Mentor Graphics, Microtec Research Merge; Form Hardware/Software Design
Powerhouse

Merger Promises Long-Awaited Reconciliation of Disjointed Hardware and
Software Design Flows; Offers Unprecedented Levels of Design Cycle-Time
Reduction

San Jose/London/Tokyo -- October 10, 1995 -- Mentor Graphics Corporation
and Microtec Research Incorporated today broke the mold in both the
traditional electronic design automation and embedded software markets.
The two companies, in an announced merger, have become the world leader in
complete electronic hardware and software design solutions.

Under the terms of the merger agreement, each outstanding share of Microtec
Research Common Stock will be converted into approximately 0.693 shares of
Mentor Graphics Common Stock. The closing price of Mentor Graphics Common
Stock on October 6, 1995 as quoted on the NASDAQ National Market System
was $20.125 per share. The total value of the transaction is estimated to
be approximately $130 million. The merger is subject to conditions,
including receipt of certain regulatory approvals and approval by the
stockholders of Microtec Research, and is expected to close by year end.
The transaction is a stock swap valued at an estimated $130 million.

"This merger is especially significant as system designs incorporating
integrated hardware and software represent the majority of design starts
today," said Gary Smith, Dataquest International. "Mentor Graphics'
hardware design tools, combined with Microtec Research's integrated
software development tools and family of real-time operating systems
(RTOS) products, will bridge the gap between hardware and embedded
software design, a major bottleneck for system suppliers searching for
better design environments to significantly shrink product-time-to-market
and address increasing complexity in embedded systems."

"The design, integration and test of embedded software is quickly becoming
the dominant factor in the development cost, time-to-market and value
proposition of electronic systems, whether the are implemented as printed
circuit boards or single chips," said Walden C. Rhines, Mentor Graphics'
president and CEO. "These issues cannot be addressed adequately without
reaching outside of the confines of the traditional EDA industry. We have,
in effect, defined a new company, dedicated to providing solutions that
avoid the sub-optimizations of disjoint hardware and software design flows
prevalent today. Microtec Research is clearly the leading source of
embedded software technology and the best partner for providing an
integrated hardware/software co- design solution."

"Mentor Graphics was the best company to get us to the point where we could
meet customers' requirements for next-generation design methodologies,"
said Jerry Kirk, Microtec Research president and CEO. "Mentor Graphics
offers increased financial strength which will allow Microtec Research to
pursue its strategic technology goals sooner than if we had remained
independent. In addition, the worldwide Mentor Graphics sales and support
channel offers us additional resources to better serve Microtec Research
customers," added Kirk. "Together we can address customers' 'design
anywhere' paradigm for both the software and hardware design needs of the
customers served by both companies. This transaction confirms Microtec
Research as the clear leader and provides the historically fragmented
embedded software market with a world class source of technology."

The merger also addresses a key imperative of Mentor Graphics' Systems on
Silicon (SOS) Initiative, which mandates hardware/software co- design
solutions to address design complexity issues driven by explosive growth
in 32-bit embedded applications, enabling deep submicron technology and
the convergence of the computer, consumer and communications markets.

Continuous reconciliation of hardware and software components through every
phase of design is critical to shortening design cycles and allowing
designers maximum flexibility in system partitioning. Mentor Graphics'
Hardware/Software Systems Division (HSD) and the new Microtec Research
business unit will address this issue through the newly announced Dynamic
Design Integration family of hardware /software co-verification,
co-analysis and, ultimately, co-design tools. Microtec Research and Mentor
Graphics began work on the first of these tools, targeted at
hardware/software co-verification, several months prior to entering into
merger discussions. Co-verification product shipments are expected in
1996.

Microtec Research will operate as a new business unit within Mentor
Graphics and will continue to support existing strategic partnerships and
customers, and aggressively pursue new ones. "We will accelerate our
investment in the technologies and products that are important to Microtec
Research's customers," Rhines said. "Combining the companies will allow
Microtec Research to achieve its strategic technology goals sooner than if
we had remained independent."

Microtec Research, (NASDAQ: MTEC), a leading supplier of software products
for the development of embedded systems, offers a broad, integrated
product line and extensive support network. The company is committed to
open systems and provides a full line of high-performance C/C++ cross
compilers, assemblers, source-level XRAY Debugger, and the well-known
VRTX/OS operating system. The products speed software development and
streamline hardware integration for thousands of demanding embedded
applications. With the XRAY MasterWorks integrated C/C++ development
environment and the Spectra backplane developers have access to versatile
embedded software products that speed the edit-compiler-debug cycle and
improve host-target connectivity.

Established in 1981, Mentor Graphics Corporation (NASDAQ:MENT) designs,
manufactures, markets and distributes electronic design automation (EDA)
software and provides professional services supporting its customers'
complete design environments. The company is a leader in worldwide EDA
sales, with revenues of $356,156,000 over the last reported 12 months.
Mentor Graphics is the first EDA vendor to receive the STAR (software
Technical Assistance Recognition) award given annually by the software
Support Professionals Association (SSPA) for service excellence. The
company currently employs approximately 2,000 people worldwide. In
addition to its corporate offices, Mentor Graphics has sales, support,
software development and professional services offices worldwide. The
company's headquarters are located at 8005 S.W. Boeckman Road,
Wilsonville, Oregon 97070-7777. World Wide Web site:
http://www.mentorg.com.
 
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