EXHIBIT 2
QUICKTURN DESIGN SYSTEMS, INC.
AND
BANKBOSTON, N.A.
(FORMERLY KNOWN AS THE FIRST NATIONAL BANK OF BOSTON)
RIGHTS AGENT
AMENDMENT NO. 1
TO
PREFERRED SHARES RIGHTS AGREEMENT
DATED AS OF AUGUST 25, 1998
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
Amendment No. 1 to Rights Agreement, dated as of August 25, 1998
("AMENDMENT NO. 1"), between Quickturn Design Systems, Inc., a Delaware
corporation (the "COMPANY"), and BankBoston, N.A. (formerly known as the First
National Bank of Boston) (the "RIGHTS AGENT").
WHEREAS, on January 10, 1996 the Company and the Rights Agent entered into
a Rights Agreement (the "ORIGINAL AGREEMENT," as amended hereby is hereinafter
referred to as the "AGREEMENT");
WHEREAS, the Company, with the approval of the Board of the Directors of
the Company, and the Rights Agent have mutually agreed to modify the terms of
the Agreement in certain respects pursuant to this Amendment No. 1.
NOW, THEREFORE, in consideration of the promises and the mutual agreements
herein set forth, the parties hereto hereby agree that the Original Agreement is
amended as follows:
1. Amendment of "Certain Definitions" Section.
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(a) Section 1(g) of the Original Agreement is hereby deleted in its
entirety.
(b) Section 1(h) of the Original Agreement is hereby deleted in its
entirety and the following is substituted therefore:
(g) "DISTRIBUTION DATE" shall mean the earlier of (i) the Close of
Business on the tenth day (or such later date as may be determined by
action of the Company's Board of Directors) after the Shares
Acquisition Date (or, if the tenth day after the Shares Acquisition
Date occurs before the Record Date, the Close of Business on the
Record Date), (ii) except as otherwise provided in clause (iii) below,
the Close of Business on the tenth day (or such later date as may be
determined by action of the Company's Board of Directors) after the
date that a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan) is commenced within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under
the Exchange Act, if, assuming the successful consummation thereof,
such Person would be the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding, or (iii) with respect to (A) the
tender offer (the "MENTOR TENDER OFFER") disclosed in a Tender Offer
Statement on Schedule 14D-1, dated August 12, 1998, filed with the
Securities and Exchange Commission by MGZ Corp., a Delaware
corporation and wholly-owned subsidiary of Mentor Graphics
Corporation, an Oregon corporation ("MENTOR"), and any amendment to
such Mentor Tender Offer or (B) the commencement of a separate tender
offer within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act by Mentor or any Affiliate or
Associate of Mentor, a date to be determined by the Company's Board of
Directors.
(c) Paragraphs (i) through (k) of Section 1 of the Original Agreement are
hereby amended such that such paragraphs shall be labeled (h) through (j),
respectively.
(d) The following shall be inserted into Section 1 of the Agreement
immediately following Section 1(j):
(k) "INTERESTED PERSON" with respect to a Transaction shall mean any
Person who (i) is or will become an Acquiring Person if such
Transaction were to be consummated or an Affiliate or Associate of
such a Person, and (ii) is, or directly or indirectly proposed,
nominated or financially supported, a director of the Company in
office at the time of consideration of such Transaction who was
elected at an annual or special meeting of stockholders.
(e) Section 1(l) of the Original Agreement is hereby deleted in its
entirety.
(f) Paragraphs (m) through (x) of Section 1 of the Original Agreement are
hereby amended such that such paragraphs shall be labeled (l) through (w),
respectively.
(g) The following shall be inserted into Section 1 of the Original
Agreement immediately following Section 1(w):
(x) "TRANSACTION" shall mean any merger, consolidation or sale of
assets described in Section 13(a) hereof or any acquisition of Common
Shares which would result in a Person becoming an Acquiring Person.
