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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 4
TO SCHEDULE 14D-1
TENDER OFFER STATEMENT
(PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
QUICKTURN DESIGN SYSTEMS, INC.
(Name of Subject Company)
MENTOR GRAPHICS CORPORATION
MGZ CORP.
(Bidders)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(including the Associated Rights)
(Title of Class of Securities)
74838E102
(CUSIP Number of Class of Securities)
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WALDEN C. RHINES
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MENTOR GRAPHICS CORPORATION
8005 S.W. BOECKMAN ROAD
WILSONVILLE, OREGON 97070-7777
(503) 685-1200
(Name, Address and Telephone Number of Persons Authorized
to Receive Notices and Communications on Behalf of Bidders)
COPY TO:
JOHN J. HUBER, ESQ. CHRISTOPHER L. KAUFMAN, ESQ.
LATHAM & WATKINS LATHAM & WATKINS
1001 PENNSYLVANIA AVENUE, N.W. 75 WILLOW ROAD
WASHINGTON, DC 20004 MENLO PARK, CALIFORNIA 94025
(202) 637-2200 (650) 328-4600
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MGZ Corp., a Delaware corporation ("Purchaser"), and Mentor Graphics
Corporation, an Oregon corporation ("Parent"), hereby amend and supplement their
Tender Offer Statement on Schedule 14D-1 filed on August 12, 1998 (the
"Statement"), as amended, with respect to the offer by Purchaser to purchase all
outstanding shares of Common Stock, par value $.001 per share, of Quickturn
Design Systems, Inc., a Delaware corporation, for a purchase price of $12.125
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 August
12, 1998 (the "Offer to Purchase"), as amended and supplemented by the
Supplement thereto, dated August 27, 1998 (the "Supplement"), and the related
Letter of Transmittal (which, together with the Offer to Purchase, as each may
be amended and supplemented from time to time, constitute the "Offer").
Capitalized terms used herein and not defined have the meanings ascribed to them
in the Schedule 14D-1 or in the Offer to Purchase.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(c) The information set forth in Section 3 of the Supplement is incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) The information set forth in the "INTRODUCTION" to the
Supplement and in Section 5 to the Supplement is incorporated herein by
reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the "INTRODUCTION" to the Supplement
and in Sections 5 and 7 to the Supplement is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in Section 6 to the Supplement is
incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the "INTRODUCTION" to the Supplement
and in Section 8 to the Supplement is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in Sections 5 and 11 to the Supplement is
incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in Sections 5 and 7 to the Supplement is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(e) The information set forth in Sections 7 and 10 to the Supplement is
incorporated herein by reference.
Item 10(f) of the Statement is hereby amended and supplemented by the
following:
1. The information set forth in the entire Supplement, a copy of which is
filed with this Schedule 14D-1 as Exhibit (a)(10) is incorporated herein by
reference.
2
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2. Slide presentation of Parent, a copy of which is filed with this Schedule
14D-1 as Exhibit (a)(13) is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C> <C>
(a)(10) -- Supplement to the Offer to Purchase, dated August 27, 1998.
(a)(11) -- Revised Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(a)(12) -- Revised Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(13) -- Slide Presentation of Parent.
</TABLE>
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SIGNATURES
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.
<TABLE>
<S> <C> <C>
Dated: August 27, 1998 MENTOR GRAPHICS CORPORATION
By: /s/ Gregory K. Hinckley
Name: Gregory K. Hinckley
Title: Executive Vice President, Chief Operating
Officer and Chief Financial Officer
MGZ CORP.
By: /s/ Gregory K. Hinckley
Name: Gregory K. Hinckley
Title: Secretary and Chief Financial Officer
</TABLE>
4
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SUPPLEMENT TO THE OFFER TO PURCHASE DATED AUGUST 12, 1998
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
QUICKTURN DESIGN SYSTEMS, INC.
AT
$12.125 NET PER SHARE
BY
MGZ CORP.
A WHOLLY OWNED SUBSIDIARY OF
MENTOR GRAPHICS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, SEPTEMBER 9, 1998 UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE (THE "COMPANY COMMON STOCK"),
OF QUICKTURN DESIGN SYSTEMS, INC. (THE "COMPANY"), INCLUDING THE ASSOCIATED
PREFERRED STOCK PURCHASE RIGHTS ISSUED PURSUANT TO THE RIGHTS AGREEMENT, DATED
JANUARY 10, 1996, BETWEEN THE COMPANY AND THE FIRST NATIONAL BANK OF BOSTON, AS
RIGHTS AGENT (THE "RIGHTS" AND, TOGETHER WITH THE COMPANY COMMON STOCK, THE
"SHARES"), WHICH, TOGETHER WITH THE SHARES OWNED BY MENTOR GRAPHICS CORPORATION
("PARENT") AND ITS SUBSIDIARIES, INCLUDING MGZ CORP. ("PURCHASER"), WOULD
REPRESENT A MAJORITY OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE
DATE OF PURCHASE, (2) THE RIGHTS HAVING BEEN REDEEMED BY THE BOARD OF DIRECTORS
OF THE COMPANY OR PURCHASER BEING SATISFIED, IN ITS REASONABLE DISCRETION, THAT
THE RIGHTS HAVE BEEN INVALIDATED OR ARE OTHERWISE INAPPLICABLE TO THE OFFER AND
THE PROPOSED MERGER DESCRIBED HEREIN (THE "PROPOSED MERGER"), (3) PURCHASER
BEING SATISFIED, IN ITS REASONABLE DISCRETION, THAT, AFTER CONSUMMATION OF THE
OFFER, THE PROVISIONS OF SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
WOULD NOT PROHIBIT FOR ANY PERIOD OF TIME, OR IMPOSE ANY VOTING REQUIREMENT IN
EXCESS OF MAJORITY STOCKHOLDER APPROVAL WITH RESPECT TO, THE PROPOSED MERGER OR
OTHER BUSINESS COMBINATION WITH PURCHASER OR ANY AFFILIATE OF PURCHASER AND (4)
THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED. THE OFFER IS
ALSO SUBJECT TO OTHER TERMS AND CONDITIONS WHICH ARE CONTAINED IN THE OFFER TO
PURCHASE. SEE "SECTION 9. CERTAIN CONDITIONS OF THE OFFER" OF THIS SUPPLEMENT
(AS DEFINED BELOW).
THE OFFER IS NOT CONDITIONED ON PURCHASER OBTAINING FINANCING.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (1) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it, together with the certificate(s) evidencing
tendered Shares and, if separate, the certificates representing the Rights, and
any other required documents, to the Depositary or tender such Shares pursuant
to the procedures for book-entry transfer set forth in "Section 3. Procedure for
Tendering Shares" of the Offer to Purchase or (2) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Any stockholder whose Shares are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
must contact such broker, dealer, commercial bank, trust company or other
nominee if such stockholder desires to tender such Shares. Unless and until
Purchaser declares that the Rights Condition is satisfied, stockholders will be
required to tender one Right for each share of Company Common Stock tendered in
order to effect a valid tender of such share of Company Common Stock.
A stockholder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available, or who cannot comply with the
procedure for book-entry transfer on a timely basis, may tender such Shares by
following the procedure for guaranteed delivery set forth in "Section 3.
Procedure for Tendering Shares" of the Offer to Purchase.
Questions or requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Supplement. Additional copies of
this Supplement, the Offer to Purchase, the Letter of Transmittal and the Notice
of Guaranteed Delivery may also be obtained from the Information Agent or from
brokers, dealers, commercial banks or trust companies.
THE DEALER MANAGER FOR THE OFFER IS:
SALOMON SMITH BARNEY
August 27, 1998
<PAGE>
To the Holders of Common Stock (including the Associated Preferred
Stock Purchase Rights) of Quickturn Design Systems, Inc.:
INTRODUCTION
The following information amends and supplements the Offer to Purchase,
dated August 12, 1998 (as amended and supplemented by the Schedule 14D-1 to
which the Offer to Purchase is an exhibit, the "Offer to Purchase") of MGZ
Corp., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of
Mentor Graphics Corporation, an Oregon corporation ("Parent").
The purpose of the Offer and the Proposed Merger (as defined below) 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 all outstanding Shares. Parent intends, as soon as
practicable following consummation of the Offer, to propose and seek to have the
Company consummate a merger or similar business combination with Purchaser or
another direct or indirect subsidiary of Parent (the "Proposed Merger"). The
purpose of the Proposed Merger is to acquire all Shares not tendered and
purchased pursuant to the Offer or otherwise. At the Effective Time of the
Proposed Merger, it is anticipated that each then outstanding Share (other than
Shares owned by Parent and its subsidiaries, including Purchaser, Shares held in
the treasury of the Company and Shares held by stockholders of the Company who
shall have demanded and perfected, and who shall not have withdrawn or otherwise
lost, dissenters' rights under the Delaware General Corporation Law) would be
converted into the right to receive an amount in cash equal to the Offer Price.
