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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 14D-9
(AMENDMENT NO. 7)
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Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
QUICKTURN DESIGN SYSTEMS, INC.
(Name of Subject Company)
QUICKTURN DESIGN SYSTEMS, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(including the associated preferred stock purchase rights)
(Title of Class of Securities)
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74838E102
(CUSIP Number of Class of Securities)
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KEITH R. LOBO
PRESIDENT AND CHIEF EXECUTIVE OFFICER
QUICKTURN DESIGN SYSTEMS, INC.
55 W. TRIMBLE ROAD
SAN JOSE, CALIFORNIA 95131
(408) 914-6000
(Name, address and telephone number of person authorized to receive
notice and communications on behalf of person(s) filing statement)
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COPY TO:
LARRY W. SONSINI, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(650) 493-9300
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INTRODUCTION
The Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") originally filed on August 24, 1998, by Quickturn Design Systems,
Inc., a Delaware corporation (the "Company" or "Quickturn"), relates to an
offer by MGZ Corp., a Delaware corporation ("MGZ") and a wholly owned
subsidiary of Mentor Graphics Corporation, an Oregon corporation ("Mentor"),
to purchase all of the outstanding shares of the common stock, par value $.001
per share (including the associated preferred stock purchase rights), of the
Company. All capitalized terms used herein without definition have the
respective meanings set forth in the Schedule 14D-9.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The response to Item 8 is hereby amended by adding the following to the end
of the last paragraph of the section entitled "Patent Litigation with Mentor":
On September 21, 1998, the Company announced that it received a payment
from Mentor which included, among other things, an amount of $425,000 to
cover the cost of sanctions imposed on Mentor by the ITC. The ITC imposed
its sanctions against Mentor for improperly withholding critical technical
information and for advancing defenses based on "inaccurate and misleading"
evidence in connection with the Company's successful defense of several of
its patents. A copy of the Company's press release announcing the receipt
of this payment is filed as Exhibit 30 hereto and is incorporated herein by
reference.
The response to Item 8 is hereby amended further by adding the following to
the end of the section entitled "Proxy Solicitation":
On September 21, 1998, the Company filed definitive proxy solicitation
materials with the SEC in connection with the Board of Directors'
solicitation of proxies in opposition to the solicitation by Mentor and MGZ
of proxies to be used at a special meeting of stockholders of the Company
and any adjournments and postponements thereof pursuant to a proxy
statement of Mentor dated September 11, 1998, as supplemented. A copy of
such definitive proxy solicitation materials is filed as Exhibit 31 hereto
and is incorporated herein by reference. The Company intends to commence
solicitation of proxies promptly.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
The response to Item 9 is hereby amended by the addition of the following
new exhibits:
<TABLE>
<C> <S>
Exhibit 30 Press Release of the Company dated September 21, 1998.
Exhibit 31 Definitive Proxy Solicitation Materials
</TABLE>
2
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SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
<TABLE>
<C> <S>
Dated: September 21, 1998 QUICKTURN DESIGN SYSTEMS, INC.
</TABLE>
By:/s/ Keith R. Lobo
----------------------------------
Keith R. Lobo
President and Chief Executive
Officer
3
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EXHIBIT 30
CONTACTS:
QUICKTURN DESIGN SYSTEMS, INC. ABERNATHY MACGREGOR FRANK
Joan Powell Pauline Yoshihashi
Director, Marketing Communications (213) 630-6550
(408) 914-6701 Judy Wilkinson
[email protected] (212) 371-5999
FOR IMMEDIATE RELEASE
QUICKTURN RECEIVES FROM MENTOR GRAPHICS $425,000 IN SANCTIONS
SAN JOSE, CALIF.--September 21, 1998--Quickturn Design Systems, Inc.
(Nasdaq:QKTN) announced today that it has received payment from Mentor Graphics
Corporation (Nasdaq:MENT) which included, among other things, an agreed-upon
amount of $425,000 for sanctions imposed on Mentor by the United States
International Trade Commission (ITC). The ITC imposed its sanctions against
Mentor for improperly withholding critical technical information and for
advancing defenses based on "inaccurate and misleading" evidence in connection
with Quickturn's successful defense of several of its patents. The
administrative law judge in the case determined that Mentor's "continuing
pattern of bad faith discovery conduct [was] designed to needlessly increase the
cost of litigation for" Quickturn and the Court. The administrative law judge
further stated that Mentor's defenses based on its "false and misleading
evidence. . . were, at a minimum, `thoughtless, reckless and harassing.'"
In December 1997, the ITC issued a Permanent Limited Exclusion Order
against Mentor permanently prohibiting Mentor and Meta Systems, a French
subsidiary of Mentor, from importing their manufactured hardware logic emulation
system, subassemblies or components, which infringe Quickturn's patents. The
ITC also issued in December 1997 a Permanent Cease and Desist Order permanently
prohibiting Mentor from, among other things, selling, offering for sale or
advertising the same hardware logic emulation devices. The ITC's two orders
remain in effect until April 28, 2009.
Quickturn Design Systems, Inc. is the leading provider of verification
products and time-to-market engineering (TtME/TM/) services for the design of
complex ICs and electronic systems. The company's products are used worldwide by
developers of high-performance computing, multimedia, graphics and
communications systems. Quickturn is headquartered at 55 W. Trimble Road, San
Jose, CA 95131-1013; Telephone: 408/914-6000. For more information, visit the
Quickturn Web site at www.quickturn.com or send e-mail to [email protected].
# # #
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QUICKTURN DESIGN SYSTEMS, INC.
55 WEST TRIMBLE ROAD
SAN JOSE, CALIFORNIA 95131
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SPECIAL MEETING OF STOCKHOLDERS
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PROXY STATEMENT
BY
THE BOARD OF DIRECTORS OF QUICKTURN DESIGN SYSTEMS, INC.
SOLICITING PROXIES IN OPPOSITION TO THE
SOLICITATION OF PROXIES BY MENTOR GRAPHICS CORPORATION AND MGZ CORP.
----------------
This Proxy Statement (the "Statement") is furnished by the Board of
Directors (herein referred to as the "Board" or the "Board of Directors") of
Quickturn Design Systems, Inc., a Delaware corporation (the "Company"), to the
holders of outstanding shares of the Company's Common Stock, $0.001 par value
(the "Shares"), in connection with the Board's solicitation of proxies in
opposition to the solicitation (the "Mentor Solicitation") by Mentor Graphics
Corporation, an Oregon corporation ("Mentor"), and MGZ Corp., a Delaware
corporation and a wholly owned subsidiary of Mentor ("MGZ"), pursuant to a
Proxy Statement of Mentor and MGZ (the "Mentor Proxy Statement") dated
September 11, 1998, of proxies to be used at a special meeting of stockholders
of the Company called by Mentor and any adjournments and postponements thereof
(the "Special Meeting").
Although Mentor purports to have called a special meeting for October 29,
1998, the validity and legality of Mentor's attempt to call the Special
Meeting and Mentor's ability to set the record date, place and time of the
Special Meeting are currently the subject of litigation between the Company
and Mentor. Hearings on these matters are currently scheduled for October
1998. See "Certain Legal Proceedings." Subject to the resolution of certain of
these matters in this litigation, the Board shall schedule the date for the
Special Meeting pursuant to the Company's bylaws (the "Bylaws"), which provide
that the Board shall determine a time for the Special Meeting which is not
less than 90 nor more than 100 days after the receipt and determination of the
validity of a request for such Special Meeting.
YOUR BOARD OF DIRECTORS OPPOSES THE MENTOR SOLICITATION AND URGES YOU NOT TO
SIGN OR RETURN ANY GOLD PROXY CARDS SENT TO YOU BY MENTOR OR MGZ.
Proxies are being solicited by your Board in order to prevent Mentor and MGZ
from taking control of the Company. At the Special Meeting, stockholders will
be asked to consider and vote upon four proposals by Mentor and MGZ (the
"Mentor Proposals"). We urge you to join us in opposing (i) the proposed
removal of all of the current members of the Board (the "Removal Proposal");
(ii) the proposed amendment of the Company's Bylaws to reduce the number of
directors of the Company to five (the "Bylaw Amendment Proposal"); (iii) the
election of five Mentor nominees to the Board (the "Election Proposal"); and
(iv) the proposed repeal of certain amendments to the Company's Bylaws (the
"Bylaw Repeal Proposal"), each as described in the Mentor Proxy Statement.
This Statement and the enclosed form of Proxy Revocation are first being
sent or given to stockholders on or about September 21, 1998.
The Board of Directors believes that the Mentor Proposals are in furtherance
of Mentor's attempt to acquire the Company by means of an unsolicited tender
offer to acquire all outstanding Shares at a purchase price of $12.125 per
Share (the "Mentor Offer") followed by a proposed second-step merger (the
"Mentor Proposed Transaction"). See "Background of the Special Meeting."
THE BOARD HAS DETERMINED THAT THE MENTOR OFFER IS INADEQUATE AND NOT IN THE
BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS. THE BOARD OF DIRECTORS
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OPPOSES THE MENTOR PROPOSALS AND URGES YOU TO (A) SIGN, DATE AND RETURN THE
ENCLOSED BLUE PROXY REVOCATION CARD TO VOTE AGAINST THE MENTOR PROPOSALS AND
(B) DISCARD ANY GOLD PROXY CARD SENT TO YOU BY MENTOR AND MGZ.
WHETHER OR NOT YOU HAVE PREVIOUSLY EXECUTED A GOLD PROXY CARD, THE BOARD OF
DIRECTORS URGES YOU TO SIGN, DATE, AND DELIVER THE ENCLOSED BLUE PROXY CARD AS
PROMPTLY AS POSSIBLE, BY FAX OR BY MAIL (USING THE ENCLOSED ENVELOPE), TO
MORROW & CO., INC., 445 PARK AVENUE, NEW YORK, NEW YORK, 10022, FAX: (212)
754-8362.
IF YOU HAVE PREVIOUSLY SIGNED AND RETURNED A GOLD PROXY CARD TO MENTOR AND
MGZ, YOU HAVE EVERY RIGHT TO CHANGE YOUR MIND. WHETHER OR NOT YOU SIGNED THE
GOLD PROXY CARD SENT TO YOU BY MENTOR AND MGZ, THIS BOARD OF DIRECTORS URGES
YOU TO REJECT THE MENTOR PROPOSALS BY SIGNING, DATING AND RETURNING THE
ENCLOSED BLUE PROXY CARD BY FAX OR IN THE POSTAGE-PAID ENVELOPE PROVIDED.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR PROXY IS IMPORTANT. PLEASE
ACT TODAY.
