2004 -- H 7945 SUBSTITUTE A AS AMENDED

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LC01122/SUB A

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2004

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A N A C T

RELATING TO CORPORATIONS, ASSOCIATIONS, AND PARTNERSHIPS

     Introduced By: Representatives Anguilla, Williamson, Kilmartin, Schadone, and Jacquard

     Date Introduced: February 12, 2004

     Referred To: House Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Chapter 7-1.1 of the General Laws entitled "Business Corporations" is

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hereby repealed in its entirety.

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     CHAPTER 7-1.1

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Business Corporations

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     7-1.1-1. Short title. -- This chapter shall be known and may be cited as the "Rhode Island

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Business Corporation Act."

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     7-1.1-2. Definitions. -- As used in this chapter, unless the context otherwise requires, the

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term:

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      (1) "Corporation" or "domestic corporation" means a corporation for profit subject to the

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provisions of this chapter, except a foreign corporation.

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      (2) "Foreign corporation" means a corporation for profit organized under laws other than

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the laws of this state for a purpose or purposes for which a corporation may be organized under

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this chapter.

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      (3) "Articles of incorporation" means the original or restated articles of incorporation or

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articles of consolidation and all of their amendments including agreements of merger.

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      (4) "Shares" means the units into which the proprietary interests in a corporation are

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divided.

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      (5) "Subscriber" means one who subscribes for shares in a corporation, whether before or

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after incorporation.

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      (6) (i) "Shareholder" means one who is a holder of record of shares in a corporation. If

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the articles of incorporation or the bylaws so provide, the board of directors may adopt by

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resolution a procedure under which a shareholder of the corporation certifies in writing to the

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corporation that all or a portion of the shares registered in the name of the shareholder are held for

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the account of a specified person or persons. The resolution shall set forth:

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      (A) The classification of shareholder who may certify;

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      (B) The purpose or purposes for which the certification may be made;

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      (C) The form of certification and information it is to contain;

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      (D) If the certification is with respect to a record date or closing of the stock transfer

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books within which the certification must be received by the corporation; and

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      (E) Any other provisions as to the procedure that are deemed necessary or desirable.

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      (ii) Upon receipt by the corporation of a certification complying with the procedure, the

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persons specified in the certification are deemed, for the purpose or purposes set forth in the

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certification, to be the holders of record of the number of shares specified in place of the

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shareholder making the certification.

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      (7) "Authorized shares" means the shares of all classes which the corporation is

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authorized to issue.

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      (8) "Treasury shares" means shares of a corporation which have been issued, have been

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subsequently acquired by and belong to the corporation, and have not, either by reason of the

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acquisition or subsequently, been cancelled or restored to the status of authorized but unissued

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shares. Treasury shares are deemed to be "issued" shares, but not "outstanding" shares.

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      (9) "Net assets" means the amount by which the total assets of a corporation exceed the

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total debts of the corporation.

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      (10) (i) "Stated capital" means, at any particular time, the sum of:

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      (A) The par value of all shares of the corporation having a par value that have been

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issued, or, if the shares have a preference in the assets of the corporation in the event of

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involuntary liquidation which is greater than the par value, then to the extent of the preference;

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      (B) The amount of the consideration received by the corporation for all shares of the

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corporation without par value that have been issued, except the part of the consideration for the

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shares that may have been allocated to capital surplus in a manner permitted by law; and

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      (C) The amounts not included in subdivisions (10)(i) and (10)(ii) that have been

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transferred to stated capital of the corporation, whether upon the issue of shares as a share

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dividend or otherwise, minus all reductions from the sum that have been effected in a manner

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permitted by law.

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      (ii) Irrespective of the manner of designation of the stated capital by the laws under

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which a foreign corporation is organized, the stated capital of a foreign corporation is determined

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on the same basis and in the same manner as the stated capital of a domestic corporation, for the

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purpose of computing fees, franchise taxes, and other charges imposed by this chapter.

