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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
(AMENDMENT NO. 2)
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)
74838E102
(CUSIP Number of Class of Securities)
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)
COPY TO:
LARRY W. SONSINI, ESQ.
WILSON SONSINI GOODRICH & ROSATI
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 3. IDENTITY AND BACKGROUND
The response to Item 3 is hereby amended by deleting the last sentence of
the second paragraph of section (b) of Item 3 and replacing it with the
following:
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.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
The response to Item 4 is hereby amended by deleting the first sentence of
paragraph (b) of Item 4 and replacing it with the following:
In reaching the conclusions referred to in Item 4(a), the Board took into
account the following factors:
The response to Item 4 is hereby amended further by deleting section (b)(iv)
in its entirety and replacing it with the following:
(iv) The written opinion, dated August 21, 1998, of H&Q that, as of such
date, the Offer was inadequate, from a financial point of view, to the
holders of Shares. In rendering such opinion, H&Q reviewed and performed
various analyses including those set forth in (iii) above. The full text of
such opinion of H&Q, setting forth the assumptions made, matters considered
and limitations on the reviews undertaken, is included as Exhibit 13 hereto
and is incorporated herein by reference.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
The response to Item 7 is hereby amended by adding the following after the
final paragraph of section (b)(i) of Item 7:
In accordance with the Board's fiduciary duties to its stockholders, the
Rights Agreement was amended to reflect the Board's view that, subject to
certain procedures, future boards of directors should have the ability to
take certain actions regarding the operation of the Rights Agreement.
The response to Item 7 is hereby amended further by adding the following
after the final paragraph of section (b)(ii) of Item 7:
In accordance with the Board's fiduciary duties to its stockholders, the
Company's Bylaws were amended to add appropriate procedures and notice
provisions to ensure that the Company and its stockholders would have
adequate time to consider any proposals which may be brought before a
special meeting.
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ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The response to Item 8 is hereby amended by adding the following after the
final paragraph of Item 8:
Additional Litigation Concerning the Offer.
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, a copy of which is attached hereto as Exhibit 14 and is
incorporated herein by reference.
On August 26, 1998, MGZ and Mentor filed a First Amended Complaint in the
U.S. District Court for the District of Delaware, a copy of which is
attached hereto as Exhibit 15 and is incorporated herein by reference.
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. Copies of the
complaints are filed as Exhibit 16 and Exhibit 17 to this statement and are
incorporated herein by reference.
Additional Antitrust Matters.
On August 28, 1998, the Company filed its premerger notification form with
the FTC.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
The response to Item 9 is hereby amended by the addition of the following
new exhibits:
Exhibit 13 Opinion of Hambrecht & Quist LLC.
Exhibit 14 Amended Verified Complaint, filed by Mentor in the Court of
Chancery of the State of Delaware in and for New Castle County
on August 25, 1998.
Exhibit 15 First Amended Complaint, filed by Mentor in the U.S. District
Court for the District of Delaware on August 26, 1998.
Exhibit 16 Complaint in Andrea Brown V. Quickturn Design Systems, Inc., et
al., filed in the Court of Chancery of the State of Delaware on
August 25, 1998.
Exhibit 17 Complaint in Mohamed Yassin V. Quickturn Design Systems, Inc.,
et al., filed in the Court of Chancery of the State of Delaware
on August 25, 1998.
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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.
Dated: August 28, 1998
QUICKTURN DESIGN SYSTEMS, INC.
By: /s/ Keith R. Lobo
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Keith R. Lobo
President and Chief Executive
Officer
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EXHIBIT 13
August 21, 1998
Confidential
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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
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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;
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
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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 only 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
By /s/ Paul B. Cleveland
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Paul B. Cleveland
Managing Director
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EXHIBIT 14
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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<S> <C>
MENTOR GRAPHICS CORPORATION, )
an Oregon corporation, and MGZ CORP., a )
Delaware corporation, )
)
Plaintiffs, )
)
v. ) Civil Action No. 16584-NC
)
QUICKTURN DESIGN SYSTEMS, INC., a )
Delaware corporation, KEITH R. LOBO, )
GLEN M. ANTLE, RICHARD C. )
ALBERDING, MICHAEL R. D'AMOUR, )
YEN-SON (PAUL) HUANG, DR. DAVID K. )
LAM, WILLLAM A. HASLER and )
CHARLES D. KISSNER, )
)
Defendants. )
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VERIFIED AMENDED COMPLAINT FOR
DECLARATORY AND INJUNCTIVE RELIEF
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Plaintiffs Mentor Graphics Corporation ("Mentor Graphics") and MGZ Corp.
("Purchaser") for their amended complaint/1/ against defendants Quickturn Design
System, Inc. ("Quickturn"), Keith R. Lobo, Glen M. Antle, Richard C. Alberding,
Michael R. D'Amour, Yen-Son (Paul) Huang, Dr. David K. Lam, William A. Hasler,
and Charles D. Kissner ("Director Defendants") allege, upon knowledge as to
themselves and their own acts and upon information and belief as to all other
matters, as follows:
Summary of this Action
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1. On August 12, 1999, plaintiff Purchaser commenced a fully-financed,
non-coercive, non-discriminatory, all-cash, all-shares tender offer for
outstanding shares of Quickturn common stock that are not already owned by
Mentor Graphics or Purchaser (the "Tender Offer"). That same day,
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1. Pursuant to Chancery Court Rule 15(aa), a black-lined copy of the
amended complaint. reflecting changes from the complaint filed on August 12,
1998 is attached hereto as Exhibit A.
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Mentor Graphics also filed with the Securities and Exchange Commission (the
"SEC") preliminary materials to solicit agent designations to call a special
meeting of Quickturn's stockholders to replace the current members of
Quickturn's Board of Directors. This action seeks declaratory and injunctive
relief requiring Quickturn to dismantle its takeover defenses including its
"poison pill," declaring ineffective certain amendments to Quickturn's by laws
and poison pill adopted in response to the Tender Offer, and enjoining the
Quickturn Board from taking any further action to thwart the stockholder
franchise or to frustrate the efforts of Quickturn's stockholders to call a
special meeting and to replace Quickturn's Board of Directors in order to
facilitate the Tender Offer.
2. Quickturn stockholders whose shares are purchased by Purchaser in the
Tender Offer will receive $12.125 per share in cash, representing a 51.6%
premium above the average closing price of Quickturn's stock on the Nasdaq
National Market on August 11, 1998, the last full trading day before the first
public announcement of Purchaser's. commencement of the Tender Offer. The
Tender Offer is the initial step in a two-step transaction pursuant to which
Purchaser proposes to acquire all of the outstanding shares of Quickturn stock.
If successful, the Tender Offer will be followed by a merger or similar business
combination with Purchaser or another direct or indirect subsidiary of Mentor
Graphics (the "Proposed Merger," and together with the Tender Offer, the
"Proposed Acquisition"). Pursuant to the Proposed Merger, it is currently
anticipated that each then outstanding share of Quickturn (other than shares
owned by Mentor Graphics or any of its subsidiaries or shares held in the
treasury of Quickturn) would be converted into the right to receive an amount in
cash equal to the price paid in the Tender Offer.
3. On August 24, 1998, Quickturn announced its rejection of Mentor's
fully-financed all shares premium offer, characterizing the Proposed Acquisition
as an "opportunistic and inadequate" offer, made "at a moment of weakness for
Quickturn's stock price and a moment of desperation for Mentor's design
strategy." 8/24/98 Quickturn Press Release (hereinafter "8/24/98 Press
Release") at 1). Later that day, Quickturn filed its Schedule 14D-9 (the "14D-
9") with the SEC, disclosing the Quickturn Board's rejection of the Proposed
Acquisition and recommending that the Quickturn stockholders not tender shares
in the Tender Offer.
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4. In January 1996, the Board of Directors of Quickturn (the "Quickturn
Board") adopted a stockholder rights plan (the "Rights Plan"), commonly known as
a "poison pill," which is designed to thwart any acquisition of Quickturn that
does not have the approval of the Quickturn Board. The Rights Plan provides the
Quickturn Board with the power to prevent summarily the consummation of the
fully-financed, all-cash, all shares, non-coercive, non-discriminatory Tender
Offer. After Mentor Graphics announced the Proposed Acquisition, on August 21,
1998, the Quickturn Board amended the Rights Plan to prohibit further amendment
of the Rights Plan or redemption of the Rights for a period of 180 days
following any annual or special meeting in which a majority of the Board is
elected, if such amendment or redemption is likely to facilitate a change in
control transaction. The original Rights Plan and the recent amendment were
both adopted without the approval -of Quickturn's stockholders and if the Rights
Plan, as amended, remains in effect and applicable to the Tender Offer, it will
impede the right of Quickturn's stockholders to decide whether to accept this
premium offer for their shares and will impose an insurmountable obstacle to
Purchaser's consummation of the Tender Offer long after the stockholders of
Quickturn have expressed their support for the Proposed Acquisition by voting to
remove the current Quickturn Board and elect Mentor Graphics' nominees to the
Quickturn Board. Moreover, the Quickturn Board will be able to prevent Mentor
Graphics and Purchaser from consummating the Proposed Merger for a least three
years unless the Board exempts the Tender Offer from restrictions imposed by
Section 203 of the Delaware General Corporation Law ("Section 203").
5. The Tender Offer is conditioned upon, among other things, (i) the
redemption or inapplicability of the Rights Plan; (ii) the exemption of the
Tender Offer from Section 203 and (iii) there being validly tendered and not
withdrawn prior to the, expiration of the Tender Offer that number of Quickturn
shares which, when combined with the Quickturn shares owned by Mentor Graphics,
Purchaser and their affiliates, represent a majority of the outstanding
Quickturn shares on a fully diluted basis. By failing to take action to satisfy
the conditions to the Tender Offer, the individual members of the Quickturn
Board have breached their fiduciary duties to Quickturn's stockholders under
Delaware law. Quickturn's stockholders, including Mentor Graphics and
Purchaser, will be irreparably harmed absent relief from this Court.
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The Parties
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6. Plaintiff Mentor Graphics is a Oregon corporation with its principal
executive offices in Wilsonville, Oregon. Mentor Graphics manufactures, markets
and supports software and hardware Electronic Design Automation ("EDA") products
and provides related services which enable engineers to design, analyze,
stimulate, model, implement and verify the components of electronic systems.
Mentor Graphics is the beneficial owner of approximately three percent of the
outstanding shares of Quickturn common stock.
7. Plaintiff Purchaser is a newly incorporated Delaware corporation and a
wholly-owned subsidiary of Mentor Graphics with its principal executive offices
in Wilsonville, Oregon. Purchaser is the record owner of 100 shares of
Quickturn common stock.
8. Defendant Quickturn is a Delaware corporation with its principal
executive offices in San Jose, California. According to its most recent Form
10-K, Quickturn "designs, manufactures, sells and supports products that verify
the design of integrated circuits ('ICs') and electronic systems.
9. Defendant Keith R. Lobo has been President, Chief Executive Officer
and a director of Quickturn since November 1992.
10. Defendants Glen M. Antle, Richard C. Alberding, Michael R. D'Amour,
Yen-Son (Paul) Huang, Dr. David K. Lam, William A. Hasler and Charles D. Kissner
are directors of Quickturn. The Director Defendants, as directors of Quickturn,
owe fiduciary duties of loyalty and care of Quickturn's stockholders.
FACTUAL BACKGROUND
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A. The Quickturn Rights Plan
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11. On or about January 10, 1996, the Quickturn Board approved the
adoption of the Rights Plan and declared a dividend of one Preferred Share
purchase right (a "Right") for each common share of Quickturn stock outstanding
as of the close of business on January 22, 1996. The Rights are distributed and
become exercisable for one one-thousandth share of Quickturn's Series A
Participating Preferred Stock (the "Series A Preferred") at a price of $50 on
the close of business tens days after the earlier of (i) the first date of
public announcement that any person (other than Quickturn, any subsidiary of
Quickturn or any employee benefit plan of Quickturn or any subsidiary of
Quickturn)
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has acquired or obtained the right to acquire beneficial ownership of
15% or more of Quickturn's common stock (an "Acquiring Person"), or (ii) the
publication pursuant to Rule 14d promulgated under the Securities Exchange Act
of 1934 (the "Exchange Act") of a tender or exchange offer which, if successful,
would result in the beneficial acquisition by any person of 15% or more of
Quickturn's common stock (the earlier of (i) and (ii) being referred to as the
"Distribution Date). The Rights expire on January 10, 2006, unless earlier
redeemed or exchanged by Quickturn..
