UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
_____________________
SCHEDULE
14D-9
Solicitation/Recommendation
Statement under
Section
14(d)(4) of the Securities Exchange Act of 1934
____________________
ETRIALS
WORLDWIDE, INC.
(Name of
Subject Company)
ETRIALS
WORLDWIDE, INC.
(Name of
Person Filing Statement)
Common
Stock, Par Value $0.0001 Per Share
(Title of
Class of Securities)
29786P103
(CUSIP
Number of Common Stock)
____________________
Joseph
(Jay) F. Trepanier, III
Chief
Financial Officer
etrials
Worldwide, Inc.
4000
Aerial Center Parkway
Morrisville,
North Carolina 27560
(919)
653-3400
(Name,
address and telephone number of person authorized to receive notice and
communications on behalf of the person filing statement)
______________________
Copy
to:
Donald
R. Reynolds, Esq.
Alexander
M. Donaldson, Esq.
Wyrick
Robbins Yates & Ponton LLP
4101
Lake Boone Trail, Suite 300
Raleigh,
North Carolina 27607
(919)
781-4000
[ ] Check
the box if the filing relates solely to preliminary communications made before
the commencement of a tender offer.
Item
1. Subject Company Information.
(a) The
name of the subject company is etrials Worldwide, Inc., a Delaware corporation
(the “
Company
”), and
the address and telephone number of the Company’s principal executive offices is
4000 Aerial Center Parkway, Morrisville, North Carolina 27560, (919)
653-3400.
(b)
The title of the class of equity securities to which this statement relates is
common stock, par value $0.0001 per share, of the Company (the “
Common Stock”
or the “
Tender
Shares
”). As of May 31, 2009, there were 11,064,142 shares of
Common Stock issued and outstanding.
Item
2. Identity and Background of Filing Person.
(a)
Name and Address
. The name,
business address and business telephone number of the Company, which is the
person filing this Schedule 14D-9, are set forth in Item 1(a) above.
Information about the Offer (as defined below) may be found on the Company’s
website at www.etrials.com.
(b)
Tender Offer
. This statement
relates to a tender offer by Merge Acquisition Corp., a Delaware corporation
(“
O
fferor
”) that is a wholly
owned subsidiary of Merge Healthcare Incorporated, a Delaware corporation
(“
Merge Healthcare
”),
disclosed in a Tender Offer Statement on Schedule TO, dated June 16, 2009 (as
amended or supplemented from time to time, the “
Schedule TO
”), to purchase
all of the issued and outstanding shares of Common Stock, at a per share
purchase price consisting of $0.80 in cash and 0.3448 shares of Merge
Healthcare’s common stock, $0.01 par value per share (the “
Merge Healthcare Common
Stock
”) (collectively, the “
Offer Consideration
”), upon
the terms and subject to the conditions set forth in the Prospectus/Offer to
Exchange, dated June 16, 2009 (as amended or supplemented from time to time, the
“
Offer to Purchase
”),
and in the related Letter of Transmittal (the “
Letter of Transmittal
”)
(which, together with the Offer to Purchase, constitute the “
Offer
”). The Offer to
Purchase and Letter of Transmittal are being mailed with this statement and are
filed as Exhibits (a)(1)(A) and (a)(1)(B) hereto, respectively, and are
incorporated herein by reference.
The Offer
is being made pursuant to an Agreement and Plan of Merger, dated as of
May 30, 2009 (as such agreement may be further amended from time to time,
the “
Merger
Agreement
”), by and among Offeror, Merge Healthcare and the Company. The
Merger Agreement provides, among other things, that following the consummation
of the Offer and subject to the satisfaction or waiver of the conditions set
forth in the Merger Agreement and in accordance with the relevant portions of
the Delaware General Corporation Law (the “
DGCL
”), Offeror will merge
with and into the Company (the “
Merger
”). At the effective
time of the Merger (the “
Effective Time
”), each share
of Common Stock that is not tendered pursuant to the Offer will be converted
into the right to receive cash and Merge Healthcare Common Stock in
an amount equal to the Offer Consideration (other than shares of Common Stock
that are held by (a) Offeror or Merge Healthcare, which will be cancelled,
(b) the Company, which will be cancelled, and (c) stockholders, if
any, who properly exercise their appraisal rights under the DGCL). Following the
Effective Time, the Company will continue as a wholly owned subsidiary of Merge
Healthcare (the Company after the Effective Time hereinafter referred to as the
“
Surviving
Corporation
”) and will be removed from trading on the Nasdaq Global
Market. Additionally, following the Effective Time, the Common Stock will no
longer be registered under the Securities Exchange Act of 1934, as amended (the
“
Exchange
Act
”). A copy of the Merger Agreement is filed as Exhibit
(e)(1) hereto and is incorporated herein by reference.
As set
forth in the Schedule TO, the address of the principal executive offices of
Merge Healthcare and Offeror is 6737 West Washington Street, Milwaukee,
Wisconsin 53214-5650, and their telephone number is (414) 977-4000.
Item
3. Past Contacts, Transactions, Negotiations and
Agreements.
Except as
set forth in this Item 3, or in the Information Statement of the Company
(the “
Information
Statement
”) attached hereto as
Annex II
or as
incorporated by reference herein, as of the date hereof, there are no material
agreements, arrangements or understandings or any actual or potential conflicts
of interest between the Company or its affiliates and: (i) its executive
officers, directors or affiliates; or (ii) Merge Healthcare, Offeror or
their respective executive officers, directors or affiliates. The
Information Statement is being furnished to the Company’s stockholders pursuant
to Section 14(f) of the Exchange Act, and Rule 14f-1 issued under the
Exchange Act in connection with Merge Healthcare’s right, after accepting Tender
Shares for payment, to designate persons to the Board of Directors of the
Company (the “
Board
”)
other than at a meeting of the stockholders of the Company. The Information
Statement is incorporated herein by reference.
|
(a)
|
Arrangements
with Current Executive Officers and Directors of the
Company.
|
Certain
agreements, arrangements or understandings between the Company or its affiliates
and certain of its directors, executive officers and affiliates are described in
the Information Statement.
Consideration
Payable Pursuant to the Offer.
If each
of the directors and executive officers of the Company were to tender the Tender
Shares each owns for purchase pursuant to the Offer as each has agreed to
pursuant to the Stockholder Support Agreement (as defined below), each would
receive the same consideration on the same terms and conditions as the other
stockholders of the Company. Any outstanding shares of Common Stock not tendered
in the Offer will be cancelled and converted at the Effective Time into the
right to receive the greater of (i)(A) $0.80, net to the holder in cash, without
interest, plus (B) 0.3448 shares of Merge Healthcare Common Stock, and (ii) the
highest price per share of Common Stock paid pursuant to the Offer, in the same
form of consideration so paid (the greater of clauses (i) and (ii), the “Merger
Consideration”).
As of May
31, 2009, the Company’s directors and executive officers beneficially owned in
the aggregate 3,621,299 shares of Common Stock (excluding 978,350 shares
issuable upon the exercise of options to purchase Common Stock, but including
397,313 shares of restricted stock). If the directors and executive officers
were to tender all of their shares of Common Stock for purchase pursuant to the
Offer, and such shares of Common Stock were purchased by Offeror at the Offer
Consideration, the directors and their affiliates and the executive officers
would receive an aggregate of approximately $2.9 million in cash and
approximately 1,248,625 shares of Merge Healthcare Common Stock, without
interest and less any required withholding taxes.
For a
discussion of the treatment of restricted stock and options held by the
directors and executive officers of the Company, please refer to the discussion
below in the Sections of this Schedule 14D-9 titled “
Treatment of Restricted Stock Held
by Current Directors and Executive Officers
” and “
Treatment of Options Held by Current
Directors and Executive Officers
.”
Director
and Officer Indemnification and Insurance.
Section 145
of the DGCL permits a corporation to include in its charter documents, and in
agreements between the corporation and its directors and officers, provisions
expanding the scope of indemnification beyond that specifically provided by
current law. The Company has included in its Amended and Restated Certificate of
Incorporation, as amended (the “
Certificate
”), a provision to
eliminate the personal liability of its directors for monetary damages for
breach of their fiduciary duties as directors, except for liability (i) for
any breach of the director’s duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involved intentional
misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit. The Certificate also provides that the Company will
indemnify to the fullest extent permitted by Section 145 of the DGCL all persons
whom it may indemnify pursuant to that section. In addition, the
Amended and Restated Bylaws of the Company (the “
Bylaws
”) provide that the
Company is required to indemnify its officers and directors under certain
circumstances.
Pursuant
to the Merger Agreement, Merge Healthcare has agreed to cause the Surviving
Corporation to assume all rights to indemnification, advancement of expenses and
exculpation from liabilities for acts or omissions occurring at or prior to the
Effective Time now existing in favor of the current and former directors and
officers of the Company (the “
Indemnified Persons
”), as
provided in the Certificate or Bylaws as in effect as of the date of the Merger
Agreement.
Merge
Healthcare has agreed to cause the certificate of incorporation and bylaws of
the Surviving Corporation to contain provisions with respect to indemnification,
advancement of expenses and exculpation of Indemnified Persons that are no less
favorable than the indemnification, advancement of expenses and exculpation
provisions contained in the Certificate and Bylaws as of the date of the Merger
Agreement, and such provisions shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would adversely affect the rights of the Indemnified Persons, unless such
amendment is required by the DGCL.
Pursuant
to the Merger Agreement, prior to the Effective Time, the Company intends to
purchase a “tail” officers’ and directors’ liability insurance policy to provide
each Indemnified Person with coverage for six years following the Effective Time
on terms no less favorable than the coverage provided under the Company’s policy
in effect on the date of the Merger Agreement, and for which the premium is not
greater than 150% of the annual premium paid by the Company for its existing
insurance, provided that the Company shall first offer Merge Healthcare the
opportunity to purchase a substitute policy which shall provide each Indemnified
Person with coverage for six years following the Effective Time on terms and
conditions no less favorable than the Company’s existing officers’ and
directors’ liability insurance in effect on the date of the Merger
Agreement.
Pursuant
to the Merger Agreement, Merge Healthcare has agreed to cause the Surviving
Corporation to indemnify and hold harmless each Indemnified Person against all
claims, losses, liabilities, damages, judgments, inquiries, fines and reasonable
fees, costs and expenses, including attorneys’ fees and disbursements, incurred
in connection with any proceeding, whether civil, criminal, administrative or
investigative, arising out of or pertaining to the fact that the Indemnified
Person is or was an officer, director, fiduciary or agent of the Company,
whether asserted or claimed prior to, at or after the Effective Time, to the
extent provided under applicable law and the Certificate or Bylaws as of the
date of the Merger Agreement.
Employment
and Executive Bonus Agreements with the Company.
In
November 2008, the Company entered into an employment agreement with M. Denis
Connaghan, the Company’s President and Chief Executive Officer. The
agreement provides that the Company may terminate the agreement and employment
for any reason at any time on reasonable notice and that Mr. Connaghan may
terminate for any reason at any time on 30 days’ notice. If the
Company terminates without “cause” (as defined in the agreement), or if Mr.
Connaghan terminates for “good reason” (as defined in the agreement), then (i)
the Company will pay 12 months’ base salary as severance, (ii) the Company will
provide 12 months of paid benefits and (iii) if bonus criteria are achieved and
a bonus would have been earned had Mr. Connaghan remained employed for the
entire year or other bonus measurement period, then the Company will pay a
prorated portion of the earned bonus based on the number of days during the year
or other bonus measurement period that the Company employed Mr. Connaghan prior
to the termination of employment.
In
November 2008, the Board granted to Mr. Connaghan 100,000 restricted shares of
Common Stock for a purchase price of $0.0001 per share. Until such
shares vest and upon a Termination of Employment (as defined in the agreement),
the Company may repurchase the restricted shares at the purchase price for which
the shares were issued. Subject to accelerated vesting as described
below, these restricted shares vest in 16 equal quarterly installments of
6,250 shares beginning in February 2009 and ending in November
2012. If termination occurs without “cause” within six months after a
“change of control” (as defined in the agreement), then 50% of the outstanding
restricted shares that remain unvested at the termination date will become
vested.
In
November 2008, the Board granted incentive stock options to Mr. Connaghan to
purchase 350,000 shares of Common Stock. The exercise price for these
options is $1.10 per share. Subject to accelerated vesting as
described below, the options vest in 16 equal quarterly installments of 21,875
shares beginning in February 2009 and ending in November 2012. If
termination occurs without “cause” within six months after a “change of
control”, then 50% of the outstanding stock options that remain unvested at the
termination date will automatically vest.
In March
2009, the Company and Mr. Connaghan entered into an executive bonus agreement
related to Mr. Connaghan’s incentive bonus for 2009. Pursuant to the
agreement, in the event of an “acceleration event,” the Company will be
obligated to pay Mr. Connaghan 100% of any unpaid portion of his 2009 cash bonus
and all unvested restricted shares will automatically vest. An
“acceleration event” occurs if a “change in control” of the Company closes or is
consummated in 2009 and, within 180 days of the change in control, either (i)
the surviving entity terminates Mr. Connaghan’s employment with the Company for
any reason other than “cause” or (ii) Mr. Connaghan terminates his employment
for “good reason” upon delivery of written notice to the surviving entity,
specifying the grounds constituting good reason. A “change in
control” shall be deemed to occur if (i) the direct or indirect beneficial
ownership (within the meaning of Section 13(d) of the Exchange Act, and
Regulation 13D thereunder) of 50% or more of the outstanding shares of Common
Stock is acquired or becomes held by any person or group of persons (within the
meaning of Section 13(d)(3) of the Act), but excluding the Company and any
employee benefit plan sponsored or maintained by the Company; (ii) a capital
reorganization, merger or consolidation involving the Company closes or is
consummated, unless (A) the transaction involves only the Company and one or
more of the Company’s parent corporation and wholly owned (excluding interests
held by employees, officers and directors) subsidiaries, or (B) the stockholders
who had the power to elect a majority of the Board immediately prior to the
transaction have the power to elect a majority of the board of directors of the
surviving entity immediately following the transaction; or (iii) the sale of all
or substantially all of the Company’s assets to another corporation, person or
business entity closes or is consummated. “Cause” and “good reason”
have the same definitions as contained in Mr. Connaghan’s employment
agreement.
The
Company entered into employment agreements with Michael Mickens, the Company’s
Vice President, Sales and Client Services, and Joseph Trepanier III, the
Company’s Chief Financial Officer, in August and October 2008,
respectively. Both employment agreements terminate in February
2010. Except for compensation, Mr. Mickens’s and Mr. Trepanier’s
employment agreements contain similar terms. Each agreement provides
that the Company may terminate the officer’s employment at any time with at
least two weeks’ notice, but that if the Company terminates employment before
February 2010 and without cause as defined in the agreement, then the officer is
entitled to six months’ base salary and paid benefits as severance.
On August
15, 2008, the Company granted to Mr. Mickens and Mr. Trepanier incentive stock
options to purchase 50,000
and 80,000 shares of
Common Stock, respectively. The exercise price for the options is
$1.54 per share. Subject to accelerated vesting as described below,
the options vest in 16 equal quarterly installments beginning in November 2008
and ending in August 2012. If termination occurs without cause within
six months after a change of control as defined in the agreement, then 50% of
the outstanding stock options and restricted stock that vest over a time
schedule and remain unvested at the termination date will become
vested. Restricted shares that are subject to vesting via achievement
of performance targets (such as the bonus plan grants described below) are not
included in this acceleration provision.
The
Company entered into an employment agreement with James Emerson, the Company’s
Vice President, Technology and Development, in March 2009. The
employment agreement terminates in September 2010. Except for
compensation, Dr. Emerson’s employment agreement contains terms similar to those
of Messrs. Mickens and Trepanier, including the provision that the Company may
terminate Dr. Emerson’s employment at any time with at least two weeks’ notice,
but that if the Company terminates employment before September 2010 and without
cause as defined in the agreement, then Dr. Emerson is entitled to one month’s
base salary plus his monthly base salary for the number of months equivalent to
his time employed by us, not to exceed six months’ salary, and paid benefits as
severance.
In March
2009, the Company and each of Messrs. Mickens and Trepanier, and, in April 2009,
the Company and Dr. Emerson entered into an executive bonus agreement related to
each officer’s incentive bonus for 2009. Pursuant to the agreement,
in the event of an “acceleration event,” the Company will be obligated to pay
the officer 100% of any unpaid portion of his 2009 cash bonus and all of the
officer’s unvested restricted shares will automatically vest. The
definitions of “acceleration event” and “change in control” are the same as
contained in Mr. Connaghan’s executive bonus agreement. “Cause” has
the same definition as contained in each officer’s employment
agreement. “Good reason” is defined as the occurrence of any of the
following without the officer’s consent: (i) the officer’s base salary is
materially reduced; (ii) the officer is transferred to a job location that is
more than 50 miles from the Company’s current principal place of business; (iii)
the surviving entity materially breaches the terms of the officer’s employment
agreement; or (iv) the officer’s operating responsibilities with the surviving
entity are a material reduction from his responsibilities with the
Company.
In March
2009, the Company entered into a variable commission plan with Mr. Mickens
effective January 1, 2009. If an “acceleration event” (as defined by
the executive bonus agreement discussed above) occurs and Mr. Mickens’s
severance is activated, Mr. Mickens will be entitled to a payout of 50% of his
remaining on target bookings commissions for 2009 (as calculated in the variable
commission plan).
The
description of the above agreements between the Company and each of Messrs.
Connaghan, Mickens and Trepanier and Dr. Emerson are qualified in their entirety
by reference to their respective employment agreements filed as
Exhibits (e)(4), (e)(5), (e)(6) and (e)(7) and the form of the executive
bonus agreement filed as Exhibit (e)(8), which are incorporated herein by
reference.
If the
Offer is consummated, a “change in control” will have occurred, which could
trigger the following cash payments for the Company’s executive officers
pursuant to their employment and executive bonus agreements:
Name
|
Salary
|
Bonus;
Commission
|
Estimated
Benefits
|
M.
Denis Connaghan
|
$325,000
|
$87,500
|
$32,500
|
Jay
Trepanier
|
$90,000
|
$48,750
|
$9,000
|
Michael
Mickens
|
$90,000
|
$18,000;
$66,500
|
$9,000
|
James
Emerson
|
$90,000
|
$45,000
|
$9,000
|
Treatment
of Restricted Stock Held by Current Directors and Executive
Officers.
Pursuant
to the Merger Agreement, immediately prior to the Effective Time any
then-outstanding restricted shares of Common Stock shall become fully vested and
all restrictions thereon shall lapse. Such Shares of Common Stock
shall then be immediately converted into the right to receive the Merger
Consideration.
The
Company’s non-employee directors do not hold any shares of restricted
stock. As of May 31, 2009, executive officers of the Company held an
aggregate of 397,313 shares of restricted stock, of which an aggregate of 50,256
shares were vested as of that date.
If the
Merger is consummated, the following accelerated vesting of restricted shares
will occur for the Company’s executive officers pursuant to the terms of the
Merger Agreement:
Name
|
Accelerated
Restricted Shares and Value(1)
|
M.
Denis Connaghan
|
214,312;
$364,330
|
Jay
Trepanier
|
59,783;
$101,631
|
Michael
Mickens
|
26,087;
$44,348
|
James
Emerson
|
46,875;
$79,688
|
(1) Value
is based on the number of restricted shares multiplied by $1.70, which is the
cash value of the Offer Price.
Treatment
of Options held by Current Directors and Executive Officers.
Pursuant
to the Merger Agreement, all outstanding options to purchase shares of Common
Stock (whether or not then exercisable) shall become fully vested and
exercisable immediately prior to the Effective Time. To the extent
not exercised, each option shall be canceled at the Effective Time, and the
holder thereof shall be entitled to receive an amount in cash equal to the
product of (i) the excess, if any, of (1) the Cash Value of the Offer Price,
over (2) the exercise price per share of Company Common Stock subject to such
option, and (ii) the total number of shares of Company Common Stock subject to
such fully vested and exercisable option as in effect immediately prior to the
Effective Time that have not been exercised. If such amount is
negative, no payment shall be made and such shares shall be
cancelled.
As of May
31, 2009, the Company’s non-employee directors held no options to purchase
shares of Common Stock with an exercise price of less than $1.70 per
share, and an aggregate of 353,350 shares of Common Stock with an exercise
price of greater than or equal to $1.70 per share, of which an aggregate of
80,166 were unvested as of that date. As of May 31, 2009, the
Company’s executive officers held options to purchase an aggregate of 575,000
shares of Common Stock with an exercise price of less than $1.70 per
share, of which an aggregate of 516,875 were unvested as of that date, and
an aggregate of 50,000 shares of Common Stock with an exercise price of
greater than or equal to $1.70 per share, of which an aggregate of 37,500
were unvested as of that date.
If the
Merger is consummated, the following accelerated vesting of stock options will
occur for the Company’s executive officers and directors pursuant to the terms
of the Merger Agreement:
Name
|
Accelerated
Stock Options and Value(1)
|
M.
Denis Connaghan
|
306,250
options; $183,750
|
Jay
Trepanier
|
15,000
options; $2,850
80,000
options; $12,800
|
Michael
Mickens
|
37,500
options; no value
40,625
options; $6,500
|
James
Emerson
|
75,000
options; $77,250
|
Robert
Brill
|
15,083
options; no value
|
Peter
Collins
|
12,500
options; no value
|
Kenneth
Jennings
|
25,000
options; no value
|
Hans
Lindroth
|
15,083
options; no value
|
Donald
Russell
|
12,500
options; no
value
|
(1) Value
is based on the difference between $1.70 and the exercise price of the option
multiplied by the number of options.
|
(b)
|
Arrangements
with Offeror and Merge Healthcare.
|
Merger
Agreement.
The
summary of the Merger Agreement contained in the section titled “Merger
Agreement” of the Offer to Purchase and the description of the conditions of the
Offer contained in the section titled “The Offer – Conditions of the Offer” of
the Offer to Purchase are incorporated herein by reference. This summary is
qualified in its entirety by reference to the Merger Agreement, which is filed
as Exhibit (e)(1) hereto and are incorporated herein by
reference.
Stockholder
Support Agreement.
The
summary of the Stockholder Support Agreement (the “
Stockholder
Support Agreement
”), dated
as of May 30, 2009, by and between Merge Healthcare and each of the
directors, executive officers and certain stockholders of the Company, contained
in the section titled “The Offer – Interests of Certain Persons –
Arrangements with Merge Healthcare” of the Offer to Purchase, is incorporated
herein by reference. This summary is qualified in its entirety by reference to
the form of Stockholder Support Agreement which is filed as Exhibit (e)(2)
hereto and is incorporated herein by reference.
Confidentiality
Agreement.
The
Company and Merge Healthcare entered into a mutual Confidentiality and
Non-Disclosure Agreement dated as of May 6, 2009 (the “
Confidentiality
Agreement
”). Each party
agreed that any information furnished to it would be kept confidential and would
be used only for the purpose of evaluating a possible transaction. Each party
also agreed, among other things, to restrict access of all confidential
information received from the other party to only those employees and
consultants of the receiving party who need to be informed of such confidential
information for the purpose of evaluating a possible transaction between the
parties, and only if such employees and consultants sign agreements of
confidentiality that contain substantially the same obligations contained in the
Confidentiality Agreement. This description of the Confidentiality Agreement is
qualified in its entirety by reference to the Confidentiality Agreement filed as
Exhibit (e)(3) hereto and is incorporated herein by reference.
Item
4. The Solicitation or Recommendation.
At a
meeting held on May 29, 2009, the Board of Directors of the Company (the
“
Board
”) unanimously:
(i) determined that the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, are advisable and fair to and in
the best interests of the Company and the Company’s stockholders;
(ii) approved and adopted the Merger Agreement and the terms and conditions
thereof and the transactions contemplated thereby, including the Offer and the
Merger; and (iii) recommended that the Company’s stockholders accept the
Offer and tender their Tender Shares thereunder and, if applicable, approve and
adopt the Merger Agreement and the Merger.
|
(b)
|
Background
and Reasons for the Recommendation.
|
Background
of the Merger and the Offer.
