Item 1.01 Entry into a Material Definitive Agreement.
By adopting the Benefit Plan, the Board is seeking to protect the Company's ability to use its net operating losses and other tax attributes (collectively, "Tax Benefits"). The Company views its Tax Benefits as highly valuable assets of the Company that are likely to inure to the benefit of the Company and its shareholders. However, if the Company experiences an "ownership change," as defined in Section 382 of the Internal Revenue Code (the "Code"), its ability to use the Tax Benefits could be substantially limited, and the timing of the usage of the Tax Benefits could be substantially delayed, which could significantly impair the value of the Tax Benefits. Generally, an "ownership change" occurs if the percentage of the Company's stock owned by one or more "five percent shareholders" increases by more than 50 percentage points over the lowest percentage of stock owned by such shareholders at any time during the prior three-year period or, if sooner, since the last "ownership change" experienced by the Company. The Plan is intended to act as a deterrent to any person acquiring 4.90% or more of the outstanding Common Shares without the approval of the Board. This would protect the Tax Benefits because changes in ownership by a person owning less than 4.90% of the Common Shares are not included in the calculation of "ownership change" for purposes of Section 382 of the Code. The Board believes that it is in the best interest of the Company and its shareholders that the Company provide for the protection of the Tax Benefits by adopting the Benefit Plan.
The following is a summary description of the terms of the Benefit Plan. This summary does not purport to be complete and is qualified in its entirety by reference to the Benefit Plan, a copy of which is attached as Exhibit 4.1 hereto and incorporated herein by reference.
Distribution and Transfer of Rights; Rights Certificates
The Board has declared a dividend of one Right for each outstanding Common Share. Prior to the Distribution Date referred to below:
· the Rights will be evidenced by and trade with the certificates for the Common Shares (or, with respect to any uncertificated Common Shares registered in book entry form, by notation in book entry), and no separate rights certificates will be distributed; · new Common Shares certificates issued after the Record Date will contain a legend incorporating the Benefit Plan by reference (for uncertificated Common Shares registered in book entry form, this legend will be contained in a notation in book entry); and · the surrender for transfer of any certificates for Common Shares (or the surrender for transfer of any uncertificated Common Shares registered in book entry form) will also constitute the transfer of the Rights associated with such Common Shares.
Rights will accompany any new Common Shares that are issued after the Record Date.
Subject to certain exceptions specified in the Benefit Plan, the Rights will separate from the Common Shares and become exercisable following (i) the 10th business day (or such later date as may be determined by the Board) after the public announcement that an Acquiring Person has acquired beneficial ownership of 4.90% or more of the Common Shares or (ii) the 10th business day (or such later date as may be determined by the Board) after a person or group announces a tender or exchange offer that would result in ownership by a person or group of 4.90% or more of the Common Shares.
The date on which the Rights separate from the Common Shares and become exercisable is referred to as the "Distribution Date."
After the Distribution Date, the Company will mail Rights certificates to the Company's shareholders as of the close of business on the Distribution Date and the Rights will become transferable apart from the Common Shares. Thereafter, such Rights certificates alone will represent the Rights.
Preferred Shares Purchasable Upon Exercise of Rights
After the Distribution Date, each Right will entitle the holder to purchase, for
Each one one-hundredth of a Preferred Share, if issued, will:
· not be redeemable; · entitle holders to quarterly dividend payments of
$0.001per one one-hundredth of a share, or an amount equal to the dividend paid on one Common Share, whichever is greater; · entitle holders upon liquidation either to receive $0.10per one one-hundredth of a share or an amount equal to the payment made on one Common Share, whichever is greater; · have no general voting rights, but will have specified class voting power in the event of mergers and similar transactions; and · entitle holders to a per share payment equal to the payment made on one Common Share if the Common Shares are exchanged via merger, consolidation or a similar transaction. Flip-In Trigger
If a person or group of affiliated or associated persons (an "Acquiring Person") obtains beneficial ownership of 4.90% or more of the Common Shares, except pursuant to an offer for all outstanding Common Shares that the independent members of the Board determine to be fair and not inadequate and to otherwise be in the best interests of the Company and its shareholders after receiving advice from one or more investment banking firms, then each Right will entitle the holder thereof to purchase, for the Exercise Price, a number of Common Shares (or, in certain circumstances, cash, property or other securities of the Company) having a then-current market value of twice the Exercise Price. However, the Rights are not exercisable following the occurrence of the foregoing event until such time as the Rights are no longer redeemable by the Company, as further described below.
Following the occurrence of an event set forth in preceding paragraph, all Rights that are or, under certain circumstances specified in the Benefit Plan, were beneficially owned by an Acquiring Person or certain of its transferees will be null and void.
Any person who, together with its affiliates and associates, beneficially owns 4.90% or more of the outstanding Common Shares as of the time of the first public announcement of the Benefit Plan (an "Exempt Person") shall not be deemed . . .
Item 3.03. Material Modification to Rights of Security Holders.
The information included in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.03.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
In connection with the adoption of the Rights Plan, on
The summary of the rights, powers and preferences of the Preferred Shares set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 5.03. A copy of the Certificate of Designation is attached as Exhibit 3.1 and is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
Exhibit No. Description
3.1 Amended and Restated Certificate of Designation of Series A Preferred Stock
4.1 Tax Benefit Preservation Plan, dated as of
Capstone Therapeutics Corp.and Computershare Inc., as rights agent.