IF YOUR SHARES ARE HELD IN THE NAME OF A BANK, BROKER OR OTHER NOMINEE, WE
URGE YOU TO CONTACT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND DIRECT HIM OR
HER TO REVOKE ANY GOLD PROXY CARDS THAT MAY HAVE BEEN CAST AND TO EXECUTE AND
RETURN A BLUE PROXY CARD ON YOUR BEHALF.
If you have any questions concerning the Company's solicitation of BLUE
Proxy Cards, or Mentor and MGZ's solicitation of gold proxy cards, please
contact our information agent:
MORROW & CO., INC.
445 PARK AVENUE
NEW YORK, NEW YORK 10022
OR
CALL TOLL-FREE: (800) 566-9061
FAX: (212) 754-8300
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BACKGROUND OF THE SPECIAL MEETING
Prior to August 11, 1998, there had been no discussions between the Company
and Mentor regarding a potential business combination for more than two years.
At approximately 7:00 pm P.D.T. on August 11, 1998, Mr. Raymond Ostby, Chief
Financial Officer of the Company, received a telephone call from a Wall Street
Journal reporter requesting comment on an advertisement which was scheduled to
appear the next morning, commencing the Mentor Offer. Mr. Ostby declined to
comment. Later that evening, Mr. Glen Antle, Chairman of the Board was given a
letter by Mr. Walden Rhines, Chief Executive Officer and President of Mentor,
stating the principal terms of the Mentor Offer. Mr. Rhines asked Mr. Antle to
accept the Mentor Offer. Mr. Antle said that he was not authorized by the
Board to accept such an offer, but that he would communicate it to the
Company's Board.
On August 12, 1998, Mentor and MGZ commenced the Mentor Offer. In response,
the Company announced that the Board would study the Mentor Offer and make its
recommendation to stockholders in due course. The Company urged all its
stockholders to take no action with respect to the Mentor Offer and any
related activities until the Company's Board made its recommendation. The
Board held a meeting on each of August 13, 1998 and August 17, 1998. At such
meetings, the Board met with senior management of the Company and its
financial and legal advisors and considered the Mentor Offer and various
matters related thereto, including presentations by the Company's senior
management and financial advisers, Hambrecht & Quist LLC ("Hambrecht &
Quist"), on the terms of the Mentor Offer, the Company's financial
performance, business strategy and business plan, and certain analyses
regarding the foregoing.
On August 14, 1998, Mr. Lobo received a telephone call from Mr. Rhines. Mr.
Rhines offered to discuss the Mentor Offer with Mr. Lobo, including future
prospects for key management and employees of the Company. Mr. Lobo stated
that he would convey Mr. Rhines' comments to the Company's Board. No further
discussions between Mr. Lobo and Mr. Rhines have occurred since that time.
On or about August 20, 1998, Mentor began soliciting purported agent
designations to call the Special Meeting.
On August 21, 1998, the Board held a further meeting, at which the Board
again reviewed and considered the Mentor Offer and related matters in
consultation with its financial and legal advisors. Additional presentations
were made by the Company's senior management concerning the Company's business
plan, and by Hambrecht & Quist concerning analyses of the Mentor Offer. At the
conclusion of its presentations, Hambrecht & Quist provided to the Board its
opinion, as of August 21, 1998, that the Mentor Offer was inadequate, from a
financial point of view, to the holders of the Shares. After further review by
the Board and consideration of the interests of the Company's stockholders,
the Board determined that the Mentor Offer was inadequate and not in the best
interests of the Company's stockholders, that the Mentor 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.
In particular, the Board determined that the Company's business plan offered
the potential for obtaining higher long-term benefits for the Company's
stockholders than the Mentor Offer. This determination was based on, among
other things, the opportunities for business expansion and revenue and
earnings growth resulting from recently introduced products and from products
under development for use in the electronic design automation market and in
other related parts of the market. See "Why You Should Vote Against The Mentor
Proposals and Revoke any Gold Proxies."
On August 21, 1998 and August 25, 1998, the Board amended certain provisions
of the Company's Bylaws (the "Special Meeting Amendment") and the Company's
Preferred Shares Rights Agreement dated as of January 10, 1996 (the "Rights
Agreement Amendment"). The Special Meeting Amendment provides that, upon the
request by any stockholder entitled to call a special meeting of stockholders,
the Board shall determine a place and time for such a meeting (the time to be
not less than 90 nor more than 100 days after receipt and determination of the
validity of such request) and a record date for the determination of
stockholders entitled to vote at such a meeting. The purpose of the Special
Meeting Amendment is to add appropriate procedures and notice provisions to
ensure that the Company and its stockholders would have adequate time to
consider any proposals, including the Mentor Proposals, which may be brought
before a special meeting.
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On August 25, 1998, Quickturn filed a motion for preliminary injunction in
Delaware federal district court, challenging Mentor's solicitation of agent
designations.
On August 26, 1998, Mentor filed a motion for preliminary injunction in the
Court of Chancery of the State of Delaware, seeking to enjoin the Board from
enforcing either of the Special Meeting Amendment or the Rights Agreement
Amendment.
On September 11, 1998, Mentor purported to deliver to the Company agent
designations executed by the holders of greater than 10% of the Shares and
purported to set a date for the Special Meeting of October 29, 1998. Also on
September 11, 1998, Mentor disclosed in the Mentor Proxy Statement that it
intended to begin soliciting proxies in favor of the Mentor Proposals on or
about September 11, 1998.
Quickturn and Mentor are currently engaged in patent and other litigation
concerning matters including the Mentor Solicitation. See "Certain Legal
Proceedings" and "Certain Patent Litigation."
The purpose of the Mentor Proposals is to facilitate the consummation of the
Mentor Offer, which the current Board of Directors has determined to be
inadequate and not in the best interest of the Company and its stockholders,
and does not adequately reflect the long-term value or prospects of the
Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS NOT RETURN THE GOLD
PROXY CARD REQUESTED BY MENTOR AND MGZ. TO STOP MENTOR AND MGZ FROM USING YOUR
SHARES TO FURTHER THE MENTOR OFFER, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
(1) DISCARD ANY GOLD PROXY CARD AND (2) IF YOU HAVE ALREADY RETURNED A GOLD
PROXY CARD, SIGN, DATE AND RETURN THE ENCLOSED BLUE PROXY CARD AS SOON AS
POSSIBLE.
WHY YOU SHOULD VOTE AGAINST THE MENTOR PROPOSALS
AND REVOKE ANY GOLD PROXIES
After careful consideration of the Mentor Offer, your Board has determined
that the Mentor Offer is inadequate and not in the best interests of the
Company's stockholders, that the Mentor Offer does 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. Your Board has
recommended that stockholders reject the Mentor Offer and not tender any of
their Shares pursuant thereto.
The Mentor Offer and the Mentor Solicitation are merely attempts by Mentor
to compel stockholders to engage in a transaction with Mentor that your Board
has determined to be inadequate and not in the best interests of the Company's
stockholders. In reaching its conclusion to recommend rejection of the Mentor
Offer, the Board considered the following factors:
(i) The Board's familiarity with the business, financial condition,
prospects and business plan of the Company, the nature of the business and
markets in which the Company operates and the Board's belief that the
Mentor Offer does not adequately reflect the long-term opportunities
available to the Company in its business and the electronic design
automation market. In this regard, the Board particularly considered the
following:
. The Company's established position as the leading provider of emulation
technology and a leader in cycle-based simulation, for the integrated
circuit design verification market, as well as its reputation in the
industry as a technological leader and innovator in this area. In this
regard, the Board noted that the Company has supplied more than 80% of
the installed base of emulation systems worldwide.
. The Company's prospects for future growth based upon its current and
future product plans, including the recently introduced Mercury(TM)
Design Verification System, which offers substantially improved
performance and ease of use, as well as the Company's additional products
and enhancements planned for introduction at appropriate intervals over
the next few years.
. The Company's proven technical expertise, reflected in an estimated 4,000
completed customer design projects and developed over years of activity
in the design verification market.
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. The Company's expenditures of over $60 million on research and
development in the past three years, leading to current and future
planned products.
. The Company's strong intellectual property position, including 25 issued
United States patents, 25 pending United States patent applications and
numerous international patents and patent application filings.
. The Company's reputation for high-quality worldwide customer service and
support resulting in the completion of an estimated 4,000 customer design
projects.
. The Company's acknowledged strength in the sale and implementation of
emulation products.
. The Company's acknowledged high-quality manufacturing infrastructure.
. Anticipated growth in demand for emulation and cycle-based simulation
resulting from continuing substantial increases in semiconductor design
complexity.
. Current conditions in the Company's business and markets, including the
current adverse economic conditions in Asia, which have had a substantial
effect upon the Company's recent quarterly financial performance and
recent stock price.
. The risks and assumptions inherent in achieving the Company's business
plan.
(ii) The historical trading prices of the Company's Common Stock, including
the Board's belief, based in part on the factors referred to above, that
the trading price for the Company's Common Stock immediately prior to
commencement of the Mentor Offer did not fully reflect the long-term value
inherent in the Company. In this regard, the Board noted that, as of the
Mentor Offer, the Mentor Offer represented a more than 25% discount from
the highest closing price of the Common Stock during the year preceding the
Mentor Offer and a less than 4% premium over the average of the closing
prices of the Common Stock during the same period.
(iii) The analyses performed by Hambrecht & Quist concerning, among other
things, the Company's historical and projected financial performance and
consequent implied valuations of the Company; Mentor's historical financial
performance; projected pro forma financial results for Mentor were the
Mentor Offer to be successful; comparisons of the terms of the Mentor
Offer, premium and the implied valuation of the Company to those in other
comparable transactions; and the trading histories of Mentor and the
Company.
(iv) The written opinion, dated August 21, 1998, of Hambrecht & Quist that,
the Mentor Offer was inadequate, from a financial point of view, to the
holders of the shares. In rendering such opinion, Hambrecht & Quist
reviewed and performed various analyses including those set forth in (iii)
above. The full text of such opinion is attached hereto as annex 1.
(v) The history of extensive patent litigation between the Company and
Mentor, which has to date affirmed the validity of the Company's key
patents and has resulted, among other things, in the issuance by the United
States International Trade Commission (the "ITC") of a permanent limited
exclusion order against Mentor prohibiting Mentor from importing into the
United States certain integrated circuit emulation systems, subassemblies
and components manufactured by Mentor and its affiliate which infringe the
Company's patents; the issuance by the ITC of a permanent cease and desist
order permanently prohibiting Mentor from, among other things, selling,
offering for sale or advertising such emulation systems, subassemblies and
components in the United States; and the granting by the Federal District
Court for the District of Oregon of the Company's motion for a preliminary
injunction against Mentor's United States emulation activities. In this
regard, the Board noted that the grant of the foregoing motion for a
preliminary injunction had been affirmed by the United States Court of
Appeals for the Federal Circuit on August 5, 1998 -- seven days prior to
Mentor's commencement of the Mentor Offer.