The Offer is subject to the fulfillment of certain conditions, including (i)
the Minimum Condition, (ii) the Rights Condition, (iii) the Section 203
Condition and (iv) the HSR Condition. The Offer is also subject to the
conditions set forth in "Section 9. Certain Conditions of the Offer" of this
Supplement.
Except as otherwise set forth in this Supplement to the Offer to Purchase
(the "Supplement"), the terms and conditions set forth in the Offer to Purchase
remain applicable in all respects to the Offer, and this Supplement should be
read in conjunction with the Offer to Purchase. Unless the context requires
otherwise, terms not defined herein have the meanings ascribed to them in the
Offer to Purchase.
THIS SUPPLEMENT DOES NOT CONSTITUTE A SOLICITATION OF A PROXY, CONSENT,
AUTHORIZATION OR AGENT DESIGNATION FOR OR WITH RESPECT TO ANY SPECIAL MEETING OF
THE COMPANY'S STOCKHOLDERS. THE SOLICITATION OF AGENT DESIGNATIONS TO CALL THE
SPECIAL MEETING AND OF PROXIES TO REMOVE THE COMPANY BOARD, REDUCE THE
AUTHORIZED NUMBER OF DIRECTORS, ELECT THE NOMINEES AND TAKE OTHER ACTION AT THE
SPECIAL MEETING WILL BE MADE ONLY PURSUANT TO SEPARATE SOLICITATION MATERIALS
COMPLYING WITH ALL APPLICABLE REQUIREMENTS OF SECTION 14(A) OF THE EXCHANGE ACT.
THE OFFER TO PURCHASE AND THIS SUPPLEMENT, AND THE AMENDMENTS THERETO,
CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
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1. INTRODUCTION
The fourth and fifth full paragraphs of page 2 of the Offer to Purchase are
amended and restated in their entirety as follows:
THE MINIMUM CONDITION. Consummation of the Offer is conditioned upon there
being validly tendered and not withdrawn prior to expiration of the Offer that
number of Shares which, together with the Shares owned by Parent and its
subsidiaries, including Purchaser, would represent a majority of the outstanding
Shares on a fully diluted basis on the date of purchase (the "Minimum Number of
Shares") (the "Minimum Condition"). Purchaser reserves the right (subject to the
applicable rules and regulations of the Commission), which it currently has no
intention of exercising, to waive or reduce the Minimum Condition and to elect
to purchase, pursuant to the Offer, fewer than the Minimum Number of Shares. See
"Section 1. Terms of the Offer" and "Section 14. Certain Conditions of the
Offer."
According to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1998 (the "Company Form 10-Q"), as of July 31, 1998,
there were 17,922,518 shares of Company Common Stock issued and outstanding. In
addition, according to the Company Form 10-Q, as of June 30, 1998, there were
4,899,274 Shares issuable upon exercise of outstanding stock options and
warrants (the "Option Shares"). Based on the foregoing and assuming that (i) no
shares of Company Common Stock have been issued or acquired by the Company after
July 31, 1998 (other than as described in clause (iii) below, (ii) no options
have been granted or have expired since June 30, 1998 and (iii) all Options
Shares have been issued at or prior to the consummation of the Offer, there
would be 22,821,792 Shares outstanding immediately following the consummation of
the Offer and the Minimum Number of Shares would be 11,410,897 Shares. Parent
currently owns 591,400 Shares and Purchaser currently owns 100 Shares which
Parent recently acquired in open market transactions. See "Schedule II. Schedule
of Transactions in Shares." Therefore, 10,819,397 Shares need to be tendered and
not withdrawn prior to the expiration of the Offer to satisfy the Minimum
Condition.
The first full paragraph of page 3 of the Offer to Purchase is amended and
restated in its entirety as follows:
THE RIGHTS CONDITION. Consummation of the Offer is conditioned upon
Purchaser being satisfied, in its reasonable discretion, that the Rights have
been redeemed or invalidated or are otherwise inapplicable to the Offer and the
Proposed Merger (the "Rights Condition").
The first full paragraph of page 4 of the Offer to Purchase is amended and
restated in its entirety as follows:
THE SECTION 203 CONDITION. Consummation of the Offer is conditioned upon
Purchaser being satisfied, in its reasonable discretion, that, after
consummation of the Offer, the provisions of Section 203 of the DGCL ("Section
203") would not prohibit for any period of time, or impose any voting
requirement in excess of majority stockholder approval with respect to, the
Proposed Merger or any other business combination with Purchaser or any
affiliate of Purchaser (the "Section 203 Condition").
2. TERMS OF THE OFFER
The third and fourth full paragraphs of page 5 of the Offer to Purchase are
amended and restated in their entirety as follows:
Purchaser expressly reserves the right at any time, and from time to time,
to extend for any reason the period of time during which the Offer is open,
including the occurrence of any of the conditions specified in "Section 14.
Certain Conditions of the Offer," by giving oral or written notice of such
extension to the Depositary. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
rights of tendering stockholders to withdraw their Shares. See "Section 4.
Withdrawal Rights."
2
<PAGE>
Subject to the applicable rules and regulations of the Commission, Purchaser
also expressly reserves the right, at any time and from time to time, (i) to
delay acceptance for payment of, or, regardless of whether such Shares were
theretofore accepted for payment, payment for any Shares pending receipt of any
regulatory approval specified in "Section 15. Certain Regulatory and Legal
Matters," (ii) to terminate the Offer and not accept for payment any Shares upon
the occurrence of any of the conditions specified in "Section 14. Certain
Conditions of the Offer" and (iii) to waive any condition or otherwise amend the
Offer in any respect, by giving oral or written notice of such delay,
termination, waiver or amendment to the Depositary and by making a public
announcement thereof. Purchaser acknowledges that (i) Rule 14e-l(c) under the
Exchange Act requires Purchaser to pay the consideration offered or to return
the Shares tendered promptly after the termination or withdrawal of the Offer
and (ii) Purchaser may not delay acceptance for payment of, or payment for
(except as provided in clause (i) of the first sentence of this paragraph), any
Shares upon the occurrence of any of the conditions specified in "Section 14.
Certain Conditions of the Offer" without extending the period of time during
which the Offer is open.
3. PRICE RANGE OF SHARES
The discussion set forth in Section 6 of the Offer to Purchase is amended
and supplemented as follows:
The high and low last sales prices per Share as reported by the Nasdaq
National Market for the third quarter of 1998 (through August 26, 1998) were
$11.38 and $7.38, respectively. HOLDERS OF SHARES ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE SHARES.
4. CERTAIN INFORMATION CONCERNING THE COMPANY SINCE AUGUST 12, 1998
The discussion set forth in Section 7 of the Offer to Purchase is amended
and supplemented as follows:
FINANCIAL INFORMATION. Set forth below is selected consolidated financial
data with respect to the Company excerpted or derived in part from the audited
financial statements contained in the Company Form 10-K and from the unaudited
financial statements contained in the Company's Quarterly Reports on Form 10-Q
for the quarters ended June 30, 1998 and June 30, 1997, in each case filed by
the Company with the Commission. More comprehensive financial information is
included in such reports and other documents filed by the Company with the
Commission. For the periods covered by such reports, the following summary is
qualified in its entirety by reference to such reports and such other documents
and all the financial information (including any related notes) contained
therein. Such reports and other documents should be available for inspection and
copies thereof should be obtainable in the manner set forth below.
