<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
SUPPLEMENT TO NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
OF
QUICKTURN DESIGN SYSTEMS, INC.
TO BE HELD ON JANUARY 8, 1999
FROM
MENTOR GRAPHICS CORPORATION
A Special Meeting of Stockholders of Quickturn Design Systems, Inc. (the
"Company") will be held on January 8, 1999 at the time and place designated by
the Company in its proxy materials. The term "Special Meeting" refers to the
special meeting of stockholders to be held on January 8, 1999, and any
adjournment, postponement or continuation thereof, which is the date set by the
Company pursuant to its amended Bylaws for the Special Meeting called by Mentor
Graphics Corporation to consider the Proposals. The term "Proposals" refers to
the proposals made by Mentor Graphics to be presented at the Special Meeting,
which Proposals are as follows:
(i) To remove all members of the Board of Directors of the Company (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 directors 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
Mentor Graphics does not know of within a reasonable time before the
Special Meeting, which is properly brought before the Special Meeting.
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.
Even if you have already returned the GOLD Proxy Card that was sent to you with
Mentor Graphics' Proxy Statement dated September 11, 1998, please properly
execute and return the enclosed GOLD Striped Proxy Card. Returning the enclosed
GOLD Striped Proxy Card will ensure that the number of shares held of record by
you as of the close of business on November 10, 1998 will be counted in
tabulating the votes at the Special Meeting.
MENTOR GRAPHICS CORPORATION
December 7, 1998
Wilsonville, Oregon
<PAGE>
SPECIAL MEETING OF STOCKHOLDERS
OF
QUICKTURN DESIGN SYSTEMS, INC.
PROXY STATEMENT SUPPLEMENT
FROM
MENTOR GRAPHICS CORPORATION
December 7, 1998
To the Stockholders of Quickturn Design Systems, Inc.:
As a result of the decision in the litigation between Mentor Graphics
Corporation and Quickturn Design Systems, Inc. (the "Company") in the Court of
Chancery of the State of Delaware announced on December 3, 1998, the Special
Meeting called at the request of the Company's stockholders will now be held on
January 8, 1999. Stockholders of record on November 10, 1998 will be entitled to
vote at the meeting.
The purpose of the Special Meeting, as described more fully in the Proxy
Statement attached hereto as Exhibit A, is to approve the Proposals, with the
objective of removing and replacing the current Board of Directors of the
Company and to replace the Company Board with five new directors nominated by
Mentor Graphics. If the new board is elected, Mentor Graphics intends to propose
entering into a friendly merger agreement with the Company, the terms of which
would provide for a first step tender offer (which would be effected by
completing the Offer) and a second step merger (which would be effected by
completing the Proposed Merger) in which Mentor Graphics would pay all of the
Company's stockholders $12.125 per Share in cash. On August 12, 1998, Mentor
Graphics commenced its all cash, fully financed tender offer for $12.125 per
Share. The Offer and the Proposed Merger together constitute the Proposed
Acquisition.
Mentor Graphics expects that a new board comprised of persons nominated by
Mentor Graphics, following their election on January 8, 1999, would, subject to
their fiduciary duties under applicable law, take the actions necessary to
remove the impediments for stockholders to accept the Offer.
If stockholders want the opportunity to accept the Offer, stockholders
should vote "FOR" all of the Proposals on the enclosed GOLD Striped Proxy Card.
Removal of the Company Board requires the affirmative vote of a majority of the
outstanding Shares in favor of Proposal number (1). Therefore, a failure to vote
or an abstention has the same practical effect as a vote against the proposal.
VOTE "FOR" EACH PROPOSAL ON THE NEW GOLD STRIPED PROXY CARD--EVEN IF YOU
PREVIOUSLY VOTED. A TENDER OF YOUR SHARES DOES NOT COUNT AS A VOTE OF YOUR
SHARES AT THE SPECIAL MEETING. YOU MUST ALSO SIGN A SEPARATE PROXY CARD TO VOTE.
Mentor Graphics has consistently stated to the Company Board and its
financial and legal advisors that Mentor Graphics is willing to negotiate a
friendly transaction in the best interests of both companies, their stockholders
and customers. Specifically, Mentor Graphics has stated that it is willing to
consider an increased offer price in the event that 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.
Unfortunately, the Company Board has rejected every one of Mentor Graphics'
overtures and has continued its entrenchment tactics and costly litigation.
Significantly, the Company's Chairman has failed to accept Mentor Graphics'
latest invitation to negotiate made on December 3, 1998 and instead the Company
appealed the Court of Chancery's decision. That decision struck down the
Company's Rights Agreement Amendment because it was adopted in violation of the
directors' fiduciary duties.
Mentor Graphics is disappointed that, despite the fact that a majority of
the Company's stockholders have already tendered their Shares, the Company Board
still will not act responsibly and sit down now to negotiate a transaction.
<PAGE>
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 Mentor
Graphics 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 authorized the Company Board to set the
date of a special meeting called by 10% of the Company's stockholders for 90 to
100 days after the call of the meeting, thus setting the Special Meeting for
January 8, 1999 instead of December 11, 1998. Concurrently, the Court of
Chancery invalidated the Rights Agreement Amendment, 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 Company has
appealed the Court of Chancery's invalidation of the Rights Agreement Amendment
to the Supreme Court of the State of Delaware and sought expedited treatment of
the appeal. See "Legal Proceedings."
This Supplement (the "Supplement") amends and supplements the Proxy
Statement of Mentor Graphics Corporation dated September 11, 1998, as
supplemented by a Supplement to the Proxy Statement of Mentor Graphics
Corporation dated September 15, 1998, each of which is attached as Exhibit A
hereto. Except as otherwise set forth in this Supplement, the terms and
conditions set forth in Exhibit A remain applicable in all respects, and this
Supplement should be read in conjunction with Exhibit A. Unless the context
requires otherwise, terms not defined herein have the meaning ascribed to them
in Exhibit A.
This Supplement and the enclosed GOLD Striped Proxy Card are first being
mailed on or about December 7, 1998 to all stockholders of the Company. As of
October 31, 1998, there were 18,077,059 Shares issued and outstanding according
to the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1998. As of December 7, 1998, Mentor Graphics and its subsidiaries had the
right to vote an aggregate of 591,500 Shares.
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN. MENTOR
GRAPHICS URGES YOU TO MARK, SIGN, DATE AND RETURN THE ENCLOSED GOLD STRIPED
PROXY CARD TO VOTE FOR THE PROPOSALS.
A VOTE FOR THE PROPOSALS WILL ENABLE YOU--AS THE OWNERS OF THE COMPANY-- TO
SEND A MESSAGE TO THE COMPANY BOARD THAT YOU ARE IN FAVOR OF A SALE OF THE
COMPANY TO MENTOR GRAPHICS.
MENTOR GRAPHICS URGES YOU NOT TO SIGN ANY PROXY CARD SENT TO YOU BY THE
COMPANY. IF YOU HAVE ALREADY DONE SO, YOU MAY REVOKE YOUR PROXY BY DELIVERING A
WRITTEN NOTICE OF REVOCATION OR A LATER DATED PROXY FOR THE SPECIAL MEETING TO
MENTOR GRAPHICS, C/O MACKENZIE PARTNERS, INC. ("MACKENZIE"), AT THE ADDRESS
BELOW, OR TO THE SECRETARY OF THE COMPANY, OR BY VOTING IN PERSON AT THE SPECIAL
MEETING. ONLY YOUR LATEST DATED PROXY CARD WILL COUNT AT THE SPECIAL MEETING.
SEE "PROXY PROCEDURES AND RECORD DATE."
<PAGE>
IMPORTANT
1. If your Shares are registered in your own name, please sign, date and
mail the enclosed GOLD Striped Proxy Card to MacKenzie in the postage-paid
envelope provided.
2. If your Shares are held in the name of a brokerage firm, bank nominee or
other institution, only it can sign a GOLD Striped Proxy Card 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 GOLD Striped Proxy Card to be signed representing your
Shares. 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.
3. Stockholders of record at the close of business on November 10, 1998 are
entitled to notice of and to vote on matters that come before the Special
Meeting. Even if you have already returned the GOLD Proxy Card that was sent to
you with Mentor Graphics' September 11, 1998 Proxy Statement, please properly
execute and return the GOLD Striped Proxy Card included with this Supplement.
Returning the enclosed GOLD Striped Proxy Card will ensure that the number of
Shares held of record by you as of the close of business on November 10, 1998
will be counted in tabulating the votes at the Special Meeting. See "Proxy
Procedures and Record Date."
If you have any questions about executing or delivering your GOLD Striped
Proxy Card or require assistance, please contact:
(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
<PAGE>
FORWARD-LOOKING STATEMENTS
MENTOR GRAPHICS URGES YOU TO READ THIS ENTIRE SUPPLEMENT CAREFULLY. THE
INFORMATION CONTAINED IN THIS SUPPLEMENT INCLUDES FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"). IT HAS NOT BEEN JUDICIALLY DETERMINED THAT THE
SAFE HARBOR PROVIDED BY SECTION 21E OF THE EXCHANGE ACT APPLIES TO
FORWARD-LOOKING STATEMENTS IN AN AGENT DESIGNATION SOLICITATION OR A PROXY
SOLICITATION CONDUCTED IN CONNECTION WITH A TENDER OFFER. 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.
THE SPECIAL MEETING
The information set forth on pages 2 through 6 in Exhibit A under the
heading "The Special Meeting" is amended and supplemented with the following
information:
As a result of the Order entered by the Court of Chancery on December 3,
1998, the date of the Special Meeting called by the Company's stockholders to
consider the Proposals is January 8, 1999 and the record date for the Special
Meeting is November 10, 1998.
Stockholders of record at the close of business on November 10, 1998 are
entitled to notice of and to vote on matters that come before the Special
Meeting. Even if you have already returned the GOLD Proxy Card that was sent to
you with Mentor Graphics' September 11, 1998 Proxy Statement, please properly
execute and return the GOLD Striped Proxy Card included with this Supplement.
Returning the enclosed GOLD Striped Proxy Card will ensure that the number of
shares held of record by you as of the close of business on November 10, 1998
will be counted in tabulating the votes at the Special Meeting. See "Proxy
Procedures and Record Date."
THE PROPOSALS
REMOVAL OF DIRECTORS. Stockholders are being asked to remove each of the
Company's current directors and any other person who may be a director
immediately prior to the effectiveness of the Proposals. 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.
REDUCTION IN SIZE OF BOARD. Stockholders are being asked to reduce 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 Company Bylaws is set forth in its entirety in Annex V of Exhibit A. 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 the Company Bylaws, the reduction of the authorized
number of directors does not have the effect of removing any director then in
office.
1
<PAGE>
ELECTION OF DIRECTORS. Stockholders are being asked to elect as directors
each of the five Nominees named in the table below, each of whom is an
individual 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. On September 11, 1998, proper notice of Mentor Graphics'
intention to nominate the Nominees was given to the Secretary of the Company in
accordance with Section 2.5 of the Company Bylaws.
Set forth below are the name, age, business address, present principal
occupation and employment history of each of the Nominees for at least the past
ten years. This information has been furnished to Mentor Graphics by the
respective Nominees and supersedes the information on page 3 of Exhibit A. Each
Nominee has consented to serve as a director. Each Nominee is at least 18 years
of age. None of the entities referenced below is a parent or subsidiary of the
Company.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION AND
NAME, AGE AND BUSINESS ADDRESS TEN YEAR EMPLOYMENT HISTORY
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Gideon Argov, 42.......................... Mr. Argov has been Chairman of the Board of Directors of Kollmorgen
Kollmorgen Corporation Corporation since March 1996. Mr. Argov has been President and Chief
1601 Trapelo Road Executive Officer of Kollmorgen Corporation since November 1991. From
Waltham, Massachusetts 02154 March 1988 to May 1991, Mr. Argov was President and Chief Executive
Officer of High Voltage Engineering Corporation. Mr. Argov serves as
a director of TransTechnology Corporation.
Scott H. Bice, 55......................... Mr. Bice has been Dean of the University of Southern California Law
University of Southern California Center since before 1988. Mr. Bice serves as a director of Jenny
Law Center, University Park Craig, Inc.
Los Angeles, California 90089
Harry L. Demorest, 57..................... Mr. Demorest has been Chief Executive Officer of Columbia Forest
Columbia Forest Products, Inc. Products, Inc. since March 1996. Mr. Demorest served as President of
222 S.W. Columbia, Suite 1575 Columbia Forest Products, Inc. from March 1994 to April 1996 and as
Portland, Oregon 97201 Executive Vice President from April 1992 to February 1994. Prior to
his employment with Columbia Forest Products, Inc., Mr. Demorest was
a partner with Arthur Andersen & Co., serving as Office Managing
Partner for the Portland, Oregon office from before 1988 to 1991. Mr.
Demorest serves as a director of Trendwest Resorts, Inc.
C. Scott Gibson, 46....................... Mr. Gibson has been President of Gibson Enterprises since March 1992
Gibson Enterprises and has served as a director and consultant to high technology
1900 Twin Points Road companies since such time. Mr. Gibson was the founder of Sequent
Lake Oswego, Oregon 97034 Computer Systems, Inc., a computer systems company, and served as its
President from January 1988 to February 1992. Mr. Gibson serves as a
director of RadiSys Corporation, Inference Corporation, Integrated
Measurement Systems, Inc., Health Systems Technology, Inc., Telemark,
Triquint Semiconductor, Inc., Egghead.com and Webridge, Inc. Mr.
Gibson is also the Chairman of the Board of the Oregon Graduate
Institute of Science and Technology.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION AND
NAME, AGE AND BUSINESS ADDRESS TEN YEAR EMPLOYMENT HISTORY
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Michael J. K. Savage, 64.................. Mr. Savage has been the Managing Director of the San Francisco Opera
San Francisco Opera since August 1994. Mr. Savage was the founder of Savage Petroleum
301 Van Ness Avenue Company and served as its President from January 1992 to October
San Francisco, California 94102 1995. From 1988 to 1992, Mr. Savage was a private investor and was
engaged in volunteer activities for civic and charitable
organizations. Mr. Savage serves as a director of HS Resources, Inc.,
the San Francisco Opera and the San Francisco Conservatory of Music.
</TABLE>
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 Company 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.
Each Nominee has been 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 and
stock options, consistent with the Company's past practice, for services as a
director of the Company. According to the Company's Proxy Statement for its 1998
Annual Meeting of Stockholders, 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. Directors of the Company are also eligible to
participate in the Company's 1994 Outside Director Stock Option Plan pursuant to
which each nonemployee director receives a stock option to purchase 20,000
Shares on the date of the first meeting at which such individual participates as
a director and, beginning four years after the initial grant, an automatic
annual stock option to purchase 3,500 Shares. 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.