(vi) The disruptive effect of the Mentor Offer on the Company's sales
efforts with its customers, as well as on the Company's relationships with
its suppliers and employees.
(vii) The Board's commitment to acting in the best interests of and
protecting the Company's stockholders.
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In view of the wide variety of factors considered in connection with its
evaluation of the Mentor Offer, the Board did not find it practicable to, and
did not, quantify or otherwise attempt to assign relative weights to the
specific factors considered in reaching its respective determinations.
IN LIGHT OF THE BOARD OF DIRECTORS' CONCLUSIONS THAT THE MENTOR OFFER IS
INADEQUATE, IS NOT IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS,
AND DOES NOT ADEQUATELY REFLECT THE LONG-TERM VALUE OR PROSPECTS OF THE
COMPANY, THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS NOT RETURN THE
GOLD PROXY CARD REQUESTED BY MENTOR AND MGZ.
IN ORDER TO STOP MENTOR AND MGZ FROM USING YOUR SHARES TO FURTHER THE MENTOR
OFFER, WHICH YOUR BOARD HAS DETERMINED TO BE INADEQUATE, PLEASE MARK, SIGN AND
DATE THE ENCLOSED BLUE PROXY CARD AND RETURN IT TO QUICKTURN DESIGN SYSTEMS,
INC., c/o MORROW & CO., 445 PARK AVENUE, NEW YORK, NEW YORK 10022, FAX (212)
754-8362. EXECUTION AND RETURN OF THE BLUE PROXY CARD IS INDEPENDENT OF ANY
DECISION BY YOU TO TENDER YOUR SHARES PURSUANT TO THE MENTOR OFFER AND WILL
NOT PRECLUDE YOU FROM ATTENDING ANY SPECIAL MEETING, IF HELD, OR FROM VOTING
IN PERSON.
THE SPECIAL MEETING
RECORD DATE AND OUTSTANDING SHARES; QUORUM
Only holders of record as of the close of business on the record date of the
Special Meeting will be entitled to vote at the Special Meeting. Pursuant to
Section 2.3 of Article II of the Bylaws of the Company, a special meeting may
be called by written request of one or more stockholders holding shares in the
aggregate entitled to cast not less than ten percent of the votes at such
meeting. The Bylaws further provide that, upon receipt of a valid request, the
Board of Directors shall determine a place and time for such meeting and shall
set a record date to determine which stockholders are entitled to vote at such
a meeting. Pursuant to Section 2.12 of Article II of the Bylaws of the
Company, the record date may not be more than 60 nor less than 10 days before
the date of the special meeting (the "Record Date"). Pursuant to Section 2.3
of Article III of the Bylaws, the Board shall determine a time for the special
meeting that is not less than 90 nor more than 100 days after receipt and
determination of the validity of the request for such meeting.
Although Mentor purports to have called a special meeting for October 29,
1998, the validity and legality of Mentor's attempt to call the Special
Meeting and Mentor's ability to set the Record Date, place and time of the
Special Meeting are currently the subject of litigation between the Company
and Mentor. Hearings on these matters are currently scheduled for October
1998. See "Certain Legal Proceedings." Subject to the resolution of certain of
these matters in this litigation, the Board shall set the Record Date, time
and place for the Special Meeting pursuant to the Company's Bylaws.
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, then either the chairman of the meeting or the
stockholders entitled to vote thereat, 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" (shares of stock held of record by a broker as to which no
discretionary authority or voting directions exist) will be counted as Shares
that are present and entitled to vote for purposes of determining the presence
of a quorum.
VOTES REQUIRED
Each stockholder is entitled to one vote for each Share held. Stockholders
do not have the right to cumulate votes in the election of directors. In
connection with the Removal Proposal, pursuant to Section 141(k) of the
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Delaware General Corporation Law (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 Removal Proposal. In connection with the Election
Proposal, pursuant to Section 216 of the DGCL, directors will be elected by a
plurality of the votes cast by stockholders at the Special Meeting. Since
votes are cast in favor of or withheld from each nominee, abstentions and
broker non-votes will have no effect on the outcome of the Election Proposal.
The Bylaw Amendment Proposal and the Bylaw Repeal Proposal (collectively, the
"Bylaw Proposals") each require the affirmative vote of a majority of the
Shares present in person or represented by proxy and entitled to vote at the
Special Meeting. Accordingly, assuming a quorum is present at the Special
Meeting, abstentions have the same effect as votes cast against the Bylaw
Proposals, while broker non-votes are not included in the total number of
votes cast on a Bylaw Proposal and therefore will not be counted for
determining whether the Bylaw Proposal has been approved. All votes will be
tabulated by the inspector of election appointed for the meeting, who will
separately tabulate affirmative and negative votes, abstentions and broker
non-votes.
REVOCATION OF PROXIES
The BLUE Proxy Card accompanying this Statement is solicited on behalf of
the Board of Directors of the Company for use at the Special Meeting. Any
stockholder who has given a gold proxy to Mentor in connection with the Mentor
Solicitation may revoke it at any time before it is voted by delivering to the
Company, c/o Morrow & Co., Inc., a duly executed BLUE Proxy Card bearing a
date LATER than the proxy delivered to Mentor. Proxies may also be revoked at
any time prior to voting by (i) delivering to the Company, c/o Morrow & Co.,
Inc., a written notice, bearing a later date than the proxy, stating that the
proxy is revoked (such revocation may be in any form, but must be signed and
dated and must clearly express your intention to revoke your previously
executed proxy), (ii) signing and delivering prior to the vote at the Special
Meeting a proxy with respect to the same shares and bearing a date later than
the date of the proxy being revoked, or (iii) attending the Special Meeting
and voting in person (although attendance at the Special Meeting will not, by
itself, constitute a revocation of your proxy). Revocations of proxies and
other instruments revoking proxies may be delivered to the Company by fax or
by mail (using the enclosed envelope), to Morrow & Co., Inc., 445 Park Avenue,
New York, New York, 10022, Fax: (212) 754-8362.
IF YOU HAVE ALREADY SIGNED MENTOR'S GOLD PROXY CARD, AND YOU WISH TO CHANGE
YOUR VOTE, YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS EXERCISE AT THE
SPECIAL MEETING BY USING THE ENCLOSED BLUE PROXY CARD OR VOTING AGAINST THE
MENTOR PROPOSALS AT THE SPECIAL MEETING.
THE MENTOR PROPOSALS
The Mentor Solicitation relates to the following proposals to be considered
and voted upon at the Special Meeting:
THE REMOVAL PROPOSAL
Mentor proposes that all of the members of the Board be removed from office
in order to replace such Board members with nominees who support the Mentor
Proposed Transaction. 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.
THE BYLAW AMENDMENT PROPOSAL
Mentor proposes to amend Section 3.2 of Article III of the Bylaws of the
Company to reduce the number of directors from eight to five.
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<PAGE>
THE ELECTION PROPOSAL
Mentor is seeking the election of a slate of five directors (Gideon Argov,
Chairman of the Board of Kollmorgen Corporation; Scott 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 Savage, the Managing Director of
the San Francisco Opera). As disclosed in the Mentor Proxy Statement, each of
Mentor's nominees, if elected, intends to take all actions, subject to his
fiduciary duties to the Company, to facilitate the Mentor Offer and the
related Mentor Proposed Transaction.
THE BYLAW REPEAL PROPOSAL
Mentor is seeking to repeal any amendment to the Company's Bylaws adopted
since March 30, 1998 and prior to adoption of the Mentor Proposals at the
Special Meeting. Such proposal will have the effect of repealing the Special
Meeting Amendment and any other amendment to the Company's Bylaws adopted
after the date of this Statement.
PROPOSAL REGARDING PROCEDURAL MATTERS
Mentor is seeking the right at the Special Meeting or any adjournment
thereof to vote your shares at their discretion on any procedural matter or
any substantive matter which is properly brought before the Special Meeting of
which there has not been "reasonable notice."
THE RECOMMENDATION OF THE BOARD OF DIRECTORS WITH RESPECT TO MENTOR PROPOSALs
The above listed proposals are designed to facilitate the consummation of
the Mentor Offer, which your Board of Directors has determined to be
inadequate and not in the best interest of the Company and its stockholders,
and not to adequately reflect the long-term value or prospects of the Company.
The Board of Directors therefore unanimously recommends that stockholders vote
against each of the Mentor Proposals described above and any other proposals
brought before the Special Meeting which are designed to, or have the effect
of, facilitating the Mentor Offer.
SUPPORT YOUR BOARD OF DIRECTORS AND ENSURE THAT YOUR BEST INTERESTS, NOT
MENTOR'S, ARE SERVED. TO EXPRESS SUPPORT FOR YOUR BOARD OF DIRECTORS, DO NOT
VOTE FOR THE MENTOR PROPOSALS AND DO NOT RETURN MENTOR'S PROXY.
IF YOU HAVE ALREADY SIGNED MENTOR'S GOLD PROXY CARD, AND YOU WISH TO CHANGE
YOUR VOTE, YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS EXERCISE AT THE
SPECIAL MEETING. IF YOU HAVE RETURNED MENTOR'S PROXY, YOU MAY REVOKE IT BY
USING THE ENCLOSED BLUE PROXY CARD.
OTHER MATTERS
The Board is not aware of any other matters to be submitted at the Special
Meeting. Under the Company's Bylaws, only such business as is stated in the
Notice of Special Meeting may be brought before such meeting. Accordingly, no
other substantive business may be transacted at the Special Meeting.
