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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[_] Preliminary proxy statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
QUICKTURN DESIGN SYSTEMS, INC.
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(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
_______________________________
(2) Aggregate number of securities to which transaction applies:
_______________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
_______________________________
(4) Proposed maximum aggregate value of transaction:
_______________________________
(5) Total fee paid: ____________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ______________________________________
(2) Form, Schedule or Registration Statement No.:__________________
(3) Filing Party: _______________________________
(4) Date Filed: _________________________________
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September 11, 1998
Dear Stockholder:
Mentor Graphics Corporation ("Mentor") and its wholly-owned subsidiary MGZ
Corporation ("MGZ") are attempting to call a special meeting of stockholders of
Quickturn Designs Systems, Inc. (the "Company" or "Quickturn") in order to seek
to implement their $12.125 per share tender offer to take over Quickturn (the
"Mentor Offer").
After careful consideration of the Mentor Offer, your Board of Directors
(the "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.
In particular, your Board has determined that the Company's business plan
offers 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.
You should also be aware of 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 on YOUR
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.
YOUR BOARD OF DIRECTORS URGES YOU NOT TO EXECUTE OR DELIVER MENTOR'S GREEN
AGENT DESIGNATION CARD. IF YOU HAVE ALREADY RETURNED MENTOR'S GREEN AGENT
DESIGNATION CARD, WE URGE YOU TO EXECUTE AND DELIVER QUICKTURN'S WHITE
REVOCATION CARD TODAY.
This matter is of critical importance to the future of the Company and
your investment. If Mentor and MGZ succeed in obtaining the consents of
holders of 10 percent of the Quickturn shares, they may be able to call this
meeting, the avowed purpose of which is to remove the entire Quickturn Board
of Directors, the same board responsible for preventing Mentor and its
affiliate from infringing on your Company's patents. In considering Mentor's
consent proposal, it is essential to keep in mind that this proposal is
designed to benefit the interests of Mentor and its own stockholders -- even
if those interests are in direct conflict with yours.
The enclosed Revocation Solicitation Statement contains information as to
reasons why you should, and how to, revoke any Mentor green agent designation
card that you previously signed and returned to Mentor. We urge you to read it
carefully. Your Board of Directors and I greatly appreciate your continued
support and encouragement.
Sincerely,
/s/ Keith R. Lobo
Keith R. Lobo
President and Chief Executive Officer
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REVOCATION SOLICITATION STATEMENT
BY THE BOARD OF DIRECTORS
IN OPPOSITION TO THE SOLICITATION OF AGENT DESIGNATIONS
BY MENTOR GRAPHICS CORPORATION TO HOLD A SPECIAL MEETING OF THE STOCKHOLDERS OF
QUICKTURN DESIGN SYSTEMS, INC.
This Revocation Solicitation Statement (the "Revocation Statement") and the
accompanying WHITE revocation card are being furnished to holders of outstanding
common shares, $0.001 par value (the "Shares") of Quickturn Design Systems,
Inc., a Delaware corporation (the "Company"or "Quickturn"), in connection with
the solicitation by the Board of Directors of the Company (the "Board") in
opposition to the solicitation by Mentor Graphics Corporation, an Oregon
corporation ("Mentor"), and MGZ Corp., a Delaware corporation and a wholly owned
subsidiary of Mentor ("MGZ"), of Appointments of Designated Agents ("Agent
Designations") to call a special meeting of the stockholders of the Company (the
"Special Meeting"). By executing an Agent Designation, a stockholder designates
specified persons as his or her agents with authority to take all actions, other
than voting the Shares at the Special Meeting, permitted to be taken by Company
stockholders under the Delaware General Corporate Law ("Delaware Law") and the
Company's Bylaws ("Bylaws") in order to call and convene the Special Meeting.