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      (11) "Surplus" means the excess of the net assets of a corporation over its stated capital.

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      (12) "Earned surplus" means the portion of the surplus of a corporation equal to the

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balance of its net profits, income, gains, and losses from the date of incorporation, or from the

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latest date when a deficit was eliminated by an application of its capital surplus or stated capital

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or otherwise, after deducting subsequent distributions to shareholders and transfers to stated

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capital and capital surplus to the extent the distributions and transfers are made out of earned

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surplus. Earned surplus also includes any portion of surplus allocated to earned surplus in

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mergers, consolidations, or acquisitions of all or substantially all of the outstanding shares or of

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the property and assets of another corporation, domestic or foreign.

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      (13) "Capital surplus" means the entire surplus of a corporation other than its earned

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surplus. Capital surplus, but not earned surplus, may include surplus arising from the revaluation

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of assets, including good will, if made in good faith upon demonstrably adequate bases of

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valuation.

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      (14) "Insolvent" means the inability of a corporation to pay its debts as they become due

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in the usual course of its business.

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      (15) "Employee" includes officers but not directors. A director may accept duties which

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also make him or her an employee.

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     7-1.1-3. Purposes. -- Corporations may be organized under this chapter for any lawful

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purpose or purposes, except for the purpose of carrying on within this state the business of a

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bank, savings bank, trust company, building and loan association, loan and investment company,

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safe deposit company, railroad, electric railroad or street railway company, telegraph or telephone

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company, gas or electric light, heat or power company, canal, aqueduct, or water company,

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turnpike company, or any corporation which now has or may subsequently have the right to take

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or condemn land or other property within this state under the power of eminent domain, or to

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exercise or acquire franchises in streets or highways of this state; provided, however, that

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corporations organized for any of the purposes specified in chapter 5.1 of this title shall be

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organized under the provisions of that chapter.

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     7-1.1-4. General powers. -- Each corporation shall have power to:

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      (1) Have perpetual succession by its corporate name unless a limited period of duration

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is stated in its articles of incorporation.

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      (2) Sue and be sued, complain and defend, in its corporate name.

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      (3) Have a corporate seal which may be altered at pleasure, and to use the seal by

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causing it, or a facsimile of it, to be impressed or affixed or reproduced in any other manner.

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      (4) Purchase, take, receive, lease, or otherwise acquire, own, hold, improve, use, and

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otherwise deal in and with, real or personal property, or any interest in that property, wherever

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situated.

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      (5) Sell, convey, mortgage, pledge, lease, exchange, transfer, and otherwise dispose of

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all or any part of its property and assets.

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      (6) Lend money and use its credit to assist its employees.

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      (7) Purchase, take, receive, subscribe for, or otherwise acquire, own, hold, vote, use,

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employ, sell, mortgage, lend, pledge, or otherwise dispose of, and otherwise use and deal in and

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with, shares or other interests in, or obligations of, other domestic or foreign corporations,

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associations, partnerships or individuals, or direct or indirect obligations of the United States or of

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any other government, state, territory, governmental district or municipality or of any of their

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instrumentalities.

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      (8) Make contracts and guarantees and incur liabilities, borrow money at the rate of

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interest that the corporation may determine, issue its notes, bonds, and other obligations, and

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secure any of its obligations by mortgage or pledge of all or any of its property, franchises, and

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income.

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      (9) Lend money for its corporate purposes, invest and reinvest its funds, and take and

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hold real and personal property as security for the payment of the funds loaned or invested.

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      (10) Conduct its business, carry on its operations, and have offices and exercise the

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powers granted by this chapter, within or without this state.

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      (11) Elect or appoint officers and agents of the corporation, and define their duties and

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fix their compensation.

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      (12) Make and alter bylaws, not inconsistent with its articles of incorporation or with the

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laws of this state, for the administration and regulation of the affairs of the corporation.