3
<PAGE>
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 either (i) at the Special Meeting if other
persons are properly nominated for election who are duly elected by a plurality
of the votes cast, (ii) after the Special Meeting by action of the Company Board
or (iii) by the Company's stockholders at a later meeting of stockholders.
REPEAL OF BYLAWS OR ANY AMENDMENT THERETO ADOPTED SUBSEQUENT TO MARCH 30,
1998 AND PRIOR TO THE EFFECTIVENESS OF THE PROPOSALS. Stockholders are being
asked to adopt a stockholder resolution repealing any provision of the Company
Bylaws, and repeal any amendment to the Company Bylaws, in each case adopted
subsequent to March 30, 1998 and prior to the effectiveness of the Proposals.
The proposed stockholder resolution is set forth in its entirety in Annex VI of
Exhibit A. This Proposal is designed to prevent the Company Board from taking
any action to amend the Company Bylaws to attempt to nullify or delay the
actions taken by the stockholders pursuant to the Proposals or to create new
obstacles to the consummation of the Proposed Acquisition, the Offer and the
Proposed Merger. The Company Bylaws filed with the Securities and Exchange
Commission (the "Commission") on March 30, 1998 as an exhibit to the Company's
Form 10-K for the year ended December 31, 1997 were the last publicly available
version of the Company Bylaws prior to the date of commencement of the Offer.
Accordingly, this Proposal would not repeal any provision of the Company Bylaws
that was publicly disclosed prior to March 30, 1998. This proposal is intended,
however, to repeal any amendment to the Company Bylaws adopted since March 30,
1998 and prior to the effectiveness of the Proposals, including, without
limitation, the amendment to Section 2.3 of the Company Bylaws adopted by the
Company Board on August 21, 1998. The amendment to Section 2.3 of the Company
Bylaws 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"). Mentor
Graphics challenged the validity of the Bylaw Amendment in the litigation
commenced by Mentor Graphics against the Company in the 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 upholding the validity of
the Bylaw Amendment. See "Legal Proceedings." Adoption of this Proposal would
repeal the Bylaw Amendment. This Proposal would also have the effect of
preventing 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.
OTHER MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING. Mentor Graphics is
not presently aware of any matters to be presented for a vote of stockholders at
the Special Meeting other than the Proposals and believes that, under Delaware
law, substantive matters not set forth in the Notice of Special Meeting may not
properly be brought before the Special Meeting. Mentor Graphics believes
however, that procedural motions, such as motions to adjourn the Special Meeting
and/or motions to elect a chairperson or other administrative matters may
properly be brought before the Special Meeting. Notwithstanding the foregoing,
in the event that any procedural matter, or any substantive matter that Mentor
Graphics does not know of within a reasonable time before the Special Meeting,
is properly brought before the Special Meeting, the persons named as proxies on
the GOLD Striped Proxy Card will have discretionary authority to vote all Shares
covered by such proxies in accordance with their best judgment with respect to
such matter, unless they are directed by a proxy to do otherwise.
4
<PAGE>
PROXY PROCEDURES AND RECORD DATE
The information set forth on pages 16 and 17 in Exhibit A under the heading
"Proxy Procedures" is amended and supplemented with the following information:
Stockholders of record at the close of business on November 10, 1998 are
entitled to notice of and to vote on matters that come before the Special
Meeting. The meeting date which had been adjourned to December 11, 1998 pursuant
to a stipulation between Mentor Graphics and the Company and the record date of
September 10, 1998 have been superseded as a result of the Bylaw Amendment
adopted by the Company Board and the Order entered by the Delaware Court of
Chancery. Since the record date for the Special Meeting was superseded, persons
may be record holders on November 10, 1998 who were not record holders on
September 10, 1998. In addition, persons who continue to be record holders may
hold a different number of Shares on November 10, 1998 than on September 10,
1998. While GOLD Proxy Cards executed by stockholders eligible to vote on the
record date are in effect, it is important to ensure that your votes are counted
properly and that all of the Shares owned by you as of November 10, 1998 are
counted in tabulating the votes at the Special Meeting and to avoid any possible
objection from the Company. Therefore, Mentor Graphics is asking each
stockholder to execute the GOLD Striped Proxy Card, whether or not you returned
the GOLD Proxy Card that was sent to you with Mentor Graphics' September 11,
1998 Proxy Statement.
Even if you have already returned the GOLD Proxy Card, please properly
execute and return the GOLD Striped Proxy Card included with this Supplement.
Returning the enclosed GOLD Striped Proxy Card will ensure that the number of
Shares held of record by you as of the close of business on November 10, 1998
will be counted in tabulating the votes at the Special Meeting.
Regardless of whether you return a GOLD Striped Proxy Card, the original
proxy you conveyed to Mentor Graphics on the GOLD Proxy Card will remain in
effect unless you revoke it, deliver a GOLD Striped Proxy Card or vote your
Shares at the Special Meeting. Only the number of Shares held of record by you
as of the close of business November 10, 1998 will be eligible for inclusion in
the tabulation of votes at the Special Meeting. Therefore, Mentor Graphics is
asking everyone who has returned a GOLD Proxy Card to execute and return a GOLD
Striped Proxy Card.
As of December 7, 1998, Mentor Graphics and its subsidiaries had the right
to vote an aggregate of 591,500 Shares. As of October 31, 1998, there were
18,077,059 Shares issued and outstanding according to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998.
BACKGROUND OF THE OFFER AND THE PROPOSED MERGER
The information set forth on pages 7 through 11 in Exhibit A under the
heading "Background of the Offer and the Proposed Merger" is amended and
supplemented with the following information:
On August 12, 1998, Mentor Graphics and Purchaser 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 expiration date of the Offer has
been extended to midnight New York City time on January 11, 1999, unless further
extended.
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. 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. This litigation is ongoing. See "Legal Proceedings."
On September 11, 1998, Mentor Graphics commenced mailing its definitive
Proxy Statement to the Company's stockholders accompanied by a letter to the
Company's stockholders, a copy of which is attached as Exhibit B hereto, and on
September 15, 1998, Mentor Graphics filed a supplement to the Proxy Statement
with the Commission. A copy of the letter transmitting such supplement to the
Company's stockholders is attached as Exhibit C hereto.
5
<PAGE>
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, Mentor Graphics delivered a letter to the Company
Board, a copy of which is attached as Exhibit D hereto, calling on the Company
Board to, among other things, stop its obstructionist and wasteful tactics. On
September 28, 1998, Mentor Graphics commenced mailing a letter to stockholders
of the Company urging stockholders to tender their Shares, a copy of which is
included as Exhibit E hereto, and a copy of the September 25, 1998 letter to the
Company Board.
On September 29, 1998, Mentor Graphics 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 Mentor
Graphics to call the Special Meeting and delivered by Mentor Graphics on
September 11, 1998 validly represented 17.26% of the Company's outstanding
Shares. For further information concerning the Agent Designations, see page 16
of Exhibit A.
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, Mentor Graphics 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 Mentor Graphics' Nominees and the other Proposals at the
Special Meeting.
On October 19, 1998, Mentor Graphics commenced mailing a letter to
stockholders of the Company, a copy of which is attached as Exhibit F hereto,
stating that the location of the special meeting called by Mentor Graphics for
October 29, 1998 had been changed.
On November 6, 1998, Mentor Graphics 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 Mentor Graphics. 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, Mentor Graphics commenced mailing a letter to
stockholders of the Company, a copy of which is attached as Exhibit G hereto,
urging stockholders to vote in favor of the Proposals.
On December 3, 1998, Mentor Graphics 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. 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 was invalid. The Company also
announced that it intended to immediately appeal the decision to the Delaware
Supreme Court.
Mentor Graphics and its financial advisor continue to make attempts to
contact the Company and its financial advisor to initiate discussions with
respect to the Proposed Acquisition.
6
<PAGE>
LEGAL PROCEEDINGS
The information set forth on pages 13 through 16 in Exhibit A under the
heading "Legal Proceedings" is amended and supplemented with the following
information:
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 Mentor
Graphics 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 authorized the Company Board to set the
date of a special meeting called by 10% of the Company's stockholders for 90 to
100 days after the call of the meeting, thus setting the Special Meeting for
January 8, 1999 instead of December 11, 1998. Concurrently, the Court of
Chancery invalidated the Rights Agreement Amendment, 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 Company has
appealed the Court of Chancery's invalidation of the Rights Agreement Amendment
to the Supreme Court of the State of Delaware and sought expedited treatment of
the appeal. Mentor Graphics and Purchaser commenced the litigation against the
Company and the Company Board in the Court of Chancery on August 12, 1998.
Mentor Graphics 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 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 shareholders entitled to vote at the special
meeting.
On September 28, 1998, the Company filed a motion for summary judgment on
all claims brought by Mentor Graphics 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, Mentor Graphics and the Company stipulated 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 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'
7
<PAGE>
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. Mentor
Graphics 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 the Order invalidating the Rights Agreement Amendment,
approving the Bylaw Amendment and determining that Mentor Graphics 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.
On December 3, 1998, the Company filed a Notice of Appeal with the Delaware
Supreme Court. Mentor Graphics presently does not intend to appeal the decision.
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
In the federal securities litigation between Mentor Graphics and the Company
pending in the United States District Court for the District of Delaware (the
"Delaware District Court"), Mentor Graphics sought to require the Company to
correct its disclosures relating to the Offer and the Special Meeting and the
Company sought to require Mentor Graphics to make corrective disclosures
relating to the Offer and Mentor Graphics' 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 Mentor Graphics and the Company.
Mentor Graphics 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 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 of Agent Designations. The
complaint was subsequently amended by Mentor Graphics 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 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 call of the Special Meeting and
the solicitation of proxies in connection with the Special Meeting.
On August 25, 1998, the Company filed the counterclaim against Mentor
Graphics, Purchaser, certain officers of Mentor Graphics 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 Mentor Graphics and Purchaser with the Commission in
connection with the Offer, Mentor Graphics' 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 Mentor Graphics and
Purchaser to correct their filings and prohibiting Mentor Graphics and Purchaser
from taking various actions in connection with the Offer, Mentor Graphics'
solicitation of Agent Designations and Mentor Graphics' solicitation of proxies
in connection with the Special Meeting and (ii) a declaration that Mentor
Graphics' 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 Mentor Graphics
and Purchaser to correct the disclosures in their filings with the Commission
and to enjoin Mentor Graphics,
8
<PAGE>
Purchaser and their agents from taking various actions in connection with the
Offer, the Proposed Acquisition and Mentor Graphics' solicitation of Agent
Designations.
On September 4, 1998, Mentor Graphics 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, Mentor Graphics'
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, Mentor Graphics 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 Mentor Graphics and Purchaser's
Motion to Dismiss was completed on September 23, 1998. The motion remains
pending.
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 Mentor Graphics and Purchaser from distributing proxy
materials in connection with the Special Meeting and (ii) compel Mentor Graphics
and Purchaser to correct alleged misstatements in materials filed by Mentor
Graphics 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 Mentor Graphics 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, Mentor Graphics 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 Mentor Graphics 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,
Mentor Graphics' solicitation of Agent Designations and the Special Meeting;
(ii) taking any action in opposition to the Offer, the Proposed Acquisition,
Mentor Graphics' 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, Mentor Graphics'
solicitation of Agent Designations and the Special Meeting. Later on November 3,
1998, Mentor Graphics 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 Mentor Graphics and the Company would be publicly
disclosed in redacted form. Based on this agreement, Mentor Graphics determined
not to continue with its Motion for Preliminary Injunction.
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 Mentor Graphics did not infringe one of the six Company
patents at issue, denied Mentor Graphics' summary judgment motions as to
noninfringement, unenforceability and invalidity as to the remaining patents and
denied the Company's motions for summary judgment that Mentor Graphics infringed
these remaining patents. The preliminary injunction prohibiting Mentor Graphics
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.
9
<PAGE>
Discovery on the issue of the damages, if any, caused by Mentor Graphics'
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. Mentor Graphics' expert has
submitted an analysis calculating the Company's compensatory damages, if any,
caused by Mentor Graphics' 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
Mentor Graphics 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 Mentor Graphics' 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. Mentor Graphics 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.
Mentor Graphics presently intends to refile its summary judgment motion.
The Company and Mentor Graphics 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 Mentor Graphics to the Company. Mentor Graphics
has appealed the ITC Administrative Law Judge's recommendation of such
sanctions, but no decision is expected until late 1999.
CERTAIN INFORMATION CONCERNING MENTOR GRAPHICS AND PURCHASER
The information set forth on pages 17 and 18 in Exhibit A under the heading
"Certain Information Concerning Mentor Graphics and Purchaser" is amended and
supplemented with the following information:
Information concerning Mentor Graphics is included in Mentor Graphics Form
10-K, Mentor Graphics' Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1998, June 30, 1998 and September 30, 1998 (the "Mentor Graphics Form
10-Qs") and other documents filed by Mentor Graphics with the Commission.
10
<PAGE>
ANNEX II
BENEFICIAL OWNERSHIP OF
COMPANY SHARES BY MENTOR GRAPHICS, PURCHASER, THE NOMINEES,
THE DIRECTORS AND CERTAIN EMPLOYEES OF MENTOR GRAPHICS,
AND OTHER REPRESENTATIVES OF MENTOR GRAPHICS
The information set forth on pages 23 and 24 in Exhibit A under the heading
"Annex II" is amended and supplemented with the following information:
On August 11, 1998, Mentor Graphics transferred record ownership of 100
Shares to the Purchaser. In addition, Mentor Graphics beneficially owned,
directly or indirectly, an aggregate of 791,500 Shares at December 7, 1998,
including the 100 Shares held of record by Purchaser and the Shares issuable
upon exercise of the Warrant (representing beneficial ownership of 4.4% of the
Shares outstanding as of October 31, 1998, according to the Company's Form 10-Q
for the quarter ended September 30, 1998). See Annex II in Exhibit A for a
description of the Warrant.
ANNEX III
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF THE COMPANY AS A GROUP
The information set forth on page 25 in Exhibit A under the heading "Annex
III" is amended and supplemented with the following information:
(3) Subsequent to the Company's 1998 Proxy Statement, Kopp Investment
Advisors, Inc. ("Kopp") filed with the Commission a Form 13F which stated that,
as of September 30, 1998, Kopp beneficially owned approximately 1,910,000
Shares.
(4) Subsequent to the Company's 1998 Proxy Statement, the State of Wisconsin
Investment Board ("SWIB") filed with the Commission a Form 13F which stated
that, as of September 30, 1998, SWIB beneficially owned approximately 2,102,000
Shares.
11
<PAGE>
EXHIBIT A
PROXY STATEMENT
OF
MENTOR GRAPHICS CORPORATION
FOR A
SPECIAL MEETING OF STOCKHOLDERS OF
QUICKTURN DESIGN SYSTEMS, INC.
