SUMMIT DESIGN INC, S-1/A, 1996-09-17

SUMMIT DESIGN INC
S-1/A, 1996-09-17
PREPACKAGED SOFTWARE

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 17, 1996

REGISTRATION NO. 333-6445
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------

AMENDMENT NO. 1

TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SUMMIT DESIGN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 7372 93-1137888
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION)

9305 S.W. GEMINI DRIVE, BEAVERTON, OREGON 97008
(503) 643-9281
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
LARRY J. GERHARD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
9305 S.W. GEMINI DRIVE, BEAVERTON, OREGON 97008
(503) 643-9281
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
ALAN K. AUSTIN, ESQ. THOMAS W. FURLONG, ESQ.
ELIZABETH R. FLINT, ESQ. DAVID A. HUBB, ESQ.
STEVEN V. BERNARD, ESQ. PAMELA PASTI, ESQ.
SUSAN L. STAPLETON, ESQ. GRAY CARY WARE & FREIDENRICH
WILSON SONSINI GOODRICH & ROSATI A PROFESSIONAL CORPORATION
PROFESSIONAL CORPORATION 400 HAMILTON AVENUE
650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94301
PALO ALTO, CALIFORNIA 94304-1050 (415) 328-6561
(415) 493-9300
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, as amended, 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, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO TO BE OFFERING PRICE OFFERING REGISTRATION
BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE(3)
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<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share......... 4,600,000 shares $9.00 $41,400,000 $15,665
</TABLE>
================================================================================

(1) Includes 600,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a) promulgated under the Securities
Act of 1933, as amended.

(3) Includes an additional registration fee of $1,785 with respect to the
575,000 share increase in the amount of shares to be registered. A
registration fee of $13,880 was previously paid with respect to 4,025,000
shares at a proposed maximum offering price of $10 per share.

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

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, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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

SUMMIT DESIGN, INC.
CROSS REFERENCE SHEET

PURSUANT TO ITEM 501(b) OF REGULATION S-K SHOWING LOCATION IN
PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-1

<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM S-1 REGISTRATION STATEMENT LOCATION OR CAPTION IN PROSPECTUS
------------------------------- ---------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus....... Forepart of Registration Statement;
Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................... Inside Front Cover Page; Page 3
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges................. Prospectus Summary; Risk Factors
4. Use of Proceeds............................... Summary; Use of Proceeds
5. Determination of Offering Price............... Outside Front Cover Page; Underwriting
6. Dilution...................................... Dilution
7. Selling Security Holders...................... Principal and Selling Stockholders
8. Plan of Distribution.......................... Outside and Inside Front Cover Pages;
Underwriting
9. Description of Securities to be Registered.... Description of Capital Stock
10. Interests of Named Experts and Counsel........ Legal Matters
11. Information with Respect to the Registrant.... Outside and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; Use
of Proceeds; Dividend Policy;
Capitalization; Dilution; Selected
Consolidated Financial Data;
Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Business; Management,
Certain Transactions; Principal and
Selling Stockholders; Description of
Capital Stock; Experts; Consolidated
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................. Not Applicable
</TABLE>
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 OFFERTO 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 SEPTEMBER 17, 1996

[LOGO OF SUMMIT APPEARS HERE]

4,000,000 SHARES

COMMON STOCK

Of the 4,000,000 shares of Common Stock offered hereby, 2,000,000 shares are
being sold by Summit Design, Inc. ("Summit" or the "Company") and 2,000,000
shares are being sold by the Selling Stockholders. See "Principal and Selling
Stockholders." The Company will not receive any of the proceeds from the sale
of shares by the Selling Stockholders. 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 $7.00 and $9.00 per
share. See "Underwriting" for information relating to the method of determining
the initial public offering price. Upon completion of this offering, the
Company's officers, directors and their affiliates will beneficially own
approximately 44.7% of the Company's Common Stock.

----------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 6.

----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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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<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE DISCOUNTS AND PROCEEDS TO SELLING
TO PUBLIC COMMISSIONS COMPANY (1) STOCKHOLDERS (2)
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<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
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Total (2)....................... $ $ $ $
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</TABLE>
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(1) Before deducting expenses payable by the Company, estimated at $1,200,000.

(2) Certain Selling Stockholders have granted the Underwriters a 30-day option
to purchase up to an additional 600,000 shares of Common Stock solely to
cover over-allotments, if any. See "Underwriting." If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Selling Stockholders will be $ , $ and
$ , respectively.

----------

The Common Stock is offered by the Underwriters as stated herein, subject to
receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of such shares will be made
through the offices of Robertson, Stephens & Company LLC ("Robertson, Stephens
& Company"), San Francisco, California, on or about , 1996.

ROBERTSON, STEPHENS & COMPANY NEEDHAM & COMPANY, INC.

The date of this Prospectus is , 1996
<PAGE>

SUMMIT DESIGN'S SOFTWARE PRODUCTS enable organizations to more easily realize
the benefits of high level design automation by simplifying and automating IC
design entry and verification and by linking manufacturing test to design. These
products assist organizations in meeting market demands for rapid time to
market, increased product functionality and lower product cost.

THE CONVENTIONAL HLDA TOP-DOWN THE SUMMIT DESIGN PROCESS
DESIGN PROCESS

(Graphic showing steps (Graphic showing steps
in the conventional HLDA in the top-down design
top-down design process) process using Summit's
software products)

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

BACKGROUND OF LINES OF HDL CODE

Most HLDA design and test
program generation tools re-
quire IC developers to work
with large amounts of textual
data. As a result, the devel-
opment and test process is
often error prone and time
consuming and yields results
that are difficult to commu-
nicate.

BACKGROUND OF LINES OF HDL CODE
<PAGE>

Summit's SLDA products allow engineers to graphically design ICs, thereby
eliminating the need to manually create designs in a textual HDL code. This
offers several benefits to
design engineers
including easier
design entry,
verification and
reuse, and faster,
more complete
design debugging.

(Graphic showing
screen shot of an
SLDA state diagram)

Summit's TDS
products can reduce
test program
development costs (Graphic showing
and can improve the screen shot
quality of of a TDS
manufacturing test flow chart)
programs by
providing a
graphical
environment to view, manage and manipulate the vast amounts of test based
data. Summit's Design to Test products provide graphical simulation test data
creation, graphical simulation results analysis and automatic manufacturing
test program generation.
<PAGE>

NO DEALER, SALES REPRESENTATIVE, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES
OR AN OFFER TO, OR SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH
OFFER OR SOLICITATION WOULD BE 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
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................. 4
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 15
Dividend Policy.......................................................... 15
Capitalization........................................................... 16
Dilution................................................................. 17
Selected Consolidated Financial Data..................................... 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Business................................................................. 31
Management............................................................... 47
Certain Transactions..................................................... 57
Principal and Selling Stockholders....................................... 60
Description of Capital Stock............................................. 64
Shares Eligible for Future Sale.......................................... 66
Underwriting............................................................. 68
Legal Matters............................................................ 69
Experts.................................................................. 69
Additional Information................................................... 70
Index to Financial Statements............................................ F-1
</TABLE>

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The Company intends to furnish to its stockholders annual reports containing
audited consolidated financial statements examined by its independent public
accountants and quarterly reports containing unaudited financial information
for each of the first three quarters of each fiscal year.

Summit Design, the Summit logo, Visual HDL, Visual HDL for VHDL, TDS, Visual
Testbench and Wavebridge are trademarks of the Company. This Prospectus also
includes trademarks of companies other than the Company.

The Company was incorporated in the State of Delaware on December 29, 1993.
The Company's principal executive offices are located at 9305 S.W. Gemini
Drive, Beaverton, Oregon 97008 and its telephone number is (503) 643-9281.
Unless the context otherwise requires, the terms "Company" and "Summit" as used
in this Prospectus refer to (i) Summit Design, Inc. and its wholly-owned
subsidiaries following the acquisition of SEE Technologies Software Environment
for Engineers Ltd. ("SEE Technologies") and the reorganization of Test Systems
Strategies, Inc. ("TSSI") as a wholly-owned subsidiary of Summit (collectively,
the "Reorganization") and (ii) TSSI prior to the Reorganization. SEE
Technologies changed its name to Summit Design (EDA) Ltd. in September 1994.

3
<PAGE>

SUMMARY

This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this
Prospectus. The following summary is qualified in its entirety by the more
detailed information, including "Risk Factors," and the consolidated financial
statements and notes thereto, appearing elsewhere in this Prospectus.

THE COMPANY

Summit Design, Inc. ("Summit" or the "Company") is a leading provider of
graphical design entry and verification software tools and design to test
software tools. The Company's products assist integrated circuit ("IC") system,
design and test engineers in meeting the market demands for rapid time to
market, increased product functionality and lower product cost. Summit's
graphical Systems Level Design Automation ("SLDA") products enable IC systems
and design engineers to create and verify IC designs using familiar graphical
paradigms such as block diagrams, state machines, flow charts or truth tables
rather than the less intuitive textual hardware description language ("HDL")
code required by synthesis and simulation tools. The Company's SLDA products
automatically generate optimized HDL descriptions from graphical designs,
eliminating time consuming and error prone manual entry of HDL code. The
Company's Design to Test products provide graphical simulation test data
creation, graphical simulation results analysis and automatic manufacturing
test program generation.

Faced with a scarcity of qualified design and test engineers and the need to
improve time to market given shorter product lifecycles, corporations with IC
design requirements need to increase design productivity to keep pace with the
increasing complexity of IC designs and the growth in the number of new IC
designs starts. Electronic design automation ("EDA") software tools have
enabled engineers to accelerate IC development schedules and create more
complex chips. However, IC development productivity has continued to lag
advances in fabrication technology in part because these tools require circuits
to be described in a textual HDL. IC design engineers, who typically create a
design using hand-drawn graphical paradigms, must manually translate their
hand-drawn designs into HDL code. This process is time-consuming and error
prone, and requires the engineer to master a complex HDL programming language.
The complexity of the textual HDL code also inhibits the ability of design
teams to communicate the functional intent of the code and to reuse the code or
retarget the design in future projects. In addition, most manufacturing test
program generation software tools require IC test engineers to work with
complex textual test programs and related data and to debug these programs on
the actual manufacturing test equipment used to test the ICs, consuming
valuable equipment process time.

Summit's SLDA products allow engineers to graphically design and verify ICs
using familiar graphical paradigms and automatically produce a synthesis-ready
HDL design, thus eliminating manual textual coding in an HDL. Graphical IC
designs are more easily debugged and communicated among IC design teams,
facilitate review by engineering management and can be more easily modified and
reused in future developments. These products optimize and can automatically
re-target the design output for nearly all of the EDA industry's standard
synthesis and simulation tools. The Company's Design to Test tools allow design
and test engineers to graphically develop simulation test pattern and timing
data, analyze the complex and voluminous simulation results and automatically
generate manufacturing test programs. These graphical tools allow the engineer
to check the IC design for manufacturing testability prior to release from the
design cycle, minimizing the need to re-design the IC to improve testability.
Summit's Visual Testbench product, released in the fourth quarter of 1995,
integrates the design and test processes and allows the design engineer and
test engineer to cooperatively develop simulation and manufacturing test
programs.

The Company employs direct sales, distributors and telesales to target
individual customers and product market segments. The Company's end-user
customers include companies in a wide range of industries, including
semiconductor devices, semiconductor test equipment, telecommunications,
computer/peripherals, consumer electronics and aerospace/defense. The Company
has installed more than 1,300 seats of its SLDA tools in more than 125
companies, of which more than 100 companies have entered into support
contracts. In addition, the Company has more than 250 active installations of
its Design to Test products.

4
<PAGE>

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by the
Company........................ 2,000,000 shares
Common Stock Offered by the
Selling Stockholders........... 2,000,000 shares
Common Stock Outstanding after
the Offering................... 13,318,704 shares (1)
Use of Proceeds................ Working capital and general corporate purposes
and to repay certain outstanding indebtedness.
See "Use of Proceeds."
Nasdaq National Market symbol.. SMMT
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------- ---------------
1993 1994 1995 1995 1996
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (2):
Revenue............................. $ 7,240 $12,982 $14,070 $ 5,821 $9,370
Income (loss) from operations....... (1,503) (1,544) (2,576) (2,772) 751
Net income (loss)................... (1,622) (2,046) (3,151) (3,046) 487
Pro forma net income (loss) per
share (3).......................... $ (0.14) $ (0.17) $ (0.26) $ (0.26) $ 0.04
Pro forma number of shares used in
per share
calculation (3).................... 11,569 11,870 11,900 11,890 11,979
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------
ACTUAL AS ADJUSTED (4)
------ ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $3,181 $16,035
Working capital......................................... (64) 13,366
Total assets............................................ 9,287 22,141
Long-term obligations, less current portion............. 1,043 729
Total stockholders' equity.............................. 1,195 14,875
</TABLE>
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(1) Based on the number of shares outstanding as of August 31, 1996. Excludes
881,013 shares issuable upon exercise of options outstanding as of August
31, 1996 at a weighted average exercise price of $1.91 per share. See
"Capitalization."
(2) The results of SEE Technologies are included in the Consolidated Financial
Statements of the Company commencing January 1, 1994.
(3) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in computing pro forma net income
(loss) per share.

(4) Adjusted to give effect to the sale of 2,000,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price
of $8.00 per share and the application of the estimated net proceeds
therefrom. See "Use of Proceeds" and "Capitalization."

Except as otherwise indicated, all share information in this Prospectus
assumes the Underwriters' over-allotment option is not exercised, and is
adjusted to reflect the conversion of all outstanding shares of Preferred Stock
into an aggregate of 9,103,346 shares of Common Stock upon the closing of this
offering.

5
<PAGE>

RISK FACTORS

This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain
factors, including those set forth in the following risk factors and elsewhere
in this Prospectus. In addition to the other information in this Prospectus,
the following risk factors should be considered carefully in evaluating the
Company and its business before purchasing the Common Stock offered by this
Prospectus.

HISTORY OF OPERATING LOSSES; FLUCTUATIONS IN QUARTERLY RESULTS

While the Company has generated net income in each of the three quarters in
the period ended June 30, 1996, it has not shown net income on an annual basis
since 1991. There can be no assurance that the Company will be profitable in
the future. In addition, the Company has experienced significant quarterly
fluctuations in operating results and cash flows and it is likely that these
fluctuations will continue in future periods. These fluctuations have been,
and may in the future be, caused by a number of factors, including the rate of
acceptance of new products, corporate acquisitions and consolidations,
product, customer and channel mix, the size and timing of orders, lengthy
sales cycles, the timing of new product announcements and introductions by the
Company and its competitors, seasonal factors, rescheduling or cancellation of
customer orders, the Company's ability to continue to develop and introduce
new products and product enhancements on a timely basis, the level of
competition, purchasing and payment patterns, pricing policies of the Company
and its competitors, product quality issues, currency fluctuations and general
economic conditions.

The Company has generally recognized a substantial portion of its revenue in
the last month of each quarter, with this revenue concentrated in the last
weeks of the quarter. Any significant deferral of purchases of the Company's
products could have a material adverse effect on the Company's business,
financial condition and results of operations in any particular quarter, and
to the extent that significant sales occur earlier than expected, operating
results for subsequent quarters may be adversely affected. The Company's
revenue is difficult to forecast for several reasons. The market for certain
of the Company's software products is evolving. The Company's sales cycle is
typically six to nine months and varies substantially from customer to
customer. The Company operates with little product backlog because its
products are typically shipped shortly after orders are received. In addition,
a significant portion of the Company's sales are made through indirect
channels and can be harder to predict. The Company establishes its expenditure
levels for product development, sales and marketing and other operating
activities based primarily on its expectations as to future revenue. As a
result, if revenue in any quarter falls below expectations, expenditure levels
could be disproportionately high as a percentage of revenue, and the Company's
operating results for that quarter would be adversely affected. Based upon the
factors described above, the Company believes that its quarterly revenue,
expenses and operating results are likely to vary significantly in the future,
that period-to-period comparisons of its results of operations are not
necessarily meaningful and that, as a result, such comparisons should not be
relied upon as indications of the Company's future performance. Moreover,
although the Company's revenue has increased in recent periods, there can be
no assurance that the Company's revenue will grow in future periods or that
the Company will remain profitable on a quarterly or annual basis. Due to the
foregoing or other factors, it is likely that the Company's results of
operations may be below investors' and market analysts' expectations in some
future quarters, which could have a severe adverse effect on the market price
of the Company's Common Stock. See "Selected Consolidated Financial
Information" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Overview" and "--Quarterly Results."

PRODUCT CONCENTRATION; UNCERTAINTY OF MARKET ACCEPTANCE OF SLDA AND DESIGN TO
TEST PRODUCTS

The Company's revenue is predominantly derived from two product lines,
Visual HDL, which includes Visual HDL for VHDL and Visual HDL for Verilog, and
TDS. The Company believes that these products will continue to account for a
substantial portion of its revenue in the future. As a result, factors
adversely

6
<PAGE>

affecting sales of these products, including increased competition, inability
to successfully introduce enhanced or improved versions of these products,
product quality issues and technological change, could have a material adverse
effect on the Company's business, financial condition and results of
operations.

The Company's future success depends primarily upon the market acceptance of
its existing and future SLDA products. The Company commercially shipped its
first SLDA product, Visual HDL for VHDL, in the first quarter of 1994. For the
six months ended June 30, 1996 and the years ended December 31, 1995 and 1994,
revenue from SLDA products and related maintenance contracts represented
61.1%, 50.4% and 34.8%, respectively, of the Company's total revenue. The
Company's SLDA products incorporate certain unique design methodologies and
thus represent a departure from industry standards for design entry and
verification. The Company believes that broad market acceptance of its SLDA
products will depend on several factors, including the ability to
significantly enhance design productivity, ease of use, interoperability with
existing EDA tools, price and the customer's assessment of the Company's
financial resources and its technical, managerial, service and support
expertise. The Company also depends on its distributors to assist the Company
in gaining market acceptance of its products. There can be no assurance that
sufficient priority will be given by the Company's distributors to marketing
the Company's products or whether such distributors will continue to offer the
Company's products. There can be no assurance that the Company's SLDA products
will achieve broad market acceptance. A decline in the demand for, or the
failure to achieve broad market acceptance of, the Company's SLDA products
will have a material adverse effect on the Company's business, financial
condition and results of operations.

Although demand for SLDA products has increased in recent years, the market
for SLDA products is still emerging and there can be no assurance that it will
continue to grow or that, even if the market does grow, businesses will
continue to purchase the Company's SLDA products. If the market for SLDA
products fails to grow or grows more slowly than the Company currently
anticipates, the Company's business, financial condition and results of
operations would be materially adversely affected.

Traditionally, EDA customers have been risk averse in accepting new design
methodologies. Because many of Summit's tools embody new design methodologies,
this risk aversion on the part of potential customers presents an ongoing
marketing and sales challenge to the Company and makes the introduction and
acceptance of new products unpredictable. The Company's newest Design to Test
product, Visual Testbench, introduced in the fourth quarter of 1995, provides
a new methodology and requires a change in the traditional design flow for
creating IC test programs. The Company anticipates a lengthy period of test
marketing for the Visual Testbench product. Accordingly, the Company cannot
predict the extent, if any, to which it will realize revenue from Visual
Testbench. The failure of Visual Testbench or any other future Design to Test
product to achieve market acceptance will have a material adverse effect on
the Company's business, financial conditions and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business--Products" and "--Marketing and Sales."

COMPETITION

7
<PAGE>

There can be no assurance that such competition will not cause the Company to
offer point solutions instead of, or in addition to, the Company's current
software products. Such point solutions would be priced lower than the
Company's current product offerings and could cause the Company's average
selling prices to decrease, which could have a material adverse effect on the
Company's business, financial condition and results of operations. In the
Design to Test market, the Company competes primarily with the internal design
groups of its existing and potential customers, many of which to date have
designed and developed customized Design to Test tools for their particular
needs, as well as smaller emerging companies.

The Company competes on the basis of certain factors including product
capabilities, product performance, price, support of industry standards, ease
of use, first to market and customer technical support and service. The
Company believes that it competes favorably overall with respect to these
factors. However, in particular cases, the Company's competitors may offer
SLDA or Design to Test products with functionality which is sought by the
Company's prospective customers and which differs from that offered by the
Company. In addition, certain competitors may achieve a marketing advantage by
establishing formal alliances with other EDA vendors. Further, the EDA
industry in general has experienced significant consolidation in recent years,
and the acquisition of one of the Company's competitors by a larger, more
established EDA vendor could create a more significant competitor. There can
be no assurance that the Company will be able to compete successfully against
current and future competitors or that competitive pressures faced by the
Company will not have a material adverse effect on its business, financial
condition and results of operations. There can be no assurance that the
Company's current and future competitors will not be able to develop products
comparable or superior to those developed by the Company or to adapt more
quickly than the Company to new technologies, evolving industry trends or
customer requirements. Increased competition could result in price reductions,
reduced margins and loss of market share, all of which could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Competition."

DEPENDENCE ON ELECTRONICS INDUSTRY MARKET

Because the electronics industry is characterized by rapid technological
change, short product life cycles, fluctuations in manufacturing capacity and
pricing and margin pressures, certain segments, including the computer,
semiconductor, semiconductor test equipment and telecommunications industries,
have experienced sudden and unexpected economic downturns. During these
periods, capital spending is commonly curtailed and the number of design
projects often decreases. Because the Company's sales are dependent upon
capital spending trends and new design projects, negative factors affecting
the electronics industry could have a material adverse effect on the Company's
business, financial condition and results of operations. A number of
electronics companies, including customers of the Company, have recently
experienced a slowdown in their businesses. The Company's future operating
results may reflect substantial fluctuations from period to period as a
consequence of such industry patterns, general economic conditions affecting
the timing of orders from customers and other factors. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Background."

DEPENDENCE ON THIRD PARTIES FOR PRODUCT INTEROPERABILITY

Because the Company's products must interoperate with EDA products of other
companies, particularly simulation and synthesis products, the Company must
have timely access to third party software to perform development and testing
of its products. Although the Company has established relationships with a
variety of EDA vendors to gain early access to new product information, these
relationships may be terminated by either party with limited notice. In
addition, such relationships are with companies that are current or potential
future competitors of the Company, including Synopsys, Inc. ("Synopsys"),
Mentor Graphics and Cadence Design Systems ("Cadence"). For example, the
Company's Visual HDL for Verilog product is currently designed to work
exclusively with the Verilog XL simulator product sold by Cadence. If any of
these relationships were terminated and the Company was unable to obtain in a
timely manner information regarding modifications of third party products
necessary for modifying its software products to interoperate with these third
party products, the Company could experience a significant increase in
development costs, the development process would take longer, product
introductions would be delayed and the Company's business, financial condition
and results of operations could be materially adversely affected. See
"Business--Product Development."

8
<PAGE>

NEW PRODUCTS AND TECHNOLOGICAL CHANGE; EVOLVING INDUSTRY STANDARDS

The EDA industry is characterized by extremely rapid technological change,
frequent new product introductions 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. In
addition, customers in the EDA industry require software products that allow
them to reduce time to market, differentiate their products, improve their
engineering productivity and reduce their design errors. The Company's future
success will depend upon its ability to enhance its current products, develop
and introduce new products that keep pace with technological developments and
emerging industry standards and address the increasingly sophisticated needs
of its customers. There can be no assurance that the Company will be
successful in developing and marketing product enhancements or new products
that respond to technological change or emerging industry standards, that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of these products, or that
its new products will adequately meet the requirements of the marketplace and
achieve market acceptance. The Company has announced that it plans to release
new versions of its products in the second half of 1996. If the Company is
unable, for technological or other reasons, to develop and introduce products
in a timely manner in response to changing market conditions, industry
standards or other customer requirements, particularly if such product
releases have been pre-announced, the Company's business, financial condition
and results of operations will be materially adversely affected.

The Company's Design to Test products employ the Company's WGL format. The
Company permits others to use this format without charge, and the Company
believes that it has been widely adopted in the industry. An industry group in
which the Company currently participates is formulating a new format, STIL,
that it plans to present as a new industry standard. If this standard is
adopted commercially, the Company would be required to provide products that
operate with the STIL format. Development of such products would take
significant effort and expense. Moreover, any delay in the availability of
such products could materially adversely affect the Company's business,
financial condition and results of operations.

Software products as complex as those offered by the Company may contain
errors that may be detected at any point in the products' life cycles. The
Company has in the past discovered software errors in certain of its products
and has experienced delays in shipment of products during the period required
to correct these errors. There can be no assurance that, despite testing by
the Company and by current and potential customers, errors will not be found,
resulting in loss of, or delay in, market acceptance and sales, diversion of
development resources, injury to the Company's reputation or increased service
and warranty costs, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Products" and "--Product Development."

DEPENDENCE ON DISTRIBUTORS

The Company relies on distributors for licensing and support of its products
outside of North America. Approximately 47.2% and 42.0% of the Company's
revenue for the six months ended June 30, 1996 and the year ended December 31,
1995, respectively, were attributable to sales made through distributors. The
Company has also entered into a joint venture with Anam S&T Co., Ltd. ("Anam")
pursuant to which the joint venture corporation (Summit Design Korea, Inc.
("Summit Asia")) shall acquire exclusive rights to sell, distribute and
support all of the Company's products in the Asia-Pacific region, excluding
Japan, until June 1997. Summit Asia has acted in such capacity since April 1,
1996. Prior to that date, Anam was an independent distributor of the Company's
products. During the fourth quarter of 1995, the Company entered into a
distribution agreement with ATE Services Company, Ltd. ("ATE") pursuant to
which ATE was granted exclusive rights to sell, distribute and support all of
Summit's Design to Test products within Japan until October 1998, subject to
the Company's ability to terminate the relationship if ATE fails to meet
quarterly sales objectives. The agreement may also be terminated by either
party for breach. In addition, in the first quarter of 1996, the Company
entered into a three-year, exclusive distribution agreement for its SLDA

9
<PAGE>

products in Japan with Seiko Instruments, Inc. ("Seiko"). In the event Seiko
fails to meet specified quotas for two or more quarterly periods, exclusivity
can be terminated by Summit, subject to Seiko's right to pay a specified fee
to maintain exclusivity. The agreement is renewable for successive five-year
terms by mutual agreement of the Company and Seiko and is terminable by either
party for breach. For the quarter ended June 30, 1996, all sales of the
Company's products in the Asia-Pacific region were through Summit Asia, ATE
and Seiko. There can be no assurance the new relationships with Summit Asia,
ATE and Seiko will be effective in maintaining or increasing sales relative to
the levels experienced prior to such relationships. The Company also has
independent distributors in Europe and is dependent on the continued viability
and financial stability of its distributors. Since the Company's products are
used by skilled design engineers, distributors must possess sufficient
technical, marketing and sales resources and must devote these resources to a
lengthy sales cycle, customer training and product service and support. Only a
limited number of distributors possess these resources. In addition, Summit
Asia, ATE and Seiko, as well as the Company's other distributors, may offer
products of several different companies, including competitors of the Company.
There can be no assurance that the Company's current distributors will
continue to market or service and support the Company's products effectively,
that any distributor will continue to sell the Company's products or that the
distributors will not devote greater resources to products of other companies.
The loss of, or a significant reduction in, revenue from the Company's
distributors could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business--
Marketing and Sales."

INTERNATIONAL SALES AND OPERATIONS

Approximately 52.3% and 53.1% of the Company's revenue for the six months
ended June 30, 1996 and the year ended December 31, 1995, respectively, were
attributable to sales made outside the United States. The Company expects that
international revenue will continue to represent a significant portion of its
total revenue. The Company's international revenue is currently denominated in
U.S. dollars. As a result, increases in the value of the U.S. dollar relative
to foreign currencies could make the Company's products more expensive and,
therefore, potentially less competitive in those markets. The Company pays the
expenses of its international operations in local currencies and does not
engage in hedging transactions with respect to such obligations. International
sales and operations are subject to numerous risks, including tariff
regulations and other trade barriers, requirements for licenses, particularly
with respect to the export of certain technologies, collectability of accounts
receivable, changes in regulatory requirements, difficulties in staffing and
managing foreign operations and extended payment terms. There can be no
assurance that such factors will not have a material adverse effect on the
Company's future international sales and operations and, consequently, on the
Company's business, financial condition and results of operations.

In order to successfully expand international sales, the Company may need to
establish additional foreign operations, hire additional personnel and recruit
additional international distributors. This will require significant
management attention and financial resources and could adversely affect the
Company's operating margins. In addition, to the extent that the Company is
unable to effect these additions in a timely manner, the Company's growth, if
any, in international sales will be limited. There can be no assurance that
the Company will be able to maintain or increase international sales of the
Company's products, and failure to do so could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Marketing and Sales."

OPERATIONS IN ISRAEL

10
<PAGE>

from the government of Israel as described in "--Israeli Research, Development
and Marketing Grants." In addition, while all of the Company's sales are
denominated in U.S. dollars, a portion of the Company's annual costs and
expenses in Israel are paid in Israeli currency. These costs and expenses were
approximately $4.3 million and $1.9 million in 1995 and the six months ended
June 30, 1996, respectively. Payment in Israeli currency subjects the Company
to foreign currency fluctuations and to economic pressures resulting from
Israel's generally high rate of inflation, which has been approximately 15%,
8% and 7% during 1994 and 1995 and the six months ended June 30, 1996,
respectively. The Company's primary expense which is paid in Israeli currency
is employee salaries for research and development activities. As a result, an
increase in the value of Israeli currency in comparison to the U.S. dollar
could increase the cost of research and development expenses and general and
administrative expenses. There can be no assurance that currency fluctuations,
changes in the rate of inflation in Israel or any of the other aforementioned
factors will not have a material adverse effect on the Company's business,
financial condition or results of operations. In addition, coordination with
and management of the Israeli operations requires the Company to address
differences in culture, regulations and time zones. Failure to successfully
address these differences could be disruptive to the Company's operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Operations in Israel."

The Company's Israeli production facility has been granted the status of an
"Approved Enterprise" under the Israeli Investment Law for the Encouragement
of Capital Investments, 1959 (the "Investment Law"). Taxable income of a
company derived from an "Approved Enterprise" is eligible for certain tax
benefits, including significant income tax rate reductions for up to seven
years following the first year in which the "Approved Enterprise" has Israeli
taxable income (after using any available net operating losses). The period of
benefits cannot extend beyond 12 years from the year of commencement of
operations or 14 years from the year in which approval was granted, whichever
is earlier. The tax benefits derived from a certificate of approval for an
"Approved Enterprise" relate only to taxable income attributable to such
"Approved Enterprise" and are conditioned upon fulfillment of the conditions
stipulated by the Investment Law, the regulations promulgated thereunder and
the criteria set forth in the certificate of approval. In the event of a
failure by the Company to comply with these conditions, the tax benefits could
be canceled, in whole or in part, and the Company would be required to refund
the amount of the canceled benefits, adjusted for inflation and interest.
There can be no assurance that the Company's Israeli production facility will
continue to operate or qualify as an "Approved Enterprise" or that the
benefits under the "Approved Enterprise" regulations will continue, or be
applicable, in the future. The loss of, or any material decrease in, these
income tax benefits could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Effective Corporate Tax Rates" and "Business--Operations in Israel."

DEPENDENCE ON KEY PERSONNEL

The Company's future success depends in large part on the continued service
of its key technical and management personnel and its ability to continue to
attract and retain highly-skilled technical, sales and marketing and
management personnel. The Company has entered into employment agreements with
certain of its executive officers, however, such agreements do not guarantee
the services of these employees and do not contain noncompetition provisions.
Competition for personnel in the software industry in general, and the EDA
industry in particular, is intense, and the Company has at times in the past
experienced difficulty in recruiting qualified personnel. There can be no
assurance that the Company will retain its key personnel or that it will be
successful in attracting and retaining other qualified technical, sales and
marketing and management personnel in the future. The loss of any key
employees or the inability to attract and retain additional qualified
personnel may have a material adverse effect on the Company's business,
financial condition and results of operations. The Company does not carry "key
person" life insurance on any of its key personnel. Additions of new personnel
and departures of existing personnel, particularly in key positions, can be
disruptive and can result in departures of additional personnel, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Management" and "Business--Employees."

11
<PAGE>

ISRAELI RESEARCH, DEVELOPMENT AND MARKETING GRANTS

Summit's Israeli subsidiary has obtained research and development grants
from the Office of the Chief Scientist (the "Chief Scientist") in the Israeli
Ministry of Industry and Trade of approximately $232,000 and $608,000 in 1993
and 1995, respectively. As of June 30, 1996, the Company was obligated to pay
back approximately $232,000 and $608,000 for the 1993 and 1995 grants,
respectively. Such obligations are secured by all tangible and intangible
assets of the Israeli subsidiary. The terms of the grants prohibit the
manufacture of products developed under these grants outside of Israel and the
transfer of the technology developed pursuant to these grants to any person,
without the prior written consent of the Chief Scientist. The Company's Visual
HDL for VHDL products have been developed under grants from the Chief
Scientist and thus are subject to these restrictions. If the Company is unable
to obtain the consent of the government of Israel, the Company would be unable
to take advantage of potential economic benefits such as lower taxes, lower
labor and other manufacturing costs and advanced research and development
facilities that may be available if such technology and manufacturing
operations could be transferred to locations outside of Israel. In addition,
the Company would be unable to minimize risks particular to operations in
Israel, such as hostilities involving Israel. See "--Operations in Israel."
Although the Company is eligible to apply for additional grants from the Chief
Scientist, it has no present plans to do so. The Company also received a
Marketing Fund Grant from the Israeli Ministry of Industry and Trade for an
aggregate of $379,000. The grant must be repaid at the rate of 3% of the
increase in exports over the 1993 export level of all Israeli products, until
repaid. As of June 30, 1996, approximately $351,000 was outstanding under the
grant. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business--Product Development" and "--Operations in
Israel" and Note 7 of Notes to Consolidated Financial Statements.

LIMITATIONS ON PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

The Company's success depends in part upon its proprietary technology. The
Company relies on a combination of copyright, trademark and trade secret laws,
confidentiality procedures, licensing arrangements and technical means to
establish and protect its proprietary rights. As part of its confidentiality
procedures, the Company generally enters into non-disclosure agreements with
its employees, distributors and corporate partners, and limits access to, and
distribution of, its software, documentation and other proprietary
information. In addition, the Company's products are protected by hardware
locks and software encryption techniques designed to deter unauthorized use
and copying. Despite these precautions, it may be possible for a third party
to copy or otherwise obtain and use the Company's products or technology
without authorization, or to develop similar technology independently.

The Company provides its SLDA products to end-users primarily under "shrink-
wrap" license agreements included within the packaged software. These
agreements are not negotiated with or signed by the licensee, and thus may not
be enforceable in certain jurisdictions. The Company provides its Design to
Test products to end-users under written license agreements, signed by each
licensee at the time of purchase of a license. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights as fully as
do the laws of the United States. There can be no assurance that the Company's
means of protecting its proprietary rights in the United States or abroad will
be adequate or that competitors will not independently develop similar
technology.

The Company could be increasingly subject to infringement claims as the
number of products and competitors in the Company's industry segment grows,
the functionality of products in its industry segment overlaps and an
increasing number of software patents are granted by the United States Patent
and Trademark Office. There can be no assurance that a third party will not
claim such infringement by the Company with respect to current or future
products. Any such claims, with or without merit, could be time-consuming,
result in costly litigation, cause product delays or require the Company to
enter into royalty or licensing agreements. Such royalty or license
agreements, if required, may not be available on terms acceptable to the
Company or at all. Failure to protect its proprietary rights or claims of
infringement could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Proprietary
Rights."

12
<PAGE>

MANAGEMENT OF GROWTH

The Company's ability to achieve significant growth will require it to
implement and continually expand its operational and financial systems,
recruit additional employees and to train and manage current and future
employees. The Company expects any such growth will place a significant strain
on its operational resources and systems. Failure to effectively manage any
such growth would have a material adverse effect on the Company's business,
financial condition and results of operations.

CONTROL BY CURRENT STOCKHOLDERS

The Company's officers, directors and their affiliates will, in the
aggregate, beneficially own approximately 44.7% of the Company's outstanding
shares of Common Stock after this offering, assuming no exercise of the
underwriters' over-allotment option. As a result, these stockholders, if
acting together, would be able to effectively control most matters requiring
approval by the stockholders of the Company, including, in most cases, the
election of all of the directors. The Company has entered into agreements with
its officers and directors indemnifying them against losses they may incur in
legal proceedings arising from their service to the Company. See "Principal
and Selling Stockholders" and "Description of Capital Stock."

NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that a regular trading market will
develop and continue after this offering or that the market price of the
Common Stock will not decline below the initial public offering price. The
initial public offering price will be determined through negotiations between
the Company and the representatives of the Underwriters and may not be
indicative of the market price of the Common Stock following this offering.
The stock markets have experienced price and volume fluctuations that have
particularly affected technology companies, resulting in changes in the market
prices of the stocks of many companies which may not have been directly
related to the operating performance of those companies. Such broad market
fluctuations may adversely affect the market price of the Common Stock
following this offering. In addition, factors such as announcements of
technological innovations or new products by the Company or its competitors,
market conditions in the computer software or hardware industries and
quarterly fluctuations in the Company's operating results may have a
significant adverse effect on the market price of the Company's Common Stock.
See "--History of Operating Losses; Fluctuations in Quarterly Results" and
"Underwriting."

