-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SKK+sZx6MADnWlWYDVOPXpunFe9DwoX3Y5KjNzBnhRuMFa/rxmvme5Zn2+DV+jyy LKGAqBtubM3N7TJO16ok6Q== 0001012870-99-000017.txt : 19990106 0001012870-99-000017.hdr.sgml : 19990106 ACCESSION NUMBER: 0001012870-99-000017 CONFORMED SUBMISSION TYPE: SC 14D9/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19990105 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: QUICKTURN DESIGN SYSTEMS INC CENTRAL INDEX KEY: 0000914252 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 770159619 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9/A SEC ACT: SEC FILE NUMBER: 005-43785 FILM NUMBER: 99500691 BUSINESS ADDRESS: STREET 1: 55 W TRIMBLE ROAD CITY: SAN JOSE STATE: CA ZIP: 951311013 BUSINESS PHONE: 4089146000 MAIL ADDRESS: STREET 1: 55 W TRIMBLE ROAD CITY: SAN JOSE STATE: CA ZIP: 95131-1013 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: QUICKTURN DESIGN SYSTEMS INC CENTRAL INDEX KEY: 0000914252 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 770159619 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9/A BUSINESS ADDRESS: STREET 1: 55 W TRIMBLE ROAD CITY: SAN JOSE STATE: CA ZIP: 951311013 BUSINESS PHONE: 4089146000 MAIL ADDRESS: STREET 1: 55 W TRIMBLE ROAD CITY: SAN JOSE STATE: CA ZIP: 95131-1013 SC 14D9/A 1 AMENDMENT #33 TO SCHEDULE 14D-9 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------------- SCHEDULE 14D-9 (AMENDMENT NO. 33) ---------------- 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 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 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 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 Item 7: On January 4, 1999, the Board approved an amendment to the Merger Agreement to provide that each stockholder of the Company will receive Cadence common stock with a value of $15.00 per share at the time of the closing of the Merger. A copy of Amendment No. 2 to the Agreement and Plan of Merger is filed as Exhibit 67 hereto and is incorporated herein by reference. On January 5, 1999, Cadence and the Company issued a press release announcing the amendment of the Merger Agreement. A copy of the press release is filed as Exhibit 68 hereto and is incorporated herein by reference. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED The response to Item 8 is hereby amended by adding the following to the end of the section entitled "Litigation Concerning the Offer": On December 28, 1998, Mentor and MGZ filed a Motion for Leave to File Fourth Amended Complaint with the United States District Court for the District of Delaware. A copy of the Fourth Amended Complaint is attached hereto as Exhibit 69 and is incorporated herein by reference. On December 31, 1998, the Supreme Court of the State of Delaware issued an opinion regarding the Company's appeal of the December 3, 1998 (as amended December 7, 1998) decision of the Court of Chancery of the State of Delaware, a copy of which is filed as Exhibit 70 hereto and incorporated herein by reference. The response to Item 8 is hereby amended by adding the following to the end of the section entitled "Proxy Solicitation": On January 5, 1999 the Company sent a press release and a second addendum to the Company's proxy statement to all stockholders of record as of November 10, 1998. A copy of the press release is filed as Exhibit 68 hereto and incorporated herein by reference. A copy of the second addendum is filed as Exhibit 71 hereto and incorporated herein by reference. 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 67 Amendment No. 2 to the Agreement and Plan of Merger. Exhibit 68 Press Release of the Company and Cadence dated January 5, 1999. Exhibit 69 Fourth Amended Complaint filed with the United States District Court for the District of Delaware. Exhibit 70 Opinion of the Supreme Court of the State of Delaware dated December 31, 1998. Exhibit 71 Second Addendum to Proxy Statement dated January 5, 1999.
2 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: January 5, 1999 QUICKTURN DESIGN SYSTEMS, INC.
/s/ Keith R. Lobo By: _________________________________ Keith R. Lobo President and Chief Executive Officer 3 EX-99.67 2 AMENDED NO. 2 TO THE AGREEMENT AND PLAN OF MERGER EXHIBIT 67 AMENDMENT NO. 2 TO AGREEMENT AND PLAN OF MERGER This AMENDMENT NO. 2 TO AGREEMENT AND PLAN OF MERGER (this "Amendment"), dated as of January 4, 1999, is entered into by and among Quickturn Design Systems, Inc., a Delaware corporation (the "Company"), Cadence Design Systems, Inc., a Delaware corporation ("Parent"), and CDSI Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Acquisition"). Capitalized terms used herein but not defined herein shall have the meanings set forth in the Merger Agreement (defined below). WHEREAS, (i) the Company, Parent and Acquisition have previously entered into that certain Agreement and Plan of Merger, dated as of December 8, 1998, as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of December 16, 1998 (the "Merger Agreement"), and (ii) the Company, Parent and Acquisition have determined that it is advisable to amend the terms of the Merger Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Company, Parent and Acquisition hereby agree as follows: ARTICLE 1 AMENDMENTS TO THE MERGER AGREEMENT 1.1. Section 1.8(b) of the Merger Agreement is hereby amended and restated to read in its entirety as follows: "(b) The Exchange Ratio shall be (i) $15.00 divided by (ii) the average closing price of one share of Parent Common Stock (as reported on the NYSE Composite Transactions reporting system) during the five trading days immediately preceding the second business day prior to the Closing Date." ARTICLE 2 MISCELLANEOUS 2.1. Affirmation. All terms of the Merger Agreement not expressly ------------ amended in this Amendment remain unmodified and in full force and effect. 2.2. Entire Agreement. The Merger Agreement, as amended by this ---------------- Amendment (including the Company Disclosure Schedule), constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements and understandings both written and oral between the parties with respect to the subject matter hereof. 2.3. Validity. If any provision of this Amendment or the Merger -------- Agreement, the application thereof to any person or circumstance is held invalid or unenforceable, the remainder of this Amendment and the Merger Agreement and the application of such provision to other persons or circumstances shall not be affected thereby and to such end the provisions of this Amendment and the Merger Agreement are agreed to be severable. 2.4. Governing Law. This Amendment shall be governed by and ------------- construed in accordance with the laws of the State of Delaware without regard to the principles of conflicts of law thereof. 2.5. Descriptive Headings. The descriptive headings herein are -------------------- inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Amendment. 2.6. Personal Liability. This Amendment shall not create or be ------------------ deemed to create or permit any personal liability or obligation on the part of any direct or indirect stockholder of the Company or Parent or Acquisition or any officer, director, employee, agent, representative or investor of any party hereto. 2.7. Counterparts. This Amendment may be executed in one or more ------------ counterparts, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement. (Remainder of page intentionally left blank) IN WITNESS WHEREOF, each of the parties has caused this Amendment to be duly executed on its behalf as of the day and year first above written. CADENCE DESIGN SYSTEMS, INC. By: /s/H. Raymond Bingham ----------------------- Name: H. Raymond Bingham Title: Executive Vice President and Chief Financial Officer QUICKTURN DESIGN SYSTEMS, INC. By: /s/Keith R. Lobo ----------------------- Name: Keith R. Lobo Title: President and Chief Executive Officer CDSI ACQUISITION, INC. By: /s/H. Raymond Bingham ------------------------ Name: H. Raymond Bingham Title: Executive Vice President and Chief Financial Officer EX-99.68 3 PRESS RELEASE DATED JANUARY 5, 1999 Exhibit 68 FOR IMMEDIATE RELEASE CADENCE RAISES PURCHASE PRICE FOR QUICKTURN TO $15 PER SHARE Cadence Rejects Auction by Proposed Mentor Nominees to Quickturn Board SAN JOSE, Calif. -- January 5, 1999 -- Cadence Design Systems, Inc. (NYSE:CDN) and Quickturn Design Systems, Inc. (NASDAQ:QKTN) today announced that they have amended their merger agreement to increase from $14 to $15 the amount of Cadence stock that Quickturn stockholders will receive for each Quickturn share. "We increased our price to end the uncertainty and clarify a confusing situation for Quickturn stockholders," said Jack Harding, president and CEO of Cadence. "This is a firm agreement for 100% of Quickturn's stock. We have absolutely no interest in taking part in an auction conducted by Mentor's nominees to the Quickturn board." Further, Cadence cautioned that completion of the merger transaction with Quickturn will be severely imperiled if Quickturn stockholders vote to replace Quickturn's current board of directors with Mentor's nominees at the special meeting of Quickturn stockholders on Friday, January 8, 1999. Mentor has stated that if its nominees are elected, it wants to conduct a due diligence examination of non-public Quickturn information. Any such sharing of non- public information would involve a breach, or require termination, of the Quickturn/Cadence merger agreement. Under such circumstances, Mentor may also be in a position to block any pooling of interests transaction, including the proposed merger with Cadence. Obtaining pooling of interests accounting treatment is an expressed condition of the Cadence/Quickturn transaction. "There is great risk to our merger if Mentor's nominees are elected," added Harding. "We will not proceed with Quickturn if a pooling of interests is blocked or if Quickturn is forced to share confidential information with Mentor -- its fiercest competitor." Keith R. Lobo, president and CEO of Quickturn, said: "We strongly urge Quickturn stockholders to vote against Mentor's effort to remove our board. If Mentor's slate of directors is elected, Quickturn could well lose the opportunity to join Cadence in a transaction that provides our stockholders superior value in the short term and tremendous potential upside in the long term." Lobo added, "Mentor is simply trying to gain control of Quickturn through the back door. Mentor has only offered to purchase less than 15 percent of the stock, has made no commitment to purchase the remaining 15.4 million shares outstanding, and has provided insufficient assurances regarding its ability to finance such an additional purchase." As previously announced, the boards of Cadence and Quickturn unanimously approved a definitive merger agreement under which Cadence will acquire 100 percent of Quickturn's outstanding common stock in a tax-free, stock-for-stock transaction. As a result of the merger, Quickturn will become a wholly-owned subsidiary of Cadence. Cadence stock will be valued for purposes of the exchange based upon the closing prices for Cadence stock on the NYSE during a five-day trading period ending three days prior to the merger. Cadence said that it expects the transaction to be accretive to earnings in 1999. The Quickturn board of directors opposes the Mentor proposals and urges stockholders to (a) vote AGAINST the Mentor proposals by signing, dating, and returning the Quickturn BLUE proxy card, and (b) discard any gold-striped proxy card sent to stockholders by Mentor. Stockholders may direct questions to Morrow & Co., Inc. at (800) 662-5200. Attached to this release is a preliminary proxy statement filed pursuant to Schedule 14(a) of the Securities Exchange Act of 1934 by Cadence Design Systems, Inc. The proxy statement contains additional information on the matters described herein. ABOUT CADENCE Cadence Design Systems, Inc. provides comprehensive services and software for the product development requirements of the world's leading electronics companies. Cadence is the largest supplier of software products, consulting services, and design services used to accelerate and manage the design of semiconductors, computer systems, networking and telecommunications equipment, consumer electronics, and a variety of other electronic-based products. With more than 4,000 employees and 1997 annual sales of $916 million, Cadence has sales offices, design centers, and research facilities around the world. The company is headquartered in San Jose, Calif. and traded on the New York Stock Exchange under the symbol CDN. More information about the company, its products and services may be obtained from the World Wide Web at http://www.cadence.com. ABOUT QUICKTURN Quickturn Design Systems, Inc. is a leading provider of verification hardware and time-to-market engineering (TtMETM) services for the design of complex ICs and electronic systems. The company's products are used worldwide by developers of high-performance computing, multimedia, graphics and communications systems. Quickturn is headquartered in San Jose, Calif. For more information, visit the Quickturn Web site at http://www.quickturn.com or send e-mail to info@quickturn.com. This release contains forward-looking statements based on current expectations or beliefs as well as a number of assumptions about future events, and that are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward- looking statements. The reader is cautioned not to put undue reliance on these forward-looking statements, which are not a guarantee of future performance and are subject to a number of uncertainties and other factors, many of which are outside the control of Cadence and Quickturn. The forward-looking statements in this release address a variety of subjects including, for example, the expected date of closing of the acquisition, the transaction being accretive to earnings in 1999, and the potential benefits of the merger. The following factors, among others, could cause actual results to differ materially from those described in these forward-looking statements: the risk that Quickturn's business will not be successfully integrated with Cadence's business; costs associated with the merger; the inability to obtain the approval of Quickturn's shareholders; matters arising in connection with the parties' efforts to comply with applicable regulatory requirements relating to the transaction; and increased competition and technological changes in the industry in which Cadence and Quickturn compete. For a detailed discussion of these and other cautionary statements, please refer to Cadence's and Quickturn's filings with the Securities and Exchange Commission, including their respective Annual Reports on Form 10-K for the year ended December 31, 1997 and their respective Quarterly Reports on Form 10-Q for the quarter ended September 30, 1998. Cadence and the Cadence logo are registered trademarks of Cadence Design Systems, Inc. All other brands or product names are the property of their respective holders. CONTACTS For Cadence Design Systems, Inc. Ray Bingham--(408) 944-7503 (Investors) Laurie Stanley--(408) 428-5019 or Robert Mead--Gavin Anderson & Co.