TO BE HELD ON OCTOBER 29, 1998
This Proxy Statement (the "Proxy Statement") and the enclosed GOLD Proxy
Card (the "Proxy Card") are being furnished in connection with the solicitation
(the "Solicitation") of proxies by and on behalf of Mentor Graphics Corporation
("Mentor Graphics"), an Oregon corporation, to be used at a Special Meeting of
Stockholders to be held on October 29, 1998 at 3 p.m. New York City time at The
Corporation Trust Company, 30 The Green, Dover, Delaware 19901, and at any
adjournment, postponement or continuation thereof (the "Special Meeting") of
Quickturn Design Systems, Inc., a Delaware corporation (the "Company").
THIS SOLICITATION IS BEING MADE BY MENTOR GRAPHICS AND NOT ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY.
On August 11, 1998, Mentor Graphics delivered a letter to the Company
containing an offer by Mentor Graphics to acquire the Company (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 offer
price in the event that 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. On August 24, 1998, without engaging in
any discussions with Mentor Graphics, the Company Board rejected Mentor
Graphics' offer.
On September 11, 1998, Walden C. Rhines, Gregory K. Hinckley and Dean M.
Freed (the "Designated Agents") called the Special Meeting by delivering to the
Company agent designations ("Agent Designations") executed by holders of greater
than 10% of the Shares (including the Shares owned by Mentor Graphics) entitled
to vote at the Special Meeting and by mailing notice of the Special Meeting to
the stockholders of the Company. Mentor Graphics and the Company are involved in
litigation regarding the date, time and record date of the Special Meeting as
well as the Designated Agents' authority to call and give notice of the Special
Meeting. See "The Special Meeting--Quorum and Voting" and "Legal Proceedings."
The proxies solicited by this Proxy Statement will be voted at the Special
Meeting, or at any special meeting called to consider Mentor Graphics' proposals
set forth herein, including any adjournment, postponement or continuation
thereof, regardless of whether such special meeting takes place on October 29,
1998, or on any other date, provided however, that in no event will the proxies
be valid beyond October 29, 1999.
As of July 1, 1998, there were 17,922,518 Shares issued and outstanding
according to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998. As of August 31, 1998, Mentor Graphics and its subsidiaries had
the right to vote an aggregate of 591,500 Shares. All Shares represented by each
properly executed, unrevoked Proxy Card received in time for the Special Meeting
will be voted in the manner specified therein. Mentor Graphics is soliciting
your proxy to vote on the following proposals to be presented by Mentor Graphics
at the Special Meeting to be presented in the order set forth below:
(i) To remove all members of the Board of Directors of the Company (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 directors 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 (together, the "Proposals"); and
(v) To take action on such procedural motions as may properly come
before the Special Meeting.
MENTOR GRAPHICS URGES YOU TO VOTE IN FAVOR OF EACH OF THE PROPOSALS.
<PAGE>
If Mentor Graphics' five nominees (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 Offer
and the Proposed Merger described below under "Introduction."
Mentor Graphics believes that the record date for determining stockholders
entitled to notice of and to vote at the Special Meeting is September 10, 1998
(the "Record Date"). Accordingly, stockholders of record at the close of
business on the Record Date will be entitled to one vote at the Special Meeting
for each Share held on the Record Date. Mentor Graphics and the Company are
involved in litigation regarding the date, time and record date of the Special
Meeting as well as the Designated Agents' authority to call and give notice of
the Special Meeting. See "The Special Meeting--Quorum and Voting" and "Legal
Proceedings."
This Proxy Statement and the enclosed GOLD Proxy Card are first being mailed
on or about September 11, 1998 to all stockholders of the Company.
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN. MENTOR
GRAPHICS URGES YOU TO MARK, SIGN, DATE AND RETURN THE ENCLOSED GOLD PROXY CARD
TO VOTE FOR THE PROPOSALS.
A VOTE FOR THE PROPOSALS WILL ENABLE YOU--AS THE OWNERS OF THE COMPANY--TO
SEND A MESSAGE TO THE COMPANY BOARD THAT YOU ARE IN FAVOR OF A SALE OF THE
COMPANY TO MENTOR GRAPHICS.
MENTOR GRAPHICS URGES YOU NOT TO SIGN ANY PROXY CARD SENT TO YOU BY THE
COMPANY. IF YOU HAVE ALREADY DONE SO, YOU MAY REVOKE YOUR PROXY BY DELIVERING A
WRITTEN NOTICE OF REVOCATION OR A LATER DATED PROXY FOR THE SPECIAL MEETING TO
MENTOR GRAPHICS, C/O MACKENZIE PARTNERS, INC. ("MACKENZIE"), AT THE ADDRESS
BELOW, OR TO THE SECRETARY OF THE COMPANY, OR BY VOTING IN PERSON AT THE SPECIAL
MEETING. ONLY YOUR LATEST DATED PROXY WILL COUNT AT THE SPECIAL MEETING. SEE
"PROXY PROCEDURES" BELOW.
IMPORTANT
1. If your shares of Company Common Stock are registered in your own name,
please sign, date and mail the enclosed GOLD Proxy Card to MacKenzie in the
postage-paid envelope provided.
2. 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 GOLD Proxy
Card 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 GOLD Proxy Card 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 GOLD Proxy Card
or require assistance, please contact:
[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
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
FORWARD-LOOKING STATEMENTS................................................................................. i
INTRODUCTION............................................................................................... 1
THE SPECIAL MEETING........................................................................................ 2
The Proposals.............................................................................................. 2
Other Matters to be Considered at the Special Meeting...................................................... 5
Quorum and Voting.......................................................................................... 5
BACKGROUND OF THE OFFER AND THE PROPOSED MERGER............................................................ 7
THE PROPOSED ACQUISITION, THE OFFER AND THE PROPOSED MERGER................................................ 11
The Proposed Acquisition................................................................................... 11
Terms of the Offer and the Proposed Merger................................................................. 11
Conditions to the Offer.................................................................................... 12
Required Stockholder Consent to the Proposed Merger........................................................ 12
LEGAL PROCEEDINGS.......................................................................................... 13
PROXY PROCEDURES........................................................................................... 16
CERTAIN INFORMATION CONCERNING MENTOR GRAPHICS AND PURCHASER............................................... 17
DISSENTERS' RIGHTS......................................................................................... 18
SOLICITATION OF PROXIES.................................................................................... 18
ADDITIONAL INFORMATION..................................................................................... 19
ANNEX I--INFORMATION CONCERNING THE DIRECTORS AND CERTAIN EMPLOYEES OF MENTOR GRAPHICS AND OTHER
REPRESENTATIVES OF MENTOR GRAPHICS....................................................................... 20
ANNEX II--BENEFICIAL OWNERSHIP OF COMPANY SHARES BY MENTOR GRAPHICS, PURCHASER, THE NOMINEES, THE DIRECTORS
AND CERTAIN EMPLOYEES OF MENTOR GRAPHICS, AND OTHER REPRESENTATIVES OF MENTOR GRAPHICS................... 23
ANNEX III--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE COMPANY AS A GROUP........ 25
ANNEX IV--TRANSACTIONS IN SHARES OF THE COMPANY BY MENTOR GRAPHICS......................................... 26
ANNEX V--FORM OF PROPOSED AMENDMENT TO THE COMPANY BYLAWS.................................................. 27
ANNEX VI--FORM OF PROPOSED STOCKHOLDER RESOLUTION.......................................................... 28
</TABLE>
FORWARD-LOOKING STATEMENTS
MENTOR GRAPHICS URGES YOU TO READ THIS ENTIRE PROXY STATEMENT CAREFULLY. THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT INCLUDES FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED (THE "EXCHANGE ACT"). IT HAS NOT BEEN JUDICIALLY DETERMINED
THAT THE SAFE HARBOR PROVIDED BY SECTION 21E OF THE EXCHANGE ACT APPLIES TO
FORWARD-LOOKING STATEMENTS IN AN AGENT DESIGNATION SOLICITATION OR PROXY
SOLICITATION CONDUCTED IN CONNECTION WITH A TENDER OFFER. 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.
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INTRODUCTION
On August 11, 1998, Mentor Graphics offered to acquire all 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. On August 24, 1998,
without engaging in any discussions with Mentor Graphics, the Company Board
rejected Mentor Graphics' offer.
On August 12, 1998, Mentor Graphics and MGZ Corp., a Delaware corporation
and a wholly owned subsidiary of Mentor Graphics ("Purchaser"), 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"), upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated August 12, 1998, the Supplement to the Offer to Purchase dated August 27,
1998 (the "Supplement"), and the related Letter of Transmittal. The Offer to
Purchase, as amended by the Supplement, and as it may be subsequently amended
and supplemented, and the Letter of Transmittal, together 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 reasonable 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
reasonable discretion, that, after consummation of the Offer, the provisions of
Section 203 ("Section 203") of the DGCL would not prohibit for any period of
time, or impose any voting requirement in excess of majority stockholder
approval with respect to, the Proposed Merger or other business combination with
Purchaser or any affiliate of Purchaser (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. The Offer is not conditioned on Purchaser obtaining financing. The
Offer is scheduled to expire at midnight New York City time on October 6, 1998,
unless extended. Mentor Graphics anticipates that Purchaser 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. See "The Proposed Acquisition, the Offer and the Proposed
Merger--Conditions to the Offer."
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 to facilitate the Proposed Acquisition, which amendments may
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include Mentor Graphics entering into a merger agreement with the Company,
Mentor Graphics responding to actions taken by 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.
Complete information about the Offer is contained in the Offer to Purchase
and the Supplement, which are available upon request from Purchaser's
Information Agent for the Offer, MacKenzie Partners, Inc., in the Tender Offer
Statement on Schedule 14D-1 and on Mentor Graphics' website located at http://
www.mentorg.com/file. 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 Securities and Exchange Commission (the
"Commission")).
MENTOR GRAPHICS URGES YOU TO COMPLETE AND RETURN THE ENCLOSED GOLD PROXY
CARD.
THE SPECIAL MEETING
THE PROPOSALS
Mentor Graphics is soliciting proxies from holders of Shares to adopt the
Proposals set forth below at the Special Meeting. On September 11, 1998, proper
notice of the Proposals was given to the Secretary of the Company in accordance
with Section 2.5 of the Company Bylaws.
REMOVAL OF DIRECTORS. Stockholders are being asked to remove each of the
Company's current directors and any other person who may be a director
immediately prior to the effectiveness of the Proposals. 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.
REDUCTION IN SIZE OF BOARD. Stockholders are being asked to reduce 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 Company Bylaws is set forth in its entirety in Annex V to this Proxy
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 the Company Bylaws, the reduction
of the authorized number of directors does not have the effect of removing any
director then in office.
ELECTION OF DIRECTORS. Stockholders are being asked to elect as directors
each of the five Nominees named in the table below, each of whom are 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. On September 11, 1998, proper notice of Mentor Graphics' intention to
nominate the Nominees was given to the Secretary of the Company in accordance
with Section 2.5 of the Company Bylaws.
Set forth below are the name, age, business address, present principal
occupation and employment history of each of the Nominees for at least the past
ten years. This information has been furnished to Mentor Graphics by the
respective Nominees. Each Nominee has consented to serve as a director. Each
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Nominee is at least 18 years of age. None of the entities referenced below is a
parent or subsidiary of the Company.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION AND
NAME, AGE AND BUSINESS ADDRESS TEN YEAR EMPLOYMENT HISTORY
- --------------------------------------- ------------------------------------------------------------------------
<S> <C>
Gideon Argov, 41 Mr. Argov has been Chairman of the Board of Directors of Kollmorgen
Kollmorgen Corporation Corporation since March 1996. Mr. Argov has been President and Chief
1601 Trapelo Road Executive Officer of Kollmorgen Corporation since November 1991. From
Waltham, Massachusetts 02154 March 1988 to May 1991, Mr. Argov was President and Chief Executive
Officer of High Voltage Engineering Corporation. Mr. Argov serves as a
director of TransTechnology Corporation and WorldCorp Inc.
Scott H. Bice, 55 Mr. Bice has been Dean of the University of Southern California Law
University of Southern California Law Center since before 1988. Mr. Bice serves as a director of Jenny Craig,
Center, University Park Inc.
Los Angeles, California 90089
Harry L. Demorest, 56 Mr. Demorest has been Chief Executive Officer of Columbia Forest
Columbia Forest Products, Inc. Products, Inc. since March 1996. Mr. Demorest served as President of
222 S.W. Columbia, Suite 1575 Columbia Forest Products, Inc. from March 1994 to April 1996 and as
Portland, Oregon 97201 Executive Vice President from April 1992 to February 1994. Prior to his
employment with Columbia Forest Products, Inc., Mr. Demorest was a
partner with Arthur Andersen & Co., serving as Office Managing Partner
for the Portland, Oregon office from before 1988 to 1991. Mr. Demorest
serves as a director of Trendwest Resorts, Inc.
C. Scott Gibson, 46 Mr. Gibson has been President of Gibson Enterprises since March 1992 and
Gibson Enterprises has served as a director and consultant to high technology companies
1900 Twin Points Road since such time. Mr. Gibson was the founder of Sequent Computer Systems,
Lake Oswego, Oregon 97034 Inc., a computer systems company, and served as its President from
January 1988 to February 1992. Mr. Gibson serves as a director of
Adaptive Solutions, Inc., RadiSys Corporation, Inference Corporation,
Integrated Measurement Systems, Inc., Health Systems Technology, Inc.,
Telemark, Triquint Semiconductor, Inc., Egghead.com and Webridge, Inc.
Mr. Gibson is also the Chairman of the Board of the Oregon Graduate
Institute of Science and Technology.
Michael J. K. Savage, 63 Mr. Savage has been the Managing Director of the San Francisco Opera
San Francisco Opera since August 1994. Mr. Savage was the founder of Savage Petroleum
301 Van Ness Avenue Company and served as its President from January 1992 to October 1995.
San Francisco, California 94102 From 1988 to 1992, Mr. Savage was a private investor and was engaged in
volunteer activities for civic and charitable organizations. Mr. Savage
serves as a director of HS Resources, Inc., the San Francisco Opera and
the San Francisco Conservatory of Music.
</TABLE>
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 Company 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
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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.
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 and
stock options, consistent with the Company's past practice, for services as a
director of the Company. According to the Company's Proxy Statement for its 1998
Annual Meeting of Stockholders (the "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. Directors of the
Company are also eligible to participate in the Company's 1994 Outside Director
Stock Option Plan pursuant to which each nonemployee director receives a stock
option to purchase 20,000 Shares on the date of the first meeting at which such
individual participates as a director and, beginning four years after the
initial grant, an automatic annual stock option to purchase 3,500 Shares. 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.
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 either (i) at the Special Meeting if other
persons are properly nominated for election who are duly elected by a plurality
of the votes cast, (ii) after the Special Meeting by action of the Company Board
or (iii) by the Company's stockholders at a later meeting of stockholders.
