PRIOR PRINTER'S NOS. 2604, 2786 PRINTER'S NO. 2849
No. 2031 Session of 1987
INTRODUCED BY O'DONNELL, McVERRY, GEIST, HAYES, F. TAYLOR,
KASUNIC, TRELLO, CAPPABIANCA, YANDRISEVITS, WAMBACH, SEVENTY,
COLAFELLA, LESCOVITZ, DISTLER, RAYMOND, VEON, SEMMEL, FARGO,
CHADWICK, NOYE, NAHILL, GALLEN, MICHLOVIC, REINARD, OLASZ,
PRESTON, LEVDANSKY, McHALE, KENNEY, DALEY, BURD, MERRY,
KOSINSKI, SAURMAN, D. W. SNYDER, SWEET, KUKOVICH, GRUPPO,
MORRIS, SIRIANNI, J. L. WRIGHT, PISTELLA, LINTON, COY,
CALTAGIRONE, LIVENGOOD, STABACK, COWELL, WOGAN, DIETTERICK,
MRKONIC, TIGUE, FEE, LaGROTTA, DeLUCA, GODSHALL, WASS,
HAGARTY, CORRIGAN, BOOK, LASHINGER, BORTNER, CLYMER, WOZNIAK,
BATTISTO, HAYDEN, MELIO, SHOWERS, MAINE, S. H. SMITH,
VAN HORNE, DORR, MURPHY, FOX, ITKIN, VROON, BOWSER, BRANDT,
CESSAR, BELARDI, R. C. WRIGHT, CARLSON, BROUJOS AND PETRARCA,
DECEMBER 1, 1987
AS AMENDED ON THIRD CONSIDERATION, HOUSE OF REPRESENTATIVES,
FEBRUARY 9, 1988
AN ACT
1 Amending the act of May 5, 1933 (P.L.364, No.106), entitled, as
2 amended, "An act relating to corporations; defining and
3 providing for the organization, merger, consolidation,
4 reorganization, winding up and dissolution of certain
5 corporations for profit; conferring certain rights, powers,
6 duties and immunities upon them and their officers and
7 shareholders; prescribing the conditions on which such
8 corporations may exercise their powers; providing for the
9 inclusion of certain existing corporations and associations
10 within the provisions of this act; prescribing the terms and
11 conditions upon which certain foreign corporations may be
12 admitted, or may continue, to do business within the
13 Commonwealth; conferring powers and imposing duties on the
14 courts of common pleas, and certain State departments,
15 commissions, and officers; authorizing certain State
16 departments, boards, commissions, or officers to collect fees
17 for services required to be rendered by this act; imposing
18 penalties; and repealing certain acts and parts of acts
19 relating to corporations and other entities," providing for
1 option and conversion rights; and further providing for the
2 rights of shareholders.
3 The General Assembly of the Commonwealth of Pennsylvania
4 hereby enacts as follows:
5 Section 1. Section 611 of the act of May 5, 1933 (P.L.364,
6 No.106), known as the Business Corporation Law, amended July 20,
7 1968 (P.L.459, No.216), is amended to read:
8 Section 611. Option Rights and Conversion Rights; Preemptive
9 Rights of Shareholders.--A. Except as otherwise provided [in
10 subsection B of this section or] in its articles[, a business
11 corporation may issue shares, option rights or securities having
12 conversion or option rights, without first offering them to
13 shareholders of any class or classes.] prior to the creation and
14 issuance thereof, a business corporation may create and issue
15 (whether or not in connection with the issuance of any of its
16 shares or other securities) option rights or securities having
17 conversion or option rights entitling the holders thereof to
18 purchase or acquire shares, option rights, securities having
19 conversion or option rights, or obligations, of any class or
20 series, or assets, of the corporation, or to purchase or acquire
21 from the corporation, shares, option rights, securities having
22 conversion or option rights, or obligations, of any class or
23 series, owned by the corporation and issued by any other person.
24 Except as otherwise provided in subsection B of this section or
25 in its articles:
26 (1) The shares, option rights, securities having conversion
27 or option rights, or obligations shall be evidenced in such
28 manner as the corporation may determine and may be offered
29 without first offering them to shareholders of any class or
30 classes; and
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1 (2) A business corporation may issue shares, option rights
2 or securities having conversion or option rights, OR OBLIGATIONS <--
3 without first offering them to shareholders of any class or
4 classes.
5 B. Unless otherwise provided in its articles, the
6 shareholders of an unlisted corporation shall have a preemptive
7 right to subscribe for shares, option rights, or securities
8 having option rights, issued for cash by the corporation, if the
9 corporation was not incorporated hereunder and its shareholders
10 were or are entitled to preemptive rights at the date the
11 corporation became or becomes subject to this act, but this
12 subsection shall apply neither to the holders of shares of a
13 class issued after the date such corporation became or becomes
14 subject to this act nor to the issue of securities having
15 conversion rights.
16 C. Except as otherwise provided in the articles, shares (or
17 any option rights or securities having conversion or option
18 rights with respect to such shares) which have been offered to
19 shareholders having a preemptive right thereto, at a price and
20 upon terms duly fixed, and which have not been subscribed for by
21 them within the time duly fixed by the articles or the board of
22 directors, may be thereafter offered for subscription to any
23 person or persons at a price and upon terms not more favorable
24 than those at which they were offered to such shareholders.
25 D. The securities, contracts, warrants, or other instruments
26 evidencing any shares, option rights, securities having
27 conversion or option rights, or obligations of a corporation may
28 contain such terms as are fixed by the board of directors,
29 including, without limiting the generality of such authority:
30 restrictions upon the authorization or issuance of additional
19870H2031B2849 - 3 -
1 shares, option rights, securities having conversion or option
2 rights, or obligations; provisions for the adjustment of the
3 conversion or option rights price; provisions concerning rights
4 or adjustments in the event of reorganization, merger,
5 consolidation, sale of assets or other fundamental changes;
6 provisions for the reservation of authorized but unissued shares
7 or other securities; restrictions upon the declaration or
8 payment of dividends or distributions or related party
9 transactions; and conditions relating to the exercise,
10 conversion, transfer or receipt of such shares, option rights,
11 securities having conversion or option rights, or obligations;
12 and, in the case of a corporation WITH A CLASS OF VOTING SHARES <--
13 registered under the Securities Exchange Act of 1934 (15 U.S.C.