12. The Primary purpose of the Rights Plan is not to enable the purchase
of the Series A Preferred at the greatly inflated price of $50 for each one-
thousandth share, but to allow the holder of the Right, under certain
circumstances, to purchase shares of Quickturn's or an acquiror's common stock
at a deep discount. If and when a person becomes an Acquiring Person, all
Rights other than those held by the Acquiring Person "flip-in" and each right
becomes exercisable for shares of Quickturn common stock equivalent in value to
twice the exercise price of the Right. Thus, for the exercise price of $50, the
holder of a Right may purchase Quickturn common stock having a market value of
$100. If and when Quickturn engages in a merger or a sale of 50% or more of its
assets, the Rights "flip-over" and become exercisable for shares of the
acquiror's common stock at the same deep discount price of two for the price of
one, Thus, stockholders have no economic incentive to exercise the Rights until
a person triggers the "flip-in" and/or "flip-over" provisions by becoming an
Acquiring Person.
13. The Rights are not exercisable for shares of Quickturn's common stock
if, prior to any person becoming an Acquiring Person, the Quickturn Board
declares that the tender or exchange offer is a "Permitted Offer." Under the
Rights Plan as originally adopt, a Permitted Offer is a tender or exchange
offer, issued pursuant to Section 14(d) of the Exchange Act, made when
"Continuing Directors" are in office, and determined to be, in the opinion of a
majority of Continuing Directors, 'both adequate and otherwise in the best
interests of the Company and its stockholders (taking into account all factors
that such Continuing Directors deem relevant)."
14. Under the original Rights Plan, the Quickturn Board could redeem the
Rights, at a redemption price of $.01 per Right, any time prior to the close of
business on the earlier of (i) the tenth day following the date of Public
announcement of the fact that an Acquiring Person has become such,
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or (ii) January 10, 2006; provided, however, that once a stockholder had become
an Acquiring Person, the Rights could be redeemed by the Quickturn Board only if
Continuing Directors remained on the Board and the redemption was approved by a
majority of the Continuing Directors. Continuing Directors were defined as (i)
persons serving on the Quickturn Board prior to the date of the adoption of the
Rights Agreement who are not associated or affiliated with an Acquiring Person,
or (ii) persons nominated or elected to the Quickturn Board with the approval of
the majority of the Continuing Directors after the date of the adoption of
Rights Plan who are not associated or affiliated with an Acquiring Person.
15. On August 24, 1998, Quickturn announced that the Quickturn Board had
adopted a resolution to amend the Rights Plan to:
(x) delete all provisions requiring the concurrence of a majority of
Continuing Directors for (1) the redemption or exchange of the Rights
at or after the time a person becomes an Acquiring Person or (2) the
amendment of the Rights Agreement on or after the Distribution Date,
(y) add a requirement that if a majority of the Company's Board is
elected at an annual or special meeting of stockholders, then for a
period of 180 days following such election (1) the Rights cannot be
redeemed or exchanged and (2) the Rights Agreement cannot be amended,
if such redemption, exchange or amendment is reasonably likely to have
the purpose or effect of facilitating an acquisition of the Company by
a person or entity who proposed, nominated or supported a director of
the Company so elected at the annual or special meeting, and (z) ...
add a clause to the definition of Distribution Date pursuant to which
the Board may determine the Distribution Date applicable to Mentor and
MGZ in connection with the Offer or any amendment to the offer or any
subsequent tender offer by Mentor or its Affiliates or Associates
(each as defined in the Rights Agreement).
14D-9 at 8. This amendment, if effective, would preclude the Quickturn Board
from redeeming or exchanging the Rights or amending the Rights Plan to
facilitate an acquisition transaction for a period of 6 months following any
annual or special meeting at which a majority of the Quickturn Board was
replaced.
16. Purchaser's acceptance of shares tendered pursuant to its Tender Offer
will result in it becoming an Acquiring Person, will make the Rights exercisable
for shares of Quickturn's common stock at a discount of 50% of their market
value, will make the Tender Offer economically infeasible for Purchaser to
accomplish, and will deprive Quickturn's stockholders of the ability to tender
their
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shares unless the Quickturn Board redeem the Rights or exempts Purchaser's
Tender Offer from the triggering provisions of the Rights Plan by declaring that
the Tender Offer is a "Permitted Offer."
B. The Delaware Business Combination Statute
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17. Section 203 of the Delaware General Corporation Law, entitled
"Business Combinations with Interested Stockholders," applies to any Delaware
corporation that has not opted out of the statute's coverage. Quickturn has not
opted out of the statute's coverage.
18. Section 203 was designed to impede coercive and inadequate tender and
exchange offers. Section 203 provides that if a person acquires 15% or more of
a corporation's voting stock (thereby becoming an "interested stockholder"),
such interested stockholder may not engage in a "business combination with the
corporation (defined to include a merger or consolidation) for three years after
becoming an interested stockholder, unless: (i) prior to the 15% acquisition,
the board of directors has approved either the acquisition resulting in the
stockholder becoming an interested stockholder or the business combination; (ii)
the interested stockholder acquires 85% of the corporation's voting stock in the
same transaction in which it crosses the 15% threshold; or (iii) on or
subsequent to the date of the 15% acquisition, the business combination is
approved by the board of directors and authorized at an annual or special
meeting of the stockholders (and not by written consent) by the affirmative vote
of at least 662/3% of the outstanding voting stock which is not owned by the
interested stockholder.
19. Application of Section 203 to the Proposed Acquisition will delay the
Proposed Merger for at least three years. Accordingly, three years of the
substantial benefits of the Proposed Acquisition will be forever lost.
Additionally, any number of events could occur within those three years that
would prevent the Proposed Merger altogether.
C. The "Quasi-California Corporation" Statute
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20. Section 2115 ("Section 2115") of the California General Corporation
Law (the "CGCL") provides that if a foreign corporation has (i) more than one-
half of the average of the corporation's property, payroll and sales in
California, and (ii) more than half of its outstanding securities held by
persons with California addresses then such foreign corporation shall be subject
to certain enumerated provisions of the CGCL, as set forth in Section 2115(b),
to the exclusion of the
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law of the jurisdiction in which the corporation is incorporated. Corporations
with then characteristics and, thus, subject to the specified provisions of the
CGCL, are commonly referred to as "quasi-California" corporations. For the
purpose of determining whether a foreign corporation is a "quasi-California"
corporation, Section 2115(a) provides that any securities held in the names of
broker-dealers, nominees for broker-dealers, banks, associations, or other
entities holding securities in a nominee name or otherwise on behalf of a
beneficial owner shall not be considered outstanding unless the foreign
corporation requests such nominee holders to certify the number of shares held
by beneficial owners and the addresses of beneficial owners for whom securities
are held.
21. Exempt from classification as a "quasi-California" corporation
pursuant to Section 2115(c) are corporations "with outstanding securities
designated as qualified for trading as a national market security on [NASDAQ] if
the corporation has at least 800 holders of its equity securities as of the
record date of its most recent annual meeting, of shareholders." Upon
information and belief, plaintiffs that Quickturn has at least 800 stockholders
and, as a corporation with outstanding securities qualified for trading on
NASDAQ as a national market security, would not be a "quasi-California"
corporation and would not be subject to the provisions of the CGCL identified in
Section 2115(b). Such provisions include, but are not limited to:
a. Section 303, which restricts the ability of stockholders to
remove directors without cause,
b. Section 708, which provides stockholders a right to cumulative
voting in the election of directors;
c. Section 710, which permits supermajority voting requirements;
d. Section 1101, which imposes limitations on mergers; and
e. Chapter 12, which applies to all transactions termed
"reorganizations" as defined in the CGCL, which includes mergers and/or
acquisitions financed by the exchange of equity securities.
22. If Quickturn were to qualify as a "quasi-California corporation,
application of the enumerated provisions of the CGCL would hamper and delay the
consummation of the Proposed Acquisition. For example, Section 1101(e)
prohibits a majority stockholder holding more than 50%
<PAGE>
but less than 90% of the outstanding shares of a quasi-California corporation
from consummating a cash-out merger.
23. While plaintiffs believe that Quickturn is not currently a "quasi-
California" corporation, the Quickturn Board could undertake one of several
transactions which would increase its percentage of stock held by California
residents and/or decrease its total number of stockholders, thereby removing
Quickturn from the exemption provided by Section 2115(c) and transforming
Quickturn into a "quasi-California" corporation. Such actions would interfere
with the consummation of the Proposed Acquisition despite the benefits of the
transactions to the Quickturn stockholders.
D. The Response to the Proposed Acquisition
----------------------------------------
24. Despite the clear-cut and significant economic benefits for the
Quickturn stockholders, from the start Quickturn and its Board have steadfastly
indicated that Quickturn will not accept the Proposed Acquisition, nor will the
Quickturn Board allow the Quickturn stockholders the opportunity to consider the
Proposed Acquisition for themselves.
25. On August 11. 1998, Dr. Walden C. Rhines ("Rhines"), Mentor Graphics'
Chief Executive Officer met with the Chairman of the Quickturn Board, Glen M.
Antle ("Antle"). At this meeting, Rhines presented Mentor Graphics' proposal to
acquire Quickturn. Rhines also delivered a letter to Antle outlining Mentor
Graphics' proposal to acquire all outstanding shares of Quickturn common stock
at a price, of $12.125 per share in a negotiated transaction. Rhines further
advised Antle that Mentor Graphics' proposal was not subject to any financing
conditions. Rhines also advised Antle that depending on the results of Mentor
Graphics' due diligence review of Quickturn. Mentor Graphics would consider
offering more value for the outstanding shares of Quickturn. While Antle stated
that he would communicate the offer to the Quickturn Board, he stated that he
was unwilling to accept the offer or to Quickturn to remove its takeover
defenses or to cause Quickturn to refrain from taking actions to prevent the
consummation of the Tender Offer.
26. On August 14.1998, Dr. Rhines telephoned Keith R. Lobo ("Lobo"),
President and Chief Executive Officer and a director of Quickturn to discuss the
Proposed Acquisition. In this conversation, Dr. Rhines, emphasized that Mentor
Graphics' interest in the Proposed Acquisition stemmed from the strategic
benefits of the transaction, and was not motivated by a desire to moot the
<PAGE>
pending patent litigation between the companies. Lobo merely stated that he
would communicate Dr. Rhines' position to the Quickturn Board.
27. On August 24, 1998, and without ever meeting with any representative
of Mentor Graphics to discuss the Proposed Acquisition, Quickturn announced that
on August 21, 1998, the Quickturn Board had rejected the Proposed Acquisition,
on the grounds that the Board considered the Tender Offer to be inadequate, not
reflective of the long-term value of Quickturn, and not in the best interests of
Quickturn or its stockholders. 14D-9 at 3. The Board further announced that it
had determined that Quickturn's business plan offered the potential for
obtaining higher long-term benefits for Quickturn's stockholders than the Tender
Offer. 14D-9 at 3. This is determination is belied, however, by both the past
performance of Quickturn and by the decision made by the Board in June 1998 to
reprice employee options having original exercise prices of up to $19.00 per
share to the reduced exercise price of $7.438 per share.
28. In addition to its rejection of the Proposed Acquisition, Quickturn
also announced that on August 21, 1998, the Quickturn Board had adopted a number
of defensive measures designed to thwart the Proposed Acquisition.
29. Specifically, the Board announced that it had adopted an amendment to
the Quickturn bylaws specifying procedures for the calling of a special meeting
by stockholders holding at least 10% of the Quickturn shares, which, if
effective, would strip from the shareholders the right to set the date of a
special meeting and would have the effect of-inequitably delaying the call of
any special meeting by at least three months. As set forth in Quickturn's 14D-
9, the amended bylaw adopted by the Quickturn Board provides as follows:
A special meeting of the stockholders may be called at any time by (i)
the board of directors, (ii) the chairman of the board, (iii) the
president, (iv) the chief executive officer or (v) subject to the
procedures set forth in this Section 2.3, one or more stockholders
holding shares in the aggregate entitled to cast not less than ten
percent (10%) of the votes at that meeting.
