Exhibit (d)(5)
[XXXXXX & XXXXXXX LETTERHEAD]
January 16, 2002
By Hand Delivery
Xx. Xxxxx Xxxx Xxxxxxx
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-1833
Re: Mentor Graphics Corporation Offer to Purchase All Outstanding
Shares of IKOS Systems, Inc. Common Stock
Dear Xxxxx:
On behalf of Mentor Graphics Corporation ("Mentor Graphics"), I am
pleased to enclose an Agreement and Plan of Merger and Reorganization (the
"Mentor Agreement") by and among Mentor Graphics, Fresno Corporation ("Fresno")
and IKOS Systems, Inc. ("IKOS"). The Mentor Agreement contemplates a
continuation of Mentor Graphics' tender offer for IKOS shares at a price of
$11.00 per share in cash and a follow-on merger that cashes out any remaining
shares at the same price.
The Mentor Agreement has been executed by Mentor Graphics and
Fresno. Mentor Graphics and Fresno hereby commit that their execution of the
Mentor Agreement will not be revoked by Mentor Graphics or Fresno prior to
Thursday, January 31, 2002. This provides IKOS with ample time to consider the
Mentor Agreement and to comply with applicable provisions of its merger
agreement (the "Synopsys Agreement") with Synopsys, Inc. ("Synopsys").
I have also enclosed a copy of the Mentor Agreement marked to
reflect changes from the Synopsys Agreement that was previously executed by
IKOS. You will note that the changes constitute significant improvements from
the perspective of IKOS and its stockholders. The improvements include:
- $11.00 per share in cash to IKOS stockholders promptly after
execution of the Mentor Agreement by IKOS compared to a highly
conditional transaction with Synopsys at an unknown price that
will not close until late summer;
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January 16, 2002
Page 2
- reduced restrictions on IKOS in running its business pending
the closing of the Mentor Agreement;
- a significantly reduced number of closing conditions in the
Mentor Agreement as compared to the Synopsys Agreement; and
- a significantly reduced break-up fee despite the fact that the
price per share is significantly higher than the anticipated
price of the Synopsys transaction.
As you know, the Board of Directors of IKOS has already determined
that Mentor Graphics' $11.00 per share cash tender offer constitutes a Superior
Proposal under the Synopsys Agreement. Mentor Graphics has now also presented
IKOS with a merger agreement that is superior to the Synopsys Agreement from
the perspective of IKOS and its stockholders.
Execution of the Mentor Agreement by IKOS does not require any
discussion or negotiation between IKOS and Mentor Graphics or disclosure by IKOS
of confidential information to Mentor Graphics. The schedules and exhibits
required under the Mentor Agreement will be identical to those that are already
a part of the Synopsys Agreement. Since Mentor Graphics and Fresno have already
signed the Mentor Agreement, the Mentor Agreement will become binding upon
execution by IKOS.
Consistent with IKOS' obligations under the Synopsys Agreement,
Mentor Graphics expects the Board of Directors of IKOS to determine, under
Section 8.1(g) and the applicable provisions of Section 5.2 of the Synopsys
Agreement and following consultation with relevant advisors, that the Takeover
Proposal (as defined in the Synopsys Agreement) is bona fide, will result in a
transaction more favorable to IKOS' stockholders from a financial point of view
and must be pursued in order for the Board of Directors to comply with its
fiduciary duties to IKOS' stockholders. Mentor Graphics similarly expects IKOS
to provide to Synopsys the notification and information required under Section
8.1(g) and the applicable provisions of Section 5.2 of the Synopsys Agreement.
Mentor Graphics does not expect IKOS to enter into discussions or
negotiations with Mentor Graphics, to disclose to Mentor Graphics nonpublic
information concerning IKOS and its subsidiaries, to modify or withdraw its
recommendation concerning the Synopsys Agreement, to recommend the Mentor
Agreement to its stockholders or to approve the entering into of the Mentor
Agreement prior to the termination of the Synopsys Agreement. Upon termination
of the Synopsys Agreement, Mentor Graphics expects IKOS immediately to approve
entering the Mentor Agreement and to execute the Mentor Agreement.
Mentor Graphics expects IKOS to notify Synopsys under Section 8.1(g)
of the Synopsys Agreement that IKOS has determined that it desires to approve
entering into the Mentor Agreement and provide Synopsys with the required five
business day period to present an offer that is at least as favorable to the
stockholders of IKOS as the Mentor Agreement. Also
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January 16, 2002
Page 3
in accordance with Section 8.1(g) of the Synopsys Agreement, Mentor Graphics
expects that IKOS will, following expiration of such five business day period
and assuming that the Board of IKOS believes that the Mentor Agreement continues
to be a Superior Proposal, pay the fees to Synopsys required under Section
8.3(b) of the Synopsys Agreement, terminate the Synopsys Agreement and execute
the Mentor Agreement. As you know, the tender offer and the merger under the
Mentor Agreement can be consummated very quickly thereafter.
You will note that Mentor Graphics does not expect to have access to
IKOS confidential information or to enter into discussions or negotiations
concerning the Mentor Agreement prior to execution of that agreement by IKOS.
Similarly, Mentor Graphics does not expect IKOS to take any action with respect
to its recommendation of the Synopsys Agreement to IKOS stockholders prior to
termination of the Synopsys Agreement. You will also note that the Mentor
Agreement contains an agreement by Mentor Graphics to maintain the
confidentiality of any non-public information provided to Mentor Graphics. For
these reasons, Xxxxxx Graphics does not believe that it is either required under
the Synopsys Agreement or appropriate under the circumstances for Mentor
Graphics to execute the form of confidentiality agreement executed by Synopsys.
Mentor Graphics looks forward to execution of the Mentor Agreement
by IKOS and prompt consummation of a transaction bringing IKOS stockholders
$11.00 per share in cash in the very near future.
Very truly yours,
/s/ Xxxxxxxxxxx X. Xxxxxxx
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Xxxxxxxxxxx X. Xxxxxxx
of XXXXXX & XXXXXXX
Enclosures
cc: Xxxxx X. Xxxxx