The
Company offers a broad range of clinical trial technology and services,
including electronic data capture, handheld devices, and interactive voice and
Web response software, designed to speed and improve the process of collecting
data in clinical trials performed for drug and medical device
development. The Company provides pharmaceutical, biotechnology,
medical device companies and contract research organizations with integrated
software technology and services designed to significantly reduce the time spent
collecting clinical trials data and managing clinical trials performance, using
an automated and easy-to-use mechanism to collect data directly from clinical
investigators and patients. The Company believes that its automated
data collection software enables its customers to reduce overall clinical trial
research costs, enhance data quality and reduce the time it takes to close a
study database.
The
Company’s principal sources of cash have been from revenues from software
application-hosting and related services as well as from proceeds from the
issuance of various debt instruments and the sale of equity
securities. At March 31, 2009, the Company had an accumulated deficit
of approximately $46.7 million, including a net loss of approximately $15.8
million for the year ended December 31, 2008 and of approximately $1.0 million
for the three months ended March 31, 2009. The Company believes its
existing cash, cash equivalents, short-term investments, and cash provided by
operating activities and the Company’s debt facilities will be sufficient to
meet its working capital and capital expenditure needs through 2009. Net service
revenues decreased 17.5% for the year ended December 31, 2008, primarily the
result of the timing of new project starts during 2008. Although the
Company experienced significant growth in awards throughout 2008, customers
delayed starting a substantial portion of those studies. This, along
with the fact that the Company experienced $3.9 million in cancellations
throughout 2008, had an unfavorable impact on 2008
revenue. Overall cancellations increased by 44.4% in
2008. Net service revenues decreased 2.2% to $3.6 million for the
three months ended March 31, 2009 as compared to the three months ended March
31, 2008. The decrease in net revenue is primarily the result of a
32.3% decline in active studies during the first quarter of
2009. During the quarter ended March 31, 2009, the Company
experienced cancellations of $5.0 million and ended the quarter with $3.3
million of studies on hold.
The cancellations and
studies on hold in 2008 and the first quarter of 2009 were a direct reflection
of the economic times and the fact that customers are opting to cancel studies
sooner than was the case in the past, especially if they do not show promising
results early in the study. As a result, total available backlog decreased
26.3% to $18.5 million at March 31, 2009 compared to $25.1 million at December
31, 2008. Of the $18.5 million backlog, $2.5 million was scheduled to
start later than six months, or after September 30,
2009. Approximately 47% and 46% of the Company’s total available
backlog as of March 31, 2009 and December 31, 2008, respectively, consisted of
fully executed contracts.
In
September 2008, Robert Brill, the Company’s Chairman, had discussions with Greg
Berlacher of Emerging Growth Equities, Ltd. (“EGE”), an investment banking firm,
to discuss the Company’s business and potential strategic
opportunities. On October 6, 2008, because of the general, economic,
financial and business circumstances discussed in the preceding paragraph, the
Company engaged EGE to evaluate strategic alternatives to enhance stockholder
value, including possible acquisitions available to the Company. The
Company hired EGE based on its experience as a financial advisor in mergers and
acquisitions as well as its familiarity with the eClinical sector, including the
Company. Shortly after its engagement, EGE began its detailed due
diligence on the Company and the eClinical market. EGE also reviewed
potential acquisition candidates and joint venture candidates, as well as
candidates for other strategic transactions, including a sale of the
Company. Given the Company’s existing customer base, limited
infrastructure and low capital resources, EGE, in analyzing potential strategic
candidates, focused on companies with the infrastructure and capital to absorb
and continue the Company’s technology and service offerings and its existing
customers. This approach produced a focused list of strategic
candidates. The Company issued a press release announcing its
engagement of EGE, which resulted in EGE receiving numerous inquiries from third
parties. EGE followed up with all inquiries.
During
EGE’s efforts, numerous possible strategic candidates never moved forward with
an indication of interest. The Company believes that this lack of interest was
primarily attributable to the slowdown nationally and globally in pharmaceutical
research and development, which led to studies being cancelled or
delayed. As a result, potential strategic partners were hesitant to
pursue mergers, acquisitions and other strategic partnerships because of the
impact these study cancellations and delays were having on eClinical companies,
including the Company.
In
November 2008, the Company hired Denis Connaghan as its Chief Executive Officer
as part of its management reorganization that began in July 2008 with the
resignation of its former chief executive officer. Mr. Connaghan
replaced the Company’s interim chief executive officer and also became a
director of the Company. Mr. Connaghan was hired to guide the Company
as it is evaluated and reviewed in a general manner various strategic
merger and acquisition alternatives. With Mr. Connaghan’s hiring, EGE
instituted a weekly call with the Company’s Board of Directors to keep them
apprised of its efforts on the Company’s behalf. During these weekly
calls, EGE reviewed the results of its due diligence, its discussion, if any,
with possible strategic candidates and possible strategic
alternatives.
In
January 2009, the Company received a letter, dated January 7, 2009, from Merge
Healthcare citing its interest in a possible transaction with the Company and
setting forth possible terms of a transaction, all of which were subject to,
among other things, due diligence by Merge Healthcare. Mr. Connaghan,
Donald Russell, a Company director, and Jay Seid of EGE, met with
representatives of Merge Healthcare to discuss a possible transaction on general
terms. Merge Healthcare, however, refused to agree to a
confidentiality agreement with a standstill provision, and the Company and Merge
Healthcare ceased contact at that time.
In
January 2009, EGE contacted Ted Kaminer, the Chief Financial Officer of
Bio-Imaging Technologies, Inc. (“
Bio-Imaging
”), to determine
whether Bio-Imaging had any interest in discussing a potential strategic
transaction with the Company. Immediately following the conversation,
representatives of EGE informed Mr. Connaghan that Mark Weinstein, Bio-Imaging’s
Chief Executive Officer, and Mr. Kaminer would be interested in meeting to
further discuss a potential acquisition of the Company. EGE
representatives immediately communicated with Messrs. Weinstein and Kaminer and
indicated that the Company was prepared to sign a confidentially agreement and
schedule a meeting to discuss a transaction. EGE
delivered a draft confidentiality agreement, including a standstill provision,
to Mr. Kaminer of Bio-Imaging on January 13, 2009, which Bio-Imaging signed on
January 16, 2009.
On
February 4, 2009, the Company and Bio-Imaging met in New York City and engaged
in preliminary discussions regarding a potential strategic transaction between
the Company and Bio-Imaging. Messrs. Connaghan and Weinstein each
gave an overview of their respective companies. The parties
discussed, at a very high level, how the two companies could combine in a way
that would be compelling for each.
Over the
next few days, Mr. Weinstein had telephone calls with Messrs. Berlacher and Seid
of EGE to request additional financial and operational information regarding the
Company in order for Bio-Imaging to assess its interest in pursuing a potential
strategic transaction of the Company. Messrs. Berlacher and Seid
continued to explore with Messrs. Connaghan and Trepanier other potential
strategic scenarios with any third parties that had expressed interest in the
Company, although none had presented any specific transaction structure or
details.
At a
meeting of the Board on February 25, 2009 at the Company’s offices, Greg
Berlacher, Jill Meyer and Jay Seid of EGE, who were participating by telephone,
presented the Board with an update on its work and contacts regarding potential
strategic transactions. The board reviewed potential
alternatives
in
various scenarios in a general manner because no specific transaction details
had been suggested by any interested party. Donald R. Reynolds of the
Company’s counsel, Wyrick Robbins Yates & Ponton LLP, also attended this
meeting and advised the Board during its deliberations. The Board,
however, did not reach any conclusion on any of these scenarios.
A second
meeting between the Company and Bio-Imaging was held in New York City on March
18, 2009. The meeting was designed to enable Bio-Imaging to speak
directly to management of the Company about its operations. The
parties reviewed and discussed the operations of the Company and Michael
Mickens, the Company’s Vie President of Sales and Client Services, gave a report
on the Company’s sales. Following this meeting, EGE prepared a
preliminary financial review of the potential business combination based on the
publicly available analyst’s estimates for Bio-Imaging contained in the then
latest analyst report issued by EGE. The analysis was conducted at a
very high level due to the lack of forward-looking information available for
Bio-Imaging. The analysis was based on a combination of the two
companies and projected operating revenue through 2010, assuming anticipated
cost savings resulting from the combination of the companies.
On March
31 2009, Mr. Kaminer of Bio-Imaging called Mr. Berlacher of EGE to propose a
potential strategic transaction between Bio-Imaging and the
Company. The proposal did not specify a particular structure for the
acquisition, but did set an exchange ratio of 0.2 shares of Bio-Imaging Common
Stock for each share of the Company’s stock.
At a
telephonic meeting on April 1, 2009, the Board met to review the strategic
proposal from Bio-Imaging. Greg Berlacher, Jay Seid, Jill Steier and
Josh Fine of EGE reviewed with the Board its analysis of Bio-Imaging and the
proposal. EGE included in its summary various financial comparisons
between Bio-Imaging and the Company, including historical performances of each
company and estimated financial information based on a combined
company. Mr. Seid also summarized EGE’s discussions with
Bio-Imaging’s financial advisors concerning Bio-Imaging’s
operations. The Board reviewed and discussed the forecasted numbers
and analyses provided by EGE. The Board also considered potential
synergies of the combined company, the strategic and competitive implications,
the form and amount of the proposed consideration, and potential alternatives to
the proposal. The Board also discussed the likely costs and timing of
an acquisition of the Company by Bio-Imaging. Based on its review,
the Board instructed EGE to make a counteroffer seeking a higher acquisition
price. At this meeting, Mr. Reynolds reviewed the duties and
responsibilities of directors in the context of a potential transaction,
including the duties of care, loyalty and good faith. Mr. Reynolds
asked the directors to disclose any conflicts of interest with respect to the
proposed transaction and none were noted.
The Board
met again telephonically on April 3, 2009. At this meeting, Mr.
Connaghan reviewed management’s analyses of various scenarios for the Company
continuing as an independent entity, whether as a public company or as a private
company. He reviewed the Company’s need to conserve cash and that
remaining independent was a possibility but it would likely severely limit its
ability to grow due to a lack of capital resources, with the result that the
Company might become a niche player in its field. Mr. Connaghan also
explained that remaining independent would not likely provide any significant
liquidity for the Company’s investors. The Board considered the
different scenarios of operating the Company as an independent entity, specific
future cost estimates for the Company, and other matters related to the
strategic outlook of the Company. Mr. Reynolds advised the Board on
strategic alternatives, including different business organizational structures
and potential timelines of a reorganization of the Company. The
directors agreed to reconvene the following week to discuss all of these issues
further.
Through
April 6, 2009, Messrs. Berlacher and Seid had numerous additional conversations
with Mr. Kaminer of Bio-Imaging and discussed in detail the requested increased
consideration and, in general terms and without any commitment or decision, the
various forms of a possible transaction. Messrs. Weinstein and
Kaminer resisted increasing the stock consideration because of their belief that
the Bio-Imaging stock was undervalued and the potential dilution to
Bio-Imaging’s existing stockholders. EGE discussed the negotiations
with Mr. Connaghan daily during this period. On April 6, 2009,
Bio-Imaging, in a telephone conversation with Messrs. Berlacher and Seid of EGE,
revised its offer to 0.2 shares of Bio-Imaging Common Stock and $0.15 in
cash.
On April
7, 2009, the Board convened a special meeting via telephone that Messrs.
Berlacher and Seid of EGE and Mr. Reynolds of Wyrick Robbins also
attended. Mr. Connaghan and Mr. Berlacher of EGE each updated the
Board on their discussions with Bio-Imaging about the proposed transaction.
Messrs. Connaghan and Berlacher summarized Bio-Imaging’s position on the
increased transaction consideration, now consisting of Bio-Imaging stock and
cash. The directors discussed in detail Bio-Imaging’s offer and the transaction
process from a legal perspective. The directors then unanimously
approved the appointment of a Mergers and Acquisitions Committee consisting of
Messrs. Brill, Russell and Connaghan to negotiate the general terms and
provisions of the proposed transaction with Bio-Imaging. These
individuals were elected due to their positions as Chairman (Mr. Brill) and
President (Mr. Connaghan) of the Company, as well as being the directors most
involved to date in the process.
Shortly
afterward, the Company and Bio-Imaging began their due diligence reviews of each
other. The Company posted its due diligence materials to a virtual
data room, and the parties held diligence meetings on April 16, 20, 21 and 27,
2009 at which Company records were reviewed.
From
April 20 through May 4, 2009, the Company and Bio-Imaging negotiated the final
terms of a merger agreement with the assistance of their respective legal and
financial advisors. These negotiations centered on two main points:
the type of consideration to be paid, which ultimately was set at the
combination of cash, Bio-Imaging common stock and Bio-Imaging preferred stock
because Bio-Imaging did not have enough authorized common stock to issue all of
the stock consideration in shares of its common stock; and the structure of the
transaction, which ultimately was set as a tender offer and subsequent merger
rather than a merger alone, due to shorter time expected to complete a tender
offer than a straight merger.
The Board
met on May 1, 2009 for the purpose of reviewing the terms of the proposed
Bio-Imaging merger agreement. Also in attendance were Messrs.
Berlacher and Seid of EGE, the company’s financial advisor, and Mr. Reynolds of
Wyrick Robbins. Mr. Reynolds reviewed the terms of the Bio-Imaging
merger agreement and the relevant corporate legal approvals necessary to
consummate the Bio-Imaging offer and merger, noting that no regulatory approvals
were necessary. Mr. Seid reviewed with the Board his firm’s analyses
of the Company, Bio-Imaging and the proposed transaction. At the
conclusion of the review of EGE’s analyses, Mr. Seid indicated to the Board that
EGE was prepared to deliver an opinion that the consideration to be received by
the Company stockholders in the Merger is fair, from a financial point of view.
The Board engaged in detailed discussion of the proposed transaction, and
unanimously approved proceeding to finalize the Bio-Imaging merger agreement,
but agreed to reconvene on Monday, May 4, 2009 to continue its deliberations on
the transaction.
The Board
then reconvened after the stock market had closed on Monday, May 4, 2009 because
the consideration was a fixed ratio of cash and Bio-Imaging stock and the Board
wanted a set value that the consideration would represent on which to make its
decision. In attendance again were Messrs. Berlacher, Seid and
Reynolds. After an update on negotiations over the weekend on final
technical terms of the Merger Agreement by Mr. Reynolds, Mr. Seid presented
EGE’s fairness opinion and his firm’s analyses. After further
deliberation, the Board determined that the Bio-Imaging merger agreement and the
transactions contemplated thereby were fair to, advisable and in the best
interests of the Company’s stockholders and each other relevant corporate
constituency and unanimously voted to approve the terms of the Bio-Imaging
merger agreement.
The Company and Bio-Imaging signed
their merger agreement on May 4, 2009 and issued a joint press release before
the opening of the markets on May 5, 2009, announcing the proposed merger and
the related transactions.
On May 5, 2009, the Company received an
unsolicited proposal with respect to a potential acquisition of the Company from
Merge Healthcare. The Board, in consultation with EGE and Wyrick
Robbins, subsequently determined that the unsolicited proposal constituted an
acquisition proposal, as defined in the Bio-Imaging merger agreement, that could
be a superior proposal, as so defined in the Bio-Imaging merger agreement (these
definitions are identical to those in the Merger Agreement), requiring
disclosure to Bio-Imaging. The Company notified Bio-Imaging of its
determination on May 6, 2009. The Company directors also confirmed to
each other that none of them had any conflicts of interest with respect to a
transaction with Merge Healthcare.
From May
6 to May 15, 2009, representatives of EGE and Wyrick Robbins, on behalf of the
Company, negotiated with representatives of Merge Healthcare on the terms of a
merger agreement among the Company, Merge Healthcare and a to-be-formed
subsidiary of Merge Healthcare. The parties also entered into a
confidentiality agreement, containing a standstill provision, identical to the
one the Company entered into with Bio-Imaging. They conducted due
diligence on one another, including Merge Healthcare having access to the
Company’s virtual data room, and meetings on May 13 and 14, 2009.
The final resulting
proposal provided for a tender offer and merger transaction identical to the
Bio-Imaging offer except for the consideration offered, which was $0.60 in cash
and 0.2584 shares of Merge Healthcare common stock, which fraction was valued at
$0.60, based on a volume-weighted average of Merge Healthcare’s stock price over
the 15 trading days ended May 14, 2009, for a total cash value of $1.20 per
Share. From the outset of the negotiations, the Company insisted to
Merge Healthcare that the merger agreement with Merge Healthcare had to be
substantively identical to that with Bio-Imaging. On May 15, 2009,
Merge Healthcare delivered a proposed merger agreement to the Company, which was
identical to the Bio-Imaging merger agreement except as to the consideration
offered, the inclusion of references to the termination of the Bio-Imaging
merger agreement and the payment of termination fees and expenses thereunder,
factual differences in Merge Healthcare’s representations, the removal of
stockholder approval of an amendment to the certificate of incorporation to
increase the authorized shares of Bio-Imaging common stock because Merge
Healthcare currently has sufficient authorized common stock to effect its
proposed tender and merger, and some minor technical revisions. At
the same time, Merge Healthcare also delivered a proposed stockholder support
agreement to be entered into by the Company’s directors and executive officers
and the same stockholders who entered into the stockholder support agreement
with Bio-Imaging, which was substantially identical to the Bio-Imaging
stockholder support agreement.
On May
15, 2009, the Company’s Board of Directors met to evaluate the Merge Healthcare
proposal and the Merge Healthcare merger agreement. After
consultation with Wyrick Robbins and EGE, the Company’s Board of Directors
unanimously determined in good faith that the Merge Healthcare proposal,
including the Merge Healthcare merger agreement, was a superior
proposal.
On the
afternoon of May 15, 2009, the Company gave written notice to Bio-Imaging of the
Merge Healthcare offer. In compliance with the Bio-Imaging merger
agreement, the Company could not exercise its right to terminate the Bio-Imaging
merger agreement until Wednesday, May 20, 2009. Therefore, the notice indicated
that the Company’s Board of Directors intended to, on May 20, exercise its right
to terminate the Bio-Imaging merger agreement in order to concurrently enter
into the Merge Healthcare merger agreement if it was a superior proposal at that
time. Also on May 15, 2009, the Company and Bio-Imaging entered into
an amendment to their merger agreement to clarify certain of its
provisions.
On the
evening of May 18, 2009, Bio-Imaging delivered to the Company a proposed
amendment to its merger agreement to increase the cash portion of its offer from
$0.15 to $0.62.
The Board
met telephonically on May 19, 2009 for the purpose of reviewing the terms of the
increased Bio-Imaging offer. Also in attendance were Mr. Seid of EGE, the
Company’s financial advisor, and Mr. Reynolds and other representatives of
Wyrick Robbins. The Board reviewed the terms of increased Bio-Imaging
offer and the Merge Healthcare offer in detail, including the relative strategic
merits of each, the impact of current market volatility and the different
periods the proposals used to value the stock consideration, the liquidity of
each and other relevant matters. Mr. Seid reviewed with the Board the
increased Bio-Imaging offer and delivered to the Board his firm’s verbal
opinion, subsequently expressed in writing, that the increased consideration to
be received by the Company stockholders in the proposed merger with Bio-Imaging
was fair, from a financial point of view. The Board engaged in detailed
discussion of the increased Bio-Imaging offer. After its
deliberation, the Board determined that the terms of increased Bio-Imaging offer
were fair to, advisable and in the best interests of the Company’s stockholders
and each other relevant corporate constituency and unanimously voted to approve
the terms of the increased Bio-Imaging offer. The Board also
unanimously authorized management of the Company to notify Merge Healthcare that
its offer was no longer a superior proposal. Following the Board
meeting, the Company and Bio-Imaging executed an amendment to the Bio-Imaging
merger agreement and thereafter the Company sent a written notice to Merge
Healthcare that its offer was no longer a superior proposal.
On the
evening of May 19, 2009, the Company and Bio-Imaging entered into an amendment
to their merger agreement to increase the purchase price. They issued
a joint press release before the opening of the markets on May 20, 2009,
announcing the execution of the amendment to the Bio-Imaging merger
agreement.
On the
evening of May 20, 2009, the Company received a letter from Merge Healthcare
offering to increase the stock portion of its offer to be 0.3451 shares of Merge
Healthcare common stock, which was valued at $0.88, based on a volume weighted
average of Merge Healthcare’s stock price over the 20 trading days ended May 20,
2009. Merge Healthcare also agreed that its merger agreement would
not be revised other than to reflect the increased consideration
offered.
On May
21, 2009, the Board met telephonically for the purpose of reviewing the terms of
the increased Merge Healthcare offer. Also in attendance were Messrs.
Berlacher and Seid of EGE and Mr. Reynolds and other representatives of Wyrick
Robbins. The Board reviewed the terms of the increased Merge
Healthcare offer and the terms of the amended Bio-Imaging merger agreement in
detail, including the relative strategic merits of each, the impact of current
market volatility, the historical prices of Bio-Imaging stock and Merge
Healthcare stock and other relevant matters. Mr. Reynolds reviewed
with the Board its fiduciary duties. Mr. Seid reviewed with the Board
the increased Merge Healthcare offer. The Board then engaged in detailed
discussion of the increased Merge Healthcare offer and the amended Bio-Imaging
merger agreement, but agreed to reconvene on Friday, May 22, 2009 to continue
its deliberations. the Company gave notice to Bio-Imaging of the
increased Merge Healthcare proposal, as required by their merger agreement, and
requested both Bio-Imaging and Merge Healthcare to consider increasing their
offers further. Neither did at that time.
On the
afternoon of May 22, 2009, the Board met telephonically to continue its
deliberations of the increased Merge Healthcare offer. Also in
attendance were Messrs. Berlacher and Seid of EGE and Mr. Reynolds and other
representatives of Wyrick Robbins. The Board reviewed the relative
strategic merits of the increased Merge Healthcare offer and the amended
Bio-Imaging merger agreement, the trading volume and prices of Bio-Imaging stock
and Merge Healthcare stock for that day and other relevant
matters. Mr. Reynolds reviewed with the Board its fiduciary
duties. After detailed discussion, the Board determined that the
increased Merge Healthcare offer was not a superior proposal, and the Company
informed both Bio-Imaging and Merge Healthcare as such.
On May
27, 2009, the Company received a letter and a draft merger agreement from Merge
Healthcare whereby Merge Healthcare increased the value of its offer to be $0.80
in cash and 0.3348 shares of Merge Healthcare Common Stock (which is the Offer
Consideration and the Merger Consideration). On the afternoon
of May 27, 2009, the Board met telephonically to continue its deliberations of
the increased Merge Healthcare offer. Also in attendance
were Messrs. Berlacher and Seid of EGE and Mr. Reynolds and other
representatives of Wyrick Robbins. The Company board reviewed the
terms of the increased Merge Healthcare offer, including historical prices of
Bio-Imaging stock and Merge Healthcare stock and other relevant
matters. After consultation with Wyrick Robbins and EGE, the Board
unanimously determined in good faith that the increased Merge Healthcare offer,
including the revised Merge Healthcare merger agreement (which is the Merger
Agreement), was a superior proposal.
On the
afternoon of May 27, 2009, the Company gave written notice to Bio-Imaging of the
increased Merge Healthcare offer. In compliance with the Bio-Imaging
merger agreement, the Company could not exercise its right to terminate the
Bio-Imaging merger agreement until Saturday, May 30, 2009. Therefore, the notice
indicated that the Board intended to, on May 30, exercise its right to terminate
the Bio-Imaging merger agreement in order to concurrently enter into the Merge
Healthcare merger agreement if it was a superior proposal at that
time.
On the
evening of May 28, 2009, Bio-Imaging delivered to the Company a proposed
amendment to the Bio-Imaging merger agreement to increase the preferred stock
portion of the Bio-Imaging offer from 0.076 shares to 0.113 shares.
The Board
met telephonically on the morning of May 29, 2009 for the purpose of reviewing
the terms of the increased Bio-Imaging offer. Also in attendance were Messrs.
