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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 32
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)
------------------------
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 up
to 2,100,000 shares of Common Stock, par value $.001 per share, of Quickturn
Design Systems, Inc., a Delaware corporation, together with the associated
preferred stock purchase rights, for a purchase price of $14 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 First Supplement thereto,
dated August 27, 1998 (the "First Supplement") and the Second Supplement
thereto, dated December 28, 1998 (the "Second Supplement") and the related
revised 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.
Item 1 is hereby amended and supplemented by the following:
(b) The information set forth in the "INTRODUCTION" and Section 1 to the
Second Supplement is incorporated herein by reference.
(c) The information set forth in Section 3 to the Second Supplement is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
Item 2 is hereby amended and supplemented by the following:
(a)-(d) and (g) The information set forth in the "INTRODUCTION" to the
Second Supplement and in Section 5 to the Second Supplement is incorporated
herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
Item 3 is hereby amended and supplemented by the following:
(a)-(b) The information set forth in the "INTRODUCTION" to the Second
Supplement and in Section 7 to the Second Supplement is incorporated herein by
reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 4 is hereby amended and supplemented by the following:
(a)-(c) The information set forth in Section 6 to the Second Supplement is
incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
Item 5 is hereby amended and supplemented by the following:
(a)-(g) The information set forth in the "INTRODUCTION" to the Second
Supplement and in Section 8 to the Second Supplement is incorporated herein by
reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
Item 6 is hereby amended and supplemented by the following:
(a)-(b) The information set forth in Section 11 to the Second Supplement is
incorporated herein by reference.
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ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
Item 7 is hereby amended and supplemented by the following:
The information set forth in Section 7 and Section 11 to the Second
Supplement is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Item 9 is hereby amended and supplemented by the following:
The information set forth in Section 5 to the Second Supplement is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
Item 10 is hereby amended and supplemented by the following:
(e) The information set forth in Section 10 to the Second Supplement is
incorporated herein by reference.
(f) The information set forth in the entire Second Supplement, and the
revised Letter of Transmittal, copies of which are attached hereto as Exhibits
(a)(57) and a(58), respectively, are incorporated herein by reference.
On December 28, 1998, Parent issued a press release, a copy of which is
attached hereto as Exhibit (a)(59) and is incorporated herein by reference.
On December 28, 1998, Parent sent a letter to Mr. Keith R. Lobo, a copy of
which is attached hereto as Exhibit (a)(60) and is incorporated herein by
reference.
On December 28, 1998, Parent commenced mailing a letter to stockholders of
the Company, a copy of which is attached hereto as Exhibit (a)(61) and is
incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
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(a)(57) -- Second Supplement to the Offer to Purchase, dated December 28, 1998.
(a)(58) -- Revised Letter of Transmittal.
(a)(59) -- Press Release dated December 28, 1998.
(a)(60) -- Letter to Mr. Keith R. Lobo dated December 28, 1998.
(a)(61) -- Letter to the Company's stockholders dated December 28, 1998.
</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.
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Dated: December 28, 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>
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SUPPLEMENT TO THE OFFER TO PURCHASE DATED AUGUST 12, 1998
OFFER TO PURCHASE FOR CASH
MGZ CORP.
A WHOLLY OWNED SUBSIDIARY OF
MENTOR GRAPHICS CORPORATION
HAS AMENDED ITS
OFFER TO PURCHASE FOR CASH
AND IS NOW OFFERING TO PURCHASE UP TO AN AGGREGATE OF
2,100,000 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
QUICKTURN DESIGN SYSTEMS, INC.
AT
$14 NET PER SHARE
THE OFFER, WITHDRAWAL RIGHTS AND THE PRORATION PERIOD WILL EXPIRE AT 12:00
MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, JANUARY 11, 1999 UNLESS THE OFFER IS EXTENDED.
THE OFFER, AS AMENDED, IS NO LONGER SUBJECT TO THE MINIMUM CONDITION, THE RIGHTS
CONDITION, THE SECTION 203 CONDITION OR THE HSR CONDITION (EACH AS DEFINED IN
THE OFFER TO PURCHASE AND/OR THE FIRST SUPPLEMENT). THE OFFER IS SUBJECT TO THE
TERMS AND CONDITIONS CONTAINED IN SECTION 9 OF THIS SECOND SUPPLEMENT.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (1) complete and sign the revised Letter of Transmittal (or
a facsimile thereof) delivered herewith in accordance with the instructions in
the revised 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 of the Offer to Purchase and Section 2 of this Second Supplement 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.
STOCKHOLDERS WHO HAVE PREVIOUSLY VALIDLY TENDERED SHARES PURSUANT TO THE
OFFER AND WHO HAVE NOT WITHDRAWN THOSE SHARES NEED NOT TAKE ANY FURTHER ACTION
IN ORDER TO TENDER SHARES PURSUANT TO THE OFFER, AS AMENDED.
TO BE VALID, A TENDER OF SHARES MUST BE ACCOMPANIED BY CERTIFICATES
REPRESENTING SHARES OR THE BOOK-ENTRY TRANSFER PROCEDURES MUST BE COMPLIED WITH
ON A TIMELY BASIS. SHARES MAY NOT BE TENDERED PURSUANT TO GUARANTEED DELIVERY
PROCEDURES AFTER THE DATE HEREOF.
In order to acquire Shares in a timely fashion and announce a proration
number, if any, at the earliest practicable date following the Expiration Date
(as defined), guarantees of delivery of Shares will no longer be accepted
pursuant to the Offer. All stockholders who have previously tendered Shares
using guarantee of delivery procedures have either perfected their tender by
delivering their Shares and any other required documents or have withdrawn their
tenders. Parent understands that no Shares that have been tendered and not
withdrawn remain subject to guarantee of delivery procedures.
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 Second Supplement. Additional copies
of this Second Supplement, the First Supplement, the Offer to Purchase, the
revised Letter of Transmittal and other tender offer materials 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
December 28, 1998
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TABLE OF CONTENTS
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PAGE
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INTRODUCTION............................................................................................... 1
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1. Terms of the Offer; Proration; Expiration Date............................... 3
2. Procedure for Tendering Shares............................................... 4
3. Price Range of Shares........................................................ 5
4. Certain Information Concerning the Company................................... 5
5. Certain Information Concerning Parent and Purchaser.......................... 6
6. Source and Amount of Funds................................................... 8
7. Background of the Offer...................................................... 8
8. Purpose of the Offer and the Proposed Merger; Plans for the Company.......... 11
9. Certain Conditions of the Offer.............................................. 11
10. Legal Proceedings............................................................ 15
11. Schedules.................................................................... 19
12. Miscellaneous................................................................ 19
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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 (the "Offer to Purchase"), as previously amended and
supplemented by the Supplement to the Offer to Purchase, dated August 27, 1998
(the "First Supplement"), of MGZ Corp. ("Purchaser"), a Delaware corporation and
a wholly owned subsidiary of Mentor Graphics Corporation, an Oregon corporation
("Parent" or "Mentor Graphics"), pursuant to which Purchaser is offering to
purchase shares of common stock, par value $.001 per share (the "Company Common
Stock"), of Quickturn Design Systems, Inc., a Delaware corporation (the
"Company"), together with the associated preferred share purchase rights (the
"Rights" and, together with the Company Common Stock, the "Shares") issued
pursuant to the Rights Agreement, dated as of January 10, 1996, as amended,
between the Company and The First National Bank of Boston, as Rights Agent.
Pursuant to this Second Supplement to the Offer to Purchase (the "Second
Supplement"), Purchaser is increasing the offering price in the tender offer for
Shares of the Company to $14 per Share, net to the seller in cash, without
interest thereon (the "Offer Price"), from $12.125 per Share, and reducing the
number of Shares being sought to 2,100,000 Shares, all upon the terms and
subject to the conditions set forth in the Offer to Purchase, as amended and
supplemented by the First Supplement and this Second Supplement, and in the
revised Letter of Transmittal (which, as amended from time to time, collectively
constitute the "Offer"). THE OFFER, AS AMENDED, IS NO LONGER SUBJECT TO THE
MINIMUM CONDITION, THE RIGHTS CONDITION, THE SECTION 203 CONDITION OR THE HSR
CONDITION (EACH AS DEFINED IN THE OFFER TO PURCHASE AND/OR THE FIRST
SUPPLEMENT). See Section 1 of the Offer to Purchase, Sections 1 and 2 of the
First Supplement and Section 1 of this Second Supplement.
On December 9, 1998, the Company announced that it had signed a merger
agreement with Cadence Design Systems, Inc. ("Cadence") pursuant to which
Cadence would acquire the Company in a stock merger in which each stockholder
would receive Cadence common stock with a value of $14 per share. On December
15, 1998, Parent sent a letter to Mr. Keith R. Lobo, President and Chief
Executive Officer of the Company, stating that Mentor Graphics is prepared to
pay more for the Company in a negotiated transaction than the $14 per share
price being proposed by Cadence. On December 15, 1998, the Company announced
that it is committed to its merger with Cadence. See "Background of the Offer."
On December 15, 1998, Parent commenced a new lawsuit in the Court of
Chancery against the Company, the Company Board and Cadence seeking, among other
things, to invalidate the $10,557,000 termination fee (the "Termination Fee")
and the $3,500,000 expense reimbursement fee (the "Reimbursement Fee") under the
Cadence merger agreement and the lock-up option for Cadence to purchase 19.9% of
the Company's outstanding Shares (the "Lock-Up Option"). The Lock-Up Option
provides that, should the Company accept an acquisition proposal from a party
other than Cadence, Cadence can, in lieu of exercising the option, require the
Company to make a "Total Payment" to Cadence of up to $14,075,000. Because
"Total Payment" is defined in the Company's merger agreement with Cadence to
include the Termination Fee, but not the Reimbursement Fee, the maximum amount
payable to Cadence is $17,575,000 (the "Break-Up Fee").
Purchaser and Parent will continue to seek to negotiate a merger agreement
or similar business combination between the Company and Purchaser or another
direct or indirect subsidiary of Parent at the Offer Price (the "Proposed
Merger"). The purpose of the Offer is for Parent, through Purchaser, to increase
its equity interest in the Company as the first step in completing the Proposed
Merger between Purchaser and the Company. In the event that Parent is successful
in invalidating all or any portion of the Break-Up Fee and the Proposed Merger
with Purchaser or another direct or indirect subsidiary of Parent
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is consummated, Parent intends to pay to all stockholders whose Shares are
converted pursuant to the Proposed Merger an amount per Share which is equal to
the Offer Price, which is currently $14, plus the lesser of (a) $.60 and (b) the
quotient of (i) seventy five percent (75%) of any portion of the Break-Up Fee
which has been invalidated divided by (ii) the total number of Shares
outstanding on the date immediately preceding the date of the closing of the
Proposed Merger.
Parent stands ready to consider increasing the Offer Price and the price to
be paid per Share in the Proposed Merger if negotiation and due diligence
demonstrate greater value of the Company to Parent.
THE SPECIAL MEETING
On September 11, 1998, Dr. Walden C. Rhines, Gregory K. Hinckley and Dean M.
Freed called a special meeting of stockholders of the Company by delivering to
the Company agent designations (the "Agent Designations") executed by holders of
greater than 10% of the Shares (including Shares owned by Parent). Also on
September 11, 1998, Parent commenced mailing its definitive Proxy Statement to
the Company's stockholders. A Special Meeting of Stockholders of the Company
will be held on January 8, 1999 at the time and place designated by the Company
in its proxy materials, or at any adjournment, postponement or continuation
thereof (the "Special Meeting"). The proposals made by Parent to be presented at
the Special Meeting are as follows: (i) to remove all members of the Company
Board, (ii) to adopt an amendment to Section 3.2 of Article III of the Company's
Bylaws (the "Company Bylaws") to reduce the authorized number of Company
directors from eight to five, (iii) to elect Gideon Argov, Scott H. Bice, Harry
L. Demorest, C. Scott Gibson and Michael J.K. Savage (the "Nominees") to fill
the five vacancies on the Company Board resulting from the removal of the
incumbent directors, (iv) to adopt a stockholder resolution repealing each
provision of the Company Bylaws or any amendment thereto adopted by the Company
Board subsequent to March 30, 1998 and prior to the effective date of the
Proposals, and (v) to take action on any procedural matter, or any substantive
matter that Parent does not know of within a reasonable time before the Special
Meeting, which is properly brought before the Special Meeting (the "Proposals").
The solicitation of proxies from the Company's stockholders in favor of the
Nominees and the other Proposals is being made pursuant to a separate proxy
solicitation. Stockholders of record at the close of business on November 10,
1998, the record date, will be entitled to notice of, and to vote at, the
Special Meeting and all stockholders may tender all or any portion of such
stockholder's Shares in the Offer.
