EXHIBIT 16
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
ANDREA BROWN, ) Civil Action No.: 166041
)
Plaintiff, )
)
v. )
)
QUICKTURN DESIGN SYSTEMS, INC., )
GLEN M. ANTLE, KEITH R. LOBO, )
RICHARD C. ALBERDING, MICHAEL R. )
D'AMOUR, YEN-SON (PAUL) HUANG; )
DAVID K. LAM and CHARLES D. )
KISSNER, )
Defendants.
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CLASS ACTION COMPLAINT
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Plaintiff, by her attorneys, alleges upon personal knowledge as to her own
acts and upon information and belief as to all other matters, as follows:
NATURE OF ACTION
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1. Plaintiff brings this action on behalf of the public stockholders of
Quickturn Design Systems, Inc. ("Quickturn" or the "Company") who have been, and
continue to be, deprived of the opportunity to realize fully the value of their
investment in Quickturn. The individual defendants, by their refusal diligently
to pursue the proposal of Mentor Graphics Corporation ("Mentor") to acquire
Quickturn, and their adoption and inequitable use of a shareholder rights plan
(the "Poison Pill"), have evidenced their unwillingness to discharge their
fiduciary duty to explore all alternatives to maximize shareholder value.
Mentor's $209.5 million pending offer for the Company, equal to $12.125 per
Quickturn share, represents a premium of over 50% on Quickturn's prior market
price of $8 per share. The individual defendants are using their fiduciary
positions of control over Quickturn to thwart Mentor and others in their
legitimate attempts to acquire the Company and are entrenching themselves in
their offices with Quickturn.
PARTIES
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2. Plaintiff is and, at all relevant times, has been the owner of common
stock of Quickturn.
3. Quickturn is a corporation duly organized and existing under the laws
of the State of Delaware. Quickturn makes instruments for measuring and testing
electrical signals. Quickturn maintains its principal executive offices at 440
Clyde Avenue, Mountainview, California. As of April 30, 1998, Quickturn had
approximately 17,809,342 shares of common stock outstanding.
4. The individual defendants are the members of Quickturn's Board of
Directors. In addition, the following individual defendants held the following
positions at Quickturn:
Glen M. Antle.................. Chairman of the Board of the Company
Keith R. Lobo.................. President and Chief Executive Officer of
the Company
5. The individual defendants, by reason of their corporate directorship
and/or executive positions, stand in a fiduciary position relative to the
Company's shareholders, which fiduciary relationship, requires the defendants to
act in the best interests of the Company's stockholders with uncompromising
loyalty and due care.
CLASS ACTION ALLEGATIONS
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6. Plaintiff brings this action on her own behalf and as a class action,
pursuant to Rule 23 of the Rules of the Chancery Court Rules, on behalf of all
stockholders of the Company (except defendants herein and any person, firm,
trust, corporation, or other entity related to or affiliated with any of the
defendants), who are or will be threatened with injury arising from defendants'
actions as described more fully below (the "Class").
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7. This action is properly maintainable as a class action because:
(a) The Class is so numerous that joinder of all members is
impracticable. The Company has hundreds, if not thousands, of record and
beneficial stockholders who are scattered throughout the United States.
(b) There are questions of law and fact common to the Class including,
inter, alia, whether:
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(i) Defendants have breached their fiduciary duties owed by them
to plaintiff and other members of the Class by, inter alia, failing to act with
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the utmost good faith to maximize shareholder value;
(ii) Defendants, through use of a Poison Pill, (described below)
have engaged in a plan and scheme to thwart and reject bona fide offers and
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proposals from third parties; and
(iii) Plaintiff and the other members of the Class are being and
will continue to be injured by the wrongful conduct alleged herein and, if so,
what is the proper remedy.
(c) Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. Plaintiff's claims
are typical of the claims of the other members of the Class. Accordingly,
plaintiff is an adequate representative of the Class.
(d) The prosecution of separate actions by individual members of
the Class would create the risk of inconsistent or varying adjudications with
respect to individual members of the Class which would establish incompatible
standard of conduct for defendants, or adjudications with respect to individual
members of the Class which would as a practical matter be dispositive of the
interests of the other members not parties to the adjudications or substantially
impair or impede their ability to protect their interests.
(e) The defendants have acted, or refused to act, on grounds generally
applicable to, and causing injury to, the Class and, therefore, preliminary and
final injunctive relief on behalf of the Class as a while is appropriate.
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SUBSTANTIVE ALLEGATIONS
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8. On or about August 12, 1998, Mentor commenced a tender offer to
acquire Quickturn for $12.125 in cash for each share of Quickturn. The offer is
not conditioned on financing. On August 24, 1998, Quickturn announced that it
was rejecting that bid.