14 § 78a et seq.) only, conditions including, but not limited to,
15 conditions that preclude or limit any person or persons owning
16 or offering to acquire a specified number or percentage of the
17 outstanding common shares, other shares, option rights,
18 securities having conversion or option rights, or obligations of
19 such a corporation or transferee or transferees of any such
20 person or persons from exercising, converting, transferring or
21 receiving such shares, option rights, securities having
22 conversion or option rights, or obligations.
23 E. Nothing contained in this section shall be construed to
24 effect a change in the fiduciary relationship between a director
25 and a business corporation or to change the standard of care of
26 a director provided for in 42 Pa.C.S. Ch. 83 Subch. F (relating
27 to corporate directors' liability).
28 Section 2. Section 910 of the act, added December 23, 1983
29 (P.L.395, No.92), is amended to read:
30 Section 910. Right of Shareholders to Receive Payment for
19870H2031B2849 - 4 -
1 Shares Following a Control Transaction.--[A. Unless (1) the
2 bylaws, by amendment adopted within ninety days of the date of
3 enactment of this section and not subsequently rescinded by an
4 article amendment, or (2) the articles explicitly provide that
5 this section shall not be applicable to the corporation, any
6 holder of voting shares of a business corporation that becomes
7 the subject of a control transaction described in subsection B
8 who shall object to the transaction shall be entitled to the
9 rights and remedies herein provided.]
10 A. Any holder of voting shares of a business corporation
11 that becomes the subject of a control transaction described in
12 subsection B who shall object to the transaction shall be
13 entitled to the rights and remedies herein provided, unless (1)
14 the bylaws, by amendment adopted either (i) by March 23, 1984,
15 or (ii) within ninety days after the effective date of this
16 amendatory act, and, in either event, not subsequently rescinded
17 by an article amendment, explicitly provide that this section
18 shall not be applicable to the corporation or (2) the articles
19 explicitly provide that this section shall not be applicable to
20 the corporation by a provision included in the original
21 articles, by an article amendment adopted prior to the date of
22 such control transaction and prior to or on the effective date
23 of this amendatory act pursuant to the procedures then
24 applicable to the corporation, or by an article amendment
25 adopted prior to the date of such control transaction and
26 subsequent to the effective date of this amendatory act pursuant
27 to both (i) the procedures then applicable to the corporation
28 and (ii) unless such proposed amendment has been approved by the
29 board of directors of the corporation, in which event this
30 clause (ii) shall not be applicable, the affirmative vote of the
19870H2031B2849 - 5 -
1 shareholders entitled to cast at least eighty per cent of the
2 votes which all shareholders are entitled to cast thereon. The
3 rights and remedies herein provided shall be in addition to, and
4 not in lieu of, any other rights or remedies provided by this
5 act, the articles of the corporation, the bylaws of the
6 corporation, any securities, option rights or obligations of the
7 corporation or otherwise.
8 B. (1) A controlling person or group shall mean for the
9 purpose of this section a person who has, or a group of persons
10 acting in concert that has, voting power over voting shares of
11 the corporation that would entitle the holders thereof to cast
12 at least [thirty] twenty per cent of the votes that all
13 shareholders would be entitled to cast in an election of
14 directors of the corporation.
15 (2) Notwithstanding the above, (i) a person or group which
16 would otherwise be a controlling person or group within the
17 meaning of this section shall not be deemed such a controlling
18 person or group unless, subsequent to the [enactment of this
19 section] later of the effective date of this amendatory act or
20 the date this section becomes applicable to a corporation by
21 bylaw or article amendment or otherwise, that person or group
22 increases the percentage of outstanding voting shares of the
23 corporation over which it has voting power to in excess of the
24 percentage of outstanding voting shares of the corporation over
25 which that person or group had voting power on [the date of
26 enactment of this section] such later date, and to at least the
27 amount specified in clause (1), as the result of forming or
28 enlarging a group, or acquiring, by purchase, voting power over
29 voting shares of the corporation and (ii) no person or group
30 shall be deemed to be a controlling person or group at any
19870H2031B2849 - 6 -
1 particular time if voting power over any of the following voting
2 shares is required to be counted at such time in order to meet
3 the twenty percent minimum:
4 (a) shares which have been held continuously by a natural
5 person since January 1, 1983, and which are held by such natural
6 person at such time; or
7 (b) shares which are held at such time by any natural person
8 or trust, estate, foundation or other similar entity to the
9 extent such shares were acquired solely by gift, inheritance,
10 bequest, devise or other testamentary distribution or series of
11 such transactions, directly or indirectly, from a natural person
12 who had acquired such shares prior to January 1, 1983; or
13 (c) shares which were acquired pursuant to a stock split,
14 stock dividend, reclassification or similar recapitalization
15 with respect to shares described under clause (ii) that have
16 been held continuously since their issuance by the corporation
17 by the natural person or entity that acquired them from the
18 corporation, or that were acquired, directly or indirectly, from
19 such natural person or entity, solely pursuant to a transaction
20 or series of transactions described in paragraph (b) of clause
21 (ii), and that are held at such time by a natural person or
22 entity described in such paragraph (b).
23 (3) (i) A person shall not be a controlling person under
24 clause (1) if such person holds voting power, in good faith and
25 not for the purpose of circumventing this section, as an agent,
26 bank, broker, nominee or trustee for one or more beneficial
27 owners who do not individually or, if they are a group acting in
28 concert, as a group have the voting power specified in clause
29 (1) or who are not deemed a controlling person or group under
30 clause (2).
