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QUICKTURN DESIGN SYSTEMS, INC.
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(Name of Registrant as Specified In Its Charter)
MENTOR GRAPHICS CORPORATION
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MENTOR SEEKS MERGER AGREEMENT TO ACQUIRE
QUICKTURN AT A PRICE GREATER THAN $14 PER SHARE
--MENTOR FILES SUIT IN DELAWARE TO BLOCK QUICKTURN'S MERGER WITH CADENCE--
WILSONVILLE, OREGON, DECEMBER 15, 1998 -- Mentor Graphics Corporation (Nasdaq:
MENT) announced today that it has sent a letter to Quickturn Design Systems,
Inc. (Nasdaq: QKTN) stating that it is prepared to pay more for Quickturn in
a negotiated merger transaction than the $14 per share price being proposed
by Cadence. The size of Mentor's 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. Mentor
is continuing to evaluate its alternatives with respect to its existing
tender offer for all of Quickturn's outstanding stock for $12.125 cash per
share, which tender offer has not been withdrawn and is scheduled to expire
at midnight, New York City time, on January 11, 1999, unless extended.
Mentor also announced that it will file today a new lawsuit against Quickturn,
the Quickturn directors and Cadence in the Delaware Court of Chancery. The suit
alleges that the Quickturn directors have again breached their fiduciary duties
to Quickturn's stockholders and seeks to enjoin consummation of the proposed
Cadence merger and to invalidate the termination fees and stock option
provisions in the Cadence merger agreement. This latest breach of fiduciary
duties by the Quickturn Board members came less than a week after the Delaware
Court of Chancery ruled that the Quickturn directors breached their fiduciary
duties in adopting a poison pill amendment.
Mentor's complaint challenges the Quickturn Board's failure to maximize
stockholder value by deliberately excluding Mentor from the process of selling
the company: Quickturn invited Mentor on December 8 to submit a higher proposal
to acquire Quickturn, and Mentor advised Quickturn on that date that it would
respond to the invitation on December 9; nevertheless, before they received
Mentor's proposal, the Quickturn directors approved the Cadence merger agreement
on December 8. Prior to announcing the Cadence merger agreement on December 9,
Quickturn never told Mentor that responding on
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December 9 would be too late, that Quickturn had decided to sell the company, or
that Quickturn was negotiating with a third party.
The letter sent today by Dr. Walden C. Rhines, Mentor President and CEO, to
Keith R. Lobo of Quickturn Design Systems, Inc. reads as follows:
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.
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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. 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,
Walden C. Rhines
President and
Chief Executive Officer
Mentor also 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. The record date for stockholders to vote at
the special meeting is November 10, 1998.
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The complaint filed in Delaware today 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/Roy Winnick
Mentor Graphics Corporation Kekst and Company
503/685-1462 212/521-4800
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