2006 Code of Virginia § 13.1-730 - Right to appraisal

13.1-730. Right to appraisal.

A. A shareholder is entitled to appraisal rights, and to obtain payment ofthe fair value of that shareholder's shares, in the event of any of thefollowing corporate actions:

1. Consummation of a merger to which the corporation is a party (i) ifshareholder approval is required for the merger by 13.1-718 and theshareholder is entitled to vote on the merger, except that appraisal rightsshall not be available to any shareholder of the corporation with respect toshares of any class or series that remain outstanding after consummation ofthe merger, or (ii) if the corporation is a subsidiary and the merger isgoverned by 13.1-719;

2. Consummation of a share exchange to which the corporation is a party asthe corporation whose shares will be acquired if the shareholder is entitledto vote on the exchange, except that appraisal rights shall not be availableto any shareholder of the corporation with respect to any class or series ofshares of the corporation that is not exchanged;

3. Consummation of a disposition of assets pursuant to 13.1-724 if theshareholder is entitled to vote on the disposition;

4. An amendment of the articles of incorporation with respect to a class orseries of shares that reduces the number of shares of a class or series ownedby the shareholder to a fraction of a share if the corporation has theobligation or right to repurchase the fractional share so created; or

5. Any other amendment to the articles of incorporation, merger, shareexchange or disposition of assets to the extent provided by the articles ofincorporation, bylaws or a resolution of the board of directors.

B. Notwithstanding subsection A, the availability of appraisal rights undersubdivisions A 1 through A 4 shall be limited in accordance with thefollowing provisions:

1. Appraisal rights shall not be available for the holders of shares of anyclass or series of shares that is:

a. Listed on the New York Stock Exchange or the American Stock Exchange ordesignated as a national market system security on an interdealer quotationsystem by the National Association of Securities Dealers, Inc.; or

b. Not so listed or designated, but has at least 2,000 shareholders and theoutstanding shares of such class or series have a market value of at least$20 million, exclusive of the value of such shares held by the corporation'ssubsidiaries, senior executive officers, directors and beneficialshareholders owning more than 10 percent of such shares.

2. The applicability of subdivision 1 of this subsection shall be determinedas of:

a. The record date fixed to determine the shareholders entitled to receivenotice of, and to vote at, the meeting of shareholders to act upon thecorporate action requiring appraisal rights; or

b. The day before the effective date of such corporate action if there is nomeeting of shareholders.

3. Subdivision 1 of this subsection shall not be applicable and appraisalrights shall be available pursuant to subsection A for the holders of anyclass or series of shares who are required by the terms of the corporateaction requiring appraisal rights to accept for such shares anything otherthan cash or shares of any class or any series of shares of any corporation,or any other proprietary interest of any other entity, that satisfies thestandards set forth in subdivision 1 of this subsection at the time thecorporate action becomes effective.

4. Subdivision 1 of this subsection shall not be applicable and appraisalrights shall be available pursuant to subsection A for the holders of anyclass or series of shares where:

a. Any of the shares or assets of the corporation are being acquired orconverted, whether by merger, share exchange or otherwise, pursuant to thecorporate action by a person, or by an affiliate of a person, who:

(1) Is, or at any time in the one-year period immediately preceding approvalby the board of directors of the corporate action requiring appraisal rightswas, the beneficial owner of 20 percent or more of the voting power of thecorporation, excluding any shares acquired pursuant to an offer for allshares having voting power if such offer was made within one year prior tothe corporate action requiring appraisal rights for consideration of the samekind and of a value equal to or less than that paid in connection with thecorporate action; or

(2) Directly or indirectly has, or at any time in the one-year periodimmediately preceding approval by the board of directors of the corporationof the corporate action requiring appraisal rights had, the power,contractually or otherwise, to cause the appointment or election of 25percent or more of the directors to the board of directors of thecorporation; or

b. Any of the shares or assets of the corporation are being acquired orconverted, whether by merger, share exchange or otherwise, pursuant to suchcorporate action by a person, or by an affiliate of a person, who is, or atany time in the one-year period immediately preceding approval by the boardof directors of the corporate action requiring appraisal rights was, a seniorexecutive officer or director of the corporation or a senior executiveofficer of any affiliate thereof, and that senior executive officer ordirector will receive, as a result of the corporate action, a financialbenefit not generally available to other shareholders as such, other than:

(1) Employment, consulting, retirement or similar benefits establishedseparately and not as part of or in contemplation of the corporate action;

(2) Employment, consulting, retirement or similar benefits established incontemplation of, or as part of, the corporate action that are not morefavorable than those existing before the corporate action or, if morefavorable, that have been approved on behalf of the corporation in the manneras is provided in 13.1-691; or

(3) In the case of a director of the corporation who will, in the corporateaction, become a director of the acquiring entity in the corporate action orone of its affiliates, rights and benefits as a director that are provided onthe same basis as those afforded by the acquiring entity generally to otherdirectors of such entity or such affiliate.

5. For the purposes of subdivision 4 of this subsection only, the term"beneficial owner" means any person who, directly or indirectly, throughany contract, arrangement or understanding, other than a revocable proxy, hasor shares the power to vote, or to direct the voting of, shares, providedthat a member of a national securities exchange shall not be deemed to be abeneficial owner of securities held directly or indirectly by it on behalf ofanother person solely because such member is the record holder of suchsecurities if the member is precluded by the rules of such exchange fromvoting without instruction on contested matters or matters that may affectsubstantially the rights or privileges of the holders of the securities to bevoted. When two or more persons agree to act together for the purpose ofvoting their shares of the corporation, each member of the group formedthereby shall be deemed to have acquired beneficial ownership, as of the dateof such agreement, of all voting shares of the corporation beneficially ownedby any member of the group.

C. Notwithstanding any other provision of this section, the articles ofincorporation as originally filed or any amendment thereto may limit oreliminate appraisal rights for any class or series of preferred shares, butany such limitation or elimination contained in an amendment to the articlesof incorporation that limits or eliminates appraisal rights for any of suchshares that are outstanding immediately prior to the effective date of suchamendment or that the corporation is or may be required to issue or sellthereafter pursuant to any conversion, exchange or other right existingimmediately before the effective date of such amendment shall not apply toany corporate action that becomes effective within one year of that date ifsuch action would otherwise afford appraisal rights.

D. A shareholder may not challenge a completed corporate action described insubsection A, unless such corporate action:

1. Was not effectuated in accordance with the applicable provisions ofArticles 11 ( 13.1-705 et seq.), 12 ( 13.1-715.1 et seq.) or 13 ( 13.1-723et seq.) of this chapter or the corporation's articles of incorporation,bylaws or board of directors' resolution authorizing the corporate action; or

2. Was procured as a result of fraud or material misrepresentation.

(Code 1950, 13-85, 13.1-75, 13.1-78; 1956, c. 428; 1968, c. 733; 1972, c.425; 1975, c. 500; 1984, c. 613; 1985, c. 522; 1986, c. 540; 1988, c. 442;1990, c. 229; 1992, c. 575; 1996, c. 246; 1999, c. 288; 2005, c. 765.)