<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
QUICKTURN DESIGN SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MENTOR GRAPHICS CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
SOLICITATION OF AGENT DESIGNATIONS
IN CONNECTION WITH THE
CALL OF A SPECIAL MEETING OF STOCKHOLDERS
OF
QUICKTURN DESIGN SYSTEMS, INC.
PRELIMINARY SOLICITATION STATEMENT
OF
MENTOR GRAPHICS CORPORATION
PLEASE SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED AGENT DESIGNATION IN THE
ENCLOSED ENVELOPE TODAY!
SIGNING AN AGENT DESIGNATION WILL NOT AFFECT YOUR ABILITY TO VOTE FOR OR AGAINST
ANY PROPOSALS PRESENTED AT THE SPECIAL MEETING.
TO THE STOCKHOLDERS OF QUICKTURN DESIGN SYSTEMS, INC.:
This Solicitation Statement (the "Solicitation Statement") and the enclosed
Appointment of Designated Agents ("Agent Designations") are being furnished in
connection with the solicitation (the "Solicitation") of Agent Designations by
and on behalf of Mentor Graphics Corporation ("Mentor Graphics"), an Oregon
corporation, to provide for the call of a Special Meeting of Stockholders (the
"Special Meeting") of Quickturn Design Systems, Inc., a Delaware corporation
(the "Company"). By signing an Agent Designation you will designate specified
persons as your agents and will authorize those persons to call the Special
Meeting.
On August 11, 1998, Mentor Graphics delivered a letter to the Company
containing an offer to acquire the Company by Mentor Graphics (the "Proposed
Acquisition"), in which stockholders of the Company would receive $12.125 in
cash for each outstanding share of common stock, par value $.001, of the Company
(the "Company Common Stock"), including the associated preferred stock purchase
rights (the "Rights" and, together with the Company Common Stock, the "Shares").
The letter also stated that Mentor Graphics would consider an increased offering
price in the event Mentor Graphics is permitted by the Company to conduct a due
diligence review of the Company and that such review demonstrates greater value
of the Company to Mentor Graphics. Mentor Graphics believes that the Proposed
Acquisition offers benefits to the stockholders and customers of both Mentor
Graphics and the Company. See "Reasons for the Proposed Acquisition." The
Company was unwilling to accept the offer regarding the Proposed Acquisition. As
a result, Mentor Graphics is soliciting Agent Designations to call the Special
Meeting, to be held within approximately 45 days following the date on which
Mentor Graphics delivers to the Company Agent Designations from the Requisite
Holders (as defined below). At the Special Meeting, Mentor Graphics will, among
other things, ask you to (i) remove the entire Board of Directors of the Company
(the "Company Board"), (ii) amend the Company's Bylaws (the "Bylaws") to reduce
the authorized number of Company directors to five, (iii) elect Mentor Graphics'
five nominees (the "Nominees") to the Company Board and (iv) repeal any
provisions of the Bylaws adopted by the Company Board subsequent to the last
public filing of the Bylaws (together, the "Proposals").
IF THE NOMINEES ARE ELECTED, MENTOR GRAPHICS EXPECTS THAT, SUBJECT TO THEIR
FIDUCIARY DUTIES UNDER APPLICABLE LAW, THE NOMINEES WOULD ACT TO FACILITATE THE
PROPOSED ACQUISITION THROUGH THE CONSUMMATION OF THE OFFER AND THE PROPOSED
MERGER DESCRIBED BELOW.
For the Special Meeting to be held, Agent Designations in favor of calling
the Special Meeting must be executed by the record holder or holders of not less
than 10% of all of the shares entitled to vote at such meeting (the "Requisite
Holders"). As of August 11, 1998, Mentor Graphics and its subsidiaries were
beneficial owners of, and had the right to vote, an aggregate of 591,500 shares,
representing 3.32%, of Company Common Stock. See "Agent Designation Procedures."
<PAGE>
This Solicitation Statement and the enclosed GREEN Agent Designations are
first being mailed on or about August , 1998 to all stockholders of the
Company. Agent Designations should be delivered as promptly as possible, by fax
or by mail (using the enclosed envelope), to Mentor Graphics' Information Agent,
MacKenzie Partners, Inc. ("MacKenzie") as set forth below.
THIS SOLICITATION IS BEING MADE BY MENTOR GRAPHICS, AND NOT ON BEHALF OF THE
COMPANY BOARD. AT THIS TIME, MENTOR GRAPHICS IS ONLY SOLICITING YOUR AGENT
DESIGNATION TO CALL THE SPECIAL MEETING. MENTOR GRAPHICS IS NOT CURRENTLY
SEEKING YOUR PROXY, CONSENT, AUTHORIZATION OR AGENT DESIGNATION FOR APPROVAL OF
THE PROPOSALS. AFTER THE SPECIAL MEETING HAS BEEN CALLED, MENTOR GRAPHICS WILL
SEND YOU PROXY MATERIALS URGING YOU TO VOTE IN FAVOR OF THE PROPOSALS. MENTOR
GRAPHICS IS NOT CURRENTLY SOLICITING PROXIES FOR A VOTE ON THE PROPOSED MERGER.
YOU MAY BE ASKED TO VOTE ON THE PROPOSED MERGER IN THE FUTURE.
YOUR AGENT DESIGNATION IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES
YOU OWN. MENTOR GRAPHICS URGES YOU TO SIGN, DATE AND RETURN THE ENCLOSED GREEN
AGENT DESIGNATION TO CALL A SPECIAL MEETING.
IMPORTANT
IF YOUR SHARES OF COMPANY COMMON STOCK ARE REGISTERED IN YOUR OWN NAME,
PLEASE SIGN, DATE AND MAIL THE ENCLOSED GREEN AGENT DESIGNATION TO MACKENZIE IN
THE POSTAGE-PAID ENVELOPE PROVIDED. IF YOUR SHARES OF COMPANY COMMON STOCK ARE
HELD IN THE NAME OF A BROKERAGE FIRM, BANK NOMINEE OR OTHER INSTITUTION, ONLY IT
CAN SIGN A GREEN AGENT DESIGNATION WITH RESPECT TO YOUR SHARES AND ONLY UPON
RECEIPT OF SPECIFIC INSTRUCTIONS FROM YOU. ACCORDINGLY, YOU SHOULD CONTACT THE
PERSON RESPONSIBLE FOR YOUR ACCOUNT AND GIVE INSTRUCTIONS FOR A GREEN AGENT
DESIGNATION TO BE SIGNED REPRESENTING YOUR SHARES OF COMPANY COMMON STOCK.
MENTOR GRAPHICS URGES YOU TO CONFIRM IN WRITING YOUR INSTRUCTIONS TO THE PERSON
RESPONSIBLE FOR YOUR ACCOUNT AND TO PROVIDE A COPY OF SUCH INSTRUCTIONS TO
MENTOR GRAPHICS IN CARE OF MACKENZIE TO THE ADDRESS BELOW, SO THAT MENTOR
GRAPHICS WILL BE AWARE OF ALL INSTRUCTIONS GIVEN AND CAN ATTEMPT TO ENSURE THAT
SUCH INSTRUCTIONS ARE FOLLOWED.
IF YOU HAVE ANY QUESTIONS ABOUT EXECUTING OR DELIVERING YOUR GREEN AGENT
DESIGNATION OR REQUIRE ASSISTANCE, PLEASE CONTACT:
[MACKENZIE PARTNERS, INC. LOGO]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL-FREE: (800) 322-2885
FAX: (212) 929-0308
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE(S)
-------------
<S> <C>
INTRODUCTION............................................................................................ 1
BACKGROUND OF THE OFFER AND THE PROPOSED MERGER......................................................... 3
THE PROPOSED ACQUISITION, THE OFFER AND THE PROPOSED MERGER............................................. 4
The Proposed Acquisition............................................................................ 4
Terms of the Offer and the Proposed Merger.......................................................... 4
Conditions to the Offer............................................................................. 5
Required Stockholder Consent to the Proposed Merger................................................. 5
THE SPECIAL MEETING..................................................................................... 6
General............................................................................................. 6
The Proposals....................................................................................... 6
Recess or Adjournment of Meeting and Other Matters.................................................. 8
LEGAL PROCEEDINGS....................................................................................... 8
AGENT DESIGNATION PROCEDURES............................................................................ 10
CERTAIN INFORMATION CONCERNING MENTOR GRAPHICS AND PURCHASER............................................ 11
SOLICITATION EXPENSES AND PROCEDURES.................................................................... 12
ADDITIONAL INFORMATION.................................................................................. 13
ANNEX I INFORMATION CONCERNING CERTAIN EMPLOYEES OF MENTOR
GRAPHICS AND OTHER REPRESENTATIVES OF MENTOR GRAPHICS................................................. 14
ANNEX II BENEFICIAL OWNERSHIP OF COMPANY SHARES BY MENTOR GRAPHICS, PURCHASER, CERTAIN EMPLOYEES OF
MENTOR GRAPHICS, AND OTHER REPRESENTATIVES OF MENTOR GRAPHICS......................................... 16
ANNEX III SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE COMPANY AS A GROUP...... 17
ANNEX IV TRANSACTIONS IN SHARES OF THE COMPANY BY MENTOR GRAPHICS AND PURCHASER......................... 18
ANNEX V FORM OF PROPOSED AMENDMENT TO THE BYLAWS........................................................ 19
</TABLE>
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<PAGE>
INTRODUCTION
MENTOR GRAPHICS URGES YOU TO READ THIS ENTIRE SOLICITATION STATEMENT
CAREFULLY. THE INFORMATION CONTAINED IN THIS SOLICITATION STATEMENT INCLUDES
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). SUCH STATEMENTS ARE
INDICATED BY WORDS OR PHRASES SUCH AS "ANTICIPATE," "ESTIMATE," "PROJECTS,"
"MENTOR GRAPHICS BELIEVES," "INTENDS," "EXPECTS" AND SIMILAR WORDS AND PHRASES.
