There is this paragraph on page D-6: 13.  Adjust

There is this paragraph on page D-6:

Quote:

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13.  Adjustments; Dissolution or Liquidation; Merger or Change in Control.

(a)  Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, may (in its sole discretion) adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Option or Stock Purchase Right; provided, however, that the Administrator shall make such adjustments to the extent required by Section 25102(o) of the California Corporations Code.

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What I have learned about a disproportionate reverse stock split since it was first mentioned could be encompassed in what is described in the above paragraph, in my opinion.

I've come across 2 scenarios describing this term. One involves a reverse stock split where the outstanding shares and authorized shares are reduced by different factors.

For example, if there are 800M shares issued and 1B shares authorized, a 1-to-4 RS would reduce shares issued to 200M but the authorized shares could be disproportionately reduced to 500M instead of the expected 250M.

Another example might involve a RS where the 800M issued shares are reduced to 300M in a 1-to-2 RS and the company pays shareholders a cash dividend to account for their "missing" 100M shares. This would reduce the issued shares by more than the RS itself and shareholders could use their cash dividend to repurchase shares of the stock.