REPEAL OF BYLAWS OR ANY AMENDMENT THERETO ADOPTED SUBSEQUENT TO MARCH 30,
1998 AND PRIOR TO THE EFFECTIVENESS OF THE PROPOSALS. Stockholders are being
asked to adopt a stockholder resolution repealing any provision of the Company
Bylaws, and repeal any amendment to the Company Bylaws, in each case adopted
subsequent to March 30, 1998 and prior to the effectiveness of the Proposals.
The proposed stockholder resolution is set forth in its entirety in Annex VI to
this Proxy Statement. This Proposal is designed to prevent the Company Board
from taking any action to amend the Company Bylaws to attempt to nullify or
delay the actions taken by the stockholders pursuant to the Proposals or to
create new obstacles to the consummation of the Proposed Acquisition, the Offer
and the Proposed Merger. The Company 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 were the last publicly available version of the Company Bylaws prior to
the date of commencement of the Offer. Accordingly, this Proposal would not
repeal any provision of the Company Bylaws that was publicly disclosed prior to
March 30, 1998. This Proposal is intended, however, to repeal any amendment to
the Company Bylaws adopted since March 30, 1998 and prior to the effectiveness
of the Proposals, including, without limitation, the amendment to Section 2.3 of
the Company Bylaws purportedly adopted by the Company Board on August 21, 1998.
The purported amendment to Section 2.3 of the Company Bylaws provides that the
Company Board shall, upon the receipt of requests
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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 then 100 days after the receipt and
determination by the Company of the validity of such requests (the "Bylaw
Amendment"). The Bylaw Amendment further would strip from the stockholders the
right to determine the date and time of the Special Meeting and to give notice
thereof. Mentor Graphics and the Company are involved in litigation regarding
the validity of the Bylaw Amendment. See "The Special Meeting--Quorum and
Voting" and "Legal Proceedings." Adoption of this Proposal would repeal this
attempt by the Company Board to needlessly delay the date of a special meeting
called by stockholders of the Company. Adoption of this Proposal would not,
however, have any effect upon the call, notice, record date, date or time of the
Special Meeting. This Proposal would also have the effect of preventing 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.
The accompanying GOLD Proxy Card will be voted in accordance with your
instructions on such card at the Special Meeting. You may vote FOR the Proposals
or vote against, or abstain from voting on, the Proposals by marking the proper
box on the GOLD Proxy Card for the Special Meeting. IF NO MARKING IS MADE, YOU
WILL BE DEEMED TO HAVE GIVEN A DIRECTION TO VOTE THE SHARES REPRESENTED BY THE
GOLD PROXY CARD FOR THE PROPOSALS, PROVIDED THAT YOU HAVE SIGNED AND DATED THE
GOLD PROXY CARD.
MENTOR GRAPHICS URGES YOU TO VOTE IN FAVOR OF EACH OF THE PROPOSALS.
OTHER MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
Mentor Graphics is not presently aware of any matters to be presented for a
vote of stockholders at the Special Meeting other than the Proposals and
believes that, under Delaware law, substantive matters not set forth in the
Notice of Special Meeting may not properly be brought before the Special
Meeting. Mentor Graphics believes however, that procedural motions, such as
motions to adjourn the Special Meeting and/or motions to elect a chairperson or
other administrative matters may properly be brought before the Special Meeting.
Notwithstanding the foregoing, in the event that any procedural matter, or any
substantive matter that Mentor Graphics does not know of within a reasonable
time before the Special Meeting, is properly brought before the Special Meeting,
the persons named as proxies on the enclosed GOLD Proxy Card will have
discretionary authority to vote all Shares covered by such proxies in accordance
with their best judgment with respect to such matter, unless they are directed
by a proxy to do otherwise.
QUORUM AND VOTING
Only stockholders of record at the close of business on the Record Date are
entitled to notice of and to vote on matters that come before the Special
Meeting. Mentor Graphics believes that, pursuant to Section 2.3 of the Company
Bylaws as in effect prior to August 21, 1998 (the "Bylaw Amendment Date"), the
holders of Shares entitled to cast at least 10% of the votes at a special
meeting are entitled to call a special meeting. Mentor Graphics further believes
that, assuming the invalidity of the Bylaw Amendment, persons with the power to
call a special meeting are entitled to determine the date and time of such
special meeting and to give notice thereof. Pursuant to Section 213(a) of the
DGCL, in the absence of prior action by the Company Board to set a different
record date, Mentor Graphics believes that the record date to determine the
stockholders entitled to vote shall be the close of business on the day next
preceding the mailing of notice of the Special Meeting. Accordingly, because the
Designated Agents commenced mailing of the Notice of the Special Meeting on
September 11, 1998, Mentor Graphics believes that the record date for the
Special Meeting is September 10, 1998.
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Mentor Graphics believes that the Company Board responded to the Offer by
purportedly amending Section 2.3 of the Company Bylaws on August 21, 1998 to
establish new procedures for the call of a special meeting. The August 21, 1998
Bylaw Amendment purported to eliminate the right of the Company's stockholders
to set the date, time and place of the Special Meeting, and to establish that
such Special Meeting must occur no less than 90 and nor more than 100 days after
the Company Board has determined that sufficient, valid requests for a Special
Meeting have been delivered. Mentor Graphics and the Company are involved in
litigation regarding the validity of the Bylaw Amendment and Mentor Graphics has
filed a motion for preliminary injunction in the Court of Chancery of the State
of Delaware seeking to enjoin the Company Board from enforcing the August 21,
1998 Bylaw Amendment to delay the Special Meeting. See "Legal Proceedings."
The presence in person or by proxy of the holders of a majority of the
Shares issued and outstanding and entitled to vote thereat are necessary to
constitute a quorum at the Special Meeting. If a quorum is not present or
represented by proxy, the stockholders entitled to vote, present or represented
by proxy, have the power to adjourn the Special Meeting from time to time,
without notice other than an announcement at the Special Meeting, until a quorum
is present or represented. Shares represented by proxies that reflect
abstentions or "broker non-votes" (i.e., Shares held by a broker or nominee
which are represented at the Special Meeting, but with respect to which such
broker or nominee is not empowered to vote) will be counted as Shares that are
present and entitled to vote for purposes of determining the presence of a
quorum.
Each stockholder is entitled to one vote for each Share held. Directors will
be elected by a plurality of the votes cast by stockholders at the Special
Meeting. Votes not cast at the Special Meeting because authority to vote for
Nominees is withheld as a result of abstentions or broker non-votes will not
affect the outcome of the election of directors.
Pursuant to Section 141(k) of the DGCL and Section 3.16 of the Company
Bylaws, the removal of directors requires the affirmative vote of a majority of
all Shares outstanding and entitled to vote on the election of directors.
Accordingly, abstentions and broker non-votes will have the same effect as votes
cast against the proposal to remove the incumbent directors.
Adoption of each of the remaining Proposals (other than the removal and
election of directors) requires the affirmative vote of a majority of the Shares
represented and entitled to vote at the Special Meeting. Accordingly, assuming a
quorum is present at the Special Meeting, abstentions and broker non-votes will
have the same effect as votes cast against the Proposals.
MENTOR GRAPHICS INTENDS TO VOTE ALL OF ITS SHARES, AND THOSE FOR WHICH MENTOR
GRAPHICS IS GIVEN PROXIES, FOR THE ELECTION OF THE NOMINEES AND IN FAVOR OF EACH
OF THE OTHER PROPOSALS.
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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, Dr. 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, Dr. 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, Dr. 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:
<TABLE>
<S> <C>
The Board of Directors
Quickturn Design Systems, Inc.
55 W. Trimble Road
San Jose, CA 95131
Attention: Glen M. Antle August 11, 1998
Chairman of the Board
</TABLE>
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.
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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
The preceding letter contains forward-looking statements within the meaning
of Section 21E of the Exchange Act. It has not been judicially determined that
the safe harbor provided by Section 21E of the Exchange Act applies to
forward-looking statements in an agent designation solicitation or proxy
solicitation conducted in connection with a tender offer.
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 agent designation
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.
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
agent designation solicitation.
On August 12, 1998, the Company issued a press release urging its
stockholders to take no action with respect to the Offer until the Company Board
made its recommendation.
On August 14, 1998, Dr. Rhines telephoned Mr. Keith R. Lobo, President,
Chief Executive Officer and director of the Company. Dr. Rhines stated that,
even if the outstanding patent litigation between the companies were resolved,
Mentor Graphics would still desire to enter into discussions with the Company
regarding the Proposed Acquisition. Dr. Rhines emphasized that Mentor Graphics'
interest in the transaction stems from the strategic benefits of the Proposed
Acquisition to the employees, stockholders
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and customers of both companies. Mr. Lobo stated that he would convey Dr.
Rhines' position to the Company Board.
On August 20, 1998, Mentor Graphics filed Premerger Notification and Report
Forms under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, with the Federal Trade Commission and the Antitrust Division of the
Department of Justice.
On August 20, 1998, Mentor Graphics filed definitive agent designation
materials with the Commission and commenced solicitation of Agent Designations.
On August 24, 1998, the Company issued a press release and filed a Schedule
14D-9 in which the Company rejected the Offer and recommended that the
stockholders of the Company not tender their shares to Mentor Graphics and
Purchaser pursuant to the Offer. The reasons given by the Company included that
the Offer was inadequate and not in the best interests of the Company's
stockholders, that the Offer did not fully reflect the long-term value of the
Company, and that stockholder interests would be better served by the Company
continuing to pursue its business plan.
On August 24, 1998, the Company also announced that the Company Board
amended one provision of the Company Bylaws and authorized certain amendments to
the Rights Agreement. The Bylaw Amendment 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 amendments to the Rights Agreement include removal of the so-called
"dead-hand" provisions that required concurrence of the continuing directors to
undertake certain actions and the addition of a prohibition on the redemption or
exchange of the Rights or any amendment to the Rights Agreement for a period of
180 days following an annual or special meeting at which a majority of the
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").
On August 24, 1998, Mentor Graphics issued a press release responding to the
Company's Schedule 14D-9 and reiterating its commitment to completing the
Proposed Acquisition. Mentor Graphics stated that the Company's rejection of the
Offer was unjustifiable in light of the 51.6% premium the Offer Price
represented over the Company's closing price the day before the Offer was
announced and the fact that the Offer Price is approximately forty times First
Call consensus estimates for the Company in 1999. Mentor Graphics noted that the
Company had repriced 1.546 million stock options in June 1998 to $7.44 per
share. Mentor Graphics further stated that the actions of the Company-including
rejection of the Offer, and the amendments to the Company Bylaws and the Rights
Agreement-were unreasonable and served to entrench management, rather than
deliver value to the Company's stockholders. Mentor Graphics and the Company are
engaged in litigation regarding the validity of the Rights Agreement Amendment.
In the event that Mentor Graphics is unsuccessful in its attempt to have the
Rights Agreement Amendment declared invalid, Mentor Graphics' Nominees, if
elected to the Company Board at the Special Meeting, would be precluded from
redeeming or exchanging the Rights or amending the Rights Agreement for a period
of 180 days following the Special Meeting, if such redemption, exchange or
amendment were likely to facilitate the Offer or any merger, consolidation or
sale of assets involving Mentor Graphics. See "Legal Proceedings."
On August 25, 1998, Mentor Graphics and Purchaser filed an Amended Verified
Complaint in the Court of Chancery of the State of Delaware challenging the
effectiveness of the amendments to the Company Bylaws and the Rights Agreement
purportedly adopted by the Company Board on August 21, 1998 on the grounds that
such amendments constitute an inequitable manipulation of the corporate
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machinery, an unreasonable response to the Offer and Mentor Graphics'
solicitation of agent designations, and an unjustified interference with the
voting rights of the Company's stockholders.
On August 25, 1998, the Company filed an Answer and Counterclaims for
Injunctive and Other Relief for Violation of Federal Securities Laws with the
United States District Court for the District of Delaware (the "Counterclaim").
In the Counterclaim, the Company contends (i) that the Offer and Proposed Merger
are a result of the ongoing patent litigation between Mentor Graphics and the
Company and (ii) that the materials filed by Mentor Graphics and Purchaser with
the Commission in connection with the Offer and Mentor Graphics' solicitation of
agent designations contain materially false and misleading statements and
omissions in violation of Sections 14(a), 14(d) and 14(e) of the Exchange Act.
The Company seeks an injunction requiring Mentor Graphics and Purchaser to
correct its filings and prohibiting Mentor Graphics and Purchaser from taking
various actions in connection with the Offer or Mentor Graphics' solicitation of
agent designations. See "The Proposed Acquisition, the Offer and the Proposed
Merger--Conditions to the Offer."
On August 26, 1998, Mentor Graphics and Purchaser filed a First Amended
Complaint with the United States District Court for the District of Delaware
which includes claims that the Schedule 14D-9 filed by the Company with the
Commission in response to the Offer contained false and misleading statements in
violation of Sections 14(d) and 14(e) of the Exchange Act. Specifically, the
amended complaint alleges that the Company made false and misleading statements
regarding its financial condition and its purported justifications for rejecting
the Offer.
On August 26, 1998, Mentor Graphics and Purchaser filed a Motion for
Preliminary Injunction in the Court of Chancery of the State of Delaware seeking
to enjoin the Company Board from enforcing either of the Bylaw Amendment or the
Rights Agreement Amendment.
On September 2, 1998, the Company filed a preliminary Revocation
Solicitation Statement with the Commission in opposition to the solicitation by
Mentor Graphics of Agent Designations to call the Special Meeting.
On September 4, 1998, Mentor Graphics filed preliminary proxy materials with
the Commission with respect to the Special Meeting.
On September 4, 1998, Mentor Graphics and Purchaser filed a Motion for
Preliminary Injunction with the United States District Court for the District of
Delaware 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 (i)
disseminating any further information or otherwise communicating with the
Company's stockholders with respect to the Offer, the Proposed Acquisition,
Mentor Graphics' solicitation of Agent Designations and the Special Meeting or
(ii) taking any action in opposition to the Offer, the Proposed Acquisition,
Mentor Graphics' 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. The Motion also seeks to enjoin the Company and its
agents from making any false and misleading statements regarding the Offer, the
Proposed Acquisition, Mentor Graphics' solicitation of Agent Designations and
the Special Meeting. The District Court has scheduled a hearing on both parties'
cross-motions to require corrective disclosures for October 6, 1998.
On September 4, 1998, the Court of Chancery of the State of Delaware
scheduled for October 19, 20 and 23, 1998 a trial on Mentor Graphics' and
Purchaser's claims regarding the validity of the Bylaw Amendment and the Rights
Agreement Amendment adopted by the Company on August 21, 1998. The Court of
Chancery of the State of Delaware also scheduled argument on the Company's
anticipated motion for summary judgment for October 7, 1998.
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On September 8, 1998, Mentor Graphics and Purchaser filed a Motion to
Dismiss Defendant's Counterclaims and an Opening Brief in support of such motion
with the United States District Court for the District of Delaware seeking to
dismiss the Company's Counterclaim for failure to state a claim upon which
relief can be granted.