- (212) 373-0226 For Quickturn Design Systems, Inc. Ray Ostby--(408) 914-6000 or Pauline Yoshihashi--Abernathy MacGregor Frank--(213) 630-6550 Matt Sherman- Abernathy MacGregor Frank--(212) 371-5999 2 PRELIMINARY PROXY STATEMENT -SUBJECT TO COMPLETION- PRELIMINARY COPY PROXY STATEMENT OF CADENCE DESIGN SYSTEMS, INC. IN OPPOSITION TO THE SOLICITATION OF MENTOR GRAPHICS CORPORATION AND MGZ CORP. SPECIAL MEETING OF STOCKHOLDERS JANUARY 8, 1999 Cadence Design Systems, Inc. may engage in activities constituting a solicitation under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including discussions with certain holders of outstanding shares of the common stock, $0.001 par value ("Quickturn Common Stock"), of Quickturn Design Systems, Inc. ("Quickturn"), a Delaware corporation, in connection with the Special Meeting of Stockholders of Quickturn, to be held at 8:00 a.m., PST, on January 8, 1999, at the offices of Wilson Sonsini Goodrich & Rosati at 650 Page Mill Road, Palo Alto, California, and at any adjournment, postponement or continuation thereof (the "Special Meeting"). The phone number at that location is (650) 493-9300. This Proxy Statement (the "Proxy Statement") will be furnished to holders of Quickturn Common Stock as necessary to comply with the Exchange Act. THIS SOLICITATION IS BEING MADE BY CADENCE DESIGN SYSTEMS, INC. This Proxy Statement is furnished by Cadence Design Systems, Inc. ("Cadence") in opposition to the solicitation by Mentor Graphics Corporation, an Oregon corporation ("Mentor"), and MGZ Corp., a Delaware corporation and a wholly-owned subsidiary of Mentor ("MGZ"), pursuant to a Proxy Statement of Mentor and MGZ dated September 11, 1998, as amended, to the extent valid, or any subsequent proxy statement of Mentor and/or MGZ (in either case, the "Mentor Proxy Statement"), of proxies to be used at the Special Meeting. This Proxy Statement is first being sent or delivered on January 5, 1999 to certain stockholders of record of Quickturn as of the Record Date (as defined below). Quickturn has entered into an Agreement and Plan of Merger (the "Merger Agreement") dated as of December 8, 1998, as amended on December 16, 1998 and January 4, 1999, with Cadence and a wholly-owned subsidiary of Cadence. Pursuant to such agreement, it is proposed that Quickturn will merge with a wholly-owned subsidiary of Cadence in a tax-free, stock-for-stock transaction, and the stockholders of Quickturn will receive Cadence common stock with a value of $15.00 per share at the time of closing of the merger. Quickturn has also entered into a Stock Option Agreement dated as of December 8, 1998 with Cadence, pursuant to which Quickturn issued Cadence an option to purchase approximately 19.9% of the outstanding Quickturn Common Stock at $14.00 per share, which option will become exercisable under certain conditions discussed below. These agreements are currently the subject of litigation between Quickturn and Cadence, on the one hand, and Mentor on the other, and between Quickturn and certain of its stockholders. For a further discussion of the Delaware litigation referred to above, the other litigation between Quickturn and Mentor or relating to the unsolicited tender offer by MGZ to purchase Quickturn Common Stock, as revised, or the proposed transaction between Quickturn and Cadence and the litigation relating thereto, see Quickturn's various filings with the Securities and Exchange Commission (the "SEC"), including sections entitled "Certain Legal Proceedings" in Quickturn's Schedules 14D-9 and 14A. 3 GENERAL/REVOCABILITY OF PROXY As described in the Quickturn Proxy Statement, any stockholder who has given a gold proxy to Mentor in connection with the Mentor Proxy Statement may revoke it at any time before it is voted by delivering to Quickturn, c/o Morrow & Co., Inc., a duly executed BLUE Proxy Card from Quickturn bearing a date LATER than the proxy delivered to Mentor. Proxies may also be revoked at any time prior to voting by (i) delivering to Quickturn, c/o Morrow & Co., Inc., a written notice, bearing a later date than the proxy, stating that the proxy is revoked (such revocation may be in any form, but must be signed and dated and must clearly express your intention to revoke your previously executed proxy), (ii) signing and delivering prior to the vote at the Special Meeting a proxy with respect to the same shares and bearing a date later than the date of the proxy being revoked, or (iii) attending the Special Meeting and voting in person (although attendance at the Special Meeting will not, by itself, constitute a revocation of your proxy). Revocations of proxies and other instruments revoking proxies may be delivered to Quickturn by fax or by mail (using the envelope provided with Quickturn Proxy Statement), to Morrow & Co., Inc., 445 Park Avenue, New York, New York, 10022, Fax: (212) 754-8362. Only holders of Quickturn Common Stock of record at the close of business on November 10, 1998 (the "Record Date") are entitled to vote at the Special Meeting. On the Record Date, 18,088,298 shares of Quickturn Common Stock were outstanding. Each share of Quickturn Common Stock is entitled to one vote on the matters to be considered at the Special Meeting. BACKGROUND UNSOLICITED TENDER OFFER FOR QUICKTURN On August 12, 1998, MGZ initiated an unsolicited tender offer to purchase all outstanding shares of Quickturn Common Stock for $12.125 per share. The tender offer is currently scheduled to remain open to Quickturn stockholders until January 11, 1999. On December 28, 1998, Mentor announced that it was reducing the number of shares being sought in its unsolicited tender offer all shares of Quickturn Common Stock to 2,100,000 shares and increasing its offering price for such reduced number of shares to $14.00 cash per share from $12.125 cash per share (the "Reduced Offer"). Mentor stated that the Reduced Offer, if successfully consummated and when combined with Mentor's current holdings, would result in Mentor holding approximately 14.9% of the outstanding shares of Quickturn Common Stock. On December 28, 1998, Quickturn's Board of Directors (the "Quickturn Board") met with its financial and legal advisors to consider the Reduced Offer. On December 29, 1998, the Quickturn Board met again with its financial and legal advisors to consider the Reduced Offer and, at the conclusion of such meeting, determined that the Reduced Offer is not in the best interests of Quickturn and its stockholders. As described in Quickturn's Schedule 14D-9, Amendment No. 32, filed with the SEC on December 30, 1998, in determining that the Reduced Offer is not in the best interests of Quickturn and its stockholders, and in making its recommendation that Quickturn stockholders reject the Reduced Offer, the Quickturn Board considered the following reasons and factors: . The Quickturn Board determined that the Reduced Offer, which is limited to an offer to purchase 2,100,000 shares, purports to be part of a process pursuant to which Mentor proposes to undertake a "proposed second-step merger." As expressed in its announcement of the Reduced Offer, Mentor's proposal for a second-step merger is highly conditional in nature. The Quickturn Board noted that these conditions include, among other things, a legal ruling invalidating certain provisions of the Merger Agreement, the negotiation of a merger agreement between Quickturn and Mentor and completion of due diligence. The Quickturn Board believes that these conditions are highly unlikely to be satisfied. 4 . The Quickturn Board noted that Mentor did not state that it has sufficient financing to complete its second-step merger, and the Quickturn Board believes it is not at all certain that Mentor can finance a transaction to acquire all of Quickturn's outstanding stock and fulfill other commitments required under the Merger Agreement. Accordingly, the Quickturn Board determined that there was significant uncertainty concerning whether a second-step merger with Mentor could occur, as well as what the consideration in such a transaction would be. . The Quickturn Board determined that the Reduced Offer could interfere with or threaten Quickturn's proposed transaction with Cadence, which the Quickturn Board determined again to be in the best interests of Quickturn stockholders. The Quickturn Board noted that the Reduced Offer purported to be a first step of a multi-step transaction that conflicts with the proposed combination with Cadence. . The Quickturn Board noted that Mentor's ownership of 14.9% of the Quickturn Common Stock, as well as its obtaining control of the Quickturn Board, could raise serious concerns about Quickturn's ability to engage in any "pooling-of-interests" transaction, including the proposed combination with Cadence. . The Quickturn Board continues to believes that, even assuming Mentor could make a firm offer to acquire all of the Quickturn Common Stock at a price consistent with its conditional proposal, the strategic combination with Cadence provides substantial and superior short- and long-term value for Quickturn, its stockholders, employees and customers. In particular, the Quickturn Board continues to believe that the Cadence transaction offers substantial strategic benefits to Quickturn which far exceed the consideration proposed by Mentor. . The Quickturn Board considered potential antitrust issues raised by the Cadence transaction. In this regard, the Quickturn Board continues to believe that the transaction does not raise significant antitrust issues. . The Quickturn Board considered the potential harm to Quickturn, as well as Quickturn's employees and customers, if Mentor were to become a 14.9% stockholder of Quickturn. In this regard, given the litigation and competition between Quickturn and Mentor, the Quickturn Board considered the potential negative impact on Quickturn if Mentor were to become a large stockholder of Quickturn. The Quickturn Board of Directors unanimously recommended that Quickturn stockholders reject the revised unsolicited proposal by Mentor to acquire a 14.9% stake in Quickturn. The Quickturn Board continues to recommend that stockholders not tender their shares to Mentor, and urges Quickturn stockholders who may have tendered to withdraw their shares. WHY CADENCE OPPOSES THE MENTOR OFFER AND THE MENTOR PROPOSALS As the Quickturn Board has stated, the combination of Quickturn with Cadence will enable Quickturn stockholders to enjoy the benefits of Cadence's proven business strategy, strong balance sheet and excellent track record in acquiring and integrating companies. Cadence feels very strongly about the advantages of combining the complementary product offerings, development efforts and marketing strengths of Cadence with those of Quickturn. Cadence believes the proposed merger is truly a strategic combination in which the whole will be greater than the sum of the parts. Despite Quickturn's proposed strategic merger with Cadence, Mentor persists in soliciting your vote to replace the Quickturn Board with its own handpicked slate of director nominees and in making the Reduced Offer. The Quickturn Board has determined that Mentor's Reduced Offer is inadequate and that Mentor's proposal is not in the best interests of Quickturn and its stockholders. 5 CERTAIN INFORMATION ABOUT CADENCE/INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON AND RELATED ADDITIONAL INFORMATION Cadence is a corporation organized under the laws of the State of Delaware. Its business address is 2655 Seely Avenue, San Jose, California 95134. The principal business of Cadence is the development, manufacture and sale of electronic design automation software technology and provision of professional services in connection therewith. On December 8, 1998, Quickturn, Cadence and CDSI Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary of Cadence ("Acquisition"), entered into the Merger Agreement, pursuant to which (upon satisfaction or waiver of certain conditions) Acquisition will be merged with and into Quickturn (the "Merger") and Quickturn will become the surviving corporation and a wholly-owned subsidiary of Cadence. Each of the shares of Quickturn Common Stock (excluding any in treasury or held by Cadence or any of its subsidiaries) issued and outstanding (together with the associated preferred share purchase rights issued under Quickturn's Preferred Shares Rights Agreement, dated as of January 10, 1996, between Quickturn and BankBoston, N.A., as rights agent, as amended) will be converted into shares of common stock of Cadence (with the appropriate number of Cadence's preferred stock purchase rights as provided in Cadence's Rights Agreement, dated as of February 9, 1996, between Cadence and Harris Trust and Savings Bank, as rights agent, whether or not such rights shall still be attached to such shares). On January 4, 1999, the Merger Agreement was amended to reflect an increase in the value of the shares of common stock of Cadence to be received by holders of Quickturn Common Stock to $15.00 per share. Quickturn and Cadence also entered into a Stock Option Agreement granting Cadence an option (the "Option") to purchase up to 19.99% of the outstanding Quickturn Common Stock. As a result, Cadence is the beneficial owner of 3,619,100 shares of Quickturn Common Stock, or 19.99% of the shares outstanding, based upon 18,095,580 shares of Quickturn Common Stock outstanding as of November 30, 1998 (as represented by Quickturn in the Merger Agreement) and assuming exercise of the Option. The Option is exercisable only upon the occurrence of certain events, including, without limitation: (1) a recommendation by Quickturn's Board of Directors to its stockholders of a Superior Proposal (as defined in the Merger Agreement), (2) the withdrawal by Quickturn's Board of Directors of its approval of the Merger, (3) the failure of Quickturn to use all reasonable efforts to convene a stockholders' meeting to vote on the Merger, (4) in certain circumstances, the failure to obtain stockholder approval after a duly convened meeting, or (5) following termination of the Merger Agreement for certain specified reasons, an agreement between Quickturn and a third party relating to certain business combinations with a third party or a third party's acquisition of certain assets of Quickturn. In addition, under certain circumstances, including any person's acquisition of thirty percent (30%) or more of the outstanding Quickturn Common Stock or a written definitive agreement between Quickturn and a third party for certain business combinations prior to the expiration date of the Option, Cadence may require Quickturn to cancel the option and pay a cancellation amount. In some instances, Quickturn may require Cadence to sell to Quickturn any shares of Quickturn Common Stock received by Cadence upon exercise of the Option. Cadence is limited in the total payments it may receive in connection with its exercise of the Option to $14.075 million, minus any amounts it receives (other than for expense reimbursements) upon termination of the Merger Agreement. Cadence does not know of any event that has occurred as of the date hereof that would allow Cadence to exercise its Option. The Option Agreement will expire upon the earlier of (i) the Effective Time of the Merger (as defined in the Merger Agreement) and (ii) the twelve (12) month anniversary of the termination of the Merger Agreement in accordance with the terms thereof. In the past, Cadence has been a customer of Quickturn in the ordinary course and has entered into arms-length purchase agreements with Quickturn for products and services. Cadence does not believe such agreements, individually or in the aggregate, to constitute material agreements of Cadence. Except as described herein, neither Cadence, nor to Cadence's knowledge, any of its associates, (i) has engaged in or has a direct or indirect interest in any transaction or series of transactions since the beginning of 6 Quickturn's last fiscal year or in any currently proposed transaction, to which Quickturn or any of its subsidiaries is a party where the amount involved was in excess of $60,000, (ii) is the beneficial or record owner of any securities of Quickturn or any parent or subsidiary thereof, (iii) is the record owner of any securities of Quickturn of which it may not be deemed to be the beneficial owner, (iv) has been within the past year, a party to any contract, arrangement or understanding with any person with respect to any securities of Quickturn or (v) has any agreement or understanding with respect to future employment by Quickturn or any arrangement or understanding with respect to any future transactions to which Quickturn will or may be a party. In connection with the execution of the Merger Agreement, Cadence entered into employment agreements with Quickturn's President, Keith R. Lobo, and certain other Quickturn employees (the "Employees"). Each employment agreement commences at the consummation of the Merger for a term of eighteen months (the "Employment Period"). During the Employment Period, Mr. Lobo and each of the other Employees will serve the surviving corporation in a capacity functionally equivalent to his current position with Quickturn and will be entitled to an annual base salary and bonus (based on a percentage of base salary) specified in the employment agreement. In addition to his cash compensation, each Employee will be entitled to receive certain options to purchase shares of Cadence Common Stock pursuant to his employment agreement. The employment agreements further provide that, upon termination of the Employee's employment with the Surviving Corporation at any time before the one year anniversary of the consummation of the Merger, the Employee's compensation will be determined solely in accordance with the applicable Quickturn retention plan. Between such one year anniversary and the date that is 18 months following the consummation of the Merger, termination of any Employee without cause (as defined in the employment agreements), or voluntary termination by the Employee as a result of a reduction in base pay, reduction in title or a material change in such Employee's job responsibilities, or because of his relocation to more than 35 miles from his work location immediately prior to the Merger, entitles such Employee to a cash payment equal to the Employee's base salary for the remainder of the Employment Period. Upon termination at any time during the Employment Period, the Cadence stock options granted to the terminated Employee during the Employment Period will cease to vest and all other employee medical, dental and other benefits will terminate, except as otherwise required under the applicable Quickturn retention plan. Each Employee has also agreed not to compete with the surviving corporation before the later of (i) the eighteen month anniversary of the consummation of the Merger and (ii) such Employee's termination of employment with the surviving corporation. In addition, until one year after termination of his employment, the Employee may solicit neither Cadence's nor the surviving corporation's employees nor their clients or customers, nor may such Employee: (x) use any Cadence or Quickturn trade secret or proprietary information, (y) interfere or attempt to interfere with the surviving corporation's or Cadence's relationship with its customers or clients, or (z) solicit the business of any client or customer of Cadence or the surviving corporation. Cadence has filed a registration statement on Form S-4 and related exhibits with the SEC under the Securities Act of 1933, as amended (the "Securities Act"). This registration statement on From S-4 also includes a proxy statement of Quickturn regarding a special meeting of the Quickturn stockholders to approve the Merger with Cadence. The registration statement contains additional information about Cadence and the Merger. The registration statement and its exhibits may be inspected without charge at the office of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies may be obtained from the SEC at prescribed rates. In addition, Cadence files annual, quarterly and special reports, proxy statements and other information with the SEC. Any document Cadence files with the SEC may be read and copied at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 (1-800-732-0330) for further information on the public reference rooms. Copies of these materials may also be obtained from the public reference section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The SEC also maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC (http://www.sec.gov). Reports and other information filed with the SEC by Cadence may be copied at the office of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. 