Berlacher and Seid and other representatives of EGE, the Company’s financial
advisor, and Mr. Reynolds and other representatives of Wyrick
Robbins. The Board reviewed the terms of the increased Bio-Imaging
offer in detail and compared the terms of the Bio-Imaging increased offer,
including the liquidity of the preferred stock portion, to those of the Offer
and other relevant matters. Mr. Seid reviewed with the Board the
increased Bio-Imaging offer and his firm’s analyses of the Company, Merge
Healthcare and the proposed transaction, which are summarized below in “Opinion
of Emerging Growth Equities Ltd., Financial Advisor to the Company” and
consisted of an analysis of selected publicly traded comparable companies, an
analysis of trading volume of the Company and Merge Healthcare, an analysis of
selected merger and acquisition transactions by comparable companies and a
premium paid analysis. Mr. Seid then delivered to the Board his
firm’s verbal opinion, subsequently expressed in writing (which is attached as
Annex I
hereto), that the consideration to be received by the Company stockholders from
Merge Healthcare in the Merger is fair, from a financial point of view. The
Board engaged in detailed discussion of the increased Bio-Imaging
offer. After its deliberation, the Board determined that, even in
light of the increased Bio-Imaging offer, the Merge Healthcare offer was a
superior proposal. The Board then determined that the Offer and the
Merger, were fair to, advisable and in the best interests of the Company’s
stockholders and each other relevant corporate constituency and unanimously
voted to approve the terms of the Offer and the Merger. The Board
also unanimously authorized management of the Company to notify Bio-Imaging that
its increased offer was not a superior proposal.
Bio-Imaging
did not make another offer prior to midnight on May 29, 2009. As a
result, the Company, Merge Healthcare and Merger Sub executed the Merger
Agreement.
As of the
date of this Schedule 14D-9, the Board unanimously recommends that the Company
stockholders accept the Offer and tender their shares to Offeror pursuant to the
Offer, and, if applicable, vote in favor of the Merger.
Reasons
for Recommendation.
In
evaluating the Merger Agreement and the other transactions contemplated thereby,
including the Offer and the Merger, and recommending that all holders of Common
Stock accept the Offer and tender their shares pursuant to the Offer and, if
applicable, approve the Merger and the Merger Agreement, the Board consulted
with the Company’s management and legal and financial advisors and considered a
number of factors, including the following considerations and
deliberations:
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Financial Condition and
Prospects of the Company
. The Board considered its knowledge and
familiarity with the Company’s business, financial condition and results
of operations, as well as the Company’s financial outlook and prospects if
it were to remain an independent company in the current and anticipated
economic environment. The Board discussed and deliberated at length
concerning the Company’s current financial outlook, including the risks
associated with achieving and executing upon the Company’s business plans,
and the Company’s cash resources. The Board considered the Company’s
projected revenues and operating expenses, the need to obtain operating
capital in the future, the risk that such capital would be available on
favorable terms, or at all, and the impact of further efforts to reduce
operating expenses on the Company’s business. The Board also considered
the competitive environment in which the Company operates and the
potential impact on its current and potential customers of further cost
reduction measures and/or the inability to raise additional
capital.
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Competitive
Environment
. The Board considered the competitive environment in
which the Company operates and the competitive challenges facing the
Company if it remained as an independent company, including current
economic and financial market conditions and competition with companies
with greater scale and access to
resources.
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Historical Trading
Prices
. With assistance from EGE, the Board reviewed the historical
market prices, volatility and trading information with respect to the
Common Stock, including the fact that the Offer Price represents a premium
of approximately 138% and 100%, respectively, over the average closing
price of the Common Stock on the Nasdaq Global Market for the 30 trading
days prior to May 4, 2009, the last trading day prior to announcement
of the original Bio-Imaging merger agreement, and May 28, 2009, the last
trading day prior to the Board’s approval of the Merger
Agreement.
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Financial Condition and
Prospects of Merge Healthcare
. The Board discussed and
deliberated at length, and considered the analysis of EGE of, Merge
Healthcare’s business, financial condition and results of operations,
including its seasoned management team, and greater financial resources
and access to capital than the
Company.
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No Financing
Condition
. The Board considered that neither the Offer
nor the Merger are subject to a financing
condition.
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Prior Acquisition History of
Merge Healthcare
. The Board considered Merge
Healthcare’s history of successful acquisitions and integration of the
acquired companies and the Board’s belief that the Offer and the Merger
could be completed relatively quickly and in an orderly
manner.
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Cash and Stock Tender
Offer
. The Board considered the fact that the Offer and
the Merger give Company stockholders the ability to achieve liquidity for
some of their shares of Common Stock and, importantly, the ability of
Company stockholders to participate in any future appreciation in value of
the combined company through the receipt of the Merge Healthcare Common
Stock as part of the Offer Consideration and Merger Consideration
.
The Board
also considered Merge Healthcare’s size and financial position, and its
ability to pay the cash portion of the Offer Price without the need for a
financing condition.
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Fixed Offer/Merger
Consideration
. The Board considered that the Offer
Consideration and the Merger Consideration is fixed, which will allow
holders of Common Stock to participate in any appreciation in the value of
Merge Healthcare Common Stock prior to the Effective
Time.
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Certainty of Value
. The
Offer provides for a tender offer for all shares of Common Stock held by
Company stockholders to be followed by the Merger for the same
consideration, thereby enabling Company stockholders, at the earliest
possible time, to obtain the benefits of the transaction in exchange for
their shares and eliminating any uncertainties in valuing the Merger
Consideration to be received by the Company
stockholders.
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Results of Discussions with
Third Parties
. The Board, with the assistance of its advisors,
discussed and considered the results of discussions that the Company’s
management and its advisors had had with Merge Healthcare and other third
parties, including Bio-Imaging, regarding a possible business combination
or similar transaction with the Company and the ability of other bidders
to make, and the likelihood that other bidders would make, an offer at a
higher price. Based on those discussions and considerations, and the
Company’s extensive negotiations with both Merge Healthcare and
Bio-Imaging, the Board believed that the Offer Price represented the
highest price reasonably
attainable.
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Opinion and Analyses of the
Company’s Financial Advisor
. The opinion of EGE to the Board, dated
May 30, 2009, to the effect that, as of May 29, 2009, the per
share consideration consisting of $0.80 in cash and 0.3448 of a share of
Merge Healthcare Common Stock to be received by the holders of Common
Stock pursuant to the Merger Agreement was fair, from a financial point of
view, to such holders, together with EGE’s related financial analyses as
presented to and discussed with the Board. The full text of the EGE
opinion, which sets forth the assumptions made, matters considered, and
limitations on and scope of the review undertaken, is attached to this
document as
Annex
I
and is incorporated by reference. The Board was aware
that EGE becomes entitled to the fees described in Item 5 upon
rendering its opinion and upon the consummation of the
Offer.
|
|
·
|
Transferability of Merge
Healthcare
Common
Stock
. The Board considered the liquidity and stability
of the market for the shares of Merge Healthcare Common Stock to be issued
to Company stockholders in the Offer and the Merger, and that those shares
will be registered with the SEC and will be freely tradable by Company
stockholders who are not affiliates of Merge
Healthcare.
|
|
·
|
Stockholder Support
Agreement
. The Board noted that the stockholders who executed the
Stockholder Support Agreements, who together control approximately 33% of
the voting rights of the Company’s Common Stock, have agreed to tender
their shares in the Offer pursuant to the Stockholder Support Agreements.
The Board also noted that the Stockholder Support Agreements will
terminate if the Merger Agreement is terminated in accordance with its
terms.
|
|
·
|
Public Announcement of the
Offer and the Merger
. The Board considered the anticipated
beneficial effect of a public announcement of the Offer and execution of
the Merger Agreement, including potential effects on the Company’s sales,
operating results and stock price, and the Company’s ability to attract
and retain key management and sales and marketing
personnel.
|
|
·
|
Merger Agreement Terms and
Conditions
. The Board reviewed, considered and discussed with the
Company’s management and the Company’s legal and financial advisors the
terms and conditions of the Merger Agreement, including the respective
representations, warranties and covenants and termination rights of the
parties. The matters considered
included:
|
|
o
|
The
Board’s view that the material terms of the Merger Agreement, taken as a
whole, were as favorable as or more favorable than those found in
comparable acquisition
transactions.
|
|
o
|
The
availability of appraisal rights with respect to the Merger for Company
stockholders who properly exercise their rights under the
DGCL.
|
|
o
|
The
Board’s assessment of Merge Healthcare’s financial strength and the fact
that Merge Healthcare and Offeror’s obligations under the Offer are not
subject to any financing condition.
|
|
o
|
The
reasonable likelihood of the consummation of the transactions contemplated
by the Merger Agreement, Merge Healthcare’s history of completing
acquisitions and the absence of significant regulatory approval
requirements.
|
|
o
|
The
provisions in the Merger Agreement allowing the Company, subject to
certain conditions as set forth in the Merger Agreement, to enter into a
written agreement concerning a superior proposal (as defined in the Merger
Agreement).
|
|
o
|
The
provisions in the Merger Agreement allowing the Board, subject to certain
conditions set forth in the Merger Agreement, to change its recommendation
to the Company’s stockholders with respect to the Offer and Merger if
required by the Board’s fiduciary
duties.
|
|
o
|
The
provisions in the Merger Agreement allowing the Company to terminate the
Merger Agreement if the Offeror has not accepted Tender Shares for payment
prior to July 29, 2009.
|
|
·
|
Availability of Appraisal
Rights
. The Board considered that appraisal rights would
be available to Company stockholders under Delaware
law.
|
The Board
also considered a number of uncertainties and risks in its deliberations
concerning the transactions contemplated by the Merger Agreement, including the
Offer and the Merger, including the following:
|
·
|
Prohibition on Solicitation of
Other Offers
. The restrictions in the Merger Agreement
on solicitation generally, which prohibit the Company from soliciting any
acquisition proposal or offer for a merger or business combination with
any other party, including a proposal that might be advantageous to the
Company stockholders when compared to the terms and conditions of the
Offer and the Merger, and further prohibit the Company from entering into
discussions regarding unsolicited proposals unless certain requirements
are met.
|
|
·
|
Termination Fee
. The
restrictions that the Merger Agreement imposes on actively soliciting
competing bids, and the insistence by Merge Healthcare as a condition to
the Offer that the Company would be obligated to pay a termination fee
equal to $500,000, plus certain out-of-pocket expenses up to $250,000,
under certain circumstances, and the potential effect of such termination
fee in deterring other potential acquirers from proposing alternative
transactions.
|
|
·
|
Failure to Close
. The
conditions to Merge Healthcare’s and Offeror’s obligation to accept the
tendered Tender Shares in the Offer and consummate the Merger, and the
possibility that such conditions may not be satisfied. The fact that, if
the Merger is not completed, the Company’s officers and other employees
will have expended extensive time and effort attempting to complete the
transaction and will have experienced significant distractions from their
work during the pendency of the transaction. The fact that, if the Merger
is not completed, the market’s perception of the Company’s continuing
business could potentially result in a loss of customers and
employees.
|
|
·
|
Pre-Closing Covenants
.
Under the terms of the Merger Agreement, the Company agreed that it will
carry on in the ordinary course of business consistent with past practice
and, subject to specified exceptions, that the Company will not take a
number of actions related to the conduct of its business without the prior
consent of Merge Healthcare.
|
|
·
|
Taxation
. The fact that
the structure of the Offer and the Merger would probably result in the
transaction’s not qualifying as a reorganization under Section 368(a) of
the Internal Revenue Code of 1986, as amended, and therefore that Company
stockholders participating in the transaction would recognize any gain or
loss in connection with the
transaction.
|
|
·
|
Fixed Offer/Merger
Consideration
. The Board considered that the Offer
Consideration and the Merger Consideration is fixed and that the value of
the Offer Consideration and the Merger Consideration will decrease if
there is any decrease in the value of Merge Healthcare Common Stock prior
to the Effective Time.
|
|
·
|
Risks Related to Merge
Healthcare Common Stock
. The Board considered the risks
of owning Merge Healthcare Common Stock, as described in Merge
Healthcare’s SEC filings, including risks related to potential delisting
of its stock from the Nasdaq Global
Market.
|
The
foregoing discussion of information and factors considered by the Board is not
intended to be exhaustive, but is believed to include all of the material
factors considered by the Board. In view of the variety of factors considered in
connection with its evaluation of the Offer and the Merger, the Board did not
find it practicable to, and did not, quantify or otherwise assign relative
weights to the specific factors considered in reaching its determinations and
recommendations. In addition, individual members of the Board may have given
different weights to different factors. In arriving at their respective
recommendations, the members of the Board were aware of the interests of
executive officers and directors of the Company as described under “
Past Contacts, Transactions,
Negotiations and Agreements
” in Item 3 hereof.
Opinion
of the Company’s Financial Advisor
The
Company retained EGE to act as its financial advisor and investment banker, and,
if requested, to render to the Board an opinion as to the fairness, from a
financial point of view, to the holders of the Shares of the per Share
consideration to be paid in the Offer and the Merger. At the May 29, 2009
meeting of the Board, EGE delivered to the Board an oral presentation and a
subsequent written opinion to the effect that, as of the date and based upon and
subject to the qualifications set forth in the written opinion, the aggregate
consideration of $0.80 in cash and 0.3448 shares of Merge Healthcare Common
Stock per Share was fair, from a financial point of view, to holders of the
Shares. The written opinion was approved by the fairness opinion
committee of EGE. No limitations were imposed by the Board upon EGE
with respect to the investigations it made or procedures it followed in
rendering its opinion.
The
full text of the EGE written opinion dated May 30, 2009, which sets forth,
among other things, the assumptions made, procedures followed, matters
considered and limitations on the scope of the review undertaken by EGE in
rendering its opinion, is attached as
Annex I
and is
incorporated in its entirety herein by reference. Company’s
stockholders are urged to, and should, carefully read the EGE opinion in its
entirety. The EGE opinion addresses only the fairness, from a financial point of
view and as of the date of the opinion, to holders of Shares of the aggregate
per Share consideration to be paid in the Offer and the Merger. The EGE opinion
was directed to the Board and was not intended to be, and does not constitute, a
recommendation as to whether any of the Company’s stockholders should tender
their Shares in connection with the Offer or how any of the Company’s
stockholders should vote with respect to the Merger or any other
matter.
The
summary of EGE's opinion described below is qualified in its entirety by
reference to the full text of the opinion, and you are encouraged to read the
opinion carefully in its entirety. EGE's opinion does not in any manner address
the Company’s underlying business decision to enter into the Merger Agreement,
the structure or tax consequences of the proposed Merger or the availability or
advisability of any alternatives to the proposed Merger. EGE's
opinion is addressed to the Board and is limited to the fairness, from a
financial point of view, of the consideration to be received by the Company’s
stockholders in connection with the proposed Merger as provided for in the
Merger Agreement. EGE expresses no opinion with respect to any other reasons,
legal, business or otherwise, that may support the Company’s stockholders
decision to approve or consummate the proposed Merger. EGE's opinion does not
constitute a recommendation that the Company approves and consummate the
proposed Merger, nor does it constitute a recommendation to any stockholder of
the Company as to whether to approve the proposed Merger.
In
connection with EGE's review of the proposed Merger and the preparation of its
opinion, EGE has, among other things:
|
·
|
reviewed
and analyzed the financial terms of the proposed Merger as stated in the
final version of the Merger Agreement proposed to be executed by the
Company;
|
|
·
|
reviewed
and analyzed historical publicly available business information and
financial results of the Company, including such information and results
contained in the Company’s Annual Report filed on Form 10-K for the year
ended December 31, 2008 and contained in the Company’s Quarterly Report
filed on Form 10-Q for the quarter ended March 31,
2009;
|
|
·
|
reviewed
and analyzed certain other operating and financial information of the
Company provided by the Company’s management, including the Company’s
projections as to the future operating and financial performance of the
Company for calendar years 2009 through
2010;
|
|
·
|
discussed
with senior executives of the Company certain information relating to the
aforementioned items, including the strategic, financial and operational
benefits anticipated from the proposed Merger and various other matters
which EGE deemed relevant to its
opinion;
|
|
·
|
reviewed
and analyzed historical market prices and trading volumes for the
Shares;
|
|
·
|
reviewed
and analyzed publicly available information (including research reports)
regarding selected publicly-traded companies EGE deemed comparable to the
Company;
|
|
·
|
reviewed
and analyzed historical publicly available business information and
financial results of Merge Healthcare, including such information and
results contained in Merge Healthcare’s Annual Report filed on Form 10-K
for the year ended December 31, 2008 and contained in Merge Healthcare’s
Quarterly Report filed on Form 10-Q for the quarter ended March 31,
2009;
|
|
·
|
reviewed
and analyzed historical market prices and trading volumes for Merge
Healthcare’s Common Stock;
|
|
·
|
reviewed
and analyzed publicly available information (including research reports)
regarding selected publicly-traded companies EGE deemed comparable to
Merge Healthcare;
|
|
·
|
reviewed
and analyzed publicly available information regarding selected business
combinations EGE deemed comparable to the proposed
Merger;
|
|
·
|
reviewed
and analyzed certain other information EGE deemed relevant for purposes of
its opinion with respect to the eClinical market;
and
|
|
·
|
performed
such other analyses and reviewed such other information as EGE deemed
appropriate, including trends prevailing in relevant industries and
financial markets.
|
In
rendering its opinion, EGE assumed and relied upon the accuracy and completeness
of the financial and other information supplied or otherwise made available to
it the Company or any other party, without independent verification, and has
further relied upon the assurances of management of the Company that they are
not aware of any facts that would make such information inaccurate or
misleading. In arriving at its opinion, EGE neither performed nor obtained any
evaluation or appraisal of the assets or liabilities of the Company, and EGE did
not perform or obtain any evaluation or appraisal of the Company’s physical
properties and facilities or sales, marketing or service
organizations.
With
respect to the financial projections provided to or otherwise reviewed by or
discussed with EGE, EGE assumed that they have been reasonably prepared in good
faith on bases reflecting the best currently available estimates and judgments
of the management of the Company as to the future operating and financial
performance of the Company, and EGE relied upon each party to advise it promptly
if any information previously provided became inaccurate or was required to be
updated during the period of its review. In addition to EGE's review and
analyses of the specific information set forth above, its opinion reflects and
gives effect to its assessment of general economic, monetary, market and
industry conditions existing and disclosed to EGE as of the date of its opinion
as they may affect the business and prospects of the Company.
For
purposes of formulating EGE's opinion, the Company agreed that EGE could assume
the following:
|
·
|
the
proposed Merger would be consummated in all respects in accordance with
the terms of the Merger Agreement, without waiver, modification or
amendment of any term, condition or agreement contained therein;
and
|
|
·
|
in
the course of obtaining the necessary regulatory or third party consents
and approvals for the proposed Merger, no limitations, restrictions or
conditions would be imposed on the Company or the proposed
Merger.
|
Although
subsequent developments or material changes in any of the information or
circumstances reviewed or considered by EGE may affect its opinion, EGE does not
have any obligation to update, revise or reaffirm its opinion to account for any
such developments or changes.
Analysis
of Selected Publicly Traded Comparable Companies
EGE
reviewed and compared certain financial, operating and stock market information
related to the Company with other publicly held eClinical companies (the “
Comparable Companies
”). EGE
identified five companies that it deemed comparable to the Company. These
companies were deemed by EGE to be comparable to the Company because they each
operate in the eClinical marketplace, including imaging and clinical trial
support services. The Comparable Companies utilized were: Phase
Forward Inc. (PFWD), eResearch Technologies, Inc. (ERES), Bio-Imaging
Technologies, Inc. d/b/a BioClinica (BITI), OmniComm Systems Inc. (OMCM), and
DataTrak International, Inc. (DATA).
Using
publicly available information, EGE analyzed certain financial, trading and
valuation statistics for the Comparable Companies. EGE analyzed enterprise
values (calculated as equity value, plus debt, less cash) and equity values, in
each case as multiples of last twelve months (“
LTM
”) revenues. This analysis
yielded the following multiples:
|
|
Low
|
|
|
High
|
|
|
Median
|
|
|
etrials
|
|
Enterprise
Value as a Multiple of LTM Actual Revenues
|
|
|
0.1x
|
|
|
|
2.7x
|
|
|
|
1.4x
|
|
|
|
0.1x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Value as a Multiple of LTM Actual Revenues
|
|
|
0.5x
|
|
|
|
3.5x
|
|
|
|
1.7x
|
|
|
|
0.7x
|
|
Using
publicly available information (as of May 28, 2009), EGE analyzed year-over-year
quarterly revenue results beginning in the first quarter 2008 (Q1 2008 compared
to Q1 2007) through the first quarter 2009 (Q1 2009 compared to Q1 2008) for
each of the Comparable Companies as compared to the Company. This
analysis is displayed in the following table:
Company
|
|
2008
|
|
2009
|
|
|
Q'1
|
Q'2
|
Q'3
|
Q'4
|
|
Q'1
|
PFWD
|
|
36%
|
36%
|
39%
|
29%
|
|
28%
|
ERES
|
|
60%
|
43%
|
42%
|
4%
|
|
-29%
|
BITI
|
|
27%
|
67%
|
46%
|
42%
|
|
21%
|
OMCM
|
|
23%
|
52%
|
94%
|
103%
|
|
140%
|
DATA
|
|
-41%
|
-27%
|
12%
|
15%
|
|
0%
|
ETRIALS
|
|
-9%
|
-38%
|
-24%
|
-33%
|
|
-28%
|
This
analysis indicates that the Company has had continuous year-over-year quarterly
declines in revenue compared with the Comparable Companies that all displayed
positive growth during the same periods (except for ERES from Q1 2009 compared
to Q1 2008 and DATA Q1,Q2 2008 compared to Q1,Q2 2007).
Using
publicly available information, EGE analyzed operating margins for each of the
Comparable Companies as compared to the Company. The analysis is
displayed as set forth below:
Company
|
2008
|
2009
|
|
Q'1
|
Q'2
|
Q'3
|
Q'4
|
Q'1
|
PFWD
|
12%
|
10%
|
10%
|
7%
|
11%
|
ERES
|
25%
|
30%
|
31%
|
29%
|
14%
|
BITI
|
9%
|
11%
|
10%
|
15%
|
8%
|
OMCM
|
-207%
|
-100%
|
-113%
|
-82%
|
-40%
|
DATA*
|
-107%
|
-99%
|
-66%
|
-5%
|
-38%
|
ETRIALS**
|
-57%
|
-57%
|
-57%
|
-41%
|
-25%
|
|
|
|
|
|
|
*DATA
Q2 2008 severance expense and impairment loss has been excluded from
margin calculations. Q4 2008 margins include the forgiveness of
a $3.0 million debt obligation.
**etrials
Q3 & Q4 amortization of intangible assets and goodwill impairment has
been excluded from margin calculation because the magnitude of the
amortized amounts would distort the comparison to the Comparable
Companies.
|
This
analysis indicated that with the exception of DATA, the Comparable Companies
generally had positive and/or increasing margins during the time periods
specified. The Company, due to its continuing and increasing losses,
has continuing negative margins that do not reflect significant
improvement.
Analysis
of Trading Volume of the Company and Merge Healthcare
Using
publicly available information, EGE reviewed an analysis of the daily trading
volume for the seven-month period ended April 28, 2009 for both the Shares and
the Merge Healthcare Common Stock. This analysis shows the relative
liquidity of both companies’ shares over the specified time
period. EGE feels that the current stockholders of the Company will
retain added value upon closing of the Merger and receiving Merge Healthcare
shares due to the increased liquidity associated with the Merge Healthcare
shares, compared to the relative illiquidity of the Shares.
EGE also
reviewed the historical stock price and trading volume data for the Shares and
compared its historical trading patterns to the trading patterns of certain
market indices (Dow Jones Industrial Average and Nasdaq Composite Index) and of
the Comparable Companies. EGE noted that the Shares generally performed
similarly to the index of Comparable Companies but underperformed the broader
market indices.
As noted
above, none of the Comparable Companies are identical or directly comparable to
the Company. Accordingly, EGE considered the multiples for such Comparable
Companies, taken as a whole, to be more relevant than the multiples of any
single Comparable Company. Further, an analysis of publicly traded comparable
companies is not mathematical; rather, it involves complex consideration and
judgments concerning differences in financial and operating characteristics of
the Comparable Companies and other factors that could affect the public trading
of the Comparable Companies.