If elected as directors of the Company, Parent would encourage the Nominees,
subject to their fiduciary duties as directors of the Company under applicable
law and in accordance with the Company's rights and obligations under the merger
agreement with Cadence, to seek to auction the Company to the highest bidder.
Parent would also encourage the Nominees, subject to their fiduciary duties as
directors of the Company under applicable law and in accordance with the
Company's rights and obligations under the merger agreement with Cadence, to
allow any bidder, including Parent, promptly to conduct a due diligence review
of the Company and to seek to execute a merger agreement with the highest
bidder. Parent believes that any such merger agreement could be executed within
30 days of the Nominees being elected as directors of the Company.
As of November 30, 1998, there were 18,095,580 Shares outstanding. Parent
currently owns 591,500 Shares, or approximately 3.3% of the outstanding Shares.
Following consummation of the Offer, Parent will own 2,691,500 Shares, or 14.9%
of the outstanding common stock, assuming 2,100,000 Shares are tendered into the
Offer and not withdrawn. To the extent Purchaser determines that, as a result of
the consummation of the Offer, Purchaser would beneficially own such number of
the then outstanding Shares as would result in the occurrence of a Distribution
Date (as defined in the Offer to Purchase) or cause the Purchaser to become an
Acquiring Person (as defined in the Offer to Purchase), Purchaser expressly
reserves the right, at any time and from time to time, to further amend the
Offer to change the number of Shares being sought in the Offer so that the
number of Shares that Purchaser would own upon consummation thereof would
represent such number of Shares then outstanding as would not result in the
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occurrence of a Distribution Date, or cause the Purchaser to become an Acquiring
Person, at such time. Any such amendment would be made in compliance with
applicable rules and regulations of the Securities and Exchange Commission (the
"Commission").
THIS SECOND SUPPLEMENT DOES NOT CONSTITUTE A SOLICITATION OF A PROXY,
CONSENT, OR AUTHORIZATION FOR OR WITH RESPECT TO ANY SPECIAL MEETING OF THE
COMPANY'S STOCKHOLDERS. THE SOLICITATION 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, THE FIRST SUPPLEMENT AND THIS SECOND SUPPLEMENT AND
THE REVISED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE
READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER.
This Second Supplement should be read in conjunction with the Offer to
Purchase and the First Supplement. Except as set forth in this Second Supplement
and the revised Letter of Transmittal, the terms and conditions previously set
forth in the Offer to Purchase and the First Supplement remain applicable in all
respects to the Offer. Terms used but not defined herein have the meanings set
forth in the Offer to Purchase or the First Supplement.
1. TERMS OF THE OFFER; PRORATION; EXPIRATION DATE
The discussion set forth in Section 1 of the Offer to Purchase and Section 2
of the First Supplement is hereby amended and supplemented as follows:
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 extension or
amendment), Purchaser will accept for payment and pay for up to an aggregate of
2,100,000 Shares that are validly tendered prior to the Expiration Date (as
defined herein) and not properly withdrawn in accordance with Section 4 of the
Offer to Purchase. The term "Expiration Date" means 12:00 midnight, New York
City time, on January 11, 1999 unless Purchaser shall have extended the period
of time during which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date at which the Offer, as so extended by
Purchaser, will expire.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE CONDITIONS SET FORTH IN
SECTION 9 OF THIS SECOND SUPPLEMENT.
PURCHASER RESERVES THE RIGHT (SUBJECT TO THE APPLICABLE RULES AND
REGULATIONS OF THE COMMISSION) TO AMEND OR WAIVE ANY TERMS AND CONDITIONS OF THE
OFFER.
If more than 2,100,000 Shares are validly tendered prior to the Expiration
Date and not properly withdrawn, Purchaser will, upon the terms and subject to
the conditions of the Offer, accept for payment and pay for only 2,100,000
Shares, on a pro rata basis, with adjustments to avoid purchases of fractional
Shares, based upon the number of Shares validly tendered prior to the Expiration
Date and not properly withdrawn. Because of the difficulty of determining
precisely the number of Shares validly tendered and not withdrawn, if proration
is required, Purchaser may not be able to announce the final results of
proration or pay for Shares until two business days after the Expiration Date.
Preliminary results of proration will be announced by press release as promptly
as practicable on the next business day after the Expiration Date. Holders of
Shares may obtain such preliminary information from the Information Agent and
also may be able to obtain such preliminary information from their brokers.
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In the event the Offer is not consummated, Purchaser currently intends to
explore all options which may be available to it, which may include, without
limitation, seeking to acquire additional Shares through open market purchases
or privately negotiated transactions, which may be at a price more or less than
the Offer Price. Purchaser also reserves the right to dispose of Shares.
2. PROCEDURE FOR TENDERING SHARES
The discussion set forth in Section 3 of the Offer to Purchase is hereby
amended and supplemented as follows:
TO BE VALID, A TENDER OF SHARES MUST BE ACCOMPANIED BY CERTIFICATES
REPRESENTING SHARES OR THE BOOK-ENTRY TRANSFER PROCEDURES MUST BE COMPLIED WITH
ON A TIMELY BASIS. SEE SECTION 3 OF THE OFFER TO PURCHASE.
In order to acquire Shares in a timely fashion and announce a proration
number, if any, at the earliest practicable date following the Expiration Date,
guarantees of delivery of Shares will no longer be accepted pursuant to the
Offer. All stockholders who have previously tendered Shares using guarantee of
delivery procedures have either perfected their tender by delivering their
Shares and any other required documents or have withdrawn their tenders. Parent
understands that no Shares that have been tendered and not withdrawn remain
subject to guarantee of delivery procedures.
The revised Letter of Transmittal distributed with this Second Supplement
may be used to tender Shares. Tendering stockholders also may continue to use
the Letter of Transmittal previously delivered with the Offer to Purchase and
the First Supplement to tender Shares. HOWEVER, THE PROVISIONS IN THE PREVIOUSLY
DISTRIBUTED LETTER OF TRANSMITTAL RELATING TO GUARANTEED DELIVERY WILL NO LONGER
BE APPLICABLE TO THE OFFER. By tendering Shares pursuant to the revised Letter
of Transmittal or the Letter of Transmittal previously delivered, tendering
stockholders will be deemed to represent and warrant to Parent and Purchaser
that the tender of Shares complies with Rule 14e-4 under the Exchange Act.
STOCKHOLDERS WHO HAVE PREVIOUSLY VALIDLY TENDERED SHARES PURSUANT TO THE
OFFER AND WHO HAVE NOT WITHDRAWN THOSE SHARES NEED NOT TAKE ANY FURTHER ACTION
IN ORDER TO TENDER SHARES PURSUANT TO THE OFFER, AS AMENDED.
By executing the Letter of Transmittal, a tendering stockholder irrevocably
appoints designees of Purchaser as the stockholder's attorneys-in-fact and
proxies, each with full power of substitution, in the manner set forth in the
appropriate Letter of Transmittal, to the full extent of the stockholder's right
with respect to the Shares (or, if applicable, the Rights) tendered by that
stockholder and accepted for payment by Purchaser (and any and all other Shares
or other securities or rights issued or issuable in respect of these Shares on
or after August 12, 1998). All powers of attorney and proxies will be considered
irrevocable and coupled with an interest in the tendered Shares. This
appointment is effective upon the acceptance for payment of Shares by Purchaser
in accordance with the terms of the Offer. Upon acceptance for payment, all
prior proxies, other than any proxies in favor of the proposals set forth in the
Proxy Statement, given by the stockholder with respect to these Shares or other
securities or rights will, without further action, be revoked and no subsequent
proxies may be given or written consents executed by the stockholder (and, if
given or executed, will not be deemed effective) with respect to these Shares.
The designees of Purchaser will, with respect to the Shares and other securities
or rights, be empowered to exercise all voting and other rights of the
stockholder as they, in their reasonable judgment, deem proper in respect of any
annual or special meeting of the Company's stockholders, or any adjournment or
postponement thereof, or by written consent in lieu of any meeting or otherwise.
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon Purchaser's payment for the Shares, Purchaser
or its designee must be able to exercise full voting and other rights with
respect to the Shares and the other securities or rights issued or issuable in
respect of the Shares, including
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the voting of Shares at any stockholders meeting (whether annual or special or
whether or not adjourned) or written consents in lieu of any meeting or
otherwise.
3. PRICE RANGE OF SHARES
The discussion set forth in Section 6 of the Offer to Purchase and Section 3
of the First Supplement is hereby amended and supplemented as follows:
The high and low last sales prices per Share as reported by the Nasdaq
National Market for the fourth quarter of 1998 (through December 23, 1998) were
$9.50 and $14.6875, respectively. HOLDERS OF SHARES ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE SHARES.
4. CERTAIN INFORMATION CONCERNING THE COMPANY
The discussion set forth in Section 7 of the Offer to Purchase and Section 4
of the First Supplement is hereby 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 September 30, 1998 and September 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 in
Section 7 of the Offer to Purchase.
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QUICKTURN DESIGN SYSTEMS, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
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NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31, (1)
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1998 1997 (2) 1997 (2) 1996 (3) 1995 (3)
---------- ---------- ---------- ---------- ---------
STATEMENTS OF OPERATIONS DATA
Total Revenues........................................ $ 73,089 $ 77,904 $ 110,404 $ 109,578 $ 82,442
Research and development.............................. $ 17,811 $ 17,555 $ 23,499 $ 19,706 $ 15,436
Operating income (loss)............................... $ (15,860) $ (18,022) $ (13,466) $ 17,973 $ 11,085
Net income (loss)..................................... $ (8,047) $ (8,924) $ (5,346) $ 14,131 $ 12,478
Gross margin percent.................................. 60% 69% 70% 70% 70%
PER SHARE DATA
Net income (loss) per share--basic.................... $ (0.45) $ (0.53) $ (0.31) $ 0.87 $ 0.81
Net income (loss) per share--diluted.................. $ (0.45) $ (0.53) $ (0.31) $ 0.79 $ 0.74
Cash dividends per common share outstanding........... $ -- $ -- $ -- $ -- $ --
Weighted average number of shares
outstanding--basic.................................. 17,772 16,954 17,110 16,323 15,497
Weighted average number of shares
outstanding--diluted................................ 17,772 16,954 17,110 17,912 16,806
BALANCE SHEET DATA (AS OF THE DATES INDICATED)
Cash and investments, short-term...................... $ 37,792 $ 33,613 $ 32,808 $ 36,404 $ 31,397
Cash and investments, long-term....................... $ 20,995 $ 16,837 $ 20,326 $ 18,198 $ 9,110
Working capital....................................... $ 41,693 $ 48,778 $ 51,143 $ 49,243 $ 44,381
Property, plant and equipment, net.................... $ 12,838 $ 10,360 $ 11,118 $ 11,243 $ 13,003
Total assets.......................................... $ 118,070 $ 116,577 $ 129,192 $ 111,977 $ 94,240
Short-term borrowings................................. $ -- $ 1,437 $ 1,095 $ 3,502 $ 3,401
Long-term debt and other deferrals.................... $ -- $ -- $ -- $ -- $ 3,701
Stockholders' equity.................................. $ 84,856 $ 87,508 $ 91,898 $ 84,045 $ 66,337
</TABLE>
- ------------------------
(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 1997 results include one-time acquisition and merger related charges of
$19.2 million.
(3) 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 discussion set forth in Section 8 of the Offer to Purchase and Section 5
of the First Supplement is hereby amended and supplemented as follows:
FINANCIAL INFORMATION. Set forth below is selected consolidated financial
data relating to Parent and its subsidiaries for Parent's last three fiscal
years, which have been excerpted or derived from the audited financial
statements contained in Parent's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 and from the unaudited financial statements contained in
Parent's Quarterly Report on Form 10-Q for the quarters ended September 30, 1998
and September 30, 1997, in each case filed by Parent with the Commission. More
comprehensive financial information is included in such reports and
6
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other documents filed by Parent with the Commission, and the following financial
data is qualified in its entirety by reference to such reports and other
documents, including the financial information and related notes contained
therein.
