BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS A. Notwithstanding any other provisions of this title, a corporation shall not engage in any business combination with any interested shareholder for a period of three (3) years following the time that the person became an interested shareholder, unless: 1. Prior to that time, the board of directors of the corporation approved either the business combination or the transaction which resulted in the person becoming an interested shareholder; 2. Upon consummation of the transaction which resulted in the person becoming an interested shareholder, the interested shareholder owned at least eighty-five percent (85%) of the outstanding voting stock of the corporation at the time the transaction commenced, excluding for purposes of determining the outstanding voting stock, but not the outstanding voting stock owned by the interested shareholder, those shares owned by: a. persons who are directors and also officers, and b. employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or 3. At or subsequent to such time, the business combination is approved by the board of directors and authorized at an annual or special meeting of shareholders, and not by written consent, by the affirmative vote of at least two-thirds (2/3) of the outstanding voting stock which is not owned by the interested shareholder. B. The restrictions contained in this section shall not apply if: 1. The corporation’s original certificate of incorporation contains a provision expressly electing not to be governed by this section; 2. The corporation, by action of its board of directors, adopted an amendment to its bylaws by November 30, 1991, expressly electing not to be governed by this section, which amendment shall not be further amended by the board of directors; 3. a. The corporation, with the approval of its shareholders, adopts an amendment to its certificate of incorporation or bylaws expressly electing not to be governed by this section; provided that, in addition to any other vote required by law, an amendment to the certificate of incorporation or bylaws must be adopted by the affirmative vote of a majority of the outstanding voting stock of the corporation. b. In the case of a corporation that both: (1) has never had a class of voting stock that falls within any of the two categories set out in paragraph 4 of this subsection, and (2) has not elected by a provision in its original certificate of incorporation or any amendment thereto to be governed by this section, such amendment shall become effective upon (i) in the case of an amendment to the certificate of incorporation, the date and time at which the certificate filed in accordance with Section 1007 of this title becomes effective, or (ii) in the case of an amendment to the bylaws, the date of the adoption of such amendment. c. In all other cases, an amendment adopted pursuant to this paragraph shall become effective (i) in the case of an amendment to the certificate of incorporation, twelve (12) months after the date and time at which the certificate filed in accordance with Section 1007 of this title becomes effective, or (ii) in the case of an amendment to the bylaws, twelve (12) months after the date of the adoption of such amendment, and in either case, the election not to be governed by this section shall not apply to any business combination between a corporation and any person who became an interested shareholder of the corporation on or before (i) in the case of an amendment to the certificate of incorporation, the date and time at which the certificate filed in accordance with Section 1007 of this title becomes effective, or (ii) in the case of an amendment to the bylaws, the date of the adoption of such amendment. A bylaw amendment adopted pursuant to this paragraph shall not be further amended by the board of directors; 4. The corporation does not have a class of voting stock that is: a. listed on a national securities exchange, or b. held of record by one thousand or more shareholders, unless any of the foregoing results from action taken, directly or indirectly, by an interested shareholder or from a transaction in which a person becomes an interested shareholder; 5. A person becomes an interested shareholder inadvertently and: a. as soon as practicable divests itself of ownership of sufficient shares so that the person ceases to be an interested shareholder, and b. would not, at any time within the three-year period immediately prior to a business combination between the corporation and the person, have been an interested shareholder but for the inadvertent acquisition; 6. a. The business combination is proposed prior to the consummation or abandonment of, and subsequent to the earlier of the public announcement or the notice required hereunder of, a proposed transaction which: (1) constitutes one of the transactions described in subparagraph b of this paragraph, (2) is with or by a person who: (a) was not an interested shareholder during the previous three (3) years, or (b) became an interested shareholder with the approval of the corporation’s board of directors or during the period described in paragraph 7 of this subsection, and (3) is approved or not opposed by a majority of the members of the board of directors then in office, but not less than one, who were directors prior to any person becoming an interested shareholder during the previous three (3) years or were recommended for election or elected to succeed the directors by a majority of the directors. b. The proposed transactions referred to in subparagraph a of this paragraph are limited to: (1) a share acquisition pursuant to Section 1090.1 of this title, or a merger or consolidation of the corporation, except for a merger in respect of which, pursuant to subsection F or G of Section 1081 of this title, no vote of the shareholders of the corporation is required, (2) a sale, lease, exchange, mortgage, pledge, transfer, or other disposition, in one transaction or a series of transactions, whether as part of a dissolution or otherwise, of assets of the corporation or of any direct or indirect majority-owned