2. Amendment of "Adjustment of Purchase Price, Number of Shares or Number of
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Rights" Section. Section 11(a) of the Original Agreement is hereby deleted in
- ---------------
its entirety and the following is substituted therefore:
(a) (i) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Common Shares payable in Common
Shares, (B) subdivide the outstanding Common Shares, (C) combine the
outstanding Common Shares (by reverse stock split or otherwise) into a
smaller number of Common Shares, or (D) issue any shares of its capital
stock in a reclassification of the Common Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, in each such
event, except as otherwise provided in this Section 11(a) and Section 7(e)
hereof: (1) each of the Rights outstanding at the time of the record date
for such dividend or the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted to that number of Rights
(calculated to the nearest one ten-thousandth (1/10,000) of a Right) equal
to a fraction (the "EXCHANGE RATIO"), the numerator of which shall
-2-
be the total number of Common Shares or shares of capital stock outstanding
immediately following such subdivision, combination or reclassification and
the denominator of which shall be the total number of Common Shares
outstanding immediately prior to such time, and the number of Rights that
shall thereafter be issued with respect to each Common Share or share of
such other capital stock that shall become outstanding thereafter prior to
the Distribution Date shall be equal to the total number of outstanding
Rights immediately after such event (as adjusted pursuant to this clause
(1)) divided by the total number of outstanding Common Shares or shares of
such other capital stock immediately after such event (subject to further
adjustment pursuant to the provisions of this Agreement); (2) the Purchase
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification shall
be adjusted so that the Purchase Price thereafter shall equal the result
obtained by dividing the Purchase Price in effect immediately prior to such
time by the Exchange Ratio; provided, however, that in no event shall the
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consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable
upon exercise of such Right; and (3) the number of Common Shares or shares
of such other capital stock issuable upon the exercise of each Right shall
remain unchanged immediately after such event, but, in the event of a
reclassification, the kind of shares issuable upon the exercise of each
Right immediately after such reclassification shall be adjusted to be the
kind of shares of such other capital stock issued in such reclassification,
rather than Common Shares. If an event occurs which would require an
adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof,
the adjustment provided for in this Section 11(a)(i) shall be in addition
to, and shall be made prior to, any adjustment required pursuant to Section
11(a)(ii) hereof.
(ii) Subject to Section 24 of this Agreement, in the event a
Triggering Event shall have occurred, then promptly following such
Triggering Event, proper provision shall be made so that each holder of a
Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive for each Right, upon exercise thereof in accordance with
the terms of this Agreement and payment of the then-current Total Exercise
Price, in lieu of a number of one-thousandths of a Preferred Share, such
number of Common Shares of the Company as shall equal the result obtained
by multiplying the then-current Purchase Price by the then number of one-
thousandths of a Preferred Share for which a Right was exercisable (or
would have been exercisable if the Distribution Date had occurred)
immediately prior to the first occurrence of a Triggering Event, and
dividing that product by 50% of the current per share market price
(determined pursuant to Section 11(d) hereof) for Common Shares on the date
of occurrence of the Triggering Event (such number of shares being
hereinafter referred to as the "ADJUSTMENT SHARES").
(iii) In lieu of issuing Common Shares in accordance with Section
11(a)(ii) hereof, the Company may, if the Board of Directors determines
that such action is necessary or appropriate and not contrary to the
interest of holders of Rights (and, in the event that the number of Common
Shares which are authorized by the Company's Certificate of Incorporation
but not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights are not sufficient to permit the exercise in full of
the Rights, or if any necessary regulatory approval for
-3-
such issuance has not been obtained by the Company, the Company shall): (A)
determine the excess of (1) the value of the Common Shares issuable upon
the exercise of a Right (the "CURRENT VALUE") over (2) the Purchase Price
(such excess, the "SPREAD") and (B) with respect to each Right, make
adequate provision to substitute for such Common Shares, upon exercise of
the Rights, (1) cash, (2) a reduction in the Purchase Price, (3) other
equity securities of the Company (including, without limitation, shares or
units of shares of any series of preferred stock which the Board of
Directors of the Company has deemed to have the same value as Common Shares
(such shares or units of shares of preferred stock are herein called
"common stock equivalents")), except to the extent that the Company has not
obtained any necessary stockholder or regulatory approval for such
issuance, (4) debt securities of the Company, except to the extent that the
Company has not obtained any necessary stockholder or regulatory approval
for such issuance, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board of Directors of the
Company based upon the advice of a nationally recognized investment banking
firm selected by the Board of Directors of the Company; provided, however,
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if the Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following the later of
(x) the first occurrence of a Triggering Event and (y) the date on which
the Company's right of redemption pursuant to Section 23(a) expires (the