MENTOR GRAPHICS CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------
<S> <C> <C> <C> <C> <C>
1998 (1) 1997 (2) 1997 (2) 1996 1995
---------- ---------- ---------- ---------- ----------
STATEMENTS OF OPERATIONS DATA
Total Revenues....................................... $ 345,058 $ 332,203 $ 454,727 $ 447,886 $ 432,517
Research and development............................. $ 86,635 $ 82,960 $ 112,227 $ 92,905 $ 86,782
Operating income (loss) (3)(4)....................... $ 4,866 $ (28,254) $ (36,370) $ (9,849) $ 52,554
Net income (loss).................................... $ 1,053 $ (22,516) $ (31,307) $ (4,978) $ 50,506
Gross margin percent................................. 73% 63% 65% 70% 73%
PER SHARE DATA
Net income (loss) per share--basic................... $ 0.02 $ (0.35) $ (0.48) $ (0.08) $ 0.79
Net income (loss) per share--diluted................. $ 0.02 $ (0.35) $ (0.48) $ (0.08) $ 0.78
Cash dividends per common share outstanding.......... $ -- $ -- $ -- $ -- $ --
Weighted average number of shares
outstanding--basic................................. 64,996 64,901 64,885 64,134 63,710
Weighted average number of shares
outstanding--diluted............................... 65,432 64,901 64,885 64,134 65,134
BALANCE SHEET DATA (AS OF THE DATES INDICATED)
Cash and investments, short-term..................... $ 126,079 $ 141,107 $ 137,060 $ 197,079 $ 211,996
Cash and investments, long-term(5)................... $ -- $ -- $ -- $ 30,000 $ 30,000
Working capital...................................... $ 157,011 $ 166,105 $ 148,191 $ 200,848 $ 213,491
Property, plant and equipment, net................... $ 98,026 $ 107,486 $ 103,452 $ 102,253 $ 99,605
Total assets......................................... $ 412,454 $ 405,698 $ 402,302 $ 513,359 $ 495,372
Short-term borrowings................................ $ -- $ -- $ -- $ 9,055 $ 9,358
Long-term debt and other deferrals................... $ 1,500 $ 3,636 $ 617 $ 56,375 $ 55,054
Stockholders' equity................................. $ 287,988 $ 295,618 $ 277,537 $ 319,640 $ 326,226
</TABLE>
- ------------------------
(1) In the nine months ended September 30, 1998, Parent acquired its Korean
distributor for $4,000.
(2) Parent recognized an impairment in the value of certain previously
capitalized software development costs in the first quarter of 1997 of
$5,358. In addition, all remaining previously capitalized software
development costs were fully amortized in 1997 to recognize the change in
the estimated useful lives of older software product offerings.
(3) Operating income (loss) includes special charges of $10,307, $8,560,
$18,858, $11,998, $(2,040) for the nine months ended September 30, 1998 and
1997 and for the years ended December 31, 1997, 1996, and 1995,
respectively. The special charges relate primarily to the disposals of
subsidiaries, related employee terminations, and streamlining of worldwide
operations as well as the impairment in value of various assets. The $2,040
benefit reflects a downward adjustment of a prior year special charge
associated with the reduced estimate for severance costs associated with the
replacement and globalization of Parent's information systems.
7
<PAGE>
(4) Operating income (loss) includes merger and acquisition related charges of
$31,344 and $2,040, for the years ended December 31, 1996 and 1995. In 1996,
Parent completed nine business combinations, seven of which were accounted
for as purchase combinations. The purchase accounting allocations resulted
in charges for in-process research and development (IPR&D) of $26,234.
Parent also completed two acquisitions which were accounted for as a pooling
of interests. Merger expenses of $5,110 were incurred with these
acquisitions. In 1995, Parent completed five business combinations, two of
which were accounted for as pooling of interests and three of which were
accounted for as purchases. The purchase accounting allocations resulted in
charges for IPR&D of $1,430. The merger related expenses associated with the
pooling transactions in 1995 were $610.
The results of operations include the purchases only from date of the
respective acquisition forward. The results of operations for all
acquisitions accounted for as pooling of interests are included for all
periods presented.
(5) In the first quarter of 1997, Parent had an early termination of an interest
rate swap agreement.
6. SOURCE AND AMOUNT OF FUNDS
The discussion set forth in Section 9 of the Offer to Purchase and Section 6
of the First Supplement is hereby amended and supplemented as follows:
Parent and Purchaser estimate that the total amount of funds required to
acquire 2,100,000 Shares pursuant to the Offer (as amended and as described in
this Second Supplement), and to pay all related costs and expenses relating
thereto will be approximately $35 million. Purchaser plans to obtain all such
funds through a capital contribution or a loan from Parent. Parent plans to
provide such funds for such capital contribution or loan from its available cash
and working capital.
7. BACKGROUND OF THE OFFER
The discussion set forth in Section 10 of the Offer to Purchase and Section
7 of the First Supplement is hereby amended and supplemented as follows:
On September 8, 1998, Parent announced that the waiting period under the HSR
Act expired with respect to the Offer.
On September 11, 1998, Dr. Walden C. Rhines, Gregory K. Hinckley and Dean M.
Freed called the Special Meeting by delivering to the Company Agent Designations
executed by holders of greater than 10% of the Shares (including Shares owned by
Parent). Also on September 11, 1998, Parent commenced mailing its definitive
Proxy Statement to the Company's stockholders accompanied by a letter to the
Company's stockholders and on September 15, 1998, Parent filed a supplement to
the Proxy Statement with the Commission.
On September 17, 1998, the Company filed preliminary proxy revocation
materials with the Commission and on September 21, 1998, the Company filed
definitive proxy revocation materials with the Commission. On September 24,
1998, the Company filed additional definitive proxy materials with the
Commission relating to the Company's business plan.
On September 25, 1998, Parent delivered a letter to the Company Board
calling on the Company Board to, among other things, stop its obstructionist and
wasteful tactics. On September 28, 1998, Parent commenced mailing a letter to
stockholders of the Company urging stockholders to tender their Shares and a
copy of the September 25, 1998 letter to the Company Board.
On September 29, 1998, Parent issued a press release stating that CT
Corporation System, an independent tabulation firm retained by the Company,
certified that the Agent Designations which had been solicited by Parent to call
the Special Meeting and delivered by Parent on September 11, 1998 validly
represented 17.26% of the Company's outstanding Shares.
8
<PAGE>
On October 1, 1998, the Company issued a press release stating the Company
Board's decision to set the record date for the Special Meeting for November 10,
1998 and the meeting date for January 8, 1999.
On October 15, 1998, Parent issued a press release stating that
Institutional Shareholder Services Inc., one of the nation's leading
institutional shareholder advisory firms, recommended to its clients that they
vote in favor of Parent's Nominees and the other Parent's other proposals at the
Special Meeting.
On October 19, 1998, Parent commenced mailing a letter to stockholders of
the Company stating that the location of the special meeting called by Parent
for October 29, 1998 had been changed.
On November 6, 1998, Parent and Bank of America entered into a definitive
$200 million line of credit, in accordance with Bank of America's August 1998
commitment letter to Parent. Funds from the line of credit, together with
working capital, will be used to pay for the Shares purchased pursuant to the
Offer.
On November 11, 1998, Parent commenced mailing a letter to stockholders of
the Company urging stockholders to vote in favor of the Proposals.
On December 3, 1998, Parent issued a press release announcing that the Court
of Chancery of the State of Delaware invalidated the deferred redemption
provision of the Rights Agreement. The release also stated that the Special
Meeting will be held on January 8, 1999, as a result of the Court of Chancery
upholding the Bylaw Amendment (as defined herein). See "Legal Proceedings."
On December 3, 1998, the Company issued a press release announcing that the
Court of Chancery of the State of Delaware ruled that the Bylaw Amendment was
valid and that the Rights Agreement Amendment (as defined herein) was invalid.
The Company also announced that it intended to immediately appeal the decision
to the Delaware Supreme Court.
On December 6, 1998, Dr. Walden C. Rhines, President and Chief Executive
Officer of Parent, called Mr. Glen Antle, Chairman of the Board of Directors of
the Company, to assure him that Parent remained willing to discuss a combination
of the two companies and to consider an increased offer if due diligence showed
greater value. During the evening of December 8, 1998, Parent's counsel called
the Company's counsel to reiterate Parent's willingness to discuss a business
combination. The Company's counsel told Parent's counsel that if Parent wished
to raise its bid, it should begin consideration of a higher proposal. Parent's
counsel stated that Parent would respond on December 9, 1998 to the Company's
invitation. Also on December 8, 1998, the Company's financial advisor contacted
Parent's financial advisor and stated that if Parent wished to raise its bid, it
should begin consideration of a higher proposal. Parent's financial advisor
stated that Parent would respond by 5:00 p.m. on December 9, 1998. The Company's
financial advisor confirmed that responding in that time frame would be
acceptable.
On December 8, 1998, before Parent could submit its higher proposal and
without informing Parent that the Company was involved in negotiations with a
third party, the Company entered into a merger agreement with Cadence.
On December 15, 1998, Parent issued a press release announcing that it is
prepared to pay more for the Company in a negotiated transaction than the $14
per share price being proposed by Cadence. Parent also stated that the size of
its merger proposal would be influenced by Parent's due diligence demonstrating
greater value for the Company and the invalidation of the Termination Fee, the
Reimbursement Fee and the Lock-Up Option. Also on December 15, 1998, Dr. Rhines
sent the following letter to Mr. Keith R. Lobo, President and Chief Executive
Officer of the Company:
9
<PAGE>
December 15, 1998
Mr. Keith R. Lobo
President and Chief Executive Officer
Quickturn Design Systems, Inc.
55 West Trimble Road
San Jose, California 96131
Dear Keith:
You and your fellow Quickturn directors have once again seriously
breached your fiduciary duties to Quickturn's stockholders.
Less than two weeks ago, the Delaware Court of Chancery found that
you and the other Quickturn directors violated your fiduciary duties to
the Quickturn stockholders in your attempt to defeat Mentor's all-cash
offer by amending your poison pill. The Court found that you and the
other Quickturn directors were "unable to articulate a cogent reason"
for your poison pill amendment.
That ruling should have caused you and the other Quickturn directors
to act responsibly and to maximize value for your stockholders.
After we received the Chancery Court's ruling, I called your
Chairman Glen Antle to assure him that Mentor remained willing to
discuss a combination of our companies and to consider an increased
offer if due diligence showed greater value. Our advisers also called
Quickturn representatives who invited us on December 8 to consider
presenting a higher offer, even as they denied Mentor the opportunity to
conduct any due diligence. Our investment banker and lawyer each
separately informed Quickturn on December 8 that Mentor would respond to
Quickturn's invitation the very next day. Your investment banker
confirmed that responding on December 9 would be acceptable. The last of
these conversations between the representatives occurred on the evening
of December 8. Instead of waiting to see Mentor's higher offer so as to
maximize stockholder value, you went ahead and signed a merger agreement
with Cadence the same night, closing the door on the response we
promised by 5:00 p.m. the next day.
The actions of the Quickturn Board show that you and your fellow
directors learned nothing from the Court's recent finding that you
breached your fiduciary duty. When you learned that Mentor was likely to
respond to your invitation to submit a higher bid, you rushed to sign a
deal with Cadence, instead of waiting less than 24 hours for Mentor's
higher offer. To make matters worse, you signed up for a transaction at
a price representing only a small increase above our initial offer at a
cost to Quickturn stockholders of an excessive break-up fee of 6.9% of
the Cadence merger consideration, a lock-up option for Cadence to
purchase 19.9% of Quickturn common stock, employment agreements for you
and other members of management, and a peculiar provision that gives you
the potential power to cause termination of the entire deal if you're
not personally happy. To put it simply, you appear to have been willing
to sign any deal--no matter how bad it might be for your
stockholders--as long as you got the autonomy and perquisites you
wanted.
We are prepared to pay more for Quickturn in a negotiated merger
transaction than the $14 per share price being proposed by Cadence. The
size of our merger proposal will be influenced by Mentor's due diligence
demonstrating greater value for Quickturn and the invalidation of the
$10.6 million termination fee, the $3.5 million expense reimbursement
fee and the lock-up option for Cadence to purchase 19.9% of Quickturn's
common stock contained in the Cadence merger agreement that was entered
into in breach of your fiduciary duties.
10
<PAGE>
Furthermore, we are continuing to evaluate our alternatives with respect
to our existing tender offer.
We are also filing suit against you and the other Quickturn
directors as well as Cadence in connection with your new breach of your
fiduciary duty to your stockholders.
Very truly yours,
/s/ Walden C. Rhines
------------------------------------------------------------------------
President and
Chief Executive Officer
On December 15, 1998, the Company announced that it is committed to the
merger with Cadence. Since December 15, 1998, Parent has sought to negotiate a
business combination with the Company as well as to resolve the outstanding
issues between the two companies and between Parent and Cadence.
On December 28, 1998, Parent issued a press release announcing the terms of
the Offer, as amended, and Dr. Rhines sent a letter to Mr. Lobo, a copy of which
accompanies this Second Supplement.