3
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QUICKTURN DESIGN SYSTEMS, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,(1)
---------------------- ----------------------------------
1998 1997(2) 1997(3) 1996(4) 1995(4)
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<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenues....................................... $ 47,512 $ 47,840 $ 110,404 $ 109,578 $ 82,442
Research and development............................. $ 12,464 $ 11,671 $ 23,499 $ 19,706 $ 15,436
Operating income (loss).............................. $ (12,372) $ (2,935) $ (13,466) $ 17,973 $ 11,085
Net income (loss).................................... $ (6,422) $ (1,398) $ (5,346) $ 14,131 $ 12,478
Gross margin percent................................. 54% 68% 70% 70% 70%
PER SHARE DATA
Net income (loss) per share--basic................... $ (0.36) $ (0.08) $ (0.31) $ 0.87 $ 0.81
Net income (loss) per share--diluted................. $ (0.36) $ (0.08) $ (0.31) $ 0.79 $ 0.74
Cash dividends per common share outstanding.......... -- -- -- -- --
Weighted average number of shares
outstanding--basic................................. 17,754 16,701 17,110 16,323 15,497
Weighted average number of shares
outstanding--diluted............................... 17,754 16,701 17,110 17,912 16,806
BALANCE SHEET DATA (AS OF THE DATES INDICATED)
Cash and investments, short-term..................... $ 37,029 $ 23,320 $ 32,808 $ 36,404 $ 31,397
Cash and investments, long-term...................... $ 21,568 $ 23,759 $ 20,326 $ 18,198 $ 9,110
Working capital...................................... $ 40,909 $ 40,527 $ 51,143 $ 49,243 $ 44,381
Property, plant and equipment, net................... $ 14,034 $ 8,775 $ 11,118 $ 11,243 $ 13,003
Total assets......................................... $ 116,046 $ 119,274 $ 129,192 $ 111,977 $ 94,240
Short-term borrowings................................ $ 715 $ 2,440 $ 1,095 $ 3,502 $ 3,401
Long-term debt and other deferrals................... $ -- $ -- $ -- $ -- $ 3,701
Stockholders' equity................................. $ 85,884 $ 93,755 $ 91,898 $ 84,045 $ 66,337
</TABLE>
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(1) Effective in 1997, the Company changed its fiscal year to December 31 from a
52-week or 53-week year, ending on the last Sunday in December.
(2) The six months of 1997 included merger related charges of $1,200.
(3) The 1997 results include one-time acquisition and merger related charges of
$19.2 million.
(4) The 1995 and 1996 results of operations and certain balance sheet data have
been restated to reflect the February 1997 merger of the Company with
SpeedSim-TM-, Inc. which was accounted for as a pooling of interests.
5. CERTAIN INFORMATION CONCERNING PARENT AND PURCHASER
The following paragraph is added and inserted after the first paragraph
under the heading "Other Information" on page 17 of the Offer to Purchase:
Parent is the holder of an unsecured subordinated promissory note of the
Company dated September 29, 1993 (the "Promissory Note"), issued in connection
with the termination of a Remarketing Agreement between Parent and PiE Design
Systems, Inc., which merged with the Company in June 1993. Pursuant to the terms
of the Promissory Note, the Company agreed to pay Parent the principal sum of
$3,000,000, together with interest on the outstanding principal sum at a rate of
four percent (4%) per
4
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annum, in five equal installments commencing on September 30, 1994. The final
installment of $600,000 under the Promissory Note is due and payable on
September 30, 1998.
6. SOURCE AND AMOUNT OF FUNDS
The first full paragraph under the section entitled "Section 9. Source and
Amount of Funds" beginning on page 17 of the Offer to Purchase is amended and
restated in its entirety as follows:
The total amount of funds required by Purchaser to purchase all of the
outstanding Shares as of July 31, 1998 pursuant to the Offer and to pay fees and
expenses related to the Offer and Proposed Merger is estimated to be
approximately $227 million ($288 million on a fully diluted basis). Purchaser
intends to obtain all funds needed for the Offer and the Proposed Merger through
a capital contribution or a loan from Parent. Parent plans to provide the funds
for such capital contribution or loan from its available cash and working
capital and pursuant to the Credit Agreement described below. At June 30, 1998,
Parent had short-term cash and investments of approximately $138.6 million and
working capital of approximately $152.9 million.
7. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY SINCE AUGUST 12, 1998
The paragraph immediately following the letter dated August 11, 1998 on page
19 of the Offer to Purchase is deleted in its entirety.
The following paragraphs are added and inserted after the first full
paragraph of page 20 of the Offer to Purchase:
On August 12, 1998, the Company issued a press release urging its
stockholders to take no action with respect to the Offer until the Company Board
made its recommendation.
On August 14, 1998, Dr. Rhines telephoned Mr. Keith R. Lobo, President,
Chief Executive Officer and director of the Company. Dr. Rhines stated that,
even if the outstanding litigation between the companies were resolved, Parent
would still desire to enter into discussions with the Company regarding the
Proposed Acquisition. Dr. Rhines emphasized that Parent's interest in the
transaction stems from the strategic benefits of the Proposed Acquisition to the
employees, stockholders and customers of both companies. Mr. Lobo stated that he
would convey Dr. Rhines' position to the Company Board.
On August 20, 1998, Parent filed Premerger Notification and Report Forms
under the HSR Act with the FTC and the Antitrust Division.
On August 20, 1998, Parent filed definitive agent designation materials with
the Commission and commenced solicitation of Agent Designations.
On August 24, 1998, the Company issued a press release and filed a Schedule
14D-9 in which the Company rejected the Offer and recommended that the
stockholders of the Company not tender their shares to Parent and Purchaser
pursuant to the Offer. The reasons given by the Company included that the Offer
was inadequate and not in the best interests of the Company's stockholders, that
the Offer did not fully reflect the long-term value of the Company, and that
stockholder interests would be better served by the Company continuing to pursue
its business plan. The Company also announced that the Company Board amended
certain provisions of the Company's Bylaws and authorized certain amendments to
the Rights Agreement. The amendment to the Company's Bylaws provide that the
Company Board shall, upon the receipt of requests from at least 10% of the
stockholders, set a date for any meeting of not less than 90 days nor more than
100 days after the receipt and determination by the Company of the validity of
such requests. The amendments to the Rights Agreement include removal of the
so-called "dead-hand" provisions that required concurrence of the Continuing
Directors to undertake certain actions and the addition of a prohibition on the
redemption or exchange of the Rights or any amendment to the Rights Agreement
for a period of 180 days following an annual or special meeting at which a
majority of the
5
<PAGE>
Company Board is elected, if such redemption, exchange or amendment is
reasonably likely to facilitate a change in control transaction with any person
or entity who proposed, nominated or supported a director elected at such annual
or special meeting.
On August 24, 1998, Parent issued a press release responding to the
Company's Schedule 14D-9 and reiterating its commitment to completing the
Proposed Acquisition. Parent stated that the Company's rejection of the Offer
was unjustifiable in light of the 51.6% premium the Offer Price represented over
the Company's closing price the day before the Offer was announced and the fact
that the Offer Price is approximately forty times First Call consensus estimates
for the Company in 1999. Parent noted that the Company had repriced 1.546
million stock options in June 1998 to $7.44 per share. Parent further stated
that the actions of the Company--including rejection of the Offer, and the
amendments to the Company's Bylaws and the Rights Agreement--were unreasonable
and served to entrench management rather than deliver value to the Company's
stockholders.
On August 25, 1998, Parent and Purchaser filed an Amended Verified Complaint
in the Court of Chancery of the State of Delaware challenging the effectiveness
of the amendments to the Company's Bylaws and the Rights Agreement purportedly
adopted by the Company Board on August 21, 1998 on the grounds that such
amendments constitute an inequitable manipulation of the corporate machinery, an
unreasonable response to the Offer and to Parent's solicitation of agent
designations, and an unjustified interference with the voting rights of the
Company's stockholders.
On August 25, 1998, the Company filed an Answer and Counterclaims for
Injunctive and Other Relief for Violation of Federal Securities Laws with the
United States District Court for the District of Delaware. In its counterclaims,
the Company contends (i) that the Offer and Proposed Merger are a result of the
ongoing patent litigation between Parent and the Company and (ii) that the
materials filed by Parent and Purchaser with the Commission in connection with
the Offer and Parent's solicitation of agent designations contain materially
false and misleading statements and omissions in violation of Sections 14(a),
14(d) and 14(e) of the Exchange Act. The Company seeks an injunction requiring
Parent and Purchaser to correct its filings and prohibiting Parent and Purchaser
from taking various actions in connection with the Offer or Parent's
solicitation of agent designations.
On August 26, 1998, Parent and Purchaser filed a First Amended Complaint
with the United States District Court for the District of Delaware which
includes claims that the Schedule 14D-9 filed by the Company with the Commission
in response to the Offer contained false and misleading statements in violation
of Sections 14(d) and 14(e) of the Exchange Act. Specifically, the amended
complaint alleges that the Company made false and misleading statements
regarding its financial condition and its purported justifications for rejecting
the Offer. See "Section 10. Legal Proceedings" of this Supplement.
8. PURPOSE OF THE OFFER AND THE PROPOSED MERGER; PLANS FOR THE COMPANY
The second full paragraph of page 22 of the Offer to Purchase is amended and
restated in its entirety as follows:
The provisions of Section 203 could impede the ability of Parent to effect
the Proposed Merger promptly after consummation of the Offer. The Offer is
conditioned on Purchaser being satisfied in its reasonable discretion that the
restrictions on business combinations contained in Section 203 are inapplicable
to the Proposed Merger (as a result of action by the Company Board, the
acquisition by Purchaser of a sufficient number of Shares, or otherwise). See
this "Section 11. Purpose of the Offer and the Proposed Merger; Plans for the
Company" and "Section 14. Certain Conditions of the Offer."
