REPORT TITLE:
Model Business Corporation Act


DESCRIPTION:
Updates Chapter 415, HRS, to make it more desirable for existing
Hawaii corporations to remain in the State and for new businesses
to incorporate in the State. (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2484
HOUSE OF REPRESENTATIVES                H.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO THE CORPORATIONS.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The Hawaii Revised Statutes is amended by adding
 
 2 a new chapter to be appropriately designated and to read as
 
 3 follows:
 
 4                             "CHAPTER
 
 5              HAWAII REVISED BUSINESS CORPORATION ACT
 
 6                    PART I.  GENERAL PROVISIONS
 
 7         -1  Short title.  This chapter shall be known and may be
 
 8 cited as the "Hawaii Revised Business Corporation Act".
 
 9         -2  Reservation of power to amend or repeal.  The
 
10 legislature has the power to amend or repeal all or part of this
 
11 chapter at any time and all domestic and foreign corporations
 
12 subject to this chapter are governed by the amendment or repeal.
 
13         -3  Definitions.  In this chapter:
 
14      "Articles of incorporation" include amended and restated
 
15 articles of incorporation and articles of merger.
 
16      "Authorized shares" means the shares of all classes a
 
17 domestic or foreign corporation is authorized to issue.
 
18      "Conspicuous" means so written that a reasonable person
 
19 against whom the writing is to operate should have noticed it.
 

 
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 1 For example, printing in italics or boldface or contrasting
 
 2 color, or typing in capitals or underlined, is conspicuous.
 
 3      "Corporation" or "domestic corporation" means a corporation
 
 4 for profit, which is not a foreign corporation, incorporated
 
 5 under or subject to this chapter.
 
 6      "Deliver" includes mail.
 
 7      "Department director" means the director of commerce and
 
 8 consumer affairs, unless the context otherwise requires.
 
 9      "Distribution" means a direct or indirect transfer of money
 
10 or other property (except its own shares) or incurrence of
 
11 indebtedness by a corporation to or for the benefit of its
 
12 shareholders in respect of any of its shares.  A distribution may
 
13 be in the form of a declaration or payment of a dividend; a
 
14 purchase, redemption, or other acquisition of shares; a
 
15 distribution of indebtedness; or otherwise.
 
16      "Effective date of notice" is defined in section    -14.
 
17      "Employee" includes an officer but not a director.  A
 
18 director may accept duties that make the director also an
 
19 employee.
 
20      "Entity" includes corporation and foreign corporation; not-
 
21 for-profit corporation; profit and not-for-profit unincorporated
 
22 association; business trust, estate, partnership, trust, and two
 
23 or more persons having a joint or common economic interest; and
 

 
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 1 state, United States, and foreign government.
 
 2      "Foreign corporation" means a corporation for profit
 
 3 incorporated under a law other than the law of this State.
 
 4      "Governmental subdivision" includes authority, county,
 
 5 district, and municipality.
 
 6      "Includes" denotes a partial definition.
 
 7      "Individual" includes the estate of an incompetent or
 
 8 deceased individual.
 
 9      "Means" denotes an exhaustive definition.
 
10      "Notice" is defined in section    -14.
 
11      "Person" includes individual and entity.
 
12      "Principal office" means the office (in or out of this
 
13 State) so designated in the annual report where the principal
 
14 executive offices of a domestic or foreign corporation are
 
15 located.
 
16      "Proceeding" includes civil suit and criminal,
 
17 administrative, and investigatory action.
 
18      "Record date" means the date established under part VI or
 
19 VII of this chapter on which a corporation determines the
 
20 identity of its shareholders and their shareholdings for purposes
 
21 of this chapter.  The determinations shall be made as of the
 
22 close of business on the record date unless another time for
 
23 doing so is specified when the record date is fixed.
 

 
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 1      "Secretary" means the corporate officer to whom the board of
 
 2 directors has delegated responsibility under section    -231(c)
 
 3 for preparation and custody of the minutes of the meetings of the
 
 4 board of directors and of the shareholders and for authenticating
 
 5 records of the corporation.
 
 6      "Shareholder" means the person in whose name shares are
 
 7 registered in the records of a corporation or the beneficial
 
 8 owner of shares to the extent of the rights granted by a nominee
 
 9 certificate on file with a corporation.
 
10      "Shares" means the units into which the proprietary
 
11 interests in a corporation are divided.
 
12      "State", when referring to a part of the United States,
 
13 includes a state and commonwealth (and their agencies and
 
14 governmental subdivisions) and a territory and insular possession
 
15 (and their agencies and governmental subdivisions) of the United
 
16 States.
 
17      "Subscriber" means a person who subscribes for shares in a
 
18 corporation, whether before or after incorporation.
 
19      "United States" includes district, authority, bureau,
 
20 commission, department, and any other agency of the United
 
21 States.
 
22      "Voting group" means all shares of one or more classes or
 
23 series that under the articles of incorporation or this chapter
 

 
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 1 are entitled to vote and be counted together collectively on a
 
 2 matter at a meeting of shareholders.  All shares entitled by the
 
 3 articles of incorporation or this chapter to vote generally on
 
 4 the matter are for that purpose a single voting group.
 
 5         -4  Notice.  (a)  Notice under this chapter must be in
 
 6 writing unless oral notice is reasonable under the circumstances.
 
 7      (b)  Notice may be communicated in person; by telephone,
 
 8 telegraph, teletype, or other form of wire or wireless
 
 9 communication; or by mail or private carrier.  If these forms of
 
10 personal notice are impracticable, notice may be communicated by
 
11 a newspaper of general circulation in the area where published;
 
12 or by radio; television, or other form of public broadcast
 
13 communication.
 
14      (c)  Written notice by a domestic or foreign corporation to
 
15 its shareholder, if in a comprehensible form, is effective when
 
16 mailed, if mailed postpaid and correctly addressed to the
 
17 shareholder's address shown in the corporation's current record
 
18 of shareholders.
 
19      (d)  Written notice to a domestic or foreign corporation
 
20 (authorized to transact business in this State) may be addressed
 
21 to its registered agent at its registered office or to the
 
22 corporation or its secretary at its principal office shown in its
 
23 most recent annual report or, in the case of a foreign
 

 
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 1 corporation that has not yet delivered an annual report, in its
 
 2 application for a certificate of authority.
 
 3      (e)  Except as provided in subsection (c), written notice,
 
 4 if in a comprehensible form, is effective at the earliest of the
 
 5 following:
 
 6      (1)  When received;
 
 7      (2)  Five days after its deposit in the United States Mail,
 
 8           as evidenced by the postmark, if mailed postpaid and
 
 9           correctly addressed; or
 
10      (3)  On the date shown on the return receipt, if sent by
 
11           registered or certified mail, return receipt requested,
 
12           and the receipt is signed by or on behalf of the
 
13           addressee.
 
14      (f)  Oral notice is effective when communicated if
 
15 communicated in a comprehensible manner.
 
16      (g)  If this chapter prescribes notice requirements for
 
17 particular circumstances, those requirements govern.  If articles
 
18 of incorporation or bylaws prescribe notice requirements not
 
19 inconsistent with this section or other provisions of this
 
20 chapter, those requirements govern.
 
21         -5  Number of shareholders.  (a)  For purposes of this
 
22 chapter, the following identified as a shareholder in a
 
23 corporation's current record of shareholders constitutes one
 

 
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 1 shareholder:
 
 2      (1)  Three or fewer coowners;
 
 3      (2)  A corporation, partnership, trust, estate, or other
 
 4           entity; or
 
 5      (3)  The trustees, guardians, custodians, or other
 
 6           fiduciaries of a single trust, estate, or account.
 
 7      (b)  For purposes of this chapter, shareholdings registered
 
 8 in substantially similar names constitute one shareholder if it
 
 9 is reasonable to believe that the names represent the same
 
10 person.
 
11         -6  Department director; powers.  The director of
 
12 commerce and consumer affairs for the State of Hawaii has the
 
13 power reasonably necessary to perform the duties required of the
 
14 department director by this chapter, and to administer this
 
15 chapter efficiently.  The department director shall adopt
 
16 necessary rules, subject to chapter 91.
 
17                    PART II.  FILING DOCUMENTS
 
18         -11  Filing requirements.  (a)  A document must satisfy
 
19 the requirements of this section, and of any other section that
 
20 adds to or varies these requirements, to be entitled to filing by
 
21 the department director.
 
22      (b)  This chapter must require or permit filing the document
 
23 in the office of the department director.
 

 
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 1      (c)  The document must contain the information required by
 
 2 this chapter.  It may contain other information as well.
 
 3      (d)  The document must be typewritten or printed.
 
 4      (e)  The document must be in the English language.  A
 
 5 corporate name need not be in English if written in English
 
 6 letters or Arabic or Roman numerals, and the certificate of
 
 7 existence required of foreign corporations need not be in English
 
 8 if accompanied by a reasonably authenticated English translation.
 
 9      (f)  The document must be certified and executed:
 
10      (1)  By the chairperson of the board of directors of a
 
11           domestic or foreign corporation, by its president, or
 
12           by another of its officers;
 
13      (2)  If directors have not been selected or the corporation
 
14           has not been formed, by an incorporator; or
 
15      (3)  If the corporation is in the hands of a receiver,
 
16           trustee, or other court-appointed fiduciary, by that
 
17           fiduciary.
 
18      (g)  The person executing the document shall sign it and
 
19 state beneath or opposite that person's signature the person's
 
20 name and the capacity in which the person signs.  The document
 
21 may but need not contain:
 
22      (1)  The corporate seal;
 
23      (2)  An attestation by the secretary or an assistant
 

 
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 1           secretary; or
 
 2      (3)  An acknowledgment, verification, or proof.
 
 3      (h)  If the department director has prescribed a mandatory
 
 4 form for the document under section    -12, the document must be
 
 5 in or on the prescribed form.
 
 6      (i)  The document must be delivered to the office of the
 
 7 department director for filing and must be accompanied by one
 
 8 exact or conformed copy (except as provided in sections    -63
 
 9 and    -439), the correct filing fee, and any penalty required by
 
10 this chapter.
 
11         -12  Forms.  (a)  The department director may prescribe
 
12 and furnish on request forms for:
 
13      (1)  An application for a certificate of existence;
 
14      (2)  A foreign corporation's application for a certificate
 
15           of authority to transact business in this State;
 
16      (3)  A foreign corporation's application for a certificate
 
17           of withdrawal; and
 
18      (4)  The annual report.
 
19 If the department director so requires, use of these forms is
 
20 mandatory.
 
21      (b)  The department director may prescribe and furnish on
 
22 request forms for other documents required or permitted to be
 
23 filed by this chapter but their use is not mandatory.
 

 
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 1         -13  Filing, service, and copying fees.  (a)  The
 
 2 following fees shall be paid to the department director upon the
 
 3 filing of corporate documents:
 
 4      (1)  Articles of incorporation, $100;
 
 5      (2)  Articles of amendment, $50;
 
 6      (3)  Restated articles of incorporation, $50;
 
 7      (4)  Articles of conversion, merger, or consolidation, $200;
 
 8      (5)  Articles of merger (subsidiary corporation), $100;
 
 9      (6)  Articles of dissolution, $50;
 
10      (7)  Annual report of domestic and foreign corporations
 
11           organized for profit, $25;
 
12      (8)  Agent's statement of change of registered office, $50
 
13           for each affected domestic corporation or foreign
 
14           corporation, except if simultaneous filings are made
 
15           the fee is reduced to $1 for each affected domestic
 
16           corporation or foreign corporation in excess of two
 
17           hundred;
 
18      (9)  Any other statement, report, certificate, application,
 
19           or other corporate document, except an annual report,
 
20           of a domestic or foreign corporation, $50;
 
21     (10)  Application for a certificate of authority, $100;
 
22     (11)  Application for a certificate of withdrawal, $50;
 
23     (12)  Reservation of corporate name, $20;
 

 
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 1     (13)  Transfer of reservation of corporate name, $20;
 
 2     (14)  Good standing certificate, $25;
 
 3     (15)  Special handling fee for review of corporation
 
 4           documents, excluding articles of conversion, merger, or
 
 5           consolidation, $50;
 
 6     (16)  Special handling fee for review of articles of
 
 7           conversion, merger, or consolidation, $150;
 
 8     (17)  Special handling fee for certificates issued by the
 
 9           department, $20 per certificate; and 
 
10     (18)  Special handling fee for certification of documents, $1
 
11           per page.
 
12      (b)  All special handling fees shall be credited to the
 
13 special fund established for use by the department of commerce
 
14 and consumer affairs in expediting the processing of documents.
 
15 At least two temporary business registration assistant I
 
16 positions shall be paid out of the special fund.
 
17      (c)  The department director shall adjust the fees assessed
 
18 under this section, as necessary from time to time, through rules
 
19 adopted under chapter 91.
 
20      (d)  The department director shall charge and collect:
 
21      (1)  For furnishing a certified copy of any document,
 
22           instrument, or paper relating to a corporation, 25
 
23           cents per page and $10 for the certificate and affixing
 

 
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 1           the seal thereto; and
 
 2      (2)  At the time of any service of process on the department
 
 3           director as agent for service of process of a
 
 4           corporation, $25, which amount may be recovered as
 
 5           taxable costs by the party to the suit or action
 
 6           causing the service to be made if the party prevails in
 
 7           the suit or action.
 
 8         -14  Effective time and date of document.  (a)  Except
 
 9 as provided in subsection (b) and section    -15(c), a document
 
10 accepted for filing is effective at the time of filing on the
 
11 date it is filed, as evidenced by the department director's date
 
12 and time endorsement on the original document.
 
13      (b)  Articles of dissolution and articles of merger or
 
14 consolidation may specify a delayed effective time and date, and
 
15 if it does so the document becomes effective at the time and date
 
16 specified.  If a delayed effective date but no time is specified,
 
17 the document is effective at the close of business on that date.
 
18 A delayed effective date for a document may not be later than the
 
19 thirtieth day after the date it is filed.
 
20         -15  Correcting filed document.  (a)  A domestic or
 
21 foreign corporation may correct a document filed by the
 
22 department director if the document:
 
23      (1)  Contains an incorrect statement; or
 

 
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 1      (2)  Was defectively executed, attested, sealed, verified,
 
 2           or acknowledged.
 
 3      (b)  A document is corrected by:
 
 4      (1)  Preparing articles of correction that:
 
 5           (A)  Describe the document (including its filing date)
 
 6                or attach a copy of it to the articles;
 
 7           (B)  Specify the incorrect statement and the reason it
 
 8                is incorrect or the manner in which the execution
 
 9                was defective; and
 
10           (C)  Correct the incorrect statement or defective
 
11                execution; and
 
12      (2)  Delivering the articles of correction to the department
 
13           director for filing.
 
14      (c)  Articles of correction are effective on the effective
 
15 date of the document they correct except as to persons relying on
 
16 the uncorrected document and adversely affected by the
 
17 correction.  As to those persons, articles of correction are
 
18 effective when filed.
 
19         -16  Filing duty of department director.  (a)  If a
 
20 document delivered to the department director for filing
 
21 satisfies the requirements of section    -11, the department
 
22 director shall file it.
 
23      (b)  The department director files a document by stamping or
 

 
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 1 otherwise endorsing "Filed," together with the date and time of
 
 2 receipt, on both the original and the document copy.  After
 
 3 filing a document, except as provided in sections    -63 and
 
 4    -439, the department director shall deliver the document copy,
 
 5 stamped with the date and time of receipt, to the domestic or
 
 6 foreign corporation or its representative.
 
 7      (c)  If the department director refuses to file a document,
 
 8 the department director shall return it to the domestic or
 
 9 foreign corporation or its representative together with a brief,
 
10 written explanation of the reason for the department director's
 
11 refusal.
 
12      (d)  The department director's duty to file documents under
 
13 this section is ministerial.  The department director's filing or
 
14 refusing to file a document does not:
 
15      (1)  Affect the validity or invalidity of the document in
 
16           whole or part;
 
17      (2)  Relate to the correctness or incorrectness of
 
18           information contained in the document; and
 
19      (3)  Create a presumption that the document is valid or
 
20           invalid or that information contained in the document
 
21           is correct or incorrect.
 
22         -17  Appeal from department director's refusal to file
 
23 document.  (a)  If the department director refuses to file a
 

 
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 1 document delivered to the department director for filing, the
 
 2 domestic or foreign corporation may appeal the refusal within
 
 3 thirty days after the return of the document in the circuit
 
 4 court.  The appeal is commenced by petitioning the court to
 
 5 compel filing the document and by attaching to the petition the
 
 6 document and the department director's explanation of the
 
 7 department director's refusal to file.
 
 8      (b)  The court may summarily order the department director
 
 9 to file the document or take other action the court considers
 
10 appropriate.
 
11      (c)  The court's final decision may be appealed as in other
 
12 civil proceedings.
 
13         -18  Evidentiary effect of copy of filed document.  A
 
14 certificate attached to a copy of a document filed by the
 
15 department director, bearing the department director's signature
 
16 (which may be in facsimile) and the seal of the department of
 
17 commerce and consumer affairs, is conclusive evidence that the
 
18 original document is on file with the department director.
 
19         -19  Certificates and certified copies to be received in
 
20 evidence.  All certificates issued by the department director
 
21 pursuant to this chapter, and all copies of documents filed in
 
22 the department director's office pursuant to this chapter when
 
23 certified by the department director, shall be taken and received
 

 
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 1 in all courts, public offices, and official bodies as prima facie
 
 2 evidence of the facts therein stated.  A certificate by the
 
 3 department director, under the seal of the department of commerce
 
 4 and consumer affairs, as to the existence or nonexistence of the
 
 5 facts relating to corporations, shall be taken and received in
 
 6 all courts, public offices, and official bodies as prima facie
 
 7 evidence of the existence or nonexistence of the facts therein
 
 8 stated.
 
 9         -20  Penalty for signing false document.  (a)  A person
 
10 commits an offense if the person signs a document the person
 
11 knows is false in any material respect with intent that the
 
12 document be delivered to the department director for filing.
 
13      (b) An offense under this section is a class C felony.
 
14                     PART III.  INCORPORATION
 
15         -31  Incorporators.  One or more individuals may act as
 
16 the incorporator or incorporators of a corporation by delivering
 
17 articles of incorporation to the department director for filing.
 
18         -32  Articles of incorporation.  (a)  The articles of
 
19 incorporation must set forth:
 
20      (1)  A corporate name for the corporation that satisfies the
 
21           requirements of section    -51;
 
22      (2)  The number of shares the corporation is authorized to
 
23           issue;
 

 
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 1      (3)  The street address of the corporation's initial
 
 2           registered office and the name of its initial
 
 3           registered agent at that office; and
 
 4      (4)  The name and address of each incorporator.
 
 5      (b)  The articles of incorporation may set forth:
 
 6      (1)  The names and addresses of the individuals who are to
 
 7           serve as the initial directors;
 
 8      (2)  Provisions not inconsistent with law regarding:
 
 9           (A)  The purpose or purposes for which the corporation
 
10                is organized;
 
11           (B)  Managing the business and regulating the affairs
 
12                of the corporation;
 
13           (C)  Defining, limiting, and regulating the powers of
 
14                the corporation, its board of directors, and
 
15                shareholders;
 
16           (D)  A par value for authorized shares or classes of
 
17                shares; and
 
18           (E)  The imposition of personal liability on
 
19                shareholders for the debts of the corporation to a
 
20                specified extent and upon specified conditions;
 
21      (3)  Any provision that under this chapter is required or
 
22           permitted to be set forth in the bylaws;
 
23      (4)  A provision eliminating or limiting the liability of a
 

 
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 1           director to the corporation or its shareholders for
 
 2           money damages for any action taken, or any failure to
 
 3           take any action, as a director, subject to section
 
 4              -222; and
 
 5      (5)  A provision permitting or making obligatory
 
 6           indemnification of a director for liability (as defined
 
 7           in section    -241(5)) to any person for any action
 
 8           taken, or any failure to take any action, as a
 
 9           director, except liability for:
 
10           (A)  Receipt of a financial benefit to which the
 
11                director is not entitled;
 
12           (B)  An intentional infliction of harm on the
 
13                corporation or its shareholders;
 
14           (C)  A violation of section    -223; or
 
15           (D)  An intentional violation of criminal law.
 
16      (c)  The articles of incorporation need not set forth any of
 
17 the corporate powers enumerated in this chapter.
 
18         -33  Incorporation.  (a)  The corporate existence begins
 
19 when the articles of incorporation are filed.
 
20      (b)  The department director's filing of the articles of
 
21 incorporation is conclusive proof that the incorporators
 
22 satisfied all conditions precedent to incorporation except in a
 
23 proceeding by the State to cancel or revoke the incorporation or
 

 
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 1 involuntarily dissolve the corporation.
 
 2         -34  Liability for pre-incorporation transactions.  All
 
 3 persons purporting to act as or on behalf of a corporation,
 
 4 knowing there was no incorporation under this chapter, are
 
 5 jointly and severally liable for all liabilities created while so
 
 6 acting.
 
 7         -35  Organization of corporation.  (a)  After
 
 8 incorporation:
 
 9      (1)  If initial directors are named in the articles of
 
10           incorporation, the initial directors shall hold an
 
11           organizational meeting, at the call of a majority of
 
12           the directors, to complete the organization of the
 
13           corporation by appointing officers, adopting bylaws,
 
14           and carrying on any other business brought before the
 
15           meeting;
 
16      (2)  If initial directors are not named in the articles, the
 
17           incorporator or incorporators shall hold an
 
18           organizational meeting at the call of a majority of the
 
19           incorporators to elect:
 
20           (i)  Directors and complete the organization of the
 
21                corporation; or
 
22          (ii)  A board of directors who shall complete the
 
23                organization of the corporation.
 

 
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 1      (b)  Action required or permitted by this chapter to be
 
 2 taken by incorporators at an organizational meeting may be taken
 
 3 without a meeting if the action taken is evidenced by one or more
 
 4 written consents describing the action taken and signed by each
 
 5 incorporator.
 
 6      (c)  An organizational meeting may be held in or out of this
 
 7 State.
 
 8         -36  Bylaws.  (a)  The incorporators or board of
 
 9 directors of a corporation shall adopt initial bylaws for the
 
10 corporation.
 
11      (b)  The bylaws of a corporation may contain any provision
 
12 for managing the business and regulating the affairs of the
 
13 corporation that is not inconsistent with law or the articles of
 
14 incorporation.
 
15         -37  Emergency bylaws.  (a)  Unless the articles of
 
16 incorporation provide otherwise, the board of directors of a
 
17 corporation may adopt bylaws to be effective only in an emergency
 
18 defined in subsection (d).  The emergency bylaws, which are
 
19 subject to amendment or repeal by the shareholders, may make all
 
20 provisions necessary for managing the corporation during the
 
21 emergency, including:
 
22      (1)  Procedures for calling a meeting of the board of
 
23           directors;
 

 
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 1      (2)  Quorum requirements for the meeting; and
 
 2      (3)  Designation of additional or substitute directors.
 
 3      (b)  All provisions of the regular bylaws consistent with
 
 4 the emergency bylaws remain effective during the emergency.  The
 
 5 emergency bylaws are not effective after the emergency ends.
 
 6      (c)  Corporate action taken in good faith in accordance with
 
 7 the emergency bylaws:
 
 8      (1)  Binds the corporation; and
 
 9      (2)  May not be used to impose liability on a corporate
 
10           director, officer, employee, or agent.
 
11      (d)  An emergency exists for purposes of this section if a
 
12 quorum of the corporation's directors cannot readily be assembled
 
13 because of some catastrophic event.
 
14                   PART IV.  PURPOSES AND POWERS
 
15         -41  Purposes.  (a)  Every corporation incorporated
 
16 under this chapter has the purpose of engaging in any lawful
 
17 business unless a more limited purpose is set forth in the
 
18 articles of incorporation.
 
19      (b)  A corporation engaging in a business that is subject to
 
20 regulation under another statute of this State may incorporate
 
21 under this chapter only if permitted by, and subject to all
 
22 limitations of, the other statute.
 
23         -42  General powers.  Unless its articles of
 

 
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 1 incorporation provide otherwise, every corporation has perpetual
 
 2 duration and succession in its corporate name and has the same
 
 3 powers as an individual to do all things necessary or convenient
 
 4 to carry out its business and affairs, including without
 
 5 limitation, the power:
 
 6      (1)  To sue and be sued, complain and defend in its
 
 7           corporate name;
 
 8      (2)  To have a corporate seal, which may be altered at will,
 
 9           and to use it, or a facsimile of it, by impressing or
 
10           affixing it or in any other manner reproducing it;
 
11      (3)  To make and amend bylaws, not inconsistent with its
 
12           articles of incorporation or with the laws of this
 
13           State, for managing the business and regulating the
 
14           affairs of the corporation;
 
15      (4)  To purchase, receive, lease, or otherwise acquire, and
 
16           own, hold, improve, use, and otherwise deal with, real
 
17           or personal property, or any legal or equitable
 
18           interest in property, wherever located;
 
19      (5)  To sell, convey, mortgage, pledge, lease, exchange, and
 
20           otherwise dispose of all or any part of its property;
 
21      (6)  To purchase, receive, subscribe for, or otherwise
 
22           acquire; own, hold, vote, use, sell, mortgage, lend,
 
23           pledge, or otherwise dispose of; and deal in and with
 

 
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 1           shares or other interests in, or obligations of, any
 
 2           other entity;
 
 3      (7)  To make contracts and guarantees, incur liabilities,
 
 4           borrow money, issue its notes, bonds, and other
 
 5           obligations (which may be convertible into or include
 
 6           the option to purchase other securities of the
 
 7           corporation), and secure any of its obligations by
 
 8           mortgage or pledge of any of its property, franchises,
 
 9           or income;
 
10      (8)  To lend money, invest and reinvest its funds, and
 
11           receive and hold real and personal property as security
 
12           for repayment;
 
13      (9)  To be a promoter, partner, member, associate, or
 
14           manager of any partnership, joint venture, trust, or
 
15           other entity;
 
16     (10)  To conduct its business, locate offices, and exercise
 
17           the powers granted by this chapter within or without
 
18           this State;
 
19     (11)  To elect directors and appoint officers, employees, and
 
20           agents of the corporation, define their duties, fix
 
21           their compensation, and lend them money and credit;
 
22     (12)  To pay pensions and establish pension plans, pension
 
23           trusts, profit sharing plans, share bonus plans, share
 

 
Page 24                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           option plans, and benefit or incentive plans for any or
 
 2           all of its current or former directors, officers,
 
 3           employees, and agents;
 
 4     (13)  To make donations for the public welfare or for
 
 5           charitable, scientific, or educational purposes;
 
 6     (14)  To transact any lawful business that will aid
 
 7           governmental policy; and
 
 8     (15)  To make payments or donations, or do any other act, not
 
 9           inconsistent with law, that furthers the business and
 
10           affairs of the corporation.
 
11         -43  Emergency powers.  (a)  In anticipation of or
 
12 during an emergency defined in subsection (d), the board of
 
13 directors of a corporation may:
 
14      (1)  Modify lines of succession to accommodate the
 
15           incapacity of any director, officer, employee, or
 
16           agent; and
 
17      (2)  Relocate the principal office, designate alternative
 
18           principal offices or regional offices, or authorize the
 
19           officers to do so.
 
20      (b)  During an emergency defined in subsection (d), unless
 
21 emergency bylaws provide otherwise:
 
22      (1)  Notice of a meeting of the board of directors need be
 
23           given only to those directors whom it is practicable to
 

 
Page 25                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           reach and may be given in any practicable manner,
 
 2           including by publication and radio; and
 
 3      (2)  One or more officers of the corporation present at a
 
 4           meeting of the board of directors may be deemed to be
 
 5           directors for the meeting, in order of rank and within
 
 6           the same rank in order of seniority, as necessary to
 
 7           achieve a quorum.
 
 8      (c)  Corporate action taken in good faith during an
 
 9 emergency under this section to further the ordinary business
 
10 affairs of the corporation:
 
11      (1)  Binds the corporation; and
 
12      (2)  May not be used to impose liability on a corporate
 
13           director, officer, employee, or agent.
 
14      (d)  An emergency exists for purposes of this section if a
 
15 quorum of the corporation's directors cannot readily be assembled
 
16 because of some catastrophic event.
 
17         -44  Ultra vires.  (a)  Except as provided in subsection
 
18 (b), the validity of corporate action may not be challenged on
 
19 the ground that the corporation lacks or lacked power to act.
 
20      (b)  A corporation's power to act may be challenged:
 
21      (1)  In a proceeding by a shareholder against the
 
22           corporation to enjoin the act;
 
23      (2)  In a proceeding by the corporation, directly,
 

 
Page 26                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           derivatively, or through a receiver, trustee, or other
 
 2           legal representative, against an incumbent or former
 
 3           director, officer, employee, or agent of the
 
 4           corporation; or
 
 5      (3)  In a proceeding by the attorney general under section
 
 6              -411.
 
 7      (c)  In a shareholder's proceeding under subsection (b)(1)
 
 8 to enjoin an unauthorized corporate act, the court may enjoin or
 
 9 set aside the act, if equitable and if all affected persons are
 
10 parties to the proceeding, and may award damages for loss (other
 
11 than anticipated profits) suffered by the corporation or another
 
12 party because of enjoining the unauthorized act.
 
13                           PART V.  NAME
 
14         -51  Corporate name.  (a)  A corporate name:
 
15      (1)  Must contain the word "corporation", "incorporated", or
 
16           "limited", or the abbreviation "corp.", "inc.", or
 
17           "ltd.", or words or abbreviations of like import in
 
18           another language; and
 
19      (2)  May not contain language stating or implying that the
 
20           corporation is organized for a purpose other than that
 
21           permitted by section    -41 and its articles of
 
22           incorporation.
 
23      (b)  Except as authorized by subsections (c) and (d), a
 

 
Page 27                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 corporate name may not be the same as or substantially identical
 
 2 to:
 
 3      (1)  The name of any domestic corporation, partnership,
 
 4           limited liability company, or limited liability
 
 5           partnership existing or registered under the laws of
 
 6           this State, or any foreign corporation, partnership,
 
 7           limited liability company, or limited liability
 
 8           partnership authorized to transact business or conduct
 
 9           affairs in this State;
 
10      (2)  A name the exclusive right to which is, at the time,
 
11           reserved in this State;
 
12      (3)  The fictitious name adopted by a foreign corporation
 
13           authorized to transact business in this State because
 
14           its real name is unavailable; and
 
15      (4)  Any trade name, trademark, or service mark registered
 
16           in this State.
 
17      (c)  A corporation may apply to the department director for
 
18 authorization to use a name that is substantially identical upon
 
19 the department director's records from one or more of the names
 
20 described in subsection (b).  The department director shall
 
21 authorize use of the name applied for if:
 
22      (1)  The other entity or holder of a reserved or registered
 
23           name consents to the use in writing and one or more
 

 
Page 28                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           words are added to make the name distinguishable from
 
 2           the name of the applying corporation; or
 
 3      (2)  The applicant delivers to the department director a
 
 4           certified copy of the final judgment of a court of
 
 5           competent jurisdiction establishing the applicant's
 
 6           right to use the name applied for in this State.
 
 7      (d)  A corporation may use the name (including the
 
 8 fictitious name) of another domestic or foreign corporation that
 
 9 is used in this State if the other corporation is incorporated or
 
10 authorized to transact business in this State and the proposed
 
11 user corporation:
 
12      (1)  Has merged with the other corporation;
 
13      (2)  Has been formed by reorganization of the other
 
14           corporation; or
 
15      (3)  Has acquired all or substantially all of the assets,
 
16           including the corporate name, of the other corporation.
 
17      (e)  This chapter does not control the use of fictitious
 
18 names.
 
19         -52  Reserved name.  (a)  A person may reserve the
 
20 exclusive use of a corporate name, by delivering an application
 
21 to the department director for filing.  The application must set
 
22 forth the name and address of the applicant and the name proposed
 
23 to be reserved.  If the department director finds that the
 

 
Page 29                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 corporate name applied for is available, the department director
 
 2 shall reserve the name for the applicant's exclusive use for a
 
 3 one hundred twenty-day period.
 
 4      (b)  The owner of a reserved corporate name may transfer the
 
 5 reservation to another person by delivering to the department
 
 6 director a signed notice of the transfer that states the name and
 
 7 address of the transferee.
 