CERTAIN LEGAL PROCEEDINGS
On August 12, 1998, Mentor and MGZ filed a complaint against the Company and
the Board in the Court of Chancery of the State of Delaware seeking, among
other things, an order (i) declaring that failure to redeem the preferred
stock purchase rights associated with the Company's Common Stock (the
"Rights") or to render the Rights inapplicable to the Mentor Offer and the
Proposed Mentor Transaction or failure to approve the Mentor Offer and the
Proposed Mentor Transaction would constitute a breach of the Board's fiduciary
duties under Delaware law, (ii) invalidating the Rights or compelling the
Board to redeem the Rights or render the
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<PAGE>
Rights inapplicable to the Mentor Offer and the Proposed Mentor Transaction,
(iii) declaring that failure to approve the Mentor Offer and the Proposed
Mentor Transaction for purposes of Section 203 of Delaware Law would
constitute a breach of the Board's fiduciary duties under Delaware law, (iv)
compelling the Board to approve the Mentor Offer and the Proposed Mentor
Transaction, for purposes of Section 203 of Delaware Law, (v) enjoining the
Board from taking any actions designed to impede or which have the effect of
impeding the Mentor Offer, the solicitation of agent designations or the
proposed merger and declaring that any such actions would constitute a breach
of the Board's fiduciary duties under Delaware Law, (vi) enjoining the Board
from taking any actions to impede, or refuse to recognize the validity of,
Mentor's call of a special meeting, and (vii) enjoining the 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 and MGZ filed a complaint against the
Company in the United States District Court for the District of Delaware
seeking, among other things, a declaratory judgment that Mentor and MGZ have
disclosed all information required by, and are otherwise in full compliance
with, the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
any other federal securities laws, rules and regulations deemed applicable to
the Mentor Offer and Mentor's solicitation of agent designations.
On August 13, 1998, Howard Shapiro filed a purported class action suit on
behalf of individual plaintiffs against the Company and the Board in the Court
of Chancery in the State of Delaware. The complaint alleges, among other
things, that the defendants have breached their fiduciary duties to the
Company's stockholders by failing to maximize stockholder value. The complaint
seeks, among other things, to compel the defendants to carry out their
fiduciary duties and to cooperate with any person or entity having a bona fide
interest in proposing any transaction which would maximize stockholder value.
On August 27, 1998, Howard Shapiro filed an Amended Class Action Complaint in
full substitution of the complaint filed on August 13, 1998.
On August 25, 1998, Quickturn filed an answer in Delaware federal district
court denying all material allegations of the Mentor Federal Complaint. In
addition, Quickturn filed counterclaims against Mentor and MGZ alleging
violation of the federal securities laws, seeking an injunction requiring
Mentor and MGZ to make certain corrections to their filings with the
Securities and Exchange Commission (the "SEC"), and prohibiting Mentor and MGZ
from taking various actions in connection with the Mentor Offer or Mentor's
solicitation of agent designations.
On August 25, 1998, MGZ and Mentor filed an Amended Verified Complaint in
the Court of Chancery of the State of Delaware in and for New Castle County,
challenging the Special Meeting Amendment and the Rights Agreement Amendment.
On August 25, 1998, Andrea Brown and Mohamed Yassin each filed a purported
class action suit on behalf of individual plaintiffs against the Company and
the Board in the Court of Chancery in the State of Delaware. The complaints
allege, among other things, that the defendants have breached their fiduciary
duties to the Company's stockholders by failing to maximize stockholder value.
The complaints seek, among other things, to compel the defendants to carry out
their fiduciary duties and to cooperate with any person or entity having a
bona fide interest in proposing any transaction which would maximize
stockholder value.
On August 26, 1998, MGZ and Mentor filed a First Amended Complaint in the U.
S. District Court for the District of Delaware, alleging that certain filings
by the Company with the SEC violate federal securities laws.
On August 26, 1998, Mentor and MGZ filed a Motion for Preliminary Injunction
in the Court of Chancery of the State of Delaware, seeking to enjoin the Board
from enforcing either of the Special Meeting Amendment or the Rights Agreement
Amendment.
On September 4, 1998, Mentor and MGZ filed a Motion for Preliminary
Injunction with United States District Court for the District of Delaware
seeking to compel the Company to make certain changes to its disclosures in
its filings with the SEC and to enjoin the Company or any of its agents from
(i) disseminating any
9
<PAGE>
further information or otherwise communicating with the Company's stockholders
with respect to the Mentor Offer, the Proposed Mentor Transaction, Mentor's
solicitation of agent designations and the Special Meeting or (ii) taking any
action in opposition to the Mentor Offer, the Proposed Mentor Transaction,
Mentor's solicitation of agent designations or the Special Meeting, until at
least thirty days after the Company makes certain changes to its disclosures
in its filings with the SEC. The motion also seeks to enjoin the Company and
its agents from making any false and misleading statements regarding the
Mentor Offer, the Proposed Mentor Transaction, Mentor's solicitation of agent
designations and the Special Meeting. The District Court has scheduled a
hearing for October 6, 1998 on both parties' cross-motions to require
corrective disclosures.
On September 4, 1998, the Court of Chancery of the State of Delaware
scheduled a trial to commence on October 19, 1998 regarding Mentor's and MGZ's
claims regarding the validity of the Special Meeting 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
motion for summary judgment for October 7, 1998.
On September 8, 1998, Mentor and MGZ filed with the United States District
Court for the District of Delaware a Motion to Dismiss the Company's
counterclaims and an opening brief in support of such motion.
On September 11, 1998, Quickturn filed its Answer to First Amendment
Complaint and Counterclaims for Injunctive and Other Relief for Violation of
Federal Securities Laws in the United States District Court for the District
of Delaware, denying all material allegations of Mentor's First Amended
Complaint.
On September 11, 1998, Mentor and MGZ filed a Motion for Leave to File
Second Verified Complaint in the Court of Chancery of the State of Delaware.
On September 14, 1998, Quickturn filed a Motion for a Temporary Restraining
Order with the United States District Court for the District of Delaware
seeking (i) to enjoin Mentor from distributing any proxy materials purporting
to call a special meeting of Quickturn stockholders on October 29, 1998, (ii)
to require Mentor to correct misstatements in its proxy materials, press
releases and other statements to Quickturn stockholders and to enjoin Mentor
from further claiming that a Quickturn stockholders meeting will be held on
October 29, 1998, (iii) to enjoin Mentor from all proxy solicitation
activities until 15 days after amended proxy materials are filed with the SEC
and Mentor has issued a press release which corrects its earlier
misstatements, and (iv) to enjoin Mentor from making any further material
misstatements of fact or omissions of material facts in any communications
with Quickturn's stockholders. A hearing on Quickturn's Motion for a Temporary
Restraining Order was held on September 16, 1998. Quickturn's Motion was
denied, and its Motion for Preliminary Injunction is scheduled to be heard on
October 6, 1998.
On September 14, 1998, Quickturn filed Amended and Supplemental
Counterclaims, alleging that Mentor made false and misleading statements
regarding the calling of a Special Meeting of the stockholders of Quickturn.
In addition to Mentor and MGZ Corp., Walden C. Rhines, Gregory K. Hinckley,
Dean M. Freed, Gideon Argov, Scott H. Bice, Harry L. DeMorest, C. Scott Gibson
and Michael J. K. Savage are named as counterdefendants.
On September 15, 1998, Quickturn filed its Answer to Verified Amended
Complaint for Declatory and Injunctive Relief in the Court of Chancery in the
State of Delaware denying all material allegations of the Amended Verified
Complaint.
10
<PAGE>
CERTAIN PATENT LITIGATION
In January 1996, the Company filed a complaint with the ITC in Washington,
DC, seeking to stop unfair importation of logic emulation systems manufactured
by Meta Systems ("Meta"), a French subsidiary of Mentor. In the complaint, the
Company alleged that Mentor's hardware logic emulation systems infringe
several of the Company's patents. Some of these patents were purchased by the
Company from Mentor in 1992, and the Company successfully argued that Mentor
could not contest their validity by reason of assignor estoppel, a legal
doctrine which prevents the seller of a patent from later asserting that the
patent is invalid ("Assignor Estoppel"). The Company sought and received in
August 1996 temporary relief from the ITC in the form of Temporary Exclusion
and Temporary Cease and Desist Orders. The Federal Circuit Court of Appeals
affirmed the ITC's issuance of temporary relief in August 1997. In December
1997, the ITC issued: (1) a Permanent Limited Exclusion Order which
permanently prohibits the importation of hardware logic emulation system,
subassemblies or components manufactured by Mentor and/or Meta which infringe
the Company's patents and (2) a Permanent Cease and Desist Order permanently
prohibiting Mentor from, among other things, selling, offering for sale or
advertising the same hardware logic emulation devices. The ITC's two orders
remain in effect until April 28, 2009, the latest expiration date of the
Company's patents involved in the investigation.
The Company is also engaged in a Federal District Court case with Mentor and
Meta involving six of the Company's patents. Mentor and Meta are seeking a
declaratory judgment of noninfringement, invalidity and unenforceability of
the patents in dispute, and the Company has filed counteractions against
Mentor and Meta for infringement and threatened infringement of the six
patents. Mentor has also claimed in this Federal District Court case that
press releases issued by the Company were defamatory and interfered with
Mentor's prospective economic relations. In June 1997, Quickturn filed a
motion for preliminary injunction, asking the District Court to prohibit
Mentor from manufacturing, assembling, marketing, loaning or otherwise
distributing emulation products and components in the United States, which
products and components infringe certain claims in Quickturn's U. S. Patent
No. 5,036,473. The District Court granted the Company's motion for summary
judgment of Assignor Estoppel with regard to such patent. On December 20,
1996, the U. S. District Court in Oregon granted Quickturn's motion for a
preliminary injunction against Mentor's domestic emulation activities. The
Federal Circuit Court of Appeals affirmed the Oregon District Court's decision
on August 5, 1998, both with regard to the preliminary injunction and the
Assignor Estoppel. The Oregon action is currently set for trial in December
1998.
In November 1996, Aptix Corporation ("Aptix") filed a suit against the
Company in the U. S. District Court for the Northern District of California,
alleging, among other things, various antitrust violations based on
Quickturn's acquisition of patents and technology from Mentor, Quickturn's
acquisition of PiE Design Systems, Inc. ("PiE") in 1993 and purported threats
by Quickturn to sue Aptix for patent infringement. Quickturn moved for summary
judgment in its favor with regards to these allegations. A hearing on these
matters was held on August 4, 1998. On August 27, 1998, the U. S. District
Court for the Northern District of California granted Quickturn's motion for
summary judgment and dismissed Aptix's suit against Quickturn.
In August 1997, a preliminary injunction sought by Mentor's German
subsidiary, Mentor Graphics (Deutschland) GmbH, was issued by a regional court
in Munich, enjoining agents of the Company from making certain statements
concerning U. S. litigation matters between the Company and Mentor. In May
1998, the Munich District Court set aside the preliminary injunction based on
the failure of Mentor's German subsidiary to advance its case within the six-
month statutory limitation. In October 1997, the Company filed against Mentor
Graphics (Deutschland) GmbH, in the District Court of Dusseldorf a complaint
alleging infringement of the German part of the Company's European Patent No.
0 437 491 B1. The main court hearing for this matter is set for March 1999.
In February 1998, Aptix and Meta filed a lawsuit against the Company, in the
U. S. District Court for the Northern District of California, alleging
infringement of a U. S. patent owned by Aptix Corporation and licensed to
Meta.