9. CERTAIN CONDITIONS OF THE OFFER
The section entitled "Section 14. Certain Conditions of the Offer" beginning
on page 24 of the Offer to Purchase is amended and restated in its entirety as
follows:
6
<PAGE>
Notwithstanding any other provision of the Offer, and in addition to (and
not in limitation of) Purchaser's rights to extend and amend the Offer at any
time, in its reasonable discretion, Purchaser shall not be required to accept
for payment or pay for any Shares tendered pursuant to the Offer, and may
terminate or amend the Offer and may postpone the acceptance for payment of and
payment for, Shares tendered, if (i) any one or more of the Minimum Condition,
the Rights Condition, the Section 203 Condition and the HSR Condition shall not
have been satisfied or (ii) at any time on or after August 12, 1998, and prior
to the Expiration Date, any of the following conditions shall exist:
(a) there shall have been threatened, instituted or be pending any
action or proceeding before any court or governmental, administrative or
regulatory authority or agency, domestic or foreign (each, a "Governmental
Entity"), or by any other person, domestic or foreign, before any court or
Governmental Entity, (i) 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
federal securities laws and the DGCL (each as in effect on the date of this
Offer to Purchase), in connection with the making of the Offer, the
acceptance for payment of, or payment for, any Shares by Purchaser or any
other affiliate of Parent or the consummation by Purchaser or any other
affiliate of Parent of the Proposed Merger or other business combination
with the Company, or seeking to obtain material damages in connection
therewith; (ii) seeking to prohibit or limit materially the ownership or
operation by the Company, Parent or any of their respective subsidiaries of
all or any material portion of the business or assets of the Company, Parent
or any of their respective subsidiaries, or to compel the Company, Parent or
any of their respective subsidiaries to dispose of or hold separate all or
any material portion of the business or assets of the Company, Parent or any
of their respective subsidiaries; (iii) seeking to impose or confirm
limitations on the ability of Parent and its subsidiaries, including
Purchaser, to exercise effectively full rights of ownership of any Shares
(including the Rights associated with Shares), including, without
limitation, the right to vote any Shares acquired by Purchaser pursuant to
the Offer or otherwise on all matters properly presented to the Company's
stockholders; (iv) seeking to require divestiture by Parent and its
subsidiaries, including Purchaser, of any Shares; (v) seeking any material
diminution in the benefits expected to be derived by Parent, Purchaser or
any other affiliate of Parent as a result of the transactions contemplated
by the Offer or the Proposed Merger or any other similar business
combination with the Company; (vi) otherwise directly or indirectly relating
to the Offer or which otherwise, in the reasonable judgment of Purchaser,
might materially adversely affect the Company or Purchaser or any other
affiliate of Parent or the value of the Shares; or (vii) which otherwise, in
the reasonable judgment of Purchaser, is likely to materially adversely
affect the business, operations (including, without limitation, results of
operations), properties (including, without limitation, intangible
properties), condition (financial or otherwise), assets or liabilities
(including, without limitation, contingent liabilities) or prospects of
either the Company or any of its subsidiaries or Parent or any of its
subsidiaries, including Purchaser;
(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to (i) Parent, Purchaser, the Company or any subsidiary or
affiliate of Parent or the Company or (ii) the Offer or the Proposed Merger
or other business combination by Purchaser or Parent or any affiliate of
Parent with the Company, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency, domestic or
foreign, other than the routine application of the waiting period provisions
of the HSR Act to the Offer or the Proposed Merger, which, in the reasonable
judgment of Purchaser, is likely to result, directly or indirectly, in any
of the consequences referred to in clauses (i) through (vii) of paragraph
(a) above;
(c) there shall have occurred any change, condition, event or
development that, in the reasonable judgment of Purchaser, is or is likely
to be materially adverse to the business, operations (including,
7
<PAGE>
without limitation, results of operations), properties (including, without
limitation, intangible properties), condition (financial or otherwise),
assets or liabilities (including, without limitation, contingent
liabilities) or prospects of the Company or any of its subsidiaries;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the Nasdaq National
Market, (ii) any decline, measured from the close of business on August 11,
1998, in the Standard & Poor's 500 Index by an amount in excess of 15%,
(iii) any material adverse change in United States currency exchange rates
or a suspension of, or limitation on, currency exchange markets, (iv) a
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States, (v) any limitation (whether or not mandatory)
by any government or governmental, administrative or regulatory authority or
agency, domestic or foreign, on, or other event that, in the reasonable
judgment of Purchaser, might affect the extension of credit by banks or
other lending institutions, (vi) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States or (vii) in the case of any of the
foregoing existing on August 11, 1998, a material acceleration or worsening
thereof;
(e) the Company or any of its subsidiaries, joint ventures or partners
or other affiliates shall have, directly or indirectly, (i) 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), (ii)
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 (other than as aforesaid), (iii) issued or sold,
or authorized or proposed the issuance, distribution or sale of, additional
Shares (other than the issuance of Shares under option 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, (iv)
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), (v)
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, (vi) incurred any
debt other than in the ordinary course of business or any debt containing
burdensome covenants, (vii) 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 or other right of the Company
or any of its subsidiaries or any comparable event not in the ordinary
course of business, (viii) 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 reasonable 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 Parent or Purchaser, (ix) 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, (x) 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,
or (xi) amended or authorized or proposed any amendment to the Company's
Articles of Incorporation or Bylaws, or Purchaser shall
8
<PAGE>
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;
(f) a tender or exchange offer for any Shares shall have been made or
publicly proposed to be made by any other person (including the Company or
any of its subsidiaries or affiliates), or it shall have been publicly
disclosed or Purchaser shall have otherwise learned that (i) any person,
entity (including the Company or any of its subsidiaries) or "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) shall have acquired or
proposed to acquire beneficial ownership of more than 5% of any class or
series of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or shall have
been granted any right, option or warrant, conditional or otherwise, to
acquire beneficial ownership of more than 5% of any class or series of
capital stock of the Company (including the Shares), other than acquisitions
for bona fide arbitrage purposes only and other than as disclosed in a
Schedule 13G on file with the Commission prior to the date of this Offer
Purchase, (ii) any such person, entity or group that prior to the date of
this Offer to Purchase had filed such a Schedule 13G with the Commission has
acquired or proposes to acquire, through the acquisition of stock, the
formation of a group or otherwise, beneficial ownership of 1% or more of any
class or series of capital stock of the Company (including the Shares), or
shall have been granted any right, option or warrant, conditional or
otherwise, to acquire beneficial ownership of 1% or more of any class or
series of capital stock of the Company (including the Shares), other than
for bona fide arbitrage purposes, (iii) any person or group shall have
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a tender offer or exchange offer or a merger,
consolidation or other business combination with or involving the Company or
(iv) any person shall have filed a Notification and Report Form under the
HSR Act (or amended a prior filing to increase the applicable filing
threshold set forth therein) or made a public announcement reflecting an
intent to acquire the Company or any subsidiary or significant assets of the
Company;
(g) any required approval, permit, authorization or consent of any
governmental authority or agency (including those described or referred to
in "Section 15. Certain Legal Matters and Regulatory Approvals") shall not
have been obtained on terms satisfactory to Purchaser in its reasonable
discretion;
(h) Parent or Purchaser shall have reached an agreement or understanding
with the Company providing for termination of the Offer, or Parent,
Purchaser or any other affiliate of Parent 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;
(i) (1) any material contractual right 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 transactions
contemplated by the Offer or the Proposed Merger or (2) 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 Parent of control of the Company); or
(j) Purchaser shall have determined in its reasonable discretion that
Section 2115 of the California General Corporation Law (the "CGCL") applies
to the Offer or the Proposed Merger;
9
<PAGE>
which, in the reasonable judgment of Parent or Purchaser in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
Purchaser or any of their affiliates) giving rise to any such condition, makes
it inadvisable to proceed with such acceptance for payment.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted by Parent or Purchaser regardless of the circumstances
giving rise to any such condition or may be waived by Parent or Purchaser in
whole or in part at any time and from time to time in their reasonable
discretion. The failure by Parent 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.
10. LEGAL PROCEEDINGS
The following paragraphs are added and inserted after the first full
paragraph of page 33 of the Offer to Purchase:
On August 13, 1998, a purported class action complaint, SHAPIRO V. ANTLE, ET
AL., C.A. NO. 16588, was filed in the Court of Chancery of the State of Delaware
against the Company and the Company Board. On August 25, 1998, two additional
purported class action complaints were filed in the Court of Chancery, YASSIN V.