Upon request in writing sent by registered mail to the president or
chief executive officer by any stockholder or stockholders entitled to
call a special meeting of stockholders pursuant to this Section 2.3,
the board of directors shall determine a place and time for such
meeting. which time shall be not less than ninety (90) nor more than
one hundred (100)
<PAGE>
days after the receipt and determination of the validity of such
request, and a record date for the determination of stockholders
entitled to vote at such meeting in the manner set forth in Section
2.12 hereof. Following such receipt and determination, it shall be the
duty of the secretary to cause notice to be given to the stockholders
entitled to vote at such meeting, in the manner set forth in Section
2.4 hereof that a meeting will be held at the place and time so
determine.
14D-9 at 8. By contrast, prior to this amendment, Section 2.3 of the Quickturn
bylaws simply provided that a special meeting could be called by "one or more
stockholders holding shares in the aggregate entitled to cast not less than ten
percent (10%) of the votes at that meeting."
30. Additionally, as described above the Quickturn Board also adopted an
amendment to the Rights Plan, which, if effective, would preclude any change of
control for another 6 months following any annual or special meeting, regardless
of the expressed will of the stockholders.
31. Taken together, these two provisions effectively preclude the
Quickturn stockholders from taking action to effect a change in control against
the wishes of management for minimum of 9 months. Such a delay may preclude a
change in control entirely by putting at risk- the ability of a potential
acquiror to obtain financing commitments for such a lengthy period of time,
and/or by virtue of the substantially increased costs associated with such a
lengthy financing commitment.
32. Quickturn's 14D-9 also disclosed that the Quickturn, Board's financial
advisor, Hambrecht & Quist, was retained pursuant to a letter agreement which
structures Hambrecht & Quist's fees to create an incentive for Hambrecht, &
Quist to opine that the Mentor Graphic's offer or any other unsolicited offer is
inadequate. Specifically, under the retention agreement, Hambrecht & Quist is
entitled to a fee of 1.0% of the aggregate consideration to be received in a
Consensual Acquisition (defined as an acquisition approved by the Quickturn
Board), but only .75% of the consideration received in an acquisition not
approved in advance by the Quickturn Board. Notably, although the 14D-9 stated
that the Quickturn Board relied upon the opinion of Hambrecht & Quist in
rejecting the Proposed Acquisition, the Hambrecht & Quist opinion was not filed
as an exhibit to the 14D-9.
<PAGE>
E. Mentor Graphics' Solicitation Of Agent Designations To Call
A Special Meeting And To Replace Quickturn's Board Of Directors
---------------------------------------------------------------
33. In light of Quickturn's unwillingness to accept or even to discuss
Mentor Graphics' proposal and its recent implementation of additional takeover
defenses, the current Quickturn Board cannot be expected to facilitate the
Proposed Acquisition, but can be expected to maintain and add to Quickturn's
anti-takeover devices and to actively oppose the Proposed Acquisition. Because
Quickturn has declined to accept the substantial benefits of the Proposed
Acquisition, Mentor Graphics has been forced to take its offer directly to the
Quickturn stockholders by soliciting agent designations and by causing Purchaser
to commence the Tender Offer.
34. Mentor Graphics filed with the SEC on August 12, 1998 preliminary
solicitation materials in connection with its solicitation of agent designations
from Quickturn's stockholders to call a special meeting of the Quickturn
stockholders for the purpose of replacing the Director Defendants with
individuals nominated by Mentor Graphics. Definitive agent designation
solicitation materials were filed with the SEC on August 20, 1998 and
immediately mailed to Quickturn's largest stockholders. If elected, the Mentor
Graphics nominees intend, subject to their fiduciary duties and assuming the
invalidity of the August 21, 1998 amendment to the Rights Plan to redeem the
Rights (or amend the Rights Plan to make the Rights inapplicable to the Tender
Offer and the Proposed Merger), approve the Tender Offer and the Proposed Merger
under Section 203, and take such other actions as may be required to facilitate
the prompt consummation of the Proposed Acquisition.
35. Upon the commencement of the Tender Offer, Mentor Graphics announced
its intention to solicit and is in the course of soliciting, agent designations
to call a special meeting of Quickturn's stockholders to occur approximately 45
days after the call of the meeting is delivered to Quickturn (the "Special
Meeting"). At that time Mentor Graphics expected, and Quickturn's management
must also have known, that sufficient agent designations to call the meeting
would be obtained within days of the mailing of definitive agent designation
materials to the Quickturn stockholders. As of the date of that Mentor Graphics
commenced its solicitation of agent designations, Section 2.3 of Quickturn's
bylaws as publicly-filed provided that "[a] special meeting of the stockholders
may be called at any time by one or more stockholders holding shares in the
<PAGE>
aggregate entitled to cast not less than ten percent (10%) of the votes at that
meeting." In accordance with Quickturn's bylaws as in effect when Mentor
Graphics commenced its solicitation, Mentor Graphics believed that (i) a special
meeting could be called by the holders of not law than 10% of the Quickturn
shares on the date the agent designations are delivered to Quickturn; (ii) the
stockholders calling the meeting, not the Board, had the right to fix the date
and time of the Special Meeting, (iii) agent designations shall remain in effect
until revoked or unless the person executing such agent designation is not the
record holder of Quickturn shares on the date the Special Meeting is called; and
(iv) absent prior action by the Quickturn Board, the record date for the Special
Meeting shall be the date next preceding the date on which the designated agents
give notice of the Special Meeting.
36. The Bylaw amendments adopted by Quickturn on August 21, 1998 are
targeted to derail Mentor Graphics' previously-announced plans to call a special
meeting on a date to be set by the stockholders calling the meeting, such date
to be within 45 days of receipt of sufficient agent designations to call the
special meeting.
37. In furtherance of the solicitation of agent designations to call the
Special Meeting, Purchaser demanded on August 12, 1998 that Quickturn produce a
list of its stockholders and related stock list materials. Quickturn responded
to Purchaser's demand on August 19, 1998, stating that the stock list materials
would be made available beginning at 12:00 noon on August 25, 1998. Given the
timing of Quickturn rejection of the Proposed Acquisition and the amendment of
the bylaws regarding the call of a special meeting. Quickturn's refusal to make
the stock fist available immediately constitutes improper maneuvering to ensure
that Mentor Graphics would not be able to mail its agent designation
solicitation materials to all of Quickturn's stockholders or to call the special
meeting before Quickturn's Board adopted its new defensive measures.
38. The efforts by Mentor Graphics and Purchaser to convene the Special
Meeting of Quickturn's stockholders comply with Delaware law and Quickturn's
bylaws as they existed at the time Mentor Graphics' commenced its acquisition
bid. These bylaw provisions, with which Mentor Graphics has complied My and
with which it will continue to comply, authorize the holders of ten percent of
Quickturn's common stock to call a special meeting without undue delay, at a
time and place designated by the stockholders calling the meeting.
<PAGE>
39. Mentor Graphics believes that under the bylaws-as they existed prior
to the recent amendment (i) the date for determining stockholders entitled to
call the Special Meeting and to submit agent designations in connection
therewith shall be the date that the Special Meeting is actually called, and
(ii) the stockholders, not the Company Board, have the right to fix the date and
time of the Special Meeting and give notice thereof Therefore, following receipt
of the requisite number of agent designations, the designated agents intend to,
and if the bylaw amendment is deemed ineffective, will call the Special Meeting,
fix the date and time of the Special Meeting and give notice of the Special
Meeting.
40. Mentor Graphics intends also to solicit proxies for the Special
Meeting so that. upon proposals by Mentor Graphics, the Director Defendants may
be removed from the Quickturn Board, the authorized number of Quickturn
directors may be reduced from eight to five, and five individuals nominated by
Mentor Graphics may be elected to the Quickturn board of directors. Al the
Special Meeting, Quickturn's stockholders also will be presaged with a proposal
by Mentor Graphics to repeal bylaws adopted subsequent to March 30, 1998 - the
last bylaws filed as an exhibit to Quickturn's Form 10-K for the year ended
December 31, 1997, filed with the Securities and Exchange Commission on March
30, 1998 and prior to the adoption of any bylaw proposals presented at the
Special Meeting, including, without limitation the bylaw amendment purportedly
adopted on August 21, 1998.
41. Mentor Graphics believes that, in the absence of inequitable conduct
by Quickturn Quickturn's stockholders will act to call the Special Meeting and,
at such meeting, will replace Quickturn's current directors with Mentor
Graphics' nominees and, if necessary, will take other actions designed to negate
inequitable conduct by the Quickturn Board undertaken to impede the Proposed
Acquisition.
42. Because Mentor Graphics' solicitation of agent designations and
solicitation of proxies in reliance on Quickturn's current bylaws threaten the
incombency of Quickturn's Baud of Directors, Mentor Graphics believed,
correctly, that Quickturn would seek to impose a constrained interpretation of
the current bylaws and purport to amend the bylaws in order to delay the Special
Meeting and frustrate the ability of Quickturn's stockholders to exercise their
voting rights. Any determinations by Quickturn that Mentor Graphics Wed to
comply with Quickturn's then-existing bylaws would lack
<PAGE>
a good fifth basis. The amendments to Quickturn's bylaws or other manipulations
of corporate machinery having the effect of hindering the ability of Quickturn's
stockholders to exercise their rights as they currently exist serve no
legitimate purpose and constitute inequitable manipulation and unlawful
entrenchment by the Director Defendants in violation of their fiduciary duties
under Delaware law.
IRREPARABLE INJURY
------------------
43. The unlawful actions of Quickturn, in its failure to accept the
Proposed Acquisition, its failure to redeem the Rights Plan, its failure to
exempt the Tender Offer from Section 203, and its adoption of additional,
unreasonable defensive measures arc preventing its stockholders from receiving
the benefits of the Proposed Acquisition and are thereby causing and will cause
Quickturn's stockholders irreparable harm. Unless the Quickturn Board is
restrained by this Court, the substantial benefits of the Proposed Acquisition
may be forever lost. The injury to Mentor Graphics and Purchaser will not be
compensable in money damages and plaintiffs have no adequate remedy at law.
COUNT I
-------
(Breach of Fiduciary Duty: The Rights Plan)
--------------------------------------------
44. Plaintiffs repeat and reallege each and every allegation set forth in
paragraphs 1 through 43 as if fully set forth herein.
45. The Director Defendants owe Quickturn's stockholders the highest
duties of cam, loyalty and good faith.
46. In light of the superior value offered to Quickturn stockholders by
the Proposed Acquisition, there is no legitimate reason for the Quickturn Board
to retain the Rights Plan. The Director Defendants' failure to redeem the
Rights or to render the Rights Plan inapplicable to the Proposed Acquisition
deprives Quickturn's stockholders of the right to maximize their wealth by
selling their Quickturn shares at the premium price offered by the Proposed
Acquisition.
47. The Director Defendants' failure to redeem the Rights or to render the
Rights Plan applicable to the Proposed Acquisition has no economic
justification, serves no legitimate purpose, and is not a reasonable response to
the Tender Offer and/or the Proposed Merger, which pow no threat to the
interests of Quickturn's stockholders or to Quickturn's corporate Policy and
effectiveness. As
<PAGE>
such, the actions of the Director Defendants are in breach of the fiduciary
duties the Director Defendants owe to Quickturn's stockholders under applicable
Delaware law.
48. Moreover, the Quickturn Board's amendment of the Rights Plan, which if
effective, would preclude the stockholders from effectively utilizing the
stockholder franchise to facilitate an offer which they believe to be in their
best interests by disabling the Quickturn Board from approving any acquisition
for 6 months after the election of new directors, serves no legitimate corporate
interest, has no economic justification and is an unreasonable response to the
Proposed Acquisition. As such, the amendment to the Rights Plan constitutes a
breach of the fiduciary duties the Director Defendants owe to Quickturn's
stockholders under applicable law.
49. Further, because the amendment to the Rights Plan permits the
stockholders to effect a change of the composition of the Quickturn Board only
at the cost of restricting the ability of the Quickturn Board to approve an
acquisition transaction, the amendment constitutes an improper infringement upon
the voting rights of the stockholders without compelling justification. As
such, the amendment to the Rights Plan constitutes a breach of the fiduciary
duties the Director Defendants owe to Quickturn's stockholders under applicable
law.
50. Mentor Graphics and Purchaser have no adequate remedy at law-
COUNT II
--------
(Breach of Fiduciary Duty: Section 203)
--------------------------------------
51. Plaintiffs repeat and reallege each and every allegation SK forth in
paragraphs I through 50 as if fully set forth herein.
52. The Director Defendants owe Quickturn's stockholders the highest
duties of care, loyalty and good faith.
