-----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, GYdFNvg/IZ0PSx6vDAOQRipsbpsqbT9bPZvfHwYELMsT1zlxQ8rIg8HnoStejKml +Ac7bAxwBdU76W9HuonIxA== 0001012870-98-002282.txt : 19980831 0001012870-98-002282.hdr.sgml : 19980831 ACCESSION NUMBER: 0001012870-98-002282 CONFORMED SUBMISSION TYPE: SC 14D9/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19980828 SROS: NASD 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: 98700555 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 #2 TO SCHEDULE 14D-9 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14D-9 (AMENDMENT NO. 2) Solicitation/Recommendation Statement Pursuant to Section 14(d)(4) of the Securities Exchange Act of 1934 QUICKTURN DESIGN SYSTEMS, INC. (Name of Subject Company) QUICKTURN DESIGN SYSTEMS, INC. (Name of Person(s) Filing Statement) COMMON STOCK, PAR VALUE $.001 PER SHARE (including the associated preferred stock purchase rights) (Title of Class of Securities) 74838E102 (CUSIP Number of Class of Securities) KEITH R. LOBO PRESIDENT AND CHIEF EXECUTIVE OFFICER QUICKTURN DESIGN SYSTEMS, INC. 55 W. TRIMBLE ROAD SAN JOSE, CALIFORNIA 95131 (408) 914-6000 (Name, address and telephone number of person authorized to receive notice and communications on behalf of person(s) filing statement) COPY TO: LARRY W. SONSINI, ESQ. WILSON SONSINI GOODRICH & ROSATI 650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94304-1050 (650) 493-9300 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INTRODUCTION The Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") originally filed on August 24, 1998, by Quickturn Design Systems, Inc., a Delaware corporation (the "Company" or "Quickturn"), relates to an offer by MGZ Corp., a Delaware corporation ("MGZ") and a wholly owned subsidiary of Mentor Graphics Corporation, an Oregon corporation ("Mentor"), to purchase all of the outstanding shares of the common stock, par value $.001 per share (including the associated preferred stock purchase rights), of the Company. All capitalized terms used herein without definition have the respective meanings set forth in the Schedule 14D-9. ITEM 3. IDENTITY AND BACKGROUND The response to Item 3 is hereby amended by deleting the last sentence of the second paragraph of section (b) of Item 3 and replacing it with the following: Also, upon Mr. Lobo's involuntary termination, except for certain causes, or, upon his constructive termination (defined as a material decrease in responsibility or authority), within 12 months after a change of control of the Company, Mr. Lobo's options will be accelerated with respect to that number of shares which would have vested after 24 months of additional employment. ITEM 4. THE SOLICITATION OR RECOMMENDATION The response to Item 4 is hereby amended by deleting the first sentence of paragraph (b) of Item 4 and replacing it with the following: In reaching the conclusions referred to in Item 4(a), the Board took into account the following factors: The response to Item 4 is hereby amended further by deleting section (b)(iv) in its entirety and replacing it with the following: (iv) The written opinion, dated August 21, 1998, of H&Q that, as of such date, the Offer was inadequate, from a financial point of view, to the holders of Shares. In rendering such opinion, H&Q reviewed and performed various analyses including those set forth in (iii) above. The full text of such opinion of H&Q, setting forth the assumptions made, matters considered and limitations on the reviews undertaken, is included as Exhibit 13 hereto and is incorporated herein by reference. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY The response to Item 7 is hereby amended by adding the following after the final paragraph of section (b)(i) of Item 7: In accordance with the Board's fiduciary duties to its stockholders, the Rights Agreement was amended to reflect the Board's view that, subject to certain procedures, future boards of directors should have the ability to take certain actions regarding the operation of the Rights Agreement. The response to Item 7 is hereby amended further by adding the following after the final paragraph of section (b)(ii) of Item 7: In accordance with the Board's fiduciary duties to its stockholders, the Company's Bylaws were amended to add appropriate procedures and notice provisions to ensure that the Company and its stockholders would have adequate time to consider any proposals which may be brought before a special meeting. 2 ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED The response to Item 8 is hereby amended by adding the following after the final paragraph of Item 8: Additional Litigation Concerning the Offer. On August 25, 1998, MGZ and Mentor filed an Amended Verified Complaint in the Court of Chancery of the State of Delaware in and for New Castle County, a copy of which is attached hereto as Exhibit 14 and is incorporated herein by reference. On August 26, 1998, MGZ and Mentor filed a First Amended Complaint in the U.S. District Court for the District of Delaware, a copy of which is attached hereto as Exhibit 15 and is incorporated herein by reference. On August 25, 1998, Andrea Brown and Mohamed Yassin each filed a purported class action suit on behalf of individual plaintiffs against the Company and the Board in the Court of Chancery in the State of Delaware. The complaints allege, among other things, that the defendants have breached their fiduciary duties to the Company's stockholders by failing to maximize stockholder value. The complaints seek, among other things, to compel the defendants to carry out their fiduciary duties and to cooperate with any person or entity having a bona fide interest in proposing any transaction which would maximize stockholder value. Copies of the complaints are filed as Exhibit 16 and Exhibit 17 to this statement and are incorporated herein by reference. Additional Antitrust Matters. On August 28, 1998, the Company filed its premerger notification form with the FTC. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS The response to Item 9 is hereby amended by the addition of the following new exhibits: Exhibit 13 Opinion of Hambrecht & Quist LLC. Exhibit 14 Amended Verified Complaint, filed by Mentor in the Court of Chancery of the State of Delaware in and for New Castle County on August 25, 1998. Exhibit 15 First Amended Complaint, filed by Mentor in the U.S. District Court for the District of Delaware on August 26, 1998. Exhibit 16 Complaint in Andrea Brown V. Quickturn Design Systems, Inc., et al., filed in the Court of Chancery of the State of Delaware on August 25, 1998. Exhibit 17 Complaint in Mohamed Yassin V. Quickturn Design Systems, Inc., et al., filed in the Court of Chancery of the State of Delaware on August 25, 1998. 3 SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: August 28, 1998 QUICKTURN DESIGN SYSTEMS, INC. By: /s/ Keith R. Lobo ----------------------------------- Keith R. Lobo President and Chief Executive Officer 4 EX-13 2 OPINION OF HAMBRECHT & QUIST LLC EXHIBIT 13 August 21, 1998 Confidential - ------------ The Board of Directors Quickturn Design Systems, Inc. 55 West Trimble Road San Jose, CA 95131 Gentlemen: You have requested our opinion as to the adequacy, from a financial point of view, to the holders of the outstanding shares of common stock, par value $0.001 per share (the "Common Stock") of Quickturn Design Systems, Inc. ("Quickturn" or the "Company"), other than Mentor Graphics Corporation ("Mentor"), of the terms of the Offer to Purchase (as hereinafter defined). For purposes of this opinion, the "Offer to Purchase" means the offer described below pursuant to that certain Offer to Purchase included in the Schedule 14D-1 filed with the Securities and Exchange Commission on August 12, 1998 by MGZ Corp, (the "Bidder"), a wholly-owned subsidiary of Mentor. As more specifically set forth in the Schedule 14D-1, the Bidder has offered, subject to certain conditions set forth in the Offer to Purchase, to purchase all the outstanding shares of Common Stock of the Company, and the associated preferred stock purchase rights issued pursuant to the Rights Agreement between the Company and the First National Bank of Boston, dated January 10, 1996, as Rights Agent (the "Rights Agreement"), at a purchase price of $12.125 per share (and associated right) net to seller in cash. Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment banking services, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, strategic transactions, corporate restructurings, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. We have acted as a financial advisor to the Board of Directors of Quickturn in connection with the proposed Offer to Purchase, and we will receive a fee for our services. We will also receive a fee upon delivery of this opinion. In the past, we have provided investment banking and other financial advisory services to Quickturn and Mentor and have received fees for rendering these services. Hambrecht & Quist served as co-manager in the Company's December 15, 1993 initial public offering, advised the Company in the January 10, 1996 adoption of its Shareholder Rights Plan, advised the Company in its February 1997 merger with SpeedSim, Inc., and advised the Company in its June 1997 acquisition of the assets of Arkos Design, Inc. Hambrecht & Quist was engaged in March 1998 to pursue the possible sale of a business unit of Mentor unrelated to the electronic design automation business. This engagement, which has been inactive for several months, has now been terminated by Hambrecht & Quist. In the ordinary course of business, Hambrecht & Quist acts as a market maker and broker in the publicly traded securities of Quickturn and Mentor and receives customary compensation in connection therewith, and also provides research coverage for Quickturn and Mentor. In the ordinary course of business, Hambrecht & Quist actively trades in the equity and derivative securities of Quickturn and Mentor for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities. Moreover, Hambrecht & Quist and its affiliates own 40,000 shares of Common Stock of the Company. In connection with our review of the proposed Offer to Purchase, and in arriving at our opinion, we have, among other things: 1. reviewed the publicly available consolidated financial statements of Quickturn for recent years and interim periods to date and certain other relevant financial and operating data of Quickturn (including its capital structure) made available to us from published sources and from the internal records of Quickturn; 2. reviewed the Offer to Purchase, the Schedule 14D-1 and certain related documents; 3. reviewed certain internal financial and operating information, including certain projections, relating to Quickturn prepared by the management of Quickturn; 4. discussed the operations, business strategy, financial condition and prospects of Quickturn with certain of its officers; 5. reviewed the publicly available consolidated financial statements of Mentor for recent years and interim periods to date and certain other relevant financial and operating data of Mentor made available to us from published sources; 6. reviewed the recent reported prices and trading activity for the common stocks of Quickturn and Mentor and compared such information and certain financial information for Quickturn and Mentor with similar information for certain other companies engaged in businesses we deemed comparable; 7. reviewed the financial terms, to the extent publicly available, of certain comparable merger and acquisition transactions; and 8. performed such other analyses and examinations and considered such other information, financial studies, analyses and investigations and financial, economic and market data as we deemed relevant. In rendering our opinion, we have assumed and relied upon the accuracy and completeness of all of the information concerning Quickturn or Mentor considered in connection with our review of the proposed Offer to Purchase, and we have not assumed any responsibility for independent verification of such information. We have not prepared any independent valuation or appraisal of any of the assets or liabilities of Quickturn or Mentor, nor have we conducted a physical inspection of the properties and facilities of either company. With respect to the financial, forecasts and projections made available to us and used in our analysis, we have assumed that they reflect the best currently available estimates and judgments of the expected future financial performance of Quickturn and Mentor. For purposes of this opinion, we have assumed that neither Quickturn nor Mentor is a party to any pending transactions, including external financings, recapitalizations or material merger discussions, other than the proposed Offer to Purchase and those activities undertaken in the ordinary course of conducting their respective businesses. Our opinion is necessarily based upon market, economic, financial and other conditions as they exist and can be evaluated as of the date of this letter and any change in such conditions would require a reevaluation of this opinion. We were not requested to, and did not, solicit indications of interest from any other parties in connection with a possible acquisition of, or business combination with, Quickturn. It is understood that this letter is for the information of the Board of Directors only and may not be used for any other purpose without our prior written consent; provided, however, that this letter may be reproduced in full in the 14D-9. This letter does not constitute a recommendation to any stockholder as to whether to tender shares of Common Stock pursuant to the Offer to Purchase. Based upon and subject to the foregoing and after considering such other matters as we deem relevant, we are of the opinion that as of the date hereof the consideration to be received by the holders of the Common Stock in the proposed Offer to Purchase is inadequate, from a financial point of view, to such holders. Very truly yours, HAMBRECHT & QUIST LLC By /s/ Paul B. Cleveland --------------------- Paul B. Cleveland Managing Director EX-14 3 AMENDED VERIFIED COMPLAINT EXHIBIT 14 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY MENTOR GRAPHICS CORPORATION, ) an Oregon corporation, and MGZ CORP., a ) Delaware corporation, ) ) Plaintiffs, ) ) v. ) Civil Action No. 16584-NC ) QUICKTURN DESIGN SYSTEMS, INC., a ) Delaware corporation, KEITH R. LOBO, ) GLEN M. ANTLE, RICHARD C. ) ALBERDING, MICHAEL R. D'AMOUR, ) YEN-SON (PAUL) HUANG, DR. DAVID K. ) LAM, WILLLAM A. HASLER and ) CHARLES D. KISSNER, ) ) Defendants. ) - -----------------------------------------