7 VOTE REQUIRED As described in the Quickturn Proxy Statement, each stockholder is entitled to one vote for each share of Quickturn Common Stock held. Stockholders do not have the right to cumulate votes in the election of directors. In connection with the Removal Proposal (as defined in the Quickturn Proxy Statement), pursuant to Section 141(k) of the Delaware General Corporation Law (the "DGCL") and Section 3.16 of the Quickturn Bylaws, the removal of directors requires the affirmative vote of a majority of all shares of Quickturn Common Stock outstanding and entitled to vote on the election of directors. Accordingly, abstentions and broker non-votes will have the same effect as votes cast against the Removal Proposal. In connection with the Election Proposal (as defined in the Quickturn Proxy Statement), pursuant to Section 216 of the DGCL, directors will be elected by a plurality of the votes cast by stockholders at the Special Meeting. Since votes are cast in favor of or withheld from each nominee, abstentions and broker non-votes will have no effect on the outcome of the Election Proposal. The Bylaw Amendment Proposal and the Bylaw Repeal Proposal (each as defined in the Quickturn Proxy Statement and collectively, the "Bylaw Proposals") each require the affirmative vote of a majority of the shares of Quickturn Common Stock present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, assuming a quorum is present at the Special Meeting, abstentions have the same effect as votes cast against the Bylaw Proposals, while broker non-votes are not included in the total number of votes cast on a Bylaw Proposal and therefore will not be counted for determining whether the Bylaw Proposal has been approved. 8 SECURITY OWNERSHIP SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth as of September 1, 1998 (unless otherwise indicated), to the knowledge of Cadence and based on a review of publicly available information, (i) each person or entity who is known by Cadence to own beneficially more than 5% of the outstanding shares of Quickturn Common Stock; (ii) each of Quickturn's current directors; (iii) each of the named Executive Officers (as defined in Item 402(a)(3) of Regulation S-K of the Exchange Act); and (iv) all directors and executive officers of Quickturn as a group.
PERCENTAGE SHARES BENEFICIALLY BENEFICIALLY NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) OWNED - ------------------------------------ ------------------- ------------ PRINCIPAL STOCKHOLDERS Kopp Investment Advisors, Inc.(2) 7701 France Avenue South, Suite 500 Edina, MN 55435............................. 2,597,975 14.4% State of Wisconsin Investment Board(2) P.O. Box 7842 Madison, WI 53707........................... 2,101,500 11.6% DIRECTORS Glen M. Antle(3)............................. 325,782 1.8% Keith R. Lobo(4)............................. 438,750 2.4% Richard C. Alberding(5)...................... 17,500 * Michael R. D'Amour(6)........................ 40,970 * Dr. Yen-Son (Paul) Huang(7).................. 354,550 2.0% Dr. David K. Lam(5).......................... 10,417 * William A. Hasler(8)......................... 3,667 * Charles D. Kissner(5)........................ 1,667 * NAMED EXECUTIVE OFFICERS (9) Jeffrey K. Jordan(10)........................ 1,134 * Raymond K. Ostby(11)......................... 102,767 * Dugald H. Stewart(12)........................ 7,390 * Tung-sun Tung(13)............................ 34,655 * ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (16 persons) (14)............................ 1,792,816 9.5%
- -------- * Less than 1%. (1) The number and percentage of shares beneficially owned is determined under rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within sixty days of September 1, 1998 through the exercise of any stock option or other right. Unless otherwise indicated in the footnotes, to Cadence's knowledge, each person has sole voting and investment power (or shares such powers with his or her spouse) with respect to the shares shown as beneficially owned. (2) This information was obtained from filings made by such stockholder with the SEC pursuant to Sections 13(d) or 13(g) of the Exchange Act. (3) Includes 257,270 shares held by The Antle Family Trust, as to which Mr. Antle shares voting and dispositive power, and 68,512 shares of Quickturn Common Stock exercisable within sixty days of September 1, 1998. (4) Includes options to purchase 433,750 shares of Quickturn Common Stock exercisable within sixty days of September 1, 1998. 9 (5) All such shares are subject to options exercisable within sixty days of September 1, 1998. (6) Includes 31,388 shares held by The D'Amour Family Trust, as to which Mr. D'Amour shares voting and dispositive power, and 4,583 shares of Quickturn Common Stock subject to options exercisable within sixty days of September 1, 1998. (7) Includes 37,548 shares held by The Huang Living Trust, as to which Mr. Huang shares voting and dispositive power, and 31,250 shares of Quickturn Common Stock subject to options exercisable within sixty days of September 1, 1998. (8) Includes options to purchase 1,667 shares of Quickturn Common Stock exercisable within sixty days of September 1, 1998. (9) Keith R. Lobo is also President and Chief Executive Officer of Quickturn and is listed above under the heading "Directors." (10) Includes options to purchase 333 shares of Quickturn Common Stock exercisable within sixty days of September 1, 1998. (11) Includes options to purchase 94,667 shares of Quickturn Common Stock exercisable within sixty days of September 1, 1998. (12) Includes options to purchase 7,000 shares of Quickturn Common Stock exercisable within sixty days of September 1, 1998. (13) Includes options to purchase 20,568 shares of Quickturn Common Stock exercisable within sixty days of September 1, 1998. (14) Includes options to purchase 747,164 shares of Quickturn Common Stock exercisable within sixty days of September 1, 1998. SECURITY OWNERSHIP BY CADENCE See "Certain Information About Cadence" for information regarding Cadence's beneficial ownership of Quickturn Common Stock. There have been no purchases and sales of Quickturn Common Stock by Cadence within the last two years. SOLICITATION EXPENSES AND PROCEDURES Cadence intends to communicate with Quickturn Stockholders by mail, telephone, facsimile and other electronic means utilizing its officers, employees and agents. No such persons shall receive compensation for making such communications. Cadence expects that this Proxy Statement will be mailed on January 5, 1999 to Quickturn Stockholders of record as of the Record Date by Morrow & Co., Inc. (which has been retained by Quickturn to assist Quickturn in connection with its solicitations relating to the meeting) as part of a distribution by Quickturn to such stockholders. Neither Morrow & Co., Inc. nor Quickturn is receiving any payment from Cadence for such distribution. Cadence anticipates that a total of less than $50,000 will be spent in communicating with Quickturn Stockholders. To date, Cadence has incurred no expenses in communicating with Quickturn Stockholders. Actual expenditures may vary materially from the estimate, however, as many of the expenditures cannot be readily predicted. Except as noted in the preceding paragraph, the entire expense of preparing, assembling, printing and mailing this Proxy Statement and any other related materials and the cost of communicating with Quickturn Stockholders will be borne by Cadence. Cadence does not intend to request reimbursement from Quickturn for these expenses. 10 QUICKTURN STOCKHOLDER PROPOSALS Quickturn will hold a 1999 Annual Meeting of Stockholders only if the Merger is not consummated before the time of such meeting. In the event that such a meeting is held, any proposals of Quickturn Stockholders intended to be presented at the 1999 Annual Meeting must be received by the secretary of Quickturn no later than , 1999 in order to be considered for inclusion in the Quickturn proxy materials relating to such meeting. Any proposal from a Quickturn Stockholder that is submitted outside the processes of Rule 14a-8 under the Exchange Act and that therefore will not be included in proxy materials to be sent to Quickturn Stockholders by Quickturn, must be received by the secretary of Quickturn not later than 90 days prior nor earlier than 120 days prior to the date of such meeting (unless less than 100 days' notice or prior public disclosure of the date of such meeting is given or made to Quickturn Stockholders, in which case a stockholder proposal must be received no later than the close of business on the 10th day following the date on which Quickturn's notice was mailed or public disclosure was made with respect to such meeting) in order to be considered timely received under Quickturn's By-Laws. 11 EX-99.69 4 FOURTH AMENDMENT COMPLAINT FILED DATED 12/28/98 Exhibit 69 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE MENTOR GRAPHICS CORPORATION NO. 98-473 RRM and MGZ CORP., Plaintiffs, v. QUICKTURN DESIGN SYSTEMS, INC.; CADENCE DESIGN SYSTEMS, INC., a Delaware corporation; JACK HARDING, an individual; KEITH LOBO, an individual, Defendants. QUICKTURN DESIGN SYSTEMS, INC., Counterclaimant, v. MENTOR GRAPHICS CORPORATION and MGZ CORP., Counterdefendants. - ------------------------------------------------------ FOURTH AMENDED COMPLAINT Pursuant to Rule 15(a) of the Federal Rules of Civil Procedure, plaintiffs Mentor Graphics Corporation ("Mentor") and MGZ Corp. ("Purchaser") file this Fourth Amended Complaint seeking declaratory and injunctive relief arising out of Purchaser's offer to purchase shares of stock of defendant Quickturn Design Systems, Inc. ("Quickturn"). INTRODUCTION 1. Mentor and Purchaser (collectively "plaintiffs") have filed this fourth amended complaint to seek immediate injunctive relief against Quickturn's latest and most egregious efforts to use concealment and non-disclosure to prevent Mentor from participating in the sale of Quickturn. Although Quickturn began negotiating with Cadence Design Systems, Inc. ("Cadence") at least as early as December 3, 1998, Quickturn failed to disclose the negotiations even though (i) it had earlier disclosed that it was NOT negotiating with anyone, (ii) it filed three separate amendments to its Schedule 14D-9 and proxy statements between December 3 and 8, 1998; and (iii) the federal securities laws specifically require disclosure of such negotiations. The obvious purpose of Quickturn's concealment was to advance its "Just say 'No' to Mentor" strategy by ensuring that Mentor would not be alerted to the bidding contest before Quickturn hastily signed a merger agreement with Cadence, inhibiting all competitive bids through huge "break up" fees and draconian "no shop" provisions. Indeed, although Quickturn invited Mentor to submit a higher bid, and stated that it would be acceptable for Mentor to respond by December 9, Quickturn never told Mentor that it was negotiating with a third party, and then signed the Cadence merger agreement less than 24 hours before Mentor's bid was due to be submitted. As soon as the Cadence deal was signed, the CEO's of Quickturn and Cadence, defendants Keith Lobo and Jack Harding, gave an interview to an industry publication in which they admitted that the January 8 Special Meeting of Quickturn stockholders will be referendum on the Cadence deal, and then systematically solicited support from Quickturn's stockholders by asserting that Mentor would need "psychiatric counseling," would "flirt with bankruptcy" and would "decimate half the company" if Mentor attempted to submit a higher bid. 2. Contrary to the statements of defendants Lobo and Harding, Purchaser has increased its offering price for shares of Quickturn to $14 - plus a portion of any breakup fees that are invalidated - and reduced the number of shares sought to 2.1 million, the maximum that plaintiffs can purchase without triggering Quickturn's poison pill. To ensure a level playing 2 field and restore the status quo, the Court should issue immediate injunctive relief. Defendants have admitted conduct that violates several provisions of the securities laws, including Sections 14(a), 14(d) and 14(e) of the Exchange Act; the resulting irreparable injuries to Mentor and other Quickturn stockholders can only be remedied by an order that invalidates the Cadence merger agreement and nullifies all proxies obtained by Quickturn without timely and complete disclosure. JURISDICTION AND VENUE 3. The Court has jurisdiction over this action pursuant to 15 U.S.C. Section 78aa, 28 U.S.C. Section 1331 and 28 U.S.C. Section 1337(a). 4. Venue is proper pursuant to 15 U.S.C. Section 78aa and 28 U.S.C. Section 1391(b). THE PARTIES 5. Mentor is an Oregon corporation with its principal executive offices in Wilsonville, Oregon. Purchaser, a wholly-owned subsidiary of Mentor and a Delaware corporation, was formed to acquire all of the outstanding shares of Quickturn through the tender offer and merger proposal described below. Mentor is the beneficial owner of more than three percent of the outstanding shares of Quickturn common stock; Purchaser is the record owner of 100 shares of Quickturn common stock. 6. Defendant Quickturn is a Delaware corporation with its principal executive offices in San Jose, California. Defendant Keith Lobo is a California resident, and the president and chief executive officer of Quickturn. 7. Defendant Cadence Design Systems, Inc. ("Cadence") is a Delaware corporation with its principal executive offices in San Jose, California. Defendant Jack Harding is a California resident, and the president and chief executive officer of Cadence. 3 8. Quickturn's common stock is registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. Section 78L(b), and is listed and traded on the Nasdaq National Market. THE TENDER OFFER 9. On August 12, 1998, Purchaser commenced a fully-financed, non- coercive, non-discriminatory, all-cash tender offer for all outstanding shares of Quickturn common stock that are not already owned by Mentor or Purchaser (the "Tender Offer"). The Tender Offer is, and will continue to be, in full compliance with all applicable federal laws and regulations governing tender offers, I.E., the provisions of the Williams Act, embodied in Sections 14(d) and 14(e) of the Exchange Act, 15 U.S.C. Sections 78n(d) and (e), and the rules and regulations promulgated thereunder by the Securities and Exchange Commission ("SEC"). In accordance with the Exchange Act and the SEC's rules and regulations, Purchaser commenced the Tender Offer by publishing a summary advertisement in the August 12, 1998 WALL STREET JOURNAL, and Purchaser filed on August 12, 1998 a Schedule 14D-1 with the SEC pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3 promulgated thereunder, 17 C.F.R. Section 240.14d-3. Purchaser has regularly updated and clarified its disclosures with respect to the Tender Offer by filing timely and proper amendments to its Schedule 14D-1. THE AGENT DESIGNATION SOLICITATION 10. In furtherance of the Proposed Acquisition and pursuant to Quickturn's bylaws, Mentor publicly disclosed on August 12, 1998 its intention to solicit agent designations from holders of ten percent or more of Quickturn's shares to appoint designated agents with the power to call a special meeting of the Quickturn stockholders (the "Agent Solicitation"). The purpose of the Agent Solicitation to call a special meeting of the Quickturn stockholders (the "Special 4 Meeting") is to allow the Quickturn stockholders to remove all current members of Quickturn's Board of Directors, to reduce the authorized number of Quickturn directors to five, to elect to the Quickturn Board five individuals nominated by Mentor, and to repeal any recent or subsequent amendments to the Quickturn bylaws. 11. Mentor's preliminary agent solicitation materials relating to the call of the Special Meeting were filed on August 12, 1998 with the SEC. On August 20, 1998, Mentor Graphics filed with the SEC definitive agent solicitation materials relating to the call of the Special Meeting (the "Agent Solicitation Materials"). Mentor has regularly updated and clarified the Agent Solicitation Materials by filing timely and proper amendments and other materials with the SEC. QUICKTURN'S REJECTION OF THE MENTOR GRAPHICS OFFER 12. On August 24, 1998, without communicating with any representative of Mentor to discuss the Proposed Acquisition, Quickturn announced that on August 21, 1998, the Quickturn Board had rejected the Proposed Acquisition on the grounds that the Board considered the Tender Offer to be inadequate, not reflective of the long-term value of Quickturn and not in the best interests of Quickturn or its stockholders. The Board further announced that it had determined that Quickturn's business plan offered the potential for obtaining higher long-term benefits for Quickturn's stockholders than the Tender Offer. 