19870H2031B2849 - 7 -
1 (ii) For the purposes of this section, a person has voting
2 power over a voting share if such person has or shares, directly
3 or indirectly, through any option, contract, arrangement,
4 understanding, conversion right or relationship, or by acting
5 jointly or in concert or otherwise, the power to vote, or to
6 direct the voting of, such voting share.
7 (4) A control transaction shall mean, for the purposes of
8 this section, the acquisition by a person or group of the status
9 of a controlling person or group.
10 C. Prompt notice that a control transaction has occurred
11 shall be given by the controlling person or group to (1) each
12 shareholder of record of the corporation holding voting shares
13 and (2) to the court of common pleas in the county in this
14 Commonwealth where the registered office of the corporation is
15 located, accompanied by a petition to such court praying that
16 the fair value (as defined in subsection E) of the voting shares
17 of the corporation be determined pursuant to subsection E if the
18 court should receive pursuant to such subsection certificates
19 from shareholders of such corporation. If the controlling person
20 or group so requests, the corporation shall, at the option of
21 the corporation and at the expense of the person or group,
22 either furnish a list of all such shareholders to the person or
23 group or mail the notice to all such shareholders. The notice
24 must state that (i) all shareholders are entitled to demand that
25 they be paid the fair value of their shares; (ii) the minimum
26 value the shareholder can receive under this section is the
27 highest price paid per share by the controlling person or group
28 within the ninety-day period ending on and including the date of
29 the control transaction, and stating that value; and (iii) if
30 the shareholder believes the fair value of his shares is higher,
19870H2031B2849 - 8 -
1 that this section provides an appraisal procedure for
2 determining the fair value of such shares, specifying the name
3 of the court referenced above and its address and the caption of
4 the petition referenced above, and stating that such information
5 is provided for the possible use by such shareholder in electing
6 to proceed with a court-appointed appraiser under subsection E.
7 The controlling person or group may, at its option, supply with
8 the notice referenced in subclause (i) a form for the
9 shareholder to demand payment of the minimum value referred to
10 in subclause (ii) directly from the controlling person or group
11 without utilizing the court appointed appraiser procedure of
12 subsection E, requiring the shareholder to state the number and
13 class or series, if any, of the shares owned by him, and stating
14 where the payment demand must be sent and the procedures to be
15 followed. There shall be included in, or enclosed with, the
16 notice a copy of this section [and subsections F through I of
17 section 515 of this act].
18 D. After the occurrence of the control transaction, any
19 holder of voting shares of the corporation may, prior to or
20 within a reasonable time after the notice required by subsection
21 C is given, which time period may be specified in the notice,
22 make written demand on the controlling person or group for
23 payment of the amount provided in subsection E with respect to
24 the voting shares of the corporation held by the shareholder,
25 and the controlling person or group shall [agree] be required to
26 pay that amount to the shareholder pursuant to the procedures
27 specified in subsection E [upon surrender of the share
28 certificate or certificates representing such shares]. The
29 demand of the shareholder shall state the number and class or
30 series, if any, of the shares owned by him with respect to which
19870H2031B2849 - 9 -
1 the demand is made.
2 Nothing contained in this section shall preclude a
3 controlling person or group subject to this section from
4 offering, whether in such notice or otherwise, to purchase
5 voting shares of the corporation at a price other than that
6 provided in subsection E, and nothing contained in this section
7 shall preclude any shareholder from agreeing to sell his voting
8 shares at that or any other price to any person.
9 E. (1) A shareholder making written demand under subsection
10 D shall be entitled to receive cash for each of his shares in an
11 amount equal to the fair value of each voting share as of the
12 [day prior to the] date on which the control transaction occurs,
13 taking into account all relevant factors, including an increment
14 representing a proportion of any value payable for acquisition
15 of control of the corporation. [Either the controlling person or
16 group or the shareholder may proceed under subsections F through
17 I of section 515 for a determination of the fair value of such
18 share as defined in this subsection. The date of notice of the
19 occurrence of the control transaction, or if no notice is given,
20 the date of written demand made by the shareholder, shall be
21 deemed to be the effective date of the plan, the shareholders
22 who make written demand shall be deemed to be the dissenting
23 shareholders, and the controlling person or group shall be
24 deemed to be the corporation for the purposes of those
25 subsections.] For the purposes of this subsection, fair value
26 means a value not less than the highest price paid per share by
27 the controlling person or group at any time during the ninety-
28 day period ending on and including the date of the control
29 transaction plus an increment representing any value, including
30 without limitation any proportion of any value payable for
19870H2031B2849 - 10 -
1 acquisition of control of the corporation, that may not be
2 reflected in such price.
3 (2) If, (i) within forty-five days (or such other time
4 period, if any, as required by applicable law) after the date of
5 the notice required by subsection C, or (ii) if such notice was
6 not provided prior to the date of the written demand by the
7 shareholder under subsection D, then within forty-five days (or
8 such other time period, if any, as required by applicable law)
9 of the date of such written demand, the controlling person or
10 group and the shareholder are unable to agree on the fair value
11 of the shares or on a binding procedure to determine the fair
12 value of the shares, then each shareholder who is unable to
13 agree on both the fair value and on such a procedure with the
14 controlling person or group and who so desires to obtain the
15 rights and remedies herein provided shall, no later than thirty
16 days after the expiration of the applicable forty-five (or
17 other) day period, surrender to the court of common pleas
18 referenced in subsection C certificates representing such shares
19 duly endorsed for transfer to the controlling person or group,
20 with a notice stating that such certificates are being
21 surrendered in connection with the petition referenced in
22 subsection C, or, if no such petition has theretofore been
23 filed, such shareholder may file a petition within such thirty-
24 day period in such court praying that the fair value (as defined
25 herein) of such shares be determined. Any such shareholder who
26 does not so surrender such certificates within such time period
27 shall have no further right to receive, with respect to shares
28 the certificates of which were not so surrendered under this
29 clause, payment under this clause from the controlling person or
30 group with respect to the control transaction giving rise to the
19870H2031B2849 - 11 -
1 shareholder's rights hereunder. Such court shall hold such
2 certificates surrendered to it in escrow for, and shall
3 promptly, following the expiration of the time period during
4 which such certificates may be surrendered, provide a notice to
5 the controlling person or group of the number of shares so
6 surrendered. The controlling person or group shall then make a
7 partial payment for the shares so surrendered to such court,
8 within ten business days of receipt of the notice from such
9 court, at a per-share price equal to the highest price paid per
10 share by the controlling person or group within the ninety-day
11 period ending on and including the date of the control
12 transaction. Such court shall then make payment, as soon as
13 practicable but in any event within ten business days, to the
14 shareholders who so surrendered their shares to the court of the
15 appropriate per share amount received from the controlling
16 person or group.
