Opinion ID: 1508700
Heading Depth: 1
Heading Rank: 11

Heading: quickturn's delayed redemption provision

Text: At the time Mentor commenced its bid, Quickturn had in place a Rights Plan that contained a so-called dead hand provision. That provision had a limited continuing director feature that became operative only if an insurgent that owned more than 15% of Quickturn's common stock successfully waged a proxy contest to replace a majority of the board. In that event, only the continuing directors (those directors in office at the time the poison pill was adopted) could redeem the rights. During the same August 21, 1998 meeting at which it amended the special meeting bylaw, the Quickturn board also amended the Rights Plan to eliminate its continuing director feature, and to substitute a no hand or delayed redemption provision into its Rights Plan. The Delayed Redemption Provision provides that, if a majority of the directors are replaced by stockholder action, the newly elected board cannot redeem the rights for six months if the purpose or effect of the redemption would be to facilitate a transaction with an Interested Person. [21] It is undisputed that the DRP would prevent Mentor's slate, if elected as the new board majority, from redeeming the Rights Plan for six months following their election, because a redemption would be reasonably likely to have the purpose or effect of facilitating a Transaction with Mentor, a party that directly or indirectly proposed, nominated or financially supported the election of the new board. Consequently, by adopting the DRP, the Quickturn board built into the process a six month delay period in addition to the 90 to 100 day delay mandated by the By-Law Amendment.