Description of Capital Stock

The following description of the capital stock of The J. M. Smucker Company (the “Company”) is only a summary and does not purport to be complete and is qualified in its entirety by reference to the Company’s Amended Articles of Incorporation (the “Articles of Incorporation”) and the Company’s Amended Regulations (the “Regulations”).

The Company’s authorized capital stock consists of 306,000,000 shares, including:

•    300,000,000 common shares, without par value; and

•    6,000,000 serial preferred shares, without par value.

The Articles of Incorporation permit the issuance of up to 300,000,000 common shares. This amount can be amended by the Company’s board of directors (the “Board”) without shareholder approval, to the extent permitted by Chapter 1701 of the Ohio Revised Code.

The Articles of Incorporation provide that each outstanding common share entitles the holder to one vote on each matter properly submitted to the shareholders for their approval, including any vote or consent for the election or removal of the Company’s directors.

Subject to the rights of holders of serial preferred shares, if any, holders of the Company’s common shares are entitled to receive dividends as, when and if dividends are declared by the Board out of assets legally available for the payment of dividends.

In the event of a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, after payment of liabilities and obligations to creditors and holders of serial preferred shares, if any, the Company’s remaining assets are to be distributed ratably among the holders of common shares.

The Company’s shareholders will not have any preemptive rights to purchase or subscribe for shares of any class or any other security of the Company.

The Company’s common shares are not subject to redemption by the Company or by the holder of the common shares.

The Company’s common shares are not convertible into shares of any other class or any other security of the Company.

Under the Articles of Incorporation, the Company, by action of the Board and without action by its shareholders, may purchase its common shares in accordance with Ohio law. The Board may authorize such purchases to be made in the open market or through a private or public sale and at such price as the Board determines.

The Company’s outstanding common shares are, and any common shares issued will be, duly authorized, validly issued, fully paid and nonassessable.

 

The Company’s common shares have no sinking fund provisions.

The Articles of Incorporation authorize 6,000,000 serial preferred shares. No serial preferred shares are currently issued and outstanding. The Board has, however, established a series designated as Series A Junior Participating Preferred Shares and authorized 1,500,000 of such shares.

The Board may establish and issue one or more series of serial preferred shares from time to time with such powers, preferences, rights, qualifications, limitations and restrictions that are permitted by the Articles of Incorporation, and as the Board fixes by resolution, including:

•    dividend rights;

•    redemption rights and price;

•    sinking fund requirements;

•    voting rights;

•    conversion rights;

•    liquidation rights, preferences and price; and

•    restrictions on the issuance of shares of any class or series.

The rights of holders of the Company’s serial preferred shares will be subordinate to the rights of the Company’s general creditors. Serial preferred shares that the Company issues will be duly authorized and validly issued, fully paid and nonassessable. Holders of the Company’s serial preferred shares will not be entitled to preemptive rights unless otherwise specified. Holders of the Company’s common shares will not have preemptive rights to participate in any issuance of serial preferred shares.

The Board believes that the serial preferred shares will provide flexibility for future financings and acquisitions by the Company. Although there currently are no plans to issue serial preferred shares, it is contemplated that from time to time the Company may consider transactions involving the issuance of serial preferred shares. Because the Articles of Incorporation give the Board flexibility in determining the terms of the serial preferred shares, the Board is able to issue serial preferred shares with terms suitable to existing market conditions at the time of issuance or to meet the needs of a particular transaction.

The ability of the Board to issue serial preferred shares could enable it to render more difficult or discourage an attempt by another person or entity to obtain control of the Company. The serial preferred shares could be issued by the Board in a public or private sale, merger or similar transaction, increasing the number of outstanding shares and thereby diluting the equity interest and voting power, if the serial preferred shares were convertible into the Company’s common shares, of a party attempting to obtain control of the Company.

Certain provisions of the Articles of Incorporation, the Regulations and Ohio law, which are summarized in the following paragraphs, may have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a shareholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by shareholders.

