Mentor Graphics Delivers Merger Agreement to IKOS Systems

Agreement Would Provide Superior Value to IKOS Stockholders Promptly

WILSONVILLE, Ore.--(BUSINESS WIRE)--Jan. 16, 2002--Mentor Graphics Corporation (Nasdaq: MENT - news) today announced that it has delivered to IKOS Systems, Inc. (Nasdaq: IKOS - news) a merger agreement that provides for prompt consummation of a transaction between the two companies.

Mentor Graphics has executed the merger agreement and is committed not to revoke the merger agreement before January 31, 2002. The Mentor agreement provides for the prompt consummation of Mentor Graphics' tender offer for IKOS shares at $11.00 per share in cash and a second-step merger for any remaining shares at the same cash price.

"The IKOS board of directors has already determined that Mentor's offer is superior to the Synopsys transaction, and now we have delivered a merger agreement that also is clearly superior," said Walden C. Rhines, Chairman and Chief Executive Officer of Mentor Graphics. "We expect the IKOS board to follow the procedures detailed in the Synopsys merger agreement by terminating that agreement, paying the break-up fee to Synopsys and executing the Mentor agreement. At that point, our acquisition will be consummated very quickly, and IKOS stockholders will receive their $11.00 per share in cash promptly."

The Mentor agreement contains significant improvements over IKOS' agreement with Synopsys, including:

• $11.00 per share in cash to IKOS stockholders promptly after execution of the Mentor agreement, compared to a highly conditional transaction with Synopsys at an unknown price that will not close until late summer;
• reduced restrictions on IKOS in running its business pending the closing of the Mentor agreement;
• a significant reduction in the conditions to the closing of the Mentor transaction compared to the Synopsys agreement; and
• a significantly reduced break-up fee despite the fact that the price per share is significantly higher than the anticipated price of the Synopsys transaction.

"IKOS can execute our merger agreement without entering into discussions or negotiations, and without even providing confidential information to Mentor Graphics," said Dr. Rhines. "I look forward to closing this transaction quickly and delivering $11.00 per share in cash to IKOS stockholders as soon as possible."

The full text of the cover letter that accompanied the Mentor merger agreement follows:

[Latham & Watkins Letterhead]


                           January 16, 2002


By Hand Delivery

Ms. Diane Holt Frankle
Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, California 94301-1833

            Re:  Mentor Graphics Corporation Offer to Purchase All
                 Outstanding Shares of IKOS Systems, Inc. Common
                 Stock

Dear Diane:

    On behalf of Mentor Graphics Corporation ("Mentor Graphics"), I am
pleased to enclose an Agreement and Plan of Merger and Reorganization
(the "Mentor Agreement") by and among Mentor Graphics, Fresno
Corporation ("Fresno") and IKOS Systems, Inc. ("IKOS"). The Mentor
Agreement contemplates a continuation of Mentor Graphics' tender offer
for IKOS shares at a price of $11.00 per share in cash and a follow-on
merger that cashes out any remaining shares at the same price.
    The Mentor Agreement has been executed by Mentor Graphics and
Fresno. Mentor Graphics and Fresno hereby commit that their execution
of the Mentor Agreement will not be revoked by Mentor Graphics or
Fresno prior to Thursday, January 31, 2002. This provides IKOS with
ample time to consider the Mentor Agreement and to comply with
applicable provisions of its merger agreement (the "Synopsys
Agreement") with Synopsys, Inc. ("Synopsys").
    I have also enclosed a copy of the Mentor Agreement marked to
reflect changes from the Synopsys Agreement that was previously
executed by IKOS. You will note that the changes constitute
significant improvements from the perspective of IKOS and its
stockholders. The improvements include:

        --  $11.00 per share in cash to IKOS stockholders promptly
            after execution of the Mentor Agreement by IKOS compared
            to a highly conditional transaction with Synopsys at an
            unknown price that will not close until late summer;

        --  reduced restrictions on IKOS in running its business
            pending the closing of the Mentor Agreement; o a
            significantly reduced number of closing conditions in the
            Mentor Agreement as compared to the Synopsys Agreement;
            and

        --  a significantly reduced break-up fee despite the fact that
            the price per share is significantly higher than the
            anticipated price of the Synopsys transaction.