QUICKTURN DESIGN SYSTEMS, INC., ET AL., C.A. NO. 16603 and BROWN V. QUICKTURN
DESIGN SYSTEMS, INC., ET AL., C.A. NO. 16604, respectively, asserting claims
substantially identical to those brought in the SHAPIRO action. All three
actions purport to be brought on behalf of the stockholders of the Company and
allege that the Company Board has refused to adequately consider Parent's
proposal to acquire the Company and that the Company Board has declined to
redeem the Rights Agreement in an attempt to entrench themselves in violation of
their fiduciary duty to the Company's stockholders. Each action seeks an
injunction requiring the Company Board to (i) consider any and all acquisition
proposals and maximize stockholder value and (ii) redeem the Rights, as well as
unspecified fees and costs.
On August 25, 1998, Parent and Purchaser filed an Amended Verified Complaint
in the Court of Chancery of the State of Delaware challenging the effectiveness
of the amendments to the Company's Bylaws and the Rights Agreement purportedly
adopted by the Company Board on August 21, 1998 on the grounds that such
amendments constitute an inequitable manipulation of the corporate machinery, an
unreasonable response to the Offer and to Parent's solicitation of agent
designations, and an unjustified interference with the voting rights of the
Company's stockholders.
On August 25, 1998, the Company filed an Answer and Counterclaims for
Injunctive and Other Relief for Violation of Federal Securities Laws with the
United States District Court for the District of Delaware. In its counterclaims,
the Company contends (i) that the Offer and Proposed Merger are a result of the
ongoing patent litigation between Parent and the Company and (ii) that the
materials filed by Parent and Purchaser with the Commission in connection with
the Offer and Parent's solicitation of agent designations contain materially
false and misleading statements and omissions in violation of Sections 14(a),
14(d) and 14(e) of the Exchange Act. The Company seeks an injunction requiring
Parent and Purchaser to correct its filings and prohibiting Parent and Purchaser
from taking various actions in connection with the Offer or Parent's
solicitation of agent designations.
On August 26, 1998, Parent and Purchaser filed a First Amended Complaint
with the United States District Court for the District of Delaware which
includes claims that the Schedule 14D-9 filed by the Company with the Commission
in response to the Offer contained false and misleading statements in violation
of Sections 14(d) and 14(e) of the Exchange Act. Specifically, the amended
complaint alleges that the Company made false and misleading statements
regarding its financial condition and its purported justifications for rejecting
the Offer.
10
<PAGE>
11. SCHEDULES
The following paragraph is added and inserted after the first full paragraph
under "Other Information" of Schedule II of the Offer to Purchase:
Parent beneficially owns, directly or indirectly, an aggregate of 791,500
Shares, including the 100 Shares held of record by Purchaser and the Shares
issuable upon exercise of the Warrant described below (representing 4.4% of the
Shares outstanding as of July 31, 1998, according to the Company's Form 10-Q for
the quarter ended June 30, 1998). Parent is the holder of a warrant to acquire
200,000 shares of Company Common Stock at an exercise price of $30.00 per share
(the "Warrant"). The Warrant was issued on February 28, 1992 in connection with
the sale by Parent to the Company of a patent covering certain emulation
technology and related assets and expires on February 27, 2000. Parent and the
Company entered into a registration rights agreement on February 28, 1992 which
provides for the registration of the shares issuable upon exercise of the
Warrant at such time as the Company proposes to register any of its stock or
other securities under the Securities Act, subject to certain limitations set
forth therein. While Parent may beneficially own the Shares issuable upon
exercise of the Warrant, Parent does not intend to exercise the Warrant because
the exercise price of $30.00 per share far exceeds the current market value of
the Shares.
12. MISCELLANEOUS
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR PURCHASER NOT CONTAINED IN THIS
SUPPLEMENT, THE 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.
Parent and Purchaser have filed with the Commission amendments to the
Schedule 14D-1 furnishing certain additional information with respect to the
Offer, and may file further amendments thereto. The Schedule 14D-1 and any and
all amendments thereto, including exhibits, may be inspected at, and copies may
be obtained from, the same places and in the same manner as set forth in
"Section 7. Certain Information Regarding the Company" of the Offer to Purchase,
except that they will not be available at the regional offices of the
Commission.
Except as modified by this Supplement and any amendments to the Schedule
14D-1, the terms and conditions set forth in the Offer to Purchase remain
applicable in all respects to the Offer, and this Supplement should be read in
conjunction with the Offer to Purchase.
August 27, 1998 MGZ Corp.
11
<PAGE>
Facsimile copies (with manual signatures) of the Letter of Transmittal will
be accepted. The Letter of Transmittal and certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, commercial bank, trust company or
other nominee to the Depositary at one of the addresses set forth below:
THE DEPOSITARY FOR THE OFFER IS:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE: BY HAND OR OVERNIGHT
DELIVERY:
P.O. Box 84 (212) 858-2611 One State Street
Bowling Green Station Attn: Reorganization Dept. New York, New York 10004
New York, New York 10274-0084 Attn: Reorganization Dept.
Attn: Reorganization Dept. Securities Processing Window
SC-1
CONFIRM RECEIPT OF FACSIMILE
BY TELEPHONE:
(212) 858-2103
</TABLE>
Any questions or requests for assistance or additional copies of the Offer
to Purchase, this Supplement and the related Letter of Transmittal, and other
tender offer materials, may be directed to the Dealer Manager or the Information
Agent at their respective addresses and telephone numbers listed below.
Stockholders may also contact their broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
CALL TOLL-FREE (800) 322-2885
THE DEALER MANAGER FOR THE OFFER IS:
SALOMON SMITH BARNEY
Seven World Trade Center
New York, New York 10048
<PAGE>
SALOMON SMITH BARNEY
SEVEN WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
QUICKTURN DESIGN SYSTEMS, INC.
AT
$12.125 NET PER SHARE
BY
MGZ CORP.
A WHOLLY OWNED SUBSIDIARY OF
MENTOR GRAPHICS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, SEPTEMBER 9, 1998 UNLESS THE OFFER IS EXTENDED.
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by MGZ Corp., a Delaware corporation ("Purchaser")
and a wholly owned subsidiary of Mentor Graphics Corporation, an Oregon
corporation ("Parent"), to act as Dealer Manager in connection with Purchaser's
offer to purchase all outstanding shares of common stock, par value $.001 per
share (the "Shares"), of Quickturn Design Systems, Inc., a Delaware corporation
(the "Company"), including the associated preferred stock purchase rights issued
pursuant to the Rights Agreement between the Company and The First National Bank
of Boston, dated January 10, 1996 (the "Rights"), at a purchase price of $12.125
per Share (and associated Right), 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 August 12, 1998 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which, together with the Offer to Purchase, as each may
be amended and supplemented from time to time, constitute the "Offer") enclosed
herewith.
UNLESS THE RIGHTS CONDITION (AS DEFINED IN THE OFFER TO PURCHASE) IS
SATISFIED, 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 SECTION 3 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, (i) there being validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which, together with the Shares owned by Parent and its subsidiaries,
including Purchaser, would represent a majority of the outstanding Shares on a
fully diluted basis on the date of purchase, (ii) the Rights having been
redeemed by the Board of Directors of the Company, or Purchaser being satisfied,
in its reasonable discretion, that the Rights have been invalidated or are
otherwise inapplicable to the Offer and the Proposed Merger (as defined in the
Offer to Purchase), (iii) Purchaser being satisfied, in its reasonable
discretion, that, after consummation of the Offer, the provisions of Section 203
of the Delaware General Corporation Law would not prohibit for any period of
time, or impose any voting requirement in excess of majority stockholder
approval with respect to, the Proposed Merger or other business combination with
Purchaser or any affiliate of Purchaser and (iv) the expiration or termination
of any applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended. The Offer is also subject to other terms
and conditions. This Offer is not conditioned on Purchaser obtaining financing.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares in your name or in the name of your nominee.
<PAGE>
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated August 12, 1998, and the Supplement to
the Offer to Purchase, dated August 27, 1998.
2. The Letter of Transmittal to tender Shares and Rights for your use
and for the information of your clients. Facsimile copies of the Letter of
Transmittal (with manual signatures) may be used to tender Shares (and
associated Rights).
3. The Notice of Guaranteed Delivery to be used to tender Shares and
Rights pursuant to the Offer if none of the procedures for tendering Shares
and Rights set forth in the Offer to Purchase can be completed on a timely
basis.
4. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares (and associated Rights) registered in your name or
in the name of your nominee, with space provided for obtaining such clients'
instructions with regard to the Offer.
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
6. A return envelope addressed to IBJ Schroder Bank & Trust Company, as
Depositary (the "Depositary").
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, SEPTEMBER 9, 1998 UNLESS THE
OFFER IS EXTENDED.
