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                                                                   EXHIBIT 10.22

                              IKOS SYSTEMS, INC.
                       1996 EMPLOYEE STOCK PURCHASE PLAN

                    (AS AMENDED EFFECTIVE OCTOBER 25, 1996)


     1.   ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
          --------------------------------------- 

          1.1       ESTABLISHMENT.  The IKOS Systems, Inc. 1996 Employee Stock
Purchase Plan (the "PLAN") is hereby established effective upon its approval by
the stockholders of the Company.

          1.2       PURPOSE.  The purpose of the Plan is to provide Eligible
Employees of the Participating Company Group with an opportunity to acquire a
proprietary interest in the Company through the purchase of Stock.  The Company
intends that the Plan shall qualify as an "employee stock purchase plan" under
Section 423 of the Code (including any amendments or replacements of such
section), and the Plan shall be so construed.

          1.3       TERM OF PLAN.  The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued.

     2.   DEFINITIONS AND CONSTRUCTION.
          ---------------------------- 

          2.1       DEFINITIONS.  Any term not expressly defined in the Plan but
defined for purposes of Section 423 of the Code shall have the same definition
herein.  Whenever used herein, the following terms shall have their respective
meanings set forth below:

                    (a) "BOARD" means the Board of Directors of the Company. If
one or more Committees have been appointed by the Board to administer the Plan,
"Board" also means such Committee(s).

                    (b) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.

                    (c) "COMMITTEE" means a committee of the Board duly
appointed to administer the Plan and having such powers as shall be specified by
the Board. Unless the powers of the Committee have been specifically limited,
the Committee shall have all of the powers of the Board granted herein,
including, without limitation, the power to amend or terminate the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law.

                    (d) "COMPANY" means IKOS Systems, Inc., a Delaware
corporation, or any successor corporation thereto.

                    (e) "COMPENSATION" means, with respect to an Offering Period
under the Plan, base salary, overtime, commissions and bonuses paid during such
Offering Period before deduction for any contributions to any plan maintained by
a Participating Company and described in Section 401(k) or Section 125 of the
Code. Compensation shall not include other incentive payments, long-term
disability, workers' compensation or any other payments not included in base
salary, overtime, commissions and bonuses.

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                    (f) "ELIGIBLE EMPLOYEE" means an Employee who meets the
requirements set forth in Section 5 for eligibility to participate in the Plan.

                    (g) "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company and for purposes of Section 423 of the Code;
provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan.

                    (h) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.

                    (i) "FAIR MARKET VALUE" means, as of any date, if there is
then a public market for the Stock, the closing price of a share of Stock (or
the mean of the closing bid and asked prices of a share of Stock if the Stock is
so reported instead) as reported on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") System, the NASDAQ National Market System
or such other national or regional securities exchange or market system
constituting the primary market for the Stock. If the relevant date does not
fall on a day on which the Stock is trading on NASDAQ, the NASDAQ National
Market System or other national or regional securities exchange or market
system, the date on which the Fair Market Value shall be established shall be
the last day on which the Stock was so traded prior to the relevant date, or
such other appropriate day as shall be determined by the Board, in its sole
discretion. If there is then no public market for the Stock, the Fair Market
Value on any relevant date shall be as determined by the Board without regard to
any restriction other than a restriction which, by its terms, will never lapse.

                    (j) "OFFERING" means an offering of Stock as provided in
Section 6.

                    (k) "OFFERING DATE" means, for any Offering Period, the
first day of such Offering Period.

                    (l) "OFFERING PERIOD" means a period determined in
accordance with Section 6.1.

                    (m) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

                    (n) "PARTICIPANT" means an Eligible Employee participating
in the Plan.

                    (o) "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation designated by the Board for inclusion in
the Plan.  The Board shall have the sole and absolute discretion to determine
from time to time which Parent Corporations or Subsidiary Corporations shall be
Participating Companies.

                    (p) "PARTICIPATING COMPANY GROUP" means, at any point in
time, the Company and all other corporations collectively which are then
Participating Companies.

                                       2
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                    (q) "PURCHASE DATE" means, for any Offering Period (or
Purchase Period if so determined by the Board in accordance with Section 6.2),
the last day of such period.

                    (r) "PURCHASE PERIOD" means any period determined in
accordance with Section 6.2.

                    (s) "PURCHASE PRICE" means the price at which a share of
Stock may be purchased pursuant to the Plan, as determined in accordance with
Section 9.