13. In an effort to defeat the Tender Offer and delay the Special Meeting, the Quickturn Board adopted an amended bylaw purporting to grant the Board power to delay any special meeting called by stockholders for 90 to 100 days (the "Bylaw Amendment"). The Board also adopted an amendment to Quickturn's "poison pill" defense purporting to bar any newly-elected board from redeeming Quickturn's poison pill for six months to facilitate an 5 acquisition by a person who sponsored the election of the new board members (the "Deferred Redemption Provision," or "DRP"). Mentor and Purchaser promptly challenged the Bylaw Amendment and the DRP (collectively, the "Defensive Measures") in Delaware Chancery Court (the "Chancery Court Action"). QUICKTURN'S SCHEDULE 14D-9 FILING 14. On August 24, 1998, Quickturn filed a Schedule 14D-9 with the SEC in response to the Tender Offer (the "Schedule 14D-9"). Among other things, Quickturn's Schedule 14D-9 stated: No negotiation is underway or is being undertaken by [Quickturn] in response to the [Tender] Offer which relates to or would result in (1) an extraordinary transaction, such as a merger or reorganization, involving [Quickturn] or any of its subsidiaries; (2) a purchase, sale or transfer of a material amount of assets by [Quickturn] or any of its subsidiaries; (3) a tender offer for or other acquisition of securities by or of [Quickturn]; or (4) any material change in the current capitalization or dividend policy of [Quickturn]. Quickturn's Schedule 14D-9 further stated that Mentor's Tender Offer "does not adequately reflect the long-term opportunities available to the Company in its business and the electronic design automation market," and that the Tender Offer "did not fully reflect the long-term value inherent in the Company." 15. Between August 24 and December 2, 1998, Quickturn regularly filed amendments to its Schedule 14D-9 that urged stockholders to reject the Tender Offer on the ground that it was inadequate and that greater value could be realized by pursuing Quickturn's business plan. During this period, Quickturn never amended its initial disclosure stating that it was not involved in any negotiations with any third party or Mentor regarding an acquisition or merger. In fact, Quickturn's repeated statements that its strategy was to pursue its business plan led any reasonable investor to believe that no negotiations would occur. 6 PROXY SOLICITATIONS FOR THE SPECIAL MEETING 16. On September 11, 1998, Mentor delivered to Quickturn agent designations executed by holders of 17 percent of Quickturn's outstanding common stock and called for the Special Meeting of stockholders to be held on October 29, 1998. On October 1, relying on the Bylaw Amendment, Quickturn's Board set the meeting date for January 8, 1999. 17. On September 11, 1998, Mentor filed with the SEC a definitive proxy statement and disseminated to stockholders materials relating to the Special Meeting (the "Mentor Proxy Statement"). The Mentor Proxy Statement discloses, among other things, the proposals Mentor intends to present for consideration at the Special Meeting: (i) to remove the entire Quickturn Board; (ii) to amend Quickturn's bylaws to reduce the authorized number of directors to five, (iii) to elect Mentor's five nominees to the Quickturn Board, and (iv) to repeal any provisions of the Quickturn bylaws adopted by the incumbent Quickturn Board subsequent to May 30, 1998. Mentor has regularly updated and clarified the Mentor Proxy Statement by filing timely and proper amendments and other materials with the SEC. 18. On September 21, 1998, Quickturn filed with the SEC a definitive proxy statement and disseminated to stockholders materials relating to the Special Meeting (the "Quickturn Proxy Statement"). The Quickturn Proxy Statement described Mentor's offer as "inadequate and not in the best interests of the Company," and stated "that stockholder interests would be better served by the Company continuing to pursue its business plan." Between September 21 and December 2, 1998, Quickturn regularly filed amendments to Quickturn's Proxy Statement that urged stockholders to vote against Mentor's nominees on the ground that the Quickturn stockholders would best be served by remaining independent. For example, Quickturn's proxy materials filed on October 2 told stockholders, "READ WHAT THE 7 EXPERTS ARE SAYING . . . QUICKTURN'S STAND-ALONE RETURN POTENTIAL OVER THE LONG-TERM SIGNIFICANTLY EXCEEDS THE PRICE BEING OFFERED BY MENTOR." Likewise, in proxy materials filed October 19, Quickturn told stockholders that they should oppose Mentor' nominees to "PARTICIPATE IN QUICKTURN'S BRIGHT FUTURE." Quickturn also said, "Your Board's rejection of Mentor's offer affirms its continued confidence in Quickturn's future and its determination that stockholders should be given every opportunity to participate fully in that future." MENTOR'S VICTORY IN THE CHANCERY ACTION 19. Following an expedited trial on the merits of the Chancery Court Action, the Court issued an opinion dated December 2, 1998 finding that the Quickturn directors had breached their fiduciary duties to Quickturn's stockholders in adopting the Deferred Redemption Provision. The Court of Chancery upheld the Bylaw Amendment and issued an order scheduling the Special Meeting for January 8, 1999. Quickturn appealed the decision to the Delaware Supreme Court. By the time the Court of Chancery filed its opinion, Quickturn's stockholders indicated their lack of confidence in Quickturn's management by tendering shares aggregating more than 50% of the outstanding Quickturn shares into Mentor's Tender Offer. QUICKTURN'S RESPONSES TO MENTOR'S VICTORY 20. According to Cadence's Form S-4 filing with the SEC on December 23, 1998, Quickturn attempted to interest Cadence in "rescuing" Quickturn from the Mentor Tender Offer as early as September 1, 1998, but Cadence said it was not interested. Following the completion of the trial on the Chancery Court Action, Quickturn again solicited Cadence's interest in an acquisition, and succeeded in arranging a meeting of the companies' top executives for December 1, 1998. 8 21. Following the ruling in the Chancery Court Action on December 2, 1998, Quickturn's efforts intensified. Cadence's Form S-4 admits that defendants Lobo and Harding "discussed the broad outlines of a possible combination of Quickturn and Cadence" as early as December 3, 1998. That same day, Quickturn filed amendment no. 23 to its Schedule 14D-9. The amendment said nothing about the acquisition negotiations; instead, it described the outcome of the Chancery Court Action and announced Quickturn's intent to appeal the ruling invalidating the DRP. Quickturn further stated, "The Quickturn Board continues to strongly recommend that stockholders vote Quickturn's BLUE proxy card, and not support Mentor's attempt to take over Quickturn at what the Board believes is an opportunistic, inadequate price. The Quickturn Board continues to urge shareholders not to tender their shares and not to vote Mentor's gold proxy card." Quickturn filed an amendment to its proxy materials containing the same statements. 22. On December 4, Quickturn and Cadence executed a confidentiality and standstill agreement, commenced due diligence, and began to discuss documentation for the acquisition. That same day, Quickturn filed amendment no. 24 to its Schedule 14D-9. Once again, the amendment said nothing about the acquisition negotiations; it only disclosed the opinion of the Court of Chancery. Quickturn filed a similar amendment to its proxy materials. 23. By December 8, Quickturn and Cadence had completed their due diligence, and the Cadence Board had approved a merger proposal; Quickturn's Board received Cadence's proposal on the evening of December 8 and accepted it within hours. That same day, Quickturn had filed amendment no. 25 to its Schedule 14D-9. The amendment disclosed no contact with Cadence, much less the imminent conclusion of the Cadence merger negotiations; instead it stated only that the Delaware Supreme Court had scheduled argument on Quickturn's appeal for 9 December 29, 1998, and asserted that the prosecution of the appeal would be in the best interest of stockholders. Quickturn filed a similar amendment to its proxy materials. 24. None of Quickturn's filings with the SEC between December 3 and 8 even hinted that Quickturn had abandoned its strategy of remaining independent and following its long-term business plan. None of these filings updated Quickturn's original disclosure stating that Quickturn was NOT negotiating with any third party concerning an acquisition or merger. QUICKTURN'S EFFORT TO EXCLUDE MENTOR FROM THE SALES PROCESS 25. Since August 12, 1998, Mentor has repeatedly requested that Quickturn negotiate with Mentor. Quickturn steadfastly rejected Mentor's overtures. 26. On December 6, 1998, Quickturn's Chairman, Glen Antle, spoke with Mentor's Chairman, Walden Rhines. During the evening of December 8, 1998, Larry Sonsini, Quickturn's primary outside counsel, told Christopher Kaufman, Mentor's primary outside counsel, that if Mentor wished to raise its bid, it should begin consideration of a higher proposal. Instead of encouraging Mentor to present immediately a higher bid because the Board was about to approve a third party's acquisition proposal, Mr. Sonsini attempted to discourage a higher bid and stated that Mentor would not be allowed to conduct due diligence. Mr. Kaufman informed Mr. Sonsini that Mentor would respond on December 9, 1998 to Quickturn's invitation to consider submitting a higher proposal. That same day, Quickturn's investment banker, Hambrecht & Quist ("H&Q"), contacted Salomon Smith Barney ("Salomon"), Mentor's investment banker. H&Q told Salomon that if Mentor wished to raise its bid, it should begin consideration of a higher proposal. Salomon told H&Q that Mentor would respond to Quickturn by 5:00 p.m. on December 9, 1998, and H&Q confirmed that responding in that time frame would be acceptable. In none of these conversations did Quickturn's representatives advise Mentor's representatives 10 that the Quickturn Board was considering a sale of the Company, that Quickturn was negotiating with another bidder, that Quickturn had granted due diligence to another bidder, that Mentor should put forward its best bid, that there was a deadline for Mentor to submit a higher offer, or that the Quickturn Board was meeting on December 8, 1998 to approve a merger agreement with Cadence or any other third party. QUICKTURN'S SWEETHEART DEAL WITH CADENCE 27. Before the opening of business on December 9, Quickturn surprised Mentor and the stock market by announcing that it had agreed to be acquired by Cadence in a merger transaction (the "Cadence Merger"). In amendment no. 26 to its Schedule 14D-9, Quickturn purported to explain the reasons for the proposed Cadence deal: The Board's decision to enter into the Merger Agreement was based on the Board's review and consideration of the interests of the Company's stockholders and all other factors permitted by applicable law, including the interests of the Company's employees, suppliers, creditors and customers, and the Company's long and short-term strategic objectives. 28. Quickturn's amendment no. 26 further stated that the Board "considered a presentation by, and the advice and views" of H&Q, and that H&Q had rendered an opinion that, "subject to the qualifications and limitations set forth in such opinion, the consideration to be received by stockholders of the Company pursuant to the Merger is fair from a financial point of view." Quickturn did not, however, disclose the opinion itself, the analysis underlying the opinion, or any of "the qualifications and limitations" referenced in amendment no. 26. Similarly, Quickturn did not disclose any information concerning the background of the Cadence Merger or the history of Quickturn's negotiations with Cadence; instead, the amendment stated only that the lengthy and complex Agreement and Plan of Merger (the "Cadence Merger Agreement") was approved by the Quickturn Board on December 8. 11 29. Quickturn's amendment no. 26 did not disclose any contacts with Mentor, nor Quickturn's deliberate efforts to exclude Mentor from the sale process. Specifically, the amendment did not disclose that Quickturn belatedly invited Mentor submit a higher proposal on December 8; that Mentor informed Quickturn that it would respond before 5:00 p.m. on December 9; that H&Q assured Salomon that this timing was acceptable; and that Quickturn nevertheless accepted the Cadence Merger on the evening of December 8, less than 24 hours before Mentor was scheduled to submit its higher offer. 30. Quickturn's amendment no. 26 did disclose the terms of the Cadence Merger Agreement, which will chill competing bids and transfer to Cadence, rather than Quickturn's stockholders, a huge portion of the increased consideration in any higher bid. The Cadence Merger Agreement grants Cadence (i) a stock option lockup to purchase shares representing 19.9% of Quickturn's common stock on a fully-diluted basis at $14.00 per share, capped at a total benefit to Cadence of $14,075,000 (the "Lockup Option"); (ii) a termination fee of $10,557,000 (the "Termination Fee"); and (iii) an expense reimbursement fee of $3,500,000 (the "Expense Reimbursement Fee," together with the Termination Fee and Lockup Option, the "Breakup Fees"). The maximum Breakup Fees represent 6.9% of the aggregate Cadence Merger price of $253 million and 9% of the transaction price net of cash on Quickturn's balance sheet. The Cadence Merger Agreement also subjects Quickturn to a highly-restrictive "no- shop" provision (the "No-Shop Clause") that not only purports to prevent Quickturn and its representatives from making any effort to obtain a superior transaction, but allows Cadence to prevail merely by matching any higher offer; the practical effect of the No-Shop Clause is to simultaneously deter competing proposals and to remove any incentive for Cadence to bid competitively. 12 31. On December 15, 1998, plaintiffs filed a second complaint in the Delaware Chancery Court challenging the decision of the Quickturn Board to enter into the Cadence Merger Agreement and to accept the Breakup Fees and the No-Shop Clause as a breach of the Board's fiduciary duties. THE IMPROPER EFFORTS OF HARDING AND LOBO TO INFLUENCE VOTING AT THE SPECIAL MEETING 32. Concurrently with the announcement of the Cadence Merger, the merger partners' CEO's, defendants Harding and Lobo, gave interviews to a widely read industry publication entitled "Electronic Engineering Times." The interview was published over the Internet and to wire services on December 10, 1998, and in print December 14, 1998. The comments of Lobo and Harding in the interview were not designed to publicize the Cadence Merger, but were instead calculated to attack Mentor and to solicit stockholder support for Quickturn at the January 8 Special Meeting. Indeed, Harding admitted that the vote at the Special Meeting will "effectively be a mandate, yes or no, for our Both Harding and Lobo attempted to dissuade stockholders from voting their proxies for the Mentor slate of nominees. According to the article, Harding said: Mentor executives could use "psychiatric counseling" if they choose to try and top Cadence's bid. "The first offer was half of their business to get a company they were going to rip heart and soul out of," he said. "If they raise the bid another $75 million, they're unlikely to raise the cash, and now they're into issuing stock and flirting with a bankruptcy situation." "I think we're doing them a favor," said Harding. "We're giving them a graceful out to a bad decision that's dragged on too long." According to the article, Lobo: 13 expressed confidence shareholders will take a tax-free $14 per- share offer over a taxable $12.125 per-share bid, especially since Cadence is a company with "enormous demonstrated growth." Mentor, he said, would have to "decimate half the company" to buy Quickturn. MENTOR'S REVISED TENDER OFFER 33. On December 28, 1998, Purchaser announced an increase in its offering price in the Tender Offer to $14.00 cash per share and a reduction in the number of shares being sought to 2,100,000. Together with the shares already owned by plaintiffs, the revised Tender Offer would result in plaintiffs owning a total of 14.9% of Quickturn's outstanding stock, the maximum amount that can be acquired without triggering Quickturn's poison pill. Mentor plans to seek to negotiate a merger agreement with Quickturn to acquire the balance of the shares at the same cash price paid in the revised Tender Offer. Mentor further stands ready to consider increasing its offer price and the price to be paid in a negotiated merger if negotiation and due diligence demonstrate greater value. In the event Mentor is successful in invalidating all or any portion of the break-up fees under the Cadence Merger Agreement and Mentor can negotiate a merger agreement with Quickturn, Mentor intends to pay all Quickturn stockholders whose shares are converted under the merger an amount per share equal to a portion of the break-up fees. The revised Mentor Tender Offer is no longer subject to the satisfaction of the Minimum Condition, the Section 203 Condition, the HSR Condition or the Rights Condition described in the initial offer to purchase issued in connection with the Tender Offer. 