 8         -53  Administrative order of abatement for infringement
 
 9 of corporate name.  (a)  Any domestic corporation in good
 
10 standing or foreign corporation authorized to do business in this
 
11 State claiming that the name of any domestic corporation,
 
12 partnership, limited partnership, limited liability partnership,
 
13 or limited liability company existing under the laws of this
 
14 State, or any foreign corporation, partnership, limited
 
15 partnership, limited liability partnership, or limited liability
 
16 company authorized to transact business in this State is
 
17 substantially identical to, or confusingly similar to, its name
 
18 may file a petition with the department director for an
 
19 administrative order of abatement to address the infringement of
 
20 its name.  The petition shall set forth the facts and authority
 
21 that support the petitioner's claim that further use of the name
 
22 should be abated.  The petitioner, at the petitioner's expense,
 
23 shall notify the registrant of the hearing in the manner
 

 
Page 30                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 prescribed by chapter 91 and the registrant shall be given an
 
 2 opportunity to respond to the petition at the hearing.  The
 
 3 notice shall be made and the hearing held in accordance with the
 
 4 contested case provisions of chapter 91.
 
 5      (b)  In addition to any other remedy or sanction allowed by
 
 6 law, the order of abatement may:
 
 7      (1)  Allow the entity to retain its registered name, but:
 
 8           (A)  Require the entity to register a new trade name
 
 9                with the department director; and
 
10           (B)  Require the entity to conduct business in this
 
11                State under this new trade name; or
 
12      (2)  (A)  Require the entity to change its registered name;
 
13           (B)  Require the entity to register the new name with
 
14                the department director; and
 
15           (C)  Require the entity to conduct business in this
 
16                State under its new name.
 
17 If the entity fails to comply with the order of abatement within
 
18 sixty days, the department director may involuntarily dissolve or
 
19 terminate the entity, or cancel or revoke the entity's
 
20 registration or certificate of authority; after the time to
 
21 appeal has lapsed and no appeal has been timely filed.  The
 
22 department director shall mail notice of the dissolution,
 
23 termination, or cancellation to the entity at its last known
 

 
Page 31                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 mailing address.  The entity shall wind up its affairs in
 
 2 accordance with this chapter or chapter 415A, 415B, 425, 425D, or
 
 3 428, as applicable.
 
 4      (c)  Any person aggrieved by the department director's order
 
 5 under this section may obtain judicial review in accordance with
 
 6 chapter 91 by filing a notice of appeal in circuit court within
 
 7 thirty days after the issuance of the department director's
 
 8 order.  The trial by the circuit court of any such proceeding
 
 9 shall be de novo.  Review of any final judgment of the circuit
 
10 court under this section shall be governed by chapter 602.
 
11                    PART VI.  OFFICE AND AGENT
 
12         -61  Registered office and registered agent.  (a)
 
13 Except as provided in subsection (b), each corporation must
 
14 continuously maintain in this State:
 
15      (1)  A registered office that may be the same as any of its
 
16           places of business; and
 
17      (2)  A registered agent, who may be:
 
18           (A)  An individual who resides in this State and whose
 
19                business office is identical with the registered
 
20                office;
 
21           (B)  A domestic corporation or not-for-profit domestic
 
22                corporation whose business office is identical
 
23                with the registered office; or
 

 
Page 32                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           (C)  A foreign corporation or not-for-profit foreign
 
 2                corporation authorized to transact business or
 
 3                conduct affairs in this State whose business
 
 4                office is identical with the registered office.
 
 5      (b)  A corporation may, but shall not be required, to
 
 6 maintain a registered office and a registered agent in this State
 
 7 during the time that the corporation has at least one officer or
 
 8 director who is a resident of this State.
 
 9         -62  Designation or change of registered office or
 
10 registered agent.  (a)  A corporation may designate or change its
 
11 registered office or registered agent by delivering to the
 
12 department director for filing a statement of change that sets
 
13 forth:
 
14      (1)  The name of the corporation;
 
15      (2)  The street address of its current registered office;
 
16      (3)  If the current registered office is to be changed, the
 
17           street address of the new registered office;
 
18      (4)  The name of its current registered agent;
 
19      (5)  If the current registered agent is to be changed, the
 
20           name of the new registered agent; and
 
21      (6)  That after the change or changes are made, the street
 
22           addresses of its registered office and the business
 
23           office of its registered agent will be identical.
 

 
Page 33                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (b)  If the street address of the registered agent's
 
 2 business office changes, the registered agent may change the
 
 3 street address of the corporation's registered office by
 
 4 notifying the corporation in writing of the change and signing
 
 5 (either manually or in facsimile) and delivering to the
 
 6 department director for filing a statement that complies with the
 
 7 requirements of subsection (a) and recites that the corporation
 
 8 has been notified of the change.
 
 9         -63  Resignation of registered agent.  (a)  A registered
 
10 agent may resign from the registered agent's appointment by
 
11 signing and delivering to the department director for filing the
 
12 signed original and two exact or conformed copies of a statement
 
13 of resignation.  The statement may include a statement that the
 
14 registered office is also discontinued.
 
15      (b)  The registered agent shall mail one copy to the
 
16 registered office (if not discontinued) and the other copy to the
 
17 corporation at its principal office.
 
18      (c)  The appointment of the agent is terminated, and the
 
19 registered office discontinued if so provided, on the thirty-
 
20 first day after the date on which the statement was filed.
 
21         -64  Service on corporation.  (a)  Service of any notice
 
22 or process authorized by law issued against any corporation,
 
23 whether domestic or foreign, by any court, judicial or
 

 
Page 34                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 administrative officer, or board, may be made in the manner
 
 2 provided by law upon any registered agent, officer, or director
 
 3 of the corporation who is found within the jurisdiction of the
 
 4 court, officer, or board; or if any registered agent, officer, or
 
 5 director cannot be found, upon the manager or superintendent of
 
 6 the corporation or any person who is found in charge of the
 
 7 property, business, or office of the corporation within the
 
 8 jurisdiction.
 
 9      (b)  If no officer, director, manager, superintendent, or
 
10 other person in charge of the property, business, or office of
 
11 the corporation can be found within the State, and in case the
 
12 corporation has not filed with the department director pursuant
 
13 to this chapter, the name of a registered agent upon whom legal
 
14 notice and process from the courts of the State may be served,
 
15 and likewise if the person named is not found within the State,
 
16 service may be made upon the corporation by registered or
 
17 certified mail, return receipt requested, addressed to the
 
18 secretary of the corporation at its principal office.  Service
 
19 using registered or certified mail is perfected at the earliest
 
20 of:
 
21      (1)  The date the corporation receives the mail;
 
22      (2)  The date shown on the return receipt, if signed on
 
23           behalf of the corporation; or
 

 
Page 35                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (3)  Five days after its deposit in the United States mail,
 
 2           as evidenced by postmark, if mailed postpaid and
 
 3           correctly addressed.
 
 4      (c)  Nothing contained herein shall limit or affect the
 
 5 right to serve any process, notice, or demand required or
 
 6 permitted by law to be served upon a corporation in any other
 
 7 manner permitted by law.
 
 8                PART VII.  SHARES AND DISTRIBUTIONS
 
 9                            A.  Shares
 
10         -71  Authorized shares.  (a)  The articles of
 
11 incorporation must prescribe the classes of shares and the number
 
12 of shares of each class that the corporation is authorized to
 
13 issue.  If more than one class of shares is authorized, the
 
14 articles of incorporation must prescribe a distinguishing
 
15 designation for each class, and, prior to the issuance of shares
 
16 of a class, the preferences, limitations, and relative rights of
 
17 that class must be described in the articles of incorporation.
 
18 All shares of a class must have preferences, limitations, and
 
19 relative rights identical with those of other shares of the same
 
20 class except to the extent otherwise permitted by section    -72.
 
21      (b)  The articles of incorporation must authorize:
 
22      (1)  One or more classes of shares that together have
 
23           unlimited voting rights; and
 

 
Page 36                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (2)  One or more classes of shares (which may be the same
 
 2           class or classes as those with voting rights) that
 
 3           together are entitled to receive the net assets of the
 
 4           corporation upon dissolution.
 
 5      (c)  The articles of incorporation may authorize one or more
 
 6 classes of shares that:
 
 7      (1)  Have special, conditional, or limited voting rights, or
 
 8           no right to vote, except to the extent prohibited by
 
 9           this chapter;
 
10      (2)  Are redeemable or convertible as specified in the
 
11           articles of incorporation:
 
12           (A)  At the option of the corporation, the shareholder,
 
13                or another person or upon the occurrence of a
 
14                designated event;
 
15           (B)  For cash, indebtedness, securities, or other
 
16                property; and
 
17           (C)  In a designated amount or in an amount determined
 
18                in accordance with a designated formula or by
 
19                reference to extrinsic data or events;
 
20      (3)  Entitle the holders to distributions calculated in any
 
21           manner, including dividends that may be cumulative,
 
22           noncumulative, or partially cumulative; or
 
23      (4)  Have preference over any other class of shares with
 

 
Page 37                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           respect to distributions, including dividends and
 
 2           distributions upon the dissolution of the corporation.
 
 3      (d)  The description of the designations, preferences,
 
 4 limitations, and relative rights of share classes in subsection
 
 5 (c) is not exhaustive.
 
 6         -72  Terms of class or series determined by board of
 
 7 directors.  (a)  If and to the extent the articles of
 
 8 incorporation so provide, the board of directors may determine,
 
 9 in whole or part, the preferences, limitations, and relative
 
10 rights (within the limits set forth in section    -71) of:
 
11      (1)  Any class of shares before the issuance of any shares
 
12           of that class; or
 
13      (2)  One or more series within a class before the issuance
 
14           of any shares of that series.
 
15      (b)  Each series of a class must be given a distinguishing
 
16 designation.
 
17      (c)  All shares of a series must have preferences,
 
18 limitations, and relative rights identical with those of other
 
19 shares of the same series and, except to the extent otherwise
 
20 provided in the description of the series, with those of other
 
21 series of the same class.
 
22      (d)  Before issuing any shares of a class or series created
 
23 under this section, the corporation must deliver to the
 

 
Page 38                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 department director for filing an articles of amendment, or a
 
 2 resolution which is effective without shareholder action, that
 
 3 sets forth:
 
 4      (1)  The name of the corporation;
 
 5      (2)  The text of the amendment or resolution determining the
 
 6           terms of the class or series or shares;
 
 7      (3)  The date it was adopted; and
 
 8      (4)  A statement that the amendment or resolution was duly
 
 9           adopted by the board of directors.
 
10 Upon the filing of the articles of amendment or resolution by the
 
11 department director, it shall constitute an amendment of the
 
12 articles of incorporation.
 
13         -73  Issued and outstanding shares.  (a)  A corporation
 
14 may issue the number of shares of each class or series authorized
 
15 by the articles of incorporation.  Shares that are issued are
 
16 outstanding shares until they are reacquired, redeemed,
 
17 converted, or canceled.
 
18      (b)  The reacquisition, redemption, or conversion of
 
19 outstanding shares is subject to the limitations of subsection
 
20 (c) and section    -111.
 
21      (c)  At all times that shares of the corporation are
 
22 outstanding, one or more shares that together have unlimited
 
23 voting rights and one or more shares that together are entitled
 

 
Page 39                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 to receive the net assets of the corporation upon dissolution
 
 2 must be outstanding.
 
 3         -74  Fractional shares.  (a)  A corporation may:
 
 4      (1)  Issue fractions of a share or pay in money the value of
 
 5           fractions of a share;
 
 6      (2)  Arrange for disposition of fractional shares by the
 
 7           shareholders; or
 
 8      (3)  Issue scrip in registered or bearer form entitling the
 
 9           holder to receive a full share upon surrendering enough
 
10           scrip to equal a full share.
 
11      (b)  Each certificate representing scrip must be
 
12 conspicuously labeled "scrip" and must contain the information
 
13 required by section    -86(b).
 
14      (c)  The holder of a fractional share is entitled to
 
15 exercise the rights of a shareholder, including the right to
 
16 vote, to receive dividends, and to participate in the assets of
 
17 the corporation upon liquidation.  The holder of scrip is not
 
18 entitled to any of these rights unless the scrip provides for
 
19 them.
 
20      (d)  The board of directors may authorize the issuance of
 
21 scrip subject to any condition considered desirable, including:
 
22      (1)  That the scrip will become void if not exchanged for
 
23           full shares before a specified date; and,
 

 
Page 40                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (2)  That the shares for which the scrip is exchangeable may
 
 2           be sold and the proceeds paid to the scripholders.
 
 3                      B.  Issuance of Shares
 
 4         -81  Subscription for shares before incorporation.  (a)
 
 5 A subscription for shares entered into before incorporation is
 
 6 irrevocable for six months unless the subscription agreement
 
 7 provides a longer or shorter period or all the subscribers agree
 
 8 to revocation.
 
 9      (b)  The board of directors may determine the payment terms
 
10 of subscription for shares that were entered into before
 
11 incorporation, unless the subscription agreement specifies them.
 
12 A call for payment by the board of directors must be uniform so
 
13 far as practicable as to all shares of the same class or series,
 
14 unless the subscription agreement specifies otherwise.
 
15      (c)  Shares issued pursuant to subscriptions entered into
 
16 before incorporation are fully paid and nonassessable when the
 
17 corporation receives the consideration specified in the
 
18 subscription agreement.
 
19      (d)  If a subscriber defaults in payment of money or
 
20 property under a subscription agreement entered into before
 
21 incorporation, the corporation may collect the amount owed as any
 
22 other debt.  Alternatively, unless the subscription agreement
 
23 provides otherwise, the corporation may rescind the agreement and
 

 
Page 41                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 may sell the shares if the debt remains unpaid for more than
 
 2 twenty days after the corporation sends written demand for
 
 3 payment to the subscriber.
 
 4      (e)  A subscription agreement entered into after
 
 5 incorporation is a contract between the subscriber and the
 
 6 corporation subject to section    -82.
 
 7         -82  Issuance of shares.  (a)  The powers granted in
 
 8 this section to the board of directors may be reserved to the
 
 9 shareholders by the articles of incorporation.
 
10      (b)  The board of directors may authorize shares to be
 
11 issued for consideration consisting of any tangible or intangible
 
12 property or benefit to the corporation, including cash,
 
13 promissory notes, services performed, contracts for services to
 
14 be performed, or other securities of the corporation.
 
15      (c)  Before the corporation issues shares, the board of
 
16 directors must determine that the consideration received or to be
 
17 received for shares to be issued is adequate.  That determination
 
18 by the board of directors is conclusive insofar as the adequacy
 
19 of consideration for the issuance of shares relates to whether
 
20 the shares are validly issued, fully paid, and nonassessable.
 
21      (d)  When the corporation receives the consideration for
 
22 which the board of directors authorized the issuance of shares,
 
23 the shares issued therefor are fully paid and nonassessable.
 

 
Page 42                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (e)  The corporation may place in escrow shares issued for a
 
 2 contract for future services or benefits or a promissory note, or
 
 3 make other arrangements to restrict the transfer of the shares,
 
 4 and may credit distributions in respect of the shares against
 
 5 their purchase price, until the services are performed, the note
 
 6 is paid, or the benefits received.  If the services are not
 
 7 performed, the note is not paid, or the benefits are not
 
 8 received, the shares escrowed or restricted and the distributions
 
 9 credited may be canceled in whole or part.
 
10         -83  Liability of shareholders.  (a)  A purchaser from a
 
11 corporation of the corporation's own shares is not liable to the
 
12 corporation or its creditors with respect to the shares except to
 
13 pay the consideration for which the shares were authorized to be
 
14 issued (section    -82) or specified in the subscription
 
15 agreement (section    -81).
 
16      (b)  Unless otherwise provided in the articles of
 
17 incorporation a shareholder of a corporation is not personally
 
18 liable for the acts or debts of the corporation except that such
 
19 shareholder may become personally liable by reason of such
 
20 shareholder's own acts or conduct.
 
21         -84  Share dividends.  (a)  Unless the articles of
 
22 incorporation provide otherwise, shares may be issued pro rata
 
23 and without consideration to the corporation's shareholders or to
 

 
Page 43                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 the shareholders of one or more classes or series.  An issuance
 
 2 of shares under this subsection is a share dividend.
 
 3      (b)  Shares of one class or series may not be issued as a
 
 4 share dividend in respect of shares of another class or series
 
 5 unless:
 
 6      (1)  The articles of incorporation so authorize;
 
 7      (2)  A majority of the votes entitled to be cast by the
 
 8           class or series to be issued approve the issue; or
 
 9      (3)  There are no outstanding shares of the class or series
 
10           to be issued.
 
11      (c)  If the board of directors does not fix the record date
 
12 for determining shareholders entitled to a share dividend, it is
 
13 the date the board of directors authorizes the share dividend.
 
14         -85  Share options.  A corporation may issue rights,
 
15 options, or warrants for the purchase of shares of the
 
16 corporation.  The board of directors shall determine the terms
 
17 upon which the rights, options, or warrants are issued, their
 
18 form and content, and the consideration for which the shares are
 
19 to be issued.
 
20         -86  Form and content of certificates.  (a)  Shares may
 
21 but need not be represented by certificates.  Unless this chapter
 
22 or another statute expressly provides otherwise, the rights and
 
23 obligations of shareholders are identical whether or not their
 

 
Page 44                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 shares are represented by certificates.
 
 2      (b)  At a minimum each share certificate must state on its
 
 3 face:
 
 4      (1)  The name of the issuing corporation and that it is
 
 5           organized under the law of this State;
 
 6      (2)  The name of the person to whom issued; and
 
 7      (3)  The number and class of shares and the designation of
 
 8           the series, if any, the certificate represents.
 
 9      (c)  If the issuing corporation is authorized to issue
 
10 different classes of shares or different series within a class,
 
11 the designations, relative rights, preferences, and limitations
 
12 applicable to each class and the variations in rights,
 
13 preferences, and limitations determined for each series (and the
 
14 authority of the board of directors to determine variations for
 
15 future series) must be summarized on the front or back of each
 
16 certificate.  Alternatively, each certificate may state
 
17 conspicuously on its front or back that the corporation will
 
18 furnish the shareholder this information on request in writing
 
19 and without charge.
 
20      (d)  Each share certificate:
 
21      (1)  Must be signed (either manually or in facsimile) by two
 
22           officers designated in the bylaws or by the board of
 
23           directors; and
 

 
Page 45                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (2)  May bear the corporate seal or its facsimile.
 
 2      (e)  If the person who signed (either manually or in
 
 3 facsimile) a share certificate no longer holds office when the
 
 4 certificate is issued, the certificate is nevertheless valid.
 
 5         -87  Shares without certificates.  (a)  Unless the
 
 6 articles of incorporation or bylaws provide otherwise, the board
 
 7 of directors of a corporation may authorize the issuance of some
 
 8 or all of the shares of any or all of its classes or series
 
 9 without certificates.  The authorization does not affect shares
 
10 already represented by certificates until they are surrendered to
 
11 the corporation.
 
12      (b)  Within a reasonable time after the issuance or transfer
 
13 of shares without certificates, the corporation shall send the
 
14 shareholder a written statement of the information required on
 
15 certificates by section    -86(b) and (c), and, if applicable,
 
16 section    -88.
 
17         -88  Restriction on transfer of shares and other
 
18 securities.  (a)  The articles of incorporation, bylaws, an
 
19 agreement among shareholders, or an agreement between
 
20 shareholders and the corporation may impose restrictions on the
 
21 transfer or registration of transfer of shares of the
 
22 corporation.  A restriction does not affect shares issued before
 
23 the restriction was adopted unless the holders of the shares are
 

 
Page 46                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 parties to the restriction agreement or voted in favor of the
 
 2 restriction.
 
 3      (b)  A restriction on the transfer or registration of
 
 4 transfer of shares is valid and enforceable against the holder or
 
 5 a transferee of the holder if the restriction is authorized by
 
 6 this section and its existence is noted conspicuously on the
 
 7 front or back of the certificate or is contained in the
 
 8 information statement required by section    -87(b).  Unless so
 
 9 noted, a restriction is not enforceable against a person without
 
10 knowledge of the restriction.
 
11      (c)  A restriction on the transfer or registration of
 
12 transfer of shares is authorized:
 
13      (1)  To maintain the corporation's status when it is
 
14           dependent on the number or identity of its
 
15           shareholders;
 
16      (2)  To preserve exemptions under federal or state
 
17           securities law; or
 
18      (3)  For any other reasonable purpose.
 
19      (d)  A restriction on the transfer or registration of
 
20 transfer of shares may:
 
21      (1)  Obligate the shareholder first to offer the corporation
 
22           or other persons (separately, consecutively, or
 
23           simultaneously) an opportunity to acquire the
 

 
Page 47                                                    2484
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 1           restricted shares;
 
 2      (2)  Obligate the corporation or other persons (separately,
 
 3           consecutively, or simultaneously) to acquire the
 
 4           restricted shares;
 
 5      (3)  Require the corporation, the holders of any class of
 
 6           its shares, or another person to approve the transfer
 
 7           of the restricted shares, if the requirement is not
 
 8           manifestly unreasonable; or
 
 9      (4)  Prohibit the transfer of the restricted shares to
 
10           designated persons or classes of persons, if the
 
11           prohibition is not manifestly unreasonable.
 
12      (e)  For purposes of this section, "shares" includes a
 
13 security convertible into or carrying a right to subscribe for or
 
14 acquire shares.
 
15         -89  Expense of issue.  A corporation may pay the
 
16 expenses of selling or underwriting its shares, and of organizing
 
17 or reorganizing the corporation, from the consideration received
 
18 for shares.
 
19               C.  Subsequent Acquisition of Shares
 
20                  by Shareholders and Corporation
 
21         -101  Shareholders' preemptive rights.  (a)  The
 
22 shareholders of a corporation do not have a preemptive right to
 
23 acquire the corporation's unissued shares except to the extent
 

 
Page 48                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 the articles of incorporation so provide.
 
 2      (b)  A statement included in the articles of incorporation
 
 3 that "the corporation elects to have preemptive rights" (or words
 
 4 of similar import) means that the following principles apply
 
 5 except to the extent the articles of incorporation expressly
 
 6 provide otherwise:
 
 7      (1)  The shareholders of the corporation have a preemptive
 
 8           right, granted on uniform terms and conditions
 
 9           prescribed by the board of directors to provide a fair
 
10           and reasonable opportunity to exercise the right, to
 
11           acquire proportional amounts of the corporation's
 
12           unisssued shares upon the decision of the board of
 
13           directors to issue them;
 
14      (2)  A shareholder may waive the shareholder's preemptive
 
15           right.  A waiver evidenced by a writing is irrevocable
 
16           even though it is not supported by consideration;
 
17      (3)  There is no preemptive right with respect to:
 
18           (A)  Shares issued as compensation to directors,
 
19                officers, agents, or employees of the corporation,
 
20                its subsidiaries or affiliates:
 
21           (B)  Shares issued to satisfy conversion or option
 
22                rights created to provide compensation to
 
23                directors, officers, agents, or employees of the
 

 
Page 49                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1                corporation, its subsidiaries or affiliates; or
 
 2           (C)  Shares authorized in articles of incorporation
 
 3                that are issued within six months from the
 
 4                effective date of incorporation;
 
 5           (D)  Shares sold otherwise than for money;
 
 6      (4)  Holders of shares of any class without general voting
 
 7           rights but with preferential rights to distributions or
 
 8           assets have no preemptive rights with respect to shares
 
 9           of any class;
 
10      (5)  Holders of shares of any class with general voting
 
11           rights but without preferential rights to distributions
 
12           or assets have no preemptive rights with respect to
 
13           shares of any class with preferential rights to
 
14           distributions or assets unless the shares with
 
15           preferential rights are convertible into or carry a
 
16           right to subscribe for or acquire shares without
 
17           preferential rights; or
 
18      (6)  Shares subject to preemptive rights that are not
 
19           acquired by shareholders may be issued to any person
 
20           for a period of one year after being offered to
 
21           shareholders at a consideration set by the board of
 
22           directors that is not lower than the consideration set
 
23           for the exercise of preemptive rights.  An offer at a
 

 
Page 50                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           lower consideration or after the expiration of one year
 
 2           is subject to the shareholders' preemptive rights.
 
 3      (c)  For purposes of this section, "shares" includes a
 
 4 security convertible into or carrying a right to subscribe for or
 
 5 acquire shares.
 
 6      (d)  Nothing in this section shall affect the validity of
 
 7 any action taken prior to April 21, 1953, by any corporation.
 
 8         -102  Corporation's acquisition of its own shares.  (a)
 
 9 A corporation may acquire its own shares and shares so acquired
 
10 constitute authorized but unissued shares.
 
11      (b)  If the articles of incorporation prohibit the
 
12 reissuance of acquired shares, the number of authorized shares is
 
13 reduced by the number of shares acquired, effective upon delivery
 
14 to the department director for filing, a statement of
 
15 cancellation showing the reduction in the authorized shares.
 
16      (c)  The statement of cancellation must set forth:
 
17      (1)  The name of the corporation;
 
18      (2)  The number of acquired shares canceled, itemized by
 
19           class and series; and
 
20      (3)  The total number of authorized shares, itemized by
 
21           class and series, remaining after reduction of the
 
22           shares.
 
23                         D.  Distributions
 

 
Page 51                                                    2484
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 1         -111  Distributions to shareholders.  (a)  A board of
 
 2 directors may authorize and the corporation may make
 
 3 distributions to its shareholders subject to restriction by the
 
 4 articles of incorporation and the limitation in subsection (c).
 
 5      (b)  If the board of directors does not fix the record date
 
 6 for determining shareholders entitled to a distribution (other
 
 7 than one involving a purchase, redemption, or other acquisition
 
 8 of the corporation's shares), it is the date the board of
 
 9 directors authorizes the distribution.
 
10      (c)  No distribution may be made if, after giving it effect:
 
11      (1)  The corporation would not be able to pay its debts as
 
12           they become due in the usual course of business; or
 
13      (2)  The corporation's total assets would be less than the
 
14           sum of its total liabilities plus (unless the articles
 
15           of incorporation permit otherwise) the amount that
 
16           would be needed, if the corporation were to be
 
17           dissolved at the time of the distribution, to satisfy
 
18           the preferential rights upon dissolution of
 
19           shareholders whose preferential rights are superior to
 
20           those receiving the distribution.
 
21      (d)  The board of directors may base a determination that a
 
22 distribution is not prohibited under subsection (c) either on
 
23 financial statements prepared on the basis of accounting
 

 
Page 52                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 practices and principles that are reasonable in the circumstances
 
 2 or on a fair valuation or other method that is reasonable in the
 
 3 circumstances.
 
 4      (e)  Except as provided in subsection (g), the effect of a
 
 5 distribution under subsection (c) is measured:
 
 6      (1)  In the case of distribution by purchase, redemption, or
 
 7           other acquisition of the corporation's shares, as of
 
 8           the earlier of:
 
 9           (A)  The date money or other property is transferred or
 
10                debt incurred by the corporation; or
 
11           (B)  The date the shareholder ceases to be a
 
12                shareholder with respect to the acquired shares;
 
13      (2)  In the case of any other distribution of indebtedness,
 
14           as of the date the indebtedness is distributed; and
 
15      (3)  In all other cases, as of:
 
16           (A)  The date the distribution is authorized if the
 
17                payment occurs within one hundred twenty days
 
18                after the date of authorization; or
 
19           (B)  The date the payment is made if it occurs more
 
20                than one hundred twenty days after the date of
 
21                authorization.
 
22      (f)  A corporation's indebtedness to a shareholder incurred
 
23 by reason of a distribution made in accordance with this section
 

 
Page 53                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 is at parity with the corporation's indebtedness to its general,
 
 2 unsecured creditors except to the extent subordinated by
 
 3 agreement.
 
 4      (g)  Indebtedness of a corporation, including indebtedness
 
 5 issued as a distribution, is not considered a liability for
 
 6 purposes of determinations under subsection (c) if its terms
 
 7 provide that payment of principal and interest are made only if
 
 8 and to the extent that payment of a distribution to shareholders
 
 9 could then be made under this section.  If the indebtedness is
 
10 issued as a distribution, each payment of principal or interest
 
11 is treated as a distribution, the effect of which is measured on
 
12 the date the payment is actually made.
 
13                     PART VIII.  SHAREHOLDERS
 
14                           A.  Meetings
 
15         -121  Annual meeting.  (a)  A corporation shall hold a
 
16 meeting of shareholders annually at a time stated in or fixed in
 
17 accordance with the bylaws.
 
18      (b)  Annual shareholders' meetings may be held in or out of
 
19 this State at the place stated in or fixed in accordance with the
 
20 bylaws.  If no place is stated in or fixed in accordance with the
 
21 bylaws, annual meetings shall be held at the corporation's
 
22 principal office.
 
23      (c)  The failure to hold an annual meeting at the time
 

 
Page 54                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 stated in or fixed in accordance with a corporation's bylaws does
 
 2 not affect the validity of any corporate action.
 
 3         -122  Special meeting.  (a)  A corporation shall hold a
 
 4 special meeting of shareholders:
 
 5      (1)  On call of its board of directors or the person or
 
 6           persons authorized to do so by the articles of
 
 7           incorporation or bylaws; or
 
 8      (2)  If the holders of at least ten per cent of all the
 
 9           votes entitled to be cast on any issue proposed to be
 
10           considered at the proposed special meeting sign, date,
 
11           and deliver to the corporation's secretary one or more
 
12           written demands for the meeting describing the purpose
 
13           or purposes for which it is to be held.
 
14      (b)  If not otherwise fixed under section    -123 or
 
15    -127, the record date for determining shareholders entitled to
 
16 demand a special meeting is the date the first shareholder signs
 
17 the demand.
 
18      (c)  Special shareholders' meetings may be held in or out of
 
19 this State at the place stated in or fixed in accordance with the
 
20 bylaws.  If no place is stated or fixed in accordance with the
 
21 bylaws, special meetings shall be held at the corporation's
 
22 principal office.
 
23      (d)  Only business within the purpose or purposes described
 

 
Page 55                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 in the meeting notice required by section    -125(c) may be
 
 2 conducted at a special shareholders' meeting.
 
 3         -123  Court-ordered meeting.  (a)  The circuit court may
 
 4 summarily order a meeting to be held:
 
 5      (1)  On application of any shareholder of the corporation
 
 6           entitled to participate in an annual meeting if an
 
 7           annual meeting was not held within the earlier of six
 
 8           months after the end of the corporation's fiscal year
 
 9           or fifteen months after its last annual meeting; or
 
10      (2)  On application of a shareholder who signed a demand for
 
11           a special meeting valid under section    -122, if:
 
12           (A)  Notice of the special meeting was not given within
 
13                thirty days after the date the demand was
 
14                delivered to the corporation's secretary; or
 
15           (B)  The special meeting was not held in accordance
 
16                with the notice.
 
17      (b)  The court may fix the time and place of the meeting,
 
18 determine the shares entitled to participate in the meeting,
 
19 specify a record date for determining shareholders entitled to
 
20 notice of and to vote at the meeting, prescribe the form and
 
21 content of the meeting notice, fix the quorum required for
 
22 specific matters to be considered at the meeting (or direct that
 
23 the votes represented at the meeting constitute a quorum for
 

 
Page 56                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 action on those matters), and enter other orders necessary to
 
 2 accomplish the purpose or purposes of the meeting.
 
 3         -124  Action without meeting.  (a)  Action required or
 
 4 permitted by this chapter to be taken at a shareholders' meeting
 
 5 may be taken without a meeting if the action is taken by all the
 
 6 shareholders entitled to vote on the action.  The action must be
 
 7 evidenced by one or more written consents describing the action
 
 8 taken, signed before or after the intended effective date of the
 
 9 action by all the shareholders entitled to vote on the action,
 
10 and delivered to the corporation for inclusion in the minutes or
 
11 filing with the corporate records.
 
12      (b)  If not otherwise fixed under section    -123 or
 
13    -127, the record date for determining shareholders entitled to
 
14 take action without a meeting is the date the first shareholder
 
15 signs the consent under subsection (a).
 
16      (c)  A consent signed under this section has the effect of a
 
17 meeting vote and may be described as such in any document.
 
18      (d)  If this chapter requires that notice of proposed action
 
19 be given to nonvoting shareholders and the action is to be taken
 
20 by unanimous consent of the voting shareholders, the corporation
 
21 must give its nonvoting shareholders written notice of the
 
22 proposed action at least ten days before the action is taken.
 