On September 8, 1998, Mentor Graphics announced that the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
expired with respect to the Offer.
On September 10, 1998, prior to 9:00 a.m. New York City time, Mentor
Graphics issued a press release extending the expiration date of the Offer to
midnight New York City time, on October 6, 1998, unless extended.
On September 11, 1998, Mentor Graphics filed its definitive Proxy Statement
with the Commission with respect to the Special Meeting. Also on September 11,
1998, the Designated Agents called the Special Meeting by delivering to the
Company Agent Designations executed by holders of greater than 10% of the Shares
(including the Shares owned by Mentor Graphics) entitled to vote at the Special
Meeting and by mailing notice of the Special Meeting to the stockholders of the
Company.
THE PROPOSED ACQUISITION, THE OFFER AND THE PROPOSED MERGER
THE PROPOSED ACQUISITION
On August 11, 1998, Mentor Graphics offered to acquire all outstanding
Shares for $12.125 in cash per share of Company Common Stock (together with each
associated Right) in a negotiated transaction. On August 12, 1998, Mentor
Graphics and Purchaser commenced the Offer. On August 24, 1998, without engaging
in any discussions with Mentor Graphics, the Company Board rejected the Offer.
If the Proposed Acquisition is to proceed, the Company Board 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 and Purchaser commenced the Offer, which
provides for the purchase of all outstanding Shares at the Offer Price ($12.125
per Share). The Offer is subject to the terms and conditions set forth in the
Offer to Purchase, the Supplement 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.
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
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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 to facilitate the Proposed Acquisition, which amendments may include
Mentor Graphics entering into a merger agreement with the Company, Mentor
Graphics responding to actions taken by 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. The Offer is also subject to other
terms and conditions described in the Offer. The Offer is not conditioned on
Purchaser obtaining financing. The Offer is scheduled to expire at midnight New
York City time on October 6, 1998, unless extended. Mentor Graphics anticipates
that Purchaser 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 this Solicitation 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 this 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 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 (as the
owner of a majority of the outstanding Shares). 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, following
consummation of the Offer, Purchaser owns 90% or more of the outstanding Shares,
Purchaser could consummate the Proposed
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Merger as a "short-form" merger pursuant to Section 253 of the DGCL in which
case neither the approval of any Company stockholder nor the Company Board would
be required.
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, in order to consummate the Proposed Merger, Purchaser 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.
LEGAL PROCEEDINGS
Mentor Graphics and the Company are involved in patent litigation in the
federal courts in Portland, Oregon and San Francisco, California and in Germany,
in which the parties have alleged various claims of patent infringement against
each other. Mentor Graphics and the Company are also involved in litigation in
the federal and state courts in the State of Delaware relating to the Offer, the
Proposed Merger and the solicitation of Agent Designations.
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-
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. On August 19, 1998, Mentor Graphics filed a Petition
for Rehearing and Suggestion for Rehearing In Banc with the United States Court
of Appeals for the Federal Circuit. On September 2, 1998, the United States
Court of Appeals for the Federal Circuit requested that the Company respond to
Mentor Graphics' petition.
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 Credit Facility, an adverse judgment could have a
material adverse effect on Mentor Graphics' results of operations in the
applicable period. See "The Proposed Acquisition, the Offer and the Proposed
Merger--Conditions to the Offer."
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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.
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 agent designation
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
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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 this
Solicitation.
On August 13, 1998, a purported class action complaint, SHAPIRO V. ANTLE, ET
AL., C.A. NO. 16588, was filed in the Court of Chancery of the State of Delaware
against the Company and the Company Board. On August 25, 1998, two additional
purported class action complaints were filed in the Court of Chancery, YASSIN V.
QUICKTURN DESIGN SYSTEMS, INC., ET AL., C.A. NO. 16603 and BROWN V. QUICKTURN
DESIGN SYSTEMS, INC., ET AL., C.A. NO. 16604, respectively, asserting claims
substantially identical to those brought in the SHAPIRO action. All three
actions purport to be brought on behalf of the stockholders of the Company and
allege that the Company Board has refused to adequately consider Mentor
Graphics' proposal to acquire the Company and that the Company Board has
declined to redeem the Rights Agreement in an attempt to entrench themselves in
violation of their fiduciary duty to the Company's stockholders. Each action
seeks an injunction requiring the Company Board to (i) consider any and all
acquisition proposals and maximize stockholder value and (ii) redeem the Rights
Agreement, as well as unspecified fees and costs.
On August 25, 1998, Mentor Graphics and Purchaser filed an Amended Verified
Complaint in the Court of Chancery of the State of Delaware challenging the
effectiveness of the amendments to the Company Bylaws and the Rights Agreement
purportedly adopted by the Company Board on August 21, 1998 on the grounds that
such amendments constitute an inequitable manipulation of the corporate
machinery, an unreasonable response to the Offer and Mentor Graphics'
solicitation of agent designations, and an unjustified interference with the
voting rights of the Company's stockholders.
On August 25, 1998, the Company filed the Counterclaim. In the Counterclaim,
the Company contends (i) that the Offer and Proposed Merger are a result of the
ongoing patent litigation between Mentor Graphics and the Company and (ii) that
the materials filed by Mentor Graphics and Purchaser with the Commission in
connection with the Offer and Mentor Graphics' solicitation of Agent
Designations contain materially false and misleading statements and omissions in
violation of Sections 14(a), 14(d) and 14(e) of the Exchange Act. The Company
seeks an injunction requiring Mentor Graphics and Purchaser to correct its
filings and prohibiting Mentor Graphics and Purchaser from taking various
actions in connection with the Offer or Mentor Graphics' solicitation of Agent
Designations. See "The Proposed Acquisition, the Offer and the Proposed
Merger--Conditions to the Offer."
On August 26, 1998, Mentor Graphics and Purchaser filed a First Amended
Complaint with the United States District Court for the District of Delaware
which includes claims that the Schedule 14D-9 filed by the Company with the
Commission in response to the Offer contained false and misleading statements in
violation of Sections 14(d) and 14(e) of the Exchange Act. Specifically, the
amended complaint alleges that the Company made false and misleading statements
regarding its financial condition and its purported justifications for rejecting
the Offer.
On August 26, 1998, Mentor Graphics and Purchaser filed a Motion for
Preliminary Injunction in the Court of Chancery of the State of Delaware seeking
to enjoin the Company Board from enforcing either of the Bylaw Amendment or The
Rights Agreement Amendment.
On September 4, 1998, Mentor Graphics and Purchaser filed a Motion for
Preliminary Injunction with the United States District Court for the District of
Delaware 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 (i)
disseminating any further information or otherwise communicating with the
Company's stockholders with respect to the Offer, the Proposed Acquisition,
Mentor Graphics' solicitation of Agent Designations
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and the Special Meeting or (ii) taking any action in opposition to the Offer,
the Proposed Acquisition, Mentor Graphics' 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. The Motion also seeks
to enjoin the Company and its agents from making any false and misleading
statements regarding the Offer, the Proposed Acquisition, Mentor Graphics'
solicitation of Agent Designations and the Special Meeting. The District Court
has scheduled a hearing on both parties' cross-motions to require corrective
disclosures for October 6, 1998.
On September 4, 1998, the Court of Chancery of the State of Delaware
scheduled for October 19, 20 and 23, 1998 a trial on Mentor Graphics' and
Purchaser's claims regarding the validity of the Bylaw Amendment and the Rights
Agreement Amendment adopted by the Company on August 21, 1998. The Court of
Chancery of the State of Delaware also scheduled argument on the Company's
anticipated motion for summary judgment for October 7, 1998.
On September 8, 1998, Mentor Graphics and Purchaser filed a Motion to
Dismiss Defendant's Counterclaims and an Opening Brief in support of such motion
with the United States District Court for the District of Delaware seeking to
dismiss the Company's Counterclaim for failure to state a claim upon which
relief can be granted.
PROXY PROCEDURES
On September 11, 1998, the Designated Agents called the Special Meeting by
delivering to the Company Agent Designations executed by holders of greater than
10% of the Shares (including the Shares owned by Mentor Graphics) entitled to
vote at the Special Meeting and by mailing notice of the Special Meeting to the
stockholders of the Company. Mentor Graphics and the Company are involved in
litigation regarding the date, time and record date of the Special Meeting as
well as the Designated Agents' authority to call and give notice of the Special
Meeting. See "The Special Meeting--Quorum and Voting" and "Legal Proceedings."
As of August 31, 1998, Mentor Graphics and its subsidiaries had the right to
vote an aggregate of 591,500 Shares. As of July 31, 1998, there were 17,922,518
Shares issued and outstanding according to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998.
The Shares represented by each GOLD Proxy Card which is properly executed
and returned will be voted at the Special Meeting in accordance with the
instructions marked thereon. Executed but unmarked GOLD Proxy Cards will be
voted FOR each of the Proposals.
In order for your views on the Proposals to be represented at the Special
Meeting, please mark, sign and date the enclosed GOLD Proxy Card and return it
to Mentor Graphics, c/o MacKenzie Partners, Inc. in the enclosed envelope in
time to be voted at the Special Meeting. Execution of the GOLD Proxy Card will
not affect your right to attend the Special Meeting and to vote in person.
Any proxy (including a proxy given to the Company) may be revoked at any
time before it is voted by (a) submitting a duly executed new proxy bearing a
later date, (b) attending and voting in person at the Special Meeting or (c) at
any time before a previously executed proxy is voted, giving written notice of
revocation to either (i) Mentor Graphics, c/o MacKenzie Partners, Inc. 156 Fifth
Avenue, New York, New York 10010, or (ii) Quickturn Design Systems, Inc., 55 W.
Trimble Road, San Jose, California 95131. Mentor Graphics requests that a copy
of any revocation sent to the Company also be sent to Mentor Graphics c/o
MacKenzie at the above address. Merely attending the Special Meeting will not
revoke any previous proxy which has been duly executed by you. The GOLD Proxy
Card furnished to you by Mentor Graphics, if properly executed and delivered,
will revoke all prior proxies. Only your latest dated proxy for the Special
Meeting will count.
Only holders of record as of the close of business on the Record Date will
be entitled to vote. If you are a stockholder of record on the Record Date, you
will retain your voting rights for the Special Meeting
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even if you sell such Shares after the Record Date. Accordingly, it is important
that you vote the Shares held by you on the Record Date, or grant a proxy to
vote such Shares on GOLD Proxy Card, even if you sell such Shares after the
Record Date.
If any of your Shares are held in the name of a brokerage firm, bank, bank
nominee or other institution on the Record Date, only it can vote such Shares
and only upon receipt of your specific instructions. Accordingly, please contact
the person responsible for your account and instruct that person to execute on
your behalf the GOLD Proxy Card.
If you have any questions regarding execution of your GOLD Proxy Card or
require assistance, please contact MacKenzie at (800) 322-2885 (toll-free) or
(212) 929-5500 (call collect).
MENTOR GRAPHICS URGES YOU TO MARK, SIGN, DATE AND RETURN THE GOLD PROXY CARD
IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING WITHIN THE UNITED
STATES.
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
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
17
<PAGE>
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 the directors and certain employees of Mentor Graphics and
Purchaser and certain other representatives of Mentor Graphics who may assist
MacKenzie in soliciting proxies is set forth in the attached Annex I. Annex II
sets forth certain information relating to Shares owned by Mentor Graphics,
Purchaser, the Nominees, such directors, employees and other representatives,
and certain transactions between any of them and the Company.
DISSENTERS' RIGHTS
Stockholders of the Company are not entitled to dissenters' rights in
connection with the Offer or the Proposals.
If the Proposed Merger is consummated involving all or part cash
consideration, holders of Shares will have certain rights pursuant to the
provisions of Section 262 of the DGCL to dissent and demand appraisal of their
Shares in connection with the Proposed Merger. Under Section 262, dissenting
stockholders who comply with the applicable statutory procedures will be
entitled to receive a judicial determination of the fair value of their Shares
(exclusive of any element of value arising from the accomplishment or
expectation of the Proposed Merger) and to receive payment of such fair value in
cash, together with a fair rate of interest, if any. Any such judicial
determination of the fair value of the Shares could be based upon factors other
than, or in addition to , the price per share to be paid in the Proposed Merger
or the market value of the Shares. The value so determined could be more or less
than the price per share to be paid in the Proposed Merger.
Dissenters' rights cannot be exercised at this time. Stockholders who may be
entitled to dissenters' rights in connection with the Proposed Merger (or
similar business combination) will receive additional information concerning any
available dissenters' rights and the procedures to be followed in connection
therewith before the stockholders have to take any action relating thereto.
EXECUTING A GOLD PROXY CARD IN FAVOR OF THE PROPOSALS WILL NOT PREVENT A
STOCKHOLDER FROM DEMANDING APPRAISAL OF HIS OR HER SHARES IN CONNECTION WITH THE
PROPOSED MERGER.
SOLICITATION OF PROXIES
Proxies may be solicited by mail, advertisement, telephone, telecopy, in
person or by other means. The proxies solicited hereby are solicited by Mentor
Graphics. Solicitations may be made by directors, officers, investor relations
personnel and other employees of Mentor Graphics, none of whom will receive
additional compensation for such solicitations. Mentor Graphics will request
banks, brokerage houses and other custodians, nominees and fiduciaries to
forward all of its solicitation materials to the beneficial owners of the Shares
they hold of record. Mentor Graphics will reimburse these record holders for
customary clerical and mailing expenses incurred by them in forwarding these
materials to their customers.
Mentor Graphics has retained MacKenzie for advisory, information agent and
proxy solicitation services in connection with the Offer, this Solicitation and
the proposed Special Meeting. MacKenzie will be paid a fee estimated at
$100,000, 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 proxies 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.
18
<PAGE>
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 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 institutions, brokers or
other persons who are stockholders of the Company for the purpose of assisting
in the solicitation of proxies. 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 $10
million, including fees payable to MacKenzie and Salomon Smith Barney. As of
August 31, 1998, Mentor Graphics had spent approximately $3.5 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 Proxy 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.
PLEASE INDICATE YOUR SUPPORT OF THE PROPOSALS BY COMPLETING, SIGNING AND
DATING THE ENCLOSED GOLD PROXY CARD AND RETURN IT PROMPTLY TO MACKENZIE
PARTNERS, INC., 156 FIFTH AVENUE, NEW YORK, NEW YORK 10010 IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS NECESSARY IF THE ENVELOPE IS MAILED IN THE UNITED
STATES.
19
<PAGE>
ANNEX I
INFORMATION CONCERNING THE DIRECTORS AND 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 the directors and
certain employees of Mentor Graphics and certain other representatives of Mentor
Graphics, other than the Nominees, who may also solicit proxies from the
stockholders of the Company. The principal business address of Mentor Graphics
is 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777.
