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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 33
TO SCHEDULE 14D-1
TENDER OFFER STATEMENT
(PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
QUICKTURN DESIGN SYSTEMS, INC.
(Name of Subject Company)
MENTOR GRAPHICS CORPORATION
MGZ CORP.
(Bidders)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(including the Associated Rights)
(Title of Class of Securities)
74838E102
(CUSIP Number of Class of Securities)
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WALDEN C. RHINES
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MENTOR GRAPHICS CORPORATION
8005 S.W. BOECKMAN ROAD
WILSONVILLE, OREGON 97070-7777
(503) 685-1200
(Name, Address and Telephone Number of Persons Authorized
to Receive Notices and Communications on Behalf of Bidders)
COPY TO:
JOHN J. HUBER, ESQ. CHRISTOPHER L. KAUFMAN, ESQ.
LATHAM & WATKINS LATHAM & WATKINS
1001 PENNSYLVANIA AVENUE, N.W. 75 WILLOW ROAD
WASHINGTON, DC 20004 MENLO PARK, CALIFORNIA 94025
(202) 637-2200 (650) 328-4600
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MGZ Corp., a Delaware corporation ("Purchaser"), and Mentor Graphics
Corporation, an Oregon corporation ("Parent"), hereby amend and supplement their
Tender Offer Statement on Schedule 14D-1 filed on August 12, 1998 (the
"Statement"), as amended, with respect to the offer by Purchaser to purchase up
to 2,100,000 shares of Common Stock, par value $.001 per share, of Quickturn
Design Systems, Inc., a Delaware corporation, together with the associated
preferred stock purchase rights, for a purchase price of $14 per share, net to
the seller in cash, without interest thereon, as set forth in this Amendment No.
33. Capitalized terms used herein and not defined have the meanings ascribed to
them in the Schedule 14D-1 or in the Offer to Purchase.
ITEM 10. ADDITIONAL INFORMATION.
Item 10(f) of the Statement is hereby amended and supplemented by the
following:
1. On December 28, 1998, Parent and Purchaser filed a Motion for Leave to
File Fourth Amended Complaint with the United States District Court for the
District of Delaware. A copy of the Fourth Amended Complaint is attached hereto
as Exhibit (g)(6) and is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C> <C>
(g)(6) -- Fourth Amended Complaint filed with the United States District Court for the
District of Delaware.
</TABLE>
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SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
<TABLE>
<S> <C> <C>
Dated: December 31, 1998 MENTOR GRAPHICS CORPORATION
By: /s/ Gregory K. Hinckley
Name: Gregory K. Hinckley
Title: Executive Vice President, Chief Operating
Officer and Chief Financial Officer
MGZ CORP.
By: /s/ Gregory K. Hinckley
Name: Gregory K. Hinckley
Title: Secretary and Chief Financial Officer
</TABLE>
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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
MENTOR GRAPHICS CORPORATION NO. 98-473 RRM
and MGZ CORP.,
Plaintiffs,
v.
QUICKTURN DESIGN SYSTEMS, INC.;
CADENCE DESIGN SYSTEMS, INC., a
Delaware corporation; JACK HARDING,
an individual; KEITH LOBO, an
individual,
Defendants.
QUICKTURN DESIGN SYSTEMS, INC.,
Counterclaimant,
v.
MENTOR GRAPHICS CORPORATION
and MGZ CORP.,
Counterdefendants.
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FOURTH AMENDED COMPLAINT
Pursuant to Rule 15(a) of the Federal Rules of Civil
Procedure, plaintiffs Mentor Graphics Corporation ("Mentor") and MGZ Corp.
("Purchaser") file this Fourth Amended Complaint seeking declaratory and
injunctive relief arising out of Purchaser's offer to purchase shares of stock
of defendant Quickturn Design Systems, Inc. ("Quickturn").
INTRODUCTION
1. Mentor and Purchaser (collectively "plaintiffs") have filed this
fourth amended complaint to seek immediate injunctive relief against Quickturn's
latest and most egregious
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efforts to use concealment and non-disclosure to prevent Mentor from
participating in the sale of Quickturn. Although Quickturn began negotiating
with Cadence Design Systems, Inc. ("Cadence") at least as early as December 3,
1998, Quickturn failed to disclose the negotiations even though (i) it had
earlier disclosed that it was NOT negotiating with anyone, (ii) it filed three
separate amendments to its Schedule 14D-9 and proxy statements between December
3 and 8, 1998; and (iii) the federal securities laws specifically require
disclosure of such negotiations. The obvious purpose of Quickturn's concealment
was to advance its "Just say 'No' to Mentor" strategy by ensuring that Mentor
would not be alerted to the bidding contest before Quickturn hastily signed a
merger agreement with Cadence, inhibiting all competitive bids through huge
"break up" fees and draconian "no shop" provisions. Indeed, although Quickturn
invited Mentor to submit a higher bid, and stated that it would be acceptable
for Mentor to respond by December 9, Quickturn never told Mentor that it was
negotiating with a third party, and then signed the Cadence merger agreement
less than 24 hours before Mentor's bid was due to be submitted. As soon as the
Cadence deal was signed, the CEO's of Quickturn and Cadence, defendants Keith
Lobo and Jack Harding, gave an interview to an industry publication in which
they admitted that the January 8 Special Meeting of Quickturn stockholders will
be referendum on the Cadence deal, and then systematically solicited support
from Quickturn's stockholders by asserting that Mentor would need "psychiatric
counseling," would "flirt with bankruptcy" and would "decimate half the company"
if Mentor attempted to submit a higher bid.