                    (t) "PURCHASE RIGHT" means an option pursuant to the Plan to
purchase such shares of Stock as provided in Section 8 which may or may not be
exercised during an Offering Period. Such option arises from the right of a
Participant to withdraw such Participant's accumulated payroll deductions not
previously applied to the purchase of Stock under the Plan (if any) and
terminate participation in the Plan or any Offering therein at any time during
an Offering Period.

                    (u) "STOCK" means the common stock of the Company, as
adjusted from time to time in accordance with Section 4.2.

                    (v) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.

          2.2       CONSTRUCTION.  Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan.  Except when otherwise indicated by the context, the
singular shall include the plural, the plural shall include the singular, and
use of the term "or" shall include the conjunctive as well as the disjunctive.

     3.   ADMINISTRATION.  The Plan shall be administered by the Board,
          --------------                                               
including any duly appointed Committee of the Board.  All questions of
interpretation of the Plan or of any Purchase Right shall be determined by the
Board and shall be final and binding upon all persons having an interest in the
Plan or such Purchase Right.  Subject to the provisions of the Plan, the Board
shall determine all of the relevant terms and conditions of Purchase Rights
granted pursuant to the Plan; provided, however, that all Participants granted
Purchase Rights pursuant to the Plan shall have the same rights and privileges
within the meaning of Section 423(b)(5) of the Code.  All expenses incurred in
connection with the administration of the Plan shall be paid by the Company.

     4.   SHARES SUBJECT TO PLAN.
          ---------------------- 

          4.1       MAXIMUM NUMBER OF SHARES ISSUABLE.  Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be one hundred thousand (100,000) and shall
consist of authorized but unissued or reacquired shares of the Stock, or any
combination thereof.  If an outstanding Purchase Right for any reason expires or
is terminated or canceled, the shares of Stock allocable to the unexercised
portion of such Purchase Right shall again be available for issuance under the
Plan.

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          4.2       ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.  In the event
of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, or in the event of any merger (including a merger effected for the
purpose of changing the Company's domicile), sale of assets or other
reorganization in which the Company is a party, appropriate adjustments shall be
made in the number and class of shares subject to the Plan, to the Per Offering
Share Limit set forth in Section 8.1 and to each Purchase Right and in the
Purchase Price.

     5.   ELIGIBILITY.
          ----------- 

          5.1       EMPLOYEES ELIGIBLE TO PARTICIPATE.  Any Employee of a
Participating Company shall be eligible to participate in the Plan except the
following:

                    (a) Employees who have not completed at least six (6) months
of continuous employment with the Participating Company Group as of the
commencement of an Offering Period; provided, however, that this subsection (a)
shall not apply to Offering Periods commencing on and after August 1, 1996,
except with respect to those employees whose transactions in Stock are subject
to Section 16 of the Exchange Act ("INSIDERS"), and provided further, that this
subsection (a) shall not apply with respect to participation by Insiders in
Offering Periods commencing on and after October 25, 1996;

                    (b) Employees who are customarily employed by the
Participating Company Group for twenty (20) hours or less per week; and

                    (c) Employees who own or hold options to purchase or who, as
a result of participation in the Plan, would own or hold options to purchase,
stock of the Company or of any Parent Corporation or Subsidiary Corporation
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of such corporation within the meaning of Section
423(b)(3) of the Code.

          5.2       LEASED EMPLOYEES EXCLUDED.  Notwithstanding anything herein
to the contrary, any individual performing services for a Participating Company
solely through a leasing agency or employment agency shall not be deemed an
"Employee" of such Participating Company.

     6.   OFFERINGS.
          --------- 

          6.1       OFFERING PERIODS.  Except as otherwise set forth below, the
Plan shall be implemented by sequential Offerings of approximately six (6)
months duration (an "OFFERING PERIOD").  The first Offering Period shall
commence on February 8, 1996 and end on July 31, 1996.  Subsequent Offerings
shall commence on the first days of February and August of each year and end on
the last days of the next July and January, respectively, occurring thereafter.
Notwithstanding the foregoing, the Board may establish a different term for one
or more Offerings or different commencing or ending dates for such Offerings;
provided, however, that no Offering may exceed a term of twenty-seven (27)
months.  An Employee who becomes an Eligible Employee after an Offering Period
has commenced shall not be eligible to participate in such Offering but may
participate in any subsequent Offering provided such Employee is still an
Eligible Employee as of the commencement of any such subsequent Offering.
Eligible Employees may not participate in more than one Offering at a time.  In
the event the first or last day of an Offering Period is not a business day, the
Company shall specify the business day that will be deemed the first or last
day, as the case may be, of the Offering Period.

