-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EFkTqv+oCodYeKiyA5PQOdO7IEqEnXL0euK8eb9PNgoI5tYftcl6DpORUnrZFqKA SbyBKHwP5678P2zdru+ylA== 0000950149-01-501929.txt : 20020412 0000950149-01-501929.hdr.sgml : 20020412 ACCESSION NUMBER: 0000950149-01-501929 CONFORMED SUBMISSION TYPE: SC TO-T PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 20011207 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: IKOS SYSTEMS INC CENTRAL INDEX KEY: 0000756365 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 770100318 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC TO-T SEC ACT: 1934 Act SEC FILE NUMBER: 005-41223 FILM NUMBER: 1809019 BUSINESS ADDRESS: STREET 1: 19050 PRUNERIDGE AVE CITY: CUPERTINO STATE: CA ZIP: 94086 BUSINESS PHONE: 4082451900 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MENTOR GRAPHICS CORP CENTRAL INDEX KEY: 0000701811 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 930786033 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T BUSINESS ADDRESS: STREET 1: 8005 SW BOECKMAN RD CITY: WILSONVILLE STATE: OR ZIP: 97070-7777 BUSINESS PHONE: 5036857000 SC TO-T 1 f77751scto-t.txt SCHEDULE TO-T ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ SCHEDULE TO (RULE 14d-100) TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------ IKOS SYSTEMS, INC. (NAME OF SUBJECT COMPANY (ISSUER)) MENTOR GRAPHICS CORPORATION FRESNO CORPORATION (NAMES OF FILING PERSONS (OFFERORS)) COMMON STOCK, PAR VALUE $0.01 PER SHARE, (TITLE OF CLASS OF SECURITIES) 451716203 (CUSIP NUMBER OF CLASS OF SECURITIES) WALDEN C. RHINES PRESIDENT AND CHIEF EXECUTIVE OFFICER MENTOR GRAPHICS CORPORATION 8005 S.W. BOECKMAN ROAD WILSONVILLE, OREGON 97070-7777 (503) 685-7000 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE FILING PERSON) COPIES TO: JOHN J. HUBER, ESQ. CHRISTOPHER L. KAUFMAN, ESQ. LATHAM & WATKINS LATHAM & WATKINS 555 11TH STREET, N.W., SUITE 1000 135 COMMONWEALTH DRIVE WASHINGTON, D.C. 20004 MENLO PARK, CALIFORNIA 94025 (202) 637-2200 (650) 328-4600 ------------------ CALCULATION OF FILING FEE TRANSACTION VALUATION* AMOUNT OF FILING FEE ---------------------- -------------------- $126,928,934 $25,385.79 * Estimated for purposes of calculating the amount of the filing fee only. This amount assumes the purchase of a total of 11,538,994 shares of the outstanding common stock, par value $0.01, of IKOS Systems, Inc., including the related preferred stock purchase rights at a price per share of $11.00 in cash. Such number of shares consists of (i) 9,225,000 shares issued and outstanding as of September 29, 2001 (as reported in IKOS' Schedule 14A filed October 31, 2001) and (ii) 3,155,594 shares reserved for issuance upon the exercise of outstanding options as of June 15, 2001 (as reported in IKOS' Form 10-Q for the fiscal quarter ended June 30, 2001), less 841,600 shares beneficially owned by Mentor Graphics Corporation (100 of which are owned of record by Fresno Corporation). [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: N/A Filing party: N/A Form or Registration No.: N/A Date Filed: N/A [ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: [X] third-party tender offer subject to Rule 14d-1 [ ] issuer tender offer subject to Rule 13e-4 [ ] going private transaction subject to Rule 13e-3 [ ] amendment to Schedule 13D under Rule 13d-2 Check the following box if the filing is a final amendment reporting the results of the tender offer [ ] ================================================================================ This Tender Offer Statement on Schedule TO relates to a tender offer by Fresno Corporation, a Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Mentor Graphics Corporation, an Oregon corporation ("Mentor"), to purchase all outstanding shares of common stock, par value $0.01 per share, of IKOS Systems, Inc., a Delaware corporation (the "Company"), including the associated preferred stock purchase rights issued pursuant to the Amended and Restated Rights Agreement, dated January 22, 1999, between the Company and Bank Boston, N.A., as amended for a purchase price of $11.00 per share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated December 7, 2001 (the "Offer to Purchase") and in the related Letter of Transmittal (the "Letter of Transmittal" which, together with the Offer to Purchase, as each may be amended and supplemented from time to time, constitute the "Offer"). Items 1 through 9, and Item 11 The information in the Offer to Purchase and the Letter of Transmittal, copies of which are filed with this Schedule TO as Exhibits (a)(1)(A) and (a)(1)(B) hereto, respectively, are incorporated herein by reference in answer to items 1 through 9, and Item 11 in this Tender Offer Statement on Schedule TO. Item 10. Financial Statements. Not Applicable. Item 12. Exhibits (a)(1)(A) Offer to Purchase dated December 7, 2001. (a)(1)(B) Letter of Transmittal (a)(1)(C) Notice of Guaranteed Delivery. (a)(1)(D) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(E) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(1)(G) Press release issued by Mentor Graphics Corporation on December 7, 2001. (a)(1)(H) Summary Advertisement, published December 7, 2001. (a)(1)(I) Complaint filed in the United States District Court for the District of Delaware on December 7, 2001. (a)(1)(J) Complaint filed in the Chancery Court, New Castle County, Delaware on December 7, 2001. (b) None. (c) None. (d)(1) Confidentiality Agreement dated June 16, 2000, between Mentor Graphics Corporation and IKOS Systems, Inc. (e) None. (f) None. (g) None. (h) None. 2 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: December 7, 2001 MENTOR GRAPHICS CORPORATION By: /s/ Gregory K. Hinckley ------------------------------------------ Name: Gregory K. Hinckley Title: President FRESNO CORPORATION By: /s/ Gregory K. Hinckley ----------------------------------------- Name: Gregory K. Hinckley Title: Chief Financial Officer 3 EXHIBIT INDEX (a)(1)(A) Offer to Purchase dated December 7, 2001. (a)(1)(B) Letter of Transmittal. (a)(1)(C) Notice of Guaranteed Delivery. (a)(1)(D) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(E) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(1)(G) Press release issued by Mentor Graphics Corporation on December 7, 2001. (a)(1)(H) Summary Advertisement, published December 7, 2001. (a)(1)(I) Complaint filed in the United States District Court for the District of Delaware on December 7, 2001. (a)(1)(J) Complaint filed in the Chancery Court, New Castle County, Delaware on December 7, 2001. (b) None. (c) None. (d)(1) Confidentiality Agreement dated June 16, 2000, between Mentor Graphics Corporation and IKOS Systems, Inc. (e) None. (f) None. (g) None. (h) None. EX-99.(A)(1)(A) 3 f77751ex99-a1a.txt EXHIBIT (A)(1)(A) EXHIBIT (a)(1)(A) OFFER TO PURCHASE FOR CASH (THE "OFFER") ALL OUTSTANDING SHARES OF COMMON STOCK (THE "SHARES") (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS (THE "RIGHTS")) OF IKOS SYSTEMS, INC. (THE "COMPANY") AT $11.00 NET PER SHARE BY FRESNO CORPORATION ("PURCHASER"), A WHOLLY-OWNED SUBSIDIARY OF MENTOR GRAPHICS CORPORATION ("MENTOR") THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 8, 2002, UNLESS THE OFFER IS EXTENDED. IMPORTANT If you wish to tender all or any part of your Shares, prior to the expiration date of the Offer you should either (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal included with this Offer to Purchase, have your signature thereon guaranteed if required by Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of Transmittal (or such facsimile thereof) and any other required documents to the depositary for the Offer and either deliver the certificates for such Shares to the depositary for the Offer along with the Letter of Transmittal (or a facsimile thereof) or deliver such Shares pursuant to the procedures for book-entry transfers set forth in "The Offer -- Procedure for Tendering Shares and Rights" of this Offer to Purchase, or (2) request your broker, dealer, commercial bank, trust company or other nominee to effect the transaction for you. If you have Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee, you must contact such broker, dealer, commercial bank, trust company or other nominee if you desire to tender your Shares. Unless and until Purchaser declares that the Rights Condition (as defined herein) is satisfied, stockholders will be required to tender one Right for each Share tendered in order to effect a valid tender of such Share. If you desire to tender your Shares and associated Rights and your certificates for such Shares (or, if applicable, associated Rights) are not immediately available, or you cannot comply with the procedures for book-entry transfers described in this Offer to Purchase on a timely basis, you may tender such Shares by following the procedures for guaranteed delivery set forth in "The Offer -- Procedure for Tendering Shares and Rights." A summary of the principal terms of the Offer appears on pages 1-5 of this Offer to Purchase. If you have questions about the Offer, you may call MacKenzie Partners, Inc., the information agent for the Offer, at its address and telephone number set forth on the back cover of this Offer to Purchase. You can also obtain additional copies of this Offer to Purchase, the related Letter of Transmittal and the Notice of Guaranteed Delivery from MacKenzie Partners, Inc., or your broker, dealer, commercial bank, trust company or other nominee. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION, AND YOU SHOULD CAREFULLY READ BOTH IN THEIR ENTIRETY BEFORE YOU MAKE A DECISION WITH RESPECT TO THE OFFER. December 7, 2001 TABLE OF CONTENTS
PAGE ---- SUMMARY TERM SHEET............................................. 1 INTRODUCTION................................................... 6 THE OFFER...................................................... 8 1. Terms of the Offer; Expiration Date........................ 8 2. Extension of Tender Period; Termination; Amendment......... 8 3. Acceptance for Payment and Payment......................... 9 4. Procedure for Tendering Shares and Rights.................. 10 5. Withdrawal Rights.......................................... 13 6. Certain United States Federal Income Tax Considerations.... 13 7. Price Range of Shares; Dividends........................... 15 8. Certain Information Concerning the Company................. 15 9. Certain Information Concerning Purchaser and Mentor........ 16 10. Source and Amount of Funds................................. 17 11. Background of the Offer.................................... 17 12. Purpose and Structure of the Offer; Plans for the Company; Appraisal Rights............................................. 22 13. Effect of the Offer on the Market for the Shares; Stock Exchange Listing(s); Registration under the Exchange Act..... 23 14. Dividends and Distributions................................ 24 15. Conditions to the Offer.................................... 24 16. Certain Legal Matters; Regulatory Approvals................ 28 17. Fees and Expenses.......................................... 31 18. Legal Proceedings between Mentor and the Company........... 32 19. Miscellaneous.............................................. 32 Schedule I -- Directors and Executive Officers of Mentor and Purchaser.................................................... 34 Schedule II -- Transactions in Shares in the Past 60 Days...... 38
SUMMARY TERM SHEET This summary term sheet is a brief description of the Offer being made by Mentor ("Mentor") through Fresno Corporation ("Purchaser"), a wholly-owned subsidiary of Mentor, to purchase all of the issued and outstanding common stock, par value $0.01 per share (the "Shares"), of IKOS Systems, Inc. (the "Company"), including the associated preferred stock purchase rights (the "Rights") issued pursuant to the Amended and Restated Rights Agreement, dated January 22, 1999, between the Company and Bank Boston, N.A., as amended (the "Rights Agreement"), at a price of $11.00 per Share net to the seller in cash, without interest. The following are some of the questions you, as a stockholder of the Company, may have and answers to those questions. You should carefully read this Offer to Purchase and the accompanying Letter of Transmittal in their entirety because the information in this summary term sheet is not complete, and additional important information is contained in the remainder of this Offer to Purchase and the Letter of Transmittal. WHO IS OFFERING TO BUY MY SECURITIES? WHY? Our name is Mentor Graphics Corporation. We are an Oregon corporation and are making the Offer through our wholly-owned subsidiary, Fresno Corporation, a Delaware corporation, which was formed for the purpose of making a tender offer for the Shares. The tender offer is the first step in our plan to acquire all of the outstanding Shares. WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER? We are seeking to purchase all of the issued and outstanding Shares, including the associated Rights. On the date of this Offer to Purchase, Mentor beneficially owns 841,600 Shares (100 of which are owned of record by Purchaser). The Company's last public disclosure stated that as of September 29, 2001, there were 9,225,000 Shares outstanding. WHAT ARE THE "ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS"? The associated preferred stock purchase rights were issued to all stockholders of the Company, but currently are not represented by separate certificates. Instead, these rights are represented by the certificates for your Shares. Unless the Rights are distributed to stockholders, a tender of your Shares will include a tender of the associated Rights. If the Rights are distributed, a holder will need to tender one right with each share tendered. We will not pay any additional consideration for the tender of a Right. HOW MUCH ARE YOU OFFERING TO PAY FOR MY SECURITIES AND WHAT IS THE FORM OF PAYMENT? WILL I HAVE TO PAY ANY FEES OR COMMISSIONS? We are offering to pay $11.00 per Share, net to you, in cash, without interest. If you tender your Shares to us in the Offer, you will not have to pay brokerage fees, commissions or similar expenses. If you own your Shares through a broker or other nominee, and your broker tenders your Shares on your behalf, your broker or nominee may charge you a fee for doing so. You should consult your broker or nominee to determine whether any charges will apply. DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT? Yes. We will need approximately $100 million to purchase all Shares pursuant to the Offer and to pay related fees and expenses. Since we will have more than $100 million in cash and working capital available to buy all of the Shares outstanding and pay related fees and expenses, the Offer is not subject to any financing condition. IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER? Since we have sufficient cash and working capital to purchase the Shares and pay all fees relating to the Offer, the Offer is not subject to any financing condition. Therefore, we believe our financial condition is not 1 material to your decision whether to tender in the Offer. If you do not tender in the Offer, in the subsequent merger (if it occurs), you will receive, for each Share you hold, the same cash price paid under the terms of the Offer. If you would like additional information about our financial condition, please see "The Offer -- Certain Information Concerning Purchaser and Mentor -- Available Information." HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER? You have until at least 12:00 Midnight, New York City time, on Tuesday, January 8, 2002, to decide whether to tender your Shares in the Offer. Further, if you cannot deliver everything required to make a valid tender to Wilmington Trust Company, the depositary for the Offer, prior to such time, you may be able to use a guaranteed delivery procedure, which is described in "The Offer -- Procedure for Tendering Shares and Rights." CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES? We may, in our sole discretion, extend the Offer at any time or from time to time. We may extend, for instance, if any of the conditions specified in "The Offer -- Conditions to the Offer" are not satisfied prior to the scheduled expiration date of the Offer. We may also elect to provide a "subsequent offering period" for the Offer. A subsequent offering period, if we include one, will be an additional period of time beginning after we have purchased Shares tendered during the Offer, during which stockholders may tender their Shares and receive payment for Shares validly tendered. If we decide to provide a subsequent offering period, we will make a public announcement of our decision at least five business days in advance. We do not currently intend to include a subsequent offering period, although we reserve the right to do so. See "The Offer -- Terms of the Offer; Expiration Date." HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED? If we decide to extend the Offer, we will inform Wilmington Trust Company, the depositary for the Offer, of that fact and will make a public announcement of the extension, not later than 9:00 a.m., New York City time, on the business day after the day on which the Offer was scheduled to expire. WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER? The most significant conditions to the Offer are the following, any or all of which may be waived by Purchaser in its sole discretion: - That the Company's stockholders validly tender and do not withdraw prior to the expiration date of the Offer the number of Shares (including the associated Rights) representing, together with the Shares owned by Mentor, at least a majority of the total number of outstanding Shares on a fully diluted basis. - That Mentor is satisfied, in its sole discretion, that the Agreement and Plan of Merger and Reorganization dated July 2, 2001, among the Company, Synopsys, Inc. and Oak Merger Corporation (the "Synopsys Agreement") has been terminated in accordance with the terms of such agreement as in effect on the date of this Offer to Purchase or such other terms as may be satisfactory to Mentor in its sole discretion. - That the termination fee provision in the Synopsys Agreement has been invalidated or the obligation to pay any amounts pursuant to such provision has been terminated, without any termination fee, or any portion thereof, having been paid by the Company or any of its affiliates pursuant to the Synopsys Agreement. - That the board of directors of the Company redeems the Rights in accordance with the terms of such Rights as in effect at such time or Mentor is satisfied, in its sole discretion, that the Rights have been invalidated or are otherwise inapplicable to the Offer and the proposed merger of Purchaser with and into the Company (the "Proposed Merger"). 2 - That Mentor is satisfied, in its sole discretion, that the provisions of Section 203 of the Delaware General Corporation Law do not apply to or otherwise restrict the Offer and the Proposed Merger. - That any waiting periods under applicable antitrust laws have expired or have been terminated. - That the Company's stockholders do not approve the Synopsys Agreement. - That the Company has not entered into or effectuated any agreement or transaction with any person or entity having the effect of impairing Purchaser's ability to acquire the Company or otherwise diminishing the expected economic value to Mentor of the acquisition of the Company. For a complete list of the conditions to the Offer, see "The Offer -- Conditions to the Offer." HOW DO I TENDER MY SHARES? To tender Shares, you must deliver the certificates representing your Shares and, if applicable, Rights, together with a completed Letter of Transmittal, to Wilmington Trust Company, the depositary for the Offer, not later than the time the Offer expires. If your Shares are held in street name by your broker, dealer, commercial bank, trust company or other nominee, such nominee can tender your Shares through The Depository Trust Company. If you cannot deliver everything required to make a valid tender to the depositary prior to the expiration date of the Offer, you may have a limited amount of additional time by having a broker, a bank or other fiduciary which is a member of the Securities Transfer Agents Medallion Program or other eligible institution guarantee that the missing items will be received by the depositary within three Nasdaq National Market trading days after the expiration of the Offer. However, the depositary must receive the missing items within that three trading day period. See "The Offer -- Procedures for Tendering Shares and Rights." UNTIL WHAT TIME CAN I WITHDRAW TENDERED SHARES? You can withdraw tendered Shares at any time until the Offer has expired and, if we have not agreed to accept your Shares for payment by February 4, 2002, you can withdraw them at any time after such date until we accept Shares for payment. If we decide to provide a subsequent offering period, we will accept Shares tendered during that period immediately and thus you will not be able to withdraw Shares tendered in the Offer during any subsequent offering period. See "The Offer -- Withdrawal Rights." HOW DO I WITHDRAW TENDERED SHARES? To withdraw Shares, you must deliver a written notice of withdrawal, or a facsimile of one, with the required information to Wilmington Trust Company, the depositary for the Offer, while you have the right to withdraw the Shares. See "The Offer -- Withdrawal Rights." WHEN AND HOW WILL I BE PAID FOR MY TENDERED SHARES? Subject to the terms and conditions of the Offer, we will pay for all validly tendered and not withdrawn Shares promptly after the expiration date of the Offer, subject to the satisfaction or waiver of the conditions to the Offer, as set forth in "The Offer -- Conditions to the Offer." We will pay for your validly tendered and not withdrawn Shares by depositing the purchase price with Wilmington Trust Company, the depositary for the Offer, which will act as your agent for the purpose of receiving payments from us and transmitting such payments to you. In all cases, payment for tendered Shares will be made only after timely receipt by Wilmington Trust Company of certificates for such Shares and, if applicable, Rights (or of a confirmation of a book-entry transfer of such Shares and Rights as described in "The Offer -- Procedure for Tendering Shares and Rights"), a properly completed and duly executed Letter of Transmittal and any other required documents for such Shares and Rights. 3 WHAT DOES THE BOARD OF DIRECTORS OF THE COMPANY THINK OF THIS OFFER? The board of directors of the Company has not approved the Offer or otherwise commented on it as of the date of this Offer to Purchase. Within 10 business days after the date of this Offer to Purchase, the Company is required to publish, send or give to you (and file with the Securities and Exchange Commission ("SEC")) a statement as to whether it recommends acceptance or rejection of this Offer, that it has no opinion with respect to this Offer or that it is unable to take a position with respect to this Offer. WILL THE OFFER BE FOLLOWED BY A MERGER? If we enter into a merger agreement with the Company and if we accept for payment and pay for the number of Shares that represent, together with Shares owned by Mentor, at least a majority of the outstanding Shares on a fully diluted basis (or fewer Shares, if we waive the Minimum Condition, as defined herein), we intend to consummate the Proposed Merger, which is a second-step merger in which Purchaser is expected to be merged with and into the Company with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Mentor. Additionally, if we accept for payment and pay for the number of Shares that represent, together with Shares owned by Mentor, at least 90% of the outstanding Shares, we would have sufficient voting power to approve the Proposed Merger without the affirmative vote of any other stockholder of the Company. If the Proposed Merger takes place, Mentor will own all of the Shares and all remaining stockholders (other than Mentor, Purchaser, or other subsidiaries of Mentor) will receive, for each Share they hold, the same cash price paid under the terms of the Offer. IF THE NUMBER OF SHARES THAT REPRESENT, TOGETHER WITH SHARES OWNED BY MENTOR, 90% OF THE OUTSTANDING SHARES ARE TENDERED AND ACCEPTED FOR PAYMENT, WILL THE COMPANY CONTINUE AS A PUBLIC COMPANY? Yes; however, if and when the Proposed Merger takes place, the Company will no longer be publicly traded. It is possible that, following the expiration date of the Offer and prior to the merger, if we purchase all the tendered Shares, there may be so few remaining stockholders and publicly held Shares that: - the Shares will no longer be eligible to be traded on the Nasdaq National Market or any securities exchange; - there may not be an active public trading market, or, possibly, any public trading market, for the Shares; and - the Company may cease making filings with the SEC or otherwise cease being subject to the SEC rules relating to publicly held companies. IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES? If the Proposed Merger takes place, stockholders not tendering in the Offer will receive the same amount of cash per Share that they would have received had they tendered their Shares in the Offer, subject to any appraisal rights properly exercised under Delaware law. Therefore, if the Proposed Merger takes place and you do not exercise appraisal rights, the only difference to you between tendering your Shares and not tendering your Shares is that you will be paid earlier if you tender your Shares. However, if the Proposed Merger does not take place and the Offer is consummated, the number of stockholders and Shares that are still in the hands of the public may be so small that there will no longer be an active public trading market, or, possibly, any public trading market, for the Shares, which may affect prices at which Shares trade. Also, as described above, the Company may cease making filings with the SEC or otherwise cease being subject to the SEC rules relating to publicly held companies. ARE APPRAISAL RIGHTS AVAILABLE IN EITHER THE OFFER OR THE PROPOSED MERGER? Appraisal rights are not available in the Offer. If the Proposed Merger is consummated, holders of Shares at the effective time of that merger who do not vote in favor of, or consent to, the Proposed Merger will have rights under Section 262 of the Delaware General Corporation Law to demand appraisal of their Shares. Under Section 262, stockholders who demand appraisal and comply with the applicable statutory procedures 4 will be entitled to receive a judicial determination of the fair value of their Shares, exclusive of any element of value arising from the accomplishment or expectation of the Proposed Merger, and to receive payment of that fair value in cash, together with a fair rate of interest, if any. Any such judicial determination of the fair value of Shares could be based upon factors other than, or in addition to, the price per Share to be paid in the Proposed Merger or the market value of the Shares. The value so determined could be more or less than the price per Share to be paid in the Proposed Merger. WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE? On June 29, 2001, the last full trading day before the date the Company entered into the Agreement and Plan of Merger and Reorganization dated July 2, 2001 among the Company, Synopsys, Inc. and Oak Merger Corporation, the closing price of a Share of the Company was $7.36. Between July 2, 2001 and December 6, 2001, the closing price of a Share ranged between $2.85 and $8.05, and on December 6, 2001, the last full trading day before the date of this Offer to Purchase, the closing price of a Share of the Company was $8.05. We advise you to obtain a recent quotation for Shares before deciding whether to tender your Shares. WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER? You can call MacKenzie Partners, Inc., the information agent for the Offer, at (800) 322-2885 (toll free). 5 To the Holders of Common Stock of IKOS Systems, Inc.: INTRODUCTION We are Mentor Graphics Corporation, an Oregon corporation ("Mentor"). Through our wholly-owned subsidiary Fresno Corporation, a Delaware corporation ("Purchaser"), we hereby offer to purchase all of the issued and outstanding common stock, par value $0.01 per share (the "Shares"), of IKOS Systems, Inc., a Delaware corporation (the "Company"), including the associated preferred stock purchase rights (the "Rights") issued pursuant to the Amended and Restated Rights Agreement, dated January 22, 1999, between the Company and Bank Boston, N.A., as amended (the "Rights Agreement"), at the price of $11.00 per Share net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together, as amended, supplemented or otherwise modified from time to time, constitute the "Offer"). All references to Rights include all benefits that may inure to holders of the Rights under the Rights Agreement and, unless the context otherwise requires, all references in this Offer to Purchase to Shares include the Rights. If you tender your Shares to us in the Offer, you will not be obligated to pay brokerage fees, commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the sale of Shares pursuant to the Offer. If you own your Shares through a broker or other nominee, and your broker tenders your Shares on your behalf, your broker or nominee may charge you a fee for doing so. You should consult your broker or nominee to determine whether any charges will apply. We will pay all charges and expenses of Wilmington Trust Company (the "Depositary") and MacKenzie Partners, Inc. (the "Information Agent") incurred in connection with the Offer. See "The Offer -- Fees and Expenses." The purpose of the Offer and the proposed second-step merger is to enable Mentor to acquire control of, and the entire equity interest in, the Company. Mentor currently intends, as soon as practicable following consummation of the Offer, to seek to have Purchaser consummate a merger with and into the Company (the "Proposed Merger"), with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Mentor. Pursuant to the Proposed Merger, at the effective time of the Proposed Merger (the "Effective Time"), each then remaining Share outstanding (other than Shares owned by Mentor, Purchaser or other subsidiaries of Mentor, all of which will be cancelled, and other than Shares that are held by stockholders, if any, who properly exercise their appraisal rights under the Delaware General Corporation Law (the "DGCL")) would be converted into the right to receive $11.00, net to the seller in cash, without interest (the "Merger Consideration"). The Offer is conditioned upon, among other things (1) there being validly tendered and not withdrawn prior to the expiration date of the Offer a number of Shares, including the associated Rights, representing, together with the Shares owned by Mentor, at least a majority of the total number of outstanding Shares on a fully diluted basis (the "Minimum Condition"); (2) Mentor being satisfied, in its sole discretion, that the Agreement and Plan of Merger and Reorganization dated July 2, 2001 among the Company, Synopsys, Inc. and Oak Merger Corporation (the "Synopsys Agreement") has been terminated in accordance with the terms of such agreement as in effect on the date of this Offer to Purchase or such other terms as may be satisfactory to Mentor in its sole discretion (the "Synopsys Agreement Condition"); (3) the termination fee provision in the Synopsys Agreement having been invalidated or the obligations to pay any amounts pursuant to such provision having been terminated, without any termination fee, or any portion thereof, having been paid by the Company or any of its affiliates pursuant to the Synopsys Agreement (the "Termination Condition"); (4) the Rights having been redeemed by the board of directors of the Company in accordance with the terms of such Rights as in effect at such time or Mentor being satisfied, in its sole discretion, that the Rights have been invalidated or are otherwise inapplicable to the Offer and the Proposed Merger (the "Rights Condition"); (5) Mentor being satisfied, in its sole discretion, that the provisions of Section 203 of the DGCL do not apply to or otherwise restrict the Offer and the Proposed Merger (the "Section 203 Condition"); (6) the Company's stockholders not having approved the Synopsys Agreement (the "Approval Condition"); (7) the Company not having entered into or effectuated any agreement or transaction with any person or entity having the effect of impairing Purchaser's ability to acquire the Company or otherwise diminishing the expected economic 6 value to Mentor of the acquisition of the Company (the "Impairment Condition"); and (8) any waiting periods under applicable antitrust laws having expired or been terminated. Any or all of the conditions set forth in (1)-(8) above may be waived by Purchaser in its sole discretion. The Offer is also subject to other conditions. See "The Offer -- Conditions to the Offer." In the event the Offer is terminated or not consummated, or after the expiration of the Offer and pending the consummation of the Proposed Merger, in accordance with applicable law and any merger agreement that it may enter into with the Company, Mentor may explore any and all options which may be available. In this regard, and after expiration or termination of the Offer, Mentor may seek to acquire additional Shares, through open market purchases, block trades, privately negotiated transactions, a tender offer or exchange offer or otherwise, upon such terms and at such prices as Mentor may determine, which may be more or less than the price offered or paid per Share pursuant to the Offer and could be for cash or other consideration. THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF STOCKHOLDERS OF THE COMPANY OR A SOLICITATION OF AGENT DESIGNATIONS TO CALL A SPECIAL MEETING OF STOCKHOLDERS OF THE COMPANY. ANY SOLICITATION OF PROXIES WHICH PURCHASER OR MENTOR MIGHT MAKE WILL BE MADE ONLY PURSUANT TO SEPARATE PROXY OR CONSENT SOLICITATION MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "EXCHANGE ACT"). THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION, AND YOU SHOULD CAREFULLY READ BOTH IN THEIR ENTIRETY BEFORE YOU MAKE A DECISION WITH RESPECT TO THE OFFER. 7 THE OFFER 1. Terms of the Offer; Expiration Date. On the terms and subject to the conditions set forth in this Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), we will accept for payment and pay for all Shares, including the associated Rights, that are validly tendered prior to the Expiration Date and not properly withdrawn. "Expiration Date" means 12:00 Midnight, New York City time, on Tuesday, January 8, 2002, unless we extend the period of time for which the Offer is open, in which event "Expiration Date" means the latest time and date at which the Offer, as so extended, shall expire. The Offer is scheduled to expire on January 8, 2001 because President Bush signed an executive order on December 6, 2001 directing federal agencies to close their offices on December 24, 2001. Under a SEC staff interpretation, the executive order resulted in December 24, 2001 not being a "business day" within Rule 14d-1(g)(3) and therefore not being included in calculating the twenty business day minimum period for purposes of Rule 14e-1(a) under the Exchange Act. If President Bush issues a similar executive order for December 31, 2001, the Offer will be scheduled to expire on January 9, 2001, instead of January 8, 2001. The Offer is conditioned upon, among other things, (1) the Minimum Condition having been satisfied, (2) the Synopsys Agreement Condition having been satisfied, (3) the Termination Fee Condition having been satisfied, (4) the Rights Condition having been satisfied, (5) the Section 203 Condition having been satisfied, (6) the Approval Condition having been satisfied, (7) the Impairment Condition having been satisfied, and (8) any waiting periods under applicable antitrust laws having expired or been terminated. The Offer is also subject to other conditions as described in "The Offer -- Conditions to the Offer." If any such condition is not satisfied, we may: (a) terminate the Offer and return all tendered Shares; (b) extend the Offer and, subject to certain conditions and to your withdrawal rights as set forth in "The Offer -- Withdrawal Rights," retain all Shares until the expiration date of the Offer as so extended; or (c) waive the Minimum Condition and, subject to any requirement to extend the period of time during which the Offer must remain open, purchase all Shares validly tendered prior to the Expiration Date and not withdrawn or delay acceptance for payment or payment for Shares, subject to applicable law, until satisfaction or waiver of the conditions to the Offer. For a description of our right to extend, amend, delay or terminate the Offer, see "The Offer -- Extension of Tender Period; Termination; Amendment," and "The Offer -- Conditions to the Offer." Under Exchange Act Rule 14d-11, Purchaser may, subject to certain conditions, provide a subsequent offering period of from three to 20 business days in length following the expiration of the Offer on the Expiration Date. A subsequent offering period would be an additional period of time, following the expiration of the Offer and the purchase of Shares in the Offer, during which stockholders may tender Shares not tendered in the Offer. A subsequent offering period, if one is included, is not an extension of the Offer, which already will have been completed. Purchaser does not currently intend to include a subsequent offering period in the Offer, although it reserves the right to do so in its sole discretion. Under Exchange Act Rule 14d-7, no withdrawal rights apply to Shares and Rights tendered during a subsequent offering period and no withdrawal rights apply during the subsequent offering period with respect to Shares and Rights tendered in the Offer and accepted for payment. Purchaser will pay the same consideration to stockholders tendering Shares in the Offer or in a subsequent offering period, if it includes one. On the date of this Offer to Purchase, Mentor beneficially owns 841,600 Shares (100 of which are owned of record by Purchaser). According to the Company's Schedule 14A filed October 31, 2001, there were 9,225,000 Shares outstanding as of September 29, 2001. According to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001, there were 3,155,594 stock options outstanding as of June 15, 2001. For purposes of the Minimum Condition, "fully diluted basis" assumes that all outstanding stock options are presently exercisable. The actual minimum number of Shares will depend on the facts as they exist on the date of purchase. 2. Extension of Tender Period; Termination; Amendment. We reserve the right to extend the Expiration Date, in our sole discretion, if at the scheduled Expiration Date any of the conditions to the Offer 8 have not been satisfied or waived. We also have the right to extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or the SEC Staff applicable to the Offer or any period required by applicable law. We expressly reserve the right to waive any of the conditions to the Offer, to make any change in the terms of our conditions to the Offer and to provide a subsequent offering period for the Offer in accordance with Rule 14d-11 under the Exchange Act. If we increase or decrease the percentage of Shares being sought or increase or decrease the consideration to be paid for Shares pursuant to the Offer and the Offer is scheduled to expire at any time before the expiration of 10 business days from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner specified below, the Offer will be extended until the expiration of 10 business days from, and including, the date of such notice. If we make a material change in the terms of the Offer (other than a change in price or percentage of securities sought) or in the information concerning the Offer, or waive a material condition of the Offer, we will extend the Offer, if required by applicable law, for a period sufficient to allow you to consider the amended terms of the Offer. In a published release, the SEC has stated its view that an offer must remain open for a minimum period of time following a material change in the terms of such offer and that the waiver of a condition such as the Minimum Condition is a material change in the terms of an offer. The release states that an offer should remain open for a minimum of five business days from the date the material change is first published, sent or given to stockholders, and that if material changes are made with respect to information that approaches the significance of price or percentage of Shares sought, a minimum of 10 business days may be required to allow adequate dissemination and investor response. "Business day" means any day other than Saturday, Sunday or a federal holiday and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York City time. Any extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement, in the case of an extension of the Offer to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date, in accordance with the public announcement requirements of Rule 14e-1(d) under the Exchange Act. Subject to applicable law (including Rules 14d-4(d) and 14d-6(c) under the Exchange Act, which require that material changes in the information published, sent or given to any stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform them of such changes), and without limiting the manner in which we may choose to make any public announcement, we have no obligation to publish, advertise or otherwise communicate any public announcements other than by issuing a press release to the Dow Jones News Service. If we extend the time during which the Offer is open, or if we are delayed in its acceptance for payment of or payment for Shares pursuant to the Offer for any reason, then, without prejudice to our rights under the Offer, the Depositary may retain tendered Shares on our behalf and those Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described herein under "The Offer -- Withdrawal Rights." However, our ability to delay the payment for Shares that we have accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of stockholders promptly after the termination or withdrawal of the bidder's offer. As of the date of this Offer to Purchase, the Rights are evidenced by the share certificates evidencing the Shares (the "Share Certificates") and do not trade separately. Accordingly, by tendering a Share Certificate, a stockholder is automatically tendering a similar number of associated Rights. If, however, pursuant to the Rights Agreement or for any other reason, the Rights detach and separate certificates evidencing the Rights ("Rights Certificates") are issued, stockholders will be required to tender Rights Certificates evidencing a number of Rights equal to the number of Shares tendered in order to effect a valid tender of such Shares. Pursuant to Rule 14d-5 under the Exchange Act and Section 220 of the Delaware General Corporation Law, requests are being made to the Company for the use of the Company's stockholder lists and security position listings for the purpose of disseminating the Offer to holders of Shares. Upon compliance by the Company with such requests, this Offer to Purchase and the Letter of Transmittal will be mailed to record holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar 9 persons whose names, or the names of whose nominees, appear on the stockholder lists for subsequent transmittal to beneficial owners of Shares. 3. Acceptance for Payment and Payment. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), we will accept for payment and pay for all Shares that are validly tendered on or prior to the Expiration Date and not properly withdrawn pursuant to the Offer as soon as we are permitted to do so under applicable law, subject to the satisfaction or waiver of the conditions set forth in "The Offer -- Conditions to the Offer." In addition, we reserve the right, subject to compliance with Rule 14e-1(c) under the Exchange Act, to delay the acceptance for payment or payment for Shares pending receipt of any regulatory or governmental approvals to the Offer as described under the caption "The Offer -- Certain Legal Matters; Regulatory Approvals." For a description of our right to terminate the Offer and not accept for payment or pay for Shares or to delay acceptance for payment or payment for Shares, see "The Offer -- Extension of Tender Period; Termination; Amendment." For purposes of the Offer, we shall be deemed to have accepted for payment tendered Shares when, as and if we give oral or written notice of our acceptance to the Depositary. We will pay for Shares accepted for payment pursuant to the Offer by depositing the purchase price with the Depositary. The Depositary will act as your agent for the purpose of receiving payments from us and transmitting such payments to you. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such Shares, and, if applicable, Rights (or of a confirmation of a book-entry transfer of such Shares and Rights into the Depositary's account at the Book-Entry Transfer Facility (as defined in "The Offer -- Procedure for Tendering Shares and Rights")), a properly completed and duly executed Letter of Transmittal and any other required documents. Accordingly, payment may be made to tendering stockholders at different times if delivery of the Shares and other required documents occurs at different times. For a description of the procedure for tendering Shares pursuant to the Offer, see "The Offer -- Procedure for Tendering Shares and Rights." Under no circumstances will we pay interest on the consideration paid for Shares pursuant to the Offer, regardless of any delay in making such payment. If we increase the consideration to be paid for Shares pursuant to the Offer, we will pay such increased consideration for all Shares purchased pursuant to the Offer. We reserve the right to transfer or assign, in whole or from time to time in part, to one or more of our affiliates the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve us of our obligations under the Offer or prejudice your rights to receive payment for Shares validly tendered and accepted for payment. If any tendered Shares are not purchased pursuant to the Offer for any reason, or if certificates are submitted for more Shares and, if applicable, Rights than are tendered, certificates for such unpurchased or untendered Shares and Rights will be returned (or, in the case of Shares tendered by book-entry transfer, such Shares will be credited to an account maintained at the Book-Entry Transfer Facility as defined below), without expense to you, as promptly as practicable following the expiration or termination of the Offer. 