Opinion ID: 1750252
Heading Depth: 2
Heading Rank: 3

Heading: contemplated adjustment

Text: In the event of the occurrence of situations 1 to 3 (stock dividends; splits; reverse splits) the warrants provide for adjustment by decrease or increase in the number of shares purchasable and the price per share to be paid. [6] In situations 4 and 5 (depleting dividend) the adjustment is to be accomplished by reducing the purchase price per share (i. e., $1 per share) by (a) the amount of the dividend, if paid in cash, and (b) the fair value of distributed assets other than cash. [7] In situations 6 to 10 (reorganization; stock reclassification; consolidation; merger; sale of all or substantially all assets) it is required by paragraph 3(c) of the agreement that appropriate provision be made for the protection of the rights and interests of the warrant holders. [8] Paragraph 3(c) which deals with situations 6 to 10 concludes with this sentence:    Any such shares of stock, securities or assets which the holder hereof may be entitled to purchase pursuant to this paragraph (c) shall be included within the term `capital stock' as used herein. This sentence becomes significant when considered in conjunction with paragraph 2 of the agreements which concludes with this sentence:    The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved, a sufficient number of shares of capital stock to provide for the exercise of the rights represented by this Warrant   . (Italics supplied.) We interpret these provisions, considered together, to impose on Plastics an obligation to have reserved a sufficient number of shares of United stock to provide for the exercise of the rights represented by the warrants if the arrangement planned and executed by the seven directors of the two corporations, described hereinafter, amounted to a reorganization; stock reclassification; consolidation; merger; or a sale of all or substantially all of Plastics' assets to United. Paragraph 3(c) provided with respect to situations 8 to 10 (consolidation; merger; sale of all or substantially all of assets) that the successor corporation should be required to assume the obligation to deliver to such [warrant] holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to purchase. [9]