DILUTION

The assumed initial public offering price is substantially higher than the
net tangible book value per share of the outstanding Common Stock. As a
result, purchasers of the Common Stock offered hereby will incur immediate,
substantial dilution in net tangible book value equal to $6.88 per share. To
the extent that outstanding options to purchase the Company's Common Stock are
exercised, there will be further dilution. See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of Common Stock after the offering
could adversely affect the market price of the Common Stock and could impair
the Company's ability to raise capital through the sale of equity securities.
Upon completion of the offering, the Company will have outstanding 13,318,704
shares of Common Stock, assuming no exercise of options after August 31, 1996.
Of these shares, the 4,000,000 shares offered hereby (4,600,000 shares if the
Underwriters' over-allotment option is exercised in full) will be freely
tradeable without restriction or further registration under the Securities Act
of 1933, as amended (the "Securities Act"), unless purchased by "affiliates"
of the Company as that term is defined in Rule 144 under the Securities Act
("Rule 144"). The remaining 9,318,704 shares of Common Stock outstanding upon
completion of the offering are "restricted securities" as that term is defined
in Rule 144.

13
<PAGE>

Beginning 90 days after the effective date of the Registration Statement
(the "Registration Statement") of which this Prospectus forms a part,
approximately 124,400 shares of Common Stock will be eligible for sale
pursuant to Rule 701 under the Securities Act ("Rule 701"). Upon the
expiration of lock-up agreements between certain of the Company's stockholders
and the Underwriters (the "Lock-up Agreements"), beginning 181 days after the
effective date of the Registration Statement, 7,664,158 shares will be
eligible for sale pursuant to Rule 701 and Rule 144, subject in certain cases
to the volume, manner of sale and notice requirements of Rule 144. In
addition, pursuant to lock-up provisions set forth in stock purchase
agreements executed in connection with the Reorganization, the Company's
Investors' Rights Agreement, as amended, and under the Company's incentive
stock option plan (the "Stand-Off Agreements"), an additional 297,435 shares
will become eligible for sale pursuant to Rule 701 and Rule 144 beginning 181
days after the effective date of the Registration Statement. The remaining
1,232,711 shares outstanding will become eligible for sale from time to time
more than 181 days after the effective date of the Registration Statement as
the Company's rights to repurchase such shares expire.

In addition to the foregoing, as of August 31, 1996, there were outstanding
options to purchase an aggregate of 881,013 shares of Common Stock. If such
options are exercised, 516,612 shares will be eligible for sale beginning 181
days after the effective date of the Registration Statement upon expiration of
the Lock-up Agreements and the lock-up provisions contained in the Stand-Off
Agreements. The Company has agreed not to release shares from the lock-up
provisions of the Stand-Off Agreements without the prior written consent of
the representatives of the Underwriters. The representatives of the
Underwriters have informed the Company that they have no current intention to
release shares from the Lock-up Agreements, nor to permit the Company to
release shares from the Stand-Off Agreements, prior to expiration of the 180-
day term of such agreements.

After this offering, the holders of approximately 8,366,314 shares of Common
Stock may require the Company, beginning six months after the effective date
of the Registration Statement, on not more than two occasions, to file a
registration statement under the Securities Act registering their shares at
the Company's expense, subject to certain conditions. See "Shares Eligible for
Future Sale" and "Description of Capital Stock--Registration Rights of Certain
Holders."

The Company intends to file a Form S-8 registration statement under the
Securities Act as soon as practicable after consummation of the offering to
register the issuance of shares of Common Stock reserved for issuance upon
exercise of options granted under its stock option and stock purchase plans.
See "Management--Stock Plans."

ANTITAKEOVER EFFECTS OF CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW

Upon consummation of this offering, the Company's Board of Directors will
have the authority to issue up to 5,000,000 shares of Preferred Stock and to
determine the price, rights, preferences, privileges and restrictions,
including voting rights, of those shares without any further vote or action by
the stockholders. The rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. The issuance of Preferred
Stock, while providing 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. The Company has no present plans to issue shares of
Preferred Stock. In addition, the Company is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law, which
prohibit the Company 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 the
business combination is approved in a prescribed manner. The application of
Section 203 also could have the effect of delaying or preventing a change of
control of the Company. Further, certain provisions of the Company's Amended
and Restated Certificate of Incorporation (the "Restated Certificate") and
Amended and Restated Bylaws, each of which will become effective upon
consummation of this offering, and of Delaware law could delay or make more
difficult a merger, tender offer or proxy contest involving the Company. These

14
<PAGE>

provisions include advance notice procedures for stockholders to nominate
candidates for election as directors of the Company, a classified board of
directors, no stockholder action by written consent, limitations on persons
who can call stockholder meetings and supermajority voting procedures for
certain amendments to the Company's Restated Certificate. See "Description of
Capital Stock--Preferred Stock" and "--Delaware Anti-Takeover Law and Certain
Charter Provisions."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$13,680,000 at an assumed initial public offering price of $8.00 per share and
after deducting the estimated underwriters' discounts and commissions and
offering expenses payable by the Company. The Company will not receive any of
the proceeds from the sale of shares of Common Stock by the Selling
Stockholders.

The Company expects to use the net proceeds for working capital and general
corporate purposes, including financing accounts receivable and capital
expenditures made in the ordinary course of its business, and to repay
$268,022 of indebtedness outstanding as of June 30, 1996 under a note issued
to a third-party real estate firm, approximately $309,000 of indebtedness
outstanding as of June 30, 1996 under an equipment loan and approximately
$249,000 of indebtedness outstanding as of June 30, 1996 under capital leases.
The indebtedness under the note and the equipment loan each bear interest at
annual rates of prime plus 1% and mature in September 1997 and June 1998,
respectively. The capital leases bear interest at annual rates of between 5.0%
and 15.0% and expire no later than December 1999. In addition, the Company may
apply a portion of the net proceeds of the offering to acquire complementary
EDA businesses, products or technologies. Although the Company has not
identified any specific businesses, products or technologies that it may
acquire, nor are there any current agreements or negotiations with respect to
any such transactions, the Company from time to time evaluates such
opportunities. Pending such uses, the Company will invest the net proceeds
from this offering in interest bearing securities. See "Certain Transactions."

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain its earnings, if any, for use
in its business and does not anticipate paying any cash dividends in the
foreseeable future. In addition, the Company's working capital line of credit
agreement prohibits the payment of dividends without the lender's prior
approval.

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<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 1996 (i) on an actual basis, (ii) on a pro forma basis to give effect to
the automatic conversion of all outstanding shares of Preferred Stock into
Common Stock and the filing of the Company's Restated Certificate to authorize
30,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock at
par values of $.01 per share upon the closing of this offering and (iii) on an
as adjusted basis to reflect the sale of the 2,000,000 shares of Common Stock
offered by the Company hereby at the assumed initial public offering price of
$8.00 per share and the application of the estimated net proceeds therefrom
after deducting the estimated underwriting discounts and commissions and
offering expenses payable by the Company. See "Use of Proceeds."

<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term obligations, less current portion.... $ 1,043 $ 1,043 $ 729
-------- -------- --------
Stockholders' equity:
Preferred Stock, $.01 par value;
9,334,283 shares authorized, 9,103,346
shares issued and outstanding, actual;
5,000,000 shares authorized, no shares
issued and outstanding, pro forma and as
adjusted.................................... 91 -- --
Common Stock, $.01 par value; 20,000,000
shares authorized, 2,215,358 shares issued
and outstanding, actual; 30,000,000 shares
authorized, 11,318,704 shares issued and
outstanding, pro forma; 13,318,704 shares
issued and outstanding, as adjusted (1)..... 22 113 133
Additional paid-in capital................... 15,550 15,550 29,210
Accumulated deficit.......................... (14,468) (14,468) (14,468)
-------- -------- --------
Total stockholders' equity................. 1,195 1,195 14,875
-------- -------- --------
Total capitalization..................... $ 2,238 $ 2,238 $ 15,604
======== ======== ========
</TABLE>
- --------

(1) Excludes 881,013 shares issuable upon exercise of options outstanding as
of August 31, 1996 at a weighted average exercise price of $1.91 per
share. See "Management--Stock Plans."

16
<PAGE>

DILUTION

The net tangible book value of the Company at June 30, 1996 was
approximately $1.2 million, or $0.11 per share of Common Stock, after giving
effect to the conversion of all outstanding Preferred Stock. "Net tangible
book value" represents the amount of total tangible assets of the Company less
total liabilities divided by the number of shares of Common Stock outstanding.
After giving effect to the sale of the 2,000,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$8.00 per share (after deducting the estimated underwriting discounts and
commissions and offering expenses payable by the Company), the Company's pro
forma net tangible book value at June 30, 1996 would have been $14,875,000, or
$1.12 per share. This represents an immediate increase in net tangible book
value of $1.01 per share to existing stockholders and an immediate dilution of
$6.88 per share to new investors. The following table illustrates this
dilution per share.

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $8.00
Net tangible book value per share before the offering........ $0.11
Increase in net tangible book value per share attributable to
new investors............................................... 1.01
-----
Pro forma net tangible book value per share after the
offering...................................................... 1.12
-----
Dilution per share to new investors............................ $6.88
=====
</TABLE>

The following table summarizes, on a pro forma basis as of August 31, 1996,
the differences in the total consideration paid and the average price per
share paid between the existing stockholders and the new investors with
respect to the 2,000,000 shares of Common Stock to be issued by the Company.
The calculations in this table with respect to shares of Common Stock to be
purchased by new investors in this offering assume an initial public offering
price of $8.00 per share (before deducting the estimated underwriting
discounts and commissions and offering expenses payable by the Company).

<TABLE>
<CAPTION>
SHARES PURCHASED (1) TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 11,318,704 85% $16,994,551 52% $1.50
New investors........... 2,000,000 15 16,000,000 48 8.00
---------- --- ----------- ---
Total............... 13,318,704 100% $32,994,551 100%
========== === =========== ===
</TABLE>
- --------

(1) Sales by the Selling Stockholders in this offering will reduce the number
of shares held by existing stockholders to 9,318,704 shares, or 70% of the
total number of shares of Common Stock outstanding after the offering, and
will increase the number of shares held by new investors to 4,000,000
shares, or 30% of the total number of shares of Common Stock outstanding
after the offering.

The computations in the tables above exclude 881,013 shares of Common Stock
reserved for issuance at August 31, 1996 upon exercise of outstanding options
under the Summit Design, Inc. 1994 Stock Plan at a weighted average exercise
price of $1.91 per share. To the extent such options are exercised, there will
be further dilution to new investors. See "Capitalization," "Management--Stock
Plans" and Note 8 of Notes to Consolidated Financial Statements.

17
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated statement of operations data for the
years ended December 31, 1993, 1994 and 1995 and the consolidated balance
sheet data at December 31, 1994 and 1995 are derived from the consolidated
financial statements of the Company, which have been audited by Coopers &
Lybrand L.L.P., and are included elsewhere in this Prospectus. The
consolidated balance sheet data at December 31, 1993 are derived from audited
financial statements not included in this Prospectus. The consolidated
statement of operations data for the years ended December 31, 1991 and 1992
and for the six months ended June 30, 1995 and 1996 and the consolidated
balance sheet data at December 31, 1991 and 1992 and at June 30, 1995 and 1996
have been derived from unaudited financial statements that include all
adjustments that the Company considers necessary for a fair presentation of
the financial information set forth therein. The results of operations for the
six months ended June 30, 1996 are not necessarily indicative of the results
to be expected for future periods. The selected consolidated financial data
should be read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------ ---------------
1991 1992 1993 1994 1995 1995 1996
------ ------- ------- ------- ------- ------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA (1):
Revenue:
Product licenses....... $7,540 $ 7,716 $ 4,693 $ 9,143 $10,383 $ 3,669 $7,191
Maintenance and
services.............. -- -- 2,547 2,323 2,637 1,202 1,895
Other.................. -- -- -- 1,516 1,050 950 284
------ ------- ------- ------- ------- ------- ------
Total revenue.......... 7,540 7,716 7,240 12,982 14,070 5,821 9,370
Cost of revenue:
Product licenses....... 298 434 440 681 651 347 278
Maintenance and
services ............. -- -- 330 390 400 210 211
------ ------- ------- ------- ------- ------- ------
Total cost of revenue.. 298 434 770 1,071 1,051 557 489
------ ------- ------- ------- ------- ------- ------
Gross profit .......... 7,242 7,282 6,470 11,911 13,019 5,264 8,881
Operating expenses:
Research and
development........... 2,414 2,642 2,381 4,632 5,113 2,626 2,619
Sales and marketing.... 3,414 4,456 3,673 5,867 7,370 3,757 4,138
General and
administrative........ 602 1,359 1,919 2,309 3,112 1,653 1,373
Restructuring expense.. -- 300 -- -- -- -- --
In-process technology.. -- -- -- 647 -- -- --
------ ------- ------- ------- ------- ------- ------
Total operating
expenses.............. 6,430 8,757 7,973 13,455 15,595 8,036 8,130
------ ------- ------- ------- ------- ------- ------
Income (loss) from
operations............. 812 (1,475) (1,503) (1,544) (2,576) (2,772) 751
Other income (expense),
net.................... (56) (122) (119) (100) (176) (101) (55)
------ ------- ------- ------- ------- ------- ------
Income (loss) before
income taxes........... 757 (1,597) (1,622) (1,644) (2,752) (2,873) 696
Income tax provision.... 59 -- -- 402 399 173 209
------ ------- ------- ------- ------- ------- ------
Net income (loss)....... $ 698 $(1,597) $(1,622) $(2,046) $(3,151) $(3,046) $ 487
====== ======= ======= ======= ======= ======= ======
Pro forma net income
(loss) per share (2)... $ (0.14) $ (0.17) $ (0.26) $ (0.26) $ 0.04
======= ======= ======= ======= ======
Pro forma number of
shares used in per
share calculation (2).. 11,569 11,870 11,900 11,890 11,979
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------------ ---------------
1991 1992 1993 1994 1995 1995 1996
------ ------- ------- ------- ------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 387 $ 267 $ 429 $1,193 $ 592 $ 881 $3,181
Working capital........ 256 (1,265) (2,077) (444) (530) (1,079) (64)
Total assets........... 3,053 2,670 2,703 8,036 8,903 6,514 9,287
Long-term obligations,
less current portion.. 181 580 302 253 1,216 467 1,043
Total stockholders'
equity (deficit)...... 396 (1,178) (1,304) 1,295 592 489 1,195
</TABLE>
- --------
(1) The results of SEE Technologies are included in the Consolidated Financial
Statements of the Company commencing January 1, 1994.
(2) See Note 1 of Notes to Consolidated Financial Statements for an
explanation of the determination of shares used in computing pro forma net
income (loss) per share.

18
<PAGE>

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

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere
in this Prospectus. The following discussion also should be read in
conjunction with the consolidated financial statements and notes thereto
included elsewhere in this Prospectus.

OVERVIEW

Summit was founded in December 1993 to act as the holding company for TSSI
and SEE Technologies (now Summit Design (EDA) Ltd.). TSSI was founded in 1979
to develop and market IC manufacturing test products. In January 1993, TSSI
retained a new Chief Executive Officer and began to restructure its senior
management team. Thereafter, the Company broadened its strategy from focusing
primarily on manufacturing test products to include providing graphical SLDA
design entry and verification tools and integrating these with its core
technology. As part of its strategy, in early 1994, TSSI acquired SEE
Technologies, an Israeli company that, through its predecessor, began
operations in 1983 and had operated primarily as a research and development
and consulting company focused on the EDA and SLDA market. As a result of the
Reorganization, TSSI and SEE Technologies became wholly-owned subsidiaries of
Summit in the first quarter of 1994. The results of operations of the Company
prior to January 1, 1994 are those of TSSI and as of and after January 1, 1994
are the combined results of TSSI and SEE Technologies.

The Company's ongoing implementation of its strategy has involved
significant expenditures. Following the Reorganization, the Company
significantly increased its research and development expenditures to support
the continued development of SLDA and Design to Test products. To promote its
products, the Company has added sales and marketing staff, increasing its
sales and marketing expenditures by 101% from 1993 to 1995, and has
restructured its key distributor relationships. This concurrent effort to
develop products and promote market awareness and acceptance of its products
in a new and evolving market has contributed to the Company's annual losses.
Such losses were mitigated in part in each of the six quarters following the
Reorganization by revenue from initial stocking orders from distributors and
one-time sales of technology. The Company introduced its first SLDA product,
Visual HDL for VHDL 1.0, in the first quarter of 1994. This product lacked
compiled simulation and operated only on a PC platform. In the third quarter
of 1994, with the release of version 2.5, Summit expanded the simulation
capability of Visual HDL for VHDL and introduced its UNIX-based version of
this product. The Company has experienced increased sales of its SLDA products
in each of the six quarters in the period ended June 30, 1996. As a result,
the Company generated net income in each of the last three quarters. However,
there can be no assurance that the Company will experience continued growth in
revenue or be profitable in the future.

Prior to the Reorganization, the Company's TDS product and related
maintenance revenue accounted for all of the Company's revenue. Currently, the
Company's revenue is predominantly derived from two product lines, Visual HDL,
which includes Visual HDL for VHDL and Visual HDL for Verilog, and TDS. The
Company believes these products will continue to account for a substantial
portion of its revenue in the future. See "Risk Factors--Product
Concentration; Uncertainty of Market Acceptance of SLDA and Design to Test
Products."

Revenue consists primarily of fees for licenses of the Company's software
products, maintenance and customer training. Revenue from the sale of software
licenses is recognized at the later of the time of shipment or satisfaction of
all acceptance terms. Maintenance revenue is deferred and recognized ratably
over the term of the maintenance agreement, which is typically 12 months.
Revenue from customer training is recognized when the service is performed.
The Company sells its products through a direct sales force in North America
and selected European countries and through distributors in the Company's
other international markets. Revenue from product sales through distributors
is recognized net of the associated distributor discounts. Fees received for
granting distribution rights are deferred and recognized ratably over the term
of the distribution agreement. Although the Company has

19
<PAGE>

not adopted a formal return policy, the Company generally reimburses customers
in full for returned products. Estimated sales returns are recorded upon
delivery of the product.

The Company has a range of prices for its products which depends on
platform, HDL language, functionality, duration of license and distribution
channel. In addition, the Company's products perform a variety of functions,
certain of which are, and in the future may be, offered as separate products
or discrete point solutions by the Company's existing and future competitors.
For example, certain companies currently offer design entry products without
simulators. There can be no assurance that such competition will not cause the
Company to offer point solutions instead of, or in addition to, the Company's
current software products. Such point solutions would be priced lower than the
Company's current product offerings and could cause the Company's average
selling prices to decrease. Accordingly, based on these and other factors, the
Company expects that average selling prices for its products will continue to
fluctuate in the future.

The Company has entered into a joint venture with Anam, effective April 1,
1996, pursuant to which the joint venture corporation (Summit Asia) shall
acquire exclusive rights to sell, distribute and support all of Summit's
products in the Asia-Pacific region, excluding Japan, until June 1997. Summit
Asia has acted in such capacity since April 1, 1996. Prior to that date, Anam
was an independent distributor of the Company's products. The amount of
revenue from sales through Summit Asia which is remitted to the Company is
fixed by the joint venture agreement at a percentage which approximates the
percentage applicable to sales through Anam prior to the formation of the
joint venture. Excluding one-time sales of technology, sales through Anam
accounted for 4.3% and 6.3% of the Company's total revenue and for 39.5% and
45.9% of the Company's revenue attributable to the Asia-Pacific region
excluding Japan for the years ended December 31, 1995 and 1994, respectively.

The Company accounts for its ownership interest in Summit Asia on the equity
method of accounting and, as a result, the Company's pro rata share of the
profits and losses of Summit Asia will be recognized as income or losses on
the Company's income statement in "Other income (expense), net." The Company
does not expect Summit Asia to recognize a profit for the forseeable future
and thus does not expect to recognize income from its investment in Summit
Asia for the foreseeable future, if at all. See "Business--Marketing and
Sales."

Approximately 52.3% and 53.1% of the Company's total revenue for the six
months ended June 30, 1996 and the year ended December 31, 1995, respectively,
were attributable to sales made outside the United States. The Company expects
that international revenue will continue to represent a significant portion of
its total revenue. The Company's international revenue is currently
denominated in U.S. dollars. As a result, increases in the value of the U.S.
dollar relative to foreign currencies could make the Company's products more
expensive and, therefore, potentially less competitive in those markets. The
Company pays the expenses of its international operations in local currencies
and does not engage in hedging transactions with respect to such obligations.
International sales and operations are subject to numerous risks, including
tariff regulations and other trade barriers, requirements for licenses,
particularly with respect to the export of certain technologies,
collectability of accounts receivable, changes in regulatory requirements,
difficulties in staffing and managing foreign operations and extended payment
terms. See "Business--Marketing and Sales."

20
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth the Company's Consolidated Statement of
Operations Data expressed as a percentage of total revenue for the periods
indicated.

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenue:
Product licenses........... 64.8% 70.4% 73.8% 63.0% 76.8%
Maintenance and services... 35.2 17.9 18.7 20.7 20.2
Other...................... -- 11.7 7.5 16.3 3.0
------- ------- ------- ------- -------
Total revenue............ 100.0 100.0 100.0 100.0 100.0
Cost of revenue:
Product licenses........... 6.0 5.2 4.6 6.0 3.0
Maintenance and services... 4.6 3.0 2.9 3.6 2.2
------- ------- ------- ------- -------
Total cost of revenue.... 10.6 8.2 7.5 9.6 5.2
------- ------- ------- ------- -------
Gross profit............. 89.4 91.8 92.5 90.4 94.8
Operating expenses:
Research and development... 32.9 35.7 36.3 45.1 28.0
Sales and marketing........ 50.7 45.2 52.4 64.5 44.2
General and
administrative............ 26.5 17.8 22.1 28.4 14.6
In-process technology...... -- 5.0 -- -- --
------- ------- ------- ------- -------
Total operating
expenses................ 110.1 103.7 110.8 138.0 86.8
------- ------- ------- ------- -------
Income (loss) from
operations.................. (20.7) (11.9) (18.3) (47.6) 8.0
Other income (expense), net.. (1.7) (0.8) (1.3) (1.7) (0.6)
------- ------- ------- ------- -------
Income (loss) before income
taxes....................... (22.4) (12.7) (19.6) (49.3) 7.4
Income tax provision......... -- 3.1 2.8 3.0 2.2
------- ------- ------- ------- -------
Net income (loss)............ (22.4)% (15.8)% (22.4)% (52.3)% 5.2%
======= ======= ======= ======= =======
</TABLE>

SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995

Total Revenue

The Company's revenue is comprised of product licenses revenue, maintenance
and services revenue and other revenue. Total revenue increased by 61% from
$5.8 million for the six months ended June 30, 1995 to $9.4 million for the
six months ended June 30, 1996. For the six months ended June 30, 1996, sales
through Seiko and ATE, as distributors, accounted for 14.9% and 10.7% of the
Company's total revenue, respectively, and no customer accounted for more than
10% of the Company's total revenue. For the six months ended June 30, 1995,
other than the sale of certain non-core technology to Soliton Systems K.K.
("Soliton") in a one-time transaction in 1995, no distributor or customer
accounted for more than 10% of the Company's total revenue.

Product licenses revenue. The Company's product licenses revenue is derived
from license fees from the Company's SLDA and Design to Test products. Product
licenses revenue increased by 96% from $3.7 million for the six months ended
June 30, 1995 to $7.2 million for the six months ended June 30, 1996. Revenue
from SLDA and Design to Test products accounted for 48.1% and 51.9%,
respectively, of product licenses revenue for the six months ended June 30,
1995 and for 70.9% and 29.1%, respectively, of product licenses revenue for
the six months ended June 30, 1996.

21
<PAGE>

SLDA revenue increased 189% from $1.8 million for the six months ended June
30, 1995 to $5.1 million for the six months ended June 30, 1996. The increase
was primarily attributable to the hiring of the SLDA sales force beginning in
late 1994 and early 1995, improved international distribution and thereafter
increased market acceptance of the Company's SLDA products.

Design to Test revenue increased 10% from $1.9 million for the six months
ended June 30, 1995 to $2.1 million for the six months ended June 30, 1996.
The increase was primarily due to sales of the Company's Visual Testbench
product which was first released in the fourth quarter of 1995. Revenue from
Design to Test products typically results from fewer, larger orders and, as a
result, the timing of orders can result in significant variations in quarterly
revenue.

Maintenance and services revenue. The Company's maintenance and services
revenue is derived from maintenance contracts related to the Company's SLDA
and Design to Test products and training classes offered to purchasers of the
Company's software products. Maintenance and services revenue increased 58%
from $1.2 million for the six months ended June 30, 1995 to $1.9 million for
the six months ended June 30, 1996. The increase was attributable to an
increase in maintenance revenue related to growth in the installed base of
SLDA customers and an increase in domestic Design to Test maintenance revenue
due to the Company hiring a telemarketing salesperson dedicated to sales of
maintenance.

Other revenue. Other revenue consists of revenue from one-time technology
sales and fees received for granting distribution rights. Other revenue for
the six months ended June 30, 1995 was approximately $950,000, which consisted
of $850,000 related to a one-time sale of non-core technology and $100,000 of
distribution rights fees. For the six months ended June 30, 1996 other revenue
consisted of $284,000 of distribution rights fees. No material costs were
associated with other revenue for the six months ended June 30, 1995 and 1996.

Cost of Revenue

Cost of product licenses revenue. Cost of product licenses revenue includes
product packaging, software documentation, labor and other costs associated
with handling, packaging and shipping product and other production related
costs. Cost of product licenses revenue decreased 20% from $347,000 for the
six months ended June 30, 1995 to $278,000 for the six months ended June 30,
1996. The decrease was primarily attributable to one-time costs incurred in
the six months ended June 30, 1995 associated with the write-off of prepaid
royalties and obsolete inventory and the production of demonstration and
evaluation materials related to the release of new versions of the Company's
SLDA products. As a percentage of product licenses revenue, the cost of
product licenses revenue decreased from 9.4% for the six months ended June 30,
1995 to 3.9% for same period in 1996. This decrease was primarily due to
leveraging fixed costs across increased product licenses revenue and, to a
lesser extent, to lower sales of TDS products as a percentage of total product
sales. TDS products have a higher cost of revenue than the Company's SLDA
products.

Cost of maintenance and services revenue. Cost of maintenance and services
revenue, which consists primarily of personnel costs for customer support and
training classes offered to purchasers of the Company's products, was $210,000
for the six months ended June 30, 1995 and $211,000 for the six months ended
June 30, 1996. As a percentage of maintenance and services revenue, the cost
of maintenance and services revenue decreased from 17.5% for the six months
ended June 30, 1995 to 11.1% for the six months ended June 30, 1996. The
Company expects that its cost of maintenance and services revenue will
increase in future periods as the Company adds customer support personnel.

Research and Development

Research and development expenses consist of the engineering and operations
support costs of developing new products and enhancements to existing products
and performing quality assurance activities. Research and development expenses
remained relatively unchanged at approximately $2.6 million for the six months
ended June 30, 1995 and 1996. As a percentage of total revenue, research and
development expenses

22
<PAGE>

decreased from 45.1% for the six months ended June 30, 1995 to 28.0% for the
same period in 1996 due to the increase in total revenue for the first six
months of 1996. The Company believes that significant investment in research
and development is required to remain competitive in its markets, and the
Company therefore anticipates that research and development expenses will
increase in absolute dollars in future periods, but may vary as a percentage
of total revenue.

Software development costs are accounted for in accordance with Financial
Accounting Standards Board Statement No. 86, under which the Company is
required to capitalize software development costs after technological
feasibility has been established. To date, development costs have been
expensed as incurred since technological feasibility generally has not been
established until shortly before the release of a new product, and no material
development costs have been incurred after establishment of technological
feasibility.

Sales and Marketing

Sales and marketing expenses, consisting primarily of salaries, commissions
and promotional costs, increased 10% from $3.8 million for the six months
ended June 30, 1995 to $4.1 million for the six months ended June 30, 1996.
The increase was primarily attributable to increased commissions and travel
expenses. As a percentage of total revenue, sales and marketing expenses
decreased from 64.5% for the six months ended June 30, 1995 to 44.2% for the
same period in 1996. The decrease was primarily attributable to the increase
in total revenue for the first six months of 1996. In the future, the Company
expects sales and marketing expenses to continue to increase in absolute
dollars, in part due to the hiring of additional sales personnel.

General and Administrative

General and administrative expenses consist primarily of the corporate,
finance, human resource, information services, administrative, legal and
auditing expenses of the Company. General and administrative expenses
decreased 17% from $1.7 million for the six months ended June 30, 1995 to $1.4
million for the six months ended June 30, 1996. During the six months ended
June 30, 1995, the Company wrote-off expenses of approximately $270,000
primarily related to prepaid expenses deemed to have no future value and costs
associated with the severance of a senior manager. As a percentage of total
revenue, general and administrative expenses decreased from 28.4% for the six
months ended June 30, 1995 to 14.6% for the same period in 1996. The decrease
as a percentage of total revenue was primarily attributable to the increase in
total revenue in the first six months of 1996. The Company expects general and
administrative expenses to increase in absolute dollars to support future
operations and sales and the additional costs associated with being a public
company.

Other Income (Expense), Net

Other income (expense) consists of interest income and expense associated
with available cash balances, loans, lines of credit and gains or losses from
the sale of property and equipment. Other income (expense) was a net expense
of $101,000 for the six months ended June 30, 1995 and $55,000 for the six
months ended June 30, 1996. The decrease in net expense was primarily due to
lower interest expense associated with outstanding bank borrowings and capital
lease obligations, partially offset by interest earned on the Company's cash
holdings.

Income Tax Provision

Income tax provision increased from $173,000 for the six months ended June
30, 1995 to $209,000 for the six months ended June 30, 1996. The increase was
primarily attributable to increased Japanese sales and the payment of
withholding tax of approximately 10% on such sales. Effective June 1996, the
Company is no longer required to pay withholding tax on its Japanese sales.
State income tax payments were lower than statutory limits due to the
carryforward of net operating losses. See "--Effective Corporate Tax Rates."

23
<PAGE>

YEARS ENDED DECEMBER 31, 1995, DECEMBER 31, 1994 AND DECEMBER 31, 1993

Total Revenue

Total revenue increased by 79% from $7.2 million in 1993 to $13.0 million in
1994 and by 8% to $14.1 million in 1995. The increase from 1993 to 1994
primarily resulted from the introduction of the Company's first SLDA product
in the first quarter of 1994 and one-time sales of non-core technology in 1994
of approximately $1.5 million. The increase from 1994 to 1995 primarily
resulted from increased sales of the Company's SLDA products. During 1993,
1994 and 1995, other than the sale of certain non-core technology to Credence
Systems Corporation ("Credence") in a one-time transaction in 1994, no
customer accounted for more than 10% of the Company's total revenue. Other
than sales through Seiko, which accounted for 15.7% and 12.7% of the Company's
total revenue in 1994 and 1995, respectively, no distributor accounted for
more than 10% of the Company's total revenue during 1993, 1994 and 1995.

Product licenses revenue. Product licenses revenue increased by 95% from
$4.7 million in 1993 to $9.1 million in 1994 and by 14% to $10.4 million in
1995. Revenue from SLDA and Design to Test products accounted for 0% and 100%,
respectively, of product licenses revenue for 1993, for 49.4% and 50.6%,
respectively, of product licenses revenue for 1994, and 58.5% and 41.5%,
respectively, of product licenses revenue for 1995.

The Company's first SLDA product, Visual HDL for VHDL, was introduced in the
first quarter of 1994 and accordingly the Company did not recognize any
revenue for SLDA licenses in 1993. SLDA revenue increased by 35% from $4.5
million in 1994 to $6.1 million in 1995. The increase was primarily
attributable to the hiring of the SLDA sales force beginning in late 1994 and
early 1995 and increased market acceptance of the product in 1995,
particularly in the second half of 1995. The increase was also attributable to
follow-on sales in 1995 to certain key customers that had initially purchased
SLDA products in 1994 and 1995.

Design to Test revenue decreased slightly from $4.7 million in 1993 to $4.6
million in 1994 and decreased by 7% to $4.3 million in 1995. The decreases
were principally due to the focus of the Company's sales force during 1995 on
promotion of the Company's SLDA products.

Maintenance and services revenue. Maintenance and services revenue decreased
by 9% from $2.5 million in 1993 to $2.3 million in 1994 and increased by 14%
to $2.6 million in 1995. The decrease from 1993 to 1994 was primarily
attributable to the Company's sales force focusing on the introduction of the
Company's SLDA products in 1994 rather than on the sale of maintenance
contracts. The increase from 1994 to 1995 was primarily the result of the
addition of a telemarketing salesperson dedicated to sales of maintenance
contract renewals and increased sales of SLDA maintenance contracts associated
with increased sales of SLDA products.

Other revenue. Other revenue was $0 in 1993, $1.5 million in 1994 and $1.1
million in 1995 due to one-time sales of technology and fees received for
granting distribution rights. Other revenue for 1994 and 1995 included $1.5
million and $850,000, respectively, attributable to non-core technology sales
to Credence and Soliton, respectively. No material costs were associated with
these sales.

Cost of Revenue

Cost of product licenses revenue. Cost of product licenses revenue increased
from $440,000 in 1993 to $681,000 in 1994 and decreased to $651,000 in 1995.
The increase from 1993 to 1994 primarily resulted from the addition of
facilities in Israel acquired in connection with the acquisition of SEE
Technologies in February 1994 and costs associated with the Company's SLDA
product, which was initially shipped in the first quarter of 1994. The
decrease from 1994 to 1995 was due in part to costs associated with the
introduction of the Company's SLDA product in 1994. As a percentage of product
licenses revenue, the cost of product licenses revenue decreased from 9.4% for
1993 to 7.4% for 1994 and to 6.3% for 1995. Cost of product licenses revenue
as a percentage of product licenses revenue decreased from 1993 through 1995
principally due to

24
<PAGE>

the Company's higher margin SLDA products constituting a greater percentage of
the Company's product mix and leveraging fixed costs across increased product
licenses revenue.

Cost of product licenses revenue for 1995 includes a one-time write-off of
$107,000 of prepaid royalty fees for software deemed unusable, offset by the
reduction of $84,000 of reserves related to the expiration of training
credits.

Cost of maintenance and services revenue. Cost of maintenance and services
revenue increased from $330,000 in 1993 to $390,000 in 1994 and increased
slightly to $400,000 in 1995. The increase from 1993 to 1994 resulted from the
addition of support personnel in connection with the introduction of the
Company's SLDA product. As a percentage of maintenance and services revenue,
the cost of maintenance and services revenue was 13.0%, 16.8% and 15.2% for
1993, 1994 and 1995, respectively.

Research and Development

Research and development expenses increased from $2.4 million in 1993 to
$4.6 million in 1994 and to $5.1 million in 1995. The increase from 1993 to
1994 was primarily due to the substantial increase in the number of research
and development employees as a result of the acquisition of SEE Technologies
in February 1994. The increase from 1994 to 1995 was primarily attributable to
an increase in salaries. As a percentage of total revenue, research and
development expenses increased from 32.9% in 1993 to 35.7% in 1994 and to
36.3% in 1995.

Sales and Marketing

Sales and marketing expenses increased from $3.7 million in 1993 to $5.9
million in 1994 and to $7.4 million in 1995. The increase from 1993 to 1994
were primarily attributable to the expansion of the Company's sales and
marketing organization and increased costs associated with the production of
marketing literature and trade show costs to support the introduction of the
Company's Visual HDL for VHDL product. The increase from 1994 to 1995 was
principally due to the continued expansion of the Company's direct sales
force. As a percentage of total revenue, sales and marketing expenses
decreased from 50.7% in 1993 to 45.2% in 1994 and increased to 52.4% in 1995.

General and Administrative

General and administrative expenses increased from $1.9 million in 1993 to
$2.3 million in 1994 and to $3.1 million in 1995. The increases from 1993 to
1995 were primarily due to increases in personnel, investments in financial
information and control systems to support expanded operations and costs
associated with the Company's international operations. During the second
quarter of 1995, the Company also wrote-off expenses of approximately $270,000
primarily related to prepaid expenses deemed to have no future value and costs
associated with the severance of a senior manager. As a percentage of total
revenue, general and administrative expenses decreased from 26.5% in 1993 to
17.8% in 1994 and increased to 22.1% in 1995.

In-Process Technology

The Company expensed $647,000 of acquired in-process technology in the first
quarter of 1994 attendant to the Reorganization. These costs related entirely
to the SLDA products being developed by SEE Technologies.

Other Income (Expense), Net

Other income (expense) was a net expense of $119,000, $100,000 and $176,000
for 1993, 1994 and 1995, respectively. The increases in net expense were
primarily a result of increased interest expense associated with outstanding
bank borrowings and capital lease obligations and a decrease in interest
income.

25
<PAGE>

Income Tax Provision

Income tax provision was $0 for 1993, $402,000 for 1994 and $399,000 for
1995. The increase in income tax expense from 1993 to 1994 and 1995 was the
result of a change in the Company's operational structure. For 1993 and prior,
the Company maintained a wholly-owned subsidiary in Japan which resulted in no
Japanese withholding taxes from sales. For 1994 and 1995, under the
restructured operations, the increase was primarily attributable to the
payment of withholding tax on Japanese and other Asian sales. State income tax
payments were lower than statutory limits due to operating losses. See "--
Effective Corporate Tax Rates."