4. Procedure for Tendering Shares and Rights. To tender Shares and, if applicable, Rights pursuant to the Offer, either (1) the Depositary must receive at one of its addresses set forth on the back cover of this Offer to Purchase (A) a properly completed and duly executed Letter of Transmittal and any other documents required by the Letter of Transmittal and (B) certificates for the Shares and, if applicable, Rights to be tendered or delivery of such Shares pursuant to the procedures for book-entry transfer described below (and a confirmation of such delivery including an Agent's Message (as defined below) if the tendering stockholder has not delivered a Letter of Transmittal), in each case by the Expiration Date, or (2) the guaranteed delivery procedure described below must be complied with. Separate Delivery of Rights Certificates. If the date upon which the Company distributes Rights Certificates to its stockholders pursuant to the Rights Agreement (the "Distribution Date") does not occur prior to the Expiration Date, a tender of Shares will also constitute a tender of the associated Rights. If the Distribution Date occurs and the Company distributes Rights Certificates prior to the time a stockholder's Shares are tendered pursuant to the Offer, in order for Rights and the corresponding Shares to be validly 10 tendered, Rights Certificates representing a number of Rights equal to the number of Shares tendered must be delivered to the Depositary or, if book-entry delivery is available with respect to Rights, an Agent's Message (as defined below) must be received by the Depositary with respect thereto. If the Distribution Date occurs and the Rights Certificates are not distributed prior to the time Shares are tendered pursuant to the Offer, Rights may be tendered prior to a stockholder receiving Rights Certificates by use of the guaranteed delivery procedure described below. In any case, a tender of Shares constitutes an agreement by the tendering stockholder to deliver Rights Certificates representing a number of Rights equal to the number of Shares tendered pursuant to the Offer to the Depositary within three Nasdaq National Market trading days of the date Rights Certificates are distributed. Purchaser reserves the right to require that the Depositary receive Rights Certificates, or an Agent's Message, if available, with respect to such Rights prior to accepting the related Shares for payment pursuant to the Offer if the Distribution Date occurs prior to the Expiration Date. If Purchaser declares that the Rights Condition is satisfied, Purchaser will not require delivery of Rights. Unless and until Purchaser declares that the Rights Condition is satisfied, holders of Shares will be required to tender one Right for each Share tendered to effect a valid tender of such share. The method of delivery of Share Certificates, Rights Certificates, if applicable, and all other required documents, including delivery through the Book-Entry Transfer Facility (as defined below), is at the option and risk of the tendering stockholder, and the delivery will be deemed made only when actually received by the Depositary including, in the case of a book-entry transfer, by Agent's Message. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. Book-Entry Delivery. The Depositary will establish an account with respect to the Shares at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in the system of the Book-Entry Transfer Facility may make delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with the procedures of the Book-Entry Transfer Facility. However, although delivery of Shares may be effected through book-entry transfer, the Letter of Transmittal properly completed and duly executed together with any required signature guarantees or an Agent's Message and any other required documents must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase by the Expiration Date, or the guaranteed delivery procedure described below must be complied with. Delivery of the Letter of Transmittal and any other required documents to the Book-Entry Transfer Facility does not constitute delivery to the Depositary. "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a book-entry confirmation which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that are the subject of such book-entry confirmation which such participant has received, and agrees to be bound by, the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant. If the Distribution Date occurs prior to the Expiration Date, the Depositary will also make a request to establish an account with respect to the Rights at the Book-Entry Transfer Facility, but no assurance can be given that the book-entry delivery of Rights will be available. If book-entry delivery of Rights is available, the foregoing book-entry transfer procedures also will apply to Rights. Otherwise, if Rights Certificates have been issued, a tendering stockholder will be required to tender Rights by means of physical delivery of Rights Certificates to the Depositary (in which event references in this Offer to Purchase to book-entry confirmations with respect to Rights will be inapplicable) or pursuant to the guaranteed delivery procedure set forth below. Signature Guarantees. Except as otherwise provided below, all signatures on a Letter of Transmittal must be guaranteed by a financial institution (including most banks, savings and loan associations and brokerage houses) that is a member of a recognized Medallion Program approved by The Securities Transfer Association, Inc. (each an "Eligible Institution"). Signatures on a Letter of Transmittal need not be guaranteed (1) if the Letter of Transmittal is signed by the registered holder of the Shares tendered therewith and such holder has not completed the box entitled "Special Payment Instructions" on the Letter of 11 Transmittal or (2) if such Shares are tendered for the account of an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal. Guaranteed Delivery. If you wish to tender Shares and associated Rights pursuant to the Offer and cannot deliver such Share Certificates or, if applicable, Rights Certificates and all other required documents to the Depositary by the Expiration Date, or cannot complete the procedure for delivery by book-entry transfer on a timely basis, you may nevertheless tender such Shares if all of the following conditions are met: - such tender is made by or through an Eligible Institution; - a properly completed and duly executed Notice of Guaranteed Delivery in the form provided by Purchaser is received by the Depositary (as provided below) by the Expiration Date; and - the Share Certificates and, if applicable, Rights Certificates (or a confirmation of a book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantee or an Agent's Message and any other documents required by the Letter of Transmittal, are received by the Depositary within three Nasdaq National Market trading days after the date of execution of the Notice of Guaranteed Delivery. If the Distribution Date occurs and the Rights Certificates are not distributed prior to the time Share Certificates are tendered, a tender of Share Certificates constitutes an agreement by the tendering stockholder to deliver Rights Certificates representing a number of Rights equal to the number of Shares tendered to the Depositary within three Nasdaq National Market trading days of the date Rights Certificates are distributed. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile transmission or mailed to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice. The method of delivery of Shares and associated Rights and all other required documents, including through the Book-Entry Transfer Facility, is at your option and risk, and the delivery will be deemed made only when actually received by the Depositary. If certificates for Shares and/or Rights are sent by mail, we recommend registered mail with return receipt requested, properly insured. Back-up Withholding. Under the federal income tax laws, the Depositary will be required to withhold a portion of the amount of any payments made to certain stockholders pursuant to the Offer or the Proposed Merger. In order to avoid such back-up withholding, you must provide the Depositary with your correct taxpayer identification number ("TIN") and certify that you are not subject to such back-up withholding by completing the Substitute Form W-9 included in the Letter of Transmittal. Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to back-up withholding. If a stockholder does not provide its correct TIN or fails to provide the certifications described above, the Internal Revenue Service may impose a penalty on the stockholder and payment of cash to the stockholder pursuant to the Offer may be subject to back-up withholding. All stockholders tendering Shares pursuant to the Offer should complete and sign the Substitute Form W-9 included in the Letter of Transmittal to provide the information necessary to avoid back-up withholding. If you are a non-resident alien or foreign entity not subject to back-up withholding, you must give the Depositary a properly completed Form W-8BEN Certificate of Foreign Status or successor form in order to avoid backup withholding with respect to payments made to you. Grant of Proxy. By executing a Letter of Transmittal (or delivering an Agent's Message), you irrevocably appoint Walden C. Rhines and Gregory K. Hinckley as your proxies in the manner set forth in the Letter of Transmittal to the full extent of your rights with respect to the Shares tendered and accepted for payment by us (and any and all other Shares or other securities issued or issuable in respect of such Shares on or after the date of this Offer to Purchase). All such proxies are irrevocable and coupled with an interest in the tendered Shares. Such appointment is effective only upon our acceptance for payment of such Shares. Upon such acceptance for payment, all prior proxies and consents granted by you with respect to such Shares and other securities will, without further action, be revoked, and no subsequent proxies may be given nor subsequent written consents executed (and, if previously given or executed, will cease to be effective). Our designees will be empowered to exercise all your voting and other rights as they, in their sole discretion, may deem proper at any annual, special or adjourned meeting of the Company's stockholders, by written consent or otherwise. We reserve the right to require that, in order for Shares to be validly tendered, immediately upon our acceptance for payment of such Shares, we are able to exercise full voting rights with respect to such 12 Shares and other securities (including voting at any meeting of stockholders then scheduled or acting by written consent without a meeting). The foregoing proxies are effective only upon acceptance for payment of Shares pursuant to the Offer. The Offer does not constitute a solicitation of proxies, absent a purchase of Shares, for any meeting of the Company's stockholders, which will be made only pursuant to separate proxy solicitation materials complying with the Exchange Act. The tender of Shares pursuant to any one of the procedures described above will constitute your acceptance of the Offer, as well as your representation and warranty that (1) you own the Shares being tendered and (2) you have the full power and authority to tender, sell, assign and transfer the Shares tendered, as specified in the Letter of Transmittal. Our acceptance for payment of Shares tendered by you pursuant to the Offer will constitute a binding agreement between us with respect to such Shares, upon the terms and subject to the conditions of the Offer. Validity. We will determine, in our sole discretion, all questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares, and our determination shall be final and binding. We reserve the absolute right to reject any or all tenders of Shares that we determine not to be in proper form or the acceptance for payment of or payment for which may, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any defect or irregularity in any tender of Shares. Our interpretation of the terms and conditions of the Offer will be final and binding. None of Mentor, Purchaser, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defect or irregularity in tenders or waiver of any such defect or irregularity or incur any liability for failure to give any such notification. 5. Withdrawal Rights. You may withdraw tenders of Shares made pursuant to the Offer at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable, except that they may be withdrawn after February 4, 2002 unless such Shares are accepted for payment as provided in this Offer to Purchase. A withdrawal of Shares will also constitute a withdrawal of the associated Rights. If we extend the period of time during which the Offer is open, are delayed in accepting for payment or paying for Shares pursuant to the Offer for any reason, or are unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to our rights under the Offer, the Depositary may, on our behalf, retain all Shares tendered, and such Shares may not be withdrawn except as otherwise provided in this section. To withdraw tendered Shares, a written or facsimile transmission notice of withdrawal with respect to the Shares must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase, and the notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn and the number of Shares to be withdrawn and the name of the registered holder of Shares, if different from that of the person who tendered such Shares. If the Shares to be withdrawn have been delivered to the Depositary, a signed notice of withdrawal with (except in the case of Shares tendered by an Eligible Institution) signatures guaranteed by an Eligible Institution must be submitted prior to the release of such Shares. In addition, such notice must specify, in the case of Shares tendered by delivery of certificates, the name of the registered holder (if different from that of the tendering stockholder) and the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn or, in the case of Shares tendered by book-entry transfer, the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered by again following one of the procedures described in "The Offer -- Procedures for Tendering Shares and Rights" at any time prior to the Expiration Date. We will determine, in our sole discretion, all questions as to the form and validity (including time of receipt) of any notice of withdrawal, and our determination shall be final and binding. None of Purchaser, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defect or irregularity in any notice of withdrawal or waiver of any such defect or irregularity or incur any liability for failure to give any such notification. 13 If Purchaser provides a subsequent offering period following the Offer, no withdrawal rights will apply to Shares and Rights tendered during that subsequent offering period or to Shares and Rights tendered in the Offer and accepted for payment. 6. Certain United States Federal Income Tax Considerations. The following summary of certain United States federal income tax consequences of the Offer and the Proposed Merger to United States Holders (as defined below) is based on the Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury Regulations, and administrative and judicial interpretations thereof, each as in effect as of the date of this Offer to Purchase, all of which may change, possibly with retroactive effect. This summary assumes that Shares are held as capital assets. It does not address all of the tax consequences that may be relevant to particular stockholders in light of their personal circumstances, or to other types of stockholders (including, without limitation, certain financial institutions, brokers, dealers or traders in securities or commodities, insurance companies, "S" corporations, expatriates, tax-exempt organizations, Non-United States Holders (as defined below), persons who are subject to alternative minimum tax, persons who hold Shares as a position in a "straddle" or as part of a "hedging" or "conversion" transaction, persons that have a functional currency other than the United States dollar, or persons who acquired their Shares upon the exercise of stock options or otherwise as compensation). The Offer is conditioned, in part, upon the Rights having been redeemed or invalidated or being otherwise inapplicable to the Offer and the Proposed Merger. This discussion assumes the satisfaction of such condition and, as a result, that no portion of the consideration received by a stockholder pursuant to the Offer or the Proposed Merger is allocable to the Rights or the Rights Certificates. In addition, this discussion does not address any state, local or foreign tax consequences of the Offer or the Proposed Merger. WE URGE EACH HOLDER OF SHARES TO CONSULT ITS OWN TAX ADVISOR REGARDING THE UNITED STATES FEDERAL INCOME OR OTHER TAX CONSEQUENCES OF THE OFFER OR THE PROPOSED MERGER TO SUCH HOLDER. A "United States Holder" is a holder of Shares that for United States federal income tax purposes is (i) a citizen or resident of the United States; (ii) a corporation or partnership created or organized in or under the laws of the United States or any State or the District of Columbia; (iii) an estate the income of which is subject to United States federal income taxation regardless of its source; or (iv) a trust (a) the administration over which a United States court can exercise primary supervision and (b) all of the substantial decisions of which one or more United States persons have the authority to control and certain other trusts considered United States Holders for federal income tax purposes. A "Non-United States Holder" is a holder of Shares other than a United States Holder. The receipt of cash in exchange of Shares pursuant to the Offer or the Proposed Merger will be a taxable transaction for United States federal income tax purposes. In general, a United States Holder who sells Shares pursuant to the Offer or receives cash in exchange for Shares pursuant to the Proposed Merger will recognize gain or loss for United States federal income tax purposes equal to the difference, if any, between the amount of cash received and the holder's adjusted tax basis in the Shares sold pursuant to the Offer or exchanged for cash pursuant to the Proposed Merger. Any such gain or loss would be long-term capital gain or loss if the holding period for the Shares exceeded one year. Long-term capital gains of noncorporate taxpayers is generally taxable at a maximum rate of 20%. Capital gains of corporate stockholders are generally taxable at the regular tax rates applicable to corporations. If the Proposed Merger is consummated, a United States Holder who exercises appraisal rights and receives cash in exchange for its Shares will generally recognize capital gain or loss equal to the difference between the cash received and the holder's adjusted tax basis in the Shares exchanged therefor. If the Rights are redeemed by the Company, the receipt of cash by a United States Holder in exchange for Rights will generally be a taxable transaction for United States federal income tax purposes. If the Rights are redeemed by the Company in satisfaction of the Rights Condition before the Distribution Date, the cash received will likely be treated as a dividend, taxable as ordinary income to the extent of the Company's current or accumulated earnings and profits, as determined under United States federal income tax principles. To the extent that the amount of the distribution exceeds the Company's current and accumulated earnings and profits, the excess first will be treated as a return of capital that will reduce the holder's tax basis in its Shares, and any remaining portion will be taxable as capital gain. Any such capital gain will be long-term capital gain 14 if the holder has held the Shares for more than one year at such time. If the redemption of the Rights occurs on or after the Distribution Date, it is unclear whether the resulting gain will be treated as a dividend or as a sale or exchange of a capital asset. THE FOREGOING DOES NOT PURPORT TO BE AN ANALYSIS OF THE POTENTIAL TAX CONSIDERATIONS RELATING TO PARTICIPATION IN THE OFFER OR THE PROPOSED MERGER, AND IS NOT TAX ADVICE. THEREFORE, STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF TENDERING INTO THE OFFER OR EXCHANGING SHARES PURSUANT TO THE PROPOSED MERGER, INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS. 7. Price Range of Shares; Dividends. The Shares are listed and principally traded on the Nasdaq National Market under the symbol "IKOS." The following table sets forth for the calendar quarters indicated the high and low sales prices per Share on the Nasdaq National Market based on published financial sources.
HIGH LOW ------ ----- 1999 First Quarter............................................. $ 6.38 $3.38 Second Quarter............................................ 9.94 4.94 Third Quarter............................................. 10.88 6.13 Fourth Quarter............................................ 9.88 6.75 2000 First Quarter............................................. $15.50 $8.56 Second Quarter............................................ 13.00 8.25 Third Quarter............................................. 13.38 9.25 Fourth Quarter............................................ 13.81 7.13 2001 First Quarter............................................. $17.44 $8.28 Second Quarter............................................ 11.38 6.43 Third Quarter............................................. 8.24 2.95 Fourth Quarter through December 6, 2001................... 8.05 2.85
On June 29, 2001, the last full trading day before the date the Company entered into the Synopsys Agreement, the closing price of a Share of the Company was $7.36. Between July 2, 2001 and December 6, 2001, the price per Share on the Nasdaq National Market ranged between $2.85 and $8.05. On December 6, 2001, the last full trading day before the date of this Offer to Purchase, the reported closing sales price per Share on the Nasdaq National Market was $8.05. We urge you to obtain current market quotations for the Shares. The Company has never declared or paid cash dividends on its stock. Prior to the Distribution Date, the Rights are attached to outstanding Shares and may not be traded separately. As a result, the sales prices per Share set forth above include the associated Rights. As a result of the commencement of the Offer, the Distribution Date may occur, after which the Rights will separate and may begin trading apart from the Shares. In such event, we urge you to obtain current market quotations, if any, for the Rights. 8. Certain Information Concerning the Company. General. The Company is a Delaware corporation, with principal executive offices at 79 Great Oaks Boulevard, San Jose, California 95119. The telephone number of the Company's executive offices is (408) 284-0400. The Company develops, manufactures, markets, and supports acceleration and verification systems for the verification of integrated circuits. The Company differentiates its verification solutions with 15 hardware acceleration systems and emulation systems which compile and integrate both emulation and acceleration hardware into the design flow. The Company also provides services to customers to assist in the integration and deployment of the Company's proprietary verification solutions. Available Information. The Company is subject to the informational requirements of the Exchange Act and in accordance therewith files periodic reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters. The Company is required to disclose in such proxy statements certain information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company. Such reports, proxy statements and other information may be inspected at the public reference facilities maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can also be obtained at prescribed rates from the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, or free of charge at the Web site maintained by the SEC at http://www.sec.gov. Except as otherwise stated in this Offer to Purchase, the information concerning the Company contained herein has been taken from or is based upon reports and other documents on file with the SEC or otherwise publicly available. Although we have no knowledge that would indicate that any statements contained herein based upon such reports and documents are untrue, we take no responsibility for the accuracy or completeness of the information contained in such reports and other documents or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information but that are unknown to us. 9. Certain Information Concerning Purchaser and Mentor. General. Purchaser is a Delaware corporation incorporated on December 3, 2001, with principal executive offices at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. The telephone number of Purchaser's principal executive offices is (503) 685-7000. To date, Purchaser has engaged in no activities other than those incident to Purchaser's formation and the commencement of the Offer. Purchaser is a wholly-owned subsidiary of Mentor. Mentor is an Oregon corporation with principal executive offices at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. The telephone number of Mentor's executive offices is (503) 685-7000. Mentor manufactures, markets and supports software and hardware electronic design automation ("EDA") products and provides related services which enable engineers to design, analyze, simulate, model, implement and verify the components of electronic systems. In 1996, Mentor expanded its product offerings beyond traditional EDA to include (1) intellectual property products and services intended to increase design efficiency by delivering standard, reusable functions for the design of hardware components and (2) embedded software development and system verification tools intended to shorten product time-to-market by allowing for simultaneous development and testing of hardware and embedded software. Mentor markets its products primarily to large companies in the communications, computer, semiconductor, consumer electronics, aerospace and transportation industries. Customers use Mentor's software in the design of such diverse products as supercomputers, automotive electronics, telephone-switching systems, cellular base stations and handsets, computer network hubs and routers, signal processors and personal computers. The name, business address, principal occupation or employment, five-year employment history and citizenship of each director and executive officer of Mentor and Purchaser and certain other information are set forth on Schedule I to this Offer to Purchase. Except as set forth in this Offer to Purchase, during the past two years, none of us, nor, to our best knowledge, any of the persons listed on Schedule I hereto, has had any business relationship or transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the SEC applicable to the Offer. Except as set forth in this Offer to Purchase, none of the persons listed in Schedule I, nor any of their respective associates or majority-owned subsidiaries, beneficially owns any securities of the Company. Except as set forth in this Offer to Purchase, there have been no contacts, negotiations or transactions between us or any of our subsidiaries or, to our best knowledge, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or 16 acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. None of the persons listed in Schedule I has, during the past five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). Except as described in Schedule I, none of the persons listed in Schedule I has, during the past five years, been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. As of the date of this Offer to Purchase, Mentor beneficially owns 841,600 Shares (100 of which are owned of record by Purchaser), representing approximately 9.1% of the outstanding Shares. Transactions in the Shares by Mentor effected in the past 60 days are described in Schedule II to this Offer to Purchase. All such transactions were effected by Mentor in the open market on the Nasdaq National Market within the price ranges per Share indicated on Schedule II. On December 5, 2001, Mentor contributed 100 shares to Purchaser. Available Information. Mentor is subject to the informational requirements of the Exchange Act and in accordance therewith files periodic reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters. Mentor is required to disclose in such proxy statements certain information, as of particular dates, concerning its directors and officers, their remuneration, stock options granted to them, the principal holders of its securities and any material interests of such persons in transactions with Mentor. Such reports, proxy statements and other information should be available for inspection and copying at the offices of the SEC in the same manner as set forth with respect to the Company in "Certain Information Concerning the Company -- Available Information." 10. Source and Amount of Funds. We will need approximately $100 million to purchase all of the outstanding Shares pursuant to the Offer and to pay related fees and expenses. Purchaser intends to obtain all funds needed for the Offer and the Proposed Merger through a capital contribution or a loan from Mentor. Mentor plans to provide the funds for such capital contribution or loan from its available cash and working capital. The Offer is not subject to any financing condition. 11. Background of the Offer. As part of the continuous evaluation of its businesses and plans, Mentor regularly considers a variety of strategic options and transactions. As part of this process, Mentor has evaluated various alternatives for expanding its business, including discussions with the Company from time to time concerning an acquisition of the Company. In the late 1990s, the Company or its financial advisors contacted Mentor on several occasions to discuss the possibility of Mentor acquiring the Company. These discussions between Mentor and the Company and its financial advisors did not result in any proposal by Mentor to acquire the Company. In late 1999, an investment banker representing the Company contacted Dennis Weldon, Treasurer of Mentor, concerning the possibility of an acquisition of the Company by Mentor. After internal discussions at Mentor, Mr. Weldon informed the investment banker that Mentor was not interested in pursuing an acquisition at that time. On May 10, 2000, at the Company's request, Ramon Nunez, Chief Executive Officer of the Company, and Larry Melling, Vice President of Business Development and Strategic Marketing of the Company, met with Gregory Hinckley, who is now the President and Chief Operating Officer of Mentor, in San Jose, California, to discuss the possibility of Mentor acquiring the Company. They agreed to discuss the matter further at the Design Automation Conference in June 2000. On June 7, 2000, at the Design Automation Conference in Los Angeles, California, Dr. Walden Rhines, who is now the Chairman of the Board of Directors and Chief Executive Officer, Mr. Hinckley and other representatives of Mentor had conversations with Mr. Nunez and Robert Hum, Senior Vice President of Product Operations of the Company, regarding the differences between Mentor's and the Company's emulation products and the production costs of such products, in the context of a potential acquisition of the Company by Mentor. The parties agreed to discuss this matter further in the future. 17 Following the June 7, 2000 meeting, an independent technology consultant to Mentor met with a representative of the Company at the Company's principal offices in San Jose, California to evaluate the Company's emulation products. To provide a context for further detailed discussions, Mentor and the Company entered into a confidentiality and standstill agreement on June 16, 2000. In late June 2000, Mr. Nunez contacted Mr. Hinckley to discuss a potential future meeting between representatives of Mentor and the Company. Subsequently, Mr. Nunez stated that he wished to schedule a meeting with Mentor in July 2000. On July 6, 2000, Dr. Rhines, Mr. Hinckley, Mr. Weldon and other representatives of Mentor met with Mr. Nunez, Mr. Hum and Mr. Melling, in Paris, France to discuss the operations of the companies' businesses, the integration of the companies' product lines and the joint marketing of the companies' products, in the event that Mentor acquired the Company. During this meeting, Mr. Hinckley informed Mr. Nunez that, before Mentor could reach any decision on its desire to acquire the Company, Mentor needed to hire a general manager for its emulation division and allow the new manager sufficient time to evaluate the needs of the emulation division. Mentor's emulation division is Mentor's business that most closely complements the Company's business. After subsequent internal meetings at Mentor and in light of his earlier comments concerning the hiring of a general manager for Mentor's emulation division, Mr. Hinckley in separate telephone conversations confirmed to Mr. Nunez and to Mr. Melling that Mentor would not be able to continue discussions until a new general manager, who had not yet been hired, completed an evaluation of Mentor's emulation division. Mr. Nunez responded that the Company would continue the process of exploring a business combination with other parties. As a result, these discussions ended in July 2000 without reaching any agreement concerning an acquisition of the Company by Mentor. Although the discussions regarding a business combination ended in July 2000, on July 27, 2000, Mentor and the Company agreed to hold discussions regarding other types of business relationships. On August 3, 2000, Mr. Nunez and Joseph Rockom, Chief Financial Officer, Vice President of Finance and Administration and Secretary of the Company, and Mr. Weldon discussed the possibility of an original equipment manufacturing agreement. These discussions ended without reaching any agreement, and there were no further discussions concerning other types of business relationships. On November 9, 2000, Mr. Hinckley met Mr. Nunez and Gerald Casilli, Chairman of the Board of Directors of the Company, to discuss the possibility of an introductory meeting between the Company and Eric Selosse, whom Mentor had hired in October 2000 to be the general manager of Mentor's emulation division. On December 5, 2000, Mr. Selosse met with Mr. Nunez and another representative of the Company and held a general discussion concerning the emulation industry and the Company's product lines as well as the possible acquisition of the Company by Mentor. These discussions ended without any agreement regarding an acquisition of the Company by Mentor. On April 13, 2001, Mr. Weldon contacted Mr. Nunez to request a meeting to discuss a possible acquisition of the Company by Mentor. On April 17, 2001, Mr. Selosse met with Mr. Nunez to discuss a possible acquisition of the Company by Mentor. Mr. Weldon attended by telephone. While Mr. Nunez expressed interest in a possible acquisition, he stated that the Company had engaged Needham & Company as the Company's financial advisor as a result of having received expressions of interest from other companies. Mr. Weldon told Mr. Nunez that Mentor would contact the Company within approximately two weeks. During April 2001, Mr. Rockom left a voice mail message for Dean Freed, Vice President, General Counsel and Secretary of Mentor, inquiring about the possibility of a new confidentiality and standstill agreement that would pertain to the April 2001 discussions regarding a potential acquisition of the Company by Mentor. Mr. Rockom also called Mr. Weldon concerning the possibility of entering into a new confidentiality and standstill agreement. Although no new confidentiality and standstill agreement had been entered into, Mr. Rockom nevertheless volunteered to furnish Mr. Weldon with certain of the Company's projections. Shortly thereafter, Mr. Rockom emailed Mr. Weldon projections prepared by the Company for the third and fourth fiscal quarter of 2001 and 2002. After reviewing the projections, Mentor concluded that 18 such projections were overly optimistic and therefore did not rely on them with respect to making any decisions regarding the Company. Also during April 2001, to provide a basis for discussions regarding any new confidentiality and standstill agreement, Mr. Freed faxed the June 16, 2000 confidentiality agreement to Mr. Rockom. In a voice mail message and telephone conversation, Jan Robertson of Needham & Company informed Mr. Freed that the June 16, 2000 confidentiality agreement would not be acceptable to cover the contemporaneous discussions in light of the Company's need for, among other things, new standstill and nonsolicitation periods. No new confidentiality and standstill agreement was entered into between Mentor and the Company. In a voice mail message on April 26, 2001, Ms. Robertson stated that since the Company had received multiple expressions of interest, the Company was commencing a bid procedure with bids due on May 4, 2001. In response, Mr. Weldon called Chad Keck, a managing director of Needham & Company, and left a voice mail message asking Mr. Keck to return his call. Mr. Keck called Mr. Weldon on April 29, 2001. In their conversation, Mr. Weldon told Mr. Keck that Mentor was very interested in negotiating an acquisition of the Company, but would not participate in a blind bidding process. In May 2001, Bruce Alexander, a managing director of Needham & Company called Mr. Hinckley. In a telephone conversation with Mr. Alexander, Mr. Hinckley expressed Mentor's continued interest in pursuing a negotiated acquisition with the Company. In a meeting among Dr. Rhines, Mr. Hinckley, Mr. Weldon and Mr. Alexander on June 5, 2001, Mr. Hinckley informed Mr. Alexander that Mentor remained very interested in acquiring the Company. Later in June 2001, Mr. Alexander called Mr. Hinckley, and Mr. Hinckley expressed Mentor's continued interest in acquiring the Company. None of Mr. Hinckley's three expressions of interest in May and June 2001 in acquiring the Company resulted in any response from the Company. In a press release dated July 2, 2001, the Company revised its outlook for revenue and earnings for its third quarter ended June 30, 2001. The press release also stated that "We expect that these customer and economic issues will continue to limit our visibility and impact our results for the fourth fiscal quarter." In a press release dated July 18, 2001 announcing revised results for its third quarter, the Company stated that continued weakness in its business due to economic factors would continue to affect its customers' budgets, limit its visibility and impact the Company's fourth quarter results. Throughout the discussions during the past two years, the Company sporadically raised the issue of price per Share, but no negotiations occurred and Mentor never made an offer to acquire the Company. On December 6, 2001, at a meeting between Mr. Hinckley and Mr. Nunez, Mentor sent the following letter to the Company's board of directors: [Mentor Graphics Corporation Letterhead] December 6, 2001 Board of Directors of IKOS Systems, Inc. IKOS Systems, Inc. 79 Great Oaks Boulevard San Jose, California 95119 c/o Ramon A. Nunez, President and Chief Executive Officer c/o Gerald S. Casilli, Chairman of the Board of Directors OFFER TO ACQUIRE IKOS SYSTEMS, INC. Gentlemen: Mentor Graphics Corporation ("Mentor Graphics") offers to acquire IKOS Systems, Inc. ("IKOS") at a price of $11.00 per share of IKOS common stock payable in cash. 19 Summary of Offer. Our offer, which is based on publicly-available information and is not subject to any financing condition, represents a premium of 37% over the Nasdaq closing price of IKOS' stock on December 6, 2001, and 49.5% over the Nasdaq closing price of IKOS' stock on June 29, 2001, the trading day before the transaction with Synopsys, Inc. was announced. Furthermore, our offer represents a premium of 87% over the average Nasdaq closing price of IKOS' stock for the thirty trading days ended December 6, 2001. Our all-cash offer will enable your stockholders to receive the entire premium immediately. This will eliminate the significant risk to your stockholders with respect to the future performance of your business, the EDA industry, the overall stock market or the economy generally that exists under your proposed transaction with Synopsys. Our offer is not subject to the onerous closing conditions contained in your agreement with Synopsys -- conditions that IKOS may well not be able to satisfy in the current environment. For example, at the revenue/backlog and profit rates of your quarter ended September 30, 2001, it is questionable whether Synopsys would even be required to close the transaction, much less pay your stockholders more than the $6.00 per share minimum in August 2002. In contrast, our offer is for $11.00 per share in cash seven months earlier in January 2002. The acquisition consists of a first-step cash tender offer for all outstanding shares of IKOS common stock, followed by a second-step merger in which IKOS' remaining stockholders would receive the same cash price per share paid in the tender offer. Background. As you are no doubt aware, Mentor Graphics approached IKOS in April 2001 to indicate its interest in making an offer for Mentor Graphics to acquire IKOS. On several subsequent occasions, Mentor Graphics indicated its continued interest in acquiring IKOS to IKOS and IKOS' financial advisor. We were therefore disappointed that you chose not to contact us prior to your acceptance of the Synopsys agreement -- an agreement which we believe your stockholders will find inadequate. We believe that both your stockholders and the investment community will welcome our superior all-cash offer -- an offer which can be consummated very quickly. We further believe that the trading price of IKOS' stock since the announcement of your agreement with Synopsys demonstrates that your stockholders have serious reservations about a transaction with Synopsys. 20 Superiority of Mentor Graphics Offer. The superiority of the Mentor Graphics offer is easily demonstrated:
- ---------------------------------------------------------------------------------------------- ISSUE SYNOPSYS PROPOSAL MENTOR GRAPHICS OFFER - ---------------------------------------------------------------------------------------------- Certainty of Closing Highly conditional. There is no Minimal standard conditions for certainty this transaction will an all-cash tender offer with no ever close, exposing IKOS' financing condition; no need to stockholders to risk of wait until late summer 2002 to termination for more than a find out whether the transaction year; Synopsys effectively has is actually completed. an "option" to acquire IKOS. Based on an annualization of IKOS' most recent quarterly results, it is questionable whether Synopsys will have any obligation to close the transaction. - ---------------------------------------------------------------------------------------------- Price Unknown at this time, subject to $11.00 per share (in cash). Our a complicated formula; based on price is not subject to IKOS' an annualization of IKOS' most financial performance and recent quarterly results, IKOS represents a premium of 49.5% stockholders may not even over the Nasdaq closing price on receive $6.00 per share. June 29, 2001, 37% over the Nasdaq closing price on December 6, 2001, and 87% over the average Nasdaq closing price of IKOS' stock for the thirty trading days ended December 6, 2001. - ---------------------------------------------------------------------------------------------- Payment of In Synopsys stock in August In cash promptly following Consideration 2002; subject to subsequent risk consummation of our tender of Synopsys stock performance. offer; no risk as to stock performance and no financing condition. - ---------------------------------------------------------------------------------------------- Closing Date Estimated to occur in August As early as 20 business days 2002, over 12 months from after launch of tender offer; announcement and at least eight could be by early-January 2002, months from now. In the Synopsys seven months before the earliest transaction IKOS is in an anticipated closing date for the uncertain state of limbo for Synopsys transaction. over a year from the date of announcement. - ----------------------------------------------------------------------------------------------
