SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
QUICKTURN DESIGN SYSTEMS, INC.
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(Name of Registrant as Specified In Its Charter)
MENTOR GRAPHICS CORPORATION
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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SUPPLEMENT TO THE
PROXY STATEMENT
OF
MENTOR GRAPHICS CORPORATION
FOR A
SPECIAL MEETING OF STOCKHOLDERS OF
QUICKTURN DESIGN SYSTEMS, INC.
December 28, 1998
To the Stockholders of Quickturn Design Systems, Inc.:
In response to the announcement by Quickturn Design Systems, Inc. (the
"Company") that it had signed a merger agreement with Cadence Design Systems,
Inc. ("Cadence") pursuant to which Cadence would acquire the Company in a stock
merger, Dr. Walden C. Rhines, President and Chief Executive Officer of Mentor
Graphics Corporation ("Mentor Graphics"), sent a letter to Mr. Keith R. Lobo,
President and Chief Executive Officer of the Company, dated December 15, 1998,
stating that Mentor Graphics is prepared to pay more for the Company in a
negotiated transaction than the $14 per share price being proposed by Cadence.
On December 28, 1998, Mentor Graphics and MGZ Corp. ("Purchaser") increased
the offering price in the tender offer for shares of the Company to $14 cash per
Share from $12.125 cash per Share, and reduced the number of Shares being sought
to 2,100,000 Shares, which, together with the 591,500 Shares already owned by
Mentor Graphics, would result in Mentor Graphics owning a total of 2,691,500
Shares, representing 14.9% of the Company's outstanding stock as of November 30,
1998.
The Special Meeting will be held on Friday, January 8, 1999 to consider
Mentor Graphics' proposals relating to the removal of the Company Board and to
replace the Company Board with five new directors nominated by Mentor Graphics.
If elected as directors of the Company, Mentor Graphics would encourage the
Nominees, subject to their fiduciary duties as directors of the Company under
applicable law and in accordance with the Company's rights and obligations under
the merger agreement with Cadence, to seek to auction the Company to the highest
bidder. Mentor Graphics would also encourage the Nominees, subject to their
fiduciary duties as directors of the Company under applicable law and in
accordance with the Company's rights and obligations under the merger agreement
with Cadence, to allow any bidder, including Mentor Graphics, promptly to
conduct a due diligence review of the Company and to seek to execute a merger
agreement with the highest bidder. Mentor Graphics believes that any such merger
agreement could be executed within 30 days of the Nominees being elected as
directors of the Company.
On December 15, 1998, Mentor Graphics commenced a new lawsuit in the
Delaware Court of Chancery against the Company, the Company Board and Cadence.
The suit alleges that the members of the Company Board have again breached their
fiduciary duties and seeks to enjoin consummation of the proposed Cadence merger
and to invalidate certain provisions of the Cadence merger agreement, including
the $17,575,000 break-up fee. See "The Litigation."
This Supplement to the Proxy Statement of Mentor Graphics (the "Supplement")
amends and supplements the Proxy Statement dated September 11, 1998 of Mentor
Graphics, as amended by a Supplement to the Proxy Statement dated September 15,
1998, and the Proxy Statement Supplement from Mentor Graphics dated December 7,
1998 (collectively, the "Proxy Statement"), each of which is enclosed herewith.
Except as otherwise set forth in this Supplement, the terms and conditions set
forth in the Proxy Statement remain applicable in all respects, and this
Supplement should be read in conjunction with the Proxy Statement. Unless the
context requires otherwise, terms not defined herein have the meaning ascribed
to them in the Proxy Statement.
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THE AMENDED OFFER
Mentor Graphics and Purchaser are now offering to purchase up to an
aggregate of 2,100,000 Shares of the Company for $14 per Share, net to the
seller in cash, without interest thereon (the "Offer Price"). The Offer, as
amended, will expire at 12:00 midnight, New York City time, on Monday, January
11, 1999, unless extended (the "Expiration Date"). The Offer, as amended, is no
longer subject to the Minimum Condition, the Section 203 Condition, the Rights
Condition or the HSR Condition.
If more than 2,100,000 Shares are validly tendered and not withdrawn in
accordance with the terms of the Offer prior to the Expiration Date, Purchaser
will accept for payment and pay for 2,100,000 Shares on a pro rata basis (with
appropriate adjustments to avoid purchases of fractional Shares) according to
the number of Shares validly tendered and not properly withdrawn by each
stockholder at or prior to the Expiration Date. In order to acquire Shares in a
timely fashion and announce a proration number, if any, at the earliest
practicable date following the Expiration Date, guarantees of delivery of Shares
will no longer be accepted pursuant to the Offer. All stockholders who have
previously tendered Shares using guarantee of delivery procedures have either
perfected their tender by delivering their Shares and any other required
documents or have withdrawn their tenders. Mentor Graphics understands that no
Shares that have been tendered and not withdrawn remain subject to guarantee of
delivery procedures.
