Ala. Code § 10A-2A-8.60: Interested Directors; Quorum.

(a) As used in this chapter, unless otherwise specified or unless the context otherwise requires, the following terms shall mean:

(1) CONFLICTING INTEREST TRANSACTION means an act or transaction effected or proposed to be effected by the corporation (or by an entity controlled by the corporation):

(i) to which, at the relevant time, a director or officer is a party;

(ii) respecting which, at the relevant time, the director or officer had knowledge and a material financial interest known to the director or officer; or

(iii) respecting which, at the relevant time, the director or officer knew that a related person was a party or had a material financial interest.

(2) CONTROL or CONTROLLED BY means (i) having the power, directly or indirectly, to elect or remove a majority of the members of the board of directors or other governing authority of an entity, whether through the ownership of voting shares or interests, by contract, or otherwise or (ii) being subject to a majority of the risk of loss from the entity’s activities or entitled to receive a majority of the entity’s residual returns.

(3) CONTROL GROUP means two or more persons that are not controlling stockholders that, by virtue of an agreement, arrangement, or understanding between or among those persons, constitute a controlling stockholder.

(4) CONTROLLING STOCKHOLDER means any person that, together with (i) any related person and (ii) any person that controls, is controlled by, or is under common control with that person:

(A) owns or controls a majority in voting power of the outstanding stock of the corporation entitled to vote generally in the election of directors or in the election of directors who have a majority in voting power of the votes of all directors on the board of directors;

(B) has the right, by contract or otherwise, to cause the election of nominees who are selected at the discretion of that person and who constitute either a majority of the members of the board of directors or directors entitled to cast a majority in voting power of the votes of all directors on the board of directors;

(C) has the power functionally equivalent to that of a stockholder that owns or controls a majority in voting power of the outstanding stock of the corporation entitled to vote generally in the election of directors by virtue of ownership or control of at least one-third in voting power of the outstanding stock of the corporation entitled to vote generally in the election of directors or in the election of directors who have a majority in voting power of the votes of all directors on the board of directors and the power to exercise managerial authority over the business and affairs of the corporation; or

(D) owns or controls a majority in voting power of the outstanding stock of the corporation entitled to vote generally when the board of directors has been eliminated under Section 10A-2A-7.32.

(5) CONTROLLING STOCKHOLDER TRANSACTION means an act or transaction between the corporation or one or more of its subsidiaries, on the one hand, and a controlling stockholder or a control group, on the other hand, or an act or transaction from which a controlling stockholder or a control group receives a material financial or other benefit not shared with the corporation’s stockholders generally; provided that a merger under Section 10A-2A-11.05 is not a controlling stockholder transaction.

(6) DISINTERESTED STOCKHOLDER means any stockholder that does not have a material financial interest in the act or transaction at issue or, if applicable, a material relationship with the controlling stockholder or other member of the control group, or any other person that has a material financial interest in the act or transaction.

(7) FAIR TO THE CORPORATION means the act or transaction at issue, as a whole, is beneficial to the corporation or its stockholders in their capacity as stockholders, given the consideration paid to or received by the corporation or its stockholders or other benefit conferred on the corporation or its stockholders and taking into appropriate account whether the act or transaction meets both of the following: (i) it is fair in terms of the director’s, officer’s, controlling stockholder’s, or control group’s dealings with the corporation, as the case may be; and (ii) it is comparable to what might have been obtainable in an arm’s length transaction available to the corporation.

(8) GOING PRIVATE TRANSACTION means, other than a merger under Section 10A-2A-11.05:

(i) for a corporation with a class of equity securities subject to Section 12(g) or Section 15(d) of the Securities Exchange Act of 1934 [15 U.S.C. § 78l(g) or § 78o(d)] or listed on a national securities exchange, a “Rule 13e-3 transaction” (as defined in 17 CFR § 240.13e-3(a)(3) or any successor provision); and

(ii) for any other corporation to which subsection (a)(8)(i) does not apply, a transaction that (A) is a controlling stockholder transaction, including a merger, recapitalization, stock purchase, amendment to the certificate of incorporation, tender or exchange offer, stock exchange, or conversion and (B) pursuant to which all or substantially all of the shares of the corporation’s capital stock held by the disinterested stockholders (but not those of the controlling stockholder or control group) are cancelled, converted, purchased, or otherwise acquired or cease to be outstanding in exchange for cash or property other than the stock or an eligible interest in the surviving organization.

