N.Y. Banking Law § 6021: Preemptive rights

§ 6021. Preemptive rights. 1. As used in this section, the term:

(a) "Unlimited dividend rights" means the right without limitation as

to amount either to all or to a share of the balance of current or

liquidating dividends after the payment of dividends on any shares

entitled to a preference.

(b) "Equity shares" means shares of any class, whether or not

preferred as to dividends or assets, which have unlimited dividend

rights.

(c) "Voting rights" means the right to vote for the election of one or

more directors, excluding a right so to vote which is dependent on the

happening of an event specified in the organization certificate which

would change the voting rights of any class of shares.

(d) "Voting shares" means shares of any class which have voting

rights.

(e) "Preemptive right" means the right to purchase shares or other

securities to be issued, as such right is defined in this section.

(f) "New shares or securities" means new equity shares of any class or

any shares or other securities convertible into equity shares of any

class.

2. The preemptive rights provided for in subdivision three of this

section shall not apply to new shares or securities of any corporation

whose organization certificate is approved on or after the effective

date of this subdivision, unless expressly provided for in the

organization certificate of such corporation, which may incorporate by

reference the preemptive rights set forth in this section, or further

modify such preemptive rights.

3. Except as otherwise provided in the organization certificate, and

except as provided in this section, in case of the proposed issuance by

the corporation of new shares or securities:

(a) if the issuance of the new shares or securities would adversely

affect the unlimited dividend rights of the holders of existing equity

shares of any class, such holders shall have the right during a

reasonable time and on reasonable conditions, both to be fixed by the

board, to purchase such new shares or securities in such proportions as

shall be determined as provided in this section; and

(b) if such new shares or securities are voting shares of any class

and the issuance of the new shares or securities would adversely affect

the voting rights of the holders of existing shares of any class, such

holders shall have the right during a reasonable time and on reasonable

conditions, both to be fixed by the board, to purchase such new shares

or other securities in such proportions as shall be determined as

provided in this section.

4. The preemptive right provided for in subdivision three of this

section shall entitle stockholders having such rights to purchase the

shares or other securities to be offered for sale as nearly as

practicable in such proportions as would, if such preemptive right were

exercised, preserve the relative unlimited dividend rights and voting

rights of such holders and at a price or prices not less favorable than

the price or prices at which such shares or other securities are

proposed to be offered for sale to others, without deduction of such

reasonable expenses of and compensation for the sale, underwriting or

purchase of such shares or other securities by underwriters or dealers

as may lawfully be paid by the corporation. In case each of the shares

entitling the holders thereof to preemptive rights does not confer the

same unlimited dividend right or voting right, the board shall apportion

the shares or other securities to be offered for sale among the

stockholders having preemptive rights to purchase them in such

proportions as in the opinion of the board shall preserve as far as

practicable the relative unlimited dividend rights and voting rights of

the holders at the time of such offering. The apportionment made by the

board shall, in the absence of fraud or bad faith, be binding upon all

stockholders.

5. Unless otherwise provided in the organization certificate, shares

or other securities offered for sale shall not be subject to preemptive

rights under subdivisions two and three of this section if they:

(a) Are to be issued by the board to effect a merger or offered for

consideration other than cash;

(b) Are to be issued or subjected to options under section one hundred

forty-a of this chapter;

(c) Are to be issued to satisfy conversion rights theretofore granted

by the corporation;

(d) Are treasury shares; or

(e) Are part of the shares or other securities of the corporation

authorized in its original organization certificate and are issued, sold

or optioned within two years from the date of filing such certificate.

6. Stockholders of record entitled to preemptive rights on the record

date fixed by the board under section six thousand four, or, if no

record date is fixed, then on the record date determined under section

six thousand four, and no others shall be entitled to the right defined

in this section.

7. The board shall cause to be given to each stockholder entitled to

purchase shares or other securities in accordance with this section, a

notice directed to him in the manner provided in section six thousand

five setting forth the time within which and the terms and conditions

upon which the stockholder may purchase such shares or other securities

and also the apportionment made of the right to purchase among the

stockholders entitled to preemptive rights. Such notice shall be given

personally or by mail at least fifteen days prior to the expiration of

the period during which the stockholder shall have the right to

purchase. All stockholders entitled to preemptive rights to whom notice

shall have been given as aforesaid shall be deemed conclusively to have

had a reasonable time in which to exercise their preemptive rights.

8. Shares or other securities which have been offered to stockholders

having preemptive rights to purchase and which have not been purchased

by them within the time fixed by the board may thereafter, for a period

of not exceeding one year following the expiration of the time during

which stockholders might have exercised such preemptive rights, be

issued or sold to any other person or persons at a price, without

deduction of such reasonable expenses of and compensation for the sale,

underwriting or purchase of such shares by underwriters or dealers as

may lawfully be paid by the corporation, not less than that at which

they were offered to such stockholders. Any such shares or other

securities not so issued or sold to others during such one year period

shall thereafter again be subject to the preemptive rights of

stockholders.

9. Except as otherwise provided in the organization certificate and

except as provided in this section, no holder of any shares of any class

shall as such holder have any preemptive right to purchase any other

shares or securities of any class which at any time may be sold or

offered for sale by the corporation.