Warrant FAQ

LGL's Board of Directors declared a warrant dividend to holders of record of LGL common stock as a means of distributing value to its stockholders.

The warrants were issued to LGL stockholders of record as 5:00 pm New York City Time, July 29, 2013.

The warrants were issued on August 6, 2013.

LGL common stock began trading ex-dividend on August 7, 2013, the first trading day following the issuance of the warrants.

The warrants trade on the NYSE MKT under the ticker symbol "LGL WS", although different financial information websites may use variants of this symbol.

The CUSIP number for these warrants is "50186A 116".

Stockholders received five (5) warrants for every share of LGL common stock owned on the Record Date of July 29, 2013. Twenty-five (25) warrants will enable the warrant holder to purchase one (1) share of LGL common stock at a price of $7.50 per share, subject to anti-dilution adjustment for certain events.

No, the warrants were issued as a dividend.

Yes. The warrants will expire on the five-year anniversary of issuance, or August 6, 2018. If August 6, 2018 is not a trading day for the NYSE MKT, the warrants will expire on the next trading day following August 6, 2018.

No. Holders of unexercised warrants are not entitled to any of the rights of LGL common stock, which includes the right to vote and to receive dividends. Future cash dividends, if any, will be paid on shares of LGL common stock outstanding on the record date set for any such dividend.

The initial exercise price for LGL common stock to be purchased in connection with these warrants is subject to anti-dilution adjustment for certain events, including:

• Stock dividends
• Stock splits or combinations
• Issuance of shares in connection with a consolidation or merger in which LGL is continuing corporation
• Issuance of rights, options, or warrants to all holders of common stock
• Distribution of debt instruments or assets to all holders of common stock
• Consummation of tender offer for more than 30% of LGL, or any of its wholly owned subsidiaries, outstanding common stock at a price that is above market price

A full description of the anti-dilutive adjustment provisions of the warrants is included in the warrant agreement.

The warrants began trading on the NYSE MKT on a "when issued" basis on or around July 31, 2013. LGL was advised by NYSE MKT that LGL common stock would trade with "due bills" attached from July 31, 2013 through date of issuance, and that the LGL warrants would begin trading separately from LGL common stock on the first trading day following the date of issuance. Due bills are essentially an assignment from a seller of common stock to a buyer of the right to receive the warrant dividend.

The warrants will not be certificated (not issued in paper form).

Direct registration holders should contact Computershare Investor Services, the warrant agent. Holders in street name should contact their broker, bank, or other intermediary.

Direct registration holders should contact Computershare Investor Services, the warrant agent. To exercise, you will be required to complete an exercise notice and provide payment to Computershare Investor Services by money order, certified check, or official back check in an amount equal to the exercise price multiplied by the number of warrants being exercised. Upon exercise, you will receive the whole number of shares of LGL common stock to which you are entitled. Holders in street name should contact their broker, bank, or other intermediary for information on how to exercise warrants.

The warrant agreement contains the complete terms and conditions of the warrants and is attached as an exhibit to LGL’s registration filing on Form 8-A, which was filed with the SEC on July 30, 2013. It is available on the SEC’s web site www.SEC.gov.

• By Telephone:
  Computershare Investor Services

   

  1-877-868-8027 (M-F 8 AM to 8 PM EST)

• By Mail:
  Computershare Investor Services

   

  P. O. Box 43078
  Providence, RI 02940-3078

• By Overnight Delivery:
  Computershare Investor Services

   

  250 Royall Street
  Canton, MA 02021

Yes. The warrants are "European-Style" warrants that are exercisable only at the earlier of (i) the expiration of the warrant term which is August 6, 2018, or (ii) immediately after the average volume weighted average price ("VWAP") of LGL common stock for 30 consecutive trading days is greater than or equal to $15.00.

No. The LGL common shares received from the exercise of LGL warrants may be traded immediately.

The LGL warrants were issued as a dividend proportionate to all outstanding shares of LGL common stock. As such, the warrant dividend would normally be a non-taxable distribution for U.S. tax payers.

The above information is presented here for information purposes only and is not intended to constitute tax advice for any individual stockholder or warrant holder or stockholder. Holders should consult their own tax advisors regarding the United States federal and other tax consequences of the distribution of the warrants.

No. This warrant dividend is a distribution of stock rights to holders of LGL common stock and does not qualify as a qualified dividend.

The general rules for allocating tax basis between common stock and rights (such as these warrants) received as a distribution require U.S. taxpayers to allocate the tax basis of their stock between the stock and the rights received. However, there is an exception to this general rule when the fair market value of the rights received is less than 15% of the value of the stock immediately prior to the distribution.

The LGL warrants were determined to have a fair market value of $0.16005 each, 5 of which represent 14.6% of the value of LGL common stock immediately after issuance. Therefore, under IRS Regulation 1.307-2, no allocation of basis between the warrants and the common stock is required.

If the warrant holder elects to allocate basis as provided under IRS Regulation 1.307-1, the allocation of basis of the common stock held prior to the issuance to the warrants received should be 12.7% of basis to the warrants and 87.3% to the common stock.

A copy of IRS Form 8937 – Report of Organizational Actions Affecting Basis of Securities is attached for your reference.

The fair market value of the warrants is based upon the trading value of the warrants as separate from the common stock on the first day of trading.

The fair market value ("FMV") of the warrants of $0.1601 each is the average of the highest ($0.2200) and lowest ($0.1001) price at which the warrants were purchased during market trading on August 7, 2013, the first trading date following the issuance of the warrants. The FMV of the common stock of $5.500 per share is the average of the highest ($5.970) and lowest ($5.030) price at which the common stock was purchased and sold during market trading on the same date, August 7, 2013.

5 warrants were issued per share of common stock, therefore 5 warrants multiplied by $0.1601 = $0.8005. The FMV of warrants of $0.8005 divided by the FMV of common stock of $5.500 = 14.6%.

A copy of IRS Form 8937 – Report of Organizational Actions Affecting Basis of Securities is attached for your reference.

As discussed above, the LGL warrants were determined to have a fair market value of $0.16005 each, 5 of which represent 14.6% of the value of LGL common stock immediately after issuance. Therefore, under IRS Regulation 1.307-2, no allocation of basis between the warrants and the common stock is required.

A copy of IRS Form 8937 – Report of Organizational Actions Affecting Basis of Securities is attached for your reference.

Generally, if you purchased your LGL common stock after the record date with a due bill attached, your tax basis in the warrants is the fair market value of the warrants at the time that you purchased the common stock.