26
<PAGE>

Quarterly Results

The following table sets forth selected unaudited quarterly financial
information for each of the six quarters in the period ended June 30, 1996.
This information has been derived from unaudited consolidated statements of
operations data that, in the opinion of management, are stated on a basis
consistent with the audited financial statements and include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such information in accordance with generally accepted
accounting principles. The Company's quarterly results have been in the past,
and may be in the future, subject to significant fluctuations. The Company
believes that results of operations for the interim periods are not
necessarily indicative of the results to be expected in the future.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1995 1995 1995 1996 1996
-------- -------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Product licenses....... $ 1,821 $ 1,848 $ 3,225 $ 3,489 $ 3,547 $ 3,644
Maintenance and
services.............. 521 681 646 789 918 977
Other.................. 400 550 50 50 142 142
------- ------- ------- ------- ------- -------
Total revenue.......... 2,742 3,079 3,921 4,328 4,607 4,763
------- ------- ------- ------- ------- -------
Cost of revenue:
Product licenses....... 134 213 131 173 132 146
Maintenance and
services.............. 103 107 97 93 102 109
------- ------- ------- ------- ------- -------
Total cost of revenue.. 237 320 228 266 234 255
------- ------- ------- ------- ------- -------
Gross profit........... 2,505 2,759 3,693 4,062 4,373 4,508
Operating Expenses:
Research and
development........... 1,266 1,360 1,252 1,235 1,332 1,287
Sales and marketing.... 1,778 1,979 1,718 1,895 2,097 2,041
General and
administrative........ 661 993 724 734 639 734
------- ------- ------- ------- ------- -------
Total operating
expenses.............. 3,705 4,332 3,694 3,864 4,068 4,062
------- ------- ------- ------- ------- -------
Income (loss) from
operations............. (1,200) (1,573) (1) 198 305 446
Other income (expense),
net.................... (52) (48) (21) (55) (52) (3)
------- ------- ------- ------- ------- -------
Income (loss) before
income taxes........... (1,252) (1,621) (22) 143 253 443
Income tax provision.... 73 100 148 78 175 34
------- ------- ------- ------- ------- -------
Net income (loss)....... $(1,325) $(1,721) $ (170) $ 65 $ 78 $ 409
======= ======= ======= ======= ======= =======
Pro forma net income
(loss) per share....... $ (0.11) $ (0.14) $ (0.01) $ 0.01 $ 0.01 $ 0.03
Pro forma number of
shares used in per
share calculation...... 11,886 11,890 11,898 11,904 11,936 12,021
AS A PERCENTAGE OF TOTAL
REVENUE:
Revenue:
Product licenses....... 66.4% 60.0% 82.2% 80.6% 77.0% 76.5%
Maintenance and
services.............. 19.0 22.1 16.5 18.2 19.9 20.5
Other.................. 14.6 17.9 1.3 1.2 3.1 3.0
------- ------- ------- ------- ------- -------
Total revenue.......... 100.0 100.0 100.0 100.0 100.0 100.0
------- ------- ------- ------- ------- -------
Cost of revenue:
Product licenses....... 4.8 6.9 3.3 4.0 2.9 3.1
Maintenance and
services.............. 3.8 3.5 2.5 2.1 2.2 2.3
------- ------- ------- ------- ------- -------
Total cost of revenue.. 8.6 10.4 5.8 6.1 5.1 5.4
------- ------- ------- ------- ------- -------
Gross profit........... 91.4 89.6 94.2 93.9 94.9 94.6
Operating Expenses:
Research and
development........... 46.3 44.2 31.9 28.5 28.9 27.0
Sales and marketing.... 64.8 64.3 43.8 43.8 45.5 42.9
General and
administrative........ 24.1 32.2 18.6 17.0 13.9 15.4
------- ------- ------- ------- ------- -------
Total operating
expenses.............. 135.2 140.7 94.3 89.3 88.3 85.3
------- ------- ------- ------- ------- -------
Income (loss) from
operations............. (43.8) (51.1) (0.1) 4.6 6.6 9.3
Other income (expense),
net.................... (1.9) (1.5) (0.5) (1.3) (1.1) 0.0
------- ------- ------- ------- ------- -------
Income (loss) before
income taxes........... (45.7) (52.6) (0.6) 3.3 5.5 9.3
Income tax provision.... 2.6 3.3 3.7 1.8 3.8 0.7
------- ------- ------- ------- ------- -------
Net income (loss)....... (48.3)% (55.9)% (4.3)% 1.5% 1.7% 8.6%
======= ======= ======= ======= ======= =======
</TABLE>

27
<PAGE>

Since the first quarter of 1995, the Company's total revenue has increased
in each subsequent quarter. The increase in revenue is primarily attributable
to increased market acceptance of the SLDA product line that commenced
shipment in the first quarter of 1994. The following table sets forth the
revenue from the Company's SLDA and Design to Test products for each of the
six quarters in the period ended June 30, 1996. The Company believes that
product revenue for the interim periods is not necessarily indicative of
future results.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1995 1995 1995 1996 1996
-------- -------- --------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
PRODUCT
- -------
SLDA..................... $ 626 $1,138 $2,100 $2,207 $2,506 $2,589
Design to Test........... 1,195 710 1,125 1,282 1,041 1,055
</TABLE>

Effective June 1996, the Company is no longer required to pay the 10%
withholding tax on its Japanese sales. As a result, the income tax provision
for the quarter ended June 30, 1996 decreased significantly compared to prior
quarters.

In the quarters ended March 31 and June 30, 1995, the Company recognized
other revenue of $350,000 and $500,000, respectively, related to the one-time
sale of certain technology. In addition, cost of product licenses revenue for
the second quarter of 1995 totaled $213,000, which includes a one-time write-
off of $107,000 of prepaid royalty fees for software deemed unusable.

Total operating expenses for the second quarter of 1995 increased as a
result of increases in each of its components. Research and development
expenses increased due to salary increases during the quarter, and were lower
in the following quarters primarily as a result of the departure of research
and development personnel associated with the development of technology which
had been sold and the restructuring of certain additional personnel to
increase efficiencies. Sales and marketing expenses increased in part due to
the forgiveness of a loan to a sales officer and the one-time write-off of
receivables deemed uncollectable. In addition, general and administrative
expenses increased in part due to the write-off of approximately $270,000
primarily related to prepaid expenses deemed to have no future value and costs
associated with the severance of a senior manager.

The Company has experienced significant quarterly fluctuations in operating
results and cash flows and it is likely that these fluctuations will continue
in future periods. These fluctuations have been, and may in the future be,
caused by a number of factors, including the rate of acceptance of new
products, corporate acquisitions and consolidations, product, customer and
channel mix, the size and timing of orders, lengthy sales cycles, the timing
of new product announcements and introductions by the Company and its
competitors, seasonal factors, rescheduling or cancellation of customer
orders, the Company's ability to continue to develop and introduce new
products and product enhancements on a timely basis, the level of competition,
purchasing and payment patterns, pricing policies of the Company and its
competitors, product quality issues, currency fluctuations and general
economic conditions.

28
<PAGE>

future revenue. As a result, if revenue in any quarter falls below
expectations, expenditure levels could be disproportionately high as a
percentage of revenue, and the Company's operating results for that quarter
would be adversely affected. Based upon the factors described above, the
Company believes that its quarterly revenue, expenses and operating results
are likely to vary significantly in the future, that period-to-period
comparisons of its results of operations are not necessarily meaningful and
that, as a result, such comparisons should not be relied upon as indications
of the Company's future performance. Moreover, although the Company's revenue
has increased in recent periods, there can be no assurance that the Company's
revenue will grow in future periods or that the Company will remain profitable
on a quarterly or annual basis. Due to the foregoing or other factors, it is
likely that the Company's results of operations may be below investors' and
market analysts' expectations in some future quarters, which could have a
severe adverse effect on the market price of the Company's Common Stock.

EFFECTIVE CORPORATE TAX RATES

The Company is taxed in its jurisdictions of operations based on the extent
of taxable income generated in each jurisdiction. For income tax purposes,
revenue is attributed to the taxable jurisdiction where the sales transactions
generating the revenue were initiated. All sales transactions by Summit Design
(EDA) Ltd., the Company's Israeli subsidiary, to the Company were recorded as
arm's length transactions based on an intercompany pricing agreement. All
sales transactions by the Company are to unrelated parties and are based upon
prevailing market prices. There is no offset of taxes between the United
States and Israel. The Israeli operations are performed entirely by Summit
Design (EDA) Ltd., which is a separate taxable Israeli entity.

The Company's future effective tax rate depends in part on the availability
of United States and Israeli net operating loss ("NOLs") and credit
carryforwards. As of June 30, 1996, the Company had recorded U.S. federal and
state NOLs of approximately $9.6 million and $7.2 million, respectively and
Israeli NOLs of approximately $5.7 million. To date, the Company has not
generated taxable income, and neither the United States nor the Israeli taxing
authorities have verified the accuracy or availability of the Company's NOLs
and credit carryforward amounts. In addition, such amounts are subject to
limitation in certain circumstances, including as a result of certain changes
of ownership or operations. Thus, due to a change in ownership resulting from
the Reorganization and a subsequent preferred stock financing, as of June 30,
1996, approximately $3.8 million and $2.5 million of the federal and state
NOLs, respectively, are limited as to the timing of their availability for
use. The portion of affected NOL that is available for use each year is
approximately $1.7 million for federal purposes and $1.2 million for state
purposes. The remaining portion of the NOLs (including all Israeli NOLs) is
not subject to this limitation and is generally available for use against
future taxable income, if any. There can be no assurance as to the amount of
such NOLs or carryforwards that will be available to the Company, if any, or
that the Company will be able to avail itself of such benefits.

In addition to its NOLs and credit carryforwards, the Company is currently
scheduled to receive tax benefits over the next several years under a tax
holiday in Israel. The Company's existing Israeli production facility has been
granted "Approved Enterprise" status under the Israeli Investment Law, which
entitles the Company to reductions in the tax rate normally applicable to
Israeli companies with respect to the income generated by its "Approved
Enterprise" programs. In particular, the tax holiday covers the seven-year
period beginning the first year in which Summit Design (EDA) Ltd. generates
taxable income from its "Approved Enterprise" (after using any available
NOLs), provided that such benefits will terminate in 2006 regardless of
whether the seven-year period has expired. The tax holiday provides that,
during such seven-year period, a portion of the Company's taxable income from
its Israeli operations will be taxed at favorable tax rates. The termination
or reduction of the Company's Israeli tax benefits would have a material
adverse effect on the Company's overall actual effective tax rate. The Company
has recently applied for "Approved Enterprise" status with respect to a new
project and intends to apply in the future with respect to additional
projects. There can be no assurance that the Company will be granted any
approvals and therefore there can be no assurance the Company will continue to
receive favorable tax status, if at all. See "Risk Factors--Operations in
Israel."

29
<PAGE>

The Company is also subject to the risk that United States and foreign tax
laws and rates may change in a future period or periods, and that any such
changes may materially adversely affect the Company's tax rate. As a result of
the factors described above and other related factors, there can be no
assurance that the Company will maintain a favorable tax rate in future
periods. Any increase in the Company's effective tax rate, or variations in
the effective tax rate from period to period, could have a material adverse
effect on the Company's business, financial condition and results of
operations.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has financed its operations primarily
through the private placement of approximately $15.4 million of capital stock,
as well as capital equipment leases, borrowings under its bank line of credit,
Israeli research and development grants and cash generated from operations. As
of June 30, 1996, the Company had approximately $3.2 million in cash, cash
equivalents and short term investments and a $2.0 million bank line of credit
with U.S. National Bank of Oregon. The line of credit expires on April 30,
1997 and borrowings thereunder accrue interest at specified percentages above
the prime lending rate based on the Company's ratio of debt to tangible net
worth. Advances under the line of credit are limited to a specified percentage
of eligible accounts receivable (as defined in the line of credit). Borrowings
under the line of credit are secured by the Company's accounts receivable,
inventory and general intangible assets, including its intellectual property
rights. As of June 30, 1996, the Company had no borrowings outstanding under
this line of credit. Additionally, as of June 30, 1996, the Company had
approximately $309,000 outstanding under an equipment term loan. The loan
matures in June 1998 and accrues interest at the prime rate plus 1% (9.25% at
June 30, 1996).

As of June 30, 1996, the Company had a working capital deficit of
approximately $64,000. The accounts receivable balance, net of allowance for
doubtful accounts, was $3.2 million, $5.5 million and $4.1 million at June 30,
1996 and December 31, 1995 and 1994, respectively. As of August 31, 1996,
approximately 94% of the Company's accounts receivable outstanding as of March
31, 1996 had been collected. The average accounts receivable days' sales
outstanding was 60 days, 115 days and 115 days as of June 30, 1996 and
December 31, 1995 and 1994, respectively. The number of days' sales
outstanding has varied significantly from quarter to quarter as a result of
factors, including a significant percentage of international sales with
payment terms ranging from 60 to 90 days and a large amount of sales in the
last weeks of a quarter.

Net cash generated by operating activities was approximately $4.1 million
for the six months ended June 30, 1996. Net cash used by operating activities
was approximately $3.0 million, $2.6 million and $673,000 for the years ended
December 31, 1995, 1994 and 1993, respectively. For the six months ended June
30, 1996, cash generated by operating activities resulted primarily from
improved collection of accounts receivable and profitability during the
period. For 1995 and 1994, the use of cash from operations resulted primarily
from the Company's net loss and the increase in accounts receivable. For 1993,
the use of cash from operations resulted primarily from the Company's net
loss.

Net cash used in investing activities was approximately $398,000, $758,000,
$552,000 and $129,000 for the six months ended June 30, 1996 and for the years
ended December 31, 1995, 1994 and 1993, respectively. Net cash used in
investing activities was related primarily to the acquisition of property and
equipment.

Net cash used by financing activities was $1.2 million for the six months
ended June 30, 1996 and net cash provided by financing activities was
approximately $3.1 million, $3.9 million and $1.0 million for the years ended
December 31, 1995, 1994, and 1993, respectively. The cash used in the first
six months of 1996 was primarily to repay amounts outstanding under the
Company's line of credit. The cash provided in 1995, 1994 and 1993 was related
primarily to the issuance of preferred stock and short-term borrowings,
partially offset by debt payments and principal payments on capital lease
obligations.

The Company presently believes the net proceeds from the sale of the common
stock offered by the Company hereby, together with existing funds and funds
expected to be generated from operations, will satisfy the Company's
anticipated working capital and other cash requirements for at least the next
12 months.

30
<PAGE>

BUSINESS

The following Business section contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.

INTRODUCTION

Summit Design, Inc. is a leading provider of graphical design entry and
verification software tools and design to test software tools. The Company's
products assist integrated circuit ("IC" or "chip") system, design and test
engineers in meeting the market demands for rapid time to market, increased
product functionality and lower product cost. Summit's graphical SLDA products
enable IC systems and design engineers to create and verify IC designs using
familiar graphical paradigms such as block diagrams, state machines, flow
charts or truth tables rather than the less intuitive textual HDL code
required by synthesis and simulation tools. The Company's SLDA products
automatically generate optimized HDL descriptions from graphical designs,
eliminating time consuming and error prone manual entry of HDL code. The
Company's Design to Test products provide a graphical simulation test data
creation, graphical simulation results analysis and automatic manufacturing
test program generation.

BACKGROUND

Electronic design automation ("EDA") software has played a critical role in
accelerating the dramatic advances in the electronics industry over the past
two decades. The need for EDA has resulted from the increasing complexity of
ICs as well as the increasing number of new IC design starts and the scarcity
of skilled IC design and test engineers. The increase in the complexity of ICs
lengthens the development cycle while, at the same time, competitive pressures
shorten product life cycles. The objectives of EDA are to reduce time to
market and the costs associated with product design and verification while
permitting the development of a greater number of designs of higher speed and
density chips that can be reliably manufactured and tested.

IC development productivity has increased through the evolution of EDA, but
has significantly lagged fabrication technology in recent years. Fabrication
technology has advanced from the ability to produce chips with over 1 thousand
gates at 5 micron line-widths in the 1970s, to more than 10,000 gates in the
1980s, to greater than 1 million gates at sub 0.5 micron line-widths today.
For example, the processor used in the original IBM PC in 1981 had
approximately 10,000 gates and was manufactured using 3 micron process
technology, whereas the Pentium Pro introduced in 1995 contains approximately
2 million gates and is manufactured using 0.35 micron process technology. This
trend of higher levels of integration is expected to continue since the
benefits include increasing speed and functionality at decreasing cost.

In contrast to the progress in fabrication technology, the productivity of
the average design engineer has not kept pace. For example, an average
engineer would typically design approximately 8 gates per day in the mid-
1970s, approximately 40 gates per day in the early 1980s and nearly 400 gates
per day in the late 1980s and early 1990s. As a result, a greater number of
engineering hours are required to produce many of today's more complex
designs, leading to either longer development schedules or the need for larger
design teams. To address this challenge, organizations with IC design
capabilities continue to search for EDA tools that enable them to increase
their productivity and meet the aggressive development schedules dictated by
competitive forces.

Advances in EDA

EDA tools emerged in the early 1970s with the introduction of computer aided
design ("CAD") software that permitted engineers to textually enter designs of
several thousand gates, and in the early 1980s evolved to computer aided
engineering ("CAE") software that enabled engineers to graphically enter
designs of tens of thousands of gates. Despite the advantages of graphical CAE
tools, design at the gate level became

31
<PAGE>

impractical and more error prone as design complexities and gate counts
increased. To address these problems, textual HDLs, logic synthesis and
functional level simulation tools were introduced in the late 1980s, allowing
engineers to engage in high level design automation ("HLDA"). To use the HLDA
methodology, engineers are required to describe their IC design in a textual
HDL, such as VHDL or Verilog. After the design is coded in HDL, the HDL
description can be executed using simulation software to emulate the operation
of the desired IC, allowing the engineer to debug the design without building
a hardware prototype. The HDL description can be automatically translated to a
gate level description using a synthesis software tool.

The Importance of Test

Once the IC development process has been completed and verified,
manufacturing can begin. As a part of the manufacturing process, millions of
chips are tested to verify their quality and functionality prior to shipment.
Manufacturing test must be both fast and exhaustive to allow high volume
manufacturing of ICs that approach a zero defect level. Test plays such a
critical role in the manufacturing process that chips are sometimes re-
designed just to optimize testability. Manufacturing test typically involves
multi-million dollar hardware test equipment running a software test program
which utilizes millions of elements of timing and pattern data for each chip
under test. The software test programs are typically produced after the design
process is completed but before manufacturing can begin. Today, EDA suppliers
provide automatic test program generation software tools that assist test
engineers in acquiring vast amounts of timing and pattern data from gate level
simulation tools. These tools then create a manufacturing test program by
combining the data with program templates for specific hardware test
equipment. Significant profits from the sale of ICs and related systems can be
lost as a result of delays in the completion of an adequate manufacturing test
program.

Limitations of HLDA and Test

HLDA tools have enabled engineers to accelerate IC development schedules and
create more complex chips. However, these tools have significant limitations.
First, the conventional design flow for IC engineers using HLDA tools is to
represent a design in hand-drawn graphical paradigms such as block diagrams,
state machines, flow charts or truth tables, and then laboriously translate
their hand-drawn graphical designs into a textual HDL which resembles software
program code. This process is time consuming and error prone, and requires the
engineer to master a complex programming language. Second, the numerous lines
of HDL code that comprise a design are very difficult for engineering teams to
understand and communicate during design reviews and equally difficult for
engineering management to understand and evaluate. Third, while it would be
possible to accelerate time to market by reusing portions of HDL code where
similar functions are needed, reuse of HDL code is difficult and often avoided
because the complex HDL code complicates understanding the design's functional
intent. Fourth, the HLDA methodology is further limiting because textual HDL
code typically must be written in either Verilog or VHDL and according to
strict rules unique to a specific synthesis tool. This limits the ability of
engineers to increase synthesis efficiency by using various HDL languages and
multiple synthesis tools. Finally, the lack of stylistic restrictions in HDLs
often allows designers to express an IC functional design several different
ways. As a result, an HDL design could comply with HDL programming constraints
and yet not be able to be synthesized. As importantly, the lack of
restrictions allows a designer to produce an HDL description that can be
synthesized but that is not as efficient in terms of the resulting gate count
or circuit timing. Further, the lack of programming consistency between
engineers arising from the lack of stylistic restrictions complicates design
team management and design integration. Primarily as a result of the above
shortcomings, adoption of HLDA tools as of 1995 had been limited to
approximately 11% of the estimated 285,000 IC design engineers worldwide.

Although EDA suppliers today provide automatic test program generation
software tools, test engineers are still required to spend substantial time
debugging the test programs and the timing and pattern data on the actual
manufacturing test equipment that will be used to test the ICs. This effort
lengthens time to market and consumes valuable equipment process time that
would otherwise be used for manufacturing test. The timing and pattern data
required by these test programs is either hand coded or converted from the
output of

32
<PAGE>

gate level simulators. As a result, the time required to develop a test
program and the related data is often longer than the time required to
complete the IC design. In addition, although the preparation of test data
begins during design simulation, the lack of integration of HLDA and automatic
test program generation tools forces the design process and the test
preparation process to be separate and serial. The separate nature of design
and test preparation often results in duplicative efforts of design and test
engineers which can lead to delayed product introduction. The serial nature of
design and test preparation can delay recognition of unacceptable testability
characteristics of an IC which can result in chip redesign.

In order to meet the market's demands for more powerful, higher density ICs
and to reduce both time to market and cost, IC designers and manufacturers
seek design and test tools that overcome the limitations of the current HLDA
and test development methodologies.

THE SUMMIT SOLUTION

Summit offers software products to assist design and test engineers in
meeting the market demands for rapid time to market, increased product
functionality and lower product cost. In 1994, Summit introduced Visual HDL
for VHDL, its first graphical SLDA product, which accelerates the development,
verification and documentation of single function ICs as well as complete
systems on a chip. Summit's SLDA products automate manual design entry and
verification by enabling IC systems and design engineers to create and verify
IC designs using familiar graphical paradigms such as block diagrams, state
machines, flow charts and truth tables, rather than less intuitive textual HDL
code. The Company's Design to Test software tools allow the design or test
engineer to graphically create simulation test data and compare simulation
results. The Design to Test software also automatically generates
manufacturing test programs. The Company's most recently introduced Design to
Test product integrates the design and test processes and allows the design
engineer and test engineer to cooperatively develop simulation and
manufacturing test programs.

The Company's software products enable organizations to more easily realize
the benefits of HLDA by simplifying and automating IC design entry and
verification and by linking manufacturing test to design.

(Diagram of (Diagram of
The Conventional The Summit
HLDA Top-Down Design Process)
Design Process)

33
<PAGE>

The Company believes that its products provide the following benefits:

Increased Design Productivity

Summit's SLDA products enhance designers' ability to create, verify and
document HDL designs while managing the HDL development environment. These
products provide the ability to capture, analyze and verify a variety of high
level graphical descriptions and automatically produce a synthesis-ready HDL
design, thus eliminating the need to perform time-consuming and error-prone
manual coding in an HDL. These familiar graphical descriptions are more easily
debugged and more easily communicated among IC engineering team members. The
descriptions also facilitate review and approval by engineering management.

Design Reuse, Re-targeting and Consistency

The Company's SLDA products enable engineers to use libraries of existing
VHDL or Verilog code. This code can be used as HDL inputs or automatically
converted into a graphical format. Due to the widespread ability of engineers
to understand this graphical format, designs can be more easily modified and
reused in future developments. In addition, Summit's products can optimize the
design output for nearly all of the EDA industry's standard synthesis and
simulation tools. In the event the designer requires a different synthesis or
simulation tool, the design can be automatically re-targeted to optimize the
HDL output for the desired tool set. Finally, because each engineer's work is
implemented using the Company's software, which automatically generates the
actual HDL code, design efficiency and consistency is maintained even when
several engineers work on a project.

Ensure Chip Functionality and Manufacturing Testability

The Company's Design to Test tools provide design and test engineers with
the capability to graphically develop simulation test pattern and timing data
and assist the engineers in the analysis of the complex and voluminous
simulation results. These graphical tools allow the engineer to check the IC
under development for manufacturing testability prior to release from the
design cycle, minimizing the need to re-design for improved manufacturing
testability. Summit's Design to Test tools automate test program generation,
thus reducing the need to debug test programs on expensive and highly utilized
manufacturing test equipment.

Reduced Test Development Time

The Company's Visual Testbench product, released in the fourth quarter of
1995, integrates the efforts of design engineers and test engineers to reduce
the time required for manufacturing test development. This product
automatically converts the millions of elements of pattern and timing data
from the graphically prepared simulation input and from simulation results.
The converted information is then combined with tester specific templates to
automatically generate manufacturing test programs. The Company believes that
Visual Testbench can reduce manufacturing test preparation time significantly.

STRATEGY

The Company's mission is to be the leading supplier of SLDA and Design to
Test software and to achieve wide-spread acceptance of these technologies. The
key elements of the Company's strategy to achieve this mission are as follows:

Accelerate Market Adoption of SLDA

Summit intends to expand market acceptance by focusing on key customer
accounts to ensure their successful adoption of the SLDA methodology. The
Company believes that successful adoption by certain key customers in various
industries will promote adoption by other customers within those industries.
The Company also believes that its joint development and marketing programs
with industry leaders promote

34
<PAGE>

awareness and adoption of SLDA. In addition, Summit supports all of the
industry's major synthesis, simulation, layout and test products and continues
to support and complement new standards as they emerge. The Company also
targets student engineers by introducing them to its SLDA products through
programs with various universities.

Integrate Design to Test Into SLDA Methodology

The Company is leveraging its test expertise by integrating its Test
Development Series technology into the SLDA design process. This integrated
approach can significantly reduce users' time to market by permitting test
design to occur in parallel with, and as part of, product design. The
Company's first step in implementing this strategy was its recent introduction
of Visual Testbench, a graphical tool that allows the design and test engineer
to verify designs and automatically generate test programs. The Company
intends to develop additional features and functionality in the areas of
graphical user interface and parallel test development with the goal of
reducing or eliminating manual test development.

Leverage SLDA Technology Leadership

The Company intends to continue to advance its technological leadership in
graphical design entry and verification to meet the future needs of current
users and to provide compelling reasons for adoption by new users. For
example, the Company's addition of Visual HDL for Verilog in the fourth
quarter of 1995 extended its graphical SLDA methodology to a new group of
users. In the future, the Company intends to expand its support of other
important modeling languages such as C and C++.

Broaden the Scope of SLDA

The Company will continue to identify challenges facing both IC systems
engineers and IC design engineers in the areas of SLDA and Design to Test and
to focus its development efforts on products to further increase productivity
in the creation, verification, documentation and test of single function ICs
and complete systems on a chip. The Company believes that power, timing,
thermal and cost constraints management and analog circuit design will become
increasingly significant bottlenecks, especially in the area of complete
systems on a chip. Summit believes that in the future its SLDA products will
provide a graphical means for both systems and design engineers to specify the
functional intent and simulate the interoperability of hardware and software,
as well as the capability to perform what-if analysis on constraints such as
power, speed, temperature and cost at the front end of the development
process.

PRODUCTS

The Company's SLDA products, Visual HDL for VHDL and Visual HDL for Verilog,
provide system design management, graphical design entry, graphical level
simulation, HDL code generation and high speed compiled simulation. These
products are the result of a focused five-year development effort of
approximately 40 EDA software development experts, and today are in their
third major release. The Company's Design to Test products, Test Development
Series ("TDS") and Visual Testbench, provide graphical simulation test data
creation, simulation results analysis and automatic manufacturing production
test program generation. The TDS product has been developed over a 15 year
period, and today is in its eighth major release. Visual Testbench has been
under development since 1994 and was first released in the fourth quarter of
1995.

The Company's products are constructed using modern software design methods
and programming languages such as C and C++. All of the Company's products
operate on the industry's most popular UNIX workstations, while Visual HDL for
VHDL also operates on PCs running Windows 3.1, Windows 95 and Windows NT.

System Level Design Automation

Visual HDL for VHDL and Visual HDL for Verilog (together, "Visual HDL") are
graphical entry and verification solutions designed to simplify and accelerate
top-down design. Visual HDL can raise productivity

35
<PAGE>

by allowing system level, behavioral level and functional level design entry
using graphical design methods such as block diagrams, state machines, flow
charts and truth tables. As a result, engineers no longer need to textually
program their designs in lines of VHDL or Verilog code. Once the design is
graphically captured, Visual HDL can then automatically generate synthesizable
HDL code that is optimized for specific synthesis tools.

Set forth below is a depiction of a block diagram, state machine, flow chart
and truth table created by design engineers using the Company's SLDA products.

[GRAPHIC APPEARS HERE]

Visual HDL for VHDL uses VHDL as its internal data format and Visual HDL for
Verilog uses Verilog as its internal data format, allowing both products to
support all the hardware modeling features of both of these standard HDL
languages. Competing products typically use proprietary internal languages
making them more difficult to use because the design engineer must learn an
additional textual language. Such products do not take full advantage of the
functionality of VHDL or Verilog, thus limiting the level of integration that
can be achieved with industry standard simulation and synthesis tools.

The Visual HDL design environment offers several benefits to top-down
designers, including: easier design entry, verification and reuse, and faster,
more complete design debugging. Because Visual HDL represents HDL code
graphically, designers can better communicate their ideas in a much more
intuitive manner. This allows experienced and novice HDL designers to work
together efficiently. Visual HDL automatically generates HDL code that is
optimized for efficient synthesis. It can also import VHDL or Verilog code and
automatically generate graphics from this source text. Utilizing the graphical
representations generated by Visual HDL, designers are able to quickly
determine the original design intent, allowing them to save time by reusing
design components in future designs. An important aspect of Visual HDL is its
graphical simulation and debug environment. This environment allows designers
to view the path of simulation execution and the simulation results. This
gives them the opportunity to shorten development time by focusing on
debugging their circuits instead of debugging their HDL code. Visual HDL also
provides point-and-click functionality which allows engineers to quickly
determine the cause of a bug by highlighting the specific line of text and the
related graphical representation where the error exists, thereby significantly
shortening the time to debug a program.

36
<PAGE>

Visual HDL operates in both VHDL and Verilog on UNIX workstations and in
VHDL on PCs. It supports a broad range of HLDA synthesis and simulation
products, including products from Synopsys, Mentor Graphics, Cadence,
VIEWlogic, Compass, IBM, Altera, Simplicity and Exemplar. Visual HDL for VHDL
was first shipped in the first quarter of 1994, and Visual HDL for Verilog was
first shipped in the fourth quarter of 1995. To date, the Company has licensed
over 1,300 seats of Visual HDL. The fourth major release is scheduled for the
second half of 1996.

Visual HDL's single seat list price ranges from $12,500 to $46,800. The list
price of the UNIX workstation version of Visual HDL for VHDL is higher than
that for PCs. The actual price for a system also varies depending on the
duration of the license and the simulation features included. For example,
because Visual HDL for VHDL generally includes a Summit simulator, its price
is higher than Visual HDL for Verilog, which uses the Verilog XL simulator
sold by Cadence. Finally, the Visual HDL price for a floating license commands
a premium over the node locked version since it offers multi-user flexibility.

Design to Test Products

Test Development Series is a vendor-independent test software development
system with a comprehensive portfolio of tools designed to automatically
convert gate-level simulation data to test programs that operate on automatic
manufacturing test equipment. TDS provides simulation analysis, stimulus
generation, simulation rules checking, tester resource checking, automatic
manufacturing test equipment test program generation and test program
conversion. TDS accepts data from more than 30 of the industry's leading gate
level simulators and more than 20 automatic test pattern generators and
produces test programs for more than 80 models of ATE equipment.

Set forth below is a depiction of graphical simulation data created using
the Company's TDS products.

[GRAPHIC APPEARS HERE]

Test development engineers use TDS to convert design simulation data into
optimized and debugged test programs. TDS can reduce test program development
costs and can improve the quality of manufacturing test programs by providing
a graphical environment to view, manage and manipulate the vast amounts of
text-based test data. TDS provides simulation data converters and test program
generators (wavebridges) through a central database. This can help engineers
move test programs from one tester to another, providing greater flexibility
in the use of manufacturing test equipment. In addition, TDS offers
specialized timing data management tools that assist in the development of
test programs that can help IC manufacturers efficiently sort parts by their
operating speed. The ninth major release for TDS is scheduled for the fourth
quarter of 1996.

37
<PAGE>

A typical fully configured TDS system would include graphical wave editors,
a library of simulation data converters and a wavebridge and would have a list
price of approximately $100,000. However, the components of a TDS system can
be sold individually. For example, each of the Company's installed base of
customers needs to purchase a new wavebridge for each new tester which the
customer uses in its manufacturing process. The list prices for components
range from approximately $15,000 for a simulation data converter to $40,000
for a wavebridge, excluding any additional development costs that may be
charged to the customer in connection with customized or special orders.

Visual Testbench provides a new methodology for creating simulation
stimulus, validating device specifications and tying simulation results
directly to test. Visual Testbench provides a structured solution to a task
traditionally resolved by manually writing lines of HDL code. Visual Testbench
is designed to raise productivity by providing graphical timing diagrams,
specification spreadsheets and flowcharts for simulation stimulus creation. In
addition, this product allows the designer to check that timing requirements
have been met by the simulation. Unique to Visual Testbench is its ability to
directly connect a Verilog simulation to ATE test equipment. In addition, the
Company is currently developing a VHDL version of Visual Testbench. The
Company believes that the market for Visual Testbench will be primarily design
teams and, as a result, the test development function will, to an extent, be
performed during the design phase. Visual Testbench's structured test program
development process should allow design teams to spend less time explaining
their test programs to test engineers or trying to put their devices into
production. The second major release for Visual Testbench is scheduled for the
second half of 1996.

The list price for Visual Testbench ranges from $25,000 to $40,000 depending
on the configuration. Visual Testbench provides a new methodology for creating
IC test programs. The Company anticipates a lengthy period of test marketing
for Visual Testbench. Accordingly, the Company cannot predict the extent, if
any, to which it will realize revenue from this product.

The Company's revenue is predominantly derived from two product lines,
Visual HDL, which includes Visual HDL for VHDL and Visual HDL for Verilog, and
TDS, and the Company believes that these products will continue to account for
a substantial portion of its revenue in the future. The Company's future
success depends primarily upon the market acceptance of its existing and
future SLDA products. The Company's SLDA products incorporate certain unique
design methodologies and thus represent a departure from industry standards
for design entry and verification. The Company believes that broad market
acceptance of its SLDA products will depend on several factors, including the
ability to significantly enhance design productivity, ease of use,
interoperability with existing EDA tools, price and the customer's assessment
of the Company's financial resources and its technical, managerial, service
and support expertise. Although demand for SLDA products has increased in
recent years, the market for SLDA products is still emerging and there can be
no assurance that it will continue to grow or that, even if the market does
grow, businesses will continue to purchase the Company's SLDA products. A
decline in the demand for, or the failure to achieve broad market acceptance
of, the Company's SLDA products will have a material adverse effect on the
Company's business, financial condition and results of operations.

38
<PAGE>

CUSTOMERS

The Company's end-user customers include companies in a wide range of
industries, including semiconductor devices, semiconductor test equipment,
telecommunications, computer/peripherals, consumer electronics,
aerospace/defense and other electronics entities. The Company has installed
more than 1,300 seats of its SLDA tools in more than 125 companies, of which
more than 100 companies have entered into support contracts. In addition, the
Company has more than 250 active installations of its Design to Test products.
No single customer represented more than 10% of the Company's total revenue in
1995. The following table lists a representative sample of the Company's
worldwide end-user customers that generated at least $25,000 in revenue for
the Company in 1995 or 1996.

<TABLE>
<CAPTION>
SEMICONDUCTOR SEMICONDUCTOR COMPUTER/ CONSUMER AEROSPACE/
DEVICES TEST EQUIPMENT TELECOMMUNICATIONS PERIPHERALS ELECTRONICS DEFENSE OTHER
- ----------------- -------------- ------------------- --------------- ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
AMD Advantest Bay Networks Compaq Canon Allied Signal Anam
Level One Credence Bell Northern Fujitsu Honeywell Hughes Aircraft Fuji/Xerox
Microchip Teradyne Ericsson Hewlett-Packard Matsushita Lockheed-Martin InFocus Systems
Motorola General Instruments Hitachi Mitsubishi Rockwell Lucky Goldstar
National Semi. Hitachi IBM NEC TRW Sumitomo Metal
SGS-Thomson Lucent OKI Philips Xerox
Texas Instruments Nippon Denso Seagate Sharp Zenith
Northern Telecom Siemens Sony
Rohm Storage Tech.
</TABLE>

The following examples illustrate the selection and use of the Company's
products by certain of the Company's customers. There can be no assurance that
new or existing customers will achieve any of the benefits described below.

A supplier of networking products used Visual HDL to develop a twelve-port
Ethernet switch with an integrated ATM port for backbone or server
connectivity. For this customer, minimizing time-to-market was critical to
meeting market-share and profit objectives. The design team coded the entire
design in Visual HDL. The final chip consisted of graphical constructs
representing 60,000 lines of VHDL code that synthesized into 115,000 gates.
The ability to design and debug the chip using Visual HDL contributed to this
customer meeting its design schedule.

A workstation division of a computer supplier used Visual HDL to
successfully re-target an 11,000 gate ASIC for a workstation graphics chip.
The primary engineer had worked on the design for over two months targeting a
specific ASIC process. When the design needed to be re-targeted to a second
ASIC technology, the designer was able to retarget the design in less than one
day using Visual HDL. The same task could have taken the engineer up to a
month to complete using traditional re-targeting methods.