VERIFIED AMENDED COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF --------------------------------- Plaintiffs Mentor Graphics Corporation ("Mentor Graphics") and MGZ Corp. ("Purchaser") for their amended complaint/1/ against defendants Quickturn Design System, Inc. ("Quickturn"), Keith R. Lobo, Glen M. Antle, Richard C. Alberding, Michael R. D'Amour, Yen-Son (Paul) Huang, Dr. David K. Lam, William A. Hasler, and Charles D. Kissner ("Director Defendants") allege, upon knowledge as to themselves and their own acts and upon information and belief as to all other matters, as follows: Summary of this Action ---------------------- 1. On August 12, 1999, plaintiff Purchaser commenced a fully-financed, non-coercive, non-discriminatory, all-cash, all-shares tender offer for outstanding shares of Quickturn common stock that are not already owned by Mentor Graphics or Purchaser (the "Tender Offer"). That same day, - -------------------- 1. Pursuant to Chancery Court Rule 15(aa), a black-lined copy of the amended complaint. reflecting changes from the complaint filed on August 12, 1998 is attached hereto as Exhibit A. Mentor Graphics also filed with the Securities and Exchange Commission (the "SEC") preliminary materials to solicit agent designations to call a special meeting of Quickturn's stockholders to replace the current members of Quickturn's Board of Directors. This action seeks declaratory and injunctive relief requiring Quickturn to dismantle its takeover defenses including its "poison pill," declaring ineffective certain amendments to Quickturn's by laws and poison pill adopted in response to the Tender Offer, and enjoining the Quickturn Board from taking any further action to thwart the stockholder franchise or to frustrate the efforts of Quickturn's stockholders to call a special meeting and to replace Quickturn's Board of Directors in order to facilitate the Tender Offer. 2. Quickturn stockholders whose shares are purchased by Purchaser in the Tender Offer will receive $12.125 per share in cash, representing a 51.6% premium above the average closing price of Quickturn's stock on the Nasdaq National Market on August 11, 1998, the last full trading day before the first public announcement of Purchaser's. commencement of the Tender Offer. The Tender Offer is the initial step in a two-step transaction pursuant to which Purchaser proposes to acquire all of the outstanding shares of Quickturn stock. If successful, the Tender Offer will be followed by a merger or similar business combination with Purchaser or another direct or indirect subsidiary of Mentor Graphics (the "Proposed Merger," and together with the Tender Offer, the "Proposed Acquisition"). Pursuant to the Proposed Merger, it is currently anticipated that each then outstanding share of Quickturn (other than shares owned by Mentor Graphics or any of its subsidiaries or shares held in the treasury of Quickturn) would be converted into the right to receive an amount in cash equal to the price paid in the Tender Offer. 3. On August 24, 1998, Quickturn announced its rejection of Mentor's fully-financed all shares premium offer, characterizing the Proposed Acquisition as an "opportunistic and inadequate" offer, made "at a moment of weakness for Quickturn's stock price and a moment of desperation for Mentor's design strategy." 8/24/98 Quickturn Press Release (hereinafter "8/24/98 Press Release") at 1). Later that day, Quickturn filed its Schedule 14D-9 (the "14D- 9") with the SEC, disclosing the Quickturn Board's rejection of the Proposed Acquisition and recommending that the Quickturn stockholders not tender shares in the Tender Offer. 4. In January 1996, the Board of Directors of Quickturn (the "Quickturn Board") adopted a stockholder rights plan (the "Rights Plan"), commonly known as a "poison pill," which is designed to thwart any acquisition of Quickturn that does not have the approval of the Quickturn Board. The Rights Plan provides the Quickturn Board with the power to prevent summarily the consummation of the fully-financed, all-cash, all shares, non-coercive, non-discriminatory Tender Offer. After Mentor Graphics announced the Proposed Acquisition, on August 21, 1998, the Quickturn Board amended the Rights Plan to prohibit further amendment of the Rights Plan or redemption of the Rights for a period of 180 days following any annual or special meeting in which a majority of the Board is elected, if such amendment or redemption is likely to facilitate a change in control transaction. The original Rights Plan and the recent amendment were both adopted without the approval -of Quickturn's stockholders and if the Rights Plan, as amended, remains in effect and applicable to the Tender Offer, it will impede the right of Quickturn's stockholders to decide whether to accept this premium offer for their shares and will impose an insurmountable obstacle to Purchaser's consummation of the Tender Offer long after the stockholders of Quickturn have expressed their support for the Proposed Acquisition by voting to remove the current Quickturn Board and elect Mentor Graphics' nominees to the Quickturn Board. Moreover, the Quickturn Board will be able to prevent Mentor Graphics and Purchaser from consummating the Proposed Merger for a least three years unless the Board exempts the Tender Offer from restrictions imposed by Section 203 of the Delaware General Corporation Law ("Section 203"). 5. The Tender Offer is conditioned upon, among other things, (i) the redemption or inapplicability of the Rights Plan; (ii) the exemption of the Tender Offer from Section 203 and (iii) there being validly tendered and not withdrawn prior to the, expiration of the Tender Offer that number of Quickturn shares which, when combined with the Quickturn shares owned by Mentor Graphics, Purchaser and their affiliates, represent a majority of the outstanding Quickturn shares on a fully diluted basis. By failing to take action to satisfy the conditions to the Tender Offer, the individual members of the Quickturn Board have breached their fiduciary duties to Quickturn's stockholders under Delaware law. Quickturn's stockholders, including Mentor Graphics and Purchaser, will be irreparably harmed absent relief from this Court. The Parties ----------- 6. Plaintiff Mentor Graphics is a Oregon corporation with its principal executive offices in Wilsonville, Oregon. Mentor Graphics manufactures, markets and supports software and hardware Electronic Design Automation ("EDA") products and provides related services which enable engineers to design, analyze, stimulate, model, implement and verify the components of electronic systems. Mentor Graphics is the beneficial owner of approximately three percent of the outstanding shares of Quickturn common stock. 7. Plaintiff Purchaser is a newly incorporated Delaware corporation and a wholly-owned subsidiary of Mentor Graphics with its principal executive offices in Wilsonville, Oregon. Purchaser is the record owner of 100 shares of Quickturn common stock. 8. Defendant Quickturn is a Delaware corporation with its principal executive offices in San Jose, California. According to its most recent Form 10-K, Quickturn "designs, manufactures, sells and supports products that verify the design of integrated circuits ('ICs') and electronic systems. 9. Defendant Keith R. Lobo has been President, Chief Executive Officer and a director of Quickturn since November 1992. 10. Defendants Glen M. Antle, Richard C. Alberding, Michael R. D'Amour, Yen-Son (Paul) Huang, Dr. David K. Lam, William A. Hasler and Charles D. Kissner are directors of Quickturn. The Director Defendants, as directors of Quickturn, owe fiduciary duties of loyalty and care of Quickturn's stockholders. FACTUAL BACKGROUND ------------------ A. The Quickturn Rights Plan ------------------------- 11. On or about January 10, 1996, the Quickturn Board approved the adoption of the Rights Plan and declared a dividend of one Preferred Share purchase right (a "Right") for each common share of Quickturn stock outstanding as of the close of business on January 22, 1996. The Rights are distributed and become exercisable for one one-thousandth share of Quickturn's Series A Participating Preferred Stock (the "Series A Preferred") at a price of $50 on the close of business tens days after the earlier of (i) the first date of public announcement that any person (other than Quickturn, any subsidiary of Quickturn or any employee benefit plan of Quickturn or any subsidiary of Quickturn) has acquired or obtained the right to acquire beneficial ownership of 15% or more of Quickturn's common stock (an "Acquiring Person"), or (ii) the publication pursuant to Rule 14d promulgated under the Securities Exchange Act of 1934 (the "Exchange Act") of a tender or exchange offer which, if successful, would result in the beneficial acquisition by any person of 15% or more of Quickturn's common stock (the earlier of (i) and (ii) being referred to as the "Distribution Date). The Rights expire on January 10, 2006, unless earlier redeemed or exchanged by Quickturn.. 12. The Primary purpose of the Rights Plan is not to enable the purchase of the Series A Preferred at the greatly inflated price of $50 for each one- thousandth share, but to allow the holder of the Right, under certain circumstances, to purchase shares of Quickturn's or an acquiror's common stock at a deep discount. If and when a person becomes an Acquiring Person, all Rights other than those held by the Acquiring Person "flip-in" and each right becomes exercisable for shares of Quickturn common stock equivalent in value to twice the exercise price of the Right. Thus, for the exercise price of $50, the holder of a Right may purchase Quickturn common stock having a market value of $100. If and when Quickturn engages in a merger or a sale of 50% or more of its assets, the Rights "flip-over" and become exercisable for shares of the acquiror's common stock at the same deep discount price of two for the price of one, Thus, stockholders have no economic incentive to exercise the Rights until a person triggers the "flip-in" and/or "flip-over" provisions by becoming an Acquiring Person. 13. The Rights are not exercisable for shares of Quickturn's common stock if, prior to any person becoming an Acquiring Person, the Quickturn Board declares that the tender or exchange offer is a "Permitted Offer." Under the Rights Plan as originally adopt, a Permitted Offer is a tender or exchange offer, issued pursuant to Section 14(d) of the Exchange Act, made when "Continuing Directors" are in office, and determined to be, in the opinion of a majority of Continuing Directors, 'both adequate and otherwise in the best interests of the Company and its stockholders (taking into account all factors that such Continuing Directors deem relevant)." 14. Under the original Rights Plan, the Quickturn Board could redeem the Rights, at a redemption price of $.01 per Right, any time prior to the close of business on the earlier of (i) the tenth day following the date of Public announcement of the fact that an Acquiring Person has become such, or (ii) January 10, 2006; provided, however, that once a stockholder had become an Acquiring Person, the Rights could be redeemed by the Quickturn Board only if Continuing Directors remained on the Board and the redemption was approved by a majority of the Continuing Directors. Continuing Directors were defined as (i) persons serving on the Quickturn Board prior to the date of the adoption of the Rights Agreement who are not associated or affiliated with an Acquiring Person, or (ii) persons nominated or elected to the Quickturn Board with the approval of the majority of the Continuing Directors after the date of the adoption of Rights Plan who are not associated or affiliated with an Acquiring Person. 15. On August 24, 1998, Quickturn announced that the Quickturn Board had adopted a resolution to amend the Rights Plan to: (x) delete all provisions requiring the concurrence of a majority of Continuing Directors for (1) the redemption or exchange of the Rights at or after the time a person becomes an Acquiring Person or (2) the amendment of the Rights Agreement on or after the Distribution Date, (y) add a requirement that if a majority of the Company's Board is elected at an annual or special meeting of stockholders, then for a period of 180 days following such election (1) the Rights cannot be redeemed or exchanged and (2) the Rights Agreement cannot be amended, if such redemption, exchange or amendment is reasonably likely to have the purpose or effect of facilitating an acquisition of the Company by a person or entity who proposed, nominated or supported a director of the Company so elected at the annual or special meeting, and (z) ... add a clause to the definition of Distribution Date pursuant to which the Board may determine the Distribution Date applicable to Mentor and MGZ in connection with the Offer or any amendment to the offer or any subsequent tender offer by Mentor or its Affiliates or Associates (each as defined in the Rights Agreement). 14D-9 at 8. This amendment, if effective, would preclude the Quickturn Board from redeeming or exchanging the Rights or amending the Rights Plan to facilitate an acquisition transaction for a period of 6 months following any annual or special meeting at which a majority of the Quickturn Board was replaced. 16. Purchaser's acceptance of shares tendered pursuant to its Tender Offer will result in it becoming an Acquiring Person, will make the Rights exercisable for shares of Quickturn's common stock at a discount of 50% of their market value, will make the Tender Offer economically infeasible for Purchaser to accomplish, and will deprive Quickturn's stockholders of the ability to tender their shares unless the Quickturn Board redeem the Rights or exempts Purchaser's Tender Offer from the triggering provisions of the Rights Plan by declaring that the Tender Offer is a "Permitted Offer." B. The Delaware Business Combination Statute ----------------------------------------- 17. Section 203 of the Delaware General Corporation Law, entitled "Business Combinations with Interested Stockholders," applies to any Delaware corporation that has not opted out of the statute's coverage. Quickturn has not opted out of the statute's coverage. 18. Section 203 was designed to impede coercive and inadequate tender and exchange offers. Section 203 provides that if a person acquires 15% or more of a corporation's voting stock (thereby becoming an "interested stockholder"), such interested stockholder may not engage in a "business combination with the corporation (defined to include a merger or consolidation) for three years after becoming an interested stockholder, unless: (i) prior to the 15% acquisition, the board of directors has approved either the acquisition resulting in the stockholder becoming an interested stockholder or the business combination; (ii) the interested stockholder acquires 85% of the corporation's voting stock in the same transaction in which it crosses the 15% threshold; or (iii) on or subsequent to the date of the 15% acquisition, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholders (and not by written consent) by the affirmative vote of at least 662/3% of the outstanding voting stock which is not owned by the interested stockholder. 