(9) MATERIAL FINANCIAL INTEREST means a nonspeculative financial interest in an act or transaction, other than one that would devolve on the corporation or the stockholders generally, that (i) in the case of a director or officer, would reasonably be expected to impair the objectivity of the director’s or officer’s judgment when participating in the negotiation, authorization, or approval of the act or transaction at issue or (ii) in the case of a stockholder or any other person (other than a director or officer), would be material to such stockholder or such other person.

(10) MATERIAL RELATIONSHIP has the meaning set forth in Section 10A-2A-1.43.

(11) QUALIFIED DIRECTOR has the meaning set forth in Section 10A-2A-1.43.

(12) RELATED PERSON has the meaning set forth in Section 10A-2A-2.02.

(13) RELEVANT TIME means (i) the time at which a directors’ action respecting the act or transaction is taken in compliance with subsection (c) or (ii) if the act or transaction is not brought before the board of directors (or a committee thereof) for action under subsection (c), at the time the corporation (or an entity controlled by the corporation) becomes legally obligated to consummate the act or transaction.

(14) REQUIRED DISCLOSURE means disclosure of (i) the existence and nature of the director’s or officer’s conflicting interest and (ii) all facts known to the director or officer respecting the subject matter of the act or transaction that a qualified director would reasonably believe to be material in deciding whether to proceed with the act or transaction.

(b)(1) An act or transaction effected or proposed to be effected by a corporation (or by an entity controlled by the corporation) may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against a director or officer of the corporation, on the grounds that the director or officer has an interest respecting the act or transaction, if the act or transaction is not a conflicting interest transaction.

(2) Except for a controlling stockholder transaction under subsection (e), a conflicting interest transaction may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against a director or officer of the corporation, in a proceeding by a stockholder or by or in the right of the corporation, on the grounds that the director or officer has an interest respecting the conflicting interest transaction, if:

(i) the directors’ action respecting the act or transaction was taken in compliance with subsection (c) at any time; or

(ii) the stockholders’ action respecting the act or transaction was taken in compliance with subsection (d) at any time; or

(iii) the act or transaction is at the relevant time fair to the corporation.

(c)(1) Directors’ action respecting a conflicting interest transaction is effective for purposes of subsection (b)(2)(i) if the conflicting interest transaction has been authorized, after required disclosure by the conflicted director or officer of information not already known by the qualified directors, or after modified disclosure in compliance with subsection (c)(2), by (A) the affirmative vote of a majority (but no fewer than two) of the qualified directors who voted on the conflicting interest transaction or (B) the affirmative vote of a majority of the members of a board committee that is composed of only qualified directors (but no fewer than two). Directors’ action respecting a conflicting interest transaction is effective even though the conflicted director or officer is present at or participates in the meeting of the board or committee which authorizes the act or transaction or was involved in the initiation, negotiation, or approval of the act or transaction.

(2) Notwithstanding subsection (c)(1), when a transaction is a conflicting interest transaction only because a related person described in clause (v) or (vi) of the definition of “related person” in Section 10A-2A-2.02 is a party to or has a material financial interest in the conflicting interest transaction, the conflicted director or officer is not obligated to make required disclosure to the extent that the director or officer reasonably believes that doing so would violate a duty imposed under law, a legally enforceable obligation of confidentiality, or a professional ethics rule, provided that the conflicted director or officer discloses to the qualified directors voting on the conflicting interest transaction:

(i) all information required to be disclosed that is not so violative;

(ii) the existence and nature of the director’s or officer’s conflicting interest; and

(iii) the nature of the conflicted director’s or officer’s duty not to disclose the confidential information.

(3) A majority (but no fewer than two) of all the qualified directors on the board of directors, or on the board committee, constitutes a quorum for purposes of action that complies with this section.

(4) Where directors’ action under this subsection (c) does not satisfy a quorum or voting requirement applicable to the authorization of the conflicting interest transaction by reason of the certificate of incorporation, the bylaws, or another provision of this chapter, independent action to satisfy those authorization requirements shall be taken by the board of directors or a board committee, in which action directors who are not qualified directors may participate.

(5) Where directors’ action under this subsection (c) is taken without a meeting in accordance with Section 10A-2A-8.21, the action is effective even though a conflicted director signs a consent to that action.

(d)(1) Stockholders’ action respecting a conflicting interest transaction is effective for purposes of subsection (b)(2)(ii) if a majority of the votes cast by the holders of all qualified shares are in favor of the conflicting interest transaction after (i) notice to stockholders describing the action to be taken respecting the conflicting interest transaction, (ii) provision to the corporation of the information referred to in subsection (d)(2), and (iii) communication to the stockholders entitled to vote on the conflicting interest transaction of the information that is the subject of required disclosure, to the extent the information is not already known by them. In the case of stockholders’ action at a meeting, the stockholders entitled to vote shall be determined as of the record date for notice of the meeting.