23 The notice must contain or be accompanied by the same material
 

 
Page 57                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 that, under this chapter, would have been required to be sent to
 
 2 nonvoting shareholders in a notice of meeting at which the
 
 3 proposed action would have been submitted to the shareholders for
 
 4 action.
 
 5         -125  Notice of meeting.  (a)  A corporation shall
 
 6 notify shareholders of the date, time, and place of each annual
 
 7 and special shareholders' meeting no fewer than ten nor more than
 
 8 sixty days before the meeting date.  Unless this chapter or the
 
 9 articles of incorporation require otherwise, the corporation is
 
10 required to give notice only to shareholders entitled to vote at
 
11 the meeting.
 
12      (b)  Unless this chapter or the articles of incorporation
 
13 require otherwise, notice of an annual meeting need not include a
 
14 description of the purpose or purposes for which the meeting is
 
15 called.
 
16      (c)  Notice of a special meeting must include a description
 
17 of the purpose or purposes for which the meeting is called.
 
18      (d)  If not otherwise fixed under section    -123 or
 
19    -127, the record date for determining shareholders entitled to
 
20 notice of and to vote at an annual or special shareholders'
 
21 meeting is the day before the first notice is delivered to
 
22 shareholders.
 
23      (e)  Unless the bylaws require otherwise, if an annual or
 

 
Page 58                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 special shareholders' meeting is adjourned to a different date,
 
 2 time, or place, notice need not be given of the new date, time,
 
 3 or place if the new date, time, or place is announced at the
 
 4 meeting before adjournment.  If a new record date for the
 
 5 adjourned meeting is or must be fixed under section    -127,
 
 6 however, notice of the adjourned meeting must be given under this
 
 7 section to persons who are shareholders as of the new record
 
 8 date.
 
 9         -126  Waiver of notice.  (a)  A shareholder may waive
 
10 any notice required by this chapter, the articles of
 
11 incorporation, or bylaws before or after the date and time stated
 
12 in the notice.  The waiver must be in writing, be signed by the
 
13 shareholder entitled to the notice, and be delivered to the
 
14 corporation for inclusion in the minutes or filing with the
 
15 corporate records.
 
16      (b)  A shareholder's attendance at a meeting:
 
17      (1)  Waives objection to lack of notice or defective notice
 
18           of the meeting, unless the shareholder at the beginning
 
19           of the meeting objects to holding the meeting or
 
20           transacting business at the meeting; and
 
21      (2)  Waives objection to consideration of a particular
 
22           matter at the meeting that is not within the purpose or
 
23           purposes described in the meeting notice, unless the
 

 
Page 59                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           shareholder objects to considering the matter when it
 
 2           is presented.
 
 3         -127  Record date.  (a)  The bylaws may fix or provide
 
 4 the manner of fixing the record date for one or more voting
 
 5 groups in order to determine the shareholders entitled to notice
 
 6 of a shareholders' meeting, to demand a special meeting, to vote,
 
 7 or to take any other action.  If the bylaws do not fix or provide
 
 8 for fixing a record date, the board of directors of the
 
 9 corporation may fix a future date as the record date.
 
10      (b)  A record date fixed under this section may not be more
 
11 than seventy days before the meeting or action requiring a
 
12 determination of shareholders.
 
13      (c)  A determination of shareholders entitled to notice of
 
14 or to vote at a shareholders' meeting is effective for any
 
15 adjournment of the meeting unless the board of directors fixes a
 
16 new record date, which it must do if the meeting is adjourned to
 
17 a date more than one hundred twenty days after the date fixed for
 
18 the original meeting.
 
19      (d)  If a court orders a meeting adjourned to a date more
 
20 than one hundred twenty days after the date fixed for the
 
21 original meeting, it may provide that the original record date
 
22 continues in effect or it may fix a new record date.
 
23                            B.  Voting
 

 
Page 60                                                    2484
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 1         -141  Shareholders' list for meeting.  (a)  After fixing
 
 2 a record date for a meeting, a corporation shall prepare an
 
 3 alphabetical list of the names of all its shareholders who are
 
 4 entitled to notice of a shareholders' meeting.  The list must be
 
 5 arranged by voting group (and within each voting group by class
 
 6 or series of shares) and show the address of and number of shares
 
 7 held by each shareholder.
 
 8      (b)  The shareholders' list must be available for inspection
 
 9 by any shareholder, beginning two business days after notice of
 
10 the meeting is given for which the list was prepared and
 
11 continuing through the meeting, at the corporation's principal
 
12 office or at a place identified in the meeting notice in the city
 
13 where the meeting will be held.  A shareholder, the shareholder's
 
14 agent, or attorney is entitled on written demand to inspect and
 
15 to copy the list, during regular business hours and at the
 
16 shareholder's expense, during the period it is available for
 
17 inspection.
 
18      (c)  The corporation shall make the shareholders' list
 
19 available at the meeting, and any shareholder, the shareholder's
 
20 agent or attorney is entitled to inspect the list at any time
 
21 during the meeting or any adjournment.
 
22      (d)  If the corporation refuses to allow a shareholder, the
 
23 shareholder's agent or attorney to inspect the shareholders' list
 

 
Page 61                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 before or at the meeting (or copy the list as permitted by
 
 2 subsection (b)), the circuit court, on application of the
 
 3 shareholder, may summarily order the inspection or copying at the
 
 4 corporation's expense and may postpone the meeting for which the
 
 5 list was prepared until the inspection or copying is complete.
 
 6      (e)  Refusal or failure to prepare or make available the
 
 7 shareholders' list does not affect the validity of action taken
 
 8 at the meeting.
 
 9         -142  Voting entitlement of shares.  (a)  Except as
 
10 provided in subsections (b) and (d) or unless the articles of
 
11 incorporation provide otherwise, each outstanding share,
 
12 regardless of class, is entitled to one vote on each matter voted
 
13 on at a shareholders' meeting.  Only shares are entitled to vote.
 
14      (b)  Absent special circumstances, the shares of a
 
15 corporation are not entitled to vote if they are owned, directly
 
16 or indirectly, by a second corporation, domestic or foreign, and
 
17 the first corporation owns, directly or indirectly, a majority of
 
18 the shares entitled to vote for directors of the second
 
19 corporation.
 
20      (c)  Subsection (b) does not limit the power of a
 
21 corporation to vote any shares, including its own shares, held by
 
22 it in a fiduciary capacity.
 
23      (d)  Redeemable shares are not entitled to vote after notice
 

 
Page 62                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 of redemption is mailed to the holders and a sum sufficient to
 
 2 redeem the shares has been deposited with a bank, trust company,
 
 3 or other financial institution under an irrevocable obligation to
 
 4 pay the holders the redemption price on surrender of the shares.
 
 5         -143  Proxies.  (a)  A shareholder may vote the
 
 6 shareholder's shares in person or by proxy.
 
 7      (b)  A shareholder may appoint a proxy to vote or otherwise
 
 8 act for the shareholder by signing an appointment form.  The
 
 9 appointment form shall be signed by either the shareholder
 
10 personally or by the shareholder's attorney-in-fact.  A
 
11 shareholder may authorize another person to act as a proxy for
 
12 the shareholder by:
 
13      (1)  Executing a writing authorizing another person or
 
14           persons to act as a proxy for the shareholder, which
 
15           may be accomplished by the shareholder or the
 
16           shareholder's authorized attorney-in-fact, officer,
 
17           director, employee, or agent signing the writing or
 
18           causing the shareholder's signature to be affixed to
 
19           the writing by any reasonable means, including without
 
20           limitation the use of a facsimile signature; or
 
21      (2)  Transmitting or authorizing the transmission of a
 
22           telegram, cablegram, facsimile, or other means of
 
23           electronic transmission authorizing the person or
 

 
Page 63                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           persons to act as a proxy for the shareholders to the
 
 2           person or persons who will be the holder of the proxy
 
 3           or to a proxy solicitation firm, proxy support service
 
 4           organization, or similar agent duly authorized by the
 
 5           person who will be the holder of the proxy to receive
 
 6           the transmission; provided that any such transmission
 
 7           shall specify that the transmission was authorized by
 
 8           the shareholder.
 
 9 A copy, facsimile telecommunication, or other reliable
 
10 reproduction of the writing or transmission created pursuant to
 
11 the foregoing may be used in lieu of the original writing or
 
12 transmission for any and all purposes for which the original
 
13 writing or transmission could be used; provided that any such
 
14 copy, facsimile telecommunication, or other reproduction shall be
 
15 a complete reproduction of the entire original writing or
 
16 transmission.  
 
17      (c)  An appointment of a proxy is effective when received by
 
18 the secretary or other officer or agent authorized to tabulate
 
19 votes.  An appointment is valid for eleven months unless a longer
 
20 period is expressly provided in the appointment form.
 
21      (d)  An appointment of a proxy is revocable by the
 
22 shareholder unless the appointment form conspicuously states that
 
23 it is irrevocable and the appointment is coupled with an
 

 
Page 64                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 interest.  Appointments coupled with an interest include the
 
 2 appointment of:
 
 3      (1)  A pledgee;
 
 4      (2)  A person who purchased or agreed to purchase the
 
 5           shares;
 
 6      (3)  A creditor of the corporation who extended it credit
 
 7           under terms requiring the appointment;
 
 8      (4)  An employee of the corporation whose employment
 
 9           contract requires the appointment; or
 
10      (5)  A party to a voting agreement created under section
 
11              -162.
 
12      (e)  The death or incapacity of the shareholder appointing a
 
13 proxy does not affect the right of the corporation to accept the
 
14 proxy's authority unless notice of the death or incapacity is
 
15 received by the secretary or other officer or agent authorized to
 
16 tabulate votes before the proxy exercises authority under the
 
17 appointment.
 
18      (f)  An appointment made irrevocable under subsection (d) is
 
19 revoked when the interest with which it is coupled is
 
20 extinguished.
 
21      (g)  A transferee for value of shares subject to an
 
22 irrevocable appointment may revoke the appointment if the
 
23 transferee did not know of its existence when the transferee
 

 
Page 65                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 acquired the shares and the existence of the irrevocable
 
 2 appointment was not noted conspicuously on the certificate
 
 3 representing the shares or on the information statement for
 
 4 shares without certificates.
 
 5      (h)  Subject to section    -145 and to any express
 
 6 limitation on the proxy's authority appearing on the face of the
 
 7 appointment form, a corporation is entitled to accept the proxy's
 
 8 vote or other action as that of the shareholder making the
 
 9 appointment.
 
10         -144  Shares held by nominees.  (a)  A corporation may
 
11 establish a procedure by which the beneficial owner of shares
 
12 that are registered in the name of a nominee is recognized by the
 
13 corporation as the shareholder.  The extent of this recognition
 
14 may be determined in the procedure.
 
15      (b)  The procedure may set forth:
 
16      (1)  The types of nominees to which it applies;
 
17      (2)  the rights or privileges that the corporation
 
18           recognizes in a beneficial owner;
 
19      (3)  The manner in which the procedure is selected by the
 
20           nominee;
 
21      (4)  The information that must be provided when the
 
22           procedure is selected;
 
23      (5)  The period for which selection of the procedure is
 

 
Page 66                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           effective; and
 
 2      (6)  Other aspects of the rights and duties created.
 
 3         -145  Corporation's acceptance of votes, etc.  (a)  If
 
 4 the name signed on a vote, consent, waiver, or proxy appointment
 
 5 corresponds to the name of a shareholder, the corporation, acting
 
 6 in good faith, is entitled to accept the vote, consent, waiver,
 
 7 or proxy appointment and to give it effect as the act of the
 
 8 shareholder.
 
 9      (b)  If the name signed on a vote, consent, waiver, or proxy
 
10 appointment does not correspond to the name of its shareholder,
 
11 the corporation if acting in good faith is nevertheless entitled
 
12 to accept the vote, consent, waiver, or proxy appointment and
 
13 give it effect as the act of the shareholder if:
 
14      (1)  The shareholder is an entity and the name signed
 
15           purports to be that of an officer or agent of the
 
16           entity;
 
17      (2)  The name signed purports to be that of an
 
18           administrator, executor, guardian, or conservator
 
19           representing the shareholder and, if the corporation
 
20           requests, evidence of fiduciary status acceptable to
 
21           the corporation has been presented with respect to the
 
22           vote, consent, waiver, or proxy appointment;
 
23      (3)  The name signed purports to be that of a receiver or
 

 
Page 67                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           trustee in bankruptcy of the shareholder and, if the
 
 2           corporation requests, evidence of this status
 
 3           acceptable to the corporation has been presented with
 
 4           respect to the vote, consent, waiver, or proxy
 
 5           appointment;
 
 6      (4)  The name signed purports to be that of a pledgee,
 
 7           beneficial owner, or attorney-in-fact of the
 
 8           shareholder and, if the corporation requests, evidence
 
 9           acceptable to the corporation of the signatory's
 
10           authority to sign for the shareholder has been
 
11           presented with respect to the vote, consent, waiver, or
 
12           proxy appointment; or
 
13      (5)  Two or more persons are the shareholder as cotenants or
 
14           fiduciaries and the name signed purports to be the name
 
15           of at least one of the coowners and the person signing
 
16           appears to be acting on behalf of all the coowners.
 
17      (c)  The corporation is entitled to reject a vote, consent,
 
18 waiver, or proxy appointment if the secretary or other officer or
 
19 agent authorized to tabulate votes, acting in good faith, has
 
20 reasonable basis to doubt the validity of the signature on the
 
21 vote, consent, waiver, or proxy appointment or about the
 
22 signatory's authority to sign for the shareholder.
 
23      (d)  The corporation and its officer or agent who accepts or
 

 
Page 68                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 rejects a vote, consent, waiver, or proxy appointment in good
 
 2 faith and in accordance with the standards of this section are
 
 3 not liable in damages to the shareholder for the consequences of
 
 4 the acceptance or rejection.
 
 5      (e)  Corporate action based on the acceptance or rejection
 
 6 of a vote, consent, waiver, or proxy appointment under this
 
 7 section is valid unless a court of competent jurisdiction
 
 8 determines otherwise.
 
 9         -146  Quorum and voting requirements for voting groups.
 
10 (a)  Shares entitled to vote as a separate voting group may take
 
11 action on a matter at a meeting only if a quorum of those shares
 
12 exists with respect to that matter.  Unless the articles of
 
13 incorporation or this chapter provide otherwise, a majority of
 
14 the votes entitled to be cast on the matter by the voting group
 
15 constitutes a quorum of that voting group for action on that
 
16 matter.
 
17      (b)  Once a share is represented for any purpose at a
 
18 meeting, it is deemed present for quorum purposes for the
 
19 remainder of the meeting and for any adjournment of that meeting
 
20 unless a new record date is or must be set for that adjourned
 
21 meeting.
 
22      (c)  If a quorum exists, action on a matter (other than the
 
23 election of directors) by a voting group is approved if the votes
 

 
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 1 cast within the voting group favoring the action exceed the votes
 
 2 cast opposing the action, unless the articles of incorporation or
 
 3 this chapter require a greater number of affirmative votes.
 
 4      (d)  An amendment of articles of incorporation adding,
 
 5 changing, or deleting a quorum or voting requirement for a voting
 
 6 group greater than specified in subsection (a) or (c) is governed
 
 7 by section    -148.
 
 8      (e)  The election of directors is governed by section
 
 9    -149.
 
10         -147  Action by single and multiple voting groups.  (a)
 
11 If the articles of incorporation or this chapter provide for
 
12 voting by a single voting group on a matter, action on that
 
13 matter is taken when voted upon by that voting group as provided
 
14 in section    -146.
 
15      (b)  If the articles of incorporation or this chapter
 
16 provide for voting by two or more voting groups on a matter,
 
17 action on that matter is taken only when voted upon by each of
 
18 those voting groups counted separately as provided in section
 
19    -146.  Action may be taken by one voting group on a matter
 
20 even though no action is taken by another voting group entitled
 
21 to vote on the matter.
 
22         -148  Greater quorum or voting requirements.  (a)  The
 
23 articles of incorporation may provide for a greater quorum or
 

 
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 1 voting requirement for shareholders (or voting groups of
 
 2 shareholders) than is provided for by this chapter.
 
 3      (b)  An amendment to the articles of incorporation that
 
 4 adds, changes, or deletes a greater quorum or voting requirement
 
 5 must meet the same quorum requirement and be adopted by the same
 
 6 vote and voting groups required to take action under the quorum
 
 7 and voting requirements then in effect or proposed to be adopted,
 
 8 whichever is greater.
 
 9         -149  Voting for directors; cumulative voting.  (a)
 
10 Unless otherwise provided in the articles of incorporation,
 
11 directors shall be elected by a plurality of the votes cast by
 
12 the shares entitled to vote in the election at a meeting at which
 
13 a quorum is present.
 
14      (b)  If, not less than forty-eight hours prior to the time
 
15 fixed for any annual or special meeting, any shareholder or
 
16 shareholders deliver to any officer of the corporation, a request
 
17 that the election of directors to be elected at the meeting be by
 
18 cumulative voting, then the directors to be elected at the
 
19 meeting shall be chosen as follows:
 
20      (1)  Each shareholder present in person or represented by
 
21           proxy at the meeting shall have a number of votes equal
 
22           to the number of shares of capital stock owned by the
 
23           shareholder multiplied by the number of directors to be
 

 
Page 71                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           elected at the meeting;
 
 2      (2)  Each shareholder shall be entitled to cumulate the
 
 3           votes of the shareholder and to give all of the votes
 
 4           to one nominee or to distribute the votes among any or
 
 5           all of the nominees; and
 
 6      (3)  The nominees receiving the highest number of votes on
 
 7           the foregoing basis, up to the total number of
 
 8           directors to be elected at the meeting, shall be the
 
 9           successful nominees.
 
10 The right to have directors elected by cumulative voting as
 
11 provided in this section shall exist notwithstanding that
 
12 provision therefor is not included in the articles of
 
13 incorporation or bylaws, and this right shall not be restricted
 
14 or qualified by any provisions of the articles of incorporation
 
15 or bylaws; provided that this right may be restricted, qualified,
 
16 or eliminated by a provision of the articles of incorporation or
 
17 bylaws of any corporation having a class of equity securities
 
18 registered pursuant to the Securities Exchange Act of 1934, as
 
19 amended, which are either listed on a national securities
 
20 exchange or traded over-the-counter on the National Market of the
 
21 National Association of Securities Dealers, Inc.  Automated
 
22 Quotation System.  This section shall not prevent the filling of
 
23 vacancies in the board of directors, which vacancies may be
 

 
Page 72                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 filled in a manner that may be provided in the articles of
 
 2 incorporation or bylaws.
 
 3                 C.  Voting Trusts and Agreements
 
 4         -161  Voting trusts.  (a)  One or more shareholders may
 
 5 create a voting trust, conferring on a trustee the right to vote
 
 6 or otherwise act for them, by signing an agreement setting out
 
 7 the provisions of the trust (which may include anything
 
 8 consistent with its purpose) and transferring their shares to the
 
 9 trustee.  When a voting trust agreement is signed, the trustee
 
10 shall prepare a list of the names and addresses of all owners of
 
11 beneficial interests in the trust, together with the number and
 
12 class of shares each shareholder transferred to the trust, and
 
13 deliver copies of the list and agreement to the corporation's
 
14 principal office.
 
15      (b)  A voting trust becomes effective on the date the first
 
16 shares subject to the trust are registered in the trustee's name.
 
17 A voting trust is valid for not more than ten years after its
 
18 effective date unless extended under subsection (c).
 
19      (c)  All or some of the parties to a voting trust may extend
 
20 it for additional terms of not more than ten years each by
 
21 signing written consent to the extension.  An extension is valid
 
22 for ten years from the date the first shareholder signs the
 
23 extension agreement.  The voting trustee must deliver copies of
 

 
Page 73                                                    2484
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 1 the extension agreement and list of beneficial owners to the
 
 2 corporation's principal office.  An extension agreement binds
 
 3 only those parties signing it.
 
 4         -162  Voting agreements.  (a)  Two or more shareholders
 
 5 may provide for the manner in which they will vote their shares
 
 6 by signing an agreement for that purpose.  A voting agreement
 
 7 created under this section is not subject to section    -161.
 
 8      (b)  A voting agreement created under this section is
 
 9 specifically enforceable.
 
10         -163  Shareholder agreements.  (a)  An agreement among
 
11 the shareholders of a corporation that complies with this section
 
12 is effective among the shareholders and the corporation even
 
13 though it is inconsistent with one or more other provisions of
 
14 this chapter in that it:
 
15      (1)  Eliminates the board of directors or restricts the
 
16           discretion or powers of the board of directors;
 
17      (2)  Governs the authorization or making of distributions
 
18           whether or not in proportion to ownership of shares,
 
19           subject to limitations in section    -111;
 
20      (3)  Establishes who shall be directors or officers of the
 
21           corporation, or their terms of office or manner of
 
22           selection or removal;
 
23      (4)  Governs, in general or in regard to specific matters,
 

 
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 1           the exercise or division of voting power by or between
 
 2           the shareholders and directors or by or among any of
 
 3           them, including use of weighted voting rights or
 
 4           director proxies;
 
 5      (5)  Establishes the terms and conditions of any agreement
 
 6           for the transfer or use of property or the provision of
 
 7           services between the corporation and any shareholder,
 
 8           director, officer, or employee of the corporation or
 
 9           among any of them;
 
10      (6)  Transfers to one or more shareholders or other persons
 
11           all or part of the authority to exercise the corporate
 
12           powers or to manage the business and affairs of the
 
13           corporation, including the resolution of any issue
 
14           about which there exists a deadlock among directors or
 
15           shareholders;
 
16      (7)  Requires dissolution of the corporation at the request
 
17           of one or more of the shareholders or upon the
 
18           occurrence of a specified event or contingency; or
 
19      (8)  Otherwise governs the exercise of the corporate powers
 
20           or the management of the business and affairs of the
 
21           corporation or the relationship among the shareholders,
 
22           the directors, and the corporation, or among any of
 
23           them, and is not contrary to public policy.
 

 
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 1      (b)  An agreement authorized by this section shall be:
 
 2      (1)  Set forth:
 
 3           (A)  In the articles of incorporation or bylaws and
 
 4                approved by all persons who are shareholders at
 
 5                the time of the agreement; or
 
 6           (B)  In a written agreement that is signed by all
 
 7                persons who are shareholders at the time of the
 
 8                agreement and is made known to the corporation;
 
 9      (2)  Subject to amendment only by all persons who are
 
10           shareholders at the time of the amendment, unless the
 
11           agreement provides otherwise; and
 
12      (3)  Valid for ten years, unless the agreement provides
 
13           otherwise.
 
14      (c)  The existence of an agreement authorized by this
 
15 section shall be noted conspicuously on the front or back of each
 
16 certificate for outstanding shares or on the information
 
17 statement required by section    -87(b).  If at the time of the
 
18 agreement the corporation has shares outstanding represented by
 
19 certificates, the corporation shall recall the outstanding
 
20 certificates and issue substitute certificates that comply with
 
21 this subsection.  The failure to note the existence of the
 
22 agreement on the certificate or information statement shall not
 
23 affect the validity of the agreement or any action taken pursuant
 

 
Page 76                                                    2484
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 1 to it.  Any purchaser of shares who, at the time of purchase, did
 
 2 not have knowledge of the existence of the agreement shall be
 
 3 entitled to rescission of the purchase.  A purchaser shall be
 
 4 deemed to have knowledge of the existence of the agreement if its
 
 5 existence is noted on the certificate or information statement
 
 6 for the shares in compliance with this subsection and, if the
 
 7 shares are not represented by a certificate, the information
 
 8 statement is delivered to the purchaser at or prior to the time
 
 9 of purchase of the shares.  An action to enforce the right of
 
10 rescission authorized by this subsection must be commenced within
 
11 the earlier of ninety days after discovery of the existence of
 
12 the agreement or two years after the time of purchase of the
 
13 shares.
 
14      (d)  An agreement authorized by this section shall cease to
 
15 be effective when shares of the corporation are listed on a
 
16 national securities exchange or regularly traded in a market
 
17 maintained by one or more members of a national or affiliated
 
18 securities association.  If the agreement ceases to be effective
 
19 for any reason, the board of directors, if the agreement is
 
20 contained or referred to in the corporation's articles of
 
21 incorporation or bylaws, may adopt an amendment to the articles
 
22 of incorporation or bylaws, without shareholder action, to delete
 
23 the agreement and any references to it.
 

 
Page 77                                                    2484
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 1      (e)  An agreement authorized by this section that limits the
 
 2 discretion or powers of the board of directors shall relieve the
 
 3 directors of, and impose upon the person or persons in whom the
 
 4 discretion or powers are vested, liability for acts or omissions
 
 5 imposed by law on directors to the extent that the discretion or
 
 6 powers of the directors are limited by the agreement.
 
 7      (f)  The existence or performance of an agreement authorized
 
 8 by this section shall not be a ground for imposing personal
 
 9 liability on any shareholder for the acts or debts of the
 
10 corporation even if the agreement or its performance treats the
 
11 corporation as if it were a partnership or results in failure to
 
12 observe the corporate formalities otherwise applicable to the
 
13 matters governed by the agreement.
 
14      (g)  Incorporators or subscribers for shares may act as
 
15 shareholders with respect to an agreement authorized by this
 
16 section if no shares have been issued when the agreement is made.
 
17                    D.  Derivative Proceedings
 
18         -171  Definitions.  In this subpart:
 
19      "Derivative proceeding" means a civil suit in the right of a
 
20 domestic corporation or, to the extent provided in section
 
21    -178, in the right of a foreign corporation.
 
22      "Shareholder" includes a beneficial owner whose shares are
 
23 held in a voting trust or held by a nominee on the beneficial
 

 
Page 78                                                    2484
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 1 owner's behalf.
 
 2         -172  Standing.  A shareholder may not commence or
 
 3 maintain a derivative proceeding unless the shareholder:
 
 4      (1)  Was a shareholder of the corporation at the time of the
 
 5           act or omission complained of or became a shareholder
 
 6           through transfer by operation of law from one who was a
 
 7           shareholder at that time; and
 
 8      (2)  Fairly and adequately represents the interests of the
 
 9           corporation in enforcing the right of the corporation.
 
10         -173  Demand.  No shareholder may commence a derivative
 
11 proceeding until:
 
12      (1)  A written demand has been made upon the corporation to
 
13           take suitable action; and
 
14      (2)  Ninety days have expired from the date the demand was
 
15           made unless the shareholder has earlier been notified
 
16           that the demand has been rejected by the corporation or
 
17           unless irreparable injury to the corporation would
 
18           result by waiting for the expiration of the ninety-day
 
19           period.
 
20         -174  Stay of proceedings.  If the corporation commences
 
21 an inquiry into the allegations made in the demand or complaint,
 
22 the court may stay any derivative proceeding for a period that
 
23 the court deems appropriate.
 

 
Page 79                                                    2484
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 1         -175  Dismissal.  (a)  A derivative proceeding shall be
 
 2 dismissed by the court on motion by the corporation if one of the
 
 3 groups specified in subsection (b) or (f) has determined in good
 
 4 faith after conducting a reasonable inquiry upon which its
 
 5 conclusions are based that the maintenance of the derivative
 
 6 proceeding is not in the best interests of the corporation.
 
 7      (b)  Unless a panel is appointed pursuant to subsection (f),
 
 8 the determination in subsection (a)  shall be made by:
 
 9      (1)  A majority vote of independent directors present at a
 
10           meeting of the board of directors if the independent
 
11           directors constitute a quorum; or
 
12      (2)  A majority vote of a committee consisting of two or
 
13           more independent directors appointed by majority vote
 
14           of independent directors present at a meeting of the
 
15           board of directors, whether or not the independent
 
16           directors constituted a quorum.
 
17      (c)  None of the following by itself shall cause a director
 
18 to be considered not independent for purposes of this section:
 
19      (1)  The nomination or election of the director by persons
 
20           who are defendants in the derivative proceeding or
 
21           against whom action is demanded;
 
22      (2)  The naming of the director as a defendant in the
 
23           derivative proceeding or as a person against whom
 

 
Page 80                                                    2484
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 1           action is demanded; or
 
 2      (3)  The approval by the director of the act being
 
 3           challenged in the derivative proceeding or demand if
 
 4           the act resulted in no personal benefit to the
 
 5           director.
 
 6      (d)  If a derivative proceeding is commenced after a
 
 7 determination has been made rejecting a demand by a shareholder,
 
 8 the complaint shall allege with particularity facts establishing
 
 9 either:
 
10      (1)  That a majority of the board of directors did not
 
11           consist of independent directors at the time the
 
12           determination was made; or
 
13      (2)  That the requirements of subsection (a) have not been
 
14           met.
 
15      (e)  If a majority of the board of directors does not
 
16 consist of independent directors at the time the determination is
 
17 made, the corporation shall have the burden of proving that the
 
18 requirements of subsection (a) have been met.  If a majority of
 
19 the board of directors consists of independent directors at the
 
20 time the determination is made, the plaintiff shall have the
 
21 burden of proving that the requirements of subsection (a) have
 
22 not been met.
 
23      (f)  The court may appoint a panel of one or more
 

 
Page 81                                                    2484
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 1 independent persons upon motion by the corporation to make a
 
 2 determination whether the maintenance of the derivative
 
 3 proceeding is in the best interests of the corporation.  In the
 
 4 case, the plaintiff shall have the burden of proving that the
 
 5 requirements of subsection (a) have not been met.
 
 6         -176  Discontinuance or settlement.  A derivative
 
 7 proceeding may not be discontinued or settled without the court's
 
 8 approval.  If the court determines that a proposed discontinuance
 
 9 or settlement will substantially affect the interests of the
 
10 corporation's shareholders or a class of shareholders, the court
 
11 shall direct that notice be given to the shareholders affected.
 
12         -177  Payment of expenses.  On termination of the
 
13 derivative proceeding the court may:
 
14      (1)  Order the corporation to pay the plaintiff's reasonable
 
15           expenses (including counsel fees) incurred in the
 
16           proceeding if it finds that the proceeding has resulted
 
17           in a substantial benefit to the corporation;
 
18      (2)  Order the plaintiff to pay any defendant's reasonable
 
19           expenses (including counsel fees) incurred in defending
 
20           the proceeding if it finds that the proceeding was
 
21           commenced or maintained without reasonable cause or for
 
22           an improper purpose; or
 
23      (3)  Order a party to pay an opposing party's reasonable
 

 
Page 82                                                    2484
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 1           expenses (including counsel fees) incurred because of
 
 2           the filing of a pleading, motion, or other paper, if it
 
 3           finds that the pleading, motion, or other paper was not
 
 4           well grounded in fact, after reasonable inquiry, or
 
 5           warranted by existing law or a good faith argument for
 
 6           the extension, modification, or reversal of existing
 
 7           law and was interposed for an improper purpose, such as
 
 8           to harass or cause unnecessary delay or needless
 
 9           increase in the cost of litigation.
 
10         -178  Applicability to foreign corporations.  In any
 
11 derivative proceeding in the right of a foreign corporation, the
 
12 matters covered by this subpart shall be governed by the laws of
 
13 the jurisdiction of incorporation of the foreign corporation
 
14 except for sections    -174,    -176, and    -177.
 
15                 PART IX.  DIRECTORS AND OFFICERS
 
16                      A.  Board of Directors
 
17         -191  Requirement for and duties of board of directors.
 
18 (a)  Except as provided in section    -163, each corporation must
 
19 have a board of directors.
 
20      (b)  All corporate powers shall be exercised by or under the
 
21 authority of, and the business and affairs of the corporation
 
22 managed under the direction of, its board of directors, subject
 
23 to any limitation set forth in the articles of incorporation or
 

 
Page 83                                                    2484
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 1 in an agreement authorized under section    -163.
 
 2         -192  Qualifications of directors.  The articles of
 
 3 incorporation or bylaws may prescribe qualifications for
 
 4 directors.  A director need not be a resident of this State or a
 
 5 shareholder of the corporation unless the articles of
 
 6 incorporation or bylaws so prescribe.
 
 7         -193  Number and election of directors.  (a)  A board of
 
 8 directors must consist of one or more individuals, with the
 
 9 number specified in or fixed in accordance with the articles of
 
10 incorporation or bylaws.
 
11      (b)  If a board of directors has power to fix or change the
 
12 number of directors, the board may increase or decrease by thirty
 
13 per cent or less the number of directors last approved by the
 
14 shareholders, but only the shareholders may increase or decrease
 
15 by more than thirty per cent the number of directors last
 
16 approved by the shareholders.
 