THE DIRECTORS AND CERTAIN EMPLOYEES OF MENTOR GRAPHICS
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION AND
NAME TITLE FIVE YEAR EMPLOYMENT HISTORY
- -------------------------- -------------------------- ---------------------------------------------------------
<S> <C> <C>
Walden C. Rhines.......... President, Dr. Rhines has served as Director, President and Chief
Chief Executive Officer Executive Officer of Mentor Graphics since 1993. From
and Director 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 President,
Chief Operating Officer Chief Operating Officer and Chief Financial Officer of
and Chief Financial Mentor Graphics since 1997. From 1995 until 1996, Mr.
Officer 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.
G. M. "Ken" Bado.......... Senior Vice President, Mr. Bado has served as Senior Vice President, World Trade
World Trade of Mentor Graphics since 1996. Mr. Bado was Vice
President of the Americas of Mentor Graphics from 1994 to
1996. In 1996, Mr. Bado also held the position of Vice
President and General Manager, Professional Services of
Mentor Graphics. From 1991 to 1994, Mr. Bado was the
Southern Area General Manager for North American Sales of
Mentor Graphics.
Dean Freed................ Vice President, Mr. Freed has served as Vice President, General Counsel
General Counsel and and Secretary of Mentor Graphics since 1995. Mr. Freed
Secretary served as Deputy General Counsel and Assistant Secretary
of Mentor Graphics from 1994 to 1995 and was Associate
General Counsel and Assistant Secretary of Mentor
Graphics from 1990 to 1994.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION AND
NAME TITLE FIVE YEAR EMPLOYMENT HISTORY
- -------------------------- -------------------------- ---------------------------------------------------------
<S> <C> <C>
Dennis Weldon............. Treasurer Mr. Weldon has served as Treasurer and Director of
Business Development of Mentor Graphics since 1996. Mr.
Weldon served as Director of Business Development of
Mentor Graphics from 1994 to 1996 and Director of Finance
for Product Operations of Mentor Graphics from 1992 to
1994.
Anne Wagner............... Vice President, Ms. Wagner has served as Vice President, Marketing of
Marketing 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.
Jon A. Shirley............ Director Mr. Shirley has served as Chairman of the Board of
Directors of Mentor Graphics since 1994 and as a Director
of Mentor Graphics since 1989. Mr. Shirley's principal
occupation is private investment. Mr. Shirley served as
President and Chief Operating Officer of Microsoft
Corporation from 1983 to 1990. Mr. Shirley is currently a
director of Microsoft Corporation.
Marsha B. Congdon......... Director Ms. Congdon has served as a Director of Mentor Graphics
since 1991. Since 1997, Ms. Congdon's principal
occupation has been private investment. Ms. Congdon
served as Vice President, Policy and Strategy of US West
Inc. from 1994 to 1997 and from 1992 to 1994, she served
as Regional Vice President and Chief Executive
Officer-Oregon of US West. From 1987 to 1992, Ms. Congdon
served as Vice President and Chief Executive
Officer--Oregon of US West Inc.
James R. Fiebiger......... Director Dr. Fiebiger has served as a Director of Mentor Graphics
since 1994. Dr. Fiebiger has been President and Chief
Executive Officer of Gatefield Corp. since 1997. From
1993 to 1997, Dr. Fiebiger served as Chairman of the
Board and Managing Director of Thunderbird Technologies,
Inc. and from 1988 to 1993, he served as President and
Chief Operating Officer of VLSI. Dr. Fiebiger is also a
director of Thunderbird Technologies, Inc.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION AND
NAME TITLE FIVE YEAR EMPLOYMENT HISTORY
- -------------------------- -------------------------- ---------------------------------------------------------
<S> <C> <C>
David A. Hodges........... Director Dr. Hodges has served as a Director of Mentor Graphics
since 1995. Dr. Hodges is a Professor in the Graduate
School of the Department of Electrical Engineering and
Computer Science at the University of California at
Berkeley (UC Berkeley) where he has been a faculty member
since 1970. Dr. Hodges was Dean of the College of
Engineering at UC Berkeley from 1990 to 1996. Dr. Hodges
is also a director of Silicon Image, Inc.
Fontaine K. Richardson.... Director Dr. Richardson has served as a Director of Mentor
Graphics since 1993. Dr. Richardson has been a General
Partner of Eastech Management Company since 1983. Dr.
Richardson is also a director of Banyan Systems
Incorporated.
</TABLE>
OTHER REPRESENTATIVES OF MENTOR GRAPHICS WHO MAY SOLICIT PROXIES
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>
22
<PAGE>
ANNEX II
BENEFICIAL OWNERSHIP OF
COMPANY SHARES BY MENTOR GRAPHICS, PURCHASER, THE NOMINEES,
THE DIRECTORS AND 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 791,500 Shares,
including the 100 Shares held of record by Purchaser and the Shares issuable
upon exercise of the Warrant described below (representing beneficial ownership
of 4.4% of the Shares outstanding as of July 31, 1998, according to the
Company's Form 10-Q for the quarter ended June 30, 1998). Mentor Graphics is the
holder of a warrant to acquire 200,000 shares of Company Common Stock at an
exercise price of $30.00 per share (the "Warrant"). The Warrant was issued on
February 28, 1992 in connection with the sale by Mentor Graphics to the Company
of a patent covering certain emulation technology and related assets and expires
on February 27, 2000. Mentor Graphics and the Company entered into a
registration rights agreement on February 28, 1992 which provides for the
registration of the shares issuable upon exercise of the Warrant at such time as
the Company proposes to register any of its stock or other securities under the
Securities Act, subject to certain limitations set forth therein. While Mentor
Graphics may beneficially own the Shares issuable upon exercise of the Warrant,
Mentor Graphics does not intend to exercise the Warrant because the exercise
price of $30.00 per share far exceeds the current market value of the Shares.
The Shares now owned by Mentor Graphics and Purchaser were purchased in the
transactions described in Annex IV hereto.
Mentor Graphics is the holder of an unsecured subordinated promissory note
of the Company dated September 29, 1993 (the "Promissory Note"), issued in
connection with the termination of a Remarketing Agreement between Mentor
Graphics and PiE Design Systems, Inc., which merged with the Company in June
1993. Pursuant to the terms of the Promissory Note, the Company agreed to pay
Mentor Graphics the principal sum of $3,000,000 together with interest on the
outstanding principal sum at a rate of four percent (4%) per annum, in five
equal installments commencing on September 30, 1994. The final installment of
$600,000 under the Promissory Note is due and payable on September 30, 1998.
Jon A. Shirley and his wife are general partners of The Shirley Family
Limited Partnership, which, in turn, is a limited partner of The Fallen Angel
Limited Partnership. The Fallen Angel Limited Partnership is the record owner of
184,500 Shares. Mr. Shirley and his wife disclaim beneficial ownership of such
Shares.
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 7,400. Accordingly, it is impracticable to list each such
transaction.
Except as otherwise set forth in this Annex II, neither Mentor Graphics,
Purchaser, the Nominees 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).
23
<PAGE>
Except as disclosed in this Proxy Statement, none of Mentor Graphics,
Purchaser, their directors, the Nominees, the employees or other representatives
of Mentor Graphics or Purchaser named in Annex I, or, to their best knowledge,
their associates, has any arrangement or understanding with any person (i) with
respect to any future employment by the Company or its affiliates or (ii) with
respect to future transactions to which the Company or any of its affiliates
will or may be a party, or any material interest, direct or indirect, in any
transaction that has occurred since January 1, 1997, or any currently proposed
transaction or series of similar transactions, which the Company or any of its
affiliates was or is to be a party and in which the amount involved exceeds
$60,000. Certain Nominees, directors and employees of Mentor Graphics or
Purchaser and/or their respective associates may also be directors or officers
of other companies and organizations that have engaged in transactions with the
Company or its subsidiaries in the ordinary course of business since January 1,
1997, but Mentor Graphics and Purchaser believes that the interest of such
persons in such transactions is not material.
24
<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
BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT OF CLASS
- ------------------------------------------------------------------------- ---------------------- -----------------
<S> <C> <C>
Kopp Investment Advisors, Inc. (2)....................................... 2,597,975(3) 14.6%(3)
7701 France Avenue South, Suite 500
Edina, MN 55435
State of Wisconsin Investment Board (2).................................. 1,149,500(4) 6.5%(4)
121 East Wilson Street
Madison, WI 53707
All directors and executive officers as a group (20 persons)(5).......... 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, Kopp Investment Advisors,
Inc. ("Kopp") filed with the Commission a Form 13F which stated that, as of
June 30, 1998, Kopp beneficially owned approximately 2,312,000 Shares.
(4) 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 beneficially owned 2,101,500 Shares,
representing 11.8% of the outstanding Shares.
(5) 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.
25
<PAGE>
ANNEX IV
TRANSACTIONS IN SHARES OF THE COMPANY
BY MENTOR GRAPHICS
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
8/10/98 2,500 $ 7.500
</TABLE>
26
<PAGE>
ANNEX V
FORM OF PROPOSED AMENDMENT TO THE COMPANY BYLAWS
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 directors shall have the effect of
removing any director before that director's term of office expires."
27
<PAGE>
ANNEX VI
FORM OF PROPOSED STOCKHOLDER RESOLUTION
Mentor Graphics intends to present the following stockholder resolution for
adoption by the Company's stockholders at the Special Meeting:
"Resolved: That each provision of the bylaws of Quickturn Design Systems,
Inc. or any amendment thereto adopted by the Board of Directors
of Quickturn Design Systems, Inc. subsequent to March 30, 1998
and prior to approval of this resolution be, and they hereby are,
repealed, effective as of the time this resolution is approved."
28
<PAGE>
IMPORTANT
Your proxy is important. No matter how many Shares you own, please give
Mentor Graphics your proxy FOR the Proposals by:
1. SIGNING the enclosed GOLD PROXY CARD,
2. DATING the enclosed GOLD PROXY CARD,
3. MAILING the enclosed GOLD PROXY CARD 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 a GOLD PROXY CARD 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 GOLD PROXY CARD.
If you have any questions or require any additional information concerning
this Proxy Statement, please contact MacKenzie at the address set forth below.
[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
<PAGE>
SUPPLEMENT TO THE
PROXY STATEMENT
OF
MENTOR GRAPHICS CORPORATION
FOR A
SPECIAL MEETING OF STOCKHOLDERS OF
QUICKTURN DESIGN SYSTEMS, INC.
September 15, 1998
To the Stockholders of Quickturn Design Systems, Inc.:
This Supplement to the Proxy Statement of Mentor Graphics Corporation (the
"Supplement") amends and supplements the Proxy Statement dated September 11,
1998 of Mentor Graphics Corporation (the "Proxy Statement"). Except as otherwise
set forth in this Supplement, the terms and conditions set forth in the Proxy
Statement remain applicable in all respects, and this Supplement should be read
in conjunction with the Proxy Statement. Unless the context requires otherwise,
terms not defined herein have the meaning ascribed to them in the Proxy
Statement.
The information set forth on pages 4 and 5 of the Proxy Statement under the
heading "The Special Meeting--The Proposals--Repeal of Bylaws or any Amendment
thereto Adopted Subsequent to March 30, 1998 and Prior to the Effectiveness of
the Proposals" is amended and supplemented with the following information:
As you know, Mentor Graphics is involved in patent, disclosure, corporate
and fiduciary duty litigation with the Company and its directors. One aspect of
the corporate litigation is the validity of the Company Board's amendment to
Section 2.3 of the Company Bylaws purportedly adopted on August 21, 1998 (the
"Bylaw Amendment") which, if valid, would have the effect of delaying beyond
October 29, 1998 the date of the Special Meeting which Mentor Graphics has
called. According to the Amended and Supplemental Counterclaims that the Company
filed with the United States District Court for the District of Delaware on
September 14, 1998, the Special Meeting "could be held only at a time and date
set by the directors of Quickturn, which under the Bylaws would have to be
between December 10, 1998 and December 20, 1998 (i.e., 90 to 100 days after
holders purportedly requested such a meeting)."
While Mentor Graphics has selected October 29, 1998 as the date of the
Special Meeting based on its understanding of the Company Bylaws prior to August
21, 1998, the date of the Special Meeting will be resolved based on the rulings
of the federal and state courts. Proceedings regarding and disclosure concerning
Mentor Graphics' claim as to the invalidity of the Bylaw Amendment, the hearings
for which are scheduled to be held before the Delaware state and federal courts
in October 1998, could result in a delay of the Special Meeting until after the
dates specified by Mentor Graphics and the Company.
Mentor Graphics continues to stand ready to negotiate with the Company and
urges you to vote the GOLD Proxy Card in favor of the Proposals to send a
message to the Company Board to stop needlessly delaying the consummation of the
Offer.
YOUR VOTE IS IMPORTANT, NO MATTER HOW FEW OR HOW MANY SHARES YOU OWN. MENTOR
GRAPHICS URGES YOU TO MARK, SIGN AND DATE AND RETURN THE ENCLOSED GOLD PROXY
CARD TO VOTE FOR THE PROPOSALS.
A VOTE FOR THE PROPOSALS WILL ENABLE YOU--AS THE OWNERS OF THE COMPANY--TO
SEND A MESSAGE TO THE COMPANY BOARD THAT YOU ARE IN FAVOR OF A SALE OF THE
COMPANY TO MENTOR GRAPHICS.
If you have any questions about executing or delivering your GOLD Proxy Card
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
<PAGE>
EXHIBIT B
[MENTOR GRAPHICS CORPORATION LOGO]
September 11, 1998
Dear Quickturn Stockholder:
For the past month, we have stood ready to discuss our $12.125 per share
all-cash, premium offer with the Quickturn Board of Directors. Rather than even
discuss this full and fair offer, we believe the Quickturn Board has taken
actions to entrench themselves and prevent you from realizing the benefits of
our offer.
Their actions to entrench themselves have forced us to take the steps
necessary to call a special meeting to vote on replacing the Quickturn Board of
Directors. We are pleased that we have received more than the requisite level of
support from the stockholders of Quickturn to call a Special Meeting for October
29, 1998.
WE NEED YOUR SUPPORT BECAUSE WE BELIEVE THAT THE QUICKTURN BOARD WILL ONLY
MEET WITH US IF YOU SEND THEM A MESSAGE BY GIVING US YOUR VOTE.
In deciding whether it is time to replace the Quickturn Board, consider for
yourself the actions the Quickturn Board took two weeks after we made our offer:
- The Board amended its "dead hand poison pill" to make it impossible for a
new board elected by a majority of Quickturn's stockholders to take the
steps necessary to approve Mentor's all-cash offer and related merger
proposal--FOR AT LEAST SIX MONTHS AFTER THE SPECIAL MEETING ELECTION.
- The Board also adopted certain anti-takeover bylaw amendments which impose
a minimum delay of 90 to 100 days before stockholders can vote to remove
the Board that is opposing Mentor's offer-- EVEN IF STOCKHOLDERS
REPRESENTING A MAJORITY OF QUICKTURN'S STOCKHOLDERS FULLY SUPPORT THAT
OFFER.