Action by IKOS Board. Our offer is vastly superior to the agreement with Synopsys. We are prepared to move expeditiously to consummate the offer. In accordance with your fiduciary duties to IKOS' stockholders and pursuant to your existing rights under Section 5.2 of your agreement with Synopsys, we expect you to afford us prompt access to information concerning IKOS so that we can operate on a level playing field with Synopsys. Following satisfactory completion of confirmatory due diligence, we would expect to enter into definitive documentation for the transaction and consummate the transaction as soon as possible thereafter. 21 We would strongly prefer to work with you toward the consummation of a negotiated transaction that is in the best interests of your stockholders. Accordingly, we stand ready to meet with you at the earliest possible time. Please contact me to arrange a meeting. Very truly yours, /s/ GREGORY K. HINCKLEY -------------------------------------- Mentor Graphics Corporation by Gregory K. Hinckley, President and Chief Operating Officer On December 7, 2001, Purchaser and Mentor commenced the Offer. 12. Purpose and Structure of the Offer; Plans for the Company; Appraisal Rights. Purpose of the Offer. The purpose of the Offer is to acquire control of, and ultimately the entire equity interest in, the Company. The Offer, as the first step in the acquisition of the Company, is intended to facilitate the acquisition of the Company. The purpose of the Proposed Merger is to acquire all outstanding Shares not tendered and purchased pursuant to the Offer. If the Offer is successful, we intend to consummate the Proposed Merger as promptly as practicable. If Purchaser owns 90% or more of the outstanding Shares, following consummation of the Offer, Purchaser intends to consummate the Proposed Merger as a "short-form" merger pursuant to Section 253 of the DGCL. Under such circumstances, neither the approval of any holder of Shares (other than Purchaser) nor the Company's Board of Directors would be required. Upon consummation of the Proposed Merger, the Company will become a wholly-owned subsidiary of Mentor. If Purchaser owns less than 90% of the outstanding Shares, following the consummation of the Offer, the Company's Board of Directors will be required to submit the Proposed Merger to the Company's stockholders for approval at a stockholders' meeting convened for that purpose in accordance with Delaware law. If the Minimum Condition and the Section 203 Condition are satisfied, we will, upon consummation of the Offer, have sufficient voting power to ensure approval of the Proposed Merger at the stockholders' meeting without the affirmative vote of any other stockholder. Under the Company's Bylaws, a special meeting of the Company's stockholders may be called by the holders of not less than 10% of all of the shares entitled to cast votes at the meeting. Under the Company's Certificate of Incorporation and Bylaws, the directors of the Company may be removed without cause upon the majority vote of all of the shares entitled to vote generally in the election of directors. Depending upon the Company's response to the Offer, in connection with the Offer and the Proposed Merger, Purchaser may solicit proxies to call a special meeting of the Company's stockholders to consider the removal of the Company's current directors and election of directors nominated by Purchaser. Purchaser may also solicit proxies with respect to such matters and with respect to the Synopsys Agreement and the transactions contemplated thereunder. Any such solicitation will be made pursuant to separate proxy materials complying with the requirements of Section 14(a) of the Exchange Act. The Offer does not constitute a solicitation of proxies for any meeting of the Company's stockholders. Any such solicitation which Purchaser might make would be made only pursuant to separate proxy materials complying with the requirements of the Exchange Act. Plans for the Company. The acquisition of the Company will allow Mentor to add a proven and complementary emulation product line to Mentor's existing emulation products. The Company's products provide a mid-range verification solution to customer desiring a lower price point solution. Acquiring the Company will also provide Mentor with North American sales and service capabilities in the emulation arena that Mentor will leverage across its entire product line. 22 Mentor is studying how the Company's business will be integrated into Mentor's emulation business. We are in the process of evaluating the business and operations of the Company during the pendency of the Offer and after the consummation of the Offer and the Proposed Merger and will take such actions as we deem appropriate under the circumstances. Except as described above or elsewhere in this Offer to Purchase, we have no present plans or proposals that would relate to or result in an extraordinary corporate transaction involving the Company or any of its subsidiaries (such as a merger, reorganization, liquidation, relocation of any operations or sale or other transfer of a material amount of assets), any change in the Company's Board of Directors or management or any material change in the Company's capitalization or dividend policy. Appraisal Rights. Appraisal rights are not available in the Offer. If the Proposed Merger is consummated, however, holders of Shares at the effective time of the merger who do not vote in favor of, or consent to, the Proposed Merger will have rights under Section 262 of the DGCL to demand appraisal of their Shares. Under Section 262, stockholders who demand appraisal and comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their Shares, exclusive of any element of value arising from the accomplishment or expectation of the Proposed Merger, and to receive payment of that fair value in cash, together with a fair rate of interest, if any. Any such judicial determination of the fair value of Shares could be based upon factors other than, or in addition to, the price per Share to be paid in the Proposed Merger or the market value of the Shares. The value so determined could be more or less than the price per Share to be paid in the Proposed Merger. The foregoing summary of Section 262 does not purport to be complete and is qualified in its entirety by reference to Section 262. Failure to follow the steps Section 262 requires for perfecting appraisal rights may result in the loss of those rights. 13. Effect of the Offer on the Market for the Shares; Stock Exchange Listing(s); Registration under the Exchange Act. The purchase of Shares by Purchaser pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and will reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public. Depending upon the number of Shares purchased pursuant to the Offer and the aggregate market value of any Shares not purchased pursuant to the Offer, the Shares may no longer meet the standards for continued listing on the Nasdaq National Market and may be delisted from the Nasdaq National Market. The published guidelines of the Nasdaq National Market indicate that the Nasdaq National Market would consider delisting the Shares if, among other things, either (1) the number of round lot holders of Shares should fall below 400, the number of publicly held Shares should fall below 750,000, the aggregate market value of the publicly held Shares should fall below $5,000,000, the minimum bid price for Shares should fall below $1 per Share, the stockholders' equity in the Company should fall below $10,000,000, or, alternatively, (2) the market capitalization of the Company (or the Company's total assets and total revenue for the last completed fiscal year, respectively) should fall below $50,000,000, the number of round lot holders of Shares should fall below 400, the number of publicly held Shares should fall below 1,100,000, the aggregate market value of the publicly held Shares should fall below $15,000,000, the minimum bid price for Shares should fall below $3 per Share or there should be less than four registered and active market makers providing quotations for the Shares. If neither of the foregoing standards are met, the Shares would no longer be admitted to quotation on the Nasdaq National Market. To the extent the Shares are delisted from the Nasdaq National Market, the market for the Shares could be adversely affected. If the Nasdaq National Market were to delist the Shares, it is possible that the Shares would continue to trade in the over-the-counter market and that price quotations for the Shares would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend on the number of holders of Shares remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act (as described below) and other factors. Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly, if any, effected by the Offer would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future market prices to be greater or less than the price per Share to be paid in the Proposed Merger. 23 The Shares are currently "margin securities," as such term is defined under the rules of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities. Depending upon factors similar to those described above regarding listing and market quotations, following the Offer it is possible that the Shares might no longer constitute "margin securities" for purposes of the margin regulations of the Federal Reserve Board, in which event such Shares could no longer be used as collateral for loans made by brokers. The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application by the Company to the SEC if the Shares are not listed on a "national securities exchange" and there are fewer than 300 record holders. The termination of the registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of Shares and to the SEC and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with stockholders' meetings and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Shares. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of such securities pursuant to Rule 144 under the Securities Act. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for reporting on the National Association of Securities Dealers Automated Quotation System. As soon as practicable after the Distribution Date has occurred, Rights Certificates are to be sent to all holders of Rights. If the Distribution Date has occurred and the Rights separate from the Shares, the foregoing discussion with respect to the effect of the Offer on the market for the Shares, Nasdaq National Market listing and Exchange Act registration would apply to the Rights in a similar manner. 14. Dividends and Distributions. If on or after the date of this Offer to Purchase, the Company should split, combine or otherwise change the Shares or its capitalization, acquire or otherwise cause a reduction in the number of outstanding Shares or issue or sell any additional Shares (other than Shares issued pursuant to and in accordance with the terms in effect on the date of this Offer to Purchase of employee stock options outstanding prior to such date), shares of any other class or series of capital stock, other voting securities or any securities convertible into, or options, rights, or warrants, conditional or otherwise, to acquire, any of the foregoing, then, without prejudice to our rights under "The Offer -- Conditions to the Offer," we may, in our sole discretion, make such adjustments in the purchase price and other terms of the Offer as we deem appropriate including the number or type of securities to be purchased. 15. Conditions to the Offer. Notwithstanding any other provision of the Offer, we are not required to accept for payment or pay for any Shares, and we may terminate the Offer, if: (1) prior to the Expiration Date, any of the Minimum Condition, the Synopsys Agreement Condition, the Termination Fee Condition, the Rights Condition, the Section 203 Condition, the Approval Condition, or the Impairment Condition, in Mentor's sole discretion, has not been satisfied, or any waiting periods under applicable antitrust laws shall not have expired or been terminated; and (2) at any time on or after the date of this Offer to Purchase and prior to the Expiration Date, any of the following conditions exists: (a) there shall have been any law or order promulgated, entered, enforced, enacted, issued or deemed applicable to the Offer or the Proposed Merger by any court of competent jurisdiction or other competent governmental or regulatory authority which, directly or indirectly, (1) prohibits, or imposes any material limitations on, Mentor's or Purchaser's ownership or operation (or that of any of their respective subsidiaries or affiliates) of any portion of their or the Company's businesses or assets which is material to the business of all such entities taken as a whole, or compels Mentor or Purchaser (or their respective subsidiaries or affiliates) to dispose of or hold separate any portion of their or the Company's business or assets which is material to the business of all such entities taken as a whole, (2) prohibits, restrains or makes or seeks to make illegal the acceptance for payment, payment for or purchase of Shares pursuant to the Offer or the consummation of the Proposed 24 Merger, (3) imposes material limitations on the ability of Purchaser or Mentor (or any of their respective subsidiaries or affiliates) effectively to acquire or to hold or to exercise full rights of ownership of the Shares purchased pursuant to the Offer including, without limitation, the right to vote such Shares on all matters properly presented to the Company's stockholders, (4) imposes material limitations on the ability of Purchaser or Mentor (or any of their respective subsidiaries or affiliates) effectively to control in any material respect any material portion of the business, assets, liabilities, capitalization, stockholder's equity, condition (financial or otherwise), licenses or franchises or results of operations of the Company and its subsidiaries taken as a whole, (5) seeks to require divestiture by Mentor, Purchaser or any affiliate of Mentor of any Share, (6) in the sole discretion of Mentor, imposes or seeks to impose any material condition to the Offer which is unacceptable to Mentor or Purchaser, (7) in the sole discretion of Mentor, might result in a diminution of the value of the Shares or the benefits expected to be derived by Mentor as a result of the Offer or the Proposed Merger, (8) restrains or prohibits or seeks to restrain or prohibit the performance of any of the contracts or other arrangements entered into by Mentor, Purchaser or any of their affiliates in connection with the acquisition of the Company or obtains or seeks to obtain any material damages or otherwise directly or indirectly relates to the Offer, or (9) otherwise materially adversely affects the Company and its subsidiaries or Mentor or any of its Subsidiaries, including Purchaser, taken as a whole; (b) there shall be threatened, instituted or pending any action, suit, proceeding, application or counterclaim brought by a governmental or regulatory authority or by any other person, domestic or foreign (whether brought by the Company, an affiliate of the Company, or any other person) (1) challenging or seeking to make illegal the acquisition by Mentor or Purchaser of Shares or otherwise seeking to restrain, delay or prohibit the making or consummation of the Offer, the Proposed Merger or any other subsequent business transaction with the Company, (2) challenging or seeking to, or which is reasonably likely to, make illegal, materially delay or otherwise directly or indirectly restrain or prohibit or seeking to, or which is reasonably likely to, impose voting, procedural, price or other requirements, including any such requirements under California law, in addition to those required by the federal securities laws and the DGCL (each as in effect on the date of this Offer to Purchase), in connection with making the Offer, the acceptance for payment of, or payment for, any Shares by Purchaser or any other affiliate of Mentor of the Proposed Merger or other business combination with the Company, or seeking to obtain material damages in connection therewith, or (3) that could reasonably be expected to result, directly or indirectly, in any of the consequences referred to in clauses (1) through (9) of paragraph (a) above; (c) there shall have occurred (1) any general suspension of trading in, or limitation on prices for, securities on any United States national securities exchange or in the over-the-counter market in excess of one day, (2) a commencement of a war, armed hostilities, terrorist attacks or other international or national calamity directly or indirectly involving the United States, (3) any limitation (whether or not mandatory) by any United States governmental or regulatory authority on the extension of credit by banks or other financial institutions, (4) any decline in either the Dow Jones Industrial Average, the Standard & Poor's 500 Index or the Nasdaq National Market by an amount in excess of 10% measured from the close of business on the date of the Offer to Purchase or (5) in the case of any of the foregoing (other than clause (4)) existing at the time of the Offer, a material acceleration or worsening thereof; (d) there shall have been any change, event or development having, or that could reasonably be expected to have, individually or in the aggregate, a material adverse effect on the condition (financial or otherwise), business, assets, liabilities or results of operations of the Company and its subsidiaries taken as a whole; (e) Mentor, Purchaser and the Company shall have agreed that Purchaser shall amend the Offer to terminate the Offer or postpone the payment for Shares thereunder; 25 (f) any person (which includes a "person" as such term is defined in Section 13(d)(3) of the Exchange Act) other than Mentor, Purchaser, any of their affiliates, or any group of which any of them is a member shall have acquired beneficial ownership of more than 5% of the outstanding Shares, or any group shall have been formed which beneficially owns more than 5% of the outstanding Shares, in each case other than any person or group that has disclosed such ownership prior to the date of the Offer, and no such person (other than Mentor, Purchaser, any of their affiliates, or any group of which any of them is a member) or group shall have increased its beneficial ownership in the Company by more than 1% of the outstanding Shares or shall have filed a Notification and Report Form under the HSR Act or made a public announcement reflecting an intent to acquire the Company or any subsidiaries or material assets of the Company; (g) the Company or any of its subsidiaries, joint ventures or partners or other affiliates shall have, directly or indirectly: - split, combined or otherwise changed, or authorized or proposed a split, combination or other change of, the Shares or its capitalization (other than by redemption of the Rights in accordance with their terms as such terms have been publicly disclosed prior to the date of this Offer to Purchase); - acquired or otherwise caused a reduction in the number of, or authorized or proposed the acquisition or other reduction in the number of, outstanding Shares or other securities of the Company (other than as aforesaid); - issued, pledged, sold, authorized, proposed or announced the issuance, distribution or sale of, additional Shares (other than the issuance of Shares under options prior to the date of this Offer to Purchase, in accordance with the terms of such options as such terms have been publicly disclosed prior to the date of this Offer to Purchase), shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing; - declared or paid, or proposed to declare or pay, any dividend or other distribution, whether payable in cash, securities or other property, on or with respect to any shares of capital stock of the Company (other than in the event the Rights are redeemed, the price of redemption thereof) or issued, authorized, recommended or proposed the issuance or payment of any distribution; - altered or proposed to alter any material term of any outstanding security (including the Rights) other than to amend the Rights Agreement to make the Rights inapplicable to the Offer and the Proposed Merger; - incurred any debt other than in the ordinary course of business and consistent with past practices or any debt containing burdensome covenants; - except with respect to the Synopsys Agreement, authorized, recommended, proposed or entered into an agreement, agreement in principle or arrangement or understanding with respect to any merger, consolidation, liquidation, dissolution, business combination, acquisition of assets, disposition of assets, release or relinquishment of any material contractual right, any material change in the Company's capitalization, or other right of the Company or any of its subsidiaries or any comparable event not in the ordinary course of business; - except with respect to the Synopsys Agreement, authorized, recommended, proposed or entered into, or announced its intention to authorize, recommend, propose or enter into, any agreement, arrangement or understanding with any person or group that, in the sole judgment of Purchaser, could adversely affect either the value of the Company or any of its subsidiaries, joint ventures or partnerships or the value of the Shares to Mentor or Purchaser, including an amendment to the Synopsys Agreement; 26 - transferred into escrow any amounts required to fund any existing benefit, employment or severance agreement with any of the Company's employees other than in the ordinary course of business and consistent with past practice, or entered into or amended any employment, change in control, severance, executive compensation or similar agreement, arrangement or plan with or for the benefit of any of its employees, consultants or directors, or made grants or awards thereunder, other than in the ordinary course of business or entered into or amended any agreements, arrangements or plans so as to provide for increased or accelerated benefits to any such persons; - except as may be required by law, taken any action to terminate or amend any employee benefit plan (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended) of the Company or any of its subsidiaries, or Purchaser shall have become aware of any such action that was not disclosed in publicly available filings prior to the date of this Offer to Purchase; - amended or authorized or proposed any amendment to the Company's Certificate of Incorporation or Bylaws, or Purchaser shall have become aware that the Company or any of its subsidiaries shall have proposed or adopted any such amendment that was not disclosed in publicly available filings prior to the date of this Offer to Purchase; - issued, sold, or authorized or announced or proposed the issuance of or sale to any person of any debt securities or any securities convertible into or exchangeable for debt securities or any rights, warrants or options entitling the holder thereof to purchase or otherwise acquire any debt securities or incurred or announced its intention to incur any debt otherwise than in the ordinary course of business and consistent with past practice; or - agreed in writing or otherwise to take any of the forgoing actions or Mentor or Purchaser shall have learned about any such action which has not previously been publicly disclosed by the Company and also set forth in filings with the SEC; (h) any required approval, permit, authorization or consent of any governmental authority or agency (including those described or referred to in "The Offer -- Certain Legal Matters; Regulatory Approvals") shall not have been obtained on terms satisfactory to Mentor in its sole discretion; (i) Mentor or Purchaser shall have reached an agreement or understanding with the Company providing for termination of the Offer, or Mentor, Purchaser or any other affiliate of Mentor shall have entered into a definitive agreement or announced an agreement in principle with the Company providing for a merger or other business combination with the Company or the purchase of stock or assets of the Company; (j)(1) any covenant, term or condition in any of the Company's or any of its subsidiaries', joint ventures' or partnerships' instruments, licenses, or agreements is or may be materially adverse to the value of the Shares in the hands of Purchaser (including, but not limited to, any event of default that may ensue as a result of the consummation of the Offer or the Proposed Merger or the acquisition by Mentor of control of the Company) or (2) any material contractual right, intellectual property or supply agreement of the Company or any of its subsidiaries or affiliates shall be impaired or otherwise adversely affected or any material amount of indebtedness of the Company or any of its subsidiaries, joint ventures or partnerships shall become accelerated or otherwise become due before its stated due date, in either case, with or without notice or the lapse of time or both, as a result of the Offer or the Proposed Merger; (k) Purchaser shall have determined in its sole discretion that Section 2115 of the California General Corporation Law (the "CGCL") applies to the Offer or the Proposed Merger; or (l) Mentor or Purchaser shall not have obtained any waiver, consent, extension, approval, action or non-action from any governmental authority or any agency, which is necessary to consummate the Offer; 27 which, in the reasonable judgment of Mentor or Purchaser in any such case, and regardless of the circumstances (including any action or inaction by Mentor or Purchaser or any of their affiliates) giving rise to any such condition, makes it inadvisable to proceed with the Offer or with such acceptance for payment. The foregoing conditions are for the sole benefit of Mentor and Purchaser and may be asserted by Mentor or Purchaser regardless of the circumstances giving rise to any such condition or may be waived by Mentor or Purchaser in whole or in part at any time and from time to time in their reasonable discretion. The failure by Mentor or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. Any determination by Mentor or Purchaser concerning the events described in "The Offer -- Conditions to the Offer" will be final and binding on all parties. 16. Certain Legal Matters; Regulatory Approvals. General. We are not aware of any governmental license or regulatory permit that appears to be material to the Company's business that might be adversely affected by our acquisition of Shares pursuant to the Offer or, except as set forth below, of any approval or other action by any government or governmental administrative or regulatory authority or agency, domestic or foreign, that would be required for our acquisition or ownership of Shares pursuant to the Offer. Should any such approval or other action be required, we currently contemplate that, such approval or other action will be sought. However, we do not intend to delay the purchase of Shares tendered pursuant to the Offer pending the outcome of any action or the receipt of any such approval. There can be no assurance that any such approval or other action, if needed, would be obtained (with or without substantial conditions) or that if such approvals were not obtained or such other actions were not taken adverse consequences might not result to the Company's business or certain parts of the Company's business might not have to be disposed of, any of which could cause us to elect to terminate the Offer without the purchase of Shares thereunder. Our obligation under the Offer to accept for payment and pay for Shares is subject to certain conditions. See "The Offer -- Conditions to the Offer." State Takeover Laws. Section 2115 of the CGCL purports to subject certain corporations with specified minimum contacts in California to certain provisions of the CGCL even if that corporation is organized under the laws of a different state. Purchaser believes that Section 2115 of the CGCL should not operate so as to make such provisions applicable to the Company. The Offer is conditioned upon, among other things, that Mentor is satisfied, in its sole discretion, that Section 203 of the DGCL is inapplicable to the Offer and the Proposed Merger. In the Delaware litigation, Mentor and Purchaser are seeking, among other things, to compel the Company's Board of Directors to approve the Offer and the Proposed Merger for purposes of satisfying the Section 203 Condition. Section 203 of the DGCL, in general, prohibits a Delaware corporation such as the Company from engaging in a "Business Combination" (defined as a variety of transactions, including mergers) with an "Interested Stockholder" (defined generally as a person that is the beneficial owner of 15% or more of a corporation's outstanding voting stock) for a period of three years following the time that such person became an interested stockholder unless: (a) prior to the time such person became an interested stockholder, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (b) 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, excluding stock held by directors who are also officers of the corporation and employee stock ownership plans that do not provide employees with the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or (c) on or subsequent to the date such person became an Interested Stockholder, the Business Combination is approved by the board of directors of the corporation and authorized at a meeting of stockholders, and not by written consent, by the affirmative vote of the holders of a least 66 2/3% of the outstanding voting stock of the corporation not owned by the Interested Stockholder. 28 Under Section 203, the restrictions described above do not apply if, among other things (a) the corporation's original certificate of incorporation contains a provision expressly electing not to be governed by Section 203; (b) the corporation, by action of its stockholders, adopts an amendment to its certificate of incorporation or bylaws expressly electing not to be governed by Section 203, provided that, in addition to any other vote required by law, such amendment of the certificate of incorporation or bylaws must be approved by the affirmative vote of a majority of the shares entitled to vote, which amendment would not be effective until 12 months after the adoption of such amendment and would not apply to any Business Combination between the corporation and any person who became an Interested Stockholder of the corporation on or prior to the date of such adoption; (c) the corporation does not have a class of voting stock that is (1) listed on a national securities exchange, (2) authorized for quotation on The NASDAQ Stock Market or (3) held of record by more than 2,000 stockholders, unless any of the foregoing results from action taken, directly or indirectly, by an Interested Stockholder or from a transaction in which a person became an Interested Stockholder; or (d) a stockholder becomes an Interested Stockholder "inadvertently" and thereafter divests itself of a sufficient number of shares so that such stockholder ceases to be an Interested Stockholder. Under Section 203, the restrictions described above also do not apply to certain Business Combinations proposed by an Interested Stockholder following the announcement or notification or one of certain extraordinary transactions involving the corporation and a person who had not been an Interested Stockholder during the previous three years or who became an Interested Stockholder with the approval of a majority of the corporation's directors. Section 203 provides that, during such three-year period, the corporation may not merge or consolidate with an Interested Stockholder or any affiliate or associate thereof, and also may not engage in certain other transactions with an Interested Stockholder or any affiliate or associate thereof, including, without limitation, (a) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets (except proportionately as a stockholder of the corporation) having an aggregate market value equal to 10% or more of the aggregate market value of all assets of the corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of a corporation; (b) any transaction which results in the issuance or transfer by the corporation or by certain subsidiaries thereof of any stock of the corporation or such subsidiaries to the Interested Stockholder, except pursuant to a transaction which effects a pro rata distribution to all stockholders of the corporation; (c) any transaction involving the corporation or any subsidiaries thereof which has the effect of increasing the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, of the corporation or any such subsidiary which is owned directly or indirectly by the Interested Stockholder (except as a result of immaterial changes due to fractional share adjustments); or (d) any receipt of the Interested Stockholder of the benefit (except proportionately as a stockholder of such corporation) of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. The foregoing description of Section 203 does not purport to be complete and is qualified in its entirety by reference to the provisions of Section 203. The Company is incorporated under the laws of the State of Delaware and its operations are conducted throughout the United States. A number of states have adopted takeover laws and regulations that purport to be applicable to attempts to acquire securities of corporations that are incorporated in those states or that have substantial assets, stockholders, principal executive offices or principal places of business in those states. To the extent that these state takeover statutes purport to apply to the Offer or the Proposed Merger, we believe that those laws conflict with U.S. federal law and are an unconstitutional burden on interstate commerce. In 1982, the Supreme Court of the United States, in Edgar v. MITE Corp., invalidated on constitutional grounds the Illinois Business Takeover Statute, which, as a matter of state securities law, made takeover of corporations meeting certain requirements more difficult. The reasoning in that decision is likely to apply to certain other state takeover statutes. In 1987, however, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court of the United States held that the State of Indiana could as a matter of corporate law and, in particular, those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining stockholders, as long as those laws were applicable only under certain conditions. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a federal district court in Oklahoma ruled that the Oklahoma statutes were 29 unconstitutional insofar as they apply to corporations incorporated outside Oklahoma, because they would subject those corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a federal district court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as applied to corporations incorporated outside Tennessee. This decision was affirmed by the United State Court of Appeals for the Sixth Circuit. In December 1988, a federal district court in Florida held, in Grand Metropolitan PLC v. Butterworth, that the provisions of the Florida Affiliated Transactions Act and Florida Control Share Acquisition Act were unconstitutional as applied to corporations incorporated outside of Florida. Except as described herein, we have not attempted to comply with any state takeover statutes in connection with this Offer or the Proposed Merger. We reserve the right to challenge the validity or applicability of any state law allegedly applicable to the Offer or the Proposed Merger, and nothing in this Offer to Purchase nor any action that we take in connection with the Offer is intended as a waiver of that right. In the event that it is asserted that one or more takeover statutes apply to the Offer or the Proposed Merger, and it is not determined by an appropriate court that the statutes in question do not apply or are invalid as applied to the Offer or the Proposed Merger, as applicable, we may be required to file certain documents with, or receive approvals from, the relevant state authorities, and we might be unable to accept for payment or purchase Shares tendered in the Offer or be delayed in continuing or consummating the Offer. In that case, we may not be obligated to accept for purchase, or pay for, any Shares tendered. See "The Offer -- Conditions to the Offer." Antitrust. Under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the rules that have been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. The purchase of Shares pursuant to the Offer is subject to such requirements. Pursuant to the requirements of the HSR Act, Mentor intends to file a Notification and Report Form with respect to the Offer and the Proposed Merger with the Antitrust Division and the FTC on or about December 10, 2001. As a result, we anticipate that the waiting period applicable to the purchase of Shares pursuant to the Offer is scheduled to expire at 11:59 p.m., New York City time, on or about Wednesday, December 26, 2001. However, prior to such time, the Antitrust Division or the FTC may extend the waiting period by requesting additional information or documentary material relevant to the Offer from us. If such a request is made, the waiting period will be extended until 11:59 p.m., New York City time, on the tenth day after our substantial compliance with such request. Thereafter, such waiting period can be extended only by court order. A request will be made pursuant to the HSR Act for early termination of the waiting period applicable to the Offer. There can be no assurance, however, that the HSR Act waiting period will be terminated early. Shares will not be accepted for payment or paid for pursuant to the Offer until the expiration or earlier termination of the applicable waiting period under the HSR Act. See "The Offer -- Conditions to the Offer." Any extension of the waiting period will not give rise to any withdrawal rights not otherwise provided for by applicable law. See "The Offer -- Withdrawal Rights." Subject to certain circumstances described in "The Offer -- Extension of Tender Period; Termination; Amendment," any extension of the waiting period will not give rise to any withdrawal rights not otherwise provided for by applicable law. If our acquisition of Shares is delayed pursuant to a request by the Antitrust Division or the FTC for additional information or documentary material pursuant to the HSR Act, the Offer may be extended. The Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2000 indicates that the Company and certain of its subsidiaries conduct business in foreign countries where regulatory filings or approvals under antitrust and other laws may be required or desirable in connection with the consummation of the Offer and the Proposed Merger. Certain of such filings for approvals, if required or desirable, may not be made or obtained prior to the expiration of the Offer. After commencement of the Offer, Mentor and Purchaser will seek further information regarding the applicability of any such laws and currently intend to take such action as may be required or desirable. If any government or governmental authority or agency takes 30 any action prior to the completion of the Offer that, in the sole judgment of Purchaser, might have certain adverse effects, Purchaser will not be obligated to accept for payment or pay for any Shares tendered. The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as our acquisition of Shares pursuant to the Offer. At any time before or after the consummation of any such transactions, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or seeking divestiture of the Shares so acquired or divestiture of Mentor's or the Company's substantial assets. Private parties (including individual states) may also bring legal actions under the antitrust laws. We do not believe that the consummation of the Offer will result in a violation of any applicable antitrust laws. However, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made, or if such a challenge is made, what the result will be. See "The Offer -- Conditions to the Offer" for certain conditions to the Offer, including conditions with respect to litigation and certain governmental actions. Appraisal Rights. Holders of Shares do not have appraisal rights as a result of the Offer. However, if the Proposed Merger is consummated, holders of Shares will have certain rights pursuant to the provisions of Section 262 of the DGCL to dissent and demand appraisal of their Shares in connection with the Proposed Merger. Under Section 262, dissenting stockholders who comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their Shares, exclusive of any element of value arising from the accomplishment or expectation of the Proposed Merger, and to receive payment of such fair value in cash, together with a fair rate of interest, if any. Any such judicial determination of the fair value of the Shares could be based upon factors other than, or in addition to, the price per Share to be paid in the Proposed Merger or the market value of the Shares. The value so determined could be more or less than the price per Share to be paid in the Proposed Merger. Delaware Law. The Proposed Merger also would need to comply with other applicable procedural and substantive requirements of Delaware law. Several decisions by Delaware courts have held that, in certain circumstances, a controlling stockholder of a corporation involved in a merger has a fiduciary duty to the other stockholders that requires the merger to be fair to such other stockholders. In determining whether a merger is fair to minority stockholders, Delaware courts have considered, among other things, the type and amount of consideration to be received by the stockholders and whether there were fair dealings among the parties. Foreign Laws. According to publicly available information, the Company also leases property and conducts businesses in a number of other jurisdictions. In connection with the acquisition of the Shares pursuant to the Offer, the laws of certain foreign countries and jurisdictions may require the filing of information with, or the obtaining of the approval of, governmental authorities in such countries and jurisdictions. In addition, the waiting period prior to consummation of the Offer associated with such filings or approvals may extend beyond the scheduled Expiration Date. The governments in such countries and jurisdictions might attempt to impose additional conditions on the Company's operations conducted in such countries and jurisdictions as a result of the acquisition of Shares pursuant to the Offer or the Proposed Merger. 17. Fees and Expenses. Mentor has retained MacKenzie Partners, Inc. to act as the Information Agent and Wilmington Trust Company to act as the Depositary in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telegraph and personal interviews and may request brokers, dealers, banks, trust companies and other nominees to forward materials relating to the Offer to beneficial owners. The Information Agent and the Depositary each will receive customary compensation for their respective services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities in connection therewith, including certain liabilities under the federal securities laws. We will not pay any fees or commissions to any broker or dealer or any other person (other than the Information Agent and the Depositary) for soliciting tenders of Shares and Rights pursuant to the Offer. Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by us for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers. 31 18. Legal Proceedings between Mentor and the Company On December 7, 2001, Mentor and Purchaser commenced litigation against the Company and the Company's Board of Directors in the Court of Chancery of the State of Delaware seeking, among other things, an order: - declaring that certain provisions of the Synopsys Agreement, including the termination fee provisions ("Termination Fee"), certain operating restrictions on the Company ("Operating Restrictions"), and the no-shop provisions ("No-Shop Provisions") were entered into in violation of the Company's Board of Directors' fiduciary duties under Delaware Law; - invalidating the No-Shop Provisions, Operating Restrictions and Termination Fee; - enjoining the Company, Synopsys, and their respective agents and employees from taking any further steps to proceed with the Synopsys Agreement until the Company's stockholders have had an opportunity to consider the Offer and Proposed Merger; - declaring that failure to redeem the Rights or to render the Rights inapplicable to the Offer and the Proposed Merger would constitute a breach of the Company's Board of Directors' fiduciary duties under Delaware law; - invalidating the Rights or compelling the Company's Board of Directors to redeem the Rights or render the Rights inapplicable to the Offer and the Proposed Merger; - declaring that failure by the Company's Board of Directors to approve the Offer and the Proposed Merger for purposes of Section 203 of the DGCL would constitute a breach of the Company's Board of Directors' fiduciary duties under Delaware law; - compelling the Company's Board of Directors to approve the Offer and the Proposed Merger for purposes of Section 203 of the DGCL; - enjoining the Company's Board of Directors from taking any actions designed to impede or which have the effect of impeding the Offer or the Proposed Merger, Mentor's and Purchaser's possible request for a call of a special meeting of stockholders, or Mentor's and Purchaser's possible solicitation of proxies for a special meeting, and declaring that any such actions would constitute a breach of the fiduciary duties by the Company's Board of Directors under Delaware law; - declaring that none of the purchases of the Shares, the Offer or Proposed Merger, Mentor's and Purchaser's possible request for a call of a special meeting, Mentor's and Purchaser's possible solicitation of proxies for a special meeting violate any continuing obligation that Mentor may have under the confidentiality agreement entered into by Mentor and the Company on June 16, 2000 (the "Confidentiality Agreement"); and - enjoining Synopsys and its respective agents and employees from aiding and abetting the Company's Board of Directors' breach of fiduciary duties to the Company's stockholders. Also on December 7, 2001, Mentor and Purchaser commenced litigation against the Company in the United States District Court for the District of Delaware seeking, among other things, a declaratory judgment that Mentor and Purchaser have disclosed all information required by, and are otherwise in full compliance with, the Exchange Act and any other federal securities laws, rules or regulations deemed applicable to any purchases of the Company's securities by Mentor or Purchaser, any future purchases of the Company's securities by Mentor or Purchaser made in conjunction with the Offer, any Schedule 13D filed by Mentor relating to its beneficial ownership of the Company's stock, and any public disclosures by Mentor made in connection with the Offer. 19. Miscellaneous. The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the laws of such jurisdiction. However, we may, in our discretion, take such action as we may 32 deem necessary to make the Offer in any such jurisdiction and extend the Offer to holders of Shares in such jurisdiction. No person has been authorized to give any information or make any representation on behalf of Purchaser or Mentor not contained in this Offer to Purchase or in the Letter of Transmittal and, if given or made, such information or representation must not be relied upon as having been authorized. We have filed with the SEC a Tender Offer Statement on Schedule TO, together with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, furnishing certain additional information with respect to the Offer. The Schedule TO and any amendments thereto, including exhibits, may be examined and copies may be obtained from the offices of the SEC in the manner set forth in "The Offer -- Certain Information Concerning the Company -- Available Information" of this Offer to Purchase. MENTOR GRAPHICS CORPORATION FRESNO CORPORATION December 7, 2001 33 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF MENTOR AND PURCHASER The name, current principal occupation or employment and material occupations, positions, offices or employment for the past five years, of each director and executive officer of Mentor are set forth below. References herein to "Mentor" mean Mentor Graphics Corporation. Unless otherwise indicated below, the business address of each director and officer is c/o Mentor Graphics Corporation, 8005 Boeckman Road, Wilsonville, Oregon 97070-7777. Where no date is shown, the individual has occupied the position indicated for the past five years. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Mentor. Except as described herein, none of the directors and officers of Mentor listed below has, during the past five years, (1) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (2) been a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. All directors and officers listed below are citizens of the United States.