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS
WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM FUTURE RESULTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE,
AMONG OTHERS, THE FOLLOWING: (I) CONSUMMATION OF THE PROPOSED ACQUISITION; (II)
THE SUCCESSFUL INTEGRATION OF THE COMPANY INTO MENTOR GRAPHICS' OPERATIONS
WITHIN SIX MONTHS AFTER CONSUMMATION OF THE PROPOSED ACQUISITION; (III) THE
RETENTION OF KEY EMPLOYEES WITHIN THE SALES, SERVICE AND MANUFACTURING
ORGANIZATIONS AS WELL AS CERTAIN ENGINEERING TEAMS OF THE COMPANY; (IV)
SATISFACTORY RESOLUTION OF PENDING PATENT LITIGATION; AND (V) MENTOR GRAPHICS'
ABILITY TO OPERATE SUCCESSFULLY WITHIN A MORE LEVERAGED CAPITAL STRUCTURE. GIVEN
THESE UNCERTAINTIES, PROSPECTIVE INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. MENTOR GRAPHICS DISCLAIMS ANY
OBLIGATION TO UPDATE ANY SUCH FACTORS OR TO PUBLICLY ANNOUNCE THE RESULTS OF ANY
REVISIONS TO ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT
FUTURE EVENTS OR DEVELOPMENTS.
On August 11, 1998, Mentor Graphics offered to acquire all of the
outstanding Shares for $12.125 in cash per share of Company Common Stock,
together with the Rights issued pursuant to the Rights Agreement of the Company
dated January 10, 1996 (the "Rights Agreement") in a negotiated transaction. The
Company was unwilling to accept the offer regarding the Proposed Acquisition.
On August 12, 1998, MGZ Corp. ("Purchaser"), a Delaware corporation and a
wholly owned subsidiary of Mentor Graphics, commenced a tender offer to purchase
all outstanding Shares at a price of $12.125 per Share, net to the seller in
cash, without interest thereon (the "Offer Price"). Also on August 12, 1998,
Mentor Graphics and Purchaser filed a Tender Offer Statement on Schedule 14D-1
with the Securities and Exchange Commission (the "Commission"). The tender offer
is subject to the terms and conditions set forth in the Offer to Purchase dated
August 12, 1998 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer").
The purpose of the Offer and the Proposed Merger (as defined below) is to
acquire control of, and ultimately the entire equity interest in, the Company.
The Offer, as the first step in the acquisition of the Company, is intended to
facilitate the acquisition of all outstanding Shares. Mentor Graphics intends,
as soon as practicable following consummation of the Offer, to propose and seek
to have the Company consummate a merger or similar business combination with
Purchaser or another direct or indirect subsidiary of Mentor Graphics (the
"Proposed Merger"). The purpose of the Proposed Merger is to acquire all Shares
not tendered and purchased pursuant to the Offer or otherwise. At the effective
time of the Proposed Merger (the "Effective Time"), it is anticipated that each
then outstanding Share (other than Shares owned by Mentor Graphics and its
subsidiaries, including Purchaser, Shares held in the treasury of the Company
and Shares held by stockholders of the Company who shall have demanded and
perfected, and who shall not have withdrawn or otherwise lost, dissenters'
rights under the Delaware General Corporation Law (the "DGCL")) would be
converted into the right to receive an amount in cash equal to the Offer Price.
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which, together with the Shares owned by Mentor Graphics and its
subsidiaries, including Purchaser, would represent a majority of the outstanding
Shares on a fully diluted basis on the date of purchase (the "Minimum
Condition"), (ii) the Rights having been redeemed by the Company Board, or
Purchaser being satisfied, in its sole discretion, that the Rights have been
invalidated or are otherwise inapplicable to the Offer and the Proposed Merger
(the "Rights Condition"), (iii) Purchaser being satisfied, in its sole
discretion, that, after consummation of the Offer, the provisions of Section 203
("Section 203") of the DGCL would not prohibit for any period of
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time, or impose any voting requirement in excess of majority stockholder
approval with respect to, the Proposed Merger or other business combination with
Purchaser or any affiliate of Purchaser (the "Section 203 Condition") and (iv)
the expiration or termination of any applicable waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Condition"). The Offer is also subject to other terms and conditions described
in the Offer to Purchase. The Offer is not conditioned on Purchaser obtaining
financing. The Offer is scheduled to expire on September 9, 1998, unless
extended. Mentor Graphics anticipates that it will extend the Offer from time to
time as necessary to permit the conditions of the Offer to be satisfied, so long
as it is reasonably possible that such conditions will be satisfied.
The purpose of this Solicitation is to facilitate the Offer by urging you to
call the Special Meeting. As long as the Company declines to approve the
Proposed Acquisition, the Proposed Acquisition cannot proceed, and unless the
Company Board takes certain actions within its control, the Rights Condition
cannot be satisfied and the Proposed Acquisition cannot be consummated. At the
Special Meeting, you will be asked to remove the current members of the Company
Board, to reduce the authorized number of Company directors and elect the
Nominees in their place, and to repeal any provisions of the Bylaws adopted by
the Company Board subsequent to the last public filing of the Bylaws. If the
Nominees are elected, Mentor Graphics expects that, subject to their fiduciary
duties under applicable law, the Nominees would redeem the Rights (or amend the
Rights Agreement to make the Rights inapplicable to the Offer and the Proposed
Merger) and approve the Offer and the Proposed Merger under Section 203, which
would satisfy the Rights Condition and the Section 203 Condition, and take such
other actions as may be required to expedite the prompt consummation of the
Proposed Acquisition by means of the Offer and the Proposed Merger.
Mentor Graphics stands ready to negotiate the Proposed Acquisition with the
Company. Accordingly, Purchaser has reserved the right to amend the Offer
(including amending the number of Shares to be purchased and the Offer Price) at
any time, including upon Mentor Graphics entering into a merger agreement with
the Company, or Mentor Graphics negotiating a merger agreement with the Company
not involving a tender offer pursuant to which Purchaser would terminate the
Offer and the Shares would, upon consummation of such merger, be converted into
cash. If the Company enters into negotiations with Mentor Graphics, agrees to
redeem the Rights and enters into a merger agreement with Mentor Graphics or
Purchaser, Mentor Graphics will terminate this Solicitation.
MENTOR GRAPHICS URGES YOU TO COMPLETE AND RETURN THE ENCLOSED GREEN AGENT
DESIGNATION CARD AS SOON AS POSSIBLE. CALLING THE SPECIAL MEETING IS AN
IMPORTANT STEP IN ENSURING THE CONSUMMATION OF THE PROPOSED ACQUISITION OR
ANOTHER TRANSACTION WITH MENTOR GRAPHICS OR PURCHASER. SIGNING AN AGENT
DESIGNATION WILL NOT AFFECT YOUR ABILITY TO VOTE FOR OR AGAINST ANY PROPOSAL
PRESENTED AT THE SPECIAL MEETING.
YOU MUST SEPARATELY TENDER YOUR SHARES PURSUANT TO THE OFFER TO PURCHASE AND
THE RELATED LETTER OF TRANSMITTAL IF YOU WISH TO PARTICIPATE IN THE OFFER.
SIGNING AND RETURNING AN AGENT DESIGNATION CARD WILL NOT CONSTITUTE A TENDER OF
YOUR SHARES PURSUANT TO THE OFFER OR OBLIGATE YOU TO TENDER YOUR SHARES PURSUANT
TO THE OFFER.
