. Revenue increased 46.7% from $15.3 million in fiscal 1996
to $22.4 million in fiscal year 1997 as the Company continued to expand its
sales of standard cell-based SIP products to a broader customer base,
principally in North America.

International revenue accounted for 54.1%, 66.2% and 48.2% of revenue in
fiscal 1995, 1996 and 1997, respectively. In fiscal 1995, Samsung Electronics,
National Semiconductor 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. In fiscal 1997, no customer accounted for more than 10% of revenue.

Cost of revenue. Cost of revenue increased from $2.3 million in fiscal 1995
to $4.7 million in fiscal 1996 and $8.8 million in fiscal 1997. These increases
primarily reflect increases in engineering personnel and related expenses
primarily associated with customer funded development programs. Cost of revenue
has fluctuated from 34.7% of revenue in fiscal 1995 to 30.8% of revenue in 1996
and 39.1% of revenue in fiscal 1997. The reduction in cost of revenue as a
percentage of revenue in fiscal 1996 compared to fiscal 1995 reflects increased
revenue in the second half of fiscal 1996 from products that did not require
significant adaptation. The increase in cost of revenue as a percentage of
revenue in fiscal 1997 compared to fiscal 1996 reflects (i) higher costs for
engineering personnel and related expenses incurred in anticipation of future
revenue growth and (ii) lower overall revenue due to lower than expected revenue
from the Company's Japanese distributor and to the diversion of management time
resulting from the DOC investigation in the second half of fiscal 1997. The
Company expects cost of revenue as a percentage of revenue to fluctuate in
future periods depending on the mix between development program revenues and
revenues from previously developed products.

20
<PAGE> 22

Research and development. Research and development expense increased from
$0.4 million in fiscal 1995 to $0.9 million in fiscal 1996 and $1.2 million in
fiscal 1997. These increases primarily reflect increases in engineering
personnel and related expenses. As a percentage of revenue, research and
development expense decreased from 6.7% in fiscal 1995 to 6.0% in fiscal 1996
and 5.3% in fiscal 1997. The Company expects research and development expense to
increase in absolute dollars in future periods as the Company expands its
engineering efforts. The expected increase in the Company's research and
development expense could have a material adverse effect on the Company's
business, operating results and financial condition if the Company's revenue
does not also increase.

Sales and marketing. Sales and marketing expense increased from $1.4
million in fiscal 1995 to $3.5 million in fiscal 1996 and $6.5 million in fiscal
1997. 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 increased as a
percentage of revenue from 20.9% in fiscal 1995 to 23.1% in fiscal 1996 and
29.3% in fiscal 1997. The Company expects sales and marketing expense to
increase in absolute dollars in future periods as the Company expands its sales
and marketing efforts. The expected increase in the Company's sales and
marketing expense could have a material adverse effect on the Company's
business, operating results and financial condition if the Company's revenue
does not also increase.

General and administrative. General and administrative expense increased
from $1.1 million in fiscal 1995 to $2.0 million in fiscal 1996 and $2.4 million
in fiscal 1997. 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. In
fiscal 1996, the Company established a bad debt reserve of approximately $0.3
million and in fiscal 1997 the Company incurred approximately $0.7 million of
costs related to its delayed initial public offering. As a percentage of
revenue, general and administrative expense decreased from 16.5% in fiscal 1995
to 13.1% in fiscal 1996 and 10.6% in fiscal 1997 as revenue increased in each
period. The Company expects general and administrative expense to increase in
absolute dollars in future periods as the Company expands its operations. The
expected increase in the Company's general and administrative expense could have
a material adverse effect on the Company's business, operating results and
financial condition if the Company's revenue does not also increase.

Provision for income taxes. The Company's tax rates of 40.0%, 41.0% and
40.0% in fiscal 1995, 1996 and 1997, respectively, approximate the combined
federal and state statutory income tax rates.

21
<PAGE> 23

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth selected statement of operations data for
the nine fiscal quarters ended February 28, 1998, as well as the percentage of
the Company's revenue represented by such data. This data 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
------------------------------------------------------------------------------------------------
FISCAL
FISCAL 1996 FISCAL 1997 1998
----------------------------------------- ----------------------------------------- --------
FEB. 29, MAY 31, AUG. 31, NOV. 30, FEB. 28, MAY 31, AUG. 31, NOV. 30, FEB. 28,
1996 1996 1996 1996 1997 1997 1997 1997 1998
-------- -------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue........................ $2,518 $2,840 $4,570 $5,337 $5,678 $5,042 $5,105 $6,567 $6,925
Cost of revenue................ 784 1,000 1,357 1,561 1,650 2,078 2,498 2,537 2,709
------ ------ ------ ------ ------ ------ ------ ------ ------
Gross profit................... 1,734 1,840 3,213 3,776 4,028 2,964 2,607 4,030 4,216
------ ------ ------ ------ ------ ------ ------ ------ ------
Operating expenses:
Research and development... 227 211 241 242 298 288 317 287 431
Sales and marketing........ 577 633 991 1,325 1,514 1,836 1,814 1,373 1,266
General and
administrative........... 472 448 500 574 396 534 340 1,093 873
------ ------ ------ ------ ------ ------ ------ ------ ------
Total operating
expenses............ 1,276 1,292 1,732 2,141 2,208 2,658 2,471 2,753 2,570
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from operations......... 458 548 1,481 1,635 1,820 306 136 1,277 1,646
Interest income................ 21 19 199 71 89 39 24 21 22
------ ------ ------ ------ ------ ------ ------ ------ ------
Income before income taxes..... 479 567 1,680 1,706 1,909 345 160 1,298 1,668
Provision for income taxes..... 197 232 689 697 764 138 64 519 667
------ ------ ------ ------ ------ ------ ------ ------ ------
Net income..................... 282 335 991 1,009 1,145 207 96 779 1,001
Accretion of Redeemable
Preferred Stock(1)........... -- -- 191 201 202 204 207 210 212
------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) attributable to
common stockholders.......... $ 282 $ 335 $ 800 $ 808 $ 943 $ 3 $ (111) $ 569 $ 789
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
AS A PERCENTAGE OF REVENUE
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue........................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue................ 31.1 35.2 29.7 29.3 29.1 41.2 48.9 38.6 39.1
------ ------ ------ ------ ------ ------ ------ ------ ------
Gross profit................... 68.9 64.8 70.3 70.7 70.9 58.8 51.1 61.4 60.9
------ ------ ------ ------ ------ ------ ------ ------ ------
Operating expenses:
Research and development... 9.0 7.4 5.3 4.5 5.2 5.7 6.2 4.4 6.2
Sales and marketing........ 22.9 22.3 21.7 24.8 26.7 36.4 35.5 20.9 18.3
General and
administrative........... 18.8 15.8 10.9 10.8 7.0 10.6 6.7 16.6 12.6
------ ------ ------ ------ ------ ------ ------ ------ ------
Total operating
expenses............ 50.7 45.5 37.9 40.1 38.9 52.7 48.4 41.9 37.1
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from operations......... 18.2 19.3 32.4 30.6 32.0 6.1 2.7 19.5 23.8
Interest income................ 0.8 0.7 4.4 1.3 1.6 0.7 0.5 0.3 .3
------ ------ ------ ------ ------ ------ ------ ------ ------
Income before income taxes..... 19.0 20.0 36.8 31.9 33.6 6.8 3.2 19.8 24.1
Provision for income taxes..... 7.8 8.2 15.1 13.0 13.4 2.7 1.3 7.9 9.6
------ ------ ------ ------ ------ ------ ------ ------ ------
Net income..................... 11.2 11.8 21.7 18.9 20.2 4.1 1.9 11.9 14.5
Accretion of Redeemable
Preferred Stock(1)........... -- -- 4.2 3.8 3.6 4.0 4.1 3.2 3.1
------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) attributable to
common stockholders.......... 11.2% 11.8% 17.5% 15.1% 16.6% 0.1% (2.2%) 8.7% 11.4%
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

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

(1) In connection with the redemption of all outstanding shares of Series A
Redeemable Preferred Stock from the proceeds of the offering, as required by
the terms of such shares, the difference between the book value and the
redemption value of approximately $4.1 million will be recorded as accretion
of Preferred Stock when determining income attributable to common
stockholders and earnings per share. This charge is expected to be recorded
in the second quarter of fiscal 1998 when the offering is completed and,
together with the anticipated charge to in-process research and development
related to the proposed acquisition of SIS Microelectronics, will result in
a loss attributable to common stockholders and a loss per share in that
quarter. See Note 6 to Notes to Consolidated Financial Statements.

22
<PAGE> 24

The Company's revenue increased on a quarterly basis during the four
quarters of fiscal 1996 and the first quarter of fiscal 1997. The Company's
revenue decreased in the second quarter of fiscal 1997 compared to the first
quarter and increased only slightly from the second quarter of fiscal 1997 to
the third quarter of 1997. The lower revenue levels in the second and third
quarters of fiscal 1997 were due principally to lower than expected revenue from
the Company's Japanese distributor and to management distraction resulting from
the DOC investigation which was initiated in May 1997 and closed in August 1997.
Revenue increased in the fourth quarter of fiscal 1997 and the first quarter of
fiscal 1998 primarily because of increased revenue from previously developed SIP
products sold to new customers, principally in North America.

Cost of revenue as a percentage of revenue increased significantly in the
second and third quarters of fiscal 1997 compared to the preceding three
quarters. These increases reflect (i) higher costs for engineering personnel and
related expenses incurred in anticipation of future revenue growth and (ii)
lower overall revenue due to lower than expected revenue from the Company's
Japanese distributor and to management distraction resulting from the DOC
investigation. Cost of revenue as a percentage of revenue decreased
significantly in the fourth quarter of fiscal 1997 compared to the third quarter
of fiscal 1997 due to the significant increase in revenue during such period,
lower growth in engineering personnel and related expenses and the resolution of
the DOC investigation in August 1997. The Company expects cost of revenue as a
percentage of revenue to fluctuate in future periods depending on the mix
between development program revenues which are recognized based on costs
associated with those revenues and revenues from products for which the related
development costs have already been charged to cost of development program
revenue.

Research and development expense generally increased in absolute dollars
over the nine quarter period, and such expenses fluctuated as a percentage of
revenue. Research and development expense increased significantly in the first
quarter of fiscal 1998 compared to the fourth quarter of fiscal 1997 due to
increased personnel and related costs and increased focus on SIP products for
0.18(LOGO) process technologies. Because a significant portion of the Company's
development programs are customer funded, only the residual unfunded development
activities of the Company are reported as research and development expense. The
Company expects research and development expense to increase in absolute dollars
over future periods as it continues to expand its engineering efforts. In
addition to its research and development efforts, the Company has significant
engineering efforts devoted to developing products on which revenue is
recognized on a percentage of completion basis which are recognized as cost of
revenue. The total development engineering spending, including cost of revenue,
has increased from $1.0 million in the first quarter of fiscal 1996 to $3.1
million in the first quarter of fiscal 1998.

Sales and marketing expense generally increased during each quarter of
fiscal 1996 and fiscal 1997 primarily as a result of the Company establishing a
North American direct sales force and relationships with distributors and sales
representatives in North America and Asia. As a percentage of revenue, sales and
marketing expense increased significantly in the second quarter of fiscal 1997
compared to the first quarter of fiscal 1997 due to a higher proportion of
revenue in Asia on which outside sales representatives earned commissions. In
the third quarter of fiscal 1997, sales and marketing expense remained
consistent with second quarter levels due to costs associated with a significant
trade show in which the Company participated.

General and administrative expense generally increased in absolute dollars
as the Company increased its administrative efforts to manage its growth and
such expenses generally decreased as a percentage of revenue due to higher
revenue during the periods. General and administrative expense declined in both
absolute dollars and as a percentage of revenue in the first quarter of fiscal
1997 due to reduced personnel and other administrative costs as certain
personnel were transferred into sales and marketing. General and administrative
expense increased in the second quarter of fiscal 1997 due to increased
personnel and other administrative costs. General and administrative expenses in
the fourth quarter of fiscal 1997 were significantly higher than the prior
quarter due to expenses of approximately $0.7 million related to the Company's
delayed initial public offering.
23
<PAGE> 25

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 on a quarterly and 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 competitors; the
Company's ability to successfully develop, introduce and market new products and
product enhancements; market acceptance of the Company's products; the
cancellation or delay of orders from major customers; the Company's ability to
hire additional personnel; and general economic conditions. These and other
factors could have a material adverse effect on the Company's business,
operating results and financial condition. In addition, it is likely that in
some future quarter the Company's operating results may 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 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 a delay in the ability to bill for or collect payment for work
previously performed, 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 canceled 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 "Risk
Factors -- Fluctuations in Future Operating Results; Dependence Upon Timely
Project Completion."

LIQUIDITY AND CAPITAL RESOURCES

To date, the Company has financed its operations principally from cash flow
from operations and through the private sale of equity securities. The Company
had positive cash flow from operating activities in fiscal 1995 of $2.1 million
and in fiscal 1996 of $4.6 million. Cash provided by operating activities
included net income of $0.9 million and $2.6 million in fiscal 1995 and 1996,
respectively, increases in customer advances of $1.3 million and $3.0 million in
fiscal 1995 and 1996, respectively, increases in accrued liabilities of $0.3
million and $1.3 million in fiscal 1995 and 1996, respectively, increases in
taxes payable of $0.4 million and $1.0 million in fiscal 1995 and 1996,
respectively, offset in part by increased accounts receivable of $0.8 million
and $3.9 million in fiscal 1995 and 1996, respectively. In fiscal 1997,
operating activities used $0.7 million in cash, primarily the result of growth
in accounts receivable of $2.2 million, an increase in deferred income taxes of
$1.4 million and the decrease in income taxes payable of $1.7 million. In the
first quarter of fiscal 1998, net cash provided by operations was $0.3 million.
Cash provided by operating activities, including net income of $1.0 million,

24
<PAGE> 26

an increase in income taxes payable of $0.6 million and depreciation and
amortization of $0.5 million, more than offset the use of cash including a
reduction in customer advances of $1.7 million.

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 $0.6 million, $2.5 million,
$3.2 million and $0.4 million in fiscal 1995, 1996, 1997 and the first quarter
of fiscal 1998, respectively. The Company expects to invest approximately $5.4
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 February 28, 1998, the Company had working capital of $5.9 million
and cash and equivalents of $2.7 million. During the three-year period, the
Company's cash balances have varied from $0.8 million at the beginning of fiscal
1995 to $6.3 million at the end of fiscal 1996 to $2.5 million at the end of
fiscal 1997. During fiscal 1995 through 1997, the Company had a bank line of
credit of $1 million, which was increased to $4 million in March 1998. The
Company has not borrowed under its credit facility.

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.

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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 merchant SIP solutions for high-performance,
complex IC designs, including system-on-a-chip ICs. Aspec's SIP consists of cell
libraries, design tools, design methodologies and related engineering services
which, when used in conjunction with EDA tools, simplify the process of
designing complex ICs. The Company believes that its SIP provides designers with
quick access to cell libraries at a lower cost than internally developed
solutions. Aspec's SIP includes its AdverPro design verification tool which
manages the IC design process, enabling EDA tools to exchange data while
providing an accurate timing function and helping to ensure compliance with
proper design procedures. Aspec's QuickPort design tool enables an IC designer
to more rapidly and economically port a design from one foundry to another to
secure alternate sourcing and to enable design reuse for next-generation process
technologies. Aspec's SIP currently supports a range of advanced, deep submicron
process technologies at leading semiconductor foundries, including Chartered
Semiconductor, Hyundai Electronics, IBM, LG Semicon, Samsung Electronics, Sanyo
Electric, Taiwan Semiconductor Manufacturing Corp. and United Microelectronics
Corporation.

INDUSTRY BACKGROUND

Semiconductors have become the critical technology component in most
electronic products manufactured today. Advances in semiconductor technologies
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.
Complex electronic products continue to be introduced at rapid rates while
increasing competition continues to shorten product life cycles. Such market
forces have driven continued improvements in semiconductor design methodologies
and manufacturing processes, most recently reflected in the migration to deep
submicron process technologies. These improvements have enabled the number of
transistors on an IC to double every 18 to 24 months, enabling entire electronic
systems to be integrated on to a single complex IC to create a system-on-a-chip.
Increased IC complexity has also resulted in a significant change in the
semiconductor industry over the past several years as more IC companies have
moved away from vertically integrated business models and begun to rely on
third-party specialists for their IC designs and EDA tools and on semiconductor
foundries for their manufacturing needs.

Complex IC designs integrate silicon building blocks such as
microprocessors, memories, graphics and I/O functions on a single IC and
typically replace multiple ICs mounted on a printed circuit board. By
integrating multiple functions, complex ICs reduce the number of electronic
connections, require less power and result in smaller board size, thus enabling
a new generation of electronic systems that are faster, smaller, cheaper, more
reliable and use lower power. With the increasing trend to deep submicron
fabrication capacity, complex IC designs are expected to proliferate as system
companies seek to provide differentiated products to their end customers.

In spite of the forces driving the growth of complex ICs, there are
significant challenges in bringing products to market. Complex ICs can contain
millions of gates and are increasingly difficult and time-consuming to design.
In addition, increasing competition in the market for electronic systems
continues to place pressure on product design cycle time. Being first-to-market
is critical for system companies, as it can result in significant financial and
market share advantages. However, the combination of increased IC complexity and
reduced design time requirements have resulted in a significant and growing
"design gap." Since existing leading-edge manufacturing capacity can already

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accommodate complex IC designs, the capability to develop such designs remains
the bottleneck in the development of complex ICs.

Merchant EDA software and ASIC design methodologies were introduced in the
1980s as tools to enable IC designers to automate portions of the design process
and to increase productivity by eliminating tedious handcrafting. While this
approach has substantially increased design productivity over the years, it has
not kept pace with the rapid increase in the capability to manufacture complex
ICs. To address the design gap, certain companies have created multiple design
teams to concurrently develop different components of complex ICs while others
have utilized merchant ASIC design services. However, each of these approaches
has become less effective as IC designs have become more complex. The challenges
associated with managing and integrating disparate design efforts and the high
costs of attracting IC design talent and maintaining separate teams have made a
multiple design team approach inadequate. Companies that adopted the merchant
ASIC design service approach are finding that although such services
historically proved to be economic and effective for many smaller designs, they
are less able to provide the desired control, flexibility and support for more
complex ICs. ASIC vendors are also finding it increasingly difficult, costly and
time consuming to develop and maintain a portfolio of proprietary SIP. Further,
companies that rely on ASIC vendors are limited to a single source for their
designs. Thus, IC designers are increasingly turning to merchant SIP suppliers
to meet their needs for rapid complex IC development.

The merchant SIP market includes providers of cell libraries, design tools,
design methodologies and related engineering services. SIP libraries are
pre-designed, reusable circuit building blocks or cores, that can be combined
using a design procedure, design methodology and design tools to create complex
IC designs. SIP libraries, for example, include basic elements such as
individual gates or I/O elements and complex cores such as microprocessors or
DSPs. However, SIP libraries alone are not enough to allow the cost-effective
reuse of intellectual capital and engineering resources. SIP design tools and
design services are also required to enable the development and subsequent
integration of SIP libraries into functional complex ICs. SIP tools enable the
representation of SIP libraries in different formats, automate or control the
design flow around EDA tools, automate the development of libraries and
facilitate the porting of a design to multiple foundries. Design services
include third-party support for in-house engineers in using merchant SIP,
porting existing in-house SIP to new processes and integrating both merchant and
in-house SIP effectively in new designs.

There are multiple requirements for merchant SIP to be used effectively in
complex IC design. SIP libraries must be flexible and adaptable to enable IC
designers to customize these libraries for their design flow and manufacturing
process to achieve maximum performance and product differentiation. Design tools
supporting design reuse must be compatible with existing EDA tools, allowing SIP
representation in the appropriate formats. Libraries and design tools must
jointly provide flexibility to allow rapid porting from one manufacturing
process to another and must be customizable to fully utilize the capabilities of
a particular manufacturing process. In addition, IC designers require services
to help aggregate SIP, test functionality and complete circuit designs in order
to achieve rapid time-to-market. Accordingly, merchant SIP solutions must
integrate libraries seamlessly with design and EDA tools so that engineers can
more rapidly design complex ICs.

SOLUTION

Aspec is a leading provider of merchant SIP solutions for high-performance,
complex IC designs, including system-on-a-chip ICs. The Company believes its
products provide the following benefits:

Accelerated Time-to-Market. Aspec's SIP facilitates the rapid design of
complex ICs by providing pre-designed, reusable cell libraries which reduce the
customer's design time requirements. Aspec's cell libraries have been used in
designs in over 30 different manufacturing processes, thus providing IC
designers with a higher probability of more quickly achieving working silicon.
The Company's AdverPro design tool manages the IC design process and is designed
to provide fast and seamless integration of cell libraries with design flow and
EDA tools.

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Cost-effective SIP Solutions. Aspec's SIP allows customers to outsource
libraries, tools and services critical for complex IC design, thereby
eliminating the need for costly engineering resources required for internally
developed solutions. By providing proven SIP solutions with time-to-market
advantages, Aspec enables customers to reduce design costs, minimize integration
costs and increase manufacturing yields. In addition, Aspec's broad
compatibility with leading EDA tools permits an IC designer to select the best
tool for each step in the design process. As a result, Aspec's SIP enables IC
designers to preserve or optimize the substantial financial and training
investments in these tools.

Access to Advanced Process Technologies. Aspec provides a suite of cell
libraries that are compatible with process technologies at the most advanced
merchant semiconductor foundries. Aspec's libraries have been successfully
implemented at Chartered, Hyundai, IBM, LG Semicon, Samsung, Sanyo, TSMC and
UMC. Aspec has years of experience with leading foundries, having successfully
developed cell libraries for use with advanced process technologies which allow
minimum feature sizes from 0.8(LOGO) to 0.25(LOGO). To maximize performance and
density, Aspec reconfigures and optimizes its libraries for each foundry's
process.

Portability to Multiple Foundries. Aspec's QuickPort design tool enables
complex IC designs to be transferred from one foundry to another. By providing
the flexibility to port their designs across foundries, Aspec enables customers
to secure multiple manufacturing sources to quickly access available
leading-edge capacity. This also reduces design time by eliminating the
reconfiguration process required to design-in a new manufacturing source.

Facilitate Design Reuse. Aspec's SIP is designed to facilitate the rapid
creation of complex ICs by enabling the reuse of internally developed or
third-party cell designs in new complex ICs. Aspec's SIP also allows designers
the flexibility to migrate pre-existing cell designs to more advanced
generations of manufacturing technology. Design reuse reduces the amount of
engineering time required to design complex ICs, thereby reducing design cost
and time-to-market.

Control of Intellectual Property and Design. With Aspec's SIP, IC designers
can establish a standard SIP for all of their design processes and maintain
ownership of the intellectual property content of their designs. Aspec's SIP
also enables electronic system 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.

