FTS International, Inc.
2020112007571380 in a 8-K12B on 11/19/2020   Download
SEC Document
SEC Filing

Rights Agreement

 

On the Effective Date, the Board of Directors of FTSI (the “Board”) declared a dividend of one preferred stock purchase right (a “Right”), payable on November 30, 2020, for each outstanding share of New Class A Common Stock and each outstanding share of FTSI’s Class B Common Stock, par value $0.01 per share (the “New Class B Common Stock” and, together with the New Class A Common Stock, the “New FTS Equity”) outstanding on November 30, 2020 (the “Record Date”) to the stockholders of record on that date. In connection with the distribution of the Rights, FTSI entered into a Rights Agreement (the “Rights Agreement”), dated as of November 19, 2020 between FTSI and American Stock Transfer & Trust Company, LLC, a New York limited liability trust company, as rights agent.

 

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The Board has adopted the Rights Agreement to reduce the likelihood that a potential acquirer would gain (or seek to influence or change) control of FTSI through acquisitions from other stockholders, open market accumulation or other tactics without paying an appropriate premium for FTSI’s shares. In general terms and subject to certain exceptions, it works by imposing a significant penalty upon any person or group that acquires 20% or more of the outstanding New FTS Equity without the approval of the Board.

 

The Rights are in all respects subject to and governed by the provisions of the Rights Agreement. This description of the Rights Agreement is qualified in its entirety by reference to the full text of the Rights Agreement, which is attached hereto as Exhibit 4.2 and is incorporated herein by reference.

 

The Rights

 

The Board authorized the issuance of a Right with respect to each outstanding share of New FTS Equity on the Record Date. The Rights will initially trade with, and will be inseparable from, the New FTS Equity, and the registered holders of the New FTS Equity will be deemed to be the registered holders of the Rights. Issuances of new shares of New FTS Equity after the Record Date but before the Distribution Date, as defined under the subheading “Exercisability” below, will be accompanied by new Rights.

 

Prior to the Distribution Date, the Rights will be evidenced by the certificates for (or by the book entry account that evidences record ownership of) the New FTS Equity. After the Distribution Date, the Rights Agent will mail separate certificates (“Rights Certificates”) evidencing the Rights to each record holder of the New FTS Equity as of the close of business on the Distribution Date, and thereafter the Rights will be transferable separately from the New FTS Equity.

 

Exercisability

 

The Rights will not be exercisable until after the Distribution Date. After the Distribution Date, each Right will be exercisable to purchase, for $71.00 (the “Purchase Price”), one one-thousandth of a share of Series A Participating Cumulative Preferred Stock, par value $0.01 per share (the “Preferred Stock”). This portion of a share of Preferred Stock will give the stockholder approximately the same dividend, voting or liquidation rights as would one share of New FTS Equity. Prior to exercise, Rights holders in their capacity as such have no rights as a stockholder of FTSI, including the right to vote and to receive dividends.

 

The “Distribution Date” generally means the earlier of:

 

·the close of business on the 10th business day after the date of the first public announcement that a person or any of its affiliates and associates has become an “Acquiring Person,” as defined below, and

 

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·the close of business on the 10th business day (or such later day as may be designated by the Board before any person has become an Acquiring Person) after the date of the commencement of a tender or exchange offer by any person which would, if consummated, result in such person becoming an Acquiring Person.

 

An “Acquiring Person” generally means any person who or which, together with all affiliates and associates of such person obtains beneficial ownership of 20% or more of shares of New FTS Equity, with certain exceptions.

 

Beneficial Ownership

 

Certain synthetic interests in securities created by derivative positions (whether or not such interests are considered to be ownership of underlying shares of New FTS Equity or are reportable for purposes of Regulation 13D of the Exchange Act) are treated as beneficial ownership of the number of shares of New FTS Equity equivalent to the economic exposure created by the derivative positions to the extent actual shares of New FTS Equity are directly or indirectly held by counterparties to the derivatives contracts. Swap dealers unassociated with any control intent or intent to evade the purposes of the Rights Agreement are excepted from such imputed beneficial ownership.