- THE EFFECT OF THESE DESPERATE ANTI-TAKEOVER TACTICS IS TO DELAY GREATLY
CONSUMMATION OF OUR OFFER AND SUBJECT QUICKTURN STOCKHOLDERS TO
UNREASONABLE AND UNNECESSARY MARKET AND BUSINESS RISK.
TO SUPPORT MENTOR'S OFFER AND ENCOURAGE THE QUICKTURN BOARD TO STOP WASTING
TIME AND YOUR MONEY, VOTE THE GOLD PROXY TODAY!
While we are seeking to have the Board's actions invalidated in the Delaware
courts, we need your support to send the Board a message to stop wasting your
money by entrenching themselves and raising roadblocks to our offer.
VOTE THE GOLD PROXY CARD TO REPLACE QUICKTURN'S BOARD, TELL THEM JUST SAYING NO
TO OUR OFFER IS JUST NOT GOOD ENOUGH!
We believe that Quickturn's Board and management have had more than enough
time to implement a successful business plan for the benefit of its
stockholders. IN OUR OPINION, THEY HAVE FAILED TO DELIVER VALUE:
- Quickturn has generated earnings per share SIGNIFICANTLY BELOW CONSENSUS
ANALYST ESTIMATES in three of the last four quarters.
- QUICKTURN'S EARNINGS HAVE DECLINED EACH YEAR SINCE 1996.
<PAGE>
- Following a less than one percent revenue increase in 1997, Quickturn
revenues for the first six months of 1998 have actually declined from the
comparable 1997 period.
HOW CAN THE QUICKTURN BOARD CLAIM THAT OUR OFFER OF $12.125 PER SHARE IS
"INADEQUATE" WHEN, LESS THAN A MONTH BEFORE OUR OFFER COMMENCED, THE BOARD
ITSELF LOWERED THE EXERCISE PRICE OF ALL 1.9 MILLION EMPLOYEE STOCK OPTIONS TO
$7.44 PER SHARE? We believe the Quickturn Board would only have taken this
drastic action if it believed that the Company's business had been significantly
impaired and that the options as repriced accurately reflected fair market
value.
- THE PRIMARY BENEFICIARIES OF THIS REPRICING WERE THE COMPANY'S SENIOR
MANAGERS.
- OBVIOUSLY, STOCKHOLDERS CANNOT REPRICE THEIR SHARES.
IF THE BOARD WON'T NEGOTIATE WITH MENTOR,
WE BELIEVE IT IS TIME TO REPLACE THEM!
We urge you to read our enclosed proxy materials, which discusses the four
proposals that we are asking you to vote FOR at the Special Meeting. If the
nominees are elected, Mentor Graphics expects that, subject to their fiduciary
duties to all stockholders, the nominees will take the steps necessary to
facilitate your ability to accept Mentor's all-cash offer at the earliest
practicable date.
Unless we are successful in overturning the anti-takeover impediments
erected by the current Board, you may be forced to wait more than nine months to
get the $12.125 per share in cash that we are offering today.
The five nominees we are nominating are: Gideon Argov, Chairman, President
and CEO of Kollmorgen Corporation; Scott H. Bice, Dean of the University of
Southern California Law Center; Harry L. Demorest, Chief Executive Officer of
Columbia Forest Products, Inc.; C. Scott Gibson, President of Gibson
Enterprises; and Michael J.K. Savage, Managing Director of the San Francisco
Opera and founder and former President of Savage Petroleum Company.
WE URGE YOU TO VOTE YOUR GOLD PROXY EARLY TO SEND A STRONG MESSAGE TO THE
EXISTING DIRECTORS THAT YOU WANT ACTION NOW--NOT IN NINE MONTHS!
We appreciate your prompt consideration of this extremely important vote. We
believe our offer is good for stockholders and good for the customers and the
employees of both companies.
Sincerely,
/s/ Dr. Walden C. Rhines
Dr. Walden C. Rhines
PRESIDENT AND CHIEF EXECUTIVE OFFICER
If you have any questions or need assistance in completing the GOLD proxy card,
please contact:
[LOGO]
156 Fifth Avenue
New York, New York 10010
CALL TOLL-FREE (800) 322-2885 OR (212) 929-5500 (COLLECT)
<PAGE>
EXHIBIT C
[MENTOR GRAPHICS CORPORATION LOGO]
September 15, 1998
Dear Quickturn Stockholder:
On September 11, 1998, we commenced mailing to Quickturn stockholders
important proxy materials regarding a Special Meeting of stockholders which we
had taken the steps to call for October 29, 1998.
The enclosed supplements the information discussed on pages 4 and 5 of the
proxy materials.
Please review the enclosed supplement together with our earlier proxy
materials.
WE URGE YOU TO VOTE YOUR GOLD PROXY EARLY TO SUPPORT MENTOR'S $12.125 ALL
CASH OFFER. BY VOTING NOW YOU WILL BE SENDING THE QUICKTURN BOARD A STRONG
MESSAGE TO STOP WASTING TIME AND MONEY ON EXPENSIVE LITIGATION AND ENTRENCHMENT
TACTICS.
We appreciate your prompt consideration of this extremely important vote. We
believe our offer is good for stockholders and good for customers and employees
of both companies.
Sincerely,
/s/ Walden C. Rhines
Dr. Walden C. Rhines
President and
Chief Executive Officer
If you have any questions or need assistance in completing the GOLD proxy card,
please contact:
[MACKENZIE PARTNERS, INC. LOGO]
156 Fifth Avenue
New York, New York 10010
CALL TOLL-FREE (800) 322-2885 OR (212) 929-5500 (COLLECT)
<PAGE>
EXHIBIT D
September 25, 1998
The Board of Directors
Quickturn Design Systems, Inc.
55 West Trimble Road
San Jose, California 95131
Gentlemen:
When I met with your Chairman, Glen Antle, on August 11, 1998--at a meeting
requested by Mr. Antle--I proposed that Mentor Graphics acquire Quickturn in a
$12.125 per share, all-cash transaction. This price represented a greater than
50% premium over Quickturn's closing stock price on that date. As I stated at
that time, we are prepared to negotiate a transaction with Quickturn and to
consider an increased offer if due diligence shows greater value.
In the nearly six weeks since that meeting, we have stood ready to negotiate
a transaction with you and have made repeated efforts to arrange a meeting for
that purpose. These efforts include my personal calls to Mr. Antle and to Keith
Lobo, Quickturn's chief executive officer, calls from our investment bankers to
your investment bankers, and calls from our counsel to your counsel.
For example, one of my attempts to call Mr. Lobo occurred on Friday, August
28, when I left my office number as well as home number for the weekend. Mr.
Lobo's only response was a message he left on voicemail--at half-past midnight
on August 31--saying that he would be out of town that week and "perhaps" would
get back to me thereafter.
Similarly, when one of your own outside advisers suggested that I make
another call, I called Mr. Antle on September 4. Mr. Antle's response was simply
that he would get back to me.
Despite all our efforts, neither Mr. Antle nor Mr. Lobo has called me to
arrange a meeting.
Instead, in our opinion, your actions throughout the six-week period have
been to erect barriers to our all-cash, premium offer, to entrench the Board and
management, and to ignore the best interests of your stockholders.
Specifically, after the commencement of our offer, you adopted new bylaw
amendments which, if valid, would take away for more than 90 days your
stockholders' ability to replace the current Quickturn directors, thus blocking
the stockholders' ability to decide for themselves the merits of our offer.
Furthermore, after the commencement of our offer, you amended Quickturn's
poison pill, an action which, if upheld, would make it impossible as a practical
matter for Mentor to purchase shares from your stockholders for an additional
six months after these same stockholders are finally given the opportunity to
replace Quickturn's Board of Directors to facilitate our offer.
If your entrenchment efforts are successful (we believe that the Delaware
court will strike them down), you will prevent your stockholders for a period of
more than 270 days--nine months--from accepting an offer that we believe they
want the right to accept today. Why are you going to such lengths to prevent
your own stockholders from exercising their right to accept our offer? Are you
simply afraid of the choice they would make?
It would be bad enough if your efforts to stonewall us and entrench
yourselves stopped there. But clearly they have not:
- In addition to your bylaw and poison pill amendments, you have done
everything you can through wasteful litigation to delay the stockholders'
meeting where the stockholders will get a chance to express their views on
our offer and on your performance as a Board of Directors. On September
11, we delivered substantially more than the requisite number of agent
designations from Quickturn stockholders to call a Special Stockholders
Meeting. However, you and your lawyers have pursued meritless litigation
to defer indefinitely the date of the meeting we called for October 29. In
our opinion, you are wasting millions of dollars of your stockholders'
money on lawyers and investment
<PAGE>
bankers to entrench yourselves and to block our offer. This diminishes the
value of Quickturn to Mentor and, in turn, to your stockholders.
- You have touted Hambrecht & Quist's "inadequacy" opinion as justification
for your rejection of Mentor's offer. A stockholder might well question
how inadequate a $12.125 all-cash offer could be--especially when you
repriced employee stock options to $7.44 only two months before our offer.
Why have you refused to disclose the important information stockholders
need to evaluate H&Q's opinion that our 50% premium cash offer is
"inadequate"? Your stockholders need to know the analyses conducted, the
assumptions made and ranges of value resulting from such analyses. Are you
afraid to let your stockholders see that information too?
- You have also touted your business prospects for the third and fourth
quarters of 1998. But--just as with the H&Q opinion--you provide no basis
for your stockholders to assess the credibility of your assertion. What,
for example, is the basis for your speculation about the "imminent"
reinvestment cycle in new design activity in the Asia/Pacific region in
your September 22 and September 24, 1998 stockholder letters? Why should
your stockholders believe these or any other ambitious projections by
Quickturn when, in our view, you have repeatedly failed to deliver on past
predictions?
- You say that the Mentor offer has been "disruptive" to your sales efforts
and relationships with suppliers. Is this another way of saying that your
business is off--yet again? If so, don't your stockholders have a right to
know, particularly when you are talking about your supposedly "strong"
business prospects for the third and fourth quarters?
- You similarly tout your "business plan" but you do not provide any
meaningful information about that plan to your stockholders. Your
September 24, 1998 letter to stockholders entitled "The Quickturn Business
Plan" merely reads like a product catalog. What are your assumptions for
such factors as revenue growth and operating profit made in this business
plan? It appears to us to be the same basic business plan that has brought
about the disappointing operating and stock-price performance of the past
two years. Why should your stockholders accept this plan today?
Mentor Graphics calls on you--the Quickturn Board--to stop these
obstructionist and wasteful tactics and do the right thing by your stockholders.
Give your stockholders the chance to make their own decision based on full
information, rather than vague comments concerning "inadequacy" and, in our
view, based on your track record, unrealistic prospects.
Now, as before, we remain ready to sit down and discuss the acquisition with
you. And even if you continue to refuse to negotiate, we at Mentor Graphics
remain committed to completing the acquisition.
Very truly yours,
/s/ Dr. Walden C. Rhines
Walden C. Rhines
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
EXHIBIT E
[MENTOR GRAPHICS CORPORATION LOGO]
September 28, 1998
Dear Quickturn Stockholder:
This week you have an important opportunity to send the Quickturn Board of
Directors a message to stop its entrenchment tactics and wasteful litigation,
which are designed to block Mentor Graphics' all cash, premium offer. Tell them
to act in your best interests--not theirs.
TENDER YOUR SHARES PRIOR TO OCTOBER 6, 1998--SEND YOUR
MESSAGE LOUD AND CLEAR
Act today. Mentor Graphics' $12.125 per share offer is scheduled to expire
at 12:00 Midnight, New York City time, on Tuesday, October 6, 1998, unless
extended.
Despite our repeated efforts to negotiate with Quickturn's Board and
management since the commencement of our offer six weeks ago on August 12, 1998,
they have refused to meet.
Instead, Quickturn's Board and management have engaged in stonewalling and
entrenchment tactics. If successful, these roadblocks, including amending
Quickturn's deadhand poison pill, will prevent all Quickturn stockholders for a
period of at least 270 days--at least nine months--from accepting an offer that
we believe you should be able to accept today. We believe that you'll find that
Quickturn's entrenchment efforts are against your best interests, as discussed
in the enclosed letter we sent to the Quickturn Board on Friday, September 25.
Furthermore, we believe that Quickturn management's business plan and their
portrayal of Quickturn's future prospects as an independent company are
doubtful. Remember that this is the same management that has repeatedly failed
to meet securities analysts' expectations in the past. Weigh their past
performance against our all-cash, fully financed premium $12.125 per share
offer. Keep in mind the $7.00 to $8.00 per share range in which Quickturn's
stock traded during the weeks immediately preceding the announcement of our
offer.
IN THE PRESENT TURBULENT STOCK MARKET, OUR 50% PREMIUM OFFER IS MORE ATTRACTIVE
NOW THAN EVER BEFORE
We stand ready to negotiate, and we would be willing to consider increasing
our offer to reflect even greater value if justified by our due diligence
review.
In early September, a significant number of Quickturn stockholders clearly
demonstrated to the Quickturn Board their preference for Mentor Graphics' offer
by tendering their shares. More than 7,046,297 shares were tendered, which when
added to the shares already owned by Mentor Graphics represent nearly 43% of
Quickturn's outstanding common stock.
JOIN YOUR FELLOW STOCKHOLDERS WHO HAVE ALREADY SENT A CLEAR MESSAGE OF SUPPORT
FOR MENTOR GRAPHICS' OFFER--ADD YOUR VOICE BY TENDERING YOUR SHARES PRIOR TO
OCTOBER 6 AND BY VOTING MENTOR GRAPHICS' GOLD PROXY.
<PAGE>
If you have any questions or need assistance in tendering your shares or
voting Mentor Graphics' GOLD proxy, please call MacKenzie Partners, Inc., which
can be reached at 800-322-2885 Toll-Free or at 212-929-5500 (Collect).
Sincerely,
/s/ Dr. Walden C. Rhines
Walden C. Rhines
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TENDER YOUR SHARES
VOTE THE GOLD PROXY TODAY
[LOGO]
156 Fifth Avenue
New York, New York 10010
CALL TOLL-FREE (800) 322-2885 OR (212) 929-5500 (COLLECT)
<PAGE>
EXHIBIT F
[MENTOR GRAPHICS LOGO]
IMPORTANT NOTICE
October 16, 1998
Dear Quickturn Stockholder:
THE LOCATION OF THE SPECIAL MEETING OF STOCKHOLDERS OF QUICKTURN DESIGN
SYSTEMS, INC., CALLED BY MENTOR GRAPHICS CORPORATION FOR OCTOBER 29, 1998 AT 3
P.M. NEW YORK CITY TIME, HAS BEEN CHANGED TO THE CORPORATION TRUST COMPANY, 1209
ORANGE STREET, WILMINGTON (COUNTY OF NEW CASTLE), DELAWARE 19801. As you know,
the Special Meeting was previously scheduled to take place at the offices of The
Corporation Trust Company in Dover, Delaware as provided in the Notice of
Special Meeting sent to you on September 11, 1998. The foregoing constitutes the
Amended and Supplemental Notice of Special Meeting to holders of record of
Quickturn common stock as of the close of business on September 10, 1998, the
record date for the October 29 Special Meeting.
