Versata Files Final Brief in Appeal of NOL Pill Case

Editor’s Note: This post relates to the appeal from the decision in Selectica, Inc. v. Versata, Inc., which was discussed on the Forum here and here. Versata’s final reply in the appeal is available here. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Versata, Inc. has filed its final reply in its appeal of the Delaware Chancery Court’s decision in Selectica, Inc. v. Versata, Inc. [1], ahead of oral argument in the appeal scheduled for next week.  The decision was discussed on the Forum in this post by David Katz and summarized here.  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 reply is available here.


[1] C.A. No. 4241-VCN (Feb. 26, 2010).
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