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), Purchaser will accept for payment and pay for all Shares which are
validly tendered and not properly withdrawn on or prior to the Expiration Date
(as defined in the Offer to Purchase). In order to take advantage of the Offer,
(i) a duly executed and properly completed Letter of Transmittal (or a manually
signed facsimile thereof) and any required signature guarantees or, in the case
of a book-entry transfer, an Agent's Message, and any other required documents
should be sent to the Depositary and (ii) certificates representing the tendered
Shares (the "Share Certificates") and, if the Rights are at such time separately
traded, certificates (the "Rights Certificates") representing that number of
Rights equal to the number of Shares being tendered, or a timely Book-Entry
Confirmation should be delivered to the Depositary in accordance with the
instructions set forth in the Offer to Purchase and the Letter of Transmittal.
Holders of Shares whose Share Certificates (and/or, if applicable, Rights
Certificates) are not immediately available or who cannot deliver their Share
Certificates (and/or, if applicable, Rights Certificates) and all other required
documents to the Depositary or complete the procedures for book-entry transfer
prior to the Expiration Date must tender their Shares and/or Rights according to
the guaranteed delivery procedures set forth in Section 3 of the Offer to
Purchase.
Purchaser will not pay any fees or commissions to any broker, dealer or
other person (other than the Dealer Manager and the Information Agent as
described in the Offer to Purchase) for soliciting tenders of Shares and Rights
pursuant to the Offer. Purchaser will, however, upon request, reimburse you for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients. Purchaser will pay or cause to be paid any
stock transfer taxes payable on the transfer of Shares and Rights to it, except
as otherwise provided in Instruction 6 to the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Salomon Smith Barney or MacKenzie Partners, Inc. (the "Information Agent"), at
their respective addresses and telephone numbers set forth on the back cover
page of the Offer to Purchase.
Requests for additional copies of the enclosed materials may be directed to
the Information Agent at the address and telephone number set forth on the back
cover page of the Offer to Purchase.
Very truly yours,
Salomon Smith Barney
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF PURCHASER, THE DEPOSITARY, THE INFORMATION
AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE
YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF
ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND
THE STATEMENTS CONTAINED THEREIN.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
QUICKTURN DESIGN SYSTEMS, INC.
AT
$12.125 NET PER SHARE
BY
MGZ CORP.
A WHOLLY OWNED SUBSIDIARY OF
MENTOR GRAPHICS CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, SEPTEMBER 9, 1998 UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated August 12,
1998 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with the Offer to Purchase, as each may be amended and supplemented
from time to time, constitute the "Offer") relating to an offer by MGZ Corp., a
Delaware corporation ("Purchaser") and a wholly owned subsidiary of Mentor
Graphics Corporation, an Oregon corporation ("Parent"), to purchase all
outstanding shares of common stock, par value $.001 per share (the "Shares"), of
Quickturn Design Systems, Inc., a Delaware corporation (the "Company"),
including the associated preferred stock purchase rights issued pursuant to the
Rights Agreement between the Company and The First National Bank of Boston,
dated January 10, 1996 (the "Rights"), at a purchase price of $12.125 per Share
(and associated Right), net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer. UNLESS THE
RIGHTS CONDITION (AS DEFINED IN THE OFFER TO PURCHASE) IS SATISFIED,
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 SECTION 3 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.
WE ARE THE HOLDER OF RECORD OF SHARES AND RIGHTS HELD BY US FOR YOUR
ACCOUNT. A TENDER OF SUCH SHARES AND 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 OR RIGHTS HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish 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.
Please note the following:
1. The tender price is $12.125 per Share, including the associated
Right, net to the seller in cash, without interest thereon, upon the terms
and subject to the conditions of the Offer.
2. The Offer is being made for all of the outstanding Shares and
Rights.
3. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Wednesday, September 9, 1998 unless the Offer is
extended.
<PAGE>
4. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the expiration of the Offer that
number of Shares which, together with the Shares owned by Parent and its
subsidiaries, including Purchaser, would represent a majority of the
outstanding Shares on a fully diluted basis on the date of purchase, (ii)
the Rights having been redeemed by the Board of Directors of the Company, or
Purchaser being satisfied, in its reasonable discretion, that the Rights
have been invalidated or are otherwise inapplicable to the Offer and the
Proposed Merger (as defined in the Offer to Purchase), (iii) Purchaser being
satisfied, in its reasonable discretion, that, after consummation of the
Offer, the provisions of Section 203 of the Delaware General Corporation Law
would not prohibit for any period of time, or impose any voting requirement
in excess of majority stockholder approval with respect to, the Proposed
Merger or other business combination with Purchaser or any affiliate of
Purchaser and (iv) the expiration or termination of any applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. The Offer is also subject to other terms and conditions. The Offer
is not conditioned on Purchaser obtaining financing.
5. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in the Letter of Transmittal, stock
transfer taxes on the transfer of Shares and Rights pursuant to the Offer.
If you wish to have us tender any or all of the Shares and Rights held by us
for your account, please so instruct us by completing, executing, detaching and
returning to us the instruction form contained in this letter. An envelope to
return your instruction to us is enclosed. If you authorize tender of your
Shares and Rights, all such Shares and Rights will be tendered unless otherwise
indicated in such instruction form. PLEASE FORWARD YOUR INSTRUCTIONS TO US AS
SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER YOUR SHARES AND RIGHTS ON YOUR
BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely pursuant to the Offer to Purchase and the related
Letter of Transmittal and any supplements or amendments thereto. 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 the Shares and Rights 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 and Rights 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
the Dealer Manager (as defined in the Offer to Purchase) or one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
QUICKTURN DESIGN SYSTEMS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated August 12, 1998 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, together with the Offer to Purchase, as each may
be amended and supplemented from time to time, constitute the "Offer") in
connection with the offer by MGZ Corp., a Delaware corporation ("Purchaser") and
a wholly owned subsidiary of Mentor Graphics Corporation, an Oregon corporation
("Parent"), to purchase all outstanding shares of common stock, par value $.001
per share (the "Shares"), of Quickturn Design Systems, Inc., a Delaware
corporation (the "Company"), and the associated preferred stock purchase rights
(the "Rights").
This will instruct you to tender to Purchaser the number of Shares and
Rights indicated below (or if no number is indicated below, all Shares and
Rights) which are held by you for the account of the undersigned, upon the terms
and subject to the conditions set forth in the Offer to Purchase.
<TABLE>
<S> <C>
Number of Shares to be Tendered: SIGN HERE
Shares*
Number of Rights to be Tendered: Signature(s)
Rights*
Dated: Print Name(s)
Print Address(es)
Taxpayer Identification or
Social Security Number(s) Area Code and Telephone Number(s)
</TABLE>
- ------------------------
* UNLESS THE RIGHTS CONDITION (AS DEFINED IN THE OFFER TO PURCHASE) IS
SATISFIED, 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 SECTION 3 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. UNLESS
OTHERWISE INDICATED, IT WILL BE ASSUMED THAT ALL SHARES AND RIGHTS HELD BY
US FOR YOUR ACCOUNT ARE TO BE TENDERED.
<PAGE>
- -------------------------------------------------------------------------------
Acquisition of
Quickturn Design Systems, Inc.
by
Mentor Graphics Corporation
- -------------------------------------------------------------------------------
[LOGO]
Slide 1
<PAGE>
- -------------------------------------------------------------------------------
Agenda
- -------------------------------------------------------------------------------
[LOGO]
Slide 2
<PAGE>
- -------------------------------------------------------------------------------
Acquisition of Quickturn by
Mentor Graphics will Create:
- - Leading supplier of emulation solutions
- Low-end to high-end product breadth
- Extensive worldwide channels
- - Reacceleration of business growth
- - Opportunities to rationalize R&D, Marketing/Sales,
Operating expenses
- - Elimination of legal expense
- - Earnings accretion beginning 3rd Q after closing
- - Synergies of $30 million in 2000
- -------------------------------------------------------------------------------
[LOGO]
Slide 3
<PAGE>
- -------------------------------------------------------------------------------
Mentor Graphics
- - Third largest EDA company, focused on system verification and IP reuse
- - 50% of products introduced since 1993 growing at nearly a 50% compound
rate
- - 2nd Q 98 bookings up 24% driven by new product acceptance and recovery
in Japan
- - Gross Margin up four sequential quarters
- -------------------------------------------------------------------------------
[Graphic]
Slide 4
<PAGE>
- -------------------------------------------------------------------------------
Wall Street Views
Mentor Graphics
"We are raising our short-term rating on MENT to buy based on the new
product momentum and improving operating margins...Mentor is well
positioned...to serve two key technology trends: the shift to 0.25 micron
design starts (Calibre) and the move towards system-on-chip design (Inventra
and system IC verification products)."