8. PURPOSE OF THE OFFER AND THE PROPOSED MERGER; PLANS FOR THE COMPANY
The discussion set forth in Section 11 of the Offer to Purchase and Section
8 of the First Supplement is hereby amended and supplemented as follows:
Purchaser and Parent will continue to seek to negotiate with the Company
regarding the Proposed Merger. The purpose of the Offer is for Parent, through
Purchaser, to increase its equity interest in the Company as the first step in
completing the Proposed Merger between Purchaser and the Company. In the event
that Parent is successful in invalidating all or any portion of the Break-Up Fee
and the Proposed Merger with Purchaser or another direct or indirect subsidiary
of Parent is consummated, Parent intends to pay to all stockholders whose Shares
are converted pursuant to the Proposed Merger an amount per Share which is equal
to the Offer Price, which is currently $14, plus the lesser of (a) $.60 and (b)
the quotient of (i) seventy five percent (75%) of any portion of the Break-Up
Fee which has been invalidated divided by (ii) the total number of Shares
outstanding on the date immediately preceding the date of the closing of the
Proposed Merger.
Parent intends to pay the consideration it recovers if Parent is successful
in invalidating the Break-Up Fee (as discussed in the preceding paragraph) in
the Proposed Merger, as opposed to in the Offer, because Parent does not believe
the litigation regarding the Break-Up Fee will be judicially resolved prior to
the Expiration Date. Consequently, stockholders who tender their Shares in the
Offer may receive slightly less cash per Share than stockholders who do not
tender in the Offer and whose Shares are converted in the Proposed Merger.
Parent stands ready to consider increasing the Offer Price and the price to
be paid per Share in the Proposed Merger if negotiation and due diligence
demonstrate greater value of the Company to Parent.
In the event that the Proposed Merger is consummated, Purchaser intends to
obtain all necessary funds through a capital contribution or a loan from Parent.
Parent believes it will be able to provide the funds for such capital
contribution or loan from its available cash and working capital and pursuant to
the Credit Agreement described in the Offer to Purchase.
9. CERTAIN CONDITIONS OF THE OFFER
The discussion set forth in Section 14 of the Offer to Purchase and Section
9 of the First Supplement is hereby amended and supplemented as follows:
Purchaser has eliminated the Minimum Condition, the Section 203 Condition,
the Rights Condition and the HSR Condition to the Offer. However, to the extent
Purchaser determines that, as a result of the
11
<PAGE>
consummation of the Offer, Purchaser would beneficially own such number of the
then outstanding Shares as would result in the occurrence of a Distribution
Date, or cause the Purchaser to become an Acquiring Person, Purchaser expressly
reserves the right, at any time and from time to time, to further amend the
Offer to reduce the number of Shares sought in the Offer so that the number of
Shares that Purchaser would own upon consummation thereof would represent such
number of Shares then outstanding as would not result in the occurrence of a
Distribution Date, or cause Purchaser to become an Acquiring Person, at such
time. Such amendment to the Offer could be required in the event the Company
amends the Rights Agreement, changes its capitalization by way of a
recapitalization or takes certain other actions in respect of the Shares. Any
such amendment of the Offer would be made in compliance with applicable rules
and regulations of the Commission.
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 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 the
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
12
<PAGE>
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, (i) is or is
likely to be materially adverse to 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 the Company or any of its subsidiaries or (ii)
might materially adversely affect the Company or Purchaser or any other
affiliate of Parent or the value of the Shares;
(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) other than the redemption of the Rights at the redemption price
thereof in accordance with their terms as such terms have been publicly
disclosed prior to the date of the Offer to Purchase, 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, (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, (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
the Offer to Purchase, in accordance with the terms of such options as such
terms have been publicly disclosed prior to the date of the 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, (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
13
<PAGE>
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 the Offer to Purchase, or
(xi) amended or authorized or proposed any amendment to the Company's
Articles of Incorporation or Bylaws, or Purchaser shall 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 the 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
the 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 or amended 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 waiver, approval, permit, extension, authorization or
consent of any governmental authority or agency (including those described
or referred to in Section 15 of the Offer to Purchase) 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) (x) 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, (y) 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
14
<PAGE>
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 (z) other
than amendments publicly announced by the Company prior to December 23,
1998, the Rights Agreement shall have been amended in any material respect;
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;
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. Any determination by Parent or Purchaser concerning
any condition or event described in this Section 9 shall be final and binding on
all parties.
10. LEGAL PROCEEDINGS
The discussion set forth in Section 17 of the Offer to Purchase and Section
10 of the First Supplement is hereby amended and supplemented as follows:
COURT OF CHANCERY OF THE STATE OF DELAWARE
On December 3, 1998, the Court of Chancery of the State of Delaware issued
its post-trial opinion and final order in the litigation commenced by Parent
against the Company and the Company Board following the announcement of the
Offer. The Court of Chancery upheld the Bylaw Amendment adopted by the Company
Board on August 21, 1998, which provides that the Company Board shall, upon the
receipt of requests from one or more stockholders holding Shares in the
aggregate entitled to cast not less than 10% of the votes at a special meeting,
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 "Bylaw Amendment"), thus setting the Special Meeting for January 8, 1999
instead of December 11, 1998. Concurrently, the Court of Chancery invalidated
the Rights Agreement Amendment (as defined below), also adopted by the Company
Board on August 21, 1998, as a breach of fiduciary duties by the members of the
Company Board and an unreasonable response to the Offer. 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
after an individual or group became an Acquiring Person (as defined in the
Rights Agreement) 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
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 (the "Rights Agreement Amendment"). The Company appealed the
Court of Chancery's invalidation of the Rights Agreement Amendment to the
Supreme Court of the State of Delaware which has granted expedited treatment of
the appeal.
Parent and Purchaser commenced the litigation against the Company and the
Company Board in the Court of Chancery on August 12, 1998. Parent amended its
complaint on August 24, 1998 and September 11, 1998. As amended, the complaint
sought an order (i) declaring that the Company Board's failure to redeem the
Rights or to render the Rights inapplicable to the Offer and the Proposed Merger
or to
15
<PAGE>
approve the Offer and Proposed Merger constituted a breach of the directors'
fiduciary duties under Delaware law; (ii) invalidating the Rights or compelling
the Company Board to redeem the Rights or render the Rights inapplicable to the
Offer and Proposed Merger; (iii) declaring that the Company Board's failure to
approve the Offer and the Proposed Merger for purposes of Section 203 of the
DGCL constituted a breach of the directors' fiduciary duties under Delaware law;
(iv) compelling the Company Board to approve the Offer and the Proposed Merger
for purposes of Section 203 of the DGCL; (v) declaring that the adoption of the
Bylaw Amendment and the Rights Agreement Amendment constituted a breach of the
director's fiduciary duties under Delaware law; (vi) invalidating the Bylaw
Amendment and Rights Agreement Amendment; (vii) declaring that any other actions
taken by the Company Board designed to impede or which have the effect of
impeding the Offer and the Proposed Merger would also constitute a breach of the
directors' fiduciary duties under Delaware law; (viii) enjoining the Company
Board from adopting any other measures designed to impede or which have the
effect of impeding the Offer and the Proposed Merger, and (ix) declaring that
the call of the Special Meeting by the Designated Agents on September 11, 1998
was effective to call a special meeting of the Company's stockholders for
October 29, 1998, and to set the record date for determining the stockholders
entitled to vote at the special meeting.
On September 28, 1998, the Company filed a motion for summary judgment on
all claims brought by Parent and Purchaser. The Court of Chancery heard oral
argument on the Company's Motion for Summary Judgment on October 7, 1998 and, in
a written opinion issued on October 9, 1998, denied the Company's motion in its
entirety.
On October 16, 1998, the Company filed a Motion for Preliminary Injunction
seeking to enjoin the holding of the special meeting on October 29, 1998. In
order to permit a decision on the merits before the special meeting, on October
27, 1998, Parent and the Company stipulated to and the Court of Chancery
approved the adjournment of the special meeting from October 29, 1998 to
November 24, 1998. On November 20, 1998, the parties further stipulated to and
the Court of Chancery approved an adjournment of the special meeting from
November 24, 1998 to December 11, 1998.
A trial was held on October 19, 20, 23, 26 and 28, 1998. Post-trial briefing
by the parties was completed on November 9, 1998. On December 2, 1998, the Court
of Chancery issued its written opinion, holding that the adoption of the Rights
Agreement Amendment constituted a breach of the directors' fiduciary duties to
the Company's stockholders. The Court held that the Company Board's rationale
for adopting the Rights Agreement Amendment was inconsistent with the terms of
the Rights Agreement Amendment and further found that the Company Board was
"unable to articulate a cogent reason" for the six month delay in the ability of
a newly-elected board to redeem the Rights. The Court therefore invalidated the
Rights Agreement Amendment as an unreasonable and disproportionate response to
the Offer and Proposed Merger. The Court of Chancery's opinion also approved the
validity of the Bylaw Amendment. Parent disagrees with the Court of Chancery's
holding on the validity of the Bylaw Amendment and the effects of the Rights
Agreement Amendment, as well as the underlying findings of fact in the opinion.
On December 3, 1998, the Court of Chancery entered a final order invalidating
the Rights Agreement Amendment, approving the Bylaw Amendment and determining
that Parent properly called the Special Meeting of the Company's stockholders to
consider the Proposals for January 8, 1999 with a record date of November 10,
1998 (the "Order").
On December 3, 1998, the Company filed a Notice of Appeal with the Delaware
Supreme Court. Parent has not appealed the Order. On December 7, 1998, the
Delaware Supreme Court granted the Company's motion for an expedited appeal of
the Court of Chancery's Order entered on December 3, 1998. Oral argument will be
presented to the Delaware Supreme Court on December 29, 1998.
On December 15, 1998, Parent commenced a new lawsuit in the Delaware Court
of Chancery against the Company, the Company Board and Cadence. The suit alleges
that the members of the Company Board have again breached their fiduciary duties
and seeks to enjoin consummation of the proposed Cadence merger and to
invalidate the Termination Fee, the Reimbursement Fee and the Lock-Up Option.
Parent's
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complaint challenges that the Company Board failed to maximize stockholder value
by excluding Parent from the process of selling the Company.
On December 16, 1998, Parent moved for summary affirmance of the Order and
on December 21, 1998, the Delaware Supreme Court denied Parent's motion.
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
In the federal securities litigation between Parent and the Company pending
in the United States District Court for the District of Delaware (the "Delaware
District Court"), Parent sought to require the Company to correct its
disclosures relating to the Offer and the Special Meeting and the Company sought
to require Parent to make corrective disclosures relating to the Offer and
Parent's solicitation of Agent Designations and proxies for a special meeting of
the Company's stockholders. On October 23, 1998, the United States District
Court denied the separate applications for preliminary injunctive relief filed
by Parent and the Company.
Parent and Purchaser commenced the litigation against the Company in the
Delaware District Court on August 12, 1998 seeking, among other things, a
declaratory judgment that Parent and Purchaser have disclosed all information
required by, and are otherwise in full compliance with, the Exchange Act and any
other federal securities laws, rules or regulations deemed applicable to the
Offer and the solicitation of Agent Designations. The complaint was subsequently
amended by Parent and Purchaser on August 26, September 11 and October 16, 1998,
to (i) include claims that materials filed by the Company with the Commission
and public statements made by the Company in response to the Offer and the call
of the Special Meeting contained false and misleading statements in violation of
Sections 14(a), 14(d) and 14(e) of the Exchange Act and (ii) seek a declaratory
judgment that Parent and Purchaser have disclosed all information required by,
and are otherwise in full compliance with, the Exchange Act and any other
federal securities laws, rules or regulations deemed applicable to the call of
the Special Meeting and the solicitation of proxies in connection with the
Special Meeting.
On August 25, 1998, the Company filed an Answer and Counterclaim for
Injunctive and Other Relief against Parent, Purchaser, certain officers of
Parent and the Nominees. The counterclaim was subsequently amended and
supplemented by the Company on September 14 and September 21, 1998. The
counterclaim, as amended, alleges that the materials filed by Parent and
Purchaser with the Commission in connection with the Offer, Parent's
solicitation of Agent Designations and the call of the Special Meeting contain
materially false and misleading statements and omissions in violation of
Sections 14(a), 14(d) and 14(e) of the Exchange Act, and seeks (i) an injunction
requiring Parent and Purchaser to correct their filings and prohibiting Parent
and Purchaser from taking various actions in connection with the Offer, Parent's
solicitation of Agent Designations and Parent's solicitation of proxies in
connection with the Special Meeting and (ii) a declaration that Parent's
solicitation of proxies in connection with the Special Meeting is invalid. Also
on August 25, 1998, the Company filed a Motion for Preliminary Injunction with
the Delaware District Court seeking to compel Parent and Purchaser to correct
the disclosures in their filings with the Commission and to enjoin Parent,
Purchaser and their agents from taking various actions in connection with the
Offer, the Proposed Acquisition and Parent's solicitation of Agent Designations.
On September 4, 1998, Parent and Purchaser filed a Motion for Preliminary
Injunction with the Delaware District Court seeking to compel the Company to
correct the disclosures in its filings with the Commission and to enjoin the
Company or any of its agents from disseminating any further information or
otherwise communicating with the Company's stockholders or taking any action
with respect to the Offer, the Proposed Acquisition, Parent's solicitation of
Agent Designations and the Special Meeting until at least thirty days after the
Company makes corrective disclosures in its filings with the Commission.