Mentor Graphics had set the Special Meeting in Dover, Delaware based on a
provision in Quickturn's bylaws. Quickturn filed a motion in Delaware state
court today stating that Quickturn's certificate of incorporation, which
provides for Wilmington, Delaware as the location of the Special Meeting, should
control over the bylaw provision. By waiting for over a month to even mention
this, the motion is another example of Quickturn's ongoing effort to delay the
vote at the Special Meeting and frustrate the will of stockholders who want to
accept our $12.125 per share, fully financed, all-cash offer. Mentor Graphics
will provide round-trip transportation to the Wilmington, Delaware location for
any stockholder who appears at the Dover, Delaware location.
-BULLETIN-
It is important for you to know that, on October 14, 1998, Institutional
Shareholder Services Inc. (ISS), one of the nation's leading institutional
shareholder advisory firms, recommended to its clients that they vote in favor
of Mentor Graphics' director nominees and related proposals at the Special
Meeting. In its report, ISS states: "At best, ISS views the [Quickturn] board's
action as an overzealous execution of its perceived fiduciary duty to
shareholders. At worst, we must give weight to the self-preservation effects
that the takeover defenses produce on behalf of the board and management at the
potential expense of shareholders. Fiduciary duty does not include eliminating
or obstructing the rights of shareholders to determine to accept any offer for
their ownership in the company."
The ISS report concludes: "The board's duty would have been more properly
executed by placing its argument squarely in opposition to the offer of
[Mentor]and allowing shareholders to exercise their right to vote democratically
and expeditiously on the matter."
VOTE YOUR GOLD PROXY CARD TODAY!
If you have any questions or need assistance in voting Mentor Graphics' GOLD
proxy card, please call MacKenzie Partners, Inc., which can be reached at
800-322-2885 Toll-Free or at 212-929-5500 (Collect).
Sincerely,
/s/ Walden C. Rhines
Walden C. Rhines
President and Chief Executive Officer
<PAGE>
EXHIBIT G
[MENTOR GRAPHICS LOGO]
VOTE YOUR GOLD PROXY CARD TODAY!
November 11, 1998
Dear Stockholder:
We want to personally thank the many Quickturn stockholders who showed their
strong support for our $12.125 per share, fully financed, all-cash offer by
tendering their shares. On October 30, 1998, the number of Quickturn shares
tendered by all of you together with the shares already owned by Mentor
represented approximately 53% of Quickturn's outstanding shares.
We now need your support once more. We ask all stockholders -- whether or
not they have tendered shares -- to take a stand at this time on our offer by
voting your GOLD proxy card promptly.
VOTE TO REPLACE THE CURRENT QUICKTURN BOARD
WITH INDEPENDENT DIRECTORS WHO WILL LISTEN TO YOU!
Unfortunately, even though a majority of the outstanding shares have clearly
expressed their support for our offer, neither the Quickturn Board nor its
financial advisors will agree to even sit down at the negotiating table with
Mentor. Don't let the Quickturn Board continue to ignore you.
DON'T LET THE CURRENT BOARD STAND IN YOUR WAY
TAKE THE NEXT STEP TO CASH IN ON OUR PREMIUM OFFER!
Vote your proxies now for the special meeting, currently scheduled by Mentor
to be held on November 24, 1998. Elect five independent nominees who, subject to
their fiduciary duties, will have the power to remove all other obstacles to our
premium offer if we are successful in our challenge in Delaware Chancery Court
to Quickturn's poison pill amendments. Vote to approve the three other proposals
designed to remove obstacles as well.
YOU CAN NO LONGER TRUST THE QUICKTURN BOARD!
The Quickturn Board has been so caught up in their entrenchment tactics that
they have lost sight of the facts. Here are the facts:
- The Quickturn Board wants you to believe that our $12.125 per share offer
is inadequate. KEEP IN MIND THAT OUR OFFER REPRESENTS MORE THAN A 51%
PREMIUM OVER THE CLOSING PRICE ON THE DAY PRIOR TO THE COMMENCEMENT OF OUR
OFFER.
- OUR $12.125 OFFER PRICE REPRESENTS NEARLY 40 TIMES NEXT YEAR'S CONSENSUS
EARNINGS ESTIMATES AND 25 TIMES PROJECTED EARNINGS FOR THE YEAR 2000.
- The Quickturn Board has told you all about the bright future of Quickturn.
IF THEY TRULY BELIEVED THAT, WHY DID THE QUICKTURN BOARD ITSELF REPRICE
DOWNWARD THE
<PAGE>
EXERCISE PRICE OF 1.5 MILLION EMPLOYEE STOCK OPTIONS TO $7.44 PER SHARE A
MERE EIGHT WEEKS BEFORE WE MADE OUR OFFER?
- Quickturn would like you to believe that the Asian economic crisis is
primarily responsible for the steep drop last spring in the price of
Quickturn shares and for its poor stock price for several months prior to
our offer. WE BELIEVE THAT QUICKTURN'S LACKLUSTER SALES AND POOR EARNINGS
PERFORMANCE ARE THE MAJOR REASONS WHY QUICKTURN'S SHARES TUMBLED.
- Quickturn's third quarter results just reported on October 13, 1998, show
that Quickturn's sales CONTINUE TO BE FLAT OR DECLINING -- NOW FOR 2 1/2
YEARS.
- Quickturn's earnings per share for the third quarter, when adjusted for
take-over related expenses, DROPPED DRAMATICALLY compared to earnings per
share in the same quarter last year, adjusted for one time acquisition
charges. QUICKTURN'S ADJUSTED EARNINGS PER SHARE IN THE QUARTER DROPPED TO
$.04 FROM $.13 PER SHARE IN THE SAME QUARTER LAST YEAR -- A NEARLY 70%
DROP.
- Contrast these poor results to Mentor's outstanding recent results. While
Mentor was exposed to the same market conditions, it posted a 400%
year-to-year earnings gain for the same period. MAYBE QUICKTURN'S
LEADERSHIP IS THE PROBLEM -- NOT ASIA?
- Quickturn wants you to believe that its pending patent litigation claims
against Mentor may be worth $225 million ($75 million trebled). When our
expert was given the opportunity to analyze the same data as Quickturn and
its own expert, he projected the MAXIMUM amount of damages -- if Quickturn
actually proves Mentor infringed a valid patent -- would be about $3
million ($1 million trebled). WHY ARE QUICKTURN'S NUMBERS SO GROSSLY
INFLATED?
- When considering the believability of Quickturn's grossly inflated claim
amount -- remember Quickturn didn't even develop the number based on the
totally new wild theories until October 5, 1998 -- NEARLY SEVEN WEEKS AFTER
WE LAUNCHED OUR OFFER.
- Quickturn's latest letter wants you to reject our offer because of a report
made to Mentor in 1997 by Arthur Andersen. Quickturn also neglected to tell
you that Arthur Andersen's report -- which was made twelve months ago --
was based upon financial projections that assumed Quickturn would have
attained revenues of $136.2 million and net income of $14 million in 1998.
CLEARLY, QUICKTURN HAS NOT ACHIEVED EVEN CLOSE TO THESE LOFTY EXPECTATIONS
AS IT CONTINUES TO LOSE MONEY AND CONSISTENTLY REPORT FLAT OR DECLINING
REVENUES.
WHEN WILL THE QUICKTURN BOARD COME CLEAN
AND TELL YOU THE WHOLE TRUTH?
TELL THE QUICKTURN BOARD TO STOP STONEWALLING AND STOP SPENDING YOUR MONEY ON
EXPENSIVE LITIGATION AND OTHER OBSTRUCTIVE TACTICS!
The trial in which Mentor is challenging the validity of amendments made to
the poison pill and bylaws of Quickturn recently ended. Post trial briefs have
been filed paving the way for the Delaware court to render a prompt decision.
<PAGE>
A FAVORABLE RULING WILL SATISFY ONE MAJOR CONDITION TO COMPLETING OUR
$12.125 PER SHARE FULLY FINANCED, ALL-CASH OFFER. WE NEED YOUR SUPPORT NOW MORE
THAN EVER TO SATISFY ANOTHER MAJOR CONDITION TO OUR OFFER -- THE REMOVAL OF THE
QUICKTURN BOARD WHICH IS PREVENTING YOU FROM BEING ABLE TO ACCEPT AND COMPLETE
OUR CASH OFFER.
VOTE THE GOLD PROXY "FOR" OUR NOMINEES AND PROPOSALS!
THE NEXT CRITICAL STEP IS IN YOUR HANDS!
Time is short. Even if you have already tendered your shares, you must send
in your GOLD proxy card if you want to replace the current Board with our
independent nominees.
WE STRONGLY URGE YOU TO TAKE A MOMENT NOW TO SIGN, DATE AND RETURN THE
ENCLOSED GOLD PROXY CARD IN THE ENVELOPE PROVIDED.
IF YOU HAVE PREVIOUSLY SIGNED A BLUE QUICKTURN PROXY, YOU HAVE EVERY PROPER
AND LEGAL RIGHT TO CHANGE YOUR VOTE BY SIMPLY SIGNING AND RETURNING A LATER
DATED GOLD PROXY CARD. ONLY THE LATEST DATED PROXY CARD THAT IS TIMELY RECEIVED
WILL BE COUNTED.
We appreciate your prompt consideration of this extremely important vote.
Sincerely,
/s/ Dr. Walden C. Rhines
Dr. Walden C. Rhines
President and Chief Executive
Officer
Even if you have tendered your shares, it is important that you complete and
return the GOLD proxy card today. If you have any questions or need assistance
in completing the GOLD 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)
<PAGE>
IMPORTANT
Your proxy is important. No matter how many Shares you own, please give
Mentor Graphics your proxy FOR the Proposals by:
1. SIGNING the enclosed GOLD STRIPED PROXY CARD,
2. DATING the enclosed GOLD STRIPED PROXY CARD,
3. MAILING the enclosed GOLD STRIPED PROXY CARD TODAY in the envelope
provided (no postage is required if mailed in the United States).
STOCKHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON NOVEMBER 10, 1998 ARE
ENTITLED TO NOTICE OF AND TO VOTE ON MATTERS THAT COME BEFORE THE SPECIAL
MEETING. EVEN IF YOU HAVE ALREADY RETURNED THE GOLD PROXY CARD THAT WAS SENT TO
YOU WITH MENTOR GRAPHICS' SEPTEMBER 11, 1998 PROXY STATEMENT, PLEASE PROPERLY
EXECUTE AND RETURN THE GOLD STRIPED PROXY CARD INCLUDED WITH THIS SUPPLEMENT.
RETURNING THE ENCLOSED GOLD STRIPED PROXY CARD WILL ENSURE THAT THE NUMBER OF
SHARES HELD OF RECORD BY YOU AS OF THE CLOSE OF BUSINESS ON NOVEMBER 10, 1998
WILL BE COUNTED IN TABULATING THE VOTES AT THE SPECIAL MEETING. SEE "PROXY
PROCEDURES AND RECORD DATE."
If you hold your Shares in the name of one or more brokerage firms, banks,
nominees or other institution, only they can sign a GOLD STRIPED PROXY CARD 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 GOLD STRIPED PROXY CARD.
If you have any questions or require any additional information concerning
this Supplement, please contact MacKenzie at the address set forth below.
(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
<PAGE>
GOLD STRIPED PROXY CARD
SPECIAL MEETING OF STOCKHOLDERS OF
QUICKTURN DESIGN SYSTEMS, INC.
THIS PROXY IS SOLICITED BY MENTOR GRAPHICS CORPORATION
The undersigned stockholder of Quickturn Design Systems, Inc. (the
"Company") hereby appoints Dr. Walden C. Rhines, Gregory K. Hinckley and Dean M.
Freed and each of them, each with full power of substitution, to vote all shares
of common stock, par value $.001 per share, of the Company that the undersigned
is entitled to vote as if personally present at the Special Meeting of
Stockholders of Quickturn Design Systems, Inc. to be held on January 8, 1999 at
the time and place designated by the Company in its proxy materials, or at any
special meeting called to consider Mentor Graphics Corporation's ("Mentor
Graphics") proposals set forth herein (the "Proposals"), and at any adjournment,
postponement or continuation of the Special Meeting or any special meeting,
provided however, that in no event will this proxy be valid beyond October 29,
1999. The undersigned hereby revokes any previous proxies with respect to the
matters covered by this proxy.
MENTOR GRAPHICS URGES YOU TO VOTE IN FAVOR OF EACH OF THE PROPOSALS.
(Please mark each proposal with an "X" in the appropriate box)
1. To remove all members of the Board of Directors of the Company other than the
Nominees (as defined below), if then directors.
/ / For / / Against / / Abstain
2. To adopt an amendment to Section 3.2 of the bylaws of the Company to fix the
number of Company directors at five.
/ / For / / Against / / Abstain
3. To elect the following directors to the Board of Directors of the Company:
Gideon Argov, Scott H. Bice, Harry L. Demorest, C. Scott Gibson and Michael
J.K. Savage (collectively, the "Nominees").
/ / FOR all Nominees, except as marked below / / WITHHOLD AUTHORITY for all
Nominees
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE NOMINEES, MARK FOR
ABOVE AND PRINT THE NAME(S) OF THE PERSON(S) WITH RESPECT TO WHOM YOU WISH TO
WITHHOLD AUTHORITY IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
(Continued on reverse side)
<PAGE>
4. To adopt a stockholder resolution repealing each provision of the bylaws or
any amendment thereto adopted by the Board of Directors of the Company
subsequent to March 30, 1998 and prior to the effective date of the
Proposals.
/ / For / / Against / / Abstain
5. In the event any procedural matter, or any substantive matter that Mentor
Graphics does not know of within a reasonable time before any special
meeting, is properly brought before any special meeting or any adjournment,
postponement or continuation thereof, the proxies are authorized to vote
upon such matters in their discretion.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER MARKED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO MARKING IS MADE, THIS PROXY WILL BE
DEEMED TO BE A DIRECTION TO VOTE FOR ALL OF THE PROPOSALS.
PLEASE DATE AND SIGN THIS PROXY EXACTLY
AS YOUR NAME APPEARS HEREON
(Dated)
----------------------------------------
(Signature)
----------------------------------------
(Title)
----------------------------------------
(Signature if held jointly)
----------------------------------------
When shares are held by joint tenants,
both should sign. When signing as
attorney-in-fact, executor, administrator,
trustee, guardian, corporate officer or
partner, please give full title as such.
If a corporation, please sign in corporate
name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE PROVIDED.