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      (13) Make donations for the public welfare or for charitable, scientific, or educational

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purposes.

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      (14) Transact any lawful business which the board of directors finds will aid

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governmental authority.

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      (15) Pay pensions and establish pension plans, pension trusts, profit sharing plans, stock

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bonus plans, stock option plans, and other incentive plans for any or all of its directors, officers,

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and employees.

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      (16) Provide insurance for its benefit on the life of any of its directors, officers, or

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employees, or on the life of any stockholder for the purpose of acquiring at his or her death shares

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of its stock owned by the stockholder.

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      (17) Be a promoter, partner, member, associate, or manager of any partnership, joint

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venture, trust, or other enterprise.

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      (18) Have and exercise all powers necessary or convenient to effect its purposes.

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     7-1.1-4.1. Indemnification. -- (a) As used in this section:

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      (1) "Director" means any person who is or was a director of the corporation and any

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person who, while a director of the corporation, is or was serving at the request of the corporation

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as a director, officer, partner, trustee, employee, or agent of another foreign or domestic

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corporation, partnership, joint venture, trust, other enterprise, or employee benefit plan.

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      (2) (i) "Corporation" includes (A) any domestic or foreign corporation, profit or

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nonprofit, and (B) any domestic or foreign predecessor entity of the corporation in a merger,

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consolidation, or other transaction in which the predecessor's existence ceased upon

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consummation of the transaction.

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      (ii) "Corporation" also includes any of the classes of quasi public corporations with

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purposes enumerated as exceptions in section 7-1.1-3 to the extent that the corporations are not

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subject to other provisions of the general laws or special acts authorizing indemnification of their

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directors and officers.

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      (3) "Expenses" include attorneys' fees.

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      (4) "Official capacity" means:

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      (i) When used with respect to a director, the office of director in the corporation; and

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      (ii) When used with respect to a person other than a director, as contemplated in

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subsection (a)(1), the elective or appointive office in the corporation held by the officer or the

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employment or agency relationship undertaken by the employee or agent on behalf of the

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corporation, but in each case does not include service for any other foreign or domestic

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corporation or any partnership, joint venture, trust, other enterprise, or employee benefit plan.

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      (5) "Party" includes a person who was, is, or is threatened to be made, a named

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defendant or respondent in a proceeding.

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      (6) "Proceeding" means any threatened, pending or completed action, suit, or

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proceeding, whether civil, criminal, administrative, or investigative.

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      (b) (1) A corporation has power to indemnify any person made a party to any proceeding

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by reason of the fact that he or she is or was a director if:

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      (i) He or she conducted him or herself in good faith; and

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      (ii) He or she reasonably believed,

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      (A) In the case of conduct in his or her official capacity with the corporation, that his or

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her conduct was in its best interests, and

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      (B) In all other cases, that his or her conduct was at least not opposed to its best interests;

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and

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      (iii) In the case of any criminal proceeding, he or she had no reasonable cause to believe

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his or her conduct was unlawful.

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      (2) Indemnification may be made against judgments, penalties, fines, settlements, and

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reasonable expenses actually incurred by the person in connection with the proceeding; except

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that if the proceeding was by or in the right of the corporation, indemnification may be made only

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against the reasonable expenses and shall not be made in respect of any proceeding in which the

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person has been adjudged to be liable to the corporation. The termination of any proceeding by

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judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall

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not, of itself, be determinative that the person did not meet the requisite standard of conduct set

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forth in this subsection.

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      (c) A director shall not be indemnified under subsection (b) in respect of any proceeding

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charging improper personal benefit to him or her, whether or not involving action in his or her

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official capacity, in which he or she has been adjudged to be liable on the basis that personal

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benefit was improperly received by the director.