A computer peripheral manufacturer designed a 10,000-gate interrupt/local
bus controller using Visual HDL. The design team had to complete the new
design in three to four months, and had differing levels of design experience.
The engineer working on the most significant parts of the design had very
little knowledge of HDL-based design. The team leader estimated that it would
have taken up to two months to sufficiently familiarize the engineer with the
HDL code. The graphical design environment of Visual HDL enabled the engineer
to effectively communicate with the other team member and familiarize himself
with the HDL code. The design was completed on schedule.

A product line group at a semiconductor manufacturer purchased Test
Development Series products to replace its prior older generation test
manufacturing solution. The group thereafter has used TDS products in
substantially all of its test development. For example, TDS products were used
to create a different test program and translate Verilog scan vectors to a
different environment for a battery pack power management chip. The
translation was functionally correct and required little debug time.

39
<PAGE>

MARKETING AND SALES

The Company markets its products to customers worldwide who design or
manufacture ICs for their own use or sale in a wide variety of industries. The
primary objectives of the Company's marketing effort are to increase market
awareness of the Company's products, to promote the adoption of SLDA and
Design to Test methodologies, and to evaluate customer satisfaction and
determine additional customer demands. To increase market awareness, the
Company displays its SLDA and Design to Test products at all major industry
trade shows, including the annual Design Automation Conference and
International Test Conference. The Company also promotes its products through
advertisements in trade journals and by sponsoring various seminar series. To
promote the adoption of its methodologies, the Company offers its products at
a reduced cost to design engineer programs at several universities so that
engineering students may become familiar with Summit's products and design
techniques.

The Company's sales strategy is to employ its direct sales, independent and
affiliated distributors and telesales distribution channels to efficiently and
effectively target individual customer and product market segments. As of June
30, 1996, the Company had 28 employees in its sales organization and seven
people in its marketing group.

Direct Sales. The Company employs direct sales teams which combine
technically proficient sales persons with skilled field applications engineers
capable of serving the sophisticated needs of the management and engineering
staff of its customers. The Company assigns selected direct sales personnel to
target major accounts, such as vertically integrated systems design houses
like Lucent, IBM, Motorola and Siemens that produce their own IC designs for
their electronic products. Major accounts receive particular focus because of
their size and influence as industry leaders.

Following the release of Visual HDL for VHDL, the direct sales force
concentrated on promoting that product, and sales efforts related to TDS
products decreased. The Company recently has adopted a strategy of designating
sales personnel as either SLDA or Design to Test specialists in an effort to
ensure that each product line receives focused attention from members of
Summit's direct sales force. The Company's direct sales force operates in the
United States and portions of Europe, with offices in California, Oregon,
Texas, Massachusetts, Florida, France and Germany. Approximately 52.8% and
58.0% of the Company's revenue for the first six months of 1996 and for the
year ended December 31, 1995, respectively, were generated through Summit's
direct sales force.

Distributors. Distributors promote and distribute the Company's products in
the Asia-Pacific region, the United Kingdom, France, Germany, Sweden, Italy
and Israel. Approximately 47.2% and 42.0% of the Company's revenue in the
first six months of 1996 and in the year ended December 31, 1995,
respectively, were attributable to sales made through distributors. During the
fourth quarter of 1995, the Company entered into a distribution agreement with
ATE pursuant to which ATE was granted exclusive rights to sell, distribute and
support all of Summit's Design to Test products within Japan until October
1998, subject to the Company's ability to terminate the relationship if ATE
fails to meet quarterly sales objectives. The agreement may also be terminated
by either party for breach. In addition, in the first quarter of 1996, the
Company entered into a three-year, exclusive distribution agreement for its
SLDA products in Japan with Seiko. In the event Seiko fails to meet specified
quotas for two or more quarterly periods, exclusivity can be terminated by
Summit, subject to Seiko's right to pay a specified fee to maintain
exclusivity. The agreement is renewable for successive five-year terms by
mutual agreement of the Company and Seiko and is terminable by either party
for breach.

In March 1996, to centralize management of the distribution of the Company's
products in the Asia-Pacific region, excluding Japan, the Company entered into
a joint venture with Anam, pursuant to which the joint venture corporation
(Summit Asia) shall acquire exclusive rights to sell, distribute and support
all of the Company's products in the Asia-Pacific region, excluding Japan,
until June 1997. Summit Asia has acted in such capacity since April 1, 1996.
Prior to that date, Anam was an independent distributor of the Company's

40
<PAGE>

products. The joint venture provides a direct sales force for the Company's
products in Korea and facilitates management and support of the independent
distributors that market the Company's products in Taiwan, Singapore, Hong
Kong, Australia, Malaysia and India. Anam currently owns approximately 80% of
the stock of Summit Asia. However, as payments are made by Summit Asia to Anam
for the repurchase from Anam of certain rights related to the Company's
products, and as stock options are exercised by employees and board members,
the Company's percentage ownership can increase until it is equal to that of
Anam. The Board of Directors of Summit Asia currently consists of two
representatives from Anam, one from Summit Asia and one from Summit. Actions
of the Board require approval of 75% of the directors.

For the quarter ended June 30, 1996, all sales of the Company's products in
the Asia-Pacific region were made through Summit Asia, ATE and Seiko. There
can be no assurance the new relationships with Summit Asia, ATE and Seiko will
be effective in maintaining or increasing sales relative to the levels
experienced prior to such relationships.

Telesales. Telesales is currently used to market the renewal of maintenance
and technical support agreements for both SLDA and Design to Test products in
North America, allowing the direct sales force to concentrate its efforts on
new accounts. The Company expects its use of the telesales channel to grow in
the future, in applications such as the marketing of product upgrades and add-
on business.

Approximately 52.3% and 53.1% of the Company's revenue for the six months
ended June 30, 1996 and the year ended December 31, 1995, respectively, were
attributable to sales made outside of the United States. In order to
successfully expand international sales, the Company may need to establish
additional foreign operations, hire additional personnel and recruit
additional international distributors. This will require significant
management attention and financial resources and could adversely affect the
Company's operating margins. In addition, to the extent that the Company is
unable to effect these additions in a timely manner, the Company's growth, if
any, in international sales will be limited. There can be no assurance that
the Company will be able to maintain or increase international sales of the
Company's products, and failure to do so could have a material adverse effect
on the Company's business, financial condition and results of operations.

The Company's reliance on distributors involves certain risks. For example,
the Company is dependent on the continued viability and financial stability of
its distributors. Since the Company's products are used by skilled design
engineers, distributors must possess sufficient technical, marketing and sales
resources and must devote these resources to a lengthy sales cycle, customer
training and product service and support. Only a limited number of
distributors possess these resources. In addition, Summit Asia, ATE and Seiko,
as well as the Company's other distributors, may offer products of several
different companies, including competitors of the Company. There can be no
assurance that the Company's current distributors will continue to market or
service and support the Company's products effectively, that any distributor
will continue to sell the Company's products or that the distributors will not
devote greater resources to products of other companies. The loss of, or a
significant reduction in, revenue from the Company's distributors could have a
material adverse effect on the Company's business, financial condition and
results of operations.

CUSTOMER SERVICES

Technical support is available to customers on both a pre-sale and post-sale
basis. Pre-sale support involves the Company's application engineers working
with the Company's direct sales force and distributors to provide on-site
support during the end user's evaluation and implementation process. Post-sale
support is provided through annual maintenance contracts which provide
customers with a choice of two programs. The first program allows the customer
to access the Company's technical support team via telephone and receive all
minor enhancements and any major upgrades. This program is sold for 20% of the
list price of the product. Under the second program, the customer purchases
telephone technical support for 8% of the list price of the product and can
purchase upgrades for between 15% and 20% of the list price depending on the
technical

41
<PAGE>

content of the upgrade and the current version used by the customer. The
Company provides its customers with a 90-day warranty that its products are
free from defects.

In addition to its maintenance, technical support and upgrade fees, the
Company also conducts a variety of training programs ranging from introductory
level courses to advanced training on full use of all of its products.
Training is offered at the Company's facilities, at distributors' facilities
and at customer locations worldwide. The Company intends to further expand its
focus on customer training. For the six months ended June 30, 1996 and the
year ended December 31, 1995, maintenance and services provided approximately
20.2% and 18.7% of the Company's total revenue, respectively.

COMPETITION

The EDA industry is highly competitive and the Company expects competition
to increase as other EDA companies introduce SLDA and Design to Test products.
The Company faces different competitive dynamics in the markets for its SLDA
and Design to Test products. In the SLDA market, the Company principally
competes with Mentor Graphics and a number of smaller firms. Indirectly, the
Company also competes with other firms that offer alternatives to SLDA and
could potentially offer more directly competitive products in the future.
Certain of these companies have significantly greater financial, technical and
marketing resources and larger installed customer bases than the Company. Some
of the Company's current and future competitors offer a more complete range of
EDA products and may distribute products that directly compete with the
Company's SLDA products by bundling such products with their core product
line. In addition, the Company's products perform a variety of functions,
certain of which are, and in the future may be, offered as separate products
or discrete point solutions by the Company's existing and future competitors.
For example, certain companies currently offer design entry products without
simulators. There can be no assurance that such competition will not cause the
Company to offer point solutions instead of, or in addition to, the Company's
current software products. Such point solutions would be priced lower than the
Company's current product offerings and could cause the Company's average
selling prices to decrease, which could have a material adverse effect on the
Company's business, financial condition and results of operations. In the
Design to Test market, the Company competes primarily with the internal design
groups of its existing and potential customers, many of which to date have
designed and developed customized Design to Test tools for their particular
needs, as well as smaller emerging companies.

PRODUCT DEVELOPMENT

The Reorganization in early 1994 resulted in the joining of SEE
Technologies, a technological leader in graphical design entry and
verification, with TSSI, a technological leader in production test products.
Thus, development of SLDA products has been performed at the Company's offices
in Israel and development of Design to Test products has been conducted at the
Company's principal office in Beaverton, Oregon. As of

42
<PAGE>

June 30, 1996, the Company's research and development team consisted of 62
software developers, including 39 dedicated to the Company's SLDA products and
23 focused on Design to Test products.

For the six months ended June 30, 1996 and for the years ended December 31,
1995, 1994 and 1993, the Company's research and development expenditures were
approximately $2.6 million, $5.1 million, $4.6 million and $2.4 million,
respectively, which represent approximately 28.0%, 36.3%, 35.7% and 32.9% of
revenue in each such period. The Company has to date expensed all research and
development costs as incurred. In addition, the Company has received grants
from the Israeli Chief Scientist. See "--Operations in Israel" and
Consolidated Financial Statements.

Summit's research and development strategy is to be proactive in determining
customer needs and to develop new SLDA and manufacturing test products to meet
these needs. The Company believes that system-level definition and design
analysis will become increasingly significant bottlenecks in the IC
development process and thus present product development opportunities. The
Company's research and development efforts are focused on creating products to
further increase productivity in the creation, verification, documentation and
production test of both IC and system level designs. Accordingly, in addition
to continued development of SLDA and TDS products, the Company is continuing
to dedicate resources to integrating its TDS technology into the SLDA design
process. Visual Testbench, first shipped in the fourth quarter of 1995, is a
product of such efforts.

The Company has actively sought to establish cooperative relationships with
certain EDA industry leaders in order to gain early access to new product
information and to better integrate the Company's products with those supplied
by other vendors in the EDA market. For example, the Company maintains a
relationship with Advantest in the Design to Test area through which the
Company receives product information from Advantest from which the Company is
developing a wavebridge for third-party customers. In addition, in the SLDA
products area, the Company has a relationship with Cadence pursuant to which
Cadence helps specify the integration between Summit's Visual HDL for Verilog
and Cadence Verilog XL simulator. The Company believes that these
relationships mutually benefit the Company and the EDA vendors by fostering
development and facilitating interoperability of the Company's and vendors'
complimentary products. These relationships are informal and may be terminated
by either party with limited notice. In addition, such relationships are with
companies that are current or potential future competitors of the Company. If
any of these relationships were terminated and the Company was unable to
obtain in a timely manner information regarding modifications of third party
products necessary for modifying its software products to interoperate with
these third party products, the Company could experience a significant
increase in development costs, the development process would take longer,
product introductions would be delayed and the Company's business, financial
condition and results of operations could be materially adversely affected.

The EDA industry is characterized by extremely rapid technological change,
frequent new product introductions 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. In
addition, customers in the EDA industry require software products that allow
them to reduce time to market, differentiate their products, improve their
engineering productivity and reduce their design errors. The Company's future
success will depend upon its ability to enhance its current products, develop
and introduce new products that keep pace with technological developments and
emerging industry standards and address the increasingly sophisticated needs
of its customers. There can be no assurance that the Company will be
successful in developing and marketing product enhancements or new products
that respond to technological change or emerging industry standards, that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of these products, or that
its new products will adequately meet the requirements of the marketplace and
achieve market acceptance. The Company has announced that it plans to release
new versions of certain of its products in the second half of 1996. If the
Company is unable, for technological or other reasons, to develop and
introduce products in a timely manner in response to changing market
conditions, industry standards or other customer requirements, particularly if

43
<PAGE>

such product releases have been pre-announced, the Company's business,
financial condition and results of operations would be materially adversely
affected.

PROPRIETARY RIGHTS

The Company's success depends upon its proprietary technology. The Company
relies on a combination of copyright, trademark and trade secret laws,
confidentiality procedures, licensing arrangements and technical means to
establish and protect its proprietary rights. As part of its confidentiality
procedures, the Company generally enters into non-disclosure agreements with
its employees, distributors and corporate partners, and limits access to, and
distribution of, its software, documentation and other proprietary
information. In addition, the Company's products are protected by hardware
locks and software encryption techniques designed to deter unauthorized use
and copying. Despite these precautions, it may be possible for a third party
to copy or otherwise obtain and use the Company's products or technology
without authorization, or to develop similar technology independently. In
addition, effective protection of intellectual property rights may be
unavailable or limited in certain foreign countries.

The Company could be increasingly subject to infringement claims as the
number of products and competitors in the Company's industry segment grows,
the functionality of products in its industry segment overlaps and an
increasing number of software patents are granted by the United States Patent
and Trademark Office. Although the Company is not aware of any threatened
litigation or infringement claims, there can be no assurance that a third
party will not claim such infringement by the Company with respect to current
or future products. Any such claims, with or without merit, could be time-
consuming, result in costly litigation, cause product delays or require the
Company to enter into royalty or licensing agreements. Such royalty or license
agreements, if required, may not be available on terms acceptable to the
Company or at all. Failure to protect its proprietary rights or claims of
infringement could have a material adverse effect on the Company's business,
financial condition and results of operations.

44
<PAGE>

OPERATIONS IN ISRAEL

The Company's research and development operations related to its SLDA
products are located in Israel and may be affected by economic, political and
military conditions in that country. Accordingly, the Company's business,
financial condition and results of operations could be materially adversely
affected if hostilities involving Israel should occur. This risk is heightened
due to the restrictions on the Company's ability to manufacture or transfer
outside of Israel any technology developed under research and development
grants from the government of Israel. In addition, while all of the Company's
sales are denominated in United States dollars, a portion of the Company's
annual costs and expenses in Israel are paid in Israeli currency. These costs
and expenses were approximately $4.3 million and $1.9 million in 1995 and the
six months ended June 30, 1996, respectively. Payment in Israeli currency
subjects the Company to foreign currency fluctuations and to economic
pressures resulting from Israel's generally high rate of inflation, which has
been approximately 15%, 8% and 7% during 1994 and 1995 and the six months
ended June 30, 1996, respectively. The Company's primary expense which is paid
in Israeli currency is employee salaries for research and development
activities. As a result, an increase in the value of Israeli currency in
comparison to the U.S. dollar could increase the cost of research and
development expenses and general and administrative expenses. There can be no
assurance that currency fluctuations, changes in the rate of inflation in
Israel or any of the other aforementioned factors will not have a material
adverse effect on the Company's business, financial condition or results of
operations. In addition, coordination with and management of the Israeli
operations requires the Company to address differences in culture, regulations
and time zones. Failure to successfully address these differences could be
disruptive to the Company's operations.

The Company's Israeli production facility has been granted the status of an
"Approved Enterprise" under the Investment Law. Taxable income of a company
derived from an "Approved Enterprise" is eligible for certain tax benefits,
including significant income tax rate reductions for up to seven years
following the first year in which the "Approved Enterprise" has Israeli
taxable income (after using any available net operating losses). The period of
benefits cannot extend beyond 12 years from the year of commencement of
operations or 14 years from the year in which approval was granted, whichever
is earlier. The tax benefits derived from a certificate of approval for an
"Approved Enterprise" relate only to taxable income attributable to such
"Approved Enterprise" and are conditioned upon fulfillment of the conditions
stipulated by the Investment Law, the regulations promulgated thereunder and
the criteria set forth in the certificate of approval. In the event of a
failure by the Company to comply with these conditions, the tax benefits could
be canceled, in whole or in part, and the Company would be required to refund
the amount of the canceled benefits, adjusted for inflation and interest. The
Company believes that it operates in compliance with all the "Approved
Enterprise" conditions and criteria applicable to it. However, there can be no
assurance that the Company's Israeli production facility will continue to
operate or qualify as an "Approved Enterprise" or that the benefits under the
"Approved Enterprise" regulations will continue, or be applicable, in the
future. The loss of or any material decrease in these income tax benefits
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Effective Corporate Tax
Rates."

Israeli Research, Development and Marketing Grants. Summit's Israeli
subsidiary has obtained research and development grants from the Chief
Scientist in the Israeli Ministry of Industry and Trade of approximately
$232,000 and $608,000 in 1993 and 1995, respectively. As of June 30, 1996, the
Company was obligated to pay back approximately $232,000 and $608,000 for the
1993 and 1995 grants, respectively. Such obligations are secured by all
tangible and intangible assets of the Israeli subsidiary. The terms of the
grants prohibit the manufacture of products developed under these grants
outside of Israel and the transfer of the technology developed pursuant to
these grants to any person, without the prior written consent of the Chief
Scientist. The Company's Visual HDL for VHDL products have been developed
under grants from the Chief Scientist and thus are subject to these
restrictions. If the Company is unable to obtain the consent of the government
of Israel, the Company would be unable to take advantage of potential economic
benefits such as lower taxes, lower labor and other manufacturing costs and
advanced research and development facilities that

45
<PAGE>

may be available if such technology and manufacturing operations could be
transferred to locations outside of Israel. In addition, the Company would be
unable to minimize risks particular to operations in Israel, such as
hostilities involving Israel. See "Risk Factors--Operations in Israel."
Although the Company is eligible to apply for additional grants from the Chief
Scientist, it has no present plans to do so. The Company also received a
Marketing Fund Grant from the Israeli Ministry of Industry and Trade for an
aggregate of $379,000. The grant must be repaid at the rate of 3% of the
increase in exports over the 1993 export level of all Israeli products, until
repaid. As of June 30, 1996, approximately $351,000 was outstanding under the
grant. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business--Product Development" and Note 7 of Notes to
Consolidated Financial Statements.

EMPLOYEES

As of August 31, 1996, the Company had 119 employees, 62 of whom were
engaged primarily in research and development and related operations, 39 of
whom were engaged primarily in sales and marketing and 18 of whom were engaged
primarily in corporate management and administration. A total of 73 of these
employees were located in the United States, 41 in Israel and five in Europe.
The Company's employees are not represented by any collective bargaining
organization and the Company has never experienced a work stoppage. The
Company's future success will depend, in part, on its ability to continue to
attract, retain and motivate highly qualified technical, marketing and
management personnel, who are in great demand.

LITIGATION

The Company is not a party to any material litigation and is not aware of
any pending or threatened litigation that could have a material adverse effect
upon the Company's business, operating results or financial condition.

FACILITIES

The Company's principal facility, located in Beaverton, Oregon, consists of
approximately 31,000 square feet of office space leased pursuant to an
agreement which terminates on December 31, 1999. The rent and common area fees
payable on this facility are currently approximately $23,000 per month, and
increase over the term of the lease to approximately $29,000 per month. This
space is used for the Company's U.S. research and development, production,
sales and marketing and administration. The Company also leases approximately
9,800 square feet of office space in Herzlia, Israel for research and
development under a lease with DCL Technologies that expires on December 31,
1997. The rent payable on this office space is currently $13,750 per month,
and increases over the term of the lease based on the Israeli consumer price
index. The Company expects that its current facilities will be adequate to
serve its needs for the foreseeable future.

46
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
executive officers and directors of the Company as of August 31, 1996.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Larry J. Gerhard................. 55 Chairman of the Board, President and
Chief Executive Officer
C. Albert Koob................... 42 Vice President--Finance and Chief
Financial Officer and Secretary
Zamir Paz........................ 47 Vice President--Worldwide Engineering
and Operations and Director
Daniel C. Skilken................ 37 Vice President--Worldwide Marketing
D. Gregory Kott.................. 36 Vice President--Worldwide Sales
Roger A. Bitter.................. 52 General Manager--TSSI Division
Eric Benhayoun................... 42 Vice President, General Manager--
European Operations
Robert Meehl..................... 35 Corporate Controller
Art Fletcher..................... 32 Treasurer and Director of Financial
Planning
Amihai Ben-David (1)............. 47 Director
John Grillos (1)(2).............. 54 Director
Fred L. Hanson (2)............... 57 Director
Jay B. Morrison.................. 49 Director
Mark Stevens (1)................. 36 Director
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.

Mr. Gerhard has served as President, Chief Executive Officer and Director of
the Company since January 1993 and was elected Chairman of the Board in May
1996. From November 1991 to November 1992, Mr. Gerhard was the President and
Chief Executive Officer of Enterprise Communications and Computing Inc., a
communications products provider for the Unix-based virtual mainframe market.
Mr. Gerhard was the President and Chief Executive Officer of Ventura Software,
Inc. ("Ventura"), a desktop publishing company and a wholly-owned subsidiary
of Xerox Corporation from November 1989 to November 1991. Prior to that time,
Mr. Gerhard was employed for nine years with Decision Data, Inc., a supplier
of peripherals and applications software for IBM System 3X and AS400,
including the last three years as President and Chief Executive Officer.

Mr. Koob has served as Vice President--Finance and Chief Financial Officer
since October 1995 and Secretary since May 1996. From October 1989 to April
1994, Mr. Koob was the Vice President and Chief Financial Officer of Ventura.
Mr. Koob was the Vice President and General Manager of Decision Business
Solutions, an IBM midrange system reseller, from 1987 to 1989. Prior to 1987,
Mr. Koob held various senior level financial management positions with
technology companies.

Mr. Paz has served as Vice President--Worldwide Engineering and Operations
and Director of the Company since January 1994. From January 1991 to January
1994, Mr. Paz was President and Managing Director of SEE Technologies Software
Environment for Engineers, Ltd. Prior to that time, Mr. Paz was employed for
eight years at Daisy Systems Israel, an EDA provider, where he served as
Director of Design Entry and Technical Marketing.

Mr. Skilken has served as Vice President--Worldwide Marketing since December
1993. From June 1991 to December 1993, Mr. Skilken was the Director of
Corporate Marketing at COMPASS Design Automation,

47
<PAGE>

Inc. (a subsidiary of VLSI Technology) ("COMPASS"), an EDA supplier. From
December 1989 to June 1991, Mr. Skilken was the Director of ASIC Marketing for
the IC Group at Mentor Graphics, an EDA provider. From December 1988 to
December 1989, Mr. Skilken worked at Daisy-Cadnetix, an EDA supplier, most
recently as Director of Semiconductor Industry Marketing. From January 1983 to
December 1988, Mr. Skilken worked at VLSI Technology, a semiconductor
manufacturer, where his last position was Product Marketing Manager for the
ASIC Division.

Mr. Kott has served as Vice President--Worldwide Sales since June 1996 and
as Vice President--North American Sales from August 1994 to June 1996. From
June 1994 to August 1994, he served as Director, Major Accounts. From January
1994 to May 1994, Mr. Kott was the Western Area Sales Director for the Logic
Modeling Division of Synopsys, an EDA provider. From January 1987 to January
1994, Mr. Kott held various sales positions at Mentor Graphics, most recently
as Director of IC Sales.

Mr. Bitter has served as General Manager--TSSI Division since March 1996.
From January 1994 to February 1996, Mr. Bitter served as Vice President--Far
East Sales Operations. From August 1991 to January 1994, Mr. Bitter was
President of COMPASS Japan K.K. From August 1986 to June 1990, Mr. Bitter held
various positions at Silicon Compiler Systems, an EDA supplier, where he
served most recently as Vice President of Far East Operations. From October
1985 to August 1986, Mr. Bitter served as Vice President--Worldwide Sales for
SDA, an EDA company. From August 1983 to October 1985, Mr. Bitter was the
Western Regional Sales Manager for the Western U.S. sales offices of Mentor
Graphics.

Mr. Benhayoun has served as Vice President, General Manager--European
Operations since June 1996 and as Vice President--European Sales Operations
from November 1994 to June 1996. From June 1994 to November 1994, Mr.
Benhayoun was the European Marketing Manager for the Modeling Product Division
of Synopsys. From March 1990 to June 1994, Mr. Benhayoun was the General
Manager and Director of Logic Modeling Corporation France, an SDA provider
which was acquired by Synopsys in January 1994. Prior to that time, he held
various European sales and marketing management positions with Cadnetix
Corporation and Daisy Systems, each an EDA supplier.

Mr. Meehl has served as Corporate Controller since March 1996. From February
1995 to March 1996, Mr. Meehl was Manager, Financial Planning and Analysis of
TriQuint Semiconductor, Inc. ("TriQuint"), a semiconductor manufacturer. From
January 1992 to February 1995, Mr. Meehl held various positions at the Oregon
Department of Transportation, most recently as Manager, Financial and Economic
Analysis. From March 1990 to January 1992, Mr. Meehl was employed as a
Financial Analyst of Industrial Funding Corporation ("Industrial Funding"), an
equipment leasing company.

Mr. Fletcher has served as Treasurer and Director of Financial Planning
since April 1996. From October 1995 to March 1996, Mr. Fletcher was Director
of Business and Financial Planning. From April 1994 to September 1995, Mr.
Fletcher was Manager of Financial Planning and Systems. From February 1992 to
April 1994, Mr. Fletcher managed the financial planning and analysis function
for TriQuint. Prior to that time, Mr. Fletcher was employed by Industrial
Funding for three years in a finance and accounting position.

Mr. Ben-David has served as a Director of the Company since January 1994. He
has been the founder, Chief Executive Officer and Chairman of DCL Technologies
Ltd., a public company located in Israel and traded on the Tel-Aviv Stock
Exchange, since May 1982. DCL Technologies Ltd. specializes in the development
of high technology companies in the areas of communications, computer
telephony, expert systems and electronic design automation. From January 1991
until the Reorganization, Mr. Ben-David was Chairman of the Board of SEE
Technologies.

Mr. Grillos has served as a Director of the Company since February 1994. Mr.
Grillos has been employed by Robertson, Stephens & Company LLC, an investment
banking firm, in its venture capital group since August 1988. He is also a
director of CBT Group, PLC and of several private companies.

48
<PAGE>

Mr. Hanson has served as a Director of the Company since September 1995. He
has been President and Chief Executive Officer of Information Optics Corp., an
optical memory company, since October 1995. From October 1994 to December
1995, Mr. Hanson was part owner and Chief Executive Officer of Acquisitions,
Mergers and Reorganizations, Inc., a consulting company. From August 1992 to
April 1993, he was President and Chief Executive Officer of Burr-Brown Corp.,
an electronic components company. He was President and Chief Executive Officer
of Bipolar Integrated Technology, an integrated circuits company, from April
1990 to August 1992. Mr. Hanson started his career with Hewlett-Packard where
his final position was General Manager of the Corvalis Division in Corvalis,
Oregon.

Mr. Morrison has served as a Director of the Company since May 1996. He has
been a General Partner of Newbury Ventures, Inc., a venture capital investment
firm, since January 1992. From July 1990 to December 1991, he was President of
Berkeley International Capital Corp., which was a wholly-owned subsidiary of
Govett & Co. Ltd. that specialized in private equity investments.

Mr. Stevens has served as a Director of the Company since February 1994. He
has been a General Partner of Sequoia Capital VI, a venture capital investment
fund, since March 1993. Prior to that time, beginning in July 1989, Mr.
Stevens was an associate at Sequoia Capital. Mr. Stevens currently serves on
the Board of Directors of Aspect Development, a client/server applications
software company, and several private companies. Prior to working at Sequoia
Capital, Mr. Stevens held technical sales and marketing positions at Intel
Corporation.

The Company's Bylaws currently authorize eight directors, which number may
be changed from time-to-time by the Board of Directors. All directors hold
office until the next annual meeting of stockholders or until their successors
are duly elected and qualified. The Amended and Restated Bylaws, which will
become effective upon consummation of this offering, authorize seven directors
and provide that, beginning with the first annual meeting of stockholders
following this offering, the Board of Directors will be divided into three
classes, with each class serving staggered, three-year terms. Certain of the
current directors of the Company were nominated and elected in accordance with
voting rights provided to the various series of preferred stock, which voting
rights will terminate when the preferred stock is automatically converted to
common stock upon the closing of this offering. Executive officers of the
Company are elected by the Board of Directors on an annual basis and serve
until their successors have been duly elected and qualified. There are no
family relationships among any of the executive officers or directors of the
Company.

The Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee oversees actions taken by the Company's
independent auditors, recommends the engagement of auditors and reviews the
Company's internal audits. The Compensation Committee approves the
compensation of executives of the Company and makes recommendations to the
Board of Directors with respect to standards for setting compensation levels.
The Compensation Committee also administers the Company's employee stock
option and stock purchase plans. See "--Stock Plans."

DIRECTOR COMPENSATION

Directors do not currently receive any cash compensation for their services
as members of the Board of Directors or its committees, except for Fred
Hanson. The Company entered into a one-year directorship agreement with Mr.
Hanson in September 1995 pursuant to which he receives a salary of $17,500 per
year as compensation for acting as a director and is entitled to reimbursement
for expenses incurred in attending board meetings outside of the Oregon area.
In addition, in September 1995, Mr. Hanson was granted an option to purchase
20,000 shares of the Company's Common Stock at an exercise price of $1.75 per
share. In lieu of the quarterly salary payments, the Company, on Mr. Hanson's
behalf, purchased 10,000 of the shares subject to the option for an aggregate
purchase price of $17,500. Mr. Ben-David is reimbursed for travel costs
incurred in attending board meetings. Effective as of the date of the first
annual meeting of stockholders following the consummation of this offering,
all non-employee directors will receive $20,000 per year and $1,000 per
meeting (excluding committee meetings) as compensation for their services as
members of the

49
<PAGE>

Board of Directors. Members also will be reimbursed for all travel and related
expenses incurred in connection with attending board and committee meetings.
The Company recently established a director stock option plan that provides
for nondiscretionary annual stock option grants to non-employee directors. The
director stock option plan will become effective upon the effective date of
this offering. See "--Stock Plans--1996 Director Option Plan" and "Certain
Transactions."

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid to the Chief Executive
Officer and each of the four other most highly compensated executive officers
of the Company whose salary and bonus exceeded $100,000 (collectively, the
"Named Executive Officers") for services rendered in all capacities to the
Company and its subsidiaries during the year ended December 31, 1995.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------
NO. OF
BONUS SECURITIES
NAME AND PRINCIPAL POSITION SALARY ($) OTHER ANNUAL UNDERLYING ALL OTHER
(1) ($) (2) (2) COMPENSATION ($) OPTIONS COMPENSATION ($)
- --------------------------- ------- ------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Larry J. Gerhard
President and Chief
Executive Officer...... 240,000 -- -- -- 6,589 (3)
Daniel C. Skilken
Vice President--
Worldwide Marketing.... 125,000 -- -- -- --
D. Gregory Kott
Vice President--
Worldwide Sales........ 116,042 25,000 1,200 (4) 52,500 (5) 342 (6)
Roger A. Bitter
General Manager--TSSI
Division............... 135,157 -- -- -- 121,200 (7)
Eric Benhayoun
Vice President, General
Manager--European
Operations............. 117,557 53,732 (8) -- -- (9) --
</TABLE>
- --------

(1) Throughout the year ended December 31, 1995, Mr. Kott served as Vice
President--North American Sales, Mr. Bitter served as Vice President--Far
East Sales Operations and Mr. Benhayoun served as Vice President--European
Sales Operations.

(2) Amounts shown include cash and noncash compensation earned and received by
executive officers as well as amounts earned but deferred at the election
of those officers.

(3) Includes $5,389 paid to Mr. Gerhard for moving expenses incurred in
connection with completing his relocation from Southern California and
$1,200 in medical expenses not covered by the Company's medical plan.

(4) Consists of a car allowance.

(5) Includes an option granted on March 1, 1995 to purchase 45,000 shares of
Common Stock and an option granted on December 20, 1995 to purchase 7,500
shares of Common Stock. On September 13, 1995, in connection with a
repricing of all outstanding options having an exercise price in excess of
$1.75 per share, the Company canceled and replaced the option to purchase
45,000 shares of Common Stock at a purchase price of $2.50 per share with
a new option to purchase the same number of shares of Common Stock at an
exercise price of $1.75 per share. Such new option is not reflected in the
above table.

(6) Contribution made by the Company on behalf of Mr. Kott pursuant to the
Company's 401(k) Plan.

(7) Consists of reimbursements to Mr. Bitter for taxes and housing costs in
Japan.

(8) Commissions earned during the fiscal year ended December 31, 1995, $9,625
of which was paid in 1996.

(9) On September 13, 1995, in connection with a repricing of all outstanding
options having an exercise price in excess of $1.75 per share, the Company
canceled and replaced the option granted to Mr. Benhayoun on October 25,
1994 to purchase 58,500 shares of Common Stock at a purchase price of
$2.50 per share with a new option to purchase the same number of shares of
Common Stock at an exercise price of $1.75 per share. Such new option is
not reflected in the above table.

50
<PAGE>

Option Grants in Last Fiscal Year

The following table sets forth information regarding stock options granted
during the fiscal year ended December 31, 1995 to each of the Named Executive
Officers.

OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
NO. OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS FAIR STOCK PRICE
UNDERLYING GRANTED TO MARKET APPREICATION
OPTIONS EMPLOYEES EXERCISE VALUE ON FOR OPTION TERM (3)
GRANTED IN 1995 PRICE DATE OF EXPIRATION ----------------------
NAME (1) (2) ($)/SHARE GRANT($) DATE 5% ($) 10% ($)
---- ---------- ---------- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Larry J. Gerhard........ -- -- -- -- -- -- --
Daniel C. Skilken....... -- -- -- -- -- -- --
D. Gregory Kott......... 52,500 9.5% (4) 1.75 (5) 1.75 (5) 3/1/2005 (6) 592,261 997,497
Roger A. Bitter......... -- -- -- -- -- -- --
Eric Benhayoun(7)....... -- -- -- -- -- -- --
</TABLE>
- --------
(1) Options granted in 1995 are immediately exercisable and generally vest
over four years, with 25% of the option shares becoming fully vested one
year from the grant date and 1/48th vesting in each successive month, with
full vesting occurring on the fourth anniversary date. The Company has a
repurchase right for shares not vested. Under the terms of the 1994 Stock
Plan, the administrator retains discretion, subject to plan limits, to
modify the terms of outstanding options and to reprice outstanding
options. The options have a term of 10 years, subject to earlier
termination in certain situations related to termination of employment.
See "Stock Plans" for a description of the material payment terms of the
options.
(2) Based on a total of 551,187 options granted to all employees and
consultants during 1995.

(3) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price. The assumed
initial public offering price of $8.00 per share was used as the base
price for these calculations.
(4) On September 13, 1995, in connection with a repricing of all outstanding
options having an exercise price in excess of $1.75 per share, 357,869
options were canceled and replaced. If such options were included in the
number of options granted in 1995, the total number of options granted to
all employees and consultants in 1995 would be 909,056, the total number
of options granted to Mr. Kott would be 97,500 and Mr. Kott's percentage
of total options granted in 1995 would be 10.7%.

(5) On September 13, 1995, in connection with a repricing of all outstanding
options having an exercise price in excess of $1.75 per share, the Company
canceled and replaced an option to purchase 45,000 shares of Common Stock
at a purchase price of $2.50 per share with a new option to purchase the
same number of shares of Common Stock at an exercise price of $1.75 per
share. Such new option is not reflected in the above table.
(6) The expiration date for 7,500 of the options granted is 12/20/2005.
(7) On September 13, 1995, in connection with a repricing of all outstanding
options having an exercise price in excess of $1.75 per share, the Company
canceled and replaced the option granted to Mr. Benhayoun on October 25,
1994 to purchase 58,500 shares of Common Stock at a purchase price of
$2.50 per share with a new option to purchase the same number of shares of
Common Stock at an exercise price of $1.75 per share. Such new option is
not reflected in the above table.

51
<PAGE>

Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

There were no option exercises by the Named Executive Officers during the
fiscal year ended December 31, 1995. The following table sets forth certain
information with respect to the value of stock options held by such
individuals as of December 31, 1995.

