17-18-201. Protection provisions; applicability; defined.
(a) A qualified corporation may, if its articles of incorporation authorize it to utilize the bondholder protection provisions of this act, utilize any of the provisions set forth in subsection (b) of this section. These protections shall apply only to bonds, debentures or other debt instruments whose original aggregate value at maturity is equal to or greater than five million dollars ($5,000,000.00) and whose original term is two (2) years or greater. Any number of bondholder protection provisions may be in effect at any time.
(b) A qualified corporation may provide bondholder protection by requiring any or all of the following:
(i) Bondholder approval of the replacement of more than twenty-four percent (24%) of the directors in any twelve (12) month period. The filling of vacancies created by the death or resignation of directors shall not be counted against the twenty-four percent (24%) limit provided that those vacancies are filled by nominees of the board of directors. If more than twenty-four percent (24%) of the directors are to be replaced, the approval of holders of a majority of the bonds shall be obtained in writing at the meeting where the directors are to be replaced or no more than thirty (30) days prior to the meeting. The consent of the bondholders shall be obtained to exceeding the twenty-four percent (24%) limit rather than to the individual directors to be replaced. If consent is denied, which directors are to be replaced shall be determined by the relative number of votes for each director by shares entitled to vote;
(ii) Bondholder consent to any merger or acquisition which the corporation may be subject to or which the corporation may make, subject to the following:
(A) The notice of bondholder protection shall specify the size of merger or acquisition at or above which the bondholder consent is required. The size may vary depending on whether the company is the acquiring party or is being acquired. In a merger the relative memberships on the board of directors of the surviving corporation may be used to determine whether or not bondholder consent is required;
(B) The term acquisition shall be deemed to include the purchase of more than a specified percentage of the shares entitled to vote for directors by a person or combination of persons under common ownership or control or acting in concert. If a person or combination of persons acquires more than the specified percentage of shares, they shall be entitled to vote only the specified percentage until bondholder consent is acquired. The specified percentage shall be set in the notice of bondholder protection and shall not be less than ten percent (10%);
(C) The bondholder consent shall be to a specific merger or acquisition rather than the general concept of mergers and acquisitions.
(iii) Bondholder consent to the sale or disposal of certain assets, or assets exceeding a certain percentage of the corporation's total assets, or assets exceeding a set total value or any combination of these factors. The specifics of what requires bondholder consent shall be set forth in the notice of bondholder protection. Disposal of assets shall be construed to include the disposition of the assets to the shareholders either directly or through distribution of shares in a new or subsidiary corporation;
(iv) Bondholder consent to the acquisition of debt above a specified percentage of total assets, a specified percentage of the net worth of the corporation, a specific amount, or any combination of these factors. The consent may be required generally or may be required only if the debt is to be used to pay for a merger or acquisition or a distribution to shareholders. The notice of bondholder protection shall specify the conditions under which bondholder consent is required.