PRESENT PRINCIPAL OCCUPATION AND NAME TITLE FIVE YEAR EMPLOYMENT HISTORY - ---------------------------- ------------------------------- ----------------------------------------- Walden C. Rhines Chairman of the Board and Chief Dr. Rhines has served as Chairman of the Executive Officer Board and Chief Executive Officer of Mentor since 2000. From 1993 to 2000 he was Director, Chief Executive Officer and President of Mentor. Gregory K. Hinckley Director, President and Chief Mr. Hinckley has served as Director and Operating Officer President of Mentor since 2000. From 1997 to 2000 he served as Executive Vice President, Chief Operating Officer and Chief Financial Officer of Mentor. From 1995 until 1996 Mr. Hinckley was Senior Vice President of VLSI Technology, Inc. L. Don Maulsby Senior Vice President, World Mr. Maulsby has served as Senior Vice Trade President, World Trade since October 1999. From June 1998 to October 1999, he was president of Tri-Tech and Associates, a manufacturer's representative firm. From June 1997 to June 1998 he was Vice President of World Wide Sales and Marketing for Interphase Corporation, a manufacturer of high performance network and mass storage products. From April 1988 to December 1997, he was employed by VLSI Technology, Inc. where his duties included Vice President Worldwide Sales and Vice President and General Manager of its Computing Division.
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PRESENT PRINCIPAL OCCUPATION AND NAME TITLE FIVE YEAR EMPLOYMENT HISTORY - ---------------------------- ------------------------------- ----------------------------------------- Anthony B. Adrian Vice President, Corporate Mr. Adrian has served as Vice President, Controller Corporate Controller since joining Mentor in January 1998. From August to December of 1997, he held the position of Vice President and Acting Controller for Wickland Oil Company, a petroleum marketing and distribution company. From January 1996 to August 1997, Mr. Adrian served as Managing Director of Wickland Terminals in Australia. From November 1992 to January 1996, Mr. Adrian served as Vice President and Controller of Wickland Oil. Jue-Hsien Chern Vice President, Deep Submicron Dr. Chern has served as Vice President Division and General Manager of Mentor's Deep Submicron (DSM) Division since joining Mentor in January 2000. From 1994 to 1998, Dr. Chern served as Vice President and Chief Technology Officer for Technology Modeling Associates. In 1998 Technology Modeling Associates merged with Avant! Corporation and Dr. Chern became head of Avant!'s DSM Business Unit. From August 1999 to December 1999, Dr. Chern was President of Ultima Corporation. Brian Derrick Vice President Mr. Derrick has served as Vice President and General Manager of Mentor's Physical Verification (PVX) Division since November 2000. From March 1998 to November 2000, he was the Director of Mentor's Calibre and Velocity Strategic Business Unit. From January 1997 to March 1998, he was marketing manager for Mentor's Calibre Business Unit. Mr. Derrick was employed by Allied Signal Corporation from 1988 to 1997, where his duties included marketing manager. He has been with Mentor since 1997. Dean Freed Vice President, General Counsel Mr. Freed has served as Vice President, and Secretary General Counsel and Secretary of Mentor since July 1995. Mr. Freed served as Deputy General Counsel and Assistant Secretary of Mentor from April 1994 to July 1995. He has been employed by Mentor since January 1989. Henry Potts Vice President and General Mr. Potts has served as Vice President Manager, Systems Design and General Manager of the Systems Design Division Division (SDD) since joining Mentor in April 1999. From 1997 to 1998, Mr. Potts was Vice President of Engineering for Hitachi Micro Systems, a semiconductor research and development company. From 1994 to 1997, he was employed by Motorola Semiconductor where his duties included leading the development activities for Advanced Signal Processor Silicon and software products.
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PRESENT PRINCIPAL OCCUPATION AND NAME TITLE FIVE YEAR EMPLOYMENT HISTORY - ---------------------------- ------------------------------- ----------------------------------------- Anne Wagner Sanquini Vice President and General Ms. Sanquini has served as Vice President Manager, HDL Division and General Manager of the Hardware Description Language (HDL) Design Division since April 1999. From June 1998 to April 1999, Ms. Sanquini served as Vice President, Marketing for Mentor. From 1996 to 1998, Ms. Sanquini was Vice President of Corporate Marketing for the SunSoft operating company of Sun Microsystems, Inc. Ms. Sanquini has been with Mentor since June 1998. Dennis Weldon Treasurer Mr. Weldon has served as Treasurer and Director of Corporate Business Development since February 1996. Mr. Weldon served as Director of Business Development from June 1994 to January 1996. Mr. Weldon has been employed by Mentor since July 1988. Marsha B. Congdon Director Ms. Congdon has served as a Director of Mentor since 1991. Since 1997, Ms. Congdon's principal occupation has been private investment. Ms. Congdon served as Vice President, Policy and Strategy of US West Inc. from 1995 to 1997. James R. Fiebiger Director Dr. Fiebiger has served as a Director of Mentor since 1994. He has been Chairman of the Board and Chief Executive Officer of Lovoltech Inc. (a semiconductor company) since 1999; Vice Chairman and Managing Director of Technology Licensing of Gatefield Corporation (a semiconductor company) from 1998 to 2000; President and Chief Executive Officer of Gatefield Corporation from 1996 to 1998; Chairman of the Board and Managing Director of Thunderbird Technologies, Inc. (a technology licensing company) from 1992 to 1997; Chairman of the Board of Directors of Thunderbird Technologies, Inc.; Director of QLogic Corporation (a developer of semiconductor and board-level products) and Actel Corporation (a developer of field programmable gate arrays). David A. Hodges Director Dr. Hodges has served as Director of Mentor since 1995. Dr. Hodges is a Professor in the Graduate School of the Department of Electrical Engineering and Computer Science at the University of California at Berkeley ("UC Berkeley") where he has been a faculty member since 1970. Dr. Hodges was Dean of the College of Engineering at UC Berkeley from 1990 to 1996. Dr. Hodges is also a Director of Silicon Image, Inc.
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PRESENT PRINCIPAL OCCUPATION AND NAME TITLE FIVE YEAR EMPLOYMENT HISTORY - ---------------------------- ------------------------------- ----------------------------------------- Kevin C. McDonough Director Dr. McDonough has served as a Director of Mentor since 1999. Since 1999, he has served as President and Chief Executive Officer of ChipData, Inc. Dr. McDonough was Vice President and General Manager of National Semiconductor Corporation from 1997 to 1999 and served as Senior Vice President of Engineering of Cyrix Corporation from 1989 to 1997. Fontaine K. Richardson Director Dr. Richardson has served as a Director of Mentor since 1983. His principal occupation since 2000 has been private investment. Dr. Richardson has been a General Partner of Eastech III and Vice President of Eastech Management Company from 1983 to 2000. He also serves as Director of ePresence, Inc.
The name and position with Purchaser of each director and officer of Purchaser are set forth below. The business address, Mentor principal occupation or employment, five-year employment history and citizenship of each such person is set forth above.
NAME TITLE - --------------------------------------------- --------------------------------------------- Walden C. Rhines President, Chief Executive Officer and Director Gregory K. Hinckley Chief Financial Officer and Director Dean Freed Secretary
37 SCHEDULE II TRANSACTIONS IN SHARES IN THE PAST 60 DAYS
DATE NO. OF SHARES PURCHASED RANGE OF PRICE PER SHARE* - -------- ----------------------- ------------------------- 11/27/01 53,400 $6.33 -- $5.895 11/28/01 55,500 $6.54 -- $6.2797 11/29/01 93,200 $7.55 -- $6.54 11/30/01 39,300 $7.48 -- $7.24 12/03/01 26,350 $7.50 -- $7.31 12/04/01 14,750 $7.45 -- $7.3594 12/05/01 8,800 $7.48 -- $7.39 12/06/01 120,300 $7.95 -- $7.48
- --------------- * Net of Brokerage Commissions 38 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF IKOS SYSTEMS, INC. AT $11.00 NET PER SHARE BY FRESNO CORPORATION A WHOLLY-OWNED SUBSIDIARY OF MENTOR GRAPHICS CORPORATION The Letter of Transmittal and certificates for Shares and any other required documents should be sent to the Depositary at one of the addresses set forth below: The Depositary for the Offer is: [WILMINGTON TRUST LOGO] By Mail: By Hand/Overnight Courier: CT Reorg. Svcs., Drop Code 1615 Wilmington Trust Company Wilmington Trust Company Rodney Square North P.O. Box 8861 1100 North Market Street Wilmington, Delaware 19899-8861 Wilmington, Delaware 19890-1615 Attn: Corporate Trust Reorg. Svcs.
By Facsimile: (302) 636-4145 Confirm by Telephone: (302) 636-6518 If you have questions or need additional copies of this Offer to Purchase and the Letter of Transmittal, you can call the Information Agent at its address and telephone number set forth below. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: [MACKENZIE LOGO] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) E-mail: proxy@mackenziepartners.com or Call Toll Free (800) 322-2885 EX-99.(A)(1)(B) 4 f77751ex99-a1b.txt EXHIBIT (A)(1)(B) EXHIBIT (a)(1)(B) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF IKOS SYSTEMS, INC. AT $11.00 NET PER SHARE BY FRESNO CORPORATION, A WHOLLY-OWNED SUBSIDIARY OF MENTOR GRAPHICS CORPORATION THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 8, 2002, UNLESS THE OFFER IS EXTENDED. THE DEPOSITARY FOR THE OFFER IS: [WILMINGTON TRUST LOGO] By Mail: By Hand/Overnight Courier: CT Reorg. Svcs., Drop Code 1615 Wilmington Trust Company Wilmington Trust Company Rodney Square North P.O. Box 8861 1100 North Market Street Wilmington, Delaware 19899-8861 Wilmington, Delaware 19890-1615 Attn: Corporate Trust Reorg. Svcs.
By Facsimile: (302) 636-4145 Confirm by Telephone: (302) 636-6518 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be used if certificates are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if delivery of Shares and associated Rights (as defined below) is to be made by book-entry transfer to the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Offer -- Procedure for Tendering Shares and Rights" of the Offer to Purchase.
- ------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES TENDERED (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) (ATTACH ADDITIONAL LIST IF NECESSARY) AND SHARES TENDERED APPEAR(S) ON SHARE CERTIFICATE(S)) - ------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF SHARES NUMBER CERTIFICATE REPRESENTED BY OF SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ Total Shares - ------------------------------------------------------------------------------------------------------------------------ * Need not be completed by stockholders tendering by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the Depositary are being tendered. See Instruction 4. - ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF RIGHTS TENDERED* - ------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES TENDERED (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) (ATTACH ADDITIONAL LIST IF NECESSARY) AND RIGHTS TENDERED APPEAR(S) ON RIGHTS CERTIFICATE(S)) - ------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER RIGHTS OF RIGHTS NUMBER CERTIFICATE REPRESENTED BY OF RIGHTS NUMBER(S)** CERTIFICATE(S)** TENDERED*** ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ Total Rights - ------------------------------------------------------------------------------------------------------------------------ * Need not be completed unless separate Rights Certificates have been issued. ** Need not be completed by stockholders tendering Rights by book-entry transfer. *** Unless otherwise indicated, it will be assumed that all Rights represented by any certificates delivered to the Depositary are being tendered. See Instruction 4. - ------------------------------------------------------------------------------------------------------------------------
Holders of outstanding shares of common stock, par value $0.01 per share (the "Shares"), of IKOS Systems, Inc. (the "Company"), including the associated preferred stock purchase rights (the "Rights") issued pursuant to the Amended and Restated Rights Agreement, dated January 22, 1999, between the Company and Bank Boston, N.A., as amended (the "Rights Agreement"), whose certificates for such Shares (the "Share Certificates") and, if applicable, such Rights (the "Rights Certificates") are not immediately available or who cannot deliver their Share Certificates or, if applicable, their Rights Certificates and all other required documents to the Depositary on or prior to the Expiration Date (as defined in the Offer to Purchase), or who cannot complete the procedure for book-entry transfer on a timely basis, must tender their Shares and Rights according to the guaranteed delivery procedure set forth in "The Offer -- Procedure for Tendering Shares and Rights -- Guaranteed Delivery" of the Offer to Purchase. See Instruction 2. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Depositary. LOST CERTIFICATES [ ] I HAVE LOST MY CERTIFICATE(S) THAT REPRESENTED ________ SHARES AND RIGHTS AND REQUIRE ASSISTANCE IN OBTAINING A REPLACEMENT CERTIFICATE(S). I UNDERSTAND THAT I MUST CONTACT THE DEPOSITARY AND/OR THE COMPANY TO OBTAIN INSTRUCTIONS FOR REPLACING LOST CERTIFICATES. SEE INSTRUCTION 9. NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY. [ ] CHECK HERE IF TENDERED SHARES AND RIGHTS ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution - -------------------------------------------------------------------------------- Account Number - -------------------------------------------------------------------------------- Transaction Code Number - -------------------------------------------------------------------------------- [ ] CHECK HERE IF TENDERED SHARES AND RIGHTS ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Tendering Stockholder(s) - -------------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery - ---------------------------------------------------------------------- Name of Institution which Guaranteed Delivery - --------------------------------------------------------------------------- If delivery is by book-entry transfer: 2 Name of Tendering Institution - -------------------------------------------------------------------------------- Account Number - -------------------------------------------------------------------------------- Transaction Code Number - -------------------------------------------------------------------------------- 3 Ladies and Gentlemen: The undersigned hereby tenders to Fresno Corporation ("Purchaser"), a Delaware corporation and a wholly-owned subsidiary of Mentor Graphics Corporation, an Oregon corporation, the above-described shares of common stock, par value $0.01 per share ("Shares") of IKOS Systems, Inc., a Delaware corporation (the "Company"), including the associated preferred stock purchase rights (the "Rights") issued pursuant to the Amended and Restated Rights Agreement, dated January 22, 1999, between the Company and Bank Boston, N.A. pursuant to Purchaser's offer to purchase all of the outstanding Shares at $11.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase dated December 7, 2001, receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together, as each may be amended or supplemented from time to time, constitute the "Offer"). We reserve the right to transfer or assign, in whole or from time to time in part, to one or more of our affiliates the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve us of our obligations under the Offer or prejudice your rights to receive payment for Shares validly tendered and accepted for payment. Upon the terms and subject to the conditions of the Offer and effective upon acceptance for payment of and payment for the Shares and associated Rights tendered herewith, the undersigned hereby sells, assigns and transfers to, or upon the order of, Purchaser all right, title and interest in and to all the Shares that are being tendered hereby (and any and all other Shares or Rights or other securities issued or issuable in respect thereof on or after the date hereof) and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and all such other Shares or Rights or securities), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver certificates for such Shares and, if applicable, Rights (and all such other Shares or Rights or securities), or transfer ownership of such Shares and Rights (and all such other Shares or Rights or securities) on the account books maintained by the Book-Entry Transfer Facility, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of Purchaser, (ii) present such Shares and Rights (and all such other Shares or securities) for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and all such other Shares or Rights or securities), all in accordance with the terms of the Offer. The undersigned understands that, unless the Rights Condition (as defined in the Offer to Purchase) is satisfied, holders of Shares will be required to tender one Right for each Share tendered in order to effect a valid tender of such Share. Unless and until the Distribution Date (as defined in the Offer to Purchase) occurs, the Rights are represented by and transferred with the Shares. Accordingly, if the Distribution Date does not occur prior to the Expiration Date, a tender of Shares will constitute a tender of the associated Rights. If a Distribution Date has occurred, Rights Certificates representing that number of Rights equal to the number of Shares being tendered must be delivered to the Depositary in order for such Shares to be validly tendered. If a Distribution Date has occurred but Rights Certificates have not been received by the undersigned, the undersigned agrees hereby to deliver Rights Certificates representing a number of Rights equal to the number of Shares tendered herewith to the Depositary within three Nasdaq National Market trading days of the date such Rights Certificates are distributed. Purchaser reserves the right to require that the Depositary receive such Rights Certificates, or an Agent's Message (as defined in the Offer to Purchase), if available, with respect to such Rights prior to accepting Shares for payment. Payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of, among other things, such Rights Certificates, if such certificates have been distributed to holders of Shares. Purchaser will not pay any additional consideration for the Rights tendered pursuant to the Offer. 4 The undersigned hereby irrevocably appoints Walden C. Rhines and Gregory K. Hinckley, individually, as the attorneys and proxies of the undersigned, each with full power of substitution, to exercise all voting and other rights of the undersigned in such manner as each such attorney and proxy or his substitute shall in his sole discretion deem proper, with respect to all of the Shares and Rights tendered hereby which have been accepted for payment by Purchaser prior to the time of any vote or other action (and any and all other Shares or Rights or other securities issued or issuable in respect thereof on or after the date hereof), at any meeting of stockholders of the Company (whether annual or special and whether or not an adjourned meeting), by written consent or otherwise. This proxy is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares and Rights by Purchaser in accordance with the terms of the Offer. Such acceptance for payment shall revoke any other proxy or written consent granted by the undersigned at any time with respect to such Shares (and all such other Shares or Rights or securities), and no subsequent proxies will be given or written consents will be executed by the undersigned (and if given or executed, will not be deemed to be effective). The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares or, if applicable, Rights tendered hereby (and any and all other Shares or Rights other securities issued or issuable in respect thereof on or after the date hereof) and that when the same are accepted for payment by Purchaser, Purchaser will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares or, if applicable, Rights tendered hereby (and all such other Shares or Rights or securities). All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer, this tender is irrevocable. The undersigned understands that tenders of Shares or Rights pursuant to any one of the procedures described in "The Offer -- Procedure for Tendering Shares and Rights" of the Offer to Purchase and in the instructions hereto will constitute an agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. Unless otherwise indicated under "Special Payment Instructions," please issue the check for the purchase price of any Share Certificates, and, if applicable, any Rights Certificates purchased, and return any Shares or Rights not tendered or not purchased, in the name(s) of the undersigned (and, in the case of Shares or Rights tendered by book-entry transfer, by credit to the account at the Book-Entry Transfer Facility). Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price of any Share Certificates and, if applicable, any Rights Certificates purchased and any certificates for Shares and Rights not tendered or not purchased (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s). In the event that both "Special Payment Instructions" and "Special Delivery Instructions" are completed, please issue the check for the purchase price of any Share Certificates and, if applicable, Rights Certificates purchased and return any Shares and Rights not tendered or not purchased in the name(s) of, and mail said check and any certificates to, the person(s) so indicated. The undersigned recognizes that Purchaser has no obligation, pursuant to the "Special Payment Instructions," to transfer any Shares and Rights from the name of the registered holder(s) thereof if Purchaser does not accept for payment any of the Shares or Rights so tendered. 5 ------------------------------------------------------------ SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 6 AND 7) To be completed ONLY if the check for the purchase price of Share Certificates and Rights Certificates purchased (less the amount of any federal income and backup withholding tax required to be withheld) or certificates for Shares and Rights not tendered or not purchased are to be issued in the name of someone other than the undersigned. Mail: [ ] check [ ] certificates to: Name: ---------------------------------------------------- (PLEASE PRINT) Address: -------------------------------------------------- ------------------------------------------------------------ ZIP CODE ------------------------------------------------------------ (TAXPAYER IDENTIFICATION NO.) ------------------------------------------------------------ ------------------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 6 AND 7) To be completed ONLY if the check for the purchase price of Share Certificates and Rights Certificates purchased (less the amount of any federal income and backup withholding tax required to be withheld) or certificates for Shares and Rights not tendered or not purchased are to be mailed to someone other than the undersigned or to the undersigned at an address other than that shown below the undersigned's signature(s). Mail: [ ] check [ ] certificates to: Name: ---------------------------------------------------- (PLEASE PRINT) Address: -------------------------------------------------- ------------------------------------------------------------ ZIP CODE ------------------------------------------------------------ (TAXPAYER IDENTIFICATION NO.) ------------------------------------------------------------ 6 SIGN HERE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (SIGNATURE(S) OF OWNERS) Dated - --------------------------- Name(s) ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (full title) ----------------------------------------------------------------- Address------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number ----------------------------------------------------- (Must be signed by registered holder(s) exactly as name(s) appear(s) on Share Certificate(s) and Rights Certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5.) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Authorized Signature ---------------------------------------------------------------- Name -------------------------------------------------------------------------- Title--------------------------------------------------------------------------- (PLEASE TYPE OR PRINT) Name of Firm --------------------------------------------------------------------- Address------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number ----------------------------------------------------- Dated - --------------------------- FOR USE BY FINANCIAL INSTITUTIONS ONLY FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE ABOVE 7 - -------------------------------------------------------------------------------- PAYER'S NAME: WILMINGTON TRUST COMPANY - --------------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND FORM W-9 CERTIFY BY SIGNING AND DATING BELOW ------------------------------ DEPARTMENT OF THE TREASURY Social Security Number INTERNAL REVENUE SERVICE OR PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION ------------------------------ NUMBER (TIN) AND Employer Identification CERTIFICATION Number(s) --------------------------------------------------------------------------------------------- PART 2 -- FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING (See Page 2 of enclosed Guidelines) ----------------------------------------------------------- PART 3 -- Certification Under Penalties of Perjury, I certify that: (1) The number shown on this form is my current taxpayer identification number (or I am waiting for a number to be issued to me) and PART 4 -- Awaiting TIN [ ] (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. --------------------------------------------------------------------------------------------- CERTIFICATION INSTRUCTIONS -- You must cross out item (2) in Part 3 above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you are subject to backup withholding you receive another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2). SIGNATURE ---------------------------------------- DATE-------------------------------- NAME------------------------------------------------------------------------------------ ADDRESS-------------------------------------------------------------------------------- CITY------------------------------- STATE---------- ZIP CODE--------------------------- - ---------------------------------------------------------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECK THE BOX IN PART 4 OF SUBSTITUTE FORM W-9 PAYER'S NAME: WILMINGTON TRUST COMPANY - -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within sixty (60) days, a portion of all reportable payments made to me thereafter will be withheld until I provide such a number. Signature ----------------------------------- Date ------------ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF A PORTION OF ANY PAYMENT MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most banks, savings and loan associations and brokerage houses) that is a member of a recognized Medallion Program approved by The Securities Transfer Association, Inc. or any other "eligible guarantor institution" (as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended) (each an "Eligible Institution"). Signatures on this Letter of Transmittal need not be guaranteed (i) if this Letter of Transmittal is signed by the registered holder(s) of the Shares and Rights (which term, for purposes of this document, shall include any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares and Rights) tendered herewith and such holder(s) have not completed the instruction entitled "Special Payment Instructions" on this Letter of Transmittal or (ii) if such Shares and Rights are tendered for the account of an Eligible Institution. See Instruction 5. 2. Delivery of Letter of Transmittal and Shares. This Letter of Transmittal is to be used if Share Certificates (and, if applicable, Rights Certificates) are to be forwarded herewith or, unless an Agent's Message is utilized, if deliveries are to be made by book-entry transfer pursuant to the procedures set forth in "The Offer -- Procedure for Tendering Shares and Rights" of the Offer to Purchase. Share Certificates for all physically delivered Shares, or a confirmation of a book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility of all Shares delivered electronically, as well as a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) and any other documents required by this Letter of Transmittal, or an Agent's Message in the case of a book-entry transfer, must be received by the Depositary at one of its addresses set forth on the front page of this Letter of Transmittal by the Expiration Date (as defined in the Offer to Purchase). If a Distribution Date (as defined in the Offer to Purchase) has occurred, Rights Certificates, or book-entry confirmation of a transfer of Rights into the Depositary's account at the Book-Entry Transfer Facility, if available (together with, if Rights are forwarded separately from Shares, a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) with any required signature guarantee, or an Agent's Message in the case of a book-entry delivery, and any other documents required by this Letter of Transmittal), must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date or, if later, within three Nasdaq National Market trading days of the date on which such Rights Certificates are distributed. If Share Certificates (and, if applicable, Rights Certificates) are forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. Stockholders whose Share Certificates (and, if applicable, Rights Certificates) are not immediately available, who cannot deliver their Share Certificates (and, if applicable, Rights Certificates) and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedure for delivery by book-entry transfer on a timely basis, may tender their Shares pursuant to the guaranteed delivery procedure described in Section 4 of the Offer to Purchase. Pursuant to such procedure: (a) such tender must be made by or through an Eligible Institution; (b) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser, must be received by the Depositary prior to the Expiration Date; and (c) Share Certificates (and, if applicable, Rights Certificates) for all tendered Shares or Rights, in proper form for tender, or a confirmation of a book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility of all Shares or Rights delivered electronically, as well as a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), and any other documents required by this Letter of Transmittal, must be received by the Depositary within (i) in the case of Shares, three Nasdaq National Market trading days of the date of execution of such Notice of Guaranteed Delivery or (ii) in the case of Rights, a period ending on the later of (y) three Nasdaq National Market trading days after the date of execution of such Notice of Guaranteed Delivery and (z) three Nasdaq National Market trading days after the date Rights Certificates are distributed, all as provided in "The Offer -- Procedure for Tendering Shares and Rights" of the Offer to Purchase. The method of delivery of Shares and associated Rights and all other required documents is at the option and risk of the tendering stockholder. If certificates for Shares and/or Rights are sent by mail, registered mail with return receipt requested, properly insured, is recommended. No alternative, conditional or contingent tenders will be accepted, and no fractional Shares and Rights will be purchased. By executing this Letter of Transmittal, the tendering stockholder waives any right to receive any notice of the acceptance for payment of the Shares. 9 3. Inadequate Space. If the space provided herein is inadequate, the Share Certificate (and, if applicable, Rights Certificate) numbers, the number of Shares evidenced by such Share Certificates (and, if applicable, the number of Rights evidenced by such Rights Certificates) and the number of Shares (and, if applicable, the number of Rights) tendered should be listed on a separate signed schedule and attached hereto. 4. Partial Tenders (not applicable to stockholders who tender by book-entry transfer). If fewer than all the Shares represented by any certificate delivered to the Depositary are to be tendered, fill in the number of Shares and, if applicable, Rights which are to be tendered in the box entitled "Number of Shares Tendered" and, if applicable, "Number of Rights Tendered." In such case, a new certificate for the remainder of the Shares or Rights represented by the old certificate will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the appropriate box on this Letter of Transmittal, as promptly as practicable following the expiration or termination of the Offer. All Shares or Rights represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares and Rights tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. If any of the Shares or Rights tendered hereby are held of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Shares or Rights tendered hereby are registered in different names on different certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal is signed by the registered holder(s) of the Shares and Rights tendered hereby, no endorsements of certificates or separate stock powers are required unless payment of the purchase price is to be made, or Shares or Rights not tendered or not purchased are to be returned, in the name of any person other than the registered holder(s). Signatures on any such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares or Rights tendered hereby, certificates must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name(s) of the registered holder(s) appear(s) on the certificates for such Shares or Rights. Signature(s) on any such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of the authority of such person so to act must be submitted. 6. Stock Transfer Taxes. Purchaser will pay any stock transfer taxes with respect to the sale and transfer of any Shares and Rights to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or Shares or Rights not tendered or not purchased are to be returned in the name of, any person other than the registered holder(s), or if a transfer tax is imposed for any reason other than the sale or transfer of Shares or Rights to Purchaser pursuant to the Offer, then the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted herewith. 7. Special Payment and Delivery Instructions. If the check for the purchase price of any Shares and Rights purchased is to be issued, or any Shares or Rights not tendered or not purchased are to be returned, in the name of a person other than the person(s) signing this Letter of Transmittal or if the check or any certificates for Shares or Rights not tendered or not purchased are to be mailed to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal at an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Stockholders tendering Shares or Rights by book-entry transfer may request that Shares or Rights not purchased be credited to such account at the Book-Entry Transfer Facility as such stockholder may designate under "Special Payment Instructions." If no such instructions are given, any such Shares or Rights not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated above. 10 8. Substitute Form W-9. Under the federal income tax laws, the Depositary will be required to withhold a portion of the amount of any payments made to certain stockholders pursuant to the Offer. In order to avoid such backup withholding, each tendering stockholder, and, if applicable, each other payee, must provide the Depositary with such stockholder's or payee's correct taxpayer identification number and certify that such stockholder or payee is not subject to such backup withholding by completing the Substitute Form W-9. In general, if a stockholder or payee is an individual, the taxpayer identification number is the Social Security number of such individual. If the Depositary is not provided with the correct taxpayer identification number, the stockholder or payee may be subject to a $50 penalty imposed by the Internal Revenue Service. For further information concerning backup withholding and instructions for completing the Substitute Form W-9 (including how to obtain a taxpayer identification number if you do not have one and how to complete the Substitute Form W-9 if Shares are held in more than one name), consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. Certain stockholders or payees (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order to satisfy the Depositary that a foreign individual qualifies as an exempt recipient, such stockholder or payee must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status, on a properly completed Form W-8BEN, or successor form. Such statements can be obtained from the Depositary. Failure to complete the Substitute Form W-9 will not, by itself, cause Shares and Rights to be deemed invalidly tendered, but may require the Depositary to withhold a portion of the amount of any payments made pursuant to the Offer. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained provided that the required information is furnished to the Internal Revenue Service. NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF A PORTION OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 9. Mutilated, Lost, Stolen or Destroyed Certificates. Any holder of a certificate(s) which represented Shares or Rights whose certificate(s) has been mutilated, lost, stolen, or destroyed should (i) complete this Letter of Transmittal and check the appropriate box above and (ii) contact the Depositary immediately by calling (302) 636-6518. The Depositary will provide such holder will all necessary forms and instructions to replace any mutilated, lost, stolen or destroyed certificates. The holder may also be required to give the Company a bond as indemnity against any claim that may be made against it with respect to the certificate(s) alleged to have been mutilated, lost, stolen, or destroyed. However, there can be no assurances that such mutilated, lost, stolen or destroyed certificates will be replaced prior to the expiration date of the Offer. 10. Waiver of Conditions. The Conditions of the Offer may be waived, in whole or in part, by Purchaser, in its sole discretion, at any time and from time to time, in the case of any shares tendered. 11. Requests for Assistance or Additional Copies. Requests for assistance or additional copies of the Offer to Purchase and this Letter of Transmittal may be obtained from the Information Agent at its address or telephone number set forth below. 11 - ---------------------------------------------------------------------------------------------------------------------- (DO NOT WRITE IN THE SPACES BELOW) Date Received --------------- Accepted by --------------- Checked by --------------- ------------------------------------------------------------------------------------------------------------ SHARES SHARES SHARES CHECK AMOUNT SHARES CERTIFICATE BLOCK SURRENDERED TENDERED ACCEPTED NO. OF CHECK RETURNED NO. NO. ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------ ---- ---- ---- Gr ---- ---- ---- ---- ---- ---- Net ---- ---- ---- Delivery Prepared By --------------- Checked By --------------- Date --------------- - ----------------------------------------------------------------------------------------------------------------------
Any questions and requests for assistance may be directed to the Information Agent at its telephone numbers and location listed below. Additional copies of the Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent at its address and telephone numbers set forth below. Holders of Shares may also contact their broker, dealer, commercial bank or trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: [MACKENZIE LOGO] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) E-mail: proxy@mackenziepartners.com or Call Toll-Free (800) 322-2885 12 EX-99.(A)(1)(C) 5 f77751ex99-a1c.txt EXHIBIT (A)(1)(C) EXHIBIT (a)(1)(C) NOTICE OF GUARANTEED DELIVERY TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF IKOS SYSTEMS, INC. AT $11.00 NET PER SHARE BY FRESNO CORPORATION, A WHOLLY-OWNED SUBSIDIARY OF MENTOR GRAPHICS CORPORATION THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 8, 2002, UNLESS THE OFFER IS EXTENDED. This form, or a form substantially equivalent to this form, must be used to accept the Offer (as defined below) if certificates evidencing shares of common stock, par value $0.01 per share (the "Shares"), of IKOS Systems, Inc., a Delaware corporation (the "Company"), and, if applicable, certificates for the associated preferred stock purchase rights (the "Rights") issued pursuant to the Amended and Restated Rights Agreement between the Company and Bank Boston, N.A. dated January 22, 1999, as amended (the "Rights Agreement"), are not immediately available (including because certificates for Rights have not yet been distributed), or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach Wilmington Trust Company (the "Depositary") on or prior to the Expiration Date (as defined in the Offer to Purchase, dated December 7, 2001 (the "Offer to Purchase")). This Notice of Guaranteed Delivery may be delivered by hand or facsimile transmission or mail to the Depositary. See "The Offer -- Procedures for Tendering Shares and Rights" of the Offer to Purchase. THE DEPOSITARY FOR THE OFFER IS: WILMINGTON TRUST COMPANY [WILMINGTON TRUST LOGO] By Mail: By Hand/Overnight Courier: CT Reorg. Svcs., Drop Code 1615 Wilmington Trust Company Wilmington Trust Company Rodney Square North P.O. Box 8861 1100 North Market Street Wilmington, Delaware 19899-8861 Wilmington, Delaware 19890-1615 Attn: Corporate Trust Reorg. Svcs.