Mentor Graphics and Purchaser will distribute to stockholders a Second
Supplement to the Offer to Purchase and a revised Letter of Transmittal setting
forth the terms and conditions of the amended Offer.
THE PROPOSED MERGER
Purchaser and Mentor Graphics will continue to seek to negotiate a merger
agreement or similar business combination between the Company and Purchaser or
another direct or indirect subsidiary of Mentor Graphics at the Offer Price (the
"Proposed Merger"). The purpose of the Offer is for Mentor Graphics, through
Purchaser, to increase its equity interest in the Company as the first step in
completing the Proposed Merger between Purchaser and the Company. In the event
that Mentor Graphics is successful in invalidating all or any portion of the
$17,575,000 Break-Up Fee (as defined) and the Proposed Merger with Purchaser or
another direct or indirect subsidiary of Mentor Graphics is consummated, Mentor
Graphics intends to pay to all stockholders whose Shares are converted pursuant
to the Proposed Merger an amount per Share which is equal to the Offer Price,
which is currently $14, plus the lesser of (a) $.60 and (b) the quotient of (i)
seventy five percent (75%) of any portion of the Break-Up Fee which has been
invalidated divided by (ii) the total number of Shares outstanding on the date
immediately preceding the date of the closing of the Proposed Merger.
Mentor Graphics intends to pay the consideration it recovers if Mentor
Graphics is successful in invalidating the Break-Up Fee (as discussed in the
preceding paragraph) in the Proposed Merger, as opposed to in the Offer, because
Mentor Graphics does not believe the litigation regarding the Break-Up Fee will
be judicially resolved prior to the Expiration Date. Consequently, stockholders
who tender their Shares in the Offer may receive slightly less cash per Share
than stockholders who do not tender in the Offer and whose Shares are converted
in the Proposed Merger.
Mentor Graphics stands ready to consider increasing the Offer Price and the
price to be paid per Share in the Proposed Merger if negotiation and due
diligence demonstrate greater value of the Company to Mentor Graphics.
BACKGROUND
The information set forth on pages 5 and 6 of the Proxy Statement Supplement
dated December 7, 1998 and on pages 7 through 11 of the Proxy Statement dated
September 11, 1998 is amended and supplemented with the following information:
On December 6, 1998, Dr. Walden C. Rhines, President and Chief Executive
Officer of Mentor Graphics, called Mr. Glen Antle, Chairman of the Board of
Directors of the Company, to assure him that Mentor Graphics remained willing to
discuss a combination of the two companies and to consider an
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increased offer if due diligence showed greater value. During the evening of
December 8, 1998, Mentor Graphics' counsel called the Company's counsel to
reiterate Mentor Graphics' willingness to discuss a business combination. The
Company's counsel told Mentor Graphics' counsel that if Mentor Graphics wished
to raise its bid, it should begin consideration of a higher proposal. Mentor
Graphics' counsel stated that Mentor Graphics would respond on December 9, 1998
to the Company's invitation. Also on December 8, 1998, the Company's financial
advisor contacted Mentor Graphics' financial advisor and stated that if Mentor
Graphics wished to raise its bid, it should begin consideration of a higher
proposal. Mentor Graphics' financial advisor stated that Mentor Graphics would
respond by 5:00 p.m. on December 9, 1998. The Company's financial advisor
confirmed that responding in that time frame would be acceptable.
On December 8, 1998, before Mentor Graphics could submit its higher proposal
and without informing Mentor Graphics that the Company was involved in
negotiations with a third party, the Company entered into a merger agreement
with Cadence.
On December 15, 1998, Mentor Graphics issued a press release announcing that
it is prepared to pay more for the Company in a negotiated transaction than the
$14 per share price being proposed by Cadence. Mentor Graphics also stated that
the size of its merger proposal would be influenced by Mentor Graphics' due
diligence demonstrating greater value for the Company and the invalidation of
the Termination Fee, the Reimbursement Fee and the Lock-Up Option (each as
defined herein). Also on December 15, 1998, Dr. Rhines sent a letter to Mr.
Lobo, a copy of which accompanies this Supplement.
On December 15, 1998, the Company announced that it is committed to the
merger with Cadence. Since December 15, 1998, Mentor Graphics has sought to
negotiate a business combination with the Company as well as to resolve
outstanding issues between the two companies and between Mentor Graphics and
Cadence.