AGGREGATED OPTION EXERCISES IN YEAR ENDED DECEMBER 31, 1995
AND DECEMBER 31, 1995 OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS AT 12/31/95 OPTIONS AT 12/31/95($)(2)
ACQUIRED ON VALUE --------------------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE(1) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ---------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry J. Gerhard........ -- -- -- -- -- --
Daniel C. Skilken....... -- -- -- -- -- --
D. Gregory Kott......... -- -- 82,500 (3) -- 553,125 --
Roger A. Bitter......... -- -- -- -- -- --
Eric Benhayoun.......... -- -- 58,500 (4) -- 365,625 --
</TABLE>
- --------
(1) Unvested options are immediately exercisable, provided that any unvested
shares are subject to repurchase by the Company at the original exercise
price paid per share upon the optionee's cessation of service to the
Company.

(2) There was no public trading market for the Common Stock at December 31,
1995. Accordingly, these values have been calculated based on an assumed
initial public offering price of $8.00 per share, minus the exercise
price.
(3) Includes 63,750 unvested shares of Common Stock that would have been
subject to repurchase by the Company on December 31, 1995 if the options
had been exercised.
(4) Includes 26,813 unvested shares of Common Stock that would have been
subject to repurchase by the Company on December 31, 1995 if the options
had been exercised.

EMPLOYMENT AGREEMENTS

The Company entered into a five-year employment agreement with Mr. Gerhard
effective January 14, 1993 pursuant to which he receives an annual base
salary, an annual bonus of up to 25% of his base salary and all standard
benefits accorded other executives of the Company. In addition, in the event
Mr. Gerhard is terminated other than for cause, he is entitled to severance of
$20,000 per month plus all insurance benefits until he accepts other full time
employment, but in no event longer than 18 months (24 months in certain
circumstances). Under the employment agreement and accompanying stock
restriction agreement, Mr. Gerhard was granted the right to purchase 412,777
shares of Common Stock at a specified price per share, of which 294,840 shares
are subject to vesting over a four-year period. Mr. Gerhard also received an
option to purchase shares of preferred stock of TSSI at the same price and
terms as other investors in such preferred stock. The employment agreement
further provides that the Company would facilitate Mr. Gerhard's relocation to
the Company's headquarters by arranging for the sale of Mr. Gerhard's prior
residence. In the event Mr. Gerhard resigned within 36 months after the
effective date of the agreement, he was obligated to resell to the Company up
to 147,420 shares at $0.01 per share and assume certain liabilities associated
with his relocation to Oregon. In the event Mr. Gerhard resigns or is
terminated for cause at any time, any unvested options, and shares issued upon
early exercise of such unvested options, may be repurchased by the Company at
$0.01 per share. Upon consummation of this offering, all unvested options will
automatically vest. See "Certain Transactions."

In May 1996, the Board of Directors authorized the Company to enter into a
new four-year employment agreement with Mr. Gerhard. The agreement will
provide for an initial grant of options to purchase up to 75,000 shares
(subject to a four-year vesting period) at an exercise price equal to the
public offering price set forth on the cover of this Prospectus, an annual
base salary and certain medical benefits and severance payments. The agreement
also will provide for an annual bonus of $75,000 payable only if the Company
achieves its annual revenue plan, which for 1998 and thereafter will be
determined with

52
<PAGE>

reference to the two highest revenue plans forecasted by independent financial
analysts, and an annual option to purchase up to 75,000 shares of Common Stock
to be granted only if the Company's total revenue for the applicable year
exceeds the total revenue for the previous year by at least 20%.

On November 20, 1993, the Company entered into a four-year employment
agreement with Mr. Skilken pursuant to which he receives an annual base
salary, an annual bonus of up to 25% of his base salary, all standard benefits
accorded other executives of the Company and relocation expenses. Under the
agreement, Mr. Skilken was granted options to purchase up to 103,194 shares of
Common Stock, subject to vesting over a four-year period, and the right to
purchase preferred stock of TSSI on the same terms and conditions as other
purchasers. In addition, in the event Mr. Skilken is terminated other than for
cause, the options automatically vest and he is entitled to severance of
$10,416 per month plus all insurance benefits until he accepts other full time
employment, but in no event longer than 12 months. In the event Mr. Skilken
resigns within 48 months after the date of the employment agreement, any
unvested options, and shares issued upon early exercise of such unvested
option, may be repurchased by the Company at the option exercise price.

On March 1, 1995, the Company entered into a four-year employment agreement
with Mr. Kott pursuant to which he receives an annual base salary, an annual
bonus of up to 25% of his base salary and all standard benefits accorded other
executives of the Company. Under the agreement, Mr. Kott was granted options
to purchase up to 52,500 shares of Common Stock, subject to vesting over a
four-year period. Such options automatically vest upon termination of Mr. Kott
other than for cause and upon the sale of more than 50% of the assets or
outstanding capital stock of the Company. In addition, in the event Mr. Kott
is terminated other than for cause, he is entitled to severance of $10,000 per
month plus all insurance benefits until he accepts other full time employment,
but in no event longer than six months. In the event Mr. Kott resigns or is
terminated for cause within 36 months after the date of the employment
agreement, any vested and unvested options, and shares issued upon exercise of
such options, may be repurchased by the Company at the option exercise price.

On January 1, 1995, the Company entered into a four-year employment
agreement with Mr. Bitter pursuant to which he receives an annual base salary,
an annual bonus of up to 25% of his base salary, all standard benefits
accorded other executives of the Company and relocation costs. In addition,
pursuant to the agreement, the Company also reimbursed Mr. Bitter for certain
living expenses while he resided in Japan and, subject to certain conditions,
agreed to provide Mr. Bitter with a loan to repay his prior tax liabilities,
which loan has been forgiven by the Company. The agreement also provides that
options to purchase up to 103,194 shares of Common Stock previously granted to
Mr. Bitter shall automatically vest upon termination of Mr. Bitter other than
for cause and upon the sale of more than 20% of the assets or more than 50% of
the outstanding capital stock of the Company. In addition, upon consummation
of this offering, the four-year vesting schedule with respect to such options
will accelerate by one year. In the event Mr. Bitter is terminated for other
than cause, he is entitled to severance of $10,000 per month plus all
insurance benefits until he accepts other full time employment, but in no
event longer than nine months. In the event Mr. Bitter resigns or is
terminated for cause within 48 months after the date of the employment
agreement, the Company may cancel the options to purchase the 103,194 shares,
whether vested or unvested, and any shares previously issued upon exercise of
such options may be repurchased by the Company at the option exercise price.
However, in certain circumstances, the Company's right to repurchase or cancel
is limited to 67% of such options or shares issued in respect of options.

Effective October 31, 1994, the Company entered into a four-year employment
agreement with Mr. Benhayoun pursuant to which he receives an annual base
salary, an annual bonus of 30% of his base salary if he meets specified
revenue targets, and all standard benefits accorded other executives of the
Company. Under the employment agreement, Mr. Benhayoun was granted options to
purchase up to 58,500 shares of Common Stock, of which 15,000 vested
immediately, 15,000 vested on October 31, 1995, and the remainder vest ratably
over the 24 months following October 31, 1995. Such options also automatically
vest upon termination of Mr. Benhayoun other than for cause and upon the sale
of more than 50% of the assets

53
<PAGE>

or outstanding capital stock of the Company. In addition, upon the
consummation of this offering, the two-year vesting schedule with respect to
such options will accelerate by one year. In addition, in the event
Mr. Benhayoun is terminated other than for cause, he is entitled to severance
of 52,083 French francs (approximately $10,111 as of July 1, 1996) per month
plus all insurance benefits until he accepts other full-time employment, but
in no event longer than nine months. In the event Mr. Benhayoun resigns within
36 months after the date of the employment agreement, any unvested options and
any options which vested, and shares issued upon exercise of such options,
within one year prior to such resignation or termination may be repurchased by
the Company at the option exercise price.

STOCK PLANS

1994 Stock Plan. The Company's 1994 Stock Plan (the "1994 Plan") was adopted
by the Board of Directors and approved by the Company's stockholders in
January 1994 and was amended by the Board in May 1996, subject to stockholder
approval. The 1994 Plan is administered by the Board of Directors or a
committee appointed by the Board (the "Administrator") and has a term of 10
years. Pursuant to the Plan, options to acquire an aggregate of 2,322,000
shares of Common Stock may be granted. The Plan provides for grants to
employees (including officers and employee directors) and consultants of the
Company and is intended to qualify as an "incentive stock option plan" under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").

Subject to the provisions of the 1994 Plan, the Administrator has the
authority to determine the individuals to whom stock options are to be
granted, the number of shares to be covered by each option, the exercise
price, the fair market value, the type of option, the term of the option, the
restrictions, if any, on the exercise of the option, the terms for the payment
of the option price and other terms and conditions. Incentive stock options
granted under the 1994 Plan must have an exercise price of at least 100% of
the fair market value on the date of grant. Payments by optionholders upon
exercise of an option may be made (as determined by the Administrator) in cash
or such other form of payment as permitted under the 1994 Plan. In addition,
an optionee may engage in a same day exercise of an option and sale of the
underlying stock, using a portion of the proceeds from the sale of the stock
to pay the exercise price. In the event of a proposed merger of the Company
with or into another corporation or a sale of substantially all of the assets
of the Company, outstanding options may be assumed or equivalent options
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event that such successor corporation does not
agree to assume options or substitute equivalent options, optionees shall have
the right to exercise their options as to all shares subject to such options,
including shares as to which options would not otherwise be exercisable.

1996 Employee Stock Purchase Plan. The material terms of the Company's 1996
Employee Stock Purchase Plan (the "1996 Purchase Plan") were approved by the
Board of Directors in May 1996. The 1996 Purchase Plan will be submitted to
the Board of Directors for further approval, and to the stockholders of the
Company for approval prior to consummation of this offering. The Company has
reserved a total of 150,000 shares of Common Stock for issuance under the 1996
Purchase Plan. The 1996 Purchase Plan, which is intended to qualify under
Section 423 of the Code, permits eligible employees of the Company to purchase
Common Stock through payroll deductions of up to 10% of their base salary, up
to a maximum of $25,000 of Common Stock (determined as of the first day of the
offering period) for all purchase periods ending within any calendar year. The
price of Common Stock purchased under the 1996 Purchase Plan will be 85% of
the lower of the fair market value of the Common Stock on the first day of
each 24-month offering period or the last day of the applicable six-month
purchase period. Employees may end their participation in the 1996 Purchase
Plan 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 1996 Purchase Plan
are not transferable by a participant other than by will, the laws of descent
and distribution, or as otherwise provided under the plan. The first offering
period of the 1996 Purchase Plan will begin on the effective date of this
offering and will end on the last trading day on or before October 31, 1998.
The first purchase period will be approximately eight and one-half months,
ending on the last trading day in the period ending April 30, 1997. Subsequent
offering periods will last 24 months and will commence on the

54
<PAGE>

first trading day on or after May 1 and November 1 of each year during which
the 1996 Purchase Plan is in effect, and will terminate on the last trading
day in the periods ending 24 months later. Each 24-month offering period will
consist of four purchase periods of approximately six months duration. The
1996 Purchase Plan will be administered by the Board of Directors or by a
committee appointed by the Board. Employees are eligible to participate if
they are customarily employed by the Company or any designated subsidiary for
at least 20 hours per week and for more than five months in any calendar year.

1996 Director Option Plan. Non-employee directors are entitled to
participate in the Company's 1996 Director Option Plan (the "Director Plan").
The material terms of the Director Plan were approved by the Board of
Directors in May 1996. The Director Plan will be submitted to the Board of
Directors for further approval, and to the stockholders of the Company for
approval prior to consummation of this offering, but shall not become
effective until the effective date of this offering. A total of 150,000 shares
of Common Stock has been reserved for issuance under the Director Plan.

The Director Plan provides for an automatic grant of an option (the "First
Option") to purchase 7,500 shares of Common Stock to each non-employee
director on the date on which the Director Plan becomes effective or, if
later, an option to purchase 10,000 shares of Common Stock on the date on
which the person first becomes a non-employee director. After the First Option
is granted to the non-employee director, he or she shall automatically be
granted an option to purchase 10,000 shares (a "Subsequent Option") on the
date of the annual meeting of each subsequent year, provided he or she is then
a non-employee director and, provided further, that on such date he or she has
served on the Board for at least six months. First Options and each Subsequent
Option shall have terms of ten years. All of the shares subject to a First
Option shall become vested and exercisable 12 months after the date of the
grant, provided that the shares subject to the First Option granted on the
effective date of the Director Plan shall become vested and exercisable one
business day prior to the date of the Company's first annual meeting after the
grant date. All of the shares subject to each Subsequent Option shall become
vested and exercisable on the earlier of (i) 12 months after the date of the
grant or (ii) one business day prior to the date of the Company's first annual
meeting after the grant date. Vesting of the First Option and each Subsequent
Option are subject to the optionee continuing to serve as a director on the
vesting date. The exercise prices of the First Option and each Subsequent
Option shall be 100% of the fair market value per share of the Company's
Common Stock on the date of the grant of the option.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Amended and Restated Certificate, to be filed upon the closing
of the offering, limits the liability of directors to the maximum extent
permitted by Delaware law. Delaware law provides that a corporation's
certificate of incorporation may contain a provision eliminating or limiting
the personal liability of a director for monetary damages for breach of their
fiduciary duties as directors, except for liability (i) for any breach of
their duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law or (iv) for any transaction from which the director
derived an improper personal benefit.

The Company's Amended and Restated Bylaws provide that the Company shall
indemnify its directors and officers and may indemnify its employees and
agents to the fullest extent permitted by law. The Company believes that
indemnification under its Amended and Restated Bylaws covers at least
negligence and gross negligence on the part of indemnified parties.

The Company has entered into agreements to indemnify its directors and
officers in addition to the indemnification provided for in the Company's
Amended and Restated Bylaws. These agreements, among other things, indemnify
the Company's directors and officers for certain expenses (including
attorneys' fees), judgments, fines and settlement amounts incurred by any such
person in any action or proceeding, including any action by or in the right of
the Company, arising out of such person's services as a director or officer of

55
<PAGE>

the Company, any subsidiary of the Company or any other company or enterprise
to which the person provides services at the request of the Company. The
Company believes that these provisions and agreements are necessary to attract
and retain qualified directors and officers.

At present, 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 threatened
litigation or proceeding that might result in a claim for such
indemnification.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee was formed in August 1994 and is currently
composed of Messrs. Ben-David, Grillos and Stevens. No interlocking
relationship exists between any member of the Company's Compensation Committee
and any member of any other company's board of directors or compensation
committee.

56
<PAGE>

CERTAIN TRANSACTIONS

In connection with the Reorganization, in December 1993, DCL Holding and
Investments in Technology (1993), Ltd. ("DCL") and Zamir Paz, the former
stockholders of SEE Technologies, exchanged all of their shares of SEE
Technologies stock for an aggregate of 2,661,154 and 935,000 shares of Series
A Preferred Stock of Summit, respectively. As a result, SEE Technologies
became a wholly-owned subsidiary of Summit. In February 1994, DCL and Mr. Paz
contributed an aggregate of 185,474 and 43,680 and shares of Series A
Preferred Stock, respectively, to Summit. Also in connection with the
Reorganization, a wholly-owned subsidiary of Summit merged with and into TSSI,
with TSSI being the surviving corporation. As consideration, the former
stockholders of TSSI received capital stock of Summit under the following
conversion schedule: (i) holders of TSSI common stock received .5896815 shares
of Common Stock of Summit for each TSSI share; (ii) holders of TSSI Series A,
B and C Preferred Stock received .5896815 shares of Series B Preferred Stock
of Summit for each such TSSI share; and (iii) holders of TSSI Series D
Preferred Stock received 1.179363 shares of Series B Preferred Stock of Summit
for each TSSI Series D share.

On February 10, 1994, the Company sold $400,000 aggregate principal amount
of convertible subordinated debentures (the "Convertible Debentures") in a
transaction exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof. The following directors, executive officers
and beneficial holders of at least 5% of the capital stock of the Company
(including members of their immediate family) purchased Convertible Debentures
as follows:

<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
PURCHASER CONVERTIBLE DEBENTURES
--------- ----------------------
<S> <C>
Larry J. Gerhard (1)(2)(3)......................... $75,000
Zamir Paz (1)(2)(3)................................ 10,000
Daniel C. Skilken (1).............................. 40,000
Roger A. Bitter (1)................................ 10,000
DCL (3)............................................ 30,000
</TABLE>
- --------
(1) Executive officer of the Company.
(2) Director of the Company.
(3) Holder of more than 5% of the Company's outstanding capital stock. Amihai
Ben-David is a director of both DCL and the Company.

Interest on the Convertible Debentures accrued at an annual rate of 5%. On
November 11, 1994, all of the then outstanding Convertible Debentures were
converted at the Company's option into an aggregate of 375,000 shares of
Series C Preferred Stock. Prior to consummation of the offering, all
outstanding shares of Series C Preferred Stock will convert into shares of
Common Stock on a one-for-one basis.

57
<PAGE>

In May 1994, the Company sold 823,091 shares of Series D Preferred Stock at
a price of $3.75 per share in a transaction exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof. The
following directors, executive officers and beneficial holders of at least 5%
of the Company's capital stock purchased Series D Preferred Stock:

<TABLE>
<CAPTION>
SHARES OF
PURCHASER (1) SERIES D PREFERRED STOCK
------------- ------------------------
<S> <C>
Entities affiliated with Robertson, Stephens &
Company (2)..................................... 26,665
Entities affiliated with Sequoia Capital (3)..... 400,000
First Century Partnership III (4)................ 68,622
Daniel C. Skilken (5)............................ 10,666
Stuart Schube (6)................................ 66,665
Walter Cunningham (7)............................ 57,332
</TABLE>
- --------
(1) See note to table of beneficial ownership in "Principal and Selling
Stockholders" for information relating to the beneficial ownership of such
shares.
(2) Includes 13,736 shares and 12,929 shares held by Bayview Investors, Ltd.
and RCS III, L.P., respectively. Mr. Grillos, a director of the Company,
is employed by Robertson, Stephens & Company LLC in its venture capital
group.
(3) Includes 376,000 shares and 24,000 shares acquired by Sequoia Capital
Growth Fund and Sequoia Technology Partners III, respectively. Mr.
Stevens, a director of the Company, is a General Partner of Sequoia
Capital IV.
(4) Holder of more than 5% of the Company's capital stock.
(5) Executive officer of the Company.
(6) Includes 53,333 shares held by Genesis Fund Ltd. and 6,666 shares held by
A.G. Edwards & Sons, Inc. as custodian for Stuart Schube IRA.
(7) Includes 53,333 shares held by Genesis Fund Ltd., of which Mr. Cunningham
is a General Partner, and 1,333 shares held by Walter Cunningham, IRA.

Prior to consummation of the offering, all outstanding shares of Series D
Preferred Stock will convert into shares of Common Stock on a one-for-one
basis.

In June and July 1995, the Company sold 600,000 shares of Series E Preferred
Stock at a price of $4.52 per share in transactions exempt from the
registration requirements of the Securities Act pursuant to Section 4(2)
thereof. An aggregate of 122,675 shares were sold to an entity affiliated with
Jay Morrison, a director of the Company. Prior to consummation of the
offering, all outstanding shares of Series E Preferred Stock will convert into
shares of Common Stock on a one-for-one basis.

The Company has entered into employment agreements with certain officers.
See "Management--Employment Agreements." The Company has also entered into
indemnification agreements with each of its directors and executive officers.
Such agreements require the Company to indemnify such individuals to the
fullest extent permitted by Delaware law.

In September 1995, the Company entered into a one-year directorship
agreement with Fred Hanson, a non-employee director of the Company, pursuant
to which Mr. Hanson receives a salary of $17,500 per year. The Company also
issued Mr. Hanson an option to purchase 20,000 shares of the Company's Common
Stock at an exercise price of $1.75 per share. In lieu of receiving quarterly
salary payments, the Company, on Mr. Hanson's behalf, purchased 10,000 of the
shares subject to the option for the aggregate purchase price of $17,500.

At the time of the Reorganization, the Company and DCL entered into a one-
year financial services agreement pursuant to which DCL, in exchange for an
aggregate of $100,000, agreed to provide to the Company on an as-needed basis
certain financial consulting services, including bookkeeping, tax filings,
payroll, accounts payable and statutory filings. The agreement terminated on
February 10, 1995.

58
<PAGE>

At the time of the Reorganization, the Company and DCL entered into a one-
year agreement pursuant to which DCL agreed to provide to the Company certain
engineering consulting services on an as-needed basis in exchange for an
aggregate of $1.4 million. Similarly, at the same time, SEE Technologies and
DCL entered into a one-year agreement pursuant to which SEE Technologies
agreed to provide to DCL certain engineering consulting services on an as-
needed basis in exchange for an aggregate of $1.3 million. No services were
required by either party under such agreements and no payments were made
thereunder. Each of the foregoing agreements terminated on February 10, 1995.

At the time of the Reorganization, SEE Technologies entered into a four-year
sublease pursuant to which SEE Technologies subleases space for its corporate
offices from DCL on terms and conditions similar to those under which DCL
leases such office space from the third-party owner of the office space. The
Company believes that the terms of the foregoing lease are no less favorable
to the Company than those that could have been obtained from unaffiliated
third parties.

On April 1, 1991, DCL and SEE Technologies entered into an agreement with
Intergraph Corporation pursuant to which it agreed to perform certain
engineering services for Intergraph. On February 10, 1994, DCL, Intergraph and
SEE Technologies entered into an agreement which terminated the previous
agreement and extinguished any rights or ownership interests of Intergraph in
the Visual HDL technology developed by SEE Technologies. In connection with
this termination, the Company issued 168,000 shares of common stock to
Intergraph.

To facilitate the relocation of Larry J. Gerhard to Beaverton, Oregon in
October 1993, the Company agreed with a third-party real estate firm ("PHH")
that PHH would purchase Mr. Gerhard's former residence in Southern California
and thereafter undertake to resell such residence. The Company further agreed
to reimburse PHH for all expenses and any loss incurred on resale. The
residence was sold for $870,000 in August 1995 following a drop in the
Southern California housing market and, as a result, in addition to payment of
certain carrying costs, the Company issued to PHH a note in the aggregate
principal amount of $441,705. The note matures on August 30, 1997 and accrues
interest at an annual rate of prime plus 1%. However, the closing of this
offering will cause the maturity date of the note to accelerate to ten
business days after the closing date. As of June 30, 1996, an aggregate of
$268,022 was outstanding under the note. The Company intends to use a portion
of the net proceeds of this offering to repay all outstanding indebtedness
under the note. See "Use of Proceeds."

In February 1996, the Company agreed to forgive a loan of approximately
$101,000 made to Roger Bitter, an executive officer of the Company, as part of
Mr. Bitter's relocation back to the United States. The loan was originally
made to Mr. Bitter to repay his prior tax liabilities while residing in Japan.
The loan accrued interest at an annual rate of 6% and, prior to forgiveness,
was repayable by Mr. Bitter upon demand by the Company. As of the date of
forgiveness, the outstanding amount due on the loan was approximately $89,892.

In September 1995, the Company loaned $87,056 to Zamir Paz, an executive
officer of the Company, for the purchase of a primary residence pursuant to a
promissory note that bore interest at the annual rate of prime plus 1%. The
principal was repaid in October 1995 and the interest was repaid in June 1996.

Robertson, Stephens & Company LLC ("Robertson, Stephens") is acting as lead
underwriter of the offering. For acting in this capacity, Robertson, Stephens
will be entitled to receive customary underwriting fees. John Grillos is an
employee of Robertson, Stephens and a director of the Company. Certain
affiliates of Robertson, Stephens will beneficially own approximately 7.8% of
the outstanding Common Stock of the Company upon completion of the offering.
See "Underwriting."

59
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of Common Stock, as of August 31, 1996, and as adjusted to reflect
the sale of the shares of Common Stock pursuant to the offering by (a) each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (b) each of the Company's directors, (c)
each of the Named Executive Officers, (d) each additional Selling Stockholder
and (e) all directors and executive officers of the Company as a group. Unless
otherwise noted in the footnotes to the table, (i) the Company believes that
the persons named in the table have sole voting and investing power with
respect to all shares of Common Stock indicated as being beneficially owned by
them and (ii) officers and directors can be contacted at the principal offices
of the Company.

Robertson, Stephens &
Company (4)............. 1,285,655 11.4 250,000 1,035,655 7.8
555 California Street
Suite 2600
San Francisco, CA 94104

Sequoia Capital (5)..... 1,171,242 10.3 -- 1,171,242 8.8
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025

Stuart Schube (6)....... 825,950 7.3 188,429 637,521 4.8
520 Post Oak Boulevard
Houston, TX 77027

STAR Venture Capital 797,659 7.0 240,017 557,642 4.2
Management GmbH (7).....
9 Possartstr
81679 Munich, Germany

First Century Partners
(8)..................... 768,835 6.8 250,000 518,835 3.9
One Palmer Square
Princeton, NJ 08542

Fiering & Sjolie
Handelsgesellschaft
m.b.H. ................. 601,320 5.3 100,000 501,320 3.8
A-1180 Wien
Ruhrhofergasse 12
Austria

Larry J. Gerhard (9).... 646,735 5.7 75,000 571,735 4.3
c/o Summit Design, Inc.
9305 S.W. Gemini Drive
Beaverton, OR 97008

C. Albert Koob (10)..... 83,000 * 4,000 79,000 *

Zamir Paz (11).......... 601,320 5.3 100,000 501,320 3.8
c/o Summit Design, Inc.
9305 S.W. Gemini Drive
Beaverton, OR 97008

Daniel C. Skilken (12).. 153,860 1.4 6,666 147,194 1.1
D. Gregory Kott (13).... 90,500 * 5,000 85,500 *
Roger A. Bitter (14).... 125,194 1.1 10,000 115,194 *
Eric Benhayoun (15)..... 66,500 * 1,000 65,500 *
Amihai Ben-David (16)... 2,305,680 20.4 250,000 2,055,680 15.4
John Grillos (17)....... 1,285,655 11.4 250,000 1,035,655 7.8
Fred L. Hanson (18)..... 20,000 * -- 20,000 *
Jay B. Morrison (19).... 265,886 2.3 80,000 185,886 1.4
Mark Stevens (20)....... 1,171,242 10.3 -- 1,171,242 8.8
</TABLE>

60
<PAGE>

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED SHARES BENEFICIALLY
PRIOR TO OFFERING NUMBER OF OWNED
(1) SHARES BEING AFTER OFFERING (2)
----------------------- OFFERED ----------------------
NAME OF BENEFICIAL OWNERS NUMBER PERCENT FOR SALE NUMBER PERCENT
- ------------------------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ADDITIONAL SELLING
STOCKHOLDERS:
Ilana Achimeir (21)..... 27,484 * 9,984 17,500 *
Michael Bragg........... 766 * 766 -- --
Jerome J. Brown......... 7,622 * 7,622 -- --
Charles Burrows......... 2,948 * 2,948 -- --
Copley Partners I, L.P.. 18,624 * 18,624 -- --
Crossroads Capital
Limited Partnership.... 37,249 * 37,249 -- --
William Den Beste (22).. 2,948 * 2,948 -- --
Lawrence Evans.......... 2,594 * 2,594 -- --
David H. Flaningham..... 78,616 * 78,616 -- --
Norman Green............ 19,179 * 1,784 17,395 *
Grenly, Rotenberg,
Laskowski, Evans &
Bragg, P.C. ........... 5,896 * 5,896 -- --
Moshe Guy (23).......... 95,000 * 10,000 85,000 *
Elkanon Herzog (24)..... 92,500 * 9,850 82,650 *
How & Company........... 27,937 * 27,937 -- --
Intergraph Corporation.. 168,000 1.5 168,000 -- --
Jerusalem Pacific
Ventures (1994) LP..... 265,886 2.3 80,000 185,886 1.4
Charles McIntyre (25)... 24,323 * 24,323 -- --
David Moffenbeier (26).. 49,484 * 10,000 39,484 *
Quality Electronics,
Inc. .................. 133,329 1.2 20,000 113,329 *
Norman Rickles.......... 471 * 471 -- --
ROC Venture Company,
Ltd. .................. 236,898 2.1 71,069 165,829 1.2
Ilan Regev (27)......... 50,000 * 10,000 40,000 *
Stanley Rotenberg....... 707 * 707 -- --
Steve Tsubota........... 40,388 * 10,000 30,388 *
UNCO Ventures, Ltd...... 363,863 3.2 28,429 335,434 2.5
Wesbanc Ventures, Ltd... 239,801 2.1 160,000 79,801 *
Kuo Wu (28)............. 84,984 * 8,500 76,484 *
All directors and
executive officers as a
group (14 persons) (29) 6,857,879 59.2 781,666 6,076,213 44.7
</TABLE>
- -------
* Represents less than 1% of the total.

(1) Based on 11,318,704 shares of Common Stock outstanding prior to the
offering. A person is deemed to be the beneficial owner of securities
that can be acquired by such person within 60 days upon the exercise of
options. Calculations of percentage of beneficial ownership assume the
exercise by only the respective named stockholder of all options for the
purchase of Common Stock held by such stockholder which are exercisable
within 60 days.

61
<PAGE>

(2) Assumes no exercise of the Underwriters' over-allotment option. If such
option is exercised in full, RCS III, L.P. would sell an additional
350,000 shares and Robertson, Stephens & Company would then hold 685,655
shares (4.9%); Sequoia Capital Growth Fund would sell 51,700 shares,
Sequoia Technology Partners III would sell 3,300 shares and Sequoia
Capital would then hold 1,116,242 shares (8.0%); UNCO Ventures, Ltd.
would sell an additional 43,946 shares and would then hold 291,488 shares
(2.1%), Wesbanc Ventures, Ltd. would sell an additional 13,946 shares and
would then hold 65,855 shares (*), and Stuart Schube would then hold
579,629 shares (4.2%); First Century Partnership III would sell an
additional 132,108 shares and First Century Partners would then hold
386,727 shares (2.8%); and Roger Bitter would sell an additional 5,000
shares and would then hold 110,194 shares (*).

(3) Includes 2,275,680 shares held by DCL Holding & Investments in Technology
(1993) Ltd., a wholly-owned subsidiary of DCL Technologies Ltd., of which
250,000 shares are being sold in the offering. DCL Technologies Ltd. is
an Israeli public company, the shares of which are traded on the Tel-Aviv
stock exchange. The Company believes that the following shareholders own
at least 5% of the outstanding shares of DCL Technologies Ltd.: Comverse
Technologies Inc., ISCAL Holdings Ltd., Uri Melamed, Bank Hapoalim,
Danbar Ltd. and Amihai Ben-David.
(4) Includes 172,568 shares held by Bayview Investors, Ltd. and 1,113,087
shares held by RCS III, L.P. RCS III, L.P. is selling 250,000 shares in
the offering.
(5) Includes 68,376 shares held by Sequoia Technology Partners III, 1,071,255
shares held by Sequoia Capital Growth Fund, 20,445 shares held by Sequoia
XVI and 11,166 shares held by Sequoia XVII.

(6) Includes 10,204 shares held by A.G. Edwards & Sons, Inc. as Custodian for
Stuart Schube, IRA, 2,599 shares held by Stuart Schube Money Purchase
Plan, 184,813 shares held by The Genesis Fund, Ltd., 363,863 shares held
by UNCO Ventures, Ltd. and 239,801 shares held by Wesbanc Ventures, Ltd.
Wesbanc Ventures, Ltd. is selling 160,000 shares in the offering and UNCO
Ventures, Ltd. is selling 28,429 shares. Mr. Schube is a General Partner
of The Genesis Fund, Ltd., UNCO Ventures, Ltd. and Wesbanc Ventures, Ltd.
and therefore may be deemed to be a beneficial owner of the shares.
Mr. Schube disclaims beneficial ownership of such shares except to the
extent of his pecuniary interest therein.

(7) Includes 170,034 shares held by Dandana Ltd., 337,517 shares held by SVE
STAR Ventures Enterprises No. 111 GbR ("SVE STAR No. 111 GbR"), 28,237
shares held by SVE STAR Ventures Enterprises No. 111a GbR ("SVE STAR No.
111a GbR"), 148,524 shares held by SVM STAR Ventures
Managementgesellschaft mbH NR. 3 & Co. Beteiligungs KG ("SVM STAR mbH NR.
3") and 113,347 shares held by Yozma Venture Capital Ltd. The total
number of shares offered for sale includes 51,164 shares to be sold by
Dandana Ltd., 34,106 shares to be sold by Yozma Venture Capital Ltd.,
101,559 shares to be sold by SVE STAR No. 111 GbR, 8,497 shares to be
sold by SVE STAR No. 111a GbR and 44,691 shares to be sold by SVM STAR
mbH NR. 3.
(8) Includes 753,491 shares held by First Century Partnership III and 15,344
shares held by Omega Partners, L.P. First Century Partnership III is
selling 250,000 in the offering.

(9) Includes 65,000 shares held by Smith Barney, custodian for the IRA of
Larry J. Gerhard and 10,000 shares held by Smith Barney, custodian for
the IRA of Kathleen Gerhard, the spouse of Larry Gerhard, all of which
are being sold in the offering.

(10) Includes 75,000 shares issuable upon exercise of options, all of which
would be subject to the Company's right of repurchase if issued as of
August 31, 1996.

(11) All shares are held by Fiering & Sjolie Handelsgesellschaft m.b.H. Mr.
Paz may be deemed to be a beneficial owner of such shares, but disclaims
beneficial ownership of such shares.

(12) Includes 34,399 shares subject to the Company's right of repurchase as of
August 31, 1996.

(13) Includes 82,500 shares issuable upon exercise of options, of which 42,814
shares would be subject to the Company's right of repurchase if issued as
of August 31, 1996.

(14) Includes 36,549 shares subject to the Company's right of repurchase, and
12,000 shares issuable upon exercise of options of which all would be
subject to the Company's right of repurchase if issued as of August 31,
1996.

(15) Includes 58,500 shares issuable upon exercise of options, of which 16,625
shares would be subject to the Company's right of repurchase if issued as
of August 31, 1996.

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<PAGE>

(16) Includes 2,275,680 shares held by DCL Holding & Investments in Technology
(1993) Ltd. and 30,000 shares held by DCL Technologies Ltd. DCL Holding &
Investments in Technology (1993) Ltd. is selling 250,000 shares in the
offering. Mr. Ben-David is the Chief Executive Officer and Chairman of
DCL Technologies Ltd. and disclaims beneficial ownership of such shares
except to the extent of his pecuniary interest therein.

(17) Includes 172,568 shares held by Bayview Investors, Ltd. and 1,113,087
shares held by RCS III, L.P. RCS III, L.P. is selling 250,000 shares in
the offering. Robertson, Stephens & Company Private Equity Group, LLC is
the general partner of RCS III and Bayview Investors, Ltd. Mr. Grillos
has been employed by Robertson, Stephens & Company LLC in its venture
capital group and is a limited partner of Bayview Investors, Ltd. As
such, Mr. Grillos may be deemed to have or to share investment control
over the above shares. Mr. Grillos disclaims any beneficial interest in
such shares in excess of his pecuniary interest as an employee of
Robertson, Stephens & Company LLC in its venture capital group and as a
limited partner of Bayview Investors, Ltd.

(18) Includes 10,000 shares issuable upon exercise of options, all of which
would be subject to the Company's right of repurchase if issued as of
August 31, 1996.

(19) These shares are owned by Jerusalem Pacific Ventures (1994) L.P., of
which Mr. Morrison is affiliated with the General Partner of the fund
that manages Jerusalem Pacific Ventures (1994) L.P. and as such may be
deemed a beneficial owner of such shares. Mr. Morrison disclaims
beneficial ownership of such shares.

(20) Includes 68,376 shares held by Sequoia Technology Partners III, 1,071,255
shares held by Sequoia Capital Growth Fund, 20,445 shares held by Sequoia
XVI and 11,166 shares held by Sequoia XVII. Mr. Stevens is a special
limited partner of Sequoia Capital Growth Fund and, as such, may be
deemed to be a beneficial owner of such shares. Mr. Stevens disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein.

(21) Includes 1,459 shares subject to the Company's right of repurchase and
3,500 shares issuable upon exercise of options, of which 2,261 would be
subject to the Company's right of repurchase if issued as of August 31,
1996.

(22) Mr. Den Beste is a former executive officer of the Company and TSSI.

(23) Includes 8,856 shares subject to the Company's right of repurchase as of
August 31, 1996.

(24) Includes 8,596 shares subject to the Company's right of repurchase as of
August 31, 1996.

(25) Mr. McIntyre is a former executive officer of the Company and TSSI.

(26) Mr. Moffenbeier is a former director of the Company, TSSI and Summit
Design (EDA) Ltd.

(27) Includes 2,917 shares subject to the Company's right of repurchase and
12,000 shares issuable upon excercise of options, of which 7,751 would
be subject to the Company's right of repurchase if issued as of August
31, 1996.

(28) Includes 10,944 shares subject to the Company's right of repurchase as
of August 31, 1996.

(29) Includes 70,948 shares subject to the Company's right of repurchase and
268,500 shares issuable upon exercise of options, of which 184,649 would
be subject to the Company's right of repurchase if issued as of August
31, 1996.

63
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Upon completion of this offering, the authorized capital stock of the
Company will consist of 30,000,000 shares of common stock, par value $.01 per
share, and 5,000,000 shares of Preferred Stock, par value $.01 per share.

COMMON STOCK

As of August 31, 1996, there were 11,318,704 shares of Common Stock
outstanding (after giving effect to the conversion of all outstanding
Preferred Stock) held of record by 180 stockholders. The holders of Common
Stock are entitled to one vote for each share held of record on all matters to
be voted on by stockholders. Subject to preferences that may be applicable to
any Preferred Stock which may be outstanding, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared by the
Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of a 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. Holders of Common Stock
have no preemptive rights or rights to convert their Common Stock into other
securities. There are no redemption or sinking fund provisions applicable to
the Common Stock.