19. Application of Section 203 to the Proposed Acquisition will delay the Proposed Merger for at least three years. Accordingly, three years of the substantial benefits of the Proposed Acquisition will be forever lost. Additionally, any number of events could occur within those three years that would prevent the Proposed Merger altogether. C. The "Quasi-California Corporation" Statute ------------------------------------------ 20. Section 2115 ("Section 2115") of the California General Corporation Law (the "CGCL") provides that if a foreign corporation has (i) more than one- half of the average of the corporation's property, payroll and sales in California, and (ii) more than half of its outstanding securities held by persons with California addresses then such foreign corporation shall be subject to certain enumerated provisions of the CGCL, as set forth in Section 2115(b), to the exclusion of the law of the jurisdiction in which the corporation is incorporated. Corporations with then characteristics and, thus, subject to the specified provisions of the CGCL, are commonly referred to as "quasi-California" corporations. For the purpose of determining whether a foreign corporation is a "quasi-California" corporation, Section 2115(a) provides that any securities held in the names of broker-dealers, nominees for broker-dealers, banks, associations, or other entities holding securities in a nominee name or otherwise on behalf of a beneficial owner shall not be considered outstanding unless the foreign corporation requests such nominee holders to certify the number of shares held by beneficial owners and the addresses of beneficial owners for whom securities are held. 21. Exempt from classification as a "quasi-California" corporation pursuant to Section 2115(c) are corporations "with outstanding securities designated as qualified for trading as a national market security on [NASDAQ] if the corporation has at least 800 holders of its equity securities as of the record date of its most recent annual meeting, of shareholders." Upon information and belief, plaintiffs that Quickturn has at least 800 stockholders and, as a corporation with outstanding securities qualified for trading on NASDAQ as a national market security, would not be a "quasi-California" corporation and would not be subject to the provisions of the CGCL identified in Section 2115(b). Such provisions include, but are not limited to: a. Section 303, which restricts the ability of stockholders to remove directors without cause, b. Section 708, which provides stockholders a right to cumulative voting in the election of directors; c. Section 710, which permits supermajority voting requirements; d. Section 1101, which imposes limitations on mergers; and e. Chapter 12, which applies to all transactions termed "reorganizations" as defined in the CGCL, which includes mergers and/or acquisitions financed by the exchange of equity securities. 22. If Quickturn were to qualify as a "quasi-California corporation, application of the enumerated provisions of the CGCL would hamper and delay the consummation of the Proposed Acquisition. For example, Section 1101(e) prohibits a majority stockholder holding more than 50% but less than 90% of the outstanding shares of a quasi-California corporation from consummating a cash-out merger. 23. While plaintiffs believe that Quickturn is not currently a "quasi- California" corporation, the Quickturn Board could undertake one of several transactions which would increase its percentage of stock held by California residents and/or decrease its total number of stockholders, thereby removing Quickturn from the exemption provided by Section 2115(c) and transforming Quickturn into a "quasi-California" corporation. Such actions would interfere with the consummation of the Proposed Acquisition despite the benefits of the transactions to the Quickturn stockholders. D. The Response to the Proposed Acquisition ---------------------------------------- 24. Despite the clear-cut and significant economic benefits for the Quickturn stockholders, from the start Quickturn and its Board have steadfastly indicated that Quickturn will not accept the Proposed Acquisition, nor will the Quickturn Board allow the Quickturn stockholders the opportunity to consider the Proposed Acquisition for themselves. 25. On August 11. 1998, Dr. Walden C. Rhines ("Rhines"), Mentor Graphics' Chief Executive Officer met with the Chairman of the Quickturn Board, Glen M. Antle ("Antle"). At this meeting, Rhines presented Mentor Graphics' proposal to acquire Quickturn. Rhines also delivered a letter to Antle outlining Mentor Graphics' proposal to acquire all outstanding shares of Quickturn common stock at a price, of $12.125 per share in a negotiated transaction. Rhines further advised Antle that Mentor Graphics' proposal was not subject to any financing conditions. Rhines also advised Antle that depending on the results of Mentor Graphics' due diligence review of Quickturn. Mentor Graphics would consider offering more value for the outstanding shares of Quickturn. While Antle stated that he would communicate the offer to the Quickturn Board, he stated that he was unwilling to accept the offer or to Quickturn to remove its takeover defenses or to cause Quickturn to refrain from taking actions to prevent the consummation of the Tender Offer. 26. On August 14.1998, Dr. Rhines telephoned Keith R. Lobo ("Lobo"), President and Chief Executive Officer and a director of Quickturn to discuss the Proposed Acquisition. In this conversation, Dr. Rhines, emphasized that Mentor Graphics' interest in the Proposed Acquisition stemmed from the strategic benefits of the transaction, and was not motivated by a desire to moot the pending patent litigation between the companies. Lobo merely stated that he would communicate Dr. Rhines' position to the Quickturn Board. 27. On August 24, 1998, and without ever meeting with any representative of Mentor Graphics to discuss the Proposed Acquisition, Quickturn announced that on August 21, 1998, the Quickturn Board had rejected the Proposed Acquisition, on the grounds that the Board considered the Tender Offer to be inadequate, not reflective of the long-term value of Quickturn, and not in the best interests of Quickturn or its stockholders. 14D-9 at 3. The Board further announced that it had determined that Quickturn's business plan offered the potential for obtaining higher long-term benefits for Quickturn's stockholders than the Tender Offer. 14D-9 at 3. This is determination is belied, however, by both the past performance of Quickturn and by the decision made by the Board in June 1998 to reprice employee options having original exercise prices of up to $19.00 per share to the reduced exercise price of $7.438 per share. 28. In addition to its rejection of the Proposed Acquisition, Quickturn also announced that on August 21, 1998, the Quickturn Board had adopted a number of defensive measures designed to thwart the Proposed Acquisition. 29. Specifically, the Board announced that it had adopted an amendment to the Quickturn bylaws specifying procedures for the calling of a special meeting by stockholders holding at least 10% of the Quickturn shares, which, if effective, would strip from the shareholders the right to set the date of a special meeting and would have the effect of-inequitably delaying the call of any special meeting by at least three months. As set forth in Quickturn's 14D- 9, the amended bylaw adopted by the Quickturn Board provides as follows: A special meeting of the stockholders may be called at any time by (i) the board of directors, (ii) the chairman of the board, (iii) the president, (iv) the chief executive officer or (v) subject to the procedures set forth in this Section 2.3, one or more stockholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting. Upon request in writing sent by registered mail to the president or chief executive officer by any stockholder or stockholders entitled to call a special meeting of stockholders pursuant to this Section 2.3, the board of directors shall determine a place and time for such meeting. which time shall be not less than ninety (90) nor more than one hundred (100) days after the receipt and determination of the validity of such request, and a record date for the determination of stockholders entitled to vote at such meeting in the manner set forth in Section 2.12 hereof. Following such receipt and determination, it shall be the duty of the secretary to cause notice to be given to the stockholders entitled to vote at such meeting, in the manner set forth in Section 2.4 hereof that a meeting will be held at the place and time so determine. 14D-9 at 8. By contrast, prior to this amendment, Section 2.3 of the Quickturn bylaws simply provided that a special meeting could be called by "one or more stockholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting." 30. Additionally, as described above the Quickturn Board also adopted an amendment to the Rights Plan, which, if effective, would preclude any change of control for another 6 months following any annual or special meeting, regardless of the expressed will of the stockholders. 31. Taken together, these two provisions effectively preclude the Quickturn stockholders from taking action to effect a change in control against the wishes of management for minimum of 9 months. Such a delay may preclude a change in control entirely by putting at risk- the ability of a potential acquiror to obtain financing commitments for such a lengthy period of time, and/or by virtue of the substantially increased costs associated with such a lengthy financing commitment. 32. Quickturn's 14D-9 also disclosed that the Quickturn, Board's financial advisor, Hambrecht & Quist, was retained pursuant to a letter agreement which structures Hambrecht & Quist's fees to create an incentive for Hambrecht, & Quist to opine that the Mentor Graphic's offer or any other unsolicited offer is inadequate. Specifically, under the retention agreement, Hambrecht & Quist is entitled to a fee of 1.0% of the aggregate consideration to be received in a Consensual Acquisition (defined as an acquisition approved by the Quickturn Board), but only .75% of the consideration received in an acquisition not approved in advance by the Quickturn Board. Notably, although the 14D-9 stated that the Quickturn Board relied upon the opinion of Hambrecht & Quist in rejecting the Proposed Acquisition, the Hambrecht & Quist opinion was not filed as an exhibit to the 14D-9. E. Mentor Graphics' Solicitation Of Agent Designations To Call A Special Meeting And To Replace Quickturn's Board Of Directors --------------------------------------------------------------- 33. In light of Quickturn's unwillingness to accept or even to discuss Mentor Graphics' proposal and its recent implementation of additional takeover defenses, the current Quickturn Board cannot be expected to facilitate the Proposed Acquisition, but can be expected to maintain and add to Quickturn's anti-takeover devices and to actively oppose the Proposed Acquisition. Because Quickturn has declined to accept the substantial benefits of the Proposed Acquisition, Mentor Graphics has been forced to take its offer directly to the Quickturn stockholders by soliciting agent designations and by causing Purchaser to commence the Tender Offer. 34. Mentor Graphics filed with the SEC on August 12, 1998 preliminary solicitation materials in connection with its solicitation of agent designations from Quickturn's stockholders to call a special meeting of the Quickturn stockholders for the purpose of replacing the Director Defendants with individuals nominated by Mentor Graphics. Definitive agent designation solicitation materials were filed with the SEC on August 20, 1998 and immediately mailed to Quickturn's largest stockholders. If elected, the Mentor Graphics nominees intend, subject to their fiduciary duties and assuming the invalidity of the August 21, 1998 amendment to the Rights Plan to redeem the Rights (or amend the Rights Plan to make the Rights inapplicable to the Tender Offer and the Proposed Merger), approve the Tender Offer and the Proposed Merger under Section 203, and take such other actions as may be required to facilitate the prompt consummation of the Proposed Acquisition. 35. Upon the commencement of the Tender Offer, Mentor Graphics announced its intention to solicit and is in the course of soliciting, agent designations to call a special meeting of Quickturn's stockholders to occur approximately 45 days after the call of the meeting is delivered to Quickturn (the "Special Meeting"). At that time Mentor Graphics expected, and Quickturn's management must also have known, that sufficient agent designations to call the meeting would be obtained within days of the mailing of definitive agent designation materials to the Quickturn stockholders. As of the date of that Mentor Graphics commenced its solicitation of agent designations, Section 2.3 of Quickturn's bylaws as publicly-filed provided that "[a] special meeting of the stockholders may be called at any time by one or more stockholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting." In accordance with Quickturn's bylaws as in effect when Mentor Graphics commenced its solicitation, Mentor Graphics believed that (i) a special meeting could be called by the holders of not law than 10% of the Quickturn shares on the date the agent designations are delivered to Quickturn; (ii) the stockholders calling the meeting, not the Board, had the right to fix the date and time of the Special Meeting, (iii) agent designations shall remain in effect until revoked or unless the person executing such agent designation is not the record holder of Quickturn shares on the date the Special Meeting is called; and (iv) absent prior action by the Quickturn Board, the record date for the Special Meeting shall be the date next preceding the date on which the designated agents give notice of the Special Meeting. 36. The Bylaw amendments adopted by Quickturn on August 21, 1998 are targeted to derail Mentor Graphics' previously-announced plans to call a special meeting on a date to be set by the stockholders calling the meeting, such date to be within 45 days of receipt of sufficient agent designations to call the special meeting. 37. In furtherance of the solicitation of agent designations to call the Special Meeting, Purchaser demanded on August 12, 1998 that Quickturn produce a list of its stockholders and related stock list materials. Quickturn responded to Purchaser's demand on August 19, 1998, stating that the stock list materials would be made available beginning at 12:00 noon on August 25, 1998. Given the timing of Quickturn rejection of the Proposed Acquisition and the amendment of the bylaws regarding the call of a special meeting. Quickturn's refusal to make the stock fist available immediately constitutes improper maneuvering to ensure that Mentor Graphics would not be able to mail its agent designation solicitation materials to all of Quickturn's stockholders or to call the special meeting before Quickturn's Board adopted its new defensive measures. 