PROPOSAL 6 - AMENDMENT TO THE COMPANY’S CHARTER TO RESTRICT THE COMPANY’S ABILITY TO ADOPT ANY “RIGHTS PLAN” OR “POISON PILL”
To Approve a Proposed Amendment to the Company’s Charter to Restrict the Company’s Ability to Adopt Any “Rights Plan” or “Poison Pill”
✓ The Board of Directors recommends that shareholders vote FOR the amendment to the Company’s Charter to restrict the Company’s ability to adopt any “Rights Plan” or “Poison Pill.”
In accordance with the Director Nomination Agreement, the Company is asking shareholders to approve an amendment (the “Rights Plan Charter Amendment”) to the Company’s Charter that would impose certain restrictions on the Company’s ability to adopt any “rights plan,” “poison pill” or similar plan, agreement or device (a “Rights Plan”). The description in this proxy statement of the proposed Rights Plan Charter Amendment is qualified in its entirety by reference to, and should be read in conjunction with, the full text of the proposed Rights Plan Charter Amendment, which is attached to this proxy statement as Annex B.
Rights Plans are adopted for the purpose of making a takeover prohibitively expensive for a potential acquirer. Customarily, a Rights Plan will provide that the company issue a large number of new shares of capital stock, often preferred stock, to existing shareholders other than the potential acquirer when the potential acquirer has acquired a certain percentage of the outstanding stock – typically 10-20%. The newly issued shares customarily have harsh exchange and/or conversion features that would cause an immediate dilution of the target company’s outstanding common stock to the detriment of the potential acquirer. Because of these severe exchange and/or conversion features, customarily a potential acquirer will not acquire a number of shares that would trigger the Rights Plan and would instead negotiate with the board of directors of the target company to amend the Rights Plan so that it will not apply to the acquirer’s attempt to take over the target company or terminate the Rights Plan. Customarily, the board of directors of a target company will use the Rights Plan as leverage to attempt to negotiate a higher acquisition price for the benefit of shareholders. Critics of Rights Plans argue that such plans can protect ineffective management, undermine accountability and discourage takeovers that would be beneficial to shareholders.
The Rights Plan Charter Amendment provides that, so long as the Icahn Group has a “net long” position, as defined in the Director Nomination Agreement, in at least 3% of the total outstanding shares of the Company’s common stock, the Board shall not adopt a Rights Plan with a beneficial ownership triggering threshold below 20% (or, with respect to a person or “group” (as defined under Section 13(d) of the Exchange Act) who has a binding written agreement in place with the Company specifying that such person is restricted from acquiring common shares that, together with all other common shares beneficially owned by such person at such time, represent an aggregate beneficial ownership percentage of more than 20% of the then-outstanding common shares, the threshold specified in such agreement); provided, that, subject to specified conditions, the Board may adopt a Rights Plan with a lower beneficial ownership triggering threshold to protect the Company’s net operating losses. As a result of the foregoing parenthetical, if the Board adopts a Rights Plan when the Director Nomination Agreement remains in effect, the lowest beneficial ownership triggering threshold applicable to the Icahn Group would be 28%. The Rights Plan Charter Amendment also requires that if the Board adopts a Rights Plan, such Rights Plan must be put to a vote of shareholders within 135 days of the date of such adoption or it will automatically terminate.
PROPOSAL 6 - AMENDMENT TO THE COMPANY’S CHARTER TO RESTRICT THE COMPANY’S ABILITY TO
ADOPT ANY “RIGHTS PLAN” OR “POISON PILL”
The Board has approved amendments to the by-laws to provide for the Rights Plan restrictions discussed above. A complete copy of the amendments to the by-laws of the Company is filed as Exhibit 3.1 to the Company’s Current Reports on Form 8-K filed with the SEC on March 1, 2019 and March 29, 2019 and is incorporated herein by reference.
The Board has determined that the Rights Plan Charter Amendment is advisable and in the best interests of the Company and its shareholders and has directed that it be submitted to the Company’s shareholders for approval. An affirmative vote of the holders of a majority of the outstanding shares of the Company’s common stock entitled to vote at the 2019 annual meeting is required to adopt the Rights Plan Charter Amendment. If approved, the Rights Plan Charter Amendment would become effective upon the filing of the Rights Plan Charter Amendment with the Secretary of State of the State of Delaware. The Board currently plans to file the Rights Plan Charter Amendment as soon as reasonably practicable after receiving approval from the Company’s shareholders.