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          6.2       PURCHASE PERIODS.  If the Board shall so determine, in its
discretion, each Offering Period may consist of two (2) or more consecutive
purchase periods having such duration as the Board shall specify (individually,
a "PURCHASE PERIOD"), and the last day of each such Purchase Period shall be a
Purchase Date.  In the event the first or last day of a Purchase Period is not a
business day, the Company shall specify the business day that will be deemed the
first or last day, as the case may be, of the Purchase Period.

          6.3       GOVERNMENTAL APPROVAL; STOCKHOLDER APPROVAL.
Notwithstanding any other provision of the Plan to the contrary, any Purchase
Right granted pursuant to the Plan shall be subject to (a) obtaining all
necessary governmental approvals or qualifications of the sale or issuance of
the Purchase Rights or the shares of Stock and (b) obtaining stockholder
approval of the Plan.

     7.   PARTICIPATION IN THE PLAN.
          ------------------------- 

          7.1       INITIAL PARTICIPATION.  An Eligible Employee shall become a
Participant on the first Offering Date after satisfying the eligibility
requirements of Section 5 and delivering to the Company's payroll office or
other office designated by the Company not later than the close of business for
such office on the last business day before such Offering Date (the
"SUBSCRIPTION DATE") a subscription agreement indicating the Employee's election
to participate in the Plan and authorizing payroll deductions.  An Eligible
Employee who does not deliver a subscription agreement to the Company's payroll
or other designated office on or before the Subscription Date shall not
participate in the Plan for that Offering Period or for any subsequent Offering
Period unless such Employee subsequently enrolls in the Plan by filing a
subscription agreement with the Company by the Subscription Date for such
subsequent Offering Period.  The Company may, from time to time, change the
Subscription Date as deemed advisable by the Company in its sole discretion for
proper administration of the Plan.

          7.2       CONTINUED PARTICIPATION.  A Participant shall automatically
participate in the Offering Period commencing immediately after the final
Purchase Date of each Offering Period in which the Participant participates
until such time as such Participant (a) ceases to be an Eligible Employee, (b)
withdraws from the Plan pursuant to Section 13.2 or (c) terminates employment as
provided in Section 14.  If a Participant automatically may participate in a
subsequent Offering Period pursuant to this Section 7.2, then the Participant is
not required to file any additional subscription agreement for such subsequent
Offering Period in order to continue participation in the Plan.   However, a
Participant may file a subscription agreement with respect to a subsequent
Offering Period if the Participant desires to change any of the Participant's
elections contained in the Participant's then effective subscription agreement.

     8.   RIGHT TO PURCHASE SHARES.
          ------------------------ 

          8.1       PURCHASE RIGHT.  Except as set forth below, during an
Offering Period each Participant in such Offering Period shall have a Purchase
Right consisting of the right to purchase that number of whole shares of Stock
arrived at by dividing Twelve Thousand Five Hundred Dollars ($12,500) by the
Fair Market Value of a share of Stock on the Offering Date of such Offering
Period; provided, however, that such number shall not exceed five hundred (500)
shares (the "PER OFFERING SHARE LIMIT").  Shares of Stock may only be purchased
through a Participant's payroll deductions pursuant to Section 10.

                                       5
<PAGE>
 
          8.2       PRO RATA ADJUSTMENT OF PURCHASE RIGHT.  Notwithstanding the
foregoing, if the Board shall establish an Offering Period of less than five and
one-half (5 1/2) months or more than six and one-half (6 1/2) months in
duration, (a) the dollar amount in Section 8.1 shall be determined by
multiplying $2,083.33 by the number of months in the Offering Period and
rounding to the nearest whole dollar, and (b) the Per Offering Share Limit shall
be determined by multiplying 83.33 shares by the number of months in the
Offering Period and rounding to the nearest whole share.  For purposes of the
preceding sentence, fractional months shall be rounded to the nearest whole
month.

     9.   PURCHASE PRICE.  The Purchase Price at which each share of Stock may
          --------------                                                  
be acquired in a given Offering Period pursuant to the exercise of all or any
portion of a Purchase Right granted under the Plan shall be set by the Board;
provided, however, that the Purchase Price shall not be less than eighty-five
percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on
the Offering Date of such Offering Period, or (b) the Fair Market Value of a
share of Stock on the Purchase Date of such Offering Period. Unless otherwise
provided by the Board prior to the commencement of an Offering Period, the
Purchase Price for that Offering Period shall be eighty-five percent (85%) of
the lesser of (a) the Fair Market Value of a share of Stock on the Offering
Date, or (b) the Fair Market Value of a share of Stock on the Purchase Date.