According to a Solicitation Statement filed with the Securities and
Exchange Commission (the "SEC") by Mentor and MGZ on August 20, 1998 (the
"Solicitation Statement"), the purported purpose of the Special Meeting would be
to consider and vote on proposals made by Mentor and MGZ (each of which is
opposed by the Board of Directors and management of the Company), which include
asking you to (i) remove the Company's entire Board of Directors, (ii) amend the
Bylaws to reduce the authorized number of Company directors to five, (iii) elect
five new directors nominated by Mentor (the "Nominees") to the Company's board
of directors and (iv) repeal any provisions of the Bylaws adopted by the Board
subsequent to the last public filing of the Bylaws (collectively, the
"Proposals").
This Revocation Statement and the enclosed WHITE REVOCATION CARD are first
being mailed to stockholders on or about September 11, 1998. THE BOARD OF
DIRECTORS OPPOSES THE SOLICITATION BY MENTOR AND MGZ. THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU NOT SIGN ANY GREEN AGENT DESIGNATION SENT TO YOU BY MENTOR
AND MGZ. WHETHER OR NOT YOU HAVE PREVIOUSLY EXECUTED A GREEN AGENT DESIGNATION,
THE BOARD OF DIRECTORS URGES YOU TO SIGN, DATE AND DELIVER THE ENCLOSED WHITE
REVOCATION CARD AS PROMPTLY AS POSSIBLE, BY FAX OR BY MAIL (USING THE ENCLOSED
ENVELOPE) TO THE COMPANY'S INFORMATION AGENT, MORROW & CO., INC., 445 PARK
AVENUE, NEW YORK, NEW YORK 10022, FAX: (212) 754-8300.
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If you have previously signed and returned any Agent Designation (including
any green Agent Designation), you have every right to change your mind and
revoke the Agent Designation by signing, dating and returning the enclosed WHITE
revocation card (the "Revocation Card"). We urge you to consider this matter
carefully, as there will be no meeting at which to revoke any Agent Designation.
A stockholder's revocation of a previously executed green Agent Designation card
will have the effect of opposing Mentor's attempt to compel the Company to call
the Special Meeting. If you have not previously executed an Agent Designation,
your WHITE Revocation Card will have no legal effect in determining whether the
Company must call the Special Meeting.
YOUR ABILITY TO VOTE ON ANY PROPOSAL BROUGHT BEFORE ANY SPECIAL MEETING
WILL NOT BE AFFECTED BY WHETHER OR NOT YOU RETURN MENTOR'S GREEN AGENT
DESIGNATION CARD.
IF YOUR SHARES ARE HELD OF RECORD BY YOUR BANK OR BROKERAGE FIRM, ONLY THAT
FIRM CAN EXECUTE YOUR WHITE REVOCATION CARD, AND YOU SHOULD, ACCORDINGLY, CALL
YOUR BANK OR BROKER WITH YOUR INSTRUCTIONS TO EXECUTE YOUR WHITE REVOCATION
CARD.
The Company is not currently seeking your proxy with respect to any merger
or other business combination, the election or removal of any person to or from
the Board, or any other matter. This Revocation Statement and the enclosed WHITE
Revocation Card are first being mailed on or about September 11, 1998 to
stockholders of the Company.
IF YOU HAVE ANY QUESTIONS OR NEED ANY ASSISTANCE IN REVOKING ANY AGENT
DESIGNATION (INCLUDING ANY GREEN AGENT DESIGNATION) YOU MAY HAVE GIVEN TO
MENTOR, PLEASE CONTACT OUR INFORMATION AGENT:
MORROW & CO., INC.
AT
445 PARK AVENUE
NEW YORK, NEW YORK 10022
OR
CALL TOLL-FREE: (800) 566-9061
FAX: (212) 754-8300
BACKGROUND AND PURPOSE OF THIS SOLICITATION
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
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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. On August
12, 1998, the Company announced, in response to the Offer, 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 advisers 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 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 that, as of August 21, 1998, 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.
On August 20, 1998, Mentor and MGZ filed with the SEC the Solicitation
Statement relating to the Special Meeting. The Solicitation Statement indicates
that Mentor and MGZ intend to mail to the Company's stockholders a Solicitation
Statement and an Agent Designation on or about August 20, 1998. A stockholder's
execution of an Agent Designation would designate specific persons as agents for
the stockholder with authority to take all actions necessary to call a special
meeting of stockholders.