17 Upon receipt of any share certificate surrendered pursuant to
18 this section, such court shall, as soon as practicable but in
19 any event within thirty days, appoint an appraiser with
20 experience in appraising share values of companies of like
21 nature to the corporation to determine the fair value of such
22 shares. The appraiser so appointed by the court shall, as soon
23 as reasonably practicable, determine the fair value of the
24 shares subject to its appraisal and the appropriate market rate
25 of interest on the amount then owed by the controlling person or
26 group to the holders of such shares. The determination of any
27 appraiser so appointed by the court shall be final and binding
28 on both the controlling person or group and all shareholders who
29 so surrendered their share certificates to such court, except
30 that the determination of the appraiser shall be subject to
19870H2031B2849 - 12 -
1 review to the extent and within the time provided or prescribed
2 by law in the case of other appointed judicial officers.
3 (3) Any amount agreed upon between the parties or determined
4 pursuant to the procedure agreed upon between the parties shall
5 be payable by the controlling person or group after it is so
6 agreed upon or so determined and upon and concurrently with the
7 delivery of the certificate or certificates representing such
8 shares to the controlling person or group by the shareholder.
9 Any amount owed, together with interest, as determined
10 pursuant to clause (2) shall be payable by the controlling
11 person or group after it is so determined and upon and
12 concurrently with the delivery of the certificate or
13 certificates representing shares surrendered to the court
14 referenced in subsection C to the controlling person or group by
15 such court (which shall make such delivery of the certificate or
16 certificates surrendered to it to the controlling person or
17 group as soon as practicable but in any event within ten
18 business days after the final determination of the amount owed),
19 and such court shall then make payment, as soon as practicable
20 but in any event within ten business days after receipt of
21 payment from the controlling person or group, to the
22 shareholders who so surrendered their shares to such court of
23 the appropriate per share amount received from the controlling
24 person or group.
25 Upon full payment by the controlling person or group of the
26 amount owed to the shareholder or to the court, as appropriate,
27 the shareholder shall cease to have any interest in such shares.
28 (4) Shareholders who surrender their shares to the court
29 pursuant to clause (2) shall retain the right to vote their
30 shares and receive dividends or other distributions thereon
19870H2031B2849 - 13 -
1 until the court receives payment in full for each of the shares
2 so surrendered of the highest price paid per share by the
3 controlling person or group within the ninety-day period ending
4 on and including the date of the control transaction (and,
5 thereafter, the controlling person or group shall be entitled to
6 vote such shares and receive dividends or other distributions
7 thereon). The fair value (as determined by the appraiser) of any
8 dividends or other distributions so received by such
9 shareholders shall be subtracted from any amount owing to such
10 shareholders hereunder.
11 (5) The court referenced in subsection C may appoint such
12 agents, including the transfer agent of the corporation, or any
13 other institution, to hold the shares so surrendered, to effect
14 any necessary change in record ownership of such shares after
15 the payment by the controlling person or group to the court of
16 the amount specified in clause (4), to receive and disburse
17 dividends or other distributions, to provide notices to
18 shareholders and to take such other actions as the court shall
19 determine are appropriate to effect the purposes of this
20 section.
21 (6) The costs and expenses of any appraiser or other agents
22 so appointed by the court shall be assessed against the
23 controlling person or group. The costs and expenses of any other
24 procedure to determine fair value shall be paid as agreed to by
25 the parties agreeing to such procedure.
26 (7) The jurisdiction of the court referenced under
27 subsection C in which the proceeding is commenced is plenary and
28 exclusive and the controlling person or group and all
29 shareholders who so surrendered their shares to such court shall
30 be made a party to the proceeding as in an action against their
19870H2031B2849 - 14 -
1 shares.
2 (8) The corporation shall comply with requests for
3 information, which may be submitted pursuant to procedures
4 maintaining the confidentiality of such information, made by the
5 court or the appraiser so selected by the court.
6 F. A person or group that proposes to engage in a control
7 transaction may comply with the requirements of this section in
8 connection with the control transaction, and the effectiveness
9 of the rights afforded herein to shareholders may be conditioned
10 upon the consummation of the control transaction.
11 The person or group shall give prompt written notice of the
12 satisfaction of any such condition to each shareholder who has
13 made demand as herein provided.
14 G. Subsections A through F shall not apply to any
15 corporation that does not have a class of voting shares
16 registered under the Securities Exchange Act of 1934 (15 U.S.C.
17 § 78a et seq.) or to any person or group that inadvertently
18 becomes a controlling person or group if that controlling person
19 or group, as soon as practicable, divests itself of a sufficient
20 amount of its voting shares so that it is no longer a
21 controlling person or group, or to any corporation that on the
22 effective date of this section is a subsidiary of any other
23 corporation.
24 For purposes of this subsection, subsidiary shall mean any
25 corporation as to which any other corporation has or has the
26 right to acquire, directly or indirectly, through the exercise
27 of all warrants, options and rights and the conversion of all
28 convertible securities, whether issued or granted by the
29 subsidiary or otherwise, voting power over voting shares of the
30 subsidiary that would entitle the holders thereof to cast in
19870H2031B2849 - 15 -
1 excess of fifty per cent of the votes that all shareholders
2 would be entitled to cast in the election of directors of such
3 subsidiary: Provided, however, That a subsidiary will not be
4 deemed to cease being a subsidiary so long as such corporation
5 remains a controlling person or group within the meaning of
6 subsection B.