later of (x) and (y) being referred to herein as the "SECTION 11(A)(II)
TRIGGER DATE"), then the Company shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring payment of the
Purchase Price, Common Shares (to the extent available), except to the
extent that the Company has not obtained any necessary stockholder or
regulatory approval for such issuance, and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread. If the
Board of Directors of the Company shall determine in good faith that it is
likely that sufficient additional Common Shares could be authorized for
issuance upon exercise in full of the Rights or that any necessary
regulatory approval for such issuance will be obtained, the thirty (30) day
period set forth above may be extended to the extent necessary, but not
more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in
order that the Company may seek stockholder approval for the authorization
of such additional shares or take action to obtain such regulatory approval
(such period, as it may be extended, the "SUBSTITUTION PERIOD"). To the
extent that the Company determines that some action need be taken pursuant
to the first and/or second sentences of this Section 11(a)(iii), the
Company (x) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution
Period in order to seek any authorization of additional shares, to take any
action to obtain any required regulatory approval and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence
and to determine the value thereof. In the event of any such suspension,
the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
For purposes of this Section 11(a)(iii), the value of the Common Shares
shall be the current per share market price (as determined pursuant to
Section 11(d) hereof) of the Common Shares on the Section 11(a)(ii) Trigger
Date and the value of any "common stock equivalent" shall be deemed to have
the same value as the Common Shares on such date.
-4-
3. Amendment of "Consolidation, Merger or Sale or Transfer of Assets or
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Earning Power" Section. Section 13(d) of the Original Agreement is hereby
- ----------------------
deleted in its entirety and paragraphs (e) and (f) of Section 13 shall be
relabeled paragraphs (d) and (e), respectively.
4. Amendment of "Redemption" Section. Section 23 of the Original Agreement is
---------------------------------
hereby deleted in its entirety and the following is substituted therefore:
Section 23. Redemption.
----------
(a) The Company may, at its option and with the approval of the Board
of Directors, at any time prior to the Close of Business on the earlier of
(i) the tenth day following the Shares Acquisition Date or such later date
as may be determined by action of a majority of the Company's Board of
Directors and publicly announced by the Company and (ii) the Final
Expiration Date, redeem all but not less than all the then outstanding
Rights at a redemption price of $0.01 per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring
after the date hereof (such redemption price being herein referred to as
the "REDEMPTION PRICE") and the Company may, at its option, pay the
Redemption Price either in Common Shares (based on the current per share
market price thereof (as determined pursuant to Section 11(d) hereof) at
the time of redemption) or cash. Such redemption of the Rights by the
Company may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
(b) Notwithstanding the provision of Section 23(a), in the event that
a majority of the Board of Directors of the Company is elected by
stockholder action at an annual or special meeting of stockholders, then
until the 180th day following the effectiveness of such election (including
any postponement or adjournment thereof), the Rights shall not be redeemed
if such redemption is reasonably likely to have the purpose or effect of
facilitating a Transaction with an Interested Person.
(c) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have
been filed with the Rights Agent, and without any further action and
without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price. The Company shall promptly give public notice of any such
redemption; provided, however, that the failure to give or any defect in,
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any such notice shall not affect the validity of such redemption. Within
ten (10) days after the action of the Board of Directors ordering the
redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by
mailing such notice to all such holders at their last addresses as they
appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each
such notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any
Rights at any time in any manner
-5-
other than that specifically set forth in this Section 23 or in Section 24
hereof, and other than in connection with the purchase of Common Shares
prior to the Distribution Date.
5. Amendment of "Exchange" Section. Section 24 of the Original Agreement is
-------------------------------
hereby deleted in its entirety and the following is substituted therefore:
Section 24. Exchange.
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(a) Subject to applicable laws, rules and regulations, and subject to
subsections (b) and (d) below, the Company may, at its option, by action of
the Board of Directors, at any time after the occurrence of a Triggering
Event, exchange all or part of the then outstanding and exercisable Rights
(which shall not include Rights that have become void pursuant to the
provisions of Section 7(e) hereof) for Common Shares at an exchange ratio
of one Common Share per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date
hereof (such exchange ratio being hereinafter referred to as the "RATIO OF
EXCHANGE"). Notwithstanding the foregoing, the Board of Directors shall
not be empowered to effect such exchange at any time after any Person
(other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity holding
Common Shares for or pursuant to the terms of any such plan), together with
all Affiliates and Associates of such Person, becomes the Beneficial Owner
of 50% or more of the Common Shares then outstanding.