38. The efforts by Mentor Graphics and Purchaser to convene the Special Meeting of Quickturn's stockholders comply with Delaware law and Quickturn's bylaws as they existed at the time Mentor Graphics' commenced its acquisition bid. These bylaw provisions, with which Mentor Graphics has complied My and with which it will continue to comply, authorize the holders of ten percent of Quickturn's common stock to call a special meeting without undue delay, at a time and place designated by the stockholders calling the meeting. 39. Mentor Graphics believes that under the bylaws-as they existed prior to the recent amendment (i) the date for determining stockholders entitled to call the Special Meeting and to submit agent designations in connection therewith shall be the date that the Special Meeting is actually called, and (ii) the stockholders, not the Company Board, have the right to fix the date and time of the Special Meeting and give notice thereof Therefore, following receipt of the requisite number of agent designations, the designated agents intend to, and if the bylaw amendment is deemed ineffective, will call the Special Meeting, fix the date and time of the Special Meeting and give notice of the Special Meeting. 40. Mentor Graphics intends also to solicit proxies for the Special Meeting so that. upon proposals by Mentor Graphics, the Director Defendants may be removed from the Quickturn Board, the authorized number of Quickturn directors may be reduced from eight to five, and five individuals nominated by Mentor Graphics may be elected to the Quickturn board of directors. Al the Special Meeting, Quickturn's stockholders also will be presaged with a proposal by Mentor Graphics to repeal bylaws adopted subsequent to March 30, 1998 - the last bylaws filed as an exhibit to Quickturn's Form 10-K for the year ended December 31, 1997, filed with the Securities and Exchange Commission on March 30, 1998 and prior to the adoption of any bylaw proposals presented at the Special Meeting, including, without limitation the bylaw amendment purportedly adopted on August 21, 1998. 41. Mentor Graphics believes that, in the absence of inequitable conduct by Quickturn Quickturn's stockholders will act to call the Special Meeting and, at such meeting, will replace Quickturn's current directors with Mentor Graphics' nominees and, if necessary, will take other actions designed to negate inequitable conduct by the Quickturn Board undertaken to impede the Proposed Acquisition. 42. Because Mentor Graphics' solicitation of agent designations and solicitation of proxies in reliance on Quickturn's current bylaws threaten the incombency of Quickturn's Baud of Directors, Mentor Graphics believed, correctly, that Quickturn would seek to impose a constrained interpretation of the current bylaws and purport to amend the bylaws in order to delay the Special Meeting and frustrate the ability of Quickturn's stockholders to exercise their voting rights. Any determinations by Quickturn that Mentor Graphics Wed to comply with Quickturn's then-existing bylaws would lack a good fifth basis. The amendments to Quickturn's bylaws or other manipulations of corporate machinery having the effect of hindering the ability of Quickturn's stockholders to exercise their rights as they currently exist serve no legitimate purpose and constitute inequitable manipulation and unlawful entrenchment by the Director Defendants in violation of their fiduciary duties under Delaware law. IRREPARABLE INJURY ------------------ 43. The unlawful actions of Quickturn, in its failure to accept the Proposed Acquisition, its failure to redeem the Rights Plan, its failure to exempt the Tender Offer from Section 203, and its adoption of additional, unreasonable defensive measures arc preventing its stockholders from receiving the benefits of the Proposed Acquisition and are thereby causing and will cause Quickturn's stockholders irreparable harm. Unless the Quickturn Board is restrained by this Court, the substantial benefits of the Proposed Acquisition may be forever lost. The injury to Mentor Graphics and Purchaser will not be compensable in money damages and plaintiffs have no adequate remedy at law. COUNT I ------- (Breach of Fiduciary Duty: The Rights Plan) -------------------------------------------- 44. Plaintiffs repeat and reallege each and every allegation set forth in paragraphs 1 through 43 as if fully set forth herein. 45. The Director Defendants owe Quickturn's stockholders the highest duties of cam, loyalty and good faith. 46. In light of the superior value offered to Quickturn stockholders by the Proposed Acquisition, there is no legitimate reason for the Quickturn Board to retain the Rights Plan. The Director Defendants' failure to redeem the Rights or to render the Rights Plan inapplicable to the Proposed Acquisition deprives Quickturn's stockholders of the right to maximize their wealth by selling their Quickturn shares at the premium price offered by the Proposed Acquisition. 47. The Director Defendants' failure to redeem the Rights or to render the Rights Plan applicable to the Proposed Acquisition has no economic justification, serves no legitimate purpose, and is not a reasonable response to the Tender Offer and/or the Proposed Merger, which pow no threat to the interests of Quickturn's stockholders or to Quickturn's corporate Policy and effectiveness. As such, the actions of the Director Defendants are in breach of the fiduciary duties the Director Defendants owe to Quickturn's stockholders under applicable Delaware law. 48. Moreover, the Quickturn Board's amendment of the Rights Plan, which if effective, would preclude the stockholders from effectively utilizing the stockholder franchise to facilitate an offer which they believe to be in their best interests by disabling the Quickturn Board from approving any acquisition for 6 months after the election of new directors, serves no legitimate corporate interest, has no economic justification and is an unreasonable response to the Proposed Acquisition. As such, the amendment to the Rights Plan constitutes a breach of the fiduciary duties the Director Defendants owe to Quickturn's stockholders under applicable law. 49. Further, because the amendment to the Rights Plan permits the stockholders to effect a change of the composition of the Quickturn Board only at the cost of restricting the ability of the Quickturn Board to approve an acquisition transaction, the amendment constitutes an improper infringement upon the voting rights of the stockholders without compelling justification. As such, the amendment to the Rights Plan constitutes a breach of the fiduciary duties the Director Defendants owe to Quickturn's stockholders under applicable law. 50. Mentor Graphics and Purchaser have no adequate remedy at law- COUNT II -------- (Breach of Fiduciary Duty: Section 203) -------------------------------------- 51. Plaintiffs repeat and reallege each and every allegation SK forth in paragraphs I through 50 as if fully set forth herein. 52. The Director Defendants owe Quickturn's stockholders the highest duties of care, loyalty and good faith. 53. The Board of Directors of Quickturn is empowered by Section 203 to render the statute inapplicable to the Proposed Acquisition by approving the Tender Offer. 54. In light of the superior value offered to Quickturn Stockholders by the Proposed Acquisition, there is no legitimate reason for the Quickturn Board of Directors to fail to approve the Tender Offer or to fail to take any other steps necessary to render Section 203 inapplicable to the Proposed Acquisition. Such failures only have the effect of withholding from Quickturn stockholders the right to maximize their wealth by selling their Quickturn sham at the premium price offered by the Proposed Acquisition. 55. The Director Defendants' failure to approve the Tender Offer or otherwise render Section 203 inapplicable to the Proposed Acquisition have no economic justification, serve no legitimate purpose, and am not reasonable responses to the Proposed Acquisition. Which poses no threat to the interests of Quickturn's stockholders or to Quickturn's corporate policy and effectiveness. As such, the actions of the Director Defendants am in breach of the fiduciary "duties the Director Defendants owe to Quickturn's stockholders under applicable Delaware law. 56. Mentor Graphics and Purchaser have, no adequate remedy at law. COUNT III --------- (Declaratory and Injunctive Relief: Section 2115 of the California General --------------------------------------------------------------------------- Corporation Law) --------------- 57. Plaintiffs repeat and reallege each and every allegation set forth in Paragraphs I through 56 as if full orth herein. 58. The Director Defendants owe Quickturn's stockholders the highest duties of care, loyalty and good faith. 59. The Tender Offer is non-coercive and non-discriminatory, it is fair to Quickturn stockholders, it poses no threat to Quickturn's corporate policy and effectiveness and it represents a substantial premium over the market price of Quickturn common stock prior to the public announcement of the Tender Offer. 60. Any action which would bring Quickturn within the provisions of Section 2115 of the California General Corporation Law and thereby hinder and/or delay the consummation of the Proposed Acquisition would be a breach of the Director Defendants' fiduciary duties to Quickturn's stockholders. 61. Mentor Graphics and Purchaser have no adequate remedy at law. COUNT IV -------- (Declaratory and Injunctive Relief: Anti-Takeover Devices) --------------------------------------------------------- 62. Plaintiffs repeat and reallege each and every allegation act forth in paragraphs 1 through 61 as if fully set forth herein. 63. The Director Defendants owe Quickturn's stockholders the highest duties of cart loyalty and good faith. 64. The Tender Offer is non-coercive and non-discriminatory, it is fair to Quickturn's stockholders, it poses no threat to Quickturn's corporate policy and effectiveness, and it represents a substantial premium over the market price of Quick-turn common stock prior to the public announcement of the Tender Offer. 65. Adoption of any defensive measures against the Tender Offer, the Proposed Merger, Motor Graphics' solicitation of agent designations, Mentor Graphics' solicitation of proxies or that would prevent a future board of directors from exercising its fiduciary duties - including, but not limited to, amendments to the Rights Plan, amendments to Quickturn's bylaws, pursuit of alternative transactions with substantial break-up fees and/or lock-ups, "White Knight" stock issuances, change to licensing agreements, or executive compensation arrangements with substantial payments triggered by a change in control - would itself be a breach of the Director Defendants' fiduciary duties to Quickturn's stockholders. 66. Specifically, the adoption by the Board of the amendment to Section 2.3 of ft Quickturn bylaws, which has the effect of (1) removing from the stockholders the right to det the date and place of, and to give notice of, a --- special meeting and (2) unreasonably delaying the call of a special meeting, serves no legitimate corporate purpose and is an unreasonable response to Mentor Graphics' agent designation solicitation and non-coercive, fully-financed, premium Tender Offer. Moreover, the amendment to the Quickturn bylaws constitutes an inequitable manipulation of the corporate franchise designed for, and with the primary affect of, entrenchment of management. 67. Further, the amendment to the Rights Plan in concert with the amendments to the bylaws would preclude the Stockholders from utilizing the stockholder franchise to facilitate an offer which they believe to be in their best interests for a period of more than 9 months, and are clearly intended to coerce stockholders into voting against Mentor Graphics' nominees by threatening the stockholders with a 6-months standstill should they vote to remove the incumbent board. As such. the amendments serve no legitimate corporate interest and are an unreasonable response to the Proposed Acquisition, and are therefore a breach of the Director Defendants' fiduciary duties to Quickturn's stockholders. Further, such amendments will delay or thwart the exercise of the corporate franchise without compelling justification and thereby cause irreparable harm. 68. Mentor Graphics and Purchaser have no adequate remedy at law. COUNT V ------- (Declaratory of Injunctive Relief: The Call of Special Meeting) ---------------------------------------------------------------- 69. Plaintiffs repeat and reallege each and every allegation set forth in paragraphs 1 through 68 as if fully set forth herein. 70. The Director Defendants owe Quickturn's stockholders the highest duties of care, loyalty and good faith. 71. Mentor Graphics' solicitation of agent designations to call the Special Meeting complied and will continue to comply with Quickturn's bylaws in effect at the time the agent designation solicitation was commenced. Mentor Graphics' disclosures regarding the agent designations, which were filed on August 12, 1998 with the SEC, are complete and accurate. 72. Quickturn's actions to hinder the procedure for or ability of its stockholders to the Special Meeting, and to dispute Mentor Graphics method of determining whether it has obtained sufficient unrevoked agent designations to call the Special Meeting, and -to affect the selected date of the call to refuse to recognize the date of the call, the stockholders' ability to fix the date and time of the Special Meeting set forth in the call and to interfere with Mentor Graphics giving notice of the Special Meeting, and to impede consideration by Quickturn's stockholders at the Special Meeting of Mentor Graphics' proposals impermissibly impede and delay Quickturn's stockholders from exercising their rights. Specifically, the August 21, 1998 amendments to the Quickturn bylaws and the Rights Plan impermissibly interfere with the ability of Quickturn's stockholders to utilize the corporate franchise. As such, these actions, including the bylaw Rights Plan amendments delay and/or thwart the exercise of stockholder voting rights without compelling justification and thereby cause irreparable harm. 73. Mentor Graphics and Purchaser have no adequate remedy at law. COUNT VI -------- (Declaratory and Injunctive Relief: Nomination of Directors) ------------------------------------------------------------- 74. Plaintiffs repeat and reallege each and every allegation set forth in paragraphs 1 through 73 as if fully set forth herein. 75. The Director Defendants owe Quickturns stockholders the highest duties of care, loyalty and good faith. 