Complete information about the Offer is contained in the Offer to Purchase,
which is available upon request from Purchaser's Information Agent for the
Offer, MacKenzie, and in the Tender Offer Statement on Schedule 14D-1. The
Tender Offer Statement on Schedule 14D-1 and any amendments thereto, including
exhibits, should be available for inspection and copies should be obtainable in
the manner set forth under "Certain Information Concerning Mentor Graphics and
Purchaser" (except that such material will not be available at the regional
offices of the Commission).
2
<PAGE>
BACKGROUND OF THE OFFER AND THE PROPOSED MERGER
During a series of meetings and telephone calls in the summer of 1995,
representatives of Mentor Graphics and the Company discussed the possibility of
a business combination between the two companies. These discussions did not
result in any negotiations concerning a business combination.
On August 11, 1998, Mr. Walden C. Rhines, Chief Executive Officer and
President of Mentor Graphics, met with Mr. Glen Antle, Chairman of the Board of
the Company. At the meeting, Mr. Rhines proposed that Mentor Graphics acquire
the Company at a price of $12.125 per Share in cash. While Mr. Antle stated that
he would communicate the offer to the Company Board, he stated that he was
unwilling to accept the offer, to cause the Company to remove its takeover
defenses or to cause the Company to refrain from taking action to prevent the
consummation of the Offer.
At the meeting, Mr. Rhines delivered the following letter to Mr. Antle
setting forth the Proposed Acquisition and its merits and indicating Mentor
Graphics' desire to enter into a negotiated transaction:
The Board of Directors August 11, 1998
Quickturn Design Systems, Inc.
55 W. Trimble Road
San Jose, CA 95131
Attention:Glen M. Antle
Chairman of the Board
Dear Mr. Antle:
I am writing to inform you that the Board of Directors of Mentor Graphics
Corporation has unanimously authorized Mentor Graphics to offer to acquire all
outstanding shares of Quickturn Design Systems, Inc. common stock at a price of
$12.125 per share in cash.
We have the necessary financing in hand to consummate this acquisition and
therefore the offer is not subject to any financing condition. Reflecting our
commitment to this acquisition, we have already acquired more than three percent
of Quickturn's outstanding common stock.
We believe our offer represents a superior opportunity for all Quickturn
stockholders to maximize the value of their investment in Quickturn. This
all-cash offer represents a substantial premium over Quickturn's current market
price.
Moreover, we believe that the combination of Mentor Graphics and Quickturn
will significantly benefit the customers of both companies. It will advance
Mentor Graphics' strategy of continuing to be a leading supplier of electronic
system verification solutions by strengthening our position in emulation
products.
In addition, in separate patent-infringement lawsuits over the past two and
a half years, Mentor Graphics has sued Quickturn and Quickturn has sued Mentor
Graphics. The acquisition will resolve these disputes between our companies,
which otherwise will continue to require substantial time and expense and
represent a significant distraction for both companies well into the future.
We are determined to make this acquisition a reality and to bring its
benefits to our respective stockholders and customers, as expeditiously as
possible. Accordingly, we are commencing a tender offer directly to your
stockholders on August 12, 1998.
We are prepared, however, to acquire Quickturn through a negotiated
transaction and to consider an increased offering price in the event that we are
first permitted to conduct a due diligence review and that such review
demonstrates greater value of Quickturn to Mentor Graphics than we can ascertain
from public information.
Very truly yours,
/s/ Walden C. Rhines
-------------------------------------------------------------
President and
Chief Executive Officer
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<PAGE>
The preceding letter contains forward-looking statements within the meaning
of Section 21E of the Exchange Act.
On August 12, 1998, Mentor Graphics and Purchaser commenced the Offer. Also
on August 12, 1998 Mentor Graphics filed preliminary materials with the
Commission to solicit agent designations.
On August 12, 1998, Mentor Graphics and Purchaser commenced litigation
against the Company and the Company Board in the Court of Chancery of the State
of Delaware seeking, among other things, an order (i) declaring that failure to
redeem the Rights or to render the Rights inapplicable to the Offer and the
Proposed Merger or to approve the Offer and the Proposed Merger would constitute
a breach of the Company Board's 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 the Proposed Merger, (iii)
declaring that failure to approve the Offer and the Proposed Merger for purposes
of Section 203 of the DGCL would constitute a breach of the Company Board's
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) enjoining the Company Board from taking any actions designed to impede
or which have the effect of impeding the Offer, the Solicitation or the Proposed
Merger and declaring that any such actions would constitute a breach of the
Company Board's fiduciary duties under Delaware law, (vi) enjoining the Company
Board from taking any actions to impede, or refuse to recognize the validity of,
Mentor Graphics' call of the Special Meeting, provided that Mentor Graphics has
obtained Agent Designations from Company stockholders holding not less than 10%
of the outstanding Shares of the Company and (vii) enjoining the Company Board
from taking any action to cause the Company to become subject to Section 2115 of
the California General Corporation Law.
Also on August 12, 1998 Mentor Graphics and Purchaser commenced litigation
against the Company in the United States District Court for the District of
Delaware seeking, among other things, a declaratory judgment that Mentor
Graphics 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.
THE PROPOSED ACQUISITION, THE OFFER AND THE PROPOSED MERGER
THE PROPOSED ACQUISITION
On August 11, 1998, Mentor Graphics offered to acquire all of the
outstanding Shares for $12.125 in cash per share of Company Common Stock
(together with each associated Right) in a negotiated transaction. The Company
was unwilling to accept the offer regarding the Proposed Acquisition.
If the Proposed Acquisition is to proceed, the Company must approve the
Proposed Merger and take all action necessary to satisfy the conditions to the
Offer, or the present members of the Company Board must be removed and the
Nominees elected in their place who are expected to take all action necessary to
facilitate consummation of the Proposed Acquisition by means of the Offer and
the Proposed Merger, subject to their fiduciary duties as directors of the
Company.
TERMS OF THE OFFER AND THE PROPOSED MERGER
On August 12, 1998, Mentor Graphics commenced the Offer, which provides for
the purchase of all outstanding Shares at the Offer Price ($12.125 per Share),
and this Solicitation. The Offer is subject to the terms and conditions set
forth in the Offer to Purchase and the Letter of Transmittal. The purpose of the
Offer and the Proposed Merger is to acquire control of, and ultimately the
entire equity interest in, the Company. The Offer, as the first step in the
acquisition of the Company, is intended to facilitate the acquisition of all
outstanding Shares.
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Mentor Graphics intends, as soon as practicable following consummation of
the Offer, to seek to have the Company consummate the Proposed Merger or a
similar business combination with Purchaser or another direct or indirect
subsidiary of Mentor Graphics. The purpose of the Proposed Merger is to acquire
all Shares not tendered and purchased pursuant to the Offer or otherwise. At the
Effective Time, it is anticipated that each then outstanding Share (other than
Shares owned by Mentor Graphics and its subsidiaries, including Purchaser,
Shares held in the treasury of the Company and Shares held by stockholders of
the Company who shall have demanded and perfected, and who shall not have
withdrawn or otherwise lost, dissenters' rights under the DGCL) would be
converted into the right to receive an amount in cash equal to the Offer Price.
If the Proposed Merger is consummated, shares of the Company's Common Stock
would cease to be listed on the Nasdaq National Market. Subject to the terms and
conditions of the Proposed Merger and in accordance with the DGCL, the Company
would be merged with and into Purchaser or another direct or indirect subsidiary
of Mentor Graphics. Purchaser or another direct or indirect subsidiary would be
the surviving corporation in the Proposed Merger, and would continue its
corporate existence under Delaware law.
Mentor Graphics stands ready to negotiate with the Company with respect to
the Proposed Acquisition. Purchaser has reserved the right to amend the Offer
(including amending the number of Shares to be purchased and the Offer Price) at
any time, including upon Mentor Graphics entering into a merger agreement with
the Company, or Mentor Graphics negotiating a merger agreement with the Company
not involving a tender offer pursuant to which Purchaser would terminate the
Offer and the Shares would, upon consummation of such merger, be converted into
cash. If the Company enters into negotiations with Mentor Graphics, agrees to
redeem the Rights and enters into a merger agreement with Mentor Graphics or
Purchaser, Mentor Graphics will terminate this Solicitation.
CONDITIONS TO THE OFFER
Consummation of the Offer is subject to fulfillment of a number of
conditions, including, without limitation, (i) the Minimum Condition, (ii) the
Rights Condition, (iii) the Section 203 Condition and (iv) the HSR Condition,
each of which is described in the Offer to Purchase. The Offer is also subject
to other terms and conditions described in the Offer to Purchase. The Offer is
not conditioned on Purchaser obtaining financing. The Offer is scheduled to
expire on September 9, 1998, unless extended. Purchaser anticipates that it will
extend the Offer from time to time as necessary to permit the conditions of the
Offer to be satisfied.
