'payable in like kind'? 'non-electing' shares?

Question

each share of Series B Preferred Stock shall, by virtue of such transaction and on the same terms as apply to the holders of Common Stock, be converted into or exchanged for the aggregate amount of shares, securities, cash or other property (payable in like kind) receivable by a holder of the number of shares of Common Stock into which such shares of Series B Preferred Stock could have been converted immediately prior to such transaction if such holder of Common Stock failed to exercise any rights of election as to the kind or amount of shares, securities, cash or other property receivable upon such transaction (provided that, if the kind or amount of shares, securities, cash or other property receivable upon such transaction is not the same for each non-electing share, then the kind and amount of shares, securities, cash or other property receivable upon such transaction for each non-electing share shall be the kind and amount so receivable per share by a plurality of non-electing shares).

Kindly explain the terms in Bold&Italic.

Answer 1

This excerpt is a little bit hard to parse without knowing what kind of transaction is being referred to, but I will give it a shot.

payable in kind means paid in property with no easily established monetary value, instead of stock or money or securities.

For example, my uncle was once a shareholder in a wild rice distributor that ceased to be economically viable as a going concern because it couldn't sell its inventory for a reasonable price. So, it wound up its business and dissolved itself. But, rather than selling the warehouse full of wild rice it had left at a fire sale price when the market was weak and distributing cash to its shareholders, it instead, after paying its creditors with the proceeds of all of its cash and assets other than wild rice, made a liquidating distribution in which shareholders received X pounds of rice per share. My uncle's share of the inventory was roughly a UPS Van filled to the brim with wild rice, some of which he kept for personal consumption, some of which he held for sale when the price of wild rice recovered, and some of which he distributed in forty gallon lots to almost everyone in his extended family. My own family's forty gallons lasted us about fifteen or twenty years.

non-electing shares This contemplates that there can be a transaction in some classes of stock can elect to participate and others may not, such as a partial liquidation of the company. Non-electing shares don't participate in the plan, while electing shares do.

For example, perhaps electing shares get cash but not very much, while non-electing shares get an in kind distribution of the remaining shares.

Answer 2

The term "payment in kind", when used by a public company, normally refers to payment in kind notes. It allows the company to pay with securities, like stocks, rather than money. It can also refer to using physical goods or services to settle debts, but that is not the most widely used method for public companies.

Payment-in-kind also refers to a financial instrument that pays interest or dividends to investors of bonds, notes, or preferred stock with additional securities or equity instead of cash. Payment-in-kind securities are attractive to companies preferring not to make cash outlays and they are often used in leveraged buyouts. https://www.investopedia.com/terms/p/paymentinkind.asp

Payment in kind loans were popular in leveraged buyouts:

In leveraged buyouts, PIKs is used if the purchase price of the target exceeds leverage levels up to which lenders are willing to provide a senior loan, a second lien loan, or a mezzanine loan, or if there is no cash flow available to service a loan (e.g., due to dividend or merger restrictions). It is typically provided to the acquisition vehicle, either another company or a special purpose entity (SPE), and not to the target itself. https://en.wikipedia.org/wiki/PIK_loan

The term non- electing shares can vary a bit from place to place, but it generally refers to a shareholder who did not exercise the right to vote. https://www.lawinsider.com/dictionary/non-electing-shareholder

Sometimes, it is used in reference to stock that does not offer voting rights, but technically, that would be non- voting stock. https://en.wikipedia.org/wiki/Non-voting_stock