On December 28, 1998, Mentor Graphics issued a press release announcing the
terms of the Offer, as amended, and Dr. Rhines sent a letter to Mr. Lobo, a copy
of which accompanies this Supplement.
THE LITIGATION
The information set forth on pages 7 through 10 of the Proxy Statement
Supplement dated December 7, 1998 and on pages 13 through 16 of the Proxy
Statement dated September 11, 1998 is amended and supplemented with the
following information:
On December 7, 1998, the Supreme Court of the State of Delaware granted the
Company's motion for an expedited appeal of the Court of Chancery's Order
entered on December 3, 1998. Oral argument will be presented to the Delaware
Supreme Court on December 29, 1998.
On December 15, 1998, Mentor Graphics commenced a new lawsuit in the
Delaware Court of Chancery against the Company, the Company Board and Cadence.
The suit alleges that the members of the Company Board have again breached their
fiduciary duties and seeks to enjoin consummation of the proposed Cadence merger
and to invalidate the $10,557,000 termination fee (the "Termination Fee") and
the $3,500,000 expense reimbursement fee (the "Reimbursement Fee") under the
Cadence merger agreement and the lock-up option for Cadence to purchase 19.9% of
the Company's outstanding Shares (the "Lock-Up Option"). The Lock-Up Option
provides that, should the Company accept an acquisition proposal from a party
other than Cadence, Cadence can, in lieu of exercising the option, require the
Company to make a "Total Payment" to Cadence of up to $14,075,000. Because
"Total Payment" is defined in the Company's merger agreement with Cadence to
include the Termination Fee, but not the Reimbursement Fee, the maximum amount
payable to Cadence is $17,575,000 (the "Break-Up Fee"). Mentor Graphics'
complaint also challenges that the Company Board failed to maximize stockholder
value by excluding Mentor Graphics from the process of selling the Company.
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On December 16, 1998, Mentor Graphics moved for summary affirmance of the
Chancery Court's Order dated December 3, 1998 and on December 21, 1998, the
Delaware Supreme Court denied Mentor Graphics' motion.
Mentor Graphics and Purchaser are filing with the Delaware District Court a
motion for leave to file a fourth amended complaint against the Company, its
President and Chief Executive Officer, Keith Lobo, Cadence, and its President
and Chief Executive Officer, Jack Harding.
The fourth amended complaint asserts additional claims for violations of
securities laws, including Sections 14(a), 14(d) and 14(e) of the Exchange Act
which are based on (a) the Company's failure to disclose prior to December 9,
1998 that (i) it had reversed its position that stockholders' interests would
best be served by the Company remaining independent and pursuing its long term
business plan; (ii) it had made contact with Cadence, given Cadence due
diligence, and commenced negotiations with Cadence regarding an acquisition; and
(iii) Mentor Graphics was misled and shut out of the bidding in favor of
Cadence; and (b) the Company's failure to disclose in its December 9, 1998
filings with the Commission regarding the Cadence merger (i) adequate
information regarding the reasons of the Company and the Company Board for
accepting the Cadence merger; (ii) sufficient information regarding the opinion
of Hambrecht & Quist that the consideration to be received by stockholders in
the Cadence merger is fair, from a financial point of view, including the
analyses underlying the opinion; and (iii) the terms or the identities of the
recipients of the employment and non-compete agreements referenced in the
Cadence merger agreement.
The fourth amended complaint asserts additional claims for violations of
Section 14(a) of the Exchange Act based on the efforts of Messrs. Lobo and
Harding to solicit stockholder support for the Company in connection with the
Special Meeting. The fourth amended complaint seeks: a declaration that the
defendants violated the securities laws; injunctive relief requiring the Company
to comply with the securities laws and to refrain from making false or
misleading statements; injunctive relief barring enforcement of the Cadence
merger agreement and voiding all proxies obtained by the Company between the
date it commenced negotiations with Cadence and the date ten business days after
it makes full disclosure; a declaration that Mentor Graphics and Purchaser are
in full compliance with the Exchange Act and all other applicable securities
laws, rules and regulations; and an award of costs and expenses, including
attorneys' fees.
YOUR VOTE IS IMPORTANT, NO MATTER HOW FEW OR HOW MANY SHARES YOU OWN. MENTOR
GRAPHICS URGES YOU TO MARK, SIGN AND DATE AND RETURN THE ENCLOSED GOLD STRIPED
PROXY CARD TO VOTE FOR THE PROPOSALS.
If you have any questions about executing or delivering the enclosed GOLD
Striped Proxy Card or require assistance, please contact:
[MacKenzie Partners, Inc.]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
CALL TOLL-FREE: (800) 322-2885
FAX: (212) 929-0308
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