SIGNING AND RETURNING AN AGENT DESIGNATION FURTHERS THE INTERESTS OF MENTOR
AND MGZ IN PURSUING THE MENTOR OFFER, WHICH YOUR BOARD OF DIRECTORS HAS
DETERMINED IS INADEQUATE AND NOT IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS. YOUR ABILITY TO VOTE ON ANY PROPOSAL BROUGHT BEFORE ANY SPECIAL
MEETING WILL NOT BE AFFECTED BY WHETHER OR NOT YOU RETURN MENTOR'S GREEN AGENT
DESIGNATION CARD. MENTOR'S NOMINEES, IF ELECTED, ARE
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COMMITTED TO ENSURING THAT A FUTURE BOARD OF DIRECTORS OF THE COMPANY APPROVES
THE MENTOR OFFER. UNLIKE THE COMPANY'S CURRENT BOARD OF DIRECTORS, FOLLOWING ANY
SPECIAL MEETING CALLED BY MENTOR THE BOARD OF DIRECTORS WOULD BE COMPRISED OF
MENTOR'S HAND-PICKED REPRESENTATIVES. ALTHOUGH MENTOR'S NOMINEES WILL HAVE A
FIDUCIARY OBLIGATION TO QUICKTURN STOCKHOLDERS IF THEY ARE ELECTED, CURRENTLY
NEITHER MENTOR NOR MGZ HAS ANY FIDUCIARY OBLIGATION TO PROTECT YOUR INTERESTS;
THEIR SOLE OBLIGATIONS ARE TO THEIR OWN STOCKHOLDERS.
If a stockholder signs and returns an Agent Designation to Mentor and
MGZ, such stockholder authorizes Mentor and MGZ to call the Special Meeting.
The Agent Designations provide that the agenda for the Special Meeting will
include proposals to: (i) remove Quickturn's entire Board, (ii) amend the
Bylaws to reduce the authorized number of Company directors to five, (iii)
elect the five new directors nominated by Mentor to the Company's board of
directors and (iv) repeal any provisions of the Bylaws adopted by the Board
subsequent to the last public filing of the Bylaws. The Company's Bylaws
contain procedures and notice provisions to ensure that the Company and its
stockholders have adequate time to consider any proposals which may be brought
before a special meeting. The Bylaws state that the date of a special meeting
called by any stockholder or stockholders shall be between ninety (90) and one
hundred (100) days following receipt and determination of the validity of a
request for such stockholder meeting.
The purpose of the Proposals is to facilitate the consummation of the
Mentor Offer, which the Board has determined to be inadequate and 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 Proposals will aid
this objective by eliminating provisions which are designed to protect the
Company against inadequate offers and to give your Board flexibility to act in
what it is convinced are the best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS NOT RETURN THE AGENT
DESIGNATIONS REQUESTED BY MENTOR AND MGZ. TO STOP MENTOR AND MGZ FROM USING
YOUR SHARES TO FURTHER THE INADEQUATE MENTOR OFFER, THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU (1) DISCARD ANY GREEN AGENT DESIGNATION OR (2) IF YOU HAVE
ALREADY RETURNED A GREEN AGENT DESIGNATION, SIGN, DATE AND RETURN THE ENCLOSED
WHITE REVOCATION CARD AS SOON AS POSSIBLE. YOUR ABILITY TO VOTE ON ANY PROPOSAL
BROUGHT BEFORE ANY SPECIAL MEETING WILL NOT BE AFFECTED BY WHETHER OR NOT YOU
RETURN MENTOR'S GREEN AGENT DESIGNATION CARD.
RECOMMENDATION OF THE BOARD OF DIRECTORS
At a meeting of the Board of Directors held on August 21, 1998, the Board
met with its financial and legal advisors and reviewed the Mentor Offer. After
careful consideration of the Mentor Offer, your 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.
