Vertrue adopts stockholder protection rights agreement to thwart 'abusive' takeover efforts

By Jennifer Lanning Drey

Portland, Ore., July 6 - Vertrue Inc.'s board of directors adopted a stockholder protection rights agreement in an effort to "deter abusive takeover tactics that can be used to deprive Vertrue's stockholders of the full value of their investment in Vertrue," the company said in a Friday news release.

The agreement will not prevent a takeover of Vertrue at a fair price but could cause substantial dilution to a person or group that acquires 15% or more of the shares of Vertrue's common stock, unless the rights are first redeemed by Vertrue's board of directors, according to the release.

Under the agreement, any stockholder beneficially owning 15% or more of the outstanding shares of Vertrue's common stock at the time of adoption is grandfathered under the terms of the rights agreement until that stockholder acquires any additional shares of Vertrue's common stock.

Terms of rights agreement

Under the rights agreement, Vertrue has declared a dividend of one right on each outstanding share of Vertrue's common stock, which will be payable under the terms of the rights agreement.

The rights will be evidenced by the common stock certificates and automatically trade with the common stock but will not be exercisable until the earlier of: Vertrue's announcing that a person or group has acquired 15% of more of the outstanding shares of the company's common stock; the date and time on which any person acquires more than 25% of the outstanding shares of Vertrue's common stock; or the tenth business day after any person or group begins a tender offer that will result in ownership of 15% of more of the outstanding shares of Vertrue's common stock.

Following one of those events, separate rights certificates will be distributed and each right will entitle its holder to purchase 1/100th of a share of Vertrue's participating preferred stock, having economic and voting terms similar to those of one share of Vertrue's common stock, for an exercise price of $240.

Also under the agreement, 10 business days after the flip-in date, each right - excluding rights beneficially owned by any acquiring person, which become void - will entitle its holder to purchase, for the exercise price, a number of shares of Vertrue's common stock, having a market value of twice the exercise price.

Additionally, the agreement states that if after an acquiring person controls Vertrue's board of directors or is the owner of 90% or more of Vertrue's common stock, Vertrue is involved in a consolidation, merger or statutory share exchange, or Vertrue sells more than 50% of its assets or earning power, and in the case of a consolidation, merger or statutory share exchange, the acquiring person will receive different treatment than all other shareholders.

Specifically, each right will entitle its holder to purchase, for the exercise price, a number of shares of capital stock of the acquiring person, which will have a market value of twice the exercise price.

If a person or group acquires between 15% and 50% of Vertrue's common stock, the company's board of directors may - at its option - exchange one share of Vertrue's common stock for each right.

Vertrue's board of directors may redeem the rights for $0.001 per right prior to the flip-in date.

The issuance of the rights has no dilutive effect, will not affect reported earnings per share, is not taxable to Vertrue or its stockholders and will not change the way Vertrue shares are traded, according to the company.

As previously reported, on March 22, Vertrue entered into a definitive agreement to be acquired by members of the company's management and an investor group including One Equity Partners, Oak Investment Partners and Rho Ventures.

Vertrue's largest shareholder, Brencourt Advisors, LLC, opposes the acquisition agreement. Brencourt beneficially owns more than 28% of the company's common stock.

Vertrue is an internet direct marketing services company located in Norwalk, Conn.

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