PREFERRED STOCK

Upon the closing of this offering, 5,000,000 shares of undesignated
Preferred Stock will be authorized and no shares will be outstanding. The
Board of Directors will have the authority to issue the shares of Preferred
Stock in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences, sinking fund terms and
the number of shares constituting any series or the designation of such series
without any further vote or action by the stockholders. The issuance of
Preferred Stock could adversely affect the voting power of holders of Common
Stock or the likelihood that such holders will receive dividend payments or
payments upon liquidation and could have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present plan
to issue any shares of Preferred Stock.

REGISTRATION RIGHTS OF CERTAIN HOLDERS

After this offering, the holders of approximately 8,366,314 shares of Common
Stock, or their transferees, will be entitled to certain rights with respect
to the registration of such shares under the Securities Act. Under the terms
of an agreement between the Company and such holders, if the Company proposes
to register any of its securities under the Securities Act, either for its own
account or the account of other securityholders exercising registration
rights, the holders are entitled to notice of such registration and are
entitled to include shares of such Common Stock therein; provided, among other
conditions, that the underwriters of any offering have the right to limit the
number of such shares included in such registration. In addition, the
securityholders benefiting from these rights may require the Company,
beginning six months after the date of this Prospectus, on not more than two
occasions to file a registration statement under the Securities Act with
respect to such shares, and the Company is required to use its best efforts to
effect such registration, subject to certain conditions and limitations.
Further, holders of a specified percentage of shares may require the Company
to file a registration statement on Form S-3 to register all or a portion of
their shares when such form becomes available to the Company, subject to
certain conditions and limitations. Registration of such shares under the
Securities Act would result in such shares becoming freely tradeable and could
have an adverse effect on the market price for the Company's Common Stock.

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"), which prohibits a publicly held
Delaware corporation from engaging in any "business

64
<PAGE>

combination" with an "interested stockholder" for three years following the
date that such stockholder became an interested stockholder, unless (i) prior
to such date, the board of directors of the corporation approved 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 owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced; or (iii) on or
subsequent to such date, the business combination is approved by the board of
directors and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock not owned by the interested stockholder.

Generally, a "business combination" includes a merger, asset or stock sale,
or other transaction resulting in a financial benefit to the interested
stockholders. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years prior did own) 15% or
more of the corporation's voting stock.

The Company's Restated Certificate, which will become effective upon
consummation of this offering, will require that any action required or
permitted to be taken by stockholders of the Company must be effected at a
duly called annual or special meeting of the stockholders and may not be
effected by a consent in writing. In addition, special meetings of the
stockholders of the Company may be called only by the Board of Directors or a
committee of the Board. These provisions may have the effect of deterring
hostile takeovers or delaying changes in control or management of the Company.

TRANSFER AGENT AND REGISTRAR

The First National Bank of Boston has been appointed as the transfer agent
and registrar for the Company's Common Stock.

65
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, based on the number of shares outstanding
as of August 31, 1996, the Company will have outstanding an aggregate of
13,318,704 shares of Common Stock, assuming no exercise of the Underwriters'
over-allotment option and no exercise of outstanding options. Of these shares,
the 4,000,000 shares sold in this offering will be freely tradeable without
restriction or further registration under the Securities Act, unless held by
"affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act. The remaining 9,318,704 shares of Common Stock held by
existing stockholders are "restricted" securities within the meaning of Rule
144 under the Securities Act. Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 promulgated under the Securities
Act, which rules are summarized below.

Beginning 90 days after the effective date of the Registration Statement,
approximately 124,400 shares of Common Stock will be eligible for sale
pursuant to Rule 701 under the Securities Act ("Rule 701"). Upon the
expiration of lock-up agreements between certain of the Company's stockholders
and the Underwriters (the "Lock-up Agreements"), beginning 181 days after the
effective date of the Registration Statement (the "Registration Statement") of
which this Prospectus forms a part, 7,664,158 shares will be eligible for sale
pursuant to Rule 701 and Rule 144, subject in certain cases to the volume,
manner of sale and notice requirements of Rule 144. In addition, pursuant to
lock-up provisions set forth in stock purchase agreements executed in
connection with the Reorganization, the Investors' Rights Agreement, as
amended, and under the Company's incentive stock option plan (the "Stand-Off
Agreements"), an additional 297,435 shares will become eligible for sale
pursuant to Rule 701 and Rule 144 beginning 181 days after the effective date
of the Registration Statement. The remaining 1,232,711 shares outstanding will
become eligible for sale from time to time more than 181 days after the
effective date of the Registration Statement as the Company's rights to
repurchase such shares expire.

In addition to the foregoing, as of August 31, 1996, there were outstanding
options to purchase an aggregate of 881,013 shares of Common Stock. If such
options are exercised, 516,612 shares will be eligible for sale upon
expiration of the lock-up provisions contained in the Stand-Off Agreements
beginning 181 days after the effective date of the Registration Statement. The
Company has agreed not to release shares from the lock-up provisions of the
Stand-Off Agreements without the prior written consent of the representatives
of the Underwriters.

In general, under Rule 144 as currently in effect, an affiliate of the
Company, or person (or persons whose shares are aggregated) who has
beneficially owned restricted shares for at least two years but less than
three years, will be entitled to sell in any three-month period a number of
shares that does not exceed the greater of (i) 1% of the then outstanding
shares of the Common Stock (approximately 13,319 shares immediately after the
offering) or (ii) the average weekly trading volume during the four calendar
weeks immediately preceding the date on which notice of the sale is filed with
the Securities and Exchange Commission. Sales pursuant to Rule 144 are subject
to certain requirements relating to manner of sale, notice and availability of
current public information about the Company. 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 and who
has beneficially owned his or her shares for at least three years is entitled
to sell such shares pursuant to Rule 144(k) without regard to the limitations
described above. In general, under Rule 701 under the Securities Act as
currently in effect, any employee, consultant or advisor of the Company who
purchases shares from the Company in connection with a compensatory stock or
option plan or other written agreement related to compensation is eligible to
resell such shares 90 days after the effective date of the offering in
reliance on Rule 144, but without compliance with certain restrictions
contained in Rule 144.

66
<PAGE>

the resale of such shares by non-affiliates in the public market without
restriction under the Securities Act, subject to compliance with the
contractual provisions described above. Such registration statement will
become effective immediately upon filing.

After this offering, the holders of approximately 8,366,314 shares are
entitled to certain registration rights with respect to such shares. If such
registration rights are exercised, the shares can be sold without any holding
period or sales volume limitation. If such holders, by exercising their
registration rights, cause a large number of shares to be registered and sold
in the public market, such sales could have an adverse effect on the market
price for the Company's Common Stock. If the Company were required to include
in a Company-initiated registration the shares held by such holders pursuant
to the exercise of their registration rights, such sales might have an adverse
effect on the Company's ability to raise needed capital. See "Description of
Capital Stock--Registration Rights of Certain Holders."

Prior to this offering, there has been no public market for the Common Stock
of the Company and no predictions can be made as to the effect, if any, that
market sales of shares of Common Stock prevailing from time to time may have
on the market price of the Common Stock. Nevertheless, sales of significant
numbers of shares of the Common Stock in the public market may adversely
affect the market price of the Common Stock offered hereby and could impair
the Company's future ability to raise capital through an offering of its
equity securities.

67
<PAGE>

UNDERWRITING

The Underwriters named below, acting through their representatives,
Robertson, Stephens & Company LLC and Needham & Company, Inc. (the
"Representatives"), have severally agreed with the Company and the Selling
Stockholders, subject to the terms and conditions of the Underwriting
Agreement, to purchase the numbers of shares of Common Stock set forth
opposite their respective names below. The Underwriters are committed to
purchase and pay for all such shares if any are purchased.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Robertson, Stephens & Company LLC....................................
Needham & Company, Inc...............................................

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

The Representatives have advised the Company and the Selling Stockholders
that the Underwriters propose to offer the shares of Common Stock to the
public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession of not
in excess of $ per share, of which $ may be reallowed to other dealers.
After the initial public offering, the offering price, concession and
reallowance to dealers may be reduced by the Representatives. No such
reduction shall change the amount of proceeds to be received by the Company as
set forth on the cover page of this Prospectus.

Certain Selling Stockholders have granted to the Underwriters an option,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to 600,000 additional shares of Common Stock, at the same price
per share as the Company and Selling Stockholders will receive for the
4,000,000 shares that the Underwriters have agreed to purchase. To the extent
that the Underwriters exercise this option, each of the Underwriters will have
a firm commitment to purchase approximately the same percentage of such
additional shares that the number of shares of Common Stock to be purchased by
it shown in the above table represents as a percentage of the 4,000,000 shares
offered hereby. If purchased, such additional shares will be sold by the
Underwriters on the same terms as those on which the 4,000,000 shares are
being sold.

The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act.

Each officer and director of the Company, and certain other persons that
beneficially own or have dispositive power over substantially all of the
shares of the Company's Common Stock, have agreed with the Representatives for
a period of 180 days after the effective date of the Registration Statement
(the "Lock-Up Period"), subject to certain exceptions, not to offer to sell,
contract to sell, or otherwise sell, dispose of, loan, pledge or grant any
rights with respect to any shares of Common Stock, any options or warrants to
purchase any shares of Common Stock, or any securities convertible into or
exchangeable for shares of Common Stock now owned or hereafter acquired
directly by such holders or with respect to which they have or hereafter
acquire the power of disposition, without the prior written consent of
Robertson, Stephens & Company LLC. Robertson, Stephens & Company LLC may, in
its sole discretion and at any time without notice, release all or any portion
of the securities subject to lock-up agreements. Pursuant to pre-existing
agreements, substantially all other holders of Common Stock and options to
purchase Common Stock have agreed not to sell such shares or shares issuable
upon the exercise of options for at least 180 days after the effective date of
the Registration Statement without the prior written consent of the Company.
In addition, the Company has

68
<PAGE>

agreed that during the Lock-Up Period, the Company will not, without the prior
written consent of Robertson, Stephens & Company LLC, subject to certain
exceptions, issue, sell, contract to sell, or otherwise dispose of, any shares
of Common Stock, any options or warrants to purchase any shares of Common
Stock or any securities convertible into, exercisable for or exchangeable for
shares of Common Stock other than the Company's sales of shares in this
offering, the issuance of Common Stock upon the exercise of outstanding
options and the Company's issuance of options and stock under the 1994 Plan,
the 1996 Purchase Plan and Director Plan.

Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock is being determined through negotiations among the Company, the Selling
Stockholders and the Representatives. Among the factors considered in such
negotiations are prevailing market conditions, certain financial information
of the Company, market valuations of other companies that the Company and the
Representatives believe to be comparable to the Company, estimates of the
business potential of the Company, the present state of the Company's
development and other factors deemed relevant.

The Underwriters do not intend to confirm sales of the Common Stock offered
hereby to any accounts over which they exercise discretionary authority.

Certain venture funds affiliated with Robertson, Stephens & Company LLC
beneficially owned 1,285,655 shares of the Company's Common Stock as of August
31, 1996. See "Management," "Certain Transactions" and "Principal and Selling
Stockholders." In view of this relationship, the offering is being made in
accordance with Schedule E of the By-Laws of the National Association of
Securities Dealers, Inc., which provides, among other things, that the price
of the Common Stock can be no higher than that recommended by a "qualified
independent underwriter" meeting certain standards. In accordance with this
requirement, Needham & Company, Inc. is serving in such role and will
recommend the maximum public offering price of the Common Stock. Needham &
Company, Inc. has also participated in the preparation of the Registration
Statement of which this Prospectus is a part and has performed due diligence
with respect thereto.

John Grillos, a director of the Company, is employed by Robertson, Stephens
& Company LLC in its venture capital group.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Stockholders by Wilson Sonsini Goodrich & Rosati,
P.C., Palo Alto, California. As of August 31, 1996, certain members and
investment partnerships of Wilson Sonsini Goodrich & Rosati, P.C.,
beneficially owned an aggregate of 11,229 shares of the Company's Common
Stock. Certain legal matters will be passed upon for the Underwriters by Gray
Cary Ware & Freidenrich, A Professional Corporation, Palo Alto, California.

EXPERTS

The consolidated financial statements and schedule of the Company as of
December 31, 1994 and December 31, 1995 and for each of the three years in the
period ended December 31, 1995 included in this Prospectus have been so
included in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, which includes explanatory paragraphs with respect to a change in
accounting method related to accounting for income taxes and restatements of
the 1993 and 1994 financial statements, given on the authority of said firm as
experts in auditing and accounting.

On February 9, 1996, Coopers & Lybrand L.L.P. was engaged as the principal
independent accountants for the Company and its subsidiaries, replacing KPMG
Peat Marwick LLP ("KPMG"), which was dismissed

69
<PAGE>

in January, 1996. The change was approved by the audit committee of the
Company's Board of Directors. In connection with the audits of the two fiscal
years in the period ended December 31, 1995 and through the interim period
ended January 31, 1996, there were no disagreements with KPMG on any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which disagreements, if not resolved to KPMG's
satisfaction would have caused them to make reference to the matter in their
report. The audit reports of KPMG on the consolidated financial statements of
the Company as of and for the years ended December 31, 1993 and 1994 did not
contain any adverse opinion or disclaimer of opinion, nor were they qualified
or modified as to uncertainty or audit scope. The audit report for the year
ended December 31, 1993 was modified for the change in accounting method
related to SFAS No. 109, "Accounting for Income Taxes." The audit report for
the year ended December 31, 1994 was modified to include a discussion on the
restatement of the Company's 1993 financial statements for the timing of when
certain expenses were recognized in the financial statements. During the audit
period ended December 31, 1994, and through the interim period ended January
31, 1996 there have been no reportable events.

During the two fiscal years ended December 31, 1995, and through the interim
period ended February 8, 1996, the Company had not consulted with Coopers &
Lybrand L.L.P. on items which concerned the subject matter of a disagreement
or reportable event with the former auditor.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act, with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedule thereto. For further
information with respect to the Company and such Common Stock, reference is
made to the Registration Statement and the exhibits and schedule filed as part
thereof. Statements contained in this Prospectus as to the contents of any
contract or any other document referred to are not necessarily complete, and,
in each instance, if such contract or document is filed as an exhibit,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference to such exhibit. A copy of the Registration
Statement, and the exhibits and schedule thereto, may be inspected without
charge at the public reference facilities maintained by the Commission in Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices located at the Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th
Floor, New York, New York 10048, and copies of all or any part of the
Registration Statement may be obtained from such offices upon the payment of
the fees prescribed by the Commission. 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 site is http://www.sec.gov.

70
<PAGE>

SUMMIT DESIGN, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June 30,
1996 (unaudited)......................................................... F-3
Consolidated Statements of Operations for the Years Ended December 31,
1993, 1994 and 1995 and for the Six Months Ended June 30, 1995 and 1996
(unaudited).............................................................. F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1993, 1994 and 1995 and for the Six Months Ended June 30,
1996 (unaudited)......................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1993, 1994 and 1995 and for the Six Months Ended June 30, 1995 and 1996
(unaudited).............................................................. F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
Summit Design, Inc.

We have audited the accompanying consolidated balance sheets of Summit
Design, Inc. and its subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the 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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Summit
Design, Inc. and its subsidiaries as of December 31, 1995 and 1994, and the
results of their consolidated operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.

As discussed in Note 9 of Notes to Consolidated Financial Statements,
effective January 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."

As discussed in Note 2 of Notes to Consolidated Financial Statements, the
1993 and 1994 financial statements have been restated.

Coopers & Lybrand L.L.P.

Portland, Oregon
June 18, 1996

F-2
<PAGE>

SUMMIT DESIGN, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
JUNE 30,
1996
DECEMBER 31, UNAUDITED
------------------ JUNE 30, PRO FORMA
1994 1995 1996 (NOTE 1)
-------- -------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 1,193 $ 592 $ 3,181
Accounts receivable, less allowance
for doubtful accounts of $355,
$455 and $432..................... 4,144 5,521 3,159
Prepaid expenses and other......... 324 319 395
-------- -------- --------
Total current assets............. 5,661 6,432 6,735
Furniture and equipment, net......... 1,449 1,790 1,724
Deposits and other assets............ 926 681 828
-------- -------- --------
Total assets..................... $ 8,036 $ 8,903 $ 9,287
======== ======== ========
LIABILITIES
Current liabilities:
Note payable to bank............... $ 1,516 $ 1,000 $ --
Long-term debt, current portion.... 411 854 844
Capital lease obligation, current
portion........................... 239 191 130
Accounts payable................... 1,347 994 772
Accrued liabilities................ 1,496 2,247 2,279
Deferred revenue................... 1,096 1,676 2,774
-------- -------- --------
Total current liabilities........ 6,105 6,962 6,799
Long-term debt, less current
portion............................. 60 1,065 924
Capital lease obligations, less
current portion..................... 193 151 119
Deferred revenue, less current
portion............................. 283 83 250
Other long-term liabilities.......... 100 50 --
-------- -------- --------
Total liabilities................ 6,741 8,311 8,092
-------- -------- --------
Commitments and contingencies (Notes
6 and 11)
STOCKHOLDERS' EQUITY
Convertible preferred stock, $.01 par
value. Authorized 9,334 shares in
1995 and 1996 and 5,000 shares pro
forma; issued and outstanding: 8,599
shares in 1994, 9,103 shares in 1995
and 1996, and no shares pro forma;
aggregate liquidation preference of
$19,315 at December 31, 1995........ 86 91 91
Common stock, $.01 par value.
Authorized 20,000 shares in 1995 and
1996 and 30,000 shares pro forma;
issued and outstanding 1,969 shares
in 1994, 1,887 shares in 1995, 2,215
shares in 1996 and 11,319 shares pro
forma; liquidation preference of
$189 at December 31, 1995 .......... 20 19 22 $ 113
Additional paid-in capital........... 12,993 15,437 15,550 15,550
Accumulated deficit.................. (11,804) (14,955) (14,468) (14,468)
-------- -------- -------- --------
Total stockholders' equity....... 1,295 592 1,195 $ 1,195
-------- -------- -------- ========
Total liabilities and
stockholders' equity............ $ 8,036 $ 8,903 $ 9,287
======== ======== ========
</TABLE>

The accompanying notes are integral part of the consolidated financial
statements.

F-3
<PAGE>

SUMMIT DESIGN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ---------------
1993 1994 1995 1995 1996
------- ------- ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Product licenses................ $ 4,693 $ 9,143 $10,383 $ 3,669 $7,191
Maintenance and services........ 2,547 2,323 2,637 1,202 1,895
Other........................... -- 1,516 1,050 950 284
------- ------- ------- ------- ------
Total revenue................. 7,240 12,982 14,070 5,821 9,370
Cost of revenue:
Product licenses................ 440 681 651 347 278
Maintenance and services........ 330 390 400 210 211
------- ------- ------- ------- ------
Total cost of revenue......... 770 1,071 1,051 557 489
------- ------- ------- ------- ------
Gross profit...................... 6,470 11,911 13,019 5,264 8,881
Operating expenses:
Research and development........ 2,381 4,632 5,113 2,626 2,619
Sales and marketing............. 3,673 5,867 7,370 3,757 4,138
General and administrative...... 1,919 2,309 3,112 1,653 1,373
In-process technology........... -- 647 -- -- --
------- ------- ------- ------- ------
Total operating expenses...... 7,973 13,455 15,595 8,036 8,130
------- ------- ------- ------- ------
Income (loss) from operations..... (1,503) (1,544) (2,576) (2,772) 751
Other income (expense), net....... (119) (100) (176) (101) (55)
------- ------- ------- ------- ------
Income (loss) before income
taxes............................ (1,622) (1,644) (2,752) (2,873) 696
Income tax provision.............. -- 402 399 173 209
------- ------- ------- ------- ------
Net income (loss)................. $(1,622) $(2,046) $(3,151) $(3,046) $ 487
======= ======= ======= ======= ======
Pro forma net income (loss) per
share............................ $ (0.14) $ (0.17) $ (0.26) $ (0.26) $ 0.04
======= ======= ======= ======= ======
Pro forma number of shares used in
per share calculation............ 11,569 11,870 11,900 11,890 11,979
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-4
<PAGE>

SUMMIT DESIGN, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended December 31, 1993, 1994 and 1995,

and the six months ended June 30, 1996 (unaudited)
(In thousands, except shares)

<TABLE>
<CAPTION>
CONVERTIBLE NOTE
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE TOTAL
------------------- ----------------- PAID-IN ACCUMULATED FROM STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT STOCKHOLDER EQUITY
---------- ------- --------- ------ ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1992 .................. 4,840,894 $ 6,878 1,170,970 $ 80 $ -- $ (8,136) $ -- $(1,178)
Issuance of Series D
preferred stock net of
issuance costs......... 800,000 1,181 -- -- -- -- -- 1,181
Conversion of bridge
loan into preferred
stock.................. 200,000 300 -- -- -- -- -- 300
Issuance of common
stock.................. -- -- 750,000 8 -- -- (7) 1
Issuance of common stock
under stock option
plan................... -- -- 128,807 14 -- -- -- 14
Net loss................ -- -- -- -- -- (1,622) -- (1,622)
---------- ------- --------- ---- ------- -------- ----- -------
BALANCE, DECEMBER 31,
1993................... 5,840,894 8,359 2,049,777 102 -- (9,758) (7) (1,304)
Recapitalization........ (1,806,973) (8,319) (841,061) (89) 8,408 -- -- --
Issuance of Series A
preferred stock in
merger................. 3,367,000 34 -- -- 1,077 -- -- 1,111
Conversion of Series C
Debentures into Series
C preferred stock...... 375,000 4 -- -- 371 -- -- 375
Issuance of Series D
preferred stock, net of
issuance costs......... 823,091 8 -- -- 3,079 -- -- 3,087
Payments from
stockholder............ -- -- -- -- -- -- 7 7
Issuance of common
stock.................. -- -- 188,048 1 4 -- -- 5
Exercise of warrants.... -- -- 47,174 1 -- -- -- 1
Repurchase of common
stock.................. -- -- (3,898) -- (1) -- -- (1)
Issuance of common stock
under stock option
plan................... -- -- 528,550 5 55 -- -- 60
Net loss................ -- -- -- -- -- (2,046) -- (2,046)
---------- ------- --------- ---- ------- -------- ----- -------
BALANCE, DECEMBER 31,
1994................... 8,599,012 86 1,968,590 20 12,993 (11,804) -- 1,295
Issuance of Series E
preferred stock........ 600,000 6 -- -- 2,575 -- -- 2,581
Repurchase of Series C
preferred stock........ (65,000) (1) -- -- (64) -- -- (65)
Repurchase of Series D
preferred stock........ (30,666) -- -- -- (115) -- -- (115)
Issuance of common stock
under stock option
plan................... -- -- 71,757 1 49 -- -- 50
Repurchase of common
stock.................. -- -- (153,705) (2) (1) -- -- (3)
Net loss................ -- -- -- -- -- (3,151) -- (3,151)
---------- ------- --------- ---- ------- -------- ----- -------
BALANCE, DECEMBER 31,
1995................... 9,103,346 91 1,886,642 19 15,437 (14,955) -- 592
Issuance of common stock
under stock option plan
and other.............. -- -- 341,230 3 115 -- -- 118
Repurchase of common
stock.................. -- -- (12,551) -- (2) -- -- (2)
Net income.............. -- -- -- -- -- 487 -- 487
---------- ------- --------- ---- ------- -------- ----- -------
BALANCE, JUNE 30, 1996
(UNAUDITED)............ 9,103,346 $ 91 2,215,321 $ 22 $15,550 $(14,468) $ -- $ 1,195
========== ======= ========= ==== ======= ======== ===== =======
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-5
<PAGE>

SUMMIT DESIGN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)............... $(1,622) $(2,046) $(3,151) $(3,046) $ 487
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation.................. 197 457 588 430 413
(Gain) loss on disposal of
assets....................... 150 15 (1) -- --
Gain on sale of subsidiary.... (72) -- -- -- --
In-process technology......... -- 647 -- -- --
Changes in assets and
liabilities:
Accounts receivable......... 385 (2,599) (1,377) 1,087 2,362
Prepaid expenses and other.. 38 (230) 6 16 (76)
Accounts payable............ (97) 787 (353) (847) (222)
Accrued liabilities......... 311 (2) 751 781 32
Deferred revenue............ 183 357 380 183 1,265
Other, net.................. (146) (14) 195 (91) (123)
------- ------- ------- ------- -------
Net cash provided by (used
in) operating
activities............... (673) (2,628) (2,962) (1,487) 4,138
------- ------- ------- ------- -------
Cash flows from investing
activities:
Additions to furniture and
equipment...................... (62) (937) (773) (281) (300)
Cash acquired in merger......... -- 212 -- -- --
Cash included in sale of
subsidiary..................... (67) -- -- -- --
Investment in joint venture..... -- -- -- -- (100)
Proceeds on asset dispositions.. -- 173 15 -- 2
------- ------- ------- ------- -------
Net cash used in investing
activities............... (129) (552) (758) (281) (398)
------- ------- ------- ------- -------
Cash flows from financing
activities:
Issuance of preferred stock..... 1,181 3,087 2,581 -- --
Issuance of common stock........ 15 72 50 12 118
Proceeds from notes payable and
long-term debt................. -- 1,052 3,260 2,331 53
Repurchase of preferred stock... -- -- (180) (100) --
Repurchase of common stock...... -- -- (3) (3) (2)
Principal payments of debt
obligations.................... (120) (67) (2,329) (687) (1,204)
Principal payments of capital
lease obligations.............. (112) (200) (260) (97) (116)
------- ------- ------- ------- -------
Net cash provided by (used
in) financing
activities............... 964 3,944 3,119 1,456 (1,151)
------- ------- ------- ------- -------
Increase (decrease) in
cash and cash
equivalents.............. 162 764 (601) (312) 2,589
Cash and cash equivalents,
beginning of period.............. 267 429 1,193 1,193 592
------- ------- ------- ------- -------
Cash and cash equivalents, end of
period........................... $ 429 $ 1,193 $ 592 $ 881 $ 3,181
======= ======= ======= ======= =======
Supplemental disclosure of cash
flow information:
Cash paid during the period for:
Interest...................... $ 109 $ 144 $ 195 $ 70 $ 82
Income taxes.................. $ 3 $ 3 $ 1 $ 12 $ 1
Supplemental disclosure of noncash
investing and financing
activities:
Equipment acquired under capital
leases......................... $ 292 $ 232 $ 170 $ -- $ 23
Net assets acquired in merger... $ -- $ 1,111 $ -- $ -- $ --
Conversion of debt to preferred
stock.......................... $ 300 $ 375 $ -- $ -- $ --
Note received in sale of
subsidiary..................... $ 586 $ -- $ -- $ -- $ --
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-6
<PAGE>

SUMMIT DESIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of June 30, 1996 and for the six months ended June 30, 1995
and 1996 is unaudited)

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Summit Design, Inc. (Summit or the Company) is a provider of graphical
design entry and verification software tools and design to test software
tools. North American sales are principally made by the Company's direct sales
force. Sales in Europe and Asia are primarily made through distributors.
Approximately 42% and 47.2% of the Company's revenue for the year ended
December 31, 1995 and the six months ended June 30, 1996, respectively, were
attributable to sales made through distributors.

The Company produces two main product lines--SLDA and Design to Test. Each
of these product lines contributed approximately 50% to the Company's revenue
in 1995.

Summit Design (EDA) Ltd., a wholly-owned subsidiary of the Company (formerly
SEE Technologies Software Environment for Engineers Ltd., hereafter SEE
Technologies), provides product research and development as well as sales and
support of certain product lines.

Summit Design, Inc. is headquartered in Beaverton, Oregon. Summit Design
(EDA) Ltd. is located in Herzlia, Israel, near Tel Aviv.

The following is a summary of the Company's significant accounting policies:

Basis of Consolidation

The 1994, 1995 and 1996 consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, Test System
Strategies, Inc. (TSSI) and Summit Design (EDA) Ltd. The 1993 consolidated
financial statements include the accounts of TSSI and its wholly-owned
subsidiary, TSSI-Japan, which was sold in December 1993. Upon consolidation,
all intercompany accounts, transactions and profits have been eliminated.

The Company was formed to accomplish the recapitalization and merger of TSSI
and SEE Technologies (the Reorganization). Under the terms of the merger
agreement which was effective January 1, 1994, all outstanding shares of stock
of TSSI and SEE Technologies were exchanged for approximately 60% and 40%
ownership in the Company, respectively. The Series A, B, C and D preferred
stockholders of TSSI received Summit Series B preferred stock at conversion
rates of .5896815 or 1.179363, resulting in 4,033,921 shares of Summit Series
B preferred being issued. Approximately 2 million outstanding shares of TSSI
common stock were converted at the rate of one share of TSSI common stock into
.5896815 shares of Summit common stock. The stockholders of SEE Technologies
received Summit Series A preferred stock totaling 3,367,000 shares. The
acquisition was accounted for under the purchase method of accounting with the
Company acquiring SEE Technologies for approximately $1.1 million. The
operations of SEE Technologies have been included commencing January 1, 1994.

F-7
<PAGE>

SUMMIT DESIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The approximate fair value of assets and liabilities acquired at the date of
merger are as follows (in thousands):

<TABLE>
<S> <C>
Cash............................................................. $ 212
Accounts receivable.............................................. 178
Prepaids and other assets........................................ 663
Inventories...................................................... 12
Marketable securities............................................ 101
Furniture and equipment.......................................... 150
In-process technology............................................ 647
Accrued and other liabilities.................................... (504)
Chief Scientist grant............................................ (348)
------
$1,111
======
</TABLE>

The amount allocated to in-process technology was determined based upon
known valuation techniques in the high technology industry. The technological
feasibility of in-process technology had not been established and had no
alternative future use at the time of merger. Accordingly, the entire amount
of approximately $647,000 was charged to operations in the first quarter of
1994.

Revenue Recognition

Product licenses revenue is derived from the sale of products to
distributors and end-users. Revenue from the sale of product licenses is
recognized upon delivery of the product if remaining vendor obligations are
insignificant and collection of the resulting receivable is probable. The
Company provides a ninety-day warranty on certain products. Estimated sales
returns and provisions for insignificant vendor obligations and estimated
warranty costs are recorded upon delivery of the product.

Maintenance and services revenue includes software maintenance and other
service revenue, primarily from training. Software maintenance revenue is
deferred and recognized ratably over the life of the maintenance contract.
Other service revenue is recognized as the related service is performed.

Fees received for granting distribution rights are deferred and recognized
ratably over the term of the distribution agreement.

Research and Development Costs

Costs related to research, design and development of products are charged to
research and development expense as incurred. Software development costs are
capitalized beginning when a product's technological feasibility has been
established by completion of a working model of the product and ending when a
product is available for general resale to customers. To date, completion of a
working model of the Company's products and general release have substantially
coincided. As a result, the Company has not capitalized any software
development costs since such costs have not been significant.

Cash Equivalents

The Company considers all highly liquid debt instruments with a remaining
maturity of three months or less when purchased to be cash equivalents.

Furniture and Equipment

Furniture and equipment, consisting primarily of computer equipment and
office furniture, are stated at cost, net of related depreciation. Maintenance
and repairs are charged to expense as incurred. Depreciation is

F-8
<PAGE>

SUMMIT DESIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

computed using the straight-line method over the estimated useful lives of the
related assets ranging from three to seven years. Amortization of equipment
under capital leases is provided using the straight-line method over the
shorter of the related lease terms or economic life of the leased assets. Upon
disposal of an asset subject to depreciation, the cost and related accumulated
depreciation are removed from the accounts and resulting gains and losses are
reflected in operations.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial reporting and
tax bases of assets and liabilities and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period of change. Valuation allowances are established when
necessary, to reduce deferred tax assets to the amounts expected to be
realized.

Concentration of Credit Risk

The Company sells its products primarily to commercial end-users across many
industries directly and through independent and affiliated distributors in
North America, Europe and Asia. The Company's end-user customers include
companies in a wide range of industries, including semiconductor devices,
semiconductor test equipment, telecommunications, computer/peripherals,
consumer electronics, aerospace/defense and other electronics entities. The
Company performs ongoing credit evaluations of its customers' financial
condition and generally does not require collateral. The Company maintains
allowances for potential losses, and such losses have been within management's
expectations.

At December 31, 1995, substantially all of the Company's cash and cash
equivalents are invested in interest-bearing deposits with a major bank.

Foreign Currency Translation

The Company's subsidiary in Israel uses the U.S. dollar as its functional
currency for financial reporting purposes. The Company's sales to foreign
distributors and customers are denominated in U.S. dollars.

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 revenue and expenses during the
reporting period. Actual results could differ from those estimates.

Disclosure of Fair Value of Financial Instruments

The carrying amount of financial instruments including cash and cash
equivalents, accounts receivable, other current assets, accounts payable and
accrued liabilities approximated fair value as of December 31, 1995 because of
the relatively short maturity of these instruments. The carrying value of note
payable and long-term debt approximated fair value as of December 31, 1995,
based upon the interest rates available for the same or similar loans.

F-9
<PAGE>

SUMMIT DESIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Pro Forma

Upon the closing of an initial public offering of the Company's common
stock, all convertible preferred stock outstanding will convert into an
aggregate of 9,103,346 shares of common stock. The unaudited pro forma
stockholders' equity at June 30, 1996, is adjusted for the conversion of the
convertible preferred stock outstanding at June 30, 1996, as disclosed on the
face of the consolidated balance sheets.

Computation of Net Income (Loss) Per Share

Historical net income (loss) per share is computed using the weighted
average number of shares of common stock outstanding. Common equivalent shares
from stock options are excluded from the computation when their effect is
antidilutive, except that, pursuant to the Securities Exchange Commission
Staff Accounting Bulletins, common and common equivalent shares, issued at
prices below the anticipated public offering price during the twelve months
immediately preceding the initial filing date of the Company's initial public
offering, have been included as if they were outstanding for all periods
presented using the treasury stock method and the assumed initial public
offering price of $8.00. Pro forma net income (loss) per share includes common
shares issuable upon the conversion of the outstanding preferred stock (using
the if-converted method) as if they were outstanding for all periods ending
prior to the Company's initial public offering.

The historical net income (loss) per share of the Company and the shares
used in the calculation of historical net income (loss) per share are as
follows (shares in thousands):

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
---------------------- JUNE 30,
1993 1994 1995 1996
------ ------ ------ ----------
<S> <C> <C> <C> <C>
Net income (loss) per share.................. $(1.05) $(1.11) $(1.68) $ 0.04
====== ====== ====== ======
Shares used in per share calculation......... 1,542 1,842 1,873 11,970
</TABLE>

Interim Financial Data (Unaudited)

The consolidated financial statements as of June 30, 1996 and for the six
months ended June 30, 1995 and 1996 are unaudited; however, these financial
statements have been prepared on a basis consistent with the audited financial
statements and, in the opinion of management, include all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation
of the financial position, results of operations and cash flows in accordance
with generally accepted accounting principles. Results of the interim periods
are not necessarily indicative of results for the entire year.

Accounting for Stock Options

During October 1995, the Financial Accounting Standards Board issued
Statement No. 123 (SFAS 123) which established a fair value based method of
accounting for stock based compensation plans. While the Company is studying
the impact of the pronouncement, it continues to account for employee stock
options under APB Opinion No. 25, "Accounting for Stock Issued to Employees."
SFAS 123 will be effective for fiscal years beginning after December 15, 1995.

2. RESTATEMENT:

The Company has restated its 1993 and 1994 financial statements to charge
software development costs incurred prior to technological feasibility to
research and development expense. The 1994 financial statements have also been
restated to adjust for misstatements of 1994 distribution rights fees and
depreciation expense.

F-10
<PAGE>

SUMMIT DESIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The effect of these restatements was to increase net loss and pro forma per
share net loss by $738,000 and $0.07 in 1993 and $2,030,000 and $0.18 in 1994,
respectively. The increase in 1993 net loss is comprised of $738,000 related
to software development costs. The increase in 1994 net loss is comprised of
$1,265,000, $483,000 and $282,000 related to software development costs,
distribution rights fees and depreciation, respectively.

3. FURNITURE AND EQUIPMENT:

Furniture and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Office furniture and equipment..................... $ 262 $ 261 $ 180
Computer equipment................................. 1,415 1,969 2,306
Leasehold improvements............................. 35 38 38
Vehicles........................................... 39 14 14
Capital leases..................................... 711 682 705
------- ------- -------
2,462 2,964 3,243
Less accumulated depreciation and amortization..... (1,013) (1,174) (1,519)
------- ------- -------
$ 1,449 $ 1,790 $ 1,724
======= ======= =======
</TABLE>

4. NOTE PAYABLE TO BANK:

The Company has available a $2 million line of credit with U.S. National
Bank of Oregon, which matures April 30, 1997 and is collateralized by accounts
receivable, inventory, chattel paper, general intangibles, patents,
trademarks, copyrights and products and proceeds of the foregoing. Maximum
borrowings under the line shall not exceed 75% of eligible accounts
receivable. Interest on the unpaid balance accrues at a rate that ranges from
prime plus 1.25% to prime plus 2.0%, depending on the debt to tangible net
worth ratio maintained by the Company, and is payable monthly. Prime at
December 31, 1995 was 8.25%. At December 31, 1995, approximately $1 million
was outstanding under the Company's line of credit. There was no amount
outstanding at June 30, 1996.