Although Mentor Graphics will seek consummation of the Proposed Merger as
soon as practicable following the purchase of Shares pursuant to the Offer, the
outcome of the proxy solicitation to elect the Nominees and certain terms of the
Rights may affect the ability of Mentor Graphics to obtain control of the
Company and to consummate the Proposed Merger. Accordingly, the exact timing and
details of the Proposed Merger will depend on a variety of factors and legal
requirements, including, among other things, the outcome of the Solicitation and
the proxy solicitation, the actions of the Board, the number of Shares acquired
by Purchaser pursuant to the Offer, and whether the Rights Condition and the
Section 203 Condition are satisfied or waived. Mentor Graphics expects the
Nominees, if elected, to redeem the Rights (or amend the Rights Agreement to
make the Rights inapplicable to the Offer and the Proposed Merger) and approve
the Offer and the Proposed Merger under Section 203, which would satisfy the
Rights Condition and the Section 203 Condition, and to take such other action as
is necessary to expedite the prompt consummation of the Offer and the Proposed
Merger, in each case subject to their fiduciary duties as directors of the
Company.
REQUIRED STOCKHOLDER CONSENT TO THE PROPOSED MERGER
Under the DGCL, the merger of a Delaware corporation generally requires the
approval of its board of directors and the affirmative vote of holders of at
least a majority of its outstanding voting securities. If the Nominees are
elected and approve the Offer and the Offer is thereafter consummated (without
any
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waiver of the Minimum Condition and assuming the satisfaction or waiver of all
other conditions to the Offer), it is expected that the Nominees would, subject
to their fiduciary duties as directors of the Company, approve the Proposed
Merger, and Mentor Graphics and Purchaser could approve the Proposed Merger
without the affirmative vote of any other Company stockholder. If the Company
Board approves the Offer prior to its consummation, the Offer is thereafter
consummated in accordance with its terms, and the existing Company Board
approves the Proposed Merger, Mentor Graphics and Purchaser also could approve
the Proposed Merger without the affirmative vote of any other Company
stockholder.
If the Company Board has not approved the Offer, remains in office following
the consummation of the Offer (following Purchaser's waiver of the Section 203
Condition, which is not presently contemplated, and the satisfaction or waiver
of all other conditions to the Offer, including without limitation the
redemption or invalidation of the Rights) and does not approve the Proposed
Merger, Purchaser, in order to consummate the Proposed Merger, would first have
to elect a majority of the Board, which would approve the Proposed Merger.
Thereafter, the Proposed Merger would require the affirmative vote of 66 2/3% of
the outstanding Shares not owned (within the meaning of Section 203) by Mentor
Graphics or Purchaser, unless the transaction were not to occur for at least
three years following consummation of the Offer or Purchaser purchased pursuant
to the Offer at least 85% of the outstanding Shares outstanding on the date of
the commencement of the Offer (excluding Shares owned by directors of the
Company who are also officers and certain employee stock plans), in which event
Mentor Graphics and Purchaser could approve the Proposed Merger without the
affirmative vote of any other stockholder.
THE SPECIAL MEETING
GENERAL
In order to facilitate the Proposed Acquisition, Mentor Graphics is
soliciting Agent Designations to call the Special Meeting. Mentor Graphics is
furnishing this Solicitation Statement and a form of Agent Designation to you
for the appointment of designated agents of the stockholders to call the Special
Meeting to be held within approximately 45 days following the date on which
Mentor Graphics delivers to the Company Agent Designations from the Requisite
Holders. After the Special Meeting has been called, Mentor Graphics will solicit
proxies from you in support of the Proposals by sending you a notice of the
Special Meeting, a proxy statement and a proxy card for use therewith.
THE PROPOSALS
If Mentor Graphics is successful in its solicitation of Agent Designations
and the Special Meeting is called and held, Mentor Graphics expects to present
the following matters for a stockholder vote, in the following order at the
Special Meeting:
REMOVAL OF DIRECTORS. Mentor Graphics expects to propose the removal of
each of the Company's current directors and any other person who may be a
director immediately prior to the effectiveness of the actions proposed to be
taken by the proxy solicitation. The Company's current directors are Glen M.
Antle, Richard C. Alberding, Michael R. D'Amour, William A. Hasler, Dr. Yen-Son
(Paul) Huang, Charles D. Kissner, Dr. David K. Lam and Keith R. Lobo. Pursuant
to Section 141(k) of the DGCL and Section 3.16 of the Bylaws, the removal of
directors requires the affirmative vote of a majority of all Shares then
outstanding and entitled to vote on the election of directors.
REDUCTION IN SIZE OF BOARD. Mentor Graphics expects to propose a reduction
in the authorized number of Company directors to five. The Company Board
currently consists of eight directors. Mentor Graphics believes that a smaller
number of directors would be a more effective working group. This proposed
amendment to the Bylaws is set forth in its entirety in Annex V to this
Solicitation Statement. This Bylaw amendment is designed to reduce the number of
directors constituting the Company Board to the number that would be in office
if the Proposal to remove the incumbent directors is approved and the Nominees
are elected. Pursuant to Sections 3.2 and 3.16 of Article III of the Bylaws, the
reduction of the
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authorized number of directors does not have the effect of removing any director
then in office. Based on publicly available information, Mentor Graphics
believes that adoption of the proposed amendment to the Bylaws requires a
majority vote of the Shares represented in person or by proxy and entitled to
vote at the Special Meeting, assuming a quorum is present.
ELECTION OF DIRECTORS. Mentor Graphics expects to propose the election as
directors of the Company of five Nominees, each of whom will be individuals not
affiliated with Mentor Graphics, to serve until the next annual meeting of
stockholders and until their successors shall have been duly elected and
qualified. Assuming there is a quorum at the Special Meeting, directors will be
elected by a plurality of the votes cast by the stockholders of the Company
entitled to vote at the Special Meeting.
Mentor Graphics does not expect that any of the Nominees will be unable to
stand for election at the Special Meeting, but, in the event that one or more
vacancies in the slate of Nominees should occur unexpectedly, Mentor Graphics
will name a substitute nominee.
In addition, Mentor Graphics reserves the right (i) to nominate additional
nominees to fill any director positions created by the Company Board prior to or
at the Special Meeting and (ii) to nominate substitute or additional persons if
the Company makes or announces any changes to the Bylaws or takes or announces
any other action that has, or if consummated would have, the effect of
disqualifying any or all of the Nominees.
Mentor Graphics' primary purpose in seeking to elect the Nominees to the
Company Board is to secure, subject to the Nominees' fiduciary duties as
directors of the Company, the redemption of the Rights (or the amendment of the
Rights Agreement to make the Rights inapplicable to the Proposed Acquisition)
and the approval of the Offer and the Proposed Merger under Section 203, thereby
facilitating the consummation of the Proposed Acquisition. However, if elected,
the Nominees would be responsible for managing the business and affairs of the
Company. Each director of the Company has an obligation under the DGCL to
discharge his or her duties as a director on an informed basis, in good faith,
with the care an ordinarily careful and prudent person in a like position would
exercise under similar circumstances and in a manner the director honestly
believes to be in the best interests of the Company. In this regard,
circumstances may arise in which the interests of Mentor Graphics and its
affiliates, on the one hand, and the interests of other stockholders of the
Company, on the other hand, may differ. In any such case, Mentor Graphics
expects the Nominees to discharge fully their obligations to the Company and its
stockholders under Delaware law.
It is contemplated that each Nominee will be paid a fee of $25,000 by Mentor
Graphics for agreeing to stand for election as a director of the Company. In
addition, it is anticipated that each Nominee, upon election, will receive
director's fees, consistent with the Company's past practice, for services as a
director of the Company. According to the Company's 1998 Proxy Statement,
directors of the Company received an annual retainer of $12,000 and an annual
committee membership stipend of $1,500 for each committee of the Company Board
on which a director served for the fiscal year ended December 31, 1997. Mentor
Graphics will indemnify each Nominee, to the fullest extent permitted by
applicable law, from and against any and all expenses, liabilities or losses of
any kind arising out of any threatened or filed claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative, asserted
against or incurred by the Nominee in his or her capacity as a nominee for
election as a director of the Company, and, if elected, as a director of the
Company, or arising out of his or her status in either such capacity. Mentor
Graphics will also reimburse each Nominee for his or her reasonable
out-of-pocket expenses, including reasonable fees and expenses of counsel.
