N.Y. Banking Law § 5005: Transferable rights to purchase shares; imposition of restrictions or conditions thereon

§ 5005. Transferable rights to purchase shares; imposition of

restrictions or conditions thereon. 1. Except as otherwise provided in

this section or in the organization certificate, a corporation may

create and issue, whether or not in connection with the issue and sale

of any of its capital notes, debentures or shares, rights or options

entitling the holders thereof to purchase from the corporation, upon

such consideration, terms and conditions as may be fixed by the board,

shares of any class or series, whether authorized but unissued shares,

treasury shares or shares to be purchased or acquired.

2. (a) In the case of a corporation that has a class of voting stock

registered pursuant to section twelve of the Exchange Act, the terms and

conditions of such rights or options may include, without limitation,

restrictions or conditions that preclude or limit the exercise, transfer

or receipt of such rights or options by an interested shareholder or any

transferee of any such interested shareholder or that invalidate or void

such rights or options held by any such interested shareholder or any

such transferee. For the purposes of this subdivision, the terms "voting

stock", "Exchange Act" and "interested shareholder" shall have the same

respective meanings as are set forth in section nine hundred twelve of

the business corporation law except that for this purpose references in

said section of the business corporation law to a "resident business

corporation" shall be read instead to refer to a "corporation" as

defined by section one thousand one of this chapter.

(b) Determinations of the board of directors whether to impose,

enforce or waive or otherwise render ineffective such limitations or

conditions as are permitted by paragraph (a) of this subdivision shall

be subject to judicial review in an appropriate proceeding in which the

courts formulate or apply appropriate standards in order to insure that

such limitations or conditions are imposed, enforced or waived in the

best long-term interests and short-term interests of the corporation and

its stockholders considering, without limitation, the prospects for

potential growth, development, productivity and profitability of the

corporation.

3. The consideration for shares to be purchased under any such right

or option shall comply with the requirements of section five thousand

four of this chapter.

4. The terms and conditions of such rights or options, including the

time or times at or within which and the price or prices at which they

may be exercised and any limitations upon transferability, shall be set

forth or incorporated by reference in the instrument or instruments

evidencing such rights or options.

5. If there is shareholder approval for the issue of rights and

options, such approval may provide that the board is authorized by

certificate of amendment under section eight thousand five of this

chapter to increase the authorized shares of any class or series to such

number as will be sufficient, when added to the previously authorized

but unissued shares of such class or series, to satisfy any such rights

or options entitling the holders thereof to purchase from the

corporation authorized but unissued shares of such class or series.

6. In the absence of fraud in the transaction, the judgment of the

board shall be conclusive as to the adequacy of the consideration,

tangible or intangible, received or to be received by the corporation

for the issue of rights or options for the purchase from the corporation

of its shares.

7. The provisions of this section are inapplicable to the rights of

the holders of convertible shares, capital notes or debentures to

acquire shares upon the exercise of conversion privileges under section

five thousand sixteen of this chapter.

8. The provisions of this section are inapplicable to the rights of

officers, directors and employees of a corporation who have been issued

options to purchase authorized and unissued shares of its capital stock

under or by reference to section one hundred forty-a of this chapter.