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      (d) (1) Unless limited by the articles of incorporation:

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      (i) A director who has been wholly successful, on the merits or otherwise, in the defense

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of any proceeding referred to in subsection (b) is indemnified against reasonable expenses

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incurred by him or her in connection with the proceeding; and

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      (ii) A court of appropriate jurisdiction, upon application of a director and any notice that

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the court requires, has authority to order indemnification in the following circumstances:

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      (A) If it determines a director is entitled to reimbursement under subdivision (d)(1)(A),

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the court shall order indemnification, in which case the director is also entitled to recover the

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expenses of securing the reimbursement; or

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      (B) If it determines that the director is fairly and reasonably entitled to indemnification

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in view of all the relevant circumstances, whether or not he or she has met the standard of

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conduct set forth in subsection (b) or has been adjudged liable in the circumstances described in

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subsection (c), the court may order such indemnification as the court shall deem proper, except

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that indemnification with respect to any proceeding by or in the right of the corporation or in

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which liability has been adjudged in the circumstances described in subsection (c) are limited to

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expenses.

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      (2) A court of appropriate jurisdiction may be the same court in which the proceeding

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involving the director's liability took place.

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      (e) (1) No indemnification under subsection (b) shall be made by the corporation unless

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authorized in the specific case after a determination has been made that indemnification of the

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director is permissible in the circumstances because he or she has met the standard of conduct set

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forth in subsection (b). The determination shall be made:

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      (i) By the board of directors by a majority vote of a quorum consisting of directors not at

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the time parties to the proceeding; or

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      (ii) If such a quorum cannot be obtained, then by a majority vote of a committee of the

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board, duly designated to act in the matter by a majority vote of the full board (in which

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designation directors who are parties may participate), consisting solely of two (2) or more

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directors not at the time parties to the proceeding; or

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      (iii) By special legal counsel, selected by the board of directors or a committee of the

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board by vote as set forth in subsection (e)(1)(i) or (e)(1)(ii), or, if the requisite quorum of the full

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board cannot be obtained for the vote and the committee cannot be established, by a majority vote

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of the full board (in which selection directors who are parties may participate); or

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      (iv) By the shareholders.

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      (2) Authorization of indemnification and determination as to reasonableness of expenses

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shall be made in the same manner as the determination that indemnification is permissible, except

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that if the determination that indemnification is permissible is made by special legal counsel,

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authorization of indemnification and determination as to reasonableness of expenses shall be

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made in a manner specified in subsection (e)(1)(iii) for the selection of the counsel. Shares held

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by directors who are parties to the proceeding shall not be voted on the subject matter under this

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subsection.

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      (f) Reasonable expenses incurred by a director who is a party to a proceeding may be

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paid or reimbursed by the corporation in advance of the final disposition of the proceeding upon

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receipt by the corporation of:

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      (1) A written affirmation by the director of his or her good faith belief that he or she has

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met the standard of conduct necessary for indemnification by the corporation as authorized in this

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section, and

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      (2) A written undertaking by or on behalf of the director to repay the amount if it is

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ultimately determined that he or she has not met that standard of conduct, and after a

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determination that the facts then known to those making the determination would not preclude

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indemnification under this section. The undertaking required by this subdivision is an unlimited

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general obligation of the director but need not be secured and may be accepted without reference

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to financial ability to make repayment. Determinations and authorizations of payments under this

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subsection shall be made in the manner specified in subsection (e).

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      (g) The indemnification provided by this section is not deemed exclusive of any other

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rights to which those seeking indemnification are entitled under any bylaw, agreement, vote of

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stockholders or disinterested directors or otherwise, both as to action in his or her official capacity

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and as to action in another capacity while holding office, and shall continue as to a person who

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has ceased to be a director, officer, partner, trustee, employee, or agent and shall inure to the

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benefit of the heirs, executors, and administrators of a person. Nothing contained in this section

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limits the corporation's power to pay or reimburse expenses incurred by a director in connection

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with his or her appearance as a witness in a proceeding at a time when he or she has not been

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made a named defendant or respondent in the proceeding.