STRATEGY

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

Establish Aspec's SIP as an Industry Standard. Aspec believes it was one of
the first companies to deliver merchant SIP for the design and development of
complex ICs, and the Company is committed to establishing its SIP as an industry
standard. Aspec's SIP provides an open solution by supporting most leading EDA
tools and process technologies at leading semiconductor foundries. The Company
believes that by establishing its SIP as an industry standard, customers will be
able to complete their designs more rapidly and precisely, preserve their
existing investment in EDA tools and utilize multiple foundries
cost-effectively. In addition, customers can more effectively maintain, reuse or
license their designs since the use of an industry standard SIP facilitates
compatibility between designs. Aspec believes that its SIP is well-positioned to
become an industry standard because certain of its existing and potential
competitors are either owned by or aligned with one EDA tool supplier and do not
allow portability of designs across the wide range of process technologies.

Leverage Leadership Position in SIP. Aspec believes that it has the
broadest merchant SIP portfolio. The Company has designed its SIP to simplify
the migration of silicon designs to future generations of deep submicron
semiconductor process technology. As a result, Aspec enables its customers to
bring quickly to market new products which utilize the most advanced
manufacturing

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processes. The Company intends to leverage its leadership position in SIP to
create high-performance, cost-effective SIP solutions for next-generation
process technologies such as 0.18(LOGO). In addition, the Company intends to
build on its current SIP portfolio through the addition of more complex
functional cores which provide increasing value to its customers. The Company
intends to continue to recruit and retain key technical personnel who have the
experience and skills to strengthen Aspec's position as a leader in merchant SIP
development. From time to time, Aspec may acquire companies which focus on the
development of SIP to continue to build its SIP expertise.

Broaden Customer Base. Aspec's goal is to continue 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 toward fabless semiconductor companies that have
historically relied on internal resources to meet their SIP needs. Due to the
increasing costs of such proprietary SIP and the shortening product life cycles
for their products, Aspec believes that these companies will increasingly seek a
third-party solution to meet their SIP requirements. Aspec is also targeting
electronic system manufacturers that currently rely on ASIC vendors for SIP. By
utilizing Aspec's SIP, electronic system manufacturers can more effectively
control the design process, intellectual property content and cost of their
designs. Aspec also intends to offer additional chip-level design services,
specialized cell development services and specialized customer support services.

Provide Collaborative Engineering Services. The Company believes that its
expertise in SIP development gives it a competitive advantage in the design of
system-level silicon products and it intends to leverage this advantage to offer
collaborative engineering services. Aspec intends to expand its ability to offer
collaborative engineering services to strengthen existing customer relationships
and attract new customers. As part of this strategy, Aspec has recently entered
into an agreement to acquire SIS Microelectronics, an engineering design firm of
approximately 20 persons. By utilizing Aspec's libraries, design methodologies
and design tools as well as Aspec's collaborative engineering services, Aspec
believes that it can lower its customers' product development costs and shorten
their product development times.

PRODUCTS AND SERVICES

Aspec offers a suite of products on a per design basis, a per site basis or
an enterprise basis to its customers. Typically a customer licenses a bundle of
products which is accompanied by documentation and training. These products are
also licensed separately. Aspec's products include SIP libraries which consist
of logic functions based on gate array/embedded array or standard cell
architectures, I/Os and memories. The Company also offers SIP design tools to
ensure that various commercially available EDA tools work together to accurately
produce the IC design in silicon and to enable the portability of designs. The
Company's SIP design tools include memory compilers which allow customers to
automatically generate memory libraries. The Company also offers various design
and consulting services to its licensees on a per project basis. The Company's
products, which run on UNIX workstations and Windows NT-based PCs, currently
support over 25 industry standard EDA tools, including those produced by Avant!,
Cadence Design Systems, Mentor Graphics and Synopsys (including Viewlogic).
Aspec's SIP supports many of the world's leading merchant semiconductor
foundries, including Chartered Semiconductor, Hyundai Electronics, IBM, LG
Semicon, Samsung Electronics, Sanyo Electric, Taiwan Semiconductor Manufacturing
Corp. and United Microelectronics Corporation. Aspec's SIP products are
generally licensed on a per process technology basis and are available to
support submicron processes from 0.8(LOGO) to 0.25(LOGO), depending on the
foundry.

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

SIP LIBRARIES

HDA Libraries. High Density Array ("HDA") is Aspec's proprietary, patented
gate array/ embedded array architecture for silicon processes from 0.8(LOGO) to
0.25(LOGO) 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 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 0.6(LOGO) to 0.5(LOGO). 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 proprietary standard
cell architecture for deep submicron processes for 0.35(LOGO), 0.25(LOGO) 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
0.35(LOGO) 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
0.8(LOGO) to 0.25(LOGO). 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.

Memory Libraries. Aspec provides a range of static random access memory
("SRAM") libraries and read only memory ("ROM") libraries for process
technologies that range from 0.8(LOGO) to 0.25(LOGO). These products include
high density, high speed and low power memories available in a variety of
configurations to meet the customer's specifications.

Each of these cell libraries is licensed on a process specific basis, and
prices range from $100,000 for a per design license to over $800,000 for an
enterprise license.

SIP DESIGN TOOLS

AdverPro. Aspec's AdverPro design tool 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 licensed, 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 design tool is designed to enable an IC
company to port economically and timely a design developed in Aspec's SIP 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 SIP. QuickPort is licensed, and its price ranges from $100,000 for a
single user license to $500,000 for an enterprise license.

Memory Compilers. Aspec offers various memory compilers for each of its
process specific libraries which allow customers to automate the process of
creating a variety of SRAM and ROM memory blocks. These memory compilers enable
customers to create memories that are optimized for each silicon process. Prices
for memory compilers range from $100,000 for a single user license to over
$450,000 for an enterprise license.

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SIP SERVICES

Complex IC Design Services. Aspec maintains a design center to test the
functionality of its design tools and to assist customers that lack experience
in completing full-circuit designs. With its acquisition of SIS
Microelectronics, Aspec is expanding its capability to offer collaborative
engineering services. These design services are offered on a per project basis
and project costs may range from $100,000 to over $300,000 depending on the
complexity of the design.

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 EDA Design Kits support leading 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.

CUSTOMERS

Aspec's principal customers include ASIC and foundry companies, EDA
companies, electronic system companies and IC companies. 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, National Semiconductor
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 51.8% of the
Company's revenue. In fiscal 1997, although no customer accounted for 10% or
more of revenue, seven customers located in Asia accounted for 37.1% of revenue
and seven domestic customers accounted for 30.5% of revenue. The Company
anticipates that the majority of its revenue will be derived from a relatively
small number of customers through at least fiscal 1998 and that sales to
customers in Asia will continue to account for a significant portion of the
Company's revenue. 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 "Risk Factors --
Customer Concentration; Dependence on Customers in Asia."

The following is a representative list of Aspec's customers, each of which
represented at least $100,000 of the Company's revenue since the beginning of
fiscal 1997:
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASIC AND FOUNDRY COMPANIES ELECTRONIC SYSTEM COMPANIES
Asahi Glass Co., Ltd. Acer Laboratories, Inc.
Hyundai Electronics Industries Co., Ltd. Compaq Computer Corporation
IBM Corporation Credence Systems Corporation
LG Semicon Co. Ltd. Matrox Graphics Inc.
National Semiconductor Corporation Nokia Phone Produktions GmbH
Samsung Electronics Co., Ltd.
Sanyo Electric Co., Ltd. IC COMPANIES
Tritech Microelectronics International, Advanced Micro Devices, Inc.
Inc. CommQuest Technologies, Inc.
United Microelectronics Corporation Integrated Device Technology, Inc.
Winbond Electronics Corp. Lattice Semiconductor Corporation
Yamaha Corporation Oak Technology Inc.
PMC-Sierra, Inc.
EDA COMPANIES Vitesse Semiconductor Corporation
Cadence Design Systems, Inc.
Silicon Valley Research, Inc.
</TABLE>

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

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SALES, MARKETING AND CUSTOMER SUPPORT

The Company's current and potential customers are principally located in
North America, Japan, Korea and parts of Asia. 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 parts of 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. The Asian and European countries that have
constituted the primary foreign markets for the Company's products are Korea,
Japan, Taiwan, Singapore and Germany.

The Company's international business involves a number of risks, including
the impact of possible recessionary environments in foreign economies, 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. Although the Company prices its products and services in United
States dollars, currency exchange fluctuations could have a material adverse
effect on the Company's business to the extent that the Company's pricing is not
competitive with products priced in local currencies. The Company does not
currently hedge against foreign currency fluctuations. See "Risk
Factors -- Risks Associated With International Operations" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

The Company licenses its SIP products 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.

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

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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 1995, 1996 and 1997, research and development expenses were $0.4 million,
$0.9 million and $1.2 million, respectively. In addition to research and
development expenses, engineering efforts devoted to developing products for
which revenue is recognized on a percentage of completion basis are recognized
as cost of revenue. 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 product offerings. The Company expects to continue to devote
significant resources to its various engineering efforts. To date, all SIP
product 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 design tools 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 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 "Risk Factors -- Dependence Upon
Continuous Product Development; Risk of Product Delays."

COMPETITION

Although the market for merchant SIP is new and emerging and the Company
has few direct competitors, the Company expects that the market for its products
will become increasingly competitive in the future. The Company's current
competitors include Artisan Components, Inc., Cascade Design Automation (a
subsidiary of Oki Semiconductor Ltd.), Compass Design Automation (a division of
Avant!), Mentor Graphics and Silicon Architects (a division of Synopsys). Duet
Technology, Inc., a design services company, recently announced an agreement to
acquire Cascade Design Automation. The Company also experiences significant
indirect competition from the engineering departments of potential customers
that maintain and develop internally developed SIP. Certain of the Company's
other potential customers rely on proprietary SIP developed and maintained by
ASIC vendors. In addition, certain semiconductor foundries currently offer or
may in the future offer one or more elements of a SIP solution. The Company's
potential competitors also include a number of large

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vertically integrated semiconductor companies and numerous EDA software
companies that may develop SIP products that compete with those of the Company.
To the extent the Company expands its capability to offer design services, it
could also experience competition from numerous small design engineering firms
and from large public companies that also offer such services. 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
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.

34
<PAGE> 36

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,
copyright and patent protection may be unavailable in certain foreign countries.

EMPLOYEES

As of February 28, 1998, the Company had 127 employees, including 80 in
operations, 15 in research and development, 21 in sales and marketing and 11 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. As
a result of its acquisition of SIS Microelectronics, the Company expects to add
approximately 20 employees.

FACILITIES

The Company occupies approximately 29,000 square feet of office space in
Sunnyvale, California, pursuant to a lease which expires in November 2001. As a
result of its acquisition of SIS Microelectronics, the Company will occupy
approximately 9,600 square feet of office space in Longmont, Colorado under a
lease which expires in February 2002. The Company also maintains sales offices
in Phoenix, Arizona, Boca Raton, Florida, Boston, Massachusetts, San Diego,
California and Tokyo, Japan. The Company believes that its existing facilities
are 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.

35
<PAGE> 37

GLOSSARY

APPLICATION SPECIFIC INTEGRATED CIRCUIT ("ASIC"): A custom/semi-custom IC
designed for a particular customer product or application.

COMPILER: A software application that creates multiple circuit layouts
based on pre-defined design rules.

DEEP SUBMICRON DESIGNS: Design rules, generally of less than 0.5(LOGO)
geometry, resulting in an IC with extremely high levels of integration and a
very small die size area.

DESIGN METHODOLOGY: A set of chip-level design guidelines and rules that
determine how the circuit libraries are used in conjunction with EDA tools to
produce the IC design in silicon.

ELECTRICAL CIRCUIT LIBRARIES: Also referred to as cell libraries. Functions
available in a semi-custom IC design environment used to define the physical and
operating parameters of the individual logic elements which are the core
building blocks of an IC.

ELECTRONIC DESIGN AUTOMATION ("EDA"): Technology and process by which
electronic products (including custom and semi-custom ICs) are designed using
computer-aided engineering tools.

FOUNDRY: Semiconductor or silicon manufacturing company that manufactures
custom and semi-custom ICs.

GATE ARRAY: A design approach, consisting of a standard architecture of
pre-designed, repetitive transistors which are used to form cell libraries, that
when connected, form a complex IC.

INPUT/OUTPUT ("I/O") FUNCTIONS: The circuitry residing at the periphery of
the IC, the purpose of which is to communicate with other parts of the system.

INTEGRATED CIRCUIT ("IC"): The chip, also referred to as a semiconductor.

MICRON ("(LOGO)"): One millionth of a meter, a standard unit of measure in
IC design.

PORTABILITY: The ability to transfer a circuit design to a new silicon
process technology or to a new foundry source.

SEMICONDUCTOR INTELLECTUAL PROPERTY ("SIP"): SIP consists of a set of cell
libraries from which all circuits are derived, design tools, design
methodologies and related engineering services.

STANDARD CELL: A design approach, consisting of pre-designed building
blocks, which, when arranged in certain combinations, can create a complex IC.

SYSTEM-ON-A-CHIP: A complex IC design that integrates silicon building
blocks such as cell libraries, microprocessors, memories, graphics and I/O
functions on a single IC and typically replaces multiple ICs mounted on a
printed circuit board.

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<PAGE> 38

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information regarding the executive
officers and directors of the Company as of March 13, 1998:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Conrad J. Dell'Oca(1).................. 56 President, Chief Executive Officer and Chairman of
the Board
Mitchell D. Bohn(1).................... 50 Chief Operating Officer, Chief Financial Officer and
Director
Jai P. Shin............................ 56 Executive Vice President and Director
Patrick Y.C. Yin....................... 47 Senior Vice President
Yen C. Chang........................... 46 Senior Vice President, Engineering
Charles R. Olson....................... 42 Vice President, Sales
Charles Kummeth........................ 37 Vice President, Marketing
James D. Behrens....................... 46 Vice President, Business Development
Charles R. Schadewitz.................. 37 Vice President, North American Sales
Martin J. Baynes....................... 50 Vice President, Engineering Operations
Edward Wan............................. 41 Vice President, Design Services
Y.S. Fu(2)(3).......................... 49 Director
Walter G. Kortschak(2)(3).............. 38 Director
Cheng Ming Lee......................... 55 Director
Jeffrey D. Saper(3).................... 49 Director and Secretary
</TABLE>

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

(1) Member of the Option Committee.

(2) Member of the Compensation Committee.

(3) Member of the Audit Committee.

Conrad J. 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.

Mitchell D. Bohn has served as Chief Operating Officer and Chief Financial
Officer and a director of the Company since February 1998. From June 1997 to
February 1998, Mr. Bohn served as Executive Vice President and Chief Financial
Officer of Thomas Group, a management consulting firm. From May 1994 to June
1996, Mr. Bohn served as President and Chief Operating Officer of EMASS, Inc., a
developer of data-storage solutions for computers which is owned by Raytheon.
From January 1990 to January 1998, Mr. Bohn owned and operated Bohn Enterprises,
a management consulting firm and investor in start-up and emerging-growth
companies in the electronics and medical technology markets. Mr. Bohn was a
founder of LSI Logic, and served as Chief Financial Officer of LSI Logic and in
various other executive management capacities of LSI Logic's foreign operations
from 1981 through 1989. Mr. Bohn received B.S. and M.S. degrees in Business
Administration from the University of North Dakota.

Jai P. Shin has served as Executive Vice President of the Company since
November 1996 and as a director of the Company since January 1992. From January
1992 to November 1996, 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,

37
<PAGE> 39

Mr. Shin served as President of LSI Logic Korea. Mr. Shin received his B.A. and
M.A. degrees in Economics from San Jose State University.

Patrick Y. Yin has served as Senior Vice President of the Company since
February 1997. From September 1997 to March 1998, he served as the Company's
Chief Technical Officer. 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.

Yen C. Chang has served as Senior Vice President, Engineering of the
Company since March 1998. From September 1997 to March 1998, he served as Vice
President, Engineering of the Company. He served as the Company's Vice
President, Engineering Asia from January 1997 to September 1997. From September
1995 to December 1996, Mr. Chang served as Vice President, Engineering of the
Company. From January 1992 to September 1997, Mr. Chang served as Director,
Engineering of the Company. From June 1982 to January 1992, Mr. Chang served as
Department Head, Megafunction Development for LSI Logic. Mr. Chang received B.S.
and M.S. degrees in Electrical Engineering from Oregon State University.

Charles R. Olson has served as Vice President, Sales of the Company since
February 1998. From July 1997 to February 1998, Mr. Olson served as Vice
President, Sales and Marketing of the Company. From May 1997 to July 1997, Mr.
Olson served as Vice President, Sales of Precedence, Inc., a provider of
multi-simulator software environments for design engineers. From October 1988 to
October 1996, Mr. Olson served as General Manager and Vice President of Zycad
Corporation, a semiconductor simulation systems manufacturer.

Charles Kummeth has served as Vice President, Marketing of the Company
since February 1998. From July 1996 to February 1998, Mr. Kummeth served as
Business Development Director for Imation Corporation, a producer of product and
service solutions for the handling of information (formerly part of 3M
Corporation). From August 1982 to July 1996, Mr. Kummeth served in various
progress positions at 3M Corporation in Electronics and Software Design
Engineering, Embedded Systems and Hardware Design, Product Development
Laboratory, Marketing and Business Operations. Mr. Kummeth received his B.S.
degree in Electrical Engineering from the University of North Dakota, an M.S.
degree in Software Design and Development from St. Thomas University in
Minnesota and an M.B.A. from the Carlson School of Business of the University of
Minnesota.

James D. Behrens has served as Vice President, Business Development of the
Company since February 1998. From August 1997 to January 1998, he served as
President of SIS Microelectronics. From March 1997 to August 1997, Mr. Behrens
served as General Partner for Quanah Consulting, a consulting firm. From October
1989 to March 1997, Mr. Behrens served in various vice president and consulting
executive roles for Cadence Design Systems, an electronic design automation
supplier. From March 1985 to October 1989, Mr. Behrens served as Director of
Marketing for Mentor Graphics Corporation. Mr. Behrens received a B.S. in
Physical Science from Colorado State University.

Charles R. Schadewitz has served as Vice President, North American Sales of
the Company since April 1996 and as Director, North American Sales of the
Company from February 1994 to March 1996. From October 1990 to November 1993,
Mr. Schadewitz was a Senior Account Manager of Mentor Graphics Corporation, an
EDA company. From December 1987 to October 1990, Mr. Schadewitz was a Senior
Account Manager of Hewlett-Packard Company. Mr. Schadewitz received a B.S.M.E.
from the University of California, Berkeley.

Martin J. Baynes has served as Vice President, Engineering Operations of
the Company since September 1997. From January 1992 until August 1997, Mr.
Baynes served as Vice President, Engineering for Zycad Corporation, an
electronic design automation company. Previously, Mr. Baynes has served as a
Director of Engineering for Genrad, National Semiconductor Corporation and

38
<PAGE> 40

Fairchild Semiconductor Corporation. Mr. Baynes received a MSc in Computer
Engineering from Brunel University, England and a BSc in Electronics from
Southampton University, England.

Edward Wan has served as Vice President, ASIC Design Services of the
Company since March 1998. From January 1998 to March 1998, he served as Vice
President in the Worldwide Services group for Cadence Design Services, Inc., an
EDA tools company. From 1985 to 1993, Mr. Wan held various positions at LSI
Logic. From 1993 to 1997, Mr. Wan served as Vice President of the North American
Engineering group at LSI Logic. He also served as a Senior Director of Corporate
Product Marketing and Vice President of Engineering for LSI Logic Canada. Prior
to LSI Logic, he spent four years at Signetics in various design and product
engineering positions. Mr. Wan received his B.S. E.E.C.S. degree from University
of California at Berkeley.

Y.S. 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.

Walter G. 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, Simulation Sciences, Inc. and SteriGenics International, Inc.

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

Jeffrey D. Saper has been Secretary and a director of the Company since May
1996. Mr. Saper has been a member of Wilson Sonsini Goodrich & Rosati, P.C.,
legal counsel to the Company, since 1980. Mr. Saper is also a director of
Diamond Multimedia Systems, Inc. and Proxim, 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. Fu,
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
39
<PAGE> 41

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.

The Option Committee consists of Conrad J. Dell'Oca and Mitchell D. Bohn.
The Option Committee has the ability to grant options (not to exceed 50,000
shares) to non-executive officers under the Corporation's 1996 Stock Option
Plan.

DIRECTOR COMPENSATION

Outside directors receive $10,000 per year for serving on the Board of
Directors, $1,000 for each regular meeting of the Board of Directors in which
they participate and $2,000 per year for serving as a member of the Audit or
Compensation Committee of the Board. Outside directors are also 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 (the "Director Plan"), which was adopted in February
1997 and amended in March 1998. 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. As of February 28, 1998, options to purchase an aggregate of
25,000 shares of Common Stock were outstanding under the Director Plan, and an
aggregate of 225,000 shares of Common Stock remained available for future
grants. 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 or, if no such meeting is held, on the anniversary
of the date of grant, 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 (3) months following
the termination of an Outside Director's status as a director or twelve (12)
months if the termination is due to death or total and permanent disability. 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. If the Outside Director's options are not assumed or
substituted, they shall become fully vested and exercisable. In addition, if an
Outside Director ceases to be a director of the Company or the successor
corporation after the merger or sale, other than upon a voluntary resignation,
the Outside Director's options shall be 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.

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<PAGE> 42

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).

EXECUTIVE COMPENSATION

The following table sets forth a summary of the compensation paid by the
Company during the fiscal years ended November 30, 1996 and 1997 to the
Company's Chief Executive Officer and the Company's four other most highly
compensated executive officers whose salary and bonus exceeded $100,000 in
fiscal 1997 (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 POSITIONS YEAR SALARY BONUS(1) COMPENSATION(2)(3) COMPENSATION(4)
---------------------------- ---- -------- -------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
Conrad J. Dell'Oca.................. 1997 $191,617 $120,000 -- $30,772
President, Chief Executive Officer 1996 174,372 50,000 $103,070 29,682
and Director
Jai P. Shin......................... 1997 175,628 120,000 -- 7,059
Executive Vice President and 1996 159,831 50,000 103,070 6,239
Director
Patrick Y. Yin...................... 1997 166,109 120,000 80,676 4,122
Senior Vice President 1996 151,161 50,000 55,500 3,130
Yen C. Chang........................ 1997 156,281 120,000 80,676 3,944
Senior Vice President, Engineering 1996 142,206 50,000 55,500 3,504
Charles R. Schadewitz............... 1997 94,853 13,892 45,553 556
Vice President, North American 1996 84,865 -- 93,443 515
Sales
</TABLE>

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

(1) Includes bonus payments earned in the fiscal year indicated even if such
bonuses were paid in a subsequent fiscal year.