17      (c)  The articles of incorporation or bylaws may establish a
 
18 variable range for the size of the board of directors by fixing a
 
19 minimum and maximum number of directors.  If a variable range is
 
20 established, the number of directors may be fixed or changed from
 
21 time to time, within the minimum and maximum, by the shareholders
 
22 or the board of directors.  After shares are issued, only the
 
23 shareholders may change the range for the size of the board or
 

 
Page 84                                                    2484
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 1 change from a fixed to a variable-range size board or vice versa.
 
 2      (d)  Directors are elected at the first annual shareholders'
 
 3 meeting and at each annual meeting thereafter unless their terms
 
 4 are staggered under section    -196.
 
 5         -194  Election of directors by certain classes of
 
 6 shareholders.  If the articles of incorporation authorize
 
 7 dividing the shares into classes, the articles may also authorize
 
 8 the election of all or a specified number of directors by the
 
 9 holders of one or more authorized classes of shares.  A class or
 
10 classes of shares entitled to elect one or more directors is a
 
11 separate voting group for purposes of the election of directors.
 
12         -195  Terms of directors generally.  (a)  The terms of
 
13 the initial directors of a corporation expire at the first
 
14 shareholders' meeting at which directors are elected.
 
15      (b)  The terms of all other directors expire at the next
 
16 annual shareholders' meeting following their election unless
 
17 their terms are staggered under section    -196.
 
18      (c)  A decrease in the number of directors does not shorten
 
19 an incumbent director's term.
 
20      (d)  The term of a director elected to fill a vacancy
 
21 expires at the next shareholders' meeting at which directors are
 
22 elected.
 
23      (e)  Despite the expiration of a director's term, the
 

 
Page 85                                                    2484
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 1 director continues to serve until the director's successor is
 
 2 elected and qualifies or until there is a decrease in the number
 
 3 of directors.
 
 4         -196  Staggered terms for directors.  If there are nine
 
 5 or more directors, the articles of incorporation may provide for
 
 6 staggering their terms by dividing the total number of directors
 
 7 into two or three groups, with each group containing one half or
 
 8 one-third of the total, as near as may be.  In that event, the
 
 9 terms of directors in the first group expire at the first annual
 
10 shareholders' meeting after their election, the terms of the
 
11 second group expire at the second annual shareholders' meeting
 
12 after their election, and the terms of the third group, if any,
 
13 expire at the third annual shareholders' meeting after their
 
14 election.  At each annual shareholders' meeting held thereafter,
 
15 directors shall be chosen for a term of two years or three years,
 
16 as the case may be, to succeed those whose terms expire.
 
17         -197  Resignation of directors.  (a)  A director may
 
18 resign at any time by delivering written notice to the board of
 
19 directors, its chairperson, or the corporation.
 
20      (b)  A resignation is effective when the notice is delivered
 
21 unless the notice specifies a later effective date.
 
22         -198  Removal of directors by shareholders.  (a)  The
 
23 shareholders may remove one or more directors with or without
 

 
Page 86                                                    2484
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 1 cause unless the articles of incorporation provide that directors
 
 2 may be removed only for cause.
 
 3      (b)  If a director is elected by a voting group of
 
 4 shareholders, only the shareholders of that voting group may
 
 5 participate in the vote to remove the director.
 
 6      (c)  If cumulative voting is authorized, a director may not
 
 7 be removed if the number of votes sufficient to elect the
 
 8 director under cumulative voting is voted against the director's
 
 9 removal.  If cumulative voting is not authorized, a director may
 
10 be removed only if the number of votes cast to remove the
 
11 director exceeds the number of votes cast not to remove the
 
12 director.
 
13      (d)  A director may be removed by the shareholders only at a
 
14 meeting called for the purpose of removing the director and the
 
15 meeting notice must state that the purpose, or one of the
 
16 purposes, of the meeting is removal of the director.
 
17         -199  Removal of directors by judicial proceeding.  (a)
 
18 The circuit court may remove a director of the corporation from
 
19 office in a proceeding commenced either by the corporation or by
 
20 its shareholders holding at least ten per cent of the outstanding
 
21 shares of any class if the court finds that:
 
22      (1)  The director engaged in fraudulent or dishonest
 
23           conduct, or gross abuse of authority or discretion,
 

 
Page 87                                                    2484
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 1           with respect to the corporation; and
 
 2      (2)  Removal is in the best interest of the corporation.
 
 3      (b)  The court that removes a director may bar the director
 
 4 from reelection for a period prescribed by the court.
 
 5      (c)  If shareholders commence a proceeding under subsection
 
 6 (a), they shall make the corporation a party defendant.
 
 7         -200  Vacancy on board.  (a)  Unless the articles of
 
 8 incorporation provide otherwise, if a vacancy occurs on a board
 
 9 of directors, including a vacancy resulting from an increase in
 
10 the number of directors:
 
11      (1)  The shareholders may fill the vacancy;
 
12      (2)  The board of directors may fill the vacancy; or
 
13      (3)  If the directors remaining in office constitute fewer
 
14           than a quorum of the board, they may fill the vacancy
 
15           by the affirmative vote of a majority of all the
 
16           directors remaining in office.
 
17      (b)  If the vacant office was held by a director elected by
 
18 a voting group of shareholders, only the holders of shares of
 
19 that voting group are entitled to vote to fill the vacancy if it
 
20 is filled by the shareholders.
 
21      (c)  A vacancy that will occur at a specific later date (by
 
22 reason of a resignation effective at a later date under section
 
23    -197(b) or otherwise) may be filled before the vacancy occurs
 

 
Page 88                                                    2484
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 1 but the new director may not take office until the vacancy
 
 2 occurs.
 
 3         -201  Compensation of directors.  Unless the articles of
 
 4 incorporation or bylaws provide otherwise, the board of directors
 
 5 may fix the compensation of directors.
 
 6               B.  Meetings and Action of the Board
 
 7         -211  Meetings.  (a)  The board of directors may hold
 
 8 regular or special meetings in or out of this State.
 
 9      (b)  Unless the articles of incorporation or bylaws provide
 
10 otherwise, the board of directors may permit any or all directors
 
11 to participate in a regular or special meeting by, or conduct the
 
12 meeting through the use of, any means of communication by which
 
13 all directors participating may simultaneously hear each other
 
14 during the meeting.  A director participating in a meeting by
 
15 this means is deemed to be present in person at the meeting.
 
16         -212  Action without meeting.  (a)  Unless the articles
 
17 of incorporation or bylaws provide otherwise, action required or
 
18 permitted by this chapter to be taken at a board of directors'
 
19 meeting may be taken without a meeting if the action is taken by
 
20 all members of the board.  The action must be evidenced by one or
 
21 more written consents describing the action taken, signed before
 
22 or after the intended effective date of the action by each
 
23 director, and included in the minutes or filed with the corporate
 

 
Page 89                                                    2484
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 1 records reflecting the action taken.
 
 2      (b)  Action taken under this section is effective when the
 
 3 last director signs the consent, unless the consent specifies a
 
 4 different effective date.
 
 5      (c)  A consent signed under this section has the effect of a
 
 6 meeting vote and may be described as such in any document.
 
 7         -213  Notice of meeting.  (a)  Unless the articles of
 
 8 incorporation or bylaws provide otherwise, regular meetings of
 
 9 the board of directors may be held without notice of the date,
 
10 time, place, or purpose of the meeting.
 
11      (b)  Unless the articles of incorporation or bylaws provide
 
12 for a longer or shorter period, special meetings of the board of
 
13 directors must be preceded by at least two days' notice of the
 
14 date, time, and place of the meeting.  The notice need not
 
15 describe the purpose of the special meeting unless required by
 
16 the articles of incorporation or bylaws.
 
17         -214  Waiver of notice or meeting.  (a)  A director may
 
18 waive any notice required by this chapter, the articles of
 
19 incorporation, or bylaws before or after the date and time stated
 
20 in the notice.  Except as provided by subsection (b), the waiver
 
21 must be in writing, signed by the director entitled to the
 
22 notice, and filed with the minutes or corporate records.
 
23      (b)  A director's attendance at or participation in a
 

 
Page 90                                                    2484
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 1 meeting waives any required notice to the director of the meeting
 
 2 unless the director at the beginning of the meeting (or promptly
 
 3 upon the director's arrival) objects to holding the meeting or
 
 4 transacting business at the meeting and does not thereafter vote
 
 5 for or assent to action taken at the meeting.
 
 6         -215  Quorum and voting.  (a)  Unless the articles of
 
 7 incorporation or bylaws require a greater number or unless
 
 8 otherwise specifically provided in this chapter, a quorum of a
 
 9 board of directors consists of:
 
10      (1)  A majority of the fixed number of directors if the
 
11           corporation has a fixed board size; or
 
12      (2)  A majority of the number of directors prescribed, or if
 
13           no number is prescribed the number in office
 
14           immediately before the meeting begins, if the
 
15           corporation has a variable-range size board.
 
16      (b)  The articles of incorporation or bylaws may authorize a
 
17 quorum of a board of directors to consist of no fewer than one-
 
18 third of the fixed or prescribed number of directors determined
 
19 under subsection (a).
 
20      (c)  If a quorum is present when a vote is taken, the
 
21 affirmative vote of a majority of directors present is the act of
 
22 the board of directors unless the articles of incorporation or
 
23 bylaws require the vote of a greater number of directors.
 

 
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 1      (d)  A director who is present at a meeting of the board of
 
 2 directors or a committee of the board of directors when corporate
 
 3 action is taken is deemed to have assented to the action taken
 
 4 unless:
 
 5      (1)  The director objects at the beginning of the meeting
 
 6           (or promptly upon the director's arrival) to holding it
 
 7           or transacting business at the meeting;
 
 8      (2)  The director's dissent or abstention from the action
 
 9           taken is entered in the minutes of the meeting; or
 
10      (3)  The director delivers written notice of the director's
 
11           dissent or abstention to the presiding officer of the
 
12           meeting before its adjournment or to the corporation
 
13           immediately after adjournment of the meeting.  The
 
14           right of dissent or abstention is not available to a
 
15           director who votes in favor of the action taken.
 
16         -216  Committees.  (a)  Unless the articles of
 
17 incorporation or bylaws provide otherwise, a board of directors
 
18 may create one or more committees and appoint members of the
 
19 board of directors to serve on them.  Each committee must have
 
20 two or more members, who serve at the pleasure of the board of
 
21 directors.
 
22      (b)  The creation of a committee and appointment of members
 
23 to it must be approved by the greater of:
 

 
Page 92                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (1)  A majority of all the directors in office when the
 
 2           action is taken; or
 
 3      (2)  The number of directors required by the articles of
 
 4           incorporation or bylaws to take action under section
 
 5              -215.
 
 6      (c)  Sections    -211 to    -215, which govern meetings,
 
 7 action without meetings, notice and waiver of notice, and quorum
 
 8 and voting requirements of the board of directors, apply to
 
 9 committees and their members as well.
 
10      (d)  To the extent specified by the board of directors or in
 
11 the articles of incorporation or bylaws, each committee may
 
12 exercise the authority of the board of directors under section
 
13    -191.
 
14      (e)  A committee may not, however:
 
15      (1)  Authorize distributions;
 
16      (2)  Approve or propose to shareholders action that this
 
17           chapter requires be approved by shareholders;
 
18      (3)  Fill vacancies on the board of directors or on any of
 
19           its committees;
 
20      (4)  Amend articles of incorporation pursuant to section
 
21              -282;
 
22      (5)  Adopt, amend, or repeal bylaws;
 
23      (6)  Approve a plan of merger not requiring shareholder
 

 
Page 93                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           approval;
 
 2      (7)  Authorize or approve reacquisition of shares, except
 
 3           according to a formula or method prescribed by the
 
 4           board of directors; or
 
 5      (8)  Authorize or approve the issuance or sale or contract
 
 6           for sale of shares, or determine the designation and
 
 7           relative rights, preferences, and limitations of a
 
 8           class or series of shares, except that the board of
 
 9           directors may authorize a committee (or a senior
 
10           executive officer of the corporation) to do so within
 
11           limits specifically prescribed by the board of
 
12           directors.
 
13      (f)  The creation of, delegation of authority to, or action
 
14 by a committee does not alone constitute compliance by a director
 
15 with the standards of conduct described in section    -221.
 
16                     C.  Standards of Conduct
 
17         -221  General standards for directors.  (a)  A director
 
18 shall discharge the director's duties as a director, including
 
19 the director's duties as a member of a committee:
 
20      (1)  In good faith;
 
21      (2)  With the care an ordinarily prudent person in a like
 
22           position would exercise under similar circumstances;
 
23           and
 

 
Page 94                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (3)  In a manner the director reasonably believes to be in
 
 2           the best interests of the corporation.
 
 3      (b)  In determining the best interests of the corporation, a
 
 4 director, in addition to considering the interests of the
 
 5 corporation's shareholders, may consider, in the director's
 
 6 discretion, any of the following factors:
 
 7      (1)  The interests of the corporation's employees,
 
 8           customers, suppliers, and creditors;
 
 9      (2)  The economy of the State and the nation;
 
10      (3)  Community and societal considerations, including,
 
11           without limitation, the impact of any action upon the
 
12           communities in or near which the corporation has
 
13           offices or operations; and
 
14      (4)  The long-term as well as short-term interests of the
 
15           corporation and its shareholders, including, without
 
16           limitation, the possibility that these interests may be
 
17           best served by the continued independence of the
 
18           corporation.
 
19      (c)  In discharging duties as a director, the director is
 
20 entitled to rely on information, opinions, reports, or
 
21 statements, including financial statements and other financial
 
22 data, if prepared or presented by:
 
23      (1)  One or more officers or employees of the corporation
 

 
Page 95                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           whom the director reasonably believes to be reliable
 
 2           and competent in the matters presented;
 
 3      (2)  Legal counsel, public accountants, or other persons as
 
 4           to matters the director reasonably believes are within
 
 5           the person's professional or expert competence; or
 
 6      (3)  A committee of the board of directors of which the
 
 7           director is not a member if the director reasonably
 
 8           believes the committee merits confidence.
 
 9      (d)  A director is not acting in good faith if the director
 
10 has knowledge concerning the matter in question that makes
 
11 reliance otherwise permitted by subsection (c) unwarranted.
 
12      (e)  A director is not liable for any action taken as a
 
13 director, or any failure to take any action, if the director
 
14 performed the duties of the director's office in compliance with
 
15 this section.
 
16         -222  Limitation of liability of directors; shareholder
 
17 approval required.  (a)  A corporation may eliminate or limit the
 
18 personal liability of its directors in any action brought by the
 
19 shareholders or the corporation for monetary damages against any
 
20 director of the corporation for any action taken, or any failure
 
21 to take any action, as a director; provided that:
 
22      (1)  The elimination or limitation shall be authorized,
 
23           directed, or provided for in:
 

 
Page 96                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           (A)  The articles of incorporation of the corporation;
 
 2                or
 
 3           (B)  Any duly adopted amendment of the articles of
 
 4                incorporation; and
 
 5      (2)  If the provision eliminating or limiting the personal
 
 6           liability of a corporation's directors is authorized,
 
 7           directed, or provided for by amendments to the articles
 
 8           of incorporation, it shall be adopted upon the
 
 9           affirmative vote of the holders of two-thirds of the
 
10           shares represented at the shareholders' meeting and
 
11           entitled to vote; provided that the vote also
 
12           constitutes a majority of the shares entitled to vote.
 
13      (b)  A corporation shall not eliminate or limit the personal
 
14 liability of a director for:
 
15      (1)  The amount of a financial benefit received by a
 
16           director to which the director is not entitled;
 
17      (2)  An intentional infliction of harm on the corporation or
 
18           the shareholders;
 
19      (3)  A violation of section    -223; or
 
20      (4)  An intentional violation of criminal law.
 
21      (c)  The shareholders of the corporation shall receive
 
22 written notice of any proposal by the corporation to eliminate or
 
23 limit the personal liability of the directors under subsection
 

 
Page 97                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 (a)(2), and the corporation shall in such cases submit the duly
 
 2 adopted amendment to the articles of incorporation to the
 
 3 department director.
 
 4      (d)  No provision pursuant to subsection (a)(1) shall be
 
 5 authorized by the corporation to eliminate or limit the liability
 
 6 of directors for acts, omissions, or causes of action occurring,
 
 7 accruing, or arising prior to June 7, 1989.
 
 8      (e)  Nothing in this section shall impair or affect the
 
 9 validity of any provisions of the bylaws of a corporation
 
10 eliminating or limiting the personal liability of the directors
 
11 which were authorized, directed, or provided for and approved by
 
12 the shareholders of the corporation in compliance with then
 
13 existing law prior to July 1, 1996.
 
14         -223  Liability for unlawful distributions.  (a)  A
 
15 director who votes for or assents to a distribution made in
 
16 violation of section    -111 or the articles of incorporation is
 
17 personally liable to the corporation for the amount of the
 
18 distribution that exceeds what could have been distributed
 
19 without violating section    -111 or the articles of
 
20 incorporation, if it is established that the director did not
 
21 perform the director's duties in compliance with section    -221.
 
22 In any proceeding commenced under this section, a director has
 
23 all of the defenses ordinarily available to a director.
 

 
Page 98                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (b)  A director held liable under subsection (a) for an
 
 2 unlawful distribution is entitled to contribution:
 
 3      (1)  From every other director who could be held liable
 
 4           under subsection (a) for the unlawful distribution; and
 
 5      (2)  From each shareholder for the amount the shareholder
 
 6           accepted knowing the distribution was made in violation
 
 7           of section    -111 or the articles of incorporation.
 
 8      (c)  A proceeding under this section is barred unless it is
 
 9 commenced within two years after the date on which the effect of
 
10 the distribution was measured under section    -111(e) or (g).
 
11      (d)  Nothing in this chapter shall prohibit the distribution
 
12 of assets to shareholders permitted or authorized by the Federal
 
13 Housing Commissioner by any corporation organized for the purpose
 
14 of providing housing for rent pursuant to regulations of the
 
15 Federal Housing Commissioner under the provisions of Title VIII
 
16 of the National Housing Act, as amended, where the principal
 
17 assets of the corporation consist of real property belonging to
 
18 the United States and leased to the corporation pursuant to Title
 
19 VIII of the National Housing Act as amended or supplemented from
 
20 time to time.
 
21                           D.  Officers
 
22         -231  Required officers.  (a)  A corporation has the
 
23 officers described in its bylaws or appointed by the board of
 

 
Page 99                                                    2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 directors in accordance with the bylaws.
 
 2      (b)  A duly appointed officer may appoint one or more
 
 3 officers or assistant officers if authorized by the bylaws or the
 
 4 board of directors.
 
 5      (c)  The bylaws or the board of directors shall delegate to
 
 6 one of the officers responsibility for preparation and custody of
 
 7 minutes of the directors' and shareholders' meetings and for
 
 8 authenticating records of the corporation.
 
 9      (d)  The same individual may simultaneously hold more than
 
10 one office in a corporation.
 
11         -232  Duties of officers.  Each officer has the
 
12 authority and shall perform the duties set forth in the bylaws
 
13 or, to the extent consistent with the bylaws, the duties
 
14 prescribed by the board of directors or by direction of an
 
15 officer authorized by the board of directors to prescribe the
 
16 duties of other officers.
 
17         -233  Standards of conduct for officers.  (a)  An
 
18 officer with discretionary authority shall discharge the
 
19 officer's duties under that authority:
 
20      (1)  In good faith;
 
21      (2)  With the care an ordinarily prudent person in a like
 
22           position would exercise under similar circumstances;
 
23           and
 

 
Page 100                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (3)  In a manner the officer reasonably believes to be in
 
 2           the best interests of the corporation.
 
 3      (b)  In discharging the duties of an officer, the officer is
 
 4 entitled to rely on information, opinions, reports, or
 
 5 statements, including financial statements and other financial
 
 6 data, if prepared or presented by:
 
 7      (1)  One or more officers or employees of the corporation
 
 8           whom the officer reasonably believes to be reliable and
 
 9           competent in the matters presented; or
 
10      (2)  Legal counsel, public accountants, or other persons as
 
11           to matters the officer reasonably believes are within
 
12           the person's professional or expert competence.
 
13      (c)  An officer is not acting in good faith if the officer
 
14 has knowledge concerning the matter in question that makes
 
15 reliance otherwise permitted by subsection (b) unwarranted.
 
16      (d)  An officer is not liable for any action taken as an
 
17 officer, or any failure to take any action, if the officer
 
18 performed the duties of the officer's office in compliance with
 
19 this section.
 
20         -234  Resignation and removal of officers.  (a)  An
 
21 officer may resign at any time by delivering notice to the
 
22 corporation.  A resignation is effective when the notice is
 
23 delivered unless the notice specifies a later effective date.  If
 

 
Page 101                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 a resignation is made effective at a later date and the
 
 2 corporation accepts the future effective date, its board of
 
 3 directors may fill the pending vacancy before the effective date
 
 4 if the board of directors provides that the successor does not
 
 5 take office until the effective date.
 
 6      (b)  Any officer or agent may be removed by the board of
 
 7 directors whenever in its judgment the best interests of the
 
 8 corporation will be served thereby, but the removal shall be
 
 9 without prejudice to the contract rights, if any, of the person
 
10 so removed.  Election or appointment of an officer or agent shall
 
11 not of itself create contract rights.
 
12         -235  Contract rights of officers.  (a)  The appointment
 
13 or election of an officer does not itself create contract rights.
 
14      (b)  An officer's removal does not affect the officer's
 
15 contract rights, if any, with the corporation.  An officer's
 
16 resignation does not affect the corporation's contract rights, if
 
17 any, with the officer.
 
18                        E.  Indemnification
 
19         -241  Definitions.  In this subpart:
 
20      "Corporation" includes any domestic or foreign predecessor
 
21 entity of a corporation in a merger.
 
22      "Director" or "officer" means an individual who is or was a
 
23 director or officer, respectively, of a corporation or who, while
 

 
Page 102                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 a director or officer of the corporation, is or was serving at
 
 2 the corporation's request as a director, officer, partner,
 
 3 trustee, employee, or agent of another domestic or foreign
 
 4 corporation, partnership, joint venture, trust, employee benefit
 
 5 plan, or other entity.  A director or officer is considered to be
 
 6 serving an employee benefit plan at the corporation's request if
 
 7 the duties of the director or officer to the corporation also
 
 8 impose duties on, or otherwise involve services by, the director
 
 9 or officer to the plan or to participants in or beneficiaries of
 
10 the plan.  "Director" or "officer" includes, unless the context
 
11 requires otherwise, the estate or personal representative of a
 
12 director or officer.
 
13      "Disinterested director" means a director who, at the time
 
14 of a vote referred to in section    -244(c) or a vote or
 
15 selection referred to in section    -246(b) or (c), is not:
 
16      (1)  A party to the proceeding; or
 
17      (2)  An individual having a familial, financial,
 
18           professional, or employment relationship with the
 
19           director whose indemnification or advance for expenses
 
20           is the subject of the decision being made, which
 
21           relationship would, in the circumstances, reasonably be
 
22           expected to exert an influence on the director's
 
23           judgment when voting on the decision being made.
 

 
Page 103                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      "Expenses" includes counsel fees.
 
 2      "Liability" means the obligation to pay a judgment,
 
 3 settlement, penalty, fine (including an excise tax assessed with
 
 4 respect to an employee benefit plan), or reasonable expenses
 
 5 incurred with respect to a proceeding.
 
 6      "Official capacity" means:
 
 7      (1)  When used with respect to a director, the office of
 
 8           director in a corporation; and
 
 9      (2)  When used with respect to an officer, as contemplated
 
10           in section    -247, the office in a corporation held by
 
11           the officer.
 
12 "Official capacity" does not include service for any other
 
13 domestic or foreign corporation or any partnership, joint
 
14 venture, trust, employee benefit plan, or other entity.
 
15      "Party" means an individual who was, is, or is threatened to
 
16 be made, a defendant or respondent in a proceeding.
 
17      "Proceeding" means any threatened, pending, or completed
 
18 action, suit, or proceeding, whether civil, criminal,
 
19 administrative, arbitrative, or investigative and whether formal
 
20 or informal.
 
21         -242  Permissible indemnification.  (a)  Except as
 
22 otherwise provided in this section, a corporation may indemnify
 
23 an individual who is a party to a proceeding because the
 

 
Page 104                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 individual is a director against liability incurred in the
 
 2 proceeding if:
 
 3      (1)  (A)  The individual conducted the individual's self in
 
 4                good faith; and
 
 5           (B)  The individual reasonably believed:
 
 6                (i)  In the case of conduct of official capacity,
 
 7                     that the individual's conduct was in the best
 
 8                     interests of the corporation; and
 
 9               (ii)  In all other cases, that the individual's
 
10                     conduct was at least not opposed to the best
 
11                     interests of the corporation; and
 
12           (C)  In the case of any criminal proceeding, the
 
13                individual had no reasonable cause to believe the
 
14                individual's conduct was unlawful; or
 
15      (2)  The individual engaged in conduct for which broader
 
16           indemnification has been made permissible or obligatory
 
17           under a provision of the articles of incorporation (as
 
18           authorized by section    -32(b)(5)).
 
19      (b)  A director's conduct with respect to an employee
 
20 benefit plan for a purpose the director reasonably believed to be
 
21 in the interests of the participants in, and the beneficiaries
 
22 of, the plan is conduct that satisfies the requirement of
 
23 subsection (a)(1)(B)(ii).
 

 
Page 105                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (c)  The termination of a proceeding by judgment, order,
 
 2 settlement, or conviction, or upon a plea of nolo contendere or
 
 3 its equivalent, is not, of itself, determinative that the
 
 4 director did not meet the relevant standard of conduct described
 
 5 in this section.
 
 6      (d)  Unless ordered by a court under section    -245(a)(3),
 
 7 a corporation may not indemnify a director:
 
 8      (1)  In connection with a proceeding by or in the right of
 
 9           the corporation, except for reasonable expenses
 
10           incurred in connection with the proceeding if it is
 
11           determined that the director has met the relevant
 
12           standard of conduct under subsection (a); or
 
13      (2)  In connection with any proceeding with respect to
 
14           conduct for which the director was adjudged liable on
 
15           the basis that the director received a financial
 
16           benefit to which the director was not entitled, whether
 
17           or not involving action in the director's official
 
18           capacity.
 
19         -243  Mandatory indemnification.  A corporation shall
 
20 indemnify a director who was wholly successful, on the merits or
 
21 otherwise, in the defense of any proceeding to which the director
 
22 was a party because the director was a director of the
 
23 corporation against reasonable expenses incurred by the director
 

 
Page 106                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 in connection with the proceeding.
 
 2         -244  Advance for expenses.  (a)  A corporation, before
 
 3 final disposition of a proceeding, may advance funds to pay for
 
 4 or reimburse the reasonable expenses incurred by a director who
 
 5 is a party to a proceeding because the director is a director if
 
 6 the director delivers to the corporation:
 
 7      (1)  A written affirmation of the director's good faith
 
 8           belief that the director has met the relevant standard
 
 9           of conduct described in section    -242 or that the
 
10           proceeding involves conduct for which liability has
 
11           been eliminated under a provision of the articles of
 
12           incorporation as authorized by section    -32(b)(4);
 
13           and
 
14      (2)  The director's written undertaking to repay any funds
 
15           advanced if the director is not entitled to mandatory
 
16           indemnification under section    -243 and it is
 
17           ultimately determined under section    -245 or -246
 
18           that the director has not met the relevant standard of
 
19           conduct described in section    -242.
 
20      (b)  The undertaking required by subsection (a)(2) must be
 
21 an unlimited general obligation of the director but need not be
 
22 secured and may be accepted without reference to the financial
 
23 ability of the director to make repayment.
 

 
Page 107                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (c)  Authorizations under this section shall be made:
 
 2      (1)  By the board of directors:
 
 3           (A)  If there are two or more disinterested directors,
 
 4                by a majority vote of all the disinterested
 
 5                directors (a majority of whom for this purpose,
 
 6                shall constitute a quorum) or by a majority of the
 
 7                members of a committee of two or more
 
 8                disinterested directors appointed by such a vote;
 
 9                or
 
10           (B)  If there are fewer than two disinterested
 
11                directors, by the vote necessary for action by the
 
12                board in accordance with section    -215(c), in
 
13                which authorization directors who do not qualify
 
14                as disinterested directors may participate; or
 
15      (2)  By the shareholders, but shares owned by or voted under
 
16           the control of a director who at the time does not
 
17           qualify as a disinterested director may not be voted on
 
18           the authorization.
 
19         -245  Court-ordered indemnification and advance for
 
20 expenses.  (a)  A director who is a party to a proceeding because
 
21 the director is a director may apply for indemnification or an
 
22 advance for expenses to the court conducting the proceeding or to
 
23 another court of competent jurisdiction.  After receipt of an
 

 
Page 108                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 application and after giving any notice it considers necessary,
 
 2 the court shall:
 
 3      (1)  Order indemnification if the court determines that the
 
 4           director is entitled to mandatory indemnification under
 
 5           section    -243;
 
 6      (2)  Order indemnification or advance for expenses if the
 
 7           court determines that the director is entitled to
 
 8           indemnification or advance for expenses pursuant to a
 
 9           provision authorized by section    -249(a); or
 
10      (3)  Order indemnification or advance for expenses if the
 
11           court determines, in view of all the relevant
 
12           circumstances, that it is fair and reasonable:
 
13           (A)  To indemnify the director; or
 
14           (B)  To advance expenses to the director, even if the
 
15                director has not met the relevant standard of
 
16                conduct set forth in section    -242(a), failed to
 
17                comply with section    -244 or was adjudged liable
 
18                in a proceeding referred to in section
 
19                   -242(d)(1) or (2), but if the director was
 
20                adjudged so liable the director's indemnification
 
21                shall be limited to reasonable expenses incurred
 
22                in connection with the proceeding.
 
23      (b)  If the court determines that the director is entitled
 

 
Page 109                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 to indemnification under subsection (a)(1) or to indemnification
 
 2 or advance for expenses under subsection (a)(2), it shall also
 
 3 order the corporation to pay the director's reasonable expenses
 
 4 incurred in connection with obtaining court-ordered
 
 5 indemnification or advance for expenses.  If the court determines
 
 6 that the director is entitled to indemnification or advance for
 
 7 expenses under subsection (a)(3), it may also order the
 
 8 corporation to pay the director's reasonable expenses to obtain
 
 9 court-ordered indemnification or advance for expenses.
 
10         -246  Determination and authorization of
 
11 indemnification.  (a)  A corporation may not indemnify a director
 
12 under section    -242 unless authorized for a specific proceeding
 
13 after a determination has been made that indemnification of the
 
14 director is permissible because the director has met the relevant
 
15 standard of conduct set forth in section    -242.
 
16      (b)  The determination shall be made:
 
17      (1)  If there are two or more disinterested directors, by
 
18           the board of directors by a majority vote of all the
 
19           disinterested directors (a majority of whom for this
 
20           purpose shall constitute a quorum), or by a majority of
 
21           the members of a committee of two or more disinterested
 
22           directors appointed by such a vote;
 
23      (2)  By special legal counsel:
 

 
Page 110                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           (A)  Selected in the manner prescribed in paragraph
 
 2                (1); or
 
 3           (B)  If there are fewer than two disinterested
 
 4                directors, selected by the board of directors (in
 
 5                which selection directors who do not qualify as
 
 6                disinterested directors may participate); or
 
 7      (3)  By the shareholders, but shares owned by or voted under
 
 8           the control of a director who at the time does not
 
 9           qualify as a disinterested director may not be voted on
 
10           the determination.
 
11      (c)  Authorization of indemnification shall be made in the
 
12 same manner as the determination that indemnification is
 
13 permissible, except that if there are fewer than two
 
14 disinterested directors or if the determination is made by
 
15 special legal counsel, authorization of indemnification shall be
 
16 made by those entitled under subsection (b)(2)(B) to select
 
17 special legal counsel.
 