On September 8, 1998, Parent and Purchaser filed in Delaware District Court
a Motion to Dismiss the Counterclaim for failure to state a claim upon which
relief can be granted. Briefing on Parent and Purchaser's Motion to Dismiss was
completed on September 23, 1998. The motion remains pending.
17
<PAGE>
On September 14, 1998, the Company filed a Motion for a Temporary
Restraining Order with the Delaware District Court seeking to, among other
things, (i) enjoin Parent and Purchaser from distributing proxy materials in
connection with the Special Meeting and (ii) compel Parent and Purchaser to
correct alleged misstatements in materials filed by Parent and Purchaser with
the Commission. On September 16, 1998, the Delaware District Court heard oral
argument on the Company's Motion for a Temporary Restraining Order and denied
the motion at the conclusion of oral argument.
The Delaware District Court heard oral argument on Parent and Purchaser's
Motion for Preliminary Injunction on October 6, 1998, and heard oral argument on
the Company's Motion for Preliminary Injunction on October 21, 1998. The
Delaware District Court denied both motions on October 23, 1998.
On November 3, 1998, Parent and Purchaser filed with the Delaware District
Court a Motion for Preliminary Injunction seeking to compel the Company to
correct disclosures in press releases and filings with the Commission regarding
the ongoing patent litigation between Parent and the Company in the United
States District Court for the District of Oregon (the "Oregon District Court")
and to enjoin the Company and any of its agents from (i) disseminating any
further information or otherwise communicating with the Company's stockholders
with respect to the Offer, the Proposed Acquisition, Parent's solicitation of
Agent Designations and the Special Meeting; (ii) taking any action in opposition
to the Offer, the Proposed Acquisition, Parent's solicitation of Agent
Designations or the Special Meeting until at least thirty days after the Company
makes corrective disclosures in its filings with the Commission; and (iii)
making any false and misleading statements regarding the Offer, the Proposed
Acquisition, Parent's solicitation of Agent Designations and the Special
Meeting. Later on November 3, 1998, Parent and the Company agreed that the
expert reports of James Mack Folsom and Blaine F. Nye, Ph.D. concerning the
Company's damages claims in the patent litigation between Parent and the Company
would be publicly disclosed in redacted form. Based on this agreement, Parent
determined not to continue with its Motion for Preliminary Injunction.
Parent and Purchaser are filing with the Delaware District Court a motion
for leave to file a fourth amended complaint against the Company, its President
and Chief Executive Officer, Keith Lobo, Cadence, and its President and Chief
Executive Officer, Jack Harding.
The fourth amended complaint asserts additional claims for violations of
securities laws, including Sections 14(a), 14(d) and 14(e) of the Exchange Act
which are based on (a) the Company's failure to disclose prior to December 9,
1998 that (i) it had reversed its position that stockholders' interests would
best be served by the Company remaining independent and pursuing its long term
business plan; (ii) it had made contact with Cadence, given Cadence due
diligence, and commenced negotiations with Cadence regarding an acquisition; and
(iii) Parent was misled and shut out of the bidding in favor of Cadence; and (b)
the Company's failure to disclose in its December 9, 1998 filings with the
Commission regarding the Cadence merger (i) adequate information regarding the
reasons of the Company and the Company Board for accepting the Cadence merger;
(ii) sufficient information regarding the opinion of Hambrecht & Quist that the
consideration to be received by stockholders in the Cadence merger is fair, from
a financial point of view, including the analyses underlying the opinion; and
(iii) the terms or the identities of the recipients of the employment and
non-compete agreements referenced in the Cadence merger agreement.
The fourth amended complaint asserts additional claims for violations of
Section 14(a) of the Exchange Act which are based on the efforts of Messrs. Lobo
and Harding to solicit stockholder support for the Company in connection with
the Special Meeting. The fourth amended complaint seeks: a declaration that the
defendants violated the securities laws; injunctive relief requiring the Company
to comply with the securities laws and to refrain from making false or
misleading statements; injunctive relief barring enforcement of the Cadence
merger agreement and voiding all proxies obtained by the Company between the
date it commenced negotiations with Cadence and the date ten business days after
it makes full disclosure; a declaration that Parent and Purchaser are in full
compliance with the Exchange Act and all other applicable securities laws, rules
and regulations; and an award of costs and expenses, including attorneys' fees.
18
<PAGE>
PATENT LITIGATION
The trial of the action in the Oregon District Court is scheduled to begin
on February 16, 1998. On November 13, 1998, the Oregon District Court granted
summary judgment that Parent did not infringe one of the six Company patents at
issue, denied Parent's summary judgment motions as to noninfringement,
unenforceability and invalidity as to the remaining patents and denied the
Company's motions for summary judgment that Parent infringed these remaining
patents. The preliminary injunction prohibiting Parent from selling its
SimExpress version 1.0 and 1.5 acceleration verification systems in the United
States remains in effect pending trial in the Oregon District Court.
Discovery on the issue of the damages, if any, caused by Parent's alleged
infringement is to be completed by December 28, 1998. On October 5, 1998, the
Company's expert submitted an analysis that calculates its compensatory damages
at approximately $78.7 million. Parent's expert has submitted an analysis
calculating the Company's compensatory damages, if any, caused by Parent's
alleged infringement to be $0.5 million, and at the most, $1.1 million. The
analysis of the expert witnesses for the Company and for Parent can be found on
the World Wide Web at http://www.mentorg.com/file. In addition to compensatory
damages, in the event the Oregon District Court finds that Parent's infringed
the patents and that the infringement was willful, the Oregon District Court has
discretion to enhance the jury award so that the total award is at most triple
the amount awarded by the jury. The Oregon District Court also has the
discretion, if it determines that the action qualifies as "an extraordinary
case" (which typically requires a finding that the infringement was willful), to
award the Company reasonable costs and attorneys' fees. Parent filed a motion
for summary judgment in June 1998 seeking to limit potential damages. This
motion was granted in part, denying the Company's request for damages with
respect to alleged losses in stock value. The motion for summary judgment was
also denied in part, with leave to refile the motion upon completion of damages
discovery. Parent presently intends to refile its summary judgment motion.
The Company and Parent have stipulated that any monetary sanctions arising
from evidentiary issues in the United States International Trade Commission
("ITC") proceeding will not exceed $425,000, which amount includes expenses and
has been paid by Parent to the Company. Parent has appealed the ITC
Administrative Law Judge's recommendation of such sanctions, but no decision is
expected until late 1999.
11. SCHEDULES
The discussion set forth under "Other Information" of Schedule II of the
Offer to Purchase and Section 11 of the First Supplement is hereby amended and
supplemented as follows:
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 (representing approximately 4.4% of the
Shares outstanding as of November 30, 1998). The Warrant entitles Parent to
acquire 200,000 shares of Company Common Stock at an exercise price of $30.00
per share. Parent intends to sell the Warrant prior to the consummation of the
Offer. Based on discussions with its financial advisor, Parent believes the
value per share of the Warrant is between $0.40 and $0.80.
12. MISCELLANEOUS
The discussion set forth in Section 18 of the Offer to Purchase and Section
12 of the First Supplement is hereby amended and supplemented as follows:
Pursuant to Rule 14d-3 of Regulation 14D under the Exchange Act, Parent and
Purchaser have filed with the Commission amendments to the Schedule 14D-1,
together with exhibits, furnishing certain additional information with respect
to the Offer. The Schedule 14D-1, and any 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 of the Offer to Purchase except
that they will not be available at the regional offices of the Commission.
December 28, 1998 MGZ Corp.
19
<PAGE>
Facsimile copies (with manual signatures) of the revised Letter of
Transmittal will be accepted. The revised 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 Attn: Reorganization Dept.
10274-0084 Securities Processing Window
Attn: Reorganization Dept. 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, the First Supplement, this Second Supplement and the revised 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>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
QUICKTURN DESIGN SYSTEMS, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 12, 1998
AS AMENDED AND SUPPLEMENTED BY
THE SUPPLEMENT DATED AUGUST 27, 1998 AND
THE SECOND SUPPLEMENT DATED DECEMBER 28, 1998
OF
MGZ CORP.
A WHOLLY OWNED SUBSIDIARY OF
MENTOR GRAPHICS CORPORATION
THE OFFER, WITHDRAWAL RIGHTS AND THE PRORATION PERIOD WILL EXPIRE AT 12:00
MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, JANUARY 11, 1999 UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: 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
</TABLE>
CONFIRM RECEIPT OF FACSIMILE
BY TELEPHONE:
(212) 858-2103
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED
BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This revised Letter of Transmittal is to be completed by stockholders either
if certificates evidencing Shares and/or Rights (as such terms are defined
below) are to be forwarded herewith or if delivery of Shares and/or Rights, is
to be made by book-entry transfer to the Depositary's account at The Depositary
Trust Company (the "Book-Entry Transfer Facility") pursuant to the book-entry
transfer procedures described in Section 3 of the Offer to Purchase (as defined
below) dated August 12, 1998 as amended and supplemented by the First Supplement
and the Second Supplement (each as defined below). 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.
STOCKHOLDERS WHO HAVE PREVIOUSLY VALIDLY TENDERED SHARES PURSUANT TO THE
OFFER AND WHO HAVE NOT WITHDRAWN THOSE SHARES NEED NOT TAKE ANY FURTHER ACTION
IN ORDER TO TENDER SHARES PURSUANT TO THE OFFER, AS AMENDED.
TO BE VALID, A TENDER OF SHARES MUST BE ACCOMPANIED BY CERTIFICATES
REPRESENTING SHARES OR THE BOOK-ENTRY TRANSFER PROCEDURES MUST BE COMPLIED WITH
ON A TIMELY BASIS. SHARES MAY NOT BE TENDERED PURSUANT TO GUARANTEED DELIVERY
PROCEDURES AFTER THE DATE HEREOF.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
<PAGE>
/ / CHECK HERE IF SHARES AND/OR RIGHTS ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________
Account Number ________________ Transaction Code Number ___________
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
NAME(S) AND ADDRESS(ES) OF HOLDER(S) (PLEASE
FILL IN,
IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
<S> <C> <C> <C>
<CAPTION>
TOTAL NUMBER
OF SHARES
SHARE EVIDENCED BY NUMBER OF
CERTIFICATE SHARE SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
Total Shares
* Need not be completed by stockholders delivering Shares by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share
Certificate delivered to the Depositary are being tendered hereby. See Instruction 4.
</TABLE>
<TABLE>
<CAPTION>
DESCRIPTION OF RIGHTS TENDERED*
NAME(S) AND ADDRESS(ES) OF HOLDER(S) (PLEASE
FILL IN,
IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON RIGHTS CERTIFICATE(S) AND RIGHTS TENDERED
RIGHTS CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
<S> <C> <C> <C>
<CAPTION>
TOTAL NUMBER
OF RIGHTS
RIGHTS EVIDENCED BY NUMBER OF
CERTIFICATE RIGHTS RIGHTS
NUMBER(S)** CERTIFICATE(S)** TENDERED***
<S> <C> <C> <C>
Total Rights
* Need not be completed unless separate Rights Certificates have been issued.
** Need not be completed by stockholders delivering Rights by book-entry transfer.
*** Unless otherwise indicated, it will be assumed that all Rights evidenced by each Rights
Certificate delivered to the Depositary are being tendered hereby. See Instruction 4.
</TABLE>
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to MGZ Corp, a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Mentor Graphics Corporation, an
Oregon corporation ("Parent"), the above-described 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 as of January 10, 1996 (the "Rights"),
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 by the Supplement to
the Offer to Purchase dated August 27, 1998 (the "First Supplement") and the
Second Supplement to the Offer to Purchase dated December 28, 1998 (the "Second
Supplement") receipt of which is hereby acknowledged, and in this revised Letter
of Transmittal (which, together, as each may be amended and supplemented from
time to time, constitute the "Offer").
Subject to, and effective upon, acceptance for payment of the Shares and
Rights tendered herewith in accordance with the terms of the Offer, the
undersigned hereby sells, assigns and transfers to or upon the order of
Purchaser all right, title and interest in and to all the Shares and Rights that
are being tendered hereby and all other Shares and Rights or other securities
issued or issuable in respect thereof (including, without limitation, the
issuance of additional shares pursuant to a stock dividend or stock split, the
issuance of other securities or the issuance of other rights (other than the
separation of the Rights from the Shares)) that is declared or paid by the
Company on or after August 12, 1998 (a "Distribution") and irrevocably
constitutes and appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares and Rights (and
any Distributions), with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to (a)
deliver Share Certificates and Rights Certificates (and any Distributions), or
transfer ownership of such Shares or Rights (and any Distributions) on the
account books maintained by the Book-Entry Transfer Facility, together, in any
such case, with all accompanying evidences of transfer and authenticity, to or
upon the order of Purchaser, (b) present such Shares and Rights (and any
Distributions) for transfer on the books of the Company, and (c) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares and Rights (and any Distributions), all in accordance with the terms and
subject to the conditions of the Offer.