By Facsimile: (302) 636-4145 Confirm by Telephone: (302) 636-6518 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS LISTED ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "eligible guarantor institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to Fresno Corporation ("Purchaser"), a Delaware corporation and a wholly-owned subsidiary of Mentor Graphics Corporation, an Oregon corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase dated December 7, 2001 and the related Letter of Transmittal (which together, as amended, supplemented or otherwise modified from time to time, constitute the "Offer"), receipt of which is hereby acknowledged, the number of Shares and/or Rights specified below pursuant to the guaranteed delivery procedure set forth in "The Offer -- Procedures for Tendering Shares and Rights" of the Offer to Purchase.
--------------------------------------------- - --------------------------------------------- SIGN HERE - --------------------------------------------- --------------------------------------------- Certificate Numbers (if available) Signature - --------------------------------------------- --------------------------------------------- [ ] Check here if Shares and Rights will be (Name(s)) (Please Print) Name of tendered by book-entry transfer Tendering Institution - --------------------------------------------- --------------------------------------------- Number of Shares tendered Address - --------------------------------------------- --------------------------------------------- Number of Rights tendered (Zip Code) - --------------------------------------------- --------------------------------------------- Account Number (Area Code and Telephone Number) - --------------------------------------------- ---------------------------------------------
2 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association, Inc. or any other "eligible guarantor institution" (as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended), guarantees (a) that the above named person(s) "own(s)" the Shares and Rights tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, (b) that such tender of Shares and Rights complies with Rule 14e-4 and (c) to deliver to the Depositary of the Shares and Rights tendered hereby, in proper form of transfer, or a Book-Entry Confirmation (as defined in the Offer to Purchase), together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other required documents (x) in the case of Shares, within three Nasdaq National Market trading days of the date hereof and (y) in the case of Rights, within a period ending on the later of (i) three Nasdaq National Market trading days after the date hereof or (ii) three Nasdaq National Market trading days after the date certificates for Rights are distributed to stockholders. - -------------------------------------------------------------------------------- (NAME OF FIRM) - -------------------------------------------------------------------------------- (AUTHORIZED SIGNATURE) - -------------------------------------------------------------------------------- (NAME) - -------------------------------------------------------------------------------- (ADDRESS) - -------------------------------------------------------------------------------- (ZIP CODE) - -------------------------------------------------------------------------------- (AREA CODE AND TELEPHONE NUMBER) DO NOT SEND SHARE CERTIFICATES OR RIGHTS CERTIFICATES WITH THIS NOTICE OF GUARANTEE DELIVERY. SHARE CERTIFICATES AND, IF APPLICABLE, RIGHTS CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. Dated: - ------------------------------------------------- 3 EX-99.(A)(1)(D) 6 f77751ex99-a1d.txt EXHIBIT (A)(1)(D) EXHIBIT (a)(1)(D) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF IKOS SYSTEMS, INC. AT $11.00 NET PER SHARE BY FRESNO CORPORATION, A WHOLLY-OWNED SUBSIDIARY OF MENTOR GRAPHICS CORPORATION THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 8, 2002, UNLESS THE OFFER IS EXTENDED. December 7, 2001 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: This letter relates to the offer being made by Mentor Graphics Corporation, an Oregon corporation ("Mentor"), through Fresno Corporation, a Delaware corporation ("Purchaser"), a wholly-owned subsidiary of Mentor, to purchase all of the issued and outstanding common stock, par value $0.01 per share (the "Shares"), of IKOS Systems, Inc., a Delaware corporation (the "Company"), including the associated preferred stock purchase rights (the "Rights") issued pursuant to the Amended and Restated Rights Agreement, dated January 22, 1999, between the Company and Bank Boston, N.A., as amended (the "Rights Agreement"), at a price of $11.00 per Share net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase dated December 7, 2001 and the related Letter of Transmittal (which together, as amended, supplemented or otherwise modified from time to time, constitute the "Offer"). Unless the Rights Condition (as defined in the Offer to Purchase) is satisfied, the Company's stockholders will be required to tender one Right for each Share tendered in order to effect a valid tender of Shares in accordance with the procedures set forth in "The Offer -- Procedures for Tendering Shares and Rights" of the Offer to Purchase. Unless the Distribution Date (as defined in the Offer to Purchase) occurs, a tender of Shares will also constitute a tender of the associated Rights. The Offer is conditioned upon, among other things, the following: - That the Company's stockholders validly tender and do not withdraw prior to the expiration date of the Offer a number of Shares, including the associated Rights, representing, together with the Shares owned by Mentor, at least a majority of the total number of outstanding Shares on a fully diluted basis. - That Mentor is satisfied, in its sole discretion, that the Agreement and Plan of Merger and Reorganization dated July 2, 2001 among the Company, Synopsys, Inc. and Oak Merger Corporation (the "Synopsys Agreement") has been terminated in accordance with the terms of such agreement as in effect on the date of the Offer to Purchase or such other terms as may be satisfactory to Mentor in its sole discretion. - That the termination fee provision in the Synopsys Agreement has been invalidated or the obligations to pay any amounts pursuant to such provision have been terminated, without any termination fee, or any portion thereof, having been paid by the Company or any of its affiliates pursuant to the Synopsys Agreement. - That the board of directors of the Company redeems the Rights in accordance with the terms of such Rights as in effect at such time or Mentor is satisfied, in its sole discretion, that the Rights have been invalidated or are otherwise inapplicable to the Offer and the Proposed Merger of Purchaser with and into the Company (the "Proposed Merger"). - That Mentor is satisfied, in its sole discretion, that the provisions of Section 203 of the Delaware General Corporation Law do not apply to or otherwise restrict the Offer and the Proposed Merger. - That the Company's stockholders do not approve the Synopsys Agreement. - That the Company has not entered into or effectuated any agreement or transaction with any person or entity having the effect of impairing Purchaser's ability to acquire the Company or otherwise diminishing the expected economic value to Mentor of the acquisition of the Company. - That any waiting periods under applicable antitrust laws have expired or have been terminated. For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, we are enclosing the following documents: 1. Offer to Purchase dated December 7, 2001; 2. Letter of Transmittal for your use and for the information of your clients (including Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 providing information relating to backup federal income tax withholding); 3. Notice of Guaranteed Delivery to be used to accept the Offer if the Shares and all other required documents cannot be delivered to Wilmington Trust Company ("the Depositary") by the Expiration Date (as defined in the Offer to Purchase); 4. A form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; and 5. Return envelope addressed to the Depositary. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 8, 2002, UNLESS THE OFFER IS EXTENDED. Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Information Agent or the Depositary as described in the Offer to Purchase) for soliciting tenders of Shares and Rights pursuant to the Offer. Purchaser will, however, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers. Purchaser will pay all stock transfer taxes applicable to its purchase of Shares and Rights pursuant to the Offer, subject to Instruction 6 of the Letter of Transmittal. In order to accept the Offer, a duly executed and properly completed Letter of Transmittal and any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares, and any other required documents, should be sent to the Depositary by 12:00 Midnight, New York City time, on Tuesday, January 8, 2002. Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed materials may be obtained from, the Information Agent or the undersigned at the addresses and telephone numbers set forth on the back cover of the Offer to Purchase. Very truly yours, MENTOR GRAPHICS CORPORATION FRESNO CORPORATION 2 NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE AGENT OF PURCHASER, MENTOR, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.(A)(1)(E) 7 f77751ex99-a1e.txt EXHIBIT (A)(1)(E) EXHIBIT (a)(1)(E) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF IKOS SYSTEMS, INC. AT $11.00 NET PER SHARE BY FRESNO CORPORATION, A WHOLLY-OWNED SUBSIDIARY OF MENTOR GRAPHICS CORPORATION THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 8, 2002, UNLESS THE OFFER IS EXTENDED. To Our Clients: Enclosed for your consideration are the Offer to Purchase dated December 7, 2001 and the related Letter of Transmittal (which together, as amended, supplemented or otherwise modified from time to time constitute the "Offer") in connection with the offer by Mentor Graphics Corporation, an Oregon corporation ("Mentor") through Fresno Corporation, a Delaware corporation ("Purchaser"), and a wholly-owned subsidiary of Mentor, to purchase for cash all of the shares of common stock, par value $0.01 per share (the "Shares"), of IKOS Systems, Inc., a Delaware corporation (the "Company"), including the associated preferred stock purchase rights (the "Rights") issued pursuant to the Amended and Restated Rights Agreement dated January 22, 1999 between the Company and Bank Boston, N.A., as amended (the "Rights Agreement"). We are the holder of record of Shares held for your account. A tender of such Shares and the associated Rights can be made only by us as the holder of record and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Shares and Rights held by us for your account. We request instructions as to whether you wish us to tender any or all of the Shares and Rights held by us for your account, upon the terms and subject to the conditions set forth in the Offer to Purchase and the Letter of Transmittal. Your attention is invited to the following: 1. The tender price is $11.00 per Share, net to you in cash. 2. The Offer and withdrawal rights expire at 12:00 Midnight, New York City time, on Tuesday, January 8, 2002, unless the Offer is extended. 3. The Offer is conditioned upon, among other things, the following: - That the Company's stockholders validly tender and do not withdraw prior to the expiration date of the Offer a number of Shares (including the associated Rights) representing, together with the Shares owned by Mentor, at least a majority of the total number of outstanding Shares on a fully diluted basis. - That Mentor is satisfied, in its sole discretion, that the Agreement and Plan of Merger and Reorganization dated July 2, 2001 among the Company, Synopsys, Inc. and Oak Merger Corporation (the "Synopsys Agreement") has been terminated in accordance with the terms of such agreement as in effect on the date of the Offer or such other terms as may be satisfactory to Mentor in its sole discretion. - That the termination fee provision in the Synopsys Agreement has been invalidated or the obligations to pay any amounts pursuant to such provision have been terminated, without any termination fee, or any portion thereof, having been paid by the Company or any of its affiliates pursuant to the Synopsys Agreement. - That the board of directors of the Company redeems the Rights in accordance with the terms of such Rights as in effect at such time or Mentor is satisfied, in its sole discretion, that the Rights have been invalidated or are otherwise inapplicable to the Offer and the Proposed Merger of Purchaser with and into the Company (the "Proposed Merger"). - That Mentor is satisfied, in its sole discretion, that the provisions of Section 203 of the Delaware General Corporation Law do not apply to or otherwise restrict the Offer and the Proposed Merger. - That the Company's stockholders do not approve the Synopsys Agreement. - That the Company has not entered into or effectuated any agreement or transaction with any person or entity having the effect of impairing Purchaser's ability to acquire the Company or otherwise diminishing the expected economic value to Mentor of the acquisition of the Company. - That any waiting periods under applicable antitrust laws have expired or have been terminated. 4. Any stock transfer taxes applicable to the sale of Shares and Rights to the Purchaser pursuant to the Offer will be paid by the Purchaser, except as otherwise provided in Instruction 6 of the Letter of Transmittal. If you wish to have us tender any or all of your Shares and Rights, please so instruct us by completing, executing, detaching and returning to us the instruction form on the detachable part hereof. An envelope to return your instructions to us is enclosed. If you authorize tender of your Shares and Rights, all such Shares and Rights will be tendered unless otherwise specified on the detachable part hereof. Your instructions should be forwarded to us in ample time to permit us to submit a tender on your behalf by the expiration of the Offer. The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares and Rights in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the laws of such jurisdiction. Payment for Shares and Rights purchased pursuant to the Offer will in all cases be made only after timely receipt by Wilmington Trust Company (the "Depositary") of (a) certificates representing the Shares and Rights tendered or timely confirmation of the book-entry transfer of such Shares and Rights into the account maintained by the Depositary at The Depository Trust Company (the "Book-Entry Transfer Facility"), pursuant to the procedures set forth in Section 4 of the Offer to Purchase, (b) the Letter of Transmittal, properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase), in connection with a book-entry delivery, and (c) any other documents required by the Letter of Transmittal. Accordingly, payment may not be made to all tendering stockholders at the same time depending upon when certificates for or confirmations of book-entry transfer of such Shares and Rights into the Depositary's account at the Book-Entry Transfer Facility are actually received by the Depositary. 2 INSTRUCTIONS WITH RESPECT TO OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) OF IKOS SYSTEMS, INC. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase dated December 7, 2001, and the related Letter of Transmittal, in connection with the offer by Mentor through Purchaser to purchase all of the shares of common stock, $0.01 par value per share (the "Shares"), of IKOS Systems, Inc. (the "Company"), including the associated preferred stock purchase rights (the "Rights) issued pursuant to the Amended and Restated Rights Agreement, dated January 22, 1999, between the Company and Bank Boston, N.A., as amended (the "Rights Agreement"). This will instruct you to tender the number of Shares and Rights indicated below held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal.
- --------------------------------------------- --------------------------------------------- Number of Shares to be Tendered: SIGN HERE --------------------------------------------- - --------------------------------------- Shares* --------------------------------------------- Signature(s) Number of Rights to be Tendered: --------------------------------------------- Please type or print name(s) - --------------------------------------- Rights* --------------------------------------------- Please type or print address Dated ---------------------------------------- ----------------------------------------- Area Code and Telephone Number --------------------------------------------- Taxpayer Identification or Social Security Number - --------------------------------------------- ---------------------------------------------
* Unless otherwise indicated, it will be assumed that all Shares and Rights held by us for your account are to be tendered. EX-99.(A)(1)(F) 8 f77751ex99-a1f.txt EXHIBIT (A)(1)(F) EXHIBIT (a)(1)(F) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security Numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer Identification Numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer.
- -------------------------------------------------------- GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - -------------------------------------------------------- 1. An individual's The individual account 2. Two or more The actual owner of the individuals (joint account or, if combined account) funds, any one of the individuals(1) 3. Husband and wife The actual owner of the (joint account) account or, if joint funds, either person(1) 4. Custodian account of a The minor(2) minor (Uniform Gift to Minors Act) 5. Adult and minor (joint The adult or, if the minor account) is the only contributor, the minor(1) 6. Account in the name of The ward, minor, or guardian or committee incompetent person(3) for a designated ward, minor, or incompetent person 7. a. The usual revocable The grantor-trustee(1) savings trust account (grantor is also trustee) b. So-called trust The actual owner(1) account that is not a legal or valid trust under State law - --------------------------------------------------------
- -------------------------------------------------------- GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - -------------------------------------------------------- 8. Sole proprietorship The Owner(4) account 9. A valid trust, estate The legal entity (Do not or pension trust furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title)(5) 10. Corporate account The corporation 11. Religious, charitable, The organization or educational organization account 12. Partnership account The partnership held in the name of the business 13. Association, club, or The organization other tax-exempt organization 14. A broker or registered The broker or nominee nominee 15. Account with the The public entity Department of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments - --------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) You must show your individual name, but you may also enter your business or "doing business" name. You may use either your Social Security Number or Employer Identification Number. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you do not have a taxpayer identification number or if you do not know your number, obtain Form SS-5, Application for Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service (the "IRS") and apply for a number. Payees specifically exempted from backup withholding on ALL payments by brokers include the following: - A corporation. - A financial institution. - An organization exempt from a tax under Section 501(a), or an individual retirement plan or a custodial account under Section 403(b)(7) if the account satisfies the requirements of Section 401(F)(2). - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under Section 584(a). - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. - A futures commission merchant registered with the Commodity Futures Trading Commission. - A person registered under the Investment Advisors Act of 1940 who regularly acts as a broker. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under Section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under Section 852). - Payments described in Section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under Section 1451. - Payments made by certain foreign corporations. - Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, CHECK "EXEMPT" IN PART 2 OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. Certain payments other than interest, dividends, and patronage dividends, which are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under Section 6041, 6041(A)(a), 6045, and 6050A. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Beginning January 1, 1993, payers must generally withhold a portion of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an under-payment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.(A)(1)(G) 9 f77751ex99-a1g.txt EXHIBIT (A)(1)(G) Exhibit (a)(1)(G) [Mentor Logo] NOT FOR IMMEDIATE RELEASE MENTOR GRAPHICS OFFERS TO ACQUIRE IKOS SYSTEMS, INC. OFFERS $11.00 IN CASH PER SHARE FOR ALL OUTSTANDING IKOS SHARES WILSONVILLE, OR -- December 7, 2001 -- Mentor Graphics Corporation (Nasdaq: MENT) today announced that it is offering to acquire IKOS Systems, Inc. (Nasdaq: IKOS) for $11.00 in cash per share 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). 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. "Our offer makes strategic sense for both companies," said Walden C. Rhines, Chairman and Chief Executive Officer of Mentor Graphics. "Our acquisition of IKOS will add to Mentor's existing products a proven and complementary emulation product line. IKOS products provide a mid-range verification solution to customers desiring a lower price point solution. Acquiring IKOS will also provide Mentor with North American sales and service capabilities in the emulation arena that we will leverage across our entire product line. "For IKOS, our all-cash offer is clearly superior to the present agreement with Synopsys," continued Dr. Rhines. "The Synopsys proposal is subject to onerous closing conditions that IKOS may well not be able to satisfy in the current environment. It is also subject to an uncertain price payable no earlier than August 2002. Our offer is for cash at a price significantly higher than the present trading price and can be consummated quickly, more than seven months earlier than the Synopsys proposal." Mentor's offer is not subject to any financing condition, and the offer is scheduled to expire at 12:00 midnight, New York City time, on Tuesday, January 8, 2002, unless the offer is extended. Mentor beneficially owns 841,600 shares or approximately 9.1% of IKOS' outstanding common stock. The Information Agent for the offer is Mackenzie Partners, Inc. The full text of the letter submitted to the Board of Directors of IKOS is printed below. *** Mentor Graphics Corporation 8005 SW Boeckman Rd. Wilsonville, Oregon 97070 December 6, 2001 Board of Directors of IKOS Systems, Inc. IKOS Systems, Inc. 79 Great Oaks Boulevard San Jose, California 95119 c/o Ramon A. Nunez, President and Chief Executive Officer c/o Gerald S. Casilli, Chairman of the Board of Directors Offer to Acquire IKOS Systems, Inc. Gentlemen: Mentor Graphics Corporation ("Mentor Graphics") offers to acquire IKOS Systems, Inc. ("IKOS") at a price of $11.00 per share of IKOS common stock payable in cash. Summary of Offer. Our offer, which is based on publicly-available information and is not subject to any financing condition, represents a premium of 37% over the Nasdaq closing price of IKOS' stock on December 6, 2001, and 49.5% over the Nasdaq closing price of IKOS' stock on June 29, 2001, the trading day before the transaction with Synopsys, Inc. was announced. Furthermore, our offer represents a premium of 87% over the average Nasdaq closing price of IKOS' stock for the thirty trading days ended December 6, 2001. Our all-cash offer will enable your stockholders to receive the entire premium immediately. This will eliminate the significant risk to your stockholders with respect to the future performance of your business, the EDA industry, the overall stock market or the economy generally that exists under your proposed transaction with Synopsys. Our offer is not subject to the onerous closing conditions contained in your agreement with Synopsys -- conditions that IKOS may well not be able to satisfy in the current environment. For example, at the revenue/backlog and profit rates of your quarter ended September 30, 2001, it is questionable whether Synopsys would even be required to close the transaction, much less pay your stockholders more than the $6.00 per share minimum in August 2002. In contrast, our offer is for $11.00 per share in cash seven months earlier in January 2002. The acquisition consists of a first-step cash tender offer for all outstanding shares of IKOS common stock, followed by a second-step merger in which IKOS' remaining stockholders would receive the same cash price per share paid in the tender offer. Background. As you are no doubt aware, Mentor Graphics approached IKOS in April 2001 to indicate its interest in making an offer for Mentor Graphics to acquire IKOS. On several subsequent occasions, Mentor Graphics indicated its continued interest in acquiring IKOS to IKOS and IKOS' financial advisor. We were therefore disappointed that you chose not to contact us prior to your acceptance of the Synopsys agreement -- an agreement which we believe your stockholders will find inadequate. We believe that both your stockholders and the investment community will welcome our superior all-cash offer -- an offer which can be consummated very quickly. We further believe that the trading price of IKOS' stock since the announcement of your agreement with Synopsys demonstrates that your stockholders have serious reservations about a transaction with Synopsys. Superiority of Mentor Graphics Offer. The superiority of the Mentor Graphics offer is easily demonstrated:
- ----------------------------- -------------------------------------- -------------------------------------- Issue Synopsys Proposal Mentor Graphics Offer - ----------------------------- -------------------------------------- -------------------------------------- Certainty of Closing Highly conditional. There is no Minimal standard conditions for an certainty this transaction will ever all-cash tender offer with no close, exposing IKOS' stockholders to financing condition; no need to wait risk of termination for more than a until late summer 2002 to find out year; Synopsys effectively has an whether the transaction is actually "option" to acquire IKOS. Based on completed. an annualization of IKOS' most recent quarterly results, it is questionable whether Synopsys will have any obligation to close the transaction. - ----------------------------- -------------------------------------- -------------------------------------- Price Unknown at this time, subject to a $11.00 per share (in cash). Our complicated formula; based on an price is not subject to IKOS' annualization of IKOS' most recent financial performance and represents quarterly results, IKOS stockholders a premium of 49.5% over the Nasdaq may not even receive $6.00 per closing price on June 29, 2001, 37% over share. the Nasdaq closing price on December 6, 2001, and 87% over the average Nasdaq closing price of IKOS' stock for the thirty trading days ended December 6, 2001. - ----------------------------- -------------------------------------- -------------------------------------- Payment of Consideration In Synopsys stock in August 2002; In cash promptly following subject to subsequent risk of consummation of our tender offer; no Synopsys stock performance. risk as to stock performance and no financing condition. - ----------------------------- -------------------------------------- -------------------------------------- Closing Date Estimated to occur in August 2002, As early as 20 business days after over 12 months from announcement and launch of tender offer; could be by at least eight months from now. In early-January 2002, seven months the Synopsys transaction IKOS is in before the earliest anticipated an uncertain state of limbo for over closing date for the Synopsys a year from the date of announcement. transaction. - ----------------------------- -------------------------------------- --------------------------------------
Action by IKOS Board. Our offer is vastly superior to the agreement with Synopsys. We are prepared to move expeditiously to consummate the offer. In accordance with your fiduciary duties to IKOS' stockholders and pursuant to your existing rights under Section 5.2 of your agreement with Synopsys, we expect you to afford us prompt access to information concerning IKOS so that we can operate on a level playing field with Synopsys. Following satisfactory completion of confirmatory due diligence, we would expect to enter into definitive documentation for the transaction and consummate the transaction as soon as possible thereafter. We would strongly prefer to work with you toward the consummation of a negotiated transaction that is in the best interests of your stockholders. Accordingly, we stand ready to meet with you at the earliest possible time. Please contact me to arrange a meeting. Very truly yours, /s/ Gregory K. Hinckley Mentor Graphics Corporation by Gregory K. Hinckley, President and Chief Operating Officer *** IMPORTANT INFORMATION Fresno Corporation, a wholly-owned subsidiary of Mentor Graphics, has commenced a tender offer for all of the issued and outstanding shares of common stock of IKOS Systems, Inc. ("IKOS"), including the associated preferred stock purchase rights, at the price of $11.00 per share, net to the seller in cash, without interest. The offer currently is scheduled to expire at 12:00 midnight, New York City time, on Tuesday, January 8, 2001. Mentor Graphics may extend the offer until the conditions to the offer, which are described in the Offer to Purchase forming part of Mentor Graphic's tender offer statement, are satisfied. If the offer is extended, Mentor Graphics will notify the depositary for the offer and issue a press release announcing the extension on or before 9:00 a.m. New York City time on the next business day following the date the offer was scheduled to expire. The complete terms and conditions of the tender offer are contained in the Offer to Purchase included in the tender offer statement to be filed today by Mentor Graphics with the U.S. Securities and Exchange Commission ("SEC"). Investors and security holders may obtain a free copy of the tender offer statement and other documents filed by Mentor Graphics with the SEC at the SEC's website at http://www.sec.gov. The tender offer statement may also be obtained by contacting MacKenzie Partners, Inc., the information agent for the offer, at (800) 322-2885 (toll free) or at (212) 929-5500 (collect) or by email to: proxy@mackenziepartners.com. THIS PRESS RELEASE IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER TO SELL SECURITIES. THE TENDER OFFER WILL BE MADE ONLY THROUGH AN OFFER TO PURCHASE AND RELATED LETTER OF TRANSMITTAL. INVESTORS AND SECURITY HOLDERS ARE STRONGLY ADVISED TO READ THE TENDER OFFER STATEMENT REGARDING THE TENDER OFFER REFERRED TO IN THIS PRESS RELEASE, WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. FORWARD-LOOKING STATEMENTS The statements contained in this press release that are not statements of historical fact, including without limitation, statements containing the words "believes," "expects," and words of similar import, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties that are difficult to predict. Moreover, from time to time Mentor Graphics may issue other forward-looking statements. Actual outcomes and results may differ materially from what is expressed or forecast in forward-looking statements. Factors that could cause or contribute to actual results differing materially from such forward looking statements are discussed in greater detail in Mentor Graphics' SEC filings. Mentor Graphics disclaims any obligation to update forward-looking statements to reflect future events or revised expectations. ABOUT MENTOR GRAPHICS Mentor Graphics Corporation (Nasdaq: MENT) 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. CONTACTS Mentor Graphics Corporation Ryerson Schwark Tel: 503-685-1660 Abernathy MacGregor Group Chuck Burgess Jason Thompson Tel: 212-371-5999 * * * EX-99.(A)(1)(H) 10 f77751ex99-a1h.txt EXHIBIT (A)(1)(H) Exhibit (a)(1)(H) THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER TO SELL SHARES. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE DATED DECEMBER 7, 2001 AND THE RELATED LETTER OF TRANSMITTAL AND ANY AMENDMENTS OR SUPPLEMENTS THERETO, AND IS BEING MADE TO ALL HOLDERS OF SHARES. PURCHASER IS NOT AWARE OF ANY STATE WHERE THE MAKING OF THE OFFER IS PROHIBITED BY ADMINISTRATIVE OR JUDICIAL ACTION PURSUANT TO ANY VALID STATE STATUTE. IF PURCHASER BECOMES AWARE OF ANY VALID STATE STATUTE PROHIBITING THE MAKING OF THE OFFER OR THE ACCEPTANCE OF SHARES PURSUANT THERETO, PURCHASER WILL MAKE A GOOD FAITH EFFORT TO COMPLY WITH SUCH STATE STATUTE. IF, AFTER SUCH GOOD FAITH EFFORT, PURCHASER CANNOT COMPLY WITH SUCH STATE STATUTE, THE OFFER WILL NOT BE MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF) THE HOLDERS OF SHARES IN SUCH STATE. IN ANY JURISDICTION WHERE THE SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO BE MADE ON BEHALF OF PURCHASER BY ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTION. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock (including the Associated Preferred Stock Purchase Rights) of IKOS Systems, Inc. at $11.00 Net Per Share in Cash by Fresno Corporation a wholly-owned subsidiary of Mentor Graphics Corporation Fresno Corporation, a Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Mentor Graphics Corporation, an Oregon corporation ("Mentor"), is offering to purchase all outstanding shares of common stock, par value $.01 per share (the "Shares"), of IKOS Systems, Inc., a Delaware corporation (the "Company"), including the associated preferred stock purchase rights (the "Rights") issued pursuant to the Amended and Restated Rights Agreement, dated January 22, 1999, between the Company and Bank Boston, N.A., as amended (the "Rights Agreement"), at a price of $11.00 per Share, net to the seller in cash, without interest (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated December 7, 2001 (the "Offer to Purchase") and in the related Letter of Transmittal (which, as amended and supplemented from time to time, together constitute the "Offer"). Unless the context otherwise requires, all references to the Shares herein include the associated Rights, and all references to the Rights include the benefits that may inure to the holders of the Rights pursuant to the Rights Agreement. Unless the Rights are redeemed prior to the Expiration Date (as defined herein), holders of Shares will be required to tender one associated Right for each Share tendered in order to effect a valid tender of such Share. All capitalized terms used but not otherwise defined herein shall have the meaning ascribed to them in the Offer to Purchase. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON JANUARY 7, 2002, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO 12:00 MIDNIGHT, NEW YORK CITY TIME, ON JANUARY 7, 2002, OR THE LATEST TIME AND DATE AT WHICH THE OFFER, IF EXTENDED BY PURCHASER, SHALL EXPIRE (SUCH TIME BEING THE "EXPIRATION DATE"), A NUMBER OF SHARES, INCLUDING THE ASSOCIATED RIGHTS, REPRESENTING, TOGETHER WITH THE SHARES OWNED BY MENTOR, AT LEAST A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"); (2) MENTOR BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE AGREEMENT AND PLAN OF MERGER AND REORGANIZATION DATED JULY 2, 2001 AMONG THE COMPANY, SYNOPSYS, INC. AND OAK MERGER CORPORATION (THE "SYNOPSYS AGREEMENT") HAS BEEN TERMINATED IN ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT AS IN EFFECT ON THE DATE OF THE OFFER TO PURCHASE OR SUCH OTHER TERMS AS MAY BE SATISFACTORY TO MENTOR IN ITS SOLE DISCRETION (THE "SYNOPSYS AGREEMENT CONDITION"); (3) THE TERMINATION FEE PROVISION IN THE SYNOPSYS AGREEMENT HAVING BEEN INVALIDATED OR THE OBLIGATIONS TO PAY ANY AMOUNTS PURSUANT TO SUCH PROVISION HAVING BEEN TERMINATED, WITHOUT ANY TERMINATION FEE, OR ANY PORTION THEREOF, HAVING BEEN PAID BY THE COMPANY OR ANY OF ITS AFFILIATES PURSUANT TO THE SYNOPSYS AGREEMENT (THE "TERMINATION CONDITION"); (4) THE RIGHTS HAVING BEEN REDEEMED BY THE BOARD OF DIRECTORS OF THE COMPANY IN ACCORDANCE WITH THE TERMS OF SUCH RIGHTS AS IN EFFECT AT SUCH TIME OR MENTOR BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE RIGHTS HAVE BEEN INVALIDATED OR ARE OTHERWISE INAPPLICABLE TO THE OFFER AND THE PROPOSED MERGER (THE "RIGHTS CONDITION"); (5) MENTOR BEING SATISFIED, IN ITS SOLE DISCRETION, THAT THE PROVISIONS OF SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW (THE "DGCL") DO NOT APPLY TO OR OTHERWISE RESTRICT MENTOR'S OFFER AND THE PROPOSED MERGER (THE "SECTION 203 CONDITION"); (6) THE COMPANY'S STOCKHOLDERS NOT HAVING APPROVED THE SYNOPSYS AGREEMENT (THE "APPROVAL CONDITION"); (7) THE COMPANY NOT HAVING ENTERED INTO OR EFFECTUATED ANY AGREEMENT OR TRANSACTION WITH ANY PERSON OR ENTITY HAVING THE EFFECT OF IMPAIRING PURCHASER'S ABILITY TO ACQUIRE THE COMPANY OR OTHERWISE DIMINISHING THE EXPECTED ECONOMIC VALUE TO MENTOR OF THE ACQUISITION OF THE COMPANY (THE "IMPAIRMENT CONDITION"); AND (8) ANY WAITING PERIODS UNDER APPLICABLE ANTITRUST LAWS HAVING EXPIRED OR BEEN TERMINATED. Any or all of the conditions set forth in (1)-(8) above may be waived by Purchaser in its sole discretion. The Offer is not conditioned on Purchaser obtaining financing. The purpose of the Offer is to enable Mentor to acquire control of, and the entire equity interest in, the Company. Mentor currently intends, as soon as practicable following consummation of the Offer, to seek to have Purchaser consummate a merger with and into the Company (the "Proposed Merger"), with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Mentor. Pursuant to the Proposed Merger, at the effective time of the Proposed Merger, each then remaining Share outstanding (other than Shares owned by Mentor, Purchaser or other subsidiaries of Mentor, all of which will be cancelled, and other than Shares that are held by stockholders, if any, who properly exercise their appraisal rights under the DGCL) would be converted into the right to receive $11.00 per Share, net to the seller in cash, without interest. For purposes of the Offer, Purchaser shall be deemed to have accepted for payment tendered Shares when, as and if Purchaser gives oral or written notice of its acceptance to Wilmington Trust Company (the "Depositary"). Purchaser will pay for Shares accepted for payment pursuant to the Offer by depositing the purchase price with the Depositary. The Depositary will act as agent for all tendering stockholders for the purpose of receiving payments from Purchaser and transmitting such payments to tendering stockholders whose Shares have been accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE FOR SHARES PURSUANT TO THE OFFER, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (1) certificates for such Shares, and, if applicable, Rights or timely confirmation of a book-entry transfer of such Shares and, if applicable, Rights into the Depositary's account at the Book-Entry Transfer Facility, (2) a properly completed and duly executed Letter of Transmittal and (3) any other required documents. Accordingly, payment may be made to tendering stockholders at different times if delivery of the Shares and other required documents occurs at different times. Purchaser does not currently intend to include a subsequent offering period in the Offer, although it reserves the right to do so in its sole discretion. Under Exchange Act Rule 14d-7, no withdrawal rights apply to Shares and Rights tendered during a subsequent Offering period and no withdrawal rights apply during the subsequent Offering period with respect to Shares and Rights tendered in the Offer and accepted for payment. Purchaser will pay the same consideration to stockholders tendering Shares in the Offer or in a subsequent Offering period, if it includes one. Tendering stockholders may withdraw tenders of Shares made pursuant to the Offer at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable, except that they may be withdrawn after February 4, 2002 unless such Shares are accepted for payment as provided in the Offer to Purchase. A withdrawal of Shares will also constitute a withdrawal of the associated Rights. If Purchaser extends the period of time during which the Offer is open, is delayed in accepting for payment or paying for Shares pursuant to the Offer for any reason, or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may, on Purchaser's behalf, retain all Shares tendered, and such Shares may not be withdrawn except as otherwise provided in the Offer to Purchase. To withdraw tendered Shares, a written or facsimile transmission notice of withdrawal with respect to the Shares must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase, and the notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn and the number of Shares to be withdrawn and the name of the registered holder of Shares, if different from that of the person who tendered such Shares. If the Shares to be withdrawn have been delivered to the Depositary, a signed notice of withdrawal with (except in the case of Shares tendered by an Eligible Institution) signatures guaranteed by an Eligible Institution must be submitted prior to the release of such Shares. In addition, such notice must specify, in the case of Shares tendered by delivery of certificates, the name of the registered holder (if different from that of the tendering stockholder) and the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn or, in the case of Shares tendered by book-entry transfer, the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered by again following one of the procedures described in "The Offer--Procedures for Tendering Shares and Rights" of the Offer to Purchase at any time prior to the Expiration Date. Purchaser will determine, in its sole discretion, all questions as to the form and validity (including time of receipt) of any notice of withdrawal, and its determination shall be final and binding. None of Purchaser, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defect or irregularity in any notice of withdrawal or waiver of any such defect or irregularity or incur any liability for failure to give any such notification. Pursuant to Exchange Act Rule 14d-5 and Section 220 of the DGCL, requests are being made to the Company for the use of the Company's stockholder lists and security position listings for the purpose of disseminating the Offer to holders of Shares. Upon compliance by the Company with such requests, the Offer to Purchase and the Letter of Transmittal will be mailed to record holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder lists for subsequent transmittal to beneficial owners of Shares. The information required to be disclosed by Exchange Act Rule 14d-6(d)(1) is contained in the Offer to Purchase and is incorporated herein by reference. THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Questions and requests for assistance or for copies of the Offer to Purchase and the related Letter of Transmittal, and other Offer materials, may be directed to the Information Agent as set forth below, and copies will be furnished promptly at Purchaser's expense. No fees or commissions will be paid to brokers, dealers or other persons (other than the Information Agent) for soliciting tenders of Shares pursuant to the Offer. THE INFORMATION AGENT FOR THE OFFER IS: [Mackenzie Logo] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) E-mail: proxy@mackenziepartners.com --------------------------- or Call Toll-Free (800) 322-2885 December 7, 2001 EX-99.(A)(1)(I) 11 f77751ex99-a1i.txt EXHIBIT (A)(1)(I) Exhibit (a)(1)(I) IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE MENTOR GRAPHICS CORPORATION ) and FRESNO CORPORATION, ) ) Plaintiffs, ) ) No.01-809 v. ) ------------- ) IKOS SYSTEMS, INC., ) ) Defendant. ) COMPLAINT Plaintiffs Mentor Graphics Corporation ("Mentor Graphics") and Fresno Corporation ("Purchaser," and together with Mentor Graphics, "Mentor") file this action seeking declaratory relief arising out of Purchaser's offer to purchase shares of common stock of defendant IKOS Systems, Inc. ("IKOS" or the "Company"). JURISDICTION AND VENUE 1. This Court has jurisdiction over this action pursuant to 15 U.S.C. Section 78aa, 28 U.S.C. Section 1331(a) and 28 U.S.C. Section 1337(a). 2. Venue in this Court is proper pursuant to 15 U.S.C. Section 78aa and 28 U.S.C. Section 1391(b). THE PARTIES 3. Plaintiff Mentor Graphics is a corporation incorporated under the laws of the State of Oregon having its principal executive offices in Wilsonville, Oregon. Mentor Graphics manufactures, markets and supports software and hardware Electronic Design Automation ("EDA") products and provides related services which enable engineers to design, analyze, simulate, model, implement and verify the components of electronic systems. Purchaser, a wholly-owned subsidiary of Mentor Graphics and a Delaware corporation, was formed to acquire all of the outstanding shares of IKOS through the tender offer and merger proposal described below. Mentor Graphics is the beneficial owner of more than 9.1 percent of the outstanding shares of IKOS common stock and Purchaser is the record owner of 100 shares of IKOS common stock. 4. Defendant IKOS is a corporation incorporated under the laws of the State of Delaware having its principal executive offices in San Jose, California. IKOS develops, manufactures, markets and supports acceleration and verification systems for the verification of integrated circuits. 5. The common stock of IKOS is registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. Section 78l(b), and is listed and traded on the Nasdaq National Market. THE TENDER OFFER 6. Purchaser commenced today a non-coercive, non-discriminatory, all-cash, all-shares tender offer not subject to any financing condition for the outstanding shares of IKOS common stock (the "Shares") that are not already owned by Mentor Graphics or Purchaser (the "Tender Offer"). In connection with the commencement of the Tender Offer, Mentor Graphics issued today a press release summarizing the terms of the Tender Offer (the "Press Release"), and a summary advertisement of the Tender Offer was published in the December 7, 2001, national edition of The Wall Street Journal (the "Summary Advertisement"). 7. IKOS stockholders whose shares are purchased by Purchaser in the Tender Offer will receive $11.00 per share in cash, representing a 37% premium above the closing price of IKOS stock on the Nasdaq National Market on December 6, 2001, the last full trading day before the first public announcement of Mentor Graphics' commencement of the Tender Offer. Furthermore, the Tender Offer represents a premium of 87% over the average closing price of IKOS stock for the thirty trading days ended December 6, 2001. The Tender Offer is conditioned upon, among other things, -2- (i) there being validly tendered and not withdrawn prior to the expiration date of the Tender Offer a number of Shares, including the associated rights (the "Rights"), representing, together with the Shares owned by Mentor, at least a majority of the total number of the outstanding Shares on a fully diluted basis (the "Minimum Condition"); (ii) Mentor being satisfied, in its sole discretion, that the Agreement and Plan of Merger and Reorganization dated July 2, 2001, among IKOS, Synopsys, Inc. ("Synopsys") and Oak Merger Corporation (the "Synposys Agreement") has been terminated in accordance with the terms of such agreement as in effect on the date of the Tender Offer or such other terms as may be satisfactory to Mentor in its sole discretion (the "Synposys Agreement Condition"); (iii) the Rights having been redeemed by the board of directors of IKOS in accordance with the terms of such Rights as in effect at such time or Mentor being satisfied, in its sole discretion, that the Rights have been invalidated or are otherwise inapplicable to the Tender Offer and Proposed Merger, as defined herein (the "Rights Condition"); (iv) Mentor being satisfied, in its sole discretion, that the provisions of Section 203 of the General Corporation Law of the State of Delaware (the "DGCL") do not apply to or otherwise restrict the Tender Offer and the Proposed Merger (the "Section 203 Condition"); (v) the stockholders of IKOS not having approved the Synposys Agreement (the "Approval Condition"); (vi) IKOS not having entered or effectuated any agreement or transaction with any person or entity having the effect of impairing Mentor's ability to acquire IKOS or otherwise diminishing the expected economic value to Mentor of the acquisition of IKOS (the "Impairment Condition"); (vii) the termination fee provision in the Synposys Agreement having been invalidated or the obligations to pay any amounts pursuant to such provision having been terminated, without any termination fee, or any portion thereof, having been paid by IKOS or any of its affiliates pursuant to the Synposys Agreement or otherwise (the "Termination Condition") and (viii) any waiting periods under applicable antitrust laws having expired or been terminated. -3- 8. The Tender Offer is the initial step in a two-step transaction pursuant to which Mentor Graphics proposes to acquire all of the outstanding shares of IKOS stock. If successful, the Tender Offer will be followed by a merger or similar business combination with Purchaser or a direct or indirect subsidiary of Mentor Graphics (the "Proposed Merger," and together with the Tender Offer, the "Proposed Acquisition"). Pursuant to the Proposed Merger, each then outstanding share of IKOS (other than shares owned by Mentor Graphics or any of its subsidiaries or shares held in the treasury of IKOS) would be converted into the right to receive an amount in cash equal to the price paid in the Tender Offer. 9. In January 1999, the Board of Directors of IKOS adopted a stockholder rights plan (the "Rights Plan"), commonly known as a "poison pill," which is designed to thwart any acquisition of IKOS that does not have the approval of the IKOS Board. The Rights Plan provides the IKOS Board with the power to prevent summarily the consummation of even an all-cash, all-shares, non- coercive, non-discriminatory tender offer by imposing a severe economic penalty (in the form of massive dilution) on a potential acquiror. The Rights Plan was adopted without approval of IKOS stockholders and, if it remains in effect and applicable to the Tender Offer, it will restrict the right of IKOS stockholders to decide whether to accept Purchaser's premium offer for their shares. 10. Moreover, the IKOS Board may be able to prevent Mentor Graphics from consummating the Proposed Merger for at least three years unless the Board exempts the Tender Offer from restrictions imposed by Section 203, Delaware's Business Combination Statute. Section 203, which applies to any Delaware corporation that has not opted out of its coverage, provides that if a person acquires 15% or more of a corporation's voting stock (thereby becoming an "interested stockholder"), such interested stockholder may not engage in a "business combination" with the corporation (defined to include a merger or consolidation) for three years after becoming an interested stockholder, unless: (i) prior to the 15% acquisition, the board of directors has approved -4- either the acquisition resulting in the stockholder becoming an interested stockholder or the business combination; (ii) the interested stockholder acquires 85% of the corporation's voting stock in the same transaction in which it crosses the 15% threshold; or (iii) on or subsequent to the date of the 15% acquisition, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholders (and not by written consent) by the affirmative vote of at least 662/3% of the outstanding voting stock which is not owned by the interested stockholder. IKOS is subject to Section 203 and has chosen not to opt-out of the statute's coverage. 11. The Tender Offer is, and will continue to be, in full compliance with all applicable federal laws and regulations governing tender offers, i.e., the provisions of the Williams Act, embodied in Sections 14(d) and 14(e) of the Exchange Act, 15 U.S.C. Sections 78n(d) and (e), and the rules and regulations promulgated thereunder by the Securities and Exchange Commission ("SEC"). In accordance with the Exchange Act and the rules and regulations promulgated thereunder by the SEC, Purchaser commenced the Tender Offer by the publication of the Summary Advertisement in today's Wall Street Journal. In connection with the Tender Offer and in accordance with the Exchange Act and the rules and regulations promulgated thereunder by the SEC, Purchaser is filing today a Schedule TO with the SEC (the "Schedule TO") pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3 promulgated thereunder, 17 C.F.R. Section 240.14d-3. 12. Section 14(d) of the Exchange Act, 15 U.S.C. Section 78n(d), and the rules and regulations promulgated thereunder by the SEC, require that any person or entity making a tender offer for beneficial ownership of more than five percent of a class of registered equity securities file and disclose certain specified information with respect to the tender offer. Any such bidder must disclose, among other things, its identity and background, past contacts, transactions or negotiations between the bidder and the company in whom the bidder seeks to acquire stock, the source and -5- amount of funds needed for the tender offer, and any plans the bidder may have to change the capitalization, corporate structure or business of the company whose stock it seeks to acquire. 13. In addition, Section 14(e) of the Exchange Act, 15 U.S.C. Section 78n(e), makes it "unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statement made, in light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practice in connection with any tender offer." Purchaser has complied fully with the Exchange Act and all rules and regulations promulgated thereunder. 14. In connection with the Tender Offer, Purchaser is in the process of disseminating to IKOS stockholders an offer to purchase containing all material information required by applicable law to be disclosed (the "Offer to Purchase"). Among other matters, the Offer to Purchase discloses: a. the background to the Tender Offer; b. publicly available information relating to the Company; and c. that depending upon the Company's response to the Tender Offer, in connection with the Tender Offer and Proposed Merger, Purchaser may solicit proxies to call a special meeting of the Company's stockholders to consider the removal of the Company's current directors and election of directors nominated by Purchaser. Purchaser may also solicit proxies with respect to such matters and with respect to the Synposys Agreement and the transactions contemplated thereunder. 15. Despite the significant benefits of the Tender Offer for the IKOS stockholders, IKOS has given no indication that it will give the Tender Offer fair consideration. IKOS' efforts will, in all likelihood, also include the commencement of baseless litigation against plaintiffs under the provisions of the federal securities laws regulating the solicitation of agency designations, the solicitation of proxies, tender offers and acquisition efforts. -6- BACKGROUND TO THE TENDER OFFER 16. On May 10, 2000, at IKOS' request, Ramon Nunez, Chief Executive Officer of IKOS, and Larry Melling, Vice President of Business Development and Strategic Marketing of IKOS, met with Gregory Hinckley, who is now the President and Chief Operating Officer of Mentor Graphics, in San Jose, California, to discuss the possibility of Mentor Graphics acquiring IKOS. They agreed to discuss the matter further at the Design Automation Conference in June 2000. 17. On June 7, 2000, at the Design Automation Conference in Los Angeles, California, Dr. Walden Rhines, who is now the Chairman of the Board of Directors and Chief Executive Officer, Mr. Hinckley and other representatives of Mentor Graphics had conversations with Mr. Nunez and Robert Hum, Senior Vice President of Product Operations of IKOS, regarding the differences between Mentor Graphics' and IKOS' emulation products and the production costs of such products, in the context of a potential acquisition of IKOS by Mentor Graphics. The parties agreed to discuss this matter further in the future. 18. Following the June 7, 2000 meeting, an independent technology consultant to Mentor Graphics met with a representative of IKOS at IKOS' principal offices in San Jose, California to evaluate IKOS' emulation products. To provide a context for further detailed discussions, Mentor Graphics and IKOS entered into a confidentiality and standstill agreement on June 16, 2000 (the "Confidentiality Agreement"). Pursuant to the Confidentiality Agreement, Mentor Graphics agreed, among other things, that it would not for a period of six months from the date of the Confidentiality Agreement acquire any securities of IKOS, engage in an extraordinary business transaction with IKOS, or engage in soliciting proxies from IKOS stockholders without prior approval of the IKOS board of directors (the "Standstill Provision"). The Standstill Provision, by its own terms, expired in December 2000. -7- 19. In late June 2000, Mr. Nunez contacted Mr. Hinckley to discuss a potential future meeting between representatives of Mentor Graphics and IKOS. Subsequently, Mr. Nunez stated that he wished to schedule a meeting with Mentor Graphics in July 2000. 20. On July 6, 2000, Dr. Rhines, Mr. Hinckley, Mr. Weldon and other representatives of Mentor Graphics met with Mr. Nunez, Mr. Hum and Mr. Melling, in Paris, France to discuss the operations of the companies' businesses, the integration of the companies' product lines and the joint marketing of the companies' products, in the event that Mentor Graphics acquired IKOS. During this meeting, Mr. Hinckley informed Mr. Nunez that, before Mentor Graphics could reach any decision on its desire to acquire IKOS, Mentor Graphics needed to hire a general manager for its emulation division and allow the new manager sufficient time to evaluate the needs of the emulation division. Mentor Graphics' emulation division is Mentor Graphics' business that most closely complements IKOS' business. 21. After subsequent internal meetings at Mentor Graphics and in light of his earlier comments concerning the hiring of a general manager for Mentor Graphics' emulation division, Mr. Hinckley in separate telephone conversations confirmed to Mr. Nunez and Mr. Melling that Mentor Graphics would not be able to continue discussions until a new general manager, who had not yet been hired, completed an evaluation of Mentor Graphics' emulation division. Mr. Nunez responded that IKOS would continue the process of exploring a business combination with other parties. As a result, these discussions ended on July 27, 2000 without reaching any agreement concerning an acquisition of IKOS by Mentor Graphics. Although the discussions regarding an acquisition of IKOS by Mentor Graphics ended on July 27, 2000, Mentor Graphics and IKOS agreed to hold discussions regarding other types of business relationships. 22. On August 3, 2000, Mr. Nunez and Joseph Rockom, Chief Financial Officer, Vice President of Finance and Administration and Secretary of IKOS, and Mr. Weldon discussed -8- the possibility of an original equipment manufacturing agreement. These discussions ended without reaching any agreement, and there were no further such discussions concerning other types of business relationships. 23. On November 9, 2000, Mr. Hinckley met Mr. Nunez and Gerald Casilli, Chairman of the Board of Directors of IKOS, to discuss the possibility of an introductory meeting between IKOS and Eric Selosse, whom Mentor Graphics had hired in October 2000 to be the general manager of Mentor Graphics' emulation division. On December 5, 2000, Mr. Selosse met with Mr. Nunez and another representative of IKOS and held a general discussion concerning the emulation industry and IKOS' product lines as well as the possible acquisition of IKOS by Mentor Graphics. These discussions ended without any agreement regarding an acquisition of IKOS by Mentor Graphics. 24. On April 13, 2001, Mr. Weldon contacted Mr. Nunez to request a meeting to discuss a possible acquisition of IKOS by Mentor Graphics. On April 17, 2001, Mr. Selosse met with Mr. Nunez to discuss a possible acquisition of IKOS by Mentor Graphics. Mr. Weldon attended by telephone. While Mr. Nunez expressed interest in a possible acquisition, he stated that IKOS had engaged Needham & Company as IKOS' financial advisor as a result of having received expressions of interest from other companies. Mr. Weldon told Mr. Nunez that Mentor Graphics would contact IKOS within approximately two weeks. 25. During April 2001, Mr. Rockom left a voice mail message for Dean Freed, vice president, general counsel and secretary of Mentor Graphics, inquiring about the possibility of a new confidentiality and standstill agreement that would pertain to the April 2001 discussions regarding a potential acquisition of IKOS by Mentor Graphics. Mr. Rockom also called Mr. Weldon concerning the possibility of entering into a new confidentiality and standstill agreement. Although no new confidentiality and standstill agreement had been entered into, Mr. Rockom nevertheless -9- volunteered to furnish Mr. Weldon with certain of IKOS' projections. Shortly thereafter, Mr. Rockom emailed Mr. Weldon projections prepared by IKOS for the third and fourth fiscal quarter of 2001 and 2002. After reviewing the projections, Mentor Graphics concluded that such projections were overly optimistic and therefore did not rely on them with respect to making any decisions regarding IKOS. Also during April 2001, to provide a basis for discussions regarding any new confidentiality and standstill agreement, Mr. Freed faxed the June 16, 2000 confidentiality agreement to Mr. Rockom. In a voice mail message and telephone conversation, Jan Robertson of Needham & Company ("Needham") informed Mr. Freed that the June 16, 2000 Confidentiality Agreement would not be acceptable to cover the contemporaneous discussions in light of IKOS' need for, among other things, new standstill and nonsolicitation periods. No new confidentiality and standstill agreement was entered into between IKOS and Mentor Graphics. 26. In a voice mail message on April 26, 2001, Ms. Robertson stated that since IKOS had received multiple expressions of interest, IKOS was commencing a bid procedure with bids due on May 4, 2001. The demand that Mentor Graphics immediately deliver its proposal in connection with the purported "auction" process was the first in a series of defensive measures culminating in the Merger Agreement. In response, Mr. Weldon called Chad Keck, a managing director of Needham & Company, and left a voice mail message asking Mr. Keck to return his call. Mr. Keck called Mr. Weldon on April 29, 2001. In their conversation, Mr. Weldon told Mr. Keck that Mentor Graphics was very interested in negotiating an acquisition of IKOS, but would not participate in a blind bidding process. 27. Given that the Merger Agreement with Synposys was not executed until early July 2001, IKOS had no basis to impose an artificial deadline for the auction of May 4, 2001 and thereafter exclude Mentor Graphics from any negotiations regarding an acquisition proposal for -10- IKOS. These actions by the IKOS Directors have denied and are continuing to deny IKOS stockholders the opportunity to receive the benefits of a Mentor merger proposal. 28. Indeed, IKOS blatantly ignored repeated expressions of interest by Mentor Graphics in pursuing a negotiated acquisition after IKOS' self-imposed May 4, 2001, deadline. In May 2001, Bruce Alexander, a managing director of Needham called Mr. Hinckley. In a telephone conversation with Mr. Alexander, Mr. Hinckley expressed Mentor Graphics' continued interest in pursuing a negotiated acquisition with IKOS. In a meeting among Dr. Rhines, Mr. Hinckley, Mr. Weldon and Mr. Alexander on June 5, 2001, Mr. Hinckley informed Mr. Alexander that Mentor Graphics remained very interested in acquiring IKOS. Later in June 2001, Mr. Alexander called Mr. Hinckley, and Mr. Hinckley expressed Mentor Graphics' continued interest in acquiring IKOS. 29. None of Mr. Hinckley's expressions of interest in May and June 2001 in acquiring IKOS resulted in any response from IKOS. Instead, IKOS continued ahead with its negotiations with Synopsys. 30. On July 2, 2001, IKOS announced the signing of the Synposys Agreement. Also on July 2, 2001, IKOS announced that it was revising its own outlook for performance downward for the very periods covered by the projections given to Mentor Graphics. This July 2, 2001 press release stated that "We expect that these customer and economic issues will continue to limit our visibility and impact our results for the fourth fiscal quarter." 31. Plaintiffs did not begin to purchase or sell any IKOS securities until July 11, 2001. By July 11, 2001, the projections provided to Mentor Graphics in April 2001 were immaterial, unreliable, stale and worthless, especially in light of IKOS' July 2, 2001 announcement revising its outlook. Further, any information provided by IKOS during 2000 to Mentor Graphics had become immaterial, unreliable and stale as well. -11- THE MENTOR MERGER PROPOSAL 32. On December 6, 2001, Mentor Graphics provided a letter to the IKOS Directors summarizing the Proposed Acquisition. 33. The Proposed Acquisition contemplates the immediate acquisition of IKOS by Mentor Graphics at a price of $11.00 per share of IKOS common stock payable in cash. This acquisition would be accomplished by the first-step cash Tender Offer for all outstanding shares of IKOS common stock, followed by a second-step merger in which the remaining stockholders of IKOS would receive the same cash price per share paid in the Tender Offer. The Proposed Acquisition, which is based on publicly-available information and is not subject to any financing contingency, represents a premium of 37% over the closing price of IKOS shares, on December 6, 2001, and 49.5% over the closing price of IKOS' stock on June 29, 2001, the day before the transaction with Synposys was announced. The Proposed Acquisition also represents a premium of 87% over the average closing price of IKOS stock for the thirty trading days ended December 6, 2001. 34. Also on December 7, 2001, pursuant to Rule 13d-2 Mentor Graphics filed with the SEC a Schedule 13D (the "Schedule 13D") relating to the beneficial ownership of IKOS common stock. The Schedule 13D incorporates the information contained in the Offer to Purchase and discloses, among other things, (i) the identity and background of Mentor Graphics and Purchaser, (ii) the source and amount funds used in the purchases of IKOS common stock by Mentor Graphics, (iii) the number of shares of IKOS common stock beneficially owned by Mentor Graphics, (iv) the number of and amount of purchases of IKOS common stock by Mentor Graphics during the previous 60 days, and (v) any contracts, arrangements, understandings or relationships between Mentor and IKOS with respect to the securities of IKOS, specifically the Confidentiality Agreement. -12- 35. The Schedule 13D also discloses that depending upon the Company's response to the Tender Offer, in connection with the Tender Offer and Proposed Merger, Purchaser may solicit proxies to call a special meeting of the Company's stockholders to consider the removal of the Company's current directors and the election of directors nominated by Purchaser. The Schedule 13D also discloses that Purchaser may also solicit proxies with respect to such matters and with respect to the Synopsys Agreement and the transactions contemplated thereunder. 36. Mentor Graphics believes that any determinations by IKOS that Mentor Graphics and Purchaser have not complied with any applicable federal securities laws, rules and regulations would lack a good faith basis. COUNT I DECLARATORY RELIEF 37. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 38. The Declaratory Judgment Act, 28 U.S.C. Section 2201, provides that "[i]n a case of actual controversy within its jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration." Plaintiffs are entitled to a declaratory judgment that the Schedule TO and all exhibits thereto are proper and comply with all applicable securities laws, rules and regulations. 39. Although the Proposed Acquisition is fairly and attractively priced, Plaintiffs reasonably expect that IKOS will thwart or delay plaintiffs' lawful attempts to consummate the Tender Offer. Plaintiffs believe IKOS will seek to delay and defeat the Tender Offer through efforts including the filing of a meritless suit claiming that public disclosures and filings made by plaintiffs in conjunction with the Tender Offer violate applicable federal securities laws and regulations. -13- Thus, there is a substantial controversy between parties having adverse interests which is of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. 40. In the absence of declaratory relief, plaintiffs will suffer irreparable harm. As evidenced by the course of action that IKOS has pursued to date and the actions taken generally by companies that receive unsolicited acquisition proposals, IKOS will likely defend against the Proposed Acquisition by, among other things, filing false claims designed to delay or defeat the Proposed Acquisition. A declaratory judgment that the disclosures in the Schedule TO, the Offer to Purchase and the Tender Offer comply with all applicable federal laws will serve the purpose of adjudicating the interests of the parties, resolving any complaints concerning the propriety of the Tender Offer under federal law, and permitting an otherwise lawful transaction to proceed. 41. Plaintiffs therefore request pursuant to the Declaratory Judgment Act, 28 U.S.C. Sections 2201 and 2202, that this Court enter a declaratory judgment that plaintiffs have disclosed all information required by, and are otherwise in all respects in compliance with, all applicable laws and other obligations, including, without limitation, Sections 14(a), 14(d) and 14(e) of the Exchange Act and any other federal securities laws, rules or regulations deemed or claimed to be applicable to the Schedule TO, the Offer to Purchase or the Tender Offer. COUNT II DECLARATORY RELIEF 42. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 43. Mentor Graphics was not provided with any material, non-public information of IKOS during its discussions with IKOS in June and July 2000. In addition, the financial projections of IKOS that were provided to Mentor Graphics in April 2001 were rendered immaterial, unreliable, stale and worthless when IKOS stated publicly in July 2001 that it was revising its outlook. -14- Specifically, on July 2, 2001, IKOS announced that it was revising its own outlook for performance downward for the very periods covered by the projections given to Mentor Graphics. This July 2, 2001 press release stated that "We expect that these customer and economic issues will continue to limit our visibility and impact our results for the fourth fiscal quarter." 44. Plaintiffs did not begin to purchase or sell any IKOS securities until July 11, 2001. By July 11, 2001, the projections provided to Mentor Graphics in April 2001 were immaterial, unreliable, stale and worthless, especially in light of IKOS' July 2, 2001 announcement revising its outlook. Further, any information provided by IKOS during 2000 to Mentor Graphics had become immaterial, unreliable, stale as well. Accordingly, any purchases of IKOS securities by Mentor Graphics since July 11, 2001, leading up to the Tender Offer and Proposed Merger were not in violation of any federal securities laws, rules or regulations. 45. Plaintiffs therefore request pursuant to the Declaratory Judgment Act, 28 U.S.C. Sections 2201 and 2202, that this Court enter a declaratory judgment that any purchases of IKOS securities by Mentor Graphics since July 11, 2001, leading up to the Tender Offer and Proposed Merger were not in violation of any federal securities laws, rules or regulations. COUNT III DECLARATORY RELIEF 46. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 47. Mentor Graphics was not provided with any material, non-public information of IKOS during its discussions with IKOS in June and July 2000. In addition, the financial projections of IKOS that were provided to Mentor Graphics in April 2001 were rendered immaterial, unreliable, stale and worthless when IKOS stated publicly in July 2001 that it was revising its outlook. Specifically, on July 2, 2001, IKOS announced that it was revising its own outlook for performance -15- downward for the very periods covered by the projections given to Mentor Graphics. This July 2, 2001 press release stated that "We expect that these customer and economic issues will continue to limit our visibility and impact our results for the fourth fiscal quarter." 48. Hence, neither the actions taken by plaintiffs to date, nor the actions that plaintiffs will take in connection with any purchases of IKOS securities in conjunction with the Tender Offer and Proposed Merger are or will be in violation of any federal securities laws, rules or regulations. 49. Plaintiffs therefore request pursuant to the Declaratory Judgment Act, 28 U.S.C. Sections 2201 and 2202, that this Court enter a declaratory judgment that any purchases of IKOS securities made in conjunction with the Tender Offer and Proposed Merger are not and will not be hereafter in violation of any federal securities laws, rules or regulations. -16- COUNT IV DECLARATORY RELIEF 50. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 51. On December 7, 2001, Mentor Graphics filed the Schedule 13D. The Schedule 13D attaches as an exhibit the Offer to Purchase and incorporates the disclosures contained in the Offer to Purchase. In addition, the Schedule 13D discloses, among other things, (i) the identity and background of Mentor Graphics and Purchaser, (ii) the source and amount funds used in the purchases of IKOS common stock by Mentor Graphics, (iii) the number of shares of IKOS common stock beneficially owned by Mentor Graphics, (iv) the number of and amount of purchases of IKOS common stock by Mentor Graphics during the previous 60 days, (v) any contracts, arrangements, understandings or relationships between Mentor and IKOS with respect to the securities of IKOS, including specifically the Confidentiality Agreement, and (vi) that Mentor Graphics and Purchaser may solicit stockholders of the Company to request the Company to call a special meeting of its stockholders to consider, among other things, the removal of the Company's current directors and election of directors nominated by Mentor Graphics. 52. In the Schedule 13D Mentor Graphics disclosed all information required by, and is otherwise in all respects in compliance with, all applicable federal securities laws, rules or regulations which may be deemed or claimed to be applicable to Schedule 13D. 53. Mentor Graphics therefore requests pursuant to the Declaratory Judgment Act, 28 U.S.C. Sections 2201 and 2202, that this Court enter a declaratory judgment that in the Schedule 13D Mentor Graphics has disclosed all information required by, and is otherwise in all respects in compliance with, all applicable federal securities laws, rules or regulations deemed or claimed to be applicable to the Schedule 13D. -17- WHEREFORE, Plaintiffs respectfully request that this Court: a. declare that plaintiffs have disclosed all information required by, and are otherwise in all respects in compliance with, all applicable laws and other obligations, including, without limitation, Sections 14(a), 14(d) and 14(e) of the Exchange Act and any other federal securities laws, rules or regulations deemed or claimed to be applicable to the Schedule TO, the Offer to Purchase or the Tender Offer; b. declare that any purchases of IKOS securities by Mentor Graphics since July 11, 2001, leading up to the Tender Offer and Proposed Merger were not in violation of any federal securities laws, rules or regulations; c. declare that any purchases of IKOS securities made in conjunction with the Tender Offer and Proposed Merger are not and will not be hereafter in violation of any federal securities laws, rules or regulations; d. declare that in the Schedule 13D Mentor Graphics has disclosed all information required by, and is otherwise in all respects in compliance with, all applicable federal securities laws, rules or regulations deemed or claimed to be applicable to the Schedule 13D; e. award plaintiffs their costs and disbursements in this action; and -18- f. grant plaintiffs such other and further relief as this Court may deem just and proper. Of Counsel: Marc Rappel /s/ Kevin G. Abrams Latham & Watkins ------------------------------------ 633 West Fifth Street, Suite 4000 Kevin G. Abrams (#2375) Los Angeles, California 90071 Srinivas M. Raju (#3313) (213) 485-1234 Peter B. Ladig (#3513) Richards, Layton & Finger, P.A. One Rodney Square P. O. Box 551 Wilmington, DE 19899 (302) 651-7700 Attorneys for Plaintiffs Dated: December 7, 2001 -19- EX-99.