<PAGE>
 
                                                                   EXHIBIT 10.20

                          AMENDMENT TO OEM AGREEMENT

This Amendment is entered into by and between COMPASS Design Automation, Inc. as
successor in interest to CAD Language Systems, Inc. ("COMPASS") and IKOS 
Systems, Inc. ("IKOS"). The Effective Date of this Amendment is the later date 
signed below by the parties.

COMPASS and IKOS are parties to that certain OEM Software License Agreement (the
"Agreement") dated June 25, 1989, as amended. The parties wish to amend the 
Agreement further to (i) formalize the grant of the non-exclusive, world wide 
license referred to in Section 1 of this Amendment and (ii) delete certain 
provisions of this Agreement and modify others in connection with the fully 
paid, non-exclusive world wide license referred to in Section 2 of this 
Amendment.

Now therefore, for good and valuable consideration, the receipt and sufficiency 
of which is hereby acknowledged, the parties hereto, intending to be legally 
bound, agree as follows:

1. GRANT OF LICENSE

Subject to the provisions of the Agreement, COMPASS grants to IKOS a license to 
use VTIP-XL, COMPASS part number VS-R-917-S, and extends the grant of licenses 
to use VTIP/VHDL COMPASS part number number VS-R-910-S, both of which include 
the complete development environment to VTIP-XL and VTIP/VHDL, respectively, 
consisting of the object code, source code, compile scripts and publicly 
releasable VHDL test cases (the "Licensed Code"). IKOS may modify, copy, 
enhance, port, maintain and create derivative works from the source code of the
Licensed Code, which derivative works shall be part of the Licensed Code. The 
use of the Licensed Code is limited to internal use only by IKOS and may not be 
distributed to any third party without the written consent of COMPASS. This 
Licensed Code is COMPASS Confidential Information and will be treated by IKOS 
with the same level of confidentiality and protection as IKOS handles its own 
confidential code. COMPASS will supply the Licensed Code to IKOS within 5 days 
of the Effective Date of this Amendment.

The Licensed Code is licensed on an "AS-IS" basis and COMPASS shall have no 
obligation under Section 7 of the Agreement to IKOS or its customers with 
respect thereto and COMPASS shall be held harmless by IKOS for any claims 
arising from using, maintaining, enhancing, modifying or porting of the Licensed
Code.

2. GRANT OF RUN TIME LICENSES

Subject to the provisions of the Agreement, COMPASS grants to IKOS a fully paid 
perpetual license to distribute and sublicense run time object code versions of 
both VTIP/VHDL, derived from COMPASS part number VS-R-910-S ("VTIP/VHDL") and 
VTIP-XL, derived from COMPASS part number VS-R-917-5 ("VTIP-XL"), or derivative
works produced therefrom, only as integrated with IKOS VHDL simulation products.

Amendment to OEM Agreement             Page 1 of 3             December 27, 1995


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3. SERVICES TO BE PROVIDED

COMPASS shall supply four man weeks of training and consulting to facilitate the
transfer of the VTIP-XL Source Code to IKOS. This consulting will be available 
from the period January 1, 1996 to September 30, 1996 and must be used by IKOS 
during that period or will be lost. Delivery of such consulting will be made at 
mutually agreed to times, but not later than two weeks after IKOS may request. 
After that period any additional consulting may be available at COMPASS' then 
prevailing rates for such consulting. Reasonable travel expenses for COMPASS 
personnel to travel and deliver such services at any site other than COMPASS 
Columbia, Md. site shall be borne by IKOS.

IKOS shall receive, at no additional charge, new versions of the Licensed Code 
resulting from changes, updates and bug fixes by COMPASS to the Licensed Code 
during the 18 month period following the Effective Date of this Amendment. 
COMPASS will also provide telephonic and e-mail maintenance support, including 
bug fixes to the Licensed Code through September 30, 1996.

4. PAYMENT

IKOS shall make a non-refundable $350,000.00 payment to COMPASS within 30 days 
of the Effective Date of this Agreement.

5. COMPLETED OBLIGATIONS

COMPASS obligations to maintain the originally licensed product, "VTIP", now 
known as VTIP/VHDL, COMPASS part number series V5-x-910, as described in Section
4 and all subsections pertaining thereto shall cease on June 30, 1996. The 
following Sections of the OEM Agreement are deleted in their entirety:

         Section 5 Reports, Payments and Pricing
         Section 5.1 Reports
         Section 5.2 Pricing
         Section 5.3 Payment
         Section 5.4 Payment upon Termination
         Section 6 Audit Rights
         Section 18 Publicity
         Section 22 Escrow of VTIP Code
         Exhibit E: CLSI Base Prices
         Exhibit G: VTIP Code Escrow Provisions

The Amendment Agreement effective September 10, 1991 is no longer applicable and
the obligations and requirements specified therein are deemed by both parties to
have been fulfilled.

Amendment to OEM Agreement             Page 2 of 3             December 27, 1995
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6. TERM OF AGREEMENT

Sections 10 and 11 are deleted in their entirety and replaced with the new 
Sections as follows:

      "SECTION 10  TERM OF THE AGREEMENT
      
      The initial term of this Agreement is extended for five years from the
      Effective Date of this amendment. Licensee shall have the sole option to
      renew the Agreement for a successive five year term by written notice to
      Licensor with 90 days notice in advance of the 5 year anniversary date. In
      the event of a normal termination of the Agreement, i.e. not termination
      by breach by IKOS, the following provisions will survive such normal
      termination: Section 1 and 2 of this Amendment and Paragraph 8 of the
      Agreement.

      This Agreement may be terminated by either party as a result of a material
      breach by the other party that has remained uncured for a period of 30
      days from written notice of such breach.
 
      SECTION 11  RESERVED"

7. To the extent that the terms of this Amendment are in conflict with the terms
of the Agreement or amendment(s) thereto, the terms of this Amendment will
prevail.

IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be 
executed by its duly authorized representative.

IKOS Systems, Inc.

    
By:    /s/ Ramon Nunez
       -------------------------- 
       Ramon Nunez

Title: President & CEO

Date:  12-27-95




COMPASS Design Automation, Inc.


By:    /s/ Taylor Scanlon
       -------------------------- 
       Taylor Scanlon

Title: V.P. North America

Date:  12-27-95


Amendment to OEM Agreement            Page 3 of 3              December 27, 1995