--Erach Desai, SoundView Financial Group
7/30/98
"We are upgrading Mentor to Long-Term Attractive based on valuation,
strategy and early results for their new products...Mentor is clearly
dominant in the VHDL simulation area and we are impressed with the adoption
we are seeing of Mentor's emulation product..."
--Jennifer Smith, BancAmerica Robertson Stephens
7/30/98
"We view the recent offer to purchase all shares of Quickturn (QKTN) as
positive for MENT... Maintaining strong buy rating."
--Robert E. Toomey, Piper Jaffray
8/14/98
"Mentor will win this one...Quickturn not growing...Mentor growing...intends
to defend its kill. Buy."
--Bill Frerichs, Black & Company
8/13/98
- -------------------------------------------------------------------------------
[LOGO]
Slide 5
<PAGE>
- -------------------------------------------------------------------------------
Quickturn Design Systems
- - Leading supplier of emulation based verification solutions based on
field programmable gate arrays
- - Products targeted to low to mid range price segment
- - Revenues flat to declining since 1996, continuing into 1999
- - Stock in mid $7 range, trading for 1.4X revenues and 30X consensus 1999
earnings
- -------------------------------------------------------------------------------
[LOGO]
Slide 6
<PAGE>
- -------------------------------------------------------------------------------
Wall Street Views
Quickturn
- - Limited following
"We are adjusting our estimates downward to reflect some of the near-term
product transition risks and management's conservative stance on CY99...With
bookings and product revenues in Q3 both projected to decline meaningfully on
a Y/Y basis, we are not compelled in the near term" Hold.
Erach Desai, SoundView
7/20/98
"We are maintaining a Hold rating on the shares of Quickturn Design. The
company is moving through a significant product transition, and suffering
from lackluster demand in the Asia/Pacific region. Until an increase is
demonstrated, we believe the shares are fairly valued at current levels."
Doug Van Dorsten, Hambrecht & Quist
7/15/98
- -------------------------------------------------------------------------------
[LOGO]
Slide 7
<PAGE>
- -------------------------------------------------------------------------------
Transaction Summary
Offer Price: $12.125 per share
Premium: 51.6%
Consideration: 100% cash fully financed
Total: $216 million
Consideration: - Bank financed
- Balance sheet financed
Expected Closing: December 1998
- -------------------------------------------------------------------------------
[LOGO]
Slide 8
<PAGE>
- -------------------------------------------------------------------------------
Acquisition of Quickturn by Mentor
Graphics Revitalizes Emulation
- -------------------------------------------------------------------------------
[LOGO]
Slide 9
<PAGE>
- -------------------------------------------------------------------------------
Worldwide Emulation
Revenue Forecast
Worldwide Emulation Product Revenue, 1991-2000
[bar graph]
1991 $12.8
1992 $25.8
1993 $54.9
1994 $65.5
1995 $81.8
1996 $104.4
1997 $125.5
1998 $153.1
1999 $186.8
2000 $227.9
Source: Collett International June 1997
- -------------------------------------------------------------------------------
[LOGO]
Slide 10
<PAGE>
- -------------------------------------------------------------------------------
Worldwide Emulation
Revenue Forecast
Worldwide Emulation Product Revenue, 1991-2000
[bar graph]
1991 $12.8
1992 $25.8
1993 $54.9
1994 $65.5
1995 $81.8
1996 $104.4
1997 $125.5
1998 $153.1 $116(a)
1999 $186.8 $144(a)
2000 $227.9 ?
Source: Collett International June 1997
- ---------------------------
(a) Assumes current combined estimates for Mentor Graphics,
Quickturn Design, Ikos and Aptix for 1998 and 1999.
- -------------------------------------------------------------------------------
[LOGO]
Slide 11
<PAGE>
- -------------------------------------------------------------------------------
Why Have Emulation Sales Slowed?
- - Customers desire to standardize on a single high performance platform
- - Confusion caused by mutual litigation involving both Quickturn and Mentor
Graphics
- - Transition to next generation Quickturn system
- - Weakness of Quickturn channel in Europe, the fastest growing emulation
area
- -------------------------------------------------------------------------------
[LOGO]
Slide 12
<PAGE>
EDA INDUSTRY ANALYST VIEWS
"Quickturn should consider the offer as a way to revive
its sluggish recent performance."
-Rita Glover, President & Principal Analyst
EDA Today Market Research
8/14/98
"No, this isn't about the lawsuit... The acquisition of
Quickturn would not only give Mentor the vertical market
strength, acceleration/emulation to RTL Simulation, but would
make them the powerhouse in horizontal space, RTL Simulation
to acceleration/emulation to hardware/software coverification
to Microtec, their embedded software tool division. Not a
bad package!"
-Gary Smith, Chief EDA Analyst, Dataquest
Worldwide Electronic Design Automation
8/17/98
- -------------------------------------------------------------------------------
[LOGO]
Slide 13
<PAGE>
EDA INDUSTRY ANALYST VIEWS
(EE TIMES 8/17/98)
"BRILLIANT"
-Gary Smith, Chief EDA Analyst, Dataquest
Worldwide Electronic Design Automation
8/17/98
- -------------------------------------------------------------------------------
[LOGO]
Slide 14
<PAGE>
- -------------------------------------------------------------------------------
Synergies
- - Reacceleration of growth
- - Substantial operational cost savings
- - Elimination of legal expense
- - Combined companies would generate more than
$20 million of synergies in 1999 and more than
$30 million in 2000
- -------------------------------------------------------------------------------
[LOGO]
Slide 15
<PAGE>
- -------------------------------------------------------------------------------
Synergies
<TABLE>
<CAPTION>
1999 2000
($ in millions) ------ ------
<S> <C> <C>
Margin on Incremental Revenues $ 0.0 ?
Manufacturing Efficiencies on
Mentor Graphics Systems 2.0 5.0
Elimination of Redundant
Engineering Activities 6.0 12.0
Reduction of S, G&A 2.0 3.0
Elimination of Legal Expense 12.0 12.0
------ ------
$22.0 $30.0+
</TABLE>
- -------------------------------------------------------------------------------
[LOGO]
Slide 16
<PAGE>
- -------------------------------------------------------------------------------
Operating the Combined Business
- - Sales
- Retain Quickturn, US and Asian quota-carrying sales representatives
- Consolidate management, building on Quickturn strength in Japan and
Mentor Graphics strength in Europe
- Eliminate redundant international and domestic offices and IT
infrastructure
- Take advantage of Quickturn existing service and support
infrastructure
- - Manufacturing
- Capitalize on Mentor Graphics SAP skills
- Consolidate manufacturing at Quickturn
- Overhead spread over greater volume to provide economies
- -------------------------------------------------------------------------------
[LOGO]
Slide 17
<PAGE>
- -------------------------------------------------------------------------------
Mentor Graphics Strategic Focus
[Graphic]
System Design
Verification
Hardware
Software
Intellectual Property
Consulting
- -------------------------------------------------------------------------------
[LOGO]
Slide 18
<PAGE>
- -------------------------------------------------------------------------------
Focus of Major EDA Companies
System Verification
Mentor Intellectual Property
- --------------------------------------------------------------------------
Design Services
Cadence Physical Design
- --------------------------------------------------------------------------
Design Creation
Synopsys Logic Synthesis
- --------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO]
Slide 19
<PAGE>
- -------------------------------------------------------------------------------
Verification will Benefit from
Integration with Emulation
[Graphic]
Models
Stimulus Physical
Environment
Celaro-TM-
Test Benches In-Circuit
Emulation
Software
Environment Faults
- -------------------------------------------------------------------------------
[LOGO]
Slide 20
<PAGE>
- -------------------------------------------------------------------------------
Verification is Fastest
Growing EDA Segment
[Graphic]
[Line graph indicates CAGRs of various EDA segments for the period from 1989
to 2001. For the period from 1996 to 2001, CAGRs of various EDA segments are
expected to increase as follows:
Verification 26%
IC Layout 19%
Design Capture 13%
PCB Layout 8%]
[Line graph indicates a market estimate of sales for the verification segment
of the EDA market of $2 billion in 2001, and a market estimate of sales for the
entire EDA market of $4 billion.]