The undersigned understands that holders of Shares will be required to
tender one Right for each Share tendered in order to effect a valid tender of
such Share. Unless and until the Distribution Date (as defined in the Offer to
Purchase) occurs, the Rights are represented by and transferred with the Shares.
Accordingly, if the Distribution Date does not occur prior to the Expiration
Date, a tender of Shares will constitute a tender of the associated Rights. If a
Distribution Date has occurred, Rights Certificates representing that number of
Rights equal to the number of Shares being tendered must be delivered to the
Depositary in order for such Shares to be validly tendered. If a Distribution
Date has occurred but Rights Certificates have not been received by the
undersigned, the undersigned agrees hereby to deliver Rights Certificates
representing a number of Rights equal to the number of Shares tendered herewith
to the Depositary within three Nasdaq National Market trading days of the date
such Rights Certificates are distributed. Purchaser reserves the right to
require that the Depositary receive such Rights Certificates, or a Book-Entry
Confirmation (as defined in the Offer to Purchase), if available, with respect
to such Rights prior to accepting Shares for payment. Payment for Shares
tendered and accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of, among other things, such Rights
Certificates, if such certificates have been distributed to holders of Shares.
Purchaser will not pay any additional consideration for the Rights tendered
pursuant to the Offer.
The undersigned hereby irrevocably appoints designees of Purchaser as the
attorneys and proxies of the undersigned, each with full power of substitution,
to exercise all voting and other rights of the undersigned in such manner as
each such attorney and proxy or his substitute shall in his sole judgment deem
proper, with respect to all of the Shares and Rights tendered hereby which have
been accepted for payment by Purchaser prior to the time of any vote or other
action (and any Distributions), at any meeting of stockholders of the Company
(whether annual or special and whether or not an adjourned or postponed meeting)
or otherwise. This appointment shall be effective when, and only to the extent
that, Purchaser accepts such Shares and Rights as provided in the Offer to
Purchase and the First Supplement and the Second Supplement. This power of
attorney and proxy are irrevocable, are coupled with an interest in the Shares
and Rights tendered hereby, and are granted in consideration of, and effective
upon, the acceptance for payment of such Shares by Purchaser in accordance with
the terms of the Offer. Such acceptance for payment shall revoke any other proxy
or written consent granted by the undersigned at any time with respect to such
Shares and Rights (and any Distributions), and no subsequent proxies will be
given or written consents executed by the undersigned (and if given or executed,
will not be deemed effective).
3
<PAGE>
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares and Rights
tendered hereby (and any Distributions) within the meaning of Rule 14e-4
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), that such tender complies with Rule 14e-4 under the Exchange Act and that
when the same are accepted for payment by Purchaser, Purchaser will acquire good
and unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim. The undersigned
will, upon request, execute and deliver any additional documents deemed by the
Depositary or Purchaser to be necessary or desirable to complete the sale,
assignment and transfer of the Shares and Rights tendered hereby (and any
Distributions). All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned, and any obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in the Offer, this
tender is irrevocable.
The undersigned understands that the tender of Shares and, if applicable,
Rights pursuant to any one of the procedures described in Section 3 of the Offer
to Purchase, as amended, and in the instructions hereto will constitute an
agreement between the undersigned and Purchaser upon the terms and subject to
the conditions of the Offer. The undersigned acknowledges that no interest will
be paid on the Offer Price for tendered Shares regardless of any extension of
the Offer or any delay in making such payment.
Unless otherwise indicated in the box entitled "Special Payment
Instructions," please issue the check for the purchase price and/or return any
Share Certificates (and/or, if applicable, Rights Certificates) evidencing any
Shares or Rights not tendered or not purchased, in the name(s) of the
undersigned (and, in the case of Shares or Rights tendered by book-entry
transfer, by credit to the account at the Book-Entry Transfer Facility).
Similarly, unless otherwise indicated in the box entitled "Special Delivery
Instructions," please mail the check for the purchase price and return any Share
Certificates (and/or, if applicable, Rights Certificates) evidencing any Shares
or Rights not tendered or not purchased (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that the boxes entitled "Special Payment
Instructions" and "Special Delivery Instructions" are both completed, please
issue the check for the purchase price and/or return any Share Certificates
(and/or, if applicable, Rights Certificates) evidencing any Shares or Rights not
tendered or not purchased in the name(s) of, and mail said check and Share
Certificates (and/or, if applicable, Rights Certificates) to, the person(s) so
indicated. The undersigned acknowledges that Purchaser has no obligation,
pursuant to the "Special Payment Instructions," to transfer any Shares or Rights
from the name of the registered holder(s) thereof if Purchaser does not accept
for payment any of the Shares or Rights so tendered.
4
<PAGE>
- --------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates or Rights Certificates not
tendered or not purchased are, and/or the check for the purchase price is,
to be issued in the name of someone other than the undersigned, or if Shares
and/or Rights tendered hereby and delivered by book-entry transfer which are
not purchased are to be returned by credit to an account at the Book-Entry
Transfer Facility other than that designated above.
Issue: / / Check / / Share Certificate(s) (or, if applicable, Rights
Certificates) to:
Name: ______________________________________________________________________
(PLEASE PRINT)
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
__________________________________________________________________________
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
/ / Credit Shares (or Rights, if applicable) delivered by book-entry
transfer and not purchased to the account set forth below:
Account Number _____________________________________________________________
- --------------------------------------------------
- --------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share Certificates and/or Rights Certificates
not tendered or not purchased are, and/or the check for the purchase price
is, to be mailed to someone other than the undersigned, or to the
undersigned at an address other than that shown under the undersigned's
signature.
Mail: / / Check / / Share Certificate(s) (or, if applicable, Rights
Certificates) to:
Name: ______________________________________________________________________
(PLEASE PRINT)
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
__________________________________________________________________________
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
- -----------------------------------------------------
5
<PAGE>
IMPORTANT
STOCKHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
________________________________________________________________________________
________________________________________________________________________________
Signature(s) of Holder(s)
Dated:____________________
(Must be signed by the registered holder(s) exactly as such holder(s)
name(s) appear(s) on the Share Certificate(s) (and/or, if applicable, Rights
Certificate(s)) or on a security position listing or by a person(s) authorized
to become the registered holder(s) of such Share Certificate(s) (and/or, if
applicable, Rights Certificate(s)) by certificates and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, please provide the following information and see
Instruction 5.)
Name(s): _______________________________________________________________________
(Please Print)
Capacity (full title): _________________________________________________________
Address: _______________________________________________________________________
(Include Zip Code)
Area Code and Telephone No.: ___________________________________________________
Taxpayer Identification or Social Security No.: ________________________________
(See Substitute Form W-9 on reverse side)
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
Authorized Signature: __________________________________________________________
Name: __________________________________________________________________________
(Please Type or Print)
Title: _________________________________________________________________________
Name of Firm: __________________________________________________________________
Address: _______________________________________________________________________
(Include Zip Code)
Area Code and Telephone No.: ___________________________________________________
Dated: _________________________________________________________________________
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, signatures
on all Letters of Transmittal must be guaranteed by a firm that is a bank,
broker, dealer, credit union, savings association or other entity which is a
member in good standing of the Securities Transfer Agents Medallion Program or
by any other bank, broker, dealer, credit union, savings association or other
entity which is an "eligible guarantor institution," as such term is defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (each of the
foregoing constituting an "Eligible Institution"), unless the Shares and Rights
tendered thereby are tendered (i) by a registered holder of Shares and Rights
who has not completed either the box labeled "Special Payment Instructions" or
the box labeled "Special Delivery Instructions" on this Letter of Transmittal or
(ii) for the account of an Eligible Institution. See Instruction 5. If Share
Certificates (and/or, if applicable, Rights Certificates) are registered in the
name of a person or persons other than the signer of this Letter of Transmittal,
or if payment is to be made or delivered to, or Share Certificates or Rights
Certificates are to be issued or returned to, a person other than the registered
owner or owners, then the tendered Share Certificates (and/or, if applicable,
Rights Certificates) must be endorsed or accompanied by duly executed stock
powers, in either case signed exactly as the name or names of the registered
owner or owners appear on the Share Certificates (and/or, if applicable, Rights
Certificates), with the signatures on the Share Certificates (and/or, if
applicable, Rights Certificates) or stock powers guaranteed by an Eligible
Institution as provided herein. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be used if Share Certificates (and/or, if applicable, Rights
Certificates) are to be forwarded herewith or, unless an Agent's Message is
utilized, if deliveries are to be made by book-entry transfer pursuant to the
procedures set forth in Section 3 of the Offer to Purchase, as amended. Share
Certificates for all physically delivered Shares, or a confirmation of a
book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility of all Shares delivered electronically, as well as a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile thereof)
and any other documents required by this Letter of Transmittal, or an Agent's
Message in the case of a book-entry transfer, must be received by the Depositary
at one of its addresses set forth on the front page of this Letter of
Transmittal by the Expiration Date (as defined in the Offer to Purchase, as
amended). If a Distribution Date (as defined in the Offer to Purchase) has
occurred, Rights Certificates, or Book-Entry Confirmation of a transfer of
Rights into the Depositary's account at the Book-Entry Transfer Facility, if
available (together with, if Rights are forwarded separately from Shares, a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) with any required signature guarantee, or an Agent's Message in the
case of a book-entry delivery, and any other documents required by this Letter
of Transmittal), must be received by the Depositary at one of its addresses set
forth herein prior to the Expiration Date or, if later, within three Nasdaq
National Market trading days of the date on which such Rights Certificates are
distributed. If Share Certificates (and/or, if applicable, Rights Certificates)
are forwarded to the Depositary in multiple deliveries, a properly completed and
duly executed Letter of Transmittal must accompany each such delivery. SHARES
MAY NOT BE TENDERED PURSUANT TO GUARANTEED DELIVERY PROCEDURES.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES,
RIGHTS CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH
THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
STOCKHOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted. By
execution of this Letter of Transmittal (or a manually signed facsimile
thereof), all tendering stockholders waive any right to receive any notice of
the acceptance of their Shares and Rights for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the Share
Certificate (and/or, if applicable, Rights Certificate) numbers, the number of
Shares evidenced by such Share Certificates (and/or if applicable, the number of
Rights evidenced by such Rights Certificates) and the number of Shares (and/or,
if applicable, the number of Rights) tendered should be listed on a separate
signed schedule and attached hereto.
7
<PAGE>
4. PARTIAL TENDERS. If fewer than all the Shares evidenced by a Share
Certificate (and/or, if applicable, fewer than all the Rights evidenced by a
Rights Certificate) delivered to the Depositary herewith are to be tendered
hereby, fill in the number of Shares (and/or, if applicable, Rights) which are
to be tendered in the box entitled "Number of Shares Tendered" (and/or, if
applicable, "Number of Rights Tendered"). In such cases, new Share Certificates
(and/or, if applicable, Rights Certificates) evidencing the remainder of the
Shares that were evidenced by the Share Certificates (and/or, if applicable,
Rights Certificates) delivered to the Depositary herewith will be sent to the
person(s) signing this Letter of Transmittal, unless otherwise provided in the
box entitled "Special Delivery Instructions" on the reverse hereof, as soon as
practicable after the expiration or termination of the Offer. All Shares
(and/or, if applicable, Rights) evidenced by Share Certificates (and/or, if
applicable, Rights Certificates) delivered to the Depositary will be deemed to
have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
and Rights tendered hereby, the signature(s) must correspond with the name(s) as
written on the face of the Share Certificate(s) (and/or, if applicable, Rights
Certificate(s)) without alteration, enlargement or any other change whatsoever.
If any of the Shares or Rights tendered hereby are owned of record by two or
more persons, all such persons must sign this Letter of Transmittal.
If any of the Shares or Rights tendered hereby are registered in different
names on different certificates, it will be necessary to complete, sign and
submit as many separate Letters of Transmittal as there are different
registrations of certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares and Rights tendered hereby, no endorsements of Share Certificate(s)
(and/or, if applicable, Rights Certificate(s)) or separate stock powers are
required, unless payment of the purchase price is to be made, or Share
Certificate(s) (and/or, if applicable, Rights Certificate(s)) evidencing Shares
or Rights not tendered or not purchased are to be returned, in the name of any
person other than the registered holder(s). Signatures on any such Share
Certificate(s) (and/or, if applicable, Rights Certificate(s)) or stock powers
must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares or Rights tendered hereby, the Share
Certificate(s) evidencing the Shares (and/or, if applicable, Rights
Certificate(s) evidencing Rights) tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s) (or,
if applicable, Rights Certificate(s)). Signature(s) on any such Share
Certificate(s) (or, if applicable, Rights Certificate(s)) or stock powers must
be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any Share Certificate (and/or, if
applicable, Rights Certificate) or stock power is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and proper evidence satisfactory to Purchaser of the
authority of such person to so act must be submitted.