53. The Board of Directors of Quickturn is empowered by Section 203 to
render the statute inapplicable to the Proposed Acquisition by approving the
Tender Offer.
54. In light of the superior value offered to Quickturn Stockholders by
the Proposed Acquisition, there is no legitimate reason for the Quickturn Board
of Directors to fail to approve the Tender Offer or to fail to take any other
steps necessary to render Section 203 inapplicable to the Proposed Acquisition.
Such failures only have the effect of withholding from Quickturn stockholders
<PAGE>
the right to maximize their wealth by selling their Quickturn sham at the
premium price offered by the Proposed Acquisition.
55. The Director Defendants' failure to approve the Tender Offer or
otherwise render Section 203 inapplicable to the Proposed Acquisition have no
economic justification, serve no legitimate purpose, and am not reasonable
responses to the Proposed Acquisition. Which poses no threat to the interests
of Quickturn's stockholders or to Quickturn's corporate policy and
effectiveness. As such, the actions of the Director Defendants am in breach of
the fiduciary "duties the Director Defendants owe to Quickturn's stockholders
under applicable Delaware law.
56. Mentor Graphics and Purchaser have, no adequate remedy at law.
COUNT III
---------
(Declaratory and Injunctive Relief: Section 2115 of the California General
---------------------------------------------------------------------------
Corporation Law)
---------------
57. Plaintiffs repeat and reallege each and every allegation set forth in
Paragraphs I through 56 as if full orth herein.
58. The Director Defendants owe Quickturn's stockholders the highest
duties of care, loyalty and good faith.
59. The Tender Offer is non-coercive and non-discriminatory, it is fair to
Quickturn stockholders, it poses no threat to Quickturn's corporate policy and
effectiveness and it represents a substantial premium over the market price of
Quickturn common stock prior to the public announcement of the Tender Offer.
60. Any action which would bring Quickturn within the provisions of
Section 2115 of the California General Corporation Law and thereby hinder and/or
delay the consummation of the Proposed Acquisition would be a breach of the
Director Defendants' fiduciary duties to Quickturn's stockholders.
61. Mentor Graphics and Purchaser have no adequate remedy at law.
COUNT IV
--------
(Declaratory and Injunctive Relief: Anti-Takeover Devices)
---------------------------------------------------------
62. Plaintiffs repeat and reallege each and every allegation act forth in
paragraphs 1 through 61 as if fully set forth herein.
<PAGE>
63. The Director Defendants owe Quickturn's stockholders the highest
duties of cart loyalty and good faith.
64. The Tender Offer is non-coercive and non-discriminatory, it is fair to
Quickturn's stockholders, it poses no threat to Quickturn's corporate policy and
effectiveness, and it represents a substantial premium over the market price of
Quick-turn common stock prior to the public announcement of the Tender Offer.
65. Adoption of any defensive measures against the Tender Offer, the
Proposed Merger, Motor Graphics' solicitation of agent designations, Mentor
Graphics' solicitation of proxies or that would prevent a future board of
directors from exercising its fiduciary duties - including, but not limited to,
amendments to the Rights Plan, amendments to Quickturn's bylaws, pursuit of
alternative transactions with substantial break-up fees and/or lock-ups, "White
Knight" stock issuances, change to licensing agreements, or executive
compensation arrangements with substantial payments triggered by a change in
control - would itself be a breach of the Director Defendants' fiduciary duties
to Quickturn's stockholders.
66. Specifically, the adoption by the Board of the amendment to Section
2.3 of ft Quickturn bylaws, which has the effect of (1) removing from the
stockholders the right to det the date and place of, and to give notice of, a
---
special meeting and (2) unreasonably delaying the call of a special meeting,
serves no legitimate corporate purpose and is an unreasonable response to Mentor
Graphics' agent designation solicitation and non-coercive, fully-financed,
premium Tender Offer. Moreover, the amendment to the Quickturn bylaws
constitutes an inequitable manipulation of the corporate franchise designed for,
and with the primary affect of, entrenchment of management.
67. Further, the amendment to the Rights Plan in concert with the
amendments to the bylaws would preclude the Stockholders from utilizing the
stockholder franchise to facilitate an offer which they believe to be in their
best interests for a period of more than 9 months, and are clearly intended to
coerce stockholders into voting against Mentor Graphics' nominees by threatening
the stockholders with a 6-months standstill should they vote to remove the
incumbent board. As such. the amendments serve no legitimate corporate interest
and are an unreasonable response to the
<PAGE>
Proposed Acquisition, and are therefore a breach of the Director Defendants'
fiduciary duties to Quickturn's stockholders. Further, such amendments will
delay or thwart the exercise of the corporate franchise without compelling
justification and thereby cause irreparable harm.
68. Mentor Graphics and Purchaser have no adequate remedy at law.
COUNT V
-------
(Declaratory of Injunctive Relief: The Call of Special Meeting)
----------------------------------------------------------------
69. Plaintiffs repeat and reallege each and every allegation set forth in
paragraphs 1 through 68 as if fully set forth herein.
70. The Director Defendants owe Quickturn's stockholders the highest
duties of care, loyalty and good faith.
71. Mentor Graphics' solicitation of agent designations to call the
Special Meeting complied and will continue to comply with Quickturn's bylaws in
effect at the time the agent designation solicitation was commenced. Mentor
Graphics' disclosures regarding the agent designations, which were filed on
August 12, 1998 with the SEC, are complete and accurate.
72. Quickturn's actions to hinder the procedure for or ability of its
stockholders to the Special Meeting, and to dispute Mentor Graphics method of
determining whether it has obtained sufficient unrevoked agent designations to
call the Special Meeting, and -to affect the selected date of the call to refuse
to recognize the date of the call, the stockholders' ability to fix the date and
time of the Special Meeting set forth in the call and to interfere with Mentor
Graphics giving notice of the Special Meeting, and to impede consideration by
Quickturn's stockholders at the Special Meeting of Mentor Graphics' proposals
impermissibly impede and delay Quickturn's stockholders from exercising their
rights. Specifically, the August 21, 1998 amendments to the Quickturn bylaws
and the Rights Plan impermissibly interfere with the ability of Quickturn's
stockholders to utilize the corporate franchise. As such, these actions,
including the bylaw Rights Plan amendments delay and/or thwart the exercise of
stockholder voting rights without compelling justification and thereby cause
irreparable harm.
73. Mentor Graphics and Purchaser have no adequate remedy at law.
<PAGE>
COUNT VI
--------
(Declaratory and Injunctive Relief: Nomination of Directors)
-------------------------------------------------------------
74. Plaintiffs repeat and reallege each and every allegation set forth in
paragraphs 1 through 73 as if fully set forth herein.
75. The Director Defendants owe Quickturns stockholders the highest duties
of care, loyalty and good faith.
76. Mentor Graphics' actions to provide proper notice of its intent to
nominate directors for election at the Special Meeting called by Quickturn's
stockholders and Mentor Graphics' solicitation of proxies in connection with
such election will comply with Quickturn's bylaws as currently enacted. Any
action by Quickturn to hinder the ability of Mentor Graphics to propose its
nominees at the Special Meeting, including but not limited to, any actions to
amend the notification procedures, would impermissibly impede and/or delay
Quickturn's stockholders from exercising their rights. Moreover, any action to
negate the effectiveness of Mentor Graphics' upcoming properly delivered
notification of its stockholder proposals and its director nominees would
eviscerate the ability of Quickturn's stockholders to change the composition of
the Quickturn Board at the Special Meeting. There cannot possibly be compelling
justification for any such action which would guarantee that the incumbent Board
could always and continuously frustrate the purposes of and/or delay a special
meeting with the effect of preventing the election of stockholder-nominated
directors. Any such action would delay and/or thwart the exercise of stockholder
voting rights without compelling justification and would thereby cause
irreparable harm.
77. Mentor Graphics and Purchaser have no adequate remedy at law.
WHEREFORE, plaintiffs respectfully that this Court:
a. declare that the Director Defendants have breached their
fiduciary obligations to Quickturn stockholders under Delaware law by failing to
redeem the Rights in response to the Tender Offer;
b. compel Quickturn and its Director Defendants to redeem the Fights
or to render the Fights Plan inapplicable to the Proposed Acquisition;
<PAGE>
c. declare that the Director Defendants have breached their
fiduciary obligations to Quickturn stockholders under Delaware law by failing to
render Section 203 inapplicable to the Proposed Acquisition;
d. compel the Director Defendants to approve the Proposed
Acquisition for purposes of Section 203 and enjoin them from taking any action
to enforce or apply Section 203 that would impede, thwart, frustrate or
interfere with the Proposed Acquisition;
e. temporarily, preliminarily and permanently enjoin Quickturn its
employees. agents and all persons acting on its behalf or in concert with it
from taking any action with, respect to the Rights Plan, except to redeem the-
Rights or render the Rights-Plan inapplicable to the Tender Offer, and from
adopting any other Rights Plan or other measures, or taking any other action
designed to impede, or which has the effect of impeding, the Tender Offer or the
efforts of Mentor Graphics to acquire control of Quickturn;
f. Declare that the taking of any action to bring Quickturn within
the provisions of Section 2115 of the California General Corporation Law,
thereby impeding, thwarting, frustrating or interfering with the Proposed
Acquisition, constitutes a breach of the Director Defendants, fiduciary duties;
g. enjoin Quickturn and the Director Defendants from taking any
action which would bring Quickturn within the provisions of Section 21 15 of the
California General Corporation Law and thereby have the effect of impeding,
thwarting, frustrating or interfering with the Proposed
h. declare that the August 21, 1999 amendments to the Quickturn
bylaws and the Rights Plan are ineffective and that the adoption thereof
constituted a breach of fiduciary duty by the Director Defendants, and enjoin
Quickturn from, enforcing the amendments to the bylaws
i. temporarily, preliminarily and permanently enjoin defendants.
their affiliates. subsidiaries, officers, directors and all others acting in
concert with them or on their behalf from bringing any action concerning the
Rights Plan, Section 203, or Section 2115 in any other court;
j. declare that the adoption of any further measure that has the
effect of impeding, thwarting, frustrating or interfering with the Tender Offer,
the Proposed Merger. Mentor Graphics' solicitation of agent designations,
Mentor Graphics' call of the Special Meeting, Mentor Graphics'
<PAGE>
notice of the Special Meeting, Mentor Graphics' notification of its director
nominees, or Mentor Graphics' solicitation of proxies, or Mentor Graphics'.
nomination of directors or presentation of proposals at the Special Meeting
constitutes a breach of the Director Defendants' fiduciary duties;
k. enjoin Quickturn and the Director Defendants from adopting any
further measure that has the effect of impeding, thwarting, frustrating or
interfering with the Tender Offer, the Proposed Merger, Mentor Graphics'
solicitation of agent designations, Mentor Graphics' call of the Special
Meeting, Mentor Graphics' notice of the Special Meeting, Mentor Graphics'
notification of its director nominees, Mentor Graphics" solicitation of proxies,
or Mentor Graphics' nomination of directors or presentation of Proposals at the
Special Meeting;
l. enjoin Quickturn and the Director Defendant from taking any
action to delay, impede, postpone or thwart the voting or other rights of
Quickturn's stockholders in connection with the Special Meeting or otherwise-,
m. compel Quickturn and the Director Defendants to recognize the
ability of Quickturn's stockholders, holding on the date of the call. of the
Special Meeting shares entitled to cast not less than ten percent of votes at
such Special Meeting, to call and provide notice of a Special Meeting at the
date and time set forth in the call and for the purposes set forth in the call
and notice of the Special Meeting;
n. declare that the date for determining stockholders entitled to
call the Special Meeting and to submit Agent Designations in connection
therewith shall be the date that the Special Meeting is actually called and that
agent designations shall remain valid until revoked upon notice to Mentor
Graphics or unless the person executing the agent designation is not the holder
of Quickturn common shares on the date the Special Meeting is called;
o. declare that Mentor Graphics' and Purchaser's disclosure in
connection with its solicitation of agency designations and proxies for the
Special Meeting are complete and accurate;
p. award plaintiffs their costs and disbursements in this action,
including reasonable attorneys' and experts' fees; and
q. grant plaintiffs such other and further relief as this Court may
dean just and proper.
