UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Item 1.01 Entry into a Material Definitive Agreement.
Item 3.03 below is incorporated herein by reference.
Item 3.03 Material Modification to Rights of Security Holders.
On January 8, 2024, Steel Connect, Inc. (the “Company”) amended its Tax Benefits Preservation Plan, dated as of January 19, 2018, as amended on January 8, 2021 (the “Plan”), by and between the Company and Equiniti Trust Company, LLC (f/k/a American Stock Transfer & Trust Company, LLC), as rights agent, to extend the term of the Plan to January 8, 2027. The amended Plan may also expire earlier, immediately following the certification of votes of the Company’s next annual meeting of stockholders (which shall be no later than January 8, 2025), unless the amended Plan is then approved by the requisite vote of stockholders, or on such other date as described in the amended Plan.
The purpose of the Plan, as amended, continues to be to protect stockholder value by preserving the Company’s ability to use its tax net operating losses and certain other tax assets (“Tax Benefits”) to offset potential future taxable income and reduce federal income tax liability. The Company’s ability to use its Tax Benefits may be significantly limited if it experiences an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). Under Section 382 of the Code, an “ownership change” occurs if one or more stockholders or groups of stockholders that is each deemed to own at least 5% of a company’s stock increases its aggregate ownership by more than 50 percentage points over its lowest ownership percentage within a rolling three-year period. Changes in both direct and indirect ownership are taken into account for purposes of Section 382. The Plan is intended to reduce the likelihood of an “ownership change” under Section 382 of the Code by deterring any person or group from acquiring beneficial ownership of 4.99% or more of the Company’s outstanding common stock.
A summary of the terms of the Plan can be found in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 19, 2018.
The Company expects to submit the extension of the Plan to stockholders for approval at its 2023 Annual Meeting of Stockholders.
The foregoing summary of the terms of the amendment to the Plan does not purport to be complete and is qualified in its entirety by the full text of the Plan and the amendment, copies of which are filed as Exhibits 4.1 and 4.2 hereto, respectively, and are incorporated herein by reference.
Item 8.01 Other Events.
On January 8, 2024, the Company issued a press release announcing amendment of the Plan. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| STEEL CONNECT, INC. | |||
| Date: January 8, 2024 | |||
| By: | /s/ Ryan O’Herrin | ||
| Name: | Ryan O’Herrin | ||
| Title: | Chief Financial Officer | ||
2
Exhibit 4.2
AMENDMENT TO TAX BENEFITS PRESERVATION PLAN, dated as of January 8, 2024 (“Amendment”), by and between Steel Connect, Inc., a Delaware corporation (the “Company”), and Equiniti Trust Company, LLC (f/k/a American Stock Transfer & Trust Company, LLC), a Delaware corporation (the “Rights Agent”).
WHEREAS, the Company and the Rights Agent are parties to that certain Tax Benefits Preservation Plan, dated as of January 19, 2018, as amended by that certain Amendment to Tax Benefits Preservation Plan on January 8, 2021 (the “Plan” or “Agreement”), which expires on January 8, 2024, unless the Rights (as defined therein) have been earlier redeemed or exchanged or the Board (as defined therein) has determined that the Plan is no longer necessary or desirable for the preservation of Tax Benefits (as defined therein);
WHEREAS, the Company has delivered to the Rights Agent a certificate from an appropriate officer of the Company stating that this Amendment complies with Section 27 of the Plan; and
WHEREAS, the Company and the Rights Agent desire to amend the Plan to extend the term thereof as further described herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
| 1. | Section 1(y) of the Plan shall be amended and restated in its entirety as follows: |
“‘Final Expiration Date’ shall mean (i) 11:59 p.m., New York City time, on the date that the votes of the stockholders of the Company, with respect to the Company’s next annual meeting of stockholders are certified (which date and time shall be in no event later than 11:59 P.M., New York City time, on January 8, 2025), unless the continuation of the Agreement is approved by the affirmative vote of the majority of shares of Common Stock present in person or represented by proxy and actually voted at such meeting of stockholders (or any adjournment or postponement thereof) duly held in accordance with the Company’s Fourth Amended and Restated Bylaws and applicable law (in which case clause (ii) will govern); or (ii) 11:59 p.m., New York City time, on January 8, 2027.”