The line of credit agreement contains financial covenants, including
covenants relating to the ratio of current assets to current liabilities,
working capital, net worth, the ratio of debt to net worth and dividend
restrictions.

5. ACCRUED LIABILITIES:

Accrued liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1994 1995 1996
------ ------ --------
<S> <C> <C> <C>
Commissions payable...................................... $ 194 $ 340 $ 120
Payroll and related benefits............................. 722 1,384 1,315
Accrued management relocation costs...................... 400 47 60
Accounting and legal..................................... -- 80 161
Sales and state income taxes payable..................... 84 42 5
Other.................................................... 96 354 618
------ ------ ------
$1,496 $2,247 $2,279
====== ====== ======
</TABLE>

F-11
<PAGE>

SUMMIT DESIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. LEASES:

The Company is obligated under capital leases for equipment that expire at
various dates during the next five years. The leased assets are included in
equipment at a capitalized amount of $682,000 at December 31, 1995. Related
accumulated amortization of $398,000 at December 31, 1995, is included in
accumulated depreciation and amortization.

The Company has entered into a noncancelable operating lease for the use of
a building. Rental expense was approximately $179,000, $193,000, $261,000,
$132,000 and $151,000 for the three years ended December 31, 1993, 1994 and
1995 and the six months ended June 30, 1995 and 1996. In addition, Summit
Design (EDA) Ltd. entered into a sublease with a related party for its
premises. The lease expires in 1997. Annual rental is contingent on the
Israeli consumer price index and is approximately $165,000 annually.

Future minimum lease payments under these operating leases and capital
leases for the years ending December 31 are as follows (in thousands):

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1996........................................................ $ 208 $ 454
1997........................................................ 65 347
1998........................................................ 48 324
1999........................................................ 48 344
----- ------
Total minimum lease payments.............................. 369 $1,469
======
Less amount representing interest (at rates ranging from 5%
to 15%).................................................... (27)
-----
Present value of minimum capital lease payments........... 342
Less current installments of obligations under capital lease
payments................................................... (191)
-----
Obligations under capital leases, excluding current
installments............................................. $ 151
=====
</TABLE>

7. LONG-TERM DEBT:

Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------ JUNE 30,
1994 1995 1996
----- ------ --------
<S> <C> <C> <C>
Equipment note, payable in monthly installments of $14
plus interest at prime plus 1% (9.25% at December 31,
1995), collateralized by the equipment financed, due
June 1998............................................... $ -- $ 381 $ 309
Note payable to a corporation, payable in monthly
installments of $19 plus interest at the prime rate plus
1% (9.25% at December 31, 1995), due September 1997..... -- 391 268
Marketing grant payable to the Israeli government........ 60 298 351
Chief Scientist grant payable to the Israeli government.. 348 849 840
Other.................................................... 63 -- --
----- ------ ------
471 1,919 1,768
Current portion.......................................... 411 854 844
----- ------ ------
Noncurrent portion....................................... $ 60 $1,065 $ 924
===== ====== ======
</TABLE>

F-12
<PAGE>

SUMMIT DESIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Chief Scientist grant represents research and development funding of
approximately $232,000 in 1993 and $608,000 in 1995 received from the Israeli
government which is to be repaid at the rate of 3% to 5% of the sale of Visual
HDL for VHDL until 150% and 100% of the 1993 and 1995 grants, respectively,
are repaid in full. The 1993 grant is reflected at 150% of the original grant
received. The Company has entered into an agreement with the Israeli
government whereby the amount under the 1995 grant will be unconditionally
repaid no later than July 31, 2000.

The Company received a Marketing Fund grant of $379,000 from the Israeli
Ministry of Industry and Trade through June 30, 1996. This grant is to be
repaid at the rate of 3% of the increase in export sales of all Israeli
products over the base year until repaid.

Future principal payments of debt outstanding for the years ending December
31 are as follows (in thousands):

8. STOCKHOLDERS' EQUITY:

Preferred Stock

Preferred stock is summarized as follows (dollar amounts in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------- --------
1994 1995 1996
------ ------ --------
<S> <C> <C> <C>
Series A -- $.01 par; 3,367,000 shares authorized,
issued and outstanding; liquidation preference of
$4,411 at December 31, 1995......................... $ 34 $ 34 $34
Series B -- $.01 par; 4,033,949 shares authorized and
4,033,921 shares issued and outstanding; liquidation
preference of $7,584 at December 31, 1995........... 40 40 40
Series C -- $.01 par; 400,000 shares authorized,
375,000 shares in 1994 and 310,000 shares in 1995
and 1996 issued and outstanding; liquidation
preference of $310 at December 31, 1995............. 4 3 3
Series D -- $.01 par; 933,334 shares authorized,
823,091 shares in 1994 and 792,425 shares issued and
outstanding in 1995 and 1996; liquidation preference
of $2,972 at December 31, 1995...................... 8 8 8
Series E -- $.01 par; 600,000 shares authorized,
issued and outstanding; liquidation preference of
$4,038 at December 31, 1995......................... -- 6 6
------ ------ ---
$ 86 $ 91 $91
====== ====== ===
</TABLE>

Each share of preferred stock has voting rights and is convertible (subject
to anti-dilutive adjustments in certain circumstances) into one share of
common stock at the option of the holder, or automatically upon the sale of
the Company's common stock pursuant to a public offering with aggregate net
cash proceeds to the Company of at least $10 million and a price to the public
of at least $5.50 per share.

F-13
<PAGE>

SUMMIT DESIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In the event of a liquidation, which includes a merger or sale of
substantially all of the Company's assets, the holders of Series E preferred
stock receive preference in the amount of $6.73 per share, plus all declared
but unpaid dividends, over all other outstanding shares of stock. Holders of
Series D preferred stock have a liquidation priority over holders of Series A-
C preferred stock up to a liquidation preference of $3.75, plus all declared
but unpaid dividends. Holders of Series A and Series B preferred stock,
treated as one class, have a liquidation priority over holders of Series C
preferred stock and common stock up to a liquidation preference of $1.31 and
$1.88 per share, respectively, plus all declared but unpaid dividends. Holders
of Series C preferred stock have liquidation priority over holders of common
stock up to a liquidation priority of $1.00 per share. Common stockholders
have a liquidation preference up to $.10 per share upon satisfaction of the
Series A, Series B, Series C, Series D and Series E preferred preferences. Any
remaining assets shall be shared equally among all outstanding stockholders.

If, in the event of liquidation, the Company's assets are insufficient to
pay the holders of any particular series of preferred stock their full
preferential amount, then legally available assets of the Company will be
distributed ratably among holders of that series of preferred stock after
payment of the full preferential amount has been made to all series of
preferred stock having a senior liquidation preference.

Each share of preferred stock has a dividend rate of $.10. Dividends are not
cumulative and none have been declared or paid to date.

1994 Stock Plan

The Company has a stock plan pursuant to which the Company may grant options
to employees and consultants. Under the terms of the plan, the option price is
determined by the Board of Directors at the time the option is granted. Under
the plan, 1,687,000 shares of common stock are authorized for issuance.
Options granted are immediately exercisable, and ownership generally vests 25%
twelve months after the date of grant and the remainder at 1/48 of the grant
amount in each successive month thereafter. Shares issued are subject to
repurchase until vested. Options expire no later than 10 years after the date
of grant.

F-14
<PAGE>

SUMMIT DESIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1995, options to purchase 612,282 shares were vested.
Options outstanding and transactions were as follows:

<TABLE>
<CAPTION>
EXERCISE
OPTIONS PRICE RANGE
--------- --------------
<S> <C> <C>
Balance, December 31, 1992........................... 213,615 $0.25 -- $0.51
Options granted.................................... 370,024 $0.01 -- $0.20
Options exercised.................................. (75,955) $0.25 -- $0.51
Options canceled................................... (32,726) $0.20 -- $0.51
--------- --------------
Balance, December 31, 1993........................... 474,958 $0.01 -- $0.51
Options granted.................................... 1,035,796 $0.02 -- $2.50
Options exercised.................................. (528,550) $0.02 -- $0.51
Options canceled................................... (108,747) $0.01 -- $1.75
--------- --------------
Balance, December 31, 1994........................... 873,457 $0.02 -- $5.00
Options granted.................................... 551,187 $1.75
Options exercised.................................. (71,757) $0.02 -- $0.51
Options canceled................................... (192,075) $0.02 -- $2.50
--------- --------------
Balance, December 31, 1995........................... 1,160,812 $0.02 -- $2.50
Options granted.................................... 110,595 $1.75 -- $7.50
Options exercised.................................. (320,002) $0.02 -- $1.75
Options canceled................................... (68,465) $0.35 -- $2.50
--------- --------------
Balance, June 30, 1996............................... 882,940 $0.02 -- $7.50
========= ==============
</TABLE>

Effective September 13, 1995, the Board of Directors of the Company approved
an adjustment to the exercise price of the Company's outstanding stock options
with an exercise price in excess of $1.75. All outstanding options subject to
the adjustment were repriced to $1.75, the fair market value at that date as
determined by the Board. Participation by each option holder was voluntary.
The weighted average exercise price per share of options outstanding at June
30, 1996 is $1.93.

Right to Repurchase Stock

The Company has the right of first refusal to repurchase common stock issued
to employees or common stock issued upon exercise of warrants. This right
terminates 90 days after the first sale of Company common stock pursuant to a
Registration Statement filed with the Securities and Exchange Commission.

Common Shares Reserved

As of December 31, 1995, the Company has reserved shares of common stock for
issuance as follows:

<TABLE>
<S> <C>
Conversion of preferred stock..................................... 9,103,346
Exercise of common stock options.................................. 1,160,812
----------
10,264,158
==========
</TABLE>

F-15
<PAGE>

SUMMIT DESIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. INCOME TAXES:

The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109 on a prospective basis effective January 1, 1993. The
adoption did not have a significant impact on the Company's financial
statements. The provision for income taxes consists of the following (in
thousands):

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------- ---------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Current:
Federal............................... $ -- $ -- $ -- $ -- $ --
State................................. -- -- 1 -- --
Foreign............................... -- 402 398 173 209
------- ------- ------- ------- -------
$ -- $ 402 $ 399 $ 173 $ 209
======= ======= ======= ======= =======
</TABLE>

The difference between the effective income tax rate and the statutory U.S.
federal income tax rate is as follows (in thousands):

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------- ----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Tax provision (benefit) at
statutory rate................... $ (551) $ (334) $ (907) $ (977) $ 237
Foreign withholding taxes......... -- 402 398 173 209
Deferred taxes, primarily increase
in valuation allowance and
utilization of net operating
losses........................... 551 334 907 977 (237)
State............................. -- -- 1 -- --
------- ------- ------- ------- ------
$ -- $ 402 $ 399 $ 173 $ 209
======= ======= ======= ======= ======
</TABLE>

At June 30, 1996, the Company had net operating loss carryforwards for
federal and state income tax purposes which can be used to offset future
income subject to taxes. In addition, there are unused research and
experimentation and foreign tax credits which may be available for offset
against future federal income taxes after use of the loss carryforwards. Such
loss carryforwards and tax credits are summarized below (in thousands):

<TABLE>
<CAPTION>
EXPIRATION
AMOUNT DATES
------ ------------
<S> <C> <C>
Loss carryforwards:
Federal................................................... $9,622 2001 -- 2010
State..................................................... 7,174 2001 -- 2010
Research and experimentation credits (federal only)......... 263 2001 -- 2011
Foreign tax credits (federal only).......................... 693 1998 -- 1999
</TABLE>

Due to changes in the Company's ownership structure which occurred as a
result of the Reorganization and a subsequent preferred stock financing, the
federal and state net operating loss carryforwards are limited in use to
approximately $1.7 million and $1.2 million annually, respectively. The tax
credit carryforwards are also subject to limitation due to the change in
ownership.

In addition, the Company has foreign income tax net operating losses of
approximately $5.7 million. These foreign losses were generated in Israel over
several years and have not yet received final assessment

F-16
<PAGE>

SUMMIT DESIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

from the Israeli government. Consequently, management is uncertain as to the
continued availability of a substantial portion of such foreign loss
carryforwards.

The approximate effects of temporary differences which give rise to deferred
tax assets and liabilities are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Deferred tax assets:
Federal and state net operating loss
carryforwards.................................... $ 2,710 $ 3,836 $ 3,519
Foreign operating loss carryforwards.............. 1,062 1,134 1,026
Research and experimentation credit
carryforwards.................................... 263 263 263
Foreign tax credit carryforwards.................. 77 486 694
Other deferred tax items.......................... 873 735 943
------- ------- -------
Total gross deferred tax assets................. 4,985 6,454 6,445
Less valuation allowances......................... (4,479) (5,982) (5,932)
------- ------- -------
Net deferred tax assets......................... 506 472 513
------- ------- -------
Deferred tax liabilities:
Other deferred tax items.......................... (506) (472) (513)
------- ------- -------
Total gross deferred tax liabilities............ (506) (472) (513)
------- ------- -------
Net deferred taxes.............................. $ -- $ -- $ --
======= ======= =======
</TABLE>

The Company has established a valuation allowance against its deferred tax
assets due to the uncertainty surrounding the realization of such assets.
Management evaluates on a quarterly basis the recoverability of the deferred
tax assets and the level of the valuation allowance. The net change in the
valuation allowance for the years ended December 31, 1994 and 1995 was an
increase of approximately $900,000 and $1.5 million, respectively. The
valuation allowance at January 1, 1994 was approximately $3.6 million.
Approximately $1.1 million of the increase in the valuation allowance for the
year ended December 31, 1995 resulted from the operating loss generated in
such year.

10. 401(K) PLAN:

The Company has a 401(k) plan (the Plan) covering substantially all
employees meeting minimum service requirements. The Plan allows for the
Company to make discretionary matching contributions as determined by a
committee of the Board of Directors. The Company provided a discretionary
contribution of $6,000 and $10,000 in 1994 and 1995, respectively.

11. COMMITMENTS AND CONTINGENCIES:

Summit Design (EDA) Ltd. has registered floating charges on all its assets
as security for compliance with the terms attached to Israeli investment
grants received.

The Company has entered into employment agreements with certain of its
executive officers. These agreements provide for base annual compensation and
certain incentive bonuses and stock options on various vesting schedules as
well as severance compensation in the event of termination without cause.

F-17
<PAGE>

SUMMIT DESIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. BUSINESS SEGMENTS, EXPORTS AND MAJOR CUSTOMERS:

The Company operates in a single industry segment comprising the electronic
design automation industry. Net revenue by geographic region (in thousands)
and as a percentage of total revenue for each region outside the United States
that constitutes more than 10% of the Company's total revenue is as follows:

<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED ENDED JUNE
DECEMBER 31, 30,
------------------- ------------
1993 1994 1995 1995 1996
----- ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
Europe...................................... $ 671 $1,164 $1,893 $ 624 $1,274
Asia Pacific................................ 2,089 3,850 5,447 2,618 3,454
As a Percentage of Total Revenue:
Europe...................................... 9.3% 9.0% 13.5% 10.7% 13.6%
Asia Pacific................................ 28.9% 29.6% 38.7% 45.0% 36.9%
</TABLE>

During 1993, 1994, 1995 and the six months ended June 30, 1995 and 1996,
other than the purchaser of certain technology in a one-time transaction, no
single customer accounted for more than 10% of total revenue. Foreign
operations of Summit Design (EDA) Ltd. accounted for less than 10% of total
revenue of the Company in each of the three years in the period ended December
31, 1995. Identifiable assets of the Company's subsidiary were $1.3 million at
December 31, 1995.

13. RELATED PARTIES:

At the time of the Reorganization, the Company entered into a one-year
financial services agreement with a significant stockholder pursuant to which
the stockholder provided the Company certain financial consulting services
related to its subsidiary in Israel. The Company entered into an agreement to
pay $100,000 to this stockholder in 1994 in conjunction with this agreement.
Additionally, Summit Design (EDA) Ltd. leases its corporate offices from the
stockholder under a four-year sublease agreement on the same terms and
conditions that the stockholder leases such space.

14. SUBSEQUENT EVENTS:

In May 1996, the Company's Board of Directors authorized management of the
Company to file a Registration Statement with the Securities and Exchange
Commission permitting the Company to sell shares of its common stock to the
public. Also in May 1996, the Board of Directors approved an Amended and
Restated Certificate of Incorporation to be filed upon the completion of this
offering. The Amended and Restated Certificate of Incorporation, among other
things, authorizes 5,000,000 shares, $0.01 par value of Preferred Stock and
increased the authorized number of shares of Common Stock, par value $0.01 per
share, from 20,000,000 shares to 30,000,000 shares. Additionally, the Board
authorized increases in the number of shares issuable under the 1994 Stock
Plan to 2,322,000.

The Company entered into an agreement with Seiko Instruments, Inc. (Seiko)
during the first quarter of 1996, which granted to Seiko an exclusive right to
distribute and support certain Summit products in Japan. Under the terms of
the agreement, Seiko will pay the Company a distribution rights fee of
$1,100,000 during the period of the agreement which is three years ending
February 1999. The Company will receive payments from Seiko of $800,000,
$200,000 and $100,000 in 1996, 1997 and 1998, respectively. In the six months
ended June 30, 1996, the Company recognized revenue of $184,000 associated
with this agreement.

Effective April 1, 1996, the Company invested $100,000 for a 20% interest in
a joint venture corporation which shall acquire the exclusive rights to
manufacture, sell, distribute and support all of the Company's products in the
Asia-Pacific region, excluding Japan.

F-18
<PAGE>

VISUAL HDL

VISUAL HDL CAN RAISE DESIGNER PRODUCTIVITY by allowing system level, behavioral
level and functional level design entry using graphical design methods such as
block diagrams, state machines, flow charts and truth tables. Summit has
installed more than 1,300 seats of its SLDA tools in more than 125 companies,
of which more than 100 companies have entered into support contracts.

[GRAPHIC SHOWING SCREEN SHOTS OF SLDA BLOCK DIAGRAMS, STATE MACHINES, FLOW
CHARTS AND TRUTH TABLES]

TDS

TEST DEVELOPMENT ENGINEERS USE TDS to convert design simulation data into
optimized and debugged test programs. Summit has more than 250 active
installations of its TDS products.

[GRAPHIC SHOWING SCREEN SHOTS OF SIMULATION DATA]
<PAGE>

[GRAPHIC OF MOUNTAIN]

[SUMMIT DESIGN LOGO APPEARS HERE]
<PAGE>

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 by the Company in connection
with the sale and distribution of Common Stock being registered. All amounts
are estimates except the registration fee and the NASD filing fee.

<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
Registration fee............................................... $ 15,665
NASD filing fee................................................ 5,560
Printing expenses.............................................. 150,000
Legal fees and expenses........................................ 300,000
Accounting fees and expenses................................... 300,000
Blue Sky fees and expenses..................................... 5,000
Transfer Agent and Registrar fees and expenses................. 10,000
Nasdaq Application and listing fees............................ 50,000
Directors and Officers Insurance Premium....................... 240,000
Miscellaneous.................................................. 123,775
----------
Total........................................................ $1,200,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Reference is made to Article Eighth of the Certificate of Incorporation of
the Company, filed herewith as Exhibit 3.1; Article VI of the Bylaws of the
Company, filed herewith as Exhibit 3.3; Section 145 of the Delaware General
Corporation Law; and the form of indemnification agreement filed herewith as
Exhibit 10.1 which, among other things, and subject to certain conditions,
authorize the Company to indemnify, or indemnify by their terms, as the case
may be, the directors and officers of the Company against certain liabilities
and expenses incurred by such persons in connection with claims made by reason
of their being such a director or officer.

See the form of the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement for certain provisions relating to indemnification of
the Company and its officers and directors.

The Company has obtained directors and officers insurance providing
indemnification for certain of the Company's directors, officers, affiliates,
partners or employees for certain liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since December 29, 1993, the date of its incorporation, the Company has sold
unregistered securities in the amounts, at the time, and for the aggregate
amounts of consideration listed as follows:

(a) In December 1993, the Company issued 3,596,154 shares of its Series A
Preferred Stock to the two stockholders of SEE Technologies in exchange for
3,390,900 Ordinary Shares of SEE Technologies. The two stockholders
subsequently contributed 229,154 shares of the Series A Preferred Stock to
Summit.

(b) In February 1994, the Company entered into an agreement with Test
Systems Strategies, Inc. ("TSSI") whereby the Company acquired (i) all of
the outstanding Common Stock of TSSI in exchange for 1,806,340 shares of
the Company's Common Stock which were issued to 112 stockholders and
(ii) all of the outstanding Preferred Stock of TSSI in exchange for
4,033,921 shares of the Company's Series B Preferred Stock which were
issued to 27 stockholders.

II-1
<PAGE>

(c) In February 1994, the Company issued $400,000 aggregate principal
amount of convertible subordinated debentures to 16 persons and entities.
On November 11, 1994, all of the then outstanding convertible subordinated
debentures were converted into 375,000 shares of Series C Preferred Stock
of the Company.

(d) In May 1994, the Company sold to 21 stockholders an aggregate of
823,091 shares of its Series D Preferred Stock at $3.75 per share, for an
aggregate purchase price of $3,085,845.

(e) In June and July 1995, the Company sold to 7 stockholders an
aggregate of 600,000 shares of its Series E Preferred Stock at $4.52 per
share, for an aggregate purchase price of $2,711,048.

(f) From January 1994 through August 31, 1996, the Registrant has granted
stock options to purchase 2,305,492 shares of the Company's Common Stock at
exercise prices ranging from $0.02 to $7.50 per share to employees,
consultants and directors pursuant to its 1994 Stock Plan.

The transactions listed in Item 15 were made in reliance upon the exemptions
from registration under the Securities Act of 1933, as amended, contained in
Section 4(2) thereof. No underwriters were involved in any of the foregoing
transactions.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS

<TABLE>
<C> <S>
1.1** Form of Underwriting Agreement.
3.1** Certificate of Incorporation, as amended.
3.2 Form of Amended and Restated Certificate of Incorporation to be filed
promptly after the closing of the offering.
3.3** Bylaws, as amended.
3.4 Amended and Restated Bylaws.
4.1 Specimen Common Stock Certificate of Company.
4.2** Investors' Rights Agreement between the Registrant and the parties
named therein dated February 10, 1994, as amended.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1** Form of Indemnification Agreement between Registrant and its
executive officers and directors.
10.2** 1994 Stock Plan, as amended.
10.3 1996 Employee Stock Purchase Plan.
10.4 1996 Director Option Plan.
10.5** Employment Agreement between the Registrant and Larry J. Gerhard
dated December 13, 1993.
10.6** Employment Agreement between the Registrant and C. Albert Koob dated
October 21, 1995.
10.7** Employment Agreement between the Registrant and Zamir Paz dated
January 1, 1996.
10.8** Employment Agreement between the Registrant and Dan Skilken dated
November 20, 1993.
10.9** Employment Agreement between the Registrant and Roger Bitter dated
November 22, 1993, as amended.
10.10 Employment Agreement between the Registrant and Eric Benhayoun dated
October 31, 1994.
10.11** Employment Agreement between the Registrant and David Greg Kott dated
March 1, 1995.
10.12** Board of Directors Directorship Agreement between the Registrant and
Fred L. Hanson dated October 9, 1995.
10.13** Lease Agreement between the Registrant and Petula Associates Ltd. and
Koll Creekside Associates II dated October 26, 1993, as amended.
10.14** Sublease Agreement, dated as of January 1993 between DCL
Technologies, Ltd. and SEE Technologies, Ltd.
10.15** Bank Line of Credit Agreement between Registrant and U.S. National
Bank of Oregon dated May 1, 1996.
</TABLE>

II-2
<PAGE>

<TABLE>
<C> <S>
10.16+** Joint Venture Agreement between Summit Design Israel, Inc. and Anam
S&T Co., Ltd. dated March 21, 1996.

10.17+** Distributor Agreement between the Registrant and Seiko Instruments,
Inc., dated February 1, 1996.

10.18+** Distributor Agreement between the Registrant and ATE Service Co.,
Ltd., dated October 23, 1995, and amended as of April 9, 1996.

11.1 Statement regarding computation of the Company's per share earnings.

16.1** Letter re Change in Certifying Accountant.

21.1** List of Subsidiaries.

23.1 Consent of Coopers & Lybrand L.L.P.

23.2 Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included in
Exhibit 5.1).

24.1** Powers of attorney (See page II-4).

27.1 Financial Data Schedule.
</TABLE>
- --------

** Previously filed.
- --------------------

+ Documents for which confidential treatment has been requested.

(B) FINANCIAL STATEMENT SCHEDULES

Schedule II--Valuation and Qualifying Accounts.

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or shown in the
Consolidated Financial Statements or notes thereto.

ITEM 17. UNDERTAKINGS

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

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 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, 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 whether such indemnification by
it is against public policy as expressed in the 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 of
1933, 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
of 1933, 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.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-1
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Beaverton, State of Oregon, on the 16th day of September, 1996.

SUMMIT DESIGN, INC.

By: /s/ C. Albert Koob
----------------------------------
C. Albert Koob
Vice President and Chief
Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* President, Chief Executive September 16, 1996
- ------------------ Officer and Director
Larry J. Gerhard (Principal Executive Officer)

/s/ C. Albert Koob Vice President and Chief September 16, 1996
- ------------------ Financial Officer (Principal
C. Albert Koob Financial and Accounting
Officer)

* Director September 16, 1996
- ------------------
Zamir Paz

* Director September 16, 1996
- ------------------
Amihai Ben-David

* Director September 16, 1996
- ------------------
John Grillos

* Director September 16, 1996
- ------------------
Fred L. Hanson

* Director September 16, 1996
- ------------------
Jay Morrison

* Director September 16, 1996
- ------------------
Mark Stevens

*By: /s/ C. Albert Koob September 16, 1996
-----------------------------------
C. Albert Koob
as Attorney-In-Fact
</TABLE>

II-4
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE

In connection with our audits of the consolidated financial statements of
Summit Design Inc. and its subsidiaries as of December 31, 1994 and 1995, and
for each of the three years in the period ended December 31, 1995, which
financial statements are included in the Prospectus, we have also audited the
financial statement schedule listed in Item 16b herein.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

Coopers & Lybrand L.L.P.

Portland, Oregon
June 18, 1996

II-5

<PAGE>

EXHIBIT 3.2
-----------

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

SUMMIT DESIGN, INC.

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

1. The name of the corporation is Summit Design, Inc. The original
Certificate of Incorporation was filed with the Secretary of State of the State
of Delaware on December 29, 1993.

2. This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the corporation's Certificate of
Incorporation as heretofore amended. The amendments and restatement herein set
forth have been duly approved by the Board of Directors in accordance with
Sections 242 and 245 of the General Corporation Law of Delaware and by the
written consent of a majority of the stockholders of the corporation and a
majority of the holders of each class entitled to a class vote thereon in
accordance with the provisions of Sections 228 and 242 of the General
Corporation Law of Delaware.

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

FIRST. The name of the corporation is Summit Design, Inc.

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

THIRD. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.

FOURTH. The corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock". The total number
of shares that the corporation is authorized to issue is Thirty-Five Million
(35,000,000) shares, consisting of Thirty Million (30,000,000) shares of Common
Stock, par value $0.01 per share, and Five Million (5,000,000) shares of
Preferred Stock, par value $0.01 per share .
<PAGE>

The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized to fix or alter from time to time
the designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions thereof, including
without limitation the dividend rights, dividend rate, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions),
redemption price or prices, and the liquidation preferences of any wholly
unissued series of Preferred Stock, and to establish from time to time the
number of shares constituting any such series and the designation thereof, or
any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.

FIFTH. The number of directors which constitute the entire Board of
Directors of the corporation shall be as specified in the bylaws of the
corporation. At each annual meeting of stockholders, directors of the
corporation shall be elected to hold office until the expiration of the term of
which they are elected and until their successors have been duly elected and
qualified; except that if any such election shall not be so held, such election
shall take place at a stockholders' meeting called and held in accordance with
the General Corporation Law of Delaware.

Effective as of the date of the first regularly-scheduled annual meeting of
the stockholders following the closing of this corporation's initial public
offering (the "Closing Date"), the directors of the corporation shall be divided
into three classes as nearly equal in size as is practicable, hereby designated
Class I, Class II and Class III. The term of office of the initial Class I
directors shall expire at the second annual meeting of the stockholders
following the Closing Date, the term of office of the initial Class II directors
shall expire at the third annual meeting of the stockholders following the
Closing Date and the term of office of the initial Class III directors shall
expire at the fourth annual meeting of the stockholders following the Closing
Date. At each annual meeting of stockholders, commencing with the second
regularly-scheduled annual meeting of stockholders following the Closing Date,
each of the successors elected to replace the directors of a Class whose term
shall have expired at such annual meeting shall be elected to hold office until
the third annual meeting next succeeding his or her election and until his or
her respective successor shall have been duly elected and qualified.

If the number of directors is hereafter changed, any newly created
directorships or decrease in directorships shall be so apportioned among the
classes as to make all classes as nearly equal in number as is practicable,
provided that no decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.

Any director may be removed from office by the stockholders of the
corporation only for cause.

Vacancies occurring on the Board of Directors for any reason and newly
created directorships resulting from an increase in the authorized number of
directors may be filled only by vote of a

-2-
<PAGE>

majority of the remaining members of the Board of Directors, although less than
a quorum, at any meeting of the Board of Directors. A person so elected by the
Board of Directors to fill a vacancy or newly created directorship shall hold
office until the next election of the Class for which such director shall have
been chosen and until his or her successor shall have been duly elected and
qualified.

SIXTH. The Board of Directors of the corporation is expressly authorized
to adopt, amend or repeal the bylaws of the corporation (except as may be
otherwise provided in the bylaws), but the stockholders may make additional
bylaws and may alter or repeal any bylaw whether adopted by them or otherwise.

SEVENTH. Elections of directors need not be by written ballot except and
to the extent provided in the bylaws of the corporation.

EIGHTH. A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of
Delaware as the same exists or may hereafter be amended. Any repeal or
modification of this Article EIGHTH shall not adversely affect any right or
protection of a director of the corporation existing hereunder with respect to
any act or omission occurring prior to such repeal or modification.

NINTH. Stockholders of the corporation may not take action by written
consent in lieu of a meeting but must take any actions at a duly called annual
or special meeting.

TENTH. Notwithstanding any other provisions of this Amended and Restated
Certificate of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any affirmative vote of the
holders of the capital stock required by law or this Amended and Restated
Certificate of Incorporation, the affirmative vote of the holders of at least
two-thirds (2/3) of the combined voting power of all of the then-outstanding
shares of the corporation entitled to vote shall be required to alter, amend or
repeal Articles FIFTH, SIXTH, SEVENTH, EIGHTH, NINTH and TENTH.

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

-3-
<PAGE>

THE UNDERSIGNED, being the President and Chief Executive Officer of the
corporation, does make this certificate, hereby declaring and certifying that
this is his act and deed and the facts herein stated are true, and accordingly,
has hereunto set his hand this __th day of ___________, 1996.

SUMMIT DESIGN, INC.

_______________________________________________________
Larry J. Gerhard, President and Chief Executive Officer

ATTEST:

- -----------------------------
C. Albert Koob, Secretary

-4-

<PAGE>

EXHIBIT 3.4
-----------

________________________________________________________________________________

AMENDED AND RESTATED BYLAWS

SUMMIT DESIGN, INC.

________________________________________________________________________________
<PAGE>

TABLE OF CONTENTS

ARTICLE I - CORPORATE OFFICES............................................... 1

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

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

2.1 PLACE OF MEETINGS............................................... 1
2.2 ANNUAL MEETING.................................................. 1
2.3 SPECIAL MEETING................................................. 3
2.4 NOTICE OF STOCKHOLDERS' MEETINGS................................ 3
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.................... 3
2.6 QUORUM.......................................................... 4
2.7 ADJOURNED MEETING; NOTICE....................................... 4
2.8 VOTING.......................................................... 4
2.9 WAIVER OF NOTICE................................................ 5
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT
WITHOUT A MEETING............................................... 5
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING;
GIVING CONSENTS................................................. 5
2.12 PROXIES......................................................... 6
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE........................... 6

ARTICLE III - DIRECTORS..................................................... 7

3.1 POWERS.......................................................... 7
3.2 NUMBER OF DIRECTORS............................................. 7
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE
OF DIRECTORS.................................................... 7
3.4 RESIGNATION AND VACANCIES....................................... 8
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE........................ 9
3.6 FIRST MEETINGS.................................................. 9
3.7 REGULAR MEETINGS................................................ 9
3.8 SPECIAL MEETINGS; NOTICE........................................ 9
3.9 QUORUM.......................................................... 10
3.10 WAIVER OF NOTICE................................................ 10
3.11 ADJOURNED MEETING; NOTICE....................................... 10
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A
MEETING......................................................... 10
3.13 FEES AND COMPENSATION OF DIRECTORS.............................. 11
3.14 APPROVAL OF LOANS TO OFFICERS................................... 11
</TABLE>
<PAGE>

<TABLE>
<S> <C> <C>
3.15 REMOVAL OF DIRECTORS......................................... 11

ARTICLE IV - COMMITTEES.................................................. 11

4.1 COMMITTEES OF DIRECTORS...................................... 11
4.2 COMMITTEE MINUTES............................................ 12
4.3 MEETINGS AND ACTION OF COMMITTEES............................ 12

ARTICLE V - OFFICERS..................................................... 13

5.1 OFFICERS..................................................... 13
5.2 ELECTION OF OFFICERS......................................... 13
5.3 SUBORDINATE OFFICERS......................................... 13
5.4 REMOVAL AND RESIGNATION OF OFFICERS.......................... 13
5.5 VACANCIES IN OFFICES......................................... 13
5.6 CHAIRMAN OF THE BOARD........................................ 14
5.7 PRESIDENT.................................................... 14
5.8 VICE PRESIDENT............................................... 14
5.9 SECRETARY.................................................... 14
5.10 CHIEF FINANCIAL OFFICER...................................... 15
5.11 ASSISTANT SECRETARY.......................................... 15
5.12 ADMINISTRATIVE OFFICERS...................................... 15
5.13 AUTHORITY AND DUTIES OF OFFICERS............................. 16

ARTICLE VI - INDEMNITY................................................... 16

6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.................... 16
6.2 INDEMNIFICATION OF OTHERS.................................... 16
6.3 INSURANCE.................................................... 16

ARTICLE VII - RECORDS AND REPORTS........................................ 17

7.1 MAINTENANCE AND INSPECTION OF RECORDS........................ 17
7.2 INSPECTION BY DIRECTORS...................................... 18
7.3 ANNUAL STATEMENT TO STOCKHOLDERS............................. 18
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS............... 18

ARTICLE VIII - GENERAL MATTERS........................................... 18

8.1 CHECKS....................................................... 18
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS............. 19
</TABLE>

-ii-
<PAGE>

TABLE OF CONTENTS
(continued)

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES......................... 19
8.4 SPECIAL DESIGNATION ON CERTIFICATES............................ 19
8.5 LOST CERTIFICATES.............................................. 20
8.6 CONSTRUCTION; DEFINITIONS...................................... 20
8.7 DIVIDENDS...................................................... 20
8.8 FISCAL YEAR.................................................... 20
8.9 SEAL........................................................... 21
8.10 TRANSFER OF STOCK.............................................. 21
8.11 STOCK TRANSFER AGREEMENTS...................................... 21
8.12 REGISTERED STOCKHOLDERS........................................ 21

ARTICLE IX - AMENDMENTS.................................................... 21

ARTICLE X - DISSOLUTION.................................................... 22

ARTICLE XI - CUSTODIAN..................................................... 22

11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES.................... 22
11.2 DUTIES OF CUSTODIAN............................................ 23
</TABLE>

-iii-
<PAGE>

AMENDED AND RESTATED BYLAWS

SUMMIT DESIGN, INC.

ARTICLE I

CORPORATE OFFICES
-----------------

1.1 REGISTERED OFFICE
-----------------

The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
- ---------- ----------
agent of the corporation at such location is The Corporation Trust Company.
-----------------------------

1.2 OTHER OFFICES
-------------

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

ARTICLE II

MEETINGS OF STOCKHOLDERS
------------------------

2.1 PLACE OF MEETINGS
-----------------

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

2.2 ANNUAL MEETING
--------------

The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such designation,
the annual meeting of stockholders shall be held on the third Friday of June in
each year at 3:00 p.m. However, if such day falls on a legal holiday, then the
meeting shall be held at the same time and place on the next succeeding full
business day. At the meeting, directors shall be elected and any other proper
business may be transacted.
<PAGE>

(a) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the board of directors, (B) otherwise properly brought before the meeting by
or at the direction of the board of directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than sixty (60) days nor
more than ninety (90) days prior to the meeting; provided, however, that in the
event that less than seventy (70) days notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice to be timely must
be so received not later than the close of business on the tenth (10th) day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. A stockholder's notice to the Secretary shall
set forth as to each matter the stockholder proposes to bring before the annual
meeting: (i) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
of the corporation which are beneficially owned by the stockholder, (iv) any
material interest of the stockholder in such business and (v) any other
information that is required to be provided by the stockholder pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the "1934
Act"), in his capacity as a proponent to a stockholder proposal. Notwithstanding
the foregoing, in order to include information with respect to a stockholder
proposal in the proxy statement and form of proxy for a stockholder's meeting,
stockholders must provide notice as required by the regulations promulgated
under the 1934 Act. Notwithstanding anything in these bylaws to the contrary, no
business shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph (b). The chairman of the annual meeting
shall, if the facts warrant, determine and declare at the meeting that business
was not properly brought before the meeting in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.