<PAGE>
OF COUNSEL: __________________________________
Kevin G. Abrams
Christopher L. Kaufman Thomas A. Beck
David A. York Catherine G. Dearlove
Latham & Watkins Holly June Stiefel
75 Willow Road Thad J. Bracegirdle
Menlo Park. CA 94025 Richards, Layton & Finger
(650) 328-4600 One Rodney Square
P.O. Box 551
Fredric J. Zepp Wilmington, DE 19899
Latham & Watkins (302) 658-6541
505 Montgomery Street Attorneys for Plaintiffs
San Frucisco, CA 94111
(415) 391-0600
H. Steven Wilson
Latham & Watkins
2100, 701 B Street
San Diego, CA 92101-8197
(619) 236-1234
Dated: August 24, 1998
<PAGE>
VERIFICATION
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I, Gregory K. Hinckley, having beca duly sworn according to law, verifies
as follows:
1. I am the Executive Vice President, Chief Operating Officer and Chief
Financial Officer of the plaintiff Mentor Graphics Corporation, an Oregon
corporation, with specific authority to make this verification on behalf of
Mentor Graphics Corporation.
2. I am also the Chief Financial Officer and Secretary and a director of
plaintiff MGZ Corp. (collectively with Mentor Graphics Corporation, the
"Plaintiffs"), a Delaware corporation with specific authority to make this
verification on behalf of MGZ Corp.
3. I have personally reviewed the attached Verified Amended Complaint For
Declaratory and Injunctive Relief (the "Amended Complaint"). filed by The
Plaintiff in the Court of Chancery of the State of Delaware.
4. Insofar as the matters contained in the Amended Complaint concern the
acts and deeds of the Plaintiffs, I know the allegations to be true and correct.
5. Insofar as the matters contained in the Amended Complaint concern the
acts and deeds of persons or entities other than the Plaintiff, I believe the
allegations to be true and correct
Mentor Graphics Corporation
By: ___________________________________
Name: Gregory K. Hinckley
Title: Executive Vice President,
Chief Operating Officer and
Chief Financial Officer
Sworn to and subscribed before me
this 25th day of August, 1998
MGZ Corp.
_________________________________
Notary Public
By: ___________________________________
My Commission expires ___________ Name: Gregory K. Hinckley
Title: Chief Financial Officer and
Secretary
<PAGE>
EXHIBIT 15
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
MENTOR GRAPHICS CORPORATION )
and MGZ CORP., )
)
Plaintiffs, )
) No. 98-473 RRM
v. )
)
QUICKTURN DESIGN SYSTEMS, INC., )
)
Defendant. )
FIRST AMENDED COMPLAINT
-----------------------
Pursuant to Rule 15(a) of the Federal Rules of Civil Procedure, plaintiffs
Mentor Graphics Corporation ("Mentor Graphics") and MGZ Corp. ("Purchaser") file
this First Amended Complaint seeking declaratory and injunctive relief arising
out of Purchaser's offer to purchase shares of stock of defendant Quickturn
Design Systems, Inc. ("Quickturn").
JURISDICTION AND VENUE
----------------------
1. This Court has jurisdiction over this action pursuant to 15 U.S.C. (S)
78aa, 28 U.S.C. (S) 1331(a) and 28 U.S.C. (S) 1337(a).
2. Venue in this Court is proper pursuant to 15 U.S.C. (S) 78aa and 28
U.S.C. (S) 1391(b).
THE PARTIES
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3. Plaintiff Mentor Graphics is a corporation incorporated under the laws
of the State of Oregon having its principal executive offices in Wilsonville,
Oregon. Mentor Graphics manufactures, markets and supports software and
hardware Electronic Design Automation ("EDA") products and provides related
services which enable engineers to design, analyze, simulate, model, implement
and
<PAGE>
verify the components of electronic systems. Purchaser, a wholly-owned
subsidiary of Mentor Graphics and a Delaware corporation, was formed to acquire
all of the outstanding shares of Quickturn through the tender offer and merger
proposal described below. Mentor Graphics is the beneficial owner of more than
three percent of the outstanding shares of Quickturn common stock and Purchaser
is the record owner of 100 shares of Quickturn common stock.
4. Defendant Quickturn is a corporation incorporated under the laws of
the State of Delaware having its principal executive offices in San Jose,
California. According to its most recent Form 10-K, Quickturn "designs,
manufactures, sells and supports products that verify the design of integrated
circuits ('ICs') and electronic systems."
5. Quickturn's common stock is registered pursuant to Section 12(b) of
the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. (S) 78l(b),
and is listed and traded on the Nasdaq National Market.
THE TENDER OFFER
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6. On August 12, 1998, Purchaser commenced a fully-financed, non-
coercive, non-discriminatory, all-cash, all-shares tender offer for outstanding
shares of Quickturn common stock that are not already owned by Mentor Graphics
or Purchaser (the "Tender Offer"). In connection with the commencement of the
Tender Offer, Mentor Graphics issued on August 12, 1998 a press release
summarizing the terms of the Tender Offer (the "Press Release"), and a summary
advertisement of the Tender Offer was published in the August 12, 1998 national
edition of The Wall Street Journal (the "Summary Advertisement").
-----------------------
7. Quickturn stockholders whose shares are purchased by Purchaser in the
Tender Offer will receive $12.125 per share in cash, representing a 51.6%
premium above the average closing price of
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Quickturn's stock on the Nasdaq National Market on August 11, 1998, the last
full trading day before the first public announcement of Mentor Graphics'
commencement of the Tender Offer. The Tender Offer is conditioned upon, among
other things, (i) the redemption or inapplicability of Quickturn's stockholder
rights plan, (ii) the exemption of the Tender Offer from Section 203 of the
Delaware General Corporation Law ("Section 203"), and (iii) the tender and
purchase of sufficient Quickturn shares to give Mentor Graphics and Purchaser a
majority of the outstanding Quickturn shares on a fully diluted basis.
8. The Tender Offer is the initial step in a two-step transaction
pursuant to which Mentor Graphics proposes to acquire all of the outstanding
shares of Quickturn stock. If successful, the Tender Offer will be followed by
a merger or similar business combination with Purchaser or a direct or indirect
subsidiary of Mentor Graphics (the "Proposed Merger," and together with the
Tender Offer, the "Proposed Acquisition"). Pursuant to the Proposed Merger, it
is currently anticipated that each then outstanding share of Quickturn (other
than shares owned by Mentor Graphics or any of its subsidiaries or shares held
in the treasury of Quickturn) would be converted into the right to receive an
amount in cash equal to the price paid in the Tender Offer.
9. In January 1996, the Board of Directors of Quickturn adopted a
stockholder rights plan (the "Rights Plan"), commonly known as a "poison pill,"
which is designed to thwart any acquisition of Quickturn that does not have the
approval of Quickturn's Board. The Rights Plan provides the Quickturn Board
with the power to prevent summarily the consummation of even an all-cash, all-
shares, non-coercive, non-discriminatory tender offer by imposing a severe
economic penalty (in the form of massive dilution) on a potential acquiror.
After Mentor Graphics announced the Proposed Acquisition, the Quickturn Board
amended the Rights Plan to prohibit further amendment or redemption of the
Rights for a period of 180 days following any annual or special meeting in which
a majority of the Board is
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elected, if such amendment is likely to facilitate certain change in control
transactions. The original Rights Plan and the recent amendment were both
adopted without approval of Quickturn's stockholders and, if the Rights Plan as
amended remains in effect and applicable to the Tender Offer, it will restrict
the right of Quickturn's stockholders to decide whether to accept Purchaser's
premium offer for their shares.
10. Moreover, Quickturn's Board may be able to prevent Mentor Graphics
from consummating the Proposed Merger for at least three years unless the Board
exempts the Tender Offer from restrictions imposed by Section 203, Delaware's
Business Combination Statute. Section 203, which applies to any Delaware
corporation that has not opted out of its coverage, provides that if a person
acquires 15% or more of a corporation's voting stock (thereby becoming an
"interested stockholder"), such interested stockholder may not engage in a
"business combination" with the corporation (defined to include a merger or
consolidation) for three years after becoming an interested stockholder, unless:
(i) prior to the 15% acquisition, the board of directors has approved either the
acquisition resulting in the stockholder becoming an interested stockholder or
the business combination; (ii) the interested stockholder acquires 85% of the
corporation's voting stock in the same transaction in which it crosses the 15%
threshold; or (iii) on or subsequent to the date of the 15% acquisition, the
business combination is approved by the board of directors and authorized at an
annual or special meeting of the stockholders (and not by written consent) by
the affirmative vote of at least 66% of the outstanding voting stock which is
not owned by the interested stockholder. Quickturn is subject to Section 203
and has chosen not to opt-out of the statute's coverage.
11. The Tender Offer is, and will continue to be, in full compliance
with all applicable federal laws and regulations governing tender offers, i.e.,
----
the provisions of the Williams Act, embodied
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in Sections 14(d) and 14(c) of the Exchange Act, 15 U.S.C. (S)(S) 78n(d) and
(e), and the rules and regulations promulgated thereunder by the Securities and
Exchange Commission ("SEC"). In accordance with the Exchange Act and the rules
and regulations promulgated thereunder by the SEC, Purchaser commenced the
Tender Offer by the publication of the Summary Advertisement in the August 12,
1998 Wall Street Journal. In connection with the Tender Offer and in accordance
-------------------
with the Exchange Act and the rules and regulations promulgated thereunder by
the SEC, Purchaser filed on August 12, 1998 a Schedule 14D-1 with the SEC
pursuant to Section 14(d)(1) of the Exchange Act and Rule l4d-3 promulgated
thereunder, 17 C.F.R. (S) 240.14d-3.
12. On August 20, 1998, Mentor Graphics and Purchaser amended the Schedule
14D-1 filed on August 12, 1998 to conform to comments from the SEC and to
disclose a press release issued by Mentor Graphics on August 12, 1998. On
August 25, 1998, Mentor Graphics and Purchaser further amended the Schedule 14D-
1 filed on August 12, 1998 (as amended, the "Schedule 14D-1") to disclose the
existence of (i) a warrant to purchase shares of Quickturn common stock granted
by Quickturn to Mentor Graphics in connection with a 1992 asset purchase
agreement between the two companies pursuant to which Quickturn acquired certain
assets from Mentor Graphics; and (ii) an outstanding promissory note payable to
Mentor Graphics by Quickturn issued in 1993. A true and complete copy of the
Schedule 14D-1, with amendments, is attached hereto as Exhibit A.
13. Section 14(d) of the Exchange Act, 15 U.S.C. (S) 79n(d), and the rules
and regulations promulgated thereunder by the SEC, require that any person or
entity making a tender offer for beneficial ownership of more than five percent
of a class of registered equity securities file and disclose certain specified
information with respect to the tender offer. Any such bidder must disclose,
among other things, its identity and background, past contacts, transactions or
negotiations between the bidder
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<PAGE>
and the company in whom the bidder seeks to acquire stock, the source and amount
of funds needed for the tender offer, and any plans the bidder may have to
change the capitalization, corporate structure or business of the company whose
stock it seeks to acquire.
14. In addition, Section 14(e) of the Exchange Act, 15 U.S.C. (S) 78n(e),
makes it "unlawful for any person to make any untrue statement of a material
fact or omit to state any material fact necessary in order to make the statement
made, in light of the circumstances under which they are made, not misleading,
or to engage in any fraudulent, deceptive, or manipulative acts or practice in
connection with any tender offer." Purchaser has complied fully with the
Exchange Act and all rules and regulations promulgated thereunder.
15. In connection with the Tender Offer, Purchaser is in the process of
disseminating to Quickturn's stockholders an offer to purchase containing all
material information required by applicable law to be disclosed (the "Offer to
Purchase"). A true and correct copy of the Offer to Purchase is attached hereto
as Exhibit B. Among other matters, the Offer to Purchase discloses:
a. the solicitation of agent designations being undertaken by Mentor
Graphics to call a special meeting of Quickturn stockholders, as more fully
described below;
b. the matters to be considered at the special meeting, including
the removal of all current members of the Quickturn Board of Directors, an
amendment of the Quickturn bylaws to reduce the size of the Quickturn Board to
five directors, and the election of five persons nominated by Mentor Graphics to
the Quickturn Board, as more fully described below; and
c. pending patent litigation between Mentor Graphics and Quickturn,
and information regarding the potential damages Quickturn may recover from such
litigation.
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<PAGE>
16. Despite the significant benefits of the Tender Offer for the Quickturn
Stockholders, Quickturn has refused to accept the Mentor Graphics offer.