In its
analysis, EGE considered that the overall lower valuation metrics of the Company
relative to the Comparable Companies is likely a result of the Company’s
significant historical losses, decline in revenue, smaller relative size and
capitalization and the limited liquidity of its stock as compared to most of the
Comparable Companies.
Analysis
of Selected Merger and Acquisition Transactions by Comparable
Companies
Using
publicly available information, EGE reviewed and compared the purchase prices
and implied transaction value multiples paid in the following six selected
merger and acquisition transactions of other publicly held eClinical providers
(the “
Comparable
Transactions
”). The Comparable Transactions were:
Acquirer
|
Target
|
Date
|
Phase
Forward, Inc. (PFWD)
|
Waban
Software
|
4/22/09
|
Tripos
International
|
Pharsight
(PHST)
|
9/9/08
|
Phase
Forward, Inc. (PFWD)
|
Clarix
LLC
|
9/5/08
|
Parexel
International Corp. (PRXL)
|
ClinPhone
(CINHF)
|
8/14/08
|
Bio-Imaging
Technologies (BITI)
|
Phoenix
Data Systems
|
3/24/08
|
eResearch
Technology, Inc. (ERES)
|
ECG
division of Covance (CVD)
|
11/28/07
|
Based on
the information disclosed in each of the Comparable Transactions, EGE calculated
and compared transaction values as multiples of LTM revenues and compared such
multiples with those implied by the Merger. All multiples were based on
financial information available at the closing date of the relevant transaction.
The analysis yielded the following multiples:
|
Low
|
High
|
Average
|
etrials
|
Transaction
Value as
Multiple:
|
|
|
|
|
|
|
|
|
|
LTM
Revenues
|
1.9x
|
6.4x
|
3.0x
|
1.3x
|
EGE also
reviewed the Comparable Transactions in light of the broad-based decline in the
stock market during the twelve months ended April 30, 2009. During
this time period the average decline of the stock price in the Comparable
Companies was 45%. While the LTM Revenue multiple associated with the
Offer Consideration is below the low range for the Comparable Transactions, the
Company differs from the listed targets in that while the Company has incurred
substantial operating losses. In addition, the Company has had a
recent history of declining revenues compared with the targets in the Comparable
Transactions whose revenues were either steady-state or
growing. Accordingly, EGE does not believe that multiples of LTM
revenues are the most appropriate methodology to utilize in an analysis of the
Merger.
Premium
Paid Analysis
EGE
reviewed current and historical market prices and trading data concerning the
Shares for specified periods prior to the announcement of the proposed Merger on
June 1, 2009. EGE utilized the Premium Paid Analysis, a market valuation
approach, for the purposes of comparing the consideration to be paid in the
proposed Merger to the average closing price of the Shares over varying time
periods prior to May 28, 2009. For the purpose of the Premium
Paid Analysis, EGE used the price of the Shares as of May 4, 2009, the day prior
to the announcement of the initial offer from Bio-Imaging. On May 28,
2009 the Shares closed at $1.31 per share and the Merge Healthcare Common Stock
closed at $3.04 per share. Accordingly the Offer Consideration
represents an implied premium of 30% over the closing price of the Shares on May
28, 2009. For calculation purposes, EGE assumed the Offer
Consideration equates to $1.70 per Share (which is calculated using the 20-day
volume-weighted average price of $2.61 for Merge Healthcare common stock as of
the close of the market on May 26, 2009, the day prior to the Merge Healthcare
proposal.
EGE also
reviewed the Offer Consideration and volume-weighted average price (“
VWAP
”) for the Shares and the
Merge Healthcare Common Stock for various time periods ending on May 28, 2009,
as set forth below, and calculated the implied premium as of such date EGE
informed the Board that the Offer Consideration per share represented a premium
to the Shares price per share as of May 28, 2009 and during each time period set
forth above.
Date/Date
Range
|
etrials
VWAP
at
May
4, 2009
|
Merge Healthcare
VWAP
at
May
28, 2009
|
Implied
Transaction
Price
|
Implied
Premium
|
10
trading days
|
$0.73
|
$2.98
|
$1.83
|
151%
|
20
trading days
|
$0.72
|
$2.67
|
$1.72
|
139%
|
30
trading days
|
$0.70
|
$2.60
|
$1.70
|
142%
|
60
trading
|
$0.73
|
$2.47
|
$1.65
|
126%
|
YTD
|
$0.69
|
$2.23
|
$1.59
|
127%
|
Miscellaneous
The
summary set forth above does not contain a complete description of the analyses
performed by EGE, but does summarize the material analyses performed by EGE in
rendering its opinion. The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to partial analysis or summary
description. EGE believes that its analyses and the summary set forth above must
be considered as a whole and that selecting portions of its analyses or of the
summary, without considering the analyses as a whole or all of the factors
included in its analyses, would create an incomplete view of the processes
underlying the analyses set forth in the EGE opinion. In arriving at its
opinion, EGE considered the results of all of its analyses and did not attribute
any particular weight to any factor or analysis. Instead, EGE made its
determination as to fairness on the basis of its experience and financial
judgment after considering the results of all of its analyses. The fact that any
specific analysis has been referred to in the summary above is not meant to
indicate that this analysis was given greater weight than any other analysis. No
company or transaction used in the above analyses as a comparison is directly
comparable to the Company or the transactions contemplated by the Merger
Agreement, and an evaluation of the results of those analyses is not entirely
mathematical. Rather, the analyses involve complex considerations and
judgments concerning financial and operating characteristics and other factors
that could affect the companies or transactions analyzed, public trading or
other values of the companies or business segments analyzed.
EGE
performed its analyses solely for purposes of providing its opinion to the
Board. In performing its analyses, EGE made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters. Certain of the analyses performed by EGE are based upon forecasts of
future results furnished to EGE by the Company’s management, which are not
necessarily indicative of actual future results and may be significantly more or
less favorable than actual future results. These forecasts are inherently
subject to uncertainty because, among other things, they are based upon numerous
factors or events beyond the control of the parties or their respective
advisors. EGE does not assume responsibility if future results are materially
different from forecasted results. Each of the analyses conducted by
EGE was carried out to provide a different perspective on the proposed
Merger. EGE did not form a conclusion as to whether any individual
analysis, considered in isolation, supported or failed to support an opinion as
to the fairness to the Company stockholders, from a financial point of view, of
the consideration to be received. EGE did not place any specific
reliance or weight on any individual analysis, but instead concluded that its
analyses, taken as a whole, supported its determination.
EGE’s
opinion was one of many factors taken into consideration by the Board in making
the determination to approve the Merger Agreement and recommend that the
stockholders tender their Shares in connection with the Offer. The type and
amount of consideration payable in the proposed Merger was determined through
negotiation between the Company and Merge Healthcare, and the decision to enter
into the proposed Merger was solely that of the Board. The above
summary does not purport to be a complete description of the analyses performed
by EGE in connection with the opinion and is qualified in its entirety by
reference to the written opinion of EGE attached as
Annex I
hereto.
EGE has
relied upon and assumed, without assuming liability or responsibility for
independent verification, the accuracy and completeness of all information that
was publicly available or was furnished, or otherwise made available, to it or
discussed with or reviewed by it. EGE has further relied upon the assurances of
the management of the Company that the financial information provided has been
prepared on a reasonable basis in accordance with industry practice and that
they are not aware of any information or facts that would make any information
provided to EGE incomplete or misleading. Without limiting the generality of the
foregoing, for the purpose of its opinion, EGE has assumed that with respect to
financial forecasts, estimates and other forward-looking information reviewed by
it, that such information has been reasonably prepared based on assumptions
reflecting the best currently available estimates and judgments of the
management of the Company as to the expected future results of operations and
financial condition of the Company to which such financial forecasts, estimates
and other forward-looking information relate. EGE expresses no opinion as to any
such financial forecasts, estimates or forward-looking information or the
assumptions on which they were based. With the consent of the Company, EGE has
relied on advice of the outside counsel and the independent accountants to the
Company, and on the assumptions of the management of the Company, as to all
accounting, legal, tax and financial reporting matters with respect to the
Company, Merge Healthcare and the Merger Agreement.
EGE
assumed that the Offer and the Merger would be completed on the terms set forth
in the Merger Agreement reviewed by EGE, without amendments and with full
satisfaction of all covenants and conditions without any waiver. EGE expressed
no opinion regarding whether the necessary approvals or other conditions to the
consummation of the merger will be obtained or satisfied.
EGE did
not assume responsibility for performing, and did not perform, any appraisals or
valuations of specific assets or liabilities of the Company. EGE expresses no
opinion regarding the liquidation value or solvency of any entity. EGE did not
undertake any independent analysis of any outstanding, pending or threatened
litigation, regulatory action, any potential delisting of the Shares or the
shares of Merge Healthcare from the Nasdaq Global Market, possible unasserted
claims or other contingent liabilities to which the Company, or any of its
respective affiliates, are a party or may be subject. At the direction of the
Company, and with its consent, EGE’s opinion made no assumption concerning, and
therefore did not consider, the potential effects of litigation, claims,
investigations, or possible assertions of claims, or the outcomes or damages
arising out of any such matters.
EGE’s
opinion was necessarily based on the information available to it and the facts
and circumstances as they existed and were subject to evaluation as of the date
of the opinion. Events occurring after the date of the opinion could materially
affect the assumptions used by EGE in preparing its opinion. EGE expresses no
opinion as to the prices at which the Shares have traded or may trade following
announcement of the transaction or at any time after the date of the opinion.
EGE has not undertaken and is not obligated to affirm or revise its opinion or
otherwise comment on any events occurring after the date it was
rendered.
EGE was
not requested to opine as to, and the opinion does not address, the basic
business decision to proceed with or effect the Offer, the Merger or the
transactions contemplated by the Merger Agreement, the pre-signing process
conducted by the Company, the merits of the transaction compared to any
alternative business strategy or transaction that may be available to the
Company, Merge Healthcare’s ability to fund the consideration, any other terms
contemplated by the Merger Agreement or the fairness of the amount or nature of
the compensation to the Company’s officers, directors or employees, or any class
of such persons, relative to the compensation to be received by holders of the
Shares. EGE did not express any opinion as to whether any alternative
transaction might produce consideration for the Company stockholders in excess
of the consideration. The fairness opinion does not address the
fairness of the amount or nature of the compensation to any of the Company’s
officers, directors or employees, or class of such persons, relative to the
compensation to any of the Company’s officers, directors or employees, or class
of such persons, relative to the compensation to the public stockholders of the
Company.
EGE is an
investment banking firm that is regularly engaged as a financial advisor in
connection with mergers and acquisitions, underwritings and secondary
distributions of securities and private placements. The Board selected EGE to
render its fairness opinion in connection with the transactions contemplated by
the Merger Agreement on the basis of its experience and reputation in acting as
a financial advisor in connection with tender offers, and mergers and
acquisitions. In the ordinary course of EGE’s brokerage business, EGE
or its affiliates may have long or short positions, for its own account or for
those of its clients, in the securities of the Company and Merge
Healthcare.
EGE also
regularly provides research coverage on public companies, with a focus on
high-growth small capitalization companies in several industries, including the
medical technology and healthcare services industry. In the course of
its research, EGE may have published analyst reports on the Company or Merge
Healthcare. EGE has instituted customary processes to prevent its
analysts from knowing of any investment banking services being provided to any
company for which EGE might provide analyst coverage.
EGE acted
as financial advisor and investment banker to the Company in connection with the
Offer and the Merger. For its financial advisory services, the
Company pays EGE a cash fee of $5,000 per month, the aggregate of which will be
credited against any success fee payable upon the completion of the Offer and
also of the Merger. The success fee will range form 2.375% to 3.50%
of the transaction value. Based on the Merger Consideration and
assuming the Offer and the Merger are completed with 100% of the Shares being
acquired by Merge Healthcare, the Company estimates that the success fee payable
to EGE will be approximately $600,000. EGE also received fees of $400,000 from
the Company for providing its opinion regarding the Merge Healthcare offer and
its prior opinions regarding the Bio-Imaging offers. The opinion fees were not
contingent upon the consummation of the Offer or the Merger. The Company expects
to pay EGE approximately $17,500 in out-of-pocket expenses associated with EGE’s
services as financial advisor and investment banker. The Company has
also agreed to indemnify EGE against certain liabilities in connection with its
services and to reimburse it for certain expenses in connection with its
services. In the ordinary course of its business, EGE and its affiliates may
actively trade securities of the Company for its own account or the accounts of
its customers and, accordingly, EGE may at any time hold a long or short
position in such securities. Other than as set forth above, EGE has
not had any material relationship with the Company (nor are any understood or
contemplated) during the prior two years.
To the
Company’s knowledge after reasonable inquiry, the executive officers and
directors of the Company currently intend to tender all Tender Shares held of
record or beneficially by them pursuant to the Offer and to vote in favor of the
Merger. At the request of Merge Healthcare, the Company’s directors
and executive officers and certain Company stockholders each entered into a
Stockholder Support Agreement in which they contractually agreed to tender all
of their Tender Shares, which constitute approximately 32.7% of the outstanding
shares of Common Stock, in the Offer.
Item
5. Persons/Assets Retained, Employed, Compensated or
Used.
The
Company retained EGE to act as financial advisor and investment banker and to
render an opinion as to the fairness, from a financial point of view, to the
holders of Common Stock of the consideration to be received by those holders
pursuant to the Merger Agreement. The Company has agreed to pay EGE fees for
rendering its opinions and for financial advisory services that the Company and
EGE believe are customary in transactions of this nature. A significant portion
of EGE’s fees are contingent on consummation of the Merger. The Company also
agreed to reimburse EGE for certain of its reasonable out-of-pocket expenses and
to indemnify it against specified liabilities relating to or arising out of
services performed by it as financial advisor to the Company.
EGE is an
investment banking firm. As part of its investment banking services, EGE is
regularly engaged in the evaluation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of securities, private placements and other purposes. EGE was
retained by the Company to act as its financial advisor in connection with the
Merger Agreement based on its experience as a financial advisor in mergers and
acquisitions as well as its familiarity with the eClinical sector, including the
Company. EGE has had no other investment banking relationship with the Company
during the past two years.
EGE also regularly
provides research coverage on public companies, with a focus on high-growth
small capitalization companies in several industries, including the
m
edical technology and healthcare services industry. In the
course of its research, EGE may have published analyst reports on the Company
and Merge Healthcare. EGE has instituted customary processes to
prevent its analysts from knowing of any investment banking services being
provided to any company for which EGE might provide analyst
coverage.
Neither
the Company, nor any person acting on its behalf, has employed, retained, or
agreed to compensate any person or class of persons to make solicitations or
recommendations to stockholders on its behalf in connection with the Offer
or the Merger.
Item
6. Interest in Securities of the Subject Company.
No
transactions in Common Stock have been effected during the past 60 days by the
Company or, to the best of the Company’s knowledge, by any executive officer,
director, affiliate or subsidiary of the Company.
Item
7. Purposes of the Transaction and Plans or
Proposals.
(a)
Except as indicated in Items 3 and 4 above, no negotiations are being undertaken
or are underway by the Company in response to the Offer which relate to a tender
offer or other acquisition of the Company’s securities by the Company, any
subsidiary of the Company or any other person.
(b)
Except as indicated in Items 3 and 4 above, no negotiations are being
undertaken or are underway by the Company in response to the Offer which relate
to, or would result in, (i) any extraordinary transaction, such as a
merger, reorganization or liquidation, involving the Company or any subsidiary
of the Company, (ii) any purchase, sale or transfer of a material amount of
assets by the Company or any subsidiary of the Company, or (iii) any
material change in the present dividend rate or policy, or indebtedness or
capitalization of the Company.
(c)
Except as indicated in Items 3 and 4 above, there are no transactions,
Board resolutions, agreements in principle or signed contracts in response to
the Offer that relate to or would result in one or more of the matters referred
to in this Item 7.
Item
8. Additional Information.
Information
Statement.
The
Information Statement attached as
Annex II
hereto
is being furnished in connection with the possible designation by Merge
Healthcare, pursuant to the Merger Agreement, of certain persons to be appointed
to the Board, other than at a meeting of the Company’s stockholders as described
in Item 3 above and in the Information Statement, and is incorporated
herein by reference.
Top-Up
Option.
Pursuant
to the Merger Agreement, the Company granted to Merge Healthcare and Offeror an
irrevocable option (the “
Top-Up Option
”) to purchase
at a price per share equal to the Cash Value of the Offer Price (defined below),
up to that number of newly issued shares of the Company Common Stock (the “
Top-Up Shares
”) equal to the
lowest number of shares of Company Common Stock that, when added to the number
of shares of Company Common Stock, directly or indirectly, owned by Merge
Healthcare and Offeror at the time of exercise of the Top-Up Option shall
constitute one share more than 90% of the Fully Diluted Shares immediately after
the issuance of the Top-Up Shares. “
Fully Diluted Shares
” means
all outstanding securities entitled generally to vote in the election of
directors of the Company on a fully diluted basis, after giving effect to the
exercise or conversion of all options, rights and securities exercisable or
convertible into such voting securities having an exercise price or conversion
price less than the Cash Value of the Offer Price. The Top-Up Option
shall be exercisable only once, at such time as Merge Healthcare and Offeror,
directly or indirectly, own at least 80% of the Fully Diluted Shares and prior
to the fifth business day after the expiration date of the Offer or the
expiration date of any subsequent offering period. The Top-Up Option
shall not be exercisable to the extent the number of shares of Company Common
Stock subject thereto (taken together with the number of Fully Diluted Shares
outstanding at such time) exceeds the number of authorized shares of Company
Common Stock available for issuances. The obligation of the Company
to deliver the Top-Up Shares upon the exercise of the Top-Up Option is subject
to the condition that no provision of any applicable law or rule of the Nasdaq
Global Market and no judgment, injunction, order or decree shall prohibit the
exercise of the Top-Up Option or the delivery of the Top-Up Shares in respect of
such exercise. In the event Merge Healthcare and Offeror wish to
exercise the Top-Up Option, Offerer shall give the Company one business day
prior written notice specifying the number of shares of the Company Common Stock
that are or will be, directly or indirectly, owned by Merge Healthcare and
Offeror immediately preceding the purchase of the Top-Up Shares and specifying a
place and a time for the closing of such purchase. The Company shall,
as soon as practicable following receipt of such notice, deliver written notice
to Offeror specifying the number of Top-Up Shares. At the closing of
the purchase of Top-Up Shares, the portion of the purchase price owed by Merge
Healthcare or Offeror upon exercise of such Top-Up Option shall be paid to the
Company in cash by wire transfer or cashier’s check. The “
Cash Value of the Offer
Price
” is the greater of (i) $1.3564
,
and (ii) an amount equal to the highest price per share
paid pursuant to the Offer
.
Vote
Required to Approve the Merger and DGCL Section 253.
The Board
has approved and adopted the Offer, the Merger and the Merger Agreement in
accordance with the DGCL. Under Section 253 of the DGCL, if Offeror
acquires, pursuant to the Offer or otherwise, including the issuance by the
Company of the Top-Up Option Company Shares, at least 90% of the outstanding
shares of Common Stock, Offeror will be able to effect the Merger after
consummation of the Offer without a vote by the Company’s stockholders (a “
Short-Form Merger
”). If
Offeror does not acquire, pursuant to the Offer or otherwise, at least 90% of
the outstanding shares of Common Stock as described above, the affirmative vote
of the holders of a majority of the outstanding shares of Common Stock would be
required in order to effect the Merger. The Merger Agreement provides that if
the approval and adoption of the Merger Agreement by the Company’s stockholders
is required by the DGCL, the Company will, as soon as practicable following the
expiration of the Offer, duly call, give notice of, convene and hold a
stockholders’ meeting for the purpose of considering the approval of the Merger
Agreement and the transactions contemplated thereby. The Board has recommended
to the stockholders the adoption or approval of the Merger Agreement and the
Merger, and will solicit proxies in favor of the Merger Agreement and the
Merger. In connection with such meeting, the Company will promptly prepare and
file with the Securities and Exchange Commission (the “
SEC
”) and will thereafter
mail to its stockholders as promptly as practicable a proxy statement of the
Company and all other proxy materials for such meeting. If Offeror acquires,
pursuant to the Offer or otherwise, at least 50% of the outstanding shares of
Common Stock, it would have the ability to ensure approval of the Merger
Agreement and the Merger at the stockholders’ meeting held for such
purposes.
State
Takeover Laws.
As a
Delaware corporation, the Company is subject to Section 203 of the DGCL. In
general, Section 203 of the DGCL would prevent an “interested stockholder”
(generally defined in Section 203 of the DGCL as a person beneficially
owning 15% or more of a corporation’s voting stock) from engaging in a “business
combination” (as defined in Section 203 of the DGCL) with a Delaware
corporation for three years following the time such person became an interested
stockholder unless, among other things, the business combination is approved by
the board of directors prior to such date. In accordance with the provisions of
Section 203, the Board has approved the Merger Agreement and the
transactions contemplated thereby, as described in Item 4 above and,
therefore, the restrictions of Section 203 are inapplicable to the Merger
and the transactions contemplated under the Merger Agreement.
Antitrust.
Under the
Hart-Scott-Rodino Act (the “
HSR Act
”) and the rules that
have been promulgated thereunder by the Federal Trade Commission (the “
FTC
”), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the “
Antitrust Division
”) and the
FTC and certain waiting period requirements have been satisfied. Based upon the
calculation of the value by Offeror of the Company’s voting securities and
assets as determined under the HSR Act, the Company believes that the
transaction is exempt from the HSR Act’s notice requirements and such
information is not required to be delivered to the Antitrust Division. Should
any such notice or other action be required, the Company currently contemplates
that such approval or other action will be sought.
The FTC
and the Antitrust Division scrutinize the legality under the antitrust laws of
transactions such as Offeror’s acquisition of Common Stock in the Offer and the
Merger. At any time before or after the purchase of Common Stock by Offeror, the
FTC or the Antitrust Division could take any action under the antitrust laws
that either considers necessary or desirable in the public interest, including
seeking to enjoin the purchase of Common Stock in the Offer and the Merger, the
divestiture of Common Stock purchased in the Offer or the divestiture of
substantial assets of Merge Healthcare, the Company or any of their respective
subsidiaries or affiliates. Private parties as well as state attorneys general
may also bring legal actions under the antitrust laws under certain
circumstances.
Appraisal
Rights.
The
Company’s stockholders do not have appraisal rights in connection with the
Offer. However, if the Merger is completed, under Section 262 of the DGCL,
any holder of Common Stock at the Effective Time (a “
Remaining Stockholder
”) who
does not wish to accept the Offer Consideration for each share of Common Stock
pursuant to the Merger has the right to seek an appraisal and be paid the “fair
value” of its Common Stock at the Effective Time (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) judicially
determined and paid to it in cash provided that such holder complies with the
provisions of Section 262 of the DGCL.
The
following is a brief summary of the statutory procedures to be followed by a
Remaining Stockholder in order to dissent from the Merger and perfect appraisal
rights under the DGCL. This summary is not intended to be complete and is
qualified in its entirety by reference to Section 262 of the DGCL, the text
of which is set forth in
Annex III
hereto. Any Remaining Stockholder considering demanding appraisal is advised to
consult legal counsel. Appraisal rights will not be available unless and until
the Merger (or a similar business combination) is consummated.
Remaining
Stockholders of record who desire to exercise their appraisal rights must fully
satisfy all of the following conditions. A written demand for appraisal of
Common Stock must be delivered to the Secretary of the Company (x) before
the taking of the vote on the approval and adoption of the Merger Agreement if
the Merger is not being effected as a Short-Form Merger but rather is being
consummated following approval thereof at a meeting of the Company’s
stockholders or pursuant to written consent of the Company’s stockholders (a
“
Long-Form Merger
”) or
(y) within 20 days after the date that the Surviving Corporation mails to
the Remaining Stockholders a notice (the “
Notice of Merger
”) to the
effect that the Merger is effective and that appraisal rights are available (and
includes in such notice a copy of Section 262 of the DGCL and any other
information required thereby) if the Merger is being effected as a Short-Form
Merger without a vote or meeting of the Company’s stockholders. If the Merger is
effected as a Long-Form Merger, this written demand for appraisal of Common
Stock must be in addition to and separate from any proxy or vote abstaining from
or against the approval and adoption of the Merger Agreement, and neither voting
against, abstaining from voting, nor failing to vote on the Merger Agreement
will constitute a demand for appraisal within the meaning of Section 262 of
the DGCL. In the case of a Long-Form Merger, any stockholder seeking appraisal
rights must hold the Common Stock for which appraisal is sought on the date of
the making of the demand, continuously hold such Common Stock through the
Effective Time, and otherwise comply with the provisions of Section 262 of
the DGCL.