     10.  ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION.  Shares
          --------------------------------------------------------         
of Stock which are acquired pursuant to the exercise of all or any portion of a
Purchase Right for an Offering Period may be paid for only by means of payroll
deductions from the Participant's Compensation accumulated during the Offering
Period.  Except as set forth below, the amount of Compensation to be deducted
from a Participant's Compensation on each payday during an Offering Period shall
be determined by the Participant's subscription agreement.

          10.1      COMMENCEMENT OF PAYROLL DEDUCTIONS.  Payroll deductions
shall commence on the first payday following the Offering Date and shall
continue to the end of the Offering Period unless sooner altered or terminated
as provided in the Plan.

          10.2      LIMITATIONS ON PAYROLL DEDUCTIONS.  The amount of payroll
deductions with respect to the Plan for any Participant on any payday shall be
in one percent (1%) increments not to exceed ten percent (10%) of the
Participant's Compensation on such payday.  Notwithstanding the foregoing, the
Board may change the limits on payroll deductions effective as of a future
Offering Date, as determined by the Board.  Amounts deducted from Compensation
shall be reduced by any amounts contributed by the Participant and applied to
the purchase of Company stock pursuant to any other employee stock purchase plan
qualifying under Section 423 of the Code.

          10.3      ELECTION TO INCREASE, DECREASE OR STOP PAYROLL DEDUCTIONS.
During an Offering Period, a Participant may elect to increase or decrease the
amount deducted or stop deductions from his or her Compensation by filing an
amended subscription agreement with the Company on or before the "Change Notice
Date."  The "CHANGE NOTICE DATE" shall initially be the seventh (7th) day prior
to the end of the first pay period for which such election is to be effective;
however, the Company may change such Change Notice Date from time to time.
Notwithstanding the foregoing, the ability of a Participant to increase the
amount of such deductions shall be effective only for Offerings beginning after
August 1, 1996.

                                       6
<PAGE>
 
          10.4      PARTICIPANT ACCOUNTS.  Individual Plan accounts shall be
maintained for each Participant.  All payroll deductions from a Participant's
Compensation shall be credited to such account and shall be deposited with the
general funds of the Company.  All payroll deductions received or held by the
Company may be used by the Company for any corporate purpose.

          10.5      NO INTEREST PAID.  Interest shall not be paid on sums
deducted from a Participant's Compensation pursuant to the Plan.

          10.6      COMPANY ESTABLISHED PROCEDURES.  The Company may, from time
to time, establish or change (a) a minimum required payroll deduction amount for
participation in an Offering, (a) limitations on the frequency or number of
changes in the rate of payroll deduction during an Offering, (c) an exchange
ratio applicable to amounts withheld in a currency other than U.S. dollars, (d)
payroll deduction in excess of or less than the amount designated by a
Participant in order to adjust for delays or mistakes in the Company's
processing of subscription agreements, (e) the date(s) and manner by which the
Fair Market Value of a share of Stock is determined for purposes of
administration of the Plan, or (vi) such other limitations or procedures as
deemed advisable by the Company in the Company's sole discretion which are
consistent with the Plan and in accordance with the requirements of Section 423
of the Code.

     11.  PURCHASE OF SHARES.
          ------------------ 

          11.1      EXERCISE OF PURCHASE RIGHT.  On each Purchase Date of an
Offering Period, each Participant who has not withdrawn from the Offering or
whose participation in the Offering has not terminated on or before such
Purchase Date shall automatically acquire pursuant to the exercise of the
Participant's Purchase Right the number of whole shares of Stock arrived at by
dividing the total amount of the Participant's accumulated payroll deductions
for the Offering Period not previously applied toward the purchase of Stock by
the Purchase Price; provided, however, in no event shall the number of shares
purchased by the Participant during an Offering Period exceed the number of
shares subject to the Participant's Purchase Right.  No shares of Stock shall be
purchased on a Purchase Date on behalf of a Participant whose participation in
the Offering or the Plan has terminated on or before such Purchase Date.

          11.2      RETURN OF CASH BALANCE.  Any cash balance remaining in the
Participant's Plan account shall be refunded to the Participant as soon as
practicable after the Purchase Date.  However, in the event the cash to be
returned to a Participant pursuant to the preceding sentence is an amount less
than the amount necessary to purchase a whole share of Stock, the Company may
establish procedures whereby such cash is maintained in the Participant's Plan
account and applied toward the purchase of shares of Stock in the subsequent
Offering Period (or Purchase Period, as the case may be).

