## Facts

- Quickturn Design Systems, Inc., a Delaware corporation, became the target of a hostile takeover effort by Mentor Graphics Corporation through a tender offer and proxy contest to replace Quickturn’s board.
- Quickturn’s board adopted two defensive measures in response:
  - It amended Quickturn’s shareholder rights plan to add a “Delayed Redemption Provision” (DRP), a time-limited “no-hand” feature.
  - It amended the bylaws to delay a stockholder-requested special meeting for 90–100 days after the request’s validity was determined.
- The DRP prevented a newly elected board from redeeming the rights plan for a fixed period (commonly described as six months), limiting the new board’s ability to remove the pill and facilitate the bid.
- Mentor and an unaffiliated stockholder, Shapiro, sued for declaratory and injunctive relief, asserting the DRP unlawfully deprived a new board of statutory authority and impeded the board’s ability to respond to the takeover.

## Issues

1. Whether a rights-plan provision that bars a newly elected board from redeeming the plan for a fixed period is valid under DGCL § 141(a), which vests management authority in the board of directors.
2. Whether the incumbent board may impose such a restriction on future boards absent express authorization in the corporation’s certificate of incorporation or the DGCL.

## Decision

- The Delaware Supreme Court affirmed the judgment invalidating the DRP.
- The Court held the DRP was invalid as a matter of Delaware corporate law because it impermissibly restricted a newly elected board’s statutory authority under DGCL § 141(a).
- The Court affirmed on this statutory ground and did not rely on fiduciary-duty analysis to resolve the DRP’s validity.
- The bylaw amendment delaying special meetings was not at issue on appeal and remained undisturbed.

## Legal Principles

- DGCL § 141(a) assigns management of the corporation’s business and affairs to the board; directors generally may not deprive a later-elected board of essential managerial powers through board-adopted mechanisms.
- A board may not, without clear charter-level authority or statutory authorization, adopt a poison-pill feature that materially disables a newly elected board from redeeming or modifying the plan for a set period.
- Rights-plan provisions that function like “dead-hand” or “no-hand” restrictions are ultra vires when they fetter a future board’s ability to exercise its full statutory authority to manage corporate affairs.

## Conclusion

The court held that Quickturn’s delayed-redemption “no-hand” poison pill provision unlawfully restrained the statutory authority of a newly elected board under DGCL § 141(a) and was therefore invalid absent express authorization in the certificate of incorporation or the DGCL.


Quickturn Design Sys., Inc. v. Shapiro, 721 A.2d 1281 (Del. 1998)