(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 the fiscal year indicated even if such
bonuses were paid in a subsequent fiscal year.

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

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<PAGE> 43

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information for the fiscal year
ended November 30, 1997 with respect to each grant of stock options to the Named
Executive Officers:

OPTION GRANTS DURING YEAR ENDED NOVEMBER 30, 1997

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------- ANNUAL
% OF TOTAL RATES OF STOCK PRICE
OPTIONS APPRECIATION FOR
GRANTED EXERCISE OPTION TERM(2)
OPTIONS TO EMPLOYEES PRICE PER EXPIRATION --------------------
NAME GRANTED IN 1997(1) SHARE DATE 5% 10%
---- ------- ------------ --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Schadewitz............. 20,000 1.5 $8.00 01/10/07 $100,623 $254,999
</TABLE>

- ---------------
(1) In 1997, the Company granted employees and consultants options to purchase
an aggregate of 1,346,600 shares of Common Stock.

(2) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), shown are the gains or "option spreads" that would exist for
the respective options granted. These gains are based on the assumed rates
of annual compound stock price appreciation of 5% and 10% from the date the
option was granted over the full option term. These assumed annual compound
rates of stock price appreciation are mandated by the rules of the
Commission and do not represent the Company's estimate or projection of
future Common Stock prices.

AGGREGATED OPTION EXERCISES IN 1997 AND NOVEMBER 30, 1997 OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS AT NOVEMBER 30, VALUE OF UNEXERCISED
1997 IN-THE-MONEY OPTIONS(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Charles R. Schadewitz.......................... -- 20,000 -- $0.00
</TABLE>

- ---------------
(1) Based upon an assumed fair market value of $8.00 per share as of November
30, 1997 less the exercise price per share.

No Named Executive Officer exercised any options during the fiscal year ended
November 30, 1997.

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 and March 1998. 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, approves the forms of option agreements, 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. As of February 28, 1998, options to purchase
an aggregate of 2,250,190 shares of Common Stock were outstanding under the
Option Plan, and an aggregate of 2,191,030 shares of Common Stock remained
available for future grants. The exercise price of all incentive stock options
granted under the Option Plan must be at least equal to the fair market value 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

42
<PAGE> 44

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. No optionee shall be granted options in
any fiscal year of the Company covering more than 500,000 shares, although in
connection with the optionee's initial service, an option to purchase up to an
additional 500,000 shares may be granted which will not count against this
limit. 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 or a parent or subsidiary of 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 1997 Employee Stock Purchase Plan (the "1997 Purchase Plan")
was adopted by the Board of Directors and by the stockholders in February 1997
and amended in March 1998 and will become effective upon the date of this
Prospectus. A total of 500,000 shares of Common Stock has been reserved for
issuance under the 1997 Purchase Plan, plus annual increases equal to the lesser
of (i) the shares underlying options granted in the immediately preceding year
or (ii) a lesser amount determined by the Board.

The 1997 Purchase Plan, which is intended to qualify under Section 423 of
the Internal Revenue Code of 1986, as amended, contains successive six-month
offering periods. The offering periods generally start on the first trading day
on or after April 1 and October 1 of each year, except for the first such
offering period which commences on the first trading day on or after the
effective date of this offering and ends on the last trading day on or before
October 31, 1998.

Employees are eligible to participate if they are customarily employed by
the Company or any participating subsidiary for at least 20 hours per week and
more than five months in any calendar year. However, any employee who (i)
immediately after grant owns stock possessing 5% or more of the total combined
voting power or value of all classes of the capital stock of the Company, or
(ii) whose rights to purchase stock under all employee stock purchase plans of
the Company accrues at a rate which exceeds $25,000 worth of stock for each
calendar year may be not be granted an option to purchase stock under the 1997
Purchase Plan. The 1997 Purchase Plan permits participants to purchase Common
Stock through payroll deductions of up to 10% of the participant's
"compensation." Compensation is defined as the participant's base straight time
gross earnings, commissions, payments for overtime, profit sharing payments,
shift premium payments, incentive compensation, incentive payments and bonuses,
but exclusive of other compensation. The maximum number of shares a participant
may purchase during a single offering period is 2,500 shares.

Amounts deducted and accumulated by the participant are used to purchase
shares of Common Stock at the end of each offering period. The price of stock
purchased under the 1997 Purchase Plan is 85% of the lower of the fair market
value of the Common Stock at the beginning or end of the offering period.
Participants may end their participation at any time during an offering period,
and they will be paid their payroll deductions to date. Participation ends
automatically upon termination of employment with the Company.

Rights granted under the 1997 Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the 1997 Purchase Plan. The 1997 Purchase Plan provides
that, in the event of a merger of the Company with or into another
43
<PAGE> 45

corporation or a sale of substantially all of the Company's assets, each
outstanding option may be assumed or substituted for by the successor
corporation. If the successor corporation refuses to assume or substitute for
the outstanding options, the offering period then in progress will be shortened
and a new exercise date will be set. The 1997 Purchase Plan will terminate in
February 2007. The Board of Directors has the authority to amend or terminate
the 1997 Purchase Plan, except that no such action may adversely affect any
outstanding rights to purchase stock under the 1997 Purchase Plan.

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 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.

44
<PAGE> 46

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 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 for an
aggregate purchase price of $5,049,980, 1,194,696 shares of Common Stock from
Yen C. Chang for an aggregate purchase price of $5,049,980, 1,194,698 shares of
Common Stock from Jai P. Shin, for an aggregate purchase price of $5,049,988 and
1,194,696 shares of Common Stock from Patrick Y. Yin for an aggregate purchase
price of $5,049,980. Messrs. Dell'Oca, Chang, Shin and Yin are executive
officers of the Company.

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 Summit Ventures IV, L.P. and Summit
Investors III, L.P., WK Technology Fund, WK Technology Fund II and WK Technology
Fund III 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. Summit Ventures
IV, L.P. and Summit Investors III, L.P. purchased an aggregate of 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 Ventures IV, L.P. and Summit Investors III, L.P. WK Technology Fund,
WK Technology Fund II and WK Technology Fund III purchased an aggregate of
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 partner of WK
Technology Fund, WK Technology Fund II and WK Technology Fund III. 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 Summit Ventures IV, L.P. and Summit Investors
III, L.P., WK Technology Fund, WK Technology Fund II and WK Technology Fund III
and Jeffrey D. Saper. Summit Ventures IV, L.P. and Summit Investors III, L.P.
purchased an aggregate of 2,365,714 shares of Common Stock for an aggregate
purchase price of $3,545,600, WK Technology Fund, WK Technology Fund II and WK
Technology Fund III purchased an aggregate of 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.
Beginning in May 2003, purchasers holding at least 55% of the shares of Common
Stock then held by all such purchasers shall have the right to require the
Company to repurchase all or any portion of such shares of Common Stock at the
then fair market value of such shares as determined by the Company and the
investors, or in the event such parties cannot agree upon the fair market value,
the fair market value shall be determined by an independent appraiser. The right
of the purchasers to cause the Company to purchase their shares of Common Stock
will terminate upon the closing of the offering.

45
<PAGE> 47

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of February 28, 1998 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 BEFORE THE AFTER THE
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING(1) OFFERING(1)
------------------------ ------------------ ----------- -----------
<S> <C> <C> <C>
Conrad J. Dell'Oca(2).............................. 2,625,304 11.7% 9.2%
830 East Arques Avenue
Sunnyvale, California 94086
Summit Partners, L.P.(3)........................... 2,601,008 11.6 9.1
Walter G. Kortschak
499 Hamilton Avenue, Suite 200
Palo Alto, California 94301
WK Technology(4)................................... 2,601,008 11.6 9.1
Y.S. Fu
10th Floor, 115 Sec. 3
Ming Sheng E. Road
Taipei, Taiwan R.O.C
Patrick Y.C. Yin(5)................................ 2,464,170 11.0 8.7
830 East Arques Avenue
Sunnyvale, California 94086
Yen C. Chang(6).................................... 2,446,570 10.9 8.6
830 East Arques Avenue
Sunnyvale, California 94086
Jai P. Shin(7)..................................... 2,012,126 9.0 7.1
830 East Arques Avenue
Sunnyvale, California 94086
Cheng Ming Lee(8).................................. 700,000 3.1 2.5
Jeffrey D. Saper(9)................................ 183,546 * *
Charles R. Schadewitz(10).......................... 125,000 * *
All directors and executive officers as a group
(14 persons)(11)................................. 15,758,732 70.2 55.4
</TABLE>

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

(1) Applicable percentage ownership is based on 22,439,557 shares of Common
Stock outstanding as of February 28, 1998 and 28,439,557 shares immediately
following the completion of this offering (assuming no exercise of the
Underwriters' over-allotment option).

(2) 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.

(3) 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, a director of the Company, is a general partner of
Summit Partners, L.P. and 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.

(4) 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

46
<PAGE> 48

any beneficial ownership of the shares held by WK Technology Fund, WK
Technology Fund II, WK Technology Fund III and WK Technology Fund IV,
except to the extent of his proportionate partnership interests in the
respective entities.

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

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

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

(8) 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 Capital
Corporation. Mr. Lee disclaims any beneficial ownership of the shares held
by Win Win Venture Capital Corporation, except to the extent of his
proportionate partnership interests in the respective entities.

(9) Includes 140,922 shares held by WS Investment Company 96-A, an investment
fund of Wilson Sonsini Goodrich & Rosati, P.C. ("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, 95,000 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
3,125 shares per month through April 2000. Includes 7,500 shares subject to
an option exercisable within 60 days of February 28, 1998.

(10) All the shares are subject to a right of repurchase in favor of the Company
in the event that Mr. Schadewitz terminates as an employee or consultant of
the Company. The repurchase right of 1,042 shares expires in March 1998.
The repurchase right of 21,667 shares expires as to 1,041 shares through
April 1999. The repurchase right of 12,667 shares expires as to 416 shares
through April 2000. Includes 5,000 shares subject to an option exercisable
within 60 days of February 28, 1998.

(11) Includes an aggregate of 12,500 shares subject to an option exercisable
within 60 days of February 28, 1998.

47
<PAGE> 49

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists 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 February 28, 1998, there were 22,439,557 shares of Common Stock
outstanding held of record by approximately 140 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 4,779,000
shares of Common Stock (the "Registrable Securities") (including funds
associated with Summit Partners, WK Technology and Win Win Venture Capital,
Messrs. Dell'Oca, Shin, Yin and Chang and the former shareholders of SIS
Microelectronics) 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

48
<PAGE> 50

Securities on Form S-3, when such form becomes available to the Company, subject
to certain conditions and limitations.

ANTI-TAKEOVER EFFECTS OF DELAWARE LAW

The Company is subject to Section 203 of the Delaware 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) 743-1444.

LISTING

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

49
<PAGE> 51

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 28,439,557 shares of
Common Stock outstanding, assuming no exercise of outstanding options after
February 28, 1998. Of this amount, the 6,000,000 shares offered hereby will be
available for immediate sale in the public market as of the date of this
Prospectus. Approximately 111,000 additional shares will be available for sale
in the public market immediately after the date of this Prospectus pursuant to
Rule 144(k). Approximately 32,000 Restricted Shares will become eligible for
sale prior to 90 days after the Effective Date pursuant to Rule 144(k) under the
Securities Act. However, approximately 5,000 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 416,000
Restricted Shares will become eligible for sale 90 days after the Effective
Date, and approximately 21,453,000 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,
approximately 290,000 of these shares will be subject to a right of repurchase
possessed by the Company. The remaining approximately 428,000 shares held by
existing stockholders will become eligible for sale from time to time in the
future under Rule 144.

<TABLE>
<CAPTION>
SHARES ELIGIBLE
DAYS AFTER DATE OF THIS PROSPECTUS FOR SALE COMMENT
---------------------------------- --------------- -------
<S> <C> <C>
Upon Effectiveness..................... 6,000,000 Shares sold in offering
Upon Effectiveness..................... 111,000 Freely tradeable shares saleable under
Rule 144(k) that are not subject to
180-day lockup
0-90 days.............................. 32,000 Freely tradeable shares that become
saleable under Rule 144(k) that are not
subject to 180-day lockup
90 days................................ 416,000 Shares saleable under Rules 701 and 144
180 days............................... 21,453,000 Lockup released; shares saleable under
Rules 144 and 701
Thereafter............................. 428,000 Restricted securities held for one year
or less
</TABLE>

In general, under Rule 144 a person (or persons whose shares are
aggregated) who has beneficially owned shares for at least one year 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 284,000 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 two 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

50
<PAGE> 52

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 they will not sell any Common
Stock without the prior consent of Hambrecht & Quist LLC for a period of 180
days from the effective date of this Prospectus, 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 4,779,000
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."

51
<PAGE> 53

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Hambrecht & Quist LLC
and Merrill Lynch, Pierce, Fenner & Smith Incorporated, have severally agreed to
purchase from the Company the following respective numbers of shares of Common
Stock:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Hambrecht & Quist LLC.......................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................

---------
Total............................................. 6,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company, its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.

The Underwriters propose to offer the shares of Common Stock directly 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 of the shares, the offering price and other
selling terms may be changed by the Representatives of the Underwriters. The
Representatives have advised the Company that the Underwriters do not intend to
confirm discretionary sales in excess of 5% of the shares of Common Stock
offered hereby.

The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to 900,000
additional shares of Common Stock at the initial public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus. To the
extent that the Underwriters exercise this option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage thereof
which the number of shares of Common Stock to be purchased by it shown in the
above table bears to the total number of shares of Common Stock offered hereby.
The Company will be obligated, pursuant to the option, to sell shares to the
Underwriters to the extent the option is exercised. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of shares of Common Stock offered hereby.

The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.

Certain stockholders of the Company, including executive officers and
directors, who will own in the aggregate 20,545,099 shares of Common Stock after
this offering, have agreed that they will not, without the prior written consent
of Hambrecht & Quist LLC, offer, sell or otherwise dispose of any

52
<PAGE> 54

shares of Common Stock, options or warrants to acquire shares of Common Stock or
securities exchangeable for or convertible into shares of Common Stock owned by
them during the 180-day period following the date of this Prospectus. The
Company has requested and the Representatives of the Underwriters have agreed
with the Company not to release any of such lockup restrictions prior to the end
of the 180-day period. In addition, stockholders who will own an aggregate of
924,980 shares of Common Stock after this offering have entered into similar
lockup agreements with the Company, and the Company has agreed that, during the
180-day period following this Prospectus, it will not waive any of such
agreements without the prior written consent of Hambrecht & Quist LLC. The
Company has agreed that it will not, without the prior written consent of
Hambrecht & Quist LLC, offer, sell or otherwise dispose of any shares of Common
Stock, options or warrants to acquire shares of Common Stock or securities
exchangeable for or convertible into shares of Common Stock during the 180-day
period following the date of this Prospectus, except that the Company may issue
shares upon the exercise of options granted prior to the date hereof, and may
grant additional options under its stock option plans, provided that, without
the prior written consent of Hambrecht & Quist LLC, such additional options
shall not be exercisable during such period.

Certain persons participating in this offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of the Common Stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. A penalty bid means an arrangement that permits the Underwriters
to reclaim a selling concession from a syndicate member in connection with the
offering when shares of Common Stock sold by the syndicate member are purchased
in syndicate covering transactions. Such transactions may be effected on the
Nasdaq Stock Market, in the over-the-counter market, or otherwise. Such
stabilizing, if commenced, may be discontinued at any time.

Prior to the offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price are prevailing
market and economic conditions, revenues and earnings of the Company, market
valuations of other companies engaged in activities similar to the Company,
estimates of the business potential and prospects of the Company, the present
state of the Company's business operations, the Company's management and other
factors deemed relevant. The estimated initial public offering price range set
forth on the cover of this preliminary prospectus is subject to change as a
result of market conditions and other factors.

At the request of the Company, the Underwriters have reserved for sale at
the initial public offering price to persons designated by the Company a number
of shares of Common Stock not to exceed 5% of the total number of shares of
Common Stock in this offering. The number of shares available for sale to the
general public will be reduced to the extent such persons purchase such shares.
Any such shares not so purchased will be offered by the Representatives to the
general public on the same basis as other shares offered hereby.

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, P.C.
("WSG&R"), Palo Alto, California. Pillsbury Madison & Sutro LLP, Palo Alto,
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 and he has been granted

53
<PAGE> 55

options to acquire an aggregate of 30,000 shares of Common Stock. 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 consolidated financial statements of the Company as of November 30,
1996 and 1997 and for each of the years in the three-year period ended November
30, 1997 included in this Prospectus and the related consolidated 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. KPMG 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.

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.

54
<PAGE> 56

ASPEC TECHNOLOGY, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Income........................... F-4
Consolidated Statements of Stockholders' Equity
(Deficiency).............................................. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 57

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated balance sheets of Aspec
Technology, Inc. as of November 30, 1996 and 1997, and the related consolidated
statements of income, stockholders' equity (deficiency) and cash flows for each
of the three years in the period ended November 30, 1997. 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 consolidated financial statements present fairly, in
all material respects, the financial position of Aspec Technology, Inc. at
November 30, 1996 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended November 30, 1997 in conformity
with generally accepted accounting principles.

Deloitte & Touche LLP

San Jose, California
March 12, 1998

F-2
<PAGE> 58

ASPEC TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

ASSETS

<TABLE>
<CAPTION>
NOVEMBER 30, PRO FORMA
------------------- FEBRUARY 28, FEBRUARY 28,
1996 1997 1998 1998
-------- -------- ------------ ------------
(UNAUDITED) (UNAUDITED)
(NOTE 1)
<S> <C> <C> <C> <C>
Current assets:
Cash and equivalents............................ $ 6,341 $ 2,524 $ 2,690 $ 2,690
Accounts receivable (net of allowances of $300,
$300 and $700):
Billed....................................... 5,620 6,996 5,247 5,247
Unbilled..................................... 121 948 2,765 2,765
Prepaid expenses................................ 586 507 448 448
Deferred income taxes........................... 398 1,778 1,778 1,778
-------- -------- -------- --------
Total current assets.................... 13,066 12,753 12,928 12,928
Property and equipment -- net..................... 2,478 4,105 3,961 3,961
Other assets...................................... 216 243 227 227
-------- -------- -------- --------
TOTAL............................................. $ 15,760 $ 17,101 $ 17,116 $ 17,116
======== ======== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable................................ $ 941 $ 801 $ 616 $ 616
Accrued liabilities............................. 1,937 2,379 2,379 2,379
Income taxes payable............................ 2,050 321 918 918
Customer advances............................... 4,434 4,747 3,085 3,085
-------- -------- -------- --------
Total current liabilities............... 9,362 8,248 6,998 6,998
-------- -------- -------- --------
Commitments and contingencies (Note 5)
Series A redeemable preferred stock, $.001 par
value: 130 shares designated and outstanding
(liquidation value: $18,495).................... 13,345 14,168 14,380 14,380
-------- -------- -------- --------
Redeemable common stock, $.001 par value; shares
outstanding: 1996, 1997 and 1998 -- 4,779; pro
forma -- none................................... 7,116 7,116 7,116 --
-------- -------- -------- --------
Stockholders' equity (deficiency):
Preferred stock, $.001 par value; 5,000
authorized (excluding Series A redeemable
preferred stock): none outstanding........... -- -- -- --
Common stock, $.001 par value: 75,000 shares
authorized; shares outstanding:
1996 -- 17,941; 1997 -- 17,234;
1998 -- 17,260; pro forma -- 22,039.......... 3,344 2,914 3,143 10,259
Stockholder notes receivable.................... (648) (301) (292) (292)
Deferred stock compensation..................... (476) (165) (139) (139)
Retained earnings (deficit)..................... (16,283) (14,879) (14,090) (14,090)
-------- -------- -------- --------
Total stockholders' deficiency.......... (14,063) (12,431) (11,378) (4,262)
-------- -------- -------- --------
TOTAL............................................. $ 15,760 $ 17,101 $ 17,116 $ 17,116
======== ======== ======== ========
</TABLE>

See Notes to Consolidated Financial Statements.
F-3
<PAGE> 59

ASPEC TECHNOLOGY, INC.

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

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED NOVEMBER 30, FEBRUARY 28,
--------------------------- -----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue.......................................... $ 6,640 $15,265 $22,392 $ 5,678 $ 6,925
Costs of revenue................................. 2,307 4,702 8,763 1,650 2,709
------- ------- ------- ------- -------
Gross profit..................................... 4,333 10,563 13,629 4,028 4,216
------- ------- ------- ------- -------
Operating expenses:
Research and development....................... 445 921 1,190 298 431
Sales and marketing............................ 1,387 3,526 6,537 1,514 1,266
General and administrative..................... 1,093 1,994 2,363 396 873
------- ------- ------- ------- -------
Total operating expenses............... 2,925 6,441 10,090 2,208 2,570
------- ------- ------- ------- -------
Income from operations........................... 1,408 4,122 3,539 1,820 1,646
Interest income.................................. 56 310 173 89 22
------- ------- ------- ------- -------
Income before income taxes....................... 1,464 4,432 3,712 1,909 1,668
Provision for income taxes....................... 585 1,815 1,485 764 667
------- ------- ------- ------- -------
Net income....................................... 879 2,617 2,227 1,145 1,001
Accretion of redeemable preferred stock.......... -- 392 823 202 212
------- ------- ------- ------- -------
Income attributable to common stockholders....... $ 879 $ 2,225 $ 1,404 $ 943 $ 789
======= ======= ======= ======= =======
Basic earnings per share......................... $ 0.05 $ 0.11 $ 0.07 $ 0.04 $ 0.04
======= ======= ======= ======= =======
Basic average shares outstanding................. 18,338 21,057 21,362 21,574 21,286
======= ======= ======= ======= =======
Diluted earnings per share....................... $ 0.04 $ 0.10 $ 0.06 $ 0.04 $ 0.04
======= ======= ======= ======= =======
Diluted average shares outstanding............... 20,172 22,396 22,532 22,974 22,222
======= ======= ======= ======= =======
</TABLE>

See Notes to Consolidated Financial Statements.
F-4
<PAGE> 60

ASPEC TECHNOLOGY, INC.