Quickturn's efforts will, in all likelihood, also include the commencement of
baseless litigation against plaintiffs under the provisions of the federal
securities laws regulating the solicitation of agency designations, the
solicitation of proxies, tender offers and acquisition efforts.
QUICKTURN REJECTS THE MENTOR GRAPHICS OFFER
-------------------------------------------
17. On August 11, 1998, Dr. Walden C. Rhines ("Rhines"), Mentor Graphics'
Chief Executive Officer and President, met with Glen M. Antel ("Antel"), the
Chairman of the Quickturn Board. At this meeting, Rhines presented Mentor
Graphics' proposal to acquire Quickturn. Rhines delivered a letter to Antel
outlining Mentor Graphics' proposal to acquire all outstanding shares of
Quickturn common stock at a price of $12.125 per share in a negotiated
transaction. Rhines further advised Antel that Mentor Graphics' proposal was
not subject to any financing conditions. Rhines also advised Antel that,
depending on the results of Mentor Graphics' due diligence review of Quickturn,
Mentor Graphics would consider offering more value for the outstanding shares of
Quickturn. While Antel stated that he would communicate the proposal to the
Quickturn Board, he stated that he was unwilling to accept the offer or to cause
Quickturn to remove its takeover defenses or to cause Quickturn to refrain from
taking actions to prevent the consummation of the Tender offer.
18. On August 14, 1998, Rhines telephoned Keith R. Lobo ("Lobo"),
President and Chief Executive Officer and a director of Quickturn, to discuss
the Proposed Acquisition. Rhines emphasized to Lobo that Mentor Graphics'
interest in the Proposed Acquisition stemmed from the strategic benefits of the
transaction, and was not motivated by a desire to moot the pending patent
litigation between the companies. Lobo merely stated that he would communicate
Rhines' position to the Quickturn Board.
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<PAGE>
19. On August 24, 1998, and without ever contacting or meeting with any
representative of Mentor Graphics to discuss Mentor Graphics' Proposed
Acquisition, Quickturn announced that on August 21, 1998, the Quickturn Board
had rejected the Proposed Acquisition, on the grounds that the Board considered
the Tender Offer to be inadequate, not reflective of the long-term value of
Quickturn and not in the best interests of Quickturn or its stockholders. The
Board further announced that it had determined that Quickturn's business plan
offered the potential for obtaining higher long-term benefits for Quickturn's
stockholders than the Tender Offer.
20. In light of Quickturn's failure to accept or even discuss Mentor
Graphics' acquisition proposal, the current Quickturn Board cannot be expected
to facilitate the Proposed Acquisition, but instead can be expected to maintain
Quickturn's anti-takeover devices and to actively oppose the Proposed
Acquisition. Because Quickturn failed to accept the substantial benefits of the
Proposed Acquisition, Mentor Graphics is taking its offer directly to the
Quickturn stockholders.
THE AGENT SOLICITATION
----------------------
21. In furtherance of the Proposed Acquisition, Mentor Graphics publicly
disclosed on August 12, 1998 its intention to solicit agent designations from
Quickturn's stockholders to appoint designated agents with the power to call a
special meeting of the Quickturn stockholders (the "Agent Solicitation").
Section 2.3 of Quickturn's bylaws provides that "[a] special meeting of the
stockholders may be called at any time by . . . one or more stockholders holding
shares in the aggregate entitled to cast not less than ten percent (10%) of the
votes at that meeting. The purpose of the Agent Solicitation to call a special
meeting of the Quickturn stockholders (the "Special Meeting") is to allow the
Quickturn stockholders to remove all current members of Quickturn's Board of
Directors, to reduce the authorized number of Quickturn directors to five, to
elect to the Quickturn Board five individuals nominated by
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<PAGE>
Mentor Graphics, and to repeal any recent or subsequent amendments to the
Quickturn bylaws. If elected, Mentor Graphics' nominees intend to, subject to
their fiduciary duties, (i) redeem the Rights Plan (or amend the Rights Plan to
make it inapplicable to the Proposed Acquisition), (ii) approve the Tender Offer
under Section 203, and (iii) take such other actions as may be required to
expedite the prompt consummation of the Proposed Acquisition.
22. Section 14(a) of the Exchange Act, 15 U.S.C. (S) 78n(a), and the rules
and regulations promulgated thereunder by the SEC, require that a person
soliciting an authorization with respect to any registered security file and
disclose certain specific information with respect to the solicitation. Any
such solicitor must disclose, among other things, its identity, the date, time
and place of the meeting at which the proposed action will be taken, and any
substantial interest of the solicitor in the matters to be acted upon. In
addition, Rule 14a-9, 17 C.F.R. (S) 240.14a-9, promulgated by the SEC under
Section 14(a) of the Exchange Act, provides that "[n]o solicitation subject to
this regulation shall be made . . . containing any statement of which, at the
time and in the light of the circumstances under which it is made, is false or
misleading with respect to any material fact, or which omits to state any
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of a proxy for the same meeting or subject
matter which has become false or misleading."
23. Mentor Graphics' preliminary agent solicitation materials relating to
the call of the Special Meeting were filed on August 12, 1998 with the SEC. On
August 20, 1998, Mentor Graphics filed with the SEC definitive agent
solicitation materials relating to the call of the Special Meeting (the "Agent
Solicitation Materials"). A true and correct copy of the Agent Solicitation
Materials is attached hereto as Exhibit C. Mentor Graphics believes the Agent
Solicitation Materials are in full compliance
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<PAGE>
with Section 14(a) of the Exchange Act and the rules and regulations promulgated
thereunder by the SEC, including Rule l4a-9. Mentor Graphics is in the process
of disseminating to Quickturn's stockholders the Agent Solicitation Materials
containing all material information required by applicable law to be disclosed.
The Agent Solicitation Materials disclose, among other things:
a. the requirement that, for the Special Meeting to be held, agent
designations in favor of calling the Special Meeting must be executed by the
holders of not less than 10% of all the shares entitled to vote at such meeting;
b. Mentor Graphics' belief that (i) a special meeting may be called
by the holders of not less than 10% of the Quickturn shares on the date the
agent designations are delivered to Quickturn, (ii) the stockholders calling the
Special Meeting, not the Quickturn Board, have the right to fix the date and
time of the Special Meeting, (iii) agent designations shall remain in effect
until revoked or unless the person executing such agent designation is not the
record holder of Quickturn shares on the date the Special Meeting is called, and
(iv) absent prior action by the Quickturn Board, the record date for the Special
Meeting shall be the date next preceding the date on which the designated agents
give notice of the Special Meeting;
c. Mentor Graphics' intent, upon receipt of the requisite number of
agent designations, to call the Special Meeting, fix the date and time of the
Special Meeting, and give notice of the Special Meeting;
d. the belief of Mentor Graphics that its efforts to convene the
Special Meeting comply with Delaware law and Quickturn's bylaws as they
presently exist; and
e. Mentor Graphics' intent, if the Special Meeting is called and
held, to ask Quickturn stockholders to (i) remove the current members of the
Board of Directors of Quickturn,
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(ii) amend Quickturn's bylaws to reduce the authorized number of directors to
five, (iii) elect Mentor Graphics' five nominees to the Quickturn Board, and
(iv) repeal any provisions of the Quickturn bylaws adopted by the incumbent
Quickturn Board subsequent to the last public filing of the bylaws.
24. In furtherance of Mentor Graphics' solicitation of agent designations,
Purchaser is demanding that Quickturn produce a list of its stockholders and
related stocklist materials. Quickturn responded to Purchaser's demand on
August 19, 1998, stating that the stocklist materials would be made available
beginning at 12:00 noon on August 25, 1998.
QUICKTURN RESPONDS TO THE TENDER OFFER
--------------------------------------
25. Section 14(d) of the Exchange Act and Rule 14d-9 promulgated
thereunder, 17 C.F.R. (S) 240.14d-9, regulate solicitations or recommendations
made by "subject" or "target" companies in response to a tender offer. Under
Rule 14d-9, no such solicitation or recommendation is permitted unless prior
thereto the target company has filed with the SEC and delivered to the offeror a
Schedule 14D-9 containing certain specified information including, among other
things, the nature of the solicitation or recommendation, particularized reasons
for the solicitation or recommendation, and recent transactions in respect of
the target company's securities by the target company or its officers or
directors.
26. On August 24, 1998, Quickturn filed a Schedule 14D-9 with the SEC in
response to the Tender Offer (the "Schedule 14D-9"). A true and correct copy of
the Schedule 14D-9 is attached hereto as Exhibit D. The Schedule 14D-9, which
contains a list of purported justifications for the Quickturn Board's
recommendation that Quickturn stockholders reject the Tender Offer, is
materially false and/or misleading in numerous respects.
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<PAGE>
27. Specifically, the Schedule 14D-9 contains the following materially
false and/or misleading statements and omissions:
a. Although the Schedule 14D-9 states that the Quickturn Board
concluded that the Tender Offer does not fully reflect the "long-term value" of
Quickturn, the Schedule 14D-9 fails to disclose any amount or range of any such
values or when such values can be expected to be realized by Quickturn
stockholders.
b. Although the Schedule 14D-9 refers to the Quickturn Board's
consideration of presentations by Quickturn senior management and Quickturn's
financial advisors on Quickturn's financial performance, business strategy and
business plan, the Schedule 14D-9 fails to disclose any specific or meaningful
information concerning these issues.
c. Although the Schedule 14D-9 states that the Quickturn Board
determined that Quickturn's business plan "offered the potential for obtaining
higher long-term benefits" for Quickturn stockholders than the Tender Offer, the
Schedule 14D-9 fails to disclose any meaningful information concerning such
benefits, including the amount thereof and when any such benefits can be
expected to be realized by Quickturn stockholders.
d. The Schedule 14D-9 fails to disclose whether the determination by
the Quickturn Board to reject the Tender Offer was unanimous and, if the
determination was not unanimous, any objections or abstentions by any Quickturn
directors with respect to such determination.
e. Although the Schedule 14D-9 refers to "the disruptive effect" of
the Tender Offer on Quickturn's sales efforts and relationships with its
suppliers and employees, it fails to disclose the nature and amount of, or
reason for, any such disruptive effect.
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f. Although the Schedule 14D-9 states that "[n]o negotiation is
underway or is being undertaken by [Quickturn] in response to the [Tender] Offer
which relates to or would result in (1) an extraordinary transaction, such as a
merger or reorganization, involving [Quickturn] or any of its subsidiaries; (2)
a purchase, sale or transfer of a material amount of assets by [Quickturn] or
any of its subsidiaries; (3) a tender offer for or other acquisition of
securities by or of [Quickturn]; or (4) any material change in the current
capitalization or dividend policy of [Quickturn]," the Schedule 14D-9 fails to
disclose whether Quickturn has made any contacts with third parties in
anticipation of future negotiations.
28. In addition, the press release issued by Quickturn on August 24,
1998, attached as Exhibit 6 to the Schedule 14D-9 (the "Quickturn Press
Release"), contains the following materially false and/or misleading statements
and omissions.
a. While the Quickturn Press Release claims that the Tender Offer
"comes at a moment of weakness for Quickturn's stock price," it fails to
disclose that the price of Quickturn common stock has been declining for a
period of 6 months, since February 1998.
b. The Quickturn Press Release makes the misleading statement that
Quickturn's stock price is depressed "because of the economic downturn in the
Asia/Pacific region and the corresponding slowdown int he region's new
electronics product design," when in actuality the decrease in Quickturn's stock
price can be attributed to the failure of Quickturn management to develop and
execute a value-enhancing business plan.
c. The Quickturn Press Release misleadingly states projections of
future growth in the emulation and high performance simulation industries,
falsely implying that Quickturn's financial performance will similarly improve.
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COUNT I
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(For Declaratory Relief)
29. Plaintiffs repeat and reallege the above paragraphs as if set forth
herein.
30. The Declaratory Judgment Act, 28 U.S.C. (S) 2201, provides that "[i]n
a case of actual controversy within its jurisdiction . . . any court of the
United States, upon the filing of an appropriate pleading, may declare the
rights and other legal relations of any interested party seeking such
declaration." Plaintiffs are entitled to a declaratory judgment that the
Schedule 14D-1 and all exhibits thereto, and the Agent Solicitation Materials,
are proper and comply with all applicable securities laws, rules and
regulations.