34. The Special Meeting is still scheduled for January 8, 1999. If Mentor's nominees are elected as directors of Quickturn, Mentor would encourage the nominees to, subject to their fiduciary duties as directors under applicable law and in accordance with Quickturn's rights under the Cadence Merger Agreement, (i) seek to auction Quickturn to the highest bidder; (ii) 14 allow any bidder, including Mentor, promptly to conduct a due diligence review of Quickturn; and (iii) seek to execute a merger agreement with the highest bidder. Mentor anticipates that any such merger agreement could be executed within 30 days of the nominees being elected as directors of Quickturn. COUNT I (For Violation of Section 14(d) of the Exchange Act, Rule 14d-9 promulgated thereunder and Schedule 14D-9) 35. Plaintiffs repeat and reallege the above paragraphs as if set forth herein. 36. Rule 14d-9, 17 C.F.R. Section 240.14d-9, promulgated by the SEC pursuant to Section 14(d) of the Exchange Act, requires the target company to file with the SEC a Schedule 14D-9 containing certain information, including, among other things, the nature of the target company's solicitation or recommendation in response to a tender offer, particularized reasons for the solicitation or recommendation, and recent transactions in respect of the target company's securities by the target company or by its officers and directors. 37. Item 7 of Schedule 14D-9 (17 C.F.R. Section 240.14d-101) requires particularized disclosure regarding any negotiations between the target and any third party with respect to a merger or other extraordinary transaction: CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY. (a) If the person filing this statement is the subject company, state whether or not any negotiation is being undertaken or is underway by the subject company in response to the tender offer which relates to or would result in: (1) An extraordinary transaction such as a merger or reorganization, involving the subject company or any subsidiary of the subject company; (2) A purchase, sale or transfer of a material amount of assets by the subject company or any subsidiary of the subject company; 15 (3) A tender offer for or other acquisition of securities by or of the subject company; or (4) Any material change in the present capitalization or dividend policy of the subject company. Instruction: If no agreement in principle has yet been reached, the possible terms of any transaction or the parties thereto need not be disclosed if in the opinion of the Board of Directors of the subject company such disclosure would jeopardize continuation of such negotiations. In such event, disclosure that negotiations are being undertaken or are underway and are in the preliminary stages will be sufficient. (b) Describe any transaction, board resolution, agreement in principle, or a signed contract in response to the tender offer, other than one described pursuant to Item 3(b) of this statement, which relates to or would result in one or more of the matters referred to in Item 7(a)(1), (2), (3) or (4). In addition, Item 8 of Schedule 14D-9, 17 C.F.R. Section 240.14d-101, requires Quickturn to "[f]urnish such additional information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not materially misleading." 38. In violation of Section 14(d) of the Exchange Act, Rule 14d-9 promulgated thereunder, and Schedule 14D-9, Quickturn's Schedule 14D-9 amendments filed with the SEC and disseminated to stockholders prior to December 9, 1998 (including at least amendment nos. 23-25), contain the following material misstatements and omissions: - They failed to disclose Quickturn's reversal of its position that it would be in the best interest of stockholders for Quickturn to remain independent and to pursue its long-term business plan. - They failed to disclose that Quickturn had made contact with Cadence, had given Cadence due diligence, and had begun to negotiate regarding an acquisition by Cadence. 16 - They failed to disclose that Mentor was mislead and shut out of the bidding in favor of Cadence. 39. In violation of Section 14(d) of the Exchange Act, Rule 14d-9 promulgated thereunder, and Schedule 14D-9, Quickturn's Schedule 14D-9 amendment no. 26 filed with the SEC and disseminated to stockholders on December 9, 1998 contains the following material misstatements and omissions: - It failed to provide full disclosure regarding the reasons of Quickturn and its Board for accepting the Cadence Merger. - It stated that H&Q had opined that the Cadence Merger would be "fair from a financial point of view" to Quickturn stockholders, but failed to disclose the opinion itself, or "the qualifications and limitations" on H&Q's opinion. Moreover, given H&Q's earlier opinion that Mentor's $12.125 offer was inadequate even though its was within or above the artificially inflated ranges contained in H&Q's analyses in August, 1998, Quickturn violated the letter and spirit of Item 8 of Schedule 14D-9 by failing to disclose the analysis underlying H&Q's conclusion that Cadence's $14 bid -- only 15 percent higher than Mentor's bid -- was "fair". 40. The misstatements and omissions described above are intentionally materially misleading because Quickturn refuses to include in its disclosures information necessary to make the information selectively disclosed not misleading. Such a course of conduct not only violates Section 14(d) of the Exchange Act, Rule 14d-9 and Schedule 14D-9 promulgated thereunder, but is intentionally designed to confuse and mislead Quickturn shareholders. Quickturn's 17 inequitable conduct violates public policy and will, unless enjoined, cause irreparable injury to Mentor and other Quickturn stockholders. 41. By reason of the foregoing, plaintiffs, all other Quickturn stockholders and the investing public have been and are being irreparably harmed because they are being deprived of, and/or mislead as to, material information required to be publicly, accurately and fully disclosed by Quickturn under applicable law, and Quickturn stockholders and the investing public are being mislead by materially false information disseminated by Quickturn. 42. Plaintiffs have been further irreparably harmed because Quickturn's failure timely to disclose its negotiations with Cadence denied plaintiffs the opportunity to make a competing bid. Unless enjoined, the Breakup Fees and No-Shop Clause of the Cadence Merger Agreement will substantially impair plaintiffs' ability to make a competing bid for Quickturn. 43. Plaintiffs have no adequate remedy at law. COUNT II (For Violation of Section 14(e) of the Exchange Act) 44. Plaintiffs repeat and reallege the above paragraphs above as if set forth herein. 45. Section 14(e) of the Exchange Act, 15 U.S.C. Section 78n(e), makes it "unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statement made, in light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practice in connection with any tender offer." 46. Quickturn's actions since August 12, 1998 demonstrate that it will pursue any means at its disposal to avoid being acquired by Mentor, even if this requires Quickturn to ignore its disclosure obligations and to harm Quickturn's stockholders and the investing public. 18 Quickturn failed to disclose its discussions with Cadence, even though it filed three amendments to its Schedule 14D-9 between December 3 and 8, 1998, because Quickturn knew that any such disclosure would prompt Mentor to submit a competing bid and likely force Quickturn to accept Mentor's acquisition proposal. 47. In violation of Section 14(e) of the Exchange Act, Quickturn failed to timely disclose that Quickturn had reversed its position that it would be in the best interest of stockholders for Quickturn to remain independent and to pursue its long-term business plan; that Quickturn had made contact with Cadence, had given Cadence due diligence, and had begun to negotiate regarding an acquisition by Cadence; and that Mentor was mislead and shut out of the bidding in favor of Cadence. 48. In violation of Section 14(e) of the Exchange Act, Quickturn stated that H&Q had opined that the Cadence Merger would be "fair from a financial point of view" to Quickturn stockholders, but failed to disclose the analysis underlying the opinion, or "the qualifications and limitations" on H&Q's opinion. On information and belief, disclosure of the analysis underlying H&Q's opinion that Cadence's $14 per share offer is "fair" would reveal that the opinion is irreconcilable with H&Q's earlier opinion that Mentor's $12.125 bid was inadequate, or that H&Q had no reasonable basis for its earlier opinion that Mentor's bid was inadequate. 49. Quickturn's disclosure is intentionally materially misleading because Quickturn refuses to include in its disclosures information necessary to make the information selectively disclosed not misleading. This course of conduct not only violates Section 14(e) of the Exchange Act, but is intentionally designated to confuse and mislead Quickturn shareholders. Quickturn's inequitable conduct violates public policy and will, unless enjoined, cause irreparable injury to Mentor and other Quickturn stockholders. 19 50. Plaintiffs, all other Quickturn stockholders and the investing public have been and are being irreparably harmed because they are being deprived of, and/or mislead as to, material information required to be publicly, accurately and fully disclosed by Quickturn under applicable law, and Quickturn stockholders and the investing public are being mislead by materially false information disseminated by Quickturn. 51. Plaintiffs have been further irreparably harmed because Quickturn's failure timely to disclose its negotiations with Cadence denied plaintiffs the opportunity to make a competing bid. The Breakup Fees and No- Shop Clause of the Cadence Merger Agreement will substantially impair plaintiffs' ability to make a competing bid for Quickturn. 52. Plaintiffs have no adequate remedy at law. COUNT III (For Violation of Exchange Act Section 14(a) and Rule 14a-9 Promulgated Thereunder) 53. Plaintiffs repeat and reallege the above paragraphs as if set forth herein. 54. Section 14(a) of the Exchange Act, 15 U.S.C. Section 78n(a), and the rules and regulations promulgated thereunder by the SEC, require that a person soliciting an authorization with respect to any registered security file and disclose certain specific information with respect to the solicitation. Any such solicitor must disclose, among other things, its identity, the date, time and place of the meeting at which the proposed action will be taken, and any substantial interest of the solicitor in the matters to be acted upon. In addition, Rule 14a-9, 17 C.F.R. Section 240.14a-9, promulgated by the SEC under Section 14(a) of the Exchange Act, provides that "[n]o solicitation subject to this regulation shall be made . . . containing any statement of which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier 20 communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading." 55. In violation of Section 14(a) and Rule 14a-9 promulgated thereunder, Quickturn's amendments to its proxy statements filed with the SEC and disseminated to stockholders on December 3, 4 and 8, 1998, contained the following material misstatements and omissions. - They failed to disclose Quickturn's reversal of its position that it would be in the best interest of stockholders for the company to remain independent and to pursue its long-term business plan. - They failed to disclose that Quickturn had made contact with Cadence, had given Cadence due diligence, and had begun to negotiate with respect to an acquisition. - They failed to disclose that Mentor had been mislead and shut out of the bidding in favor of Cadence. 56. In violation of Section 14(a) and Rule 14a-9 promulgated thereunder, Quickturn's amendment to its proxy materials filed on December 9, 1998 contained the following material misstatements and omissions. - It failed to disclose adequately how the Cadence Merger would benefit stockholders. - It stated that H&Q had opined that the Cadence Merger would be "fair from a financial point of view" to Quickturn stockholders, but failed to disclose "the qualifications and limitations" on H&Q's opinion. Moreover, given H&Q's earlier opinion that Mentor's $12.125 offer was inadequate even though its was within or above the artificially inflated ranges contained in H&Q's analysis in August, 1998, Quickturn was 21 required to disclose the analyses underlying H&Q's conclusion that Cadence's $14 bid -- only 15 percent higher than Mentor's bid -- was "fair". 57. In addition, Quickturn, Cadence, Lobo and Harding made the statements referred to in paragraph 32 above with the intention and design to solicit proxies for the Special Meeting of Quickturn stockholders set for January 8, 1999, and to influence the outcome of the Special Meeting. These statements were published over the Internet and to wire services on or about December 10, 1998, and in print on or about December 14, 1998. These statements were made with the intent and knowledge that they be published and disseminated widely to stockholders. 58. The statements described above are intentionally materially misleading because Quickturn refuses to include in its disclosures information necessary to make the information selectively disclosed not misleading. This a course of conduct not only violates Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder but is intentionally designed to confuse and mislead Quickturn shareholders. Quickturn's inequitable conduct violates public policy and will, unless enjoined, cause irreparable injury to Mentor and other Quickturn stockholders. 59. Plaintiffs, other Quickturn stockholders and the investing public have been and are being irreparably harmed because they are being deprived of, and/or mislead as to, material information required to be publicly, accurately and fully disclosed by Quickturn under applicable law, and Quickturn stockholders and the investing public are being mislead by materially false information disseminated by Quickturn. 60. Unless injunctive relief issues, plaintiffs will be irreparably harmed because defendants' materially misleading statements will have a substantial impact on the voting at the 22 Special Meeting, with the result of substantially impairing plaintiffs' ability to elect the directors they favor. 61. Plaintiffs have no adequate remedy at law. COUNT IV (For Declaratory Relief) 62. Plaintiffs repeat and reallege the above paragraphs as if set forth herein. 63. The Declaratory Judgment Act, 28 U.S.C. Section 2201, provides that "[i]n a case of actual controversy within its jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration." Plaintiffs are entitled to a declaratory judgment that their Schedule 14D-1 filings and all amendments thereto, the Agent Solicitation Materials and all amendments thereto, and the Mentor Proxy Statement and all amendments thereto (collectively, "Mentor's SEC Filings") are proper and comply with all applicable securities laws, rules and regulations. 64. Although the Proposed Acquisition is fairly and attractively priced, Quickturn has acted to thwart and delay plaintiffs' lawful attempts to consummate the Tender Offer. Quickturn's efforts to delay and defeat the Tender Offer include the filing of a meritless cross-complaint and amendments thereto claiming that public disclosures and filings made by plaintiffs in conjunction with the Tender Offer, the Agent Solicitation and the Special Meeting violate applicable federal securities laws and regulations. Thus, there is a substantial controversy between parties having adverse interests which is of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. 65. In the absence of declaratory relief, plaintiffs will suffer irreparable harm. As evidenced by the course of action that Quickturn has pursued to date and the actions taken generally by companies that receive unsolicited acquisition proposals, Quickturn has defended, 23 and likely will continue to defend, against the Proposed Acquisition, the Agent Solicitation and the Special Meeting by, among other things, filing false claims designed to delay or defeat the Proposed Acquisition, the Agent Solicitation and the Special Meeting. A declaratory judgment that the disclosures in the Mentor SEC Filings comply with all applicable federal laws will serve the purpose of adjudicating the interests of the parties, resolving any complaints concerning the propriety of the Tender Offer, the Agent Solicitation or the Special Meeting under federal law, and permitting an otherwise lawful transaction to proceed. 