    As you know, the Board of Directors of IKOS has already determined
that Mentor Graphics' $11.00 per share cash tender offer constitutes a
Superior Proposal under the Synopsys Agreement. Mentor Graphics has
now also presented IKOS with a merger agreement that is superior to
the Synopsys Agreement from the perspective of IKOS and its
stockholders.
    Execution of the Mentor Agreement by IKOS does not require any
discussion or negotiation between IKOS and Mentor Graphics or
disclosure by IKOS of confidential information to Mentor Graphics. The
schedules and exhibits required under the Mentor Agreement will be
identical to those that are already a part of the Synopsys Agreement.
Since Mentor Graphics and Fresno have already signed the Mentor
Agreement, the Mentor Agreement will become binding upon execution by
IKOS.
    Consistent with IKOS' obligations under the Synopsys Agreement,
Mentor Graphics expects the Board of Directors of IKOS to determine,
under Section 8.1(g) and the applicable provisions of Section 5.2 of
the Synopsys Agreement and following consultation with relevant
advisors, that the Takeover Proposal (as defined in the Synopsys
Agreement) is bona fide, will result in a transaction more favorable
to IKOS' stockholders from a financial point of view and must be
pursued in order for the Board of Directors to comply with its
fiduciary duties to IKOS' stockholders. Mentor Graphics similarly
expects IKOS to provide to Synopsys the notification and information
required under Section 8.1(g) and the applicable provisions of Section
5.2 of the Synopsys Agreement.
    Mentor Graphics does not expect IKOS to enter into discussions or
negotiations with Mentor Graphics, to disclose to Mentor Graphics
nonpublic information concerning IKOS and its subsidiaries, to modify
or withdraw its recommendation concerning the Synopsys Agreement, to
recommend the Mentor Agreement to its stockholders or to approve the
entering into of the Mentor Agreement prior to the termination of the
Synopsys Agreement. Upon termination of the Synopsys Agreement, Mentor
Graphics expects IKOS immediately to approve entering the Mentor
Agreement and to execute the Mentor Agreement.
    Mentor Graphics expects IKOS to notify Synopsys under Section
8.1(g) of the Synopsys Agreement that IKOS has determined that it
desires to approve entering into the Mentor Agreement and provide
Synopsys with the required five business day period to present an
offer that is at least as favorable to the stockholders of IKOS as the
Mentor Agreement. Also in accordance with Section 8.1(g) of the
Synopsys Agreement, Mentor Graphics expects that IKOS will, following
expiration of such five business day period and assuming that the
Board of IKOS believes that the Mentor Agreement continues to be a
Superior Proposal, pay the fees to Synopsys required under Section
8.3(b) of the Synopsys Agreement, terminate the Synopsys Agreement and
execute the Mentor Agreement. As you know, the tender offer and the
merger under the Mentor Agreement can be consummated very quickly
thereafter.
    You will note that Mentor Graphics does not expect to have access
to IKOS confidential information or to enter into discussions or
negotiations concerning the Mentor Agreement prior to execution of
that agreement by IKOS. Similarly, Mentor Graphics does not expect
IKOS to take any action with respect to its recommendation of the
Synopsys Agreement to IKOS stockholders prior to termination of the
Synopsys Agreement. You will also note that the Mentor Agreement
contains an agreement by Mentor Graphics to maintain the
confidentiality of any non-public information provided to Mentor
Graphics. For these reasons, Mentor Graphics does not believe that it
is either required under the Synopsys Agreement or appropriate under
the circumstances for Mentor Graphics to execute the form of
confidentiality agreement executed by Synopsys.
    Mentor Graphics looks forward to execution of the Mentor Agreement
by IKOS and prompt consummation of a transaction bringing IKOS
stockholders $11.00 per share in cash in the very near future.

                                     Very truly yours,

                                     /s/ Christopher L. Kaufman

                                     Christopher L. Kaufman
                                     of LATHAM & WATKINS
Enclosures

cc:  Ramon A. Nunez

Pursuant to its all cash tender offer, Mentor Graphics is offering to acquire IKOS Systems for $11.00 per share in cash of IKOS common stock. The offer represents a premium of 37% over the Nasdaq closing price of IKOS stock on December 6, 2001 and a premium of 49.5% over IKOS' closing price on June 29, 2001, the last trading day before IKOS announced its proposed acquisition by Synopsys, Inc. (Nasdaq: SNPS - news). Furthermore, the offer represents a premium of 87% over the average closing price of IKOS stock for the thirty trading days ended December 6, 2001. In addition, Mentor Graphics' offer is subject to fewer conditions than the Synopsys proposal and can be consummated months earlier than the Synopsys proposal. Mentor Graphics' offer is not subject to any financing condition and is scheduled to expire at 12:00 Midnight, New York City time on Friday, January 25, 2002, unless extended.

About Mentor Graphics

Mentor Graphics Corporation (Nasdaq: MENT - news) is a world leader in electronic hardware and software design solutions, providing products, consulting services and award-winning support for the world's most successful electronics and semiconductor companies. Established in 1981, Mentor Graphics reported revenues over the last 12 months of more than $600 million and employs approximately 3,000 people worldwide. Corporate headquarters are located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777; Silicon Valley headquarters are located at 1001 Ridder Park Drive, San Jose, California 95131-2314. World Wide Web site: www.mentor.com .

Mentor Graphics is a registered trademark of Mentor Graphics Corporation. All other company or product names are the registered trademarks or trademarks of their respective owners.

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