76. Mentor Graphics' actions to provide proper notice of its intent to nominate directors for election at the Special Meeting called by Quickturn's stockholders and Mentor Graphics' solicitation of proxies in connection with such election will comply with Quickturn's bylaws as currently enacted. Any action by Quickturn to hinder the ability of Mentor Graphics to propose its nominees at the Special Meeting, including but not limited to, any actions to amend the notification procedures, would impermissibly impede and/or delay Quickturn's stockholders from exercising their rights. Moreover, any action to negate the effectiveness of Mentor Graphics' upcoming properly delivered notification of its stockholder proposals and its director nominees would eviscerate the ability of Quickturn's stockholders to change the composition of the Quickturn Board at the Special Meeting. There cannot possibly be compelling justification for any such action which would guarantee that the incumbent Board could always and continuously frustrate the purposes of and/or delay a special meeting with the effect of preventing the election of stockholder-nominated directors. Any such action would delay and/or thwart the exercise of stockholder voting rights without compelling justification and would thereby cause irreparable harm. 77. Mentor Graphics and Purchaser have no adequate remedy at law. WHEREFORE, plaintiffs respectfully that this Court: a. declare that the Director Defendants have breached their fiduciary obligations to Quickturn stockholders under Delaware law by failing to redeem the Rights in response to the Tender Offer; b. compel Quickturn and its Director Defendants to redeem the Fights or to render the Fights Plan inapplicable to the Proposed Acquisition; c. declare that the Director Defendants have breached their fiduciary obligations to Quickturn stockholders under Delaware law by failing to render Section 203 inapplicable to the Proposed Acquisition; d. compel the Director Defendants to approve the Proposed Acquisition for purposes of Section 203 and enjoin them from taking any action to enforce or apply Section 203 that would impede, thwart, frustrate or interfere with the Proposed Acquisition; e. temporarily, preliminarily and permanently enjoin Quickturn its employees. agents and all persons acting on its behalf or in concert with it from taking any action with, respect to the Rights Plan, except to redeem the- Rights or render the Rights-Plan inapplicable to the Tender Offer, and from adopting any other Rights Plan or other measures, or taking any other action designed to impede, or which has the effect of impeding, the Tender Offer or the efforts of Mentor Graphics to acquire control of Quickturn; f. Declare that the taking of any action to bring Quickturn within the provisions of Section 2115 of the California General Corporation Law, thereby impeding, thwarting, frustrating or interfering with the Proposed Acquisition, constitutes a breach of the Director Defendants, fiduciary duties; g. enjoin Quickturn and the Director Defendants from taking any action which would bring Quickturn within the provisions of Section 21 15 of the California General Corporation Law and thereby have the effect of impeding, thwarting, frustrating or interfering with the Proposed h. declare that the August 21, 1999 amendments to the Quickturn bylaws and the Rights Plan are ineffective and that the adoption thereof constituted a breach of fiduciary duty by the Director Defendants, and enjoin Quickturn from, enforcing the amendments to the bylaws i. temporarily, preliminarily and permanently enjoin defendants. their affiliates. subsidiaries, officers, directors and all others acting in concert with them or on their behalf from bringing any action concerning the Rights Plan, Section 203, or Section 2115 in any other court; j. declare that the adoption of any further measure that has the effect of impeding, thwarting, frustrating or interfering with the Tender Offer, the Proposed Merger. Mentor Graphics' solicitation of agent designations, Mentor Graphics' call of the Special Meeting, Mentor Graphics' notice of the Special Meeting, Mentor Graphics' notification of its director nominees, or Mentor Graphics' solicitation of proxies, or Mentor Graphics'. nomination of directors or presentation of proposals at the Special Meeting constitutes a breach of the Director Defendants' fiduciary duties; k. enjoin Quickturn and the Director Defendants from adopting any further measure that has the effect of impeding, thwarting, frustrating or interfering with the Tender Offer, the Proposed Merger, Mentor Graphics' solicitation of agent designations, Mentor Graphics' call of the Special Meeting, Mentor Graphics' notice of the Special Meeting, Mentor Graphics' notification of its director nominees, Mentor Graphics" solicitation of proxies, or Mentor Graphics' nomination of directors or presentation of Proposals at the Special Meeting; l. enjoin Quickturn and the Director Defendant from taking any action to delay, impede, postpone or thwart the voting or other rights of Quickturn's stockholders in connection with the Special Meeting or otherwise-, m. compel Quickturn and the Director Defendants to recognize the ability of Quickturn's stockholders, holding on the date of the call. of the Special Meeting shares entitled to cast not less than ten percent of votes at such Special Meeting, to call and provide notice of a Special Meeting at the date and time set forth in the call and for the purposes set forth in the call and notice of the Special Meeting; n. declare that the date for determining stockholders entitled to call the Special Meeting and to submit Agent Designations in connection therewith shall be the date that the Special Meeting is actually called and that agent designations shall remain valid until revoked upon notice to Mentor Graphics or unless the person executing the agent designation is not the holder of Quickturn common shares on the date the Special Meeting is called; o. declare that Mentor Graphics' and Purchaser's disclosure in connection with its solicitation of agency designations and proxies for the Special Meeting are complete and accurate; p. award plaintiffs their costs and disbursements in this action, including reasonable attorneys' and experts' fees; and q. grant plaintiffs such other and further relief as this Court may dean just and proper. OF COUNSEL: __________________________________ Kevin G. Abrams Christopher L. Kaufman Thomas A. Beck David A. York Catherine G. Dearlove Latham & Watkins Holly June Stiefel 75 Willow Road Thad J. Bracegirdle Menlo Park. CA 94025 Richards, Layton & Finger (650) 328-4600 One Rodney Square P.O. Box 551 Fredric J. Zepp Wilmington, DE 19899 Latham & Watkins (302) 658-6541 505 Montgomery Street Attorneys for Plaintiffs San Frucisco, CA 94111 (415) 391-0600 H. Steven Wilson Latham & Watkins 2100, 701 B Street San Diego, CA 92101-8197 (619) 236-1234 Dated: August 24, 1998 VERIFICATION ------------ I, Gregory K. Hinckley, having beca duly sworn according to law, verifies as follows: 1. I am the Executive Vice President, Chief Operating Officer and Chief Financial Officer of the plaintiff Mentor Graphics Corporation, an Oregon corporation, with specific authority to make this verification on behalf of Mentor Graphics Corporation. 2. I am also the Chief Financial Officer and Secretary and a director of plaintiff MGZ Corp. (collectively with Mentor Graphics Corporation, the "Plaintiffs"), a Delaware corporation with specific authority to make this verification on behalf of MGZ Corp. 3. I have personally reviewed the attached Verified Amended Complaint For Declaratory and Injunctive Relief (the "Amended Complaint"). filed by The Plaintiff in the Court of Chancery of the State of Delaware. 4. Insofar as the matters contained in the Amended Complaint concern the acts and deeds of the Plaintiffs, I know the allegations to be true and correct. 5. Insofar as the matters contained in the Amended Complaint concern the acts and deeds of persons or entities other than the Plaintiff, I believe the allegations to be true and correct Mentor Graphics Corporation By: ___________________________________ Name: Gregory K. Hinckley Title: Executive Vice President, Chief Operating Officer and Chief Financial Officer Sworn to and subscribed before me this 25th day of August, 1998 MGZ Corp. _________________________________ Notary Public By: ___________________________________ My Commission expires ___________ Name: Gregory K. Hinckley Title: Chief Financial Officer and Secretary EX-15 4 FIRST AMENDED COMPLAINT EXHIBIT 15 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE MENTOR GRAPHICS CORPORATION ) and MGZ CORP., ) ) Plaintiffs, ) ) No. 98-473 RRM v. ) ) QUICKTURN DESIGN SYSTEMS, INC., ) ) Defendant. ) FIRST AMENDED COMPLAINT ----------------------- Pursuant to Rule 15(a) of the Federal Rules of Civil Procedure, plaintiffs Mentor Graphics Corporation ("Mentor Graphics") and MGZ Corp. ("Purchaser") file this First Amended Complaint seeking declaratory and injunctive relief arising out of Purchaser's offer to purchase shares of stock of defendant Quickturn Design Systems, Inc. ("Quickturn"). JURISDICTION AND VENUE ---------------------- 1. This Court has jurisdiction over this action pursuant to 15 U.S.C. (S) 78aa, 28 U.S.C. (S) 1331(a) and 28 U.S.C. (S) 1337(a). 2. Venue in this Court is proper pursuant to 15 U.S.C. (S) 78aa and 28 U.S.C. (S) 1391(b). THE PARTIES ----------- 3. Plaintiff Mentor Graphics is a corporation incorporated under the laws of the State of Oregon having its principal executive offices in Wilsonville, Oregon. Mentor Graphics manufactures, markets and supports software and hardware Electronic Design Automation ("EDA") products and provides related services which enable engineers to design, analyze, simulate, model, implement and verify the components of electronic systems. Purchaser, a wholly-owned subsidiary of Mentor Graphics and a Delaware corporation, was formed to acquire all of the outstanding shares of Quickturn through the tender offer and merger proposal described below. Mentor Graphics is the beneficial owner of more than three percent of the outstanding shares of Quickturn common stock and Purchaser is the record owner of 100 shares of Quickturn common stock. 4. Defendant Quickturn is a corporation incorporated under the laws of the State of Delaware having its principal executive offices in San Jose, California. According to its most recent Form 10-K, Quickturn "designs, manufactures, sells and supports products that verify the design of integrated circuits ('ICs') and electronic systems." 5. Quickturn's common stock is registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. (S) 78l(b), and is listed and traded on the Nasdaq National Market. THE TENDER OFFER ---------------- 6. On August 12, 1998, Purchaser commenced a fully-financed, non- coercive, non-discriminatory, all-cash, all-shares tender offer for outstanding shares of Quickturn common stock that are not already owned by Mentor Graphics or Purchaser (the "Tender Offer"). In connection with the commencement of the Tender Offer, Mentor Graphics issued on August 12, 1998 a press release summarizing the terms of the Tender Offer (the "Press Release"), and a summary advertisement of the Tender Offer was published in the August 12, 1998 national edition of The Wall Street Journal (the "Summary Advertisement"). ----------------------- 7. Quickturn stockholders whose shares are purchased by Purchaser in the Tender Offer will receive $12.125 per share in cash, representing a 51.6% premium above the average closing price of -2- Quickturn's stock on the Nasdaq National Market on August 11, 1998, the last full trading day before the first public announcement of Mentor Graphics' commencement of the Tender Offer. The Tender Offer is conditioned upon, among other things, (i) the redemption or inapplicability of Quickturn's stockholder rights plan, (ii) the exemption of the Tender Offer from Section 203 of the Delaware General Corporation Law ("Section 203"), and (iii) the tender and purchase of sufficient Quickturn shares to give Mentor Graphics and Purchaser a majority of the outstanding Quickturn shares on a fully diluted basis. 8. The Tender Offer is the initial step in a two-step transaction pursuant to which Mentor Graphics proposes to acquire all of the outstanding shares of Quickturn stock. If successful, the Tender Offer will be followed by a merger or similar business combination with Purchaser or a direct or indirect subsidiary of Mentor Graphics (the "Proposed Merger," and together with the Tender Offer, the "Proposed Acquisition"). Pursuant to the Proposed Merger, it is currently anticipated that each then outstanding share of Quickturn (other than shares owned by Mentor Graphics or any of its subsidiaries or shares held in the treasury of Quickturn) would be converted into the right to receive an amount in cash equal to the price paid in the Tender Offer. 9. In January 1996, the Board of Directors of Quickturn adopted a stockholder rights plan (the "Rights Plan"), commonly known as a "poison pill," which is designed to thwart any acquisition of Quickturn that does not have the approval of Quickturn's Board. The Rights Plan provides the Quickturn Board with the power to prevent summarily the consummation of even an all-cash, all- shares, non-coercive, non-discriminatory tender offer by imposing a severe economic penalty (in the form of massive dilution) on a potential acquiror. After Mentor Graphics announced the Proposed Acquisition, the Quickturn Board amended the Rights Plan to prohibit further amendment or redemption of the Rights for a period of 180 days following any annual or special meeting in which a majority of the Board is -3- elected, if such amendment is likely to facilitate certain change in control transactions. The original Rights Plan and the recent amendment were both adopted without approval of Quickturn's stockholders and, if the Rights Plan as amended remains in effect and applicable to the Tender Offer, it will restrict the right of Quickturn's stockholders to decide whether to accept Purchaser's premium offer for their shares. 10. Moreover, Quickturn's Board may be able to prevent Mentor Graphics from consummating the Proposed Merger for at least three years unless the Board exempts the Tender Offer from restrictions imposed by Section 203, Delaware's Business Combination Statute. Section 203, which applies to any Delaware corporation that has not opted out of its coverage, provides that if a person acquires 15% or more of a corporation's voting stock (thereby becoming an "interested stockholder"), such interested stockholder may not engage in a "business combination" with the corporation (defined to include a merger or consolidation) for three years after becoming an interested stockholder, unless: (i) prior to the 15% acquisition, the board of directors has approved either the acquisition resulting in the stockholder becoming an interested stockholder or the business combination; (ii) the interested stockholder acquires 85% of the corporation's voting stock in the same transaction in which it crosses the 15% threshold; or (iii) on or subsequent to the date of the 15% acquisition, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholders (and not by written consent) by the affirmative vote of at least 66% of the outstanding voting stock which is not owned by the interested stockholder. Quickturn is subject to Section 203 and has chosen not to opt-out of the statute's coverage. 