EXHIBIT 8
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
MENTOR GRAPHICS CORPORATION and ) No. 98-423
MGZ CORP., )
)
Plaintiffs, )
)
v. )
)
QUICKTURN DESIGN SYSTEMS, INC., )
)
Defendant. )
COMPLAINT
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Plaintiffs Mentor Graphics Corporation ("Mentor Graphics") and MGZ Corp.
("Purchaser") file this action seeking declaratory relief arising out of
Purchaser's offer to purchase shares of common stock of defendant Quickturn
Design Systems, Inc. ("Quickturn").
JURISDICTION AND VENUE
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1. This Court has jurisdiction over this action pursuant to 15 U.S.C. (S)
78aa, 28 U.S.C. (S) 133l(a) and 28 U.S.C. (S) 1337(a).
2. Venue in this Court is proper pursuant to 15 U.S.C. (S) 78aa and 28
U.S.C. (S) 1391(b).
THE PARTIES
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3. Plaintiff Mentor Graphics is a corporation incorporated under the laws
of the State of Oregon having its principal executive offices in Wilsonville,
Oregon. Mentor Graphics manufactures, markets and supports software and
hardware Electronic Design Automation ("EDA") products and provides related
services which enable engineers to design, analyze, simulate, model, implement
and 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) 781(b),
and is listed and traded on the Nasdaq National Market.
THE TENDER OFFER
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6. Purchaser commenced today 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 today 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
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Street Journal (the "Summary Advertisement").
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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 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
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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. The
Rights Plan was adopted without approval of Quickturn's stockholders and, if it
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
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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
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provisions of the Williams Act, embodied in Sections 14(d) and 14(e) 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 today's Wall Street Journal. In connection with
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the Tender Offer and in accordance with the Exchange Act and the rules and
regulations promulgated thereunder by the SEC, Purchaser is filing today a
Schedule 14D-1 with the SEC (the "Schedule 14D-1") pursuant to Section 14(d)(1)
of the Exchange Act and Rule l4d-3 promulgated thereunder, 17 C.F.R.
(S) 240.I4d-3.
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12. Section 14(d) of the Exchange Act, 15 U.S.C. (S) 78n(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 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.
13. 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.
14. 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"). 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;
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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.
15. 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
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16. On August 11, 1998, Dr. Walden C. Rhines ("Rhines"), Mentor Graphics'
Chief Executive Officer and President, met with Glen M. Antle ("Antle"), the
Chairman of the Quickturn Board. At this meeting, Rhines presented Mentor
Graphics' proposal to acquire Quickturn. Rhines 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 proposal to the
Quickturn Board, he
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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.
17. In light of Quickturn's failure to accept 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
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18. In furtherance of the Proposed Acquisition, Mentor Graphics publicly
disclosed today 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 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.
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19. 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."
20. Mentor Graphics' preliminary agent solicitation materials relating to
the call of the Special Meeting are being filed today with the SEC (the "Agent
Solicitation Materials"). Mentor Graphics believes the Agent Solicitation
Materials are in full compliance with Section 14(a) of the Exchange Act and the
rules and regulations promulgated thereunder by the SEC, including Rule 14a-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 preliminary 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;
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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, (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.
21. In furtherance of Mentor Graphics' solicitation of agent designations,
Purchaser is demanding that Quickturn produce a list of its stockholders and
related stocklist materials.
DECLARATORY RELIEF
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22. 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
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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.
23. 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.
24. 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
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.
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25. 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.
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 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. award plaintiffs their costs and disbursements in this action,
including reasonable attorneys' fees; and
c. grant plaintiffs such other and further relief as this Court may
deem just and proper.
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/s/ Kevin G. Abrams / by T.J. Bracegirdle
Of Counsel: _________________________________________
Kevin G. Abrams (ID #2375)
Christopher L. Kaufman Thomas A. Beck (ID #2086)
David A. York Catherine G. Dearlove (ID #3328)
Latham & Watkins Holly June Stiefel (ID #3594)
75 Willow Road Thad J. Bracegirdle (ID #3691)
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 Francisco, CA 94111
(415) 391-0600
H. Steven Wilson
Latham & Watkins
2100, 701 B Street
San Diego, CA 92101-8197
(619) 236-1234
Dated: August 12, 1998
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