§ 490.1110 — Business combinations with interested shareholders

Iowa § 490.1110

• Jurisdiction: Iowa
• Title XII: BUSINESS ENTITIES
• Ch. 490: BUSINESS CORPORATIONS

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1. Notwithstanding any other provision of this chapter, a corporation shall not engage in
anybusinesscombinationwithaninterestedshareholderforaperiodofthreeyearsfollowing
the time that the shareholder became an interested shareholder, unless any of the following
apply:
a. Prior to the time the shareholder became an interested shareholder, the board of
directors of the corporation approved either the business combination or the transaction
which resulted in the shareholder becoming an interested shareholder.
b. Upon consummation of the transaction which resulted in the shareholder becoming
an interested shareholder, the interested shareholder owned at least eighty-five percent of
the voting stock of the corporation outstanding at the time the transaction commenced,
excluding, for purposes of determining the number of shares outstanding, those shares
owned by persons who are directors and officers, and by 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.
c. At or subsequent to the time the shareholder became an interested shareholder, the
business combination is approved by the board of directors and authorized at an annual or
special meeting of shareholders by the affirmative vote of at least sixty-six and two-thirds
percent of the outstanding voting stock which is not owned by the interested shareholder.
Such approval shall not be by written consent.
2. a. This section does not apply in any of the following circumstances:
(1) The corporation does not have a class of voting stock that is listed on a national
securities exchange, authorized for quotation on the national association of securities
dealers automated quotations – national market system, or held of record by more than two
thousand 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.
(2) The corporation’s original articles of incorporation contain a provision expressly
electing not to be governed by this section.
(3) Thecorporation, byactionofitsboardofdirectors, adoptsanamendmenttoitsbylaws
by no later than September 29, 1997, expressly electing not to be governed by this section,
which amendment shall not be further amended by the board of directors.
(4) (a) The corporation, by action of its shareholders, adopts an amendment to its articles
ofincorporationorbylawsexpresslyelectingnottobegovernedbythissection,providedthat,
in addition to any other vote required by law, such amendment to the articles of incorporation
or bylaws must be approved by the affirmative vote of a majority of the shares entitled to
vote. An amendment adopted pursuant to this subparagraph is effective immediately in the
case of a corporation that has never had a class of voting stock that falls within any of the
three categories set out in subparagraph (1) and has not elected by a provision in its original
articles of incorporation or any amendment to such articles to be governed by this section.
In all other cases, an amendment adopted pursuant to this subparagraph is not effective
until twelve months after the adoption of the amendment and does not apply to any business

combination between the corporation and any person who became an interested shareholder
of the corporation on or prior to such adoption.
(b) An amendment to the bylaws adopted pursuant to this subparagraph shall not be
further amended by the board of directors.
(5) A shareholder becomes an interested shareholder inadvertently and both of the
following apply:
(a) As soon as practicable the shareholder divests itself of ownership of sufficient shares
so that the shareholder ceases to be an interested shareholder.
(b) The shareholder would not, at any time within the three-year period immediately
prior to a business combination between the corporation and such shareholder, have been
an interested shareholder but for the inadvertent acquisition of ownership.
(6) (a) Thebusinesscombinationisproposedpriortotheconsummationorabandonment
of and subsequent to the earlier of the public announcement or the notice required in this
subparagraph of a proposed transaction which satisfies all of the following:
(i) Constitutes a transaction described in subparagraph division (b).
(ii) Iswithorbyapersonwhoeitherwasnotaninterestedshareholderduringtheprevious
three years or who became an interested shareholder with the approval of the corporation’s
board of directors or who became an interested shareholder during the time period described
in subparagraph (7).
(iii) Is approved or not opposed by a majority of the members of the board of directors
then in office who were directors prior to any person becoming an interested shareholder
during the previous three years, or who were recommended for election or elected to succeed
such directors by a majority of such directors.
(b) A proposed transaction under subparagraph division (a) is limited to the following:
(i) A merger of the corporation, other than a merger pursuant to section 490.1105.
(ii) A sale, lease, exchange, mortgage, pledge, transfer, or other disposition, in one
or more transactions and 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 a direct or indirect wholly owned subsidiary of the corporation or to the corporation
itself, which has an aggregate market value equal to fifty percent 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.
(iii) A proposed tender or exchange offer for fifty percent or more of the outstanding
voting stock of the corporation.
(c) The corporation shall give no less than twenty days’ notice to all interested
shareholderspriortotheconsummationofanyofthetransactionsdescribedinsubparagraph
division (b), subparagraph subdivision (i) or (ii).
(7) The business combination is with an interested shareholder who becomes an
interested shareholder of the corporation at a time when the corporation is not subject to
this section pursuant to subparagraph (1), (2), (3), or (4).
b. Notwithstandingparagraph“a”,subparagraphs(1)through(4),acorporationmayelect
under its original articles of incorporation or any amendment to such articles to be subject
to this section. However, such amendment shall not apply to restrict a business combination
between the corporation and an interested shareholder of the corporation if the interested
shareholder became such prior to the effective date of the amendment.
3. As used in this section, unless the context otherwise requires:
a. “Affiliate” means a person that directly, or indirectly, through one or more
intermediaries,controls,oriscontrolledby,orisundercommoncontrolwith,anotherperson.
b. “Associate”, when used to indicate a relationship with a person, means any of the
following:
(1) A corporation, partnership, unincorporated association, or other entity of which the
person is a director, officer, or partner or is, directly or indirectly, the owner of twenty percent
or more of any class of voting stock.
(2) A 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.