7 Section 3. The act is amended by adding a section to read:
8 Section 911. Requirements Relating to Certain Business
9 Combinations.--A. For the purposes of this section:
10 (1) "Affiliate" means a person that directly, or indirectly
11 through one or more intermediaries, controls, or is controlled
12 by, or is under common control with, a specified person.
13 (2) "Announcement Date" when used in reference to any
14 business combination, means the date of the first public
15 announcement of the final, definitive proposal for such business
16 combination.
17 (3) "Associate" when used to indicate a relationship with
18 any person, means (a) any corporation or organization of which
19 such person is an officer, director or partner or is, directly
20 or indirectly, the beneficial owner of shares entitling that
21 person to cast at least ten percent of the votes that all
22 shareholders would be entitled to cast in an election of
23 directors of the corporation or organization, (b) any trust or
24 other estate in which such person has a substantial beneficial
25 interest or as to which such person serves as trustee or in a
26 similar fiduciary capacity, and (c) any relative or spouse of
27 such person, or any relative of such spouse, who has the same
28 home as such person.
29 (4) "Beneficial Owner" when used with respect to any shares,
30 means a person:
19870H2031B2849 - 16 -
1 (i) that, individually or with or through any of its
2 affiliates or associates, beneficially owns such shares,
3 directly or indirectly; or
4 (ii) that, individually or with or through any of its
5 affiliates or associates, has (a) the right to acquire such
6 shares (whether such right is exercisable immediately or only
7 after the passage of time), pursuant to any agreement,
8 arrangement or understanding (whether or not in writing), or
9 upon the exercise of conversion rights, exchange rights,
10 warrants or options, or otherwise: Provided, however, That a
11 person shall not be deemed the beneficial owner of shares
12 tendered pursuant to a tender or exchange offer made by such
13 person or any of such person's affiliates or associates until
14 such tendered shares are accepted for purchase or exchange; or
15 (b) the right to vote such shares pursuant to any agreement,
16 arrangement or understanding (whether or not in writing):
17 Provided, however, That a person shall not be deemed the
18 beneficial owner of any shares under this item if the agreement,
19 arrangement or understanding to vote such shares (I) arises
20 solely from a revocable proxy or consent given in response to a
21 proxy or consent solicitation made in accordance with the
22 applicable rules and regulations under the Exchange Act and (II)
23 is not then reportable on a Schedule 13D under the Exchange Act
24 (or any comparable or successor report); or
25 (iii) that has any agreement, arrangement or understanding
26 (whether or not in writing), for the purpose of acquiring,
27 holding, voting (except voting pursuant to a revocable proxy or
28 consent as described in paragraph (b) of clause (4)(ii) of
29 subsection A), or disposing of such shares with any other person
30 that beneficially owns, or whose affiliates or associates
19870H2031B2849 - 17 -
1 beneficially own, directly or indirectly, such shares.
2 (5) "Business Combination" when used in reference to any
3 business corporation and any interested shareholder of such
4 business corporation, means:
5 (i) any merger or consolidation of such business corporation
6 or any subsidiary of such business corporation with (a) such
7 interested shareholder or (b) any other corporation (whether or
8 not itself an interested shareholder of such business
9 corporation) which is, or after such merger or consolidation
10 would be, an affiliate or associate of such interested
11 shareholder;
12 (ii) any sale, lease, exchange, mortgage, pledge, transfer
13 or other disposition (in one transaction or a series of
14 transactions) to or with such interested shareholder or any
15 affiliate or associate of such interested shareholder of assets
16 of such business corporation or any subsidiary of such business
17 corporation (a) having an aggregate market value equal to ten
18 per cent or more of the aggregate market value of all the
19 assets, determined on a consolidated basis, of such business
20 corporation, (b) having an aggregate market value equal to ten
21 per cent or more of the aggregate market value of all the
22 outstanding shares of such business corporation, or (c)
23 representing ten per cent or more of the earning power or net
24 income, determined on a consolidated basis, of such business
25 corporation;
26 (iii) the issuance or transfer by such business corporation
27 or any subsidiary of such business corporation (in one
28 transaction or a series of transactions) of any shares of such
29 business corporation or any subsidiary of such business
30 corporation which has an aggregate market value equal to five
19870H2031B2849 - 18 -
1 per cent or more of the aggregate market value of all the
2 outstanding shares of such business corporation to such
3 interested shareholder or any affiliate or associate of such
4 interested shareholder except pursuant to the exercise of option
5 rights to purchase shares, or pursuant to the conversion of
6 securities having conversion rights, offered, or a dividend or
7 distribution paid or made, pro rata to all shareholders of such
8 business corporation;
9 (iv) the adoption of any plan or proposal for the
10 liquidation or dissolution of such business corporation proposed
11 by, or pursuant to any agreement, arrangement or understanding
12 (whether or not in writing) with, such interested shareholder or
13 any affiliate or associate of such interested shareholder;
14 (v) any reclassification of securities (including, without
15 limitation, any split of shares, dividend of shares, or other
16 distribution of shares in respect of shares, or any reverse
17 split of shares), or recapitalization of such business
18 corporation, or any merger or consolidation of such business
19 corporation with any subsidiary of such business corporation, or
20 any other transaction (whether or not with or into or otherwise
21 involving such interested shareholder), proposed by, or pursuant
22 to any agreement, arrangement or understanding (whether or not
23 in writing) with, such interested shareholder or any affiliate
24 or associate of such interested shareholder, which has the
25 effect, directly or indirectly, of increasing the proportionate
26 share of the outstanding shares of any class or series of voting
27 shares or securities convertible into voting shares of such
28 business corporation or any subsidiary of such business
29 corporation which is, directly or indirectly, owned by such
30 interested shareholder or any affiliate or associate of such
19870H2031B2849 - 19 -
1 interested shareholder, except as a result of immaterial changes
2 due to fractional share adjustments; or
3 (vi) any receipt by such interested shareholder or any
4 affiliate or associate of such interested shareholder of the
5 benefit, directly or indirectly (except proportionately as a
6 shareholder of such business corporation) of any loans,
7 advances, guarantees, pledges or other financial assistance or
8 any tax credits or other tax advantages provided by or through
9 such business corporation.