In the
case of both a Short-Form Merger and a Long-Form Merger, a demand for appraisal
must be executed by or for the stockholder of record, fully and correctly, as
such stockholder’s name appears on the stock certificates. If shares of Common
Stock are owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, such demand must be executed by the fiduciary. If shares
of Common Stock are owned of record by more than one person, as in a joint
tenancy or tenancy in common, such demand must be executed by all joint owners.
An authorized agent, including an agent for two or more joint owners, may
execute the demand for appraisal for a stockholder of record; however, the agent
must identify the record owner and expressly disclose the fact that, in
exercising the demand, he is acting as agent for the record owner.
A record
owner, such as a broker, who holds Common Stock as a nominee for others, may
exercise appraisal rights with respect to the Common Stock held for all or less
than all beneficial owners of Common Stock as to which the holder is the record
owner. In such case the written demand must set forth the number of shares of
Common Stock covered by such demand. Where the number of shares of Common Stock
is not expressly stated, the demand will be presumed to cover all shares of
Common Stock outstanding in the name of such record owner. Beneficial owners who
are not record owners and who intend to exercise appraisal rights should
instruct the record owner to comply strictly with the statutory requirements
with respect to the exercise of appraisal rights before the date of any meeting
of stockholders of the Company called to approve the Merger in the case of a
Long-Form Merger and within 20 days following the mailing of the Notice of
Merger in the case of a Short-Form Merger.
Remaining
Stockholders who elect to exercise appraisal rights must mail or deliver their
written demands to: Secretary, Merge Healthcare Technologies, Inc., 826
Newtown-Yardley Road, Newtown, Pennsylvania 18940. The written demand for
appraisal should specify the stockholder’s name and mailing address, the number
of shares of Common Stock covered by the demand and that the stockholder is
thereby demanding appraisal of such shares of Common Stock. In the case of a
Long-Form Merger, the Company must, within 10 days after the Effective Time,
provide notice of the Effective Time to all stockholders who have complied with
Section 262 of the DGCL and have not voted for approval and adoption of the
Merger Agreement.
In the
case of a Long-Form Merger, Remaining Stockholders electing to exercise their
appraisal rights under Section 262 must not vote for the approval and
adoption of the Merger Agreement or consent thereto in writing. Voting in favor
of the approval and adoption of the Merger Agreement, or delivering a proxy in
connection with the stockholders meeting called to approve the Merger Agreement
(unless the proxy votes against, or expressly abstains from the vote on, the
approval and adoption of the Merger Agreement), will constitute a waiver of the
stockholder’s right of appraisal and will nullify any written demand for
appraisal submitted by the stockholder.
Regardless
of whether the Merger is effected as a Long-Form Merger or a Short-Form Merger,
within 120 days after the Effective Time, either the Company or any stockholder
who has complied with the required conditions of Section 262 and who is
otherwise entitled to appraisal rights may file a petition in the Delaware Court
of Chancery demanding a determination of the fair value of the Common Stock of
the dissenting stockholders. If a petition for an appraisal is timely filed,
after a hearing on such petition, the Delaware Court of Chancery will determine
which stockholders are entitled to appraisal rights and thereafter will appraise
the Common Stock owned by such stockholders, determining the fair value of such
Common Stock, exclusive of any element of value arising from the accomplishment
or expectation of the Merger, together with a fair rate of interest to be paid,
if any, upon the amount determined to be the fair value.
Remaining
Stockholders who in the future consider seeking appraisal should have in mind
that the fair value of their Common Stock determined under Section 262
could be more than, the same as, or less than the Offer Consideration, if they
do seek appraisal of their shares of Common Stock, and that opinions of
investment banking firms as to fairness from a financial point of view are not
necessarily opinions as to fair value under Section 262 of the DGCL. The
cost of the appraisal proceeding may be determined by the Delaware Court of
Chancery and imposed upon the parties as the Delaware Court of Chancery deems
equitable under the circumstances. Upon application of a dissenting stockholder,
the Delaware Court of Chancery may order that all or a portion of the expenses
incurred by any dissenting stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys’ fees and the
fees and expenses of experts, be charged pro rata against the value of all
Common Stock entitled to appraisal. In the absence of such a determination or
assessment, each party bears its own expenses.
Any
Remaining Stockholder who has duly demanded appraisal in compliance with
Section 262 of the DGCL will not, after the Effective Time, be entitled to
vote for any purpose the Common Stock subject to such demand or to receive
payment of dividends or other distributions on such Common Stock, except for
dividends or other distributions payable to stockholders of record at a date
prior to the Effective Time.
At any
time within 60 days after the Effective Time, any former holder of Common Stock
shall have the right to withdraw his or her demand for appraisal and to accept
the Offer Consideration for each share of Common Stock. After this period, such
holder may withdraw his or her demand for appraisal only with the consent of the
Company as the Surviving Corporation. If no petition for appraisal is filed with
the Delaware Court of Chancery within 120 days after the Effective Time,
stockholder’s rights to appraisal shall cease and all stockholders shall be
entitled to receive the Offer Consideration for each share of Common Stock.
Inasmuch as the Company has no obligation to file such a petition, and the
Company understands Merge Healthcare has no present intention to cause or permit
the Surviving Corporation to do so, any stockholder who desires such a petition
to be filed is advised to file it on a timely basis. However, no petition timely
filed in the Delaware Court of Chancery demanding appraisal shall be dismissed
as to any stockholder without the approval of the Delaware Court of Chancery,
and such approval may be conditioned upon such terms as the Delaware Court of
Chancery deems just.
Failure
to take any required step in connection with the exercise of appraisal rights
may result in the termination or waiver of such rights.
APPRAISAL
RIGHTS CANNOT BE EXERCISED AT THIS TIME. THE INFORMATION SET FORTH ABOVE IS FOR
INFORMATIONAL PURPOSES ONLY WITH RESPECT TO ALTERNATIVES AVAILABLE TO
STOCKHOLDERS IF THE MERGER IS CONSUMMATED. STOCKHOLDERS WHO WILL BE ENTITLED TO
APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER WILL RECEIVE ADDITIONAL
INFORMATION CONCERNING APPRAISAL RIGHTS AND THE PROCEDURES TO BE FOLLOWED IN
CONNECTION THEREWITH BEFORE SUCH STOCKHOLDERS HAVE TO TAKE ANY ACTION RELATING
THERETO.
STOCKHOLDERS
WHO SELL COMMON STOCK IN THE OFFER WILL NOT BE ENTITLED TO EXERCISE APPRAISAL
RIGHTS WITH RESPECT THERETO BUT, RATHER, WILL RECEIVE THE PRICE PAID IN THE
OFFER THEREFOR.
Item
9. Exhibits.
Exhibit
No.
(a)(1)(A)
|
Prospectus/Offer
to Exchange, dated June 16,
2009.*†
|
(a)(1)(B)
|
Form
Letter of Election and
Transmittal.*†
|
(a)(1)(C)
|
Form
of Notice of Guaranteed
Delivery.*†
|
(a)(1)(D)
|
Form
of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.*†
|
(a)(1)(E)
|
Form
of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other
Nominees.*†
|
(a)(1)(F)
|
Guidelines
for Certification of Taxpayer Identification Number on Substitute
Form W-9.*†
|
(a)(1)(G)
|
Information
Statement Pursuant to Section 14(f) of the Securities Exchange Act of 1934
and Rule 14f-1 thereunder (incorporated by reference to
Annex II
attached to this Schedule
14D-9).†
|
(a)(2)(A)
|
Press
release issued by etrials Worldwide, Inc. and Merge Healthcare
Incorporated dated June 1, 2009 (incorporated by reference to the Form 8-K
filed by etrials Worldwide, Inc. with the SEC on June 1,
2009).
|
(a)(2)(B)
|
Script
for address on June 1, 2009 by M. Denis Connaghan, Chief Executive Officer
of etrials Worldwide, Inc., to employees of etrials Worldwide, Inc.
(incorporated by reference to the pre-commencement Schedule 14D-9C filed
by etrials Worldwide, Inc. with the SEC on June 1,
2009).
|
(a)(2)(C)
|
FAQ
distributed by etrials Worldwide, Inc. to its employees (incorporated by
reference to the pre-commencement Schedule 14D-9C filed by etrials
Worldwide, Inc. with the SEC on June 1,
2009).
|
(a)(2)(D)
|
Letter
dated June 1, 2009, delivered etrials Worldwide, Inc. to its clients
(incorporated by reference to the pre-commencement Schedule 14D-9C filed
with the SEC on June 1,
2009).
|
(a)(2)(E)
|
FAQ
distributed by etrials Worldwide, Inc. to its clients (incorporated by
reference to the pre-commencement Schedule 14D-9C filed by etrials
Worldwide, Inc. with the SEC on June 1,
2009).
|
(a)(4)
|
Prospectus/Offer
to Exchange, dated June 16, 2009.
*†
|
(a)(5)
|
Opinion
of Emerging Growth Equities, Ltd. to the Board of Directors of etrials
Worldwide, Inc., dated May 30, 2009 (incorporated by reference to
Annex I
attached to this Schedule
14D-9).†
|
(e)(1)
|
Agreement
and Plan of Merger, dated as of May 30, 2009, by and among Merge
Healthcare Incorporated, Merge Acquisition Corp. and etrials Worldwide,
Inc. (incorporated by reference to Exhibit 2.1 attached to the Current
Report on Form 8-K filed by etrials Worldwide, Inc. with the SEC on June
1, 2009).
|
(e)(2)
|
Form
of Stockholder Support Agreement, dated as of May 30, 2009, by and among
Merge Healthcare Incorporated and each director and executive officer and
certain stockholders of etrials Worldwide, Inc. (incorporated by reference
to Exhibit 2.2 to the Current Report on Form 8-K filed by etrials
Worldwide, Inc. with the SEC on June 1,
2009).
|
(e)(3)
|
Confidentiality
and Non-Disclosure Agreement, dated May 6, 2009, by and between etrials
Worldwide, Inc. and Merge Healthcare Incorporated (incorporated by
reference to Exhibit 99.4 the Form 8-K filed by Merge Healthcare
Incorporated with the SEC on June 1,
2009).
|
(e)(4)
|
Employment
Agreement, dated November 12, 2008, between etrials Worldwide, Inc. and
Michael Denis Connaghan (incorporated by reference to Exhibit 99.1 to
Current Report on Form 8-K filed by etrials Worldwide, Inc. with the SEC
on November 14, 2008).
|
(e)(5)
|
Employment
Agreement, dated October 7, 2008, between etrials Worldwide, Inc. and
Joseph Trepanier III (incorporated by reference to Exhibit 99.2 to Current
Report on Form 8-K filed by etrials Worldwide, Inc. with the SEC on
October 31, 2008).
|
(e)(6)
|
Employment
Agreement, dated October 7, 2008, between etrials Worldwide, Inc. and
Michael Mickens.
|
(e)(7)
|
Employment
Agreement, dated March 16, 2009, between etrials Worldwide, Inc. and Dr.
E. James Emerson.
|
(e)(8)
|
Form
of Executive Bonus Agreement between etrials Worldwide, Inc. and each of
Michael Denis Connaghan, Joseph Trepanier III and Michael
Mickens.
|
*
Incorporated by reference to the Schedule TO and the Registration Statement on
Form S-4 filed by Merge Acquisition Corp. and Merge Healthcare Technologies,
Inc. on June 16, 2009.
†
Included in materials mailed to stockholders of etrials Worldwide,
Inc.
SIGNATURE
After due
inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete and
correct.
|
ETRIALS
WORLDWIDE, INC.
|
|
|
|
By:
/s/
Joseph F. Trepanier, III
|
|
Joseph
(Jay) F. Trepanier, III
|
|
Chief
Financial Officer
|
|
|
Dated:
June 16, 2009
Annex
I
May 30,
2009
The Board
of Directors of etrials Worldwide, Inc.
4000
Aerial Center Parkway
Morrisville,
North Carolina 27560
Members
of the Board of Directors:
You have
requested our opinion as to the fairness, from a financial point of view, of the
consideration to be received by etrials Worldwide, Inc. (the “Company”) in
connection with the proposed tender offer and merger (the “Merger”) with Merge
Healthcare Incorporated (“Parent”) and Merge Acquisition Corp (“Parent Sub”),
pursuant to an Agreement and Plan of Merger dated May 30, 2009, by and among the
Company, Parent and Parent Sub (the “Agreement”). Pursuant to the
Agreement, a wholly owned subsidiary of Parent will offer to purchase the
outstanding shares of the Company and then merge with and into the Company and
each outstanding share of the Company will be converted into a right to receive
at closing (i) $0.80 in cash and (ii) 0.3448 of a validly issued, fully paid and
non-assessable share of the common stock of Parent.
You have
agreed that, for purposes of formulating our opinion, we may assume that (1) the
proposed Merger will be consummated in all respects in accordance with the terms
of the Agreement (the final version of which has been provided for our review),
without waiver, modification or amendment of any term, condition or agreement
contained therein, and (2) in the course of obtaining the necessary regulatory
or third party consents and approvals for the proposed Merger, no limitations,
restrictions or conditions will be imposed on the Company or the proposed
Merger.
In
connection with our review of the proposed Merger and the preparation of our
opinion, we have, among other things:
|
(i)
|
reviewed
and analyzed the financial terms of the proposed Merger as stated in the
final version of the Agreement proposed to be executed by the
Company;
|
|
(ii)
|
reviewed
and analyzed historical publicly available business information and
financial results of the Company, including such information and results
contained in the Company’s Annual Report filed on Form 10-K for the year
ended December 31, 2008 and contained in the Company’s Quarterly Report
filed on Form 10-Q for the quarter ended March 31,
2009;
|
|
(iii)
|
reviewed
and analyzed certain other operating and financial information of the
Company provided by management of the Company, including the Company’s
projections as to the future operating and financial performance of the
Company for calendar years 2009 through
2010;
|
|
(iv)
|
discussed
with senior executives of the Company certain information relating to the
aforementioned items, including the strategic, financial and operational
benefits anticipated from the proposed Merger and various other matters
which we deemed relevant to our
opinion;
|
|
(v)
|
reviewed
and analyzed historical market prices and trading volumes for the
Company’s Common Stock;
|
|
(vi)
|
reviewed
and analyzed publicly available information (including research reports)
regarding selected publicly-traded companies we deemed comparable to the
Company;
|
|
(vii)
|
reviewed
and analyzed historical publicly available business information and
financial results of the Parent, including such information and results
contained in the Parent’s Annual Report filed on Form 10-K for the year
ended December 31, 2008 and contained in the Parent’s Quarterly Report
filed on Form 10-Q for the quarter ended March 31,
2009;
|
|
(viii)
|
reviewed
and analyzed historical market prices and trading volumes for the Parent’s
Common Stock;
|
|
(ix)
|
reviewed
and analyzed publicly available information (including research reports)
regarding selected publicly-traded companies we deemed comparable to the
Parent;
|
|
(x)
|
reviewed
and analyzed publicly available information regarding selected business
combinations we deemed comparable to the proposed
Merger;
|
|
(xi)
|
reviewed
and analyzed certain other information we deemed relevant for purposes of
our opinion with respect to the eClinical market;
and
|
|
(xii)
|
performed
such other analyses and reviewed such other information as we deemed
appropriate, including trends prevailing in relevant industries and
financial markets.
|
We have
assumed and relied upon the accuracy and completeness of the financial and other
information supplied or otherwise made available to us by the Company or any
other party, without independent verification, and have further relied upon the
assurances of management of the Company that they are not aware of any facts
that would make such information inaccurate or misleading. In
arriving at our opinion, we neither performed nor obtained any evaluation or
appraisal of the assets or liabilities of the Company, and we did not perform or
obtain any evaluation or appraisal of the Company’s physical properties and
facilities or sales, marketing or service organizations. With respect
to the financial projections provided to or otherwise reviewed by or discussed
with us, we have assumed that they have been reasonably prepared in good faith
on bases reflecting the best currently available estimates and judgments of the
management of the Company as to the future operating and financial performance
of the Company, and we have relied upon each party to advise us promptly if any
information previously provided became inaccurate or was required to be updated
during the period of our review. In addition to our review and
analyses of the specific information set forth above, our opinion herein
reflects and gives effect to our assessment of general economic, monetary,
market and industry conditions existing and disclosed to us as of the date
hereof as they may affect the business and prospects of the
Company.
It should
be understood that subsequent developments or material changes in any of the
information or circumstances reviewed or considered by us may affect this
opinion, and we do not have any obligation to update, revise or reaffirm this
opinion to account for any such developments or changes.
You have
not requested that we perform, and we have not performed, an appraisal of the
Company’s business or assets. You have also not requested that we
opine as to, and our opinion does not in any manner address, the Company’s
underlying business decision to enter into the Agreement or to proceed with or
effect the proposed Merger, the structure or tax consequences of the proposed
Merger or the availability or advisability of any alternatives to the proposed
Merger. Our opinion is limited to the fairness, from a financial
point of view, of the consideration to be received by the stockholders of the
Company in connection with the proposed Merger. We express no opinion
with respect to any other reasons, legal, business or otherwise, that may
support your decision to approve or consummate the proposed
Merger. Our opinion rendered herein does not constitute a
recommendation that the Company approve and consummate the Merger, nor does it
constitute a recommendation to any stockholder of the Company as to whether to
tender their shares or approve the Merger.
It is
understood that this letter is for the information of the Board of Directors of
the Company in connection with and for the sole purpose of its evaluation of the
proposed Merger and is not on behalf of, and shall not confer any rights or
remedies upon, any person other than the Board of
Directors. Furthermore, this letter should not be construed as
creating any fiduciary duty on our part to any party.
This
opinion may not be used, disclosed or referred to for any other purpose without
our prior written consent in each instance, except that this letter may be
included in its entirety in any filing made by the Company or the Parent with
the Securities and Exchange Commission with respect to the Merger, so long as
this opinion is reproduced in such filing in full and any description of or
reference to us or summary of this opinion and the related analysis in such
filing is in a form acceptable to us and our counsel. In furnishing
this opinion, we do not admit that we are experts within the meaning of the term
“experts” as used in the Securities Act of 1933, as amended (the “Securities
Act”), and the rules and regulations promulgated thereunder, nor do we admit
that this opinion constitutes a report or valuation within the meaning of
Section 11 of the Securities Act.
We, as
part of our investment banking business, are regularly engaged in the valuation
of businesses and their securities in connection with tender offers, mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. We will receive a fee in connection with services
provided in rendering our opinion pursuant to our engagement agreement with the
Company, which fee is payable upon delivery of this opinion. In
addition, the Company has agreed to indemnify us against certain liabilities
arising out of our engagement.
In the
ordinary course of our brokerage business, we or our affiliates may have long or
short positions, for our own account or for those of our clients, in the
securities of the Company and Parent.
Based on
the foregoing and subject to the qualifications stated herein, we are of the
opinion that, as of the date hereof, the consideration to be received by the
stockholders of the Company in connection with the Merger is fair from a
financial point of view.
Very
truly yours,
EMERGING
GROWTH EQUITIES, LTD.
Gregory
J. Berlacher
Chief
Executive Officer
Annex
II
ETRIALS
WORLDWIDE, INC.
4000
AERIAL CENTER PARKWAY
MORRISVILLE,
NORTH CAROLINA 27560
INFORMATION
STATEMENT PURSUANT TO SECTION 14(f) OF THE SECURITIES
EXCHANGE
ACT OF 1934 AND RULE 14f-1 THEREUNDER
This
information statement is being mailed on or about June 16, 2009 as a part of the
Solicitation/Recommendation Statement on Schedule 14D-9 (the “
Schedule 14D-9
”) of etrials
Worldwide, Inc. (“
etrials
”) with respect to the
tender offer by Merge Acquisition Corp. (“
Offeror
”), a Delaware
corporation and a wholly owned subsidiary of Merge Healthcare Incorporated, a
Delaware corporation (“
Merge
Healthcare
”), to the holders of record of shares of common stock, par
value $0.0001 per share, of etrials. Capitalized terms used and not otherwise
defined herein shall have the meaning set forth in the Schedule 14D-9. You are
receiving this information statement in connection with the possible election of
persons designated by Offeror to a majority of the seats on the etrials’ board
of directors. Such designation is to be made pursuant to an Agreement and Plan
of Merger, dated as of May 30, 2009 (as such agreement may be further
amended from time to time, the “
Merger Agreement
”), by and
among etrials, Merge Healthcare and Offeror.
The
Merger Agreement provides, among other things, that following the consummation
of the Offer and subject to the satisfaction or waiver of the conditions set
forth in the Merger Agreement and in accordance with the relevant portions of
the Delaware General Corporation Law, Offeror will merge with and into etrials
with etrials as the surviving entity (the “
Merger
”).
Pursuant
to the Merger Agreement, Offeror commenced a cash and stock tender offer (the
“
Offer
”) on June 16,
2009 to purchase all outstanding shares of etrials’ common stock at a per share
purchase price consisting of $0.80 in cash, without interest, and 0.3448 shares
of Merge Healthcare’s common stock, $0.01 par value per share, less any required
withholding taxes, upon the terms and conditions set forth in the
Prospectus/Offer to Exchange, dated June 16, 2009 (the “
Offer to Purchase
”). Unless
extended in accordance with the terms and conditions of the Merger Agreement,
the Offer is scheduled to expire at midnight, New York City time, on July 14,
2009, at which time if all conditions to the Offer have been satisfied or
waived, Offeror will purchase all shares of common stock validly tendered
pursuant to the Offer and not properly withdrawn. Copies of the Offer to
Purchase and the accompanying Letter of Transmittal have been mailed to etrials’
stockholders and are filed as exhibits to the Tender Offer Statement on Schedule
TO filed by Offeror and Merge Healthcare with the Securities and Exchange
Commission (the “
SEC
”)
on June 16, 2009.
The
Merger Agreement provides that promptly upon the acceptance for payment of any
shares of etrials’ common stock pursuant to the Offer and subject to compliance
with Section 14(f) of the Securities Exchange Act of 1934, as amended (the
“
Exchange Act
”), and
Rule 14f-1 thereunder, Merge Healthcare is entitled to designate such number of
directors, rounded up to the next whole number, on etrials’ board of directors
as will give Merge Healthcare representation thereon equal to the product of (i)
the total number of directors (giving effect to the directors so elected) and
(ii) the percentage that the number of shares of etrials’ common stock owned by
Merge Healthcare, Offeror or any subsidiary of Merge Healthcare bears to the
total number of shares of etrials’ common stock outstanding, and etrials shall
cause Merge Healthcare’s designees to be so elected or appointed; provided that
if Merge Healthcare’s designees are so appointed, until the effective time of
the Merger, the board of directors shall have at least three directors who are
etrials directors as of the date of the Merger Agreement and who are
“independent” for purposes of Rule 10A-3 of the Exchange Act (the “
Independent Directors
”); and
provided further that, in such event, if the number of Independent Directors
shall be reduced below three for any reason whatsoever, any remaining
Independent Directors (or Independent Director, if there shall be only one
remaining) shall be entitled to designate persons to fill such vacancies who
shall be deemed to be Independent Directors for purposes of the Merger Agreement
or, if no Independent Directors then remain, the other directors shall designate
three persons to fill such vacancies who will be independent for purposes of
Rule 10A-3 under the Exchange Act, and such persons shall be deemed to be
Independent Directors for purposes of the Merger Agreement. In
connection with the foregoing, etrials shall promptly, at the option of Merge
Healthcare, use reasonable efforts to either increase the size of the etrials
board or obtain the resignation of such number of its current directors as is
necessary to enable such designees to be elected or appointed to the etrials
board as provided above.
