Mentor Graphics Corporation v. Quickturn Design Systems, Inc.
Court of Chancery of Delaware
728 A.2d 25 (1998)
Mentor Graphics Corporation (Mentor) (plaintiff) and Quickturn Design Systems, Inc. (Quickturn) (defendant) are publicly held corporations. Mentor announced an unsolicited cash tender offer for all of Quickturn’s outstanding common stock. Mentor did not attempt to contact Quickturn’s management or board to negotiate a consensual deal. Mentor also announced its intent to solicit proxies to replace Quickturn’s board at a special meeting, to be held 45 days after Mentor acquired the 10 percent of Quickturn shareholders necessary to call a special meeting, as required under the company’s bylaws. Quickturn concluded that Mentor’s offer was inadequate. Quickturn’s board amended the company’s bylaws to provide that any special meeting called by at least 10 percent of stockholders would take place between 90 and 100 days after the shareholders’ request. The board also amended Quickturn’s shareholder rights plan to include a Deferred Redemption Plan (DRP). The DRP provided that, if a majority of the directors were replaced by stockholder action, the newly elected board would not be able to redeem the rights to facilitate an acquisition by a hostile bidder, if the purpose or effect of the redemption would be to facilitate a transaction with a person who proposed, nominated or financially supported the election of the new board directors. Mentor brought suit, seeking a declaratory judgment that the DRP is invalid.
Rule of Law
Holding and Reasoning (Jacobs, V.C.)