subsidiary of the corporation, other than to any direct or indirect wholly owned subsidiary or to the corporation, having an aggregate market value equal to fifty percent (50%) or more of either the aggregate market value of all of the assets of the corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of the corporation, or (3) a proposed tender or exchange offer for outstanding stock of the corporation which represents fifty percent (50%) or more of the outstanding voting stock of the corporation. The corporation shall give not less than twenty (20) days’ notice to all interested shareholders prior to the consummation of any of the transactions described in divisions (1) or (2) of this subparagraph; or 7. The business combination is with an interested shareholder who became an interested shareholder at a time when the restriction contained in this section did not apply by reason of any of paragraphs 1 through 4 of this subsection; provided, however, that this paragraph shall not apply if, at the time the interested shareholder became an interested shareholder, the corporation’s certificate of incorporation contained a provision authorized by subsection C of this section. C. Notwithstanding paragraphs 1, 2, 3 and 4 of subsection B of this section, a corporation may elect by a provision of its original certificate of incorporation or any amendment thereto to be governed by this section; provided, that any amendment to the certificate of incorporation shall not apply to restrict a business combination between the corporation and an interested shareholder of the corporation if the interested shareholder became an interested shareholder before the date and time at which the certificate filed in accordance with Section 1007 of this title becomes effective. D. As used in this section: 1. “Affiliate” means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another person; 2. “Associate”, when used to indicate a relationship with any person, means: a. any corporation, partnership, unincorporated association, or other entity of which the person is a director, officer, or partner or is the owner of twenty percent (20%) or more of any class of voting stock, b. any trust or other estate in which the person has at least a twenty-percent beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity, and c. any relative or spouse of the person, or any relative of the spouse, who has the same residence as the person; 3. “Business combination”, when used in reference to any corporation and any interested shareholder of the corporation, means: a. any merger or consolidation of the corporation or any direct or indirect majority-owned subsidiary of the corporation with: (1) the interested shareholder, or (2) any other corporation, partnership, unincorporated association, or other entity if the merger or consolidation is caused by the interested shareholder and, as a result of the merger or consolidation subsection A of this section is not applicable to the surviving entity, b. any sale, lease, exchange, mortgage, pledge, transfer, or other disposition, in one transaction or a series of transactions, except proportionately as a shareholder of the corporation, to or with the interested shareholder, whether as part of a dissolution or otherwise, of assets of the corporation or of any direct or indirect majority-owned subsidiary of the corporation which assets have an aggregate market value equal to ten percent (10%) or more of either the aggregate market value of all the assets of the corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of the corporation, c. any transaction which results in the issuance or transfer by the corporation or by any direct or indirect majority-owned subsidiary of the corporation of any stock of the corporation or of the subsidiary to the interested shareholder, except: (1) pursuant to the exercise, exchange, or conversion of securities exercisable for, exchangeable for, or convertible into stock of the corporation or any subsidiary which securities were outstanding prior to the time that the interested shareholder became an interested shareholder, (2) pursuant to a merger under subsection G of Section 1081 of this title, (3) pursuant to a dividend or distribution paid or made, or the exercise, exchange, or conversion of securities exercisable for, exchangeable for, or convertible into stock of the corporation or any subsidiary which security is distributed, pro rata, to all holders of a class or series of stock of the corporation subsequent to the time the interested shareholder became an interested shareholder, (4) pursuant to an exchange offer by the corporation to purchase stock made on the same terms to all holders of the stock, or (5) any issuance or transfer of stock by the corporation; provided, however, that in no case under divisions (3) through (5) of this subparagraph shall there be an increase in the interested shareholder’s proportionate share of the stock of any class or series of the corporation or of the voting stock of the corporation, d. any transaction involving the corporation or any direct or indirect majority-owned subsidiary of the corporation which has the effect, directly or indirectly, of increasing the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, or the outstanding voting stock, of the corporation or of any subsidiary which is owned by the interested shareholder, except as a result of immaterial changes due to fractional share adjustments or as a result of any purchase or redemption of any shares of stock not caused, directly or indirectly, by the interested shareholder, e. any receipt by the interested shareholder of the benefit, directly or indirectly, except proportionately as a shareholder of the corporation, of any loans, advances, guarantees, pledges, or other financial benefits, other than those expressly permitted in subparagraphs a through d of this paragraph, provided by or through the corporation or any direct or indirect majority-owned subsidiary, or f. any share acquisition by the interested shareholder from the corporation or any direct or indirect majority-owned subsidiary of the corporation