(A)(1)(J) 12 f77751ex99-a1j.txt EXHIBIT (A)(1)(J) Exhibit (a)(1)(J) IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY MENTOR GRAPHICS CORPORATION, an ) Oregon corporation, and FRESNO ) CORPORATION, a Delaware corporation, ) ) Plaintiffs, ) ) C.A. No. 19299 v. ) -------------- ) IKOS SYSTEMS, INC., a Delaware ) corporation, GERALD S. CASILLI, ) RAMON A. NUNEZ, WILLIAM ) STEVENS, GLENN E. PENISTEN, JAMES ) R. OYLER, JACKSON HU, SYNOPSYS, ) INC., a Delaware corporation, and OAK ) MERGER CORPORATION, a Delaware ) corporation, Defendants. VERIFIED COMPLAINT Plaintiffs Mentor Graphics Corporation ("Mentor") and Fresno Corporation, a wholly-owned subsidiary of Mentor ("Purchaser"), by and through their undersigned counsel, upon knowledge as to themselves and their own acts and upon information and belief as to all other matters, allege as follows: NATURE OF THE ACTION 1. On July 2, 2001, IKOS Systems, Inc. ("IKOS") and Synopsys, Inc. ("Synopsys") announced a non-premium stock-for-stock merger (the "IKOS-Synopsys Merger") pursuant to the terms of which IKOS would be merged with and into Oak Merger Corporation, a wholly owned subsidiary of Synopsys. The IKOS-Synopsys Merger, which is not scheduled to close until August 2002, approximately eight months from now, would result in the receipt by the IKOS stockholders of Synopsys stock with a highly contingent and uncertain value of $6-$20 of Synopsys common stock per IKOS share. On December 6, 2001, Mentor and Purchaser proposed to acquire IKOS in an all-cash transaction that would entail the near-term payment of $11.00 in cash per IKOS share (the "Mentor Merger Proposal"). 2. The Mentor Merger Proposal contemplates the immediate acquisition of IKOS by Mentor and Purchaser at a price of $11.00 per share of IKOS common stock payable in cash. The acquisition would be accomplished by a first-step cash tender offer for all outstanding shares of IKOS common stock, followed by a second-step merger in which the remaining stockholders of IKOS would receive the same cash price per share paid in the tender offer. 3. By approving the merger agreement dated July 2, 2001 with Synopsys (the "Synopsys Agreement"), the members of the IKOS board of directors (the "IKOS Directors" or "Director Defendants") have breached their fiduciary obligations to act in the best interests of the IKOS stockholders by agreeing to unprecedented and grossly inappropriate defensive provisions in the Synopsys Agreement designed to preclude Mentor (or any other entity) from successfully consummating a merger with IKOS, preventing the IKOS stockholders from considering and voting on a competing, superior merger proposal, coercing IKOS stockholders into voting for the Synopsys Agreement, and tying the hands of the IKOS directors in managing IKOS until the IKOS-Synopsys Merger is consummated (which is not scheduled to occur until August 2002). 4. Three of the Synopsys Agreement's features are particularly inappropriate and in violation of Delaware law. The IKOS Directors effectively have contracted away their duty of care by approving these features. First, while the Synopsys Agreement supposedly permits the IKOS directors to terminate the agreement and abandon the IKOS-Synopsys Merger to pursue a superior 2 proposal, an unreasonable termination fee renders this right meaningless. Indeed, the Synopsys Agreement imposes draconian financial penalties -- an astounding 10.1% of the equity value of IKOS based on the average closing price of IKOS stock for the thirty trading days ended December 6, 2001 -- if IKOS terminates the Synopsys Agreement to pursue a superior proposal. 5. Second, the Synopsys Agreement imposes onerous restrictions on the IKOS Directors' authority to manage the business and affairs of IKOS pending the consummation of the IKOS-Synopsys Merger, which is scheduled to occur in August 2002. These operating restrictions foreclose the IKOS Directors from making any non-routine decision and IKOS from taking any non- routine action until the IKOS-Synopsys Merger is consummated. By agreeing to these operating restrictions for the extended period of time prior to the closing of the IKOS-Synopsys Merger, the IKOS Directors impermissibly have abdicated their fiduciary and statutory obligations to manage the business and affairs of IKOS. Moreover, by vesting Synopsys with significant authority to manage IKOS, the Synopsys Agreement effectively has transferred control of IKOS to Synopsys. 6. Third, under a draconian no-shop provision which becomes operative after IKOS stockholders approve the Synopsys Agreement and long before the potential closing of the Merger in August 2002, the IKOS Directors effectively are not permitted even to learn about, let alone evaluate meaningfully, alternative proposals -- no matter how compelling or financially rewarding. Following IKOS stockholder approval of the Merger, an IKOS director cannot make an informed decision about the merits of a proposed transaction -- or, equally important, the relative merits of a strategic alternative -- because the no-shop provision in the Synopsys Agreement prohibits the IKOS Directors from communicating freely with interested parties without fear of outrageous financial penalties. 3 7. In sum, the IKOS Directors have breached their fiduciary duties and have abdicated their responsibilities. The foregoing terms of the Synopsys Agreement should be enjoined and the IKOS Directors should be required to act in accordance with Delaware law going forward. THE PARTIES 8. Plaintiff Mentor is an Oregon corporation with its principal executive offices in Wilsonville, Oregon. Mentor manufactures, markets and supports software and hardware electronic design automation ("EDA") products and related services. EDA products enable engineers to design, analyze, simulate, model, implement and verify the components of electronic systems. Mentor is the beneficial owner of 841,500 shares of IKOS common stock, or approximately 9.1% of the outstanding shares of IKOS common stock as of December 6, 2001. 9. Plaintiff Purchaser is a Delaware corporation and a wholly-owned subsidiary of Mentor with its principal executive offices in Wilsonville, Oregon. Purchaser is the record owner of 100 shares of IKOS common stock. 10. Defendant IKOS is a Delaware corporation with its principal executive offices in San Jose, California. IKOS is a diversified technology company engaged in high-performance design verification solutions, including hardware and software simulation for language-based design, logic emulation for system integration and compatibility verification, and verification services. IKOS has direct sales operations in North America, the UK, France, Germany, the Netherlands, Japan and India and a distribution network throughout Asia-Pacific and Israel. 11. Defendant Synopsys is a Delaware corporation with its principal executive offices in Mountain View, California. Synopsys is a technology company engaged in the creation of EDA 4 tools for the global electronics market. Synopsys also delivers design technologies and solutions to developers of complex integrated circuits, electronic systems and systems on chip. 12. Defendant Oak Merger Corporation is a newly incorporated Delaware corporation and a wholly owned subsidiary of Synopsys. 13. Defendant Gerald S. Casilli has been the Chairman of IKOS since 1989 and served as its Chief Executive Officer from April 1989 until August 1995. He is a director of IKOS and owes fiduciary duties to IKOS and its stockholders. As of September 29, 2001, he beneficially owned approximately 391,583 shares of IKOS common stock (including approximately 45,800 shares subject to options exercisable within 60 days of September 29, 2001). 14. Defendants Ramon A. Nunez, William Stevens, Glenn E. Penisten, James R. Oyler, and Jackson Hu are current directors of IKOS and all owe fiduciary duties to IKOS and its stockholders. As of September 29, 2001, these directors beneficially owned approximately 359,019 shares of IKOS common stock collectively (including approximately 307,556 shares subject to options exercisable within 60 days of September 29, 2001). FACTUAL BACKGROUND A. THE PROPOSED MERGER OF IKOS AND SYNOPSYS. 15. On July 2, 2001, IKOS and Synopsys announced a stock-for-stock merger pursuant to the terms of which IKOS stockholders are to receive shares of Synopsys common stock, with the final per-share purchase price between $6 and $20 to be determined by IKOS' revenue, change in backlog, and profit before tax during a 12-month measurement period ending June 30, 2002. 16. After the close of the measurement period, IKOS' auditors, subject to review by Synopsys and its auditors, will calculate revenue plus change in backlog and profit before tax 5 ("PBT"), as defined in the Synopsys Agreement, and the price per share will be calculated using both metrics. The final price per share will be the price determined by revenue plus the change in backlog or the price determined by PBT, whichever is lower, except that if the price determined by PBT is lower than the price determined by revenue plus the change in backlog but the same or higher than the price determined by revenue without regard to backlog, the final price will be determined by revenue plus the change in backlog. 17. The closing of the IKOS-Synopsys Merger is currently scheduled for August 2002. Upon closing of the IKOS-Synopsys Merger, IKOS stockholders will receive shares of Synopsys common stock, with the ratio determined by dividing the purchase price per share by the average closing price of Synopsys stock during the ten trading-day period ending on the fifth trading day prior to the closing date. IKOS stock options will be assumed by Synopsys at the same exchange ratio. The IKOS-Synopsys Merger will be accounted for as a purchase transaction. 18. The IKOS-Synopsys Merger is subject to numerous unusual and onerous closing conditions which if not met would relieve Synopsys of its obligations under the Synopsys Agreement. For example, one closing condition is that IKOS achieve revenue of at least $50 million and losses before tax not exceeding $10 million during the 12-month period ending June 30, 2002 (the "Financial Performance Condition"). Another closing condition is that certain key employees of IKOS accept employment with and/or enter into certain employment agreements with Synopsys (the "Employee Condition"). 19. Not only are these closing conditions unusual, but also they are onerous given that IKOS has limited control with respect to whether these conditions are satisfied. Indeed, while IKOS has some control with respect to the Financial Performance Condition, the achievement of this 6 condition is dependent greatly on external and non-controllable factors such as general market conditions and industry cycles. Given the poor market conditions that currently exist, it is quite possible that the Financial Performance Condition will not be met. The other condition described in the preceding paragraph, the Employee Condition, is even more onerous because IKOS has no control whatsoever with respect to whether it is satisfied. By contrast, Synopsys has significant control over whether these two conditions are met. In other words, Synopsys has significant control over the very closing conditions that will determine whether Synopsys has any obligation under the Synopsys Agreement to consummate the IKOS-Synopsys Merger. Hence, Synopsys' obligations under the Synopsys Agreement are illusory. As one stock analyst has correctly noted, not only is there no certainty that the IKOS-Synopsys Merger will close, but also the Synopsys Agreement effectively provides Synopsys an "option" to acquire IKOS if it so chooses at a later time. 20. The market reaction to the proposed no-premium IKOS-Synopsys Merger was hardly inspired, pushing the stock price of IKOS down. On June 29, 2001, the last trading day before the announcement of the IKOS-Synopsys Merger, the common stock of IKOS closed at $7.36. Although both IKOS and Synopsys have touted expected synergies of the IKOS-Synopsys Merger, it is apparent that the market has not recognized any incremental value in the current share price of IKOS. In fact, the average closing price of IKOS stock for the thirty most recent trading days is $5.87, which is well below the pre-announcement price of $7.36. Moreover, this lackluster performance in IKOS' stock price occurred despite Mentor being an active and large purchaser of IKOS common stock following the announcement of the IKOS-Synopsys Merger. 7 B. MENTOR'S REPEATED ATTEMPTS TO INFORM THE IKOS DIRECTORS REGARDING ITS DESIRE TO MAKE A SUPERIOR MERGER PROPOSAL. 21. Prior to the announcement of the IKOS-Synopsys Merger on July 2, 2001, Mentor repeatedly advised IKOS' representatives that Mentor was interested in making a merger proposal to allow Mentor to acquire IKOS. Notwithstanding their knowledge of Mentor's interest in acquiring IKOS, the IKOS Directors entered into an unlawful Synopsys Agreement that is intended to preclude the IKOS stockholders from receiving the benefits of a Mentor merger proposal. The conduct of the IKOS Directors not only represents a gross dereliction of their responsibility to make informed decisions but also is detrimental to the IKOS stockholders and violates their fiduciary duties. By virtue of these breaches of fiduciary duty, IKOS stockholders have been deprived of the opportunity to consider, vote on, and accept the Mentor Merger Proposal. 1. IKOS' INCONSISTENT REACTIONS TO MENTOR'S OVERTURES. 22. As part of Mentor's continuous evaluation of its businesses and plans, Mentor considers a variety of strategic options and transactions. As part of this process, Mentor has had discussions with IKOS from time to time concerning an acquisition of IKOS. In the late 1990s, IKOS or its financial advisors contacted Mentor on several occasions to discuss the possibility of Mentor acquiring IKOS. These discussions between Mentor and IKOS and its financial advisors did not result in any proposal by Mentor to acquire IKOS. 23. In late 1999, an investment banker representing IKOS contacted Dennis Weldon, Treasurer of Mentor, concerning the possibility of an acquisition of IKOS by Mentor. After internal discussions at Mentor, Mr. Weldon informed the investment banker that Mentor was not interested in pursuing an acquisition at that time. 8 24. On May 10, 2000, at IKOS' request, Ramon Nunez, Chief Executive Officer of IKOS, and Larry Melling, Vice President of Business Development and Strategic Marketing of IKOS, met with Gregory Hinckley, who is now the President and Chief Operating Officer of Mentor, in San Jose, California, to discuss the possibility of Mentor acquiring IKOS. They agreed to discuss the matter further at the Design Automation Conference in June 2000. 25. On June 7, 2000, at the Design Automation Conference in Los Angeles, California, Dr. Walden Rhines, who is now the Chairman of the Board of Directors and Chief Executive Officer, Mr. Hinckley and other representatives of Mentor had conversations with Mr. Nunez and Robert Hum, Senior Vice President of Product Operations of IKOS, regarding the differences between Mentor's and IKOS' emulation products and the production costs of such products, in the context of a potential acquisition of IKOS by Mentor. The parties agreed to discuss this matter further in the future. 26. Following the June 7, 2000 meeting, an independent technology consultant to Mentor met with a representative of IKOS at IKOS' principal offices in San Jose, California to evaluate IKOS' emulation products. To provide a context for further detailed discussions, Mentor and IKOS entered into a confidentiality and standstill agreement on June 16, 2000 (the "Confidentiality Agreement"). Pursuant to the Confidentiality Agreement, Mentor agreed, among other things, that it would not for a period of six months from the date of the Confidentiality Agreement acquire any securities of IKOS, engage in an extraordinary business transaction with IKOS, or engage in soliciting proxies from IKOS stockholders without prior approval of the IKOS board of directors (the "Standstill Provision"). The Standstill Provision, by its own terms, expired in December 2000. 9 27. In late June 2000, Mr. Nunez contacted Mr. Hinckley to discuss a potential future meeting between representatives of Mentor and IKOS. Subsequently, Mr. Nunez stated that he wished to schedule a meeting with Mentor in July 2000. 28. On July 6, 2000, Dr. Rhines, Mr. Hinckley, Mr. Weldon and other representatives of Mentor met with Mr. Nunez, Mr. Hum and Mr. Melling, in Paris, France to discuss the operations of the companies' businesses, the integration of the companies' product lines and the joint marketing of the companies' products, in the event that Mentor acquired IKOS. During this meeting, Mr. Hinckley informed Mr. Nunez that, before Mentor could reach any decision on its desire to acquire IKOS, Mentor needed to hire a general manager for its emulation division and allow the new manager sufficient time to evaluate the needs of the emulation division. Mentor's emulation division is Mentor's business that most closely complements IKOS' business. 29. After subsequent internal meetings at Mentor and in light of his earlier comments concerning the hiring of a general manager for Mentor's emulation division, Mr. Hinckley in separate telephone conversations confirmed to Mr. Nunez and Mr. Melling that Mentor would not be able to continue discussions until a new general manager, who had not yet been hired, completed an evaluation of Mentor's emulation division. Mr. Nunez responded that IKOS would continue the process of exploring a business combination with other parties. As a result, these discussions ended on July 27, 2000 without reaching any agreement concerning an acquisition of IKOS by Mentor. Although the discussions regarding an acquisition of IKOS by Mentor ended on July 27, 2000, Mentor and IKOS agreed to hold discussions regarding other types of business relationships. 30. On August 3, 2000, Mr. Nunez and Joseph Rockom, Chief Financial Officer, Vice President of Finance and Administration and Secretary of IKOS, and Mr. Weldon discussed the 10 possibility of an original equipment manufacturing agreement. These discussions ended without reaching any agreement, and there were no further such discussions concerning other types of business relationships. 31. On November 9, 2000, Mr. Hinckley met Mr. Nunez and Gerald Casilli, Chairman of the Board of Directors of IKOS, to discuss the possibility of an introductory meeting between IKOS and Eric Selosse, whom Mentor had hired in October 2000 to be the general manager of Mentor's emulation division. On December 5, 2000, Mr. Selosse met with Mr. Nunez and another representative of IKOS and held a general discussion concerning the emulation industry and IKOS' product lines as well as the possible acquisition of IKOS by Mentor. These discussions ended without any agreement regarding an acquisition of IKOS by Mentor. 32. On April 13, 2001, Mr. Weldon contacted Mr. Nunez to request a meeting to discuss a possible acquisition of IKOS by Mentor. On April 17, 2001, Mr. Selosse met with Mr. Nunez to discuss a possible acquisition of IKOS by Mentor. Mr. Weldon attended by telephone. While Mr. Nunez expressed interest in a possible acquisition, he stated that IKOS had engaged Needham & Company as IKOS' financial advisor as a result of having received expressions of interest from other companies. Mr. Weldon told Mr. Nunez that Mentor would contact IKOS within approximately two weeks. 33. During April 2001, Mr. Rockom left a voice mail message for Dean Freed, Vice President, General Counsel and Secretary of Mentor, inquiring about the possibility of a new confidentiality and standstill agreement that would pertain to the April 2001 discussions regarding a potential acquisition of IKOS by Mentor. Mr. Rockom also called Mr. Weldon concerning the possibility of entering into a new confidentiality and standstill agreement. Although no new 11 confidentiality and standstill agreement had been entered into, Mr. Rockom nevertheless volunteered to furnish Mr. Weldon with certain of IKOS' projections. Shortly thereafter, Mr. Rockom e-mailed Mr. Weldon projections prepared by IKOS for the third and fourth fiscal quarter of 2001 and 2002. After reviewing the projections, Mentor concluded that such projections were overly optimistic and therefore did not rely on them with respect to making any decisions regarding IKOS. Also during April 2001, to provide a basis for discussions regarding any new confidentiality and standstill agreement, Mr. Freed faxed the June 16, 2000 confidentiality agreement to Mr. Rockom. In a voice mail message and telephone conversation, Jan Robertson of Needham & Company ("Needham") informed Mr. Freed that the June 16, 2000 Confidentiality Agreement would not be acceptable to cover the contemporaneous discussions in light of IKOS' need for, among other things, new standstill and nonsolicitation periods. No new confidentiality and standstill agreement was entered into between IKOS and Mentor. 34. In a voice mail message on April 26, 2001, Ms. Robertson stated that since IKOS had received multiple expressions of interest, IKOS was commencing a bid procedure with bids due on May 4, 2001. The demand that Mentor immediately deliver its proposal in connection with the purported "auction" process was the first in a series of defensive measures culminating in the Synopsys Agreement. In response, Mr. Weldon called Chad Keck, a managing director of Needham & Company, and left a voice mail message asking Mr. Keck to return his call. Mr. Keck called Mr. Weldon on April 29, 2001. In their conversation, Mr. Weldon told Mr. Keck that Mentor was very interested in negotiating an acquisition of IKOS, but would not participate in a blind bidding process. 35. Given that the Synopsys Agreement was not executed until early July 2001, IKOS had no basis to impose an artificial deadline for the auction of May 4, 2001 and thereafter exclude 12 Mentor from any negotiations regarding an acquisition proposal for IKOS. These actions by the IKOS Directors have denied and are continuing to deny IKOS stockholders the opportunity to receive the benefits of a Mentor merger proposal. 36. Indeed, IKOS blatantly ignored repeated expressions of interest by Mentor in pursuing a negotiated acquisition after IKOS' self-imposed May 4, 2001, deadline. In May 2001, Bruce Alexander, a managing director of Needham called Mr. Hinckley. In a telephone conversation with Mr. Alexander, Mr. Hinckley expressed Mentor's continued interest in pursuing a negotiated acquisition with IKOS. In a meeting among Dr. Rhines, Mr. Hinckley, Mr. Weldon and Mr. Alexander on June 5, 2001, Mr. Hinckley informed Mr. Alexander that Mentor remained very interested in acquiring IKOS. Later in June 2001, Mr. Alexander called Mr. Hinckley, and Mr. Hinckley expressed Mentor's continued interest in acquiring IKOS. 37. None of Mr. Hinckley's expressions of interest in May and June 2001 in acquiring IKOS resulted in any response from IKOS. Instead, IKOS continued ahead with its negotiations with Synopsys. In short, the Director Defendants conducted a defective sales process. 38. In addition, other decisions by the IKOS Directors reveal improper motivations behind the IKOS Directors' decision to approve and recommend the IKOS-Synopsys Merger. For example, certain of the IKOS Directors and officers will be eligible to participate in a bonus plan of up to $7.5 million if, and only if, the IKOS-Synopsys Merger is consummated. Furthermore, many of these same IKOS Directors and officers have or will execute lucrative employment and/or severance agreements providing for, among other things, cash payments and accelerated vesting of their unvested option shares in case of the termination of their employment by Synopsys. Specifically, if the IKOS-Synopsys Merger closes in August 2002, each outside director of IKOS 13 shall receive an additional option to purchase 6,000 shares of IKOS common stock. All of the unvested options held by outside directors of IKOS also will vest in full and become exercisable immediately prior to the IKOS-Synopsys Merger. Additionally, the executive officers of IKOS, with one exception, who are terminated without cause or terminate their own employment within two years of the closing of the IKOS-Synopsys Merger will have all of their former IKOS options become fully vested and accelerated in full. Thus, the IKOS Directors' motivation in approving and recommending the IKOS-Synopsys Merger was not based solely on what was in the best interest of the IKOS stockholders, but rather was based substantially on what was in the IKOS Directors' own self-interest. 39. Indeed, in order to further their self-interest in an IKOS-Synopsys deal, the IKOS Directors improperly hired Needham to render a fairness opinion with respect to the IKOS-Synopsys Merger and made a significant portion of the Needham fee contingent upon the consummation of the IKOS-Synopsys Merger. IKOS has agreed to pay Needham an initial fee of $350,000 for rendering its fairness opinion in connection with the IKOS-Synopsys Merger. In addition, upon consummation of the IKOS-Synopsys Merger, Needham will receive a transaction fee equal to .75% of the aggregate purchase price up to $150 million paid in the IKOS-Synopsys Merger, plus 1.5% of the aggregate purchase price in excess of $150 million, subject to a minimum "success fee" of $750,000, against which only $200,000 of the initial fee would be credited. Thus, by creating an improper incentive for Needham to find the IKOS-Synopsys Merger to be fair, the IKOS Directors further breached their fiduciary duties. 14 2. THE MENTOR MERGER PROPOSAL. 40. On December 6, 2001, Mentor provided a letter to the IKOS Directors summarizing the Mentor Merger Proposal. The Mentor Merger Proposal contemplates the immediate acquisition of IKOS by Mentor and Purchaser at a price of $11.00 per share of IKOS common stock payable in cash. This acquisition would be accomplished by a first-step cash tender offer for all outstanding shares of IKOS common stock (the "Tender Offer"), followed by a second-step merger in which the remaining stockholders of IKOS would receive the same cash price per share paid in the Tender Offer. The Mentor Merger Proposal, which is based on publicly-available information and is not subject to any financing contingency, represents a premium of 37% over the closing price of IKOS shares, on December 6, 2001, and 49.5% over the closing price of IKOS stock on June 29, 2001, the day before the IKOS-Synopsys Merger was announced. The Mentor Merger Proposal also represents a premium of 87% over the average closing price of IKOS stock for the thirty trading days ended December 6, 2001. 41. The Tender Offer is conditioned upon, in general terms, (i) there being validly tendered and not withdrawn prior to the expiration date of the Tender Offer a number of shares of common stock of IKOS, including the associated preferred stock purchase rights (the "Rights") issued pursuant to the IKOS amended and restated rights agreement, dated January 22, 1999 (the "Rights Plan"), representing, together with the shares owned by Mentor, at least a majority of the total number of outstanding shares of Fresno on a fully diluted basis; (ii) the stockholders of IKOS not having approved the Synopsys Agreement; (iii) the termination fee provisions of the Synopsys Agreement having been invalidated, or the obligation to pay any amounts pursuant to such provisions having been terminated, without any termination fee, or any portion thereof, having been paid by 15 IKOS or any of its affiliates pursuant to the Synopsys Agreement or otherwise.; (iv) Mentor being satisfied that the Synopsys Agreement has been terminated; (v) the Rights having been redeemed by the IKOS Directors or Mentor being satisfied that the Rights have been invalidated or are otherwise inapplicable to the Mentor Merger Proposal; (vi) Mentor being satisfied that the provisions of Section 203 of the Delaware General Corporation Law ("Section 203") do not apply to or otherwise restrict the Mentor Merger Proposal; (vii) IKOS not having entered into or effectuated any agreement or transaction with any person or entity having the effect of impairing Mentor's ability to acquire IKOS or otherwise diminishing the expected economic value to Mentor of acquiring IKOS; and (viii) any waiting periods under applicable antitrust laws having expired or been terminated. C. THE SUPERIORITY OF THE MENTOR MERGER PROPOSAL. 42. In the December 6, 2001 letter to IKOS, Mentor set forth some of the distinct advantages and specific strengths that would result from combining the two companies and which (in combination with the premium offered to the IKOS stockholders in the Mentor Merger Proposal) plainly render the Mentor Merger Proposal far superior to the IKOS-Synopsys Merger. These advantages and strengths include: - a premium of 37% over the closing market price on December 6, 2001; - a premium of 87% over the average closing price for the thirty days ended December 6, 2001; - payment in cash promptly following completion of the Tender Offer; - a closing date as early as 20 business days after launch of the Tender Offer with no risk as to acquiror stock performance; and - minimal standard conditions to the consummation of a Tender Offer. 16 43. These advantages become all the more apparent when compared to the IKOS-Synopsys Merger, which contains the following deleterious terms and conditions: - a price of $6 - $20 depending on IKOS' uncertain financial performance for the twelve months ending June 2002; - payment in Synopsys stock that is subject to the risk of Synopsys' stock performance; - a closing date estimated for August 2002 -- over 13 months from the date of the announcement of the IKOS-Synopsys Merger; and - no certainty of closing since the Synopsys Agreement is subject to numerous conditions based on IKOS' performance through June 2002. D. THE UNREASONABLE TERMS OF THE SYNOPSYS AGREEMENT. 44. The Synopsys Agreement contains a number of noteworthy provisions, including an excessive termination fee, a no-shop provision and limitations on the conduct of IKOS' business, that reflect patent violations of the fiduciary duties owed by the IKOS Directors. These provisions are transparent efforts to protect a non-premium deal and to entrench IKOS' management at the expense of IKOS stockholders. 1. THE TERMINATION FEE. 45. In general terms, under Section 8.3 of the Synopsys Agreement, the IKOS Directors may terminate the Synopsys Agreement if (i) IKOS receives a takeover proposal that is a superior proposal, (ii) IKOS has given written notification of the superior proposal to Synopsys, (iii) Synopsys has not made an offer that is at least as favorable as the superior proposal within five business days of the written notification, (iv) the IKOS Directors believe that the takeover proposal continues to be a superior proposal, and (v) IKOS prior to terminating the Synopsys Agreement pays a termination fee to Synopsys of $5.5 million (the "Termination Fee"). The Termination Fee is a 17 blatant attempt to prevent the IKOS Directors from accepting a superior proposal even if the IKOS Directors conclude that accepting such proposal is in the best interests of IKOS stockholders. Moreover, the amount of the Termination Fee is unconscionable and not rationally related to any measure of damages that Synopsys might conceivably sustain in the event the IKOS-Synopsys Merger does not close, and has no purpose other than to excessively increase the cost of consummating a superior merger proposal and to entrench IKOS management. In the case of IKOS, the Termination Fee amounts to approximately 8.25 % of its equity value on June 29, 2001. 2. SYNOPSYS' CONTROL OVER IKOS 46. The Synopsys Agreement also contains numerous restrictions on the authority of the IKOS Directors to manage the business and affairs of IKOS. Namely, the Synopsys Agreement includes, in general terms, prohibitions and/or restrictions on the IKOS board's authority to do any of the following prior to consummation of the IKOS-Synopsys Merger: (i) cause or permit any amendments to the IKOS charter; (ii) declare or pay any dividends; (iii) amend or change any existing stock option plans; (iv) enter into, violate, amend or otherwise modify any material contract; (v) issue, deliver, encumber or sell IKOS securities; (vi) transfer or license any intellectual property of IKOS; (vii) enter into or amend any agreements pursuant to which an exclusive marketing or other exclusive right is granted; (viii) sell, lease, license or otherwise dispose of or encumber assets which in the aggregate have a value in excess of $5 million; (ix) incur any indebtedness; (x) enter into any operating leases contemplating total payments over the life of the lease in excess of $250,000 for any individual lease or $3 million with respect to all leases in the aggregate; (xi) pay, discharge or satisfy an amount in excess of $1 million; (xii) make any capital expenditures, capital additions or capital improvements exceeding $2 million individually or $7.5 million in the aggregate; (xiii) materially 18 reduce the amount or scope of any material insurance coverage; (xiv) terminate or waive any right to claim a substantial value under certain contracts; (xv) adopt or amend any employee benefit or stock purchase or option plans or increase the salaries or wage rates of employees except in connection with scheduled annual performance reviews; (xvi) enter into any employment contract other than an offer letter for at will employment; (xvii) grant any severance or termination pay to any director, officer or employee of IKOS; (xviii) commence certain lawsuits; (xix) acquire or agree to acquire any business entity or enter into any material strategic relationships or alliances; (xx) make or change any material election with respect to taxes or accounting methods relating to taxes; (xxi) write down the value of inventory or write off notes or accounts receivable; and (xxii) make any change to its accounting methods, principles, assumptions, policies, procedures or practices (collectively, the "Operating Restrictions"). The fact that the Operating Restrictions will be in effect for more than one year before the potential closing of the IKOS-Synopsys Merger in August 2002 demonstrates their patent invalidity. By agreeing to the Operating Restrictions for an extended period of time, the IKOS Directors impermissibly abdicated their statutory and fiduciary duties to manage IKOS. 3. THE NO-SHOP PROVISION. 47. After the Synopsys Agreement is adopted by the IKOS stockholders, Section 5.2 of the Synopsys Agreement generally restrains IKOS and each of its subsidiaries, their directors, officers, agents, representatives and advisors from directly or indirectly soliciting, initiating or encouraging (whether by furnishing information or otherwise), or taking any other action designed to facilitate an alternative merger proposal unless a superior proposal is received that would result in a transaction with a value of greater than $24.70 per share of IKOS common stock (the "No-Shop 19 Provision"). On December 6, 2001, the IKOS common stock closed at a $8.05 a share. Thus, at yesterday's closing market price, Mentor (or any other entity) could be required after IKOS stockholder approval of the Merger to submit a proposal offering IKOS stockholders a premium of at least $16.65 or 207%. Moreover, approximately eight months from now -- the expected time for the closing of the IKOS-Synopsys Merger -- Mentor would potentially be required to pay an even higher premium if the market price of IKOS shares fluctuates downward. 48. Such a defensive provision is excessive under Delaware law. Indeed, the excessive trigger price for the exception to the No-Shop Provision is designed to preclude Mentor (or any other entity) from successfully pursuing a superior merger with IKOS once the IKOS stockholders have been coerced into voting for the Synopsys Agreement. The operation of the No-Shop Provision during the many months after IKOS stockholder approval of the Merger and prior to the potential Merger closing is patently unreasonable in light of the highly contingent undertaking by Synopsys to even proceed with the Merger. Furthermore, the IKOS Directors' acceptance of a $24.70 floor for an alternative merger proposal is particularly inappropriate in light of the possibility that IKOS stockholders could receive as low as $6 and only a maximum of $20 per IKOS share. 49. As a consequence of the Termination Fee, the Operating Restrictions and the No- Shop Provision, the IKOS Directors effectively are precluded from considering superior offers or proposals and are restrained from acting in the best interests of IKOS stockholders during the many months between IKOS stockholder approval of the Synopsys Agreement and the anticipated closing of the IKOS-Synopsys Merger. Although the Synopsys Agreement contains a provision which would allow the IKOS Directors to terminate the Synopsys Agreement in order to fulfill their fiduciary duties, the exception to the No-Shop Provision is illusory because the Termination Fee 20 imposes an exorbitant penalty, which is unreasonable with respect to both the amount and timing of the payment, that effectively precludes IKOS from terminating the Synopsys Agreement. Furthermore, following IKOS stockholder approval of the Merger, the $24.70 floor price for a competing merger proposal effectively precludes the IKOS stockholders from receiving a superior bid even if IKOS' short-term performance over the next year indicates that Synopsys will pay the IKOS stockholders any amount in the $6-$20 price range established in the Synopsys Agreement. 