Mentor Graphics Corporation v. Quickturn Design Systems Inc

Plaintiff sold an emulation product to Defendant. Some time later, Plaintiff acquired Meta Systems, a French company involved in the emulation business, and began to market its products in the United States. Defendant reacted by successfully suing for patent infringement. Plaintiff then decided to acquire Defendant. Plaintiff announced an unsolicited cash tender offer for all outstanding common shares of Defendant at a price representing a 50% premium over Defendant’s immediate pre-offer price and a 20% discount from Defendant’s February 1998 stock price levels. Plaintiff also announced its intent to solicit proxies to replace the board at a special meeting. Defendant concluded that Plaintiff’s offer was inadequate and recommended that Defendant shareholders reject Plaintiff’s offer. Then the board amended the by-laws to delay a shareholder called special meeting for at least three months. The board also amended Defendants shareholder rights plan by eliminating its dead hand feature and replacing it with a Deferred Redemption Plan, (DRP) under which no newly elected board member could redeem the rights plan for six months after taking office if the purpose of the redemption would be to facilitate transaction with an “Interested Person” An Interested Person would be one who proposed the election of the new directors to the board, in this case, Plaintiff. Plaintiff then filed this action seeking declaratory judgment that Defendant’s newly adopted takeover defenses are invalid and an injunction requiring the board to dismantle those defenses.