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

<TABLE>
<CAPTION>
NON REDEEMABLE TOTAL
COMMON STOCK STOCKHOLDER DEFERRED RETAINED STOCKHOLDERS'
----------------- NOTES STOCK EARNINGS EQUITY
SHARES AMOUNT RECEIVABLE COMPENSATION (DEFICIT) (DEFICIENCY)
------- ------- ----------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, December 1, 1994...... 18,519 $ 99 $ -- $ -- $ 805 $ 904
Issuance of common stock under
employee 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 1,346 (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)
Issuance of common stock under
stock option plans............ 2 10 -- -- -- 10
Repurchase of common stock from
employees..................... (709) (440) 239 197 -- (4)
Accretion of redeemable
preferred stock............... -- -- -- -- (823) (823)
Collection of stockholder notes
receivable.................... -- -- 108 -- -- 108
Amortization of deferred stock
compensation.................. -- -- -- 114 -- 114
Net income...................... -- -- -- -- 2,227 2,227
------ ------ ----- ----- -------- --------
BALANCES, November 30, 1997..... 17,234 2,914 (301) (165) (14,879) (12,431)
Issuance of common stock under
stock option plans*........... 57 246 -- -- -- 246
Repurchase of common stock from
employees*.................... (31) (17) 9 7 -- (1)
Accretion of redeemable
preferred stock*.............. -- -- -- -- (212) (212)
Amortization of deferred stock
compensation*................. -- -- -- 19 -- 19
Net income...................... -- -- -- -- 1,001 1,001
------ ------ ----- ----- -------- --------
BALANCES, February 28, 1998*.... 17,260 $3,143 $(292) $(139) $(14,090) $(11,378)
====== ====== ===== ===== ======== ========
</TABLE>

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

* Unaudited

See Notes to Consolidated Financial Statements.
F-5
<PAGE> 61

ASPEC TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED NOVEMBER 30, FEBRUARY 28,
-------------------------- ---------------
1995 1996 1997 1997 1998
------ -------- ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 879 $ 2,617 $2,227 $1,145 $1,001
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 313 736 1,570 299 524
Deferred income taxes.......................... (230) (315) (1,380) -- --
Stock compensation expense..................... -- 106 114 36 19
Changes in assets and liabilities:
Accounts receivable.......................... (762) (3,949) (2,203) 1,424 (68)
Prepaid expenses and other assets............ (88) (699) 52 23 75
Accounts payable............................. 11 845 (140) 5 (185)
Accrued liabilities.......................... 293 1,269 442 (462) --
Income taxes payable......................... 415 964 (1,729) (1,827) 597
Customer advances............................ 1,295 3,036 313 (1,899) (1,662)
------ -------- ------ ------ ------
Net cash provided by (used for) operating
activities.............................. 2,126 4,610 (734) (1,256) 301
------ -------- ------ ------ ------
Cash flows from investing activities --
Purchases of property and equipment............... (594) (2,463) (3,197) (707) (380)
------ -------- ------ ------ ------
Cash flows from financing activities:
Sale of common stock.............................. -- 2,016 10 -- 246
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) (4) -- (1)
Collection of stockholder notes receivable........ 28 -- 108 91 --
------ -------- ------ ------ ------
Net cash provided by financing
activities.............................. 15 1,877 114 91 245
------ -------- ------ ------ ------
Net increase (decrease) in cash and equivalents..... 1,547 4,024 (3,817) (1,872) 166
Cash and equivalents, beginning of period........... 770 2,317 6,341 6,341 2,524
------ -------- ------ ------ ------
Cash and equivalents, end of period................. $2,317 $ 6,341 $2,524 $4,469 $2,690
====== ======== ====== ====== ======
Supplemental disclosure of cash flow information --
Cash paid for income taxes........................ $ 404 $ 1,166 $4,594 $2,589 $ 70
====== ======== ====== ====== ======
Supplemental schedule of noncash investing and
financing activities:
Issuance of common stock for notes receivable..... $ 28 $ 648 $ -- $ -- $ --
====== ======== ====== ====== ======
Accretion of redeemable preferred stock........... $ -- $ 392 $ 823 $ 202 $ 212
====== ======== ====== ====== ======
</TABLE>

See Notes to Consolidated Financial Statements.
F-6
<PAGE> 62

ASPEC TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1995, 1996 AND 1997

(INFORMATION AT FEBRUARY 28, 1998 AND FOR THE THREE MONTHS ENDED
FEBRUARY 28, 1997 AND 1998 IS UNAUDITED)

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Business -- Aspec Technology, Inc. (the Company) is a leading provider of
merchant semiconductor intellectual property ("SIP") solutions for
high-performance, complex IC designs, including system-on-a-chip ICs.

Principles of Consolidation -- The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries.
Intercompany accounts and transactions are eliminated.

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.

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. A significant portion of the Company's
revenues are derived from customers in Asia, a region experiencing economic
volatility. The Company has experienced a lengthening of the payment period for
accounts receivables from certain Asian-based customers. At November 30, 1997
and February 28, 1998, approximately 58.9% and 63.6%, respectively, of the
Company's accounts receivable (including unbilled receivables) were from
Asian-based customers. Although the Company currently believes, based in part on
continuing discussions with these customers, that its existing accounting
reserves are adequate given the estimated exposure related to all of its
accounts receivable, there can be no assurance that such accounting reserves
will prove to be adequate nor that present or future dislocations in Asian
countries or elsewhere or other factors will not have a material adverse effect
on the Company's ability to collect its accounts receivable or on its business,
operating results and financial condition.

Revenue Recognition -- A 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
F-7
<PAGE> 63
ASPEC TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED NOVEMBER 30, 1995, 1996 AND 1997

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 customer advances, while revenue in excess of
billings is recorded as unbilled receivables. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. 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 support and maintenance contracts is deferred as customer
advances and recognized ratably over the term of the agreement, which is
typically one year. Royalty revenues are earned and recognized in the period
reported by the customer or when cash is received.

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.

Stock Compensation -- The Company accounts for stock-based awards granted
to employees based on the intrinsic value method in accordance with APB Opinion
No. 25, "Accounting for Stock Issued to Employees" (see Note 7).

Earnings Per Share -- In the period ended February 28, 1998, the Company
adopted Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" (SFAS 128). All earnings per share (EPS) data for prior periods have been
restated to conform with SFAS 128.

SFAS 128 requires a dual presentation of basic and diluted EPS. Basic EPS
excludes dilution and is computed by dividing net income attributable to common
stockholders by the weighted average common shares less shares subject to
repurchase rights outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock.

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

A reconciliation between basic average and diluted average shares
outstanding follows:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED NOVEMBER 30, FEBRUARY 28,
--------------------------- -----------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Basic average shares outstanding......... 18,338 21,057 21,362 21,574 21,286
Weighted average common shares subject to
repurchase rights...................... 575 859 982 1,149 731
Weighted average common share equivalents
related to stock purchase rights and
options................................ 1,259 480 188 251 205
------- ------- ------- ------- -------
Diluted average shares outstanding....... 20,172 22,396 22,532 22,974 22,222
======= ======= ======= ======= =======
</TABLE>

Unaudited Interim Financial Information -- The unaudited interim financial
information as of February 28, 1998 and for the three months ended February 28,
1997 and 1998 has been prepared on the same basis as the audited financial
statements. In the opinion of management, such unaudited information includes
all adjustments (consisting only of normal recurring accruals) necessary for a
fair presentation of this interim information. Operating results for the three
months ended February 28, 1998 are not necessarily indicative of the results
that may be expected for any future period.

F-8
<PAGE> 64
ASPEC TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED NOVEMBER 30, 1995, 1996 AND 1997

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 consolidated balance sheet present the Company's stockholders'
equity (deficiency) as if all such redemption privileges had terminated as of
February 28, 1998.

Recently Issued Accounting Standards -- In June 1997, the FASB issued SFAS
No. 130, "Reporting Comprehensive Income," which requires an enterprise to
report, by major components and as a single total, the change in net assets
during the period from nonowner sources; and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which establishes annual and
interim reporting standards for an enterprise's business segments and related
disclosures about its products, services, geographic areas and major customers.
Adoption of these statements will not impact the Company's financial position,
results of operations or cash flows. Both statements are effective for fiscal
years beginning after December 15, 1997, with earlier application permitted.

2. PROPERTY AND EQUIPMENT

Property and equipment consist of (in thousands):

<TABLE>
<CAPTION>
NOVEMBER 30,
------------------ FEBRUARY 28,
1996 1997 1998
------- ------- ------------
<S> <C> <C> <C>
Computer equipment and software.................... $ 3,674 $ 6,621 $ 6,954
Office and other equipment......................... 243 492 539
------- ------- -------
3,917 7,113 7,493
Less accumulated depreciation and amortization..... (1,439) (3,008) (3,532)
------- ------- -------
$ 2,478 $ 4,105 $ 3,961
======= ======= =======
</TABLE>

3. ACCRUED LIABILITIES

Accrued liabilities consist of (in thousands):

<TABLE>
<CAPTION>
NOVEMBER 30,
------------------ FEBRUARY 28,
1996 1997 1998
------- ------- ------------
<S> <C> <C> <C>
Accrued compensation and related benefits.......... $ 1,140 $ 1,089 $ 1,049
Accrued commissions to outside sales
representatives.................................. 484 651 757
Other.............................................. 313 639 573
------- ------- -------
$ 1,937 $ 2,379 $ 2,379
======= ======= =======
</TABLE>

4. LINE OF CREDIT

In March 1998, the Company increased its bank line of credit from
$1,000,000 to $4,000,000. Borrowings under this line are due on demand, are
collateralized by substantially all of the Company's assets and bear interest at
the bank's prime rate (8.5% at February 28, 1998) plus 0.5%. As of November 30,
1997 and February 28, 1998, 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, 1997 and February 28, 1998,
the Company was in compliance with these covenants.

F-9
<PAGE> 65
ASPEC TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED NOVEMBER 30, 1995, 1996 AND 1997

5. LEASE COMMITMENTS

The Company leases its primary operating facility under a noncancelable
operating lease agreement which expires in November 2001. Rent expense incurred
under operating leases was approximately $144,000, $186,000 and $465,000 for the
years ended November 30, 1995, 1996 and 1997, respectively.

Future minimum lease commitments under operating leases as of November 30,
1997 are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING
NOVEMBER 30,
------------
<S> <C>
1998..................................................... $ 417
1999..................................................... 400
2000..................................................... 418
2001..................................................... 435
------
Total minimum lease payments................................ $1,670
======
</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 ($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 stockholders, 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.

F-10
<PAGE> 66
ASPEC TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED NOVEMBER 30, 1995, 1996 AND 1997

- 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, the 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,
1997 and February 28, 1998 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 ($4,115,000 at February 28, 1998) will be considered as additional
accretion for preferred stock in the quarter of the IPO which is expected
to result in a loss attributable to common stockholders and a loss per
share during that quarter.

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.

7. STOCKHOLDERS' EQUITY (DEFICIENCY)

Retained Earnings (Deficit)

The Company's retained earnings (deficit) at November 30, 1997 and February
28, 1998 is comprised of (in thousands):

<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 28,
1997 1998
------------ ------------
<S> <C> <C>
Cumulative net income from inception...................... $ 6,528 $ 7,529
Cumulative accretion of redeemable preferred stock........ (1,215) (1,427)
Repurchase of common stock................................ (20,192) (20,192)
-------- --------
$(14,879) $(14,090)
======== ========
</TABLE>

Stock Split

During 1997, the Company effected a two for one split of the outstanding
shares of common stock. All shares and per share data in the accompanying
financial statements have been retroactively adjusted to reflect the stock
split.

F-11
<PAGE> 67
ASPEC TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED NOVEMBER 30, 1995, 1996 AND 1997

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. The Company has the option to repurchase
exercised shares that have not vested 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, 4,500,000 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%.

In 1997, the Board of Directors adopted 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.

During 1997, the Company adopted the 1997 Employee Stock Purchase Plan and,
as amended in March 1998, reserved 500,000 shares of common stock (plus annual
increases equal to the lesser of (i) the shares underlying options granted in
the immediately preceding year or (ii) a lesser amount determined by the Board)
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 such offering. At February 28, 1998, no shares have been issued under this
plan.

F-12
<PAGE> 68
ASPEC TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED NOVEMBER 30, 1995, 1996 AND 1997

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 WEIGHTED
OPTIONS AVERAGE
OUTSTANDING EXERCISE PRICE
----------- --------------
<S> <C> <C>
Outstanding, December 1, 1994........................ 1,830 $0.05
Granted.............................................. 369 0.23
Exercised............................................ (677) 0.02
------ -----
Outstanding, November 30, 1995....................... 1,522 0.11
Granted.............................................. 2,325 1.14
Exercised............................................ (3,293) 0.23
------ -----
Outstanding, November 30, 1996....................... 554 4.05
Granted.............................................. 1,372 7.58
Exercised............................................ (2) 5.00
Cancelled............................................ (475) 5.81
------ -----
Outstanding, November 30, 1997....................... 1,449 6.82
Granted.............................................. 974 8.00
Exercised............................................ (57) 4.19
Cancelled............................................ (91) 5.82
------ -----
Outstanding, February 28, 1998....................... 2,275 $7.43
====== =====
</TABLE>

At November 30, 1997 and February 28, 1998, approximately 574,000 and
2,191,000 shares, respectively, were available for future grant under the 1996
Plan. At November 30, 1997 and February 28, 1998, 225,000 shares were available
for future grant under the 1997 Director Option Plan. As of November 30, 1997
and February 28, 1998, approximately 858,000 and 765,000 shares, respectively,
exercised and outstanding under the 1992 Plan were subject to repurchase by the
Company at the original purchase price.

The weighted average fair value of rights or options granted in fiscal 1996
and 1997 was $0.56 and $2.11, respectively. At November 30, 1995, all of the
rights outstanding were exercisable while at November 30, 1996, no options were
exercisable.

In connection with certain issuances of stock 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.

Additional information regarding options outstanding as of November 30,
1997 is as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------------
WEIGHTED AVE. EXERCISABLE OPTIONS
RANGE OF REMAINING -----------------------------
EXERCISE NUMBER CONTRACTUAL WEIGHTED AVE. NUMBER WEIGHTED AVE.
PRICES OUTSTANDING LIFE (YRS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ----------- ----------- ------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
$2.20-$4.25 328,250 6.1 $4.03 125,749 $4.08
$5.00-$6.80 325,700 8.2 6.68 4,750 6.80
$8.00-$8.50 795,240 9.1 8.02 13,840 9.00
---------- --- ----- ------- -----
1,449,190 8.2 $6.82 144,339 $4.55
========== === ===== ======= =====
</TABLE>

F-13
<PAGE> 69
ASPEC TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED NOVEMBER 30, 1995, 1996 AND 1997

Additional Stock Plan Information

Effective for fiscal 1997, the Company was required to adopt the disclosure
requirements of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" (SFAS 123). SFAS 123 defines a fair value method
of accounting for stock-based compensation awards to employees. The Company has
elected to continue to follow the provisions of Accounting Principals Board No.
25, "Accounting for Stock Issued to Employees," and its related interpretations.

SFAS 123 requires that the fair value of stock-based awards to employees be
calculated through the use of option pricing models, even though such models
were developed to estimate the fair value of freely tradable, fully transferable
options without vesting restrictions, which significantly differ from the
Company's stock option awards. These models also require subjective assumptions,
which greatly affect the calculated values. The Company's calculations were made
using the Black-Scholes option pricing model with the following weighted average
assumptions: expected life, five years; no stock volatility; risk free interest
rate, approximately 6.0% in 1996 and 6.1% in 1997; and no dividend payments
during the expected term. Forfeitures are recognized as they occur. If the
computed fair values of the 1996 and 1997 awards had been amortized to expense
over the vesting period of the awards, pro forma income attributable to common
stockholders and diluted earnings per share would have been approximately
$2,195,000 ($0.10 per share) in 1996 and $449,000 ($0.02 per share) in 1997.
However, the impact of outstanding non-vested options granted prior to 1996 has
been excluded from the pro forma calculation; accordingly, the 1996 and 1997 pro
forma adjustments are not indicative of future period pro forma adjustments,
when the calculation will apply to all applicable stock options.

8. INCOME TAXES

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

<TABLE>
<CAPTION>
1995 1996 1997
----- ------ -------
<S> <C> <C> <C>
Current:
Federal................................................ $ 556 $1,484 $ 1,884
State.................................................. 172 469 401
Foreign................................................ 87 177 580
----- ------ -------
Total current............................................ 815 2,130 2,865
----- ------ -------
Deferred:
Federal................................................ (197) (276) (1,174)
State.................................................. (33) (39) (206)
----- ------ -------
Total deferred........................................... (230) (315) (1,380)
----- ------ -------
Total provision for income taxes......................... $ 585 $1,815 $ 1,485
===== ====== =======
</TABLE>

The provision 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>
1995 1996 1997
---- ------ ------
<S> <C> <C> <C>
Income tax expense......................................... $498 $1,507 $1,262
State income taxes, net of federal benefit................. 87 266 189
Other...................................................... -- 42 34
---- ------ ------
Total provision for income taxes........................... $585 $1,815 $1,485
==== ====== ======
</TABLE>

F-14
<PAGE> 70
ASPEC TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED NOVEMBER 30, 1995, 1996 AND 1997

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>
1996 1997
---- ------
<S> <C> <C>
Deferred tax assets:
Customer advances included in taxable income.............. $ -- $ 978
Reserves and accruals not currently deductible............ 213 664
State taxes............................................... 169 136
Depreciation and amortization............................. 16 --
---- ------
Net deferred tax assets..................................... $398 $1,778
==== ======
</TABLE>

9. MAJOR CUSTOMERS AND INTERNATIONAL SALES

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. In fiscal 1997, no customer accounted for more than 10% of revenue.

Export sales to Asia, Europe and North America accounted for approximately
54.1%, 66.2% and 48.2% of total revenue for the years ended November 30, 1995,
1996 and 1997, respectively. Export sales to Asia accounted for approximately
50.1%, 57.6% and 44.3% of total revenue in fiscal 1995, 1996 and 1997,
respectively.

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.

F-15
<PAGE> 71

DESCRIPTION OF GRAPHICS

Inside front cover:

A graphical diagram appears here that depicts the steps in the IC manufacturing
process and how EDA tools and Aspec's SIP interact with such process.

Captions read as follows:

ASPEC TECHNOLOGY

ASPEC IS A LEADING PROVIDER OF SEMICONDUCTOR INTELLECTUAL PROPERTY (SIP)
SOLUTIONS FOR HIGH-PEROFRMANCE, COMPLEX IC DESIGNS, INCLUDING SYSTEM-ON-A-CHIP
ICs.

I/O MEMORY COMPLEX CORE CHARTERED SANYO
DSP CPU MPEG SAMSUNG LG SEMICON
MEMORY I/O COMPLEX CORE TSMC HYUNDAI
IBM UMC

Complex IC IC design optimized
Design for manufacture at a
variety of leading
merchant semiconductor
founderies.

Aspec provides cell
libraries, design tools,
design methodologies
ASPEC DESIGN and engineering
TOOLS, DESIGN services to accelerate
METHODOLOGY & complex IC design.
SERVICES

COMPLEX IC
DESIGN AND
DEVELOPMENT
PROCESS
Complex
ICs

Reduced
CUSTOMER THIRD-PARTY time-to-market
SIP SIP for electronic
systems.
CELL ASPEC
LIBRARIES SIP
<PAGE> 72

============================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 5
Use of Proceeds................................. 13
Dividend Policy................................. 13
Capitalization.................................. 14
Dilution........................................ 15
Selected Consolidated Financial Data............ 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 17
Business........................................ 26
Glossary........................................ 36
Management...................................... 37
Certain Transactions............................ 45
Principal Stockholders.......................... 46
Description of Capital Stock.................... 48
Shares Eligible for Future Sale................. 50
Underwriting.................................... 52
Legal Matters................................... 53
Experts......................................... 54
Additional Information.......................... 54
Index to Consolidated Financial Statements...... F-1
</TABLE>

------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
============================================================
============================================================

6,000,000 SHARES

LOGO

COMMON STOCK

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

HAMBRECHT & QUIST

MERRILL LYNCH & CO.

, 1998

============================================================
<PAGE> 73

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........................................ $ 24,426
NASD Filing Fee............................................. 8,780
Nasdaq National Market Listing Fee.......................... 50,000
Printing.................................................... 150,000
Legal Fees and Expenses..................................... 200,000
Accounting Fees and Expenses................................ 100,000
Blue Sky Fees and Expenses.................................. 5,000
Transfer Agent and Registrar Fees........................... 10,000
Miscellaneous............................................... 151,794
--------
Total............................................. $700,000
========
</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 4,139,780 shares of Common
Stock to employees and consultants of the Registrant pursuant to
restricted stock purchase agreements for an aggregate amount of
$1,057,092.

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
4,778,80 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., 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

II-1
<PAGE> 74

Hung Tien Investment Corporation pursuant to a Purchase Agreement for aggregate
cash consideration of $2,160,105.

4. Between July 1996 and February 1998, the Registrant granted and issued
options to purchase an aggregate of 2,599,600 shares of Common Stock to
employees and consultants of the Registrant pursuant to the Registrant's
1996 Stock Option Plan for an aggregate exercise price of $18,024,050.

5. On February 25, 1997, the Registrant granted and issued options to
purchase 25,000 shares of Common Stock to Jeffrey D. Saper pursuant to
the Registrant's 1997 Director Option Plan for an exercise price of
$212,500.

There was no underwriter involved in connection with any transaction set
forth above. The issuances of the securities set forth in paragraphs 1, 4 and 5
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> <C>
1.1* Form of Underwriting Agreement.
2.1(1) Agreement and Plan of Merger of Aspec Technology, Inc., a
Delaware corporation, and Aspec Technology, Inc., a
California corporation.
2.2 Agreement and Plan of Reorganization by and among the
Registrant, SIS Microelectronics, Inc. ("SIS
Microelectronics") and certain shareholders of SIS
Microelectronics dated as of March 17, 1998.
3.1(1) Certificate of Incorporation of Registrant.
3.2(1) Bylaws of Registrant.
3.3(1) Form of Certificate of Amendment of the Certificate of
Incorporation of Registrant.
3.4(1) Form of Amended and Restated Certificate of Incorporation of
Registrant.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
10.1(1) Form of Indemnification Agreement.
10.2(1) 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(1) Registration Agreement dated May 28, 1996 among the
Registrant and certain stockholders of the Registrant, as
amended October 3, 1996.
10.6(1) Lease Agreement by and between Wolfe Road Investments No. 3
and the Registrant dated December 5, 1996.
10.7(1) Business Loan Agreement dated February 27, 1998 between the
Registrant and U.S. Bank National Association.
</TABLE>

II-2
<PAGE> 75

<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
-------------- -----------------------
<C> <S> <C>
16.1(1) Letter from KPMG Peat Marwick LLP to the Securities and
Exchange Commission dated March 6, 1997.
21.1(1) Subsidiaries of Registrant.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included
in Exhibit 5.1).
24.1(1) Power of Attorney (see page II-4).
27.1(1) Financial Data Schedule.
</TABLE>

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

(1) Previously filed.

(b) CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
Schedule II -- Valuation and Qualifying Accounts

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> 76

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Sunnyvale,
State of California, on April 1, 1998.

Aspec Technology, Inc.