          11.3      TAX WITHHOLDING.  At the time a Participant's Purchase Right
is exercised, in whole or in part, or at the time a Participant disposes of some
or all of the shares of Stock he or she acquires under the Plan, the Participant
shall make adequate provision for the foreign, federal, state and local tax
withholding obligations of the Participating Company Group, if any, which arise
upon exercise of the Purchase Right or upon such disposition of shares,
respectively.  The Participating Company Group may, but shall not be obligated
to, withhold from the Participant's compensation the amount necessary to meet
such withholding obligations.

                                       7
<PAGE>
 
          11.4      EXPIRATION OF PURCHASE RIGHT.  Any portion of a
Participant's Purchase Right remaining unexercised after the end of the Offering
Period to which such Purchase Right relates shall expire immediately upon the
end of such Offering Period.

     12.  LIMITATIONS ON PURCHASE OF SHARES; RIGHTS AS A STOCKHOLDER.
          ---------------------------------------------------------- 

          12.1      FAIR MARKET VALUE LIMITATION.  Notwithstanding any other
provision of the Plan, no Participant shall be entitled to purchase shares of
Stock under the Plan (or any other employee stock purchase plan which is
intended to meet the requirements of Section 423 of the Code sponsored by the
Company or a Parent Corporation or Subsidiary Corporation) at a rate which
exceeds $25,000 in Fair Market Value, which Fair Market Value is determined for
shares purchased during a given Offering Period as of the Offering Date for such
Offering Period (or such other limit as may be imposed by the Code), for each
calendar year in which the Participant participates in the Plan (or any other
employee stock purchase plan described in this sentence).

          12.2      PRO RATA ALLOCATION.  In the event the number of shares of
Stock which might be purchased by all Participants in the Plan exceeds the
number of shares of Stock available in the Plan, the Company shall make a pro
rata allocation of the remaining shares in as uniform a manner as shall be
practicable and as the Company shall determine to be equitable.

          12.3      RIGHTS AS A STOCKHOLDER AND EMPLOYEE.  A Participant shall
have no rights as a stockholder by virtue of the Participant's participation in
the Plan until the date of the issuance of a stock certificate for the shares of
Stock being purchased pursuant to the exercise of the Participant's Purchase
Right.  No adjustment shall be made for cash dividends or distributions or other
rights for which the record date is prior to the date such stock certificate is
issued.  Nothing herein shall confer upon a Participant any right to continue in
the employ of the Participating Company Group or interfere in any way with any
right of the Participating Company Group to terminate the Participant's
employment at any time.

     13. WITHDRAWAL.
         ---------- 

          13.1      WITHDRAWAL FROM AN OFFERING.  A Participant may withdraw
from an Offering by signing and delivering to the Company's payroll or other
designated office a written notice of withdrawal on a form provided by the
Company for such purpose.  Such withdrawal may be elected at any time prior to
the end of an Offering Period; provided, however, if a Participant withdraws
after a Purchase Date, the withdrawal shall not affect shares of Stock acquired
by the Participant on such Purchase Date.  Unless otherwise indicated,
withdrawal from an Offering shall not result in a withdrawal from the Plan or
any succeeding Offering therein.  A Participant is prohibited from again
participating in an Offering at any time following withdrawal from such
Offering.  The Company may impose, from time to time, a requirement that the
notice of withdrawal be on file with the Company's payroll office or other
designated office for a reasonable period prior to the effectiveness of the
Participant's withdrawal from an Offering.

                                       8
<PAGE>
 
          13.2      WITHDRAWAL FROM THE PLAN.  A Participant may withdraw from
the Plan by signing and delivering to the Company's payroll office or other
designated office a written notice of withdrawal on a form provided by the
Company for such purpose.  Withdrawals made after a Purchase Date shall not
affect shares of Stock acquired by the Participant on such Purchase Date.  In
the event a Participant voluntarily elects to withdraw from the Plan, the
Participant may not resume participation in the Plan during the same Offering
Period, but may participate in any subsequent Offering under the Plan by again
satisfying the requirements of Sections 5 and 7.1.  The Company may impose, from
time to time, a requirement that the notice of withdrawal be on file with the
Company's payroll office or other designated office for a reasonable period
prior to the effectiveness of the Participant's withdrawal from the Plan.

          13.3      RETURN OF PAYROLL DEDUCTIONS.  Upon a Participant's
withdrawal from an Offering or the Plan pursuant to Sections 13.1 or 13.2,
respectively, the Participant's accumulated payroll deductions which have not
been applied toward the purchase of shares of Stock shall be returned as soon as
practicable after the withdrawal, without the payment of any interest, to the
Participant, and the Participant's interest in the Offering or the Plan, as
applicable, shall terminate.  Such accumulated payroll deductions may not be
applied to any other Offering under the Plan.