10 (6) "Business Corporation" means a business corporation as
11 defined in clause (6) of section 2. No business corporation,
12 which is organized under the laws of this Commonwealth, shall
13 cease to be a business corporation as defined herein by reason
14 of events occurring or actions taken while such business
15 corporation is subject to the provisions of this section.
16 (7) "Common Shares" means any shares other than preferred
17 shares.
18 (8) "Consummation Date" with respect to any business
19 combination, means the date of consummation of such business
20 combination, or, in the case of a business combination as to
21 which a shareholder vote is taken, the later of the business day
22 prior to the vote or twenty days prior to the date of
23 consummation of such business combination.
24 (9) "Control" including the terms "Controlling," "Controlled
25 By," and "Under Common Control With," means the possession,
26 directly or indirectly, of the power to direct or cause the
27 direction of the management and policies of a person, whether
28 through the ownership of voting shares, by contract, or
29 otherwise. A person's beneficial ownership of shares entitling
30 that person to cast at least ten per cent of the votes that all
19870H2031B2849 - 20 -
1 shareholders would be entitled to cast in an election of
2 directors of the corporation shall create a presumption that
3 such person has control of such corporation. Notwithstanding the
4 foregoing, a person shall not be deemed to have control of a
5 corporation if such person holds voting shares, in good faith
6 and not for the purpose of circumventing this section, as an
7 agent, bank, broker, nominee, custodian or trustee for one or
8 more beneficial owners who do not individually or as a group
9 have control of such corporation.
10 (10) "Exchange Act" means the Securities Exchange Act of
11 1934 (48 Stat. 881, 15 U.S.C. § 78a et seq.), as the same has
12 been or hereafter may be amended from time to time.
13 (11) "Interested Shareholder," when used in reference to any
14 business corporation, means any person (other than such business
15 corporation or any subsidiary of such business corporation)
16 that:
17 (i) (a) is the beneficial owner, directly or indirectly, of
18 shares entitling that person to cast at least twenty per cent of
19 the votes that all shareholders would be entitled to cast in an
20 election of directors of the corporation; or
21 (b) is an affiliate or associate of such business
22 corporation and at any time within the five-year period
23 immediately prior to the date in question was the beneficial
24 owner, directly or indirectly, of shares entitling that person
25 to cast at least twenty per cent of the votes that all
26 shareholders would be entitled to cast in an election of
27 directors of the corporation;
28 (ii) provided that, for the purpose of determining whether a
29 person is an interested shareholder, (a) the number of votes
30 that would be entitled to be cast in an election of directors of
19870H2031B2849 - 21 -
1 such business corporation shall be calculated by including
2 shares deemed to be beneficially owned by the person through
3 application of clause 4 of subsection A of this section but
4 excluding any other unissued shares of such business corporation
5 which may be issuable pursuant to any agreement, arrangement or
6 understanding, or upon exercise of conversion or option rights,
7 or otherwise; and (b) there shall be excluded from the
8 beneficial ownership of such interested shareholder any:
9 (I) shares which have been held continuously by a natural
10 person since January 1, 1983, and which are then held by such
11 natural person; or
12 (II) shares which are then held by any natural person or
13 trust, estate, foundation or other similar entity to the extent
14 such shares were acquired solely by gift, inheritance, bequest,
15 devise or other testamentary distribution or series of such
16 transactions, directly or indirectly, from a natural person who
17 had acquired such shares prior to January 1, 1983; or
18 (III) shares which were acquired pursuant to a stock split,
19 stock dividend, reclassification or similar recapitalization
20 with respect to shares described under paragraph (b) that have
21 been held continuously since their issuance by the corporation
22 by the natural person or entity that acquired them from the
23 corporation, or that were acquired, directly or indirectly, from
24 such natural person or entity, solely pursuant to a transaction
25 or series of transactions described in subparagraph (II) of
26 paragraph (b), and that are then held by a natural person or
27 entity described in subparagraph (II).
28 (12) "Market Value" when used in reference to shares or
29 property of any business corporation, means:
30 (i) in the case of shares, the highest closing sale price
19870H2031B2849 - 22 -
1 during the thirty-day period immediately preceding the date in
2 question of such a share on the composite tape for New York
3 Stock Exchange-listed shares, or, if such shares are not quoted
4 on such composite tape or if such shares are not listed on such
5 exchange, on the principal United States securities exchange
6 registered under the Exchange Act on which such shares are
7 listed, or, if such shares are not listed on any such exchange,
8 the highest closing bid quotation with respect to such a share
9 during the thirty-day period preceding the date in question on
10 the National Association of Securities Dealers, Inc. Automated
11 Quotations System or any system then in use, or if no such
12 quotations are available, the fair market value on the date in
13 question of such a share as determined by the board of directors
14 of such business corporation in good faith; and
15 (ii) in the case of property other than cash or shares, the
16 fair market value of such property on the date in question as
17 determined by the board of directors of such business
18 corporation in good faith.
19 (13) "Preferred Shares" means any class or series of shares
20 of a business corporation which, under the bylaws or articles of
21 such business corporation, is entitled to receive payment of
22 dividends prior to any payment of dividends on some other class
23 or series of shares, or is entitled in the event of any
24 voluntary liquidation, dissolution or winding up of the business
25 corporation to receive payment or distribution of a preferential
26 amount before any payments or distributions are received by some
27 other class or series of shares.
28 (14) "Shares" means:
29 (i) any shares or similar security, any certificate of
30 interest, any participation in any profit-sharing agreement, any
19870H2031B2849 - 23 -
1 voting trust certificate, or any certificate of deposit for
2 shares; and
3 (ii) any security convertible, with or without
4 consideration, into shares, or any option right, conversion
5 right or privilege of buying shares without being bound to do
6 so, or any other security carrying any right to acquire,
7 subscribe to or purchase shares.