11. The Tender Offer is, and will continue to be, in full compliance with all applicable federal laws and regulations governing tender offers, i.e., ---- the provisions of the Williams Act, embodied -4- in Sections 14(d) and 14(c) of the Exchange Act, 15 U.S.C. (S)(S) 78n(d) and (e), and the rules and regulations promulgated thereunder by the Securities and Exchange Commission ("SEC"). In accordance with the Exchange Act and the rules and regulations promulgated thereunder by the SEC, Purchaser commenced the Tender Offer by the publication of the Summary Advertisement in the August 12, 1998 Wall Street Journal. In connection with the Tender Offer and in accordance ------------------- with the Exchange Act and the rules and regulations promulgated thereunder by the SEC, Purchaser filed on August 12, 1998 a Schedule 14D-1 with the SEC pursuant to Section 14(d)(1) of the Exchange Act and Rule l4d-3 promulgated thereunder, 17 C.F.R. (S) 240.14d-3. 12. On August 20, 1998, Mentor Graphics and Purchaser amended the Schedule 14D-1 filed on August 12, 1998 to conform to comments from the SEC and to disclose a press release issued by Mentor Graphics on August 12, 1998. On August 25, 1998, Mentor Graphics and Purchaser further amended the Schedule 14D- 1 filed on August 12, 1998 (as amended, the "Schedule 14D-1") to disclose the existence of (i) a warrant to purchase shares of Quickturn common stock granted by Quickturn to Mentor Graphics in connection with a 1992 asset purchase agreement between the two companies pursuant to which Quickturn acquired certain assets from Mentor Graphics; and (ii) an outstanding promissory note payable to Mentor Graphics by Quickturn issued in 1993. A true and complete copy of the Schedule 14D-1, with amendments, is attached hereto as Exhibit A. 13. Section 14(d) of the Exchange Act, 15 U.S.C. (S) 79n(d), and the rules and regulations promulgated thereunder by the SEC, require that any person or entity making a tender offer for beneficial ownership of more than five percent of a class of registered equity securities file and disclose certain specified information with respect to the tender offer. Any such bidder must disclose, among other things, its identity and background, past contacts, transactions or negotiations between the bidder -5- and the company in whom the bidder seeks to acquire stock, the source and amount of funds needed for the tender offer, and any plans the bidder may have to change the capitalization, corporate structure or business of the company whose stock it seeks to acquire. 14. In addition, Section 14(e) of the Exchange Act, 15 U.S.C. (S) 78n(e), makes it "unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statement made, in light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practice in connection with any tender offer." Purchaser has complied fully with the Exchange Act and all rules and regulations promulgated thereunder. 15. In connection with the Tender Offer, Purchaser is in the process of disseminating to Quickturn's stockholders an offer to purchase containing all material information required by applicable law to be disclosed (the "Offer to Purchase"). A true and correct copy of the Offer to Purchase is attached hereto as Exhibit B. Among other matters, the Offer to Purchase discloses: a. the solicitation of agent designations being undertaken by Mentor Graphics to call a special meeting of Quickturn stockholders, as more fully described below; b. the matters to be considered at the special meeting, including the removal of all current members of the Quickturn Board of Directors, an amendment of the Quickturn bylaws to reduce the size of the Quickturn Board to five directors, and the election of five persons nominated by Mentor Graphics to the Quickturn Board, as more fully described below; and c. pending patent litigation between Mentor Graphics and Quickturn, and information regarding the potential damages Quickturn may recover from such litigation. -6- 16. Despite the significant benefits of the Tender Offer for the Quickturn Stockholders, Quickturn has refused to accept the Mentor Graphics offer. Quickturn's efforts will, in all likelihood, also include the commencement of baseless litigation against plaintiffs under the provisions of the federal securities laws regulating the solicitation of agency designations, the solicitation of proxies, tender offers and acquisition efforts. QUICKTURN REJECTS THE MENTOR GRAPHICS OFFER ------------------------------------------- 17. On August 11, 1998, Dr. Walden C. Rhines ("Rhines"), Mentor Graphics' Chief Executive Officer and President, met with Glen M. Antel ("Antel"), the Chairman of the Quickturn Board. At this meeting, Rhines presented Mentor Graphics' proposal to acquire Quickturn. Rhines delivered a letter to Antel outlining Mentor Graphics' proposal to acquire all outstanding shares of Quickturn common stock at a price of $12.125 per share in a negotiated transaction. Rhines further advised Antel that Mentor Graphics' proposal was not subject to any financing conditions. Rhines also advised Antel that, depending on the results of Mentor Graphics' due diligence review of Quickturn, Mentor Graphics would consider offering more value for the outstanding shares of Quickturn. While Antel stated that he would communicate the proposal to the Quickturn Board, he stated that he was unwilling to accept the offer or to cause Quickturn to remove its takeover defenses or to cause Quickturn to refrain from taking actions to prevent the consummation of the Tender offer. 18. On August 14, 1998, Rhines telephoned Keith R. Lobo ("Lobo"), President and Chief Executive Officer and a director of Quickturn, to discuss the Proposed Acquisition. Rhines emphasized to Lobo that Mentor Graphics' interest in the Proposed Acquisition stemmed from the strategic benefits of the transaction, and was not motivated by a desire to moot the pending patent litigation between the companies. Lobo merely stated that he would communicate Rhines' position to the Quickturn Board. -7- 19. On August 24, 1998, and without ever contacting or meeting with any representative of Mentor Graphics to discuss Mentor Graphics' Proposed Acquisition, Quickturn announced that on August 21, 1998, the Quickturn Board had rejected the Proposed Acquisition, on the grounds that the Board considered the Tender Offer to be inadequate, not reflective of the long-term value of Quickturn and not in the best interests of Quickturn or its stockholders. The Board further announced that it had determined that Quickturn's business plan offered the potential for obtaining higher long-term benefits for Quickturn's stockholders than the Tender Offer. 20. In light of Quickturn's failure to accept or even discuss Mentor Graphics' acquisition proposal, the current Quickturn Board cannot be expected to facilitate the Proposed Acquisition, but instead can be expected to maintain Quickturn's anti-takeover devices and to actively oppose the Proposed Acquisition. Because Quickturn failed to accept the substantial benefits of the Proposed Acquisition, Mentor Graphics is taking its offer directly to the Quickturn stockholders. THE AGENT SOLICITATION ---------------------- 21. In furtherance of the Proposed Acquisition, Mentor Graphics publicly disclosed on August 12, 1998 its intention to solicit agent designations from Quickturn's stockholders to appoint designated agents with the power to call a special meeting of the Quickturn stockholders (the "Agent Solicitation"). Section 2.3 of Quickturn's bylaws provides that "[a] special meeting of the stockholders may be called at any time by . . . one or more stockholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting. The purpose of the Agent Solicitation to call a special meeting of the Quickturn stockholders (the "Special Meeting") is to allow the Quickturn stockholders to remove all current members of Quickturn's Board of Directors, to reduce the authorized number of Quickturn directors to five, to elect to the Quickturn Board five individuals nominated by -8- Mentor Graphics, and to repeal any recent or subsequent amendments to the Quickturn bylaws. If elected, Mentor Graphics' nominees intend to, subject to their fiduciary duties, (i) redeem the Rights Plan (or amend the Rights Plan to make it inapplicable to the Proposed Acquisition), (ii) approve the Tender Offer under Section 203, and (iii) take such other actions as may be required to expedite the prompt consummation of the Proposed Acquisition. 22. Section 14(a) of the Exchange Act, 15 U.S.C. (S) 78n(a), and the rules and regulations promulgated thereunder by the SEC, require that a person soliciting an authorization with respect to any registered security file and disclose certain specific information with respect to the solicitation. Any such solicitor must disclose, among other things, its identity, the date, time and place of the meeting at which the proposed action will be taken, and any substantial interest of the solicitor in the matters to be acted upon. In addition, Rule 14a-9, 17 C.F.R. (S) 240.14a-9, promulgated by the SEC under Section 14(a) of the Exchange Act, provides that "[n]o solicitation subject to this regulation shall be made . . . containing any statement of which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading." 23. Mentor Graphics' preliminary agent solicitation materials relating to the call of the Special Meeting were filed on August 12, 1998 with the SEC. On August 20, 1998, Mentor Graphics filed with the SEC definitive agent solicitation materials relating to the call of the Special Meeting (the "Agent Solicitation Materials"). A true and correct copy of the Agent Solicitation Materials is attached hereto as Exhibit C. Mentor Graphics believes the Agent Solicitation Materials are in full compliance -9- with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder by the SEC, including Rule l4a-9. Mentor Graphics is in the process of disseminating to Quickturn's stockholders the Agent Solicitation Materials containing all material information required by applicable law to be disclosed. The Agent Solicitation Materials disclose, among other things: a. the requirement that, for the Special Meeting to be held, agent designations in favor of calling the Special Meeting must be executed by the holders of not less than 10% of all the shares entitled to vote at such meeting; b. Mentor Graphics' belief that (i) a special meeting may be called by the holders of not less than 10% of the Quickturn shares on the date the agent designations are delivered to Quickturn, (ii) the stockholders calling the Special Meeting, not the Quickturn Board, have the right to fix the date and time of the Special Meeting, (iii) agent designations shall remain in effect until revoked or unless the person executing such agent designation is not the record holder of Quickturn shares on the date the Special Meeting is called, and (iv) absent prior action by the Quickturn Board, the record date for the Special Meeting shall be the date next preceding the date on which the designated agents give notice of the Special Meeting; c. Mentor Graphics' intent, upon receipt of the requisite number of agent designations, to call the Special Meeting, fix the date and time of the Special Meeting, and give notice of the Special Meeting; d. the belief of Mentor Graphics that its efforts to convene the Special Meeting comply with Delaware law and Quickturn's bylaws as they presently exist; and e. Mentor Graphics' intent, if the Special Meeting is called and held, to ask Quickturn stockholders to (i) remove the current members of the Board of Directors of Quickturn, -10- (ii) amend Quickturn's bylaws to reduce the authorized number of directors to five, (iii) elect Mentor Graphics' five nominees to the Quickturn Board, and (iv) repeal any provisions of the Quickturn bylaws adopted by the incumbent Quickturn Board subsequent to the last public filing of the bylaws. 24. In furtherance of Mentor Graphics' solicitation of agent designations, Purchaser is demanding that Quickturn produce a list of its stockholders and related stocklist materials. Quickturn responded to Purchaser's demand on August 19, 1998, stating that the stocklist materials would be made available beginning at 12:00 noon on August 25, 1998. QUICKTURN RESPONDS TO THE TENDER OFFER -------------------------------------- 25. Section 14(d) of the Exchange Act and Rule 14d-9 promulgated thereunder, 17 C.F.R. (S) 240.14d-9, regulate solicitations or recommendations made by "subject" or "target" companies in response to a tender offer. Under Rule 14d-9, no such solicitation or recommendation is permitted unless prior thereto the target company has filed with the SEC and delivered to the offeror a Schedule 14D-9 containing certain specified information including, among other things, the nature of the solicitation or recommendation, particularized reasons for the solicitation or recommendation, and recent transactions in respect of the target company's securities by the target company or its officers or directors. 26. On August 24, 1998, Quickturn filed a Schedule 14D-9 with the SEC in response to the Tender Offer (the "Schedule 14D-9"). A true and correct copy of the Schedule 14D-9 is attached hereto as Exhibit D. The Schedule 14D-9, which contains a list of purported justifications for the Quickturn Board's recommendation that Quickturn stockholders reject the Tender Offer, is materially false and/or misleading in numerous respects. -11- 27. Specifically, the Schedule 14D-9 contains the following materially false and/or misleading statements and omissions: a. Although the Schedule 14D-9 states that the Quickturn Board concluded that the Tender Offer does not fully reflect the "long-term value" of Quickturn, the Schedule 14D-9 fails to disclose any amount or range of any such values or when such values can be expected to be realized by Quickturn stockholders. b. Although the Schedule 14D-9 refers to the Quickturn Board's consideration of presentations by Quickturn senior management and Quickturn's financial advisors on Quickturn's financial performance, business strategy and business plan, the Schedule 14D-9 fails to disclose any specific or meaningful information concerning these issues. c. Although the Schedule 14D-9 states that the Quickturn Board determined that Quickturn's business plan "offered the potential for obtaining higher long-term benefits" for Quickturn stockholders than the Tender Offer, the Schedule 14D-9 fails to disclose any meaningful information concerning such benefits, including the amount thereof and when any such benefits can be expected to be realized by Quickturn stockholders. d. The Schedule 14D-9 fails to disclose whether the determination by the Quickturn Board to reject the Tender Offer was unanimous and, if the determination was not unanimous, any objections or abstentions by any Quickturn directors with respect to such determination. e. Although the Schedule 14D-9 refers to "the disruptive effect" of the Tender Offer on Quickturn's sales efforts and relationships with its suppliers and employees, it fails to disclose the nature and amount of, or reason for, any such disruptive effect. -12- f. Although the Schedule 14D-9 states that "[n]o negotiation is underway or is being undertaken by [Quickturn] in response to the [Tender] Offer which relates to or would result in (1) an extraordinary transaction, such as a merger or reorganization, involving [Quickturn] or any of its subsidiaries; (2) a purchase, sale or transfer of a material amount of assets by [Quickturn] or any of its subsidiaries; (3) a tender offer for or other acquisition of securities by or of [Quickturn]; or (4) any material change in the current capitalization or dividend policy of [Quickturn]," the Schedule 14D-9 fails to disclose whether Quickturn has made any contacts with third parties in anticipation of future negotiations. 