pursuant to Section 1090.1 of this title; 4. “Control” including the terms “controlling”, “controlled by” and “under common control with”, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting stock, by contract, or otherwise. A person who is the owner of twenty percent (20%) or more of the outstanding voting stock of any corporation, partnership, unincorporated association or other entity shall be presumed to have control of the entity, in the absence of proof by a preponderance of the evidence to the contrary. Notwithstanding the foregoing, a presumption of control shall not apply where the person holds stock, in good faith and not for the purpose of circumventing this section, as an agent, bank, broker, nominee, custodian, or trustee for one or more owners who do not individually or as a group have control of the entity; 5. a. “Interested shareholder” means: (1) any person, other than the corporation and any direct or indirect majority-owned subsidiary of the corporation, that: (a) is the owner of fifteen percent (15%) or more of the outstanding voting stock of the corporation, or (b) is an affiliate or associate of the corporation and was the owner of fifteen percent (15%) or more of the outstanding voting stock of the corporation at any time within the three-year period immediately prior to the date on which it is sought to be determined whether the person is an interested shareholder, and (2) the affiliates and associates of the person. b. “Interested shareholder” shall not mean: (1) any person who: (a) owned shares in excess of the fifteen percent (15%) limitation set forth herein as of, or acquired such shares pursuant to a tender offer commenced prior to, September 1, 1991, or pursuant to an exchange offer announced prior to September 1, 1991, and commenced within ninety (90) days thereafter and either: i. continued to own shares in excess of the fifteen percent (15%) limitation or would have but for action by the corporation, or ii. is an affiliate or associate of the corporation and so continued, or so would have continued but for action by the corporation, to be the owner of fifteen percent (15%) or more of the outstanding voting stock of the corporation at any time within the three-year period immediately prior to the date on which it is sought to be determined whether the person is an interested shareholder, or (b) acquired the shares from a person described in subdivision (a) of this division by gift, inheritance, or in a transaction in which no consideration was exchanged, or (2) any person whose ownership of shares in excess of the fifteen percent (15%) limitation set forth herein is the result of action taken solely by the corporation; provided, that the person shall be an interested shareholder if thereafter the person acquires additional shares of voting stock of the corporation, except as a result of further corporate action not caused, directly or indirectly, by the person. c. For the purpose of determining whether a person is an interested shareholder, the stock of the corporation deemed to be outstanding shall include stock deemed to be owned by the person through application of paragraph 9 of this subsection, but shall not include any other unissued stock of the corporation which may be issuable pursuant to any agreement, arrangement, or understanding, or upon exercise of conversion rights, warrants, or options, or otherwise; 6. “Person” means any individual, corporation, partnership, unincorporated association, any other entity, any group and any member of a group; 7. “Stock” means, with respect to any corporation, capital stock and, with respect to any other entity, any equity interest; 8. “Voting stock” means, with respect to any corporation, stock of any class or series entitled to vote generally in the election of directors and, with respect to any entity that is not a corporation, any equity interest entitled to vote generally in the election of the governing body of the entity. Every reference to a percentage of voting stock refers to the percentage of the votes of the voting stock; and 9. “Owner” including the terms “own” and “owned”, when used with respect to any stock, means a person who individually or with or through any of its affiliates or associates: a. beneficially owns the stock, directly or indirectly, or b. has: (1) the right to acquire the stock, whether the right is exercisable immediately or only after the passage of time, pursuant to any agreement, arrangement, or understanding, or upon the exercise of conversion rights, exchange rights, warrants, or options, or otherwise; provided, however, that a person shall not be deemed the owner of stock tendered pursuant to a tender or exchange offer made by the person or any of the person’s affiliates or associates until the tendered stock is accepted for purchase or exchange, or (2) the right to vote the stock pursuant to any agreement, arrangement or understanding; provided, however, that a person shall not be deemed the owner of any stock because of the person’s right to vote the stock if the agreement, arrangement or understanding to vote the stock arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to ten or more persons, or c. has any agreement, arrangement or understanding for the purpose of acquiring, holding or voting, except voting pursuant to a revocable proxy or consent as described in division (2) of subparagraph b of this paragraph, or disposing of the stock with any other person that beneficially owns, or whose affiliates or associates beneficially own, directly or indirectly, the stock. E. No provisions of a certificate of incorporation or bylaw shall require, for any vote of shareholders required by this section, a greater vote of shareholders than that specified in this section. Added by Laws 1991, c. 53, § 2, eff. Sept. 1, 1991. Amended by Laws 1998, c. 422, § 20, eff. Nov. 1, 1998; Laws 1999, c. 421, § 17, eff. Nov. 1, 1999; Laws 2001, c. 405, § 25, eff. Nov. 1, 2001; Laws 2004, c. 255, § 27, eff. Nov. 1, 2004; Laws 2017, c. 323, § 25, eff. Nov. 1, 2017; Laws 2021, c. 51, § 14, eff. Nov. 1, 2021.
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