By: /s/ CONRAD J. DELL'OCA

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

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Exchange Act of 1933, on
April 1, 1998 this Amendment to the 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/ MITCHELL D. BOHN Chief Operating Officer and
- -------------------------------------------------------- Chief Financial Officer and Director
Mitchell D. Bohn (Principal Financial and Accounting Officer)

/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 G. Kortschak

/s/ JEFFREY D. SAPER* Director
- --------------------------------------------------------
Jeffrey D. Saper

*By: /s/ CONRAD J. DELL'OCA
----------------------------------------
Conrad J. Dell'Oca
Attorney-in-fact
</TABLE>

II-4
<PAGE> 77

SCHEDULE II

ASPEC TECHNOLOGY, INC.

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT
ALLOWANCES FOR ACCOUNTS RECEIVABLE FOR THE BEGINNING OF CHARGED TO COSTS BALANCE AT END
FISCAL YEARS ENDED NOVEMBER 30, PERIOD AND EXPENSES DEDUCTIONS(1) OF PERIOD
- ------------------------------------------ ------------ ---------------- ------------- --------------
<S> <C> <C> <C> <C>
1995.................................. $ -- $ -- $-- --
1996.................................. -- 310 10 300
1997.................................. 300 -- -- 300
</TABLE>

- ---------------
(1) Write-off of accounts, net of recoveries.
<PAGE> 78

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
-------------- -----------------------
<S> <C>
1.1* Form of Underwriting Agreement.
2.1(1) Agreement and Plan of Merger of Aspec Technology, Inc., a
Delaware corporation, and Aspec Technology, Inc., a
California corporation.
2.2 Agreement and Plan of Reorganization by and among the
Registrant, SIS Microelectronics, Inc. ("SIS
Microelectronics") and certain shareholders of SIS
Microelectronics dated as of March 17, 1998.
3.1(1) Certificate of Incorporation of Registrant.
3.2(1) Bylaws of Registrant.
3.3(1) Form of Certificate of Amendment of the Certificate of
Incorporation of Registrant.
3.4(1) Form of Amended and Restated Certificate of Incorporation of
Registrant.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
10.1(1) Form of Indemnification Agreement.
10.2(1) 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(1) Registration Agreement dated May 28, 1996 among the
Registrant and certain stockholders of the Registrant, as
amended October 3, 1996.
10.6(1) Lease Agreement by and between Wolfe Road Investments No. 3
and the Registrant dated December 5, 1996.
10.7(1) Business Loan Agreement dated February 27, 1998 between the
Registrant and U.S. Bank National Association.
16.1(1) Letter from KPMG Peat Marwick LLP to the Securities and
Exchange Commission dated March 6, 1997.
21.1(1) Subsidiaries of Registrant.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included
in Exhibit 5.1).
24.1(1) Power of Attorney (see page II-4).
27.1(1) Financial Data Schedule.
</TABLE>

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

* To be supplied by amendment.

(1) Previously filed.

<PAGE> 1
Exhibit 2.2

AGREEMENT AND PLAN OF REORGANIZATION

BY AND AMONG

ASPEC TECHNOLOGY, INC.,
ASPEC ACQUISITION CORPORATION,
SIS MICROELECTRONICS, INC.
AND CERTAIN SHAREHOLDERS OF
SIS MICROELECTRONICS, INC.

MARCH 17, 1998

<PAGE> 2

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Certain Definitions....................................................... 1

2. The Merger................................................................ 3
2.1 Merger; Effective Time of the Merger................................ 3
2.2 Closing............................................................. 3
2.3 Effect of the Merger................................................ 3
2.4 Tax-Free Reorganization............................................. 4
2.5 SIS Stock Options and Convertible Securities........................ 4

3. Effect of Merger on the Capital Stock of SIS; Exchange of Certificates.... 4
3.1 Exchange of Stock................................................... 4
3.2 Dissenters' Rights.................................................. 4
3.3 Fractional Shares................................................... 5
3.4 Exchange of Certificates............................................ 5
3.5 Taking of Necessary Action; Further Action.......................... 6

4. Securities Act Compliance................................................. 6
4.1 Securities Act Exemption............................................ 6
4.2 Stock Restrictions.................................................. 6

5. Representations and Warranties of SIS and the Majority Shareholders....... 7
5.1 Organization, Qualification, and Corporate Power.................... 7
5.2 Authorization....................................................... 7
5.3 Capitalization...................................................... 7
5.4 Noncontravention.................................................... 8
5.5 Broker's Fees....................................................... 8
5.6 Financial Statements................................................ 8
5.7 Subsidiaries........................................................ 9
5.8 Title to Assets..................................................... 9
5.9 Events Subsequent to Most Recent Fiscal Period End.................. 9
5.10 Undisclosed Liabilities............................................. 11
5.11 Legal Compliance.................................................... 12
5.12 Tax Matters......................................................... 12
5.13 Properties.......................................................... 13
5.14 Intellectual Property............................................... 14
5.15 Tangible Assets..................................................... 15
5.16 Inventory........................................................... 15
5.17 Contracts........................................................... 15
5.18 Notes and Accounts Receivable....................................... 17
5.19 Power of Attorney................................................... 17
5.20 Insurance........................................................... 17
5.21 Litigation.......................................................... 17
5.22 Product Warranty.................................................... 17
</TABLE>

-i-

<PAGE> 3

TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
5.23 Product Liability.................................................. 18
5.24 Employees.......................................................... 18
5.25 Employee Benefits.................................................. 18
5.26 Guaranties......................................................... 20
5.27 Environment, Health, and Safety.................................... 20
5.28 Certain Business Relationships With SIS............................ 21
5.29 No Adverse Developments............................................ 22
5.30 Full Disclosure.................................................... 22

6. Representations and Warranties of Aspec.................................. 22
6.1 Organization, Qualification, and Corporate Power................... 22
6.2 Authorization...................................................... 22
6.3 Capitalization..................................................... 23
6.4 Noncontravention................................................... 23
6.5 Brokers' Fees...................................................... 23
6.6 Financial Statements............................................... 23
6.7 Undisclosed Liabilities............................................ 24
6.8 Litigation......................................................... 24
6.9 Legal Compliance................................................... 24
6.10 No Adverse Developments............................................ 24

7. Pre-Closing Covenants.................................................... 24
7.1 General............................................................ 24
7.2 Notices and Consents............................................... 25
7.3 Conduct of Business................................................ 25
7.4 Preservation of Business........................................... 25
7.5 Access to Information.............................................. 25
7.6 Notice of Developments............................................. 26
7.7 Preparation of Shareholder Notice and Information Statement........ 26
7.8 Exclusivity........................................................ 26
7.9 Voting Agreement and Voting Proxy.................................. 27

8. Post-Closing Covenants................................................... 27
8.1 General............................................................ 27
8.2 Litigation Support................................................. 27
8.3 Transition......................................................... 27
8.4 Confidentiality.................................................... 27
8.5 SIS Employees; Employee Stock Options.............................. 28
8.6 Restrictions on Sales of Aspec Common Stock........................ 28
</TABLE>

-ii-

<PAGE> 4

TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
9. Conditions to Obligations to Close....................................... 28
9.1 Conditions to Aspec's Obligation to Close.......................... 28
9.2 Conditions to SIS's Obligation..................................... 29

10. Survival of Representations, Indemnification............................. 30
10.1 Limited Survival of Representations and Warranties................. 30
10.2 Indemnification by Aspec........................................... 30
10.3 Indemnification by Majority Shareholders........................... 31
10.4 Notice of Claims................................................... 31
10.5 Third Party Claims................................................. 32
10.6 Limitation of Claims............................................... 32

11. Termination.............................................................. 32
11.1 Termination of the Agreement....................................... 32
11.2 Effect of Termination.............................................. 33

12. Miscellaneous............................................................ 33
12.1 Publicity.......................................................... 33
12.2 No Third-Party Beneficiaries....................................... 33
12.3 Entire Agreement................................................... 34
12.4 Succession and Assignment.......................................... 34
12.5 Counterparts....................................................... 34
12.6 Headings........................................................... 34
12.7 Notices............................................................ 34
12.8 Governing Law; Dispute Resolution.................................. 35
12.9 Amendments and Waivers............................................. 36
12.10 Severability....................................................... 36
12.11 Expenses........................................................... 36
12.12 Construction....................................................... 36
12.13 Incorporation of Exhibits and Schedules............................ 37
</TABLE>

-iii-

<PAGE> 5

EXHIBITS

Exhibit A Certificate of Merger
Exhibit B SIS Disclosure Schedule
Exhibit C Aspec Disclosure Schedule
Exhibit D Voting Agreement and Voting Proxy
Exhibit E Opinion of Counsel for SIS and Majority Shareholders
Exhibit F Opinion of Counsel for Aspec
Exhibit G Registration Agreement Amendment

-iv-

<PAGE> 6

AGREEMENT AND PLAN OF REORGANIZATION

This Agreement and Plan of Reorganization (the "AGREEMENT") is entered
into as of March 17, 1998, by and among Aspec Technology, Inc., a Delaware
corporation ("ASPEC"), Aspec Acquisition Corporation, a Delaware corporation and
a wholly-owned subsidiary of Aspec ("MERGER SUB"), SIS Microelectronics, Inc., a
Colorado corporation ("SIS"), and William D. Burkard, James L. D. Roser and
Thomas P. Brock (collectively, the "MAJORITY SHAREHOLDERS"). Aspec, Merger Sub,
SIS and the Majority Shareholders are sometimes referred to herein individually
as a "PARTY" and collectively as the "PARTIES."

RECITALS

A. Pursuant to a Certificate of Merger (together with any Articles of
Merger required by the CBCA) providing for the merger of Merger Sub with and
into SIS pursuant to the Colorado Business Corporation Act (the "CBCA") and the
Delaware General Corporation Law (the "DGCL"), the shares of Common Stock of
SIS, no par value, issued and outstanding immediately prior to the effective
time of the Merger will be converted into an aggregate of 400,000 shares of
Common Stock of Aspec, and SIS will become a wholly-owned subsidiary of Aspec.

B. The Parties desire to enter into this Agreement for the purpose of
setting forth certain representations, warranties and covenants made by each to
the other as an inducement to the execution and delivery of this Agreement, and
to serve as conditions precedent to the consummation of the merger of Merger Sub
with and into SIS.

C. The respective Boards of Directors of Aspec and SIS have approved and
adopted this Agreement, and the Agreement is intended to be a plan of
reorganization under the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended.

NOW, THEREFORE, in consideration of these premises and of the mutual
agreements, representations, warranties and covenants herein contained, the
parties hereto do hereby agree as follows:

AGREEMENT

1. Certain Definitions. As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have a correlative
meaning when used in the plural and vice versa). Certain other terms are defined
in the text of this Agreement.

"AFFILIATE" of a Person means any other Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with such Person.

<PAGE> 7

"BUSINESS CONDITION" means the current business, financial
condition, results of operations and assets of such corporate entity.

"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation, retirement plan, severance plan or similar plan or arrangement;
(b) Employee Pension Benefit Plan; (c) Employee Welfare Benefit Plan; and (d)
any other nonqualified plan providing welfare benefits, including but not
limited to medical, dental, life insurance and disability benefits.

"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Sec. 3(2).

"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Sec. 3(1).

"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.

"GROSS NEGLIGENCE" consists of an intentional act, or the failure to
perform a duty, with reckless disregard for the consequences of such act or
failure.

"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (b) all trademarks, service marks, trade
dress, logos, trade names, and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, (c) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith, (d) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, drawings, specifications,
customer and supplier lists, pricing and cost information, financial
information, and business and marketing plans and proposals), (e) all computer
software (including data and related documentation), (f) all other proprietary
rights, and (g) all copies and tangible embodiments thereof (in whatever form or
medium).

"LOSSES" shall mean any and all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
reasonable amounts paid in settlement, liabilities, obligations, taxes, liens,
losses, expenses, and fees, including court costs and reasonable attorneys' fees
and expenses in connection with any action, suit or proceeding to the extent of
the amount of such actions, suits, proceedings, hearings, investigations,
charges, complaints, claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, reasonable amounts paid in
settlement, liabilities, obligations, taxes, liens, losses, expenses or fees.

"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
the Business Condition of the corporate entity and its subsidiaries.

"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37)
and Code Sec. 414(f).

-2-

<PAGE> 8

"SIS SHAREHOLDERS" shall mean the shareholders of record of SIS
immediately prior to the Effective Time of the Merger (other than the holders of
Dissenting Shares (as defined herein)).

"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).

"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).

"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.

2. The Merger.

2.1 Merger; Effective Time of the Merger. Subject to the terms and
conditions of this Agreement, Merger Sub will be merged with and into SIS (the
"MERGER") in accordance with the CBCA and the DGCL, and, as a result, SIS will
become a wholly-owned subsidiary of Aspec. In accordance with the provisions of
this Agreement, a Certificate of Merger in the form attached hereto as Exhibit A
shall be filed with the Delaware Secretary of State in accordance with the DGCL
and such Certificate of Merger (or, to the extent required by the CBCA, Articles
of Merger in form and substance mutually acceptable to counsel for SIS and
counsel for Aspec) shall be filed with the Colorado Secretary of State in
accordance with the CBCA on the Closing Date (as defined in Section 2.2) and
each issued and outstanding share of Common Stock, no par value, of SIS ("SIS
COMMON STOCK") shall be converted into a fraction of a share of Common Stock,
$0.001 par value, of Aspec ("ASPEC COMMON STOCK") in the manner contemplated by
Section 3. The Merger shall become effective at the time of the filing of the
Merger Agreement with the Colorado Secretary of State and the Delaware Secretary
of State (the date of such filing being hereinafter referred to as the
"EFFECTIVE DATE OF THE MERGER" and the time of such filing being hereinafter
referred to as the "EFFECTIVE TIME OF THE MERGER").

2.2 Closing. The closing of the Merger (the "CLOSING") will take
place as soon as practicable after satisfaction or waiver of the latest to occur
of the conditions set forth in Section 9 (the "CLOSING DATE"), at the offices of
Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road,
Palo Alto, California 94304-1050.

-3-
<PAGE> 9

2.3 Effect of the Merger. At the Effective Time of the Merger, (i)
the separate existence of Merger Sub shall cease and Merger Sub shall be merged
with and into SIS (Merger Sub and SIS are sometimes referred to herein as the
"CONSTITUENT CORPORATIONS" and SIS after the Merger is sometimes referred to
herein as the "SURVIVING CORPORATION"), (ii) the Certificate of Incorporation of
Merger Sub shall be the Certificate of Incorporation of the Surviving
Corporation, (iii) the Bylaws of Merger Sub shall be the Bylaws of the Surviving
Corporation, (iv) the directors of Merger Sub shall be the directors of the
Surviving Corporation and (v) the Merger shall, from and after the Effective
Time of the Merger, have all the effects provided by applicable law.

2.4 Tax-Free Reorganization. The Merger is intended to qualify as a
tax free reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "CODE").

2.5 SIS Stock Options and Convertible Securities. On or prior to the
Effective Time of the Merger, all outstanding options and convertible securities
of SIS shall terminate unless otherwise exercised prior to such time.

3. Effect of Merger on the Capital Stock of SIS; Exchange of Certificates.

3.1 Exchange of Stock. As of the Effective Time of the Merger, each
share of SIS Common Stock that is issued and outstanding immediately prior to
the Effective Time of the Merger (other than shares, if any, held by persons
exercising dissenters' rights in accordance with Article 113 of the CBCA
("DISSENTING SHARES") as provided for in Section 3.2 below), shall, by virtue of
the Merger and without any action on the part of SIS shareholders, be converted
into a fraction of a share of Aspec Common Stock (the "EXCHANGE RATIO"),
determined by dividing 400,000 by the aggregate number of shares of SIS Common
Stock issued and outstanding immediately prior to the Effective Time of the
Merger (including any shares issued upon the exercise of outstanding SIS options
or SIS convertible securities and any Dissenting Shares).

3.2 Dissenters' Rights. If holders of SIS Common Stock are entitled
to dissenters' rights at the Effective Time of the Merger under Article 113 of
the CBCA, the shares as to which dissenters' rights are available ("DISSENTING
SHARES") shall not be converted into the Merger Consideration on or after the
Effective Time of the Merger, but shall instead be converted into the right to
receive from the Surviving Corporation such consideration as may be determined
to be due with respect to such Dissenting Shares pursuant to the CBCA. Each
holder of Dissenting Shares (a "DISSENTING SHAREHOLDER") who, pursuant to the
provisions of Article 113 of the CBCA, becomes entitled to payment of the value
of shares of SIS Common Stock held by such Dissenting Shareholder shall receive
payment therefor (but only after the value therefor shall have been agreed upon
or finally determined pursuant to such provisions). In the event of the legal
obligation, after the Effective Time of the Merger, to deliver shares of Aspec
Common Stock pursuant to the Exchange Ratio (as defined herein) to any
Dissenting Shareholder who shall have failed to make an effective demand for
appraisal or shall have lost his status as a Dissenting Shareholder, the
Surviving Corporation shall issue and deliver, upon surrender by such Dissenting
Shareholder of his certificate

-4-
<PAGE> 10

or certificates representing shares of SIS Common Stock, the shares of Aspec
Common Stock to which such Dissenting Shareholder is then entitled under this
Section 3.2 and Article 113 of the CBCA. In the event that Aspec makes any
payment or payments in respect of any Dissenting Shares, Aspec shall not be
entitled to recover any such amounts under the terms of Section 10 hereof or
otherwise.

3.3 Fractional Shares. No fractional shares of Aspec Common Stock
shall be issued in the Merger. In lieu thereof, each holder of shares of SIS
Common Stock who would otherwise be entitled to receive a fraction of a share of
Aspec Common Stock shall receive from Aspec an amount of cash (rounded to the
nearest whole cent) equal to the product of the fraction of a share of Aspec
Common Stock to which such holder would otherwise be entitled, multiplied by
$10.00. For the purpose of determining fractional shares, all shares of Aspec
Common Stock to be issued to any SIS shareholder shall be aggregated.

3.4 Exchange of Certificates.

(a) Exchange Agent. Prior to the Closing Date, Aspec shall
appoint itself or ChaseMellon Shareholder Services, L.L.C. to act as the
exchange agent (the "EXCHANGE AGENT") in the Merger.

(b) Aspec to Provide Aspec Common Stock. Promptly after the
Effective Date of the Merger, Aspec shall make available for exchange in
accordance with this Section 3, through such reasonable procedures as Aspec may
adopt, the shares of Aspec Common Stock issuable pursuant to Section 3.1 in
exchange for outstanding shares of SIS Common Stock.

(c) Exchange Procedures. Within ten (10) days after the
Effective Date of the Merger, the Exchange Agent shall mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Date of the Merger represented outstanding shares of SIS Common Stock (the
"CERTIFICATES") whose shares are being converted into shares of Aspec Common
Stock pursuant to Section 3.1 hereof (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and which shall be in such form and have such other provisions as Aspec
may reasonably specify, including appropriate investment representations to be
made by each such shareholder) (the "LETTER OF TRANSMITTAL") and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for shares of Aspec Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Aspec, together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor the
number of shares of Aspec Common Stock to which the holder of SIS Common Stock
is entitled pursuant to Section 3.1 hereof. The Certificate so surrendered shall
forthwith be canceled. No interest will accrue or be paid to the holder of any
outstanding SIS Common Stock. From and after the Effective Date of the Merger,
until surrendered as contemplated by this Section 3.4, each Certificate shall be
deemed for all corporate purposes to evidence the number of shares of Aspec
Common Stock into which the shares

-5-
<PAGE> 11

of SIS Common Stock represented by such Certificate have been converted.
Notwithstanding the foregoing procedures, Aspec shall use its reasonable efforts
to provide the form of Letter of Transmittal to SIS as soon as practical after
the date hereof, and SIS shall provide such Letter of Transmittal to each SIS
shareholder. The parties agree that in the event Aspec makes such Letter of
Transmittal available to SIS, any Exchange Agent shall not be obligated to mail
such Letter of Transmittal to the SIS shareholders. Aspec agrees that to the
extent a SIS shareholder provides a fully executed and completed Letter of
Transmittal together with the related SIS stock certificate(s) held by such
shareholder to Aspec at least five (5) business days prior to the Closing, then
Aspec will provide to SIS at the Closing a certificate representing the shares
of Aspec Common Stock to which such SIS shareholder is entitled pursuant to the
terms hereof.

(d) No Further Ownership Rights in Capital Stock of SIS. The
shares of Aspec Common Stock delivered upon the surrender for exchange of shares
of SIS Common Stock in accordance with the terms hereof shall be deemed to have
been delivered in full satisfaction of all rights pertaining to such SIS Common
Stock. There shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of SIS Common Stock which were outstanding
immediately prior to the Effective Date of the Merger. If, after the Effective
Date of the Merger, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Section
3.4, provided that the presenting holder is listed on SIS's shareholder list as
a holder of SIS Common Stock.

3.5 Taking of Necessary Action; Further Action. Aspec, Merger Sub,
SIS and the Majority Shareholders shall take all such actions as may be
necessary or appropriate in order to effect the Merger as promptly as possible.
If, at any time after the Effective Date of the Merger, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of SIS, the officers and
directors of the Surviving Corporation are fully authorized in the name of the
corporation or otherwise to take, and shall take, all such action.

4. Securities Act Compliance.

4.1 Securities Act Exemption. The issuance of the Aspec Common Stock
in the Merger shall not be registered under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), in reliance upon Section 4(2) and/or Regulation
D of the Securities Act.

4.2 Stock Restrictions. The certificates representing the shares of
Aspec Common Stock issued pursuant to this Agreement shall bear a restrictive
legend (and stop transfer orders shall be placed against the transfer thereof
with Aspec's transfer agent), stating substantially as follows:

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED,
ASSIGNED OR

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<PAGE> 12

OTHERWISE DISPOSED OF EXCEPT (I) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO, (II) IN COMPLIANCE
WITH RULE 144 OR (III) PURSUANT TO AN OPINION OF COUNSEL FOR
ASPEC THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933."

5. Representations and Warranties of SIS and the Majority Shareholders.
SIS and, to their respective knowledge, each of the Majority Shareholders
severally and not jointly represents and warrants to Aspec and Merger Sub that
the statements contained in this Section 5 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Section 5), except as set forth in the
disclosure schedule delivered by SIS to Aspec on the date hereof (and initialed
by Aspec), a copy of which is attached hereto as Exhibit B (referred to herein
as the "SIS DISCLOSURE SCHEDULE"). The SIS Disclosure Schedule will be arranged
in paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 5.

5.1 Organization, Qualification, and Corporate Power. SIS is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Colorado. SIS is duly authorized to conduct business and is
in good standing under the laws of each other jurisdiction where such
qualification is required. There is no state, other than Colorado, in which SIS
owns any property or in which it has any employees, offices or operations. SIS
has full corporate power and authority, and has all necessary and material
licenses and permits, to carry on the businesses in which it is engaged and to
own and use the properties owned and used by it. Section 5 of the SIS Disclosure
Schedule lists the directors and officers of SIS. The operations now being
conducted by SIS have not been conducted under any other name during the past
five (5) years.