28. In addition, the press release issued by Quickturn on August 24, 1998, attached as Exhibit 6 to the Schedule 14D-9 (the "Quickturn Press Release"), contains the following materially false and/or misleading statements and omissions. a. While the Quickturn Press Release claims that the Tender Offer "comes at a moment of weakness for Quickturn's stock price," it fails to disclose that the price of Quickturn common stock has been declining for a period of 6 months, since February 1998. b. The Quickturn Press Release makes the misleading statement that Quickturn's stock price is depressed "because of the economic downturn in the Asia/Pacific region and the corresponding slowdown int he region's new electronics product design," when in actuality the decrease in Quickturn's stock price can be attributed to the failure of Quickturn management to develop and execute a value-enhancing business plan. c. The Quickturn Press Release misleadingly states projections of future growth in the emulation and high performance simulation industries, falsely implying that Quickturn's financial performance will similarly improve. -13- COUNT I ------- (For Declaratory Relief) 29. Plaintiffs repeat and reallege the above paragraphs as if set forth herein. 30. The Declaratory Judgment Act, 28 U.S.C. (S) 2201, provides that "[i]n a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration." Plaintiffs are entitled to a declaratory judgment that the Schedule 14D-1 and all exhibits thereto, and the Agent Solicitation Materials, are proper and comply with all applicable securities laws, rules and regulations. 31. Although the Proposed Acquisition is fairly and attractively priced, Plaintiffs reasonably expect that Quickturn will thwart or delay plaintiffs' lawful attempts to consummate the Tender Offer. Plaintiffs believe Quickturn will seek to delay and defeat the Tender Offer through efforts including the filing of a meritless suit claiming that public disclosures and filings made by plaintiffs in conjunction with the Tender Offer and the Agent Solicitation violate applicable federal securities laws and regulations. Thus, there is a substantial controversy between parties having adverse interests which is of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. 32. In the absence of declaratory relief, plaintiffs will suffer irreparable harm. As evidenced by the course of action that Quickturn has pursued to date and the actions taken generally by companies that receive unsolicited acquisition proposals, Quickturn will likely defend against the Proposed Acquisition and the Agent Solicitation by, among other things, filing false claims designed to delay or defeat the Proposed Acquisition and the Agent Solicitation. A declaratory judgment that the disclosures -in the Schedule 14D- 1, the Offer to Purchase and the Agent Solicitation Materials comply with all -14- applicable federal laws will serve the purpose of adjudicating the interests of the parties, resolving any complaints concerning the propriety of the Tender Offer or the Agent Solicitation under federal law, and permitting an otherwise lawful transaction to proceed. 33. Plaintiffs therefore request pursuant to the Declaratory Judgment Act, 28 U.S.C. (S)(S) 2201 and 2202, that this Court enter a declaratory judgment that the public disclosures and documents filed with the SEC by plaintiffs and which are being disseminated to Quickturn stockholders in connection with the Tender Offer and the Agent Solicitation comply fully with all applicable provisions of law. COUNT II -------- (For Violation of Section 14(d) of the Exchange Act and Rule 14d-9 promulgated thereunder) 34. Plaintiffs repeat and reallege the above paragraphs as if set forth herein. 35. Rule 14d-9, 17 C.F.R. (S) 240.14d-9 promulgated by the SEC pursuant to Section 14(d) of the Exchange Act, requires the target company to file with the SEC a Schedule 14d-9 containing certain information, including, among other things, the nature of the target company's solicitation or recommendation in response to a tender offer, particularized reasons for the solicitation or recommendation, and recent transactions in respect of the target company's securities by the target company or by its officers and directors. 36. In violation of Section 14(d) of the Exchange Act and Rule l4d-9 promulgated thereunder, the Schedule 14D-9 filed by Quickturn with the SEC contains material misstatements and omissions as set forth in paragraphs 27 and 28. 37. By reason of the foregoing, plaintiffs, Quickturn stockholders and the investing public have been and are being irreparably harmed in that they are being deprived of, and/or misled as to, important information required to be publicly, accurately and fully disclosed by Quickturn under -15- applicable law, and Quickturn stockholders and the investing public are being misled by materially false information disseminated by Quickturn. 38. Plaintiffs have no adequate remedy at law. COUNT III --------- (For Violation of Section 14(e) of the Exchange Act) 39. Plaintiffs repeat and reallege the above paragraphs as if set forth herein. 40. Section 14(e) of the Exchange Act, 15 U.S.C. (S) 78n(e), makes it "unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statement made, in light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practice in connection with any tender offer." 41. In violation of Section 14(e) of the Exchange Act, the Schedule 14D-9 filed by Quickturn with the SEC contains material misstatements and omissions as set forth in paragraphs 27 and 28. 42. By reason of the foregoing, plaintiffs, Quickturn stockholders and the investing public have been and are being irreparably harmed in that they are being deprived of, and/or misled as to, important information required to be publicly, accurately and fully disclosed by Quickturn under applicable law, and Quickturn stockholders and the investing public are being misled by materially false information disseminated by Quickturn. 43. Plaintiffs have no adequate remedy at law. WHEREFORE, plaintiffs respectfully request that this Court: a. declare that plaintiffs have disclosed all information required by, and are otherwise in all respects in compliance with, all applicable laws and other obligations, including, without -16- limitation, Sections 14(a), 14(d) and 14(e) of the Exchange Act and any other federal securities laws, rules or regulations deemed or claimed to be applicable to the Schedule 14D-1, the Tender Offer, the Agent Solicitation or the Agent Solicitation Materials; b. declare that Quickturn has violated Sections 14(d) and 14(e) of the Exchange Act and Rule 14d-9; c. compel Quickturn to comply with the requirements of the Exchange Act and the rules promulgated thereunder, and compel Quickturn to file immediately an amended Schedule 14D-9 which is complete and accurate and which corrects the misleading and untrue statements in its Schedule 14D-9; d. preliminarily and permanently enjoin Quickturn, its agents, employees and anyone acting on its behalf, from making any false or misleading statements with respect to the Tender Offer; e. award plaintiffs their costs and disbursements in this action, including reasonable attorneys' fees; and f. grant plaintiffs such other and further relief as this Court may deem just and proper. Of Counsel: Fredric J. Zepp Latham & Watkins Christopher L. Kaufman 505 Montgomery Street David A. York San Francisco, CA 94111 Latham & Watkins (415) 391-0600 75 Willow Road Menlo Park, CA 94025 H. Steven Wilson (650) 328-4600 Latham & Watkins 2100, 701 B Street San Diego, CA 92101-8197 (619) 236-1234 -17- Kevin G. Abrams (ID #2375) Thomas A. Beck (ID) #2086) Catherine G. Dearlove (ID #3328) Holly June Stiefel (ID #3594) Thad J. Bracegirdle (ID #3691) Richards, Layton & Finger One Rodney Square P. O. Box 551 Wilmington, DE 19899 (302) 658-6541 Attorneys for Plaintiffs Dated: August 25, 1998 -18- EX-16 5 COMPLAINT IN ANDREA BORWN V. QUICKTURN EXHIBIT 16 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY ANDREA BROWN, ) Civil Action No.: 166041 ) Plaintiff, ) ) v. ) ) QUICKTURN DESIGN SYSTEMS, INC., ) GLEN M. ANTLE, KEITH R. LOBO, ) RICHARD C. ALBERDING, MICHAEL R. ) D'AMOUR, YEN-SON (PAUL) HUANG; ) DAVID K. LAM and CHARLES D. ) KISSNER, ) Defendants. - ----------------------------------- CLASS ACTION COMPLAINT ---------------------- Plaintiff, by her attorneys, alleges upon personal knowledge as to her own acts and upon information and belief as to all other matters, as follows: NATURE OF ACTION ---------------- 1. Plaintiff brings this action on behalf of the public stockholders of Quickturn Design Systems, Inc. ("Quickturn" or the "Company") who have been, and continue to be, deprived of the opportunity to realize fully the value of their investment in Quickturn. The individual defendants, by their refusal diligently to pursue the proposal of Mentor Graphics Corporation ("Mentor") to acquire Quickturn, and their adoption and inequitable use of a shareholder rights plan (the "Poison Pill"), have evidenced their unwillingness to discharge their fiduciary duty to explore all alternatives to maximize shareholder value. Mentor's $209.5 million pending offer for the Company, equal to $12.125 per Quickturn share, represents a premium of over 50% on Quickturn's prior market price of $8 per share. The individual defendants are using their fiduciary positions of control over Quickturn to thwart Mentor and others in their legitimate attempts to acquire the Company and are entrenching themselves in their offices with Quickturn. PARTIES ------- 2. Plaintiff is and, at all relevant times, has been the owner of common stock of Quickturn. 3. Quickturn is a corporation duly organized and existing under the laws of the State of Delaware. Quickturn makes instruments for measuring and testing electrical signals. Quickturn maintains its principal executive offices at 440 Clyde Avenue, Mountainview, California. As of April 30, 1998, Quickturn had approximately 17,809,342 shares of common stock outstanding. 4. The individual defendants are the members of Quickturn's Board of Directors. In addition, the following individual defendants held the following positions at Quickturn: Glen M. Antle.................. Chairman of the Board of the Company Keith R. Lobo.................. President and Chief Executive Officer of the Company 5. The individual defendants, by reason of their corporate directorship and/or executive positions, stand in a fiduciary position relative to the Company's shareholders, which fiduciary relationship, requires the defendants to act in the best interests of the Company's stockholders with uncompromising loyalty and due care. CLASS ACTION ALLEGATIONS ------------------------ 6. Plaintiff brings this action on her own behalf and as a class action, pursuant to Rule 23 of the Rules of the Chancery Court Rules, on behalf of all stockholders of the Company (except defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants), who are or will be threatened with injury arising from defendants' actions as described more fully below (the "Class"). -2- 7. This action is properly maintainable as a class action because: (a) The Class is so numerous that joinder of all members is impracticable. The Company has hundreds, if not thousands, of record and beneficial stockholders who are scattered throughout the United States. (b) There are questions of law and fact common to the Class including, inter, alia, whether: - ----- ---- (i) Defendants have breached their fiduciary duties owed by them to plaintiff and other members of the Class by, inter alia, failing to act with ----- ---- the utmost good faith to maximize shareholder value; (ii) Defendants, through use of a Poison Pill, (described below) have engaged in a plan and scheme to thwart and reject bona fide offers and ---- ---- proposals from third parties; and (iii) Plaintiff and the other members of the Class are being and will continue to be injured by the wrongful conduct alleged herein and, if so, what is the proper remedy. (c) Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. Plaintiff's claims are typical of the claims of the other members of the Class. Accordingly, plaintiff is an adequate representative of the Class. (d) The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standard of conduct for defendants, or adjudications with respect to individual members of the Class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. (e) The defendants have acted, or refused to act, on grounds generally applicable to, and causing injury to, the Class and, therefore, preliminary and final injunctive relief on behalf of the Class as a while is appropriate. -3- SUBSTANTIVE ALLEGATIONS ----------------------- 8. On or about August 12, 1998, Mentor commenced a tender offer to acquire Quickturn for $12.125 in cash for each share of Quickturn. The offer is not conditioned on financing. On August 24, 1998, Quickturn announced that it was rejecting that bid. 9. In a Schedule 14A filed by Mentor with the Securities and Exchange Commission in connection with the proposal, Mentor disclosed that it had had discussions with Quickturn about a business combination as early as August, 1995. By January, 1996, Quickturn had implemented a "shareholder rights plan," or "poison pill," in order to hinder any takeover proposal not supported by Quickturn's Board. 10. Instead of utilizing the Poison Pill as required by defendants' fiduciary duties, i.e., to allow Quickturn's directors to explore proposals without undue pressure, Quickturn has refused to properly explore the Mentor proposal or even to give general assurances that the poison pill would be deployed for the purpose of maximizing shareholder value. 11. On or about August 12, 1998, Mentor commenced suit against Quickturn in this Court seeking to enjoin deployment of the Rights plan to impede its offer and to prohibit Quickturn and its Board from adopting any other defensive measure that would have the effect of impeding or interfering with the offer. On August 12, 1998, Mentor commenced suit in the United States District Court for the District of Delaware seeking related relief under the federal securities laws. 12. Any improper use of the Poison Pill has the force and effect of entrenching the Individual Defendants in their corporate offices against any real or perceived threat to their control, and dramatically impairs the rights of Class members to exercise freedom of choice in a proxy contest or to avail themselves of a bona fide offer to purchase their shares by an acquiror, such as ---- ---- Mentor, unfavored by incumbent management. This fundamental shift of control of the Company's destiny from the hands of its stockholders to the hands of the Individual Defendants results in a heightened fiduciary duty on the part of the individual defendants to consider, in good faith, a third party bid, such as Mentor's, and further requires the Individual Defendants to pursue a third party's -4- interest in acquiring the Company and to negotiate in good faith with a bidder on behalf of the Company's shareholders. 