Advance Notice of Nominations and Shareholder Proposals. The Regulations provide that only business properly brought before annual or special meetings will be considered at the meeting. For annual meetings, the shareholder must have (i) been a shareholder of record at the time notice was given for the annual meeting, (ii) been entitled to vote at the annual meeting, (iii) given timely notice in writing to the Company’s corporate secretary of the business or nominations for election of directors to be considered at the meeting and (iv) in the case of nominations of persons for election to the Board, complied in all respects with the requirements of Section 14 of the Exchange Act including, without limitation, the requirements of Rule 14a-19 (as such rules and regulations may be amended from time to time by the Securities and Exchange Commission (the “SEC”), including any SEC staff interpretations relating thereto).

The regulations require shareholders to provide notice of nominations of persons for election to the Board or other business no earlier than 120 days, nor later than 90 days, prior to the anniversary date of the prior year’s annual meeting (unless the annual meeting date is more than 30 days before or 60 days after the prior year’s annual meeting date, in which case the Regulations provide for alternative notice deadlines).

The shareholder’s notice must set forth certain information about the shareholder, including:

•    Whether the shareholder is acting in his or her own capacity or on behalf of another person or entity;

•    Any interests that the shareholder has that are not shared generally by other shareholders and that could have influenced that shareholder’s decision to bring the business before the meeting;

•    The number of shares beneficially owned by the shareholder;

•    Any options or derivative instruments owned by the shareholder that derive their value directly or indirectly by reference to the Company’s stock;

•    Any proxies or other arrangements pursuant to which the shareholder has a right to vote shares of the Company’s stock;

•    Any short interest held by the shareholder in the Company’s stock;

•    Any other interests held by the shareholder that are directly or indirectly tied to the value of the Company’s stock;

•    Any interests that the shareholder may have in any contract with the Company or with a principal competitor;

•    Any litigation between the shareholder and the Company or its affiliates; and

•    Any transactions during the past 12 months between the shareholder and the Company or a principal competitor.

The notice must also include information concerning the business to be brought before the meeting, including a brief description of the shareholder’s proposal, including the reasons for the proposal, any material interest that the shareholder has in the proposal, and any agreements or understandings between the shareholder and any other person concerning the proposal.

In the event that the shareholder is proposing a nominee for election as a director, the notice must include all information about that person that would be required to be included in a proxy statement under the SEC’s proxy rules and a description of all material monetary arrangements and other material relationships between the shareholder and the nominee. The notice must be accompanied by the nominee’s completed Director Questionnaire, and the nominee’s representation that he or she will comply with the Company’s policies applicable to directors and that he or she is not a party to any agreement as to how such person will vote on any matter presented to the Board that has not been disclosed to the Company or providing any compensation, expense reimbursement or indemnification arrangements that have not been disclosed to the Company.

In the case of a notice of nomination delivered pursuant to Rule 14a-19, the nominating shareholder’s notice must also include (i) a representation that such nominating shareholder or beneficial owner, if any, intends to solicit

the holders of common shares representing at least 67% of the voting power of the common shares entitled to vote on the election of directors in support of director nominees other than the Company’s nominees in accordance with Rule 14a-19 under the Exchange Act and (ii) any other information relating to the nominating shareholder or beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder.

Compliance with these provisions of the regulations will be the exclusive means for shareholders to make nominations or submit other business at the meeting (other than shareholder proposals submitted in conformity with Rule 14a-8 of the Exchange Act).

The Regulations also extend similar advance notice requirements to proposals made in connection with special meetings of shareholders.

In addition, the Regulations contain “proxy access” provisions, whereby a shareholder, or a group of up to 20 shareholders, owning at least three percent of the Company’s common shares continuously for at least three years, may nominate and include in the Company’s annual meeting proxy materials director nominees constituting up to the greater of (a) two directors or (b) twenty percent of the Board, subject to certain limitations and provided that the shareholders and nominees satisfy the requirements specified in the Regulations. To be timely, a Notice of Proxy Access Nomination must be delivered to or mailed and received at the Company’s principal executive offices not less than 120 days nor more than 150 days prior to the anniversary of the date that the Company first distributed its proxy statement to shareholders for the immediately preceding annual meeting of shareholders. The complete proxy access provisions for director nominations are set forth in the Regulations.

No Cumulative Voting. Holders of the Company’s common shares do not have cumulative voting rights.