11
<PAGE>
ANTITRUST MATTERS
On August 20, 1998, the Company received from MGZ written notice that Mentor
had filed a pre-merger notification form (the "Pre-merger Form") with the
Federal Trade Commission (the "FTC") and the Department of Justice (the "DOJ")
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act")
on or about August 20, 1998. The purpose of the Pre-merger Form is to give the
FTC and the DOJ notice of the merger Mentor proposes to effect with the
Company if the Mentor Offer is consummated.
On August 28, 1998, the Company filed its pre-merger notification form with
the FTC and the DOJ. The waiting period under the HSR Act expired at 11:59 p.
m. New York City time on September 4, 1998.
SOLICITATION OF BLUE PROXIES
All expenses of this proxy solicitation, including the cost of preparing and
mailing this Statement, will be borne by the Company. In addition to
solicitation by use of the mails, proxies may be solicited by directors,
certain officers, and employees of the Company in person or by telephone,
telegram, telex, telecopier, facsimile, advertisement, courier service, or
other means of communication. Such directors, officers and employees will not
be additionally compensated, but may be reimbursed for out-of-pocket expenses
in connection with such solicitation. Except as described below, neither the
Company nor any person acting on its behalf has retained any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Mentor Offer, including the solicitation of proxies.
The Company has retained Morrow & Co. , Inc. to assist the Company in
connection with its solicitation of proxies, at an estimated fee of $100,000,
plus reimbursements of out-of-pocket expenses.
The Company has engaged Hambrecht & Quist LLC to act as its financial
advisor in connection with the proposed Mentor Offer and related matters,
including this solicitation. Hambrecht & Quist may assist in the solicitation
of proxies. Pursuant to a letter agreement dated August 14, 1998 (the "Letter
Agreement"), the Company has retained Hambrecht & Quist as its exclusive
financial advisor with respect to the Mentor Offer and the evaluation of
strategic alternatives.
Pursuant to the Letter Agreement, the Company has agreed to pay Hambrecht &
Quist: (1) a non-refundable retainer of $100,000 payable on the date of the
Letter Agreement and creditable against any subsequent fees payable under the
Letter Agreement; (2) a fee of $750,000 payable on delivery of an initial
opinion regarding the fairness or adequacy of the Mentor Offer; (3) a fee of
$250,000 payable on delivery of each additional fairness opinion rendered in
connection with a transaction including the same party or an additional party;
(4) in the event the Company enters into an agreement for the sale of the
Company, or recommends that the stockholders of the Company tender their
shares in connection with a tender offer for 50% or more of the outstanding
shares of Common Stock of the Company or recommends that the stockholders of
the Company vote in favor of a proposed sale of the Company, or otherwise
approves or endorses the sale of the Company, and such sale (a "Consensual
Acquisition") of the Company is consummated, a fee, payable at closing, equal
to 1.0% of the aggregate consideration received, less any fees previously
paid; (5) in the event the Company determines it should remain independent and
does not consummate a Consensual Acquisition by May 14, 1999, a fee, payable
on May 14, 1999, of $1,000,000, less any fees previously paid; and (6) in the
event that the Company is acquired prior to May 14, 1999 in a transaction
other than a Consensual Acquisition, then upon consummation of such sale of
the Company, a fee, payable at closing, equal to 0. 75% of the aggregate
consideration received, less any fees previously paid. A "sale" of the Company
means any transaction or event or series or combination thereof, other than in
the ordinary course of trade or business, whereby directly or indirectly, a
majority interest in the Company or its businesses or assets is transferred;
such transactions or events to include without limitation a sale or exchange
of capital stock or assets (whether in a leveraged acquisition or otherwise),
a merger or consolidation, a tender or exchange offer, a recapitalization
(including without limitation one or more distributions to stockholders or
repurchases or redemptions of shares which in the aggregate constitute greater
than 50 percent of the market value of the Company's shares prior to such
actions), or any similar transaction or event.
12
<PAGE>
Pursuant to the Letter Agreement, the Company agreed to indemnify Hambrecht
& Quist against all liability resulting from the performance of Hambrecht &
Quist duties under such agreement, except for liability resulting from the
gross negligence or willful misconduct of Hambrecht & Quist. The Company has
also agreed to reimburse Hambrecht & Quist periodically for their reasonable
out-of-pocket expenses, including the reasonable fees and disbursements of
their attorneys arising in connection with any matter referred to in the
Letter Agreement. The Letter Agreement also provides that Hambrecht & Quist,
if requested by the Board, will, among other things, assist the Company as an
agent in contracting, qualifying and negotiating with potential acquirors
approved by the Company. The Letter Agreement may be terminated at any time by
either party thereto, in which event, Hambrecht & Quist will be entitled to
full compensation if any time prior to the expiration of one year after such
date of termination the Company consummates a sale of the Company and any
compensation earned by it up to the date of the termination, including the
reimbursement of all reasonable expenses incurred by Hambrecht & Quist.
Hambrecht & Quist will not receive any fee for, or in connection with, any
solicitation activities apart from the fees it is otherwise entitled to
receive under its engagement. Hambrecht & Quist does not admit or deny that
any of its directors, officers or employees is a "participant" as defined in
Schedule 14A promulgated by the Commission under the Securities Exchange Act
of 1934, as amended, or that such Schedule 14A requires the disclosure of
certain information concerning such persons. In the normal course of its
business, Hambrecht & Quist regularly buys and sells the Common Stock and
other securities for its own account and for the accounts of its customers,
which transactions may result from time to time in Hambrecht & Quist and its
associates having a net "long" or net "short" position in the Common Stock or
other securities or option contracts or derivatives in or relating to the
Company's securities. If Hambrecht & Quist assists the Company in connection
with the solicitation of proxy revocations, such activity will be carried out
by a team of individuals consisting of officers and employees of Hambrecht &
Quist identified in Schedule A.
The Company estimates that its total expenditures relating to this
solicitation (excluding costs representing salaries and wages of regular
employees and officers of the Company) will be approximately $2 million. The
Company to date has incurred estimated total expenses of approximately
$750,000. In addition to the members of the Board, the Company's executive
officers may solicit proxies. For further information with respect to
participants in the solicitation, including the names of its executive
officers who may solicit proxies, and certain transactions by those
participants in the shares, see Schedules A and B. The business address for
each of the members of the Board and the officers named in Schedule A is, and
the Company's executive offices are located at 55 W. Trimble Road, San Jose,
California 95131.
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BENEFICIAL SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of Common Stock as of
September 1, 1998 for the following: (i) each person or entity who is known by
the Company to own beneficially more than 5% of the outstanding shares of the
Common Stock; (ii) each of the Company's current directors; (iii) each of the
named Executive Officers (as defined in Item 402 (a) (3) of Regulation S-K of
the Exchange Act); and (iv) all directors and executive officers of the Company
as a group.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME OWNED(1) OWNED
- ---- ------------ ------------
<S> <C> <C>
PRINCIPAL STOCKHOLDERS
Kopp Investment Advisors, Inc. (2)................... 2,597,975 14.4%
7701 France Avenue South, Suite 500
Edina, MN 55435
State of Wisconsin Investment Board (2).............. 2,101,500 11.6%
P.O. Box 7842
Madison, WI 53707
DIRECTORS
Glen M. Antle (3).................................... 325,782 1. 8%
Keith R. Lobo (4).................................... 438,750 2.4%
Richard C. Alberding (5)............................. 17,500 *
Michael R. D'Amour (6)............................... 40,970 *
Dr. Yen-Son (Paul) Huang (7)......................... 354,550 2. 0%
Dr. David K. Lam (5)................................. 10,417 *
William A. Hasler (8)................................ 3,667 *
Charles D. Kissner (5)............................... 1,667 *
NAMED OFFICERS
Jeffrey K. Jordan (9)................................ 1,134 *
Raymond K. Ostby (10)................................ 102,767 *
Dugald H. Stewart (11)............................... 7,390 *
Tung-sun Tung (12)................................... 34,655 *
All directors and executive officers as a group (16
persons) (13)....................................... 1,792,816 9.5%
</TABLE>
- --------
* Less than 1%.
(1) The number and percentage of shares beneficially owned is determined under
rules of the Securities and Exchange Commission ("SEC"), 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 shares which the individual has the right to acquire
within sixty days of September 1, 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 SEC pursuant to
Sections 13(d) or 13(g) of the Securities Exchange Act of 1934, as
amended.
(3) Includes 257,270 shares held by The Antle Family Trust, as to which Mr.
Antle shares voting and dispositive power, and 68,512 shares of Common
Stock subject to options exercisable within sixty days of September 1,
1998.
(4) Includes options to purchase 433,750 shares of Common Stock exercisable
within sixty days of September 1, 1998.
(5) All such shares are subject to options exercisable within sixty days of
September 1, 1998.
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<PAGE>
(6) Includes 31,388 shares held by The D'Amour Family Trust, as to which Mr.
D'Amour shares voting and dispositive power, and 4,583 shares of Common
Stock subject to options exercisable within sixty days of September 1,
1998.
(7) Includes 37,548 shares held by The Huang Living Trust, as to which Mr.
Huang shares voting and dispositive power, and 31,250 shares of Common
Stock subject to options exercisable within sixty days of September 1,
1998.
(8) Includes options to purchase 1,667 shares of Common Stock exercisable
within sixty days of September 1, 1998.
(9) Includes options to purchase 333 shares of Common Stock exercisable
within sixty days of September 1, 1998.
(10) Includes options to purchase 94,667 shares of Common Stock exercisable
within sixty days of September 1, 1998.
(11) Includes options to purchase 7,000 shares of Common Stock exercisable
within sixty days of September 1, 1998.
(12) Includes options to purchase 20,568 shares of Common Stock exercisable
within sixty days of September 1, 1998.
(13) Includes options to purchase 747,164 shares of Common Stock exercisable
within sixty days of September 1, 1998.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for their services as directors of the Company. However,
nonemployee directors receive an annual cash retainer of $12,000 and an annual
committee membership stipend of $1,500 for each committee of the Board on
which such director serves.
