§ 5005 — Transferable rights to purchase shares; imposition of restrictions or conditions thereon

§ 5005. Transferable rights to purchase shares; imposition of\nrestrictions or conditions thereon. 1. Except as otherwise provided in\nthis section or in the organization certificate, a corporation may\ncreate and issue, whether or not in connection with the issue and sale\nof any of its capital notes, debentures or shares, rights or options\nentitling the holders thereof to purchase from the corporation, upon\nsuch consideration, terms and conditions as may be fixed by the board,\nshares of any class or series, whether authorized but unissued shares,\ntreasury shares or shares to be purchased or acquired.\n 2. (a) In the case of a corporation that has a class of voting stock\nregistered pursuant to section twelve of the Exchange Act, the terms and\nconditions of such rights or options may include, without limitation,\nrestrictions or conditions that preclude or limit the exercise, transfer\nor receipt of such rights or options by an interested shareholder or any\ntransferee of any such interested shareholder or that invalidate or void\nsuch rights or options held by any such interested shareholder or any\nsuch transferee. For the purposes of this subdivision, the terms "voting\nstock", "Exchange Act" and "interested shareholder" shall have the same\nrespective meanings as are set forth in section nine hundred twelve of\nthe business corporation law except that for this purpose references in\nsaid section of the business corporation law to a "resident business\ncorporation" shall be read instead to refer to a "corporation" as\ndefined by section one thousand one of this chapter.\n (b) Determinations of the board of directors whether to impose,\nenforce or waive or otherwise render ineffective such limitations or\nconditions as are permitted by paragraph (a) of this subdivision shall\nbe subject to judicial review in an appropriate proceeding in which the\ncourts formulate or apply appropriate standards in order to insure that\nsuch limitations or conditions are imposed, enforced or waived in the\nbest long-term interests and short-term interests of the corporation and\nits stockholders considering, without limitation, the prospects for\npotential growth, development, productivity and profitability of the\ncorporation.\n 3. The consideration for shares to be purchased under any such right\nor option shall comply with the requirements of section five thousand\nfour of this chapter.\n 4. The terms and conditions of such rights or options, including the\ntime or times at or within which and the price or prices at which they\nmay be exercised and any limitations upon transferability, shall be set\nforth or incorporated by reference in the instrument or instruments\nevidencing such rights or options.\n 5. If there is shareholder approval for the issue of rights and\noptions, such approval may provide that the board is authorized by\ncertificate of amendment under section eight thousand five of this\nchapter to increase the authorized shares of any class or series to such\nnumber as will be sufficient, when added to the previously authorized\nbut unissued shares of such class or series, to satisfy any such rights\nor options entitling the holders thereof to purchase from the\ncorporation authorized but unissued shares of such class or series.\n 6. In the absence of fraud in the transaction, the judgment of the\nboard shall be conclusive as to the adequacy of the consideration,\ntangible or intangible, received or to be received by the corporation\nfor the issue of rights or options for the purchase from the corporation\nof its shares.\n 7. The provisions of this section are inapplicable to the rights of\nthe holders of convertible shares, capital notes or debentures to\nacquire shares upon the exercise of conversion privileges under section\nfive thousand sixteen of this chapter.\n 8. The provisions of this section are inapplicable to the rights of\nofficers, directors and employees of a corporation who have been issued\noptions to purchase authorized and unissued shares of its capital stock\nunder or by reference to section one hundred forty-a of this chapter.\n