(b) Notwithstanding the provision of Section 24(a), in the event that
a majority of the Board of Directors of the Company is elected by
stockholder action at an annual or special meeting of stockholders, then
until the 180th day following the effectiveness of such election (including
any postponement or adjournment thereof), the Rights shall not be exchanged
pursuant to Section 24(a) if such exchange is reasonably likely to have the
purpose or effect of facilitating a Transaction with an Interested Person.
(c) Immediately upon the action of the Board of Directors ordering the
exchange of any Rights pursuant to subsection (a) of this Section 24 and
without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of
such Rights shall be to receive that number of Common Shares equal to the
number of such Rights held by such holder multiplied by the Ratio of
Exchange. The Company shall give public notice of any such exchange;
provided, however, that the failure to give, or any defect in, such notice
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shall not affect the validity of such exchange. The Company shall mail a
notice of any such exchange to all of the holders of such Rights at their
last addresses as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the Common Shares
for Rights will be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights which
have become void pursuant to the provisions of Section 7(f) hereof) held by
each holder of Rights.
-6-
(d) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with Section 24(a), the
Company shall either take such action as may be necessary to authorize
additional Common Shares for issuance upon exchange of the Rights or
alternatively, at the option of a majority of the Board of Directors, with
respect to each Right (i) pay cash in an amount equal to the Current Value
(as hereinafter defined), in lieu of issuing Common Shares in exchange
therefor, or (ii) issue debt or equity securities or a combination thereof,
having a value equal to the Current Value, in lieu of issuing Common Shares
in exchange for each such Right, where the value of such securities shall
be determined by a nationally recognized investment banking firm selected
by majority vote of the Board of Directors, or (iii) deliver any
combination of cash, property, Common Shares and/or other securities having
a value equal to the Current Value in exchange for each Right. For
purposes of this Section 24(d) only, the Current Value shall mean the
product of the current per share market price of Common Shares (determined
pursuant to Section 11(e) on the date of the occurrence of the event
described above in subparagraph (a)) multiplied by the number of Common
Shares for which the Right otherwise would be exchangeable if there were
sufficient shares available. To the extent that the Company determines
that some action need be taken pursuant to clauses (i), (ii) or (iii) of
this Section 24(d), the Board of Directors may temporarily suspend the
exercisability of the Rights for a period of up to sixty (60) days
following the date on which the event described in Section 24(a) shall have
occurred, in order to seek any authorization of additional Common Shares
and/or to decide the appropriate form of distribution to be made pursuant
to the above provision and to determine the value thereof. In the event of
any such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended.
(e) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, there shall be paid to
the registered holders of the Rights Certificates with regard to which such
fractional Common Shares would otherwise be issuable, an amount in cash
equal to the same fraction of the current per share market value of a whole
Common Share (as determined pursuant to the second sentence of Section
11(e) hereof).
(f) The Company may, at its option, by majority vote of the Board of
Directors, at any time before any Person has become an Acquiring Person,
exchange all or part of the then outstanding Rights for rights of
substantially equivalent value, as determined reasonably and with good
faith by the Board of Directors, based upon the advice of one or more
nationally recognized investment banking firms.
(g) Immediately upon the action of the Board of Directors ordering
the exchange of any Rights pursuant to subsection (f) of this Section 24
and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of rights in exchange
therefor as has been determined by the Board of Directors in accordance
with subsection (f) above. The Company shall give public notice of any
such exchange; provided, however, that the failure to
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-7-
give, or any defect in, such notice shall not affect the validity of such
exchange. The Company shall mail a notice of any such exchange to all of
the holders of such Rights at their last addresses as they appear upon the
registry books of the transfer agent for the Common Shares of the Company.
Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the Rights will be
effected.
6. Amendment to "Supplements and Amendments" Section. Section 27 of the
-------------------------------------------------
Original Agreement is hereby deleted in its entirety and the following is
substituted therefore:
Section 27. Supplements and Amendments.