In reaching these conclusions, the Board took into account 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
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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.
. 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
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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, as of such date, 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.
(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.
(viii) The various circumstances of the Mentor Offer and conditions to
which the Mentor Offer is subject.
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
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STOCKHOLDERS NOT RETURN THE AGENT DESIGNATIONS REQUESTED BY MENTOR AND MGZ. TO
STOP MENTOR AND MGZ FROM USING YOUR SHARES TO FURTHER THE INADEQUATE MENTOR
OFFER, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU (1) DISCARD ANY GREEN AGENT
DESIGNATION OR (2) IF YOU HAVE ALREADY RETURNED A GREEN AGENT DESIGNATION,
SIGN, DATE AND RETURN THE ENCLOSED WHITE REVOCATION CARD AS SOON AS POSSIBLE.
THE RETURN OF A SIGNED REVOCATION CARD OR AGENT DESIGNATION BY A
STOCKHOLDER IS INDEPENDENT OF ANY DECISION BY SUCH STOCKHOLDER WHETHER OR NOT
TO TENDER SHARES PURSUANT TO THE INADEQUATE MENTOR OFFER. YOUR ABILITY TO VOTE
ON ANY PROPOSAL BROUGHT BEFORE ANY SPECIAL MEETING WILL NOT BE AFFECTED BY
WHETHER OR NOT YOU RETURN MENTOR'S GREEN AGENT DESIGNATION CARD.
REVOCATION AND EFFECT OF EXECUTION AND DELIVERY OF WHITE REVOCATION CARDS
Under the Company's Bylaws, stockholders holding 10% or more of the
outstanding Common Shares are entitled to call a special meeting. As of
September 10, 1998, there were 17.85 million Shares outstanding. Based on such
numbers, Agent Designations from holders of an aggregate of at least 1.194
million Shares, in addition to the 591,000 Shares owned by Mentor and MGZ, are
required for Mentor to be able to call the Special Meeting. Mentor has
indicated that if it receives the required number of Agent Designations, it
will (i) take all actions necessary to call a Special Meeting, (ii) attempt to
fix the date and time of the Special Meeting or any adjournment thereof, and
to give notice of the Special Meeting or any adjournment thereof and the
purposes for which the Special Meeting or any adjournment thereof has been
called, and (iii) exercise any and all other rights incidental to (a) calling
the Special Meeting, (b) causing notice of the Special Meeting to be given to
the Company's stockholders and (c) causing the purposes of the authority
purportedly granted pursuant to the Agent Designations to the designated
agents to be carried into effect. The Company's Bylaws contain procedures and
notice provisions to ensure that the Company and its stockholders have
adequate time to consider any proposals which may be brought before a special
meeting. The Bylaws state that the date of a special meeting called by any
stockholder or stockholders shall be between ninety (90) and one hundred (100)
days following receipt and determination of the validity of a request for such
stockholder meeting.
To oppose Mentor's and MGZ's solicitation of Agent Designations and their
efforts to install the Nominees on the Company's board of directors and
thereby facilitate acceptance of the Mentor Offer at $12.125 per Share, which
the Board has determined to be inadequate, the Board urges record holders of
Common Shares who have already returned a green Agent Designation to sign and
date the WHITE Revocation Card and return it in the enclosed postage-paid
envelope. You should discard any green Agent Designation you may receive from
Mentor and MGZ. Even if you have already returned a green Agent Designation,
you can act to stop Mentor and MGZ from calling the Special Meeting and
furthering their own interests by signing, dating and returning the WHITE
Revocation Card.
If a broker indicates on the form of Agent Designation or Revocation Card
that it does not have discretionary authority as to certain Common Stock to
execute either a WHITE Revocation Card or a green Agent Designation, such an
indication will have the practical effect of an action against the call for the
Special Meeting with respect to those Shares. Agent Designations on behalf of
any Shares held in the names of a brokerage firm, bank, bank nominee or other
institution on the record date can only be executed upon receipt of specific
instructions by such brokerage firm, bank, bank nominee or other institution.