     14.  TERMINATION OF EMPLOYMENT OR ELIGIBILITY.  Termination of a
          ----------------------------------------                   
Participant's employment with the Company for any reason, including retirement,
disability or death or the failure of a Participant to remain an Eligible
Employee, shall terminate the Participant's participation in the Plan
immediately.  In such event, the payroll deductions credited to the
Participant's Plan account since the last Purchase Date shall, as soon as
practicable, be returned to the Participant or, in the case of the Participant's
death, to the Participant's legal representative, and all of the Participant's
rights under the Plan shall terminate.  Interest shall not be paid on sums
returned to a Participant pursuant to this Section 14.  A Participant whose
participation has been so terminated may again become eligible to participate in
the Plan by again satisfying the requirements of Sections 5 and 7.1.

     15.  TRANSFER OF CONTROL.
          ------------------- 

          15.1      DEFINITIONS.

                    (a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the
Company a party; (iii) the sale, exchange, or transfer of all or substantially
all of the assets of the Company; or (iv) a liquidation or dissolution of the
Company.

                    (b) A "TRANSFER OF CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets

                                       9
<PAGE>
 
of the Company were transferred (the "TRANSFEREE CORPORATION(S)"), as the case
may be.  For purposes of the preceding sentence, indirect beneficial ownership
shall include, without limitation, an interest resulting from ownership of the
voting stock of one or more corporations which, as a result of the Transaction,
own the Company or the Transferee Corporation(s), as the case may be, either
directly or through one or more subsidiary corporations.  The Board shall have
the right to determine whether multiple sales or exchanges of the voting stock
of the Company or multiple Ownership Change Events are related, and its
determination shall be final, binding and conclusive.

          15.2      EFFECT OF TRANSFER OF CONTROL ON PURCHASE RIGHTS.  In the
event of a Transfer of Control, the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the
"ACQUIRING CORPORATION"), may assume the Company's rights and obligations under
the Plan or substitute substantially equivalent Purchase Rights for stock of the
Acquiring Corporation.  If the Acquiring Corporation elects not to assume or
substitute for the outstanding Purchase Rights, the Board may, in its sole
discretion and notwithstanding any other provision herein to the contrary,
adjust the Purchase Date of the then current Purchase Period to a date on or
before the date of the Transfer of Control, but shall not adjust the number of
shares of Stock subject to any Purchase Right.  All Purchase Rights which are
neither assumed or substituted for by the Acquiring Corporation in connection
with the Transfer of Control nor exercised as of the date of the Transfer of
Control shall terminate and cease to be outstanding effective as of the date of
the Transfer of Control.  Notwithstanding the foregoing, if the corporation the
stock of which is subject to the outstanding Purchase Rights immediately prior
to an Ownership Change Event described in Section 15.1(a)(i) constituting a
Transfer of Control is the surviving or continuing corporation and immediately
after such Ownership Change Event less than fifty percent (50%) of the total
combined voting power of its voting stock is held by another corporation or by
other corporations that are members of an affiliated group within the meaning of
section 1504(a) of the Code without regard to the provisions of section 1504(b)
of the Code, the outstanding Purchase Rights shall not terminate unless the
Board otherwise provides in its sole discretion.

     16.  NONTRANSFERABILITY OF PURCHASE RIGHTS.  A Purchase Right may not
          -------------------------------------                           
be transferred in any manner otherwise than by will or the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant.  The Company, in its absolute discretion, may impose
such restrictions on the transferability of the shares purchasable upon the
exercise of a Purchase Right as it deems appropriate and any such restriction
shall be set forth in the respective subscription agreement and may be referred
to on the certificates evidencing such shares.

     17.  REPORTS.  Each Participant who has exercised all or part of his
          -------                                                        
or her Purchase Right shall receive, as soon as practicable after the Purchase
Date, a report of such Participant's Plan account setting forth the total
payroll deductions accumulated, the number of shares of Stock purchased, the
Purchase Price for such shares, the date of purchase and the remaining cash
balance to be refunded or retained in the Participant's Plan account pursuant to
Section 11.2, if any.  Each Participant shall be provided information concerning
the Company equivalent to that information generally made available to the
Company's common stockholders.

