Versata, Inc. and Selectica, Inc. have filed briefs in Versata’s appeal of the Delaware Chancery Court’s decision in Selectica, Inc. v. Versata, Inc. [1]. That decision was discussed on the Forum in this post by David Katz. In brief, Vice Chancellor Noble upheld the use by Selectica of a rights plan or “poison pill” that had a 4.99% threshold, which was designed to protect certain non-operating losses (NOLs) of Selectica. Versata had deliberately triggered the rights plan by purchasing 6.7% of Selectica’s common stock. After Versata refused to enter into a standstill agreement that would allow the Selectica board more time to consider their response, the board implemented the exchange feature of the rights plan, diluting Versata’s holding to 3.3%.
Vice Chancellor Noble’s opinion, as further discussed in Mr. Katz’s post, recognized that a rights plan can be an appropriate mechanism for protecting NOLs. The decision acknowledged that reducing the threshold of Selectica’s rights plan to 4.99% to convert it to a NOL pill in response to a potential acquirer’s accumulation of shares is permissible under the Unocal standard.
Versata’s brief argues that Vice Chancellor Noble erred in holding (1) that Selectica’s board undertook a reasonable investigation in adopting the NOL pill with a 4.99% trigger, and (2) that Selectica’s NOL pill was not preclusive because it did not render a successful proxy contest a “near impossibility or else utterly moot”.
Versata’s brief is available here; Selectica’s answering brief is available here.
Endnotes
[1] C.A. No. 4241-VCN (Feb. 26, 2010).
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