9. In a Schedule 14A filed by Mentor with the Securities and Exchange
Commission in connection with the proposal, Mentor disclosed that it had had
discussions with Quickturn about a business combination as early as August,
1995. By January, 1996, Quickturn had implemented a "shareholder rights plan,"
or "poison pill," in order to hinder any takeover proposal not supported by
Quickturn's Board.
10. Instead of utilizing the Poison Pill as required by defendants'
fiduciary duties, i.e., to allow Quickturn's directors to explore proposals
without undue pressure, Quickturn has refused to properly explore the Mentor
proposal or even to give general assurances that the poison pill would be
deployed for the purpose of maximizing shareholder value.
11. On or about August 12, 1998, Mentor commenced suit against Quickturn
in this Court seeking to enjoin deployment of the Rights plan to impede its
offer and to prohibit Quickturn and its Board from adopting any other defensive
measure that would have the effect of impeding or interfering with the offer.
On August 12, 1998, Mentor commenced suit in the United States District Court
for the District of Delaware seeking related relief under the federal securities
laws.
12. Any improper use of the Poison Pill has the force and effect of
entrenching the Individual Defendants in their corporate offices against any
real or perceived threat to their control, and dramatically impairs the rights
of Class members to exercise freedom of choice in a proxy contest or to avail
themselves of a bona fide offer to purchase their shares by an acquiror, such as
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Mentor, unfavored by incumbent management. This fundamental shift of control of
the Company's destiny from the hands of its stockholders to the hands of the
Individual Defendants results in a heightened fiduciary duty on the part of the
individual defendants to consider, in good faith, a third party bid, such as
Mentor's, and further requires the Individual Defendants to pursue a third
party's
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interest in acquiring the Company and to negotiate in good faith with a
bidder on behalf of the Company's shareholders.
13. The purpose, intent and effect of the Poison Pill, in the face of a
pending offer for the Company, is to thwart, deter, impede, and delay the
acquisition of Quickturn by Mentor or any other suitor unfavored by management
- -- no matter how attractive the offer.
14. Defendants' rejection of Mentor's offer ensures their continued
positions with the Company and deprives plaintiff and the Company's other public
shareholders of the opportunity to maximize the value of their Quickturn stock
through the premium that Mentor is prepared to pay, or of the enhanced premium
that further negotiation or exposure of Quickturn to the market and other
potential bidders could provide.
15. Defendants owe fundamental fiduciary obligations to Quickturn's
stockholders to take all necessary and appropriate steps to maximize the value
of their shares. In addition, the Individual Defendants have the responsibility
to act independently so that the interests of the Company's public stockholders
will be protected, to consider seriously all bona fide offers for the Company,
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to sell the Company if it would be in the best interests of the stockholders to
do so, and, if so, to take steps to ensure that the highest possible price is
achieved.
16. Plaintiff seeks preliminary and permanent injunctive relief and
declaratory relief preventing defendants from inequitably and unlawfully
depriving plaintiff and the Class of their rights to realize full and fair value
for their stock at a premium over the market price while unlawfully entrenching
themselves in their positions of control, and to compel defendants to carry out
their fiduciary duties to maximize shareholder value.
17. Only through the exercise of this Court's equitable powers can
plaintiff and the Class be fully protected from the immediate and irreparable
injury which defendants' actions threaten to inflict.
18. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
A. Declaring this to be a proper class action and certifying plaintiff as
a class representative;
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B. Ordering the Individual Defendants to fulfill their fiduciary duties
to plaintiff and the other members of the Class by;
(i) carefully and impartially investigating any expression of
interest by any entity or person, including but not limited to Mentor, having
a bona fide interest in proposing any transactions that would maximize
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shareholder value, including, but not limited to, a merger or acquisition of
Quickturn;
(ii) immediately undertaking an appropriate evaluation of Quickturn's
worth as a merger/acquisition candidate;
(iii) taking all appropriate steps to enhance Quickturn's value and
attractiveness as a merger/acquisition candidate; and
(iv) taking all appropriate steps to effectively expose Quickturn to
the marketplace in an effort to create an active auction of the Company, or
otherwise ensuring that
Quickturn's public stockholders receive the maximum value for their shares;
C. Ordering the Individual Defendants to deploy Quickturn's Poison Pill
in a manner which will maximize shareholder value;
D. Ordering the Individual Defendants, jointly and severally, to
account to plaintiff and the Class for all damages suffered and to be
suffered by them as a result of the wrongs complained of herein;
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E. Awarding plaintiff the costs and disbursements of this action,
including a reasonable allowance for plaintiff's attorneys' and experts' fees;
and
F. Granting such other and further relief as may be just and proper.
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: [Illegible]
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Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, Delaware 19899
Telephone: (302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
ABBEY, GARDY & SQUITIERI, LLP
212 East 39th Street
New York, New York 10016
Telephone: (212) 889-3700
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