8 (15) "Share Acquisition Date" with respect to any person and
9 any business corporation, means the date that such person first
10 becomes an interested shareholder of such business corporation.
11 (16) "Subsidiary" means any corporation as to which any
12 other corporation is the beneficial owner, directly or
13 indirectly, of shares of such first corporation that would
14 entitle such other corporation to cast in excess of fifty per
15 cent of the votes that all shareholders would be entitled to
16 cast in the election of directors of such first corporation.
17 (17) "Voting Shares" means shares of a corporation entitled
18 to vote generally in the election of directors.
19 B. Notwithstanding anything to the contrary contained in
20 this act (except the provisions of subsection C of this
21 section), no business corporation shall engage at any time in
22 any business combination with any interested shareholder of such
23 business corporation other than a business combination specified
24 in any one of clauses (1), (2), (3) or (4) of this subsection:
25 (1) A business combination approved by the board of
26 directors of such business corporation prior to such interested
27 shareholder's share acquisition date, or where the purchase of
28 shares made by such interested shareholder on such interested
29 shareholder's share acquisition date had been approved by the
30 board of directors of such business corporation prior to such
19870H2031B2849 - 24 -
1 interested shareholder's share acquisition date.
2 (2) A business combination approved (i) by the affirmative
3 vote of the holders of shares entitling such holders to cast a
4 majority of the votes that all shareholders would be entitled to
5 cast in an election of directors of such business corporation,
6 not including any voting shares beneficially owned by such
7 interested shareholder or any affiliate or associate of such
8 interested shareholder, at a meeting called for such purpose no
9 earlier than three months after such interested shareholder
10 became, and provided that at the time of such meeting such
11 interested shareholder is, the beneficial owner, directly or
12 indirectly, of shares entitling such interested shareholder to
13 cast at least eighty per cent of the votes that all shareholders
14 would be entitled to cast in an election of directors of the
15 corporation, and provided that such business combination
16 satisfies all the conditions of subclauses (i) through (v) of
17 clause (4) of subsection B or (ii) by the affirmative vote of
18 all of the holders of all of the outstanding common shares.
19 (3) A business combination approved by the affirmative vote
20 of the holders of shares entitling such holders to cast a
21 majority of the votes that all shareholders would be entitled to
22 cast in an election of directors of such business corporation,
23 not including any voting shares beneficially owned by such
24 interested shareholder or any affiliate or associate of such
25 interested shareholder, at a meeting called for such purpose no
26 earlier than five years after such interested shareholder's
27 share acquisition date.
28 (4) A business combination approved at a shareholders'
29 meeting called for such purpose no earlier than five years after
30 such interested shareholder's share acquisition date that meets
19870H2031B2849 - 25 -
1 all of the following conditions:
2 (i) The aggregate amount of the cash and the market value as
3 of the consummation date of consideration other than cash to be
4 received per share by holders of outstanding common shares of
5 such business corporation in such business combination is at
6 least equal to the higher of the following:
7 (a) the highest per share price paid by such interested
8 shareholder at a time when he was the beneficial owner, directly
9 or indirectly, of shares entitling that person to cast at least
10 five per cent of the votes that all shareholders would be
11 entitled to cast in an election of directors of such business
12 corporation, for any common shares of the same class or series
13 acquired by it (I) within the five-year period immediately prior
14 to the announcement date with respect to such business
15 combination, or (II) within the five-year period immediately
16 prior to, or in, the transaction in which such interested
17 shareholder became an interested shareholder, whichever is
18 higher; plus, in either case, interest compounded annually from
19 the earliest date on which such highest per share acquisition
20 price was paid through the consummation date at the rate for one
21 year United States treasury obligations from time to time in
22 effect; less the aggregate amount of any cash dividends paid,
23 and the market value of any dividends paid other than in cash,
24 per common share since such earliest date, up to the amount of
25 such interest; and
26 (b) the market value per common share on the announcement
27 date with respect to such business combination or on such
28 interested shareholder's share acquisition date, whichever is
29 higher; plus interest compounded annually from such date through
30 the consummation date at the rate for one-year United States
19870H2031B2849 - 26 -
1 treasury obligations from time to time in effect; less the
2 aggregate amount of any cash dividends paid, and the market
3 value of any dividends paid other than in cash, per common share
4 since such date, up to the amount of such interest.
5 (ii) The aggregate amount of the cash and the market value
6 as of the consummation date of consideration other than cash to
7 be received per share by holders of outstanding shares of any
8 class or series of shares, other than common shares, of such
9 business corporation is at least equal to the highest of the
10 following (whether or not such interested shareholder has
11 previously acquired any shares of such class or series of
12 shares):
13 (a) the highest per share price paid by such interested
14 shareholder at a time when he was the beneficial owner, directly
15 or indirectly, of shares entitling such person to cast at least
16 five per cent of the votes that all shareholders would be
17 entitled to cast in an election of directors of such business
18 corporation, for any shares of such class or series of shares
19 acquired by it (I) within the five-year period immediately prior
20 to the announcement date with respect to such business
21 combination, or (II) within the five-year period immediately
22 prior to, or in, the transaction in which such interested
23 shareholder became an interested shareholder, whichever is
24 higher; plus, in either case, interest compounded annually from
25 the earliest date on which such highest per share acquisition
26 price was paid through the consummation date at the rate for one
27 year United States treasury obligations from time to time in
28 effect; less the aggregate amount of any cash dividends paid,
29 and the market value of any dividends paid other than in cash,
30 per share of such class or series of shares since such earliest
19870H2031B2849 - 27 -
1 date, up to the amount of such interest;
2 (b) the highest preferential amount per share to which the
3 holders of shares of such class or series of shares are entitled
4 in the event of any voluntary liquidation, dissolution or
5 winding up of such business corporation, plus the aggregate
6 amount of any dividends declared or due as to which such holders
7 are entitled prior to payment of dividends on some other class
8 or series of shares (unless the aggregate amount of such
9 dividends is included in such preferential amount); and
10 (c) the market value per share of such class or series of
11 shares on the announcement date with respect to such business
12 combination or on such interested shareholder's share
13 acquisition date, whichever is higher; plus interest compounded
14 annually from such date through the consummation date at the
15 rate for one year United States treasury obligations from time
16 to time in effect; less the aggregate amount of any cash
17 dividends paid and the market value of any dividends paid other
18 than in cash, per share of such class or series of shares since
19 such date, up to the amount of such interest.