31. Although the Proposed Acquisition is fairly and attractively priced,
Plaintiffs reasonably expect that Quickturn will thwart or delay plaintiffs'
lawful attempts to consummate the Tender Offer. Plaintiffs believe Quickturn
will seek to delay and defeat the Tender Offer through efforts including the
filing of a meritless suit claiming that public disclosures and filings made by
plaintiffs in conjunction with the Tender Offer and the Agent Solicitation
violate applicable federal securities laws and regulations. Thus, there is a
substantial controversy between parties having adverse interests which is of
sufficient immediacy and reality to warrant the issuance of a declaratory
judgment.
32. In the absence of declaratory relief, plaintiffs will suffer
irreparable harm. As evidenced by the course of action that Quickturn has
pursued to date and the actions taken generally by companies that receive
unsolicited acquisition proposals, Quickturn will likely defend against the
Proposed Acquisition and the Agent Solicitation by, among other things, filing
false claims designed to delay or defeat the Proposed Acquisition and the Agent
Solicitation. A declaratory judgment that the disclosures -in the Schedule 14D-
1, the Offer to Purchase and the Agent Solicitation Materials comply with all
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applicable federal laws will serve the purpose of adjudicating the interests of
the parties, resolving any complaints concerning the propriety of the Tender
Offer or the Agent Solicitation under federal law, and permitting an otherwise
lawful transaction to proceed.
33. Plaintiffs therefore request pursuant to the Declaratory Judgment Act,
28 U.S.C. (S)(S) 2201 and 2202, that this Court enter a declaratory judgment
that the public disclosures and documents filed with the SEC by plaintiffs and
which are being disseminated to Quickturn stockholders in connection with the
Tender Offer and the Agent Solicitation comply fully with all applicable
provisions of law.
COUNT II
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(For Violation of Section 14(d) of the Exchange Act
and Rule 14d-9 promulgated thereunder)
34. Plaintiffs repeat and reallege the above paragraphs as if set forth
herein.
35. Rule 14d-9, 17 C.F.R. (S) 240.14d-9 promulgated by the SEC pursuant to
Section 14(d) of the Exchange Act, requires the target company to file with the
SEC a Schedule 14d-9 containing certain information, including, among other
things, the nature of the target company's solicitation or recommendation in
response to a tender offer, particularized reasons for the solicitation or
recommendation, and recent transactions in respect of the target company's
securities by the target company or by its officers and directors.
36. In violation of Section 14(d) of the Exchange Act and Rule l4d-9
promulgated thereunder, the Schedule 14D-9 filed by Quickturn with the SEC
contains material misstatements and omissions as set forth in paragraphs 27 and
28.
37. By reason of the foregoing, plaintiffs, Quickturn stockholders and the
investing public have been and are being irreparably harmed in that they are
being deprived of, and/or misled as to, important information required to be
publicly, accurately and fully disclosed by Quickturn under
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applicable law, and Quickturn stockholders and the investing public are being
misled by materially false information disseminated by Quickturn.
38. Plaintiffs have no adequate remedy at law.
COUNT III
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(For Violation of Section 14(e) of the Exchange Act)
39. Plaintiffs repeat and reallege the above paragraphs as if set forth
herein.
40. Section 14(e) of the Exchange Act, 15 U.S.C. (S) 78n(e), makes it
"unlawful for any person to make any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statement made, in
light of the circumstances under which they are made, not misleading, or to
engage in any fraudulent, deceptive, or manipulative acts or practice in
connection with any tender offer."
41. In violation of Section 14(e) of the Exchange Act, the Schedule 14D-9
filed by Quickturn with the SEC contains material misstatements and omissions as
set forth in paragraphs 27 and 28.
42. By reason of the foregoing, plaintiffs, Quickturn stockholders and the
investing public have been and are being irreparably harmed in that they are
being deprived of, and/or misled as to, important information required to be
publicly, accurately and fully disclosed by Quickturn under applicable law, and
Quickturn stockholders and the investing public are being misled by materially
false information disseminated by Quickturn.
43. Plaintiffs have no adequate remedy at law.
WHEREFORE, plaintiffs respectfully request that this Court:
a. declare that plaintiffs have disclosed all information required
by, and are otherwise in all respects in compliance with, all applicable laws
and other obligations, including, without
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limitation, Sections 14(a), 14(d) and 14(e) of the Exchange Act and any other
federal securities laws, rules or regulations deemed or claimed to be applicable
to the Schedule 14D-1, the Tender Offer, the Agent Solicitation or the Agent
Solicitation Materials;
b. declare that Quickturn has violated Sections 14(d) and 14(e) of
the Exchange
Act and Rule 14d-9;
c. compel Quickturn to comply with the requirements of the Exchange
Act and the rules promulgated thereunder, and compel Quickturn to file
immediately an amended Schedule 14D-9 which is complete and accurate and which
corrects the misleading and untrue statements in its Schedule 14D-9;
d. preliminarily and permanently enjoin Quickturn, its agents,
employees and anyone acting on its behalf, from making any false or misleading
statements with respect to the Tender Offer;
e. award plaintiffs their costs and disbursements in this action,
including reasonable attorneys' fees; and
f. grant plaintiffs such other and further relief as this Court
may deem just and
proper.
Of Counsel: Fredric J. Zepp
Latham & Watkins
Christopher L. Kaufman 505 Montgomery Street
David A. York San Francisco, CA 94111
Latham & Watkins (415) 391-0600
75 Willow Road
Menlo Park, CA 94025 H. Steven Wilson
(650) 328-4600 Latham & Watkins
2100, 701 B Street
San Diego, CA 92101-8197
(619) 236-1234
-17-
<PAGE>
Kevin G. Abrams (ID #2375)
Thomas A. Beck (ID) #2086)
Catherine G. Dearlove (ID #3328)
Holly June Stiefel (ID #3594)
Thad J. Bracegirdle (ID #3691)
Richards, Layton & Finger
One Rodney Square
P. O. Box 551
Wilmington, DE 19899
(302) 658-6541
Attorneys for Plaintiffs
Dated: August 25, 1998
-18-
<PAGE>
EXHIBIT 16
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
ANDREA BROWN, ) Civil Action No.: 166041
)
Plaintiff, )
)
v. )
)
QUICKTURN DESIGN SYSTEMS, INC., )
GLEN M. ANTLE, KEITH R. LOBO, )
RICHARD C. ALBERDING, MICHAEL R. )
D'AMOUR, YEN-SON (PAUL) HUANG; )
DAVID K. LAM and CHARLES D. )
KISSNER, )
Defendants.
- -----------------------------------
CLASS ACTION COMPLAINT
----------------------
Plaintiff, by her attorneys, alleges upon personal knowledge as to her own
acts and upon information and belief as to all other matters, as follows:
NATURE OF ACTION
----------------
1. Plaintiff brings this action on behalf of the public stockholders of
Quickturn Design Systems, Inc. ("Quickturn" or the "Company") who have been, and
continue to be, deprived of the opportunity to realize fully the value of their
investment in Quickturn. The individual defendants, by their refusal diligently
to pursue the proposal of Mentor Graphics Corporation ("Mentor") to acquire
Quickturn, and their adoption and inequitable use of a shareholder rights plan
(the "Poison Pill"), have evidenced their unwillingness to discharge their
fiduciary duty to explore all alternatives to maximize shareholder value.
Mentor's $209.5 million pending offer for the Company, equal to $12.125 per
Quickturn share, represents a premium of over 50% on Quickturn's prior market
price of $8 per share. The individual defendants are using their fiduciary
positions of control over Quickturn to thwart Mentor and others in their
legitimate attempts to acquire the Company and are entrenching themselves in
their offices with Quickturn.
<PAGE>
PARTIES
-------
2. Plaintiff is and, at all relevant times, has been the owner of common
stock of Quickturn.
3. Quickturn is a corporation duly organized and existing under the laws
of the State of Delaware. Quickturn makes instruments for measuring and testing
electrical signals. Quickturn maintains its principal executive offices at 440
Clyde Avenue, Mountainview, California. As of April 30, 1998, Quickturn had
approximately 17,809,342 shares of common stock outstanding.
4. The individual defendants are the members of Quickturn's Board of
Directors. In addition, the following individual defendants held the following
positions at Quickturn:
Glen M. Antle.................. Chairman of the Board of the Company
Keith R. Lobo.................. President and Chief Executive Officer of
the Company
5. The individual defendants, by reason of their corporate directorship
and/or executive positions, stand in a fiduciary position relative to the
Company's shareholders, which fiduciary relationship, requires the defendants to
act in the best interests of the Company's stockholders with uncompromising
loyalty and due care.
CLASS ACTION ALLEGATIONS
------------------------
6. Plaintiff brings this action on her own behalf and as a class action,
pursuant to Rule 23 of the Rules of the Chancery Court Rules, on behalf of all
stockholders of the Company (except defendants herein and any person, firm,
trust, corporation, or other entity related to or affiliated with any of the
defendants), who are or will be threatened with injury arising from defendants'
actions as described more fully below (the "Class").
-2-
<PAGE>
7. This action is properly maintainable as a class action because:
(a) The Class is so numerous that joinder of all members is
impracticable. The Company has hundreds, if not thousands, of record and
beneficial stockholders who are scattered throughout the United States.
(b) There are questions of law and fact common to the Class including,
inter, alia, whether:
- ----- ----
(i) Defendants have breached their fiduciary duties owed by them
to plaintiff and other members of the Class by, inter alia, failing to act with
----- ----
the utmost good faith to maximize shareholder value;
(ii) Defendants, through use of a Poison Pill, (described below)
have engaged in a plan and scheme to thwart and reject bona fide offers and
---- ----
proposals from third parties; and
(iii) Plaintiff and the other members of the Class are being and
will continue to be injured by the wrongful conduct alleged herein and, if so,
what is the proper remedy.
(c) Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. Plaintiff's claims
are typical of the claims of the other members of the Class. Accordingly,
plaintiff is an adequate representative of the Class.
(d) The prosecution of separate actions by individual members of
the Class would create the risk of inconsistent or varying adjudications with
respect to individual members of the Class which would establish incompatible
standard of conduct for defendants, or adjudications with respect to individual
members of the Class which would as a practical matter be dispositive of the
interests of the other members not parties to the adjudications or substantially
impair or impede their ability to protect their interests.
(e) The defendants have acted, or refused to act, on grounds generally
applicable to, and causing injury to, the Class and, therefore, preliminary and
final injunctive relief on behalf of the Class as a while is appropriate.
-3-
<PAGE>
SUBSTANTIVE ALLEGATIONS
-----------------------
8. On or about August 12, 1998, Mentor commenced a tender offer to
acquire Quickturn for $12.125 in cash for each share of Quickturn. The offer is
not conditioned on financing. On August 24, 1998, Quickturn announced that it
was rejecting that bid.
9. In a Schedule 14A filed by Mentor with the Securities and Exchange
Commission in connection with the proposal, Mentor disclosed that it had had
discussions with Quickturn about a business combination as early as August,
1995. By January, 1996, Quickturn had implemented a "shareholder rights plan,"
or "poison pill," in order to hinder any takeover proposal not supported by
Quickturn's Board.
10. Instead of utilizing the Poison Pill as required by defendants'
fiduciary duties, i.e., to allow Quickturn's directors to explore proposals
without undue pressure, Quickturn has refused to properly explore the Mentor
proposal or even to give general assurances that the poison pill would be
deployed for the purpose of maximizing shareholder value.
11. On or about August 12, 1998, Mentor commenced suit against Quickturn
in this Court seeking to enjoin deployment of the Rights plan to impede its
offer and to prohibit Quickturn and its Board from adopting any other defensive
measure that would have the effect of impeding or interfering with the offer.
On August 12, 1998, Mentor commenced suit in the United States District Court
for the District of Delaware seeking related relief under the federal securities
laws.
12. Any improper use of the Poison Pill has the force and effect of
entrenching the Individual Defendants in their corporate offices against any
real or perceived threat to their control, and dramatically impairs the rights
of Class members to exercise freedom of choice in a proxy contest or to avail
themselves of a bona fide offer to purchase their shares by an acquiror, such as
---- ----
Mentor, unfavored by incumbent management. This fundamental shift of control of
the Company's destiny from the hands of its stockholders to the hands of the
Individual Defendants results in a heightened fiduciary duty on the part of the
individual defendants to consider, in good faith, a third party bid, such as
Mentor's, and further requires the Individual Defendants to pursue a third
party's
-4-
<PAGE>
interest in acquiring the Company and to negotiate in good faith with a
bidder on behalf of the Company's shareholders.