Source: Dataquest '97
- -------------------------------------------------------------------------------
[LOGO]
Slide 21
<PAGE>
- -------------------------------------------------------------------------------
Mentor Graphics Leads Verification
<TABLE>
<CAPTION>
Business Size $M*
MGC MGC -----------------
Leader Best in Class 1996 2000
------- ---------------- ------ ------
<S> <C> <C> <C> <C>
HDL Simulation X 174 322
VHDL X X
Verilog
VHDL/Verilog Co Sim X X
Mixed Signal simulation X 63 122
Emulation & Acceleration X 152 322
Hardware/Software Co-Verification X X 3 35
Design for Test X X 37 84
Physical Verification/Parasitic Extraction X 85 238
Static Timing and Noise Analysis X 14 52
- ---------------------------
Source: Dataquest
</TABLE>
- -------------------------------------------------------------------------------
[LOGO]
Slide 22
<PAGE>
- -------------------------------------------------------------------------------
Emulation Becomes
Increasingly Important
[graphic]
[Chart indicates competing alternatives for verifying the "on" sequence for a
typical cellular phone design as follows:]
Alternative Approximate Time Frame
----------- ----------------------
Breadboard (informal 3 seconds to 1 minute
assembly for verification)
Emulation 1 minute to 10 minutes
Instruction-Set Simulation 10 minutes to 2 hours
Hardware/Software Co-Verification 2 hours to 1 day
Cycle-based Simulation 1 day to 10 days
RTL Simulation 10 days to 3 months
Gate Simulation 3 months to 3 years
- -------------------------------------------------------------------------------
[LOGO]
Slide 23
<PAGE>
- -------------------------------------------------------------------------------
Mentor Graphics Success in Emulation
- - Rapid sales growth in first two years
- Up to 100x compile time advantage
- Worldwide sales channel, especially Europe
- Total solution: simulation, emulation, services
- -------------------------------------------------------------------------------
[LOGO]
Slide 24
<PAGE>
- -------------------------------------------------------------------------------
Celaro Leads Next
Generation Emulation
- - Fastest Time-to-Emulation
- Days vs. Weeks
- - Shortest Design-Iteration Time
- 2x Capacity
- ASIC-Enabled Compilation Speed
- Generation Ahead of FPGA Based Systems
- Highly Flexible & Interactive
- Slashes Development Cycle time up to 50%
- -------------------------------------------------------------------------------
[LOGO]
Slide 25
<PAGE>
- -------------------------------------------------------------------------------
Mentor Graphics is Committed to
the Emulation Business
- - Mentor Graphics lawsuit against Quickturn for patent infringement
- - New products = early lead for Mentor Graphics in next generation emulation
- - Worldwide sales and support strengths
- Over 800 sales and support persons
- - Emulation solutions will be a rapidly growing and profitable part of
Mentor's system verification strategy
- -------------------------------------------------------------------------------
[LOGO]
Slide 26
<PAGE>
- -------------------------------------------------------------------------------
Summary
- - Good for Quickturn shareholders
- - Good for Mentor Graphics shareholders
- - Good for customers
- - Good for the industry
- - Bad for the lawyers
- -------------------------------------------------------------------------------
[LOGO]
Slide 27
<PAGE>
APPENDIX
- -------------------------------------------------------------------------------
[LOGO]
Slide 28
<PAGE>
FINANCIAL OVERVIEW
1998 YTD ACTUALS AND FULL YEAR ESTIMATES
<TABLE>
MENTOR GRAPHICS QUICKTURN
------------------------ ------------------------
(DOLLARS IN MILLIONS) 6 MO. (b) 12 MO. (c) 6 MO. (d) 12 MO. (e)
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Revenues $227.1 $485.8 $47.5 $101.0
Gross Margin 71.9% 72.4% 66.4% 68.4%
Operating Expense $158.3 $320.0 $38.2 $ 76.7
Net Income $ 3.7 $ 25.2 $(3.1) $ (0.3)
E.P.S. $ 0.06 $ 0.39 $(0.17) $(0.01)
Market Capitalization (a) $621.3 $138.0
</TABLE>
(a) Assumes share price of $7 3/4 for Quickturn and $9 1/2 for Mentor
Graphics as of August 10, 1998.
(b) Excludes special charges of $10.3 million in 1H'98.
(c) Source: Needham, 7/30/98.
(d) Excludes Inventory obsolescence charge of $5.7 million in Q2 1998.
(e) Source: Robertson Stephens 7/30/98.
- -------------------------------------------------------------------------------
[LOGO]
<PAGE>
- -------------------------------------------------------------------------------
Proposed Sources and
Uses of Funds
<TABLE>
<CAPTION>
Sources: Uses:
- -------- -----
<S> <C> <C>
Mentor Graphics Cash $ 91.5 Total Consideration(2) $215.9
Debt Financing(1) 134.4 Transaction Costs 10.0
------ ------
$225.9 $225.9
------ ------
------ ------
</TABLE>
- ---------------------------
(1) Does not include the appreciation of any excess cash available to Quickturn
to retire debt.
(2) Based on the number of shares outstanding on the date of commencement of
the offer at an offer price of $12.125 per share.
Does not include the effect of the exercise of options and warrants
(4.474 million shares as of 12/31/97).
- -------------------------------------------------------------------------------
[LOGO]
<PAGE>
- -------------------------------------------------------------------------------
In Process R&D Balance Sheet
Sensitivity Analysis
<TABLE>
<CAPTION>
Scenario I Scenario II
Mentor Graphics at Pro Forma at Pro Forma at
6/30/98 6/30/98(a) 6/30/98(b)
(Dollars in Millions) ------------------ ------------ ------------
<S> <C> <C> <C>
Current Assets $280.2 $225.7 $225.7
Total Assets 407.4 446.9 371.8
Current Liabilities 127.3 156.7 156.7
Total Debt 0.1 96.3 96.3
Total Liabilities 127.9 254.4 254.4
Total Equity(c) 279.5 192.5 117.4
Total Liabilities & Shareholders' Equity 407.4 446.9 371.8
------ ------ ------
------ ------ ------
</TABLE>
- ---------------------------
Note: Pro forma balance sheets reflect conversion of 3.274 million options at
an average exercise price of $8.22(d). Assumes use of $58.6 million of
Quickturn cash to pay down debt post-acquisition.
(a) Based on $12.125 per share purchase price and 50% R&D write-off.
(b) Based on $12.125 per share purchase price and 100% R&D write-off.
(c) Includes Minority Interest of $.9 million.
(d) Estimated using option information as of 12/31/97. Option price
adjustments in 1998 will slightly lower the assets and liabilities.
- -------------------------------------------------------------------------------
[LOGO]
<PAGE>
FINANCIAL OVERVIEW
QUICKTURN
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
---------------------
1998 1997(a)
---------- ---------
<S> <C> <C>
Statement of Operations Data
- ----------------------------
Total Revenues............................................................................. $ 47,512 $ 47,840
Research and development................................................................... $ 12,464 $ 11,671
Operating income (loss).................................................................... $ (12,372) $ (2,935)
Net income (loss).......................................................................... $ (6,422) $ (1,398)
Gross margin............................................................................... 54% 68%
Per Share Data
- --------------
Net income (loss) per share-
basic.................................................................................. $ (0.36) $ (0.08)
diluted................................................................................ $ (0.36) $ (0.08)
Cash dividends per share................................................................... -- --
Weighted average number of shares outstanding-
basic.................................................................................. 17,754 16,701
diluted................................................................................ 17,754 16,701
</TABLE>
- ------------------------
(a) The first six months of 1997 included merger related charges of $1,200
<PAGE>
FINANCIAL OVERVIEW CONTINUED
QUICKTURN
<TABLE>
<CAPTION>
AS OF JUNE 30
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Balance Sheet Data
- ------------------
Cash and investments, short-term.......................................................... $ 37,029 $ 23,320
Cash and investments, long-term........................................................... 21,568 23,759
Working capital........................................................................... 40,909 40,527
Property, plant and equipment, net........................................................ 14,034 8,775
Total assets.............................................................................. 116,046 119,274
Short-term borrowings..................................................................... 715 2,440
Long-term debt and other deferrals........................................................ -- --
Stockholders' equity...................................................................... 85,884 93,755
</TABLE>
<PAGE>
QUICKTURN RELATIVE STOCK PRICE TO OFFER
<TABLE>
<CAPTION>
DAILY CLOSING STOCK PRICE
DAYS PRIOR TO ------------------------------- OFFER PRICE PREMIUM
ANNOUNCEMENT LOW HIGH AVERAGE TO AVERAGE PRICE
- ---------------------------------------------------------------- --------- --------- --------- ---------------------
<S> <C> <C> <C> <C>
0............................................................... -- -- $ 8.00 51.6%
30.............................................................. $ 7.38 $ 7.88 7.63 58.9
60.............................................................. 7.00 7.88 7.51 61.5
90.............................................................. 6.50 10.00 7.88 53.9
180............................................................. 6.50 15.38 9.71 24.9
360............................................................. 6.50 16.31 11.71 3.5
540............................................................. 6.50 19.13 12.14 (0.1)
--------- --------- --------- -----
Offer Price..................................................... -- -- $ 12.125 --
</TABLE>
Source: Saloman Smith Barney
