14A:5-29. Preemptive rights.

14A:5-29. Preemptive rights.

(1) The shareholders of corporations organized after January 1, 1969 shall not have preemptive rights unless the certificate of incorporation provides otherwise. The shareholders of corporations organized prior to January 1, 1969 shall have preemptive rights unless a bylaw duly adopted by the shareholders prior to that date or the certificate of incorporation provides otherwise. Any corporation may alter or abolish preemptive rights by amendment to its certificate of incorporation.

(2) Any corporation may elect to grant its shareholders preemptive rights. An election may be made by including in the certificate of incorporation a statement to the effect that the shareholders shall have preemptive rights.

(3) Unless otherwise provided in the certificate of incorporation, the effect of shareholders having preemptive rights shall be as follows:

(a) Upon the issuance for cash of shares, or options to purchase shares, of the same class as those held by a shareholder, the shareholder shall have a right to acquire a pro rata portion of such shares or options so issued according to the number of shares of such class held by him. Such preemptive right shall extend to shares, obligations or other securities, however described, which are convertible into shares of the same class as those held by the shareholder.

(b) Shares, obligations or other securities of the corporation which are subject to preemptive rights as herein provided shall not be deemed to be issued for cash within the meaning of this section if cash constitutes only a part of the consideration received by the corporation.

(c) A shareholder may waive his preemptive right; a waiver of a preemptive right, when evidenced by a writing, shall be binding upon the shareholder notwithstanding it is given without consideration.

(d) No shareholder shall have a preemptive right to acquire shares, obligations or other securities as herein provided, which

(i) are issued pursuant to a plan of merger or consolidation;

(ii) are issued pursuant to Chapter 8 of this act;

(iii) are issued to satisfy conversion or option rights, however evidenced, granted by the corporation;

(iv) are issued pursuant to a plan of reorganization approved by a court pursuant to a statute of this State or of the United States; or

(v) are part of the shares, obligations or other securities authorized in the original certificate of incorporation and are issued within six months from the effective date of such certificate.

(e) Upon the proposed issuance of shares, obligations or other securities subject to preemptive rights, the board shall cause notice to be given to each shareholder of record entitled to preemptive rights. The notice shall set forth (i) the amount of shares, obligations or other securities with respect to which the shareholder has a preemptive right and the method used to determine that amount;

(ii) the price and other terms and conditions upon which the shareholder may purchase such shares, obligations or other securities; and

(iii) the time within which and the method by which the shareholder must exercise the right.

The notice shall be given at least 30 days prior to the time within which the shareholder must exercise the right.

(f) Shares, obligations or other securities subject to preemptive rights, which are not acquired by shareholders in the exercise of their preemptive rights may, for a period not exceeding one year after the date limited by the directors for the exercise of such preemptive rights, be issued, sold, or optioned to such person or persons as the board may determine, at a price not less than that at which they were offered to such shareholders. Any such shares, obligations or other securities not so issued, sold or optioned during such one-year period, shall at the expiration of such period again be subject to preemptive rights of shareholders.

L.1968, c.350; amended 1973,c.366,s.20; 1988,c.94,s.23; 1995,c.279,s.6.