                                       10
<PAGE>
 
     18.  RESTRICTION ON ISSUANCE OF SHARES.  The issuance of shares under
          ---------------------------------                               
the Plan shall be subject to compliance with all applicable requirements of
foreign, federal or state law with respect to such securities.  A Purchase Right
may not be exercised if the issuance of shares upon such exercise would
constitute a violation of any applicable foreign, federal or state securities
laws or other law or regulations.  In addition, no Purchase Right may be
exercised unless (a) a registration statement under the Securities Act of 1933,
as amended, shall at the time of exercise of the Purchase Right be in effect
with respect to the shares issuable upon exercise of the Purchase Right, or (b)
in the opinion of legal counsel to the Company, the shares issuable upon
exercise of the Purchase Right may be issued in accordance with the terms of an
applicable exemption from the registration requirements of said Act.  The
inability of the Company to obtain from any regulatory body having jurisdiction
the authority, if any, deemed by the Company's legal counsel to be necessary to
the lawful issuance and sale of any shares under the Plan shall relieve the
Company of any liability in respect of the failure to issue or sell such shares
as to which such requisite authority shall not have been obtained.  As a
condition to the exercise of a Purchase Right, the Company may require the
Participant to satisfy any qualifications that may be necessary or appropriate,
to evidence compliance with any applicable law or regulation, and to make any
representation or warranty with respect thereto as may be requested by the
Company.

     19.  LEGENDS.  The Company may at any time place legends or other
          -------                                                     
identifying symbols referencing any applicable foreign, federal or state
securities law restrictions or any provision convenient in the administration of
the Plan on some or all of the certificates representing shares of Stock issued
under the Plan.  The Participant shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to a Purchase Right in the possession of the Participant in order to
carry out the provisions of this Section.  Unless otherwise specified by the
Company, legends placed on such certificates may include but shall not be
limited to the following:

          "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN
EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED.  THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY
SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE
REGISTERED HOLDER HEREOF MADE ON OR BEFORE ______________, 19__.  THE REGISTERED
HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN THE REGISTERED HOLDER'S
NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE."

     20.  NOTIFICATION OF SALE OF SHARES.  The Company may require the
          ------------------------------                              
Participant to give the Company prompt notice of any disposition of shares
acquired by exercise of a Purchase Right within two years from the date of
granting such Purchase Right or one year from the date of exercise of such
Purchase Right.  The Company may require that until such time as a Participant
disposes of shares acquired upon exercise of a Purchase Right, the Participant
shall hold all such shares in the Participant's name (and not in the name of any
nominee) until the lapse of the time periods with respect to such Purchase Right
referred to in the preceding sentence.  The Company may direct that the
certificates evidencing shares acquired by exercise of a Purchase Right refer to
such requirement to give prompt notice of disposition.

                                       11
<PAGE>
 
     21.  AMENDMENT OR TERMINATION OF THE PLAN.  The Board may at any time
          ------------------------------------                            
amend or terminate the Plan, except that (a) such termination shall not affect
Purchase Rights previously granted under the Plan, except as permitted under the
Plan, and (b) no amendment may adversely affect a Purchase Right previously
granted under the Plan (except to the extent permitted by the Plan or as may be
necessary to qualify the Plan as an employee stock purchase plan pursuant to
Section 423 of the Code or to obtain qualification or registration of the shares
of Stock under applicable foreign, federal or state securities laws).  In
addition, an amendment to the Plan must be approved by the stockholders of the
Company within twelve (12) months of the adoption of such amendment if such
amendment would authorize the sale of more shares than are authorized for
issuance under the Plan or would change the definition of the corporations that
may be designated by the Board as Participating Companies.

                                       12
<PAGE>
 
          IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing IKOS Systems, Inc. 1996 Employee Stock Purchase Plan was duly
adopted by the Board on October 26, 1995 and amended by the Board on July 23,
1996.



                                        Secretary

                                        /s/ Joseph W. Rockom
                                        ---------------------------

                                       13
<PAGE>
 
                                  PLAN HISTORY

October 26, 1995    Board adopts Plan, with an initial reserve of 100,000
                    shares.

February 8, 1996    Stockholders approve Plan, with an initial reserve of
                    100,000 shares.

July 23, 1996       Board amends Plan to eliminate 6-month service requirement
                    except for Section 16 insiders.

October 25, 1996    Board amends Plan in connection with compliance with final
                    version of new Rule 16-3.

                                       14
<PAGE>
 
                               IKOS SYSTEMS, INC.
                       1996 EMPLOYEE STOCK PURCHASE PLAN
                             SUBSCRIPTION AGREEMENT

[_]  Original Application for participation commencing with the Offering Period
     beginning ____________________ _____, 199__.

[_]  Change in Percentage of Payroll Deductions effective with the pay period
     ending ____________________ _____, 199__.

     I hereby elect to participate in the 1996 Employee Stock Purchase Plan (the
"PLAN") of IKOS Systems, Inc. (the "COMPANY") and subscribe to purchase shares
of the Company's common stock as determined in accordance with the terms of the
Plan.