18         -247  Officers.  (a)  A corporation may indemnify and
 
19 advance expenses under this subpart to an officer of the
 
20 corporation who is a party to a proceeding because the officer is
 
21 an officer of the corporation
 
22      (1)  To the same extent as a director; and
 
23      (2)  If the person is an officer but not a director, to such
 

 
Page 111                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           further extent as may be provided by the articles of
 
 2           incorporation, the bylaws, a resolution of the board of
 
 3           directors, or contract except for:
 
 4           (A)  Liability in connection with a proceeding by or in
 
 5                the right of the corporation other than for
 
 6                reasonable expenses incurred in connection with
 
 7                the proceeding; or
 
 8           (B)  Liability arising out of conduct that constitutes:
 
 9                (i)  Receipt by the officer of a financial benefit
 
10                     to which the officer is not entitled;
 
11               (ii)  An intentional infliction of harm on the
 
12                     corporation or the shareholders; or
 
13              (iii)  An intentional violation of criminal law.
 
14      (b)  Subsection (a)(2) shall apply to an officer who is also
 
15 a director if the basis on which the officer is made a party to
 
16 the proceeding is an act or omission solely as an officer.
 
17      (c)  An officer of a corporation who is not a director is
 
18 entitled to mandatory indemnification under section    -243, and
 
19 may apply to a court under section    -245 for indemnification or
 
20 an advance for expenses, in each case to the same extent to which
 
21 a director may be entitled to indemnification or advance for
 
22 expenses under those provisions.
 
23         -248  Insurance.  A corporation may purchase and
 

 
Page 112                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 maintain insurance on behalf of an individual who is a director
 
 2 or officer of the corporation, or who, while a director or
 
 3 officer of the corporation, serves at the corporation's request
 
 4 as a director, officer, partner, trustee, employee, or agent of
 
 5 another domestic or foreign corporation, partnership, joint
 
 6 venture, trust, employee benefit plan, or other entity, against
 
 7 liability asserted against or incurred by the director or officer
 
 8 in that capacity or arising from the director's or officer's
 
 9 status as a director or officer, whether or not the corporation
 
10 would have power to indemnify or advance expenses to the director
 
11 or officer against the same liability under this subpart.
 
12         -249  Variation by corporate action; application of
 
13 subpart.  (a)  A corporation, by a provision in its articles of
 
14 incorporation or bylaws or in a resolution adopted or a contract
 
15 approved by its board of directors or shareholders, may obligate
 
16 itself in advance of the act or omission giving rise to a
 
17 proceeding to provide indemnification in accordance with section
 
18    -242 or advance funds to pay for or reimburse expenses in
 
19 accordance with section    -244.  Any such obligatory provision
 
20 shall be deemed to satisfy the requirements for authorization
 
21 referred to in section    -244(c) and    -246(c).  Any such
 
22 provision that obligates the corporation to provide
 
23 indemnification to the fullest extent permitted by law shall be
 

 
Page 113                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 deemed to obligate the corporation to advance funds to pay for or
 
 2 reimburse expenses in accordance with section    -244 to the
 
 3 fullest extent permitted by law, unless the provision
 
 4 specifically provides otherwise.
 
 5      (b)  Any provision pursuant to subsection (a) shall not
 
 6 obligate the corporation to indemnify or advance expenses to a
 
 7 director of a predecessor of the corporation, pertaining to
 
 8 conduct with respect to the predecessor, unless otherwise
 
 9 specifically provided.  Any provision for indemnification or
 
10 advance for expenses in the articles of incorporation, bylaws, or
 
11 a resolution of the board of directors or shareholders of a
 
12 predecessor of the corporation in a merger or in a contract to
 
13 which the predecessor is a party, existing at the time the merger
 
14 takes effect, shall be governed by section    -316(a)(3).
 
15      (c)  A corporation, by a provision in its articles of
 
16 incorporation, may limit any of the rights to indemnification or
 
17 advance for expenses created by or pursuant to this subpart.
 
18      (d)  This subpart does not limit a corporation's power to
 
19 pay or reimburse expenses incurred by a director or an officer in
 
20 connection with the director's or officer's appearance as a
 
21 witness in a proceeding at a time when the officer or director is
 
22 not a party.
 
23      (e)  This subpart does not limit a corporation's power to
 

 
Page 114                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 indemnify, advance expenses to, or provide or maintain insurance
 
 2 on behalf of an employee or agent.
 
 3         -250  Non-exclusivity of subpart.  (a)  The
 
 4 indemnification provided by this subpart shall not be deemed
 
 5 exclusive of any other rights to which those indemnified may be
 
 6 entitled under any bylaw, agreement, vote of shareholders, or
 
 7 disinterested directors or otherwise, both as to action in a
 
 8 person's official capacity and as to action in another capacity
 
 9 while holding the office, and shall continue as to a person who
 
10 has ceased to be an agent and shall inure to the benefit of the
 
11 heirs and personal representatives of that person.
 
12      (b)  This subpart does not apply to any proceeding against
 
13 any trustee, investment manager, or other fiduciary of an
 
14 employee benefit plan in that person's capacity, though the
 
15 person may also be an agent of the employer corporation.
 
16 Nothing contained in this section shall limit any right to
 
17 indemnification to which a trustee, investment manager, or other
 
18 fiduciary may be entitled by contract or otherwise.
 
19         F.  Directors' Conflicting Interest Transactions
 
20         -261  Definitions.  In this subpart:
 
21      "Conflicting interest" with respect to a corporation means
 
22 the interest a director of the corporation has respecting a
 
23 transaction effected or proposed to be effected by the
 

 
Page 115                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 corporation (or by a subsidiary of the corporation or any other
 
 2 entity in which the corporation has a controlling interest) if:
 
 3      (1)  Whether or not the transaction is brought before the
 
 4           board of directors of the corporation for action, the
 
 5           director knows at the time of commitment that the
 
 6           director or a related person is a party to the
 
 7           transaction or has a beneficial financial interest in
 
 8           or so closely linked to the transaction and of such
 
 9           financial significance to the director or a related
 
10           person that the interest would reasonably be expected
 
11           to exert an influence on the director's judgment if the
 
12           director were called upon to vote on the transaction;
 
13           or
 
14      (2)  The transaction is brought (or is of such character and
 
15           significance to the corporation that it would in the
 
16           normal course be brought) before the board of directors
 
17           of the corporation for action, and the director knows
 
18           at the time of commitment that any of the following
 
19           persons is either a party to the transaction or has a
 
20           beneficial financial interest in or so closely linked
 
21           to the transaction and of such financial significance
 
22           to the person that the interest would reasonably be
 
23           expected to exert an influence on the director's
 

 
Page 116                                                   2484
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 1           judgment if the director were called upon to vote on
 
 2           the transaction:
 
 3           (A)  An entity (other than the corporation) of which
 
 4                the director is a director, general partner,
 
 5                agent, or employee;
 
 6           (B)  A person that controls one or more of the entities
 
 7                specified in subparagraph (A) or an entity that is
 
 8                controlled by, or is under common control with,
 
 9                one or more of the entities specified in
 
10                subparagraph (A); or
 
11           (C)  An individual who is a general partner, principal,
 
12                or employer of the director.
 
13      "Director's conflicting interest transaction" with respect
 
14 to a corporation means a transaction effected or proposed to be
 
15 effected by the corporation (or by a subsidiary of the
 
16 corporation or any other entity in which the corporation has a
 
17 controlling interest) respecting which a director of the
 
18 corporation has a conflicting interest.
 
19      "Related person" of a director means:
 
20      (1)  The spouse (or a parent or sibling thereof) of the
 
21           director, or a child, grandchild, sibling, parent (or
 
22           spouse of any thereof) of the director, or an
 
23           individual having the same home as the director, or a
 

 
Page 117                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           trust or estate of which an individual specified in
 
 2           this paragraph is a substantial beneficiary; or
 
 3      (2)  A trust, estate, incompetent, conservatee, or minor of
 
 4           which the director is a fiduciary.
 
 5      "Required disclosure" means disclosure by the director who
 
 6 has a conflicting interest of:
 
 7      (1)  The existence and nature of the director's conflicting
 
 8           interest; and
 
 9      (2)  All facts known to the director respecting the subject
 
10           matter of the transaction that an ordinarily prudent
 
11           person would reasonably believe to be material to a
 
12           judgment about whether or not to proceed with the
 
13           transaction.
 
14      "Time of commitment" respecting a transaction means the time
 
15 when the transaction is consummated or, if made pursuant to
 
16 contract, the time when the corporation (or its subsidiary or the
 
17 entity in which it has a controlling interest) becomes
 
18 contractually obligated so that its unilateral withdrawal from
 
19 the transaction would entail significant loss, liability, or
 
20 other damage.
 
21         -262  Judicial action.  (a)  A transaction effected or
 
22 proposed to be effected by a corporation (or by a subsidiary of
 
23 the corporation or any other entity in which the corporation has
 

 
Page 118                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 a controlling interest) that is not a director's conflicting
 
 2 interest transaction may not be enjoined, set aside, or give rise
 
 3 to an award of damages or other sanctions, in a proceeding by a
 
 4 shareholder or by or in the right of the corporation, because a
 
 5 director of the corporation, or any person with whom or which the
 
 6 director has a personal, economic, or other association, has an
 
 7 interest in the transaction.
 
 8      (b)  A director's conflicting interest transaction may not
 
 9 be enjoined, set aside, or give rise to an award of damages or
 
10 other sanctions, in a proceeding by a shareholder or by or in the
 
11 right of the corporation, because the director, or any person
 
12 with whom or which the director has a personal, economic, or
 
13 other association, has an interest in the transaction, if:
 
14      (1)  Directors' action respecting the transaction was at any
 
15           time taken in compliance with section    -263;
 
16      (2)  Shareholders' action respecting the transaction was at
 
17           any time taken in compliance with section    -264; or
 
18      (3)  The transaction, judged according to the circumstances
 
19           at the time of commitment, is established to have been
 
20           fair to the corporation.
 
21         -263  Directors' action.  (a)  The action of directors
 
22 respecting a transaction is effective for purposes of section
 
23    -262(b)(1) if the transaction received the affirmative vote of
 

 
Page 119                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 a majority (but no fewer than two) of those qualified directors
 
 2 on the board of directors or on a duly empowered committee of the
 
 3 board who voted on the transaction after either required
 
 4 disclosure to them (to the extent the information was not known
 
 5 by them) or compliance with subsection (b); provided that action
 
 6 by a committee is so effective only if:
 
 7      (1)  All its members are qualified directors; and
 
 8      (2)  Its members are either all the qualified directors on
 
 9           the board or are appointed by the affirmative vote of a
 
10           majority of the qualified directors on the board.
 
11      (b)  If a director has a conflicting interest respecting a
 
12 transaction, but neither the director nor a related person of the
 
13 director, as set forth in paragraph (2) of the definition of
 
14 related person in section    -261, is a party to the transaction,
 
15 and if the director has a duty under law or professional canon,
 
16 or a duty of confidentiality to another person, respecting
 
17 information relating to the transaction such that the director
 
18 may not make the required disclosure described in paragraph (2)
 
19 of the definition of related person in section    -261, then
 
20 disclosure is sufficient for purposes of subsection (a) if the
 
21 director:
 
22      (1)  Discloses to the directors voting on the transaction
 
23           the existence and nature of the director's conflicting
 

 
Page 120                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           interest and informs them of the character and
 
 2           limitations imposed by that duty before their vote on
 
 3           the transaction; and
 
 4      (2)  Plays no part, directly or indirectly, in their
 
 5           deliberations or vote.
 
 6      (c)  A majority (but no fewer than two) of all the qualified
 
 7 directors on the board of directors, or on the committee,
 
 8 constitutes a quorum for purposes of action that complies with
 
 9 this section.  The action of directors that otherwise complies
 
10 with this section is not affected by the presence or vote of a
 
11 director who is not a qualified director.
 
12      (d)  For purposes of this section, "qualified director"
 
13 means, with respect to a director's conflicting interest
 
14 transaction, any director who does not have either:
 
15      (1)  A conflicting interest respecting the transaction; or
 
16      (2)  A familial, financial, professional, or employment
 
17           relationship with a second director who does have a
 
18           conflicting interest respecting the transaction, which
 
19           relationship would, in the circumstances, reasonably be
 
20           expected to exert an influence on the first director's
 
21           judgment when voting on the transaction.
 
22         -264  Shareholders' action.  (a)  Shareholders' action
 
23 respecting a transaction is effective for purposes of section
 

 
Page 121                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1    -262(b)(2) if a majority of the votes entitled to be cast by
 
 2 the holders of all qualified shares were cast in favor of the
 
 3 transaction after:
 
 4      (1)  Notice to shareholders describing the director's
 
 5           conflicting interest transaction;
 
 6      (2)  Provision of the information referred to in subsection
 
 7           (d); and
 
 8      (3)  Required disclosure to the shareholders who voted on
 
 9           the transaction (to the extent the information was not
 
10           known by them).
 
11      (b)  For purposes of this section, "qualified shares" means
 
12 any shares entitled to vote with respect to the director's
 
13 conflicting interest transaction except shares that, to the
 
14 knowledge, before the vote, of the secretary (or other officer or
 
15 agent of the corporation authorized to tabulate votes), are
 
16 beneficially owned (or the voting of which is controlled) by a
 
17 director who has a conflicting interest respecting the
 
18 transaction or by a related person of the director, or both.
 
19      (c)  A majority of the votes entitled to be cast by the
 
20 holders of all qualified shares constitutes a quorum for purposes
 
21 of action that complies with this section.  Subject to
 
22 subsections (d) and (e), shareholders' action that otherwise
 
23 complies with this section is not affected by the presence of
 

 
Page 122                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 holders, or the voting, of shares that are not qualified shares.
 
 2      (d)  For purposes of compliance with subsection (a), a
 
 3 director who has a conflicting interest respecting the
 
 4 transaction, before the shareholders' vote, shall inform the
 
 5 secretary (or other officer or agent of the corporation
 
 6 authorized to tabulate votes) of the number, and the identity of
 
 7 persons holding or controlling the vote, of all shares that the
 
 8 director knows are beneficially owned (or the voting of which is
 
 9 controlled) by the director or by a related person of the
 
10 director, or both.
 
11      (e)  If a shareholders' vote does not comply with subsection
 
12 (a) solely because of a failure of a director to comply with
 
13 subsection (d), and if the director establishes that the
 
14 director's failure did not determine and was not intended by the
 
15 director to influence the outcome of the vote, the court, with or
 
16 without further proceedings respecting section    -262(b)(3), may
 
17 take such action respecting the transaction and the director, and
 
18 give such effect, if any, to the shareholders' vote, as it
 
19 considers appropriate in the circumstances.
 
20                       PART X.  CONVERSIONS
 
21         -271  Conversion into and from corporations.  (a)  A
 
22 domestic corporation may adopt a plan of conversion and convert
 
23 to a foreign corporation or any other entity if:
 

 
Page 123                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (1)  The board of directors and shareholders of the domestic
 
 2           corporation approve a plan of conversion in the manner
 
 3           prescribed by section    -313 and the conversion is
 
 4           treated as a merger to which the converting entity is a
 
 5           party and not the surviving entity;
 
 6      (2)  The conversion is permitted by, and complies with the
 
 7           laws of the state or country in which the converted
 
 8           entity is to be incorporated, formed, or organized; and
 
 9           the incorporation, formation, or organization of the
 
10           converted entity complies with those laws;
 
11      (3)  At the time the conversion becomes effective, each
 
12           shareholder of the domestic corporation, unless
 
13           otherwise agreed to by that shareholder, owns an equity
 
14           interest or other ownership interest in, and is a
 
15           shareholder, partner, member, owner, or other security
 
16           holder of, the converted entity;
 
17      (4)  The shareholders of the domestic corporation, as a
 
18           result of the conversion, shall not become personally
 
19           liable, without the shareholders' consent, for the
 
20           liabilities or obligations of the converted entity; and
 
21      (5)  The converted entity is incorporated, formed, or
 
22           organized as part of or pursuant to the plan of
 
23           conversion.
 

 
Page 124                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (b)  Any foreign corporation or other entity may adopt a
 
 2 plan of conversion and convert to a domestic corporation if the
 
 3 conversion is permitted by and complies with the laws of the
 
 4 state or country in which the foreign corporation or other entity
 
 5 is incorporated, formed, or organized.
 
 6      (c)  A plan of conversion shall set forth:
 
 7      (1)  The name of the converting entity and the converted
 
 8           entity;
 
 9      (2)  A statement that the converting entity is continuing
 
10           its existence in the organizational form of the
 
11           converted entity;
 
12      (3)  A statement describing the organizational form of the
 
13           converted entity and the state or country under the
 
14           laws of which the converted entity is to be
 
15           incorporated, formed, or organized;
 
16      (4)  The manner and basis of converting the shares or other
 
17           forms of ownership of the converting entity into shares
 
18           or other forms of ownership of the converted entity, or
 
19           any combination thereof;
 
20      (5)  If the converted entity is a domestic corporation, the
 
21           articles of incorporation of the domestic corporation
 
22           shall be attached; and
 
23      (6)  If the converted entity is not a domestic corporation,
 

 
Page 125                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           proof that the converted entity is registered in this
 
 2           State shall be attached.
 
 3      (d)  A plan of conversion may set forth any other provisions
 
 4 relating to the conversion that are not prohibited by law,
 
 5 including without limitation the initial bylaws and officers of
 
 6 the converted entity.
 
 7      (e)  After a conversion of a domestic or foreign corporation
 
 8 is approved, and at any time before the conversion becomes
 
 9 effective, the plan of conversion may be abandoned by the
 
10 converting entity without shareholder action and in accordance
 
11 with the procedures set forth in the plan of conversion or, if
 
12 these procedures are not provided in the plan, in the manner
 
13 determined by the board of directors.  If articles of conversion
 
14 have been filed with the department director but the conversion
 
15 has not become effective, the conversion may be abandoned if a
 
16 statement, executed on behalf of the converting entity by an
 
17 officer or other duly authorized representative and stating that
 
18 the plan of conversion has been abandoned in accordance with
 
19 applicable law, is filed with the department director prior to
 
20 the effective date of the conversion.  If the department director
 
21 finds the statement satisfies the requirements provided by law,
 
22 the department director, after all fees have been paid shall:
 
23      (1)  Stamp the word "Filed" on the statement and the date of
 

 
Page 126                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           the filing;
 
 2      (2)  File the document in the department director's office;
 
 3           and
 
 4      (3)  Issue a certificate of abandonment to the converting
 
 5           entity or its authorized representatives.
 
 6      (f)  Once the statement provided in subsection (e) is filed
 
 7 with the department director, the conversion shall be deemed
 
 8 abandoned and shall not be effective.
 
 9         -272  Articles of conversion.  (a)  If a plan of
 
10 conversion has been approved in accordance with section    -271
 
11 and has not been abandoned, articles of conversion shall be
 
12 executed by an officer or other duly authorized representative of
 
13 the converting entity and shall set forth.
 
14      (1)  A statement certifying the following:
 
15           (A)  The name, state, or country of incorporation,
 
16                formation, or organization of the converting
 
17                entity;
 
18           (B)  That a plan of conversion has been approved in
 
19                accordance with the section    -271;
 
20           (C)  That an executed plan of conversion is on file at
 
21                the principal place of business of the converting
 
22                entity and stating the address thereof; and
 
23           (D)  That a copy of the plan of conversion shall be
 

 
Page 127                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1                furnished by the converting entity prior to the
 
 2                conversion or by the converted entity after the
 
 3                conversion on written request and without cost, to
 
 4                any shareholder, partner, member, or owner of the
 
 5                converting entity or the converted entity;
 
 6      (2)  If the converting entity is a domestic corporation, the
 
 7           number of shares outstanding and, if the shares of any
 
 8           class or series are entitled to vote as a class, the
 
 9           designation and number of outstanding shares of each
 
10           class or series;
 
11      (3)  If the converting entity is a domestic corporation, the
 
12           number of shares outstanding that voted for and against
 
13           the plan, and, if the shares of any class or series are
 
14           entitled to vote as a class, the number of shares of
 
15           each such class or series that voted for and against
 
16           the plan; and
 
17      (4)  If the converting entity is a foreign corporation or
 
18           other entity, a statement that the approval of the plan
 
19           of conversion was duly authorized and complied with the
 
20           laws under which it was incorporated, formed, or
 
21           organized.
 
22      (b)  The articles of conversion shall be delivered to the
 
23 department director.  If the converted entity is a domestic
 

 
Page 128                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 corporation, the articles of incorporation shall also be
 
 2 delivered to the department director with the articles of
 
 3 conversion.
 
 4      (c)  If the department director finds that the articles of
 
 5 conversion satisfy the requirements provided by law, and that all
 
 6 required documents are filed, the department director, after all
 
 7 fees have been paid, shall:
 
 8      (1)  Stamp the word "Filed" on the articles of conversion
 
 9           and the date of the filing:
 
10      (2)  File the document in the department director's office;
 
11           and
 
12      (3)  Issue a certificate of conversion to the converted
 
13           entity or its authorized representatives.
 
14         -273  Effective date of the conversion.  Upon the
 
15 issuance of the certificate of conversion by the department
 
16 director, the conversion shall be effective.
 
17         -274  Effect of conversion.  When a conversion becomes
 
18 effective:
 
19      (1)  The converting entity shall continue to exist without
 
20           interruption, but in the organizational form of the
 
21           converted entity;
 
22      (2)  All rights, title, and interest in all real estate and
 
23           other property owned by the converting entity shall
 

 
Page 129                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           automatically be owned by the converted entity without
 
 2           reversion or impairment, subject to any existing liens
 
 3           or other encumbrances thereon;
 
 4      (3)  All liabilities and obligations of the converting
 
 5           entity shall automatically be liabilities and
 
 6           obligations of the converted entity without impairment
 
 7           or diminution due to conversion;
 
 8      (4)  The rights of creditors of the converting entity shall
 
 9           continue against the converted entity and shall not be
 
10           impaired or extinguished by the conversion;
 
11      (5)  Any action or proceeding pending by or against the
 
12           converting entity may be continued by or against the
 
13           converted entity without any need for substitution of
 
14           parties;
 
15      (6)  The shares and other forms of ownership in the
 
16           converting entity that are to be converted into shares,
 
17           or other forms of ownership, in the converted entity as
 
18           provided in the plan of conversion shall be converted,
 
19           and if the converting entity is a domestic corporation,
 
20           the shareholders of the domestic corporation shall be
 
21           entitled only to the rights provided in the plan of
 
22           conversion or to the rights to dissent under section
 
23              -342;
 

 
Page 130                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (7)  A shareholder, partner, member, or other owner of the
 
 2           converted entity shall be liable for the debts and
 
 3           obligations of the converting entity that existed
 
 4           before the conversion takes effect only to the extent
 
 5           that the shareholder, partner, member, or other owner:
 
 6           (A)  Agreed in writing to be liable for the debts or
 
 7                obligations;
 
 8           (B)  Was liable under applicable law prior to the
 
 9                effective date of the conversion, for the debts or
 
10                obligations; or
 
11           (C)  Becomes liable under applicable law for existing
 
12                debts and obligations of the converted entity by
 
13                becoming a shareholder, partner, member, or other
 
14                owner of the converted entity;
 
15      (8)  If the converted entity is a foreign corporation or
 
16           other entity, the converted entity shall:
 
17           (A)  Appoint a resident of this State, as its agent for
 
18                service of process in a proceeding to enforce any
 
19                obligation or the rights of dissenting
 
20                shareholders of the converting domestic
 
21                corporation; and
 
22           (B)  Promptly pay the dissenting shareholders of the
 
23                converting domestic corporation the amount, if
 

 
Page 131                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1                any, to which they are entitled under part XIV of
 
 2                this chapter; and
 
 3      (9)  If the converting entity is a domestic corporation,
 
 4           part XIV of this chapter shall apply as if the
 
 5           converted entity were the survivor of a merger with the
 
 6           converting entity.
 
 7    PART XI.  AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
 
 8            A.  Amendment of Articles of Incorporation
 
 9         -281  Authority to amend.  (a)  A corporation may amend
 
10 its articles of incorporation at any time to add or change a
 
11 provision that is required or permitted in the articles of
 
12 incorporation or to delete a provision not required in the
 
13 articles of incorporation.  Whether a provision is required or
 
14 permitted in the articles of incorporation is determined as of
 
15 the effective date of the amendment.
 
16      (b)  A shareholder of the corporation does not have a vested
 
17 property right resulting from any provision in the articles of
 
18 incorporation, including provisions relating to management,
 
19 control, capital structure, dividend, entitlement, or purpose or
 
20 duration of the corporation.
 
21         -282  Amendment by board of directors.  Unless the
 
22 articles of incorporation provide otherwise, a corporation's
 
23 board of directors may adopt one or more amendments to the
 

 
Page 132                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 corporation's articles of incorporation without shareholder
 
 2 action:
 
 3      (1)  To delete the names and addresses of the initial
 
 4           directors;
 
 5      (2)  To delete the name and address of the initial
 
 6           registered agent or registered office, if a statement
 
 7           of change is on file with the department director; or
 
 8      (3)  To make any other change expressly permitted by this
 
 9           chapter to be made without shareholder action.
 
10         -283  Amendment by board of directors and shareholders.
 
11 (a)  A corporation's board of directors may propose one or more
 
12 amendments to the articles of incorporation for submission to the
 
13 shareholders.
 
14      (b)  For the amendment to be adopted:
 
15      (1)  The board of directors must recommend the amendment to
 
16           the shareholders unless the board of directors
 
17           determines that because of conflict of interest or
 
18           other special circumstances it should make no
 
19           recommendation and communicates the basis for its
 
20           determination to the shareholders with the amendment;
 
21           and
 
22      (2)  The shareholders entitled to vote on the amendment must
 
23           approve the amendment as provided in subsection (e).
 

 
Page 133                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (c)  The board of directors may condition its submission of
 
 2 the proposed amendment on any basis.
 
 3      (d)  The corporation shall notify each shareholder, whether
 
 4 or not entitled to vote, of the proposed shareholders' meeting in
 
 5 accordance with section    -125.  The notice of meeting must also
 
 6 state that the purpose, or one of the purposes, of the meeting is
 
 7 to consider the proposed amendment and contain or be accompanied
 
 8 by a copy or summary of the amendment.
 
 9      (e)  Unless this chapter, the articles of incorporation, or
 
10 the board of directors (acting pursuant to subsection (c))
 
11 require a greater vote or a vote by voting groups, the amendment
 
12 to be adopted must be approved by:
 
13      (1)  With respect to corporations incorporated on or after
 
14           July 1, 1987, at the meeting a vote of the shareholders
 
15           entitled to vote thereon shall be taken on the proposed
 
16           amendment.  The proposed amendment shall be adopted
 
17           upon receiving the affirmative vote of the holders of a
 
18           majority of the shares entitled to vote thereon, unless
 
19           any class of shares is entitled to vote thereon as a
 
20           class, in which event the proposed amendment shall be
 
21           adopted upon receiving the affirmative vote of the
 
22           holders of a majority of the shares of each class of
 
23           shares entitled to vote thereon as a class and of the
 

 
Page 134                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           total shares entitled to vote thereon.
 
 2      (2)  With respect to corporations incorporated before
 
 3           July 1, 1987, at such meeting a vote of the
 
 4           shareholders entitled to vote thereon shall be taken on
 
 5           a proposed amendment.  The proposed amendment shall be
 
 6           adopted upon receiving the affirmative vote of the
 
 7           holders of two-thirds of the shares entitled to vote
 
 8           thereon.  The articles of incorporation may be amended
 
 9           by the vote set forth in the preceding sentence to
 
10           provide for a lesser proportion of shares, or of any
 
11           class or series thereof, than is provided in the
 
12           preceding sentence, in which case the articles of
 
13           incorporation shall control; provided that the lesser
 
14           proportion shall not be less than the proportion set
 
15           forth in paragraph (1).  Any number of amendments may
 
16           be submitted to the shareholders, and voted upon by
 
17           them, at one meeting.
 
18         -284  Voting on amendments by voting groups.  (a)  The
 
19 holders of the outstanding shares of a class are entitled to vote
 
20 as a separate voting group (if shareholder voting is otherwise
 
21 required by this chapter) on a proposed amendment if the
 
22 amendment would:
 
23      (1)  Increase or decrease the aggregate number of authorized
 

 
Page 135                                                   2484
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 1           shares of the class;
 
 2      (2)  Effect an exchange or reclassification of all or part
 
 3           of the shares of the class into shares of another
 
 4           class;
 
 5      (3)  Effect an exchange or reclassification, or create the
 
 6           right of exchange, of all or part of the shares of
 
 7           another class into shares of the class;
 
 8      (4)  Change the designation, rights, preferences, or
 
 9           limitations of all or part of the shares of the class;
 
10      (5)  Change the shares of all or part of the class into a
 
11           different number of shares of the same class;
 
12      (6)  Create a new class of shares having rights or
 
13           preferences with respect to distributions or to
 
14           dissolution that are prior, superior, or substantially
 
15           equal to the shares of the class;
 
16      (7)  Increase the rights, preferences, or number of
 
17           authorized shares of any class that, after giving
 
18           effect to the amendment, have rights or preferences
 
19           with respect to distributions or to dissolution that
 
20           are prior, superior, or substantially equal to the
 
21           shares of the class;
 
22      (8)  Limit or deny an existing preemptive right of all or
 
23           part of the shares of the class; or
 

 
Page 136                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (9)  Cancel or otherwise affect rights to distributions or
 
 2           dividends that have accumulated but not yet been
 
 3           declared on all or part of the shares of the class.
 
 4      (b)  If a proposed amendment would affect a series of a
 
 5 class of shares in one or more of the ways described in
 
 6 subsection (a), the shares of that series are entitled to vote as
 
 7 a separate voting group on the proposed amendment.
 
 8      (c)  If a proposed amendment that entitles two or more
 
 9 series of shares to vote as separate voting groups under this
 
10 section would affect those two or more series in the same or a
 
11 substantially similar way, the shares of all the series so
 
12 affected must vote together as a single voting group on the
 
13 proposed amendment.
 
14      (d)  A class or series of shares is entitled to the voting
 
15 rights granted by this section although the articles of
 
16 incorporation provide that the shares are nonvoting shares.
 
17         -285  Amendment before issuance of shares.  If a
 
18 corporation has not yet issued shares, its incorporators or board
 
19 of directors may adopt one or more amendments to the
 
20 corporation's articles of incorporation.
 
21         -286  Articles of amendment.  A corporation amending its
 
22 articles of incorporation shall deliver to the department
 
23 director for filing articles of amendment setting forth:
 

 
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 1      (1)  The name of the corporation;
 
 2      (2)  The text of each amendment adopted;
 
 3      (3)  If an amendment provides for an exchange,
 
 4           reclassification, or cancellation of issued shares, a
 
 5           statement that provisions necessary to effect the
 
 6           exchange, reclassification, or cancellation have been
 
 7           made;
 
 8      (4)  The date of each amendment's adoption;
 
 9      (5)  If an amendment was adopted by the incorporators or
 
10           board of directors without shareholder action, a
 
11           statement to that effect and that shareholder action
 
12           was not required; and
 
13      (6)  If an amendment was approved by the shareholders:
 
14           (A)  The designation, number of outstanding shares,
 
15                number of votes entitled to be cast by each voting
 
16                group entitled to vote separately on the
 
17                amendment, and number of votes of each voting
 
18                group indisputably represented at the meeting; and
 
19           (B)  Either the total number of votes cast for and
 
20                against the amendment by each voting group
 
21                entitled to vote separately on the amendment or
 
22                the total number of undisputed votes cast for the
 
23                amendment by each voting group and a statement
 

 
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 1                that the number cast for the amendment by each
 
 2                voting group was sufficient for approval by that
 
 3                voting group.
 
 4         -287  Restated articles of incorporation.  (a)  A
 
 5 corporation's board of directors may restate its articles of
 
 6 incorporation at any time with or without shareholder action.
 
 7      (b)  The restatement may include one or more amendments to
 
 8 the articles.  If the restatement includes an amendment requiring
 
 9 shareholder approval, it must be adopted as provided in section
 
10    -283.
 
11      (c)  If the board of directors submits a restatement for
 
12 shareholder action, the corporation shall notify each
 
13 shareholder, whether or not entitled to vote, of the proposed
 
14 shareholders' meeting in accordance with section    -125.  The
 
15 notice must also state that the purpose, or one of the purposes,
 
16 of the meeting is to consider the proposed restatement and
 
17 contain or be accompanied by a copy of the restatement that
 
18 identifies any amendment or other change it would make in the
 
19 articles or incorporation.
 