In
addition, following the election or appointment of Merge Healthcare’s designees
and prior to the effective time of the Merger, any amendment of the Merger
Agreement, any termination of the Merger Agreement by etrials, any extension by
etrials of the time for the performance of any of the obligations or other acts
of Merge Healthcare or Offeror or waiver of any of etrials’ rights thereunder,
may only be authorized by a majority of the directors of etrials then in office
who are directors of etrials on the date of the Merger Agreement.
The
Merger Agreement further provides that the directors of Offeror immediately
prior to the effective time of the Merger will be the directors of the surviving
corporation in the Merger until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified.
This
information statement is required by Section 14(f) of the Exchange Act and
Rule 14f-1 thereunder in connection with the appointment of Merge Healthcare’s
designees to the Board.
You are
urged to read this information statement carefully. You are not, however,
required to take any action.
The
information contained in this information statement (including information
herein incorporated by reference) concerning Merge Healthcare, Offeror and Merge
Healthcare’s designees has been furnished to etrials by Merge Healthcare, and
etrials assumes no responsibility for the accuracy or completeness of such
information.
OFFEROR
DESIGNEES
Merge
Healthcare has informed etrials that its designees for the board of directors
will be those persons set forth below. The following information for these
persons has been furnished to etrials by Merge Healthcare and sets forth, with
respect to each individual who is a Merge Healthcare designee, the name, age of
the individual as of May 31, 2009, citizenship, present principal occupation and
employment history during the past five years. Offeror has informed etrials that
each individual has consented to act as a director of etrials, if so appointed
or elected. The business address for each of the individuals listed below is c/o
Merge Healthcare Incorporated, 6737 W. Washington Street, Milwaukee, Wisconsin
53214.
None of
the individuals listed below has, during the past five years, (i) been
convicted in a criminal proceeding or (ii) been a party to any judicial or
administrative proceeding that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting activities
subject to, U.S. federal or state securities laws, or a finding of any violation
of U.S. federal or state securities laws.
|
·
|
Dennis
Brown
, age 61, served as vice president of finance, chief financial
officer and treasurer of Apogent Technologies Inc. (“Apogent”), a New York
Stock Exchange company from January 2003 to
December 2004. Fisher Scientific International Inc.
acquired Apogent in August 2004, and after completion of a transition
period, Mr. Brown retired from Apogent in
December 2004. From December 2000 through
January 2003, Mr. Brown served as a financial consultant to
Apogent. Mr. Brown also served as vice president of
finance, chief financial officer and treasurer of Apogent’s predecessor,
Sybron International Corporation ( “Sybron”), a publicly traded company
formerly headquartered in Milwaukee, Wisconsin, from January 1993
through December 2000, at which time Sybron’s life sciences group was
relocated to Portsmouth, New Hampshire, and Sybron was renamed
Apogent. Mr. Brown is a Fellow of the Chartered Institute
of Management Accountants (England). Mr. Brown has served
on Merge Healthcare’s Board since May 2003 and previously served on
Merge Healthcare’s board of directors from the date of its initial public
offering in February 1998 until
May 2000.
|
|
·
|
Justin C.
Dearborn
, age 39, served as managing director and general counsel
of Merrick Ventures, LLC (collectively with its operating entities and
affiliates, “Merrick”) from January 2007 until his appointment as
chief executive officer of the Merge Healthcare on June 4,
2008. Mr. Dearborn has diverse experience in operational,
financial and legal roles. Prior to joining Merrick,
Mr. Dearborn worked over nine years for Click Commerce, Inc. (“Click
Commerce”), a publicly traded software and services company that was
acquired by Illinois Tool Works Inc. in October 2006. From
May 2003 until May, 2005, Mr. Dearborn served as vice president
of Corporate Legal Affairs and Human Resources at Click
Commerce. Mr. Dearborn was appointed corporate secretary
of Click Commerce on May 2, 2003. Prior to Click Commerce,
Mr. Dearborn worked at Motorola, Inc. where he specialized in
intellectual property transactions and also held management positions in
Motorola’s Semiconductor and Corporate
Groups. Mr. Dearborn and holds a B.A. from Illinois State
University and a J.D. from DePaul University. He has practiced
law in the state of Illinois but no longer holds a license to practice
law. Mr. Dearborn has served on Merge Healthcare’s board of
directors since his appointment as chief executive officer of the company
on June 4, 2008.
|
|
·
|
Michael W.
Ferro, Jr.
, age 43, has served as a director and chairman of the
board of directors of Merge Healthcare since June 4,
2008. Since May 2007, Mr. Ferro has served as
chairman and chief executive officer of Merrick, a private investment
firm. From June 1996 until October 2006,
Mr. Ferro served as chief executive officer and chairman of the board
of Click Commerce. Mr. Ferro is currently a member of the
board of trustees of the Chicago Museum of Science and Industry, the Field
Museum, the Joffrey Ballet, Northwestern University and the Lyric Opera of
Chicago. He also serves on the boards of directors of the
Chicago Community Trust, Children’s Memorial Hospital, Northwestern
Memorial Foundation, Big Shoulders Foundation, and After School
Matters. Mr. Ferro holds a B.A. from the University of
Illinois.
|
|
·
|
Gregg G.
Hartemayer
, age 56, has served on the board of directors of Merge
Healthcare since June 4, 2008. Since May 2007,
Mr. Hartemayer has served as a special advisor to
Merrick. Prior to his association with Merrick, he served in
various capacities at Arthur Anderson LLP, and its then affiliate,
Accenture for 28 years. Mr. Hartemayer retired from
Accenture in February 2004 where he was chief executive for Global
Technology, Outsourcing and Global
Delivery. Mr. Hartemayer holds an M.B.A. and a B.A. in
Mathematics from the University of
Michigan.
|
|
·
|
Richard A.
Reck
, age 59, is the president of Business Strategy Advisors LLC, a
business strategy consulting firm, and has served in such capacity since
August 2002. Mr. Reck joined the certified public
accounting firm of KPMG LLP in June 1973 and remained employed there
until his retirement as a partner in July 2002. He
currently serves on the boards of Interactive Intelligence, Inc., a
publicly held software company, and Advanced Life Sciences Holdings Inc.,
a publicly held biopharmaceutical company, as well as the boards of
several private and not–for–profit entities. Mr. Reck is a
certified public accountant and holds a B.A. in Mathematics from DePauw
University and an M.B.A. in Accounting from the University of
Michigan. Mr. Reck has served on Merge Healthcare’s
board of directors since
April 2003.
|
None of
Merge Healthcare’s designees is a director of, or holds any position with,
etrials. Merge Healthcare and Offeror have advised etrials that, to their
knowledge, except as disclosed in the Offer to Purchase, none of Merge
Healthcare’s designees beneficially owns any securities (or rights to acquire
any securities) of etrials or has been involved in any transactions with etrials
or any of its directors, executive officers or affiliates that are required to
be disclosed pursuant to the rules of the SEC. Merge Healthcare and Offeror have
advised etrials that, to their knowledge, none of Merge Healthcare’s designees
has any family relationship with any director, executive officer or key
employees of etrials.
It is
expected that Merge Healthcare’s designees may assume office at any time
following the time at which such designees are designated in accordance with the
terms of the Merger Agreement and that, upon assuming office, Merge Healthcare’s
designees will thereafter constitute at least a majority of the board of
directors. This step will be accomplished at a meeting or by written consent of
the board of directors providing that the size of the board of directors will be
increased and/or sufficient numbers of current directors will resign such that,
immediately following such action, the number of vacancies to be filled by Merge
Healthcare’s designees will constitute at least a majority of the available
positions on the board of directors.
CERTAIN
INFORMATION CONCERNING ETRIALS
The
authorized capital stock of etrials consists of 50,000,000 shares of common
stock and no shares of preferred stock. As of the close of business on May 31,
2009, there were 11,064,142 shares of common stock outstanding. Each
share of common stock entitles the record holder to one vote on all matters
submitted to a vote of the stockholders.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To
etrials’ knowledge, the following table sets forth information regarding
ownership of etrials common stock on May 31, 2009, by each (1) director and
executive officer, (2) holder of more than 5% of etrials common stock who is not
an officer or director, and (3) all of etrials’ directors and executive officers
as a group. Except as otherwise indicated and subject to applicable
community property laws, each owner has sole voting and investment powers with
respect to the securities listed.
Stockholder(1)
|
Number
of Shares of Common Stock Beneficially Owned at May 31,
2009
|
|
|
|
Percent
of Class
|
|
|
|
|
|
|
Directors
|
|
|
|
|
|
Robert
Brill
|
1,092,828
|
|
(2)
|
|
9.9%
|
Peter
Collins
|
50,000
|
|
(3)
|
|
Less
than 1%
|
M.
Denis Connaghan
|
281,182
|
|
(4)
|
|
2.5%
|
Kenneth
Jennings
|
35,000
|
|
(5)
|
|
Less
than 1%
|
Hans
Lindroth
|
101,675
|
|
(6)
|
|
Less
than 1%
|
Donald
Russell
|
326,750
|
|
(7)
|
|
3.0%
|
|
|
|
|
|
|
Non-Director
Executive Officers
|
|
|
|
|
|
Michael
Mickens
|
59,035
|
|
(8)
|
|
Less
than 1%
|
Joseph
Trepanier III
|
82,946
|
|
(9)
|
|
Less
than 1%
|
|
|
|
|
|
|
5%
Stockholders
|
|
|
|
|
|
InfoLogix
|
607,236
|
|
(10)
|
|
5.5%
|
MiniDoc
AB
|
1,319,747
|
|
(11)
|
|
11.9%
|
Newlight
Associates Funds
|
991,153
|
|
(12)
|
|
9.0%
|
All
Current Officers and Directors as a Group (9) individuals
|
2,107,978
|
|
(13)
|
|
19.1%
|
(1)
|
Unless
otherwise indicated, the business address of each of the following is 4000
Aerial Center Parkway, Morrisville, North Carolina
27560.
|
(2)
|
Robert
Brill’s and Newlight Associates Funds’ business addresses are both c/o
Newlight Management, LLC, 500 North Broadway, Suite 144, Jericho, New York
11753. These shares consist of (i) 665,191 shares of
common stock held by Newlight Associates II, LP; (ii) 229,950 shares of
common stock held by Newlight Associates II (BVI), LP; (iii) 96,012
shares of common stock held by Newlight Associates II-E, LLC; and (iv)
101,675 shares of common stock issuable upon exercise of stock options
that are currently exercisable or which will become exercisable within 60
days after May 31, 2009 held by Dr. Brill. Dr. Brill is a
general partner of each of the three Newlight Associates II entities and
exercises voting control over the shares of etrials common stock held by
the three Newlight Associates II
entities.
|
(3)
|
Peter
Collins’s business address is 350 Camino Gardens Boulevard, Suite 102,
Boca Raton, FL 33432. These shares consist of 50,000 shares of
common stock issuable upon exercise of stock options that are currently
exercisable or which will become exercisable within 60 days after May 31,
2009.
|
(4)
|
Mr.
Connaghan’s shares include 43,750 shares of common stock issuable upon
exercise of options that are currently exercisable or which will become
exercisable within 60 days after May 31, 2009 and 214,312 restricted
shares that are subject to
forfeiture.
|
(5)
|
Mr.
Jennings’s shares include 25,000 shares of common stock issuable upon
exercise of options that are currently exercisable or which will become
exercisable within 60 days after May 31, 2009 and 10,000 shares of common
stock owned by his wife.
|
(6)
|
Hans
Lindroth’s business address is c/o Lingfield AB, Klevgránd 2, 11646
Stockholm, Sweden. His shares consist of 101,675 shares of
common stock issuable upon the exercise of options that are currently
exercisable or which will become exercisable within 60 days after May 31,
2009. These shares do not include (i) 1,319,747 shares of
common stock held by MiniDoc AB, of which Mr. Lindroth is a member of
the Board of Directors; and (ii) 607,236 shares of common stock held by
Infologix (BVI) Limited, of which Mr. Lindroth is a member of the Board of
Directors.
|
(7)
|
Donald
Russell’s business address is 101 E. Kennedy Blvd., Suite 3300, Tampa,
Florida 33602. His shares include of 50,000 shares of common
stock issuable upon exercise of stock options that are currently
exercisable or which will become exercisable within 60 days after May 31,
2009.
|
(8)
|
Mr.
Mickens’ shares include 21,875 shares of common stock issuable upon
exercise of options that are currently exercisable or which will become
exercisable within 60 days after May 31, 2009 and 26,087 restricted shares
that are subject to forfeiture.
|
(9)
|
Mr.
Trepanier’s shares include 5,000 shares of common stock issuable upon
exercise of options that are currently exercisable or which will become
exercisable within 60 days after May 31, 2009 and 59,783 restricted shares
that are subject to forfeiture.
|
(10)
|
Infologix
(BVI) Limited, or Infologix, is a company organized in the British Virgin
Islands whose registered office address is Palm Grove House, Road Town,
Tortola, British Virgin Islands, and whose business address is 14
Boulevard de Philosophes, 1205 Geneve, Switzerland. Infologix is wholly
owned by Hammerwood (BVI) Limited, or Hammerwood, a company organized
under the laws of the British Virgin Islands. Hammerwood is controlled by
Elmwood Investment Holdings Ltd., a holding company organized in the
British Virgin Islands. The Peder Sager Wallenberg Charitable Trust has
the right to receive 25% of 99.9% of all dividends declared by Hammerwood
and 25% of all of the assets of Hammerwood distributed upon any
liquidation thereof. These shares do not include 1,319,747 shares of
common stock held by MiniDoc AB, a company organized in Sweden, of which
Infologix owns approximately 39.4%. The Board of Directors of Infologix
consists of Martyn David Crespel, Hans Lindroth and Ellipsis Limited, a
company organized under the laws of Malaysia. The Board of Directors of
Infologix has the power to vote the shares of common stock held by
Infologix.
|
(11)
|
MiniDoc
AB’s business address is Norrmalmstorg 14, 111 46 Stockholm,
Sweden. MiniDoc AB is a publicly-traded holding company the
stock of which is traded on the small cap over-the-counter market in
Sweden. These shares do not include shares of common stock
issuable upon the exercise of options that are held by Mr. Lindroth,
nor do they include shares of stock held by Infologix (BVI) Limited (see
note 10, above), which owns approximately 39.4% of the outstanding shares
of MiniDoc AB. The Board of Directors of MiniDoc consists of
Mr. Lindroth, Lars Lindgren and Per Egeberg. The Board of
Directors of MiniDoc exercises voting control over the shares of etrials
common stock held by MiniDoc, other than those matters (if any) which must
be presented to a vote of MiniDoc’s stockholders under applicable
law.
|
(12)
|
Robert
Brill’s and Newlight Associates Funds’ business addresses are both c/o
Newlight Management, LLC, 500 North Broadway, Suite 144, Jericho, New York
11753. These shares consist of (i) 665,191 shares of
common stock held by Newlight Associates II, LP; (ii) 229,950 shares of
common stock held by Newlight Associates II (BVI), LP; and
(iii) 96,012 shares of common stock held by Newlight Associates II-E,
LLC. Dr. Brill is a general partner of each of the three
Newlight Associates II entities and exercises voting control over the
shares of etrials common stock held by the three Newlight
Associates II entities.
|
(13)
|
Includes
403,662 shares of common stock issuable upon the exercise of options that
are currently exercisable or which will become exercisable within 60 days
of May 31, 2009.
|
BOARD
OF DIRECTORS AND EXECUTIVE OFFICERS
etrials
has a classified board of directors currently consisting of three Class I
directors, two Class II directors and three Class III directors, who will serve
until the annual meetings of stockholders to be held in 2011, 2010 and 2009,
respectively, or until their respective successors are duly elected and
qualified. The names, ages and positions of etrials’ directors and executive
officers are listed below, together with a brief account of their business
experience. There are no family relationships among any of the directors and
executive officers.
Board
of Directors
The
following directors’ terms expire in 2009.
Name,
Age, and Service On Board
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|
Information
about Director
|
Hans
Lindroth
50
Years Old
Director
Since February 2006
|
|
Hans Lindroth
has been
a Board member since February 2006. He served as a member the
Board of Directors of etrials’ subsidiary, etrials, Inc., from January
2003 until February 2006. Mr. Lindroth was the Chairman of the
Board of Directors from February 2006 through May 2008. Since
April 1998, Mr. Lindroth has served as chief executive officer of
Lingfield AB, an organization that manages a group of investment vehicles
whose beneficial owner is the Peder Sager Wallenberg Charitable
Trust. Mr. Lindroth is a non-executive director of several
companies, including two companies that are publicly listed in Sweden –
MiniDoc AB and Smarteq AB. Mr. Lindroth received his undergraduate degree
in management, finance and computer science and received a Master of Arts
in political science from the University of
Stockholm.
|
Name,
Age, and Service On Board
|
|
Information
about Director
|
Peter
Collins
40 Years
Old
Director
Since January 2005
|
|
Peter Collins
has been
a Board member since January 2005. He is Managing Principal of
Forge Capital Partner LLC, a diversified merchant banking, private equity
and real estate investment business headquartered in Tampa,
FL. Additionally, Mr. Collins is the co-founder and President
of Community Reinvestment Partners, LP, a group of private real estate
investment partnerships focused on acquiring and developing
income-producing commercial real estate in low to moderate-income
communities. From December 1997 to May 2002, Mr. Collins was a
Partner at Rock Creek Capital, a private equity firm. From June
1994 to December 1997, Mr. Collins served as a Manager with the Florida
State Board of Administration (Florida’s Public Pension Fund) and was also
the chief of staff for four years for State Senator Charles
Williams. Mr. Collins also currently serves as a non-executive
director of Digital Lightwave, a public company and as a director/advisor
to several private companies and venture capital firms. Mr.
Collins received both an undergraduate degree in Finance and a Master of
Business Administration in Finance from Florida State
University.
|
The
following directors’ terms expire in 2010.
Name,
Age, and Service on Board
|
|
Information
about Director
|
Donald
Russell
56 Years
Old
Director
Since November 2003
|
|
Donald Russell
has been
a Board member since November 2003. He served as our Vice
Chairman from October 2003 until he resigned from that position in
February 2006. Mr. Russell is also a Board member of Aerosonic
Corporation (AIM), an American Stock Exchange company. Mr.
Russell has been the Chairman of the Investment Committee for CEA Capital
Partners USA, L.P., a $150 million private equity fund, since its
inception in February 1997. He also has been a member of the
Investment Committee of Seaport Capital Partners II, L.P., a $262 million
private equity fund, since its inception in February 2000. Both
of these funds are focused on the entertainment, media, telecommunications
and information services industries. From July 1987 to June
1994, Mr. Russell was President of Communications Equity Associates’ New
York affiliate, CEA, Inc., and was responsible for overseeing CEA’s
mergers, acquisitions and corporate financing business in the cable
television and broadcasting segments. Mr. Russell received a
Bachelor of Arts in economics from Colgate
University. He was elected to the Society of International
Business Fellows in
2000.
|
Name,
Age, and Service on Board
|
|
Information
about Director
|
M.
Denis Connaghan
58
Years Old
Director
Since November 2008
|
|
M. Denis Connaghan
has
been a Board member and Chief Executive Officer of etrials since November
2008. Mr. Connaghan was a Managing Director, Global Operations
and Global IT Program Management Offices with Marsh USA, Inc., a
subsidiary of Marsh McLennan Company, from March 2007 through March
2008. Prior to that, he was a consultant to Marsh USA, Inc.
from October 2006 through March 2007. Before joining Marsh, Mr.
Connaghan was Chief Executive Officer of P2Plink, a medical bill
processing and review company related to workman’s compensation insurance
owned by The Hartford and Marsh USA from February 2005 through September
2006. Prior to that, he was a self-employed independent
executive consultant providing advice to numerous companies in health care
technology related businesses from April 2003 through December
2004. From May 2002 through March 2003, he was Chief Executive
Officer, Transaction Services for a division of Medic Computer
Systems/MISYS Healthcare Systems, which provides hardware and software
solutions for healthcare providers. He joined MISYS Healthcare
in September 1999. From early 1996 until August 2004, he was a
member of the Board of Directors of Transolutions, Inc., a medical
transcription company. Mr. Connaghan received a Master in
Business Administration in 1990 from the University of Chicago Graduate
School of Business.
|
The
following directors’ terms expire in 2011.
Name,
Age, and Service on Board
|
|
Information
about Director
|
Robert
Brill
62
Years Old
Director
Since February 2006
Chairman
of the Board
|
|
Robert Brill
has been a
Board member since February 2006. He served as a member of the
Board of Directors of etrials’ subsidiary, etrials, Inc., from December
2003 until February 2006. Dr. Brill has been founding managing
partner of Newlight Associates since June 1997, and was a general partner
of PolyVentures, whose principal investment focus was on early stage
investments in technology companies, from August 1988 until December
2002. Dr. Brill was also a founding member of the Technical
Advisory Board of the Semiconductor Research Corporation. Dr.
Brill received a Doctor in Philosophy in physics from Brown University and
a Bachelor of Arts and Bachelor of Science in engineering physics from
Lehigh University, both with honors. Dr. Brill also holds
multiple patents and invention disclosures.
|
|
Name,
Age, and Service on Board
|
|
Information
about Director
|
Kenneth
Jennings, Ph.D.
54 Years
Old
Director
Since November 2007
|
|
Kenneth Jennings
has
been a Board member since November 2007. He is the owner and
Managing Director of Third River Partners, LLC (formerly called Venture
Works Partners), a consulting company, where he focuses on growth
strategies and developing client companies’ human resources. He
has held these positions since January 2000. Mr. Jennings
received a Bachelor of Science in behavioral science from the Air Force
Academy in 1977, a Master of Science in management from the Air Force
Institute of Technology in 1981 and a Doctor of Philosophy in
organizational development from Purdue University in
1986.
|
Executive
Officers
The
executive officers of etrials who are not members of its board of directors are
set forth below.
Joseph
Trepanier
. (40 years old) Mr. Trepanier has served
as Chief Financial Officer since October 2008. From March 2008 to
October 2008, Mr. Trepanier served as Vice President of Finance and Corporate
Controller. From July 2007 until March 2008, Mr. Trepanier served as
Chief Operating Officer of Smart Online, from February 2004 until June 2007 he
was the Chief Financial Officer of DataFlux Corporation, and from January 2003
until February 2004 he was director of Finance of Hill-Rom
Corporation. Mr. Trepanier is a North Carolina-licensed Certified
Public Accountant and received a Bachelor in Science in accounting from West
Virginia University, a Bachelor in Science in business from the University of
New Hampshire, and a Master in Business Administration from Southern New
Hampshire University.
Michael
Mickens
. (41 years old) Mr. Mickens has served as Vice
President - Sales and Client Services since December 2007. Mr.
Mickens joined etrials from Cerner Corp., where he was Vice President -
Worldwide Sales and Business Development from June 2004 until November
2007. From January 2002 until July 2003, he was Vice President of
Worldwide Sales and Business Development at QED Solutions, Inc. Mr.
Mickens received a Bachelor of Science in business administration from Colorado
State University.
E. James Emerson,
Ph.D.
(66 years old) Dr. Emerson has served as Vice President
– Technology and Development since March 2009. From 1976 until 1984,
Dr. Emerson served as director of computer resources at KPMG in their New York
executive office. He served as Vice President of Technology at Pansophic
Systems (now part of Computer Associates) from 1984 until 1990 and as President
of RTI Software from 1990 until 2007. From 2007 until 2008, Dr. Emerson
was the Senior Vice President at Marsh USA. He holds a doctorate in
computer science from the New York University Polytechnic Institute, a Master in
Business Administration from Seton Hall University and a Bachelor of Science in
Physics from the University of Florida. Dr. Emerson has also served
as a professor of data base management systems and SQL at North Central College
in Naperville, IL.
Related
Party Transactions
Except
for normal compensation arrangements for services in their capacities as
executive officers and directors, etrials did not enter into any transactions
with any of its executive officers or directors or beneficial owners of 5% or
more of its outstanding common stock during the period beginning January 1,
2008 and ending December 31, 2008 or through the date of this Information
Statement.