 

Preferred Stock

 

The value of one one-thousandth interest in a share of Preferred Stock should approximate the value of one share of New FTS Equity, subject to adjustment. Each one one-thousandth of a share of Preferred Stock, if issued:

 

·will not be redeemable,

 

·will entitle holders to quarterly dividend payments of $0.01 per share, or an amount equal to the dividend paid on one share of New FTS Equity, whichever is greater,

 

·will entitle holders upon liquidation either to receive $1.00 per share, or an amount equal to the payment made on one share of New FTS Equity, whichever is greater,

 

·will have the same voting power as one share of New FTS Equity, and

 

·if shares of the New FTS Equity are exchanged via merger, consolidation, or a similar transaction, will entitle holders to a per share payment equal to the payment made on one share of New FTS Equity.

 

Consequences of a Person or Group Becoming an Acquiring Person

 

Flip in. Subject to FTSI’s exchange rights, described below, at any time after any person has become an Acquiring Person, each holder of a Right (other than an Acquiring Person, its affiliates and associates) will be entitled on exercise to purchase for each Right held, at the Purchase Price, a number of shares of New Class A Common Stock having a market value of twice the Purchase Price.

 

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Exchange. At any time on or after any person has become an Acquiring Person (but before any person becomes the beneficial owner of 50% or more of the outstanding shares of New FTS Equity or the occurrence of any of the events described in the next paragraph), the Board may exchange all or part of the Rights (other than Rights beneficially owned by an Acquiring Person, its affiliates and associates) for shares of New Class A Common Stock at an exchange ratio of one share of New Class A Common Stock per Right.

 

Flip over. If, after any person has become an Acquiring Person, (1) FTSI is involved in a merger or other business combination in which FTSI is not the surviving corporation or the New FTS Equity is exchanged for other securities or assets or (2) FTSI and/or one or more of its subsidiaries sell or otherwise transfer assets or earning power aggregating more than 50% of the assets or earning power of FTSI and its subsidiaries, taken as a whole, then each Right (other than Rights beneficially owned by an Acquiring Person, its affiliates and associates) will entitle the holder on exercise to purchase for each Right held, for the Purchase Price, a number of shares of common stock of the other party to such business combination or sale (or in certain circumstances, an affiliate) having a market value of twice the Purchase Price.

 

Expiration

 

The Rights will expire on November 18, 2021, unless earlier exercised, exchanged, amended or redeemed. If the Board has not renewed the Rights Agreement or called a meeting of stockholders for the purpose of voting on whether or not to renew the Rights Agreement, in each case, by the close of business on the date that is 90 days prior to November 18, 2021, then holders of 25% or more of the outstanding New FTS Equity may submit a written demand directing the Board to submit to a vote of stockholders a resolution renewing the Rights Agreement, and if such resolution is approved by a majority of the outstanding New FTS Equity, the Rights Agreement will be renewed for a period of one year.

 

Redemption

 

The Board may redeem all of the Rights at a price of $0.001 per Right at any time before any person has become an Acquiring Person. If the Board redeems any Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of Rights will be to receive the redemption price per Right. The redemption price will be subject to adjustment. If FTSI receives certain qualifying offers, and the Board has not redeemed the Rights or exempted such qualifying offer from the Rights Agreement or called a meeting of stockholders for the purpose of voting on whether or not to exempt such qualifying offer from the Rights Agreement, in each case by 90 days following such qualifying offer, the holders of 25% or more of the outstanding New FTS Equity may submit to the Board a written demand directing the Board to submit to a vote of stockholders a resolution exempting such qualifying offer from the Rights Agreement and, if such resolution is approved by (i) in the case where the consideration is all cash, a majority of the outstanding New FTS Equity, or (ii) in the case where the consideration is other than all cash, 66 2/3% of the outstanding New FTS Equity, then such qualifying offer will be exempt from the Rights Agreement.

 

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Amendment

 

At any time before any person has become an Acquiring Person, the Rights Agreement may be amended in any respect. After such time, the Rights Agreement may be amended (i) to cure any ambiguity, (ii) to correct any defective or inconsistent provision or (iii) in any respect that does not adversely affect Rights holders (other than any Acquiring Person, its affiliates and associates).

 

Antidilution

 

The Rights Agreement includes antidilution provisions designed to prevent efforts to diminish the effectiveness of the Rights.