| 2. | The first sentence of the first full paragraph of the Form of Rights Certificate, which is attached as Exhibit B to the Plan, shall be amended and restated in its entirety as follows: |
“NOT EXERCISABLE AFTER THE EARLIER OF (I) 11:59 P.M., NEW YORK CITY TIME, ON THE DATE THAT THE VOTES OF THE STOCKHOLDERS OF THE COMPANY, WITH RESPECT TO THE COMPANY’S NEXT ANNUAL MEETING OF STOCKHOLDERS ARE CERTIFIED (WHICH DATE AND TIME SHALL BE IN NO EVENT LATER THAN 11:59 P.M., NEW YORK CITY TIME, ON JANUARY 8, 2025), UNLESS THE CONTINUATION OF THE AGREEMENT IS APPROVED BY THE AFFIRMATIVE VOTE OF THE MAJORITY OF SHARES OF COMMON STOCK PRESENT IN PERSON OR REPRESENTED BY PROXY AND ACTUALLY VOTED AT SUCH MEETING OF STOCKHOLDERS (OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF) DULY HELD IN ACCORDANCE WITH THE COMPANY’S FOURTH AMENDED AND RESTATED BYLAWS AND APPLICABLE LAW (IN WHICH CASE CLAUSE (II) WILL GOVERN); (II) 11:59 P.M., NEW YORK CITY TIME, ON JANUARY 8, 2027; AND (III) SUCH TIME AS THE RIGHTS ARE EARLIER REDEEMED, EXCHANGED OR TERMINATED OR SUCH OTHER EARLIER EXPIRATION DATE (AS DEFINED IN THE TAX BENEFITS PRESERVATION PLAN).”
| 3. | The first sentence of the second full paragraph of the Form of Rights Certificate, which is attached as Exhibit B to the Plan, shall be amended and restated in its entirety as follows: |
“This certifies that ______________________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Tax Benefits Preservation Plan, dated as of January 19, 2018, between Steel Connect, Inc., a Delaware corporation (the “Company”) and Equiniti Trust Company, LLC, a New York limited liability trust company, as Rights Agent (the “Rights Agent”), as amended as of January 8, 2021, as further amended as of January 8, 2024 and as it may be amended from time to time (the “Tax Benefits Preservation Plan”), to purchase from the Company at any time after the Distribution Dated and prior to the earlier of (i) 11:59 p.m., New York City time, on the date that the votes of the stockholders of the Company, with respect to the Company’s next annual meeting of stockholders are certified (which date and time shall be in no event later than 11:59 P.M., New York City time, on January 8, 2025), unless the continuation of the Agreement is approved by the affirmative vote of the majority of shares of Common Stock present in person or represented by proxy and actually voted at such meeting of stockholders (or any adjournment or postponement thereof) duly held in accordance with the Company’s Fourth Amended and Restated Bylaws and applicable law (in which case clause (ii) will govern); (ii) 11:59 p.m., New York City time, on January 8, 2027; or (iii) such time as the Rights are earlier redeemed, exchanged or terminated or such other earlier Expiration Date (as defined in the Tax Benefits Preservation Plan), at the office or offices of the Rights Agent designated for such purpose, or its successors as Rights Agent, one one-thousandth of a fully paid, non-assessable share of Series D Junior Participating Preferred Stock (the “Preferred Stock”) of the Company, at a purchase price of $20.00 per one one-thousandth of a share (the “Purchase Price”), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate duly executed.
| 4. | The fifth full paragraph of the Form of Summary of Rights to Purchase Preferred Stock, which is attached as Exhibit C to the Plan, shall be amended and restated in its entirety as follows: |
“The Rights are not exercisable until the Distribution Date and will expire at the earliest of (i) 11:59 p.m., New York City time, on the date that the votes of the stockholders of the Company, with respect to the Company’s next annual meeting of stockholders are certified (which date and time shall be in no event later than 11:59 P.M., New York City time, on January 8, 2025), unless the continuation of the Agreement is approved by the affirmative vote of the majority of shares of Common Stock present in person or represented by proxy and actually voted at such meeting of stockholders (or any adjournment or postponement thereof) duly held in accordance with the Company’s Fourth Amended and Restated Bylaws and applicable law (in which case clause (ii) will govern); (ii) 11:59 p.m., New York City time, on January 8, 2027; (iii) the time at which the Rights are redeemed or exchanged as provided in the Tax Benefits Preservation Plan, and (iv) the time at which the Board determines that the Tax Benefits Preservation Plan is no longer necessary or desirable for the preservation of Tax Benefits.”
