What is the primary purpose of Ford's Tax Benefit Preservation Plan?

The primary purpose of the Tax Benefit Preservation Plan is to protect Ford Motor Company's substantial tax attributes, specifically its Net Operating Losses (NOLs) and tax credits. These attributes can be used to reduce future federal income tax obligations. The plan is designed to prevent an "ownership change" as defined by the Internal Revenue Code, which could significantly limit Ford's ability to utilize these valuable tax assets.

How do the preferred share purchase rights (the "Rights") work?

The Rights are distributed to shareholders and will become exercisable if a person or group acquires 4.99% or more of Ford's outstanding common stock without the Board's approval (becoming an "Acquiring Person"). Upon this event, Rights holders (other than the Acquiring Person) will be able to purchase Ford's Series A Junior Participating Preferred Stock at a discounted price. This mechanism is intended to make any hostile acquisition prohibitively expensive by diluting the stake of the Acquiring Person.

When will shareholders receive these Rights and how long are they valid?

The dividend of the Rights is payable on September 25, 2009, to shareholders of record as of the close of business on that date. The Rights are generally set to expire on September 11, 2012, unless extended, redeemed by the Board, or rendered obsolete by changes in tax law or if the Board determines they are no longer necessary.

Can the Board of Directors modify or eliminate these Rights?

Yes, the Board of Directors has significant discretion. They can exempt any person or group from being deemed an "Acquiring Person" if it's determined their ownership won't jeopardize the tax attributes. Additionally, the Board can redeem all the Rights at a nominal price ($.001 per Right) before an "Acquiring Person" emerges. The Board can also amend the Plan, subject to certain limitations, especially after the Rights are no longer redeemable.

F 8-K: Material Agreements, Shareholder Matters & More

Summary

Ford Motor Company (F) announced on September 11, 2009, the adoption of a Tax Benefit Preservation Plan and the declaration of a dividend of preferred share purchase rights (the "Rights"). This move is primarily aimed at protecting the company's substantial net operating losses (NOLs) and other tax attributes from being significantly limited or delayed due to an "ownership change" under Section 382 of the Internal Revenue Code. Such limitations could arise if a single entity or group acquires a significant stake in Ford, potentially diminishing the value of these tax assets. The Rights, which will be distributed on September 25, 2009, to shareholders of record, allow holders to purchase preferred stock under certain conditions. The plan is designed to deter hostile takeovers or significant stake acquisitions that could trigger an ownership change, thereby safeguarding Ford's ability to utilize its tax carryforwards to offset future tax liabilities. This strategic move underscores Ford's efforts to preserve financial flexibility and maximize shareholder value by protecting a key intangible asset.

Key Highlights

1Ford adopted a Tax Benefit Preservation Plan to protect its significant Net Operating Losses (NOLs) and other tax attributes.
2The plan aims to prevent an "ownership change" under IRS rules (Section 382) which could severely limit the use of these tax assets.
3A dividend of preferred share purchase rights (the "Rights") was declared for all outstanding common and Class B stock.
4These Rights will be distributed to shareholders of record on September 25, 2009.
5The Rights trigger if an "Acquiring Person" beneficially owns 4.99% or more of the company's common stock without Board approval.
6Upon triggering, Rights holders (excluding the Acquiring Person) can purchase Ford's Series A Junior Participating Preferred Stock at a discount, effectively diluting the stake of the Acquiring Person.
7The Board retains the discretion to exempt entities or redeem the Rights under specific circumstances.

FORD MOTOR CO 8-K Report, Material Agreement (Sep 11, 2009)

Summary

Key Highlights

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