In addition, nonemployee directors participate in the Company's 1994 Outside
Director Stock Option Plan (the "Director Plan"). The Director Plan was
adopted by the Board in January 1994 and was approved by the stockholders in
May 1994. The Director Plan provides for an automatic grant of a nonstatutory
stock option to purchase 20,000 shares of Common Stock to a nonemployee
director on the date of the first meeting on which such individual
participates as a director (an "Initial Option"). An Initial Option has a term
of ten years and vests monthly over four years. Beginning four years after the
grant of an Initial Option to a director, such director is granted an
automatic annual option to purchase 3,500 shares of Common Stock, which option
has a term of ten years and vests monthly over one year. The exercise price of
each option granted equals 100% of the fair market value of the Common Stock,
based on the closing sales price of the Common Stock as reported on the Nasdaq
National Market on the date of grant. Options granted under the Director Plan
must be exercised within three months following the end of the optionee's
tenure as a director of the Company or within twelve months after the
termination of a director's tenure due to death or disability. The Director
Plan is designed to work automatically, without administration; however, to
the extent administration is necessary, the Director Plan has been structured
so that options granted to nonemployee directors who administer the Company's
other employee benefit plans qualify as transactions exempt from Section 16(b)
of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder.
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<PAGE>
CERTAIN TRANSACTIONS
EMPLOYMENT AGREEMENT
The Company has an employment agreement dated November 4, 1992 with Keith R.
Lobo, the Company's President and Chief Executive Officer, which is terminable
by either the Company or Mr. Lobo at any time upon 30 days written notice.
Pursuant to such agreement, upon termination of Mr. Lobo's employment, except
for certain causes, the Company is obligated to pay Mr. Lobo severance
payments equal to six months of his then base salary. Also, upon Mr. Lobo's
involuntary termination, except for certain causes, or upon his constructive
termination (defined as a material decrease in responsibility or authority),
within 12 months after a change of control of the Company, Mr. Lobo's options
will be accelerated with respect to that number of shares which would have
vested after 24 months of additional employment.
RETENTION PLANS
At a Board meeting held on September 2, 1998 and pursuant to a
recommendation from the Board's Compensation Committee, the Board authorized
the Company to implement two separate plans (collectively, the "Plans") to
assist the Company in retaining its employees during times of uncertainty, and
to keep such persons focused on their jobs and the business of the Company
during such times so that the Company can continue to execute its business
plan. William M. Mercer, Incorporated, assisted and advised the Board and its
Compensation Committee in formulating the terms of each Plan. Each Plan is
summarized below.
Management Retention Plan. The Management Retention Plan (the "Management
Plan") provides retention and severance benefits for designated executive
officers, vice presidents and employees with comparable responsibility to
executive officers or vice presidents. There are three components to the
Management Plan: (i) severance payments, (ii) post-employment coverage under
the Company's group health, dental and life insurance plans, and (iii) pro-
rated bonus payments.
A participant's total potential severance payment is based on a multiple of
the participant's annual target bonus and/or annual base salary, with the
level of payment related to the participant's job level. The multiplier ranges
from 150% of annual base salary up to 250% of annual base salary and
commission or annual average bonus. The severance payment will be paid only if
the participant is involuntarily terminated without cause, or is
constructively terminated, within twelve months following a change of control.
The severance payment is offset by any cash severance payments required by law
or contract.
In the event of an involuntary termination without cause, or constructive
termination, within twelve months following a change of control, a participant
in the Management Plan (and, if covered prior to the change of control, his or
her dependents) will receive continued group health, dental and life insurance
coverage. The Company is required to pay the same percentage of the related
insurance premiums as were paid prior to the change of control. The Company
must continue to make these premium payments for a period ranging from one and
one-half years to two and one-half years (depending on the participants's job
level) or, if earlier, until the participant becomes covered under comparable
benefit plans of another employer.
Under the Management Plan, participants are also eligible to be paid their
pro-rated annual target bonus for the year in which a change of control
occurs. This payment is in lieu of any bonus otherwise payable under the
annual incentive plan. The proration is made by multiplying the annual target
bonus by a fraction, the numerator of which is the number of days in the
Company's fiscal year that have elapsed prior to the change of control and the
denominator of which is three hundred sixty-five. The pro-rated bonus is paid
to those executive officers and vice-presidents who remain employed until the
last day of the fiscal year in which the change of control occurs or who are
involuntarily terminated without cause or are constructively terminated prior
to the end of the fiscal year, but following a change of control.
Employee Retention Plan. The Employee Retention Plan (the "Employee Plan")
provides severance benefits for employees who are not participants in the
Management Plan. The Employee Plan provides for a
16
<PAGE>
severance payment of two week's base salary for each full year of employment
with the Company up to and including the date of a change of control. The
severance payment will be paid only if the participant is involuntarily
terminated without cause within twelve months following a change of control,
with a minimum payment of three months (or six months for director-level
employees and up to approximately 10% of the employee population designated as
key contributors by the chief executive officer). The severance payment is
offset by any cash severance payments required by law or contract.
Golden Parachute Excise Tax and Non-Deductibility. In general, benefits and
payments under the Management Plan and the Employee Plan are subject to
reduction, if, in the opinion of the Company's independent accountants, the
golden parachute excise tax and non-deductibility provisions of the Internal
Revenue Code would otherwise be triggered. In such event, a participant's
benefits may be reduced to the largest amount that would not trigger the
golden parachute excise tax and non-deductibility provisions. In the case of
the Company's chief executive officer and certain other participants under the
Management Plan, benefits under the Management Plan are reduced to avoid
triggering the golden parachute excise tax and non-deductibility provisions
only if so doing would maximize the after-tax economic benefit to such
persons, as determined by the Company's independent accountants.
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Section
16(a)") requires the Company's officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership on Form 3 and amendments thereto and
changes in ownership on Form 4 or Form 5 and amendments to each with the SEC
and the National Association of Securities Dealers, Inc. Such officers,
directors and ten-percent stockholders are also required by SEC rules to
furnish the Company with copies of all such forms that they file.
Based solely on its review of the copies of such forms and amendments
thereto received by the Company, or written representations from certain
reporting persons that no Forms 5 were required for such persons, which
representations have been maintained for at least two years, the Company
believes that during fiscal 1997 all Section 16(a) filing requirements
applicable to its officers, directors and ten-percent stockholders were
complied with, except that Mr. Dugald Stewart did not file a Form 4 to report
a sale of Common Stock (although such sale was subsequently reported on an
amended Form 4), and Mr. Tung-sun Tung filed a Form 3 late following his
assumption of his responsibilities as an executive officer.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was formed in October 1993 and is
currently composed of Messrs. Alberding, Antle and Lam. No interlocking
relationship exists between any member of the Company's Board of Directors or
Compensation Committee and any member of the board of directors or
compensation committee of any other company, nor has any such interlocking
relationship existed in the past. No member of the Compensation Committee is
or was formerly an officer or an employee of the Company or its subsidiaries,
except that Mr. Antle at certain times during the past five years has been an
employee or consultant of the Company.
17
<PAGE>
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning total
compensation received by the person serving as Chief Executive Officer and
each of the four most highly compensated executive officers during fiscal 1997
(the "Named Officers"), for services rendered to the Company in all capacities
for fiscal years 1997, 1996 and 1995.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
--------------------- ------------
SECURITIES
NAME AND PRINCIPAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS (1) OPTIONS COMPENSATION (2)
- ------------------ ---- -------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Keith R. Lobo........... 1997 $250,000 $ 144,000 0 $11,168
President and Chief 1996 $250,000 $ 200,000 100,000 $ 6,768
Executive Officer 1995 $227,369 $ 150,000 20,000 $ 3,978
Jeffrey K. Jordan....... 1997 $244,351(3) $ 0 0 $16,400
Vice President, North
American Sales 1996 $382,499 $ 30,000 25,000 $34,000
1995 $544,567 $ 30,000 10,000 $10,800
Raymond K. Ostby........ 1997 $205,000 $ 59,000 0 $ 6,968
Vice President, Finance
and Administration, 1996 $190,000 $ 70,000 40,000 $ 6,768
Chief Financial
Officer, and Secretary 1995 $156,667 $ 66,000 0 $ 5,863
Dugald H. Stewart....... 1997 $205,223 $ 57,000 0 $ 9,073
Vice President,
Manufacturing 1996 $184,333 $ 102,000 40,000 $ 8,873
1995 $151,667 $ 56,000 10,000 $ 6,000
Tung-sun Tung........... 1997 $188,666 $ 40,000 0 $ 9,073
Vice President, 1996 $174,584 $ 64,000 60,000 $ 8,873
Research & Development 1995 $140,000 $ 36,000 0 $ 6,000
</TABLE>
- --------
(1) Includes bonuses earned or accrued with respect to services rendered in
the fiscal year indicated, whether or not such bonus was actually paid
during such fiscal year.
(2) Includes health care premiums and 401(k) contributions.
(3) Includes $143,370 from commissions.
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted to the Named Officers during the fiscal year ended
December 31, 1997.
18
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth, as to the Named Officers, certain
information concerning stock options exercised during fiscal 1997 and the
number of shares subject to both exercisable and unexercisable stock options
as of December 31, 1997. Also reported are values for "in-the-money" options
that represent the positive spread between the respective exercise prices of
outstanding stock options and the fair market value of the Common Stock on the
last trading day of fiscal 1997, which was $11.75 per share.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS
SHARES END AT FISCAL YEAR END(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Keith R. Lobo........... 0 $ 0 458,750 76,250 $4,015,519 $ 25,731
Jeffrey K. Jordan....... 7,000 68,377 15,354 22,646 22,237 12,138
Raymond K. Ostby........ 0 0 93,208 41,792 452,684 84,191
Dugald H. Stewart 5,000 21,875 24,896 32,104 55,090 23,035
Tung-sun Tung........... 5,000 48,050 49,744 43,966 161,857 441,711
</TABLE>
- --------
(1) Market value of underlying securities based on the closing price of the
Common Stock on the last trading day of fiscal 1997 on the Nasdaq National
Market of $11.75 minus the exercise price.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Generally, proposals of security holders to be presented at the 1999 Annual
Meeting of Stockholders of the Company must have been in proper form and
received by the Company by November 13, 1998. However, the Securities and
Exchange Commission has recently amended Rule 14a-4(c)(1) promulgated under
the Exchange Act. As amended, Rule 14a-4(c)(1) provides that where a
stockholder proponent chooses not to use the procedures set forth in Rule 14a-
8 under the Exchange Act for placing such stockholder's proposal in a
company's proxy materials, a proxy may confer discretionary authority to vote
on a matter presented at an annual meeting of stockholders if the proponent
fails to notify the company at least 45 days prior to the anniversary date of
mailing of the prior year's proxy statement. A statement conferring such
discretionary authority must be made in the proxy statement or proxy for such
annual meeting. The proxy statement for the Company's 1998 Annual Meeting of
Stockholders was mailed to stockholders on March 13, 1998. Accordingly, if a
proponent does not notify the Company on or before January 27, 1999 of a
proposal to be presented at the 1999 Annual Meeting of Stockholders, the
Company may use its discretionary voting authority to vote on such proposal
when and if presented at the 1999 Annual Meeting of Stockholders.