2. Contrary to the statements of defendants Lobo and Harding, Purchaser
has increased its offering price for shares of Quickturn to $14 - plus a portion
of any breakup fees that are invalidated - and reduced the number of shares
sought to 2.1 million, the maximum that plaintiffs can purchase without
triggering Quickturn's poison pill. To ensure a level playing
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field and restore the status quo, the Court should issue immediate injunctive
relief. Defendants have admitted conduct that violates several provisions of the
securities laws, including Sections 14(a), 14(d) and 14(e) of the Exchange Act;
the resulting irreparable injuries to Mentor and other Quickturn stockholders
can only be remedied by an order that invalidates the Cadence merger agreement
and nullifies all proxies obtained by Quickturn without timely and complete
disclosure.
JURISDICTION AND VENUE
3. The Court has jurisdiction over this action pursuant to 15 U.S.C.
Section 78aa, 28 U.S.C. Section 1331 and 28 U.S.C. Section 1337(a).
4. Venue is proper pursuant to 15 U.S.C. Section 78aa and 28
U.S.C. Section 1391(b).
THE PARTIES
5. Mentor is an Oregon corporation with its principal executive offices
in Wilsonville, Oregon. Purchaser, a wholly-owned subsidiary of Mentor and a
Delaware corporation, was formed to acquire all of the outstanding shares of
Quickturn through the tender offer and merger proposal described below. Mentor
is the beneficial owner of more than three percent of the outstanding shares of
Quickturn common stock; Purchaser is the record owner of 100 shares of Quickturn
common stock.
6. Defendant Quickturn is a Delaware corporation with its principal
executive offices in San Jose, California. Defendant Keith Lobo is a California
resident, and the president and chief executive officer of Quickturn.
7. Defendant Cadence Design Systems, Inc. ("Cadence") is a Delaware
corporation with its principal executive offices in San Jose, California.
Defendant Jack Harding is a California resident, and the president and chief
executive officer of Cadence.
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8. Quickturn's common stock is registered pursuant to Section 12(b)
of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C.
Section 78L(b), and is listed and traded on the Nasdaq National Market.
THE TENDER OFFER
9. On August 12, 1998, Purchaser commenced a fully-financed,
non-coercive, non-discriminatory, all-cash tender offer for all outstanding
shares of Quickturn common stock that are not already owned by Mentor or
Purchaser (the "Tender Offer"). The Tender Offer is, and will continue to be,
in full compliance with all applicable federal laws and regulations governing
tender offers, I.E., the provisions of the Williams Act, embodied in Sections
14(d) and 14(e) of the Exchange Act, 15 U.S.C. Sections 78n(d) and (e), and
the rules and regulations promulgated thereunder by the Securities and
Exchange Commission ("SEC"). In accordance with the Exchange Act and the
SEC's rules and regulations, Purchaser commenced the Tender Offer by
publishing a summary advertisement in the August 12, 1998 WALL STREET
JOURNAL, and Purchaser filed on August 12, 1998 a Schedule 14D-1 with the SEC
pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3 promulgated
thereunder, 17 C.F.R. Section 240.14d-3. Purchaser has regularly updated and
clarified its disclosures with respect to the Tender Offer by filing timely
and proper amendments to its Schedule 14D-1.
THE AGENT DESIGNATION SOLICITATION
10. In furtherance of the Proposed Acquisition and pursuant to
Quickturn's bylaws, Mentor publicly disclosed on August 12, 1998 its
intention to solicit agent designations from holders of ten percent or more
of Quickturn's shares to appoint designated agents with the power to call a
special meeting of the Quickturn stockholders (the "Agent Solicitation"). The
purpose of the Agent Solicitation to call a special meeting of the Quickturn
stockholders (the "Special
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Meeting") is to allow the Quickturn stockholders to remove all current members
of Quickturn's Board of Directors, to reduce the authorized number of Quickturn
directors to five, to elect to the Quickturn Board five individuals nominated by
Mentor, and to repeal any recent or subsequent amendments to the Quickturn
bylaws.
11. Mentor's preliminary agent solicitation materials relating to the
call of the Special Meeting were filed on August 12, 1998 with the SEC. On
August 20, 1998, Mentor Graphics filed with the SEC definitive agent
solicitation materials relating to the call of the Special Meeting (the "Agent
Solicitation Materials"). Mentor has regularly updated and clarified the Agent
Solicitation Materials by filing timely and proper amendments and other
materials with the SEC.
QUICKTURN'S REJECTION OF THE MENTOR GRAPHICS OFFER
12. On August 24, 1998, without communicating with any representative
of Mentor to discuss the Proposed Acquisition, Quickturn announced that on
August 21, 1998, the Quickturn Board had rejected the Proposed Acquisition on
the grounds that the Board considered the Tender Offer to be inadequate, not
reflective of the long-term value of Quickturn and not in the best interests of
Quickturn or its stockholders. The Board further announced that it had
determined that Quickturn's business plan offered the potential for obtaining
higher long-term benefits for Quickturn's stockholders than the Tender Offer.
13. In an effort to defeat the Tender Offer and delay the Special
Meeting, the Quickturn Board adopted an amended bylaw purporting to grant the
Board power to delay any special meeting called by stockholders for 90 to 100
days (the "Bylaw Amendment"). The Board also adopted an amendment to Quickturn's
"poison pill" defense purporting to bar any newly-elected board from redeeming
Quickturn's poison pill for six months to facilitate an
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acquisition by a person who sponsored the election of the new board members (the
"Deferred Redemption Provision," or "DRP"). Mentor and Purchaser promptly
challenged the Bylaw Amendment and the DRP (collectively, the "Defensive
Measures") in Delaware Chancery Court (the "Chancery Court Action").
