IMAGENSING SYSTEMS Item 1.01. Entry into a Material Definitive Agreement. (a)
Effective June 4, 2020 , the Special Committee (the
"Committee") of the Board of Directors (the "Board") of
By adopting the Amendment, the Committee is helping to preserve the value of certain deferred tax benefits of the Company, including those generated by net operating losses (collectively, the "Tax Benefits"). In general terms, it works by imposing a significant penalty upon any person or group that acquires 4.99% or more of the outstanding shares of the Company's common stock without the approval of the Board. The Company's ability to use these Tax Benefits would be substantially limited if it were to experience an "ownership change" as defined under Section 382 of the Internal Revenue Code (the "Code"). In general, an ownership change would occur if there is a greater than 50percentage point change in ownership of securities by shareholders owning (or deemed to own under Section 382 of the Code) five percent or more of a corporation's securities over a rolling threeyear period. The Amendment reduces the likelihood that changes in the Company's investor base have the unintended effect of limiting the Company's use of its Tax Benefits. The Committee believes 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 Amendment.
The Rights Agreement is intended to act as a deterrent to any Acquiring Person (as defined below). This would protect the Tax Benefits because changes in ownership by a person owning less than 4.99% of the Company's common stock are not included in the calculation of "ownership change" for purposes of Section 382 of the Code. The Board has established procedures to consider requests to exempt certain acquisitions of the Company's securities from the Rights Agreement if the Board determines that doing so would not limit or impair the availability of the Tax Benefits or is otherwise in the best interests of the Company.
The Amendment extends the expiration date of the Rights Agreement from
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Distribution and Transfer of Rights; Rights Certificates
Before the Distribution Date referred to below:
• the Rights are and will be evidenced by and trade with the stock certificates
for the shares of the Company's common stock (or, with respect to any
uncertificated shares of common stock registered in book entry form, by
notation in book entry), and no separate Rights certificates will be
distributed;
• stock certificates for shares of the Company's common stock issued after the
Record Date contain a legend incorporating the Rights Agreement by reference
(and, for any uncertificated shares of common stock registered in book entry
form, this legend is contained in a notation in book entry);
• new Rights will accompany any new shares of the Company's common stock issued
after the Record Date; and
• the surrender for transfer of any certificates for shares of the Company's
common stock (or the surrender for transfer of any uncertificated shares of
common stock registered in book entry form) will also constitute the transfer
of the Rights associated with such shares.
Distribution Date
Subject to certain exceptions specified in the Rights Agreement, the Rights will separate from the Company's common stock 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 4.99% 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 4.99% or more of the Company's common stock. The date on which the Rights separate from the shares of the Company's common stock and become exercisable is referred to as the "Distribution Date."
After the Distribution Date, the Rights will separate from the shares of common stock and be evidenced by bookentry credits or by Rights certificates that the Company will cause to be mailed to all eligible holders of common stock, and any Rights held by an Acquiring Person will be void and may not be exercised.
Preferred Shares Purchasable Upon Exercise of Rights
After the Distribution Date, each Right will entitle the holder to purchase, for the Exercise Price, one onethousandth of a Preferred Share having economic and other terms similar to that of one share of the Company's common stock. This portion of a Preferred Share is intended to give the shareholder approximately the same dividend, voting and liquidation rights as would one share of common stock and should approximate the value of one share of common stock. . . .
Item 8.01. Other Events.
On
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The following exhibits are filed with or incorporated into this Current Reports on Form 8K:
3.1 Certificate of Designation amending the Articles of
Incorporation of
4.1 Third Amendment to Rights Agreement dated as ofJune 4, 2020 , by
and between
4.2 Second Amendment to Rights Agreement dated as ofMarch 12, 2018 ,
by and between
4.3 First Amendment to Rights Agreement dated as ofAugust 23, 2016 ,
by and between
4.4 Rights Agreement dated as of
99.1 Press Release of
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