66. Plaintiffs therefore request pursuant to the Declaratory Judgment Act, 28 U.S.C. Sections 2201 and 2202, that this Court enter a declaratory judgment that the Mentor SEC Filings (and similar filings in the future) comply fully with all applicable provisions of law. WHEREFORE, plaintiffs respectfully request that this Court: a. declare that Quickturn has violated Sections 14(a), 14(d) and 14(e) of the Exchange Act and Rule 14d-9, and that Cadence, Lobo and Harding have violated Section 14(a) and Rule 14a-9; b. compel Quickturn to comply with the requirements of the Exchange Act and the rules promulgated thereunder, and compel Quickturn to file immediately an amended Schedule 14D-9 which is complete and accurate and which corrects the misleading and untrue statements in its Schedule 14D-9; c. preliminarily and permanently enjoin defendants and their agents, employees and anyone acting on its behalf, from making any false or misleading statements with respect to the Tender Offer; 24 d. compel defendants and their agents, employees and anyone acting on its behalf to correct their deceptive statements, and to order them to make no such deceptive statements in the future; e. enjoin the performance and enforcement of the Cadence Merger Agreement, including the Lockup Option, the Breakup Fees and the No-Shop Provisions, and all related agreements; f. declare void all proxies transmitted to Quickturn (including revocations of proxies previously granted to Mentor) between the date Quickturn commenced negotiations with Cadence and the date which is ten business days after Quickturn makes corrective disclosures; g. declare that plaintiffs have disclosed all information required by, and are otherwise in all respects in compliance with, all applicable laws and other obligations, including, without limitation, Sections 14(a), 14(d) and 14(e) of the Exchange Act and any other federal securities laws, rules or regulations deemed or claimed to be applicable to the Mentor SEC Filings, as well as any other related materials or similar materials filed in the future; h. award plaintiffs their costs and disbursements in this action, including reasonable attorneys' fees; and i. grant plaintiffs such other and further relief as this Court may deem just and proper. 25 Of Counsel: ------------------------------- Kevin G. Abrams (ID #2375) Fredric J. Zepp Thomas A. Beck (ID #2086) Heidi E. Klein Lisa A. Schmidt (#3019) Latham & Watkins J. Travis Laster (ID #3514) 505 Montgomery Street Leanne J. Reese (ID #3690) San Francisco, CA 94111 Richards, Layton & Finger (415) 391-0600 One Rodney Square P. O. Box 551 Marc W. Rappel Wilmington, DE 19899 Latham & Watkins (302) 658-6541 633 West Fifth Street, Ste 4000 Attorneys for Plaintiffs Los Angeles, CA 90071 (213) 485-1234 Dated: December 28, 1998 26 EX-99.70 5 OPINION OF THE SUPREME COURT DATED 12/31/98 Exhibit 70 IN THE SUPREME COURT OF THE STATE OF DELAWARE 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, ) WILLIAM A. HASLER, and ) CHARLES D. KISSNER, ) ) Defendants below, ) No. 511, 1998 Appellants, ) ) v. ) Court Below: Court of Chancery ) of the State of Delaware, HOWARD SHAPIRO, ) in and for New Castle County ) C.A. No. 16588 Plaintiff Below, ) Appellee. ) _______________________________ ) ) 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, ) WILLIAM A. HASLER, and ) CHARLES D. KISSNER, ) ) Defendants below, ) No. 512, 1998 Appellants, ) ) v. ) Court Below: Court of Chancery ) of the State of Delaware, ) in and for New Castle County MENTOR GRAPHICS CORPORATION, ) C.A. No. 16584 an Oregon corporation, and ) MGZ CORP., a Delaware ) corporation, ) ) Plaintiffs Below, ) Appellees, ) Submitted: December 29, 1998 Decided: December 31, 1998 Before WALSH, HOLLAND and HARTNETT, Justices Upon appeal from the Court of Chancery. AFFIRMED. Kenneth J. Nachbar, Esquire, William M. Lafferty, Esquire, and Donna L. Culver, Esquire, of Morris, Nichols, Arsht & Tunnell, Wilmington, Delaware; and James A. DiBoise, Esquire and David J. Berger, Esquire (argued), of Wilson, Sonsini, Goodrich & Rosati, P.C., Palo Alto, California, attorneys for appellants. Kevin G. Abrams, Esquire (argued), Thomas A. Beck, Esquire, Lisa A. Schmidt, Esquire, J. Travis Laster, Esquire, Dominick Gattuso, Esquire, and Michael K. Reilly, Esquire, of Richards, Layton & Finger, Wilmington, Delaware; Fredric J. Zepp, Esquire, of Latham & Watkins, San Francisco, California, and Marc W. Rappel, Esquire, of Latham & Watkins, Los Angeles, California; attorneys for appellees, Mentor Graphics Corporation and MGZ Corporation. Joseph A. Rosenthal, Esquire, and Norman M. Monhait, Esquire, of Rosenthal, Monhait, Gross & Goddess, P.A., Wilmington, Delaware; and Stanley Bernstein, Esquire and Abraham I. Katsman, Esquire, of Bernstein, Liebhard & Lifshitz, LLP, New York, New York, for appellee, Howard Shapiro. HOLLAND, Justice: 2 This is an expedited appeal from a final judgment entered by the Court of Chancery. The dispute arises out of an ongoing effort by Mentor Graphics Corporation ( "Mentor"), a hostile bidder, to acquire Quickturn Design Systems, Inc. ("Quickturn"), the target company. The plaintiffs-appellees are Mentor/1/ and an unaffiliated stockholder of Quickturn. The named defendants- appellants are Quickturn and its directors. In response to Mentor's tender offer and proxy contest to replace the Quickturn board of directors, as part of Mentor's effort to acquire Quickturn, the Quickturn board enacted two defensive measures. First, it amended the Quickturn shareholder rights plan ("Rights Plan") by adopting a "no hand" feature of limited duration (the "Delayed Redemption Provision" or "DRP"). Second, the Quickturn board amended the corporation's bylaws to delay the holding of any special stockholders meeting requested by stockholders for 90 to 100 days after the validity of the request is determined (the "Amendment" or "ByLaw Amendment"). Mentor filed actions for declarative and injunctive relief in the Court - --------------------- /1/ Mentor and MGZ Corp., a wholly owned Mentor subsidiary specially created as a vehicle to acquire Quickturn, are referred to collectively as "Mentor." Unless otherwise indicated, Mentor and Howard Shapiro, the shareholder plaintiff in Court of Chancery Civil Action No. 16588, are referred to collectively as "Mentor." 3 of Chancery challenging the legality of both defensive responses by Quickturn's board. The Court of Chancery conducted a trial on the merits. It determined that the By-Law Amendment is valid. It also concluded, however, that the DRP is invalid on fiduciary duty grounds. In this appeal, Quickturn argues that the Court of Chancery erred in finding that Quickturn's directors breached their fiduciary duty by adopting the Delayed Redemption Provision. We have concluded that, as a matter of Delaware law, the Delayed Redemption Provision was invalid. Therefore, on that alternative basis, the judgment of the Court of Chancery is affirmed. STATEMENT OF FACTS/2/ THE PARTIES Mentor (the hostile bidder) is an Oregon corporation, headquartered in Wilsonville, Oregon, whose shares are publicly traded on the NASDAQ national market system. Mentor manufactures, markets, and supports electronic design automation ("EDA") software and hardware. It also provides related services that enable engineers to design, analyze, simulate, - --------------------- /2/ Given the expedited nature of the appeal, this Court has relied almost verbatim on the excellent recitation of facts set forth in the Court of Chancery's opinion. Mentor Graphics Corp. v. Quickturn Design Systems, et al., Del. Ch., C.A. No. 16584, Jacobs, V.C. (Dec. 7, 1998) . 4 model, implement, and verify the components of electronic systems. Mentor markets its products primarily for large firms in the communications, computer, semiconductor, consumer electronics, aerospace, and transportation industries. Quickturn, the target company, is a Delaware corporation, headquartered in San Jose, California. Quickturn has 17,922,518 outstanding shares of common stock/3/ that are publicly traded on the NASDAQ national market system. Quickturn invented, and was the first company to successfully market, logic emulation technology, which is used to verify the design of complex silicon chips and electronics systems. Quickturn is currently the market leader in the emulation business, controlling an estimated 60% of the worldwide emulation market and an even higher percentage of the United States market. Quickturn maintains the largest intellectual property portfolio in the industry, which includes approximately twenty-nine logic emulation patents issued in the United States, and numerous other patents issued in foreign jurisdictions. Quickturn's customers include the world's leading technology companies, among them Intel, IBM, Sun Microsystems, - --------------------- /3/ As of July 30, 1998. 5 Texas Instruments, Hitachi, Fujitsu, Siemens, and NEC. Quickturn's board of directors consists of eight members, all but one of whom are outside, independent directors. All have distinguished careers and significant technological experience./4/ Collectively, the board has more than 30 years of experience in the EDA industry and owns one million shares (about 5%) of Quickturn's common stock. Since 1989, Quickturn has historically been a growth company, having experienced increases in earnings and revenues during the past seven years. Those favorable trends were reflected in Quickturn's stock prices, which reached a high of $15.75 during the first quarter of 1998, and generally traded in the $15.875 to $21.25 range during the year preceding Mentor's hostile - --------------------- /4/ The Quickturn board includes Messrs. Glen Antle (President and Chairman of Quickturn's board of directors); Michael D'Amour (Quickturn's founding CEO and chairman through 1993, and Executive Vice President for research and development and head of international sales until he left Quickturn management in 1995); Dean William A. Hasler (a former Vice chairman and partner of KPMG Peat Marwick; a former Dean of the Haas Graduate School of Business at the University of California, Berkeley, a position he held until 1998; and currently a technology and business advisor); Keith Lobo (Quickturn's President and CEO); Charles D. Kissner (currently CEO and Chairman of the Board of Digital Microwave Corporation, a telecommunications company, and a former President, CEO, and director for Aristacom International, Inc.; also a former AT&T executive); Richard Alberding (a management consultant for high technology companies; and who currently serves on the board of directors of several technology companies); Dr. David Lam (former Vice President at Wyse Technology, former President and CEO of Expert Edge, Inc., and currently a technology and business advisor in the semiconductor equipment industry and Chairman of the David Lam Group); Dr. Yen-Son (Paul) Huang (a co-founder and President of PiE and, following PiE's merger with Quickturn in 1993, Executive Vice President of Quickturn until June 1997. Since then, Dr. Huang has served Quickturn only as a director). 6 bid. Since the spring of 1998, Quickturn's earnings, revenue growth, and stock price levels have declined, largely because of the downturn in the semiconductor industry and more specifically in the Asian semiconductor market. Historically, 30%-35% of Quickturn's annual sales (approximately $ 35 million) had come from Asia, but in 1998, Quickturn's Asian sales declined dramatically with the downturn of the Asian market./5/ Management has projected that the negative impact of the Asian market upon Quickturn's sales should begin reversing itself sometime between the second half of 1998 and early 1999. QUICKTURN-MENTOR PATENT LITIGATION Since 1996, Mentor and Quickturn have been engaged in patent litigation that has resulted in Mentor being barred from competing in the United States emulation market. Because its products have been adjudicated to infringe upon Quickturn's patents, Mentor currently stands enjoined from selling, manufacturing, or marketing its emulation products in the United - ---------------------- /5/ By the summer of 1998, Quickturn's stock price had declined to $6 per share. On August 11, 1998, the closing price was $8.00. It was in this "trough" period that Mentor, which had designs upon Quickturn since the fall of 1997, saw an opportunity to acquire Quickturn for an advantageous price. 7 States. Thus, Mentor is excluded from an unquestionably significant market for emulation products. The origin of the patent controversy was Mentor's sale of its hardware emulation assets, including its patents, to Quickturn in 1992. Later, Mentor reentered the emulation business when it acquired a French company called Meta Systems ("Meta") and began to market Meta's products in the United States in December 1995. Quickturn reacted by commencing a proceeding before the International Trade Commission ("ITC") claiming that Meta and Mentor were infringing Quickturn's patents./6/ In August 1996, the ITC issued an order prohibiting Mentor from importing, selling, distributing, advertising, or soliciting in the United States, any products manufactured by Meta. That preliminary order was affirmed by the Federal Circuit Court of Appeals in August 1997./7/ In December 1997, the ITC issued a Permanent Exclusion - ------------------------- /6/ See In the Matter of Certain Hardware Logic Emulation Systems and Components Thereof, Inv. No. 337-TA-383, Notice of Investigation, 61 Fed. Reg. 9486 (ITC March 8, 1996). /7/ See In the Matter of Certain Hardware Logic Emulation Systems and Components Thereof, Inv. No. 337-TA-383, Notice of Commission Decision Not to Modify or Vacate an Initial Determination Granting Temporary Relief, and Issuance of a Temporary Limited Exclusion Order and a Temporary Cease and Desist Order, Subject to Posting of Bond By Complainant (ITC Aug. 5, 1996) ("ITC Temporary Orders"), aff'd, Mentor Graphics Corp. v. U.S. Int'l Trade Commission, No. 97-1106, 1997, U.S. App., LEXIS 21646 (Fed. Cir. Aug. 15, 1997). (continued...) 8 Order prohibiting Mentor from importing, selling, marketing, advertising, or soliciting in the United States, until at least April 28, 2009, any of the emulation products manufactured by Meta outside the United States./8/ At present, the only remaining patent litigation is pending in the Oregon Federal District Court. Quickturn is asserting a patent infringement damage claim that, Quickturn contends, is worth approximately $225 million. Mentor contends that Quickturn's claim is worth only $5.2 million or even less. MENTOR'S INTEREST IN ACQUIRING QUICKTURN Mentor began exploring the possibility of acquiring Quickturn. If Mentor owned Quickturn, it would also own the patents, and would be in a position to "unenforce" them by seeking to vacate Quickturn's injunctive orders against Mentor in the patent litigation. The exploration process began when Mr. Bernd Braune, a Mentor senior executive, retained Arthur - ------------------------- /7/(...continued) Mentor was also sanctioned more than $400,000 in that proceeding for advancing defenses "based on inaccurate and misleading evidence" thereby "needlessly increasing the cost of litigation" as a result of its continuing practice of "bad faith discovery." In the Matter of Certain Hardware Logic Emulation Systems, ALJ Order No. 96, Inv. No. 337-TA-383, 1997 ITC LEXIS 288 at *97 (ITC July 31, 1996). /8/ In the Matter of Certain Hardware Logic Emulation Systems and Components Thereof, Inv. No. 337-TA-383, Notice of Issuance of a Permanent Limited Exclusion Order and a Permanent Cease and Desist Order (ITC Dec. 3, 1997) ("ITC Permanent Orders") 9 Andersen ("Andersen") to advise Mentor how it could successfully compete in the emulation market. The result was a report Andersen issued in October 1997, entitled "PROJECT VELOCITY"/9/ and "Strategic Alternatives Analysis." The Andersen report identified several advantages and benefits Mentor would enjoy if it acquired Quickturn./10/ In December 1997, Mentor retained Salomon Smith Barney ("Salomon") to act as its financial advisor in connection with a possible acquisition of Quickturn. Salomon prepared an extensive study which it reviewed with Mentor's senior executives in early 1998. The Salomon study concluded that although a Quickturn acquisition could provide substantial value for Mentor, Mentor could not afford to acquire Quickturn at the then-prevailing market price levels. Ultimately, Mentor decided not to attempt an acquisition of Quickturn during the first half of 1998. After Quickturn's stock price began to decline in May 1998, however, - -------------------- /9/ Andersen used "Project Velocity" and "Cyclone" as code names for the study and Quickturn, respectively. /10/ These included: (i) eliminating the time and expense associated with litigation; (ii) creating synergy from combining two companies with complementary core competencies; (iii) reducing customer confusion over product availability, which in turn would accelerate sales; and (iv) eliminating the threat of a large competitor moving into the emulation market. Mentor has utilized these reasons in public statements in which it attempted to explain why its bid made sense. 