QUICKTURN'S SCHEDULE 14D-9 FILING
14. On August 24, 1998, Quickturn filed a Schedule 14D-9 with the SEC
in response to the Tender Offer (the "Schedule 14D-9"). Among other things,
Quickturn's Schedule 14D-9 stated:
No negotiation is underway or is being undertaken by [Quickturn] in
response to the [Tender] Offer which relates to or would result in
(1) an extraordinary transaction, such as a merger or
reorganization, involving [Quickturn] or any of its subsidiaries;
(2) a purchase, sale or transfer of a material amount of assets by
[Quickturn] or any of its subsidiaries; (3) a tender offer for or
other acquisition of securities by or of [Quickturn]; or (4) any
material change in the current capitalization or dividend policy of
[Quickturn].
Quickturn's Schedule 14D-9 further stated that Mentor's Tender Offer "does not
adequately reflect the long-term opportunities available to the Company in its
business and the electronic design automation market," and that the Tender Offer
"did not fully reflect the long-term value inherent in the Company."
15. Between August 24 and December 2, 1998, Quickturn regularly filed
amendments to its Schedule 14D-9 that urged stockholders to reject the Tender
Offer on the ground that it was inadequate and that greater value could be
realized by pursuing Quickturn's business plan. During this period, Quickturn
never amended its initial disclosure stating that it was not involved in any
negotiations with any third party or Mentor regarding an acquisition or merger.
In fact, Quickturn's repeated statements that its strategy was to pursue its
business plan led any reasonable investor to believe that no negotiations would
occur.
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PROXY SOLICITATIONS FOR THE SPECIAL MEETING
16. On September 11, 1998, Mentor delivered to Quickturn agent
designations executed by holders of 17 percent of Quickturn's outstanding common
stock and called for the Special Meeting of stockholders to be held on October
29, 1998. On October 1, relying on the Bylaw Amendment, Quickturn's Board set
the meeting date for January 8, 1999.
17. On September 11, 1998, Mentor filed with the SEC a definitive proxy
statement and disseminated to stockholders materials relating to the Special
Meeting (the "Mentor Proxy Statement"). The Mentor Proxy Statement discloses,
among other things, the proposals Mentor intends to present for consideration at
the Special Meeting: (i) to remove the entire Quickturn Board; (ii) to amend
Quickturn's bylaws to reduce the authorized number of directors to five, (iii)
to elect Mentor's five nominees to the Quickturn Board, and (iv) to repeal any
provisions of the Quickturn bylaws adopted by the incumbent Quickturn Board
subsequent to May 30, 1998. Mentor has regularly updated and clarified the
Mentor Proxy Statement by filing timely and proper amendments and other
materials with the SEC.
18. On September 21, 1998, Quickturn filed with the SEC a definitive
proxy statement and disseminated to stockholders materials relating to the
Special Meeting (the "Quickturn Proxy Statement"). The Quickturn Proxy Statement
described Mentor's offer as "inadequate and not in the best interests of the
Company," and stated "that stockholder interests would be better served by the
Company continuing to pursue its business plan." Between September 21 and
December 2, 1998, Quickturn regularly filed amendments to Quickturn's
Proxy Statement that urged stockholders to vote against Mentor's nominees on the
ground that the Quickturn stockholders would best be served by remaining
independent. For example, Quickturn's proxy materials filed on October 2 told
stockholders, "READ WHAT THE
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EXPERTS ARE SAYING . . . QUICKTURN'S STAND-ALONE RETURN POTENTIAL OVER THE
LONG-TERM SIGNIFICANTLY EXCEEDS THE PRICE BEING OFFERED BY MENTOR." Likewise, in
proxy materials filed October 19, Quickturn told stockholders that they should
oppose Mentor' nominees to "PARTICIPATE IN QUICKTURN'S BRIGHT FUTURE." Quickturn
also said, "Your Board's rejection of Mentor's offer affirms its continued
confidence in Quickturn's future and its determination that stockholders should
be given every opportunity to participate fully in that future."
MENTOR'S VICTORY IN THE CHANCERY ACTION
19. Following an expedited trial on the merits of the Chancery Court
Action, the Court issued an opinion dated December 2, 1998 finding that the
Quickturn directors had breached their fiduciary duties to Quickturn's
stockholders in adopting the Deferred Redemption Provision. The Court of
Chancery upheld the Bylaw Amendment and issued an order scheduling the Special
Meeting for January 8, 1999. Quickturn appealed the decision to the Delaware
Supreme Court. By the time the Court of Chancery filed its opinion, Quickturn's
stockholders indicated their lack of confidence in Quickturn's management by
tendering shares aggregating more than 50% of the outstanding Quickturn shares
into Mentor's Tender Offer.
QUICKTURN'S RESPONSES TO MENTOR'S VICTORY
20. According to Cadence's Form S-4 filing with the SEC on December 23,
1998, Quickturn attempted to interest Cadence in "rescuing" Quickturn from the
Mentor Tender Offer as early as September 1, 1998, but Cadence said it was not
interested. Following the completion of the trial on the Chancery Court Action,
Quickturn again solicited Cadence's interest in an acquisition, and succeeded in
arranging a meeting of the companies' top executives for December 1, 1998.
