REPRESENTATIVES Willamowski, Seitz, Sulzer, Manning

To amend sections 1701.11, 1701.16, 1701.58, and

1

1701.71 of the Revised Code to restrict shareholder

2

removal of directors on a classified board of

3

directors of issuing public corporations to removal

4

for cause, to require in addition to existing law's

5

requirements that an amendment to declassify such a

6

board be with the approval of a majority of the

7

shares held by voting disinterested shareholders,

8

and to confirm the authority of directors to redeem

9

options.

10

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1. That sections 1701.11, 1701.16, 1701.58, and	11
1701.71 of the Revised Code be amended to read as follows:	12

Sec. 1701.11.  (A)(1) Regulations for the government of a	13
corporation, the conduct of its affairs, and the management of its	14
property, consistent with law and the articles, may be adopted in	15
any of the following ways:	16

(a) Within ninety days after the corporation is formed, by	17
the directors in accordance with section 1701.10 of the Revised	18
Code;	19

(b) By the shareholders at a meeting held for that purpose,	20
by the affirmative vote of the holders of shares entitling them to	21
exercise a majority of the voting power of the corporation on the	22
proposal;	23

(c) Without a meeting, by the written consent of the holders	24
of shares entitling them to exercise two-thirds of the voting	25
power of the corporation on the proposal.	26

(2) TheExcept as otherwise provided in division (A)(4) of	27
this section, the regulations may be amended, or new regulations	28
may be adopted, in either of the following ways:	29

(a) By the shareholders at a meeting held for that purpose,	30
by the affirmative vote of the holders of shares entitling them to	31
exercise a majority of the voting power of the corporation on the	32
proposal;	33

(b) Without a meeting, by the written consent of the holders	34
of shares entitling them to exercise two-thirds of the voting	35
power of the corporation on the proposal.	36

(3) IfExcept as otherwise provided in division (A)(4) of	37
this section, if the articles or regulations that have been	38
adopted so provide or permit, regulations may be adopted or	39
amended or new regulations may be adopted by the affirmative vote	40
or written consent of the holders of shares entitling them to	41
exercise a greater or lesser proportion but not less than a	42
majority of the voting power of the corporation.	43

(4) Any amendment of regulations and any amended or new	44
regulations adopted by shareholders of an issuing public	45
corporation whose directors are classified pursuant to section	46
1701.57 of the Revised Code that would change or eliminate the	47
classification of directors shall be adopted by the shareholders	48
only at a meeting held for that purpose, by the affirmative vote	49
of holders of shares entitling them to exercise the voting power	50
of the corporation that is required for shareholders at a meeting	51
under division (A)(2)(a) or (3) of this section, and also by the	52
affirmative vote of the holders of a majority of disinterested	53
shares voted on the proposal determined as specified in division	54
(C)(9) of section 1704.01 of the Revised Code.	55

(B) Without limiting the generality of the authority	56
described in division (A) of this section, the regulations may	57
include provisions with respect to all of the following:	58

(1) The time and place for holding, the manner of and	59
authority for calling, giving notice of, and conducting, and the	60
requirements of a quorum for, meetings of shareholders;	61

(2) The taking of a record of shareholders or the temporary	62
closing of books against transfers of shares;	63

(3) The number, classification, manner of fixing or changing	64
the number, qualifications, term of office, and compensation or	65
manner of fixing compensation, of directors;	66

(4) The time and place for holding, the manner of and	67
authority for calling, giving notice of, and conducting, and the	68
requirements of a quorum for, meetings of the directors;	69

(5) The appointment of an executive and other committees of	70
the directors, and their authority;	71

(6) The titles, qualifications, duties, term of office,	72
compensation or manner of fixing compensation, and the removal, of	73
officers;	74

(7) The terms on which new certificates for shares may be	75
issued in the place of lost, stolen, or destroyed certificates;	76

(8) The manner in which and conditions upon which a	77
certificated security, and the conditions upon which an	78
uncertificated security, and the shares represented by a	79
certificated or uncertificated security, may be transferred,	80
restrictions on the right to transfer the shares, and reservations	81
of liens on the shares;	82

