Item 1.01 Entry into a Material Definitive Agreement
On March 25, 2016,
VirtualScopics, Inc. (the “Company” or “VirtualScopics”) entered into an Agreement and Plan of Merger
(the “Merger Agreement”) with BioTelemetry, Inc. (“BioTelemetry”) and Biotelemetry Research Acquisition
Corporation, a wholly-owned subsidiary of BioTelemetry (“Merger Sub”), pursuant to which Merger Sub will, on the terms
and subject to the conditions set forth therein, conduct a tender offer for all of the Company’s outstanding shares of the
Company’s common stock (the “Common Stock”) at a purchase price of $4.05 per share in cash (the “Common
Stock Offer”).
Simultaneously with the
commencement of the Common Stock Offer, the Purchaser shall commence an offer to purchase (i) all the outstanding shares of the
Company’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”) at a price per share of Series
A Preferred Stock of $336.30 in cash; (ii) all outstanding shares of the Company’s Series B Convertible Preferred Stock (the
“Series B Preferred Stock”) at a price per share of Series B Preferred Stock of $336.30 in cash; and (iii) all outstanding
shares of the Company’s Series C-1 Convertible Preferred Stock (the “Series C-1 Preferred Stock” and collectively
with the Series A Preferred Stock and the Series B Preferred Stock, the “Preferred Stock”), at a price per share of
Series C-1 Preferred Stock of $920.00 in cash (the “Preferred Stock Offer” and together with the Common Stock Offer,
the “Offer”).
Following the consummation
of the Offer, Merger Sub will merge with and into the Company with the Company surviving as a wholly-owned subsidiary of BioTelemetry
(the “Merger”).
The Offer is subject to
customary conditions, including, among other things, (i) that the number of shares of Common Stock and Preferred Stock validly
tendered in accordance with the terms of the Offer and not validly withdrawn, together with any shares of Common Stock and Preferred
Stock then owned by Merger Sub, shall equal at least a majority of the voting power of outstanding Common Stock and Preferred Stock
(voting on an as converted to Common Stock basis), as if voting together as a single class, (ii) that the number of shares
of Series C-1 Preferred Stock validly tendered in accordance with the terms of the Offer and not validly withdrawn, together with
any shares of Series C-1 Preferred Stock then owned by Merger Sub, shall equal at least a majority of the outstanding shares of
Series C-1 Preferred Stock; (iii) no temporary or permanent judgment issued by any governmental entity of competent jurisdiction
or law or other legal restraint or prohibition preventing or prohibiting the consummation of the Merger shall be in effect; (iv) the
absence of a termination of the Merger Agreement in accordance with its terms; and (v) that no event, condition, change, occurrence
or development of a state of facts that has had or would have a material adverse effect on the Company shall have occurred. The
Offer also is subject to other customary conditions for a transaction of this nature.
The Merger is subject
to the following closing conditions: (i) Merger Sub having accepted for payment all the shares of Common Stock and Preferred
Stock validly tendered and not withdrawn in the Offer and (ii) no temporary or permanent judgment issued by any governmental
entity of competent jurisdiction or law or other legal restraint or prohibition preventing or prohibiting the consummation of the
Merger shall be in effect.
The Merger Agreement contains
representations, warranties and covenants of the parties customary for a transaction of this type, including, among other things,
a covenant of the Company not to solicit alternative transactions or to provide information or enter into discussions in connection
with alternative transactions, subject to certain exceptions to allow the Company’s board of directors to exercise its fiduciary
duties.
The Merger Agreement may
be terminated under certain circumstances, including in specified circumstances in connection with superior proposals. Upon the
termination of the Merger Agreement, under specified circumstances, the Company will be required to reimburse BioTelemetry for
costs and expenses incurred in connection with the transaction in the maximum aggregate amount of $620,000.
Concurrently with the
execution of the Merger Agreement, certain stockholders entered into tender and support agreements (the “Support Agreements”)
with BioTelemetry and Merger Sub. Pursuant to the terms of the Support Agreements, these stockholders agreed to tender their shares
in the Offer, to not solicit any other acquisition proposals and to vote their shares against any competing acquisition proposals.
The shares subject to the Support Agreements comprise approximately 20% of all outstanding shares. The Support Agreements will
terminate in certain circumstances, including upon termination of the Merger Agreement.
The foregoing description
of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger
Agreement, which is filed as Exhibit 2.1 hereto and incorporated herein by reference.