REPEAL OF BYLAWS ADOPTED SUBSEQUENT TO MARCH 30, 1998 AND PRIOR TO THE
EFFECTIVENESS OF THE PROPOSALS. Mentor Graphics expects to propose the repeal of
any provision of the Bylaws, and the repeal of any amendment to the Bylaws, in
each case adopted subsequent to March 30, 1998 and prior to the effectiveness of
the Proposals. This Proposal is designed to prevent the Company Board from
taking actions to amend the Bylaws to attempt to nullify or delay the actions
taken by the stockholders pursuant
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to the Proposals or to create new obstacles to the consummation of the Proposed
Acquisition, the Offer and the Proposed Merger. The Bylaws filed with the
Commission on March 30, 1998 as an exhibit to the Company's Form 10-K for the
year ended December 31, 1997 are the most recent publicly available version of
the Bylaws. Accordingly, this Proposal would not repeal any provision of the
Bylaws that has been publicly disclosed prior to the date thereof. If, however,
the Company Board has adopted since March 30, 1998, or adopts prior to the
effectiveness of the Proposals, any amendment to the Bylaws, this Proposal would
repeal such amendment so as to prevent the Company Board from creating new
obstacles to the consummation of the Proposed Acquisition, the Offer and the
Proposed Merger and to remove any existing undisclosed obstacles to the
consummation of the Proposed Acquisition, the Offer and the Proposed Merger.
RECESS OR ADJOURNMENT OF MEETING AND OTHER MATTERS.
Mentor Graphics expects to request, in the proxy solicitation relating to
the Special Meeting, authority (i) to initiate and vote for proposals to recess
or adjourn the Special Meeting for any reason, including to allow inspectors of
the election to certify the outcome of the election of directors, or to allow
the solicitation of additional votes, if necessary, to approve any of the
proposals and (ii) to oppose and vote against any proposal to recess or adjourn
the Special Meeting. Mentor Graphics does not currently anticipate additional
proposals on any substantive matters. Nevertheless, Mentor Graphics reserves the
right either to modify the Proposals or cause additional proposals to be
identified in the notice of, and in the proxy materials for, the Special
Meeting. Mentor Graphics is not aware of any other proposals to be brought
before the Special Meeting. However, should other proposals be brought before
the Special Meeting, Mentor Graphics will vote its proxies on such matters in
its discretion.
Mentor Graphics' proposals to reduce to five the authorized number of
Company directors and to elect its Nominees are dependent upon the removal at
the Special Meeting of all incumbent directors of the Company. If Mentor
Graphics is successful at the Special Meeting in removing all incumbent
directors of the Company, and is not successful in reducing the size of the
Company Board, Mentor Graphics intends to elect the Nominees, and the remaining
vacancies on the Board may be filled by the Company's stockholders or the
Company Board.
IF THE SPECIAL MEETING IS CALLED, YOU WILL BE FURNISHED WITH NOTICE OF THE
SPECIAL MEETING AND PROXY MATERIALS RELATING TO THE FOREGOING PROPOSALS. THESE
PROXY MATERIALS WILL CONTAIN SIGNIFICANTLY MORE DETAILED INFORMATION CONCERNING
THE PROPOSALS AND THE PROPOSED ACQUISITION, INCLUDING RELEVANT PRO FORMA
FINANCIAL INFORMATION.
LEGAL PROCEEDINGS
Mentor Graphics and the Company are involved in patent litigation in the
United States District Court in Portland, Oregon and San Francisco, California
and in Germany, in which the parties have alleged various claims of patent
infringement against each other.
In March 1996, Mentor Graphics filed suit (MENTOR GRAPHICS CORPORATION v.
QUICKTURN DESIGN SYSTEMS, INC.) in the United States District Court in Portland,
Oregon against the Company for a declaratory judgment of non-infringement,
invalidity and unenforceability of three of the Company's patents. The Company
filed a counterclaim against Mentor Graphics alleging infringement of six of the
Company's patents, including the three patents subject to the declaratory
judgment action. The counterclaim seeks a permanent injunction prohibiting sales
of Mentor Graphics' SimExpress products in the United States as well as
compensatory damages and attorneys' fees. In August 1997, the District Court
granted the Company a preliminary injunction prohibiting Mentor Graphics from
selling its SimExpress version 1.0 and 1.5 acceleration verification systems in
the United States. The injunction also prohibits Mentor Graphics from shipping
current United States inventory modified in the United States to any of its non-
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United States locations. On August 5, 1998, the United States Court of Appeals
for the Federal Circuit affirmed the grant of the preliminary injunction on
Mentor Graphics' appeal.
In June 1998, the District Court appointed a senior patent litigator to be
Special Master in the case. The Special Master has reviewed the judge's rulings
on claim interpretation (so-called "Markman" rulings) and will provide
recommended rulings on summary judgment motions filed in June 1998 by Mentor
Graphics and the Company. Rulings on these District Court matters are expected
in the third and fourth quarters of 1998. While a trial in the District Court is
scheduled to begin December 1, 1998, there can be no assurance that such date
will not be extended. An unfavorable ruling in the District Court trial could
involve substantial cost to Mentor Graphics and could make permanent the
prohibition on Mentor Graphics' manufacturing and selling its existing
accelerated verification of hardware design products in the United States. While
an adverse judgment in this litigation would not affect Mentor Graphics' ability
to borrow funds under the $200 million unsecured revolving credit facility
obtained in connection with the Offer, an adverse judgment could have a material
adverse effect on Mentor Graphics' results of operations in the applicable
period.
In January 1996, the Company filed an administrative complaint with the
United States International Trade Commission ("ITC") (IN THE MATTER OF CERTAIN
HARDWARE LOGIC EMULATION SYSTEMS AND COMPONENTS THEREOF, Investigation No.
337-TA-383) seeking to prohibit the distribution of SimExpress products in the
United States. In August 1996, the ITC issued a ruling effectively prohibiting
the importation of this technology into the United States. In August 1997, the
ITC Administrative Law Judge recommended the imposition of evidentiary and
monetary sanctions against Mentor Graphics. While this decision is expected to
be appealed, no decision is expected for at least nine months. If Mentor
Graphics is unsuccessful in its appeal, the amount of monetary sanctions has
been stipulated to be $425,000. In December 1997, the ITC issued a Cease and
Desist Order prohibiting Mentor Graphics from importing SimExpress products or
components, and from providing repair or maintenance services to existing United
States customers. This order took effect in February 1998.
Discovery on the issue of the Company's damages caused by Mentor Graphics'
alleged infringement is not yet complete, and the Company has not presented a
calculation of its damages nor made a monetary settlement demand. Mentor
Graphics believes that the Company's damages would be based in significant part
upon the fact that the gross amount of all of Mentor Graphics' allegedly
infringing U.S. sales total only approximately $3,500,000. In addition to
compensatory damages, in the event the court finds that Mentor Graphics'
infringement was willful, the trial court judge has the discretion to enhance
the jury award so that the total award is at most triple the amount awarded by
the jury. The trial court judge also has the discretion, if he 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.
In October 1997, the Company also filed an action against Mentor Graphics in
a German court alleging that SimExpress infringes on a German patent held by the
Company (the European version of one of the patents in dispute in MENTOR
GRAPHICS CORPORATION V. QUICKTURN DESIGN SYSTEMS, INC. discussed above). Mentor
Graphics expects resolution in this case no earlier than late 1999.
In February 1998, Meta Systems, Inc. ("Meta"), a subsidiary of Mentor
Graphics, filed a patent infringement action against the Company in the United
States District Court for the Northern District of California in San Francisco,
California (META SYSTEMS, INC. AND APTIX CORPORATION V. QUICKTURN DESIGN SYSTEMS
INC.). The complaint, which is based on a patent licensed from Aptix Corporation
of San Jose, California by Meta and Mentor Graphics, relates to the Company's
M3000 System Realizer and seeks damages for infringement as a result of the
Company's manufacture and sale of certain emulation equipment. Meta, which was
joined in the suit by Aptix Corporation, plans to seek an injunction prohibiting
further infringement by the Company. A trial date of July 6, 1999 has been set.