Because no action can be taken by the persons responsible for your account
unless you provide them with instructions on whether to oppose or support the
call for the
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Special Meeting with respect to the Shares you beneficially own, we request that
you not provide any instructions to such persons.
Either a green Agent Designation or a WHITE Revocation Card may be
revoked by a stockholder. A stockholder's revocation of a previously executed
green Agent Designation will have the effect of opposing Mentor's and MGZ's
call for the Special Meeting. You may effect a revocation by filing with the
Secretary of the Company a written notice of revocation, which must be signed,
dated and clearly express your intention to revoke your previously executed
green Agent Designation or WHITE Revocation Card. Your latest dated card will
supersede any earlier-dated card, except that a WHITE Revocation Card that
would otherwise act as a revocation will be inoperative and of no effect if
delivered after the date, if any, on which the Special Meeting is held.
YOU MUST ACT PROMPTLY TO BE CERTAIN YOUR REVOCATION WILL BE EFFECTIVE.
THERE WILL BE NO MEETING AT WHICH YOU CAN REVOKE AN AGENT DESIGNATION OR A
REVOCATION CARD. IF YOU DELAY RETURNING YOUR WHITE REVOCATION CARD, YOUR EFFORT
TO REVOKE MAY NOT BE SUCCESSFUL.
If you have any questions concerning Mentor's and MGZ's solicitation of
Agent Designations, or the Corporation's solicitation of Revocation Cards,
please contact Morrow & Co., Inc. at 1-800-566-9061 (Toll-Free).
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 merger or failure to approve the Mentor Offer and the proposed merger
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 Rights inapplicable to the Mentor Offer and the proposed merger,
(iii) declaring that failure to approve the Mentor Offer and the proposed
merger 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 merger 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, provided that Mentor has obtained Agent Designations from Company
stockholders holding not less than 10% of the outstanding Shares of the
Company 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
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<PAGE>
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, seeking
injunctive relief and alleging violation of the federal securities laws.
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.
On August 26, 1998, MGZ and Mentor filed a First Amended Complaint in the
U.S. District Court for the District of Delaware.
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.
ANTITRUST MATTERS
On August 20, 1998, the Company received from MGZ written notice that
Mentor filed a premerger notification form (the "Premerger 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 Premerger Form is to give the
FTC and the DOJ notice of the merger Mentor proposes to effect with the Company
if the Offer is consummated. The applicable waiting period under the HSR Act
will expire on September 4, 1998, unless terminated early or extended by the FTC
or the DOJ.
On August 28, 1998, the Company filed its premerger 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.
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 alleges that Mentor's hardware logic
-9-
<PAGE>
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 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 a complaint
alleging infringement of the German part of the Company's European Patent No. 0
437 491 B1 against Mentor Graphics (Deutschland) GmbH, in the District Court of
Dusseldorf. The main court hearing for this matter is set for March 1999.
-10-
<PAGE>
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.
SOLICITATION OF REVOCATIONS
Revocations of Agent Designations ("Revocations") are being solicited by
and on behalf of the Company. All expenses of this solicitation, including the
cost of preparing and mailing this Revocation Statement, will be borne by the
Company. In addition to solicitation by use of the mails, Revocations may be
solicited by directors, certain officers and employees of the Company in
person or by telephone, telegram, telex, 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
herein, 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.
The Company has retained Morrow & Co., Inc. to assist the Company in
connection with its solicitation of Revocations, at an estimated fee of
$100,000, plus reimbursement of out-of pocket expenses.
The Company has engaged Hambrecht & Quist, 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 Revocations.
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 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
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<PAGE>
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.
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, employees or affiliates 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 Revocations, such activity will be
carried out by a team of individuals consisting of officers and employees of
Hambrecht & Quist identified in Appendix A.
The Company estimates that its total expenditures relating to the
solicitation (excluding costs representing salaries and wages of regular
employees and officers of the Company) will be approximately $300,000.
