2023 New York Laws › BSC - Business Corporation › Article 5 - Corporate Finance › 505 - Rights and Options to Purchase Shares; Issue of Rights and Options to Directors, Officers and Employees.

§ 505. Rights  and  options  to  purchase  shares;  issue  of rights and
options to directors, officers and employees.
(a) (1) Except as  otherwise  provided  in  this  section  or  in  the
certificate  of  incorporation,  a  corporation  may  create  and issue,
whether or not in connection with the issue  and  sale  of  any  of  its
shares  or  bonds,  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 or assets of the corporation.
(2)  (i)  In  the  case  of a domestic corporation that has a class of
voting stock registered with  the  Securities  and  Exchange  Commission
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  purpose  of  this subparagraph, the terms "voting
stock", "Exchange Act" and "interested shareholder" shall have the  same
meanings as set forth in section nine hundred twelve of this chapter;
(ii)  Determinations  of  the  board  of  directors whether to impose,
enforce or waive or otherwise render  ineffective  such  limitations  or
conditions  as are permitted by clause (i) of this subparagraph 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  shareholders  considering,  without  limitation,  the prospects for
potential growth, development, productivity  and  profitability  of  the
corporation.
(b)  The consideration for shares to be purchased under any such right
or  option  shall  comply  with  the   requirements   of   section   504
(Consideration and payment for shares).
(c)  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.
(d)  The  issue  of  such  rights or options to one or more directors,
officers or employees of the corporation or a  subsidiary  or  affiliate
thereof,  as  an  incentive  to  service  or  continued service with the
corporation, a subsidiary or affiliate  thereof,  or  to  a  trustee  on
behalf  of such directors, officers or employees, shall be authorized as
required by the policies of all stock exchanges or  automated  quotation
systems  on  which the corporation's shares are listed or authorized for
trading, or if the corporation's shares are not so listed or authorized,
by a majority of the votes cast at a  meeting  of  shareholders  by  the
holders  of  shares  entitled  to  vote  thereon,  or  authorized by and
consistent with a plan adopted by such vote of shareholders.  If,  under
the  certificate of incorporation, there are preemptive rights to any of
the shares to be thus subject to rights or options to  purchase,  either
such  issue  or  such plan, if any shall also be approved by the vote or
written consent of the holders of a majority of the shares  entitled  to
exercise  preemptive rights with respect to such shares and such vote or
written consent shall operate to  release  the  preemptive  rights  with
respect  thereto  of the holders of all the shares that were entitled to
exercise such preemptive rights.
In the absence of preemptive rights, nothing in this  paragraph  shall
require  shareholder  approval  for the issuance of rights or options to
purchase shares of the corporation in  substitution  for,  or  upon  the
assumption  of, rights or options issued by another corporation, if such
substitution   or   assumption   is   in   connection  with  such  other
corporation's merger or consolidation with, or the  acquisition  of  its
shares  or  all  or  part  of  its  assets  by,  the  corporation or its
subsidiary.
(e) A plan adopted by the shareholders for  the  issue  of  rights  or
options  to  directors, officers or employees shall include the material
terms and conditions upon which such rights or options are to be issued,
such as, but without limitation thereof, any restrictions on the  number
of  shares  that  eligible  individuals  may have the right or option to
purchase, the method of administering the plan, the terms and conditions
of payment  for  shares  in  full  or  in  installments,  the  issue  of
certificates  for shares to be paid for in installments, any limitations
upon the transferability of such shares  and  the  voting  and  dividend
rights  to  which the holders of such shares may be entitled, though the
full amount of the consideration therefor has not  been  paid;  provided
that  under this section no certificate for shares shall be delivered to
a shareholder, prior to full payment therefor, unless the fact that  the
shares  are  partly  paid  is noted conspicuously on the face or back of
such certificate.
(f) If there is shareholder  approval  for  the  issue  of  rights  or
options to individual directors, officers or employees, but not under an
approved plan under paragraph (e), the terms and conditions of issue set
forth  in paragraph (e) shall be permissible except that the grantees of
such rights or options shall not be granted voting  or  dividend  rights
until  the consideration for the shares to which they are entitled under
such rights or options has been fully paid.
(g) 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 805  (Certificate  of  amendment;
contents)  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.
(h)  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.
(i) The provisions of this section are inapplicable to the  rights  of
the  holders  of  convertible shares or bonds to acquire shares upon the
exercise of conversion privileges under section 519 (Convertible  shares
and bonds).