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On August 12, 1998, Mentor Graphics and Purchaser commenced litigation
against the Company and the Company Board in the Court of Chancery of the State
of Delaware seeking, among other things, an order (i) declaring that failure to
redeem the Rights or to render the Rights inapplicable to the Offer and the
Proposed Merger or to approve the Offer and the Proposed Merger would constitute
a breach of the Company Board's 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 the Proposed Merger, (iii)
declaring that failure to approve the Offer and the Proposed Merger for purposes
of Section 203 of the DGCL would constitute a breach of the Company Board's
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) enjoining the Company Board from taking any actions designed to impede
or which have the effect of impeding the Offer, the Solicitation or the Proposed
Merger and declaring that any such actions would constitute a breach of the
Company Board's fiduciary duties under Delaware law, (vi) enjoining the Company
Board from taking any actions to impede, or refuse to recognize the validity of,
Mentor Graphics' call of the Special Meeting, provided that Mentor Graphics has
obtained Agent Designations from Company stockholders holding not less than 10%
of the outstanding Shares of the Company and (vii) enjoining the Company Board
from taking any action to cause the Company to become subject to Section 2115 of
the California General Corporation Law.
Also on August 12, 1998 Mentor Graphics and Purchaser commenced litigation
against the Company in the United States District Court for the District of
Delaware seeking, among other things, a declaratory judgment that Mentor
Graphics 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.
AGENT DESIGNATION PROCEDURES
Pursuant to this Solicitation Statement, Mentor Graphics is soliciting Agent
Designations from holders of outstanding Shares to call the Special Meeting. By
executing an Agent Designation, a stockholder will designate specified persons
as the stockholder's agents (each, a "Designated Agent") and will authorize the
Designated Agents (i) to call the Special Meeting, (ii) to set the date and time
of the Special Meeting, (iii) to give notice of the Special Meeting and any
adjournment thereof and (iv) to exercise all rights of Requisite Holders
incidental to calling and convening the Special Meeting and causing the purposes
of the authority expressly granted pursuant to the Agent Designations to the
Designated Agents to be carried into effect. Agent Designations do not grant the
Designated Agents the power to vote any Shares at the Special Meeting. To vote
on the matters to be brought before the Special Meeting you must vote by proxy
or in person at the Special Meeting.
Pursuant to the applicable law and the Bylaws, record holders of not less
than 10% of the outstanding shares of the Company entitled to vote may call the
Special Meeting. According to the Company's Form 10-Q for the quarter ended
March 31, 1998, as of April 30, 1998, there were 17,809,342 Shares outstanding.
Based on such number and the fact that Mentor Graphics and its subsidiaries,
including Purchaser, own 591,500 Shares, Agent Designations from holders of an
aggregate of at least 1,189,434 Shares in addition to Shares owned by Mentor
Graphics will be required to call the Special Meeting. Mentor Graphics believes
that (i) the date for determining stockholders entitled to call the Special
Meeting and submit Agent Designations in connection therewith shall be the date
that the Special Meeting is actually called and (ii) the stockholders, not the
Company Board, have the right to fix the date and time of the Special Meeting
and give notice thereof. Therefore, following receipt of Agent Designations from
the Requisite Holders, the Designated Agents will call the Special Meeting and
fix the date and time of the Special Meeting. Shortly thereafter, Mentor
Graphics will distribute the appropriate notice of the Special Meeting, together
with proxy materials and a proxy card, to the holders of record of Company
Common Stock entitled to vote at the Special Meeting.
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The record date for determining stockholders entitled to notice of, or to
vote at, the Special Meeting shall be at the close of business on the day next
preceding the day on which notice of the Special Meeting is given to
stockholders, unless the Company Board sets a different record date in
accordance with the DGCL.
You may revoke your Agent Designation at any time by delivering a written
revocation to Mentor Graphics in care of MacKenzie at the address or fax number
set forth on the back cover of this Solicitation Statement. Such a revocation
must clearly state that your Agent Designation is no longer effective. Any
revocation of an Agent Designation will not affect any action taken by the
Designated Agents pursuant to the Agent Designation prior to such revocation.
If your Shares are held in the name of a brokerage firm, bank nominee or
other institution, only it can sign an Agent Designation with respect to your
Shares and only upon receipt of your specific instructions. Accordingly, please
contact the person responsible for your account and give instructions for a
GREEN Agent Designation representing your Shares to be signed. Mentor Graphics
urges you to confirm in writing your instructions to the person responsible for
your account and to provide a copy of such instructions to Mentor Graphics in
care of MacKenzie at the address or fax number set forth on the back cover of
this Solicitation Statement so that Mentor Graphics will be aware of all
instructions given and can attempt to ensure that such instructions are
followed.
BY EXECUTING THE GREEN AGENT DESIGNATION AND RETURNING IT TO MENTOR
GRAPHICS, YOU ARE NOT COMMITTING TO CAST ANY VOTE IN FAVOR OR AGAINST, NOR ARE
YOU GRANTING ANY PROXY TO VOTE ON, ANY OF THE PROPOSALS TO BE BROUGHT BEFORE THE
SPECIAL MEETING. MOREOVER, EXECUTION OF THE GREEN AGENT DESIGNATION WILL NOT
OBLIGATE YOU IN ANY WAY TO SELL YOUR SHARES PURSUANT TO THE OFFER.
CERTAIN INFORMATION CONCERNING MENTOR GRAPHICS AND PURCHASER
Mentor Graphics manufactures, markets and supports software and hardware
electronic design automation ("EDA") products and provides related services
which enable engineers to design, analyze, simulate, model, implement and verify
the components of electronic systems. In 1996, Mentor Graphics expanded its
product offerings beyond traditional EDA to include (1) intellectual property
products and services intended to increase design efficiency by delivering
standard, reusable functions for the design of hardware components and (2)
embedded software development and system verification tools intended to shorten
product time-to-market by allowing for simultaneous development and testing of
hardware and embedded software. Mentor Graphics markets its products primarily
to large companies in the communications, computer, semiconductor, consumer
electronics, aerospace and transportation industries. Customers use Mentor
Graphics' software in the design of such diverse products as supercomputers,
automotive electronics, telephone-switching systems, cellular base stations and
handsets, computer network hubs and routers, signal processors and personal
computers. Mentor Graphics licenses its products primarily through its direct
sales force in North America, Europe and Asia and through distributors in
territories where the volume of business does not warrant a direct sales
presence. Mentor Graphics was incorporated in Oregon in 1981 and its common
stock is traded on the Nasdaq National Market under the symbol "MENT." Mentor
Graphics' executive offices are located at 8005 S.W. Boeckman Road, Wilsonville,
Oregon 97070-7777.
Purchaser is a newly incorporated Delaware corporation and a wholly owned
subsidiary of Mentor Graphics which to date has not conducted any business other
than in connection with the Offer and the Proposed Merger. Purchaser's principal
offices are located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777.
Mentor Graphics is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports relating to its business,
financial condition and other matters. Comprehensive information concerning
Mentor Graphics is included in Mentor Graphics' Form 10-K for the year ended
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December 31, 1997 (the "Mentor Graphics Form 10-K"), Mentor Graphics' Quarterly
Report on Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998 (the
"Mentor Graphics Form 10-Qs") and other documents filed by Mentor Graphics with
the Commission. Such reports and other documents should be available for
inspection at the public reference facilities of the Commission at 450 Fifth
Street, N.W., Washington, DC 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, NY 10048
and Citicorp Center, 500 West Madison Street, (Suite 1400), Chicago, IL 60661.
The Commission also maintains an Internet site on the World Wide Web at http://
www.sec.gov that contains reports, proxy statements and other information.
Copies of the Mentor Graphics Form 10-K, the Mentor Graphics Form 10-Qs and
Mentor Graphics' other filings with the Commission should be obtainable, by
mail, upon payment of the Commission's customary charges, by writing to the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the Mentor Graphics Form 10-K, the Mentor Graphics Form 10-Qs and
Mentor Graphics' other filings with the Commission are also available for
inspection at the offices of the Nasdaq National Market, 1735 K Street, N.W.,
Washington, D.C. 20006.
Information about certain employees of Mentor Graphics and Purchaser and
certain other representatives of Mentor Graphics who may assist MacKenzie in
soliciting Agent Designations is set forth in the attached Annex I. Annex II
sets forth certain information relating to Shares owned by Mentor Graphics and
Purchaser, such employees and other representatives, and certain transactions
between any of them and the Company.
SOLICITATION EXPENSES AND PROCEDURES
The entire expense of preparing, assembling, printing and mailing this
Solicitation Statement and the accompanying Agent Designation, and the cost of
soliciting Agent Designations, will be borne by Mentor Graphics.
In addition to the use of the mails, Agent Designations may be solicited by
certain employees of Mentor Graphics and its affiliates by mail, advertisement,
telephone, telegram, personal solicitation, and live or prerecorded audio or
video presentations, for which no compensation will be paid to such individuals.
Banks, brokerage houses and other custodians, nominees and fiduciaries will be
requested to forward the solicitation material to the customers for whom they
hold Shares, and Mentor Graphics will reimburse them for their reasonable
out-of-pocket expenses.