20      (d)  A corporation restating its articles of incorporation
 
21 shall deliver to the department director for filing articles of
 
22 restatement setting forth the name of the corporation and the
 
23 text of the restated articles of incorporation together with a
 

 
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                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 certificate setting forth:
 
 2      (1)  Whether the restatement contains an amendment to the
 
 3           articles requiring shareholder approval and, if it does
 
 4           not, that the board of directors adopted the
 
 5           restatement; or
 
 6      (2)  If the restatement contains an amendment to the
 
 7           articles requiring shareholder approval, the
 
 8           information required by section    -286.
 
 9      (e)  Duly adopted restated articles of incorporation
 
10 supersede the original articles of incorporation and all
 
11 amendments to them.
 
12      (f)  The department director may certify restated articles
 
13 of incorporation as the articles of incorporation currently in
 
14 effect, without including the certificate information required by
 
15 subsection (d).
 
16         -288  Amendment pursuant to reorganization.  (a)  A
 
17 corporation's articles of incorporation may be amended without
 
18 action by the board of directors or shareholders to carry out a
 
19 plan of reorganization ordered or decreed by a court of competent
 
20 jurisdiction under federal statute, if the articles of
 
21 incorporation after amendment contain only provisions required or
 
22 permitted by section    -32.
 
23      (b)  The individual or individuals designated by the court
 

 
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 1 shall deliver to the department director for filing articles of
 
 2 amendment setting forth:
 
 3      (1)  The name of the corporation;
 
 4      (2)  The text of each amendment approved by the court;
 
 5      (3)  The date of the court's order or decree approving the
 
 6           articles of amendment;
 
 7      (4)  The title of the reorganization proceeding in which the
 
 8           order or decree was entered; and
 
 9      (5)  A statement that the court had jurisdiction of the
 
10           proceeding under federal statute.
 
11      (c)  Shareholders of a corporation undergoing reorganization
 
12 do not have dissenters' rights except as and to the extent
 
13 provided in the reorganization plan.
 
14      (d)  This section does not apply after entry of a final
 
15 decree in the reorganization proceeding even though the court
 
16 retains jurisdiction of the proceeding for limited purposes
 
17 unrelated to consummation of the reorganization plan.
 
18         -289  Effect of amendment.  An amendment to articles of
 
19 incorporation does not affect a cause of action existing against
 
20 or in favor of the corporation, a proceeding to which the
 
21 corporation is a party, or the existing rights of persons other
 
22 than shareholders of the corporation.  An amendment changing a
 
23 corporation's name does not abate a proceeding brought by or
 

 
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                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 against the corporation in its former name.
 
 2                      B.  Amendment of Bylaws
 
 3         -301  Amendment by board of directors or shareholders.
 
 4 (a)  A corporation's board of directors may amend or repeal the
 
 5 corporation's bylaws unless:
 
 6      (1)  The articles of incorporation or this chapter reserve
 
 7           this power exclusively to the shareholders in whole or
 
 8           part; or
 
 9      (2)  The shareholders in amending or repealing a particular
 
10           bylaw provide expressly that the board of directors may
 
11           not amend or repeal that bylaw.
 
12      (b)  A corporation's shareholders may amend or repeal the
 
13 corporation's bylaws even though the bylaws may also be amended
 
14 or repealed by its board of directors.
 
15         -302  Bylaw increasing quorum or voting requirement for
 
16 shareholders.  (a)  If authorized by the articles of
 
17 incorporation, the shareholders may adopt or amend a bylaw that
 
18 fixes a greater quorum or voting requirement for shareholders (or
 
19 voting groups of shareholders) than is required by this chapter.
 
20 The adoption or amendment of a bylaw that adds, changes, or
 
21 deletes a greater quorum or voting requirement for shareholders
 
22 must meet the same quorum requirement and be adopted by the same
 
23 vote and voting groups required to take action under the quorum
 

 
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 1 and voting requirement then in effect or proposed to be adopted,
 
 2 whichever is greater.
 
 3      (b)  A bylaw that fixes a greater quorum or voting
 
 4 requirement for shareholders under subsection (a)  may not be
 
 5 adopted, amended, or repealed by the board of directors.
 
 6         -303  Bylaw increasing quorum or voting requirement for
 
 7 directors.  (a)  A bylaw that fixes a greater quorum or voting
 
 8 requirement for the board of directors may be amended or
 
 9 repealed:
 
10      (1)  If originally adopted by the shareholders, only by the
 
11           shareholders;
 
12      (2)  If originally adopted by the board of directors, either
 
13           by the shareholders or by the board of directors.
 
14      (b)  A bylaw adopted or amended by the shareholders that
 
15 fixes a greater quorum or voting requirement for the board of
 
16 directors may provide that it may be amended or repealed only by
 
17 a specified vote of either the shareholders or the board of
 
18 directors.
 
19      (c)  Action by the board of directors under subsection
 
20 (a)(2) to adopt or amend a bylaw that changes the quorum or
 
21 voting requirement for the board of directors must meet the same
 
22 quorum requirement and be adopted by the same vote required to
 
23 take action under the quorum and voting requirement then in
 

 
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 1 effect or proposed to be adopted, whichever is greater.
 
 2               PART XII.  MERGER AND SHARE EXCHANGE
 
 3         -311  Merger.  (a)  One or more corporations may merge
 
 4 into another corporation if the board of directors of each
 
 5 corporation adopts and its shareholders (if required by section
 
 6    -313) approve a plan of merger.
 
 7      (b)  The plan of merger must set forth:
 
 8      (1)  The name of each corporation planning to merge and the
 
 9           name of the surviving corporation into which each other
 
10           corporation plans to merge;
 
11      (2)  The terms and conditions of the merger; and
 
12      (3)  The manner and basis of converting the shares of each
 
13           corporation into shares, obligations, or other
 
14           securities of the surviving or any other corporation or
 
15           into cash or other property in whole or in part.
 
16      (c)  The plan of merger may set forth:
 
17      (1)  Amendments to the articles of incorporation of the
 
18           surviving corporation and;
 
19      (2)  Other provisions relating to the merger.
 
20         -312  Share exchange.  (a)  A corporation may acquire
 
21 all of the outstanding shares of one or more classes or series of
 
22 another corporation if the board of directors of each corporation
 
23 adopts and its shareholders (if required by section    -313)
 

 
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 1 approve the exchange.
 
 2      (b)  The plan of exchange must set forth:
 
 3      (1)  The name of the corporation whose shares will be
 
 4           acquired and the name of the acquiring corporation;
 
 5      (2)  The terms and conditions of the exchange; and
 
 6      (3)  The manner and basis of exchanging the shares to be
 
 7           acquired for shares, obligations, or other securities
 
 8           of the acquiring corporation or any other corporation
 
 9           or for cash or other property in whole or in part.
 
10      (c)  The plan of exchange may set forth other provisions
 
11 relating to the exchange.
 
12      (d)  This section does not limit the power of a corporation
 
13 to acquire all or part of the shares of one or more classes or
 
14 series of another corporation through a voluntary exchange or
 
15 otherwise.
 
16         -313  Action plan.  (a)  After adopting a plan of merger
 
17 or share exchange, the board of directors of each corporation
 
18 party to the merger, and the board of directors of the
 
19 corporation whose shares will be acquired in the share exchange,
 
20 shall submit the plan of merger (except as provided in subsection
 
21 (g)) or share exchange for approval by its shareholders.
 
22      (b)  For a plan of merger or share exchange to be approved:
 
23      (1)  The board of directors must recommend the plan of
 

 
Page 145                                                   2484
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 1           merger or share exchange to the shareholders, unless
 
 2           the board of directors determines that because of
 
 3           conflict of interest or other special circumstances it
 
 4           should make no recommendation and communicates the
 
 5           basis for its determination to the shareholders with
 
 6           the plan; and
 
 7      (2)  The shareholders entitled to vote must approve the
 
 8           plan.
 
 9      (c)  The board of directors may condition its submission of
 
10 the proposed merger or share exchange on any basis.
 
11      (d)  The corporation shall notify each shareholder, whether
 
12 or not entitled to vote, of the proposed shareholders' meeting in
 
13 accordance with section    -125.  The notice must also state that
 
14 the purpose, or one of the purposes, of the meeting is to
 
15 consider the plan of merger or share exchange and contain or be
 
16 accompanied by a copy or summary of the plan.
 
17      (e)  With respect to corporations incorporated on or after
 
18 July 1, 1987, at such a meeting, a vote of the shareholders shall
 
19 be taken on the proposed plan.  The plan shall be approved upon
 
20 receiving the affirmative vote of the holders of a majority of
 
21 each class of the shares entitled to vote thereon as a class and
 
22 of the total shares entitled to vote thereon.  Any class of
 
23 shares of any such corporation shall be entitled to vote as a
 

 
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 1 class if any such plan contains any provision which, if contained
 
 2 in a proposed amendment to articles of incorporation, would
 
 3 entitle that class of shares to vote as a class and, in the case
 
 4 of an exchange, if the class is included in the exchange.
 
 5      (f)  With respect to corporations incorporated before
 
 6 July 1, 1987, at such meeting, a vote of the shareholders shall
 
 7 be taken on the proposed plan.  The plan shall be approved upon
 
 8 receiving the affirmative vote of the holders of three-fourths of
 
 9 all the issued and outstanding shares of stock having voting
 
10 power even though their right to vote is otherwise restricted or
 
11 denied by the articles, bylaws, or resolutions of any such
 
12 corporation.  The articles of incorporation may be amended by the
 
13 vote set forth in the preceding sentence to provide for a lesser
 
14 proportion of shares, or of any class or series thereof, than is
 
15 provided in the preceding sentence, in which case the articles of
 
16 incorporation shall control; provided that the lesser proportion
 
17 shall be not less than the proportion set forth in subsection
 
18 (e).
 
19      (g)  Separate voting by voting groups is required:
 
20      (1)  On a plan of merger if the plan contains a provision
 
21           that, if contained in a proposed amendment to articles
 
22           of incorporation, would require action by one or more
 
23           separate voting groups on the proposed amendment under
 

 
Page 147                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           section    -284; or
 
 2      (2)  On a plan of share exchange by each class or series of
 
 3           shares included in the exchange, with each class or
 
 4           series constituting a separate voting group.
 
 5      (h)  Action by the shareholders of the surviving corporation
 
 6 on a plan of merger is not required if:
 
 7      (1)  The articles of incorporation of the surviving
 
 8           corporation will not differ (except for amendments
 
 9           enumerated in section    -282) from the articles of
 
10           incorporation before the merger;
 
11      (2)  Each shareholder of the surviving corporation whose
 
12           shares were outstanding immediately before the
 
13           effective date of the merger will hold the same number
 
14           of shares, with identical designations, preferences,
 
15           limitations, and relative rights, immediately after the
 
16           merger;
 
17      (3)  The number of voting shares outstanding immediately
 
18           after the merger, plus the number of voting shares
 
19           issuable as a result of the merger (either by the
 
20           conversion of securities issued pursuant to the merger
 
21           or the exercise of rights and warrants issued pursuant
 
22           to the merger), will not exceed by more than twenty per
 
23           cent the total number of voting shares of the surviving
 

 
Page 148                                                   2484
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 1           corporation outstanding immediately before the merger;
 
 2           and
 
 3      (4)  The number of participating shares outstanding
 
 4           immediately after the merger, plus the number of
 
 5           participating shares issuable as a result of the merger
 
 6           (either by the conversion of securities issued pursuant
 
 7           to the merger or exercise of rights and warrants issued
 
 8           pursuant to the merger), will not exceed by more than
 
 9           twenty per cent the total number of participating
 
10           shares outstanding immediately before the merger.
 
11      (i)  As used in subsection (h):
 
12      "Participating shares" means shares that entitle their
 
13 holders to participate without limitations in distributions.
 
14      "Voting shares" means shares that entitle their holders to
 
15 vote unconditionally in elections of directors.
 
16      (j)  After a merger or share exchange is authorized, and at
 
17 any time before articles of merger or share exchange are filed,
 
18 the planned merger or share exchange may be abandoned (subject to
 
19 any contractual rights), without further shareholder action, in
 
20 accordance with the procedure set forth in the plan of merger or
 
21 share exchange or, if none is set forth, in the manner determined
 
22 by the board of directors.
 
23         -314  Merger of subsidiary.  (a)  A parent corporation
 

 
Page 149                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 owning at least ninety per cent of the outstanding shares of each
 
 2 class of a subsidiary corporation may merge the subsidiary into
 
 3 itself without approval of the shareholders of the parent or
 
 4 subsidiary.
 
 5      (b)  The board of directors of the parent corporation shall
 
 6 adopt a plan of merger that sets forth:
 
 7      (1)  The names of the parent and subsidiary; and
 
 8      (2)  The manner and basis of converting the shares of the
 
 9           subsidiary into shares, obligations, or other
 
10           securities of the parent or any other corporation or
 
11           into cash or other property in whole or in part.
 
12      (c)  The parent corporation shall mail a copy of the plan of
 
13 merger to each shareholder of the subsidiary corporation who does
 
14 not waive the mailing requirement in writing.
 
15      (d)  The parent may not deliver articles of merger to the
 
16 department director for filing until at least thirty days after
 
17 the date it mailed a copy of the plan of merger to each
 
18 shareholder of the subsidiary corporation who did not waive the
 
19 mailing requirement.
 
20      (e)  Articles of merger under this section may not contain
 
21 amendments to the articles of incorporation of the parent
 
22 corporation (except for amendments enumerated in section
 
23    -282).
 

 
Page 150                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1         -315  Articles of merger or share exchange.  (a)  After
 
 2 a plan of merger or share exchange is approved by the
 
 3 shareholders, or adopted by the board of directors if shareholder
 
 4 approval is not required, the surviving or acquiring corporation
 
 5 shall deliver to the department director for filing articles of
 
 6 merger or share exchange setting forth:
 
 7      (1)  A statement that the plan of merger or share exchange
 
 8           has been approved by the board of directors of each
 
 9           corporation involved in the merger or share exchange;
 
10      (2)  If shareholder approval was not required, a statement
 
11           to that effect;
 
12      (3)  If approval of the shareholders of one or more
 
13           corporations party to the merger or share exchange was
 
14           required:
 
15           (A)  The designation, number of outstanding shares, and
 
16                number of votes entitled to be cast by each voting
 
17                group entitled to vote separately on the plan as
 
18                to each corporation; and
 
19           (B)  Either the total number of votes cast for and
 
20                against the plan by each voting group entitled to
 
21                vote separately on the plan or the total number of
 
22                undisputed votes cast for the plan separately by
 
23                each voting group and a statement that the number
 

 
Page 151                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1                cast for the plan by each voting group was
 
 2                sufficient for approval by that voting group; and
 
 3      (4)  If a merger, a statement indicating the changes in the
 
 4           articles of incorporation of the surviving corporation
 
 5           to be effected by the merger.
 
 6      (b)  A merger or share exchange takes effect upon the
 
 7 effective date of the articles of merger or share exchange.
 
 8         -316  Effect of merger or share exchange.  (a)  When a
 
 9 merger takes effect:
 
10      (1)  Every other corporation party to the merger merges into
 
11           the surviving corporation and the separate existence of
 
12           every corporation except the surviving corporation
 
13           ceases;
 
14      (2)  The title to all real estate and other property owned
 
15           by each corporation party to the merger is vested in
 
16           the surviving corporation without reversion or
 
17           impairment;
 
18      (3)  The surviving corporation has all liabilities of each
 
19           corporation party to the merger;
 
20      (4)  A proceeding pending against any corporation party to
 
21           the merger may be continued as if the merger did not
 
22           occur or the surviving corporation may be substituted
 
23           in the proceeding for the corporation whose existence
 

 
Page 152                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           ceased;
 
 2      (5)  The articles of incorporation of the surviving
 
 3           corporation are amended to the extent provided in the
 
 4           plan of merger and indicated in the articles of merger;
 
 5           and
 
 6      (6)  The shares of each corporation party to the merger that
 
 7           are to be converted into shares, obligations, or other
 
 8           securities of the surviving or any other corporation or
 
 9           into cash or other property are converted, and the
 
10           former holders of the shares are entitled only to the
 
11           rights provided in the articles of merger or to their
 
12           rights under part XIV of this chapter.
 
13      (b)  When a share exchange takes effect, the shares of each
 
14 acquired corporation are exchanged as provided in the plan, and
 
15 the former holders of the shares are entitled only to the
 
16 exchange rights provided in the articles of share exchange or to
 
17 their rights under part XIV of this chapter.
 
18         -317  Merger or share exchange with foreign corporation.
 
19 (a)  One or more foreign corporations may merge or enter into a
 
20 share exchange with one or more domestic corporations if:
 
21      (1)  In a merger, the merger is permitted by the law of the
 
22           state or country under whose law each foreign
 
23           corporation is incorporated and each foreign
 

 
Page 153                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           corporation complies with that law in effecting the
 
 2           merger;
 
 3      (2)  In a share exchange, the corporation whose shares will
 
 4           be acquired is a domestic corporation, whether or not a
 
 5           share exchange is permitted by the law of the state or
 
 6           country under whose law the acquiring corporation is
 
 7           incorporated;
 
 8      (3)  The foreign corporation complies with section    -315
 
 9           if it is the surviving corporation of the merger or
 
10           acquiring corporation of the share exchange; and
 
11      (4)  Each domestic corporation complies with the applicable
 
12           provisions of sections    -311 to 314 and, if it is the
 
13           surviving corporation of the merger or acquiring
 
14           corporation of the share exchange, with section
 
15              -315.
 
16      (b)  Upon the merger or share exchange taking effect, the
 
17 surviving foreign corporation of a merger and the acquiring
 
18 foreign corporation of a share exchange is deemed:
 
19      (1)  To appoint the department director as its agent for
 
20           service of process in a proceeding to enforce any
 
21           obligation or the rights of dissenting shareholders of
 
22           each domestic corporation party to the merger or share
 
23           exchange; and
 

 
Page 154                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (2)  To agree that it will promptly pay to the dissenting
 
 2           shareholders of each domestic corporation party to the
 
 3           merger or share exchange the amount, if any, to which
 
 4           they are entitled under part XIV of this chapter.
 
 5      (c)  This section does not limit the power of a foreign
 
 6 corporation to acquire all or part of the shares of one or more
 
 7 classes or series of a domestic corporation through a voluntary
 
 8 exchange or otherwise.
 
 9         -318  Merger of subsidiary corporations.  (a)  Any
 
10 corporation owning at least ninety per cent of the outstanding
 
11 shares of each class of two or more corporations may adopt a plan
 
12 of merger pursuant to section    -314 and deliver to the
 
13 department director for filing articles of merger.  The articles
 
14 of merger shall be signed by the parent corporation and the
 
15 surviving subsidiary corporation, and the plan of merger shall
 
16 set forth:
 
17      (1)  The name of the parent corporation owning at least
 
18           ninety per cent of the shares of the subsidiary
 
19           corporations, the name of any nonsurviving subsidiary
 
20           corporation, and the name of the surviving subsidiary
 
21           corporation; and
 
22      (2)  The manner and basis of converting the shares of any
 
23           nonsurviving subsidiary corporation into shares,
 

 
Page 155                                                   2484
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 1           obligations, or other securities of the surviving
 
 2           subsidiary corporation or of any other corporation or,
 
 3           in whole or in part, into cash or other property.
 
 4      (b)  A copy of the plan of merger shall be mailed to each
 
 5 shareholder of record of any nonsurviving  subsidiary
 
 6 corporation, except the parent corporation.
 
 7      (c)  On or after the thirtieth day after the mailing of a
 
 8 copy of the plan of merger to shareholders of any nonsurviving
 
 9 subsidiary corporation or upon the waiver thereof by the holders
 
10 of all outstanding shares, the articles of merger shall be
 
11 delivered to the department director for filing.  Articles of
 
12 merger shall set forth:
 
13      (1)  A statement that the plan of merger has been approved
 
14           by the board of directors of the parent corporation;
 
15      (2)  The number of outstanding shares of each class of any
 
16           nonsurviving subsidiary corporation and the number of
 
17           the shares of each class owned by the parent
 
18           corporation; and
 
19      (3)  The date a copy of the plan of merger is mailed to
 
20           shareholders of any nonsurviving subsidiary corporation
 
21           entitled to receive the plan of merger.
 
22         -319  Merger with or into domestic or foreign limited
 
23 liability company.  (a)  As used in this section, the terms
 

 
Page 156                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 "limited liability company" and "foreign limited liability
 
 2 company" shall have the meanings defined in section 428-101.
 
 3      (b)  One or more corporations or foreign corporations may
 
 4 merge with or into one or more limited liability companies or
 
 5 foreign limited liability companies if in the case of a domestic
 
 6 corporation the board of directors and the shareholders approve a
 
 7 plan of merger as provided in sections    -311 and    -313, and
 
 8 in the case of a foreign corporation it complies with section
 
 9     -312.
 
10      (c)  In addition to the requirements of section    -311, the
 
11 plan of merger shall also set forth:
 
12      (1)  The name of each limited liability company and foreign
 
13           limited liability company proposing to merge; and
 
14      (2)  If the surviving entity is a limited liability company
 
15           or a foreign limited liability company:
 
16           (A)  The manner and basis of converting the shares of
 
17                each corporation or foreign corporation and the
 
18                interests as members of each limited liability
 
19                company or foreign limited liability company into
 
20                interests as members of the surviving domestic
 
21                limited liability company or foreign limited
 
22                liability company pursuant to the merger, or a
 
23                statement that the information is contained in the
 

 
Page 157                                                   2484
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 1                operating agreement proposed for the surviving
 
 2                entity;
 
 3           (B)  The contents of the articles of organization of
 
 4                the surviving entity pursuant to the merger in
 
 5                accordance with section 428-203 if a domestic
 
 6                limited liability company is the surviving entity,
 
 7                or in accordance with comparable provisions of
 
 8                applicable law if a foreign limited liability
 
 9                company is the surviving entity; and
 
10           (C)  The contents of the operating agreement to be
 
11                entered into among the persons who will be the
 
12                members of the surviving entity pursuant to the
 
13                merger, which, if not separately provided in the
 
14                plan of merger, shall state the manner and basis
 
15                for the conversion of the shares of each merging
 
16                corporation or foreign corporation and the
 
17                interests as members of each merging limited
 
18                liability company or foreign limited liability
 
19                company into interests as members of the surviving
 
20                entity and that notice of the approval of the
 
21                merger will be deemed to be execution of the
 
22                operating agreement by these persons.
 
23      (d)  After a plan of merger is approved by the shareholders
 

 
Page 158                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 of each corporation and foreign corporation as provided in
 
 2 subsection (b), and by the members of each domestic limited
 
 3 liability company as provided in section 428-904, or as provided
 
 4 in comparable provisions of applicable law for each foreign
 
 5 limited liability company, the surviving entity shall deliver to
 
 6 the office of the department director for filing articles of
 
 7 merger complying with section    -315, executed on behalf of each
 
 8 party to the merger.
 
 9      (e)  Section    -316 shall be applicable to each corporation
 
10 that is a party to the plan of merger.
 
11      (f)  If a foreign corporation is a party to the merger,
 
12 section    -317 shall apply to the foreign corporation.
 
13                    PART XIII.  SALE OF ASSETS
 
14         -331  Sale of assets in regular course of business and
 
15 mortgage of assets.  (a)  A corporation, on the terms and
 
16 conditions and for the consideration determined by the board of
 
17 directors, may:
 
18      (1)  Sell, lease, exchange, or otherwise dispose of all, or
 
19           substantially all, of its property in the usual and
 
20           regular course of business;
 
21      (2)  Mortgage, pledge, dedicate to the repayment of
 
22           indebtedness (whether with or without recourse), or
 
23           otherwise encumber any or all of its property whether
 

 
Page 159                                                   2484
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 1           or not in the usual and regular course of business; or
 
 2      (3)  Transfer any or all of its property to a corporation
 
 3           all the shares of which are owned by the corporation.
 
 4      (b)  Unless the articles of incorporation require it,
 
 5 approval by the shareholders of a transaction described in
 
 6 subsection (a)  is not required.
 
 7         -332  Sale of assets other than in regular course of
 
 8 business.  (a)  A corporation may sell, lease, exchange, or
 
 9 otherwise dispose of all, or substantially all, of its property
 
10 (with or without the good will), otherwise than in the usual and
 
11 regular course of business, on the terms and conditions and for
 
12 the consideration determined by the corporation's board of
 
13 directors, if the board of directors proposes and its
 
14 shareholders approve the proposed transaction.
 
15      (b)  For a transaction to be authorized:
 
16      (1)  The board of directors must recommend the proposed
 
17           transaction to the shareholders unless the board of
 
18           directors determines that because of conflict of
 
19           interest or other special circumstances it should make
 
20           no recommendation and communicates the basis for its
 
21           determination to the shareholders with the submission
 
22           of the proposed transaction; and
 
23      (2)  The shareholders entitled to vote must approve the
 

 
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 1           transaction.
 
 2      (c)  The board of directors may condition its submission of
 
 3 the proposed transaction on any basis.
 
 4      (d)  The corporation shall notify each shareholder, whether
 
 5 or not entitled to vote, of the proposed shareholders' meeting in
 
 6 accordance with section    -125.  The notice must also state that
 
 7 the purpose, or one of the purposes, of the meeting is to
 
 8 consider the sale, lease, exchange, or other disposition of all,
 
 9 or substantially all, the property of the corporation and contain
 
10 or be accompanied by a description of the transaction.
 
11      (e)  With respect to the corporations incorporated on or
 
12 after July 1, 1987, at the meeting the shareholders may authorize
 
13 the sale, lease, exchange, or other disposition and may fix, or
 
14 may authorize the board of directors to fix, any or all of the
 
15 terms and conditions thereof and the consideration to be received
 
16 by the corporation therefor.  The authorization shall require the
 
17 affirmative vote of the holders of a majority of the shares of
 
18 the corporation entitled to vote thereon, unless any class of
 
19 shares is entitled to vote thereon as a class, in which event the
 
20 authorization shall require the affirmative vote of the holders
 
21 of a majority of the shares of each class of shares entitled to
 
22 vote as a class thereon and of the total shares entitled to vote
 
23 thereon.
 

 
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 1      (f)  With respect to corporations incorporated before
 
 2 July 1, 1987, at the meeting the shareholders may authorize the
 
 3 sale, lease, exchange, or other disposition and may fix, or may
 
 4 authorize the board of directors to fix, any or all of the terms
 
 5 and conditions therefor.  The authorization shall require the
 
 6 affirmative vote of the holders of three-fourths of the shares of
 
 7 the corporation entitled to vote as a class thereon and of the
 
 8 total shares entitled to vote thereon.  The articles of
 
 9 incorporation may be amended by the vote set forth in the
 
10 preceding sentence to provide for a lesser proportion of shares,
 
11 or of any class or series thereof, than is provided in the
 
12 preceding sentence, in which case the articles of incorporation
 
13 shall control; provided that the lesser proportion shall not be
 
14 less than the proportion set forth in subsection (e).
 
15      (g)  After a sale, lease, exchange, or other disposition of
 
16 property is authorized, the transaction may be abandoned (subject
 
17 to any contractual rights) without further shareholder action.
 
18      (h)  A transaction that constitutes a distribution is
 
19 governed by section    -111 and not by this section.
 
20                   PART XIV.  DISSENTERS' RIGHTS
 
21        A.  Right to Dissent and Obtain Payment for Shares
 
22         -341  Definitions.  In this part:
 
23      "Beneficial shareholder" means the person who is a
 

 
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 1 beneficial owner of shares held in a voting trust or by a nominee
 
 2 as the record shareholder.
 
 3      "Corporation" means the issuer of the shares held by a
 
 4 dissenter before the corporate action, or the surviving or
 
 5 acquiring corporation by merger or share exchange of that issuer.
 
 6      "Dissenter" means a shareholder who is entitled to dissent
 
 7 from corporate action under section    -342 and who exercises
 
 8 that right when and in the manner required by sections    -351 to
 
 9    -359.
 
10      "Fair value", with respect to a dissenter's shares, means
 
11 the value of the shares immediately before the effectuation of
 
12 the corporate action to which the dissenter objects, excluding
 
13 any appreciation or depreciation in anticipation of the corporate
 
14 action unless exclusion would be inequitable.
 
15      "Interest" means interest from the effective date of the
 
16 corporate action until the date of payment, at the average rate
 
17 currently paid by the corporation on its principal bank loans or,
 
18 if none, at a rate that is fair and equitable under all the
 
19 circumstances.
 
20      "Record shareholder" means the person in whose name shares
 
21 are registered in the records of a corporation or the beneficial
 
22 owner of shares to the extent of the rights granted by a nominee
 
23 certificate on file with a corporation.
 

 
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 1      "Shareholder" means the record shareholder or the beneficial
 
 2 shareholder.
 
 3         -342  Right to dissent.  (a)  A shareholder is entitled
 
 4 to dissent from, and obtain payment of the fair value of the
 
 5 shareholder's shares in the event of, any of the following
 
 6 corporate actions:
 
 7      (1)  Consummation of a plan of merger to which the
 
 8           corporation is a party:
 
 9           (A)  If shareholder approval is required for the merger
 
10                by section    -313 or the articles of
 
11                incorporation and the shareholder is entitled to
 
12                vote on the merger; or
 
13           (B)  If the corporation is a subsidiary that is merged
 
14                with its parent under section    -314;
 
15      (2)  Consummation of a plan of share exchange to which the
 
16           corporation is a party as the corporation whose shares
 
17           will be acquired, if the shareholder is entitled to
 
18           vote on the plan;
 
19      (3)  Consummation of a sale or exchange of all, or
 
20           substantially all, of the property of the corporation
 
21           other than in the usual and regular course of business,
 
22           if the shareholder is entitled to vote on the sale or
 
23           exchange, including a sale in dissolution, but not
 

 
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 1           including a sale pursuant to court order or a sale for
 
 2           cash pursuant to a plan by which all or substantially
 
 3           all of the net proceeds of the sale will be distributed
 
 4           to the shareholders within one year after the date of
 
 5           sale;
 
 6      (4)  An amendment of the articles of incorporation that
 
 7           materially and adversely affects rights in respect of a
 
 8           dissenter's shares because it:
 
 9           (A)  Alters or abolishes a preferential right of the
 
10                shares;
 
11           (B)  Creates, alters, or abolishes a right in respect
 
12                of redemption, including a provision respecting a
 
13                sinking fund for the redemption or repurchase, of
 
14                the shares;
 
15           (C)  Alters or abolishes a preemptive right of the
 
16                holder of the shares to acquire shares or other
 
17                securities;
 
18           (D)  Excludes or limits the right of the shares to vote
 
19                on any matter, or to cumulate votes, other than a
 
20                limitation by dilution through issuance of shares
 
21                or other securities with similar voting rights; or
 
22           (E)  Reduces the number of shares owned by the
 
23                shareholder to a fraction of a share if the
 

 
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 1                fractional share so created is to be acquired for
 
 2                cash under section    -74;
 
 3      (5)  Any corporate action taken pursuant to a shareholder
 
 4           vote to the extent the articles of incorporation,
 
 5           bylaws, or a resolution of the board of directors
 
 6           provides that voting or nonvoting shareholders are
 
 7           entitled to dissent and obtain payment for their
 
 8           shares; or
 
 9      (6)  Consummation of a plan of conversion to which the
 
10           corporation is the converting entity, if the
 
11           shareholder is entitled to vote on the plan.
 
12      (b)  A shareholder entitled to dissent and obtain payment
 
13 for the shareholder's shares under this part may not challenge
 
14 the corporate action creating the shareholder's entitlement
 
15 unless the action is unlawful or fraudulent with respect to the
 
16 shareholder or the corporation.
 
17         -343  Dissent by nominees and beneficial owners.  (a)  A
 
18 record shareholder may assert dissenters' rights as to fewer than
 
19 all the shares registered in the shareholder's name only if the
 
20 shareholder dissents with respect to all shares beneficially
 
21 owned by any one person and notifies the corporation in writing
 
22 of the name and address of each person on whose behalf the record
 
23 shareholder asserts dissenters' rights.  The rights of a partial
 

 
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 1 dissenter under this subsection are determined as if the shares
 
 2 as to which the partial dissenter dissents and the partial
 
 3 dissenter's other shares were registered in the names of
 
 4 different shareholders.
 