13. The purpose, intent and effect of the Poison Pill, in the face of a pending offer for the Company, is to thwart, deter, impede, and delay the acquisition of Quickturn by Mentor or any other suitor unfavored by management - -- no matter how attractive the offer. 14. Defendants' rejection of Mentor's offer ensures their continued positions with the Company and deprives plaintiff and the Company's other public shareholders of the opportunity to maximize the value of their Quickturn stock through the premium that Mentor is prepared to pay, or of the enhanced premium that further negotiation or exposure of Quickturn to the market and other potential bidders could provide. 15. Defendants owe fundamental fiduciary obligations to Quickturn's stockholders to take all necessary and appropriate steps to maximize the value of their shares. In addition, the Individual Defendants have the responsibility to act independently so that the interests of the Company's public stockholders will be protected, to consider seriously all bona fide offers for the Company, ---- ---- to sell the Company if it would be in the best interests of the stockholders to do so, and, if so, to take steps to ensure that the highest possible price is achieved. 16. Plaintiff seeks preliminary and permanent injunctive relief and declaratory relief preventing defendants from inequitably and unlawfully depriving plaintiff and the Class of their rights to realize full and fair value for their stock at a premium over the market price while unlawfully entrenching themselves in their positions of control, and to compel defendants to carry out their fiduciary duties to maximize shareholder value. 17. Only through the exercise of this Court's equitable powers can plaintiff and the Class be fully protected from the immediate and irreparable injury which defendants' actions threaten to inflict. 18. Plaintiff and the Class have no adequate remedy at law. WHEREFORE, plaintiff demands judgment as follows: A. Declaring this to be a proper class action and certifying plaintiff as a class representative; -5- B. Ordering the Individual Defendants to fulfill their fiduciary duties to plaintiff and the other members of the Class by; (i) carefully and impartially investigating any expression of interest by any entity or person, including but not limited to Mentor, having a bona fide interest in proposing any transactions that would maximize ---- ---- shareholder value, including, but not limited to, a merger or acquisition of Quickturn; (ii) immediately undertaking an appropriate evaluation of Quickturn's worth as a merger/acquisition candidate; (iii) taking all appropriate steps to enhance Quickturn's value and attractiveness as a merger/acquisition candidate; and (iv) taking all appropriate steps to effectively expose Quickturn to the marketplace in an effort to create an active auction of the Company, or otherwise ensuring that Quickturn's public stockholders receive the maximum value for their shares; C. Ordering the Individual Defendants to deploy Quickturn's Poison Pill in a manner which will maximize shareholder value; D. Ordering the Individual Defendants, jointly and severally, to account to plaintiff and the Class for all damages suffered and to be suffered by them as a result of the wrongs complained of herein; -6- E. Awarding plaintiff the costs and disbursements of this action, including a reasonable allowance for plaintiff's attorneys' and experts' fees; and F. Granting such other and further relief as may be just and proper. ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A. By: [Illegible] --------------------------------------- Suite 1401, Mellon Bank Center P.O. Box 1070 Wilmington, Delaware 19899 Telephone: (302) 656-4433 Attorneys for Plaintiff OF COUNSEL: ABBEY, GARDY & SQUITIERI, LLP 212 East 39th Street New York, New York 10016 Telephone: (212) 889-3700 -7- EX-17 6 COMPLAINT IN MOHAMED YASSIN V. QUICKTURN EXHIBIT 17 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY MOHAMED YASSIN, ) Civil Action No.: 16603NC ) Plaintiff, ) ) v. ) ) QUICKTURN DESIGN SYSTEMS, INC., ) GLEN M. ANTLE, KEITH R. LOBO, ) RICHARD C. ALBERDING, MICHAEL R. ) D'AMOUR, YEN-SON (PAUL) HUANG, ) DAVID K. LAM and CHARLES D. ) KISSNER, ) Defendants. - ----------------------------------- CLASS ACTION COMPLAINT ---------------------- Plaintiff, by his attorneys, alleges upon personal knowledge as to his own acts and upon information and belief as to all other matters, as follows: 1. Plaintiff brings this action pursuant to Rule 23 of the Rules of the Chancery Court Rules on his own behalf and as a class action on behalf of all persons, other than defendants and those in privity with them, who own the common stock of Quickturn Design Systems, Inc. ("Quickturn" or the "Company"). 2. Plaintiff has been the owner of the common stock of the Company since prior to the wrongs herein complained of and continuously to date. 3. Defendant Quickturn is a corporation duly organized and existing under the laws of the State of Delaware. Quickturn makes instruments for measuring and testing electrical signals. Quickturn maintains its principal executive offices at 440 Clyde Avenue, Mountainview, California. As of April 30, 1998, Quickturn had approximately 17,809,342 shares of common stock outstanding. Quickturn's common stock is traded on the NASDAQ national market system. 4. Defendant Glen M. Antle is Chairman of the Board of the Company. 5. Defendant Keith R. Lobo is President and Chief Executive Officer of the Company. 6. Defendants Richard C. Alberding, Michael R. D'Amour, Yen-Son (Paul) Huang, David K. Lam and Charles D. Kissner are directors of Quickturn. 7. The individual defendants are collectively referred to throughout this complaint as the "Individual Defendants". 8. The Individual Defendants are fiduciaries to the Company's shareholders and owe them the highest obligations of loyalty and due care. CLASS ACTION ALLEGATIONS ------------------------ 9. Plaintiff brings this action on his own behalf and as a class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all stockholders of Quickturn (except defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants), who are and will be threatened with injury arising from defendants' actions as more fully described herein. 10. This action is properly maintainable as a class action because: (a) The Class is so numerous that joinder of all members is impracticable. The Company has hundreds, if not thousands, of record and beneficial stockholders who are scattered throughout the United States. According to Quickturn's latest Form 10-K filed with the Securities -2- and Exchange Commission, Quickturn has 207 shareholders of record. Many of these record holders act as nominees for multiple beneficial owners. (b) There are questions of law and fact common to the Class including, inter alia, whether: (i) Defendants have breached their fiduciary duties owed by them to plaintiff and other members of the Class by, inter alia, failing in good faith to maximize shareholder value; (ii) Defendants, through use of a "Poison Pill" (described below), have engaged in a plan and scheme to thwart and reject bona fide offers ---- ---- from third parties; and (iii) Plaintiff and the other members of the Class are being and will continue to be injured by the wrongful conduct alleged herein and, if so, what is the proper remedy. (c) Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. Plaintiff's claims are typical of the claims of the other members of the Class. Accordingly, plaintiff is an adequate representative of the Class. (d) The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standard of conduct for defendants, or adjudications with respect to individual members of the Class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. -3- (e) The defendants have acted, or refused to act, on grounds generally applicable to, and causing injury to, the Class and, therefore, preliminary and final injunctive relief on behalf of the Class as a whole is appropriate. SUBSTANTIVE ALLEGATIONS ----------------------- 11. On or about August 12, 1998, Mentor Graphics Corporation ("Mentor") commenced a fully financed tender offer to acquire all of the outstanding stock of Quickturn for $12.125 per share in cash. On August 24, 1998, Quickturn announced that it was rejecting that bid. 12. In a Schedule 14A filed by Mentor with the Securities and Exchange Commission in connection with its tender offer, Mentor disclosed that it had had discussions with Quickturn about a business combination as early as August, 1995. By January, 1996, Quickturn had implemented a "Shareholder Rights Plan," or "Poison Pill," in order to hinder any takeover proposal not favored by Quickturn's Board. 13. Instead of utilizing the Poison Pill as required by defendants' fiduciary duties, i.e., to allow Quickturn's directors to explore proposals ---- without undue pressure, Quickturn has refused to properly explore the Mentor proposal or even to give general assurances that the Poison Pill would be deployed to maximize shareholder value. 14. On or about August 12, 1998, Mentor commenced suit against Quickturn in this Court seeking to enjoin deployment of the Shareholder Rights Plan to impede its offer and to prohibit Quickturn and its Board from adopting any other defensive measure that would have the effect of impeding or interfering with the offer. On August 12, 1998, Mentor commenced suit in the United States District Court for the District of Delaware seeking related relief under the federal securities laws. -4- 15. Defendants' improper use of the Poison Pill has the force and effect of entrenching the Individual Defendants in their corporate offices against any real or perceived threat to their control, and dramatically impairs the rights of Class members to exercise freedom of choice in a proxy contest or to avail themselves of a bona fide offer to purchase their shares by an acquiror, such as ---- ---- Mentor, unfavored by incumbent management. This fundamental shift of control of the Company's destiny from its stockholders to the Individual Defendants results in a heightened fiduciary duty on the part of the Individual Defendants to consider, in good faith, a third party bid, such as Mentor's, and further requires the Individual Defendants to pursue a third party's interest in acquiring the Company and to negotiate in good faith with a bidder on behalf of the Company's shareholders. 16. The purpose, intent and effect of the Poison Pill, in the face of the pending offer for the Company, is to thwart, deter, impede, and delay the acquisition of Quickturn by Mentor or any other suitor unfavored by defendants even if the potential acquisition of Quickturn would represent the strategic alternative most advantageous to the Company's shareholders. 17. Defendants' rejection of Mentor's offer ensures their continued positions with the Company and deprives plaintiff and the Company's other public shareholders of the opportunity to maximize the value of their Quickturn stock through the premium that Mentor is prepared to pay, or of the enhanced premium that further negotiation or exposure of Quickturn to the market and other potential bidders could provide. 18. Defendants owe fundamental fiduciary obligations to Quickturn's stockholders to take all necessary and appropriate steps to maximize the value of their shares. In addition, the Individual Defendants have the responsibility to act independently so that the interests of the Company's public stockholders will be protected, to consider seriously all bona fide offers for the Company, ---- ---- to sell the -5- Company if it would be in the best interests of the stockholders to do so, and, if so, to take steps to ensure that the highest possible price is achieved. 19. Plaintiff seeks preliminary and permanent injunctive relief and declaratory relief preventing defendants from inequitably and unlawfully depriving plaintiff and the Class of their rights to realize full and fair value for their stock at a significant premium over the market price while unlawfully entrenching defendants in their positions of control, and to compel defendants to carry out their fiduciary duties to maximize shareholder value. -6- 20. Only through the exercise of this Court's equitable powers can plaintiff and the Class be fully protected from the immediate and irreparable injury which defendants' actions threaten to inflict. 21. Plaintiff and the Class have no adequate remedy at law. WHEREFORE, plaintiff demands judgment as follows: A. Declaring this to be a proper class action and certifying plaintiff as a class representative; B. Ordering the Individual Defendants to fulfill their fiduciary duties to plaintiff and the other members of the Class by: (i) carefully and impartially investigating any expression of interest by any entity or person, including, but not limited to Mentor, having a bona fide interest in proposing any transactions that would maximize shareholder - ---- ---- value, including, but not limited to, a merger or acquisition of Quickturn; (ii) immediately undertaking an appropriate evaluation of Quickturn's worth as a merger/acquisition candidate; (iii) taking all appropriate steps to enhance Quickturn's value and attractiveness as a merger/acquisition candidate; and (iv) taking all appropriate steps to effectively expose Quickturn to the marketplace in an effort to create an active auction of the Company, or otherwise ensuring that Quickturn's public stockholders receive the maximum value for their shares; -7- C. Ordering the Individual Defendants to deploy Quickturn's Poison Pill in a manner which will maximize shareholder value; D. Ordering the Individual Defendants, jointly and severally, to account to plaintiff and the Class for all damages suffered and to be suffered by them as a result of the wrongs complained of herein; E. Awarding plaintiff the costs and disbursements of this action, including a reasonable allowance for plaintiff's attorneys' and experts' fees; and F. Granting such other and further relief as may be just and proper. ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A. By: [Illegible] ------------------------------------- Suite 1401, Mellon Bank Center P.O. Box 1070 Wilmington, Delaware 19899 Telephone: (302) 656-4433 Attorneys for Plaintiff OF COUNSEL: FARUQI & FARUQI, LLP 415 Madison Avenue New York, New York 10017 (212) 986-1074 -8- -----END PRIVACY-ENHANCED MESSAGE-----