Mentor Graphics has retained MacKenzie for advisory, information agent and
proxy solicitation services in connection with the Offer, the Solicitation and
the proposed Special Meeting. MacKenzie will be paid a fee not to exceed
$50,000, and will be reimbursed for its reasonable out-of-pocket expenses in
connection with this Solicitation. Mentor Graphics has also agreed to indemnify
MacKenzie against certain liabilities and expenses in connection with its
engagement, including certain liabilities under the federal securities laws.
MacKenzie will solicit Agent Designations from individuals, brokers, bank
nominees and other institutional holders. It is anticipated that approximately
50 persons will be utilized by MacKenzie in its solicitation efforts, which may
be made by telephone, telegram, facsimile and in person.
Salomon Smith Barney is acting as Dealer Manager in connection with the
Offer and as financial advisor to Mentor Graphics in connection with Mentor
Graphics' effort to acquire the Company. Mentor Graphics has agreed to pay to
Salomon Smith Barney a fee of $2.4 million if the Offer and the Proposed Merger
or a similar acquisition transaction is consummated or a fee of $600,000 if,
following commencement of the Offer, no such acquisition transaction is
consummated. Mentor Graphics has also agreed to pay to Salomon Smith Barney 10%
of certain proceeds received by Mentor Graphics from the sale of the Shares
owned by Mentor Graphics in the event the Offer and the Proposed Merger or a
similar acquisition transaction is not consummated. In the event Mentor Graphics
receives a termination, topping or similar fee following the termination or
abandonment of a proposed acquisition transaction, Mentor Graphics has also
agreed to pay to Salomon Smith Barney 10% of the excess (if any) of such fee
over Mentor Graphics' out-of-pocket expenses in connection with such proposed
acquisition transaction. Mentor Graphics has
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also agreed to reimburse Salomon Smith Barney for its reasonable out-of-pocket
expenses, including the reasonable fees and expenses of its counsel, and to
indemnify Salomon Smith Barney and certain related persons against certain
liabilities and expenses, including certain liabilities and expenses under the
federal securities laws.
Salomon Smith Barney is a service mark of Smith Barney Inc. Salomon Brothers
Inc and Smith Barney Inc. are affiliated but separately registered
broker/dealers under common control of Salomon Smith Barney Holdings Inc.
Salomon Brothers Inc and Salomon Smith Barney Holdings Inc. have been licensed
to use the Salomon Smith Barney service mark.
In connection with Salomon Smith Barney's engagement as financial advisor,
Mentor Graphics anticipates that certain employees of Salomon Smith Barney may
communicate in person, by telephone or otherwise with a limited number of
institutions, brokers or other persons who are stockholders of the Company for
the purpose of assisting in the solicitation of Agent Designations. Salomon
Smith Barney will not receive any fee for or in connection with such
solicitation activities by employees of Salomon Smith Barney apart from the fees
it is otherwise entitled to receive as described above.
Mentor Graphics estimates that total costs relating to the Offer, the
solicitation of Agent Designations and the solicitation of proxies for approval
of the Proposals, including expenditures for attorneys, accountants, financial
advisors, proxy solicitors, public relations advisors, printing, advertising,
postage, litigation and related expenses and filing fees, other than payment for
Shares pursuant to the Offer, are expected to aggregate approximately $7.4
million, including fees payable to MacKenzie and Salomon Smith Barney. To date,
Mentor Graphics has spent $2.3 million of such total estimated expenditures.
ADDITIONAL INFORMATION
Set forth on Annex III hereto is certain information relating to each person
who, based on publicly available information, owns beneficially more than 5% of
the shares of Company Common Stock and information relating to the ownership of
Company Common Stock by directors and executive officers of the Company.
The information concerning the Company contained in this Solicitation
Statement and the Annexes attached hereto has been taken from, or is based upon,
publicly available documents and records on file with the Commission and other
public sources. Neither Mentor Graphics nor Purchaser assumes any responsibility
for the accuracy or completeness thereof or for any failure by the Company to
disclose events which may have occurred or may affect the significance or
accuracy of any such information but which are unknown to Mentor Graphics and
Purchaser. Mentor Graphics and Purchaser have not had access to the books and
records of the Company.
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ANNEX I
INFORMATION CONCERNING CERTAIN EMPLOYEES OF MENTOR GRAPHICS
AND OTHER REPRESENTATIVES OF MENTOR GRAPHICS
Set forth in the tables below are the present principal occupation or
employment, and the name, principal business and address of any corporation or
organization in which such employment is carried on, for certain employees of
Mentor Graphics and certain other representatives of Mentor Graphics, other than
the Nominees, who may also solicit Agent Designations from the stockholders of
the Company. The principal business address of Mentor Graphics is 8005 S.W.
Boeckman Road, Wilsonville, Oregon 97070-7777.
CERTAIN EMPLOYEES OF MENTOR GRAPHICS
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION AND
NAME TITLE FIVE YEAR EMPLOYMENT HISTORY
- -------------------------- ----------------------------------- ---------------------------------------------------
<S> <C> <C>
Walden C. Rhines President, Chief Executive Officer Dr. Rhines has served as Director, President and
and Director Chief Executive Officer of Mentor Graphics since
1993. From 1972 to 1993, Dr. Rhines was employed by
Texas Instruments Incorporated where his duties
included Executive Vice President of Texas
Instruments Semiconductor Group. Dr. Rhines is also
a director of Cirrus Logic, Inc. and Triquint
Semiconductor, Inc.
Gregory K. Hinckley Executive Vice President, Mr. Hinckley has served as Executive Vice
Chief Operating Officer and Chief President, Chief Operating Officer and Chief
Financial Officer Financial Officer of Mentor Graphics since 1997.
From 1995 until 1996, Mr. Hinckley was Senior Vice
President of VLSI Technology, Inc. From 1992 until
1996, Mr. Hinckley was Vice President, Finance and
Chief Financial Officer of VLSI. Mr. Hinckley is
also a director of OEC Medical Systems, Inc. and
Amkor Technology, Inc.
Dennis Weldon Treasurer Mr. Weldon has served as Treasurer of Mentor
Graphics since 1996. Mr. Weldon served as Director
of Finance Administration of Mentor Graphics from
1994 to 1996 and prior thereto served as Finance
Manager of Mentor Graphics.
Ann Wagner Vice President, Marketing Ms. Wagner has served as Vice President, Marketing
of Mentor Graphics since June 1998. From 1996 to
1998, Ms. Wagner was Vice President of Corporate
Marketing for the SunSoft operating company of Sun
Microsystems, Inc. From 1977 to 1996, Ms. Wagner
was employed by National Semiconductor Corporation
where her duties included Vice President, Marketing
and Communications.
</TABLE>
14
<PAGE>
OTHER REPRESENTATIVES OF MENTOR GRAPHICS WHO MAY SOLICIT AGENT DESIGNATIONS
Although Salomon Smith Barney does not admit that it or any of its
directors, officer, employees or affiliates is a "participant," as defined in
Schedule 14A promulgated by the Commission under the Exchange Act, or that
Schedule 14A requires the disclosure of certain information concerning them, the
following employees of Salomon Smith Barney may assist Mentor Graphics in
soliciting proxies from the Company's stockholders. The principal business
address of each Salomon Smith Barney employee named below is Salomon Brothers
Inc, Seven World Trade Center, New York, NY 10048.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL
NAME OCCUPATION OR EMPLOYMENT
--------------------- ------------------------------
<S> <C>
Christopher Varelas.......................................... Director
Adam M. Berger............................................... Vice President
Richard Gallivan............................................. Vice President
Gregory J. Dalvito........................................... Associate
Maurizio Cortese............................................. Financial Analyst
</TABLE>
15
<PAGE>
ANNEX II
BENEFICIAL OWNERSHIP OF
COMPANY SHARES BY MENTOR GRAPHICS, PURCHASER,
CERTAIN EMPLOYEES OF MENTOR GRAPHICS,
AND OTHER REPRESENTATIVES OF MENTOR GRAPHICS
On August 11, 1998, Mentor Graphics transferred record ownership of 100
Shares to the Purchaser. In addition, on the date hereof, Mentor Graphics
beneficially owns, directly or indirectly, an aggregate of 591,500 Shares,
including the Shares held of record by Purchaser (representing 3.32% of the
17,809,342 Shares outstanding as of April 30, 1998, according to the Company's
Form 10-Q for quarter ended March 31, 1998). The Shares now owned by Mentor
Graphics and Purchaser were purchased in the transactions described in Annex IV
hereto.
In the ordinary course of its brokerage business, Salomon Smith Barney
trades securities of the Company and has engaged in numerous transactions for
its own account and for the accounts of its customers during the past two years.