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21. Following the ruling in the Chancery Court Action on December 2,
1998, Quickturn's efforts intensified. Cadence's Form S-4 admits that defendants
Lobo and Harding "discussed the broad outlines of a possible combination of
Quickturn and Cadence" as early as December 3, 1998. That same day, Quickturn
filed amendment no. 23 to its Schedule 14D-9. The amendment said nothing about
the acquisition negotiations; instead, it described the outcome of the Chancery
Court Action and announced Quickturn's intent to appeal the ruling invalidating
the DRP. Quickturn further stated, "The Quickturn Board continues to strongly
recommend that stockholders vote Quickturn's BLUE proxy card, and not support
Mentor's attempt to take over Quickturn at what the Board believes is an
opportunistic, inadequate price. The Quickturn Board continues to urge
shareholders not to tender their shares and not to vote Mentor's gold proxy
card." Quickturn filed an amendment to its proxy materials containing the same
statements.
22. On December 4, Quickturn and Cadence executed a confidentiality and
standstill agreement, commenced due diligence, and began to discuss
documentation for the acquisition. That same day, Quickturn filed amendment no.
24 to its Schedule 14D-9. Once again, the amendment said nothing about the
acquisition negotiations; it only disclosed the opinion of the Court of
Chancery. Quickturn filed a similar amendment to its proxy materials.
23. By December 8, Quickturn and Cadence had completed their due
diligence, and the Cadence Board had approved a merger proposal; Quickturn's
Board received Cadence's proposal on the evening of December 8 and accepted it
within hours. That same day, Quickturn had filed amendment no. 25 to its
Schedule 14D-9. The amendment disclosed no contact with Cadence, much less the
imminent conclusion of the Cadence merger negotiations; instead it stated only
that the Delaware Supreme Court had scheduled argument on Quickturn's appeal for
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December 29, 1998, and asserted that the prosecution of the appeal would be in
the best interest of stockholders. Quickturn filed a similar amendment to its
proxy materials.
24. None of Quickturn's filings with the SEC between December 3 and 8
even hinted that Quickturn had abandoned its strategy of remaining independent
and following its long-term business plan. None of these filings updated
Quickturn's original disclosure stating that Quickturn was NOT negotiating with
any third party concerning an acquisition or merger.
QUICKTURN'S EFFORT TO EXCLUDE
MENTOR FROM THE SALES PROCESS
25. Since August 12, 1998, Mentor has repeatedly requested that
Quickturn negotiate with Mentor. Quickturn steadfastly rejected Mentor's
overtures.
26. On December 6, 1998, Quickturn's Chairman, Glen Antle, spoke with
Mentor's Chairman, Walden Rhines. During the evening of December 8, 1998, Larry
Sonsini, Quickturn's primary outside counsel, told Christopher Kaufman, Mentor's
primary outside counsel, that if Mentor wished to raise its bid, it should begin
consideration of a higher proposal. Instead of encouraging Mentor to present
immediately a higher bid because the Board was about to approve a third party's
acquisition proposal, Mr. Sonsini attempted to discourage a higher bid and
stated that Mentor would not be allowed to conduct due diligence. Mr. Kaufman
informed Mr. Sonsini that Mentor would respond on December 9, 1998 to
Quickturn's invitation to consider submitting a higher proposal. That same day,
Quickturn's investment banker, Hambrecht & Quist ("H&Q"), contacted Salomon
Smith Barney ("Salomon"), Mentor's investment banker. H&Q told Salomon that if
Mentor wished to raise its bid, it should begin consideration of a higher
proposal. Salomon told H&Q that Mentor would respond to Quickturn by 5:00 p.m.
on December 9, 1998, and H&Q confirmed that responding in that time frame would
be acceptable. In none of these conversations did Quickturn's representatives
advise Mentor's representatives
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that the Quickturn Board was considering a sale of the Company, that Quickturn
was negotiating with another bidder, that Quickturn had granted due diligence to
another bidder, that Mentor should put forward its best bid, that there was a
deadline for Mentor to submit a higher offer, or that the Quickturn Board was
meeting on December 8, 1998 to approve a merger agreement with Cadence or any
other third party.
QUICKTURN'S SWEETHEART DEAL WITH CADENCE
27. Before the opening of business on December 9, Quickturn surprised
Mentor and the stock market by announcing that it had agreed to be acquired by
Cadence in a merger transaction (the "Cadence Merger"). In amendment no. 26 to
its Schedule 14D-9, Quickturn purported to explain the reasons for the proposed
Cadence deal:
The Board's decision to enter into the Merger Agreement was based
on the Board's review and consideration of the interests of the
Company's stockholders and all other factors permitted by
applicable law, including the interests of the Company's employees,
suppliers, creditors and customers, and the Company's long and
short-term strategic objectives.
28. Quickturn's amendment no. 26 further stated that the Board
"considered a presentation by, and the advice and views" of H&Q, and that H&Q
had rendered an opinion that, "subject to the qualifications and limitations set
forth in such opinion, the consideration to be received by stockholders of the
Company pursuant to the Merger is fair from a financial point of view."
Quickturn did not, however, disclose the opinion itself, the analysis underlying
the opinion, or any of "the qualifications and limitations" referenced in
amendment no. 26. Similarly, Quickturn did not disclose any information
concerning the background of the Cadence Merger or the history of Quickturn's
negotiations with Cadence; instead, the amendment stated only that the lengthy
and complex Agreement and Plan of Merger (the "Cadence Merger Agreement") was
approved by the Quickturn Board on December 8.
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29. Quickturn's amendment no. 26 did not disclose any contacts with
Mentor, nor Quickturn's deliberate efforts to exclude Mentor from the sale
process. Specifically, the amendment did not disclose that Quickturn belatedly
invited Mentor submit a higher proposal on December 8; that Mentor informed
Quickturn that it would respond before 5:00 p.m. on December 9; that H&Q assured
Salomon that this timing was acceptable; and that Quickturn nevertheless
accepted the Cadence Merger on the evening of December 8, less than 24 hours
before Mentor was scheduled to submit its higher offer.