5.2 Authorization. SIS has full power and authority to execute and
deliver this Agreement and the Merger Agreement, and, subject to receipt of the
requisite approval of its share holders, to consummate the transactions
contemplated hereunder and to perform its obligations here under and no other
proceedings on the part of SIS are necessary to authorize the execution,
delivery and performance of this Agreement and the Merger Agreement. This
Agreement and the Merger Agreement and the transactions contemplated thereby
have been approved by the unanimous vote of SIS's Board of Directors. This
Agreement and the Merger Agreement constitute the valid and legally binding
obligations of SIS, enforceable against SIS in accordance with their respective
terms and conditions. SIS need not give any notice to, make any filing with, or
obtain any authorization, con sent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by this
Agreement.

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<PAGE> 13

5.3 Capitalization.

(a) Capital Stock. As of the date of this Agreement, the
entire authorized capital stock of SIS consists of 5,000,000 shares of Common
Stock, 1,174,375 of which are issued and outstanding. All of the issued and
outstanding shares of capital stock have been duly authorized, are validly
issued, fully paid, and non-assessable, and are held of record by the respective
shareholders as set forth in Section 5.3(a) of the SIS Disclosure Schedule. All
of the outstanding shares of capital stock have been offered, issued and sold by
SIS in material compliance with applicable Federal and state securities laws. As
of the Closing Date, the entire authorized capital stock of SIS shall consist of
5,000,000 shares of Common Stock, 1,224,375 of which shall be issued and
outstanding. As of the Closing Date, all of the then issued and outstanding
shares of capital stock shall have been duly authorized, shall be validly
issued, fully paid, and non-assessable, and shall be held of record by the
respective shareholders as set forth in Section 5.3(a) of the SIS Disclosure
Schedule. As of the Closing Date, all of the then outstanding shares of capital
stock shall have been offered, issued and sold by SIS in material compliance
with applicable Federal and state securities laws.

(b) No Other Rights or Agreements. As of the date of this
Agreement, Section 5.3(b) of the SIS Disclosure Schedule lists all of the
holders of options, warrants, purchase rights, subscription rights, conversion
rights, convertible debentures or other securities, exchange rights and other
rights that could require SIS to issue, sell or otherwise cause to become
outstanding any of its capital stock (the "STOCK RIGHTS"), and the number of
shares of SIS Common Stock subject to such Stock Rights. Except as set forth in
Section 5.3(b) of the SIS Disclosure Schedule, there are no other outstanding or
authorized Stock Rights. Except as set forth in Section 5.3(b) of the SIS
Disclosure Schedule, there are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to SIS.
Other than as contemplated by Section 7.9 hereof, there are no voting trusts,
proxies, or other agreements or understandings with respect to the voting of the
capital stock of SIS. All of the SIS Stock Rights will be fully exercised or
canceled prior to the Effective Time of the Merger. As of the Effective Time of
the Merger, there will be (i) no outstanding or authorized Stock Rights, (ii) no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to SIS and (iii) no voting trusts,
proxies, or other agreements or understandings with respect to the voting of the
capital stock of SIS (other than as contemplated by Section 7.9 hereof).

5.4 Noncontravention. Neither the execution and the delivery of this
Agreement by SIS nor the consummation by SIS of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which SIS is subject or any
provision of its Articles of Incorporation or bylaws, or (B) (i) conflict with,
(ii) result in a breach of, (iii) constitute a default under, (iv) result in the
acceleration of, (v) create in any party the right to accelerate, terminate,
modify, or cancel, or (vi) except as set forth in Section 5.4 of the SIS
Disclosure Schedule, require any notice under, any agreement, contract, lease,
license, instrument,

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<PAGE> 14

franchise permit or other arrangement to which SIS is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets).

5.5 Broker's Fees. Neither SIS nor any of the Majority Shareholders
has any liability or obligation to pay any fees or commissions to any broker,
finder or agent with respect to the transactions contemplated by this Agreement.

5.6 Financial Statements. Section 5.6 of the SIS Disclosure Schedule
contains the following financial statements (collectively the "FINANCIAL
STATEMENTS"): (i) unaudited balance sheets and statements of income and cash
flows as of and for the fiscal years ended December 31, 1996 and December 31,
1997 (the "MOST RECENT FISCAL YEAR END") for SIS; and (ii) an unaudited balance
sheet and statements of income and cash flows (the "MOST RECENT FINANCIAL
STATEMENTS") as of and for the two month period ended February 28, 1998 (the
"MOST RECENT FISCAL PERIOD END") for SIS. The Financial Statements (including
the notes thereto) have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods covered thereby and present fairly the financial condition of SIS as of
such dates and the results of operations of SIS for such periods; provided,
however, that the Most Recent Financial Statements lack footnotes and certain
other presentation items and are subject to normal year end adjustments. Except
as set forth in Section 5.6 of the SIS Disclosure Schedule, the books of account
of SIS reflect as of the dates shown thereon all items of income and expenses,
and all assets, liabilities and accruals of SIS required to be reflected
therein, in accordance with generally accepted accounting principles
consistently applied.

5.7 Subsidiaries. SIS has no subsidiaries and has not been a
subsidiary of another company.

5.8 Title to Assets. SIS has good and marketable title to, or a
valid leasehold interest in, the properties and assets (including, without
limitation, all Intellectual Property) used by it, located on its premises, or
shown on the balance sheet contained within the Most Recent Financial Statements
(the "MOST RECENT BALANCE SHEET") or acquired after the date thereof, free and
clear of all Security Interests, except for properties and assets disposed of in
the Ordinary Course of Business since the date of the Most Recent Balance Sheet
and except as set forth in Section 5.8 of the SIS Disclosure Schedule. No Person
other than SIS will own at the time of the Closing any assets or properties
currently utilized in or necessary to the operations or business of SIS or
situated on any of the premises of SIS. There are no existing contracts,
agreements, commitments or arrangements with any Person to acquire any of the
assets or properties of SIS (or any interest therein) except for this Agreement.

5.9 Events Subsequent to Most Recent Fiscal Period End. Since the
Most Recent Fiscal Period End, there has not been any material adverse change in
the Business Condition of SIS. Without limiting the generality of the foregoing,
since that date:

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<PAGE> 15

(a) SIS has not sold, leased, transferred, or assigned any
assets or properties, tangible or intangible, outside the Ordinary Course of
Business;

(b) except for those agreements, contracts, leases and
commitments identified in Section 5.17 of the SIS Disclosure Schedule, SIS has
not entered into, assumed or become bound under or obligated by any agreement,
contract, lease or commitment (collectively a "SIS AGREEMENT") or extended or
modified the terms of any SIS Agreement which (i) involves the payment of
greater than $10,000 per annum or which extends for more than one (1) year, (ii)
involves any payment or obligation to any Affiliate of SIS other than in the
Ordinary Course of Business, (iii) involves the sale of any material assets,
(iv) involves any OEM relationship, or (v) involves any license of SIS's
technology;

(c) to the knowledge of SIS, no party (including SIS) has
accelerated, terminated, made modifications to, or canceled any agreement,
contract, lease, or license to which SIS is a party or by which it is bound and
SIS has not modified, canceled or waived or settled any debts or claims held by
it, outside the Ordinary Course of Business, or waived or settled any rights or
claims of a substantial value, whether or not in the Ordinary Course of
Business;

(d) none of the assets of SIS, tangible or intangible, has
become subject to any Security Interest, except as set forth on Section 5.8 of
the SIS Disclosure Schedule;

(e) SIS has not made any capital expenditures except in the
Ordinary Course of Business and not exceeding $10,000 in the aggregate of all
such capital expenditures;

(f) SIS has not made any capital investment in, or any loan
to, any other Person;

(g) SIS has not created, incurred, assumed, prepaid or
guaranteed any indebtedness for borrowed money and capitalized lease
obligations, or extended or modified any existing indebtedness, except as
provided in Section 9.1(i) hereof;

(h) SIS has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;

(i) there has been no change made or authorized in the
Articles of Incorporation or bylaws of SIS;

(j) SIS has not issued, sold, or otherwise disposed of any of
its capital stock, or granted any options, warrants, or other rights to purchase
or obtain (except upon the conversion, exchange or exercise of any such
securities which are described on Section 5.3 of the SIS Disclosure Schedule)
any of its capital stock;

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<PAGE> 16

(k) SIS has not declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased, or otherwise acquired any of its capital stock
(other than with respect to any Dissenting Shares (as defined herein));

(l) SIS has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property in excess of $10,000 in
the aggregate of all such damage, destruction and losses;

(m) SIS has not suffered any repeated, recurring or prolonged
shortage, cessation or interruption of inventory shipments, supplies or utility
services;

(n) SIS has not made any loan to, or entered into any other
transaction with, or paid any bonuses in excess of an aggregate of $10,000 to,
any of its Affiliates, directors, officers, or employees or their Affiliates,
and, in any event, any such transaction was on fair and reasonable terms no less
favorable to SIS than would be obtained in a comparable arm's length transaction
with a Person which is not such a director, officer or employee or Affiliate
thereof;

(o) SIS has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;

(p) SIS has not granted any increase in the base compensation
of any of its directors or officers, or, except in the Ordinary Course of
Business, any of its employees;

(q) SIS has not adopted, amended, modified, or terminated any
bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, or employees (or
taken any such action with respect to any other Employee Benefit Plan);

(r) SIS has not made any other change in employment terms for
any of its directors or officers, and SIS has not made any other change in
employment terms for any other employees outside the Ordinary Course of
Business;

(s) SIS has not suffered any material adverse change or any
threat of any material adverse change in its relations with, or any loss or
threat of loss of, any of its major customers, distributors or dealers;

(t) SIS has not suffered any material adverse change or any
threat of any material adverse change in its relations with, or any loss or
threat of loss of, any of it major suppliers;

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<PAGE> 17

(u) SIS has not received notice or had knowledge of any actual
or threatened labor trouble or strike, or any other occurrence, event or
condition of a similar character;

(v) SIS has not changed any of the accounting principles
followed by it or the method of applying such principles, except as described on
Schedule 5.6 of the SIS Disclosure Schedule;

(w) SIS has not made a change in any of its banking or safe
deposit arrangements;

(x) SIS has not entered into any transaction other than in the
Ordinary Course of Business; and

(y) SIS has not committed to any of the foregoing.

5.10 Undisclosed Liabilities. SIS has no material liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due, including any liability for taxes) of a
character which, under GAAP, should be accrued, shown or disclosed on a balance
sheet of SIS, except for (i) liabilities set forth on the Most Recent Balance
Sheet and (ii) liabilities which have arisen after the Most Recent Fiscal Period
End in the Ordinary Course of Business.

5.11 Legal Compliance. SIS has complied in all material respects
with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof). To
the knowledge of SIS, no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, notice or inquiry has been filed or commenced
by or against, or received by, any governmental body alleging any failure to so
comply. SIS has all licenses, permits, approvals, registrations, qualifications,
certificates and other governmental authorizations that are necessary for the
operations of SIS as they are presently conducted, except for any such licenses,
permits, approvals, registrations, qualifications, certificates and other
governmental authorizations which, if not obtained, would not individually or in
the aggregate be likely to result Material Adverse Effect on SIS.

5.12 Tax Matters.

(a) For purposes of this Agreement, "TAXES" means all federal,
state, municipal, local or foreign income, gross receipts, windfall profits,
severance, property, production, sales, use, value added, license, excise,
franchise, employment, withholding, capital stock, levies, imposts, duties,
transfer and registration fees or similar taxes or charges imposed on the
income, payroll, properties or operations of SIS, together with any interest,
additions or penalties,

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<PAGE> 18

deficiencies or assessments with respect thereto and any interest in respect of
such additions or penalties.

(b) SIS has filed all reports and returns with respect to any
Taxes ("TAX RETURNS") that it was required to file. All such Tax Returns were
correct and complete in all material respects, and no such Tax Returns are
currently the subject of audit. All Taxes owed by SIS (whether or not shown on
any Tax Return) were paid in full when due or are being contested in good faith
and are supported by adequate reserves on the Most Recent Financial Statements,
except any state Taxes (other than Colorado related Taxes) which are not
individually or in the aggregate material to SIS . SIS has provided adequate
reserves on its Financial Statements for the payment of any taxes accrued but
not yet due and payable. SIS is not currently the beneficiary of any extension
of time within which to file any Tax Return, and SIS has not waived any statute
of limitations in respect of Taxes or agreed to any extension of time with
respect to any Tax assessment or deficiency.

(c) There is no dispute or claim concerning any Tax liability
of SIS either (A) claimed or raised by any authority in writing or (B) based
upon personal contact with any agent of such authority. There are no tax liens
of any kind upon any property or assets of SIS, except for inchoate liens for
taxes not yet due and payable.

(d) SIS has not filed a consent under Sec. 341(f) of the
Internal Revenue Code of 1986, as amended (the "CODE") concerning collapsible
corporations. SIS has not made any payments, is not obligated to make any
payments, and is not a party to any agreement that under any circumstances could
obligate it to make any payments as a result of the consummation of the Merger
that will not be deductible under Code Sec. 280G. SIS has not been a United
States real property holding corporation within the meaning of Code Sec.
897(c)(2) during the applicable period specified in Code Sec. 897(c)(1)(A)(ii).
SIS is not a party to any tax allocation or sharing agreement. SIS (A) has not
been a member of any affiliated group within the meaning of Code Sec. 1504 or
any similar group defined under a similar provision of state, local, or foreign
law (an "AFFILIATED GROUP") filing a consolidated federal Income Tax Return and
(B) has no any liability for the taxes of any Person under Treas. Reg. Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.

(e) The unpaid Taxes of SIS (A) did not, as of the Most Recent
Fiscal Period End, exceed by any amount the reserve for Tax liability (other
than any reserve for deferred taxes established to reflect timing differences
between book and tax income) set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) and (B) will not exceed that reserve as
adjusted for operations and transactions through the Closing Date in accordance
with the past custom and practice of SIS in filing its Tax Returns.

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<PAGE> 19

5.13 Properties.

(a) SIS does not currently own and has never previously owned
any real property.

(b) Section 5.13 of the SIS Disclosure Schedule lists and
describes briefly all real property leased or subleased to SIS. SIS has
delivered to Aspec correct and complete copies of the leases and subleases
listed in Section 5.13 of the SIS Disclosure Schedule (as amended to date). With
respect to each lease and sublease listed in Section 5.13 of the SIS Disclosure
Schedule to the knowledge of SIS:

(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect in all respects;

(ii) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;

(iii) no party to the lease or sublease has repudiated
any provision thereof;

(iv) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease:

(v) SIS has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold; and

(vi) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof, and have been
operated and maintained in accordance with applicable laws, rules, and
regulations in all material respects.

5.14 Intellectual Property.

(a) To the knowledge of SIS, SIS has not interfered with,
infringed upon, misappropriated or violated any Intellectual Property rights of
third parties. SIS has not received since its inception any charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that SIS must license or
refrain from using any Intellectual Property rights of any third party), except
as disclosed in Section 5.14 of the SIS Disclosure Schedule. To the knowledge of
SIS, no third party has interfered with, infringed upon, misappropriated, or
violated any Intellectual Property rights of SIS. Each employee of SIS has
signed an invention assignment and/or confidentiality agreement with SIS that
provides that any

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<PAGE> 20

Intellectual Property developed by such employee while employed by SIS is the
sole property of SIS.

(b) Section 5.14(b) of the SIS Disclosure Schedule identifies
each patent or registration which has been issued to SIS or any Affiliate of SIS
with respect to any of the Intellectual Property used in SIS's business,
identifies each pending patent application or application for registration which
SIS or any Affiliate of SIS has made with respect to any of the Intellectual
Property used in SIS's business, and identifies each material license,
agreement, or other permission which SIS or any Affiliate of SIS has granted to
any third party with respect to any of the Intellectual Property used in SIS's
business (together with any exceptions). SIS has delivered to Aspec correct and
complete copies of all such patents, registrations, applications, licenses,
agreements, and permissions (as amended to date). Section 5.14(b) of the SIS
Disclosure Schedule also identifies (i) each trade name or unregistered
trademark used by SIS or any Affiliate of SIS which is material to the business
of SIS and (ii) each unregistered copyright owned by SIS or any Affiliate of SIS
with respect to Intellectual Property which is material to the business of SIS.
With respect to each item of Intellectual Property required to be identified in
Section 5.14(b) of the SIS Disclosure Schedule, to the knowledge of SIS:

(i) SIS possesses all right, title, and interest in and
to the item, free and clear of any Security Interest (except as disclosed in
Section 5.8 of the SIS Disclosure Schedule), license or other restriction;

(ii) the item is legal and valid and in full force and
effect and is not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;

(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
knowledge of SIS, threatened which challenges the legality, validity,
enforceability, use or ownership of the item; and

(iv) SIS has never agreed to indemnify any Person for
or against any interference, infringement, misappropriation, or other conflict
with respect to the item, except pursuant to the contracts set forth in Section
5.17 of the SIS Disclosure Schedule.

(c) Section 5.14(c) of the SIS Disclosure Schedule identifies
each material item of Intellectual Property that any third party owns and that
SIS uses pursuant to license, sublicense, agreement, or permission. SIS has
delivered to Aspec correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With respect to
each item of Intellectual Property required to be identified in Section 5.14(c)
of the SIS Disclosure Schedule, to the knowledge of SIS:

(i) the license, sublicense, agreement or permission
covering the item is legal, valid, binding, enforceable, and in full force and
effect in all material respects;

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<PAGE> 21

(ii) no party to the license, sublicense, agreement, or
permission is in breach or default, and, to the knowledge of SIS, no event has
occurred which with notice or lapse of time would constitute a breach or default
or permit termination, modification or acceleration thereunder;

(iii) no party to the license, sublicense, agreement,
or permission has repudiated any provision thereof; and

(iv) SIS has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or permission.

5.15 Tangible Assets. The buildings, machinery, equipment, and other
tangible assets that SIS owns and leases are free from material defects (patent
and latent) and are in good operating condition and repair (subject to normal
wear and tear) and are usable in the Ordinary Course of Business.

5.16 Inventory. In all material respects, all of the inventory of
SIS and any supplies, manufactured and processed parts, work in process or
finished goods, is usable, merchantable and fit for the purpose for which it was
procured or manufactured, and none of such inventory is slow-moving, obsolete,
damaged, or defective, subject to adjustments for operations and transactions
through the Closing Date in accordance with the past custom and practice of SIS.

5.17 Contracts. Section 5.17 of the SIS Disclosure Schedule lists
the following contracts, agreements, commitments and other arrangements to which
SIS is a party or by which SIS or any of its assets is bound:

(a) any agreement (or group of related agreements) for the
lease of personal property to or from any Person which involves the payment by
SIS of more than $10,000 per year;

(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year or involve
consideration in excess of $10,000;

(c) any agreement for the purchase of supplies, components,
products or services from single source suppliers, custom manufacturers or
subcontractors which involves the payment by SIS of more than $10,000 per year;

(d) any agreement concerning a partnership or joint venture;

(e) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money or any capitalized

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<PAGE> 22

lease obligation in excess of $10,000 or under which a Security Interest has
been imposed on any of its assets, tangible or intangible;

(f) any agreement concerning noncompetition or restraint of
trade or any agreement on currently active projects which involves
confidentiality;

(g) any agreement with any SIS shareholder or any of such
shareholder's Affiliates (other than SIS) or with any Affiliate of SIS;

(h) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of its current or former directors, officers or employees;

(i) any collective bargaining agreement;

(j) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis;

(k) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees;

(l) any agreement pursuant to which SIS is obligated to
provide services, maintenance, support or training which involves payments to
SIS of more than $50,000 per year;

(m) any standard form agreement used by SIS, including, but
not limited to, any purchase order, statement of standard terms and conditions
of sale, or employment offer letter; and

(n) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000 or which is
expected to continue for more than six (6) months from the date hereof.

SIS has delivered to Aspec a correct and complete copy of each written agreement
listed in Section 5.17 of the SIS Disclosure Schedule (as amended to date) and a
written summary setting forth the terms and conditions of each oral agreement
referred to in Section 5.17 of the SIS Disclosure Schedule. With respect to each
such agreement: (A) the agreement is legal, valid, binding, enforceable, and in
full force and effect in all respects against SIS and, to the knowledge of SIS,
the other parties thereto; (B) SIS is not and, to the knowledge of SIS, no other
party is in breach or default, and no event has occurred, which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; (C) SIS has not and, to the
knowledge of SIS, no other party has repudiated any provision of the agreement;
and (D) SIS does not have any reason to believe that the service called for
thereunder cannot be supplied in accordance with its terms and without resulting
in a loss to any of SIS.

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<PAGE> 23

5.18 Notes and Accounts Receivable. All notes and accounts
receivable of SIS, all of which are reflected properly on the books and records
of SIS in all material respects, are, to the knowledge of SIS, (i) valid
receivables subject to no setoffs, defenses or counterclaims, and are current
and collectible, and (ii) will be collected in accordance with their terms at
their recorded amounts, subject only to adjustments for operations and
transactions through the Closing Date in accordance with the past custom and
practice of SIS.

5.19 Power of Attorney. There are no outstanding powers of attorney
executed on behalf of SIS.

5.20 Insurance. SIS has delivered to Aspec copies of each insurance
policy (including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) with respect to which
SIS is a party, a named insured, or otherwise the beneficiary of coverage. With
respect to each such insurance policy: (A) the policy is legal, valid, binding,
enforceable, and in full force and effect (and there has been no notice of
cancellation or nonrenewal of the policy received) with respect to SIS and, to
the knowledge of SIS, the other parties thereto; (B) neither SIS nor, to the
knowledge of SIS, any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under the policy; (C) neither SIS nor, to the knowledge of SIS,
any other party to the policy has repudiated any provision thereof; and (D)
there has been no failure by SIS to give any notice or present any claim under
the policy in due and timely fashion. Section 5.20 of the SIS Disclosure
Schedule describes any self-insurance arrangements presently maintained by SIS.

5.21 Litigation. Section 5.21 of the SIS Disclosure Schedule sets
forth each instance in which SIS (or any of its assets) (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or, to the knowledge of SIS, is threatened to be made a party, to any
action, suit, proceeding, hearing, arbitration, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator. To the knowledge
of SIS, there are no facts or circumstances which would form the basis of any
claim against SIS.

5.22 Product Warranty. All of the services performed and products
licensed, manufactured, sold, leased, and delivered by SIS have conformed in all
material respects with all applicable contractual commitments and all express
and implied warranties, and, to the knowledge of SIS, SIS has no liability
(whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due) for replacement or repair thereof or other damages in connection therewith,
other than in the Ordinary Course of Business in an aggregate amount not
exceeding $10,000. Section 5.17(o) of the SIS Disclosure Schedule includes
copies of the standard terms and conditions of license for SIS (containing
applicable guaranty, warranty, and indemnity provisions).