The number of such transactions for Salomon's own account during this period is
approximately . Accordingly, it is impracticable to list each such
transaction.
Except as otherwise set forth in this Annex II, neither Mentor Graphics,
Purchaser nor any of the other participants in this Solicitation, (i) is the
beneficial or record owner of any Shares, (ii) has purchased or sold any Shares
within the past two years, borrowed any funds for the purpose of acquiring or
holding any Shares, or is or was within the past year a party to any contract,
arrangement or understanding with any person with respect to any Shares, or
(iii) was in the past ten years convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors). There have not been any
transactions between the Company and Mentor Graphics or any of the other
participants in this Solicitation since the beginning of the Company's last
fiscal year and, other than the Offer, the Proposed Merger and the Proposed
Acquisition, none of Mentor Graphics, Purchaser, or any of the other
participants in this Solicitation, or any associate of the foregoing persons or
any other person who may be deemed a "participant" in this Solicitation has any
arrangement or understanding with any person with respect to any future
employment by the Company or its affiliates, or with respect to any future
transactions to which the Company or its affiliates will or may be a party.
16
<PAGE>
ANNEX III
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF THE COMPANY AS A GROUP
The following table sets forth, based on the Company's 1998 Proxy Statement,
the security ownership of certain persons who have advised the Company that as
of February 25, 1998 each "beneficially" owned more than 5% of the outstanding
Shares and the beneficial ownership of Shares by all directors and officers of
the Company and its subsidiaries as a group as of February 25, 1998.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP PERCENT OF
OF BENEFICIAL OWNER (1) CLASS
--------------------- ---------------------- ---------------
<S> <C> <C>
Kopp Investment Advisors, Inc. (2)...................................... 2,597,975 14.6%
7701 France Avenue South, Suite 500
Edina, MN 55435
State of Wisconsin Investment Board (2)................................. 1,149,500(3) 6.5%(3)
121 East Wilson Street
Madison, WI 53707
All directors and executive officers as a group (20 persons)(4)......... 2,710,805 14.4%
</TABLE>
- ------------------------
(1) The number and percentage of shares beneficially owned is determined under
rules of the Commission, and the information is not necessarily indicative
of beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual has sole or shared
voting power or investment power and also any share which the individual has
the right to acquire within sixty days of February 25, 1998 through the
exercise of any stock option or other right. Unless otherwise indicated in
the footnotes, each person has sole voting and investment power (or shares
such powers with his or her spouse) with respect to the shares shown as
beneficially owned.
(2) This information was obtained from filings made with the Commission pursuant
to Sections 13(d) or 13(g) of the Exchange Act.
(3) Subsequent to the Company's 1998 Proxy Statement, the State of Wisconsin
Investment Board ("SWIB") filed with the Commission a Schedule 13G on August
5, 1998 which stated that SWIB had beneficial ownership of 2,101,500 Shares,
representing 11.8% of the outstanding Shares.
(4) Includes options to purchase 1,117,064 shares of Common Stock exercisable
within sixty days of February 25, 1998.
Although Mentor Graphics does not have any knowledge that would indicate
that any statements contained herein are untrue, Mentor Graphics does not take
any responsibility for the accuracy or completeness of the information contained
herein, or for any failure by the Company to disclose events that may have
occurred or which may affect the significance or accuracy of any such
information but which are unknown to Mentor Graphics.
17
<PAGE>
ANNEX IV
TRANSACTIONS IN SHARES OF THE COMPANY
BY MENTOR GRAPHICS AND PURCHASER
Purchases and (sales) of Company Common Stock since August 1996 were made by
Mentor Graphics as shown below:
<TABLE>
<CAPTION>
DATE SHARES PURCHASED PURCHASE PRICE
- --------- ---------------- ---------------
<S> <C> <C>
6/19/98 10,000 $ 7.150
6/22/98 7,000 $ 7.500
6/23/98 29,000 $ 7.483
6/24/98 15,000 $ 7.438
6/25/98 20,000 $ 7.438
6/26/98 10,000 $ 7.350
6/29/98 7,500 $ 7.313
7/1/98 3,500 $ 7.313
7/2/98 2,500 $ 7.500
7/6/98 9,000 $ 7.403
7/7/98 25,000 $ 7.625
7/8/98 9,000 $ 7.590
7/9/98 12,500 $ 7.563
7/13/98 10,000 $ 7.938
7/14/98 137,000 $ 7.865
7/15/98 50,000 $ 7.622
7/17/98 25,000 $ 7.813
7/20/98 10,000 $ 7.750
7/21/98 12,000 $ 7.688
7/22/98 46,000 $ 7.565
7/23/98 10,000 $ 7.625
7/27/98 5,000 $ 7.688
7/28/98 6,000 $ 7.750
7/31/98 50,000 $ 7.788
8/3/98 18,000 $ 7.653
8/4/98 30,000 $ 7.521
8/5/98 20,000 $ 7.438
8/10/9 2,500 $ 7.500
</TABLE>
18
<PAGE>
ANNEX V
FORM OF PROPOSED AMENDMENT TO THE BYLAWS
REDUCTION IN SIZE OF BOARD. Section 3.2 of Article III would be amended in its
entirety to read as follows:
"The authorized number of directors of the Corporation shall be five (5). No
reduction of the authorized number of the authorized number of directors shall
have the effect of removing any director before that director's term of office
expires."
19
<PAGE>
IMPORTANT
Your action is important. No matter how many Shares you own, please give
Mentor Graphics your Agent Designation by:
1. SIGNING the enclosed GREEN AGENT DESIGNATION,
2. DATING the enclosed GREEN AGENT DESIGNATION,
3. MAILING the enclosed GREEN AGENT DESIGNATION TODAY in the envelope
provided (no postage is required if mailed in the United States).
If you hold your Shares in the name of one or more brokerage firms, banks,
nominees or other institution, only they can sign an Agent Designation with
respect to your Shares, and only upon receipt of your specific instructions.
Accordingly, please contact the person responsible for your account and instruct
that person to execute the GREEN AGENT DESIGNATION.
If you have any questions or require any additional information concerning
this Solicitation Statement, please contact MacKenzie at the address set forth
below.
[MACKENZIE PARTNERS, INC. LOGO]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL-FREE: (800) 322-2885
Fax: (212) 929-0308
20
<PAGE>
AGENT DESIGNATION
TO STOCKHOLDERS OF QUICKTURN DESIGN SYSTEMS, INC.
THIS AGENT DESIGNATION IS SOLICITED BY MENTOR GRAPHICS FOR THE APPOINTMENT
OF DESIGNATED AGENTS TO CALL A SPECIAL MEETING OF THE STOCKHOLDERS OF QUICKTURN
DESIGN SYSTEMS, INC.
Each of the undersigned hereby constitutes and appoints , and
, and each of them, with full power of substitution, the proxies and
agents of the undersigned (said proxies and agents, together with each
substitute appointed by any of them, if any, collectively, the "Designated
Agents") in respect of all common stock, par value $.001 per share
(collectively, the "Shares"), of Quickturn Design Systems, Inc. (the "Company")
owned by the undersigned to do any or all of the following, to which each of the
undersigned hereby consents:
1. To take all action necessary to call (BUT NOT TO VOTE AT) a special
meeting of stockholders of the Company (the "Special Meeting"), for the purpose
of considering and voting upon the Proposals as described in the Solicitation of
Agent Designations of Mentor Graphics;
2. Without limitation of the foregoing, to fix the date and time of the
Special Meeting or any adjournement thereof, and to give notice of the Special
Meeting or any adjournement thereof and the purposes for which the Special
Meeting or any adjournement thereof has been called;
<PAGE>
3. To exercise any and all other rights of each of the undersigned
incidental to (i) calling the Special Meeting, (ii) causing notice of the
Special Meeting to be given to the Company's stockholders and (iii) causing the
purposes of the authority expressly granted herein able to the Designated Agents
to be carried into effect; provided, however, that NOTHING CONTAINED IN THIS
INSTRUMENT SHALL BE CONSTRUED TO GRANT THE DESIGNATED AGENTS THE RIGHT, POWER OR
AUTHORITY TO VOTE ANY SHARES OWNED BY THE UNDERSIGNED AT THE SPECIAL MEETING.
Date: , 1998
______________________________________
Signature
______________________________________
Signature, if jointly held
Title: _______________________________
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as an attorney, executor,
administrator, trustee or guardian,
give full title as such. If a
corporation, sign in full corporate
name by President or other authorized
officer. If a partnership, sign in
partnership name by authorized person.
PLEASE SIGN, DATE AND MAIL PROMPTLY IN THE ENCLOSED ENVELOPE.