30. Quickturn's amendment no. 26 did disclose the terms of the Cadence
Merger Agreement, which will chill competing bids and transfer to Cadence,
rather than Quickturn's stockholders, a huge portion of the increased
consideration in any higher bid. The Cadence Merger Agreement grants Cadence (i)
a stock option lockup to purchase shares representing 19.9% of Quickturn's
common stock on a fully-diluted basis at $14.00 per share, capped at a total
benefit to Cadence of $14,075,000 (the "Lockup Option"); (ii) a termination fee
of $10,557,000 (the "Termination Fee"); and (iii) an expense reimbursement fee
of $3,500,000 (the "Expense Reimbursement Fee," together with the Termination
Fee and Lockup Option, the "Breakup Fees"). The maximum Breakup Fees represent
6.9% of the aggregate Cadence Merger price of $253 million and 9% of the
transaction price net of cash on Quickturn's balance sheet. The Cadence Merger
Agreement also subjects Quickturn to a highly-restrictive "no-shop" provision
(the "No-Shop Clause") that not only purports to prevent Quickturn and its
representatives from making any effort to obtain a superior transaction, but
allows Cadence to prevail merely by matching any higher offer; the practical
effect of the No-Shop Clause is to simultaneously deter competing proposals and
to remove any incentive for Cadence to bid competitively.
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31. On December 15, 1998, plaintiffs filed a second complaint in the
Delaware Chancery Court challenging the decision of the Quickturn Board to enter
into the Cadence Merger Agreement and to accept the Breakup Fees and the No-Shop
Clause as a breach of the Board's fiduciary duties.
THE IMPROPER EFFORTS OF HARDING AND LOBO
TO INFLUENCE VOTING AT THE SPECIAL MEETING
32. Concurrently with the announcement of the Cadence Merger, the
merger partners' CEO's, defendants Harding and Lobo, gave interviews to a widely
read industry publication entitled "Electronic Engineering Times." The interview
was published over the Internet and to wire services on December 10, 1998, and
in print December 14, 1998. The comments of Lobo and Harding in the interview
were not designed to publicize the Cadence Merger, but were instead calculated
to attack Mentor and to solicit stockholder support for Quickturn at the
January 8 Special Meeting. Indeed, Harding admitted that the vote at the Special
Meeting will "effectively be a mandate, yes or no, for our
Both Harding and Lobo attempted to dissuade stockholders from voting their
proxies for the Mentor slate of nominees.
According to the article, Harding said:
Mentor executives could use "psychiatric counseling" if they choose
to try and top Cadence's bid. "The first offer was half of their
business to get a company they were going to rip heart and soul out
of," he said. "If they raise the bid another $75 million, they're
unlikely to raise the cash, and now they're into issuing stock and
flirting with a bankruptcy situation."
"I think we're doing them a favor," said Harding.
"We're giving them a graceful out to a bad decision that's dragged
on too long."
According to the article, Lobo:
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expressed confidence shareholders will take a tax-free $14
per-share offer over a taxable $12.125 per-share bid, especially
since Cadence is a company with "enormous demonstrated growth."
Mentor, he said, would have to "decimate half the company" to buy
Quickturn.
MENTOR'S REVISED TENDER OFFER
33. On December 28, 1998, Purchaser announced an increase in its
offering price in the Tender Offer to $14.00 cash per share and a reduction in
the number of shares being sought to 2,100,000. Together with the shares already
owned by plaintiffs, the revised Tender Offer would result in plaintiffs owning
a total of 14.9% of Quickturn's outstanding stock, the maximum amount that can
be acquired without triggering Quickturn's poison pill. Mentor plans to seek to
negotiate a merger agreement with Quickturn to acquire the balance of the shares
at the same cash price paid in the revised Tender Offer. Mentor further stands
ready to consider increasing its offer price and the price to be paid in a
negotiated merger if negotiation and due diligence demonstrate greater value. In
the event Mentor is successful in invalidating all or any portion of the
break-up fees under the Cadence Merger Agreement and Mentor can negotiate a
merger agreement with Quickturn, Mentor intends to pay all Quickturn
stockholders whose shares are converted under the merger an amount per share
equal to a portion of the break-up fees. The revised Mentor Tender Offer is no
longer subject to the satisfaction of the Minimum Condition, the Section 203
Condition, the HSR Condition or the Rights Condition described in the initial
offer to purchase issued in connection with the Tender Offer.
34. The Special Meeting is still scheduled for January 8, 1999. If
Mentor's nominees are elected as directors of Quickturn, Mentor would encourage
the nominees to, subject to their fiduciary duties as directors under applicable
law and in accordance with Quickturn's rights under the Cadence Merger
Agreement, (i) seek to auction Quickturn to the highest bidder; (ii)
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allow any bidder, including Mentor, promptly to conduct a due diligence review
of Quickturn; and (iii) seek to execute a merger agreement with the highest
bidder. Mentor anticipates that any such merger agreement could be executed
within 30 days of the nominees being elected as directors of Quickturn.
COUNT I
(For Violation of Section 14(d) of the Exchange Act,
Rule 14d-9 promulgated thereunder and Schedule 14D-9)
35. Plaintiffs repeat and reallege the above paragraphs as if set forth
herein.
36. Rule 14d-9, 17 C.F.R. Section 240.14d-9, promulgated by the SEC
pursuant to Section 14(d) of the Exchange Act, requires the target company to
file with the SEC a Schedule 14D-9 containing certain information, including,
among other things, the nature of the target company's solicitation or
recommendation in response to a tender offer, particularized reasons for the
solicitation or recommendation, and recent transactions in respect of the
target company's securities by the target company or by its officers and
directors.