50. In short, following IKOS stockholder approval of the Synopsys Agreement, the IKOS Directors have voluntarily tied their own hands over an extended period of time with respect to (i) managing the business and affairs of IKOS; (ii) promoting the interests of IKOS stockholders with respect to third party proposals for IKOS; (iii) agreeing not to solicit, encourage, or facilitate inquiries for information by third parties and not to participate in discussions with respect to any other proposals except under the untenable circumstances provided for by the No-Shop Provision; and (iv) agreeing to the grossly excessive Termination Fee. The Director Defendants should not be allowed to hide behind unreasonable provisions in the Synopsys Agreement as justification for their refusal to protect and promote the interests of IKOS stockholders or to allow the IKOS stockholders to consider a far superior proposal. E. THE RIGHT OF IKOS STOCKHOLDERS TO CALL A SPECIAL MEETING. 51. Under the IKOS bylaws, a special meeting of the IKOS stockholders may be called by the holders of not less than 10% of all of the shares entitled to cast votes at the meeting. Under IKOS' certificate of incorporation and bylaws, the directors of IKOS may be removed without cause upon the majority vote of all of the shares entitled to vote generally in the election of directors. Depending upon the response of IKOS and the Director Defendants to the Mentor Merger Proposal, 21 Purchaser, in connection with the Mentor Merger Proposal, may solicit proxies to call a special meeting of IKOS stockholders to consider the removal of the current IKOS directors and the election of directors nominated by Purchaser. Purchaser may also solicit proxies with respect to such matters and with respect to the Synopsys Agreement. In furtherance of these possible solicitation of proxies, Purchaser on December 7, 2001 is formally demanding that IKOS produce a list of its stockholders and related stocklist materials. 52. Plaintiffs believe that IKOS may seek to impose a constrained interpretation of the current bylaws or purport to amend the bylaws in order to impede the ability of plaintiffs to call a special meeting, delay any such special meeting or frustrate the ability of IKOS stockholders to exercise their voting rights. Any amendments to IKOS' bylaws or other manipulations of corporate machinery having the effect of hindering the ability of IKOS stockholders to exercise their rights as they currently exist would serve no legitimate purpose and would clearly constitute unlawful entrenchment by the Director Defendants in violation of their fiduciary duties under Delaware law. F. MENTOR AND THE IKOS STOCKHOLDERS WILL SUFFER IRREPARABLE HARM IF THE IKOS-SYNOPSYS MERGER IS NOT ENJOINED. 53. Plaintiff seeks temporary, preliminary and permanent injunctive relief preventing the implementation of the provisions in the Synopsys Agreement discussed above. 54. The terms of the Synopsys Agreement effectively prohibit the IKOS Directors from considering and negotiating alternative proposals as a result of the purported obligation to pay a draconian Termination Fee of $5.5 million upon terminating the Synopsys Agreement to pursue a superior proposal, as well as the pernicious No-Shop Provision. The IKOS Directors are thereby 22 precluded from complying with their fiduciary duties to inform themselves regarding alternative merger proposals and to act in the best interests of the IKOS stockholders. 55. The Mentor Merger Proposal is non-coercive and nondiscriminatory and represents a substantial premium over the market price of the IKOS common stock at the time the Mentor Merger Proposal was made. The Mentor Merger Proposal does not pose a threat to IKOS' corporate policies or effectiveness. By agreeing to the Termination Fee, the Operating Restrictions and the No Shop Provision in the Synopsys Agreement, the Director Defendants have adopted unreasonable and disproportionate measures in breach of their fiduciary obligations to the IKOS stockholders. Moreover, these provisions improperly limit the freedom of the IKOS Directors to make decisions on management policy and otherwise discharge their fiduciary obligations by, among other things, preventing the IKOS Directors from exploring alternative proposals that would be superior to the IKOS-Synopsys Merger and terminating the Synopsys Agreement to pursue a superior merger proposal. As a result, plaintiffs and other IKOS stockholders will suffer irreparable harm unless the defendants are enjoined from enforcing these egregious and unlawful provisions in the Synopsys Agreement and from submitting the Synopsys Agreement to IKOS stockholders for their approval. 56. Moreover, Mentor, as a potential party to a merger with IKOS, will be deprived of the unique opportunity to enter into a business combination that would provide it with substantial benefits. 57. The resulting injury to Mentor will not be compensable in money damages and plaintiffs, as well as other IKOS stockholders, have no adequate remedy at law. 23 COUNT I (BREACH OF FIDUCIARY DUTY: THE SYNOPSYS AGREEMENT VIOLATES UNITRIN) 58. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 59. The Director Defendants owe the IKOS stockholders the highest duties of care, loyalty and good faith. 60. In entering into the Synopsys Agreement, the Director Defendants adopted a preclusive and coercive defense to the purported threat they perceived from a potential business combination with any acquirer of IKOS other than Synopsys. 61. The Synopsys Agreement is a disproportionate response to the purported threat the Director Defendants perceived from a potential business combination with or any acquirer of IKOS other than Synopsys that falls outside of the range of reasonableness. 62. Mentor and Purchaser have no adequate remedy at law. COUNT II (BREACH OF FIDUCIARY DUTY: THE SYNOPSYS AGREEMENT AND THE DUTY OF CARE) 63. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 64. The Director Defendants owe the IKOS stockholders the highest duties of care, loyalty and good faith. 65. In approving the Synopsys Agreement, including the draconian Termination Fee, the No-Shop Provision and the onerous Operating Restrictions, the Director Defendants failed to exercise due care and were grossly negligent. 24 66. The Director Defendants failed to inform themselves about Mentor's potential interest in a superior transaction and instead willfully blinded themselves to the potential benefits of a business combination with Mentor. 67. The Director Defendants also failed to understand, inform themselves about or consider fully the impact on the IKOS stockholders of the Termination Fee, the Operating Restrictions or the No-Shop Provision. 68. Mentor and Purchaser have no adequate remedy at law. COUNT III (BREACH OF FIDUCIARY DUTY: THE SYNOPSYS AGREEMENT VIOLATES QVC) 69. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 70. The Director Defendants owe IKOS stockholders the highest duties of care, loyalty and good faith. 71. In entering into the Synopsys Agreement, the Director Defendants abandoned IKOS' long-term business plan of remaining an independent entity, as evidenced by their agreement with Synopsys. The IKOS Directors have thereby triggered a duty to gather all information reasonably available about potential strategic alternatives and to obtain the transaction that offered the best value reasonably available to the stockholders. 72. In entering into the Synopsys Agreement, the Director Defendants approved a transaction that will affect fundamentally the ownership interests of the IKOS stockholders. The resulting change in ownership interest is so significant as to trigger a duty to gather all information 25 reasonably available about potential strategic alternatives and to obtain the transaction that offered the best value reasonably available to the stockholders. 73. The Director Defendants failed to gather all information reasonably available about potential strategic alternatives for IKOS. The Director Defendants failed to explore fully a potential strategic combination with Mentor, despite knowing that Mentor was interested in a potential business combination. There is no justification for the Director Defendants' failure to explore a potential strategic combination with Mentor. 74. The Director Defendants failed to obtain the transaction that offered the best value reasonably available to IKOS stockholders. The Mentor Merger Proposal proves that the IKOS- Synopsys Merger is not the transaction that offers the best value reasonably available to the IKOS stockholders. The Mentor Merger Proposal also demonstrates that negotiations on an even playing field would generate additional information reasonably available about potential strategic alternatives for IKOS and result in a transaction offering additional value for the IKOS stockholders. 75. Mentor and Purchaser have no adequate remedy at law. COUNT IV (THE SYNOPSYS AGREEMENT VIOLATES 8 DEL. C. SECTION 141) 76. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 77. Under 8 Del. C. Section 141 ("Section 141"), the Director Defendants have an obligation to oversee, manage and direct the business and affairs of IKOS. In fulfilling this obligation, the Director Defendants owe the IKOS stockholders the highest duties of care, loyalty and good faith. 26 78. The Synopsys Agreement, particularly the Termination Fee, the Operating Restrictions and the No-Shop Provision, prevents the IKOS Directors from completely discharging their fiduciary obligations to protect and promote the interest of IKOS and IKOS stockholders. The Synopsys Agreement violates Section 141 by requiring the Defendant Directors to abdicate their responsibility to manage the business and affairs of IKOS and to exercise their best judgment on matters presented to the IKOS board of directors. 79. The Synopsys Agreement therefore violates Section 141 and is ultra vires and void. 80. Mentor and Purchaser have no adequate remedy at law. COUNT V (BREACH OF FIDUCIARY DUTY: THE SYNOPSYS AGREEMENT IMPERMISSIBLY INTERFERES WITH THE STOCKHOLDER VOTE) 81. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 82. The Director Defendants owe the IKOS stockholders the highest duties of care, loyalty and good faith. 83. The Termination Fee coerces the IKOS stockholders into voting in favor of the IKOS-Synopsys Merger by imposing a $5.5 million penalty on IKOS for terminating the Synopsys Agreement to pursue a superior proposal. 84. The IKOS Directors have not and cannot offer a compelling justification for interfering with the stockholder vote on the Merger. 85. Mentor and Purchaser have no adequate remedy at law. 27 COUNT VI (THE SYNOPSYS AGREEMENT IS INVALID AND UNENFORCEABLE) 86. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 87. The decision of the Director Defendants to enter into the Synopsys Agreement, including the Termination Fee, the Operating Restrictions and the No-Shop Provision, constituted a breach of the IKOS Directors' fiduciary duties to IKOS and its stockholders. Moreover, the Termination Fee, the Operating Restrictions and the No-Shop Provision act to limit the exercise by the Director Defendants of their fiduciary duties. 88. Therefore, the Synopsys Agreement, including the Termination Fee, the Operating Restrictions and the No-Shop Provision, is invalid and unenforceable under Delaware law. 89. Mentor and Purchaser have no adequate remedy at law. COUNT VII (BREACH OF FIDUCIARY DUTY: THE RIGHTS PLAN) 90. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 91. The Director Defendants owe IKOS stockholders the highest duties of care, loyalty and good faith. 92. The Rights Plan is designed to thwart any acquisition of IKOS that does not have the approval of the IKOS Directors. Indeed, the Rights Plan provides the IKOS Directors with the power to prevent summarily the consummation of the all-cash, all-shares, non-coercive, non-discriminatory Tender Offer. In light of the superior value offered to IKOS stockholders by the Tender Offer and the Mentor Merger Proposal, there is no legitimate reason for the IKOS Board to 28 retain the Rights Plan. The Director Defendants' presumptive failure to redeem the Rights or to render the Rights Plan inapplicable to the Mentor Merger Proposal deprives Mentor's stockholders of the right to maximize their wealth by selling their IKOS shares at the premium price offered by the Mentor Merger Proposal. 93. The Director Defendants' presumptive failure to redeem the Rights or to render the Rights Plan inapplicable to the Mentor Merger Proposal has no economic justification, serves no legitimate purpose, and is not a reasonable response to the Mentor Merger Proposal, which pose no threat to the interests of IKOS stockholders or to IKOS' corporate policy and effectiveness. As such, the actions of the Director Defendants are in breach of the fiduciary duties the Director Defendants owe to IKOS stockholders under applicable Delaware law. 94. Mentor and Purchaser have no adequate remedy at law. COUNT VIII (BREACH OF FIDUCIARY DUTY: SECTION 203) 95. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 96. The Director Defendants owe IKOS stockholders the highest duties of care, loyalty and good faith. 97. The Director Defendants are empowered by Section 203 to render the statute inapplicable to the Mentor Merger Proposal by approving the Tender Offer. 98. In light of the superior value offered to IKOS stockholders by the Mentor Merger Proposal, there is no legitimate reason for the IKOS Directors to fail to approve the Tender Offer or to fail to take any other steps necessary to render Section 203 inapplicable to the Mentor Merger 29 Proposal. Such failures only have the effect of withholding from IKOS stockholders the right to maximize value by selling their IKOS shares at the premium price offered by the Mentor Merger Proposal. 99. The Director Defendants' presumptive failure to approve the Mentor Merger Proposal or otherwise render Section 203 inapplicable to the Mentor Merger Proposal have no economic justification, serve no legitimate purpose, and are not reasonable responses to the Mentor Merger Proposal, which poses no threat to the interests of IKOS stockholders or to IKOS' corporate policy and effectiveness. As such, the actions of the Director Defendants are in breach of the fiduciary duties the Director Defendants owe to IKOS stockholders under applicable Delaware law. 100. Mentor and Purchaser have no adequate remedy at law. COUNT IX (AIDING AND ABETTING BREACH OF FIDUCIARY DUTY) 101. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 102. The Director Defendants owe IKOS stockholders the highest duties of care, loyalty and good faith. 103. Synopsys has aided and abetted the Director Defendants in the breach of their fiduciary duties. As a direct participant in the IKOS-Synopsys Merger, Synopsys knew of, and in fact actively encouraged and participated in, the breach of fiduciary duties set forth herein. Synopsys induced the Director Defendants to breach their fiduciary duties in order to obtain the substantial financial benefits that the IKOS-Synopsys Merger would provide, at the expense of IKOS stockholders. 30 104. Plaintiff seeks an injunction preventing Synopsys, its employees, agents and all persons acting on its behalf, from aiding and abetting the Director Defendants' breach of fiduciary duties to the IKOS stockholders, with respect to the Synopsys Agreement, the IKOS-Synopsys Merger and the Mentor Merger Proposal. 105. Mentor and Purchaser have no adequate remedy at law. COUNT X (DECLARATORY AND INJUNCTIVE RELIEF: THE RIGHT TO CALL A SPECIAL MEETING) 106. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 107. The Director Defendants owe IKOS stockholders the highest duties of care, loyalty and good faith. 108. Under the bylaws of IKOS, a special meeting of the IKOS stockholders may be called by the holders of not less than 10% of all of the shares entitled to cast votes at the meeting. Any action by IKOS to eliminate or hinder the procedure for or ability of its stockholders to request a call of a special meeting, or to affect the prescribed time period when the special meeting must be held, or to interfere with any efforts to call a special meeting, or to impede possible consideration by IKOS stockholders at the special meeting of removing the current IKOS directors and electing Mentor's and Purchaser's nominees to the IKOS board of directors would thwart the exercise of stockholder voting rights without compelling justification and would thereby cause irreparable harm. 109. Mentor and Purchaser have no adequate remedy at law. 31 COUNT XI (DECLARATORY AND INJUNCTIVE RELIEF: THE CONFIDENTIALITY AGREEMENT) 110. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 111. Mentor was not provided with any material, non-public information of IKOS during its discussions with IKOS in June and July 2000. In addition, the financial projections of IKOS that were provided to Mentor in April 2001 were rendered immaterial, unreliable, stale and worthless when IKOS stated publicly in July 2001 that it was revising its outlook. Specifically, on July 2, 2001, IKOS announced that it was revising its own outlook for performance downward for the very periods covered by the projections given to Mentor. This July 2, 2001 press release stated that "We expect that these customer and economic issues will continue to limit our visibility and impact our results for the fourth fiscal quarter." 112. Plaintiffs did not begin to purchase or sell any IKOS securities until July 11, 2001. By July 11, 2001, the projections provided to Mentor in April 2001 were immaterial, unreliable, stale and worthless, especially in light of IKOS' July 2, 2001 announcement revising its outlook. Further, any information provided by IKOS during 2000 to Mentor had become immaterial, unreliable and stale as well. Hence, neither the actions taken by plaintiffs to date, including their purchases of IKOS stock, nor the actions that plaintiffs will take in connection with the Tender Offer, the Mentor Merger Proposal, or a possible call of a special meeting of IKOS stockholders will violate any continuing obligation that plaintiffs may have under the Confidentiality Agreement. 113. Mentor and Purchaser have no adequate remedy at law. 32 COUNT XII (DECLARATORY AND INJUNCTIVE RELIEF: THE STANDSTILL PROVISION) 114. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 115. The Tender Offer and the Mentor Merger Proposal comply and will comply with Mentor's rights under the Standstill Provision of the Confidentiality Agreement. Given that the Standstill Provision expired in December 2000, IKOS has no basis for relying on the Standstill Provision to impede or hinder the Tender Offer, the Mentor Merger Proposal or any possible call of a special meeting of IKOS stockholders by plaintiffs (including the possible solicitation of proxies in connection therewith). 116. Mentor and Purchaser have no adequate remedy at law. WHEREFORE, plaintiffs respectfully request that this Court enter an order: a. declaring that: (i) the failure to make good faith effort to obtain information about reasonable alternatives, such as the Mentor Merger Proposal, in order to make an informed decision about the IKOS-Synopsys Merger; (ii) the agreement to the Termination Fee in the Synopsys Agreement; (iii) the agreement to the Operating Restrictions in the Synopsys Agreement; and (iv) the agreement to the No-Shop Provision in the Synopsys Agreement, constitute breaches of the Director Defendants' fiduciary duties which they owe to the IKOS stockholders; b. declaring that the failure: (i) adequately to consider the Mentor Merger Proposal; (ii) to determine that the Mentor Merger Proposal is in the best interests of the IKOS stockholders; and (iii) to submit the Mentor Merger Proposal to the IKOS stockholders constitute breaches of the Director Defendants' fiduciary duties; 33 c. compelling defendants to consider the Mentor Merger Proposal and take all steps necessary to provide plaintiffs with a fair and equal opportunity to enter into a transaction with IKOS, including submitting the proposal to the IKOS stockholders; d. invalidating the No-Shop Provision, the Operating Restrictions and the Termination Fee in the Synopsys Agreement; e. temporarily, preliminarily and permanently enjoining IKOS, the Director Defendants, Synopsys, and their respective agents, employees, and anyone acting on their behalf, from effectuating or enforcing or taking any steps to effectuate or enforce the No-Shop Provision, the Operating Restrictions and the Termination Fee in the Synopsys Agreement; f. temporarily, preliminarily and permanently enjoining IKOS, the Director Defendants, Synopsys, and their respective agents, employees, and anyone acting on their behalf, from taking any further steps to proceed with the proposed IKOS-Synopsys Merger until the stockholders of IKOS have had an opportunity to consider the Mentor Merger Proposal; g. declaring that failure to redeem the Rights or to render the Rights inapplicable to the Tender Offer and the Mentor Merger Proposal or to approve the Tender Offer and the Mentor Merger Proposal would constitute a breach of the Director Defendants' fiduciary duties to IKOS stockholders under Delaware law; h. invalidating the Rights or compelling IKOS and its Director Defendants to redeem the Rights or to render the Rights Plan inapplicable to the Tender Offer and the Mentor Merger Proposal; 34 i. declaring that the failure to approve the Tender Offer and the Mentor Merger Proposal for purposes of Section 203 would constitute a breach of the Director Defendants' fiduciary duties to the IKOS stockholders under Delaware law; j. compelling the Director Defendants to approve the Tender Offer and the Mentor Merger Proposal for purposes of Section 203; k. declaring that the adoption or exercise of any measures by IKOS, the Director Defendants, Synopsys, and their respective agents, employees, and anyone acting on their behalf, which have the effect of impeding, frustrating or interfering with the Tender Offer, the Mentor Merger Proposal or the possible call of a special meeting of IKOS stockholders by plaintiffs (including the possible solicitation of proxies in connection therewith) would constitute a breach of the Director Defendants' fiduciary duties under Delaware law; l. declaring that neither the actions taken by Mentor and Purchaser to date, including their purchases of IKOS stock, nor the actions that Mentor and Purchaser may take in connection with the Tender Offer, the Mentor Merger Proposal, or the possible call of a special meeting of IKOS stockholders by plaintiffs (including the possible solicitation of proxies in connection therewith) will violate any continuing obligation that Mentor and Purchaser may have under the Confidentiality Agreement; m. declaring that the Tender Offer, the Mentor Merger Proposal, and the possible call of a special meeting of IKOS stockholders by plaintiffs (including the possible solicitation of proxies in connection therewith) are consistent with Mentor's rights under the now expired Standstill Provision; 35 n. temporarily, preliminarily and permanently enjoining the adoption or exercise of any measures by IKOS, the Director Defendants, Synopsys, and their respective agents, employees, and anyone acting on their behalf, which have the effect of impeding, frustrating or interfering with the Tender Offer, the Mentor Merger Proposal, or the possible call of a special meeting of IKOS stockholders by plaintiffs (including the possible solicitation of proxies in connection therewith); o. temporarily, preliminarily and permanently enjoining IKOS, the Director Defendants, Synopsys, and their respective agents, employees, and anyone acting on their behalf from taking any action to delay, impede, postpone or thwart the director removal, nomination and replacement rights, as well as the voting or other rights, of IKOS stockholders in connection with a possible call of a special meeting of IKOS stockholders by plaintiffs (including the possible solicitation of proxies in connection therewith) or otherwise; p. temporarily, preliminarily and permanently enjoining Synopsys and its agents, employees, and anyone acting on its behalf, from aiding and abetting the Director Defendants' breach of fiduciary duties to the IKOS stockholders; q. temporarily, preliminarily and permanently enjoining defendants, their affiliates, subsidiaries, officers, directors and all others acting in concert with them or on their behalf from bringing any action concerning the Synopsys Agreement, the Termination Fee, the No-Shop Provision, the Operating Restrictions, the Rights Plan, Section 203, the Confidentiality Agreement, or the possible call of a special meeting of IKOS stockholders by plaintiffs (including the possible solicitation of proxies in connection therewith) in any other court; 36 r. granting damages for all incidental injuries suffered as a result of Defendants' unlawful conduct; s. awarding plaintiffs their costs and expenses, including attorneys' fees and experts' fees, incurred in this action; and t. granting plaintiffs such other and further relief as the Court deems just and proper. /s/ Kevin G. Abrams ------------------------------------ Of Counsel: Kevin G. Abrams Srinivas M. Raju Marc W. Rappel Peter B. Ladig Latham & Watkins Richards, Layton & Finger, P.A. 633 West Fifth Street, Suite 4000 One Rodney Square Los Angeles, California 90071 P.O. Box 551 (213) 485-1234 Wilmington, Delaware 19899 (302) 651-7700 Attorneys for Plaintiffs Dated: December 7, 2001 37 VERIFICATION ------------ I, Dean Freed, having been duly sworn according to law, verifies as follows: 1. I am Vice President and General Counsel of the plaintiff Mentor Graphics Corporation, an Oregon corporation, with specific authority to make this verification on behalf of Mentor Graphics Corporation. 2. I am the Secretary of the plaintiff Fresno Corporation, a Delaware Corporation, with specific authority to make this verification on behalf of Fresno Corporation. 3. I have personally reviewed the attached Verified Complaint filed by the Plaintiffs in the Court of Chancery of the State of Delaware. 4. Insofar as the matters contained in the Verified Complaint concern the acts and deeds of the Plaintiffs, I know the allegations to be true and correct. 5. Insofar as the matters contained in the Verified Complaint concern the acts and deeds of persons or entities other than the Plaintiffs, I believe the allegations to be true and correct. Sworn to and subscribed before me Mentor Graphics Corporation this 6th day of December, 2001 /s/ Michelle R. Anderson By: /s/ Dean Freed - ------------------------ --------------------------- Notary Public for Oregon Name: Dean Freed Title: Vice President and My Commission expires 6-26-2002 General Counsel OFFICIAL SEAL MICHELLE R. ANDERSON NOTARY PUBLIC-OREGON COMMISSION NO. 313300 MY COMMISSION EXPIRES JUN 26, 2002 Sworn to and subscribed before me Fresno Corporation this 6th day of December, 2001 /s/ Michelle R. Anderson By: /s/ Dean Freed - ------------------------ --------------------------- Notary Public for Oregon Name: Dean Freed Title: Secretary My Commission expires 6-26-2002 OFFICIAL SEAL MICHELLE R. ANDERSON NOTARY PUBLIC-OREGON COMMISSION NO. 313300 MY COMMISSION EXPIRES JUN 26, 2002 EX-99.(D)(1) 13 f77751ex99-d1.txt EXHIBIT (D)(1) EXHIBIT (d)(1) IKOS SYSTEMS, INC. June 16, 2000 Mentor Graphics Corporation 8005 S.W. Boeckman Road Wilsonville, Oregon 97070-7777 CONFIDENTIALITY AGREEMENT Ladies and Gentlemen: In connection with your possible interest in an acquisition or other business combination (the "Transaction") involving IKOS, Inc. (the "Company"), you have requested that we or our representatives furnish you or your representatives with certain information relating to the Company or the Transaction. All such information (whether written, electronic or oral) furnished (whether before or after the date hereof) by us or our directors, officers, employees, affiliates, representatives (including, without limitation, financial advisors, attorneys and accountants) or agents (collectively, "our Representatives") to you or your directors, officers, employees, affiliates, representatives (including, without limitation, financial advisors, attorneys and accountants) or agents or your potential sources of financing for the Transaction (collectively, "your Representatives") and all analyses, compilations, forecasts, studies or other documents prepared by you or your Representatives in connection with your or their review of, or your interest in, the Transaction which contain or reflect any such information is hereinafter referred to as the "Information". The term Information will not, however, include information which (i) is or becomes publicly available other than as a result of a disclosure by you or your Representatives, (ii) is developed independently by Recipient without use of the Discloser's confidential information; or (iii) is or becomes available to you on a nonconfidential basis from a source (other than us or our Representatives) which, to the best of your knowledge after due inquiry, is not prohibited from disclosing such information to you by a legal, contractual or fiduciary obligation to us. Accordingly, you hereby agree that: 1. You and your Representatives (i) will keep the Information confidential and will not (except as permitted by paragraph 3 below), without our prior written consent, disclose any Information in any manner whatsoever, and (ii) will not use any Information other than in connection with the Transaction; provided, however, that you may reveal the Information to your Representatives (a) who need to know the Information for the purpose of evaluating the Transaction, (b) who are informed by you of the confidential nature of the Information and (c) who agree to act in accordance with the terms of this letter agreement. You will cause your Representatives to observe the terms of this letter agreement, and you will be responsible for any breach of this letter agreement by any of your Representatives. The term of this agreement is five years. 2. Neither party will (except as permitted by paragraph 3 below), without the other party's prior written consent, disclose to any person the fact that the Information exists or has been made available, that you are considering the Transaction or any other transaction involving the Company, or that discussions or negotiations are taking or have taken place concerning the Transaction or involving the Company or any term, condition or other fact relating to the Transaction or such discussions or negotiations, including, without limitation, the status thereof. 3. In the event that you or any of your Representatives are requested pursuant to, or required by, applicable law, regulation or legal process to disclose any of the Information, you will notify us promptly so that we may seek a protective order or other appropriate remedy or, in our sole discretion, waive compliance with the terms of this letter agreement. In the event that no such protective order or other remedy is obtained, or that the Company waives compliance with the terms of the letter agreement, you will furnish only that portion of the Information which you are advised by counsel is legally required and will exercise all reasonable efforts to obtain reliable assurance that confidential treatment will be accorded the Information. 4. If you determine not to proceed with the Transaction, you will promptly inform the Company of that decision. 5. At any time upon the request of the Company or any of our Representatives, and in any event upon your decision not to proceed with a Transaction, you will either (i) promptly destroy all copies of the written or electronic Information in your or your Representatives' possession and confirm such destruction to us in writing, or (ii) promptly deliver to the Company at your own expense all copies of the written Information in your or your Representatives' possession. Any oral Information will continue to be subject to the terms of this letter agreement. 6. You acknowledge that neither we, nor our affiliates, nor our other Representatives, nor any of our or their respective officers, directors, employees, agents or controlling persons within the meaning of Section 20 of the Securities Exchange Act of 1934, as amended, makes any express or implied representation or warranty as to the accuracy or completeness of the Information, and you agree that no such person will have any liability relating to the Information or for any errors therein or omissions therefrom. You further agree that you are not entitled to rely on the accuracy or completeness of the Information and that you will be entitled to rely solely on such representations and warranties as may be included in any definitive agreement with respect to the Transaction, subject to such limitations and restrictions as may be contained therein. 7. Each party agrees that, for a period of six months from the date of this letter agreement, it will not, directly or indirectly, solicit for employment any employee of the other party or any of its subsidiaries with whom a party had contact or who became known to that party in connection with the Transaction; provided, however, that the foregoing provision will not prevent a party from employing any such person who contacts the other party on his or her own initiative without any direct or indirect solicitation by or encouragement. 8. You agree that, for a period of six months from the date of this Confidentiality Agreement, neither you nor any of your affiliates will, without the prior written consent of the Company or the Company's Board of Directors: (i) acquire, offer to acquire, or agree to acquire, directly or indirectly, by purchase or otherwise, any voting securities or direct or indirect rights to acquire any voting securities of the Company or any subsidiary thereof, or of any successor corporation; (ii) make, or in any way participate in, directly or indirectly, any "solicitation" of "proxies" (as such terms are used in the Rules of the Securities and Exchange Commission) to vote, or seek to advise or influence any person or entity with respect to the voting of, any voting securities of the Company; (iii) make any public announcement with respect to, or submit a proposal for, or offer of any extraordinary transaction involving the Company or its securities or assets; (iv) form, join or in any way participate in a "group" (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) in connection with any of the foregoing; provided, however, that the provisions of this paragraph 8 shall not apply if during the six month effective period of this paragraph the Company shall voluntarily join with any other entity in any of the activities listed in clauses (i), (ii), (iii) or (iv) above, or if another entity shall announce an intent to acquire Company or engage in either of the activities listed in clauses (ii) or (iii) above. You will promptly advise the Company of any inquiry or proposal made to it with respect to any of the foregoing. 9. You acknowledge and agree that (a) we and our Representatives are free to conduct the process leading up to a possible Transaction as we and our Representatives, in our sole discretion, determine (including, without limitation, by negotiating with any prospective buyer and entering into a preliminary or definitive agreement without prior notice to you or any other person). (b) we reserve the right, in our sole discretion, to change the procedures relating to our consideration of the Transaction at any time without prior notice to you or any other person, to reject any and all proposals made by you or any of your Representatives with regard to the Transaction, and to terminate discussions and negotiations with you at any time and for any reason, and (c) unless and until written definitive agreement concerning the Transaction has been executed, neither we nor any of our Representatives will have any liability to you with respect to the Transaction, whether by virtue of this letter agreement, any other written or oral expression with respect to the Transaction, whether by virtue of this letter agreement, any other written or oral expression with respect to the Transaction or otherwise. 10. You acknowledge that remedies at law may be inadequate to protect us against any actual or threatened breach of this letter agreement by you or by your Representatives, and, without prejudice to any other rights and remedies otherwise available to us, you agree that Company may seek the granting of injunctive relief in our favor without proof of actual damages. In the event of litigation relating to this letter agreement, if a court of competent jurisdiction reaches a final, nonappealable decision, then the prevailing party shall reimburse the other party for its costs and expenses (including, without limitation, legal fees and expenses) incurred in connection with all such litigation. 11. You are aware, and you will advise your Representatives who are informed of the matters that are the subject of this letter agreement, of the restrictions imposed by the United States securities laws on the purchase or sale of securities by any person who has received material, non-public information from the issuer of such securities and on the communication of such information to any other person when it is reasonably foreseeable that such other person is likely to purchase or sell such securities in reliance upon such information. 12. You agree that no failure or delay by us in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. 13. This letter agreement will be governed by and construed in accordance with the laws of the State of California applicable to contracts between residents of that State and executed in and to be performed in that State. 14. This letter agreement contains the entire agreement between you and us concerning the confidentiality of the Information, and no modifications of this letter agreement or waiver of the terms and conditions hereof will be binding upon you or us, unless approved in writing by each of you and us. Please confirm your agreement with the foregoing by signing and returning to the undersigned the duplicate copy of this letter enclosed herewith. Sincerely, IKOS, Inc. By: /s/ LARRY MELLING -------------------------- Name: Larry Melling ------------------------- Title: VP Business Development ------------------------ Accepted and Agreed as of the date first written above: MENTOR GRAPHICS CORPORATION By: /s/ Dean Freed --------------------------- Name: VP & Gen. Counsel ------------------------- Title: 6/19/2000 ------------------------ -----END PRIVACY-ENHANCED MESSAGE-----