Election of Board of Directors. The Articles of Incorporation provide that in an uncontested election of directors, a candidate will be elected as a director only if the votes cast for the candidate exceed the votes cast against the candidate. Abstentions will not be counted as votes cast for or against a candidate. If, however, the Board determines that the number of candidates exceeds the number of directors to be elected in that year, a plurality voting standard will apply and the candidates receiving the greatest number of votes will be elected.

Removal of Directors. The Company’s directors may be removed, without assigning any cause, by the affirmative vote of the holders of a majority of the Company’s voting power with respect to the election of directors.

The Articles of Incorporation provide for the opting out of Ohio’s control share acquisition law. The Company has, however, adopted similar provisions in the Articles of Incorporation requiring that notice and informational filings and special shareholder meetings and voting procedures must be followed prior to consummation of a proposed “control share acquisition.” In general a control share acquisition is the acquisition, directly or indirectly, by any person of the Company’s shares that when added to all other shares of the Company in respect of which that person, directly or indirectly, may exercise or direct the exercise of voting power as provided in the Articles of Incorporation, would entitle the person, immediately after the acquisition, directly or indirectly, to exercise or direct the exercise of the voting power in the election of directors of a number of the Company’s outstanding shares (as distinguished from the number of votes to which the holder of the shares is entitled) within any of the following ranges:

•    one-fifth or more but less than one-third of outstanding shares;

•    one-third or more but less than a majority of outstanding shares; and

•    a majority or more of outstanding shares.

Assuming compliance with the notice and information filings, the proposed control share acquisition may be made only if both of the following occur:

•    shareholders who hold shares entitling them to vote in the election of directors authorize the acquisition at a special meeting held for that purpose at which a quorum is present by an affirmative vote of a majority of the Company’s voting power in the election of directors represented at the meeting in person or by proxy and a majority of the portion of the voting power excluding the voting power of interested shares represented at the meeting in person or by proxy; and

•    the acquisition is consummated, in accordance with the terms authorized, not later than 360 days following shareholder authorization of the control share acquisition.

In general, “interested shares” means shares of which any of the following persons may exercise or direct the exercise of the Company’s voting power in the election of directors:

•    the acquiring person;

•    any officer elected by the Board, except shares beneficially owned by such officer for four years or more;

 

•    any employee who is also a director, except shares beneficially owned by such employee for four years or more;

•    any person that acquires shares during the period beginning with the first public disclosure of the proposed control share acquisition and ending with the record date established for the special meeting, if either of the following applies:

•    the aggregate consideration paid by such person, and any persons acting in concert therewith, exceeds $250,000; or

•    the number of shares acquired by such person, and any persons acting in concert therewith, exceeds one-half of one percent (1/2%) of the Company’s outstanding shares entitled to vote on the election of directors; and

•    any person who transfers shares after the record date for the special meeting, if accompanied by voting power in the form of a blank proxy, an agreement to vote as instructed by the transferee or otherwise.

The Company is subject to Chapter 1704 of the Ohio Revised Code, which generally prohibits certain business combinations and transactions with “interested shareholders” for a period of three years after (i) the interested shareholder acquired ten percent or more of the voting power of the corporation in the election of directors or (ii) at any time within the three years prior, such interested shareholder held ten percent of more of the voting power of the corporation in the election of directors, unless prior to the interested shareholder’s acquisition of ten percent or more of the corporation’s shares, the directors of the corporation approved the business combination or other transaction or the purchase of shares by the interested shareholder on the date the shareholder acquired ten percent or more of the corporation’s shares.

In general, subsequent to the three-year period, a transaction subject to Chapter 1704 may take place provided that at least one of the following is satisfied:

•    prior to the date the interested shareholder acquired ten percent or more of the corporation’s shares, the board of directors approved the purchase of shares by the interested shareholder;

•    the transaction is approved, at a meeting held for that purpose, by the affirmative vote of the holders of shares of the corporation entitling them to exercise at least two-thirds of the voting power of the corporation in the election of directors, or of such different proportion as the articles of incorporation may provide, provided that the transaction is also approved by the affirmative vote of the holders of at least a majority of the disinterested shares; or

•    the transaction results in shareholders, other than the interested shareholder, receiving a fair price (as described in Chapter 1704) plus interest for their shares.