(9)(a) Restrictions on the transfer and the right to	83
transfer shares of either of the following:	84

(i) An issuing public corporation to any person in a control	85
share acquisition;	86

(ii) A corporation with fifty or more shareholders to any	87
person in an acquisition that would be a control share acquisition	88
if the corporation were an issuing public corporation.	89

(b) The restrictions on the transfer and the right to	90
transfer shares described in division (B)(9)(a)(i) and (ii) of	91
this section may include requirements and procedures for consent	92
to an acquisition of the shares by directors based on a	93
determination by the directors of the best interests of the	94
corporation and its shareholders, consent to an acquisition of the	95
shares by shareholders, and reasonable sanctions for a violation	96
of those requirements, including the right of the corporation to	97
refuse to transfer, to redeem, or to deny voting or other	98
shareholder rights appurtenant to shares acquired in an	99
acquisition of the shares.	100

(10) Defining, limiting, or regulating the exercise of the	101
authority of the corporation, the directors, the officers, or all	102
the shareholders.	103

(C) The shareholders of a corporation may adopt and may	104
authorize the directors to adopt, either before or during an	105
emergency, as that term is defined in division (U) of section	106
1701.01 of the Revised Code, emergency regulations that shall be	107
operative only during an emergency. The emergency regulations may	108
include any provisions that are authorized to be included in	109
regulations by divisions (A) and (B) of this section. In	110
addition, unless expressly prohibited by the articles or the	111
regulations, the emergency regulations may make any provision,	112
notwithstanding any different provisions in this chapter and	113
notwithstanding any different provisions in the articles or the	114
regulations that are not expressly stated to be operative during	115
an emergency, that may be practical or necessary with respect to	116
the following:	117

(1) The time and place for holding, the manner of and	118
authority for calling, giving notice of, and conducting, and the	119
requirements of a quorum for, meetings of the directors;	120

(2) The creation and appointment of an executive and other	121
committees of the directors and the delegation of authority to the	122
committees by the board;	123

(3) The creation, existence, and filling of vacancies,	124
including temporary vacancies, in the office of director;	125

(4) The selection, by appointment, election, or otherwise,	126
of officers and other persons to serve as directors for a meeting	127
of the board in the absence from the meeting of one or more of the	128
directors;	129

(5) The creation, existence, and filling of vacancies,	130
including temporary vacancies, in any office;	131

(6) The order of rank and the succession to the duties and	132
authority of officers.	133

(D) If the regulations are amended or new regulations are	134
adopted, without a meeting of the shareholders, the secretary of	135
the corporation shall mail a copy of the amendment or the new	136
regulations to each shareholder who would have been entitled to	137
vote on the adoption of the amendment or the new regulations and	138
did not participate in the adoption of the amendment or the new	139
regulations.	140

(E) No person dealing with the corporation shall be charged	141
with constructive notice of the regulations.	142

(F) Unless expressly prohibited by the articles or the	143
regulations or unless otherwise provided by the emergency	144
regulations, the following special rules shall be applicable	145
during an emergency notwithstanding any different provision	146
elsewhere in this chapter:	147

(1) Meetings of the directors may be called by any officer	148
or director.	149

(2) Notice of the time and place of each meeting of the	150
directors shall be given to such of the directors as it may be	151
feasible to reach at the time and by the means of communication,	152
written or oral, personal or mass, as may be practicable at the	153
time.	154

(3) The director or directors present at any meeting of the	155
directors that has been duly called and notice of which has been	156
duly given shall constitute a quorum for the meeting, and, in the	157
absence of one or more of the directors, the director or directors	158
present may appoint one or more of the officers of the corporation	159
directors for the meeting.	160

(4) If none of the directors attends a meeting of the	161
directors that has been duly called and notice of which has been	162
duly given, the officers of the corporation who are present, not	163
exceeding three, in order of rank, shall be directors for the	164
meeting, shall constitute a quorum for the meeting, and may	165
appoint one or more of the other officers of the corporation	166
directors for the meeting.	167