37. Item 7 of Schedule 14D-9 (17 C.F.R. Section 240.14d-101) requires
particularized disclosure regarding any negotiations between the target and any
third party with respect to a merger or other extraordinary transaction:
CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY. (a)
If the person filing this statement is the subject company, state
whether or not any negotiation is being undertaken or is underway
by the subject company in response to the tender offer which
relates to or would result in:
(1) An extraordinary transaction such as a merger or
reorganization, involving the subject company or any subsidiary of
the subject company;
(2) A purchase, sale or transfer of a material amount of
assets by the subject company or any subsidiary of the subject
company;
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(3) A tender offer for or other acquisition of securities
by or of the subject company; or
(4) Any material change in the present capitalization or
dividend policy of the subject company.
Instruction: If no agreement in principle has yet been
reached, the possible terms of any transaction or the parties
thereto need not be disclosed if in the opinion of the Board of
Directors of the subject company such disclosure would jeopardize
continuation of such negotiations. In such event, disclosure that
negotiations are being undertaken or are underway and are in the
preliminary stages will be sufficient.
(b) Describe any transaction, board resolution, agreement
in principle, or a signed contract in response to the tender offer,
other than one described pursuant to Item 3(b) of this statement,
which relates to or would result in one or more of the matters
referred to in Item 7(a)(1), (2), (3) or (4).
In addition, Item 8 of Schedule 14D-9, 17 C.F.R. Section 240.14d-101, requires
Quickturn to "[f]urnish such additional information, if any, as may be necessary
to make the required statements, in light of the circumstances under which they
are made, not materially misleading."
38. In violation of Section 14(d) of the Exchange Act, Rule 14d-9
promulgated thereunder, and Schedule 14D-9, Quickturn's Schedule 14D-9
amendments filed with the SEC and disseminated to stockholders prior to December
9, 1998 (including at least amendment nos. 23-25), contain the following
material misstatements and omissions:
- They failed to disclose Quickturn's reversal of its
position that it would be in the best interest of
stockholders for Quickturn to remain independent and to
pursue its long-term business plan.
- They failed to disclose that Quickturn had made contact
with Cadence, had given Cadence due diligence, and had
begun to negotiate regarding an acquisition by Cadence.
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- They failed to disclose that Mentor was mislead and shut
out of the bidding in favor of Cadence.
39. In violation of Section 14(d) of the Exchange Act, Rule 14d-9
promulgated thereunder, and Schedule 14D-9, Quickturn's Schedule 14D-9 amendment
no. 26 filed with the SEC and disseminated to stockholders on December 9, 1998
contains the following material misstatements and omissions:
- It failed to provide full disclosure regarding the reasons
of Quickturn and its Board for accepting the Cadence Merger.
- It stated that H&Q had opined that the Cadence Merger would
be "fair from a financial point of view" to Quickturn
stockholders, but failed to disclose the opinion itself, or
"the qualifications and limitations" on H&Q's opinion.
Moreover, given H&Q's earlier opinion that Mentor's $12.125
offer was inadequate even though its was within or above the
artificially inflated ranges contained in H&Q's analyses in
August, 1998, Quickturn violated the letter and spirit of
Item 8 of Schedule 14D-9 by failing to disclose the analysis
underlying H&Q's conclusion that Cadence's $14 bid -- only
15 percent higher than Mentor's bid -- was "fair".
40. The misstatements and omissions described above are intentionally
materially misleading because Quickturn refuses to include in its disclosures
information necessary to make the information selectively disclosed not
misleading. Such a course of conduct not only violates Section 14(d) of the
Exchange Act, Rule 14d-9 and Schedule 14D-9 promulgated thereunder, but is
intentionally designed to confuse and mislead Quickturn shareholders.
Quickturn's
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inequitable conduct violates public policy and will, unless enjoined, cause
irreparable injury to Mentor and other Quickturn stockholders.
41. By reason of the foregoing, plaintiffs, all other Quickturn
stockholders and the investing public have been and are being irreparably harmed
because they are being deprived of, and/or mislead as to, material information
required to be publicly, accurately and fully disclosed by Quickturn under
applicable law, and Quickturn stockholders and the investing public are being
mislead by materially false information disseminated by Quickturn.
42. Plaintiffs have been further irreparably harmed because Quickturn's
failure timely to disclose its negotiations with Cadence denied plaintiffs the
opportunity to make a competing bid. Unless enjoined, the Breakup Fees and
No-Shop Clause of the Cadence Merger Agreement will substantially impair
plaintiffs' ability to make a competing bid for Quickturn.
43. Plaintiffs have no adequate remedy at law.
COUNT II
(For Violation of Section 14(e) of the Exchange Act)
44. Plaintiffs repeat and reallege the above paragraphs above as if set
forth herein.
45. Section 14(e) of the Exchange Act, 15 U.S.C. Section 78n(e),
makes it "unlawful for any person to make any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statement made, in light of the circumstances under which they are made, not
misleading, or to engage in any fraudulent, deceptive, or manipulative acts
or practice in connection with any tender offer."
46. Quickturn's actions since August 12, 1998 demonstrate that it will
pursue any means at its disposal to avoid being acquired by Mentor, even if this
requires Quickturn to ignore its disclosure obligations and to harm Quickturn's
stockholders and the investing public.
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Quickturn failed to disclose its discussions with Cadence, even though it filed
three amendments to its Schedule 14D-9 between December 3 and 8, 1998, because
Quickturn knew that any such disclosure would prompt Mentor to submit a
competing bid and likely force Quickturn to accept Mentor's acquisition
proposal.