10 Gregory Hinckley, Mentor's Executive Vice President, told Dr. Walden Rhines, Mentor's Chairman, that "the market outlook being very weak due to the Asian crisis made it a good opportunity" to try acquiring Quickturn for a cheap price. Mr. Hinckley then assembled Mentor's financial and legal advisors, proxy solicitors, and others, and began a three month process that culminated in Mentor's August 12, 1998 tender offer. MENTOR TENDER OFFER AND PROXY CONTEST On August 12, 1998, Mentor announced an unsolicited cash tender offer for all outstanding common shares of Quickturn at $12.125 per share, a price representing an approximate 50% premium over Quickturn's immediate pre-offer price, and a 20% discount from Quickturn's February 1998 stock price levels. Mentor's tender offer, once consummated, would be followed by a second step merger in which Quickturn's nontendering stockholders would receive, in cash, the same $12.125 per share tender offer price. Mentor also announced its intent to solicit proxies to replace the board at a special meeting. Relying upon Quickturn's then-applicable by-law provision governing the call of special stockholders meetings, Mentor began soliciting agent designations from Quickturn stockholders to satisfy the by- 11 law's stock ownership requirements to call such a meeting./11/ QUICKTURN BOARD MEETINGS Under the Williams Act, Quickturn was required to inform its shareholders of its response to Mentor's offer no later than ten business days after the offer was commenced. During that ten day period, the Quickturn board met three times, on August 13, 17, and 21, 1998. During each of those meetings, it considered Mentor's offer and ultimately decided how to respond. The Quickturn board first met on August 13, 1998, the day after Mentor publicly announced its bid. All board members attended the meeting, for the purpose of evaluating Mentor's tender offer. The meeting lasted for several hours. Before or during the meeting, each board member received a package that included (i) Mentor's press release announcing the unsolicited offer; (ii) Quickturn's press release announcing its board's review of Mentor's offer; (iii) Dr. Rhines's August 11 letter to Mr. Antle; (iv) the complaints filed by Mentor against Quickturn and its directors; and (v) copies of - --------------------- /11/ The applicable by-law (Article II, Section 2.3) authorized a call of a special stockholders meeting by shareholders holding at least 10% of Quickturn's shares. In their agent solicitation, Mentor informed Quickturn stockholders that Mentor intended to call a special meeting approximately 45 days after it received sufficient agent designations to satisfy the 10% requirement under the original by-law. The solicitation also disclosed Mentor's intent to set the date for the special meeting, and to set the record date and give formal notice of that meeting. 12 Quickturn's then-current Rights Plan and by-laws. The Quickturn board first discussed retaining a team of financial advisors to assist it in evaluating Mentor's offer and the company's strategic alternatives. The board discussed the importance of selecting a qualified investment bank, and considered several investment banking firms. Aside from Hambrecht & Quist ("H&Q"), Quickturn's long-time investment banker, other firms that the board considered included Goldman Sachs & Co. and Morgan Stanley Dean Witter. Ultimately, the board selected H&Q, because the board believed that H&Q had the most experience with the EDA industry in general and with Quickturn in particular./12/ During the balance of the meeting, the board discussed for approximately one or two hours (a) the status, terms, and conditions of Mentor's offer; (b) the status of Quickturn's patent litigation with Mentor; (c) the applicable rules and regulations that would govern the board's response to the offer required by the Securities Exchange Act of 1934 (the "34 Act"); (d) the board's fiduciary duties to Quickturn and its shareholders in a tender - -------------------- /12/ Apparently, the board had already decided to retain Quickturn's outside counsel, Wilson, Sonsini, Goodrich & Rosati, as its legal advisors. Larry Sonsini, Esquire, a senior partner of that firm, is shown on the minutes of all three board meetings as "Secretary of the Meeting," and appears to have authored those minutes in that capacity. 13 offer context; (e) the scope of defensive measures available to the corporation if the board decided that the offer was not in the best interests of the company or its stockholders; (f) Quickturn's then-current Rights Plan and special stockholders meeting by-law provisions; (g) the need for a federal antitrust filing; and (h) the potential effect of Mentor's offer on Quickturn's employees. The board also instructed management and H&Q to prepare analyses to assist the directors in evaluating Mentor's offer, and scheduled two board meetings, August 17, and August 21, 1998. The Quickturn board next met on August 17, 1998. That meeting centered around financial presentations by management and by H&Q. Mr. Keith Lobo, Quickturn's President and CEO, presented a Medium Term Strategic Plan, which was a "top down" estimate detailing the economic outlook and the company's future sales, income prospects and future plans (the "Medium Term Plan"). The Medium Term Plan contained an optimistic (30%) revenue growth projection for the period 1998-2000./13/ After management made its presentation, H&Q supplied its valuation of Quickturn, which relied upon a "base case" that assumed management's 30% revenue - ------------------------- /13/ The Court of Chancery concluded that the Quickturn board had grounds to anticipate that the company could "turn around" in a year and perform at the projected revenue levels. 14 growth projection. On that basis, H&Q presented various "standalone" valuations based on various techniques, including a discounted cash flow ("DCF") analysis. Finally, the directors discussed possible defensive measure but took no action at that time. The Quickturn board held its third and final meeting in response to Mentor's offer on August 21, 1998. Again, the directors received extensive materials and a further detailed analysis performed by H&Q. The focal point of that analysis was a chart entitled "Summary of Implied Valuation." That chart compared Mentor's tender offer price to the Quickturn valuation ranges generated by H&Q's application of five different methodologies./14/ The chart showed that Quickturn's value under all but one of those methodologies was higher than Mentor's $12.125 tender offer price. QUICKTURN'S BOARD REJECTS MENTOR'S OFFER AS INADEQUATE After hearing the presentations, the Quickturn board concluded that Mentor's offer was inadequate, and decided to recommend that Quickturn shareholders reject Mentor's offer. The directors based their decision upon: - ----------------------- /14/ The five methodologies and the respective price ranges were: Historical Trading Range ($6.13- $21.63); Comparable Public Companies ($2.55-$15.61); Comparable M&A Transactions ($6.00- $31.36); Comparable Premiums Paid ($9.54-$10.72); and Discounted Cash Flow Analysis ($11.88- $57.87). 15 (a) H&Q's report; (b) the fact that Quickturn was experiencing a temporary trough in its business, which was reflected in its stock price; (c) the company's leadership in technology and patents and resulting market share; (d) the likely growth in Quickturn's markets (most notably, the Asian market) and the strength of Quickturn's new products (specifically, its Mercury product); (e) the potential value of the patent litigation with Mentor; and (f) the problems for Quickturn's customers, employees, and technology if the two companies were combined as the result of a hostile takeover. QUICKTURN'S DEFENSIVE MEASURES At the August 21 board meeting, the Quickturn board adopted two defensive measures in response to Mentor's hostile takeover bid. First, the board amended Article II, Section 2.3 of Quickturn's by-laws, which permitted stockholders holding 10% or more of Quickturn's stock to call a special stockholders meeting. The By-Law Amendment provides that if any such special meeting is requested by shareholders, the corporation (Quickturn) would fix the record date for, and determine the time and place of, that special meeting, which must take place not less than 90 days nor more than 100 days after the receipt and determination of the validity of the shareholders' request. 16 Second, the board amended Quickturn's shareholder Rights Plan by eliminating its "dead hand" feature and replacing it with the Deferred Redemption Provision, under which no newly elected board could redeem the Rights Plan for six months after taking office, if the purpose or effect of the redemption would be to facilitate a transaction with an "Interested Person" (one who proposed, nominated or financially supported the election of the new directors to the board)./15/ Mentor would be an Interested Person. The effect of the By-Law Amendment would be to delay a shareholder called special meeting for at least three months. The effect of the DRP would be to delay the ability of a newly-elected, Mentor-nominated board to redeem the Rights Plan or "poison pill" for six months, in any transaction with an Interested Person. Thus, the combined effect of the two defensive measures - ---------------------- /15/ The amended Rights Plan pertinently provides that: "[I]n the event that a majority of the Board of Directors of the Company is elected by stockholder action at an annual or special meeting of stockholders, then until the 180th day following the effectiveness of such election (including any postponement or adjournment thereof), the Rights shall not be redeemed if such redemption is reasonably likely to have the purpose or effect of facilitating a Transaction with an Interested Person." An "Interested Person" is defined under the amended Rights Plan as "any Person who (i) is or will become an Acquiring Person if such Transaction were to be consummated or an Affiliate or Associate of such a Person, and (ii) is, or directly or indirectly proposed, nominated or financially supported, a director of [Quickturn] in office at the time of consideration of such Transaction who was elected at an annual or special meeting of stockholders." 17 would be to delay any acquisition of Quickturn by Mentor for at least nine months. PROCEDURAL HISTORY Mentor filed this action in the Court of Chancery on August 12, 1998, seeking a declaratory judgment that Quickturn's newly adopted takeover defenses are invalid and an injunction requiring the Quickturn board to dismantle those defenses. After expedited briefing and oral argument, the Court of Chancery denied Quickturn's case dispositive pre-trial motion on October 9, 1998./16/ A trial was held on October 19, 20, 23, 26 and 28, 1998. Thereafter, the parties submitted post-trial briefs on an expedited schedule. During the course of the litigation in the Court of Chancery, the Quickturn board, relying upon the By-Law Amendment, noticed the special meeting requested by Mentor for January 8, 1999 -- 71 days after the October 1, 1998 meeting date originally noticed by Mentor./17/ After the trial, Mentor - ------------------- /16/ Mentor Graphics Corp. v. Quickturn Design Systems, et al., Del. Ch., C.A. No. 16584, Jacobs, V.C. (Oct. 9, 1998). /17/ Mentor later renoticed the special meeting date to November 24, 1998, anticipating that the Court of Chancery would issue its decision before that time. After the Court of Chancery informed the parties that it would be unable to issue a decision by November 24, Mentor agreed that its meeting would be convened and then immediately adjourned to a later date. 18 announced in Amendments to its Schedule 14A-1 that were filed with the Securities and Exchange Commission, that it had received tenders of Quickturn shares which, together with the shares that Mentor already owned, represented over 51% of Quickturn's outstanding stock. QUICKTURN BY-LAW AMENDMENT At the time Mentor commenced its tender offer and proxy contest, Quickturn's by-laws authorized shareholders holding at least 10% of Quickturn's voting stock to call a special meeting of stockholders. The then- applicable by-law, Article II, Section 2.3, read thusly: 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) one or more shareholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting. At the August 21, 1998 board meeting, the Quickturn board amended Section 2.3 in response to the Mentor bid, to read 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 19 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) 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 time and place so determined. The Court of Chancery found that the Quickturn board amended the By-Law because (i) the original Section 2.3 was incomplete: it did not explicitly state who would be responsible for determining the time, place, and record date for the meeting and (ii) the original by-law language arguably would have allowed a hostile bidder holding the requisite percentage of shares to call a special stockholders meeting on minimal notice and stampede the shareholders into making a decision without time to become adequately informed. The Court of Chancery concluded that the By-Law Amendment responded to those concerns by explicitly making the Quickturn board responsible for fixing the time, place, record date and notice of the special meeting and by mandating a 90 to 100 day period of delay for holding the meeting after the validity of the shareholder's meeting request is determined. 20 That specific delay period was chosen to make Section 2.3 parallel to, and congruent with, Quickturn's "advance notice" by-law, which contained a similar 90 to 100 day minimum advance notice period. The only By-Law Amendment-related issue that the Court of Chancery decided was whether the Amendment, standing alone, fell outside any range of potentially reasonable responses and, therefore, constituted a disproportionate response to the threat posed by the Mentor tender offer and proxy contest. Among the factors the Court of Chancery considered were whether the challenged defensive response "is a statutorily authorized form of business decision that a board of directors may routinely make in a non- takeover context,"/18/ and whether the response "was limited and corresponded in degree or magnitude to the degree or magnitude of the threat."/19/ The Court of Chancery concluded that the Quickturn board's adoption of the By-Law Amendment did not violate the fiduciary principles embodied - -------------------------- /18/ Unitrin, Inc. v. American General Corp., Del. Supr., 651 A.2d 1361, 1389 (1995); Unocal Corp. v. Mesa Petroleum Co., Del. Supr., 493 A.2d 946, 958 (1985); Cheff v. Mathes, Del. Supr., 199 A.2d 548, 554 (1964). /19/ Unitrin, Inc. V. American General Corp., 651 A.2d at 1389. 21 in UNOCAL and its progeny./20/ Although the Delayed Redemption Provision and the By-Law Amendment were enacted as a concerted defensive response to Mentor's hostile takeover efforts, Mentor did not file a cross-appeal challenging the Court of Chancery's decision upholding the validity of Quickturn's amendment to its by-laws. Consequently, the Court of Chancery's ruling on the By-Law Amendment is not at issue in this appeal and has become final. QUICKTURN'S DELAYED REDEMPTION PROVISION At the time Mentor commenced its bid, Quickturn had in place a Rights Plan that contained a so-called "dead hand" provision. That provision had a limited "continuing director" feature that became operative only if an insurgent that owned more than 15% of Quickturn's common stock successfully waged a proxy contest to replace a majority of the board. In that event, only the "continuing directors" (those directors in office at the time the poison pill was adopted) could redeem the rights. During the same August 21, 1998 meeting at which it amended the - -------------------------- /20/ The Court of Chancery noted, however, that its "conclusion should not be regarded as a pronouncement that a by-law mandated 90 to 100 delay interval between the request for and the holding of a shareholder-initiated special meeting is invariably reasonable as a matter of law." Mentor Graphics Corp. v. Quickturn Design Systems, et al., Del. Ch., C.A. No. 16584, Jacobs, V.C., slip op. at 43 (Dec. 7, 1998). 22 special meeting by-law, the Quickturn board also amended the Rights Plan to eliminate its "continuing director" feature, and to substitute a "no hand" or "delayed redemption provision" into its Rights Plan. The Delayed Redemption Provision provides that, if a majority of the directors are replaced by stockholder action, the newly elected board cannot redeem the rights for six months if the purpose or effect of the redemption would be to facilitate a transaction with an "Interested Person."