(5) If the chief executive officer dies, is missing, or for	168
any other reason is temporarily or permanently incapable of	169
discharging the duties of the office, the next ranking officer who	170
is available shall assume the duties and authority of the office	171
of the deceased, missing, or incapacitated chief executive officer	172
until such time as the directors shall otherwise order.	173

(6) The offices of secretary and treasurer shall be deemed	174
to be of equal rank, and, within the same office and as between	175
the offices of secretary and treasurer, rank shall be determined	176
by priority in time of the first election to the office or, if two	177
or more persons have been first elected to the office at the same	178
time, by seniority in age.	179

Sec. 1701.16.  (A) Unless the articles otherwise provide, a	180
corporation by its directors may grant options to subscribe for or	181
to purchase shares of any authorized class at the times and on the	182
terms that are set forth in the securities, or in the contracts,	183
warrants or instruments that evidence the options, which	184
contracts, warrants, or instruments may be transferable or	185
nontransferable and may be separable or inseparable from	186
securities, upon the following conditions:	187

(1) If the shares are subject to preemptive rights and if	188
the options are not granted to shareholders in satisfaction of	189
their preemptive rights, the granting of the options must be	190
authorized by the vote or consent of the shareholders or holders	191
of shares of particular classes that then would be required to	192
waive or release such preemptive rights. The vote or consent	193
shall release the preemptive rights to the shares required to	194
satisfy the options if and when exercised.	195

(2) If, at the time of granting the options, the corporation	196
does not have authorized and unissued shares sufficient to satisfy	197
the options if and when exercised, the granting of the options	198
must be authorized by the vote of the shareholders or holders of	199
shares of particular classes that then would be required to adopt	200
an amendment to the articles for the purpose of increasing the	201
authorized number of such shares, and the shares required to be	202
issued upon the exercise of the options shall be provided by an	203
amendment concurrently or thereafter adopted by the shareholders	204
or the directors.	205

(B)(1) The securities, contracts, warrants, or instruments	206
that evidence the options may contain any terms not repugnant to	207
law for the protection of the holders of the options, including,	208
but not limited to, the following:	209

(a) Restrictions upon the authorization or issuance of	210
additional shares;	211

(b) Provisions for the adjustment of the option price;

212

(c) Provisions concerning rights in the event of	213
reorganization, merger, consolidation, or sale of the entire	214
assets of the corporation;	215

(d) Provisions for the reservation of authorized but	216
unissued shares to satisfy the options;	217

(e) Restrictions upon the declaration or payment of	218
dividends or distributions;	219

(f) Conditions on the exercise or redemption of the options,	220
including, subject to the limitation specified in division (B)(2)	221
of this section, conditions that preclude the holder or holders of	222
at least a specified number or percentage of the outstanding	223
common shares of a corporation from exercising or redeeming the	224
options.	225

(2) The express or implied authority conferred by division	226
(B)(1) of this section or any other section of this chapter for	227
securities, contracts, warrants, or instruments that evidence	228
options to contain a condition on the exercise or redemption of	229
options that precludes the holder or holders of at least a	230
specified number or percentage of the outstanding common shares of	231
a corporation from exercising or redeeming options shall apply	232
only to the following:	233

(a) A corporation that has issued and outstanding shares	234
listed on a national securities exchange or regularly quoted in an	235
over-the-counter market by one or more members of a national or	236
affiliated securities association;	237

(b) A corporation that has adopted a close corporation	238
agreement pursuant to which options are granted, if the	239
securities, contracts, warrants, or instruments that evidence the	240
options contain a condition that precludes the holder or holders	241
of at least a specified number or percentage of the outstanding	242
common shares of that corporation from exercising or redeeming the	243
options.	244

(C) As used in this section, "securities" includes	245
obligations and shares of the corporation.	246

Sec. 1701.58.  (A) The office of a director becomes vacant	247
if hethe director dies or resigns. A resignation shall take	248
effect immediately or at such other time as the director may	249
specify.	250

(B) The directors may remove any director and thereby create	251
a vacancy in the board:	252

(1) If by order of court hethe director has been found to	253
be of unsound mind, or if hethe director is adjudicated a	254
bankrupt;	255