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<PAGE> 24

5.23 Product Liability. To the knowledge of SIS, SIS has no material
liability (whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due) arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product licensed,
manufactured, sold, leased, or delivered by SIS.

5.24 Employees. No executive, key employee, or significant group of
employees has advised any executive officer of SIS that he, she or they plan to
terminate employment with SIS during the next six (6) months. SIS is not a party
to or bound by any collective bargaining agreement, nor has it experienced any
strike or grievance, claim of unfair labor practices, or other collective
bargaining dispute. To the knowledge of SIS, SIS has not committed any unfair
labor practice. To the knowledge of SIS, there is no organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of SIS.

5.25 Employee Benefits.

(a) Section 5.25(a) of the SIS Disclosure Schedule lists each
Employee Benefit Plan that SIS maintains or to which SIS contributes or is
obligated to contribute.

(i) Each such Employee Benefit Plan (and each related
trust, or fund established by SIS) complies in form and in operation in all
material respects with their terms, the applicable requirements of ERISA, the
Code, and other applicable laws.

(ii) All required reports and descriptions (including
Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately with respect to each
such Employee Benefit Plan. The requirements of Code Sec. 4980B have been met in
all material respects with respect to each such Employee Benefit Plan which is
an Employee Welfare Benefit Plan. No event has occurred and no condition exists
with respect to any Employee Benefit Plan that would subject SIS to any tax
under Code Sections 4972, 4976 or 4979 or to a fine under ERISA Sections 502(i)
or 502(l).

(iii) All contributions, premiums or other payments
(including all employer contributions and employee salary reduction
contributions) which are due have been paid to each Employee Benefit Plan and
all contributions, premiums or other payments for any period ending on or before
the Closing Date which are not yet due shall been paid to each such Employee
Benefit Plan or shall be accrued in accordance with the custom and practice of
SIS.

(iv) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan and which is intended to qualify under Code Sec.
401(a), has received a favorable determination letter from the Internal Revenue
Service with respect to the qualification of the plan under Code Section 401(a)
and the exemption of any corresponding trust under Code Section 501, unless the
Internal Revenue Service is deemed to have approved the form of such Plan under
applicable IRS Revenue Procedures. A copy of such determination letters have
been provided

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<PAGE> 25

to Aspec and nothing has occurred since the date of each such determination
letter that would cause such Employee Pension Benefit Plan to lose its ability
to rely on such letter. Each Employee Pension Benefit Plan has been restated to
comply with the 1986 Tax Reform Act and subsequent applicable tax legislation to
the extent required by governing tax law. A copy of any determination letters
applicable to such restatement which have been received by SIS has been provided
to Aspec.

(v) Neither SIS nor any other Person or entity under
common control with SIS within the meaning of Section 414(b), (c) or (m) of the
Code and the regulations thereunder has now or at any previous time, maintained,
established, sponsored, participated in, or contributed to, any Employee Pension
Benefit Plan that is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code. No Employee Welfare Benefit Plan or
other Employee Benefit Plan providing welfare benefits is funded with a trust or
other funding vehicle, other than insurance policies or contracts with a health
maintenance organization or similar health care delivery entity.

(vi) SIS has delivered to Aspec correct and complete
copies of the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, if any, the
most recent Form 5500 Annual Report, and all related trust agreements, insurance
contracts, and other funding agreements which implement each maintained Employee
Benefit Plan. The terms of any such documentation or other communication do not
prohibit Aspec from amending or terminating any such Employee Benefit Plan.

(b) With respect to each Employee Benefit Plan that SIS,
and/or any controlled group of corporations within the meaning of Code Sec. 1563
(a "CONTROLLED GROUP OF CORPORATIONS") which includes SIS, maintains or ever has
maintained or to which any of them contributes, ever contributed, or ever has
been required to contribute:

(i) There have been no prohibited transactions within
the meaning of ERISA Sec 406 and Code Sec. 4975 with respect to any such
Employee Benefit Plan. No fiduciary within the meaning of ERISA Sec. 3(21) (a
"FIDUCIARY"), has any liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or investment of
the assets of any such Employee Benefit Plan. No action, suit, proceeding,
hearing, or investigation with respect to the administration or the investment
of the assets of any such Employee Benefit Plan (other than routine claims for
benefits) is pending or threatened.

(c) Except as disclosed in Schedule 5.25(c) of the SIS
Disclosure Schedule, SIS does not maintain or contribute to, has never
maintained or contributed to, and has never been required to contribute to, any
Employee Welfare Benefit Plan or any other Employee Benefit Plan providing
medical, health, or life insurance or other welfare-type benefits for current or
future retired or terminated employees, their spouses, or their dependents
(other than in accordance with Code Sec. 4980B or Part 6 of Subtitle B of
Title I of ERISA).

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<PAGE> 26

(d) There is no liability in connection with any Employee
Benefit Plan that is not fully disclosed or provided for on the Most Recent
Balance Sheet for which disclosure would be required under generally accepted
accounting principles.

(e) No Employee Benefit Plan or SIS has any liability to any
plan participant, beneficiary or other person by reason of the payment of
benefits or the failure to pay benefits with respect to benefits under or in
connection with any such Employee Benefit Plan, other than claims in the normal
administration of such plans.

5.26 Guaranties. SIS is not a guarantor or otherwise responsible for
any liability or obligation (including indebtedness) of any other Person.

5.27 Environment, Health, and Safety.

(a) For purposes of this Agreement, the following terms have
the following meanings:

"ENVIRONMENTAL, HEALTH, AND SAFETY LAWS" means any and all
federal, state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, plans, injunctions, judgments, decrees, requirements or
rulings now or hereafter in effect, imposed by any governmental authority
regulating, relating to, or imposing liability or standards of conduct relating
to pollution or protection of the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
public health and safety, or employee health and safety, concerning any
Hazardous Materials or Extremely Hazardous Substances, as such terms as defined
herein, or otherwise regulated, under any Environmental, Health and Safety Laws.
The term "ENVIRONMENTAL, HEALTH AND SAFETY LAWS" shall include, without
limitation, the Clean Water Act (also known as the Federal Water Pollution
Control Act), 33 U.S.C. Section 1251 et seq., the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et
seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section
136 et seq., the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., the Superfund Amendment and Reauthorization Act of 1986,
Public Law 99-4, 99, 100 Stat. 1613, the Emergency Planning and Community Right
to Know Act, 42 U.S.C. Section 11001 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq., and the Occupational Safety and
Health Act, 29 U.S.C. Section 651 et seq., all as amended, together with any
amendments thereto, regulations promulgated thereunder and all substitutions
thereof.

"EXTREMELY HAZARDOUS SUBSTANCE" means a substance on the list
described in Section 302 (42 U.S.C. Section 11002(a)(2)) of the Emergency
Planning and Community Right to Know Act, 42 U.S.C. Section 11001 et seq., as
amended.

"HAZARDOUS MATERIAL" means any material or substance that,
whether by its nature or use, is now or hereafter defined as a pollutant,
dangerous substance, toxic substance, hazardous waste, hazardous material,
hazardous substance or contaminant under any Environmental,

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<PAGE> 27

Health and Safety Laws, or which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and
which is now or hereafter regulated under any Environmental, Health and Safety
Laws, or which is or contains petroleum, gasoline, diesel fuel or other
petroleum hydrocarbon product.

(b) To the knowledge of SIS, each of SIS and its predecessors
and Affiliates (A) has complied with the Environmental, Health, and Safety Laws
(and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, directive or notice has been filed or commenced against any of
them alleging any such failure to comply), (B) has obtained and been in
substantial compliance with all of the terms and conditions of all permits,
licenses, certificates and other authorizations which are required under the
Environmental, Health, and Safety Laws, and (C) has complied in all material
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in the Environmental, Health, and Safety Laws.

(c) To the knowledge of SIS, SIS has no liability (whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), and none of SIS and its predecessors and Affiliates has handled or
disposed of any Hazardous Materials or extremely Hazardous Substances, arranged
for the disposal of any Hazardous Materials or Extremely Hazardous Substances,
exposed any employee or other individual to any Hazardous Materials or Extremely
Hazardous Substances, or owned or operated any property or facility in any
manner that could give rise to any liability, for damage to any site, location,
surface water, groundwater, land surface or subsurface strata, for any illness
of or personal injury to any employee or other individual, or for any reason
under any Environmental, Health, and Safety Law.

(d) To the knowledge of SIS, no Extremely Hazardous Substances
are currently, or have been, located at, on, in, under or about all properties
and equipment used in the business of SIS and its predecessors and Affiliates.

(e) To the knowledge of SIS, no Hazardous Materials are
currently located at, on, in, under or about all properties and equipment used
in the business of SIS and its predecessors and Affiliates in a manner which
violates any Environmental, Health and Safety Laws or which requires cleanup or
corrective action of any kind under any Environmental, Health and Safety Laws.

5.28 Certain Business Relationships With SIS. None of the Majority
Shareholders nor SIS nor any director or officer of SIS, nor any member of their
immediate families, nor any Affiliate of any of the foregoing, owns, directly or
indirectly, or has an ownership interest in any business (corporate or
otherwise) which is a party to, or in any property which is the subject of, any
business arrangement or relationship of any kind with SIS.

5.29 No Adverse Developments. To the knowledge of SIS, there is no
development (exclusive of general economic factors affecting business in
general) or threatened

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<PAGE> 28

development affecting SIS (or affecting customers, suppliers, employees, and
other Persons which have relationships with SIS) that (i) is having or is
reasonably likely to have a Material Adverse Effect on SIS, or (ii) would
prevent Aspec from conducting the business of the Surviving Corporation
following the Closing in the manner in which it was conducted or planned to be
conducted by SIS prior to the Closing.

5.30 Full Disclosure. No representation or warranty in this Section
5 or in any document delivered by the Majority Shareholders or SIS pursuant to
the transactions contemplated by this Agreement, and no statement, list,
certificate or instrument furnished to Aspec pursuant hereto or in connection
with this Agreement, when taken as a whole, contains any untrue statement of a
material fact, or omits to state any fact necessary to make any statement herein
or therein not materially misleading. There is no fact, development or
threatened development (excluding general economic factors affecting business in
general) known to SIS or the Majority Shareholders which SIS has not disclosed
to Aspec and which is having or may have a Material Adverse Effect on SIS. SIS
has delivered to Aspec true, correct and complete copies of all documents,
including all amendments, supplements and modifications thereof or waivers
currently in effect thereunder, described in the SIS Disclosure Schedule.

6. Representations and Warranties of Aspec. Aspec represents and warrants
to SIS that the statements contained in this Section 6 are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 6), except as
set forth in the disclosure schedule delivered by Aspec to SIS on the date
hereof (and initialed by Aspec and SIS), a copy of which is attached hereto as
Exhibit C (referred to herein as the "ASPEC DISCLOSURE SCHEDULE"). The Aspec
Disclosure Schedule will be arranged in paragraphs corresponding to the numbered
paragraphs contained in this Section 6.

6.1 Organization, Qualification, and Corporate Power. Aspec is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. Aspec is duly authorized to conduct business and
is in good standing under the laws of each other jurisdiction where such
qualification is required. Aspec has full corporate power and authority, and has
all necessary and material licenses and permits, to carry on the businesses in
which it is engaged and to own and use the properties owned and used by it.

6.2 Authorization. Aspec has full power and authority to execute and
deliver this Agreement and the Merger Agreement, and to consummate the
transactions contemplated hereunder and to perform its obligations hereunder and
no other proceedings on the part of Aspec is necessary to authorize the
execution, delivery and performance of this Agreement and the Merger Agreement.
This Agreement and the Merger Agreement and the transactions contemplated
thereby have been approved by the unanimous vote of Aspec's Board of Directors.
This Agreement and the Merger Agreement constitute the valid and legally binding
obligations of Aspec enforceable against Aspec in accordance with their
respective terms and conditions. Aspec need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions contemplated by
this Agreement.

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<PAGE> 29

6.3 Capitalization.

(a) As of February 28, 1998, the authorized capital stock of
Aspec consisted of (i) 130,378 shares of Series A Redeemable Preferred Stock,
$0.001 par value, all of which are issued were outstanding, (ii) 75,000,000
shares of Common Stock, of which 22,039,557 shares were issued and outstanding,
(iii) 5,000,000 shares of undesignated preferred stock, none of which were
issued and outstanding, and (iv) an aggregate of approximately 5,200,000 shares
were subject to outstanding options or reserved for issuance pursuant to Aspec's
employee and director stock plans. All of the outstanding shares of Aspec's
capital stock have been duly authorized and validly issued and are fully paid
and nonassessable. Except as set forth in this Section 6.3, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of Aspec or
obligating Aspec to issue or sell any shares of capital stock of, or other
equity interests in, Aspec. The authorized capital stock of Merger Sub consists
of 1,000 shares of common stock , all of which are held of record by Aspec.

(b) The shares of Aspec Common Stock to be issued pursuant to
Section 3.1 of this Agreement are duly authorized and reserved for issuance, and
upon issuance thereof will be validly issued, fully paid and nonassessable.

6.4 Noncontravention. Neither the execution and the delivery of this
Agreement nor the consummation of the transactions contemplated hereby, will (A)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Aspec is subject or any provision of its
Certificate of Incorporation or bylaws, or (B) (i) conflict with, (ii) result in
a breach of, (iii) constitute a default under, (iv) result in the acceleration
of, (v) create in any party the right to accelerate, terminate, modify, or
cancel, or (vi) require any notice under, any agreement, contract, lease,
license, instrument, or other arrangement to which Aspec is a party or by which
it is bound or to which any of its assets is subject.

6.5 Brokers' Fees. Aspec has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.

6.6 Financial Statements. Section 6.6 of the Aspec Disclosure
Schedule contains Aspec's audited balance sheets and statements of income and
cash flows as of and for the fiscal years ended November 30, 1996 and November
30, 1997 (the "ASPEC FINANCIAL STATEMENTS"). The Aspec Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby and present fairly
the financial condition of Aspec as of such dates and the results of operations
of Aspec as of such periods. The books of account of Aspec reflect as of the
dates shown thereon all items of income and expenses, and all assets,
liabilities and accruals of Aspec required to be reflected therein, in
accordance with generally accepted accounting principles consistently applied.

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<PAGE> 30

6.7 Undisclosed Liabilities. Aspec has no material liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due, including any liability for taxes) of a
character which, under GAAP, should be accrued, shown or disclosed on a balance
sheet of Aspec, except for (i) liabilities set forth in the Aspec Financial
Statements and (ii) liabilities which have arisen after November 30, 1997 in the
Ordinary Course of Business.

6.8 Litigation. Section 6.8 of the Aspec Disclosure Schedule sets
forth each instance in which Aspec (or any of its assets) (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or, to the knowledge of Aspec, is threatened to be made a party, to any
action, suit, proceeding, hearing, arbitration, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator.

6.9 Legal Compliance. Aspec has complied in all material respects
with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof). To
the knowledge of Aspec, no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, notice or inquiry has been filed or commenced
by or against, or received by, any governmental body alleging any failure to so
comply. Aspec has all licenses, permits, approvals, registrations,
qualifications, certificates and other governmental authorizations that are
necessary for the operations of Aspec as they are presently conducted, except
for any such licenses, permits, approvals, registrations, qualifications,
certificates and other governmental authorizations which, if not obtained, would
not individually or in the aggregate be likely to result Material Adverse Effect
on Aspec.

6.10 No Adverse Developments. To the knowledge of Aspec, there is no
development (exclusive of general economic factors affecting business in
general) or threatened development affecting Aspec (or affecting customers,
suppliers, employees, and other Persons which have relationships with Aspec)
that (i) is having or is reasonably likely to have a Material Adverse Effect on
Aspec, or (ii) would prevent Aspec from conducting its business following the
Closing in the manner in which it was conducted or planned to be conducted by
Aspec prior to the Closing.

7. Pre-Closing Covenants. With respect to the period between the execution
of this Agreement and the earlier of the termination of this Agreement in
accordance with Section 11 hereof and the Effective Time of the Merger:

7.1 General. Each of the Parties will use their reasonable best
efforts to take all actions and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Section 9 below).

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<PAGE> 31

7.2 Notices and Consents. Except as otherwise agreed to by Aspec,
SIS will give any notices to third parties and will use its best efforts to
obtain any third party consents that are required in connection with the matters
identified in Section 5.4 of the SIS Disclosure Schedule. Each of the Parties
will give any notices to, make any filings with, and use its best efforts to
obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters identified in Section 5.4
of the SIS Disclosure Schedule.

7.3 Conduct of Business. SIS will not engage in any practice, take
any action, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, SIS will not (a)
issue or sell, or contract to issue or sell, any shares of its capital stock or
that of any of its subsidiaries or any securities convertible into to
exchangeable for shares of capital stock of it or any of its subsidiaries, or
securities, warrants, options or rights to purchase any of the foregoing (other
than shares issued upon exercise of outstanding options or upon the conversion
of outstanding convertible securities described on the SIS Disclosure Schedule),
(b) purchase or redeem any shares of its capital stock (other than with respect
to Dissenting Shares), (c) declare or pay any dividends or agree to make any
other distribution with respect to any shares of its capital stock (other than
with respect to Dissenting Shares), (d) amend its Articles of Incorporation or
Bylaws, or (e) enter into or propose to enter into an agreement with any other
person providing for the possible acquisition by it or any of its subsidiaries
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise) of any material portion of the capital stock or assets of another
entity. In addition, SIS will comply with all laws, statutes, ordinances, rules,
regulations and orders applicable to it or to the conduct of its business,
except for violations that could not subject SIS to a penalty or loss that could
constitute a Material Adverse Effect on SIS.

7.4 Preservation of Business. SIS will use its best efforts to keep
its business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers and employees. Aspec will use its best
efforts to keep its business and properties substantially intact, including its
present operations, physical facilities, working conditions, and relationships
with lessors, licensors, suppliers, customers and employees.

7.5 Access to Information. SIS will permit Aspec and its
representatives to have access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of SIS, to the business and
operations of SIS. Neither such access, inspection and furnishing of information
to Aspec and its representatives, nor any investigation by Aspec and its
representatives, shall in any way diminish or otherwise effect Aspec's right to
rely on any representation or warranty made by SIS or the Majority Shareholders
hereunder. Aspec will permit SIS and its representatives to have access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of Aspec, to the business and operations of Aspec. Neither
such access, inspection and furnishing of information to SIS and its
representatives, nor any investigation by SIS and its representatives, shall in
any way diminish or otherwise effect SIS's right to rely on any representation
or warranty made by Aspec hereunder.

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<PAGE> 32

7.6 Notice of Developments. Each Party will give prompt written
notice to the others of any adverse development causing a material breach of any
of its own representations and warranties in Section 5 or Section 6 above. No
disclosure by any Party pursuant to this Section 7.6, however, shall be deemed
to amend or supplement the SIS Disclosure Schedule or the Aspec Disclosure
Schedule or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.

7.7 Preparation of Shareholder Notice and Information Statement. As
soon as practicable after the date hereof (but in no event later than ten (10)
days following the date hereof), SIS will prepare a shareholder notice and
information statement to be delivered to its shareholders for the purpose of
soliciting their consent to the Merger (the "INFORMATION STATEMENT") and shall
use its best efforts to obtain such consent. The Board of Directors of SIS will
recommend unanimously in the Information Statement the approval of the Merger by
the SIS shareholders. The Information Statement shall contain the information
required by Regulation D of the Securities Act with respect to transactions
under Rule 505 or Rule 506 thereof and shall be in form reasonably satisfactory
to Aspec and its counsel. Aspec will provide SIS will all necessary disclosure
with respect to Aspec to be included in the Information Statement.

7.8 Exclusivity. From and after the date hereof through the date
which is thirty (30) days following the termination of this Agreement pursuant
to Section 11 hereof, without the prior written consent of Aspec, neither SIS,
the Majority Shareholders nor any of SIS's other officers, directors,
shareholders, agents or Affiliates shall, directly or indirectly, (a) solicit,
conduct discussions with or engage in negotiations with any person, other than
Aspec, relating to the possible acquisition of SIS or any of its subsidiaries
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise) or any material portion of its or their capital stock or assets, (b)
provide information with respect to SIS or any of its subsidiaries to any
person, other than Aspec, relating to the possible acquisition of SIS or any of
its subsidiaries (whether by way of merger, purchase of capital stock, purchase
of assets or otherwise) or any material portion of its or their capital stock or
assets, (c) enter into an agreement with any person, other than Aspec, providing
for the acquisition of SIS or any of its subsidiaries (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise) or any material
portion of its or their capital stock or assets, (d) make or authorize any
statement, recommendation or solicitation in support of any possible acquisition
of SIS or any of it subsidiaries (whether by way of merger, purchase of capital
stock, purchase of assets or otherwise) or any material portion of its or their
capital stock or assets by any person, other than by Aspec, (e) unless otherwise
agreed to by Aspec, enter into any agreement with any person, other than Aspec,
providing for any extension of credit (other than trade credit in the ordinary
course of business) or other debt investment in SIS, or (f) unless otherwise
agreed to by Aspec, enter into any additional agreement for the licensing or
distribution of products, technology, or intellectual property of SIS, whether
now existing or hereafter created. In addition to the foregoing, if SIS or any
of its subsidiaries receives any unsolicited offer or proposal to enter
negotiations relating to any of the above, SIS shall immediately notify Aspec
thereof, including information as to the identity of the offeror or the party
making any such offer or proposal and the specific terms of such offer or
proposal, as the case may be. From and after the date hereof until the first to
occur of the Closing of the Merger or the termination of this Agreement pursuant
to

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<PAGE> 33

Section 11 hereof, none of the Majority Shareholders will transfer or offer to
transfer any of their SIS Common Stock except to Aspec pursuant to the Merger.

7.9 Voting Agreement and Voting Proxy. At or prior to the time this
Agreement is executed, SIS shall have delivered to Aspec a Voting Agreement and
Voting Proxy in the form attached hereto as Exhibit D, duly executed by each of
the Majority Shareholders and by such other shareholders of SIS that, together
with the Majority Shareholders, hold no less than 80% of the outstanding voting
power of SIS.

8. Post-Closing Covenants. With respect to the period following the
Effective Time of the Merger:

8.1 General. In case at any time after the Effective Time of the
Merger any further action is necessary to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor under
Section 10 below).

8.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction (A) on or
prior to the Effective Time of the Merger involving SIS or the Majority
Shareholders or (B) arising out of Aspec's operation of the business of the
Surviving Corporation following the Effective Time of the Merger in the manner
in which it is presently conducted and planned to be conducted, each of the
other Parties will cooperate with the party, its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be reasonably necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 10 below).

8.3 Transition. None of the Majority Shareholders will take any
action that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business associate of SIS from
maintaining the same business relationships with the Surviving Corporation after
the Effective Time of the Merger as it maintained with SIS prior to the
Effective Time of the Merger.