| 5. | All references to “American Stock Transfer & Trust Company, LLC” in the Plan shall be deleted in their entirety and replaced with “Equiniti Trust Company, LLC” |
| 6. | Except as expressly provided in this Amendment, all of the terms and provisions of the Plan shall remain in full force and effect. |
| 7. | This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute one and the same instrument. A signature to this Amendment executed and/or transmitted electronically shall have the same authority, effect and enforceability as an original signature. |
| 8. | This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts made and to be performed entirely within such State. |
[Remainder of page intentionally left blank. Signature page follows.]
| 2 |
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment as of the date first set forth above.
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STEEL CONNECT, INC. | ||
| By: |
/s/ Ryan O’Herrin | ||
| Name: | Ryan O’Herrin | ||
| Title: | Chief Financial Officer | ||
| Equiniti Trust Company, LLC (f/k/a American Stock Transfer & Trust Company, LLC) | |||
| By: | /s/ Sharon Best-Jhagroo | ||
| Name: | Sharon Best-Jhagroo | ||
| Title: | SVP, Relationship Director | ||
Exhibit 99.1
Steel Connect, Inc. Amends Tax Benefits Preservation Plan
NEW YORK, NY — (BUSINESS WIRE) January 8, 2024 — Steel Connect, Inc. (the “Company”) (Nasdaq: STCN), today announced that its Board of Directors (the “Board”) further amended its tax benefits preservation plan, dated as of January 19, 2018, as amended on January 8, 2021 (the “Plan”), to extend the term of the Plan from January 8, 2024 to January 8, 2027 (subject to earlier expiration, as described below).
The Company has significant net operating loss carryforwards for federal and state tax purposes and believes that its ability to utilize these net operating loss carryforwards and other tax attributes (collectively, “Tax Benefits”) would be substantially limited if the Company undergoes an “ownership change” (within the meaning of Section 382 of the Internal Revenue Code). The Plan is intended to prevent an “ownership change” of the Company that would impair the Company’s ability to utilize its Tax Benefits.
Pursuant to the Plan and subject to certain exceptions, if a stockholder (or group) becomes a 4.99 percent stockholder, the rights issued under the Plan (the “Rights”) would generally become exercisable and entitle stockholders (other than the 4.99-percent stockholder or group) to purchase additional shares of the Company’s common stock at a significant discount, resulting in substantial dilution in the economic interest and voting power of the 4.99-percent stockholder (or group). In addition, under certain circumstances in which the Company is acquired in a merger or other business combination after a non-exempt stockholder (or group) becomes a 4.99 percent stockholder, each holder of a Right (other than the 4.99-percent stockholder or group) would then be entitled to purchase shares of the acquiring company’s common stock at a discount.
The Rights are not exercisable until the Distribution Date (as defined in the Plan) and, pursuant to the amendment, will expire at the earliest of (i) 11:59 p.m., New York City time, on the date that the votes of the stockholders of the Company, with respect to the Company’s next annual meeting of stockholders are certified (which the annual meeting shall be held no later than 11:59 P.M., New York City time, on January 8, 2025), unless the continuation of the Plan is approved by the affirmative vote of the majority of shares of Common Stock present in person or represented by proxy and actually voted at such meeting of stockholders (or any adjournment or postponement thereof) duly held in accordance with the Company’s Fourth Amended and Restated Bylaws and applicable law (in which case clause (ii) will govern); (ii) 11:59 p.m., New York City time, on January 8, 2027; (iii) the time at which the Rights are redeemed or exchanged as provided in the Plan, and (iv) the time at which the Board determines that the Plan is no longer necessary or desirable for the preservation of Tax Benefits.
The Company has not materially amended the Plan other than with respect to the expiration date. Additional details regarding the Plan were described in a current report on Form 8-K filed with the U.S. Securities and Exchange Commission on January 8, 2024.
About Steel Connect, Inc.
Steel Connect, Inc. is a holding company with a wholly owned subsidiary, ModusLink Corporation, which serves the supply chain management markets.
Contacts
Jennifer Golembeske
212-520-2300