 5      (b)  A beneficial shareholder may assert dissenters' rights
 
 6 as to shares held on the beneficial shareholder's behalf only if:
 
 7      (1)  The beneficial shareholder submits to the corporation
 
 8           the record shareholder's written consent to the dissent
 
 9           not later than the time the beneficial shareholder
 
10           asserts dissenters' rights; and
 
11      (2)  The beneficial shareholder does so with respect to all
 
12           shares of which the beneficial shareholder is the
 
13           beneficial shareholder or over which the beneficial
 
14           shareholder has power to direct the vote.
 
15         B.  Procedure for Exercise of Dissenters' Rights
 
16         -351  Notice of dissenters' rights.  (a)  If proposed
 
17 corporate action creating dissenters' rights under section
 
18    -342 is submitted to a vote at a shareholders' meeting, the
 
19 meeting notice must state that shareholders are or may be
 
20 entitled to assert dissenters' rights under this part and be
 
21 accompanied by a copy of this part.
 
22      (b)  If corporate action creating dissenters' rights under
 
23 section    -342 is taken without a vote of shareholders, the
 

 
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 1 corporation shall notify in writing all shareholders entitled to
 
 2 assert dissenters' rights that the action was taken and send them
 
 3 the dissenters' notice described in section    -353.
 
 4         -352  Notice of intent to demand payment.  (a)  If
 
 5 proposed corporate action creating dissenters' rights under
 
 6 section    -342 is submitted to a vote at a shareholders'
 
 7 meeting, a shareholder who wishes to assert dissenters' rights:
 
 8      (1)  Must deliver to the corporation before the vote is
 
 9           taken written notice of the shareholder's intent to
 
10           demand payment for the shareholder's shares if the
 
11           proposed action is effectuated; and
 
12      (2)  Must not vote the shareholder's shares in favor of the
 
13           proposed action.
 
14      (b)  A shareholder who does not satisfy the requirements of
 
15 subsection (a) is not entitled to payment for the shareholder's
 
16 shares under this part.
 
17         -353  Dissenters' notice.  (a)  If proposed corporate
 
18 action creating dissenters' rights under section    -342 is
 
19 authorized at a shareholders' meeting, the corporation shall
 
20 deliver a written dissenters' notice to all shareholders who
 
21 satisfied the requirements of section    -352.
 
22      (b)  The dissenters' notice must be sent no later than ten
 
23 days after the corporate action was taken, and must:
 

 
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 1      (1)  State where the payment demand must be sent and where
 
 2           and when certificates for certificated shares must be
 
 3           deposited;
 
 4      (2)  Inform holders of uncertificated shares to what extent
 
 5           transfer of the shares will be restricted after the
 
 6           payment demand is received;
 
 7      (3)  Supply a form for demanding payment that includes the
 
 8           date of the first announcement to news media or to
 
 9           shareholders of the terms of the proposed corporate
 
10           action and requires that the person asserting
 
11           dissenters' rights certify whether or not the person
 
12           acquired beneficial ownership of the shares before that
 
13           date;
 
14      (4)  Set a date by which the corporation must receive the
 
15           payment demand, which date may not be fewer than thirty
 
16           nor more than sixty days after the date the subsection
 
17           (a)  notice is delivered; and
 
18      (5)  Be accompanied by a copy of this part.
 
19         -354  Duty to demand payment.  (a)  A shareholder sent a
 
20 dissenters' notice described in section    -353 must demand
 
21 payment, certify whether the shareholder acquired beneficial
 
22 ownership of the shares before the date required to be set forth
 
23 in the dissenter's notice pursuant to section    -353(b)(3), and
 

 
Page 169                                                   2484
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 1 deposit the shareholder's certificates in accordance with the
 
 2 terms of the notice.
 
 3      (b)  The shareholder who demands payment and deposits the
 
 4 shareholder's share certificates under subsection (a) retains all
 
 5 other rights of a shareholder until these rights are canceled or
 
 6 modified by the taking of the proposed corporate action.
 
 7      (c)  A shareholder who does not demand payment or deposit
 
 8 the shareholder's share certificates where required, each by the
 
 9 date set in the dissenters' notice, is not entitled to payment
 
10 for the shareholder's shares under this part.
 
11         -355  Share restrictions.  (a)  The corporation may
 
12 restrict the transfer of uncertificated shares from the date the
 
13 demand for their payment is received until the proposed corporate
 
14 action is taken or the restrictions released under section
 
15    -357.
 
16      (b)  The person for whom dissenters' rights are asserted as
 
17 to uncertificated shares retains all other rights of a
 
18 shareholder until these rights are canceled or modified by the
 
19 taking of the proposed corporate action.
 
20         -356  Payment.  (a)  Except as provided in section
 
21    -358, as soon as the proposed corporate action is taken, or
 
22 upon receipt of a payment demand, the corporation shall pay each
 
23 dissenter who complied with section    -354 the amount the
 

 
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 1 corporation estimates to be the fair value of the dissenter's
 
 2 shares, plus accrued interest.
 
 3      (b)  The payment must be accompanied by:
 
 4      (1)  The corporation's balance sheet as of the end of a
 
 5           fiscal year ending not more than sixteen months before
 
 6           the date of payment, an income statement for that year,
 
 7           a statement of changes in shareholders' equity for that
 
 8           year, and the latest available interim financial
 
 9           statements, if any;
 
10      (2)  A statement of the corporation's estimate of the fair
 
11           value of the shares;
 
12      (3)  An explanation of how the interest was calculated;
 
13      (4)  A statement of the dissenter's right to demand payment
 
14           under section    -359; and
 
15      (5)  A copy of this part.
 
16         -357  Failure to take action.  (a)  If the corporation
 
17 does not take the proposed action within sixty days after the
 
18 date set for demanding payment and depositing share certificates,
 
19 the corporation shall return the deposited certificates and
 
20 release the transfer restrictions imposed on uncertificated
 
21 shares.
 
22      (b)  If after returning deposited certificates and releasing
 
23 transfer restrictions, the corporation takes the proposed action,
 

 
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 1 it must send a new dissenters' notice under section    -353 and
 
 2 repeat the payment demand procedure.
 
 3         -358  After-acquired shares.  (a)  A corporation may
 
 4 elect to withhold payment required by section    -356 from a
 
 5 dissenter unless the dissenter was the beneficial owner of the
 
 6 shares before the date set forth in the dissenters' notice as the
 
 7 date of the first announcement to news media or to shareholders
 
 8 of the terms of the proposed corporate action.
 
 9      (b)  To the extent the corporation elects to withhold
 
10 payment under subsection (a), after taking the proposed corporate
 
11 action, it shall estimate the fair value of the shares, plus
 
12 accrued interest, and shall pay this amount to each dissenter who
 
13 agrees to accept it in full satisfaction of the dissenter's
 
14 demand.  The corporation shall send with its offer a statement of
 
15 its estimate of the fair value of the shares, an explanation of
 
16 how the interest was calculated, and a statement of the
 
17 dissenter's right to demand payment under section    -359.
 
18         -359  Procedure if shareholder dissatisfied with payment
 
19 or offer.  (a)  A dissenter may notify the corporation in writing
 
20 of the dissenter's own estimate of the fair value of the
 
21 dissenter's shares and amount of interest due, and demand payment
 
22 of the dissenter's estimate (less any payment under section
 
23    -356), or reject the corporation's offer under section    -358
 

 
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 1 and demand payment of the fair value of the dissenter's shares
 
 2 and interest due, if:
 
 3      (1)  The dissenter believes that the amount paid under
 
 4           section    -356 or offered under section    -358 is
 
 5           less than the fair value of the dissenter's shares or
 
 6           that the interest due is incorrectly calculated;
 
 7      (2)  The corporation fails to make payment under section
 
 8              -356 within sixty days after the date set for
 
 9           demanding payment; or
 
10      (3)  The corporation, having failed to take the proposed
 
11           action, does not return the deposited certificates or
 
12           release the transfer restrictions imposed on
 
13           uncertificated shares within sixty days after the date
 
14           set for demanding payment.
 
15      (b)  A dissenter waives the dissenter's right to demand
 
16 payment under this section unless the dissenter notifies the
 
17 corporation of the dissenter's demand in writing under subsection
 
18 (a) within thirty days after the corporation made or offered
 
19 payment for the dissenter's shares.
 
20                 C.  Judicial Appraisal of Shares
 
21         -371  Court action.  (a)  If a demand for payment under
 
22 section    -359 remains unsettled, the corporation shall commence
 
23 a proceeding within sixty days after receiving the payment demand
 

 
Page 173                                                   2484
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 1 and petition the court to determine the fair value of the shares
 
 2 and accrued interest.  If the corporation does not commence the
 
 3 proceeding within the sixty-day period, it shall pay each
 
 4 dissenter whose demand remains unsettled the amount demanded.
 
 5      (b)  The corporation shall commence the proceeding in the
 
 6 circuit court.  If the corporation is a foreign corporation
 
 7 without a registered office in this State, it shall commence the
 
 8 proceeding in the county in this State where the registered
 
 9 office of the domestic corporation merged with or whose shares
 
10 were acquired by the foreign corporation was located.
 
11      (c)  The corporation shall make all dissenters (whether or
 
12 not residents of this State) whose demands remain unsettled
 
13 parties to the proceeding as in an action against their shares
 
14 and all parties must be served with a copy of the petition.
 
15 Nonresidents may be served by registered or certified mail or by
 
16 publication as provided by law.
 
17      (d)  The jurisdiction of the court in which the proceeding
 
18 is commenced under subsection (b) is plenary and exclusive.  The
 
19 court may appoint one or more persons as appraisers to receive
 
20 evidence and recommend decision on the question of fair value.
 
21 The appraisers have the powers described in the order appointing
 
22 them, or in any amendment to it.  The dissenters are entitled to
 
23 the same discovery rights as parties in other civil proceedings.
 

 
Page 174                                                   2484
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 1      (e)  Each dissenter made a party to the proceeding is
 
 2 entitled to judgment:
 
 3      (1)  For the amount, if any, by which the court finds the
 
 4           fair value of the dissenter's shares, plus interest,
 
 5           exceeds the amount paid by the corporation; or
 
 6      (2)  For the fair value, plus accrued interest, of the
 
 7           dissenter's after-acquired shares for which the
 
 8           corporation elected to withhold payment under section
 
 9              -358.
 
10         -372  Court costs and counsel fees.  (a)  The court in
 
11 an appraisal proceeding commenced under section    -371 shall
 
12 determine all costs of the proceeding, including the reasonable
 
13 compensation and expenses of appraisers appointed by the court.
 
14 The court shall assess the costs against the corporation, except
 
15 that the court may assess costs against all or some of the
 
16 dissenters, in amounts the court finds equitable, to the extent
 
17 the court finds the dissenters acted arbitrarily, vexatiously, or
 
18 not in good faith in demanding payment under section    -359.
 
19      (b)  The court may also assess the fees and expenses of
 
20 counsel and experts for the respective parties, in amounts the
 
21 court finds equitable:
 
22      (1)  Against the corporation and in favor of any or all
 
23           dissenters if the court finds the corporation did not
 

 
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 1           substantially comply with the requirements of
 
 2           sections    -351 to    -359; or
 
 3      (2)  Against either the corporation or a dissenter, in favor
 
 4           of any other party, if the court finds that the party
 
 5           against whom the fees and expenses are assessed acted
 
 6           arbitrarily, vexatiously, or not in good faith with
 
 7           respect to the rights provided by this part.
 
 8      (c)  If the court finds that the services of counsel for any
 
 9 dissenter were of substantial benefit to other dissenters
 
10 similarly situated, and that the fees for those services should
 
11 not be assessed against the corporation, the court may award to
 
12 these counsel reasonable fees to be paid out of the amounts
 
13 awarded the dissenters who were benefited.
 
14                       PART XV.  DISSOLUTION
 
15                     A.  Voluntary Dissolution
 
16         -381  Dissolution by incorporators or initial directors.
 
17 A majority of the incorporators or initial directors of a
 
18 corporation that has not issued shares or has not commenced
 
19 business may dissolve the corporation by delivering to the
 
20 department director for filing articles of dissolution that set
 
21 forth:
 
22      (1)  The name of the corporation;
 
23      (2)  The date of its incorporation;
 

 
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 1      (3)  Either:
 
 2           (A)  That none of the corporation's shares has been
 
 3                issued; or
 
 4           (B)  That the corporation has not commenced business;
 
 5      (4)  That no debt of the corporation remains unpaid;
 
 6      (5)  That the net assets of the corporation remaining after
 
 7           winding up have been distributed to the shareholders,
 
 8           if shares were issued; and
 
 9      (6)  That a majority of the incorporators or initial
 
10           directors authorized the dissolution.
 
11         -382  Dissolution by board of directors and
 
12 shareholders.  (a)  A corporation's board of directors may
 
13 propose dissolution for submission to the shareholders.
 
14      (b)  For a proposal to dissolve to be adopted:
 
15      (1)  The board of directors must recommend dissolution to
 
16           the shareholders unless the board of directors
 
17           determines that because of conflict of interest or
 
18           other special circumstances it should make no
 
19           recommendation and communicates the basis for its
 
20           determination to the shareholders; and
 
21      (2)  The shareholders entitled to vote must approve the
 
22           proposal to dissolve as provided in subsection (e).
 
23      (c)  The board of directors may condition its submission of
 

 
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 1 the proposal for dissolution on any basis.
 
 2      (d)  The corporation shall notify each shareholder, whether
 
 3 or not entitled to vote, of the proposed shareholders' meeting in
 
 4 accordance with section    -125.  The notice must also state that
 
 5 the purpose, or one of the purposes, of the meeting is to
 
 6 consider dissolving the corporation.
 
 7      (e)  With respect to the corporations incorporated on or
 
 8 after July 1, 1987, at the meeting a vote of shareholders
 
 9 entitled to vote thereat shall be taken on a resolution to
 
10 dissolve the corporation.  The resolution shall be adopted upon
 
11 receiving the affirmative vote of the holders of a majority of
 
12 the shares of the corporation entitled to vote thereon, unless
 
13 any class of shares is entitled to vote thereon as a class, in
 
14 which event the resolution shall be adopted upon receiving the
 
15 affirmative vote of the holders of a majority of the shares of
 
16 each class of shares entitled to vote thereon as a class and of
 
17 the total shares entitled to vote thereon.
 
18      (f)  With respect to corporations incorporated before
 
19 July 1, 1987, at the meeting a vote of shareholders entitled to
 
20 vote thereat shall be taken on a resolution to dissolve the
 
21 corporation.  The resolution shall be adopted upon receiving the
 
22 affirmative vote of the holders of three-fourths of the shares of
 
23 the corporation entitled to vote thereon, unless any class of
 

 
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 1 shares is entitled to vote thereon as a class, in which event the
 
 2 resolution shall be adopted upon receiving the affirmative vote
 
 3 of the holders of the holders of three-fourths of the shares of
 
 4 each class of shares entitled to vote thereon as a class and of
 
 5 the total shares entitled to vote thereon.  The articles of
 
 6 incorporation may be amended by the vote set forth in the
 
 7 preceding sentence to provide for a lesser proportion of shares,
 
 8 or of any class or series thereof, than is provided in the
 
 9 preceding sentence, in which case the articles of incorporation
 
10 shall control; provided that the lesser proportion shall not be
 
11 less than the proportion set forth in subsection (e).
 
12         -383  Articles of dissolution.  (a)  At any time after
 
13 dissolution is authorized, the corporation may dissolve by
 
14 delivering to the department director for filing articles of
 
15 dissolution setting forth:
 
16      (1)  The name of the corporation;
 
17      (2)  The date dissolution was authorized;
 
18      (3)  If dissolution was approved by the shareholders;
 
19           (A)  The number of votes entitled to be cast on the
 
20                proposal to dissolve; and
 
21           (B)  Either the total number of votes cast for and
 
22                against dissolution or the total number of
 
23                undisputed votes cast for dissolution and a
 

 
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 1                statement that the number cast for dissolution was
 
 2                sufficient for approval; and
 
 3      (4)  If voting by voting groups was required, the
 
 4           information required by paragraph (3) must be
 
 5           separately provided for each voting group entitled to
 
 6           vote separately on the plan to dissolve.
 
 7      (b)  A corporation is dissolved upon the effective date of
 
 8 its articles of dissolution.
 
 9         -384  Revocation of dissolution.  (a)  A corporation may
 
10 revoke its dissolution within one hundred twenty days of its
 
11 effective date.
 
12      (b)  Revocation of dissolution must be authorized in the
 
13 same manner as the dissolution was authorized unless that
 
14 authorization permitted revocation by action of the board of
 
15 directors alone, in which event the board of directors may revoke
 
16 the dissolution without shareholder action.
 
17      (c)  After the revocation of dissolution is authorized, the
 
18 corporation may revoke the dissolution by delivering to the
 
19 department director for filing articles of revocation of
 
20 dissolution, together with a copy of its articles of dissolution,
 
21 that set forth:
 
22      (1)  The name of the corporation;
 
23      (2)  The effective date of the dissolution that was revoked;
 

 
Page 180                                                   2484
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 1      (3)  The date that the revocation of dissolution was
 
 2           authorized;
 
 3      (4)  If the corporation's board of directors (or
 
 4           incorporators) revoked the dissolution, a statement to
 
 5           that effect;
 
 6      (5)  If the corporation's board of directors revoked a
 
 7           dissolution authorized by the shareholders, a statement
 
 8           that revocation was permitted by action by the board of
 
 9           directors alone pursuant to that authorization; and
 
10      (6)  If shareholder action was required to revoke the
 
11           dissolution, the information required by section
 
12              -383(a)(3) or (4).
 
13      (d)  Revocation of dissolution is effective upon the
 
14 effective date of the articles of revocation of dissolution.
 
15      (e)  When the revocation of dissolution is effective, it
 
16 relates back to and takes effect as of the effective date of the
 
17 dissolution and the corporation resumes carrying on its business
 
18 as if dissolution had never occurred.
 
19         -385  Effect of dissolution.  (a)  A dissolved
 
20 corporation continues its corporate existence but may not carry
 
21 on any business except that appropriate to wind up and liquidate
 
22 its business and affairs, including:
 
23      (1)  Collecting its assets;
 

 
Page 181                                                   2484
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 1      (2)  Disposing of its properties that will not be
 
 2           distributed in kind to its shareholders;
 
 3      (3)  Discharging or making provision for discharging its
 
 4           liabilities;
 
 5      (4)  Distributing its remaining property among its
 
 6           shareholders according to their interests; and
 
 7      (5)  Doing every other act necessary to wind up and
 
 8           liquidate its business and affairs.
 
 9      (b)  Dissolution of a corporation does not:
 
10      (1)  Transfer title to the corporation's property;
 
11      (2)  Prevent transfer of its shares or securities, although
 
12           the authorization to dissolve may provide for closing
 
13           the corporation's share transfer records;
 
14      (3)  Subject its director or officers to standards of
 
15           conduct different from those prescribed in part IX of
 
16           this chapter;
 
17      (4)  Change quorum or voting requirements for its board of
 
18           directors or shareholders; change provisions for
 
19           selection, resignation, or removal of its directors or
 
20           officers or both; or change provisions for amending its
 
21           bylaws;
 
22      (5)  Prevent commencement of a proceeding by or against the
 
23           corporation in its corporate name;
 

 
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 1      (6)  Abate or suspend a proceeding pending by or against the
 
 2           corporation on the effective date of dissolution; or
 
 3      (7)  Terminate the authority of the registered agent of the
 
 4           corporation.
 
 5         -386  Known claims against dissolved corporation.  (a)
 
 6 A dissolved corporation may dispose of the known claims against
 
 7 it by following the procedure described in this section.
 
 8      (b)  The dissolved corporation shall notify its known
 
 9 claimants in writing of the dissolution at any time after its
 
10 effective date.  The written notice must:
 
11      (1)  Describe information that must be included in a claim;
 
12      (2)  Provide a mailing address where a claim may be sent;
 
13      (3)  State the deadline, which may not be fewer that one
 
14           hundred twenty days from the effective date of the
 
15           written notice, by which the dissolved corporation must
 
16           receive the claim; and
 
17      (4)  State the claim will be barred if not received by the
 
18           deadline.
 
19      (c)  A claim against the dissolved corporation is barred:
 
20      (1)  If a claimant who was given written notice under
 
21           subsection (b) does not deliver the claim to the
 
22           dissolved corporation by the deadline;
 
23      (2)  If a claimant whose claim was rejected by the dissolved
 

 
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 1           corporation does not commence a proceeding to enforce
 
 2           the claim within ninety days from the effective date of
 
 3           the rejection notice.
 
 4      (d)  For purposes of this section, "claim" does not include
 
 5 a contingent liability or a claim based on an event occurring
 
 6 after the effective date of dissolution.
 
 7         -387  Unknown claims against dissolved corporation.  (a)
 
 8 A dissolved corporation may also publish notice of its
 
 9 dissolution and request that persons with claims against the
 
10 corporation present them in accordance with the notice.
 
11      (b)  The notice must:
 
12      (1)  Be published one time in a newspaper of general
 
13           circulation in the county where the dissolved
 
14           corporation's principal office (or, if none in this
 
15           State, its registered office) is or was last located;
 
16      (2)  Describe the information that must be included in a
 
17           claim and provided a mailing address where the claim
 
18           may be sent; and
 
19      (3)  State that a claim against the corporation will be
 
20           barred unless a proceeding to enforce the claim is
 
21           commenced within five years after the publication of
 
22           the notice.
 
23      (c)  If the dissolved corporation publishes a newspaper
 

 
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                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 notice in accordance with subsection (b), the claim of each of
 
 2 the following claimants is barred unless the claimant commences a
 
 3 proceeding to enforce the claim against the dissolved corporation
 
 4 within five years after the publication date of the newspaper
 
 5 notice:
 
 6      (1)  A claimant who did not receive written notice under
 
 7           section    -386;
 
 8      (2)  A claimant whose claim was timely sent to the dissolved
 
 9           corporation but not acted on;
 
10      (3)  A claimant whose claim is contingent or based on an
 
11           event occurring after the effective date of
 
12           dissolution.
 
13      (d)  A claim may be enforced under this section:
 
14      (1)  Against the dissolved corporation, to the extent of its
 
15           undistributed assets; or
 
16      (2)  If the assets have been distributed in liquidation,
 
17           against a shareholder of the dissolved corporation to
 
18           the extent of the shareholder's pro rata share of the
 
19           shareholder claim or the corporate assets distributed
 
20           to the shareholder in liquidation, whichever is less,
 
21           but a shareholder's total liability for all claims
 
22           under this section may not exceed the total amount of
 
23           assets distributed to such shareholder.
 

 
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                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1                  B.  Administrative Dissolution
 
 2         -401  Grounds for administrative dissolution.  The
 
 3 department director may commence a proceeding under section
 
 4    -402 to administratively dissolve a corporation if:
 
 5      (1)  The corporation has failed to file its annual report
 
 6           with the department director for a period of two years;
 
 7      (2)  The corporation procured its articles of incorporation
 
 8           through fraud;
 
 9      (3)  The corporation has continued to exceed or abuse the
 
10           authority conferred upon it by law; or
 
11      (4)  The corporation does not notify the department director
 
12           within sixty days that its registered agent or
 
13           registered office has been changed, that its registered
 
14           agent has resigned, or that its registered office has
 
15           been discontinued.
 
16         -402  Procedure for and effect of administrative
 
17 dissolution.  (a)  If the department director determines that one
 
18 or more grounds exist under section    -401 for dissolving a
 
19 corporation, the department director shall give written notice of
 
20 the department director's determination by mailing the notice to
 
21 the corporation at its last known address appearing in the
 
22 records of the department director.
 
23      (b)  If the corporation does not correct each ground for
 

 
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                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 dissolution or demonstrate to the reasonable satisfaction of the
 
 2 department director that each ground determined by the department
 
 3 director does not exist within sixty days after the date of
 
 4 mailing of the department director's written notice, the
 
 5 department director shall administratively dissolve the
 
 6 corporation by signing a decree of dissolution that recites the
 
 7 ground for dissolution and its effective date.  The decree shall
 
 8 be filed in the department director's office.
 
 9      (c)  A corporation administratively dissolved continues its
 
10 corporate existence but may not carry on any business except that
 
11 necessary to wind up and liquidate its business and affairs under
 
12 section    -385 and notify claimants under sections    -386 and
 
13    -387.
 
14      (d)  The administrative dissolution of a corporation does
 
15 not terminate the authority of its registered agent.
 
16      (e)  Parties of interest may petition a court of competent
 
17 jurisdiction to appoint a trustee to settle the affairs of any
 
18 corporation so dissolved.  If a trustee is appointed, the trustee
 
19 shall pay to the State out of any funds that may come into the
 
20 trustee's hands as trustee, a sum equal to any penalty imposed
 
21 under section    -473.  If a trustee is not appointed by a court
 
22 of competent jurisdiction, the last directors of the dissolved
 
23 corporation shall be and act as trustees for the creditors and
 

 
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                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 shareholders of the dissolved corporation with full powers to
 
 2 settle its affairs.
 
 3      (f)  A corporation whose articles of incorporation have
 
 4 expired shall cease to exist by operation of law.
 
 5         -403  Reinstatement following administrative
 
 6 dissolution.  (a)  A corporation administratively dissolved under
 
 7 section    -402 may apply to the department director for
 
 8 reinstatement within two years after the effective date of
 
 9 dissolution.  The application must:
 
10      (1)  Recite the name of the corporation and the effective
 
11           date of its administrative dissolution;
 
12      (2)  Contain all reports due and unfiled;
 
13      (3)  Contain the payment of all delinquent fees and
 
14           penalties; and
 
15      (4)  Contain a certificate from the department of taxation
 
16           reciting that all taxes owed by the corporation have
 
17           been paid.
 
18      (b)  Within the applicable reinstatement period, should the
 
19 name of the corporation, or a name substantially identical
 
20 thereto be registered or reserved by another corporation,
 
21 partnership, limited liability company, or limited liability
 
22 partnership, or should the name or a name substantially identical
 
23 thereto be registered as a trade name, trademark, or service
 

 
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                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 mark, then reinstatement shall be allowed only upon the
 
 2 registration of a new name by the involuntary dissolved
 
 3 corporation pursuant to the amendment provisions of this chapter.
 
 4      (c)  When the reinstatement is effective, it relates back to
 
 5 and takes effect as of the effective date of the administrative
 
 6 dissolution and the corporation resumes carrying on its business
 
 7 as if the administrative dissolution had never occurred.
 
 8         -404  Appeal from denial of reinstatement.  (a)  If the
 
 9 department director denies a corporation's application for
 
10 reinstatement following administrative dissolution, the
 
11 department director shall mail a written notice to the
 
12 corporation that explains the reason or reasons for denial.
 
13      (b)  The corporation may appeal the denial of reinstatement
 
14 to the circuit court within thirty days after service of the
 
15 notice of denial is perfected.  The corporation appeals by
 
16 petitioning the court to set aside the dissolution and attaching
 
17 to the petition copies of the department director's certificate
 
18 of dissolution, the corporation's application for reinstatement,
 
19 and the department director's notice of denial.
 
20      (c)  The court may summarily order the department director
 
21 to reinstate the dissolved corporation or may take other action
 
22 the court considers appropriate.
 
23      (d)  The court's final decision may be appealed as in other
 

 
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 1 civil proceedings.
 
 2                     C.  Judicial Dissolution
 
 3         -411  Grounds for judicial dissolution.  The circuit
 
 4 court may dissolve a corporation:
 
 5      (1)  In a proceeding by the attorney general if it is
 
 6           established that:
 
 7           (A)  The corporation obtained its articles of
 
 8                incorporation through fraud; or
 
 9           (B)  The corporation has continued to exceed or abuse
 
10                the authority conferred upon it by law;
 
11      (2)  In a proceeding by a shareholder if it is established
 
12           that:
 
13           (A)  The directors are deadlocked in the management of
 
14                the corporate affairs, the shareholders are unable
 
15                to break the deadlock, and irreparable injury to
 
16                the corporation is threatened or being suffered,
 
17                or the business and affairs of the corporation can
 
18                no longer be conducted to the advantage of the
 
19                shareholders generally, because of the deadlock;
 
20           (B)  The directors or those in control of the
 
21                corporation have acted, are acting, or will act in
 
22                a manner that is illegal, oppressive, or
 
23                fraudulent;
 

 
Page 190                                                   2484
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 1           (C)  The shareholders are deadlocked in voting power
 
 2                and have failed, for a period that includes at
 
 3                least two consecutive annual meeting dates, to
 
 4                elect successors to directors whose terms have
 
 5                expired; or
 
 6           (D)  The corporate assets are being misapplied or
 
 7                wasted;
 
 8      (3)  In a proceeding by a creditor if it is established
 
 9           that:
 
10           (A)  The creditor's claim has been reduced to judgment,
 
11                the execution on the judgment returned
 
12                unsatisfied, and the corporation is insolvent; or
 
13           (B)  The corporation has admitted in writing that the
 
14                creditor's claim is due and owing and the
 
15                corporation is insolvent; or
 
16      (4)  In a proceeding by the corporation to have its
 
17           voluntary dissolution continued under court
 
18           supervision.
 
19         -412  Procedure for judicial dissolution.  (a)  Venue
 
20 for a proceeding by the attorney general to dissolve a
 
21 corporation lies in circuit court.  Venue for a proceeding
 
22 brought by any other party named in section    -411 lies in the
 
23 county where a corporation's principal office (or, if none in
 

 
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 1 this State, its registered office) is or was last located.
 
 2      (b)  It is not necessary to make shareholders parties to a
 
 3 proceeding to dissolve a corporation unless relief is sought
 
 4 against them individually.
 
 5      (c)  A court in a proceeding brought to dissolve a
 
 6 corporation may issue injunctions, appoint a receiver or
 
 7 custodian pendente lite with all powers and duties the court
 
 8 directs, take other action required to preserve the corporate
 
 9 assets wherever located, and carry on the business of the
 
10 corporation until a full hearing can be held.
 
11      (d)  Within ten days after the commencement of a proceeding
 
12 under section    -411(2) to dissolve a corporation that has no
 
13 shares listed on a national securities exchange or regularly
 
14 traded in a market maintained by one or more members of a
 
15 national or affiliated securities association, the corporation
 
16 must send to all shareholders, other than the petitioner, a
 
17 notice stating that the shareholders are entitled to avoid the
 
18 dissolution of the corporation by electing to purchase the
 
19 petitioner's shares under section    -415 and accompanied by a
 
20 copy of section    -415.
 
21         -413  Receivership or custodianship.  (a)  A court in a
 
22 judicial proceeding brought to dissolve a corporation may appoint
 
23 one or more receivers to wind up and liquidate, or one or more
 

 
Page 192                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 custodians to manage, the business and affairs of the
 
 2 corporation.  The court shall hold a hearing, after notifying all
 
 3 parties to the proceeding and any interested persons designated
 
 4 by the court, before appointing a receiver or custodian.  The
 
 5 court appointing a receiver or custodian has exclusive
 
 6 jurisdiction over the corporation and all of its property
 
 7 wherever located.
 
 8      (b)  The court may appoint an individual or a domestic or
 
 9 foreign corporation (authorized to transact business in this
 
10 State) as a receiver or custodian.  The court may require the
 
11 receiver or custodian to post bond, with or without sureties, in
 
12 an amount the court directs.
 
13      (c)  The court shall describe the powers and duties of the
 
14 receiver or custodian in its appointing order, which may be
 
15 amended from time to time.  Among other powers:
 
16      (1)  The receiver:
 
17           (A)  May dispose of all or any part of the assets of
 
18                the corporation wherever located, at a public or
 
19                private sale, if authorized by the court; and
 
20           (B)  May sue and defend in the receiver's own name as
 
21                receiver of the corporation in all courts of this
 
22                State; and
 
23      (2)  The custodian may exercise all of the powers of the
 

 
Page 193                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           corporation, through or in place of its board of
 
 2           directors, to the extent necessary to manage the
 
 3           affairs of the corporation in the best interests of its
 
 4           shareholders and creditors.
 
 5      (d)  The court during a receivership may redesignate the
 
 6 receiver a custodian, and during a custodianship may redesignate
 
 7 the custodian a receiver, if doing so is in the best interests of
 
 8 the corporation, its shareholders, and creditors.
 
 9      (e) The court from time to time during the receivership or
 
10 custodianship may order compensation paid and expense
 
11 disbursements or reimbursements made to the receiver or custodian
 
12 and the receiver's or custodian's counsel from the assets of the
 
13 corporation or proceeds from the sale of the assets.
 