47. In violation of Section 14(e) of the Exchange Act, Quickturn failed
to timely disclose that Quickturn had reversed its position that it would be in
the best interest of stockholders for Quickturn to remain independent and to
pursue its long-term business plan; that Quickturn had made contact with
Cadence, had given Cadence due diligence, and had begun to negotiate regarding
an acquisition by Cadence; and that Mentor was mislead and shut out of the
bidding in favor of Cadence.
48. In violation of Section 14(e) of the Exchange Act, Quickturn stated
that H&Q had opined that the Cadence Merger would be "fair from a financial
point of view" to Quickturn stockholders, but failed to disclose the analysis
underlying the opinion, or "the qualifications and limitations" on H&Q's
opinion. On information and belief, disclosure of the analysis underlying H&Q's
opinion that Cadence's $14 per share offer is "fair" would reveal that the
opinion is irreconcilable with H&Q's earlier opinion that Mentor's $12.125 bid
was inadequate, or that H&Q had no reasonable basis for its earlier opinion that
Mentor's bid was inadequate.
49. Quickturn's disclosure is intentionally materially misleading
because Quickturn refuses to include in its disclosures information necessary to
make the information selectively disclosed not misleading. This course of
conduct not only violates Section 14(e) of the Exchange Act, but is
intentionally designated to confuse and mislead Quickturn shareholders.
Quickturn's inequitable conduct violates public policy and will, unless
enjoined, cause irreparable injury to Mentor and other Quickturn stockholders.
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50. Plaintiffs, all other Quickturn stockholders and the investing
public have been and are being irreparably harmed because they are being
deprived of, and/or mislead as to, material information required to be publicly,
accurately and fully disclosed by Quickturn under applicable law, and Quickturn
stockholders and the investing public are being mislead by materially false
information disseminated by Quickturn.
51. Plaintiffs have been further irreparably harmed because Quickturn's
failure timely to disclose its negotiations with Cadence denied plaintiffs the
opportunity to make a competing bid. The Breakup Fees and No-Shop Clause of the
Cadence Merger Agreement will substantially impair plaintiffs' ability to make a
competing bid for Quickturn.
52. Plaintiffs have no adequate remedy at law.
COUNT III
(For Violation of Exchange Act Section 14(a) and Rule 14a-9
Promulgated Thereunder)
53. Plaintiffs repeat and reallege the above paragraphs as if set forth
herein.
54. Section 14(a) of the Exchange Act, 15 U.S.C. Section 78n(a), and
the rules and regulations promulgated thereunder by the SEC, require that a
person soliciting an authorization with respect to any registered security
file and disclose certain specific information with respect to the
solicitation. Any such solicitor must disclose, among other things, its
identity, the date, time and place of the meeting at which the proposed
action will be taken, and any substantial interest of the solicitor in the
matters to be acted upon. In addition, Rule 14a-9, 17 C.F.R. Section
240.14a-9, promulgated by the SEC under Section 14(a) of the Exchange Act,
provides that
"[n]o solicitation subject to this regulation shall be made . . .
containing any statement of which, at the time and in the light of the
circumstances under which it is made, is false or misleading with
respect to any material fact, or which omits to state any material fact
necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier
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communication with respect to the solicitation of a proxy for the same
meeting or subject matter which has become false or misleading."
55. In violation of Section 14(a) and Rule 14a-9 promulgated
thereunder, Quickturn's amendments to its proxy statements filed with the SEC
and disseminated to stockholders on December 3, 4 and 8, 1998, contained the
following material misstatements and omissions.
- They failed to disclose Quickturn's reversal of its
position that it would be in the best interest of
stockholders for the company to remain independent and to
pursue its long-term business plan.
- They failed to disclose that Quickturn had made contact
with Cadence, had given Cadence due diligence, and had
begun to negotiate with respect to an acquisition.
- They failed to disclose that Mentor had been mislead and
shut out of the bidding in favor of Cadence.
56. In violation of Section 14(a) and Rule 14a-9 promulgated
thereunder, Quickturn's amendment to its proxy materials filed on December 9,
1998 contained the following material misstatements and omissions.
- It failed to disclose adequately how the Cadence Merger
would benefit stockholders.
- It stated that H&Q had opined that the Cadence Merger
would be "fair from a financial point of view" to
Quickturn stockholders, but failed to disclose "the
qualifications and limitations" on H&Q's opinion.
Moreover, given H&Q's earlier opinion that Mentor's
$12.125 offer was inadequate even though its was within or
above the artificially inflated ranges contained in H&Q's
analysis in August, 1998, Quickturn was
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required to disclose the analyses underlying H&Q's
conclusion that Cadence's $14 bid -- only 15 percent
higher than Mentor's bid -- was "fair".
57. In addition, Quickturn, Cadence, Lobo and Harding made the
statements referred to in paragraph 32 above with the intention and design to
solicit proxies for the Special Meeting of Quickturn stockholders set for
January 8, 1999, and to influence the outcome of the Special Meeting. These
statements were published over the Internet and to wire services on or about
December 10, 1998, and in print on or about December 14, 1998. These statements
were made with the intent and knowledge that they be published and disseminated
widely to stockholders.
58. The statements described above are intentionally materially
misleading because Quickturn refuses to include in its disclosures information
necessary to make the information selectively disclosed not misleading. This a
course of conduct not only violates Section 14(a) of the Exchange Act and Rule
14a-9 promulgated thereunder but is intentionally designed to confuse and
mislead Quickturn shareholders. Quickturn's inequitable conduct violates public
policy and will, unless enjoined, cause irreparable injury to Mentor and other
Quickturn stockholders.