The Company to date has incurred estimated total expenses of approximately
$200,000. In addition to the members of the Board, the Company's executive
officers may solicit Revocations. For further information with respect to
participants in the solicitation, including the names of its executive officers
who may solicit Revocations, and certain transactions by those participants in
the Company's shares of Common Stock, see Appendix A and
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<PAGE>
Appendix B. Unless otherwise noted, the business address for each of the members
of the Board and the officers named in Appendix A is, and the Company's
executive offices are located at 55 W. Trimble Road, San Jose, California 95131.
BENEFICIAL SECURITY OWNERSHIP OF
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
- ---- -------------- -------------
PRINCIPAL STOCKHOLDERS
<S> <C> <C>
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 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 Exchange Act.
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<PAGE>
(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 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.
(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.
EMPLOYMENT AGREEMENT AND EMPLOYEE PLANS
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
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<PAGE>
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.
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.
The total potential severance payment is based on a multiple of 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 severance
cash 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, the
participant (and, if covered prior to the change of control, his or her
dependents) receives 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
continues to make these premium payments for a period ranging from one and
one-half years to two and one-half years (depending on the participant's job
level), or, if earlier, until the participant becomes covered under comparable
benefit plans of another employer.
Under the Management Plan, participants are eligible to be paid their
prorated annual target bonus for the year in which the 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 and 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 Retention Plan. It provides for a 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 severance cash 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 participants
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 only reduced to avoid
triggering the golden parachute excise tax and non-deductibility provisions if
so doing would maximize the after-tax economic benefit to such officers, as
determined by the Company's independent accountants.
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 11, 1998
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<PAGE>
APPENDIX A
INFORMATION REGARDING PARTICIPANTS
IN THE REVOCATION 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 Revocations 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 Revocation Statement
(including the Appendices 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 as
Name (Age) Principal Occupation or Employment Director
- ----------------------------- -------------------------------------------- -----------------------
<S> <C> <C>
Glen M. Antle (60) Chairman of the Board of the Company. Mr. Antle 1993
served as Chairman of PiE Design Systems, Inc.
("PiE") from September 1992 to June 1993 and
Chief Executive Officer. 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 (46) President, Chief Executive Officer and Director. 1992
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.
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
Year First Elected as
Name (Age) Principal Occupation or Employment Director
- ----------------------------- -------------------------------------------- -----------------------
<S> <C> <C>
Richard C. Alberding (67) Director of the Company. Mr. Alberding has served 1995
as a management consultant since June 1991.
Mr. Alberding's principal business address is 15
Ashdown Pl., Half Moon Bay, CA 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 (44) Director of the Company. Mr. D'Amour has served as 1987
President of D'Amour and Associates, a research and
development company, since December 1995. The principal
business address of D'Amour and 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 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) Huang (52) Director of the Company. Dr. Huang is self-employed 1993
and his principal business address is 13870 Pike Road,
Saratoga, California, 95070. 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 (55) Director of the Company. Dr. Lam is a technology 1996
and business advisor in the semiconductor
equipment industry and Chairman of the David Lam
Group. Mr. Lam's principal business address is
2055 Gateway Place, Suite 400, San Jose, CA 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 (56) Director of the Company. Mr. Hasler is the Co-Chief 1998
Executive Officer of Aphton Corporation. Mr. Hasler's
principal business address is P.O. Box 194204, San
Francisco, CA 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., TCSI Corporation.
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
Year First Elected as
Name (Age) Principal Occupation or Employment Director
- ----------------------------- -------------------------------------------- -----------------------
<S> <C> <C>
Charles D. Kissner (51) Director of the Company. Mr. Kissner has served as 1998
Chief Executive Officer and Chairman of the Board
for 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, CA
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 for Aristacom
International, Inc. from February 1990 to July
1993. Mr. Kissner is currently a director of
Spectrian, Inc.