6. STOCK TRANSFER TAXES. Purchaser will pay any stock transfer taxes with
respect to the sale and transfer of any Shares and Rights to it or its order
pursuant to the Offer. If, however, payment of the purchase price is to be made
to, or if Share Certificate(s) (and/or, if applicable, Rights Certificate(s))
evidencing Shares or Rights not tendered or not purchased are to be returned in
the name of, any person other than the registered holder(s) of such Shares or
Rights, then the amount of any stock transfer taxes (whether imposed on the
registered holder(s), such other person or otherwise) payable on account of the
transfer to such person will be deducted from the purchase price unless
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY
FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATE(S) (AND/OR, IF
APPLICABLE, RIGHTS CERTIFICATE(S)) LISTED IN THIS LETTER OF TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
purchase price is to be issued, or any Share Certificate(s) (and/or, if
applicable, Rights Certificate(s)) evidencing Shares or Rights not tendered or
not purchased are to be returned, in the name of a person other than the
person(s) signing this Letter of Transmittal or if the check or any Share
Certificate(s) (and/or, if applicable, Rights Certificate(s)) evidencing Shares
or Rights not tendered or not purchased are to be mailed to someone other than
the person(s) signing this Letter of Transmittal or to the person(s) signing
this Letter of Transmittal at an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Stockholders tendering Shares or Rights by book-entry transfer may request that
Shares or Rights not purchased be credited to such account at the Book-Entry
Transfer Facility as such stockholder may designate in the box entitled "Special
Payment Instructions." If no such instructions are given, any such Shares or
Rights not purchased will be returned by crediting the account at the Book-Entry
Transfer Facility.
8
<PAGE>
8. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide
the Depositary with such holder's correct taxpayer identification number ("TIN")
on Substitute Form W-9, which is provided below, unless an exemption applies. In
the case of any holder who has completed the box entitled "Special Payment
Instructions," however, the correct TIN on Substitute Form W-9 should be
provided for the recipient of the payment pursuant to such instructions. Failure
to provide the information on the Substitute Form W-9 may subject the tendering
holder to a $50 penalty and to 31% federal income tax backup withholding on the
payment of the purchase price for the Shares and Rights.
9. PRORATION. If more than the number of Shares being sought by Purchaser
pursuant to the Offer are validly tendered prior to the Expiration Date (as
defined in the Offer to Purchase, as amended) and not properly withdrawn,
Purchaser will, upon the terms and subject to the conditions of the Offer,
accept for payment and pay for only the number of Shares being sought pursuant
to the Offer, on a pro rata basis, with adjustments to avoid purchases of
fractional Shares, based upon the number of Shares validly tendered prior to the
Expiration Date and not properly withdrawn. Because of the difficulty of
determining precisely the number of Shares validly tendered and not withdrawn,
if proration is required, Purchaser may not be able to announce the final
results of proration or pay for Shares until two business days after the
Expiration Date. Preliminary results of proration will be announced by press
release as promptly as practicable on the next business day after the Expiration
Date. Holders of Shares may obtain such preliminary information from the
Information Agent and also may be able to obtain such preliminary information
from their brokers.
10. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Information Agent or the
Dealer Manager at their respective addresses and telephone numbers set forth on
the back cover of the Offer to Purchase. Additional copies of the Offer to
Purchase, the First Supplement, the Second Supplement, the Letter of Transmittal
and other related materials may be obtained from the Information Agent or from
brokers, dealers, commercial banks and trust companies.
THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE COPY HEREOF
(TOGETHER WITH SHARE CERTIFICATES (AND/OR, IF APPLICABLE, RIGHTS CERTIFICATES)
OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) MUST BE
RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE
OFFER TO PURCHASE, AS AMENDED).
IMPORTANT TAX INFORMATION
Under the federal income tax law, a holder of Shares whose tendered Shares
and/or Rights are accepted for payment is required by law to provide the
Depositary (as payer) with such holder's correct TIN on Substitute Form W-9
below. The holder of Shares and/or Rights must also state that (i) such holder
has not been notified by the Internal Revenue Service that such holder is
subject to backup withholding as a result of a failure to report all interest or
dividends or (ii) the Internal Revenue Service has notified such holder that
such holder is no longer subject to backup withholding. If the Depositary is not
provided with the correct TIN, the holder of Shares and/or Rights may be subject
to a $50 penalty imposed by the Internal Revenue Service and payments made to
such holder may be subject to backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement, signed under penalties of
perjury, attesting to such individual's exempt status. Forms of such statements
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the holder of Shares and/or Rights. Backup withholding is
not an additional tax. Rather, the tax withheld pursuant to backup withholding
rules will be available as a credit against such holder's tax liabilities. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
WHAT NUMBER TO GIVE THE DEPOSITARY
If the holder of Shares and/or Rights is an individual, the correct TIN is
his or her social security number. In other cases, the correct TIN may be the
employer identification number of the record holder of the Shares and/or Rights
tendered hereby. If the Shares and/or Rights are in more than one name or are
not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidance on which number to report. If the tendering holder of Shares
has not been issued a TIN and has applied for a number or intends to apply for a
number in the near future, the holder should write "Applied For" in the space
provided for the TIN in Part I of the Substitute Form W-9, and sign and date the
Substitute Form W-9. If "Applied For" is written in Part I of the Substitute
Form W-9 and the Depositary is not provided with a TIN within thirty (30) days,
the Depositary may withhold 31% of all payments of the purchase price to such
holder until a TIN is provided to the Depositary.
9
<PAGE>
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<CAPTION>
<S> <C> <C>
SUBSTITUTE PART I -- Taxpayer Identification ---------------------------------
FORM W-9 Number -- For all accounts, enter Social Security Number
Department of the Treasury taxpayer identification number in OR
Internal Revenue Service the box at right. (For most ---------------------------------
individuals this is your social Employer Identification Number
security number. If you do not (If awaiting TIN write
have a number, see Obtaining a "Applied For")
Number in the enclosed
GUIDELINES.) Certify by signing
and dating below.
Note: If the account is in more
than one name, see chart in the
enclosed GUIDELINES to determine
which number to give the payer
PAYER'S REQUEST FOR TAXPAYER PART II -- For Payees exempt from backup withholding, see the enclosed
IDENTIFICATION NUMBER (TIN) GUIDELINES and complete as instructed therein.
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a
number to be issued to me); and
(2) I am not subject to backup withholding either because (a) I have not been notified by the Internal
Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all
interest or dividends, or (b) the IRS has notified me that I am no longer subject to backup
withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that
you are subject to backup withholding because of underreporting interest or dividends on your tax return.
However, if, after being notified by the IRS that you were subject to backup withholding, you received
another notification from the IRS that you were no longer subject to backup withholding, do not cross out
item (2). (Also see instructions in the enclosed GUIDELINES.)
SIGNATURE ------------------------------------ DATE ------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING (OR WILL SOON
APPLY FOR) A TAXPAYER IDENTIFICATION NUMBER
10
<PAGE>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that, notwithstanding the information I provided in Part I of the
Substitute Form W-9 (and the fact that I have completed this Certificate of
Awaiting Taxpayer Identification Number), if I do not provide a correct
taxpayer identification number to the Depositary within thirty (30) days,
31% of all reportable payments made to me thereafter may be withheld.
SIGNATURE
------------------------------------------ DATE
--------------------------------
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
(212) 783-3738
(800) 558-3745
11
<PAGE>
MENTOR GRAPHICS OFFERS $14.00 CASH PER SHARE TO BRING
QUICKTURN SHARES OWNED TO 14.9%
--MENTOR SEEKS MERGER AGREEMENT TO ACQUIRE
REMAINING QUICKTURN SHARES--
WILSONVILLE, OREGON, DECEMBER 28, 1998 -- Mentor Graphics Corporation (Nasdaq:
MENT) today increased the offering price in its tender offer for shares of
Quickturn Design Systems, Inc. (Nasdaq: QKTN) to $14.00 cash per share from
$12.125 cash per share, and changed the number of shares being sought to
2,100,000 shares. Those shares, together with the 591,500 shares of Quickturn
stock Mentor already owns, would result in Mentor owning a total of 14.9% of
Quickturn's outstanding stock, the maximum amount that can be acquired without
triggering Quickturn's poison pill.
Mentor said that if more than 2,100,000 shares are validly tendered, Mentor's
purchases pursuant to the tender offer will be made as nearly as practicable
on a pro rata basis.
Mentor plans to seek to negotiate a merger agreement with Quickturn to acquire
the balance of the shares at the same cash price paid in the tender offer. The
amended offer is scheduled to expire at 12:00 midnight, New York City time, on
Monday, January 11, 1999, unless extended. Mentor said it intends to use
available cash and working capital to consummate the offer; Mentor believes
its financing commitments, which remain in place, would allow it to complete
the proposed second-step merger with Quickturn.
Mentor President and Chief Executive Officer Dr. Walden C. Rhines said: "This
offer will allow Mentor to increase its equity interest in Quickturn as the
first step in completing a merger agreement or similar business combination
between Mentor and Quickturn. Mentor's proposed transaction is more compelling
than the proposed Cadence merger, and doesn't suffer from the Cadence deal's
drawbacks.
"Our deal offers all cash, greater certainty as to timing and, importantly, no
antitrust risk. We believe the electronics industry will object strongly to
the proposed Cadence merger because of Cadence's already dominant share of the
EDA market. Even though Mentor has already received antitrust clearance, when
Mentor acquires Quickturn, Mentor currently expects to license the
<PAGE>
2
combined emulation intellectual property to the other participants in the
sector. Cadence has given no indication that it will license the intellectual
property."
On December 15, 1998, Mentor commenced a new lawsuit against Quickturn, the
Quickturn directors and Cadence in the Delaware Court of Chancery. The suit
alleges that the Quickturn directors again breached their fiduciary duties to
Quickturn's stockholders and seeks to enjoin consummation of the proposed
Cadence merger and to invalidate break-up fees payable to Cadence totaling
$17,575,000.
In the event that Mentor is successful in invalidating all or any portion of
the break-up fee and Mentor can negotiate a merger agreement with Quickturn,
Mentor intends to pay all Quickturn stockholders whose shares are converted in
the merger an amount per share which is equal to the tender offer price, which
is currently $14.00, plus the lesser of (a) $.60 and (b) the quotient of (i)
75% of any portion of the break-up fee which has been invalidated divided by
(ii) the total number of shares outstanding on the date immediately preceding
the date of the closing of the proposed merger.
Mentor said it stands ready to consider increasing its offer price and the
price to be paid per share in a negotiated merger transaction if negotiation
and due diligence demonstrate greater value of Quickturn to Mentor.
The Mentor offer will be subject to proration and satisfaction of certain
conditions. The Mentor offer is not conditioned on the invalidation of any
provision of the Cadence merger agreement. It also is not conditioned on "The
Minimum Condition," "The Section 203 Condition," "The HSR Condition" or "The
Rights Condition" of the original offer.
In order to acquire shares in a timely fashion and announce a proration
number, if any, at the earliest practicable date following completion of the
tender offer, guarantees of delivery of shares will no longer be accepted
pursuant to the offer.
All stockholders who have previously tendered using guarantee of delivery
procedures have either perfected their tender by delivering their shares and
any other required documents or have withdrawn their tenders. Mentor
understands that no shares that have been tendered and not withdrawn remain
subject to guarantee of delivery procedures. As of the close of business on
Thursday,
<PAGE>
3
December 24, 1998, 6,795,429 shares of Quickturn common stock had been validly
tendered in the Offer, which, together with the 591,500 shares already owned
by Mentor, represents approximately 41 percent of Quickturn's outstanding
common stock (based upon 18,095,580 shares outstanding as of November 30,
1998). The shares tendered represent 38 percent of the outstanding common
stock.
Mentor said the special meeting of Quickturn's stockholders will be held on
Friday, January 8, 1999 to consider Mentor's proposals relating to the removal
of the current Quickturn Board and to replace the Quickturn directors with
five new directors nominated by Mentor. If elected as directors of Quickturn,
Mentor would encourage the nominees to, subject to their fiduciary duties as
directors under applicable law and in accordance with Quickturn's rights and
obligations under the merger agreement with Cadence, seek to auction Quickturn
to the highest bidder. Mentor would also encourage the nominees, subject to
their fiduciary duties as directors of Quickturn under applicable law and in
accordance with Quickturn's rights and obligations under the merger agreement
with Cadence, to allow any bidder, including Mentor, promptly to conduct a due
diligence review of Quickturn and seek to execute a merger agreement with the
highest bidder. Mentor anticipates that any such merger agreement could be
executed within 30 days of the nominees being elected as directors of
Quickturn. The record date for stockholders to vote at the special meeting is
November 10, 1998.