(2) If within sixty days, or within such other period of	256
time as is prescribed in the articles or the regulations, from the	257
date of histhe director's election hethe director does not	258
qualify by accepting in writing histhe director's election to	259
such office or by acting at a meeting of the directors, and by	260
acquiring the qualifications specified in the articles or the	261
regulations; or if, for such period as is prescribed in the	262
articles or the regulations, hethe director ceases to hold the	263
required qualifications.	264

(C) IfExcept as otherwise provided in this division, if the	265
shareholders have a right to vote cumulatively in the election of	266
directors, then, unless the articles or the regulations expressly	267
provide that no director may be removed from office or that	268
removal of directors requires a greater vote than that specified	269
in this division, all the directors, all the directors of a	270
particular class, or any individual director may be removed from	271
office, without assigning any cause, by the vote of the holders of	272
a majority of the voting power entitling them to elect directors	273
in place of those to be removed, except that, unless all the	274
directors, or all the directors of a particular class, are	275
removed, no individual director shall be removed if the votes of a	276
sufficient number of shares are cast against histhe director's	277
removal that, if cumulatively voted at an election of all the	278
directors, or all the directors of a particular class, as the case	279
may be, would be sufficient to elect at least one director. In the	280
case of an issuing public corporation whose directors are	281
classified pursuant to section 1701.57 of the Revised Code, the	282
shareholders may effect a removal under this division only for	283
cause.	284

(D) If the shareholders do not have the right to vote	285
cumulatively as a result of an amendment to the articles permitted	286
by division (B)(10) of section 1701.69 of the Revised Code, then,	287
unless the articles or the regulations expressly provide that no	288
director may be removed from office or that removal of directors	289
requires a greater vote than that specified in this division, all	290
the directors, all the directors of a particular class, or any	291
individual director may be removed from office, without assigning	292
any cause, by the vote of the holders of a majority of the voting	293
power entitling them to elect directors in place of those to be	294
removed; except that in the case of an issuing public corporation	295
whose directors are classified pursuant to section 1701.57 of the	296
Revised Code, the shareholders may effect that removal only for	297
cause.	298

(E) In case of any removal pursuant to division (C) or (D)	299
of this section, a new director may be elected at the same meeting	300
for the unexpired term of each director removed. Failure to elect	301
a director to fill the unexpired term of any director removed is	302
deemed to create a vacancy in the board.	303

(F) Unless the articles or the regulations otherwise	304
provide, the remaining directors, though less than a majority of	305
the whole authorized number of directors, may, by the vote of a	306
majority of their number, fill any vacancy in the board for the	307
unexpired term. Under this section, a vacancy exists if the	308
shareholders increase the authorized number of directors but fail	309
at the meeting at which such increase is authorized, or an	310
adjournment of that meeting, to elect the additional directors	311
provided for, or if the shareholders fail at any time to elect the	312
whole authorized number of directors.	313

Sec. 1701.71.  (A)(1) Except as otherwise provided in this	314
division or division (A)(2) of this section, the shareholders, at	315
a meeting held for that purpose, may adopt an amendment, including	316
any amendment that could be adopted by the directors, by the	317
affirmative vote of the holders of shares entitling them to	318
exercise two-thirds of the voting power of the corporation on the	319
proposal or, if the articles provide or permit, by the affirmative	320
vote of a greater or lesser proportion, but not less than a	321
majority, of such voting power, and by the affirmative vote of the	322
holders of shares of any particular class that is required by the	323
articles. Any amendment that would change or eliminate the	324
classification of directors of an issuing public corporation whose	325
directors are classified pursuant to section 1701.57 of the	326
Revised Code shall be adopted by the shareholders only at a	327
meeting expressly held for that purpose, by the affirmative votes	328
required under this division, and also by the affirmative vote of	329
the holders of at least a majority of disinterested shares voted	330
on the proposal determined as specified in division (C)(9) of	331
section 1704.01 of the Revised Code. If, at the time an amendment	332
to eliminate cumulative voting rights permitted by division	333
(B)(10) of section 1701.69 of the Revised Code is acted upon by	334
the shareholders, a corporation does not have issued and	335
outstanding shares that are listed on a national securities	336
exchange or are regularly quoted in an over-the-counter market by	337
one or more members of a national or affiliated securities	338
association, that amendment shall not be adopted if the votes of a	339
sufficient number of shares are cast against the amendment that,	340
if cumulatively voted at an election of all the directors, or all	341
the directors of a particular class, as the case may be, would at	342
the time the amendment is acted upon by the shareholders be	343
sufficient to elect at least one director.	344