--------------------------
(a) Prior to the Distribution Date, the Company may supplement or amend
this Agreement in any respect without the approval of any holders of Rights
and the Rights Agent shall, if the Company so directs, execute such
supplement or amendment. From and after the Distribution Date, the Company
and the Rights Agent may from time to time supplement or amend this
Agreement without the approval of any holders of Rights in order to (i)
cure any ambiguity, (ii) correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions
herein, (iii) shorten or lengthen any time period hereunder, or (iv) change
or supplement the provisions hereunder in any manner that the Company may
deem necessary or desirable and that shall not adversely affect the
interests of the holders of Rights (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person); provided, this Agreement
--------
may not be supplemented or amended to lengthen, pursuant to clause (iii) of
this sentence, (A) a time period relating to when the Rights may be
redeemed at such time as the Rights are not then redeemable or (B) any
other time period unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and/or the benefits to, the holders
of Rights (other than an Acquiring Person or an Affiliate or Associate of
an Acquiring Person). Upon the delivery of a certificate from an
appropriate officer of the Company that states that the proposed supplement
or amendment is in compliance with the terms of this Section 27, the Rights
Agent shall execute such supplement or amendment. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares.
(b) Notwithstanding the provisions of Section 27(a), in the event that
a majority of the Board of Directors of the Company is elected by
stockholder action at an annual or special meeting of stockholders, then
until the 180th day following the effectiveness of such election (including
any postponement or adjournment thereof), this Agreement shall not be
supplemented or amended in any manner reasonably likely to have the purpose
or effect of facilitating a Transaction with an Interested Person.
7. Amendment of "Determinations and Actions by the Board of Directors, etc."
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Section. Section 29 of the Original Agreement is hereby deleted in its entirety
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and the following is substituted therefore:
-8-
Section 29. Determinations and Actions by the Board of Directors, etc.
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For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding Common Shares of
which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and
Regulations under the Exchange Act. The Board of Directors of the Company
shall have the exclusive power and authority to administer this Agreement
and to exercise all rights and powers specifically granted to the Board, or
the Company, or as may be necessary or advisable in the administration of
this Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Agreement and (ii) make all determinations
deemed necessary or advisable for the administration of this Agreement
(including a determination to redeem or not redeem the Rights or to amend
the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions
with respect to the foregoing) which are done or made by the Board in good
faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights Certificates and all other parties
and (y) not subject the Board to any liability to the holders of the
Rights.
8. Amendment of "Exhibit C". Exhibit C of the Original Agreement is hereby
------------------------
deleted in its entirety and Exhibit C as attached hereto is substituted
therefore.
9. Ratification of Original Agreement. Except as amended hereby, the Original
----------------------------------
Agreement remains unchanged and is ratified and confirmed in all respects.
-9-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
Rights Agreement to be duly executed as of the day and year first above written.
"COMPANY" QUICKTURN DESIGN SYSTEMS, INC.
By: /s/ Keith R. Lobo
-------------------------------------
Keith R. Lobo
President and Chief Executive Officer
"RIGHTS AGENT" BANKBOSTON, N.A.
By: /s/ Geoffrey D. Anderson
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Name: Geoffrey D. Anderson
--------------------------------------
Title: Director
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[AMENDMENT NO. 1 TO RIGHTS AGREEMENT]
EXHIBIT C
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QUICKTURN DESIGN SYSTEMS, INC.
STOCKHOLDER RIGHTS PLAN
Summary of Rights
-----------------
Distribution and The Board of Directors has declared a dividend of one
- ---------------- Right for each outstanding share of Common Stock of
Transfer of Rights; Quickturn Design Systems, Inc. (the "COMPANY"). Prior
- ------------------- to the Distribution Date referred to below, the Rights
Rights Certificate: will be evidenced by and trade with the certificates
- ------------------ for the Common Stock. After the Distribution Date, the
Company will mail Rights certificates to the Company's
stock holders and the Rights will become transferable
apart from the Common Stock.
