Section 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).