</TABLE>
EXECUTIVE OFFICERS OF QUICKTURN
The principal Executive Officers of the Company are as follows:
Name Office Held Age
- -------------------- -------------------------- ------
Michael H. Ferguson Vice President, 46
Asia Pacific Operations
Jeffrey K. Jordan Vice President, North 53
American Sales
Keith R. Lobo President and Chief 46
Executive Officer
Donald J. McInnis Senior Vice President 51
Raymond K. Ostby Vice President, Finance and 51
Administration; Chief
Financial Officer
Dugald H. Stewart Vice President, Manufacturing 45
Christopher J. Tice Vice President, World-Wide 39
Support Services
Tung-sun Tung Vice President, Research and 50
Development
Naeem Zafar Vice President, Marketing 41
A-3
<PAGE>
HAMBRECHT & QUIST LLC
The business address for each of the persons named below is 1 Bush Street,
San Francisco, California 94104:
Name Title
- -------------------- ----------------------
Paul B. Cleveland Managing Director
Glover H. Lawrence Vice President
David M. Wehner Associate
Erik A. Jorgensen Financial Analyst
A-4
<PAGE>
APPENDIX B
TRANSACTIONS OF PARTICIPANTS IN THE COMPANY'S SHARES
SINCE SEPTEMBER 1, 1996
There have been no transactions in the Shares during the past two years by
the Company or, to the Company's knowledge, by any executive officer, director,
affiliate or subsidiary of the Company, except:
Number of Shares
Transaction Acquired
Name Date (A) or Sold (S) Notes
- ------------------ ----------------- ------------------ -----------------
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
B-1
<PAGE>
Number of Shares
Transaction Acquired
Name Date (A) or Sold (S) Notes
- -------------------- ------------ ----------------- ----------------
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
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)
B-2
<PAGE>
Number of Shares
Transaction Acquired
Name Date (A) or Sold (S) Notes
-------------------- ------------ ----------------- ----------------
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)
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)
B-3
<PAGE>
Number of Shares
Transaction Acquired
Name Date (A) or Sold (S) Notes
- -------------------- ------------ ----------------- ----------------
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) (1)
750 (A)
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)
2/18/97 690 (A)
12/2/96 965 (S)
(1) Shares purchased pursuant to an option exercise.
(2) Shares purchased pursuant to the Company's 1993 Employee Qualified Stock
Purchase Plan.
B-4
<PAGE>
QUICKTURN DESIGN SYSTEMS, INC.
THIS REVOCATION CARD IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
IN OPPOSITION TO THE SOLICITATION OF AGENT DESIGNATIONS BY
MGZ CORP. AND MENTOR GRAPHICS CORPORATION
The undersigned stockholder, acting with regard to all common shares, par
value $.001 per share (the "Common Shares"), of Quickturn Design Systems, Inc.,
a Delaware corporation, owned by such stockholder, hereby REVOKES any previously
executed Agent Designation requesting the call of a special meeting of
stockholders (the "Special Meeting").
THE BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT YOU REVOKE ANY PREVIOUSLY
EXECUTED AGENT DESIGNATION REQUESTING THE CALL OF THE SPECIAL MEETING BY
PROPERLY SIGNING, DATING AND RETURNING AS PROMPTLY AS POSSIBLE THIS REVOCATION
CARD (USING THE POSTAGE-PAID ENVELOPE PROVIDED). THERE WILL BE NO MEETING AT
WHICH TO REVOKE ANY AGENT DESIGNATION, AND ACCORDINGLY YOU MUST ACT QUICKLY.
PLEASE SIGN THIS REVOCATION CARD EXACTLY AS YOUR NAME APPEARS
HEREON. IF SIGNING AS ATTORNEY, ADMINISTRATOR, EXECUTOR,
GUARDIAN OR TRUSTEE, PLEASE GIVE TITLE AS SUCH. IF A
CORPORATION, THIS SIGNATURE SHOULD BE THAT OF AN AUTHORIZED
OFFICER WHO SHOULD STATE HIS OR HER TITLE. IF A PARTNERSHIP,
SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
SIGNATURE ___________________________
Title(s) (if applicable) ___________________________
SIGNATURE (if held jointly) ___________________________
Title(s) (if applicable) ___________________________
Dated:______________, 1998