59. Plaintiffs, other Quickturn stockholders and the investing public
have been and are being irreparably harmed because they are being deprived of,
and/or mislead as to, material information required to be publicly, accurately
and fully disclosed by Quickturn under applicable law, and Quickturn
stockholders and the investing public are being mislead by materially false
information disseminated by Quickturn.
60. Unless injunctive relief issues, plaintiffs will be irreparably
harmed because defendants' materially misleading statements will have a
substantial impact on the voting at the
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Special Meeting, with the result of substantially impairing plaintiffs' ability
to elect the directors they favor.
61. Plaintiffs have no adequate remedy at law.
COUNT IV
(For Declaratory Relief)
62. Plaintiffs repeat and reallege the above paragraphs as if set forth
herein.
63. The Declaratory Judgment Act, 28 U.S.C. Section 2201, provides that
"[i]n a case of actual controversy within its jurisdiction, . . . any court of
the United States, upon the filing of an appropriate pleading, may declare the
rights and other legal relations of any interested party seeking such
declaration." Plaintiffs are entitled to a declaratory judgment that their
Schedule 14D-1 filings and all amendments thereto, the Agent Solicitation
Materials and all amendments thereto, and the Mentor Proxy Statement and all
amendments thereto (collectively, "Mentor's SEC Filings") are proper and comply
with all applicable securities laws, rules and regulations.
64. Although the Proposed Acquisition is fairly and attractively
priced, Quickturn has acted to thwart and delay plaintiffs' lawful attempts to
consummate the Tender Offer. Quickturn's efforts to delay and defeat the Tender
Offer include the filing of a meritless cross-complaint and amendments thereto
claiming that public disclosures and filings made by plaintiffs in conjunction
with the Tender Offer, the Agent Solicitation and the Special Meeting violate
applicable federal securities laws and regulations. Thus, there is a substantial
controversy between parties having adverse interests which is of sufficient
immediacy and reality to warrant the issuance of a declaratory judgment.
65. In the absence of declaratory relief, plaintiffs will suffer
irreparable harm. As evidenced by the course of action that Quickturn has
pursued to date and the actions taken generally by companies that receive
unsolicited acquisition proposals, Quickturn has defended,
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and likely will continue to defend, against the Proposed Acquisition, the Agent
Solicitation and the Special Meeting by, among other things, filing false claims
designed to delay or defeat the Proposed Acquisition, the Agent Solicitation and
the Special Meeting. A declaratory judgment that the disclosures in the Mentor
SEC Filings comply with all applicable federal laws will serve the purpose of
adjudicating the interests of the parties, resolving any complaints concerning
the propriety of the Tender Offer, the Agent Solicitation or the Special Meeting
under federal law, and permitting an otherwise lawful transaction to proceed.
66. Plaintiffs therefore request pursuant to the Declaratory Judgment
Act, 28 U.S.C. Sections 2201 and 2202, that this Court enter a declaratory
judgment that the Mentor SEC Filings (and similar filings in the future) comply
fully with all applicable provisions of law.
WHEREFORE, plaintiffs respectfully request that this Court:
a. declare that Quickturn has violated Sections 14(a), 14(d) and
14(e) of the Exchange Act and Rule 14d-9, and that Cadence, Lobo and Harding
have violated Section 14(a) and Rule 14a-9;
b. compel Quickturn to comply with the requirements of the Exchange
Act and the rules promulgated thereunder, and compel Quickturn to file
immediately an amended Schedule 14D-9 which is complete and accurate and which
corrects the misleading and untrue statements in its Schedule 14D-9;
c. preliminarily and permanently enjoin defendants and their
agents, employees and anyone acting on its behalf, from making any false or
misleading statements with respect to the Tender Offer;
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d. compel defendants and their agents, employees and anyone acting
on its behalf to correct their deceptive statements, and to order them to make
no such deceptive statements in the future;
e. enjoin the performance and enforcement of the Cadence Merger
Agreement, including the Lockup Option, the Breakup Fees and the No-Shop
Provisions, and all related agreements;
f. declare void all proxies transmitted to Quickturn (including
revocations of proxies previously granted to Mentor) between the date Quickturn
commenced negotiations with Cadence and the date which is ten business days
after Quickturn makes corrective disclosures;
g. declare that plaintiffs have disclosed all information required
by, and are otherwise in all respects in compliance with, all applicable laws
and other obligations, including, without limitation, Sections 14(a), 14(d) and
14(e) of the Exchange Act and any other federal securities laws, rules or
regulations deemed or claimed to be applicable to the Mentor SEC Filings, as
well as any other related materials or similar materials filed in the future;
h. award plaintiffs their costs and disbursements in this action,
including reasonable attorneys' fees; and
i. grant plaintiffs such other and further relief as this Court may
deem just and proper.
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Of Counsel:
-------------------------------
Kevin G. Abrams (ID #2375)
Fredric J. Zepp Thomas A. Beck (ID #2086)
Heidi E. Klein Lisa A. Schmidt (#3019)
Latham & Watkins J. Travis Laster (ID #3514)
505 Montgomery Street Leanne J. Reese (ID #3690)
San Francisco, CA 94111 Richards, Layton & Finger
(415) 391-0600 One Rodney Square
P. O. Box 551
Marc W. Rappel Wilmington, DE 19899
Latham & Watkins (302) 658-6541
633 West Fifth Street, Ste 4000 Attorneys for Plaintiffs
Los Angeles, CA 90071
(213) 485-1234
Dated: December 28, 1998
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