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a)
of the Securities Exchange Act requires etrials’ directors, officers and persons
who own more than 10% of the etrials common stock to file with the SEC and
Nasdaq an initial report of ownership of etrials stock on Form 3 and
reports of changes in ownership on Form 4 or
Form 5. Persons subject to Section 16 are required by SEC
regulations to furnish etrials with copies of all Section 16(a) forms that
they file. Under SEC rules, certain forms of indirect ownership and
ownership of etrials stock by certain family members are covered by these
reporting requirements. As a matter of practice, etrials’
administrative staff assists its executive officers and directors in preparing
initial ownership reports and reporting ownership changes, and typically files
these reports on their behalf.
Based
solely on a review of the copies of such forms in etrials’ possession, and on
written representations from certain reporting persons, etrials believes that
during 2008 all of its executive officers and directors filed the required
reports on a timely basis under Section 16(a) other than as
follows:
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·
|
Peter
S. Benton’s Form 4 reporting a grant of 24,938 shares of etrials common
stock on March 7, 2008 was due on March 11, 2008, and filed on March 21,
2008; and his Form 5 reporting cancellation of 24,938 shares of etrials
common stock on May 1, 2008 was due on February 16, 2009 and has not
been filed.
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|
·
|
Dr.
Robert M. Brill’s
Form 4 reporting
the expiration without consideration of warrants representing a total of
526,005 shares of etrials common stock on February 11, 2008, was due on
February 13, 2008 and filed on June 13, 2008; and his Form 4 reporting the
cancellation without consideration of 160,229 shares of etrials common
stock on February 19, 2008, was due on February 21, 2008, and filed on
June 13, 2008.
|
|
·
|
Arthur
David Campbell’s Form 4 reporting a grant of 15,517 shares of etrials
common stock on March 4, 2008 based on the closing price for etrials
common stock on March 7, 2008, was due on March 11, 2008 and filed on
March 21, 2008; and his Form 5 reporting cancellation of 15,517 shares of
etrials common stock on April 18, 2008 was due on or before February 16,
2009 and has not been filed.
|
|
·
|
James
W. Clark Jr.’s Form 4 reporting the expiration without consideration of
warrants representing a total of 57,248 shares of etrials common stock on
February 11, 2008 was due on February 13, 2008 and filed on March 21,
2008;
his
Form 4 reporting
cancellation of 19,188 shares of etrials common stock on February 19, 2008
was due on February 21, 2008 and filed on March 21, 2008; and his Form 4
reporting a grant of 49,261 shares of etrials common stock on March 4,
2008 based on the closing price for etrials common stock on March 7, 2008,
was due on March 11, 2008 and filed on March 21,
2008.
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|
·
|
M.
Denis Connaghan’s Form 4 reporting a grant of 100,000 shares of etrials
common stock and grant of options to purchase 350,000 shares of etrials
common stock on November 12, 2008, was due on November 14, 2008 and filed
on his initial report on Form 3 on November 21,
2008.
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|
·
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Eugene
Jennings’s Form 4 reporting a grant of 100,000 shares of etrials common
stock on March 4, 2008, was due on March 6, 2008, and filed on March 21,
2008; his Form 4 reporting a grant of 80,049 shares of etrials common
stock on March 4, 2008 based on the closing price for etrials common stock
on March 7, 2008 was due on March 11, 2008 and filed on March 21, 2008;
and his Form 5 reporting cancellation of 80,049 shares of etrials common
stock on July 10, 2008 was due on February 16, 2009 and has not been
filed.
|
|
·
|
Kenneth
Jennings’s initial report on Form 3 was due on November 26, 2007 and filed
on March 18, 2008; and his Form 4 reporting a grant of options to purchase
50,000 shares of etrials common stock on March 4, 2008, was due on March
6, 2008, and filed on March 18,
2008.
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|
·
|
Marc
K. Leighton’s initial report on Form 3 was due on November 26, 2007 and
was filed on January 29, 2008; his Form 4 reporting a grant of options to
purchase 50,000 shares of etrials common stock on November 15, 2007 was
due on November 19, 2007 and filed on his initial report on Form 3 on
January 29, 2008; his Form 4 reporting a grant of 14,482 shares of etrials
common stock on March 7, 2008 was due on March 11, 2008, and filed on
March 21, 2008; and his Form 5 reporting cancellation of 14,482 shares of
etrials common stock on July 11, 2008 was due on or before February 16,
2009 and has not been filed.
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|
·
|
Michael
Mickens’s initial report on Form 3 was due on December 6, 2007 and filed
on March 21, 2008; his Form 4 reporting a grant of 8,867 shares of etrials
common stock on March 7, 2008 was due on March 11, 2008, and filed on
March 21, 2008; his Form 4 reporting a grant of options to purchase 50,000
shares of etrials common stock on February 20, 2008, was due on February
22, 2008, and filed on March 21, 2008; and his Form 4 reporting a grant of
options to purchase 50,000 shares of etrials common stock on July 30,
2008, with an option price effective as of August 15, 2008, was due on
August 19, 2008, and filed on December 18,
2008.
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|
·
|
Charles
J. Piccirillo’s initial report on Form 3 was due on November 26, 2007 and
was filed on January 29, 2008; his Form 4 reporting a stock option award
of 25,000 shares of etrials common Stock on November 15, 2007 was due on
November 19, 2007 and filed on his initial report on Form 3 on January 29,
2008; his Form 4 reporting a grant of 12,931 shares of etrials common
stock on March 4, 2008 based on the closing price for etrials common stock
on March 7, 2008 was due on March 11, 2008 and filed on March 21, 2008;
his Form 4 reporting a grant of 25,000 shares of etrials common stock on
May 9, 2008 was due on May 13, 2008 and filed on November 12, 2008; his
Form 4 reporting purchases of 2,500 shares of etrials common stock on June
6, 2008 was due on June 10, 2008 and filed on June 11, 2008; and his Form
4 reporting a grant of options to purchase 50,000 shares of etrials common
stock on July 30, 2008, with an effective option price as of August 15,
2008, was due on August 19, 2008 and filed on November 12,
2008.
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|
·
|
Stuart
Thiede’s initial report on Form 3 was due on June 2, 2008 and was filed on
November 12, 2008; his Form 4 reporting a grant of 29,221 shares of
etrials common stock on July 30, 2008 based on the closing price for
etrials common stock on August 15, 2008 and reporting a grant of options
to purchase 50,000 shares of etrials common stock on July 30, 2008, with
an effective option price as of August 15, 2008 was due on August 19,
2008, and filed on November 12,
2008.
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|
·
|
Joseph
Trepanier’s initial report on Form 3 was due on March 27, 2008 and was
filed on April 17, 2008; his Form 4 reporting a grant of options to
purchase 20,000 shares of etrials common stock on May 9, 2008, was due on
May 13, 2008 and filed on November 12, 2008; his Form 4 reporting a grant
of 26,786 shares of etrials common stock on July 30, 2008 based on the
closing price for etrials common stock on August 15, 2008, was due on
August 19, 2008 and filed on November 12, 2008; and his Form 4 reporting a
grant of options to purchase 80,000 shares of etrials common stock on July
30, 2008, with an effective option price as of August 15, 2008, was due on
August 19, 2008, and filed on November 12,
2008.
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Director
Independence
Each of
etrials’ current directors other than M. Denis Connaghan and Donald Russell
qualifies as “independent” in accordance with the published listing requirements
of Nasdaq. The Nasdaq independence definition includes a series of
objective tests, such as that the director is not an employee of the company and
has not engaged in various types of business dealings with the
company. In addition, as further required by Nasdaq rules, the
etrials board has made a subjective determination as to each independent
director that no relationships exist that, in the opinion of the board, would
interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. In making these determinations, the
directors reviewed and discussed information provided by the directors and
etrials with regard to each director’s business and personal activities as they
relate to etrials and its management.
Board
and Committee Matters
The
primary responsibilities of the Board are oversight, counseling and direction to
our management in the long-term interests of the Company and our
stockholders. The Board held two meetings in 2008, and took action by
written consent in lieu of a meeting 15 times. During 2008,
each of the directors attended at least 75% of the meetings of the Board and the
committees on which he served. We expect directors to attend the
annual meeting of stockholders and all of the directors either attended in
person or via teleconference the 2008 annual meeting of
stockholders.
The Board
has delegated various responsibilities and authority to the Audit Committee, the
Compensation Committee and the Nominating and Corporate Governance
Committee. Each committee acts pursuant to a written charter, copies
of which are available under the Investors section of the etrials website at
www.etrials.com.
Audit
Committee
The Audit
Committee assists the Board in its general oversight of our financial reporting,
internal controls and audit functions, and is directly responsible for the
appointment, retention, compensation and oversight of the work of our
independent registered public accounting firm. The members of the
Audit Committee are Robert Brill, Peter Collins and Kenneth
Jennings. The Audit Committee held four meetings in
2008.
In
accordance with law, the Audit Committee has ultimate authority and
responsibility to select, compensate, evaluate and, when appropriate, replace
our registered public accounting firm. The Audit Committee has the
authority, as it determines appropriate, to engage its own outside advisors,
including experts in particular areas of accounting, apart from counsel or
advisors hired by management.
The Audit
Committee also includes at least one independent member who the Board has
determined meets the qualifications of an audit committee financial expert in
accordance with SEC rules. The Board has determined that Robert Brill
is an audit committee financial expert. You should understand that
this designation is a disclosure requirement of the SEC related to Mr. Brill’s
experience and understanding with respect to accounting and auditing
matters. The designation does not impose upon Mr. Brill any duties,
obligations or liabilities that are greater than are generally imposed on him as
a member of the Audit Committee and the Board, and his designation as an audit
committee financial expert pursuant to this SEC requirement does not affect the
duties, obligations or liabilities of any other member of the Audit Committee or
the Board.
Compensation
Committee
The
Compensation Committee reviews and determines salaries, performance-based
incentives and other matters relating to executive compensation, and administers
the etrials stock option plans, including reviewing and granting stock options
to the executive officers. The Compensation Committee also reviews
and determines various other company compensation policies and
matters. The Compensation Committee held five meetings in
2008.
The
charter of the Compensation Committee requires that the Compensation Committee
consist of at least two directors who are independent under Nasdaq rules and who
are non-employee directors under SEC Rule 16b-3 and are outside directors for
purposes of Section 162(m) of the Internal Revenue Code. The charter
requires the committee to meet at least twice each year and separately meet at
least annually with the Company’s Chief Executive Officer and principal human
resources executive and compliance officer. The Committee is also
required to meet without any management representatives
present. Officers are not permitted to be present when their own
compensation is being discussed, but the Compensation Committee solicits
information from the Chief Executive Officer about the performance of other
officers. The Compensation Committee is permitted to delegate its
authority only to the extent permitted under applicable law, corporate documents
and policies and Nasdaq rules. The Compensation Committee did not to
delegate its authority during 2008. The Compensation Committee’s
charter also authorizes the Compensation Committee to retain outside experts,
including independent legal counsel and compensation and benefits
consultants. The Compensation Committee did not retain any
independent experts during 2008.
Nominating
and Corporate Governance Committee
The
Nominating and Corporate Governance Committee reviews and reports to the Board
on a periodic basis with regard to the size of the Board of Directors, criteria
and qualifications for membership on the Board and reviews the qualifications of
both current members and new candidates. The Nominating
Committee also has the duties of evaluating the performance of current members
of the Board, evaluating compensation policies for Board members and evaluating
other corporate governance policies of etrials.
The
Nominating and Corporate Governance Committee held one meeting in
2008.
The
Nominating Committee will consider candidates proposed by
stockholders. The criteria for evaluating candidates are contained in
the Nominating Committee’s charter. Candidates will be reviewed in
the context of current composition of the Board, etrials’ operating requirements
and the long-term interests of the etrials stockholders. The
Nominating Committee evaluates candidates proposed by stockholders using the
same criteria as for other candidates.
In conducting its
assessment, the Committee will consider and evaluate each director-candidate
based upon its assessment of whether the candidate:
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§
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is
independent pursuant to the requirements of
Nasdaq;
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§
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is
accomplished in his or her field and has a reputation, both personal and
professional, that is consistent with the image and reputation of
etrials;
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§
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has
the ability to read and understand basic financial
statements;
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§
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satisfies
the criteria for being an audit committee financial expert, as defined by
the SEC;
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§
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has
relevant experience and expertise and would be able to provide insights
and practical wisdom based upon that experience and
expertise;
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|
§
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has
knowledge of etrials and issues affecting
etrials;
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§
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is
committed to enhancing stockholder
value;
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§
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fully
understands, or has the capacity to fully understand, the legal
responsibilities of a director and the governance processes of a public
company;
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|
§
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is
of high moral and ethical character and would be willing to apply sound,
objective and independent business judgment, and to assume broad fiduciary
responsibility;
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§
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has,
and would be willing to commit, the required hours necessary to discharge
the duties of Board membership;
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§
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has
any prohibitive interlocking relationships or conflicts of
interest;
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§
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is
able to develop a good working relationship with other Board members and
contribute to the Board’s working relationship with the senior management
of etrials; and
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§
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is
able to suggest business opportunities to
etrials.
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Communications
from Stockholders to the Board
The Board
recommends that stockholders initiate any communications with the Board in
writing and send them in care of the Corporate Secretary, Joseph (Jay) Trepanier
III. Stockholders can send communications by e-mail to jay.trepanier@etrials.com
or by mail to 4000 Aerial Center Parkway, Morrisville, North Carolina
27560. This centralized process will assist the Board in reviewing
and responding to stockholder communications in an appropriate
manner. The name of any specific intended Board recipient should be
noted in the communication. The Board has instructed the Corporate
Secretary to forward such correspondence only to the intended recipients;
however, the Board has also instructed our Corporate Secretary, prior to
forwarding any correspondence, to review all correspondence and, in his
discretion, not to forward certain items if he deems them to be of a commercial
or frivolous nature or otherwise inappropriate for the Board’s
consideration. In such cases, the Corporate Secretary may forward
some of that correspondence elsewhere within the company for review and possible
response.
EXECUTIVE
COMPENSATION
The
compensation system for etrials’ senior management relies on the following
components:
|
·
|
performance-based
bonuses that might be less than, equal to, or more than, base
salary;
|
|
·
|
sales
commissions for certain personnel;
|
|
·
|
equity
compensation in the form of stock options and/or restricted stock;
and
|
|
·
|
health
insurance, 401k and other benefits.
|
The
following table sets forth summary information concerning the compensation paid
for the last two fiscal years to (1) the individuals who served as etrials’
principal executive officers in 2008, (2) its two most highly compensated
executive officers other than the principal executive officers who were serving
as executive officers at the end of the last completed fiscal year
,
and (3) up to
two additional individuals for whom disclosure would have been provided but for
the fact that the individual was not serving as an executive officer of etrials
at the end of the last completed fiscal year.
SUMMARY
COMPENSATION TABLE
Name
and principal position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards ($)
|
Option
Awards
($)(2)
|
All
Other
Compensation
($)
|
Total
($)
|
M.
Denis Connaghan
President
& CEO
|
2008
2007
|
$45,832
-
|
$11,986(1)
-
|
$15,152(1)
-
|
$9,012
-
|
$1,082(3)
-
|
$82,315
-
|
Joseph
(Jay) Trepanier III
Chief
Financial Officer & Secretary from May 2008
|
2008
2007
|
$117,084
-
|
$20,625(4)
-
|
$20,625(4)
-
|
$9,908
-
|
$5,305(19)
-
|
$169,071
-
|
Michael
Mickens
Vice
President – Sales & Client Services
|
2008
2007
|
$180,000
$18,462
|
$84,726(4)
-
|
$23,469(4)
-
|
$11,250
-
|
$7,858(5)
$794(6)
|
$307,339
$18,462
|
Eugene
Jennings
President
& CEO
until
July 2008
|
2008
2007
|
$305,631
$199,740
|
$7,813
$95,000(7)
|
$51,043
$36,537
|
$582,433(8)
$190,962
|
$122,213(9)(10)
$29,713(9)(11)
|
$1,068,863
$515,415
|
Charles
Piccirillo
Interim
CEO, July 2008- November 2008;
Vice
President -Product Development until January 2009
|
2008
2007
|
$174,583
$49,424
|
$18,750(4)
-
|
$20,581(4)
-
|
$18,750
$1,651
|
$9,629(12)
$2,448(13)
|
$242,290
$53,523
|
James
W. Clark, Jr.
Treasurer
& Chief Financial Officer until May 2008
|
2008
2007
|
$132,837
$200,000
|
-
-
|
-
-
|
$366,452(8)
$310,360
|
$134,089(9)(14)
$24,481(9)(15)
|
$633,378
$534,841
|
Michael
Harte
Senior
VP of Sales until December 2008
|
2008
2007
|
$187,775
$171,250
|
$38,472
$114,688(17)
|
-
-
|
$29,179(8)
$19,568
|
$22,653(9)(16)
$22,008(9)(18)
|
$
278,079
$327,514
|
(1) Bonus
for M. Denis Connaghan for 2008 was guaranteed as a condition of his employment
contract with etrials. etrials paid 50%, or $11,986, in cash and 50%
in stock based on a per share price of $0.73. etrials paid the bonus
in 2009.
(2) Amounts
shown in this column are based on the accounting expense recognized by etrials
in fiscal years 2008 and 2007 related to stock option awards made in relevant
fiscal years. There can be no assurance that the options will ever be
exercised (in which case no value will be realized by the executive) or that the
value on exercise will equal the FAS 123R value. The assumptions and
methodology used to calculate the accounting expense recognized in fiscal years
2008 and 2007 for these stock option awards are as follows:
Valuation and amortization
method
- etrials determines the fair value of stock options using the
Black-Scholes option-pricing formula. This fair value is then
amortized on a straight-line basis over the requisite service periods of the
awards, which is generally the vesting period.
Expected Term
-
The expected term
represents the period that etrials determined based upon the simplified method
as allowed under the provisions of the Securities and Exchange Commission’s
Staff Accounting Bulletin No. 107 and represents the period of time that options
granted are expected to be outstanding.
Expected Volatility
- The
fair value of stock-based awards reflects a volatility factor etrials has
determined based on an analysis of reported data for a peer group of companies
that have issued stock options with substantially similar terms.
Expected Dividend Yield
- The
expected dividend yield is assumed to be zero because etrials has not paid and
does not anticipate paying cash dividends on its shares of common
stock.
Risk-Free Interest Rate
-
etrials bases the risk-free interest rate used in the Black-Scholes valuation
method on the yield to maturity at the time of the stock option grant on
zero-coupon U.S. government bonds having a remaining life equal to the option’s
expected life.
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
Expected
dividend yield
|
0%
|
0%
|
0%
|
0%
|
0%
|
0%
|
Expected
volatility
|
0%
|
0%
|
0%
|
100%
|
100%
|
100%
|
Risk-free
interest rate
|
3.61%
|
4.46%
|
3.74%
|
5.08%
|
4.36%
|
2.68%
|
Expected
life (in years)
|
7.0
|
7.0
|
7.0
|
3.7
|
4.0
|
4.0
|
|
(3)
|
Consists
for Mr. Connaghan of company-paid premiums for medical and dental employee
programs.
|
|
(4)
|
Includes
performance-based awards earned for fiscal year 2008 but paid in 2009 of
$20,625 in cash and $20,625 in stock for Mr. Trepanier, $11,250 in cash
and $11,250 in stock for Mr. Mickens, and $18,750 in cash and $18,750 in
stock for Mr. Piccirillo.
|
|
(5)
|
Consists
for Mr. Mickens of imputed value of group term life insurance of $231 and
company-paid premiums for health, dental, and disability insurance
employee programs of $7,626.
|
|
(6)
|
Consists
for Mr. Mickens of company-paid premiums for health and dental insurance
employee programs of $794.
|
|
(7)
|
Bonus
for Eugene Jennings for 2007 was guaranteed as a condition of his
employment contract with etrials.
|
|
(8)
|
Includes
an additional expense to etrials in connection with the forfeiture of
options without consideration under FAS 123R, of $464,358 for Mr.
Jennings, $279,227 for Mr. Clark, and $16,039 for Mr.
Harte.
|
|
(9)
|
Includes
automobile allowances for Eugene Jennings of $3,000 for 2008 and $3,688
for 2007, for James Clark of $2,500 for 2008 and $6,000 for 2007, and for
Michael Harte $8,625 for 2008 and $9,000 for
2007.
|
|
(10)
|
Includes
for Mr. Jennings a severance payment of $103,125, a company contribution
to 401(k) plan of $4,024, imputed value of group term life insurance of
$253 and company-paid premiums for health, dental, and disability
insurance employee programs of
$11,811.
|
|
(11)
|
Includes
for Mr. Jennings of value of vested restricted stock award of $18,844 for
2007, imputed value of group term life insurance of $259 for 2007 and
company-paid premiums for health, dental, and disability insurance
employee programs of $6,922 for
2007.
|
|
(12)
|
Consists
for Mr. Piccirillo of a Company contribution to 401(k) plan of $2,083,
imputed value of group term life insurance of $370 and Company-paid
premiums for health, dental, and disability insurance employee programs of
$7,176.
|
|
(13)
|
Consists
for Mr. Piccirillo of imputed value of group term life insurance of $116
and company-paid premiums for health, dental, and disability insurance
employee programs of $2,332.
|
|
(14)
|
Includes for
Mr. Clark of a severance payment of $116,667, a company contribution to
401(k) plan of $6,642, imputed value of group term life insurance of $240
and company-paid premiums for health, dental, and disability insurance
employee programs of $8,041.
|
|
(15)
|
Includes for
Mr. Clark of a company contribution to 401(k) plan of $9,442 for 2007,
imputed value of group term life insurance of $774 for 2007 and
company-paid premiums for health, dental, and disability insurance
employee programs of $8,265 for
2007.
|
|
(16)
|
Includes for
Mr. Harte of a company contribution to 401(k) plan of $6,429, imputed
value of group term life insurance of $224 and company-paid premiums for
health, dental, and disability insurance employee programs of
$7,375.
|
|
(17)
|
Consists
of commissions earned in 2007 for Michael
Harte.
|
|
(18)
|
Includes for
Mr. Harte of a company contribution to 401(k) plan of $5,331for 2007,
imputed value of group term life insurance of $265 for 2007 and
company-paid premiums for health, dental, and disability insurance
employee programs of $7,412 for
2007.
|
|
(19)
|
Consists
for Mr. Trepanier of company contribution to 401(k) plan of $688, imputed
value of group term life insurance of $106 and company-paid premiums for
health, dental, and disability insurance employee programs of
$4,512.
|
UNEXERCISED
STOCK OPTIONS AND UNVESTED EQUITY AT YEAR END
The
following table provides information for each named executive officer concerning
unexercised options, stock that has not vested and equity incentive plan awards
outstanding at December 31, 2008.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR END
OPTION
AWARDS
|
|
|
STOCK
AWARDS
|
|
Name
& Title
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number
of
Shares
of
Common
Stock
That
Have
Not
Vested
(#)
|
|
|
Market
Value
of
Shares
of
Common
Stock
That
Have
Not
Vested
($)
(6)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares
or
Other
Rights
That
Have
Not
Been
Vested
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payment
Value
of
Unearned
Shares
Units
or
Other
Rights
That
Have
Not
Vested
($)
(6)
|
|
M.