13. The purpose, intent and effect of the Poison Pill, in the face of a
pending offer for the Company, is to thwart, deter, impede, and delay the
acquisition of Quickturn by Mentor or any other suitor unfavored by management
- -- no matter how attractive the offer.
14. Defendants' rejection of Mentor's offer ensures their continued
positions with the Company and deprives plaintiff and the Company's other public
shareholders of the opportunity to maximize the value of their Quickturn stock
through the premium that Mentor is prepared to pay, or of the enhanced premium
that further negotiation or exposure of Quickturn to the market and other
potential bidders could provide.
15. Defendants owe fundamental fiduciary obligations to Quickturn's
stockholders to take all necessary and appropriate steps to maximize the value
of their shares. In addition, the Individual Defendants have the responsibility
to act independently so that the interests of the Company's public stockholders
will be protected, to consider seriously all bona fide offers for the Company,
---- ----
to sell the Company if it would be in the best interests of the stockholders to
do so, and, if so, to take steps to ensure that the highest possible price is
achieved.
16. Plaintiff seeks preliminary and permanent injunctive relief and
declaratory relief preventing defendants from inequitably and unlawfully
depriving plaintiff and the Class of their rights to realize full and fair value
for their stock at a premium over the market price while unlawfully entrenching
themselves in their positions of control, and to compel defendants to carry out
their fiduciary duties to maximize shareholder value.
17. Only through the exercise of this Court's equitable powers can
plaintiff and the Class be fully protected from the immediate and irreparable
injury which defendants' actions threaten to inflict.
18. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
A. Declaring this to be a proper class action and certifying plaintiff as
a class representative;
-5-
<PAGE>
B. Ordering the Individual Defendants to fulfill their fiduciary duties
to plaintiff and the other members of the Class by;
(i) carefully and impartially investigating any expression of
interest by any entity or person, including but not limited to Mentor, having
a bona fide interest in proposing any transactions that would maximize
---- ----
shareholder value, including, but not limited to, a merger or acquisition of
Quickturn;
(ii) immediately undertaking an appropriate evaluation of Quickturn's
worth as a merger/acquisition candidate;
(iii) taking all appropriate steps to enhance Quickturn's value and
attractiveness as a merger/acquisition candidate; and
(iv) taking all appropriate steps to effectively expose Quickturn to
the marketplace in an effort to create an active auction of the Company, or
otherwise ensuring that
Quickturn's public stockholders receive the maximum value for their shares;
C. Ordering the Individual Defendants to deploy Quickturn's Poison Pill
in a manner which will maximize shareholder value;
D. Ordering the Individual Defendants, jointly and severally, to
account to plaintiff and the Class for all damages suffered and to be
suffered by them as a result of the wrongs complained of herein;
-6-
<PAGE>
E. Awarding plaintiff the costs and disbursements of this action,
including a reasonable allowance for plaintiff's attorneys' and experts' fees;
and
F. Granting such other and further relief as may be just and proper.
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: [Illegible]
---------------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, Delaware 19899
Telephone: (302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
ABBEY, GARDY & SQUITIERI, LLP
212 East 39th Street
New York, New York 10016
Telephone: (212) 889-3700
-7-
<PAGE>
EXHIBIT 17
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
MOHAMED YASSIN, ) Civil Action No.: 16603NC
)
Plaintiff, )
)
v. )
)
QUICKTURN DESIGN SYSTEMS, INC., )
GLEN M. ANTLE, KEITH R. LOBO, )
RICHARD C. ALBERDING, MICHAEL R. )
D'AMOUR, YEN-SON (PAUL) HUANG, )
DAVID K. LAM and CHARLES D. )
KISSNER, )
Defendants.
- -----------------------------------
CLASS ACTION COMPLAINT
----------------------
Plaintiff, by his attorneys, alleges upon personal knowledge as to his own
acts and upon information and belief as to all other matters, as follows:
1. Plaintiff brings this action pursuant to Rule 23 of the Rules of the
Chancery Court Rules on his own behalf and as a class action on behalf of all
persons, other than defendants and those in privity with them, who own the
common stock of Quickturn Design Systems, Inc. ("Quickturn" or the "Company").
2. Plaintiff has been the owner of the common stock of the Company since
prior to the wrongs herein complained of and continuously to date.
3. Defendant Quickturn is a corporation duly organized and existing under
the laws of the State of Delaware. Quickturn makes instruments for measuring and
testing electrical signals.
<PAGE>
Quickturn maintains its principal executive offices at 440 Clyde Avenue,
Mountainview, California. As of April 30, 1998, Quickturn had approximately
17,809,342 shares of common stock outstanding. Quickturn's common stock is
traded on the NASDAQ national market system.
4. Defendant Glen M. Antle is Chairman of the Board of the Company.
5. Defendant Keith R. Lobo is President and Chief Executive Officer of
the Company.
6. Defendants Richard C. Alberding, Michael R. D'Amour, Yen-Son (Paul)
Huang, David K. Lam and Charles D. Kissner are directors of Quickturn.
7. The individual defendants are collectively referred to throughout this
complaint as the "Individual Defendants".
8. The Individual Defendants are fiduciaries to the Company's
shareholders and owe them the highest obligations of loyalty and due care.
CLASS ACTION ALLEGATIONS
------------------------
9. Plaintiff brings this action on his own behalf and as a class action,
pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all
stockholders of Quickturn (except defendants herein and any person, firm, trust,
corporation, or other entity related to or affiliated with any of the
defendants), who are and will be threatened with injury arising from defendants'
actions as more fully described herein.
10. This action is properly maintainable as a class action because:
(a) The Class is so numerous that joinder of all members is
impracticable. The Company has hundreds, if not thousands, of record and
beneficial stockholders who are scattered throughout the United States.
According to Quickturn's latest Form 10-K filed with the Securities
-2-
<PAGE>
and Exchange Commission, Quickturn has 207 shareholders of record. Many of these
record holders act as nominees for multiple beneficial owners.
(b) There are questions of law and fact common to the Class including,
inter alia, whether:
(i) Defendants have breached their fiduciary duties owed by them
to plaintiff and other members of the Class by, inter alia, failing in good
faith to maximize shareholder value;
(ii) Defendants, through use of a "Poison Pill" (described
below), have engaged in a plan and scheme to thwart and reject bona fide offers
---- ----
from third parties; and
(iii) Plaintiff and the other members of the Class are being and
will continue to be injured by the wrongful conduct alleged herein and, if so,
what is the proper remedy.
(c) Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature.
Plaintiff's claims are typical of the claims of the other members of the Class.
Accordingly, plaintiff is an adequate representative of the Class.
(d) The prosecution of separate actions by individual members of the
Class would create the risk of inconsistent or varying adjudications with
respect to individual members of the Class which would establish incompatible
standard of conduct for defendants, or adjudications with respect to individual
members of the Class which would as a practical matter be dispositive of the
interests of the other members not parties to the adjudications or substantially
impair or impede their ability to protect their interests.
-3-
<PAGE>
(e) The defendants have acted, or refused to act, on grounds generally
applicable to, and causing injury to, the Class and, therefore, preliminary and
final injunctive relief on behalf of the Class as a whole is appropriate.
SUBSTANTIVE ALLEGATIONS
-----------------------
11. On or about August 12, 1998, Mentor Graphics Corporation ("Mentor")
commenced a fully financed tender offer to acquire all of the outstanding stock
of Quickturn for $12.125 per share in cash. On August 24, 1998, Quickturn
announced that it was rejecting that bid.
12. In a Schedule 14A filed by Mentor with the Securities and Exchange
Commission in connection with its tender offer, Mentor disclosed that it had had
discussions with Quickturn about a business combination as early as August,
1995. By January, 1996, Quickturn had implemented a "Shareholder Rights Plan,"
or "Poison Pill," in order to hinder any takeover proposal not favored by
Quickturn's Board.
13. Instead of utilizing the Poison Pill as required by defendants'
fiduciary duties, i.e., to allow Quickturn's directors to explore proposals
----
without undue pressure, Quickturn has refused to properly explore the Mentor
proposal or even to give general assurances that the Poison Pill would be
deployed to maximize shareholder value.
14. On or about August 12, 1998, Mentor commenced suit against Quickturn
in this Court seeking to enjoin deployment of the Shareholder Rights Plan to
impede its offer and to prohibit Quickturn and its Board from adopting any other
defensive measure that would have the effect of impeding or interfering with the
offer. On August 12, 1998, Mentor commenced suit in the United States District
Court for the District of Delaware seeking related relief under the federal
securities laws.
-4-
<PAGE>
15. Defendants' improper use of the Poison Pill has the force and effect
of entrenching the Individual Defendants in their corporate offices against any
real or perceived threat to their control, and dramatically impairs the rights
of Class members to exercise freedom of choice in a proxy contest or to avail
themselves of a bona fide offer to purchase their shares by an acquiror, such as
---- ----
Mentor, unfavored by incumbent management. This fundamental shift of control of
the Company's destiny from its stockholders to the Individual Defendants results
in a heightened fiduciary duty on the part of the Individual Defendants to
consider, in good faith, a third party bid, such as Mentor's, and further
requires the Individual Defendants to pursue a third party's interest in
acquiring the Company and to negotiate in good faith with a bidder on behalf of
the Company's shareholders.
16. The purpose, intent and effect of the Poison Pill, in the face of the
pending offer for the Company, is to thwart, deter, impede, and delay the
acquisition of Quickturn by Mentor or any other suitor unfavored by defendants
even if the potential acquisition of Quickturn would represent the strategic
alternative most advantageous to the Company's shareholders.
17. Defendants' rejection of Mentor's offer ensures their continued
positions with the Company and deprives plaintiff and the Company's other public
shareholders of the opportunity to maximize the value of their Quickturn stock
through the premium that Mentor is prepared to pay, or of the enhanced premium
that further negotiation or exposure of Quickturn to the market and other
potential bidders could provide.
18. Defendants owe fundamental fiduciary obligations to Quickturn's
stockholders to take all necessary and appropriate steps to maximize the value
of their shares. In addition, the Individual Defendants have the responsibility
to act independently so that the interests of the Company's public stockholders
will be protected, to consider seriously all bona fide offers for the Company,
---- ----
to sell the
-5-
<PAGE>
Company if it would be in the best interests of the stockholders to do so, and,
if so, to take steps to ensure that the highest possible price is achieved.
19. Plaintiff seeks preliminary and permanent injunctive relief and
declaratory relief preventing defendants from inequitably and unlawfully
depriving plaintiff and the Class of their rights to realize full and fair value
for their stock at a significant premium over the market price while unlawfully
entrenching defendants in their positions of control, and to compel defendants
to carry out their fiduciary duties to maximize shareholder value.
-6-
<PAGE>
20. Only through the exercise of this Court's equitable powers can
plaintiff and the Class be fully protected from the immediate and irreparable
injury which defendants' actions threaten to inflict.
21. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
A. Declaring this to be a proper class action and certifying
plaintiff as a class representative;
B. Ordering the Individual Defendants to fulfill their fiduciary
duties to plaintiff and the other members of the Class by:
(i) carefully and impartially investigating any expression of
interest by any entity or person, including, but not limited to Mentor, having a
bona fide interest in proposing any transactions that would maximize shareholder
- ---- ----
value, including, but not limited to, a merger or acquisition of Quickturn;
(ii) immediately undertaking an appropriate evaluation of
Quickturn's worth as a merger/acquisition candidate;
(iii) taking all appropriate steps to enhance Quickturn's
value and attractiveness as a merger/acquisition candidate; and
(iv) taking all appropriate steps to effectively expose
Quickturn to the marketplace in an effort to create an active auction of the
Company, or otherwise ensuring that Quickturn's public stockholders receive the
maximum value for their shares;
-7-
<PAGE>
C. Ordering the Individual Defendants to deploy Quickturn's Poison Pill
in a manner which will maximize shareholder value;
D. Ordering the Individual Defendants, jointly and severally, to
account to plaintiff and the Class for all damages suffered and to be
suffered by them as a result of the wrongs complained of herein;
E. Awarding plaintiff the costs and disbursements of this action,
including a reasonable allowance for plaintiff's attorneys' and experts' fees;
and
F. Granting such other and further relief as may be just and proper.
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: [Illegible]
-------------------------------------
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, Delaware 19899
Telephone: (302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
FARUQI & FARUQI, LLP
415 Madison Avenue
New York, New York 10017
(212) 986-1074
-8-