(3) A relative or spouse of the person, or any relative of the spouse, who has the same
residence as the person.
c. “Business combination”, with respect to a corporation and an interested shareholder of
such corporation, means any of the following:
(1) A merger or consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with the interested shareholder, or with 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 such merger the surviving entity is
not subject to subsection 1.
(2) A sales, lease, exchange, mortgage, pledge, transfer, or other disposition, in one
transaction or a series of transactions, except proportionately as a shareholder of such
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 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.
(3) A transaction which results in the issuance or transfer by the corporation or by any
directorindirectmajority-ownedsubsidiaryofthecorporationofanystockofthecorporation
or of such subsidiary to the interested shareholder, except for the following:
(a) Pursuant to the exercise, exchange, or conversion of securities exercisable for,
exchangeable for, or convertible into stock of the corporation or such subsidiary which
securities were outstanding prior to the time that the interested shareholder became an
interested shareholder.
(b) Pursuant to a merger under section 490.1105.
(c) Pursuant to a distribution paid or made, or the exercise, exchange, or conversion of
securities exercisable for, exchangeable for, or convertible into stock of such corporation or
any such subsidiary, which stock 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.
(d) Pursuant to an exchange offer by the corporation to purchase stock made on the same
terms to all holders of the stock.
(e) Any issuance or transfer of stock by the corporation, provided, however, that in no
case under subparagraph divisions (c) and (d) and this subparagraph division 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.
(4) A 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, of the corporation or of any such 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.
(5) The receipt by the interested shareholder of the benefit, directly or indirectly, except
proportionately as a shareholder of such corporation, of any loans, advances, guarantees,
pledges,orotherfinancialbenefits,otherthanthoseexpresslypermittedinsubparagraphs(1)
through (4), provided by or through the corporation or any direct or indirect majority-owned
subsidiary.
d. “Control”, including the terms “controlling”, “controlled by”, and “under common
control with”, means the ability, directly or indirectly, 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 or more of the
outstanding voting stock of any corporation, partnership, unincorporated association,
or other entity is presumed to have control of such entity, in the absence of proof by
a preponderance of the evidence to the contrary. Notwithstanding this paragraph, a
presumption of control shall not apply where a person holds voting 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 such entity.
e. “Interested shareholder” means any person, other than the corporation and any direct
or indirect majority-owned subsidiary of the corporation, that is the owner of ten percent or
more of the outstanding voting stock of the corporation, or is an affiliate or associate of the
corporation and was the owner of ten percent 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 such person is an interested shareholder, and the
affiliates and associates of such person. “Interested shareholder” does not include a person
whose ownership of shares in excess of the ten percent limitation is the result of action
taken solely by the corporation, provided that such person is an interested shareholder
if, after such action by the corporation, the person acquires additional shares of voting
stock of the corporation, other than as a result of further corporate action not caused,
directly or indirectly, by such person. For purposes of determining whether a person is an
interested shareholder, the outstanding voting stock of the corporation does 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.
f. “Owner”, including the terms “own” and “owned” when used with respect to any
stock, means a person that individually or with or through any of such person’s affiliates or
associates satisfies any of the following:
(1) Beneficially owns such stock, directly or indirectly.
(2) Has the right to do either of the following:
(a) Acquire such stock, whether such 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. However,
a person is not deemed the owner of stock tendered pursuant to a tender or exchange offer
made by such person or any of such person’s affiliates or associates until such tendered stock
is accepted for purchase or exchange.
(b) Votesuchstockpursuanttoanyagreement,arrangement,orunderstanding. However,
a person is not deemed the owner of any stock because of such person’s right to vote such
stock if the agreement, arrangement, or understanding to vote such stock arises solely from
the revocable proxy or consent given in response to a proxy or consent solicitation made to
ten or more persons.
(3) Has any agreement, arrangement, or understanding for the purpose of acquiring,
holding, voting, or disposing of such stock with any other person who beneficially owns, or
whose affiliates or associates beneficially own, directly or indirectly, such stock. However,
an agreement, arrangement, or understanding for the purpose of voting such stock does
not include voting pursuant to a revocable proxy or consent under subparagraph (2),
subparagraph division (b).
g. “Person” means any individual, corporation, partnership, unincorporated association,
or other entity.
h. “Stock” means, with respect to any corporation, capital stock and, with respect to any
other entity, any equity interest.
i. “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 such entity.
4. The articles of incorporation or bylaws shall not require, for any vote of shareholders
required by this section, a greater vote of shareholders than that specified in this section.