20 (iii) The consideration to be received by holders of a
21 particular class or series of outstanding shares (including
22 common shares) of such business corporation in such business
23 combination is in cash or in the same form as the interested
24 shareholder has used to acquire the largest number of shares of
25 such class or series of shares previously acquired by it, and
26 such consideration shall be distributed promptly.
27 (iv) The holders of all outstanding shares of such business
28 corporation not beneficially owned by such interested
29 shareholder immediately prior to the consummation of such
30 business combination are entitled to receive in such business
19870H2031B2849 - 28 -
1 combination cash or other consideration for such shares in
2 compliance with subclauses (i), (ii) and (iii) of clause (4) of
3 subsection B.
4 (v) After such interested shareholder's share acquisition
5 date and prior to the consummation date with respect to such
6 business combination, such interested shareholder has not become
7 the beneficial owner of any additional voting shares of such
8 business corporation except:
9 (a) as part of the transaction which resulted in such
10 interested shareholder becoming an interested shareholder;
11 (b) by virtue of proportionate splits of shares, share
12 dividends or other distributions of shares in respect of shares
13 not constituting a business combination under subclause (v) of
14 clause (5) of subsection A;
15 (c) through a business combination meeting all of the
16 conditions of clauses (1), (2), (3) or (4) of subsection B;
17 (d) through purchase by such interested shareholder at any
18 price which, if such price had been paid in an otherwise
19 permissible business combination the announcement date and
20 consummation date of which were the date of such purchase, would
21 have satisfied the requirements of subclauses (i), (ii) and
22 (iii) of clause (4) of subsection B; or
23 (e) through purchase required by and pursuant to the
24 provisions of, and at no less than the fair value (including
25 interest to the date of payment) as determined by a court-
26 appointed appraiser under clause (2) of subsection E of section
27 910 of this act (or if such fair value was not then so
28 determined, then at a price that would satisfy the conditions in
29 the preceding paragraph (d)).
30 C. The provisions of this section shall not apply:
19870H2031B2849 - 29 -
1 (1) to any business combination of a business corporation
2 that does not have a class of voting shares registered under the
3 Exchange Act; or
4 (2) to any business combination of a business corporation
5 whose articles have been amended to provide that such business
6 corporation shall be subject to the provisions of this section,
7 which did not have a class of voting shares registered under the
8 Exchange Act on the effective date of such amendment, and which
9 is a business combination with an interested shareholder whose
10 share acquisition date is prior to the effective date of such
11 amendment; or
12 (3) to any business combination of a business corporation
13 (i) the bylaws of which, by amendment adopted within ninety days
14 of the date of enactment of this section, and not subsequently
15 rescinded either by an article amendment or by a bylaw amendment
16 approved by at least eighty-five per cent of the whole board of
17 directors, explicitly provide that this section shall not be
18 applicable to the corporation or (ii) the articles of which
19 explicitly provide that this section shall not be applicable to
20 the corporation by a provision included in the original
21 articles, or by an article amendment adopted pursuant to both
22 (a) the procedures then applicable to the corporation and (b)
23 the affirmative vote of the holders, other than interested
24 shareholders and their affiliates and associates, of shares
25 entitling such holders to cast a majority of the votes that all
26 shareholders would be entitled to cast in an election of
27 directors of such business corporation, excluding the voting
28 shares of interested shareholders and their affiliates and
29 associates, expressly electing not to be governed by this
30 section, provided that such amendment to the articles shall not
19870H2031B2849 - 30 -
1 be effective until eighteen months after such vote of such
2 business corporation's shareholders and shall not apply to any
3 business combination of such business corporation with an
4 interested shareholder whose share acquisition date is on or
5 prior to the effective date of such amendment; or
6 (4) to any business combination of a business corporation
7 with an interested shareholder of such business corporation
8 which became an interested shareholder inadvertently, if such
9 interested shareholder (i) as soon as practicable, divests
10 itself of a sufficient amount of the voting shares of such
11 business corporation so that it no longer is the beneficial
12 owner, directly or indirectly, of shares entitling such person
13 to cast at least twenty per cent of the votes that all
14 shareholders would be entitled to cast in an election of
15 directors of such business corporation, and (ii) would not at
16 any time within the five-year period preceding the announcement
17 date with respect to such business combination have been an
18 interested shareholder but for such inadvertent acquisition;
19 (5) to any business combination with an interested
20 shareholder who was the beneficial owner, directly or
21 indirectly, of shares entitling such person to cast at least
22 fifteen per cent of the votes that all shareholders would be
23 entitled to cast in an election of directors of such business
24 corporation on the effective date of this section and remain so
25 to such interested shareholder's share acquisition date; or
26 (6) to any business corporation that on the effective date
27 of this section is a subsidiary of any other corporation;
28 provided, however, that a corporation that is a subsidiary on
29 the effective date of this section will not be deemed to cease
30 being a subsidiary so long as such other corporation remains a
19870H2031B2849 - 31 -
1 controlling person or group of such subsidiary within the
2 meaning of subsection B of section 910 of this act.
3 D. The rights and remedies herein provided shall be in
4 addition to, and not in lieu of, any other rights or remedies
5 provided by this act, the articles of the corporation, the
6 bylaws of the corporation, any securities, option rights or
7 obligations of the corporation or otherwise.
8 Section 4. This act shall take effect immediately.
J29L15DGS/19870H2031B2849 - 32 -