Mentor's Offer to Purchase, proxy solicitation materials and related documents
are available on a Mentor World Wide Web site at http://www.mentorg.com/file.
The Dealer Manager for the Offer is Salomon Smith Barney. The Information
Agent for the Offer is MacKenzie Partners, Inc., which can be reached
toll-free at 800-322-2885 or by collect call at 212-929-5500.
Contacts: Anne M. Wagner/Ry Schwark Todd Fogarty/Jason Lynch
Mentor Graphics Corporation Kekst and Company
503/685-1462 212/521-4800
# # #
<PAGE>
[Mentor Graphics Corporation Logo]
December 28, 1998
Mr. Keith R. Lobo
President and Chief Executive Officer
Quickturn Design Systems, Inc.
55 West Trimble Road
San Jose, California 96131
Dear Keith:
As you should know by now, Mentor today increased its offering price for
shares of Quickturn Design Systems, Inc. to $14.00 cash per share from $12.125
cash per share, and changed the number of shares being sought to 2,100,000
shares. Those shares, together with the 591,500 shares of Quickturn stock we
already own, will result in Mentor owning a total of 14.9% of Quickturn's
outstanding stock, the maximum amount that can be acquired without triggering
Quickturn's poison pill.
We have the cash in hand to consummate our tender offer for the 2,100,000
shares, and we believe the financing commitments we have in place would allow us
to complete our proposed second-step merger.
The purpose of the offer is to add to our equity interest in Quickturn as
the first step in completing a merger agreement or a similar business
combination of our two companies. The next logical step would be the negotiation
of a merger agreement between Mentor and Quickturn subsequent to which we would
acquire the balance of the Quickturn shares at the same cash price as that paid
in the tender offer. While we believe the extraordinarily restrictive no-shop
provisions of your merger agreement with Cadence are not legal, and are suing in
Delaware Court of Chancery to invalidate them, we stand ready to consider
increasing our offer price and the price to be paid per share in a negotiated
merger transaction if negotiation and due diligence demonstrate greater value of
Quickturn to Mentor.
As evidence of our commitment to completing a merger, we would pay Quickturn
stockholders, in addition to $14.00 per share, a portion of the $17.5 million
break-up fee that is part of the current agreement with Cadence, in the event
that we are successful in invalidating this and other provisions through either
the present litigation in the Delaware Court of Chancery or a negotiated merger
agreement.
Now that we have increased our offer--and consistent with your rights under
the Cadence merger agreement--it is time for you to sit down with us, negotiate
and fulfill your fiduciary duty to Quickturn's stockholders.
If, however, you choose not to negotiate with us, your stockholders will be
able to express their outrage at your conduct in less than two weeks. The
special
<PAGE>
meeting of Quickturn stockholders will be held on Friday, January 8, 1999 to
consider our proposals relating to your removal and the removal of the rest of
the Quickturn Board.
If our nominees are elected as directors of Quickturn, we would encourage
them, subject to their fiduciary duties as directors under applicable law and in
accordance with Quickturn's rights and obligations under the merger agreement
with Cadence, to seek to auction Quickturn to the highest bidder. We also would
encourage the nominees, subject to their fiduciary duties as directors of
Quickturn under applicable law and in accordance with Quickturn's rights and
obligations under the merger agreement with Cadence, to allow any bidder,
including Mentor, promptly to conduct a due diligence review of Quickturn and to
seek to execute a merger agreement with the highest bidder. We believe that any
merger agreement could be executed within 30 days of the nominees' election as
directors of Quickturn.
It is time for you and the other Quickturn directors to act responsibly and
to maximize value for your stockholders.
Very truly yours,
/s/ WALDEN C. RHINES
-------------------------------------
President and
Chief Executive Officer
<PAGE>
[Mentor Graphics Corporation Logo]
December 28, 1998
TIME IS SHORT--EVERY VOTE COUNTS
DEAR QUICKTURN STOCKHOLDER:
Today, we increased the price of our tender offer to $14 per share matching
in cash the proposed amount to be paid in Cadence stock pursuant to the merger
proposal announced by Quickturn on December 9, 1998.
In order to avoid triggering Quickturn's poison pill, we are forced to
reduce the number of shares to be purchased in the first step tender offer to
2,100,000 shares. These shares, together with the 591,500 shares that we already
own, would represent 14.9% of Quickturn's outstanding stock.
MAXIMIZE THE VALUE OF YOUR QUICKTURN SHARES
VOTE THE GOLD STRIPED PROXY CARD TODAY!
If you vote to replace the current Quickturn directors at the January 8,
1999 Special Meeting, we will encourage the new directors, subject to their
fiduciary duties and Quickturn's rights and obligations under the Cadence merger
agreement, TO SEEK TO PROMPTLY AUCTION QUICKTURN TO THE HIGHEST BIDDER -- BE IT
MENTOR, CADENCE OR ANY OTHER COMPANY.
- In our opinion, the current Quickturn directors once again breached their
fiduciary duties to you and your fellow stockholders WHEN THEY FAILED TO
SEE IF MENTOR OR ANYONE ELSE WAS WILLING TO PAY MORE IN A FAIR AUCTION AND
INSTEAD ATTEMPTED TO LOCKUP A $14 STOCK DEAL WITH CADENCE WITH EXCESSIVE
AND UNJUSTIFIED BREAKUP FEES AND STOCK OPTIONS.
- IN OUR OPINION, IT WAS CLEARLY NOT IN YOUR BEST INTERESTS TO LOCK UP A DEAL
WITH CADENCE AND SIGNIFICANTLY HINDER THE BIDDING PROCESS BY AGREEING TO
PAY CADENCE A POTENTIAL $17.5 MILLION BREAKUP FEE -- WITHOUT EVEN WAITING
TO RECEIVE MENTOR'S REVISED OFFER.
- We believe Mentor should have been given the same opportunity as Cadence to
conduct due diligence -- IF THE CURRENT DIRECTORS REALLY WANTED TO GET YOU
THE BEST PRICE FOR YOUR SHARES.
MENTOR WANTS TO BUY ALL OF QUICKTURN -- BUT WE WANT A
LEVEL PLAYING FIELD -- NOT ONE THAT IS STACKED
BY QUICKTURN'S INCUMBENT DIRECTORS!
Remember, for more than four months, we have been trying to get the current
board to sit down with us and negotiate a friendly deal in the best interests of
all stockholders. The Quickturn directors in our opinion hastily signed up the
Cadence stock deal to again attempt to defeat Mentor's all cash tender offer --
LESS THAN ONE WEEK AFTER THE DELAWARE COURT OF CHANCERY RULED THAT QUICKTURN'S
DIRECTORS BREACHED THEIR FIDUCIARY DUTIES TO STOCKHOLDERS BY ADOPTING THEIR
POISON PILL AMENDMENTS.
<PAGE>
It is now clearer to us than ever before that it is necessary to replace the
Quickturn directors with our nominees if you want Quickturn sold for the highest
price possible.
Following the completion of our tender offer, we will seek to consummate a
negotiated merger in which all other shares would be acquired for $14 cash per
share, plus an additional amount equal to approximately 75% of the $17.5 million
breakup fee that Quickturn's directors agreed to pay Cadence, if we are able to
invalidate these exorbitant fees. WE THINK THIS BREAKUP FEE IS EXCESSIVE, NOT
JUSTIFIED AND YET ANOTHER BREACH BY QUICKTURN'S DIRECTORS OF THEIR FIDUCIARY
DUTIES TO QUICKTURN'S STOCKHOLDERS. Stockholders would share with Mentor this
payment, to the extent we are successful in invalidating it, through our new
lawsuit against Quickturn's directors for breaching their fiduciary duties in
approved the Cadence merger agreement.
Furthermore, the precise timing of their deal with Cadence, in our view,
shows clearly that THEY WERE MORE INTERESTED IN PROTECTING THEIR CONSULTING
AGREEMENTS AND THE JOBS OF KEITH LOBO AND OTHERS -- INSTEAD OF OBTAINING THE
HIGHEST AND BEST PRICE FOR YOU AND YOUR FELLOW QUICKTURN STOCKHOLDERS. THE FACTS
ARE:
- On December 8, 1998, Quickturn invited Mentor to consider submitting a
revised offer to acquire Quickturn, and Mentor said it would respond by
5:00 p.m. on December 9, 1998. Despite Quickturn's investment banker
statement at that time that this timing was acceptable -- THEY WENT AHEAD
AND LOCKED UP THE CADENCE DEAL.
- We believe they again breached their fiduciary duties to Quickturn
stockholders by ignoring this prompt and positive indication from Mentor,
and instead proceeding to approve the Cadence merger agreement on December
8 -- WITHOUT MAKING EVEN ANOTHER CALL TO MENTOR OR EVEN WAITING 24 HOURS TO
RECEIVE MENTOR'S REVISED OFFER.
- Quickturn formally signed its $14 per share Cadence stock merger agreement
with its exorbitant breakup fees on the evening of December 8 -- IN OUR
OPINION TO PREVENT A HIGHER OFFER FROM MENTOR.
WE BELIEVE THE QUICKTURN DIRECTORS HAVE ONCE AGAIN BREACHED THEIR FIDUCIARY
DUTIES BY FAILING TO SEEK TO MAXIMIZE THE PRICE YOU WOULD RECEIVE FROM A SALE OF
QUICKTURN
We have reiterated our willingness, as expressed in our December 15 letter
to Keith R. Lobo, Quickturn's President, that Mentor is prepared to pay more for
Quickturn in a negotiated merger than the $14 per share proposed in Cadence's
all stock deal. As we indicated at that time, the final amount over $14 to be
paid under Mentor's negotiated merger proposal will be influenced by due
diligence demonstrating greater value in Quickturn and the extent of the
invalidation of the $17.5 million in breakup fees for Cadence. QUICKTURN'S
DIRECTORS IN ESSENCE DIVERTED NEARLY $1 PER SHARE TO CADENCE RATHER THAN TO
QUICKTURN STOCKHOLDERS.
REMEMBER, THIS IS NOT THE FIRST TIME MENTOR HAS INDICATED TO QUICKTURN THAT
IT WOULD BE WILLING TO INCREASE THE PURCHASE PRICE FOR YOUR SHARES, IF THE
QUICKTURN DIRECTORS WOULD SIMPLY SIT DOWN WITH US, NEGOTIATE AND SHOW US GREATER
VALUES.
<PAGE>
DON'T LET THE CURRENT QUICKTURN BOARD CONTINUE TO
MAKE YOUR INVESTMENT DECISIONS FOR YOU!
The Quickturn directors continue to take actions that attempt to prevent
Quickturn stockholders from maximizing the value of their investment. The
current board does not appear to remember that less than three weeks ago the
Delaware Court of Chancery found that they violated their fiduciary duties to
the Quickturn stockholders in an attempt to defeat Mentor's all cash offer by
amending Quickturn's poison pill.
REPLACE THE CURRENT QUICKTURN BOARD OF DIRECTORS
WITH MENTOR'S NOMINEES WHO UNDERSTAND THAT THE
STOCKHOLDERS -- NOT THE DIRECTORS -- OWN THE COMPANY!
We urge you to replace the current Board of Directors with the Mentor
nominees who, subject to their fiduciary responsibilities and Quickturn's rights
and obligations under the Cadence merger agreement, WILL TAKE THE NECESSARY
STEPS TO MAXIMIZE STOCKHOLDER VALUE. If you vote to replace the current
Quickturn directors, Mentor would encourage the new directors TO SELL QUICKTURN
IN A PROMPT AUCTION TO THE HIGHEST BIDDER.
EXERCISE YOUR RIGHTS AS STOCKHOLDERS BY SIGNING AND RETURNING THE ENCLOSED
GOLD STRIPED PROXY CARD TODAY.
Even if you have already tendered your shares or previously voted you should
vote your enclosed proxy to be sure to have your vote counted.
TENDERING YOUR SHARES ALONE WILL NOT REPLACE
THE CURRENT QUICKTURN DIRECTORS!
If you have any questions, or require assistance, please call MacKenzie
Partners, Inc. at (800) 322-2885 TOLL FREE or (212) 929-5500 COLLECT.
Sincerely,
/s/ Walden C. Rhines
Dr. Walden C. Rhines
President and Chief Executive Officer
<PAGE>
If you have any questions or need assistance in completing the GOLD STRIPED
proxy card, please contact:
[MacKenzie Partners, Inc.]
156 Fifth Avenue
New York, New York 10010
CALL TOLL-FREE (800) 322-2885 or (212) 929-5500 (collect)