Denis
Connaghan
President
&
CEO
since November
2008
|
|
|
--
|
|
|
|
350,000
|
(1)
|
|
$
|
1.10
|
|
|
11/10/2018
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
$
|
88,000
|
|
|
|
|
|
|
|
|
|
Joseph (Jay) Trepanier
III
Chief
Financial Officer from
May
2008
|
|
|
--
|
|
|
|
20,000
|
(2)
|
|
$
|
1.51
|
|
|
5/9/2018
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
80,000
|
(3)
|
|
$
|
1.54
|
|
|
8/15/2018
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
26,786
|
|
|
$
|
23,572
|
|
Michael
Mickens
Vice
President – Sales & Client Services
|
|
|
--
|
|
|
|
50,000
|
(4)
|
|
$
|
2.47
|
|
|
2/20/2018
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
3,125
|
|
|
|
46,875
|
(5)
|
|
$
|
1.54
|
|
|
8/15/2018
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
8,867
|
|
|
$
|
7,803
|
|
Eugene
Jennings
President
& CEO until July 2008
|
|
|
92,500
|
|
|
|
--
|
|
|
$
|
4.70
|
|
|
7/22/09
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
Charles
Piccirillo
Interim
CEO, July 2008- November 2008; Vice President Product Development until
January 2009
|
|
|
6,250
|
|
|
|
--
|
|
|
$
|
2.99
|
|
|
6/30/09
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
3,125
|
|
|
|
--
|
|
|
$
|
1.54
|
|
|
6/30/09
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
12,931
|
|
|
$
|
11,379
|
|
James
W. Clark, Jr.
Treasurer
& CFO until May 2008
|
|
|
84,272
|
|
|
|
--
|
|
|
$
|
1.93
|
|
|
5/31/09
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
96,460
|
|
|
|
--
|
|
|
$
|
1.92
|
|
|
5/31/09
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
55,120
|
|
|
|
--
|
|
|
$
|
2.18
|
|
|
5/31/09
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
20,670
|
|
|
|
--
|
|
|
$
|
4.35
|
|
|
5/31/09
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
49,261
|
|
|
$
|
43,350
|
|
Michael
Harte
Senior
VP of Sales until December 2008
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
(1) Subject
to accelerated vesting as described in Mr. Connaghan’s Incentive Stock Option
Agreement, the options vest in sixteen equal quarterly installments of 21,875
shares on the 12th day of February, May, August and November of each year
beginning February 12, 2009.
(2) Options
to purchase 5,000 shares vest annually, commencing on May 9, 2009.
(3) Options
to purchase 3,125 shares vest quarterly in sixteen equal installments over four
years on the 15th day of November, February, May and August, commencing on
November 15, 2009.
(4) Options
to purchase 12,500 shares vest annually commencing on February 20,
2009.
(5) Options
to purchase 3,125 shares vest quarterly in sixteen equal installments over four
years, on the 15th day of November, February, May and August, commencing on
November 15, 2008.
(6) Based
on a closing price of $.88 per share on December 31, 2008.
Employment
Agreements
M.
Denis Connaghan
In
November 2008, etrials entered into an employment agreement with Mr.
Connaghan. The agreement continues until terminated by etrials or by
Mr. Connaghan and provides for a base salary of $325,000 per
year. Mr. Connaghan is eligible to earn a bonus of up to $175,000 per
year on terms and conditions determined by the Compensation Committee of the
Board of Directors. For 2008, the agreement provides for a guaranteed
bonus of $23,973, which is $175,000 prorated by the number of days in the year
that etrials employed Mr. Connaghan. etrials may choose to pay up to
50% of any bonus in shares of common stock of etrials. If the shares
are issued before the bonus is earned, the shares will be restricted shares
subject to forfeiture.
The
agreement provides that etrials may terminate the agreement and employment for
any reason at any time on reasonable notice and that Mr. Connaghan may terminate
for any reason at any time on 30 days’ notice. If etrials terminates
without “cause” (as defined in the agreement), or if Mr. Connaghan terminates
for “good reason" (as defined in the agreement), then (i) etrials will pay 12
months’ base salary as severance, (ii) etrials will provide 12 months of paid
benefits and (iii) if bonus criteria are achieved and a bonus would have been
earned had Mr. Connaghan remained employed for the entire year or other bonus
measurement period, then etrials will pay a prorated portion of the earned bonus
based on the number of days during the year or other bonus measurement period
that we employed Mr. Connaghan prior to the termination of
employment. The agreement includes certain restrictive covenants that
limit Mr. Connaghan’s ability to compete with etrials and its subsidiary or to
divulge certain confidential information concerning etrials and its
subsidiary.
Etrials
has also agreed to recommend that Mr. Connaghan be reelected to the Board when
his term expires, if the Board determines such recommendation is consistent with
the fiduciary duties of Board members and would not otherwise harm
etrials. The agreement also provides that upon termination of
employment, Mr. Connaghan will be deemed to have resigned from the Board, and
his receipt of severance payments is conditioned upon delivery of a letter of
resignation.
In
November 2008, the Board of Directors granted to Mr. Connaghan 100,000
restricted shares of etrials common stock for a purchase price of $0.0001 per
share. Until such shares vest and upon a Termination of Employment
(as defined in the agreement), etrials may repurchase the restricted shares at
the purchase price for which the shares were issued. Subject to
accelerated vesting as described below, these restricted shares vest in sixteen
equal quarterly installments of 6,250 shares beginning in February 2009 and
ending in November 2012. If termination occurs without "cause" within
six months after a “change of control” (as defined in the agreement), then 50%
of the outstanding restricted shares that remain unvested at the termination
date will become vested. If no “change of control” has occurred, but
etrials terminates without “cause”, or if the executive terminates for “good
reason” or upon death, disability or “normal retirement” (as defined in the
plan), all the unvested shares will become vested. These shares of
restricted stock are subject to the terms of the etrials 2005 Performance Equity
Plan, as amended. Mr. Connaghan's restricted stock agreement is in a
form utilized for grants to other employees and, except for the accelerated
vesting provisions described above, does not grant him more favorable terms than
restricted stock agreements of other employees.
In
November 2008, the Board of Directors granted incentive stock options to Mr.
Connaghan to purchase 350,000 shares of etrials common stock. The
exercise price for these options is $1.10 per share, which was the closing sale
price of the common stock on November 11, 2008. Subject to
accelerated vesting as described below, the options vest in sixteen equal
quarterly installments of 21,875 shares beginning in February 2009 and ending in
November 2012. If termination occurs without “cause” within six
months after a “change of control”, then 50% of the outstanding stock options
that remain unvested at the termination date will automatically
vest. If no “change of control” has occurred, but etrials terminates
without “cause”, or if the executive terminates for “good reason” or upon death,
disability or "normal retirement", all the unvested shares will vest and be
available for exercise for 90 days. These options are subject to the
terms of the plan. The option agreement is in a form utilized
for option grants to employees generally and, except for the accelerated vesting
provisions described above, does not grant Mr. Connaghan more favorable terms
than option agreements of other employees.
Michael
Mickens and Joseph (Jay) Trepanier III
In August
and October 2008, etrials entered into employment agreements with Michael
Mickens and Joseph (Jay) Trepanier III, respectively. Mr. Mickens’
base salary is $180,000 per year and Mr. Trepanier’s base salary was initially
$165,000 per year. In March 2009, etrials increased Mr. Trepanier’s
base salary to $180,000. Mr. Mickens and Mr. Trepanier are eligible
to receive bonuses on terms and conditions determined by the Compensation
Committee of the Board of Directors. Both employment agreements
terminate in February 2010 and do not contain automatic renewal
provisions.
Except
for compensation, Mr. Mickens’s and Mr. Trepanier’s employment agreements
contain similar terms. Each agreement provides that etrials may
terminate the officer’s employment at any time with at least two weeks’ notice,
but that if etrials terminates employment before February 2010 and without cause
as defined in the agreement, then the officer is entitled to six months’ base
salary and paid benefits as severance. Each agreement includes
restrictive covenants that limit the officer’s ability to compete with etrials
and its subsidiary or to divulge certain confidential information.
In July
2008, the Board of Directors granted to Mr. Mickens and Mr. Trepanier incentive
stock options to purchase 50,000
and 80,000 shares of
etrials common stock, respectively. The exercise price for the
options is $1.54 per share, which was the closing sale price of the common stock
on August 15, 2008. Subject to accelerated vesting as described
below, the options vest in 16 equal quarterly installments beginning in November
2008 and ending in August 2011. If termination occurs without cause
within six months after a change of control as defined in the agreement, then
50% of the outstanding stock options and restricted stock that vest over a time
schedule and remain unvested at the termination date will become
vested. Restricted shares that are subject to vesting via achievement
of performance targets (such as the bonus plan grants described below) are not
included in this acceleration provision. The option agreement is in a
form utilized for option grants to employees generally and, except for the
accelerated vesting provisions described above, do not grant Mr. Mickens or Mr.
Trepanier more favorable terms than option agreements of other
employees.
Mr.
Connaghan’s and Mr. Trepanier’s employment agreements are exhibits to etrials’
filings with the Securities and Exchange Commission, and if you desire to
understand all the provisions of these agreements (including the definitions of
defined terms) should read these agreements in their entirety. The
exhibit index to the etrials Annual Report on Form 10-K filed on March 11, 2009,
refers to the reports in which these employment agreements are furnished as
exhibits.
2008
Severance Payments
Beginning
in 2008 and continuing into 2009, etrials agreed to pay Messrs. Jennings,
Piccirillo, Clark and Harte certain severance payments in connection with their
terminations of employment. etrials agreed to partially accelerate
Mr. Jennings’s severance payment, paying him $100,000 of his severance up front
and the remaining $225,000 over the course of 12 months. Under their
respective employment agreements, etrials agreed to pay Messrs. Clark and Harte
one year’s base salary. Under his employment agreement, etrials
agreed to pay Mr. Piccirillo six months’ base salary. In addition,
etrials agreed to provide health benefits to Messrs. Jennings, Clark and Harte
for one year and to Mr. Piccirillo for six months. Finally, for Mr.
Jennings, 20,000 shares of restricted stock accelerated and vested upon the
termination of his employment.
2008 Incentive Bonus Plan
Awards
In March
2008, the Board of Directors created and approved the 2008 Executive Incentive
Bonus Plan, a more formal framework for making decisions about annual bonuses to
be paid to etrials executive officers and other employees. The
Executive Incentive Bonus Plan authorizes the Compensation Committee of the
Board to make grants of cash, restricted stock, stock options or other
securities to officers and employees in connection with annual bonus
awards. Stock and options granted pursuant to the Executive Incentive
Bonus Plan will generally be under the terms of etrials’ 2005 Performance Equity
Plan, which was approved by the stockholders of etrials. Restricted
shares are subject to forfeiture until the Compensation Committee determines
whether performance criteria have been met after reviewing etrials’ audited
year-end financial statements.
The Board
approved awards providing that 50% of the bonus for performance during 2008 is
payable in shares of restricted common stock. The purchase price of
the shares is $0.0001 per share.
The remainder of the
bonus, if earned, is to be paid in cash after determination by the Compensation
Committee of the amount of the bonus earned based on the Committee’s review of
2008 performance criteria. The number of shares of restricted stock
issued to each executive officer was determined by dividing the part of the
dollar amount of bonus (based on the assumption that 100% of all performance
target goals will be achieved) that is to be allocated to restricted stock by
the closing sale price of a share of common stock on March 7, 2008, which
was $2.03 per share. In February 2009, the Board recalculated the
number of restricted stock based on the closing sale price of a share of common
stock on February 27, 2009, which was $0.73 per share, and accordingly granted
additional shares.
The
provisions of the awards for all executive officers to whom awards were made are
uniform except for the amounts of the awards. A bonus is to be paid
only if etrials’ deficit in EBITDA, or earnings before interest, taxes,
depreciation, amortization and non-cash stock-based compensation expense, is at
least 90% of the target performance level criteria established by the
Compensation Committee. If that EBITDA deficit performance is
achieved, then the executive officers become eligible to earn bonuses based on
four categories of performance during 2008 as follows:
(1) Total
orders;
(2) EBITDA;
(3) Net
service revenues; and
(4) A
discretionary component that is determined by the Compensation
Committee.
If the
minimum EBITDA target performance level is achieved, then the actual 2008
performance in each of the four categories is separately measured to determine
whether any bonus is earned for performance in that category. Each
category carries equal weight and accounts for 25% of the potential bonuses than
can be earned. A 90% is the minimum level of actual performance must
be met to earn any bonus in any category. A 90% actual performance
compared to target performance earns a bonus equal to 75% of the target bonus
cash and restricted stock for such performance category. If 2008
actual performance exceeds 100% of the target performance level for a category,
the bonus earned can be increased to up to 150% of the target bonus level for
that category, which is the amount that would be earned if 2008 actual
performance exceeds target performance levels by 125% or more.
Director
Compensation
The
following table provides information concerning the compensation during the
fiscal year ended December 31, 2008 for persons who served on the Board of
Directors during 2008, other than M. Denis Connaghan, the principal
executive officer, and Eugene Jennings, the former principal executive officer
who served on the Board of Directors until July 8, 2008, each of whose
compensation is discussed under Executive Compensation.
DIRECTOR
COMPENSATION
|
Name
|
Fees
Earned
or
Paid in Cash ($)
|
Option
Awards
($)(1)(2)
|
Total
($)
|
|
|
|
|
Robert
Brill
|
$29,833
|
$35,084(4)
|
$64,917
|
Peter
Collins
|
$29,000
|
$35,084(4)
|
$64,084
|
Peter
Coker (3)
|
$12,500
|
--(4)
|
$12,500
|
Kenneth
Jennings
|
$22,083
|
$37,774(4)(5)
|
$59,857
|
Hans
Lindroth
|
$27,917
|
$35,084(4)
|
$63,001
|
Donald
Russell
|
$23,792
|
$35,084(4)
|
$58,876
|
|
(1)
|
See
footnote (4) of the Summary Compensation Table for an explanation of how
etrials values options.
|
|
(2)
|
As
of December 31, 2008, the number of shares underlying vested and unvested
options held by the etrials non-employee directors was as
follows: 101,675 shares for Mr. Brill, 50,000 shares for Mr.
Collins, 50,000 shares for Mr. Jennings, 101,675 shares for Mr. Lindroth,
and 50,000 shares for Mr. Russell. Mr. Coker forfeited his
options in connection with his resignation from the
Board.
|
|
(3)
|
Mr.
Coker served as a director until May 2008. etrials recognized $8,677
in accounting expense related to stock option awards in the first quarter,
but recouped that expense upon the forfeiture of all his options in
connection with his resignation from the
Board.
|
|
(4)
|
Represents
the accounting expense recognized by etrials in fiscal year 2008 related
to stock option awards made in prior
years.
|
|
(5)
|
Represents
options to purchase 50,000 shares as of December 31,
2008.
|
The
Board believes that compensation for independent directors should be a mix of
cash and equity-based compensation. etrials does not pay employee
directors for Board service in addition to their regular employee
compensation. The meeting fees that etrials paid non-employee
directors in 2008 are set forth in the table below. etrials
reimbursed the directors for their travel and related expenses in connection
with attending Board meetings and Board-related activities, such as site visits
and sponsored events.
The
Compensation Committee, which consists solely of independent directors, has the
primary responsibility to review and consider any revisions to directors’
compensation. In accordance with the Compensation Committee’s
recommendations, the Board determined the non-employee directors’ compensation
effective April 1, 2006 as follows:
Cash
compensation:
|
etrials
Worldwide, Inc.
|
Annual
retainer
|
$10,000
|
|
|
Additional
annual retainer for Board chairman
|
$5,000
|
|
|
Annual
retainer for committee member
|
$1,500
|
|
|
Additional
annual retainer for committee chairman
|
$1,000
|
|
|
Board
meeting attendance
|
$1,000
(in person)
$500
(telephonically)
|
|
|
Committee
meeting attendance
|
$500
(whether in person or telephonically)
|
Stock
Options:
|
|
Upon
joining Board
|
50,000
shares
|
|
|
Option
vesting schedule
|
25%
on grant date and 25% annually on the anniversary of the
grant
|
In
October 2007 in order to facilitate making changes to the composition of the
Board of Directors, the Board approved a plan to reward directors for resigning
if the Board determines that changing the composition of the Board is in the
best interests of our stockholders. Because etrials’ Certificate of
Incorporation provides for a staggered Board with directors generally elected
for three-year terms, the Board determined that a plan to facilitate
resignations would be in the interests of the stockholders by giving the Board a
tool to shape Board composition to adapt to changing circumstances.
The plan
provides that its sole purpose is to give the Board greater flexibility in
changing the composition of the Board of Directors to adapt to changing
circumstances. Any director who is an executive officer or employee
of etrials at the time he is asked to resign from the Board is not eligible to
receive benefits under the plan. Directors whose conduct or
performance of duties or failure to perform duties is the reason for being asked
to resign are also not eligible to receive benefits under the plan.
The plan
was adopted to comply with Rule 16b-3 under the Securities Exchange Act of 1934
to cause cashless exercises to be exempt from the provisions of Section 16 to
the fullest extent possible.
The plan
provides that each director who resigns prior to the end of his term of office
after being asked by the Board of Directors to resign will have his option
agreement automatically changed upon such resignation so that: (1) all options
that have not vested will immediately become vested effective as of the date of
resignation; (2) the expiration date of all his options will be extended until
the earlier of the original termination date in effect when the option was
granted or a date that is 90 days after the next annual meeting of stockholders
of etrials, unless the Board selects an earlier expiration date; and (3) any
options that have vested as of the resignation date will become exercisable on a
cashless basis until the option expires.
Cashless
exercise is a benefit if options are “in the money,” that is, if the market
value of etrials common stock exceeds the exercise price of the options being
exercised. If a director elects to exercise options on a cashless
basis, the director would receive fewer shares than the director would have
received had the director paid the exercise price in cash. The number
of shares that are issued upon cashless exercise is calculated by determining
the amount by which the market price of the common stock (determined in
accordance with the plan or agreement under which the options were granted),
exceeds the exercise price of the options being exercised on a cashless basis,
and then dividing that excess market value by the exercise price per share of
the options being exercised on a cashless basis.
Annex
III
APPRAISAL
RIGHTS UNDER THE DELAWARE GENERAL CORPORATION LAW
§
262. Appraisal rights.
(a) Any
stockholder of a corporation of this State who holds shares of stock on the date
of the making of a demand pursuant to subsection (d) of this section with
respect to such shares, who continuously holds such shares through the effective
date of the merger or consolidation, who has otherwise complied with subsection
(d) of this section and who has neither voted in favor of the merger or
consolidation nor consented thereto in writing pursuant to § 228 of this title
shall be entitled to an appraisal by the Court of Chancery of the fair value of
the stockholder’s shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the
word “stockholder” means a holder of record of stock in a stock corporation and
also a member of record of a nonstock corporation; the words “stock” and “share”
mean and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
“depository receipt” mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the
depository.
(b)
Appraisal rights shall be available for the shares of any class or series of
stock of a constituent corporation in a merger or consolidation to be effected
pursuant to § 251 (other than a merger effected pursuant to § 251(g) of this
title), § 252, § 254, § 257, § 258, § 263 or § 264 of this title:
(1)
Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or (ii) held of record by
more than 2,000 holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of
§ 251 of this title.
(2)
Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to §§ 251, 252, 254, 257, 258,
263 and 264 of this title to accept for such stock anything except:
a. Shares
of stock of the corporation surviving or resulting from such merger or
consolidation, or depository receipts in respect thereof;
b. Shares
of stock of any other corporation, or depository receipts in respect thereof,
which shares of stock (or depository receipts in respect thereof) or depository
receipts at the effective date of the merger or consolidation will be either
listed on a national securities exchange or held of record by more than 2,000
holders;
c. Cash
in lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a. and b. of this paragraph; or
d. Any
combination of the shares of stock, depository receipts and cash in lieu of
fractional shares or fractional depository receipts described in the foregoing
subparagraphs a., b. and c. of this paragraph.
(3) In
the event all of the stock of a subsidiary Delaware corporation party to a
merger effected under § 253 of this title is not owned by the parent corporation
immediately prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
(c) Any
corporation may provide in its certificate of incorporation that appraisal
rights under this section shall be available for the shares of any class or
series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is
practicable.
(d)
Appraisal rights shall be perfected as follows:
(1) If a
proposed merger or consolidation for which appraisal rights are provided under
this section is to be submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting, shall notify each of
its stockholders who was such on the record date for such meeting with respect
to shares for which appraisal rights are available pursuant to subsection
(b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder’s shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder’s shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder’s shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If
the merger or consolidation was approved pursuant to § 228 or § 253 of this
title, then either a constituent corporation before the effective date of the
merger or consolidation or the surviving or resulting corporation within 10 days
thereafter shall notify each of the holders of any class or series of stock of
such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section. Such
notice may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of the
merger or consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice, demand in writing from
the surviving or resulting corporation the appraisal of such holder’s shares.
Such demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of such holder’s shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders of
any class or series of stock of such constituent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a second notice
to all such holders on or within 10 days after such effective date; provided,
however, that if such second notice is sent more than 20 days following the
sending of the first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has demanded appraisal
of such holder’s shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the corporation
that is required to give either notice that such notice has been given shall, in
the absence of fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be not
more than 10 days prior to the date the notice is given, provided, that if the
notice is given on or after the effective date of the merger or consolidation,
the record date shall be such effective date. If no record date is fixed and the
notice is given prior to the effective date, the record date shall be the close
of business on the day next preceding the day on which the notice is
given.
(e)
Within 120 days after the effective date of the merger or consolidation, the
surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal proceeding by filing a
petition in the Court of Chancery demanding a determination of the value of the
stock of all such stockholders. Notwithstanding the foregoing, at any time
within 60 days after the effective date of the merger or consolidation, any
stockholder who has not commenced an appraisal proceeding or joined that
proceeding as a named party shall have the right to withdraw such stockholder’s
demand for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) of this section hereof, upon written request,
shall be entitled to receive from the corporation surviving the merger or
resulting from the consolidation a statement setting forth the aggregate number
of shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholder’s written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) of this section hereof, whichever is later. Notwithstanding
subsection (a) of this section, a person who is the beneficial owner of
shares of such stock held either in a voting trust or by a nominee on behalf of
such person may, in such person’s own name, file a petition or request from the
corporation the statement described in this subsection.
(f) Upon
the filing of any such petition by a stockholder, service of a copy thereof
shall be made upon the surviving or resulting corporation, which shall within 20
days after such service file in the office of the Register in Chancery in which
the petition was filed a duly verified list containing the names and addresses
of all stockholders who have demanded payment for their shares and with whom
agreements as to the value of their shares have not been reached by the
surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting
corporation.
(g) At
the hearing on such petition, the Court shall determine the stockholders who
have complied with this section and who have become entitled to appraisal
rights. The Court may require the stockholders who have demanded an appraisal
for their shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings; and if any stockholder fails to comply
with such direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After
the Court determines the stockholders entitled to an appraisal, the appraisal
proceeding shall be conducted in accordance with the rules of the Court of
Chancery, including any rules specifically governing appraisal proceedings.
Through such proceeding the Court shall determine the fair value of the shares
exclusive of any element of value arising from the accomplishment or expectation
of the merger or consolidation, together with interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. Unless the Court in its
discretion determines otherwise for good cause shown, interest from the
effective date of the merger through the date of payment of the judgment shall
be compounded quarterly and shall accrue at 5% over the Federal Reserve discount
rate (including any surcharge) as established from time to time during the
period between the effective date of the merger and the date of payment of the
judgment. Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, proceed to trial upon the appraisal prior to the final
determination of the stockholders entitled to an appraisal. Any stockholder
whose name appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted such
stockholder’s certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The
Court shall direct the payment of the fair value of the shares, together with
interest, if any, by the surviving or resulting corporation to the stockholders
entitled thereto. Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court’s decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any
state.
(j) The
costs of the proceeding may be determined by the Court and taxed upon the
parties as the Court deems equitable in the circumstances. Upon application of a
stockholder, the Court may order all or a portion of the expenses incurred by
any stockholder in connection with the appraisal proceeding, including, without
limitation, reasonable attorney’s fees and the fees and expenses of experts, to
be charged pro rata against the value of all the shares entitled to an
appraisal.
(k) From
and after the effective date of the merger or consolidation, no stockholder who
has demanded appraisal rights as provided in subsection (d) of this section
shall be entitled to vote such stock for any purpose or to receive payment of
dividends or other distributions on the stock (except dividends or other
distributions payable to stockholders of record at a date which is prior to the
effective date of the merger or consolidation); provided, however, that if no
petition for an appraisal shall be filed within the time provided in subsection
(e) of this section, or if such stockholder shall deliver to the surviving
or resulting corporation a written withdrawal of such stockholder’s demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of
the corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right of any
stockholder who has not commenced an appraisal proceeding or joined that
proceeding as a named party to withdraw such stockholder’s demand for appraisal
and to accept the terms offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set forth in
subsection (e) of this section.
(l) The
shares of the surviving or resulting corporation to which the shares of such
objecting stockholders would have been converted had they assented to the merger
or consolidation shall have the status of authorized and unissued shares of the
surviving or resulting corporation.
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