(2) A director or officer who has a conflicting interest respecting the conflicting interest transaction shall, before the stockholders’ vote, inform the secretary or other officer or agent of the corporation authorized to tabulate votes, in writing, of the number of shares that the director or officer knows are not qualified shares under subsection (c), and the identity of the holders of those shares.

(3) For purposes of this section: (i) “holder” means and “held by” refers to shares held by a record stockholder, a beneficial stockholder, and an unrestricted voting trust beneficial owner and (ii) “qualified shares” means all shares entitled to be voted with respect to the conflicting interest transaction except for shares that the secretary or other officer or agent of the corporation authorized to tabulate votes either knows, or under subsection (b) is notified, are held by (A) a director or officer who has a conflicting interest respecting the conflicting interest transaction or (B) a related person of the director or officer (excluding a person described in clause (vi) of the definition of a related person in Section 10A-2A-2.02).

(4) A majority of the votes entitled to be cast by the holders of all qualified shares constitutes a quorum for purposes of compliance with this section. Subject to the provisions of subsection (e), stockholders’ action that otherwise complies with this section is not affected by the presence of holders, or by the voting, of shares that are not qualified shares.

(5) If a stockholders’ vote does not comply with subsection (d)(1) solely because of a director’s or officer’s failure to comply with subsection (d)(2), and if the director or officer establishes that the failure was not intended to influence and did not in fact determine the outcome of the vote, then the action by the stockholders respecting the conflicting interest transaction shall be given effect.

(6) Where stockholders’ action under this section does not satisfy a quorum or voting requirement applicable to the authorization of the conflicting interest transaction by reason of the certificate of incorporation, the bylaws, or another provision of this chapter, independent action to satisfy those authorization requirements shall be taken by the stockholders, in which action shares that are not qualified shares may participate.

(7) Where stockholders’ action under this subsection (d) is taken without a meeting in accordance with Section 10A-2A-7.04, the action is effective even though stockholders holding shares that are not qualified shares sign a consent to that action.

(e)(1) An act or transaction effected or proposed to be effected by the corporation (or by an entity controlled by the corporation) may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against a stockholder of the corporation, on the grounds that the stockholder has an interest respecting the act or transaction, if the act or transaction is not a controlling stockholder transaction.

(2) A controlling stockholder transaction (other than a going private transaction) may not be the subject of equitable relief, or give rise to an award of damages or other sanctions, against a director or officer of the corporation or any controlling stockholder or member of a control group, by reason of a claim based on a breach of fiduciary duty by a director or officer, or a duty (as described in Section 10A-2A-6.22) of a controlling stockholder or member of a control group, if:

(i) the material facts as to the controlling stockholder transaction (including the controlling stockholder’s or control group’s interest therein) are disclosed or are known to all members of the board of directors or a committee of the board of directors to which the board of directors has expressly delegated the authority to negotiate (or oversee the negotiation of) and to reject the controlling stockholder transaction, and the controlling stockholder transaction is approved (or recommended for approval) by the affirmative vote of a majority (but no fewer than two) of the qualified directors who voted on the controlling stockholder transaction; or

(ii) the controlling stockholder transaction is conditioned, by its terms, as in effect at the time it is submitted to stockholders for their approval or ratification, on the approval of or ratification by disinterested stockholders, and the controlling stockholder transaction is approved or ratified by an informed, uncoerced, affirmative vote of a majority of the votes cast by the disinterested stockholders; or

(iii) the controlling stockholder transaction is at the relevant time fair to the corporation.

(3) A controlling stockholder transaction constituting a going private transaction may not be the subject of equitable relief, or give rise to an award of damages or other sanctions, against a director or officer of the corporation or any controlling stockholder or member of a control group by reason of a claim based on breach of fiduciary duty by a director or officer or a duty (described in Section 10A-2A-6.22) of a controlling stockholder or member of a control group, if:

(i) the controlling stockholder transaction is approved (or recommended for approval) in accordance with subsection (e)(2)(i) and approved in accordance with subsection (e)(2)(ii); or

(ii) the controlling stockholder transaction is at the relevant time fair to the corporation.

(4) No person shall be deemed a controlling stockholder unless that person satisfies the criteria in subsection (a)(4). No two or more persons that are not controlling stockholders shall be a control group unless they satisfy the criteria in subsection (a)(3).

(f) For purposes of this section, if a corporation has eliminated its board of directors under Section 10A-2A-7.32, each stockholder of that corporation shall be deemed to be a director, in addition to their capacity as a stockholder.