8.4 Confidentiality. Each of the parties hereto hereby agrees to
keep such information or knowledge obtained in any due diligence or other
investigation pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential in accordance
with the terms of that certain Nondisclosure and Nonsolicitation Agreement
between Aspec and SIS dated March 5, 1998 (the "NONDISCLOSURE AGREEMENT").

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<PAGE> 34

8.5 SIS Employees; Employee Stock Options. Upon the Effective Date
of the Merger, all employees of SIS shall be offered employment with the
Surviving Corporation. In addition, upon the Effective Date of the Merger, Mr.
Burkard shall be granted an option to purchase 175,000 shares of Aspec Common
Stock and the other employees of SIS shall be granted options to purchase an
aggregate of 150,000 shares of Aspec Common Stock (in such amounts to be
mutually determined by the Chief Executive Officer of SIS and Aspec). In each
case, such options shall be granted at the fair market value of the Aspec Common
Stock at the date of grant and shall vest monthly over a four-year period. The
options shall also be subject to the other terms and conditions of Aspec's 1996
Stock Option Plan (the "STOCK PLAN"). Aspec will file a Registration Statement
on Form S-8 with respect to the Stock Plan no later than 180 days following the
initial public offering of Aspec's Common Stock. With respect to such
Registration Statement on Form S-8, the options issued to the former SIS
employees shall be treated the same as the options granted to Aspec's other
employees. All employees of SIS that are employees of the Surviving Corporation
following the Closing shall execute Aspec's standard form of employee
confidentiality and inventions assignment agreement.

8.6 Restrictions on Sales of Aspec Common Stock. Other than in
connection with the exercise of the registration rights contemplated by Section
9.2(f) hereof, each of the Majority Shareholders agrees that, without the prior
written consent of Aspec, he will not, for a period of one hundred eighty (180)
days subsequent to the closing of the initial public offering of the Common
Stock of Aspec (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Aspec Common Stock or any securities convertible into
or exercisable or exchangeable for Aspec Common Stock or (ii) enter into any
swap or similar agreement that transfers, in whole or in part, the economic risk
of ownership of the Aspec Common Stock, whether any such transaction described
in clause (i) or (ii) above is to be settled by delivery of Aspec Common Stock
or such other securities, in cash or otherwise. Each of the Majority
Shareholders further agrees and consents to the entry of stop-transfer
instructions with Aspec's transfer agent against the transfer of shares of Aspec
Common Stock held by the undersigned except in compliance with this Section 8.6.

9. Conditions to Obligations to Close.

9.1 Conditions to Aspec's Obligation to Close. The obligations of
Aspec to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:

(a) the representations and warranties of SIS and the Majority
Shareholders set forth in Section 5 above shall be true and correct in all
material respects at and as of the Closing Date;

(b) SIS and the Majority Shareholders shall have performed and
complied with all of their respective covenants hereunder in all material
respects through the Closing;

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<PAGE> 35

(c) SIS shall have obtained such of the third party consents
listed on Section 5.4 of the SIS Disclousre Schedule as may be mutually agreed
to by Aspec and SIS;

(d) no action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator (other than such an action
initiated by Aspec or Merger Sub) wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, or (C)
affect materially and adversely the right of Aspec or Merger Sub to control SIS
following the Effective Time of the Merger, and no law, statute, ordinance,
rule, regulation or order shall have been enacted, enforced or entered which has
caused or will likely cause any of the effects under clause (A), (B) or (C) of
this Section 9.1(d) to occur.

(e) the President and the Chief Financial Officer of SIS and
the Majority Shareholders shall have delivered to Aspec a certificate to the
effect that each of the conditions specified above in Section 9.1(a) to 9.1(d)
(inclusive) is satisfied in all material respects;

(f) No Material Adverse Effect shall have occurred with
respect to SIS;

(g) Aspec shall have received from counsel to SIS and the
Majority Shareholders an opinion in form and substance as set forth in Exhibit E
attached hereto, addressed to Aspec, and dated as of the Closing Date;

(h) this Agreement and the Merger shall have been approved by
the vote of the holders of at least 90% of the outstanding shares of Common
Stock of SIS.

(i) certain outstanding indebtedness of SIS in the amount of
$85,000 payable to a SIS shareholder shall have been repaid or canceled;

(j) all outstanding options, convertible securities and other
Stock Rights to purchase securities of SIS shall have been exercised or
canceled; and

(k) William Burkard, Bob Morford, Ray Eschenbrenner and at
least eight (8) other engineers presently employed by SIS shall have accepted
employment with the Surviving Corporation.

Aspec may waive any condition (in whole or in part) specified in
this Section 9.1 if it executes a writing so stating at or prior to the Closing.

9.2 Conditions to SIS's Obligation. The obligation of SIS and the
Majority Shareholders to consummate the transactions to be performed by each of
them in connection with the Closing is subject to satisfaction of the following
conditions:

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(a) the representations and warranties of Aspec set forth in
Section 6 above shall be true and correct in all material respects at and as of
the Closing Date;

(b) Aspec shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;

(c) no action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator (other than such an action
initiated by SIS or any of the Majority Shareholders) wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);

(d) the Chief Executive Officer or other duly authorized
officer of Aspec shall have delivered to SIS a certificate to the effect that
each of the conditions specified above in Section 9.2(a) to 9.2(c) (inclusive)
is satisfied in all material respects;

(e) SIS shall have received from counsel to Aspec an opinion
in form and substance as set forth in Exhibit F attached hereto, addressed to
SIS, and dated as of the Closing Date;

(f) The Registration Agreement dated May 28, 1996 by and
between Aspec and certain other parties shall have been amended in the form
attached hereto as Exhibit G.

(g) No Material Adverse Change shall have occurred with
respect to Aspec that would be reasonably likely to result in Aspec's revenues
for fiscal 1998 being reduced by $11 million or more.

SIS and the Majority Shareholders may waive any condition (in whole
or in part) specified in this Section 9.2 if SIS executes a writing so stating
at or prior to the Closing.

10. Survival of Representations, Indemnification.

10.1 Limited Survival of Representations and Warranties. All
covenants of Aspec, Merger Sub, SIS and the Majority Shareholders to be
performed prior to the Effective Time of the Merger, and all representations and
warranties of Aspec, SIS and the Majority Shareholders in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Merger for
a period of six (6) months from the Effective Time of the Merger (the
"EXPIRATION DATE"), and, notwithstanding anything to the contrary in this
Agreement, no claim for breach of any representation, warranty or covenant by
any Party and no claim for indemnification by Aspec or the Majority Shareholders
hereunder shall be brought at any time after the Expiration Date.

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<PAGE> 37

10.2 Indemnification by Aspec.

(a) From and after the Effective Time of the Merger, Aspec
shall indemnify and hold harmless each of the Majority Shareholders, and each of
the heirs, executors, successors and assigns of any of the foregoing, from and
against any and all Losses arising out of, or in connection with, any breach of
any representation or warranty or of any covenant, agreement, or undertaking
made by Aspec in this Agreement.

(b) Notwithstanding any provision to the contrary in this
Agreement, the maximum obligation and liability of Aspec and Merger Sub to any
SIS shareholder (including the Majority Shareholders) shall be determined by
multiplying the number of shares of Aspec Common Stock received by each such SIS
shareholder in the Merger by $10.00.

10.3 Indemnification by Majority Shareholders.

(a) From and after the Effective Time of the Merger, each of
SIS and the Majority Shareholders shall indemnify and hold harmless Aspec,
Merger Sub and each of their respective Affiliates, and each of their respective
directors, officers, employees and agents, and each of the heirs, executors,
successors and assigns of any of the foregoing, from and against any and all
Losses arising out of, or in connection with, any breach of any representation
or warranty or of any covenant, agreement, or undertaking made by SIS or the
Majority Shareholders in this Agreement. The liability of the Majority
Shareholders hereunder shall be several in proportion to number of shares of
Aspec Common Stock received by each such Majority Shareholder and his Affiliates
as a result of the Merger, and not joint.

(b) Any claim for indemnification pursuant to this Section 10
may be satisfied by the Majority Shareholders by returning shares of Aspec
Common Stock received by each such Majority Shareholder and his Affiliates in
the Merger to Aspec. Notwithstanding any provision to the contrary in this
Agreement, the maximum obligation and liability of each of the Majority
Shareholders hereunder shall be limited to the forfeiture to Aspec of all of the
shares of Aspec Common Stock received by each such Majority Shareholder and his
Affiliates in the Merger to Aspec. Any shares of Aspec Common Stock returned to
Aspec shall be valued at the then fair market value of the Aspec Common Stock.

(c) The Majority Shareholders may agree, as among themselves
and without limiting the rights of Aspec or Merger Sub hereunder, as to the
respective amounts of any liability for which they each shall be responsible.

(d) Any payment made pursuant to this Section 10.3 or Section
10.2 hereof shall be treated by the Parties as an adjustment to the purchase
price provided for herein, and the Parties agree not to take any position
inconsistent therewith for any purpose.

10.4 Notice of Claims. No action or proceeding may be brought by a
party seeking indemnification hereunder (the "INDEMNIFIED PARTY") with respect
to any breach of the

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representations, warranties, covenants or agreements made hereunder unless
written notice thereof, setting forth in reasonable detail (to the extent then
known) the amount of the claim and the claimed misrepresentation or breach of
warranty or breach of covenant or agreement, or the reasons for which such
Indemnified Party believes there has been or may have been a breach of
representation, warranty, covenant or agreement, shall have been delivered to
the party alleged to have breached such representation, warranty, covenant or
agreement (the "INDEMNIFYING PARTY") on or prior to the Expiration Date. If the
Indemnifying Party contests the assertion of the claim, then the parties shall
act in good faith to reach agreement regarding such claim.

10.5 Third Party Claims. If a claim by a third party is made against
an Indemnified Party, and if such Indemnified Party intends to seek indemnity
with respect thereto under this Section 10, such Indemnified Party shall
promptly notify the Indemnifying Party in writing of such claims setting forth
such claims in reasonable detail; provided, however, that failure of such
Indemnified Party to give such notice shall not result in a waiver of its
indemnity rights except to the extent that such failure prejudices the
Indemnifying Party's ability to respond to or defend the claim. The Indemnifying
Party shall have thirty (30) days after receipt of such notice to undertake,
through counsel of its own choosing and at its own expense, the settlement or
defense thereof, and the Indemnified Party shall cooperate with it in connection
therewith; provided, however, that the Indemnified Party may participate in such
settlement or defense through counsel chosen by such Indemnified Party, provided
that the fees and expenses of such counsel shall be borne by such Indemnified
Party. The Indemnified Party shall not pay or settle any claim without the
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. The Indemnifying Party will not pay or settle any claim
unless it contains an unconditional release of the Indemnified Party. If the
Indemnifying Party does not within thirty (30) days after the receipt of the
Indemnified Party's notice of a claim of indemnity hereunder undertake the
defense thereof or if the Indemnified Party must obtain separate legal counsel
due to an actual or potential conflict arising from such claim (as determined in
good faith by the Indemnified Party's legal counsel), the Indemnified Party
shall have the right to contest, settle or compromise the claim but shall not
thereby waive any right to indemnity therefor (and for all associated reasonable
costs and attorney's fees which, in the case of such costs and fees, shall be
reimbursed by the Indemnifying Party as incurred) pursuant to this Agreement.

10.6 Limitation of Claims. The Majority Shareholders shall not be
liable for any claims by Aspec made hereunder unless and until the aggregate
amount of all such claims against one or more of the Majority Shareholders
exceeds $25,000, provided that in the event such claims exceed $25,000, Aspec
shall be entitled to recover for the full amount of such claims (including the
$25,000 limitation). Aspec and Merger Sub shall not be liable for any claims by
the Majority Shareholders made hereunder unless and until the aggregate amount
of all such claims against Aspec and Merger Sub exceeds $25,000, provided that
in the event such claims exceed $25,000, the Majority Shareholders shall be
entitled to recover for the full amount of such claims (including the $25,000
limitation).

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<PAGE> 39

11. Termination.

11.1 Termination of the Agreement. This Agreement may be terminated
at any time prior to the Closing as follows:

(a) Aspec and SIS may terminate this Agreement as to all
Parties by mutual written consent at any time prior to the Closing.

(b) Aspec may terminate this Agreement by giving written
notice to SIS and the Majority Shareholders at any time prior to the Closing (A)
in the event either of SIS or the Majority Shareholders has materially breached
any representation, warranty, or covenant contained in this Agreement and Aspec
has notified SIS and the Majority Shareholders of the breach or (B) if the
Closing shall not have occurred on or before May 31, 1998, by reason of the
failure of any condition precedent under Section 9.1 hereof (unless the failure
results primarily from Aspec itself materially breaching any representation,
warranty, or covenants contained in this Agreement).

(c) Aspec may terminate this Agreement by giving written
notice to SIS and the Majority Shareholders at any time prior to 5:00 p.m.
(California time) on March 27, 1998 in the event that Aspec is not satisfied in
its sole discretion with the results of its due diligence investigation
regarding the business and financial and corporate records of SIS.

(d) SIS may terminate this Agreement by giving written notice
to Aspec at any time prior to the Closing (A) in the event Aspec has materially
breached any representation, warranty, or covenant contained in this Agreement
and SIS has notified Aspec of the breach, or (B) if the Closing shall not have
occurred on or before May 31, 1998, by reason of the failure of any condition
precedent under Section 9.2 hereof (unless the failure results primarily from
SIS or the Majority Shareholders materially breaching any representation,
warranty, or covenants contained in this Agreement).

11.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 11 above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided, however, that
the Confidentiality Agreement shall survive in accordance with its terms.

12. Miscellaneous.

12.1 Publicity. No Party shall issue any press release or make any
public announcement relating to the subject matter of this Agreement prior to
the Closing without the prior written approval of Aspec and SIS. Notwithstanding
the foregoing, Aspec may disclose the Merger in its Registration Statement on
Form S-1, and any amendments thereto, to be filed with the Securities and
Exchange Commission in connection with the initial public offering of its Common
Stock and may discuss the Merger with its underwriters and potential investors
in connection with such offering.

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12.2 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties, the shareholders
of SIS and their respective successors and permitted assigns.

12.3 Entire Agreement. This Agreement (including the exhibits and
schedules hereto) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof (including that certain letter agreement between Aspec and
SIS dated March 9, 1998). Notwithstanding the foregoing, SIS and Aspec agree
that the terms of the Confidentiality Agreement shall remain in effect.

12.4 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Parties.

12.5 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which together will
constitute one and the same instrument.

12.6 Headings. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

12.7 Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if deli vered by hand, (c) one (1) business day after the business day of
deposit with Federal Express or similar overnight courier, freight prepaid or
(d) one (1) business day after the business day of facsimile transmission, if
delivered by facsimile transmission with copy by first class mail, postage
prepaid, and shall be addressed to the intended recipient as set forth below:

If to Aspec or Merger Sub:

Aspec Technology, Inc.
830 East Arques Avenue
Sunnyvale, California 94086
Attention: Conrad J. Dell'Oca,
President and Chief Executive Officer

Copy to:

Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: J. Robert Suffoletta, Esq.

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<PAGE> 41

If to SIS or the Majority Shareholders:

SIS Microelectronics, Inc.
P.O. Box 1432
Longmont, Colorado 80501
Attention: William D. Burkard,
President and Chief Executive Officer

Copy to:

Berg, McMurry & Culley, P.C.
1881 Ninth Street, Suite 102
Boulder, Colorado 80302
Attention: Scott H. Culley, Esq.

Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties written notice of such change in accordance with the above provisions.

12.8 Governing Law; Dispute Resolution.

(a) This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California without giving
effect to any choice or conflict of law provision or rule (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.

(b) It is the express intention of the Parties to this
Agreement to make a good faith effort to resolve, without resort to arbitration,
any dispute arising under or related to this Agreement. In the event of a
dispute relating to any provision of this Agreement which cannot be resolved
promptly by negotiations between the Parties involved directly in the dispute,
any Party to the dispute may give the other Party written notice of its intent
to arbitrate, as provided in this Section 12.8. No arbitration may commence
earlier than thirty (30) days after the delivery of the notice of intent to
arbitrate, unless the failure to commence arbitration is reasonably likely to
result in some demonstrable harm.

(c) The Parties hereto agree that the appropriate and
exclusive forum for any disputes among any of the Parties hereto arising out of
this Agreement or the transactions contemplated hereby, shall be settled by
arbitration in Santa Clara County, California, in accordance with the rules of
the American Arbitration Association, and judgment upon any award rendered by
the arbitrator or arbitrators may be entered in any court having jurisdiction
thereof. The arbitration panel will consist of three (3) people to be mutually
selected by the Parties to the dispute. In the event that the Parties to the
dispute cannot agree upon the arbitrators within ten (10) days after

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the commencement of the arbitration procedures, one (1) arbitrator shall be
selected by Aspec, one (1) arbitrator shall be selected by the Majority
Shareholders involved in the dispute and one (1) arbitrator shall be selected by
the two (2) other arbitrators so designated. The parties further agree, to the
extent permitted by law, that final and non-appealable judgment against any of
them in any action or proceeding contemplated above shall be conclusive and may
be enforced in any other jurisdiction within or outside the United States by
suit on the judgment, a certified or exemplified copy of which shall be
conclusive evidence of the fact and amount of such judgment. The Parties hereby
consent to the jurisdiction of the Superior Court of the State of California and
the United States District Courts of California and waive any objections or
rights as to forum nonconvenience, lack of personal jurisdiction or similar
grounds with respect to the enforcement of any such judgment.

(d) In the event of any arbitration proceeding hereunder, the
arbitrator(s) shall have the discretion to award the prevailing party
reimbursement of all costs and expenses incurred in connection with said action,
including reasonable attorney's fees.

(e) To the extent that Aspec or the Majority Shareholders have
or hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, Aspec and the Majority Shareholders (as the case may be) hereby
irrevocably waive such immunity in respect of its obligations with respect to
this Agreement.

12.9 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
Aspec, Merger Sub, SIS and the Majority Shareholders. No waiver by any Party of
any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior to subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
occurrence.

12.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.

12.11 Expenses. Each of Aspec, SIS and the Majority Shareholders
will bear its or their own costs and expenses (including legal and accounting
fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby; provided, however, that the Majority
Shareholders will be responsible for (i) any brokers', finders' or advisory fees
payable on behalf of SIS in connection with the Agreement and the transactions
contemplated hereby, and (ii) any legal or accounting fees undertaken on behalf
of SIS or the Majority Shareholders in connection with the Agreement and the
transactions contemplated hereby in excess of $50,000 which may be paid by SIS.

12.12 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises,

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this Agreement shall be construed as if drafted jointly by the Parties and no
presumption or burden of proof shall arise favoring or disfavoring any Party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word "including" shall mean including
without limitation.

12.13 Incorporation of Exhibits and Schedules. The Exhibits
identified in this Agreement are incorporated herein by reference and made a
part hereof.

[remainder of page intentionally left blank]

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<PAGE> 44

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.

Aspec: ASPEC TECHNOLOGY, INC.

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

Merger Sub: ASPEC ACQUISITION CORPORATION

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

SIS: SIS MICROELECTRONICS, INC.

By: /s/ WILLIAM D. BURKARD
--------------------------------------
William D. Burkard
Chief Executive Officer

Majority Shareholders: /s/ WILLIAM D. BURKARD
------------------------------------------
William D. Burkard

/s/ JAMES L.D. ROSER
------------------------------------------
James L.D. Roser

/s/ THOMAS P. BROCK
------------------------------------------
Thomas P. Brock

[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]

<PAGE> 1
Exhibit 10.3

ASPEC TECHNOLOGY, INC.

1997 DIRECTOR OPTION PLAN
(AS AMENDED MARCH 11, 1998)

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 Delaware 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;

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<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 250,000 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.

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<PAGE> 3

(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:

(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 25,000 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 stockholders 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 5,000 Shares (a "Subsequent Option") on the date of the
annual meeting of stockholders 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 annual meeting of stockholders of each year or, if no such meeting is
held, on each anniversary of the date of grant, provided that the Optionee
continues to serve as a Director on such dates.

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<PAGE> 4

(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.

(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 1/4th of the Shares subject to the Subsequent Option on
the day before the annual meeting of stockholders of each year or, if no such
meeting is held, on each anniversary of the date of grant, 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 stockholders 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 stockholders 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

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<PAGE> 5

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.

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

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<PAGE> 6

Optionee may exercise his or her Option, but only within twelve (12) months
following the date of such ter mination, 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.

(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
stockholders 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.

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<PAGE> 7

(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 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.

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<PAGE> 8

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 there
under, state securities laws, 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.

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 stockholders of the Company at or prior to the first annual
meeting of stockholders 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 Delaware 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.

1. Nature of the Option. This Option is a nonstatutory option and is not
intended to qualify for any special tax benefits to the Optionee.

2. Exercise Price. The exercise price is $_______ for each share of Common
Stock.

3. 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 annual meeting of stockholders of each year or, if no such
meeting is held, on each anniversary of the date of grant, 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 stockholders
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

4. 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.

5. 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.

6. 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.

7. 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.

8. 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

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<PAGE> 11

date 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 Delaware 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

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<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
Delaware and Delaware 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
(AS AMENDED MARCH 11, 1998)

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.

(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

<PAGE> 2
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 end on the last
Trading Day in the period ending the following September 30. The duration of
Offering Periods may be changed pursuant to Section 4 of this Plan.

(l) "Plan" shall mean this 1997 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.

(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.

-2-

<PAGE> 3
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 end on the last Trading Day in the period ending the following
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.

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.

-3-

<PAGE> 4
(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 parti
cipation 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 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

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<PAGE> 5
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 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.

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<PAGE> 6
13. Stock.

(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be five hundred thousand (500,000) shares, plus an annual increase to be
added on the first day of the Company's fiscal year (beginning December 1, 1998)
equal to the lesser of (i) the number of Shares needed to restore the maximum
aggregate number of Shares available for sale under the Plan to 500,000, or (ii)
a lesser amount determined by the Board. 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 parti cipant'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 Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more

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<PAGE> 7
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 Offering Period then in progress shall be
shortened by setting a new Exercise Date (the "New

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<PAGE> 8
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.

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<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 pur chased 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.

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<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 10%) 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 of Alex Brown for the account 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

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<PAGE> 11
withholding obligations, if any, which arise upon the disposition of the
Common Stock. The 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: _________________________________________________

_________________________________________________

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<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)

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<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 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 Amendment No. 3 to Registration Statement No.
333-22913 of Aspec Technology, Inc. of our report dated March 12, 1998,
appearing in the Prospectus, which is a part of such Registration Statement,
and to the references to us under the headings "Selected Consolidated Financial
Data" and "Experts" in such Prospectus.

Our audits of the consolidated financial statements referred to in our
aforementioned report also included the consolidated financial statement
schedule of Aspec Technology, Inc., "Valuation and Qualifying Accounts." This
consolidated 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 consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

Deloitte & Touche LLP
San Jose, California
March 30, 1998