By Order of the Board of Directors,
By: /s/ Keith R. Lobo
-----------------------------------
Name: Keith R. Lobo
Title: President and Chief Executive
Officer
San Jose, California
September 21, 1998
19
<PAGE>
August 21, 1998
CONFIDENTIAL
The Board of Directors
Quickturn Design Systems, Inc.
55 West Trimble Road
San Jose, CA 95131
Gentlemen:
You have requested our opinion as to the adequacy, from a financial point of
view, to the holders of the outstanding shares of common stock, par value
$0.001 per share (the "Common Stock") of Quickturn Design Systems, Inc.
("Quickturn" or the "Company"), other than Mentor Graphics Corporation
("Mentor"), of the terms of the Offer to Purchase (as hereinafter defined).
For purposes of this opinion, the "Offer to Purchase" means the offer
described below pursuant to that certain Offer to Purchase included in the
Schedule 14D-1 filed with the Securities and Exchange Commission on August 12,
1998 by MGZ Corp, (the "Bidder"), a wholly-owned subsidiary of Mentor.
As more specifically set forth in the Schedule 14D-1, the Bidder has
offered, subject to certain conditions set forth in the Offer to Purchase, to
purchase all the outstanding shares of Common Stock of the Company, and the
associated preferred stock purchase rights issued pursuant to the Rights
Agreement between the Company and the First National Bank of Boston, dated
January 10, 1996, as Rights Agent (the "Rights Agreement"), at a purchase
price of $12.125 per share (and associated right) net to seller in cash.
Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment
banking services, is regularly engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, strategic
transactions, corporate restructurings, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. We have acted as a financial
advisor to the Board of Directors of Quickturn in connection with the proposed
Offer to Purchase, and we will receive a fee for our services. We will also
receive a fee upon delivery of this opinion.
In the past, we have provided investment banking and other financial
advisory services to Quickturn and Mentor and have received fees for rendering
these services. Hambrecht & Quist served as co-manager in the Company's
December 15, 1993 initial public offering, advised the Company in the January
10, 1996 adoption of its Shareholder Rights Plan, advised the Company in its
February 1997 merger with SpeedSim, Inc., and advised the Company in its June
1997 acquisition of the assets of Arkos Design, Inc. Hambrecht & Quist was
engaged in March 1998 to pursue the possible sale of a business unit of Mentor
unrelated to the electronic design automation business. This engagement, which
has been inactive for several months, has now been terminated by Hambrecht &
Quist. In the ordinary course of business, Hambrecht & Quist acts as a market
maker and broker in the publicly traded securities of Quickturn and Mentor and
receives customary compensation in connection therewith, and also provides
research coverage for Quickturn and Mentor. In the ordinary course of
business, Hambrecht & Quist actively trades in the equity and derivative
securities of Quickturn and Mentor for its own account and for the accounts of
its customers and, accordingly, may at any time hold a long or short position
in such securities. Moreover, Hambrecht & Quist and its affiliates own 40,000
shares of Common Stock of the Company.
In connection with our review of the proposed Offer to Purchase, and in
arriving at our opinion, we have, among other things:
1. reviewed the publicly available consolidated financial statements of
Quickturn for recent years and interim periods to date and certain other
relevant financial and operating data of Quickturn (including its capital
structure) made available to us from published sources and from the
internal records of Quickturn;
2. reviewed the Offer to Purchase, the Schedule 14D-1 and certain related
documents;
1
<PAGE>
3. reviewed certain internal financial and operating information,
including certain projections, relating to Quickturn prepared by the
management of Quickturn;
4. discussed the operations, business strategy, financial condition and
prospects of Quickturn with certain of its officers;
5. reviewed the publicly available consolidated financial statements of
Mentor for recent years and interim periods to date and certain other
relevant financial and operating data of Mentor made available to us from
published sources;
6. reviewed the recent reported prices and trading activity for the
common stocks of Quickturn and Mentor and compared such information and
certain financial information for Quickturn and Mentor with similar
information for certain other companies engaged in businesses we deemed
comparable;
7. reviewed the financial terms, to the extent publicly available, of
certain comparable merger and acquisition transactions; and
8. performed such other analyses and examinations and considered such
other information, financial studies, analyses and investigations and
financial, economic and market data as we deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning Quickturn or Mentor
considered in connection with our review of the proposed Offer to Purchase, and
we have not assumed any responsibility for independent verification of such
information. We have not prepared any independent valuation or appraisal of any
of the assets or liabilities of Quickturn or Mentor, nor have we conducted a
physical inspection of the properties and facilities of either company. With
respect to the financial, forecasts and projections made available to us and
used in our analysis, we have assumed that they reflect the best currently
available estimates and judgments of the expected future financial performance
of Quickturn and Mentor. For purposes of this opinion, we have assumed that
neither Quickturn nor Mentor is a party to any pending transactions, including
external financings, recapitalizations or material merger discussions, other
than the proposed Offer to Purchase and those activities undertaken in the
ordinary course of conducting their respective businesses. Our opinion is
necessarily based upon market, economic, financial and other conditions as they
exist and can be evaluated as of the date of this letter and any change in such
conditions would require a reevaluation of this opinion.
We were not requested to, and did not, solicit indications of interest from
any other parties in connection with a possible acquisition of, or business
combination with, Quickturn.
It is understood that this letter is for the information of the Board of
Directors and may not be used for any other purpose without our prior written
consent; provided, however, that this letter may be reproduced in full in the
14D-9. This letter does not constitute a recommendation to any stockholder as
to whether to tender shares of Common Stock pursuant to the Offer to Purchase.
Based upon and subject to the foregoing and after considering such other
matters as we deem relevant, we are of the opinion that as of the date hereof
the consideration to be received by the holders of the Common Stock in the
proposed Offer to Purchase is inadequate, from a financial point of view, to
such holders.
Very truly yours,
HAMBRECHT & QUIST LLC
/s/ Paul B. Cleveland
By___________________________________
Paul B. Cleveland Managing
Director
2
<PAGE>
SCHEDULE A
INFORMATION REGARDING PARTICIPANTS
IN THE PROXY SOLICITATION
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 (1) each of the
directors and executive officers of the Company and (2) certain employees and
other representatives of the Company who may also solicit proxies from the
stockholders of the Company. The principal business address of the Company is
55 W. Trimble Road, San Jose, California 95131. Unless otherwise indicated,
the principal business address for each individual listed below is the address
of the Company. Except as otherwise provided in this Statement (including the
Schedules hereto), none of the participants in this solicitation, (i) directly
or indirectly owns any Shares or any other securities of the Company, (ii) was
in the past ten years convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), (iii) is, or was within the past year a
party to any contracts, arrangements or understandings with any person with
respect to any securities of the Company, including but not limited to joint
ventures, loan or option arrangements, puts or calls, guarantees against loss
or guarantees of profit, division of losses or profits, or the giving or
withholding or proxies.
DIRECTORS OF QUICKTURN
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED A
NAME (AGE) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
---------------------- ------------------------------------------ ----------
<C> <S> <C>
Glen M. Antle Chairman of the Board of the Company. Mr. 1993
(60) Antle served as Chairman of PiE Design
Systems, Inc. ("PiE") from September 1990
to June 1993 and Chief Executive Officer
from September 1992 to June 1993. He was
Chairman, from August 1982 to May 1988,
Co-Chairman, from May 1988 to June 1989,
and Chief Executive Officer, from August
1982 to September 1988, of Cadence Design
Systems, Inc. , a company that develops
CAD software products.
Keith R. Lobo President, Chief Executive Officer and 1992
(46) Director. From March 1992 to October 1992,
Mr. Lobo served as a consultant in the
venture capital field and was a private
investor. From March 1988 to February
1992, he served as Executive Vice
President and Chief Operating Officer of
Chips & Technologies, Inc., a
semiconductor supplier of microcomputer
components to the personal computer
industry.
Richard C. Alberding Director of the Company. Mr. Alberding has 1995
(67) served as a management consultant since
June 1991. Mr. Alberding's principal
business address is 15 Ashdown Pl. , Half
Moon Bay, California 94019. From 1958 to
1991, he served in a variety of positions
for Hewlett-Packard Company, most recently
as Executive Vice President. Mr. Alberding
also serves as a director of Walker
Interactive Systems, Inc., Paging Network,
Inc., Sybase, Inc., Kennametal Inc.,
Digital Microwave Corp., Digital Link
Corp., Storm Technology, Inc. and JLK
Direct, Inc.
Michael R. D'Amour Director of the Company. Mr. D'Amour has 1987
(44) served as President of D'Amour and
Associates, a research and development
company, since December 1995. The
principal business address of D'Amour
Associates is 11839 Hilltop Drive, Los
Altos Hills, California 94024. From
January 1995 to April 1995, he served as
the Company's Executive Vice President. He
previously served as the Company's
Executive Vice
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED A
NAME (AGE) PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
---------------------- ------------------------------------------ ----------
<C> <S> <C>
President, International Sales from June
1990 to December 1994, as the Company's
Executive Vice President, Research and
Development from September 1987 to June
1990, as the Company's President and Chief
Executive Officer from September 1987 to
July 1988, and as the Company's Chairman
of the Board from the Company's inception
until June 1993.
Dr. Yen-Son (Paul) Director of the Company. Dr. Huang is 1993
Huang self-employed, and his principal business
(52) address is 13870 Pike Road, Saratoga,
California, 95079. Dr. Huang served as
Executive Vice President of the Company
between January 1996 and September 1997.
He served as the Company's Executive Vice
President, Product Development, from June
1993 to January 1996. From January 1990 to
June 1993, Dr. Huang served as President
of PiE, a company he co-founded.
Dr. David K. Lam Director of the Company. Dr. Lam is a 1996
(55) technology and business advisor in the
semiconductor equipment industry and
Chairman of the David Lam Group. Dr. Lam's
principal business address is 2055 Gateway
Place, Suite 400, San Jose, California
95110. Between April 1989 and October
1996, Dr. Lam served as President and
Chief Executive Officer of ExpertEdge,
Inc. , a provider of integrated,
multimedia client-server software. From
1987 to 1989, he was Vice President at
Wyse Technology, Inc. , and he founded Lam
Research in 1980. Dr. Lam is currently a
director of Asante Technology, Inc.