In addition, the Articles of Incorporation provide that any business combination between the Company and any person that beneficially owns more than 30% of the Company’s shares entitled to vote in the election of directors (or at any time owned more than 30% of the Company’s shares entitled to vote in the election of directors) must be approved by the affirmative vote of 85% of all shares entitled to vote in the election of directors. The 85% voting requirement is not applicable if:

•    the cash, or fair market value of other consideration, to be received per share by the Company’s common shareholders in the business combination is at least an amount equal to the highest per share price paid by the other entity in acquiring any of its holdings of the Company’s common shares plus the aggregate amount, if any, by which 5% per annum of the per share price exceeds the aggregate amount of all dividends paid in cash, in each case since the date on which the other entity acquired the 30% interest;

 

•    after the other entity has acquired a 30% interest and prior to the consummation of the business combination, (1) the other entity has taken steps to ensure that the Board included at all times representation by continuing directors proportionate to the shareholdings of the public holders of the Company’s common shares not affiliated with the other entity (with a continuing director to occupy any resulting fractional board position), (2) the other entity has not acquired any newly issued shares,

directly or indirectly, from the Company (except upon conversion of convertible securities acquired by it prior to obtaining a 30% interest or as a result of a pro rata share dividend or share split) and (3) the other entity has not acquired any additional outstanding common shares or securities convertible into the Company’s common shares except as part of the transaction that resulted in the other entity’s acquiring its 30% interest;

•    the other entity has not (1) received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or tax credits provided by the Company or (2) made any major change in the Company’s business or equity capital structure without in either case the approval of at least a majority of all the directors and at least two-thirds of the continuing directors, in either case prior to the consummation of the business combination; and

•    a proxy statement responsive to the requirements of the Exchange Act has been mailed to the Company’s public shareholders for the purpose of soliciting shareholder approval of the business combination and contained at the front, in a prominent place, any recommendations as to the advisability (or inadvisability) of the business combination that the continuing directors, or any of them, may choose to state and, if deemed advisable by a majority of the continuing directors, an opinion of a reputable investment banking firm as to the fairness (or not) of the terms of the business combination, from the point of view of the Company’s remaining public shareholders (the investment banking firm to be selected by a majority of the continuing directors and to be paid a reasonable fee for their services by the Company upon receipt of the opinion).

Continuing directors are directors elected by shareholders prior to the time when such entity acquired more than 5% of the shares entitled to vote in the election of directors, or a person recommended to succeed a continuing director or by a majority of continuing directors.

The Ohio Revised Code requires approval of mergers, dissolutions, dispositions of all or substantially all of a corporation’s assets and majority share acquisitions and combinations involving issuance of shares representing one-sixth or more of the voting power of the corporation immediately after the consummation of the transaction (other than so-called “parent-subsidiary” mergers), by two-thirds of the voting power of a corporation, unless the articles of incorporation specify a different proportion (but not less than a majority). The Articles of Incorporation do not specify a voting power proportion different than that specified by Ohio law in connection with the approval of these transactions.

Ohio law permits the adoption of amendments to articles of incorporation if those amendments are approved at a meeting held for that purpose by the holders of shares entitling them to exercise two-thirds of the voting power of the corporation, or a lesser, but not less than a majority, or greater vote as specified in the articles of incorporation. The Articles of Incorporation specify that amendments relating to transactions with interested persons require the affirmative vote of the holders of 85% of the common shares entitled to vote in the election of directors, except that the 85% vote will not be required for any amendment to that provision recommended to the Company’s shareholders if the recommendation was approved by at least a majority of the Company’s directors and at least two-thirds of the Company’s continuing directors.

Ohio law permits adoption of amendments to regulations by an affirmative vote of the majority of shares entitled to vote or by written consent from holders of two-thirds of the shares entitled to vote or by written consent or vote of a greater or lesser proportion as provided in the articles of incorporation or regulations but not less than the majority of voting power. The Regulations may be amended by (1) the Board to the extent permitted by Ohio law or (2) the Company’s shareholders by the affirmative vote of a majority of the Company’s voting power at a meeting held for that purpose, or without a meeting by the affirmative written consent of two-thirds of the Company’s voting power.