/21/ It is undisputed that the DRP would prevent Mentor's slate, if elected as the new board majority, from redeeming the Rights Plan for six months following their election, because a redemption would be "reasonably likely to have the purpose or effect of facilitating a Transaction" with Mentor, a party that "directly or indirectly proposed, nominated or financially supported" the - ------------------------ /21/ The "no hand" or Delayed Redemption Provision is found in a new Section 23(b) of the Rights Plan, which states: (b) Notwithstanding the provisions of Section 23(a), in the event that a majority of the Board of Directors of the Company is elected by stockholder action at an annual or special meeting of stockholders, then until the 180th day following the effectiveness of such election (including any postponement or adjournment thereof), the Rights shall not be redeemed if such redemption is reasonably likely to have the purpose or effect of facilitating a Transaction with an Interested Person. Substantially similar provisions were added to Sections 24 ("Exchange") and 27 ("Supplements and Amendments") of the Rights Plan. 23 election of the new board. Consequently, by adopting the DRP, the Quickturn board built into the process a six month delay period in addition to the 90 to 100 day delay mandated by the By-Law Amendment. COURT OF CHANCERY INVALIDATES DELAYED REDEMPTION PROVISION When the board of a Delaware corporation takes action to resist a hostile bid for control, the board of directors' defensive actions are subjected to "enhanced" judicial scrutiny./22/ For a target board's actions to be entitled to business judgment rule protection, the target board must first establish that it had reasonable grounds to believe that the hostile bid constituted a threat to corporate policy and effectiveness; and second, that the defensive measures adopted were "proportionate," that is, reasonable in relation to the threat that the board reasonably perceived./23/ The Delayed Redemption Provision was reviewed by the Court of Chancery pursuant to that standard. The Court of Chancery found: "the evidence, viewed as a whole, shows that the perceived threat that led the Quickturn board to adopt the DRP, - -------------------- /22/ Unocal Corp. v. Mesa Petroleum Co., Del. Supr., 493 A.2d 946, 955 (1985). /23/ Id.; See also Unitrin, Inc. v. American General Corp., Del. Supr., 651 A.2d 1361, 1372 (1995); Paramount Communications, Inc. v. Time, Inc., Del. Supr., 571 A.2d 1140, 1152 (1990). 24 was the concern that Quickturn shareholders might mistakenly, in ignorance of Quickturn's true value, accept Mentor's inadequate offer, and elect a new board that would prematurely sell the company before the new board could adequately inform itself of Quickturn's fair value and before the shareholders could consider other options."/24/ The Court of Chancery concluded that Mentor's combined tender offer and proxy contest amounted to substantive coercion./25/ Having concluded that the Quickturn board reasonably perceived a cognizable threat, the Court of Chancery then examined whether the board's response -- the Delayed Redemption Provision -- was proportionate in relation to that threat. In assessing a challenge to defensive measures taken by a target board in response to an attempted hostile takeover, enhanced judicial scrutiny requires an evaluation of the board's justification for each contested defensive measure and its concomitant results./26/ The Court of Chancery found that the Quickturn board's "justification or rationale for adopting the Delayed - ------------------ /24/ Mentor Graphics Corp. v. Quickturn Design Systems, et al., Del. Ch., C.A. No. 16584, Jacobs, V.C., slip op. at 50 (Dec. 7, 1998). /25/ Unitrin, Inc. v. American General Corp., 651 A.2d at 1387. /26/ Id. 25 Redemption Provision was to force ANY newly elected board to take sufficient time to become familiar with Quickturn and its value, and to provide shareholders the opportunity to consider alternatives, before selling Quickturn to ANY acquiror."/27/ The Court of Chancery concluded that the Delayed Redemption Provision could not pass the proportionality test. Therefore, the Court of Chancery held that "the DRP cannot survive scrutiny under Unocal and must be declared invalid."/28/ DELAYED REDEMPTION PROVISION VIOLATES FUNDAMENTAL DELAWARE LAW In this appeal, Mentor argues that the judgment of the Court of Chancery, should be affirmed because the Delayed Redemption Provision is invalid as a matter of Delaware law. According to Mentor, the Delayed Redemption Provision, like the "dead hand" feature in the Rights Plan that was held to be invalid in Toll Brothers,/29/ will impermissibly deprive any newly elected board - ------------------ /27/ Mentor Graphics Corp. v. Quickturn Design Systems, et al., del. Ch., C.A. No. 16584, Jacobs, V.C., slip op. at 64 (Dec. 7, 1998). /28/ Id. /29/ Carmody v. Toll Brothers, Inc., Del. Ch., C.A. No. 15983, Jacobs, V.C. (July 24, 1998) ("Toll Brothers"). See Bank of New York Co., Inc. v. Irving Bank Corp., N.Y. Sup. Ct., 528 N.Y.S.2d 482 (1988). See Also Shawn C. Lese, Note: Preventing Control From the Grave: A Proposal for Judicial Treatment of Dead Hand Provisions in Poison Pills, 96 Colum. L. Rev. 2175 (1996); Jeffrey N. Gordon, "Just Say Never?" (continued...) 26 of both its statutory authority to manage the corporation under 8 DEL. C. Section 141(a) and its concomitant fiduciary duty pursuant to that statutory mandate. We agree. Our analysis of the Delayed Redemption Provision in the Quickturn Rights Plan is guided by the prior precedents of this Court with regard to a board of directors authority to adopt a Rights Plan or "poison pill." In Moran, this Court held that the "inherent powers of the Board conferred by 8 Del. C. Section 141(a) concerning the management of the corporation's 'business and affairs' provides the Board additional authority upon which to enact the Rights Plan."/30/ Consequently, this Court upheld the adoption of the Rights Plan in Moran as a legitimate exercise of business judgment by the board of directors./31/ In doing so, however, this Court also held "the rights plan is not - -------------------- /29/(...continued) Poison Pills, Dead Hand Pills, and Shareholder Adopted By-Laws: An Essay for Warren Buffett, 19 Cardozo L. Rev. 511 (1997). Cf. Invacare Corp. v. Healthdyne Technologies, Inc., N.D. Ga., 968 F. Supp. 1578 (1997) (applying Georgia law). /30/ Moran v. Household International. Inc., Del. Supr., 500 A.2d 1346, 1353 (1985), citing Unocal Corp. v. Mesa Petroleum Co., Del. Supr., 493 A.2d 946, 953 (1985). /31/ Id. 27 absolute":/32/ When the Household Board of Directors is faced with a tender offer and a request to redeem the Rights [Plan], they will not be able to arbitrarily reject the offer. They will be held to the same fiduciary standards any other board of directors would be held to in deciding to adopt a defensive mechanism, the same standards as they were held to in originally approving the Rights Plan./33/ In Moran, this Court held that the "ultimate response to an actual takeover bid must be judged by the Directors' actions at the time and nothing we say relieves them of their fundamental duties to the corporation and its shareholders."/34/ Consequently, we concluded that the use of the Rights Plan would be evaluated when and if the issue arises./35/ One of the most basic tenets of Delaware corporate law is that the board of directors has the ultimate responsibility for managing the business and affairs of a corporation./36/ Section 141(a) requires that any limitation on the - -------------------- /32/ Id. at 1354 /33/ Id.; See also Unocal Corp. v. Mesa Petroleum Co., 493 A.2d at 954-55, 958. /34/ Moran v. Household International, Inc., 490 A.2d at 1357. /35/ Id. /36/ 8 Del. C. Section 141(a). See Mills Acquisition Co. v. MacMillan, Inc., Del. Supr., 559 A.2d 1261, 1280 (1989). 28 board's authority be set out in the certificate of incorporation./37/ The Quickturn certificate of incorporation contains no provision purporting, to limit the authority of the board in any way. The Delayed Redemption Provision, however, would prevent a newly elected board of directors from completely discharging its fundamental management duties to the corporation and its stockholders for six months. While the Delayed Redemption Provision limits the board of directors' authority in only one respect, the suspension of the Rights Plan, it nonetheless restricts the board's power in an area of fundamental importance to the shareholders -- negotiating a possible sale of the corporation. Therefore, we hold that the Delayed Redemption Provision is invalid under Section 141(a), which confers upon any newly elected board of directors full power to manage and direct the business and affairs of a Delaware corporation./38/ In discharging the statutory mandate of Section 141(a), the directors - --------------------- /37/ 8 Del. C. Section 141(a) states: "The business and affairs of every corporation organized under this chapter shall be managed by or under the direction of a board of directors, except as may be otherwise provided in this chapter or in its certificate of incorporation. If any such provision is made in the certificate of incorporation, the powers and duties conferred or imposed upon the board of directors by this chapter shall be exercised or performed to such extent and by such Person or persons as shall be provided in the certificate of incorporation." /38/ 8 Del. C. Section 141(a). See, e.g., Paramount Communications, Inc. v. QVC Network, Inc., Del. Supr., 637 A.2d 34, 41-42 (1994). 29 have a fiduciary duty to the corporation and its shareholders./39/ This unremitting obligation extends equally to board conduct in a contest for corporate control./40/ The Delayed Redemption Provision prevents a newly elected board of directors from completely discharging its fiduciary duties to protect fully the interests of Quickturn and its stockholders./41/ This Court has recently observed that "although the fiduciary duty of a Delaware director is unremitting, the exact course of conduct that must be charted to properly discharge that responsibility will change in the specific context of the action the director is taking with regard to either the corporation or its shareholders."/42/ This Court has held "[t]o the extent that a contract, or a provision thereof, purports to require a board to act or not act in such a fashion as to limit the exercise of fiduciary duties, it is invalid and - ------------------------- /39/ Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., Del. Supr., 506 A.2d 173, 179 (1986); Aronson v. Lewis, Del. Supr., 473 A.2d 805, 811 (1984); Guth v. Loft, Inc., Del. Supr., 23 Del. Ch. 2, 5 A.2d 503, 510 (1939). /40/ Mills Acquisition Co. v. MacMillan, Inc., Del. Supr., 559 A.2d 1261, 1280 (1989); Smith v. Van Gorkom, Del. Supr., 488 A.2d 858, 872-73 (1985). /41/ See Moran v. Household International, Inc., 500 A.2d at 1354. /42/ Malone v. Brincat, Del. Supr., ______ A.2d ______ (1998). 30 unenforceable."/43/ The Delayed Redemption Provision "tends to limit in a substantial way the freedom of [newly elected] directors' decisions on matters of management policy."/44/ Therefore, "it violates the duty of each [newly elected]director to exercise his own best judgment on matters coming before the board."/45/ In this case, the Quickturn board was confronted by a determined bidder that sought to acquire the company at a price the Quickturn board concluded was inadequate. Such situations are common in corporate takeover efforts./46/ In Revlon, this Court held that no defensive measure can be sustained when it represents a breach of the directors' fiduciary duty. A fortiori, no defensive measure can be sustained which would require a new board of directors to breach its fiduciary duty. In that regard, we note Mentor - ----------------------- /43/ See Paramount Communications, Inc. v. QVC Network, Inc., 637 A.2d at 51 (emphasis added). See, e.g., Mills Acquisition Co. v. MacMillan, Inc., 559 A.2d at 1281 (holding that a "board of directors . . . may not avoid its active and direct duty of oversight in a matter as significant as the sale of corporate control"); Grimes v. Donald, Del. Ch., C.A. No. 13358, slip op. at 17, Allen, C. (Jan. 11, 1995, revised Jan. 19, 1995), aff'd, Del. Supr., 673 A.2d 1207 (1996) ("[t]he board may not either formally or effectively abdicate its statutory power and its fiduciary duty to manage or direct the management of the business and affairs of this corporation"). /44/ Abercrombie v. Davies, Del. Ch., 123 A.2d 893, 899 (1956), rev'd on other grounds, Del. Supr., 130 A.2d 338 (1957). /45/ Id. /46/ Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d at 185. 31 has properly acknowledged that in the event its slate of directors are elected, those newly elected directors will be required to discharge their unremitting fiduciary duty to manage the corporation for the benefit of Quickturn and its stockholders./47/ CONCLUSION The Delayed Redemption Provision would prevent a new Quickturn board of directors from managing the corporation by redeeming the Rights Plan to facilitate a transaction that would serve the stockholders' best interests, even under circumstances where the board would be required to do so because of its fiduciary duty to the Quickturn stockholders. Because the Delayed Redemption Provision impermissibly circumscribes the board's statutory power under Section 141(a) and the directors' ability to fulfill their concomitant fiduciary duties, we hold that the Delayed Redemption Provision is invalid. On that alternative basis, the judgment of the Court of Chancery is AFFIRMED. - --------------------- /47/ Malone v. Brincat, Del. Supr., _____ A.2d _____ (1998). 32 EX-99.71 6 SECOND ADDENDUM TO PROXY STATEMENT DATED 1/5/99 EXHIBIT 71 QUICKTURN DESIGN SYSTEMS, INC. 55 WEST TRIMBLE ROAD SAN JOSE, CALIFORNIA 95131 ---------------- SPECIAL MEETING OF STOCKHOLDERS ---------------- SECOND ADDENDUM TO PROXY STATEMENT BY THE BOARD OF DIRECTORS OF QUICKTURN DESIGN SYSTEMS, INC. SOLICITING PROXIES IN OPPOSITION TO THE SOLICITATION OF PROXIES BY MENTOR GRAPHICS CORPORATION AND MGZ CORP. ---------------- This Second Addendum to Proxy Statement is furnished by the Board of Directors of Quickturn Design Systems, Inc., a Delaware corporation (the "Company"), to the holders of outstanding shares of the Company's Common Stock, $0.001 par value, in connection with the Board's solicitation of proxies in opposition to the solicitation (the "Mentor solicitation") by Mentor Graphics Corporation, an Oregon corporation ("Mentor"), and MGZ Corp., a Delaware corporation and a wholly owned subsidiary of Mentor ("MGZ"), pursuant to a Proxy Statement of Mentor and MGZ dated September 11, 1998, to the extent valid, or any subsequent proxy statement of Mentor and/or MGZ (in either case, the "Mentor Proxy Statement"), of proxies to be used at a special meeting of stockholders of the Company called by Mentor and any adjournments and postponements thereof (the "Special Meeting"). The Special Meeting will be held at 8:00 a.m., PST, on January 8, 1999 at the offices of Wilson Sonsini Goodrich & Rosati at 650 Page Mill Road, Palo Alto, California. The phone number at that location is (650) 493-9300. The record date for the Special Meeting is November 10, 1998 (the "Record Date"). This Second Addendum is first being sent or given on January 5, 1999 to all stockholders of record of the Company as of the Record Date. Capitalized terms not otherwise defined herein have the meanings ascribed to them in the Proxy Statement of the Board of Directors of Quickturn dated September 21, 1998 (the "September Proxy Statement"). On January 4, 1999, the Company and Cadence Design Systems, Inc., a Delaware corporation ("Cadence") entered into an amendment to the Agreement and Plan of Merger dated as of December 8, 1998 between the Company, Cadence, and a wholly owned subsidiary of Cadence. Pursuant to such agreement, as amended, it is proposed that the Company will merge with a wholly-owned subsidiary of Cadence in a tax-free stock-for-stock transaction, and the stockholders of the Company will receive Cadence common stock with a value of $15.00 per share at the time of closing. All other terms of the agreement remain in full force and effect. For a further discussion of the proposed transaction between the Company and Cadence Design Systems, Inc., see the Company's various filings with the Securities and Exchange Commission, including Schedules 14D-9 and 14A. AS FURTHER DESCRIBED IN THE SEPTEMBER PROXY STATEMENT, THE QUICKTURN BOARD OF DIRECTORS HAS DETERMINED THAT THE MENTOR OFFER IS INADEQUATE AND NOT IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS. THE BOARD OF DIRECTORS OPPOSES THE MENTOR PROPOSALS AND URGES YOU TO (A) SIGN, DATE AND RETURN THE ENCLOSED BLUE PROXY CARD TO VOTE AGAINST THE MENTOR PROPOSALS AND (B) DISCARD ANY GOLD STRIPED PROXY CARD SENT TO YOU BY MENTOR AND MGZ. WHETHER OR NOT YOU HAVE PREVIOUSLY EXECUTED A GOLD STRIPED PROXY CARD, THE BOARD OF DIRECTORS URGES YOU TO SIGN, DATE, AND DELIVER THE ENCLOSED BLUE PROXY CARD AS PROMPTLY AS POSSIBLE, BY FAX OR BY MAIL (USING THE ENCLOSED ENVELOPE), TO MORROW & CO., INC., 445 PARK AVENUE, NEW YORK, NEW YORK, 10022, FAX: (212) 754-8300. IF YOU HAVE PREVIOUSLY SIGNED AND RETURNED A GOLD STRIPED PROXY CARD TO MENTOR AND MGZ, YOU HAVE EVERY RIGHT TO CHANGE YOUR MIND. WHETHER OR NOT YOU SIGNED THE GOLD STRIPED PROXY CARD SENT TO YOU BY MENTOR AND MGZ, THIS BOARD OF DIRECTORS URGES YOU TO REJECT THE MENTOR PROPOSALS BY SIGNING, DATING AND RETURNING THE ENCLOSED BLUE PROXY CARD BY FAX OR IN THE POSTAGE-PAID ENVELOPE PROVIDED. REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR PROXY IS IMPORTANT. PLEASE ACT TODAY. IF YOUR SHARES ARE HELD IN THE NAME OF A BANK, BROKER OR OTHER NOMINEE, WE URGE YOU TO CONTACT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND DIRECT HIM OR HER TO REVOKE ANY GOLD STRIPED PROXY CARDS THAT MAY HAVE BEEN CAST AND TO EXECUTE AND RETURN A BLUE PROXY CARD ON YOUR BEHALF. If you have any questions concerning the Company's solicitation of BLUE Proxy Cards, or Mentor and MGZ's solicitation of gold striped proxy cards, please contact our information agent: MORROW & CO., INC. 445 PARK AVENUE NEW YORK, NEW YORK 10022 OR CALL TOLL-FREE: (800) 662-5200 FAX: (212) 754-8300 By Order of the Board of Directors By: /s/ Keith R. Lobo __________________________________ Keith R. Lobo President and Chief Executive Officer San Jose, California January 5, 1999 -----END PRIVACY-ENHANCED MESSAGE-----