Distribution Date: Rights will separate from the Common Stock and become
- ----------------- exercisable on the earlier of (i) the tenth day (or such
later date as may be determined by a majority of the
Company's Board of Directors) after a person or group
acquires beneficial ownership of 15% or more of the
Company's Common Stock, (ii) the tenth day (or such
later date as may be determined by the Company's Board
of Directors) after a person or group announces a tender
or exchange offer, the consummation of which would
result in ownership by a person or group of 15% or more
of the Company's Common Stock, or (iii) with respect to
(A) the tender offer (the "TENDER OFFER") disclosed in a
Tender Offer Statement on Schedule 14D-1, dated August
12, 1998, filed with the Securities and Exchange
Commission by MGZ Corp., a Delaware corporation and
wholly-owned subsidiary of Mentor Graphics Corporation,
an Oregon corporation ("MENTOR"), and any amendment to
such Tender Offer or (B) the commencement of a separate
tender offer within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act by
Mentor or any Affiliate or Associate of Mentor, a date
to be determined by the Company's Board of Directors.
Preferred Stock After the Distribution Date, each Right will entitle the
- --------------- holder to purchase, for fifty dollars ($50) a fraction
Purchasable Upon of a share of the Company's Preferred Stock with
- ---------------- economic terms similar to that of one share of the
Exercise of Rights: Company's Common Stock.
- ------------------
Flip-In: If an acquiror obtains 15% or more of the Company's
- ------- Common Stock, thereby becoming an "ACQUIRING PERSON",
then each Right (other than Rights owned by an Acquiring
----
Person or its affiliates) will entitle the holder
thereof to purchase, for the exercise price, a number of
shares of the Company's Common Stock having a then
current market value of twice the exercise price.
Flip-Over: If, after the Shares Acquisition Date (defined below),
- --------- (a) the Company merges into another entity, (b) an
acquiring entity merges into the Company or (c) the
Company sells more than 50% of the Company's assets or
earning power, then each Right (other than Rights owned
----
by an Acquiring Person or its affiliates) will entitle
the holder thereof to purchase, for the exercise price,
a number of shares of Common Stock of the person
engaging in the transaction having a then current market
value of twice the exercise price.
Exchange Provision: At any time after an event triggering the flip-in or
- ------------------ flip-over rights and prior to the acquisition by the
Acquiring Person of 50% or more of the outstanding
Common Stock, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by the
Acquiring Person or its affiliates), in whole or in
part, at an exchange ratio of one Common Share per Right
(subject to adjustment).
Redemption of Rights will be redeemable at the Company's option for
- ------------- $0.01 per Right at any time on or prior to the
the Rights: Distribution Date, (i.e., the tenth day (or such later
- ---------- date as may be determined by the Company's Board of
Directors) after public announcement that a person has
acquired beneficial ownership of 15% or more of the
Company's Common Stock (the "SHARES ACQUISITION DATE")).
Expiration of The Rights expire on the earliest of (a) January 10,
- ------------- 2006, (b) exchange or redemption of the Rights as
the Rights: described above, or (c) consummation of a merger or
- ---------- consolidation resulting in expiration of the Rights as
described above.
Amendment of The terms of the Rights and the Rights Agreement may be
- ------------ amended in any respect without the consent of the Rights
Terms of Rights: holders on or prior to the Distribution Date;
- --------------- thereafter, the terms of the Rights and the Rights
Agreement may be amended without the consent of the
Rights holders in order to cure any ambiguities or to
make changes which do not adversely affect the interests
of Rights holders (other than the Acquiring Person).
-2-
Delay of Exchange, The Company's ability to exchange or redeem the Rights
- ------------------ and the Company's ability to amend the Rights Agreement
Redemption will be prohibited for a period of 180 days following
- ---------- the election of a majority of the Company's directors if
or Amendment it would have the purpose or effect of facilitating a
- ------------ Transaction with an Interested Person.
Voting Rights: Rights will not have any voting rights.
- -------------
Anti-Dilution Rights will have the benefit of certain customary anti-
- ------------- dilution provisions.
Provisions:
- ----------
Taxes: The Rights distribution should not be taxable for
- ----- federal income tax purposes. However, following an
event which renders the Rights exercisable or upon
redemption of the Rights, stockholders may recognize
taxable income.
The foregoing is a summary of certain principal terms of the Stockholder Rights
Plan only and is qualified in its entirety by reference to the detailed terms of
the Rights Agreement dated as of January 10, 1996, as amended, between the
Company and the Rights Agent.
-3-