     I hereby authorize payroll deductions in the amount of ______________
percent (in 1% increments not to exceed 10%) of my compensation from each
paycheck throughout the "OFFERING PERIOD" (as defined in the Plan) in accordance
with the terms of the Plan.  ("COMPENSATION" for purposes of the Plan means my
base salary, overtime, commissions and bonuses.)  I understand that these
payroll deductions will be accumulated for the purchase of shares of common
stock of the Company at the applicable purchase price determined in accordance
with the Plan.  I further understand that, except as otherwise set forth in the
Plan, I will automatically purchase shares on each Purchase Date under the Plan
unless I withdraw from the Plan or from the Offering by giving written notice to
the Company or unless I terminate employment.

     I further understand that I will automatically participate in each
subsequent Offering which commences immediately after the last day of an
Offering in which I am participating under the Plan until such time as I file
with the Company a notice of withdrawal from the Plan on such form as may be
established from time to time by the Company or I terminate employment.

     Shares purchased for me under the Plan should be issued in the name set
forth below.  (I understand that shares may be issued either in my name alone or
together with my spouse as community property or in joint tenancy.)

     NAME:     _________________________________________________________________

     ADDRESS:  _________________________________________________________________

               _________________________________________________________________

     MY SOCIAL SECURITY NUMBER: _______________________________________________

     I hereby authorize withholding from my compensation in order to satisfy the
foreign, federal, state and local tax withholding obligations, if any, which may
arise upon my purchase of shares under the Plan and/or upon my disposition of
shares I acquired under the Plan.  I hereby agree that until I dispose of the
shares, unless otherwise permitted by the Company, I will hold all shares I
acquire under the Plan in the name entered above (and not in the name of any
nominee) for at least two (2) years from the first day of the Offering Period in
which, and at least one (1) year from the Purchase Date on which, I acquired
such shares.  I further agree that I will promptly notify the Chief Financial
Officer of the Company in writing of any transfer of such shares prior to the
end of the periods referred to in the preceding sentence.

     I am familiar with the provisions of the Plan and hereby agree to
participate in the Plan subject to all of the provisions thereof.  I understand
that the Board of Directors of the Company reserves the right to amend the Plan
and my right to purchase stock under the Plan as may be necessary to qualify the
Plan as an employee stock purchase plan as defined in section 423 of the
Internal Revenue Code of 1986, as amended, or to obtain qualification or
registration of the Company's common stock to be issued out of the Plan under
applicable foreign, federal and state securities laws.  I understand that the
effectiveness of this subscription agreement is dependent upon my eligibility to
participate in the Plan.

Date: ___________________ Signature: __________________________________________

                          Name Printed: _______________________________________

                                       15
<PAGE>
 
                               IKOS SYSTEMS, INC.
                       1996 EMPLOYEE STOCK PURCHASE PLAN
                              NOTICE OF WITHDRAWAL


     I hereby elect to withdraw from the offering of the common stock of IKOS
Systems, Inc. under the 1996 Employee Stock Purchase Plan (the "PLAN") which
began on _________________________, 199__ and in which I am currently
participating (the "CURRENT OFFERING").

A.  Current Offering. I elect to terminate my participation in the Current
    ----------------
    Offering immediately. I hereby request that all payroll deductions credited
    to my account under the Plan (if any) not previously used to purchase shares
    under the Plan shall not be used to purchase shares on the last day of the
                         ---
    Current Offering. Instead, I request that all such amounts be paid to me as
    soon as practicable. I understand that this election immediately terminates
    my interest in the Current Offering.

B.  Future Offerings. As to my participation in future offerings of common stock
    ----------------
    under the Plan, I elect as follows (check one):


[_]  1.   I elect to participate in future offerings under the Plan.

          I understand that by making this election I will participate in the
          next offering under the Plan commencing subsequent to the Current
          Offering, and in each subsequent offering commencing immediately after
          the last day of an offering in which I participate, until such time as
          I elect to withdraw from the Plan or from any such subsequent
          offering.


[_]  2.   I elect not to participate in future offerings under the Plan.
                  ---                                                   

          I understand that by making this election I terminate my interest in
          the Plan and that no further payroll deductions will be made unless I
          elect in accordance with the Plan to become a participant in another
          offering under the Plan.

     I understand that if no election is made as to participation in future
offerings under the Plan, I will be deemed to have elected to participate in
future offerings.


Date: _________________  Signature: ___________________________________________


                         Name Printed: ________________________________________

                                       16