14         -414  Decree of dissolution.  (a)  If after a hearing
 
15 the court determines that one or more grounds for judicial
 
16 dissolution described in section    -411 exist, it may enter a
 
17 decree dissolving the corporation and specifying the effective
 
18 date of the dissolution, and the clerk of the court shall deliver
 
19 a certified copy of the decree to the department director, who
 
20 shall file it.
 
21      (b)  After entering the decree of dissolution, the court
 
22 shall direct the winding up and liquidation of the corporation's
 
23 business and affairs in accordance with section    -385 and the
 

 
Page 194                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 notification of claimants in accordance with sections    -386 and
 
 2    -387.
 
 3         -415  Election to purchase in lieu of dissolution.  (a)
 
 4 In a proceeding under section    -411(2) to dissolve a
 
 5 corporation that has no shares listed on a national securities
 
 6 exchange or regularly traded in a market maintained by one or
 
 7 more members of a national or affiliated securities association,
 
 8 the corporation may elect or, if it fails to elect, one or more
 
 9 shareholders may elect to purchase all shares owned by the
 
10 petitioning shareholder at the fair value of the shares.  An
 
11 election pursuant to this section shall be irrevocable unless the
 
12 court determines that it is equitable to set aside or modify the
 
13 election.
 
14      (b)  An election to purchase pursuant to this section may be
 
15 filed with the court at any time within ninety days after the
 
16 filing of the petition under section    -411(2) or at such later
 
17 time as the court in its discretion may allow.  If the election
 
18 to purchase is filed by one or more shareholders, the
 
19 corporation, within ten days thereafter, shall give written
 
20 notice to all shareholders, other than the petitioner.  The
 
21 notice must state the name and number of shares owned by the
 
22 petitioner and the name and number of shares owned by each
 
23 electing shareholder and must advise the recipients of their
 

 
Page 195                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 right to join in the election to purchase shares in accordance
 
 2 with this section.  Shareholders who wish to participate must
 
 3 file notice of their intention to join in the purchase no later
 
 4 than thirty days after the effective date of the notice to them.
 
 5 All shareholders who have filed an election or notice of their
 
 6 intention to participate in the election to purchase thereby
 
 7 become parties to the proceeding and shall participate in the
 
 8 purchase in proportion to their ownership of shares as of the
 
 9 date the first election was filed, unless they otherwise agree or
 
10 the court otherwise directs.  After an election has been filed by
 
11 the corporation or one or more shareholders, the proceeding under
 
12 section    -411(2) may not be discontinued or settled, nor may
 
13 the petitioning shareholder sell or otherwise dispose of the
 
14 shareholder's shares, unless the court determines that it would
 
15 be equitable to the corporation and the shareholders, other than
 
16 the petitioner, to permit the discontinuance, settlement, sale,
 
17 or other disposition.
 
18      (c)  If, within sixty days of the filing of the first
 
19 election, the parties reach agreement as to the fair value and
 
20 terms of purchase of the petitioner's shares, the court shall
 
21 enter an order directing the purchase of petitioner's shares upon
 
22 the terms and conditions agreed to by the parties.
 
23      (d)  If the parties are unable to reach an agreement as
 

 
Page 196                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 provided for in subsection (c), the court, upon application of
 
 2 any party, shall stay the section    -411(2) proceedings and
 
 3 determine the fair value of the petitioner's shares as of the day
 
 4 before the date on which the petition under section    -411(2)
 
 5 was filed or as of any other date the court deems appropriate
 
 6 under the circumstances.
 
 7      (e)  Upon determining the fair value of the shares, the
 
 8 court shall enter an order directing the purchase upon the terms
 
 9 and conditions that the court deems appropriate, which may
 
10 include payment of the purchase price in installments, where
 
11 necessary in the interests of equity, provision for security to
 
12 assure payment of the purchase price and any additional costs,
 
13 fees, and expenses as may have been awarded, and, if the shares
 
14 are to be purchased by shareholders, the allocation of shares
 
15 among them.  In allocating petitioner's shares among holders of
 
16 different classes of shares, the court should attempt to preserve
 
17 the existing distribution of voting rights among holders of
 
18 different classes insofar as practicable and may direct that
 
19 holders of a specific class or classes shall not participate in
 
20 the purchase.  Interest may be allowed at the rate and from the
 
21 date determined by the court to be equitable, but if the court
 
22 finds that the refusal of the petitioning shareholder to accept
 
23 an offer of payment was arbitrary or otherwise not in good faith,
 

 
Page 197                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 no interest shall be allowed.  If the court finds that the
 
 2 petitioning shareholder had probable grounds for relief under
 
 3 section    -411(2)(B) or (D), it may award to the petitioning
 
 4 shareholder reasonable fees and expenses of counsel and of any
 
 5 experts employed by the petitioning shareholder.
 
 6      (f)  Upon entry of an order under subsections (c) or (e),
 
 7 the court shall dismiss the petition to dissolve the corporation
 
 8 under section    -411, and the petitioning shareholder shall no
 
 9 longer have any rights or status as a shareholder of the
 
10 corporation, except the right to receive the amounts awarded to
 
11 the petitioning shareholder by the order of the court which shall
 
12 be enforceable in the same manner as any other judgment.
 
13      (g)  The purchase ordered pursuant to subsection (e), shall
 
14 be made within ten days after the date the order becomes final
 
15 unless before that time the corporation files with the court a
 
16 notice of its intention to adopt articles of dissolution pursuant
 
17 to sections    -382 and    -383, which articles must then be
 
18 adopted and filed within fifty days thereafter.  Upon filing of
 
19 the articles of dissolution, the corporation shall be dissolved
 
20 in accordance with sections     -385 to    -387, and the order
 
21 entered pursuant to subsection (e) shall no longer be of any
 
22 force or effect, except that the court may award the petitioning
 
23 shareholder reasonable fees and expenses in accordance with the
 

 
Page 198                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 provisions of the last sentence of subsection (e) and the
 
 2 petitioner may continue to pursue any claims previously asserted
 
 3 on behalf of the corporation.
 
 4      (h)  Any payment by the corporation pursuant to an order
 
 5 under subsections (c) or (e), other than an award of fees and
 
 6 expenses pursuant to subsection (e), is subject to section
 
 7    -111.
 
 8                         D.  Miscellaneous
 
 9         -421  Deposit with director of finance.  Assets of a
 
10 dissolved corporation that should be transferred to a creditor,
 
11 claimant, or shareholder of the corporation who cannot be found
 
12 or who is not competent to receive them shall be reduced to cash
 
13 and deposited with the director of finance for disposition in
 
14 accordance with the chapter 523A.
 
15                  PART XVI.  FOREIGN CORPORATIONS
 
16                   A.  Certificate of Authority
 
17         -431  Authority to transact business required.  (a)  A
 
18 foreign corporation may not transact business in this State until
 
19 it obtains a certificate of authority from the department
 
20 director.
 
21      (b)  The following activities, among others, do not
 
22 constitute transacting business within the meaning of subsection
 
23 (a):
 

 
Page 199                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (1)  Maintaining, defending, or settling any proceeding;
 
 2      (2)  Holding meetings of the board of directors or
 
 3           shareholders or carrying on other activities concerning
 
 4           internal corporate affairs;
 
 5      (3)  Maintaining bank accounts;
 
 6      (4)  Maintaining offices or agencies for the transfer,
 
 7           exchange, and registration of the corporation's own
 
 8           securities or maintaining trustees or depositaries with
 
 9           respect to those securities;
 
10      (5)  Selling through independent contractors;
 
11      (6)  Soliciting or obtaining orders, whether by mail or
 
12           through employees or agents or otherwise, if the orders
 
13           require acceptance outside this State before they
 
14           become contracts;
 
15      (7)  Creating as borrower or lender, or acquiring, as
 
16           borrower or lender, indebtedness, mortgages, and
 
17           security interests in real or personal property;
 
18      (8)  Securing or collecting debts or enforcing mortgages and
 
19           security interests in property securing the debts;
 
20      (9)  Owning, without more, real or personal property;
 
21     (10)  Conducting an isolated transaction that is completed
 
22           within thirty days and that is not one in the course of
 
23           repeated transactions of a like nature; and
 

 
Page 200                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1     (11)  Transacting business in interstate commerce.
 
 2      (c)  The list of activities in subsection (b) is not
 
 3 exhaustive.
 
 4         -432  Consequences of transacting business without
 
 5 authority.  (a)  A foreign corporation transacting business in
 
 6 this State without a certificate of authority may not maintain a
 
 7 proceeding in any court in this State until it obtains a
 
 8 certificate of authority.
 
 9      (b)  The successor to a foreign corporation that transacted
 
10 business in this State without a certificate of authority and the
 
11 assignee of a cause of action arising out of that business may
 
12 not maintain a proceeding based on that cause of action in any
 
13 court in this State until the foreign corporation or its
 
14 successor obtains a certificate of authority.
 
15      (c)  A court may stay a proceeding commenced by a foreign
 
16 corporation, its successor, or assignee until it determines
 
17 whether the foreign corporation or its successor requires a
 
18 certificate of authority.  If it so determines, the court may
 
19 further stay the proceeding until the foreign corporation or its
 
20 successor obtains the certificate.
 
21      (d)  A foreign corporation which transacts business in this
 
22 State without a certificate of authority shall be liable to this
 
23 State, for the years or parts thereof during which it transacted
 

 
Page 201                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 business in this State without a certificate of authority, in an
 
 2 amount equal to all fees which would have been imposed by this
 
 3 chapter upon the corporation had it duly applied for and received
 
 4 a certificate of authority to transact business in this State as
 
 5 required by this chapter and thereafter filed all reports
 
 6 required by this chapter, plus all penalties imposed by this
 
 7 chapter for failure to pay the fees.
 
 8      The attorney general shall bring proceedings to recover all
 
 9 amounts due this State under this section.
 
10      (e)  Notwithstanding subsections (a) and (b), the failure of
 
11 a foreign corporation to obtain a certificate of authority does
 
12 not impair the validity of its corporate acts or prevent it from
 
13 defending any proceeding in this State.
 
14         -433  Application for certificate of authority.  (a)  A
 
15 foreign corporation may apply for a certificate of authority to
 
16 transact business in this State by delivering an application to
 
17 the department director for filing.  The application must set
 
18 forth:
 
19      (1)  The name of the foreign corporation or, if its name is
 
20           unavailable for use in this State, a corporate name
 
21           that satisfies the requirements of section    -436;
 
22      (2)  The name of the state or country under whose law it is
 
23           incorporated;
 

 
Page 202                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (3)  Its date of incorporation and period of duration;
 
 2      (4)  The street address of its principal office;
 
 3      (5)  The street address of its registered office in this
 
 4           State and the name of its registered agent at that
 
 5           office; and
 
 6      (6)  The names and usual business addresses of its current
 
 7           directors and officers.
 
 8      (b)  The foreign corporation shall deliver with the
 
 9 completed application a certificate of existence (or a document
 
10 of similar import) duly authenticated by the secretary of state
 
11 or other official having custody of corporate records in the
 
12 state or country under whose law it is incorporated.
 
13         -434  Change of name by foreign corporation.  (a)
 
14 Whenever the name of a foreign corporation authorized to
 
15 transact business in this State is changed by the amendment of
 
16 its articles of incorporation, the foreign corporation, within
 
17 thirty days after the amendment becomes effective, shall deliver
 
18 to the department director a certificate evidencing the name
 
19 change, duly authenticated by the proper officer of the state or
 
20 country under the laws of which it is incorporated.  If the
 
21 certificate is in a foreign language, a translation under oath of
 
22 the translator shall accompany the certificate.
 
23      (b)  Whenever a foreign corporation which is authorized to
 

 
Page 203                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 transact business in this State shall change its name to one
 
 2 under which a certificate of authority would not be granted to it
 
 3 on application therefor, the foreign corporation shall not
 
 4 thereafter transact any business in this State until it has
 
 5 changed its name to a name which is available to it under the
 
 6 laws of this State or has otherwise complied with this chapter.
 
 7      (c)  If a foreign corporation is unable to change its name
 
 8 to a name which is available to it under the laws of this State,
 
 9 it may deliver to the department director a copy of a certificate
 
10 of registration of a trade name for the foreign corporation's
 
11 file and thereafter shall become authorized to transact business
 
12 in the State under that name.
 
13         -435  Effect of certificate of authority.  (a)  A
 
14 certificate of authority authorizes the foreign corporation to
 
15 which it is issued to transact business in this State subject to
 
16 the right of this State to revoke the certificate as provided in
 
17 this chapter.
 
18      (b)  A foreign corporation with a valid certificate of
 
19 authority has the same but no greater rights and has the same but
 
20 no greater privileges as, and except as otherwise provided by
 
21 this chapter is subject to the same duties, restrictions,
 
22 penalties, and liabilities now or later imposed on, a domestic
 
23 corporation of like character.
 

 
Page 204                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (c)  This chapter does not authorize this State to regulate
 
 2 the organization or internal affairs of a foreign corporation
 
 3 authorized to transact business in this State.
 
 4         -436  Corporate name of foreign corporation.  (a)  If
 
 5 the corporate name of a foreign corporation does not satisfy the
 
 6 requirements of section    -51, the foreign corporation to obtain
 
 7 or maintain a certificate of authority to transact business in
 
 8 this State may use a fictitious name to transact business in this
 
 9 State if its real name is unavailable and it delivers to the
 
10 department director for filing a copy of a certificate of
 
11 registration of a trade name by the foreign corporation under
 
12 which the foreign corporation will transact business in this
 
13 State.
 
14      (b)  Except as authorized by subsections (c) and (d), the
 
15 corporate name (including a fictitious name) of a foreign
 
16 corporation may not be the same as, or substantially identical
 
17 to:
 
18      (1)  The name of any domestic corporation, partnership,
 
19           limited liability company, or limited liability
 
20           partnership existing or registered under the laws of
 
21           this State, or any foreign corporation, partnership,
 
22           limited liability company, or limited liability
 
23           partnership authorized to transact business in this
 

 
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 1           State;
 
 2      (2)  A name the exclusive right to which is, at the time,
 
 3           reserved in this State;
 
 4      (3)  The fictitious name of another foreign corporation
 
 5           authorized to transact business in this State; and
 
 6      (4)  Any trade name, trademark, or service mark registered
 
 7           in this State.
 
 8      (c)  A foreign corporation may apply to the department
 
 9 director for authorization to use in this State the name of
 
10 another corporation (incorporated or authorized to transact
 
11 business in this State) that is substantially identical based
 
12 upon the department director's records from the name applied for.
 
13 The department director shall authorize use of the name applied
 
14 for if:
 
15      (1)  The other entity or holder of a reserved or registered
 
16           name consents to the use in writing and one or more
 
17           words are added to the other entity's name to make the
 
18           name distinguishable from the name of the applicant; or
 
19      (2)  The applicant delivers to the department director a
 
20           certified copy of a final judgment of a court of
 
21           competent jurisdiction establishing the applicant's
 
22           right to use the name applied for in this State.
 
23      (d)  A foreign corporation may use in this State the name
 

 
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                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 (including the fictitious name) of another domestic or foreign
 
 2 corporation that is used in this State if the other corporation
 
 3 is incorporated or authorized to transact business in this State
 
 4 and the foreign corporation:
 
 5      (1)  Has merged with the other corporation;
 
 6      (2)  Has been formed by reorganization of the other
 
 7           corporation; or
 
 8      (3)  Has acquired all or substantially all of the assets,
 
 9           including the corporate name, of the other corporation.
 
10         -437  Registered office and registered agent of foreign
 
11 corporation.  Each foreign corporation authorized to transaction
 
12 business in this State must continuously maintain in this State:
 
13      (1)  A registered office that may be the same as any of its
 
14           places of business; and
 
15      (2)  A registered agent, who may be:
 
16           (A)  An individual who resides in this State and whose
 
17                business office is identical with the registered
 
18                office;
 
19           (B)  A domestic corporation or not-for-profit domestic
 
20                corporation whose business office is identical
 
21                with the registered office; or
 
22           (C)  A foreign corporation or foreign not-for-profit
 
23                corporation authorized to transact business or
 

 
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 1                conduct affairs in this State whose business
 
 2                office is identical with the registered office.
 
 3         -438  Change of registered office or registered agent of
 
 4 foreign corporation.  (a)  A foreign corporation authorized to
 
 5 transact business in this State may change its registered office
 
 6 or registered agent by delivering to the department director for
 
 7 filing a statement of change that sets forth:
 
 8      (1)  Its name;
 
 9      (2)  The street address of its current registered office;
 
10      (3)  If the current registered office is to be changed, the
 
11           street address of its new registered office;
 
12      (4)  The name of its current registered agent;
 
13      (5)  If the current registered agent is to be changed, the
 
14           name of its new registered agent; and
 
15      (6)  That after the change or changes are made, the street
 
16           addresses of its registered office and the business
 
17           office of its registered agent will be identical.
 
18      (b)  If a registered agent changes the street address of the
 
19 agent's business office, the agent may change the street address
 
20 of the registered office of any foreign corporation for which the
 
21 agent is the registered agent by notifying the corporation in
 
22 writing of the change and signing (either manually or in
 
23 facsimile) and delivering to the department director for filing a
 

 
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 1 statement of change that complies with the requirements of
 
 2 subsection (a)  and recites that the corporation has been
 
 3 notified of the change.
 
 4         -439  Resignation of registered agent of foreign
 
 5 corporation.  (a)  The registered agent of a foreign corporation
 
 6 may resign from the registered agent's appointment by signing and
 
 7 delivering to the department director for filing the original and
 
 8 two exact or conformed copies of a statement of resignation.  The
 
 9 statement of resignation may include a statement that the
 
10 registered office is also discontinued.
 
11      (b)  The registered agent shall attach the filing receipt to
 
12 one copy and mail the copy and receipt to the registered office
 
13 if not discontinued.  The department director shall mail the
 
14 other copy to the foreign corporation at its principal office
 
15 address shown in its most recent annual report.
 
16      (c)  The appointment of the agent is terminated, and the
 
17 registered office discontinued if so provided, on the thirty-
 
18 first day after the date on which the statement was filed.
 
19         -440  Service on foreign corporation.  (a)  The
 
20 registered agent of a foreign corporation authorized to transact
 
21 business in this State is the corporation's agent for service of
 
22 process, notice, or demand required or permitted by law to be
 
23 served on the foreign corporation.
 

 
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                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (b)  A foreign corporation may be served by registered or
 
 2 certified mail, return receipt requested, addressed to the
 
 3 secretary of the foreign corporation at its principal office
 
 4 shown in its application for a certificate of authority or in its
 
 5 most recent annual report if the foreign corporation:
 
 6      (1)  Has no registered agent or its registered agent cannot
 
 7           with reasonable diligence be served;
 
 8      (2)  Has withdrawn from transacting business in this State
 
 9           under 451; or
 
10      (3)  Has had its certificate of authority revoked under
 
11           section    -462.
 
12      (c)  Service is perfected under subsection (b) at the
 
13 earliest of:
 
14      (1)  The date the foreign corporation receives the mail;
 
15      (2)  The date shown on the return receipt, if signed on
 
16           behalf of the foreign corporation; or
 
17      (3)  Five days after its deposit in the United States mail,
 
18           as evidenced by the postmark, if mailed postpaid and
 
19           correctly addressed.
 
20      (d)  This section does not prescribe the only means, or
 
21 necessarily the required means, of serving a foreign corporation.
 
22         -441  Application to corporations heretofore authorized
 
23 to transact business in this State.  Foreign corporations which
 

 
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 1 are duly authorized to transact business in this State at the
 
 2 time this chapter takes effect, for a purpose or purposes for
 
 3 which a corporation might secure the authority under this
 
 4 chapter, shall be entitled to all of the rights and privileges
 
 5 applicable to foreign corporations procuring certificates of
 
 6 authority to transact business in this State under this chapter,
 
 7 and from the time this chapter takes effect the corporations
 
 8 shall be subject to all of the limitations, restrictions,
 
 9 liabilities, and duties prescribed herein for foreign
 
10 corporations procuring certificates of authority to transact
 
11 business in this State under this chapter.
 
12                          B.  Withdrawal
 
13         -451  Withdrawal of foreign corporation.  (a)  A foreign
 
14 corporation authorized to transact business in this State may not
 
15 withdraw from this State until it obtains a certificate of
 
16 withdrawal from the department director.
 
17      (b)  A foreign corporation authorized to transact business
 
18 in this State may apply for a certificate of withdrawal by
 
19 delivering an application to the department director for filing.
 
20 The application must set forth:
 
21      (1)  The name of the foreign corporation and the name of the
 
22           state or country under whose law it is incorporated;
 
23      (2)  That it is not transacting business in this State and
 

 
Page 211                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           that it surrenders its authority to transact business
 
 2           in this State;
 
 3      (3)  That it revokes the authority of its registered agent
 
 4           to accept service on its behalf and appoints the
 
 5           department director as its agent for service of process
 
 6           in any proceeding based on a cause of action arising
 
 7           during the time it was authorized to transact business
 
 8           in this State;
 
 9      (4)  A mailing address to which the department director may
 
10           mail a copy of any process served on the department
 
11           director under paragraph (3); and
 
12      (5)  A commitment to notify the department director in the
 
13           future of any change in its mailing address.
 
14      (c)  After the withdrawal of the corporation is effective,
 
15 service of process on the department director under this section
 
16 is service on the foreign corporation.  Upon receipt of process,
 
17 the department director shall mail a copy of the process to the
 
18 foreign corporation at the mailing address set forth under
 
19 subsection (b).
 
20      (d)  After the filing of the application of withdrawal, the
 
21 department director shall issue a certificate of withdrawal which
 
22 shall be effective as of the date of the filing of the
 
23 application of withdrawal, and the authority of the foreign
 

 
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                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 corporation to transact business in this State shall cease.
 
 2            C.  Revocation of Certificate of Authority
 
 3         -461  Grounds for revocation.  The department director
 
 4 may commence a proceeding under section    -462 to revoke the
 
 5 certificate of authority of a foreign corporation authorized to
 
 6 transact business in this State if:
 
 7      (1)  The foreign corporation has failed to file its annual
 
 8           report with the department director for a period of two
 
 9           years;
 
10      (2)  The foreign corporation is without a registered agent
 
11           or registered office in this State as required by this
 
12           chapter;
 
13      (3)  The foreign corporation does not inform the department
 
14           director under section    -438 or 439 that its
 
15           registered agent or registered office has changed, that
 
16           its registered agent has resigned, or that its
 
17           registered office has been discontinued within sixty
 
18           days of the change, resignation, or discontinuance;
 
19      (4)  An incorporator, director, officer, or agent of the
 
20           foreign corporation signed a document that
 
21           incorporator, director, officer, or agent knew was
 
22           false in any material respect with intent that the
 
23           document be delivered to the department director for
 

 
Page 213                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           filing; or
 
 2      (5)  The department director receives a duly authenticated
 
 3           certificate from the department director or other
 
 4           official having custody of corporate records in the
 
 5           state or country under whose law the foreign
 
 6           corporation is incorporated stating that it has been
 
 7           dissolved or disappeared as the result of a merger.
 
 8         -462  procedure for and effect of revocation.  (a)  If
 
 9 the department director determines that one or more grounds exist
 
10 under section    -461 for revocation of a certificate of
 
11 authority, the department director shall give written notice of
 
12 the department director's determination by mailing the notice to
 
13 the foreign corporation at its last known address appearing in
 
14 the records of the department director.
 
15      (b)  If the foreign corporation does not correct each ground
 
16 for revocation or demonstrate to the reasonable satisfaction of
 
17 the department director that each ground determined by the
 
18 department director does not exist within sixty days after the
 
19 date of mailing of the department director's written notice, the
 
20 department director may revoke the foreign corporation's
 
21 certificate of authority by signing a certificate of revocation
 
22 that recites the ground or grounds for revocation and its
 
23 effective date.  The department director shall file the original
 

 
Page 214                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 of the certificate and serve a copy on the foreign corporation
 
 2 under section    -440.
 
 3      (c)  The authority of a foreign corporation to transact
 
 4 business in this State ceases on the date shown on the
 
 5 certificate revoking its certificate of authority.
 
 6      (d)  The department director's revocation of a foreign
 
 7 corporation's certificate of authority appoints the department
 
 8 director the foreign corporation's agent for service of process
 
 9 in any proceeding based on a cause of action which arose during
 
10 the time the foreign corporation was authorized to transact
 
11 business in this State.  Service of process on the department
 
12 director under this subsection is service on the foreign
 
13 corporation.  Upon receipt of process, the department director
 
14 shall mail a copy of the process to the secretary of the foreign
 
15 corporation at its principal office shown in its most recent
 
16 annual report or in any subsequent communication received from
 
17 the corporation stating the current mailing address of its
 
18 principal office, or, if none are on file, in its application for
 
19 a certificate of authority.
 
20      (e)  Revocation of a foreign corporation's certificate of
 
21 authority does not terminate the authority of the registered
 
22 agent of the corporation.
 
23         -463  Appeal from revocation.  (a)  A foreign
 

 
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                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 corporation may appeal the department director's revocation of
 
 2 its certificate of authority to the circuit court within thirty
 
 3 days after the certificate of revocation is signed.  The foreign
 
 4 corporation appeals by petitioning the court to set aside the
 
 5 revocation and attaching to the petition copies of its
 
 6 certificate of authority and the department director's
 
 7 certificate of revocation.
 
 8      (b)  The court may summarily order the department director
 
 9 to reinstate the certificate of authority or may take any other
 
10 action the court considers appropriate.
 
11      (c)  The court's final decision may be appealed as in other
 
12 civil proceedings.
 
13                  PART XVII.  RECORDS AND REPORTS
 
14                            A.  Records
 
15         -411  Books and records.  (a)  Each corporation shall
 
16 keep accurate and complete books and records of account and shall
 
17 keep and maintain at its principal office, or other place as its
 
18 board of directors may order, minutes of the proceedings of its
 
19 shareholders and board of directors.  The books and records of
 
20 account shall include accounts of the corporation's assets,
 
21 liabilities, receipts, disbursements, gains, and losses.  The
 
22 minutes of the proceedings of the shareholders and board of
 
23 directors of the corporation shall show, as to each meeting of
 

 
Page 216                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 the shareholders or the board of directors, the time and place
 
 2 thereof, whether regular or special, whether notice thereof was
 
 3 given, and if so in what manner, the names of those present at
 
 4 directors' meetings, the number of shares present or represented
 
 5 at shareholders' meetings, and the proceedings at each meeting.
 
 6      (b)  In every corporation incorporated under this chapter,
 
 7 the board of directors of the corporation shall cause a book to
 
 8 be kept for registering the names of all persons who are or shall
 
 9 become shareholders of the corporation, showing the number of
 
10 shares of stock held by them respectively, and the time when they
 
11 respectively became the owner of the shares.  The book shall be
 
12 open at all reasonable times for the inspection of the
 
13 shareholders.  The secretary or the person having the charge
 
14 thereof shall give a certified transcript of anything therein
 
15 contained to any shareholder applying therefor; provided that the
 
16 shareholder pays a reasonable charge for the preparation of the
 
17 certified transcript.  The transcript shall be legal evidence of
 
18 the facts therein set forth in any suit by or against the
 
19 corporation.
 
20                            B.  Reports
 
21         -472  Annual report.  (a)  Each domestic corporation,
 
22 and each foreign corporation authorized to transact business in
 
23 this State, shall deliver to the department director for filing
 

 
Page 217                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 an annual report that sets forth:
 
 2      (1)  The name of the corporation and the state or country
 
 3           under whose law it is incorporated;
 
 4      (2)  The address of its registered office and the name of
 
 5           its registered agent at that office in this State;
 
 6      (3)  The address of its principal office;
 
 7      (4)  The names and business addresses of its directors and
 
 8           principal officers;
 
 9      (5)  A brief description of the nature of its business;
 
10      (6)  The total number of authorized shares, itemized by
 
11           class and series, if any, within each class; and
 
12      (7)  The total number of issued and outstanding shares,
 
13           itemized by class and series, if any, within each
 
14           class.
 
15      (b)  Information in the annual report must reflect the state
 
16 of the corporation's affairs as of December 31, of the year
 
17 preceding the year of filing.
 
18      (c)  The first annual report must be delivered to the
 
19 department director between January 1 and April 1 of the year
 
20 following the calendar year in which a domestic corporation was
 
21 incorporated or a foreign corporation was authorized to transact
 
22 business.  Subsequent annual reports must be delivered to the
 
23 department director between January 1 and April 1 of the
 

 
Page 218                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 following calendar years.
 
 2      (d)  If an annual report does not contain the information
 
 3 required by this section, the department director shall promptly
 
 4 notify the reporting domestic or foreign corporation in writing
 
 5 and return the report to it for correction.  If the report is
 
 6 corrected to contain the information required by this section and
 
 7 delivered to the department director within thirty days after the
 
 8 effective date of notice, it is deemed to be timely filed.
 
 9         -473  Penalties imposed upon corporations.  Each
 
10 corporation, domestic or foreign, that fails or refuses to file
 
11 its annual report for any year within the time prescribed by this
 
12 part shall be subject to a forfeiture of an amount to be
 
13 determined by the department director not exceeding $100 for
 
14 every the violation, neglect, or failure, to be recovered by
 
15 action brought in the name of the State by the department
 
16 director.  A continuance of a failure to file the required report
 
17 shall be a separate offense for each thirty days of the
 
18 continuance.  The department director, for good cause shown, may
 
19 reduce or waive the penalty imposed by this section.
 
20                PART XVIII.  TRANSITION PROVISIONS
 
21         -481  Application to existing domestic corporations.
 
22 This chapter applies to all domestic corporations in existence on
 
23 its effective date that were incorporated under any general
 

 
Page 219                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 statute of this State providing for incorporation of corporations
 
 2 for profit if the power to amend or repeal the statute under
 
 3 which the corporation was incorporated was reserved.
 
 4         -482  Application to qualified foreign corporations.  A
 
 5 foreign corporation authorized to transact business in this State
 
 6 on the effective date of this chapter is subject to this chapter
 
 7 but is not required to obtain a new certificate of authority to
 
 8 transact business under this chapter.
 
 9         -483  Saving provisions.  (a)  Except as provided in
 
10 subsection (b), the repeal of a statute by this chapter does not
 
11 affect:
 
12      (1)  The operation of the statute or any action taken under
 
13           it before its repeal;
 
14      (2)  Any ratification, right, remedy, privilege, obligation,
 
15           or liability acquired, accrued, or incurred under the
 
16           statute before its repeal;
 
17      (3)  Any violation of the statute, or any penalty,
 
18           forfeiture, or punishment incurred because of the
 
19           violation, before its repeal;
 
20      (4)  Any proceeding, reorganization, or dissolution
 
21           commenced under the statute before its repeal, and the
 
22           proceeding, reorganization, or dissolution may be
 
23           completed in accordance with the statute as if it had
 

 
Page 220                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1           not been repealed.
 
 2      (b)  If a penalty or punishment imposed for violation of a
 
 3 statute repealed by this chapter is reduced by this chapter, the
 
 4 penalty or punishment if not already imposed shall be imposed in
 
 5 accordance with this chapter.
 
 6      (c)  Nothing in this chapter shall affect the validity of
 
 7 any action taken by any corporation, or shall impair or affect
 
 8 the validity of any provision of the articles of incorporation or
 
 9 bylaws adopted by any corporation, prior to the effective date of
 
10 this chapter.
 
11         -484  Severability.  If any provision of this chapter or
 
12 its application to any person or circumstance is held invalid by
 
13 a court of competent jurisdiction, the invalidity does not affect
 
14 other provisions or applications of the chapter that can be given
 
15 effect without the invalid provision or application, and to this
 
16 end the provisions of the chapter are severable."
 
17      SECTION 2.  Chapter 415, Hawaii Revised Statutes, is
 
18 repealed except for the grouping control share acquisitions,
 
19 sections 415-171 and 415-172, Hawaii Revised Statutes, which
 
20 shall remain in effect.
 
21      SECTION 3.  The revisor of statutes shall prepare a table
 
22 indicating the Hawaii Revised Statutes section numbers in section
 
23 1 of this Act when codified and the equivalent Model Corporation
 

 
Page 221                                                   2484
                                     H.B. NO.           S.D. 1
                                                        
                                                        

 
 1 Act as of January 1, 1984, section number.  The table shall be
 
 2 placed in the Hawaii Revised Statutes preceding the new chapter
 
 3 added in section 1 of this Act.
 
 4      SECTION 4.  This Act shall take effect on July 1, 2010.