William A. Hasler Director of the Company. Mr. Hasler is the 1998
(56) Co-Chief Executive Officer of Aphton
Corporation. Mr. Hasler's principal
business address is P. O. Box 194204, San
Francisco, California 94119. Mr. Hasler
has served as Vice Chairman of Aphton
Corporation since October 1996 and as a
director since October 1991. Mr. Hasler
served as the Dean of the Graduate School
of Business at the University of
California, Berkeley, from 1991 to June
1998. Mr. Hasler also serves as a director
for The Gap, Inc., Walker Interactive
Systems, Tenera Inc., and TCSI
Corporation.
Charles D. Kissner Director of the Company. Mr. Kissner has 1998
(51) served as Chairman of the Board of Digital
Microwave Corporation since August 1995
and Chief Executive Officer and a director
since July 1995. Mr. Kissner's principal
business address is 170 Rose Orchard Way,
San Jose, California 95134. From July 1993
to July 1995, Mr. Kissner served as Vice
President and General Manager of the
Microelectronics Division of M/A-COM, Inc.
Mr. Kissner served as President, Chief
Executive Officer and a Director of
Aristacom International, Inc. from
February 1990 to July 1993. Mr. Kissner is
currently a director of Spectrian, Inc.
</TABLE>
A-2
<PAGE>
EXECUTIVE OFFICERS OF QUICKTURN
The principal executive officers of the Company and their recent business
experiences are as follows:
<TABLE>
<CAPTION>
NAME OFFICE HELD AGE
- ---- ----------- ---
<S> <C> <C>
Keith R. Lobo........... President and Chief Executive Officer 46
Michael H. Ferguson..... Vice President, Asia Pacific Operations 46
Jeffrey K. Jordan....... Vice President, North American Sales 53
Donald J. McInnis....... Senior Vice President 52
Raymond K. Ostby........ Vice President, Finance and Administration; Chief Financial Officer 51
Dugald H. Stewart....... Vice President, Manufacturing 45
Christopher J. Tice..... Vice President, World-Wide Support Services 39
Tung-sun Tung........... Vice President, Research and Development 50
Naeem Zafar............. Vice President, Marketing 41
</TABLE>
HAMBRECHT & QUIST LLC
The business address for each of the persons named below is 1 Bush Street,
San Francisco, California 94104:
<TABLE>
<CAPTION>
NAME TITLE
- ---- -----
<S> <C>
Paul B. Cleveland............................................. Managing Director
Glover H. Lawrence............................................ Vice President
David M. Wehner............................................... Associate
Erik A. Jorgensen............................................. Financial Analyst
</TABLE>
A-3
<PAGE>
SCHEDULE B
TRANSACTIONS OF PARTICIPANTS IN THE COMPANY'S SHARES
SINCE SEPTEMBER 1, 1996
<TABLE>
<CAPTION>
NUMBER OF SHARES
TRANSACTION ACQUIRED
NAME DATE (A) OR SOLD (S) NOTES
---- ----------- --------------------------------- -----
<S> <C> <C> <C> <C>
Glen M. Antle 6/8/98 50,000 (A) (1)
Richard Alberding none
Michael R. D'Amour 5/28/98 3,000 (S)
3,000 (S)
2/24/98 7,000 (S)
1/28/98 13,000 (S)
11/17/97 3,000 (S)
11/14/97 7,000 (S)
7/29/97 5,958 (S)
391 (A) (1)
391 (S)
1,146 (A) (1)
1,146 (S)
7/28/97 10,000 (S)
7/20/97 3,775 (S)
10/23/96 10,000 (S)
10/21/96 5,000 (S)
10/18/96 5,000 (S)
David K. Lam none
Keith R. Lobo none
Yen-Son Huang (Paul) none
William A. Hasler 7/24/98 2,000 (A)
Charles D. Kissner none
Michael H. Ferguson none
Jeffrey Jordon 8/17/98 801 (A) (2)
2/19/98 556 (S)
2/18/98 534 (S)
2/17/98 1,090 (A) (2)
2/3/98 2,667 (A) (1)
2,667 (S)
10/16/97 4,000 (A) (1)
4,000 (S)
7/22/97 2,325 (S)
7/18/97 3,000 (A) (1)
3,000 (S)
2/18/97 2,325 (A) (2)
Raymond K. Ostby none
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
TRANSACTION ACQUIRED
NAME DATE (A) OR SOLD (S) NOTES
---- ----------- ---------------------------------- -----
<S> <C> <C> <C> <C>
Dugald H. Stewart 8/17/98 120 (A) (2)
2/17/98 91 (A) (2)
5/8/97 1,333 (A) (1)
1,333 (S)
3,667 (A) (1)
3,667 (S)
11/22/96 1,875 (A) (1)
1,875 (S)
234 (A) (1)
234 (S)
Tung-Sun Tung 8/17/98 1,174 (A) (2)
2/20/98 2,948 (S)
543 (S)
1,000 (S)
1,000 (S)
2/17/98 721 (A) (2)
8/15/97 841 (A) (2)
5/30/97 5,000 (A) (1)
2,000 (S)
2/18/97 806 (A) (2)
11/29/96 2,000 (A) (1)
11/29/96 2,000 (S)
11/27/96 1,328 (A) (1)
2,948 (A) (1)
Donald J. McInnis 2/6/98 5,000 (S)
2/5/98 15,000 (S)
5,000 (S)
5,000 (S)
10/20/97 5,000 (S)
7,500 (S)
2,500 (S)
9,000 (S)
5,000 (S)
1,000 (S)
10/16/97 25,000 (S)
5,000 (S)
10/15/97 14,000 (S)
11,000 (S)
5,000 (S)
7/23/97 20,000 (S)
7/22/97 15,000 (S)
5,000 (S)
7/21/97 20,000 (S)
5/7/97 2,000 (S)
5/6/97 20,000 (S)
5/5/97 5,000 (S)
2/7/97 603,051 (A) (3)
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
TRANSACTION ACQUIRED
NAME DATE (A) OR SOLD (S) NOTES
---- ----------- ------------------------------------ -----
<S> <C> <C> <C> <C>
Christopher Tice 8/17/98 578 (A) (2)
2/23/98 1,200 (S)
2/19/98 255 (S)
2/18/98 500 (A) (2)
8/2/97 3,500 (S)
5/7/97 4,000 (S)
2/20/97 2,922 (A) (1)
Naeem Zafar 8/17/98 1,104 (A) (2)
2/17/98 820 (A) (2)
2/2/98 1,531 (A) (1)
1,531 (S)
1/30/98 1,000 (A) (1)
1,000 (S)
469 (A) (1)
469 (S)
11/28/97 750 (A) (1)
750 (S)
11/26/97 750 (S)
750 (A) (1)
11/7/97 500 (A) (1)
500 (S)
11/5/97 400 (S)
1,000 (A) (1)
1,000 (S)
10/14/97 418 (S)
8/25/97 818 (S)
8/17/97 796 (A) (2)
2/18/97 690 (A) (2)
12/2/96 965 (S)
</TABLE>
- --------
(1) Shares purchased pursuant to an option exercise.
(2) Shares purchased pursuant to the Company's 1993 Employee Qualified Stock
Purchase Plan.
(3) Shares acquired in the Company's acquisition of SpeedSim, Inc., in 1997.
B-3
<PAGE>
PROXY CARD
QUICKTURN DESIGN SYSTEMS, INC.
SPECIAL MEETING OF STOCKHOLDERS
CALLED BY MENTOR
THIS PROXY IS SOLICITED BY
THE BOARD OF DIRECTORS OF QUICKTURN DESIGN SYSTEMS, INC.
The undersigned hereby appoints Keith R. Lobo and Raymond K. Ostby, each of
them, with full power of substitution, the proxies of the undersigned to vote
all of the outstanding Common Shares, par value $1.00 per share ("Common
Shares"), of Quickturn Design Systems, Inc. (the "Company") that the
undersigned is entitled to vote at the Special Meeting of Stockholders of the
Company called by Mentor (the "Special Meeting"), or at any adjournment or
postponement of the Special Meeting, on the following matters which are
described in the Proxy Statement (the "Proxy Statement"; all capitalized terms
used herein without definition having the meaning set forth therein) of the
Board of Directors of the Company, dated September 21, 1998, as follows:
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMEND THAT YOU VOTE "AGAINST" EACH
OF ITEMS 1 THROUGH 4.
ITEM 1: FOR AGAINST ABSTAIN
To remove all members of the Board of Directors of [ ] [ ] [ ]
the Company, other than the Nominees (as defined
below), if then directors.
ITEM 2: FOR AGAINST ABSTAIN
To adopt an amendment to Section 3.2 of the Bylaws [ ] [ ] [ ]
of the Company to reduce the number of Company
Directors from eight to five.
ITEM 3: FOR AGAINST ABSTAIN
To elect Mentor's nominees to the Board of Directors [ ] [ ] [ ]
of the Company: Gideon Argov, Scott H. Brice,
Harry L. Demorest, C. Scott Gibson, and Michael J.K.
Savage (collectively, the "Nominees")
(Instruction: To grant authority to vote for
only one or more nominees, mark "AGAINST"
above and print the name(s) of the person(s)
with respect to whom you wish to grant authority
to vote for in the space
provided below).
- ------------------------------------------------------
ITEM 4: FOR AGAINST ABSTAIN
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 Mentor proposals.
The proxies of the undersigned named above are authorized to vote, in their
discretion, upon such other matters, procedural or substantive, as may
properly come before the Special Meeting and any adjournment or postponement
thereof.
[PROXY CONTINUED ON REVERSE]
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER MARKED HEREIN
BY THE UNDERSIGNED. IF NO MARKING IS MADE AS TO ANY PROPOSAL OR ALL PROPOSALS,
THIS PROXY REVOCATION WILL BE VOTED "AGAINST" PROPOSALS 1 THROUGH 4 DESCRIBED
ABOVE. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE PROXY STATEMENT OF
THE BOARD OF DIRECTORS OF THE COMPANY DATED SEPTEMBER 21, 1998, SOLICITING
PROXIES FOR THE SPECIAL MEETING.
All previous proxies given by the undersigned to vote at the Special Meeting
or at any adjournment or postponement thereof are hereby revoked.
Please sign exactly as name appears on this Proxy:
---------------------------------------------------
(Signature)
---------------------------------------------------
(Signature, if jointly held)
Title:
-------------------------------------------------
Dated: _______________________________ , 1998
When shares are held by joint tenants, both should sign. When signing as an
attorney, executor, administrator, trustee or guardian, give full title as
such. If a corporation, sign in full corporate name by President or other
authorized officer. If a partnership, sign in partnership name by authorized
person.
PLEASE COMPLETE, SIGN, DATE AND MAIL THIS PROXY CARD
PROMPTLY IN THE ENCLOSED ENVELOPE.