(b) Only persons who are nominated in accordance with the procedures
set forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the board of directors of the corporation
may be made at a meeting of stockholders by or at the direction of the board of
directors or by any stockholder of the corporation entitled to vote in the
election of directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the board of directors, shall be made pursuant to timely notice
in writing to the Secretary of the corporation in accordance with the provisions
of paragraph (b) of this Section 2.2. Such stockholder's notice shall set forth
(i) as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a director: (A) the name, age, business address and
residence address of such person, (B) the principal occupation or employment of
such person, (C) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings

-2-
<PAGE>

between the stockholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nominations are to be made by the
stockholder, and (E) any other information relating to such person that is
required to be disclosed in solicitations of proxies for elections of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the 1934
Act (including without limitation such person's written consent to being named
in the proxy statement, if any, as a nominee and to serving as a director if
elected); and (ii) as to such stockholder giving notice, the information
required to be provided pursuant to paragraph (b) of this Section 2.2. At the
request of the board of directors, any person nominated by a stockholder for
election as a director shall furnish to the Secretary of the corporation that
information required to be set forth in the stockholder's notice of nomination
which pertains to the nominee. No person shall be eligible for election as a
director of the corporation unless nominated in accordance with the procedures
set forth in this paragraph (c). The chairman of the meeting shall, if the facts
warrants, determine and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by these bylaws, and if he should so
determine, he shall so declare at the meeting, and the defective nomination
shall be disregarded.

2.3 SPECIAL MEETING
---------------

Special meetings of stockholders for any purpose or purposes may be called
at any time by the board of directors, or by a committee of the board of
directors which has been duly designated by the board of directors and whose
powers and authority, as expressly provided in a resolution of the board of
directors, include the power to call such meetings, but, except as otherwise
provided in Section 3.4(c) of these bylaws, such special meetings may not be
called by any other person or persons.

2.4 NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------

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

2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------

Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer

-3-
<PAGE>

agent of the corporation that the notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.

2.6 QUORUM
------

The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present or represented. At such adjourned meeting at which a quorum is present
or represented, any business may be transacted that might have been transacted
at the meeting as originally noticed.

The stockholders present at a duly called or held meeting at which a quorum
is present may continue to do business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.

2.7 ADJOURNED MEETING; NOTICE
-------------------------

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

2.8 VOTING
------

The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgers and joint owners
of stock and to voting trusts and other voting agreements).

Except as may be otherwise provided in the certificate of incorporation,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder.

-4-
<PAGE>

2.9 WAIVER OF NOTICE
----------------

Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.

2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------------

Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such stockholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.

Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.

2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
-----------------------------------------------------------

In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.

-5-
<PAGE>

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

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

(b) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting (if permitted), when no
prior action by the board of directors is necessary, shall be the day on which
the first written consent is expressed.

(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.

2.12 PROXIES
-------

Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.

2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------

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

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<PAGE>

ARTICLE III

DIRECTORS
---------

3.1 POWERS
------

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

3.2 NUMBER OF DIRECTORS
-------------------

The authorized number of directors shall be seven (7). This number may be
changed by a duly adopted amendment to the certificate of incorporation or by an
amendment to this bylaw adopted by the vote or written consent of the holders of
a majority of the stock issued and outstanding and entitled to vote or by
resolution of a majority of the board of directors.

No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.

3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
-------------------------------------------------------

Except as provided in Section 3.4 of these bylaws, directors shall hold
office until the expiration of the term for which elected. Directors need not be
stockholders unless so required by the certificate of incorporation or these
bylaws, wherein other qualifications for directors may be prescribed. Each
director, including a director elected to fill a vacancy, shall hold office
until his successor is elected and qualified or until his earlier resignation or
removal.

Effective as of the date of the first regularly-scheduled annual meeting of
the stockholders following the closing date of this corporation's initial public
offering (the "Closing Date"), the directors of the corporation shall be divided
into three classes as nearly equal in size as is practicable, hereby designated
Class I, Class II and Class III. The term of office of the initial Class I
directors shall expire at the second annual meeting of the stockholders
following the Closing Date, the term of office of the initial Class II directors
shall expire at the third annual meeting of the stockholders following the
Closing Date and the term of office of the initial Class III directors shall
expire at the fourth annual meeting of the stockholders following the Closing
Date. At each annual meeting of stockholders, commencing with the second
regularly-scheduled annual meeting of stockholders following the Closing Date,
each of the successors elected to replace the directors of a Class whose term
shall have expired at such annual meeting shall be elected to hold office until
the third annual meeting next succeeding his or her election and until his or
her respective successor shall have been duly elected and qualified. If the
number of directors is hereafter changed, any newly created

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<PAGE>

directorships or decrease in directorships shall be so apportioned among the
classes as to make all classes as nearly equal in number as is practicable,
provided that no decrease in the number of directors constituting the board of
directors shall shorten the term of any incumbent director.

Elections of directors need not be by written ballot.

3.4 RESIGNATION AND VACANCIES
-------------------------

(a) Any director may resign at any time upon written notice to the
corporation. When one or more directors so resigns and the resignation is
effective at a future date, unless otherwise provided in the certificate of
incorporation, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided in this
section in the filling of other vacancies.

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

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

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

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

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

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<PAGE>

office as aforesaid, which election shall be governed by the provisions of
Section 211 of the General Corporation Law of Delaware as far as applicable.

3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------

The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.

Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.

3.6 FIRST MEETINGS
--------------

The first meeting of each newly elected board of directors shall be held at
such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.

3.7 REGULAR MEETINGS
----------------

Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.

3.8 SPECIAL MEETINGS; NOTICE
------------------------

Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.

Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be

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<PAGE>

communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.

3.9 QUORUM
------

At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute, or by the certificate of
incorporation or in these bylaws. If a quorum is not present at any meeting of
the board of directors, then the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.

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

3.10 WAIVER OF NOTICE
----------------

Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.

3.11 ADJOURNED MEETING; NOTICE
-------------------------

If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.

3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------

Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may

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<PAGE>

be, consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the board or committee.

3.13 FEES AND COMPENSATION OF DIRECTORS
----------------------------------

Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.

3.14 APPROVAL OF LOANS TO OFFICERS
-----------------------------

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

3.15 REMOVAL OF DIRECTORS
--------------------

Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any director or the entire board of directors may be removed
only for cause by the holders of a majority of the shares then entitled to vote
at an election of directors.

No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.

ARTICLE IV

COMMITTEES
----------

4.1 COMMITTEES OF DIRECTORS
-----------------------

The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the corporation. The board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he, she
or they constitute a quorum, may unanimously appoint another member of the board
of directors to act at the meeting in the place of

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<PAGE>

any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the board of directors or in the bylaws of the
corporation, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers that may require it; but no such committee shall have the power or
authority to (i) amend the certificate of incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as provided in
Section 151(a) of the General Corporation Law of Delaware, fix any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation), (ii) adopt an agreement of merger or consolidation under Sections
251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, (iv) recommend to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or (v) amend
the bylaws of the corporation; and, unless the board resolution establishing the
committee, the bylaws or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to Section 253 of the General Corporation Law of Delaware.

4.2 COMMITTEE MINUTES
-----------------

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

4.3 MEETINGS AND ACTION OF COMMITTEES
---------------------------------

Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings and meetings by telephone), Section 3.7 (regular meetings),
Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10
(waiver of notice), Section 3.11 (adjournment and notice of adjournment), and
Section 3.12 (action without a meeting), with such changes in the context of
those bylaws as are necessary to substitute the committee and its members for
the board of directors and its members; provided, however, that the time of
regular meetings of committees may also be called by resolution of the board of
directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.

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<PAGE>

ARTICLE V

OFFICERS
--------

5.1 OFFICERS
--------

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

5.2 ELECTION OF OFFICERS
--------------------

The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 of these bylaws, shall be
chosen by the board of directors, subject to the rights, if any, of an officer
under any contract of employment.

5.3 SUBORDINATE OFFICERS
--------------------

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

5.4 REMOVAL AND RESIGNATION OF OFFICERS
-----------------------------------

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

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

5.5 VACANCIES IN OFFICES
--------------------

Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.

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<PAGE>

5.6 CHAIRMAN OF THE BOARD
---------------------

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

5.7 PRESIDENT
---------

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

5.8 VICE PRESIDENT
--------------

In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.

5.9 SECRETARY
---------

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

The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolu tion of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.

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<PAGE>

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

5.10 CHIEF FINANCIAL OFFICER
-----------------------

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

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

5.11 ASSISTANT SECRETARY
-------------------

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

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

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<PAGE>

5.13 AUTHORITY AND DUTIES OF OFFICERS
--------------------------------

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

ARTICLE VI

INDEMNITY
---------

6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------

The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation or any subsidiary, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.

6.2 INDEMNIFICATION OF OTHERS
-------------------------

The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.

6.3 INSURANCE
---------

The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the

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<PAGE>

corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the corporation would
have the power to indemnify him or her against such liability under the
provisions of the General Corporation Law of Delaware.

ARTICLE VII

RECORDS AND REPORTS
-------------------

7.1 MAINTENANCE AND INSPECTION OF RECORDS
-------------------------------------

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

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

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<PAGE>

7.2 INSPECTION BY DIRECTORS
-----------------------

Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.

7.3 ANNUAL STATEMENT TO STOCKHOLDERS
--------------------------------

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

7.4 REPRESENTATION OF SHARES OF OTHER CORPORATION
---------------------------------------------

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

ARTICLE VIII

GENERAL MATTERS
---------------

8.1 CHECKS
------

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

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<PAGE>

8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
------------------------------------------------

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

8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
--------------------------------------

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

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

8.4 SPECIAL DESIGNATION ON CERTIFICATES
-----------------------------------

If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General

-19-
<PAGE>

Corporation Law of Delaware, in lieu of the foregoing requirements there may be
set forth on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, the designations, the preferences, and the relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.

8.5 LOST CERTIFICATES
-----------------

Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal represen tative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.

8.6 CONSTRUCTION; DEFINITIONS
-------------------------

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

8.7 DIVIDENDS
---------

The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.

The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.

8.8 FISCAL YEAR
-----------

The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.

-20-
<PAGE>

8.9 SEAL
----

The corporate seal shall have the name of the corporation inscribed thereon
and shall be in such form as may be approved from time to time by the board of
directors.

8.10 TRANSFER OF STOCK
-----------------

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

8.11 STOCK TRANSFER AGREEMENTS
-------------------------

The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.

8.12 REGISTERED STOCKHOLDERS
-----------------------

The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.

ARTICLE IX

AMENDMENTS
----------

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

-21-
<PAGE>

ARTICLE X

DISSOLUTION
-----------

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

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

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

ARTICLE XI

CUSTODIAN
---------

11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
-------------------------------------------

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

-22-
<PAGE>

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

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

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

11.2 DUTIES OF CUSTODIAN
-------------------

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

-23-

<PAGE>

EXHIBIT 4.1

[LOGO OF SUMMIT DESIGNS APPEARS HERE]

THIS CERTIFIES THAT

is the record holder of

FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE
$0.01 PER SHARE, OF
SUMMIT DESIGN, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.

WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.

Dated:

AUTHORIZED SIGNATURE

/s/ C. Albert Koob /s/ Larry J. Gerhard

CHIEF FINANCIAL OFFICER PRESIDENT AND
AND SECRETARY CHIEF EXECUTIVE OFFICER

COUNTERSIGNED AND REGISTERED:
THE FIRST NATIONAL BANK OF BOSTON
TRANSFER AGENT AND REGISTRAR

BY /s/

<PAGE>

The Corporation shall furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock of the
corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Such requests shall be made to
the Corporation's Secretary at the principal office of the Copporation.

The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;

<TABLE>
<CAPTION>
<S> <C>
TEN COM -as tenants in common UNIF GIFT MIN ACT.............Custodian................
TEN ENT -as tenants by the entireties (cust) (Minor)
JT Ten -as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act.....................................
in common (state)
UNIF TRF MIN ACT.........Custodian(until age..........)
(cust)
................under Uniform Transfers
(Minor)
to Minors act..........................
(State)
</TABLE>

Additional abbreviations may also be used through not in above list.

FOR VALUE RECEIVED,_________________hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________

______________________________________

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)

________________________________________________________________________________

__________________________________________________________________________Shares
of the common stock reprensented by the within Certificate, and do hereby
irrevocably constitute and appoint

________________________________________________________________________________
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.

Dated__________________________

X ______________________________________

X ______________________________________
THE SIGNATURE(S) TO THIS ASSIGNMENT
NOTICE: MUST CORRESPOND WITH THE NAMES(S)
AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMNT OR
ANY CHANGE WHATEVER.

Signature(s) Guaranteed

By__________________________________________________
THE SIGNATURE(S) SHOULD BE QUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM. PURSUANT
TO S.E.C. RULE 17AD-15.

____________________________________________
AMERICAN BANK NOTE COMPANY JUNE 24, 1996 dw
3504 ATLANTIC AVENUE
SUITE 12
LONG BEACH, CA 90807
(310) 989-2333
(FAX) (310) 426-7450 NEW
____________________________________________

<PAGE>

EXHIBIT 5.1
-----------

Summit Design, Inc.
9305 S.W. Gemini Drive
Beaverton, Oregon 97008

RE: REGISTRATION STATEMENT ON FORM S-1
----------------------------------

Ladies and Gentlemen:

We have examined the Registration Statement on Form S-1 filed by you with
the Securities and Exchange Commission on June 20, 1996 (Registration No. 333-
6445), as amended (the "Registration Statement"), in connection with the
registration under the Securities Act of 1933, as amended, of up to 4,600,000
shares of your Common Stock, $0.01 par value per share (the "Shares"). The
Shares include an over-allotment option granted to the underwriters of the
offering to purchase up to 600,000 shares. We understand that the Shares are to
be sold to the underwriters of the offering for resale to the public as
described in the Registration Statement. As your legal counsel, we have examined
the proceedings taken, and are familiar with the proceedings proposed to be
taken, by you in connection with the sale and issuance of the Shares to be sold
by you ("Company Shares") and the sale of the Shares to be sold by certain of
your stockholders ("Selling Stockholder Shares").

It is our opinion that (i) upon completion of the proceedings being taken
or contemplated by us, as your counsel, to be taken prior to the issuance of the
Company Shares, including the proceedings being taken in order to permit such
transaction to be carried out in accordance with applicable state securities
laws, the Company Shares, when issued and sold in the manner described in the
Registration Statement, will be legally issued, fully paid and non-assessable
and (ii) the Selling Stockholder Shares are legally issued, fully paid and non-
assessable.

We are members of the Bar of the State of California only and express no
opinion as to any matter relating to the laws of any jurisdiction other than the
laws of the State of California and the federal laws of the United States.
Without limiting the foregoing, we express no opinion as to the securities laws
of the State of Oregon.

We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.

Very truly yours,

WILSON SONSINI GOODRICH & ROSATI
Professional Corporation

/s/ Wilson Sonsini Goodrich & Rosati
--------------------------------

<PAGE>

Exhibit 10.3
------------

SUMMIT DESIGN, INC.

1996 EMPLOYEE STOCK PURCHASE PLAN

The following constitute the provisions of the 1996 Employee Stock Purchase
Plan of Summit Design, Inc.

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 Summit Design, Inc. and any Designated
-------
Subsidiary of the Company.

(e) "Compensation" shall mean all base straight time gross earnings
------------
and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.

(f) "Designated Subsidiaries" shall mean the Subsidiaries which have
-----------------------
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.
<PAGE>

(i) "Exercise Date" shall mean the last day of each Purchase 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 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, or;

(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, or;

(3) For the purposes of the Enrollment Date under the first
Offering Period under the Plan, the Fair Market Value of the Common Stock shall
be the price to public as set forth in the final prospectus included within the
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Common Stock.

(4) 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.

(k) "Offering Periods" shall mean the periods of approximately
----------------
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after May 1 and November
1 of each year and terminating on the last Trading Day in the periods ending
twenty-four months later. The first Offering Period shall be the period
commencing with the first Trading Day on or after the date on which the
Company's registration statement on Form S-1 is declared effective by the
Securities and Exchange Commission and terminating on the last Trading Day on or
before October 31, 1998. The duration and timing of Offering Periods may be
changed pursuant to Section 4 of this Plan.

(l) "Plan" shall mean this Employee Stock Purchase Plan.
----

(m) "Purchase Price" shall mean an amount equal to 85% of the Fair
--------------
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.

(n) "Purchase Period" shall mean the approximately six month period
---------------
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.

-2-
<PAGE>

(o) "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.

(p) "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.

(q) "Trading Day" shall mean a day on which national stock exchanges
-----------
and the Nasdaq System are open for trading.

3. Eligibility.
-----------

(a) Any Employee (as defined in Section 2(g)), 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,
----------------
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1 and November 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 19 hereof. The first Offering Period shall begin on the
effective date of the initial public offering of the Company's Common Stock that
is filed with the Securities and Exchange Commission and shall end on the last
Trading Day on or before October 31, 1998. 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.

-3-
<PAGE>

(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.

(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.

(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.

(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at such time during any
Purchase Period which is scheduled to end during the current calendar year (the
"Current Purchase Period") that the aggregate of all payroll deductions which
were previously used to purchase stock under the Plan in a prior Purchase Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Purchase Period equal $21,250. Payroll deductions
shall recommence at the rate provided in such participant's subscription
agreement at the beginning of the first Purchase 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

-4-
<PAGE>

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 each Exercise Date during 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 Purchase Period more than a
number of shares determined by dividing $12,500 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date, and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. Exercise of the option shall occur as provided in Section 8
hereof, unless the participant has withdrawn pursuant to Section 10 hereof. The
option shall expire on the last day of the Offering Period.

8. Exercise of Option. Unless a participant withdraws from the Plan as
------------------
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or 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; Termination of Employment.
-------------------------------------

(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.

-5-
<PAGE>

(b) Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof), 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 14 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.

(c) 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. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.

12. Stock.
-----

(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 150,000 shares, subject
to adjustment upon changes in capitalization of the Company as provided in
Section 18 hereof. If, on a given Exercise Date, the number of shares with
respect to which options are to be exercised exceeds the number of shares then
available under the Plan, the Company shall make a pro rata allocation of the
shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.

(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.

(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.

13. Administration.
--------------

(a) Administrative Body. 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.

-6-
<PAGE>

(b) Rule 16b-3 Limitations. Notwithstanding the provisions of
----------------------
Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision ("Rule 16b-3") provides specific requirements for the
administrators of plans of this type, the Plan shall be administered only by
such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.

14. Designation of Beneficiary.
--------------------------

(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.

(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.

15. 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 14 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.

16. 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.

17. 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.

-7-
<PAGE>

18. 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, 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 Periods 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, any Purchase Periods then in progress shall be
shortened by setting a new Exercise Date (the "New Exercise Date") and any
Offering Periods then in progress shall end on the New Exercise Date. The New
Exercise Date shall be before the date of the Company's proposed sale or merger.
The Board shall notify each participant in writing, at least ten (10) business
days prior to the New Exercise Date, that the Exercise Date for the
participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.

19. 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 18 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 18
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 Rule 16b-3 or under Section 423 of the Code (or any successor rule
or provision or any other applicable law or regulation), the Company shall
obtain stockholder approval in such a manner and to such a degree as required.

-8-
<PAGE>

(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.

20. 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.

21. 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.

As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.

22. 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 19 hereof.

23. Automatic Transfer to Low Price Offering Period. To the extent
-----------------------------------------------
permitted by Rule 16b-3 of the Exchange Act, if the Fair Market Value of the
Common Stock on any Exercise Date in an Offering Period is lower than the Fair
Market Value of the Common Stock on the Enrollment Date of such Offering Period,
then all participants in such Offering Period shall be automatically withdrawn
from such Offering Period immediately after the exercise of their option on such
Exercise Date and automatically re-enrolled in the immediately following
Offering Period as of the first day thereof.

-9-
<PAGE>

EXHIBIT A
---------

SUMMIT DESIGN, INC.

1996 EMPLOYEE STOCK PURCHASE PLAN

SUBSCRIPTION AGREEMENT

_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)

1. ___________________________________ hereby elects to participate in the
Summit Design, Inc. 1996 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(s) of (Employee or Employee and Spouse only): __________
________________________________.

6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, 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
---------------------------------------------
<PAGE>

within 30 days after the date of any disposition of my shares and I will
------------------------------------------------------------------------
make adequate provision for Federal, state or other tax withholding
-------------------------------------------------------------------
obligations, if any, which arise upon the disposition of the Common Stock.
-------------------------------------------------------------------------
The 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 and 1-year holding periods, 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(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:

NAME: (Please print)___________________________________________________________
(First) (Middle) (Last)

____________________________ _____________________________________________
Relationship

_____________________________________________
(Address)

-2-
<PAGE>

Employee's Social
Security Number: _____________________________________________

Employee's Address: _____________________________________________

_____________________________________________

I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.

Dated:______________________ _____________________________________________
Signature of Employee

_____________________________________________
Spouse's Signature (If beneficiary other than
spouse)

-3-
<PAGE>

EXHIBIT B
---------

SUMMIT DESIGN, INC.

1996 EMPLOYEE STOCK PURCHASE PLAN

NOTICE OF WITHDRAWAL

The undersigned participant in the Offering Period of the Summit Design,
Inc. 1996 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>

Exhibit 10.4
------------
SUMMIT DESIGN, INC.

1996 DIRECTOR OPTION PLAN

1. Purposes of the Plan. The purposes of this 1996 Director Option
--------------------
Plan are to attract and retain the best available personnel for service as
Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.

All options granted hereunder shall be nonstatutory stock options.

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

(a) Board" means the Board of Directors of the Company.
-----

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

(d) "Company" means Summit Design, 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 a
------------
mended.

(h) "Fair Market Value" means, as of any date, the value of
-----------------
CommonStock 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 Board deems reliable;
<PAGE>

(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;

(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.

(iv) The Fair Market Value of a Share of Common Stock on the
effective date of this Plan shall be the price to the public of the Common Stock
as set forth in the final prospectus included within the Registration Statement
on Form S-1 filed with the Securities and Exchange Commission for the initial
public offering of the Common Stock.

(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 not an Employee.
----------------

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

(o) "Plan" means this 1996 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 150,000 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.

-2-
<PAGE>

4. Administration and Grants of Options under the Plan.
---------------------------------------------------

(a) Procedure for Grants. The provisions set forth in this Section
--------------------
4(a) shall not be amended more than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income Security Act of 1974,
as amended, or the rules thereunder. 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 (the "First Option") to purchase a number of Shares determined as follows
on the later to occur of (A) the effective date of this Plan 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:

(A) If granted on the effective date of this Plan,
7,500 Shares;

(B) If granted on the date the person first becomes an
Outside Director, 10,000 Shares.

The above notwithstanding, no Employee Director who
ceases to be an Employee but who remains a Director shall receive a First
Option.

(iii) Each Outside Director shall be automatically granted an
Option to purchase 10,000 Shares (a "Subsequent Option") each year on the date
of the Company's Annual Meeting of Stockholders, 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
stockholder approval of the Plan in accordance with Section 16 hereof shall be
conditioned upon obtaining such stockholder 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.

-3-
<PAGE>

(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.

(D) subject to Section 10 hereof, the First Option
shall become exercisable according to the following schedule, provided that the
Optionee continues to serve as a Director on such date:

(a) If granted on the effective date of this
Plan, the First Option shall vest in full one business day prior to the date of
the first Annual Meeting of the Stockholders of the Company held thereafter;

(b) If granted after the effective date of this
Plan, the First Option shall vest in full on the first anniversary of the date
of grant.

(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.

(D) subject to Section 10 hereof, the Subsequent
Option shall become exercisable in full on the earlier of (i) the first
anniversary of the date of grant, or (ii) one business day prior to the date of
the Company's first Annual Meeting of the Stockholders following the date of
grant, provided in each case that the Optionee continues to serve as a Director
on such date.

(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, 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

-4-
<PAGE>

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 on the date of the
------------
final prospectus with respect to the IPO. It shall continue in effect for a term
of ten (10) years unless sooner terminated under Section 11 of the Plan.

7. Form of Consideration. The consideration to be paid for the Shares
---------------------
to be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) 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, or (v) any combination of the foregoing methods of payment.

8. Exercise of Option.
------------------

(a) Procedure for Exercise; Rights as a Stockholder. 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
stockholder 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 stockholder 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.

-5-
<PAGE>

(b) Rule 16b-3. Options granted to Outside Directors must comply
----------
with the applicable provissuccessor thereto and shall contain such additional
conditions or restrictions as may be required thereunder to qualify Plan
transactions, and other transactions by Outside Directors that otherwise could
be matched with Plan transactions, for the maximum exemption from Section 16 of
the Exchange Act.

(c) 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.

(d) Disability of Optionee. In the event Optionee's status as a
----------------------
Director terminates as a result of total and permanent disability (as defined in
Section 22(e)(3) of the Code), the Optionee may exercise his or her Option, but
only within twelve (12) months following the date of such 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.

(e) 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. 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

-6-
<PAGE>

as the price per Share covered by each such outstanding Option, and the number
of Shares issuable pursuant to the automatic grant provisions of Section 4
hereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.

(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.

(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or Subsidiary thereof (the
"Successor Corporation"). If an Option is assumed or substituted for, the
Option or equivalent option shall continue to be exercisable as provided in
Section 4 hereof for so long as the Optionee serves as a Director or a director
of the Successor Corporation. Following such assumption or substitution, if the
Optionee's status as a Director or director of the Successor Corporation, as
applicable, is terminated other than upon a voluntary resignation by the
Optionee, the Option or option shall become fully exercisable, including as to
Shares for which it would not otherwise be exercisable. Thereafter, the Option
or option shall remain exercisable in accordance with Sections 8(c) through (e)
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

-7-
<PAGE>

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. Except as set forth in Section 4,
-------------------------
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 Rule 16b-3 under the Exchange Act (or any other applicable law or
regulation), the Company shall obtain stockholder approval of any Plan amendment
in such a manner and to such a degree as required.

(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.

12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date determined in accordance with Section 4 hereof.

13. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated 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.

-8-
<PAGE>

15. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.

16. Stockholder 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 stockholder approval shall be obtained in the degree and manner required
under applicable state and federal law.

-9-

<PAGE>

Exhibit 10.10

SUMMIT DESIGN, INC.
EMPLOYMENT AGREEMENT

EMPLOYEE: ERIC BENHAYOUN
EFFECTIVE DATE: October 31, 1994

This Agreement is entered into as of the above date by and between SUMMIT
DESIGN, INC., a Delaware corporation ("SUMMIT") and the above-named employee
("Benhayoun").

1. Employment and Duties. SUMMIT hereby employs Benhayoun to serve and
----------------------
perform in the role of Vice President, General Manager of European Operations
reporting to the Vice President of Worldwide Sales. Benhayoun agrees to perform
the duties of this position to the best of his ability and to devote full time
and attention to the transaction of SUMMIT's business. These duties will be
carried out at the branch office of Summit Design, Inc. or at any other place to
which the two parties agree.

2. Term and Termination.
---------------------

(a) This Agreement shall have an initial term of four (4) years, unless
sooner terminated in accordance with Subsection 2(b) and/or 2(c) and/or 2(d)
and/or 2(e) below. After the initial term of four (4) years, or any extension
thereof, the term of the Agreement shall automatically extend for additional one
(1) year periods unless terminated by either party with at least ninety (90)
days' advanced written notice prior to the end of the current term. Both parties
acknowledge that the employment created herein is Employment-at-Will and may be
terminated with or without cause under the terms stated herein.

(b) In the event that Benhayoun notifies Summit of termination of his
employment with Summit for any reason other than specified in Section 2(d), this
Agreement shall terminate as of the date of such notification. Termination under
this Section 2(b) is "Resignation".

(c) In the event that Summit notifies Benhayoun of termination of his
employment by Summit because Benhayoun willfully abandoned the duties of his
position or engaged in any business or criminal practice which the Chief
Executive Officer or Board of Directors reasonably determines is detrimental or
harmful to the good name, goodwill, or reputation of Summit, or which does or
could adversely effect the interests of Summit, then this Agreement shall
terminate as of the date of such notification. Termination under this Section
2(c) is "Cause".

(d) In the event that Benhayoun notifies Summit of his resignation as an
employee of Summit because Summit has required (in writing) Benhayoun to perform
solely in any role other than Vice President, General Manager of European
Operations without Benhayoun's consent (in writing), then this Agreement shall
terminate as of the date of such notification. Termination under this Section
2(d) is "Construction".

1
<PAGE>

(e) In the event that Summit notifies Benhayoun of termination of his
employment by Summit for any reason other than specified in Section 2(b) and/or
2(c) and/or 2(d), this Agreement shall terminate as of the date of such
notification. Termination under this Section 2(e) is "convenience".

(f) Notwithstanding the above, termination of this Agreement shall not
release Benhayoun from any obligations under Sections 4, 5, and 6 hereof.

3. Compensation and Benefits. In consideration of the services to be
--------------------------
performed by Benhayoun, SUMMIT agrees to pay Benhayoun the compensation and
extend to Benhayoun the benefits consisting of the following:

(a) Annual Base Salary of French Francs (FF) 625,000, paid monthly and
prorated and beginning on the first pay period following the date agreed upon by
Benhayoun and the Chief Financial Officer.

(b) 1996 annual bonus of 30% of salary, paid in a quarterly basis, based
on achievement of the target revenue (bookings) in Europe. Target is achieved at
100% of planned revenue plan for Europe.

(c) In the event that target revenue is not achieved in a given quarter
then the bonus amount for that quarter is converted to commission. This
commission can be earned to the extent that subsequent quarters are
overachieved.

(d) Equity

(i) Summit hereby grants Benhayoun an incentive stock option of
58,500 shares of Summit common stock at $2.50 per share. These shares are
governed by the terms and conditions of the Summit Incentive Stock Option
Plan ("ISO Plan"). Notwithstanding the terms and conditions of the ISO
Plan, 15,000 of these shares shall vest at execution of this Agreement,
15,000 shall vest on the one year anniversary of signing of this Agreement
and the remaining shares shall vest at a rate of 1/24 per month for the
next 24 months following the one year anniversary of signing of this
agreement.

In addition, if Summit completes a public offering of its common
stock ("IPO"), the vesting defined above shall accelerate by one (1) year.

In addition, if more than 50% of the assets or more than 50% of
the outstanding shares of Summit are sold to another company, all of the
shares covered under this Section 3(c)(i) shall be 100% vested at closing
of the transaction.

In addition, if this Agreement is terminated for Construction as
defined in Section 2(d) or convenience as defined in Section 2(e), all
shares covered under this Section 3(c)(i) shall be 100% vested.

<PAGE>

In addition, if this Agreement is terminated for Resignation as
defined in Section 2(b) within 36 months of the effective date of this
Agreement, then Summit shall have the right to repurchase all unvested
shares and all vested shares that have been vested for less than one (1)
year for $2.50 per share.

In addition, in the event that Summit is acquired then Benhayoun
will receive one (1) additional common share at the current price for each
vested share of the 58,500 shares stated in 3(d)(i).

In addition, in the event of death or disability, vesting shall
continue for twelve (12) months.

(e) Benhayoun shall be provided the right to participate in the health,
dental, and life insurance programs provided for the senior level executives of
Summit.

(f) Benhayoun shall earn and be entitled to use vacation during his first
year of employment and each year thereafter equal to the Summit standard
vacation policy for European employees.

(g) In the event that this Agreement is terminated for Construction as
defined in Section 2(d) or convenience as defined in Section 2(e), then Summit
shall pay Benhayoun (FF)52,083 per month plus all insurance benefits normally
paid by Summit. This payment shall continue monthly for nine (9) months
provided, however, that if Benhayoun accepts full-time employment from another
party prior to the end of such nine (9) months, these monthly payments shall
immediately terminate.

(h) Benhayoun shall be provided an automobile and specified operating
expenses which are mutually agreeable to Summit and Benhayoun.

4. Confidentiality. Benhayoun acknowledges that certain customer lists,
----------------
design work, and related information, equipment, computer software, and other
proprietary products and information, whether of a technical or non-technical
nature, including but not limited to schematics, drawings, models, photographs,
sketches, blueprints, printouts, and program listings of SUMMIT, collectively
referred to as "Technology", were and will be designated and developed by SUMMIT
at great expense and over lengthy periods of time, are secret and confidential,
are unique and constitute the exclusive property and trade secrets of SUMMIT,
and any use or disclosure of such Technology, except in accordance with and
under the provisions of this or any other written agreements between the
parties, would be wrongful and would cause irreparable injury to SUMMIT.
Benhayoun hereby agrees that he will not, at any time, without the express
written consent of SUMMIT, publish, disclose, or divulge to any person, firm, or
corporation any of the Technology, nor will Benhayoun use, directly or
indirectly, for Benhayoun's own benefit or the benefit of any other person,
firm, or corporation, any of the Technology, except in accordance with this
Agreement or other written agreements between the parties.

3
<PAGE>

5. Inventions. All original written material including programs, charts,
-----------
schematics, drawings, tables, tapes, listings, and technical documentation which
are prepared partially or solely by Benhayoun in connection with employment by
SUMMIT shall belong exclusively to SUMMIT.

6. Return of Documents. Benhayoun acknowledges that all originals and copies
--------------------
of records, reports, documents, lists, plans, drawings, memoranda, notes, and
other documentation related to the business of SUMMIT or containing any
confidential information of SUMMIT shall be the sole and exclusive property of
SUMMIT, and shall be returned to SUMMIT upon the termination of employment for
any reason whatsoever or upon the written request of SUMMIT.

7. Compliance. Benhayoun agrees to comply with all of SUMMIT's written
-----------
employment policies, guidelines, and procedures as contained in an employment
manual, including revisions and additions thereto.

8. Injunction. In addition to all other legal rights and remedies, SUMMIT
-----------
shall be entitled to obtain from any court of competent jurisdiction preliminary
and permanent injunctive relief of any actual or threatened violation of any
term hereof without requirement of bond, as well as an equitable accounting of
all profits or benefits arising out of such violation.

9. Waiver. The waiver of either party of a breach of any provision of this
-------
Agreement shall not operate or be construed as a waiver of any subsequent breach
thereof.

10. Disputes. The legal relations of the parties hereunder, and all other
---------
matters hereunder, shall be governed by the laws of the State of Oregon.
Unresolved disputes shall be resolved in a court of competent jurisdiction in
Washington County, Oregon, and all parties hereto consent to the jurisdiction of
such court.

11. Entire Agreement. This Agreement sets forth the entire agreement between
-----------------
the parties hereto, and fully supersedes any and all prior agreements or
understandings, written or oral, between the parties hereto pertaining to the
subject matter hereof. No modification of amendment hereof is effective unless
in writing and signed by both parties.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first herein above written.

"EMPLOYER": SUMMIT:
A Delaware Corporation

By: /s/ Larry J. Gerhard
-------------------------------
Name: Larry J. Gerhard
Title: Chief Executive Officer, SUMMIT

/s/ Eric Benhayoun
-------------------------------
"EMPLOYEE": Eric Benhayoun

<PAGE>

EXHIBIT 11.1

SUMMIT DESIGN, INC.

COMPUTATION OF SHARES USED IN PRO FORMA NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
SIX MONTHS
ENDED
1993 1994 1995 JUNE 30, 1996
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Weighted average shares out-
standing...................... 1,541,922 1,842,108 1,872,508 1,951,165
Stock options (1).............. 924,101 924,101 924,101 924,101
Preferred shares (2)........... 9,103,346 9,103,346 9,103,346 9,103,346
---------- ---------- ---------- ----------
11,569,369 11,869,555 11,899,955 11,978,612
========== ========== ========== ==========
</TABLE>
- --------

(1) Assumes exercise of all outstanding options and options issued within one
year of the date of the initial filing of this Registration Statement
which options are considered exercised in all periods presented.

(2) Assumes conversion of all preferred shares outstanding as of the date of
the filing of this Registration Statement which shares are considered
outstanding for all periods presented.

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Amendment No. 1 to Registration
Statement on Form S-1 (File No. 333-6445) of our report, dated June 18, 1996
on our audits of the consolidated financial statements and financial statement
schedule of Summit Design, Inc. We also consent to the reference to our firm
under the captions "Experts" and "Selected Consolidated Financial Data."

Coopers & Lybrand, L.L.P.

Portland, Oregon

September 13, 1996

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 592 3,181
<SECURITIES> 0 0
<RECEIVABLES> 5,976 3,591
<ALLOWANCES> (455) (432)
<INVENTORY> 0 0
<CURRENT-ASSETS> 6,432 6,735
<PP&E> 2,964 3,243
<DEPRECIATION> (1,174) (1,519)
<TOTAL-ASSETS> 8,903 9,287
<CURRENT-LIABILITIES> 6,962 6,799
<BONDS> 0 0
0 0
91 91
<COMMON> 19 22
<OTHER-SE> 482 1,082
<TOTAL-LIABILITY-AND-EQUITY> 8,903 9,287
<SALES> 0 0
<TOTAL-REVENUES> 14,070 9,370
<CGS> 0 0
<TOTAL-COSTS> 1,051 489
<OTHER-EXPENSES> 15,595 8,130
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (176) (55)
<INCOME-PRETAX> (2,752) 696
<INCOME-TAX> 399 209
<INCOME-CONTINUING> (3,151) 487
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,151) 487
<EPS-PRIMARY> (0.26) .04
<EPS-DILUTED> 0 0

</TABLE>