(2) Whenever under division (B) of this section the holders	345
of shares of any particular class are entitled to vote as a class	346
on the adoption of an amendment, the amendment, in order to be	347
adopted, must receive the affirmative vote of the holders of at	348
least two-thirds of the shares of that class or, if the articles	349
provide or permit, a greater or lesser proportion, but not less	350
than a majority, of the shares of that class. If the proposed	351
amendment would authorize any particular corporate action that,	352
under any applicable provision of law or under the existing	353
articles, could be authorized only by or pursuant to a specified	354
vote of shareholders, the amendment, in order to be adopted, must	355
receive the affirmative vote so specified.	356

(B) Regardless of limitations or restrictions in the	357
articles on the voting rights of the shares of any class, the	358
holders of shares of a particular class, and in the cases	359
specified in divisions (B)(6), (7), and (8) of this section the	360
holders of shares of every class, shall be entitled to vote as a	361
class on the adoption of an amendment that does any of the	362
following:	363

(1) Increases or decreases the par value of the issued	364
shares of the particular class;	365

(2) Changes issued shares of the particular class, whether	366
with or without par value, into a lesser number of shares of the	367
same class or into the same or a different number of shares of any	368
other class, with or without par value, previously or then	369
authorized;	370

(3) Changes the express terms, or adds express terms, of the	371
shares of the particular class in any manner substantially	372
prejudicial to the holders of the shares;	373

(4) Changes the express terms of issued shares of any class	374
senior to the particular class in any manner substantially	375
prejudicial to the holders of shares of the particular class;	376

(5) Authorizes shares of another class that are convertible	377
into, or authorizes the conversion of shares of another class	378
into, shares of the particular class, or authorizes the directors	379
to fix or alter conversion rights of shares of another class that	380
are convertible into shares of the particular class; provided,	381
however, both of the following apply:	382

(a) The failure to obtain the shareholders' approval only	383
prevents the conversion of the shares until the shareholders'	384
approval is obtained and does not otherwise affect the	385
authorization or any other express terms of the shares;	386

(b) The articles may provide that no vote of the holders of	387
common shares, as a class, is required in connection with the	388
authorization of shares of any class that are convertible into	389
common shares.	390

(6) Provides, in the case of an amendment described in	391
division (B)(1) or (2) of this section, that the stated capital of	392
the corporation shall be reduced or eliminated as a result of the	393
amendment, or provides, in the case of an amendment described in	394
division (B)(5) of this section, that the stated capital of the	395
corporation shall be reduced or eliminated upon the exercise of	396
such conversion rights, provided that any reduction or elimination	397
is consistent with section 1701.30 of the Revised Code;	398

(7) Changes substantially the purposes of the corporation,	399
or provides that a subsequent amendment to the articles may be	400
adopted that changes substantially the purposes of the	401
corporation;	402

(8) Changes a corporation into a nonprofit corporation.

403

(C) An amendment that changes a corporation into a nonprofit	404
corporation shall contain a statement of purposes proper in the	405
case of a nonprofit corporation and a statement that, after the	406
effective date of the amendment, the corporation shall be subject	407
to the provisions of the Revised Code relating to nonprofit	408
corporations. In the case of a corporation formed on or after	409
June 9, 1927, the amendment also shall provide for the	410
cancellation of all outstanding shares and the terms and	411
considerations, if any, for the cancellation. In the case of a	412
corporation formed prior to June 9, 1927, the amendment may	413
provide for the cancellation of outstanding shares, but if it does	414
not so provide, the amendment shall contain a provision forbidding	415
the payment of dividends or distributions on any shares after the	416
effective date of the amendment.	417

Section 2. That existing sections 1701.11, 1701.16, 1701.58,	418
and 1701.71 of the Revised Code are hereby repealed.	419