Law 514 Corporations Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com  Control Shares – Acquirer of designated % of target shares can’t shares unless target board approves bid. Forces proxy contest if board not approve.  Business Combination Bar – Acquire of designated % of target’s shares can’t enter into any business combination with target unless target board approves. Often coupled with fairness standards for a number of years.  Poison Pill Laws – Statute specifically authorizes pill.  Constituency Laws – Statute authorizes board to consider interests of employees, customers, community (etc) in rejecting tender offer.  Delaware – 3 year combination bar unless target board approve, acquirer has more 85% vote, or 2/3 other shareholders approve. State Anti-Takeover Statutes

Law 514 Corporations Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 23B : Legislative Findings – Broad State Interests 23B : Key definitions - Acquiring person threshold 10% - Control presumed if person hold 10% - Significant business transaction includes any merger, share exchange, consolidation, 5% asset purchase, 5% employee termination, discriminatory stock issuance or redemption, liquidation of target. - Target includes (1) any domestic public company (’34 Act section 12 or 15), (2) any other domestic company that elects through articles that elects to have stature apply, (3) any foreign exchange act company that has principle executive office in state, more than 10% shareholders or shares in state (or 1000 shareholders), majority of employees in state (or over 1000 employees), and majority of tangible assets in state (or over 50 mill of tangible assets) Washington Anti-Takeover Statute 23B

Law 514 Corporations Instructor: Dwight Drake Copyright 2005 Dwight Drake. All Rights Reserved. Business Planning: Closely Held Enterprises www. drake-business-planning.com 23B : Requirements No significant business transaction between acquirer and target for 5 years unless target board approves. Proposal deemed rejected unless approved by board. If not approved by target board and outside 5 year window, any merger or liquidation must pay target shareholders price at least equal to greater of highest price paid by acquire after 5% ownership (increased for interest) or market value of stock on transaction announcement date or acquirer acquisition date (whichever higher and increased for interest). Any significant transaction that not comply with above is void. Washington Anti-Takeover Statute 23B