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      (h) For purposes of this section, the corporation is deemed to have requested a director to

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serve an employee benefit plan whenever the performance by a director of his or her duties to the

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corporation also imposes duties on, or otherwise involves services by, him or her to the plan or

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participants or beneficiaries of the plan; excise taxes assessed on a director with respect to an

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employee benefit plan pursuant to applicable law are deemed "fines"; and action taken or omitted

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by him or her with respect to an employee benefit plan in the performance of his or her duties for

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a purpose reasonably believed by him or her to be in the interest of the participants and

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beneficiaries of the plan is deemed to be for a purpose which is not opposed to the best interests

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of the corporation.

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      (i) Unless limited by the articles of incorporation:

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      (1) An officer of the corporation is indemnified as and to the same extent provided in

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subsection (d) for a director, and is entitled to the same extent as a director to seek

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indemnification pursuant to the provisions of subsection (d);

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      (2) A corporation has the power to indemnify and to advance expenses to an officer,

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employee, or agent of the corporation to the same extent that it may indemnify and advance

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expenses to directors pursuant to this section; and

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      (3) A corporation, in addition, has the power to indemnify and to advance expenses to an

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officer, employee, or agent who is not a director to a further extent, consistent with law, that is

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provided by its articles of incorporation, bylaws, general or specific action of its board of

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directors, or contract.

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      (j) A corporation has power to purchase and maintain insurance on behalf of any person

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who is or was a director, officer, employee, or agent of the corporation, or who, while a director,

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officer, employee, or agent of the corporation, is or was serving at the request of the corporation

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as a director, officer, partner, trustee, employee, or agent of another foreign or domestic

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corporation, partnership, joint venture, trust, other enterprise, or employee benefit plan, against

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any liability asserted against him or her and incurred by him or her in any corporate capacity or

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arising out of his or her status as a director, officer, employee, or agent of the corporation,

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whether or not the corporation would have the power to indemnify him or her against the liability

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under the provisions of this section.

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      (k) Any indemnification of, or advance of expenses to, a director in accordance with this

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section, if arising out of a proceeding by or in the right of the corporation, shall be reported in

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writing to the shareholders with or before the notice of the next shareholders' meeting.

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     7-1.1-4.2. Guarantee authorized by shareholders. -- Each corporation has the power to

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make guarantees, although not in furtherance of its corporate purposes, when authorized at a

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meeting of shareholders by the affirmative vote of the holders of a majority of the shares of the

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corporation entitled to vote on guarantees, or a greater percentage that is provided in the articles

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of incorporation or bylaws. If authorized by a like vote, a corporation has the power to mortgage,

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pledge, or give a security interest in all or any of its property, franchises, and income to secure a

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guarantee or to secure obligations other than its own.

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     7-1.1-5. Right of corporation to acquire and dispose of its own shares. -- (a) A

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corporation has the right to purchase, take, receive, or otherwise acquire, hold, own, pledge,

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transfer, or otherwise dispose of its own shares, but purchases of its own shares, whether direct or

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indirect, shall be made only to the extent of its unreserved and unrestricted earned surplus

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available for purchases of its own shares, or, if it has no earned surplus, to the extent of its

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unreserved and unrestricted capital surplus pursuant to the provisions of section 7-1.1-41.

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      (b) Until disposition or cancellation of treasury shares, the cost of the shares is treated as

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a deduction from the total of the stated capital and surplus of the corporation: and the earned

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surplus or capital surplus used as the measure of the corporation's right to purchase its own shares

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is restricted so long as the shares are held as treasury shares. Upon the disposition or cancellation

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of any treasury shares, the restriction on earned surplus or capital surplus is removed pro tanto,

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but the earned surplus or capital surplus previously restricted is reduced by the amount of any

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excess of the cost of the shares over the proceeds (if any) received upon their disposition or

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cancellation.

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      (c) Notwithstanding the foregoing limitations, a corporation may purchase or otherwise

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acquire its own shares out of its capital surplus, or, if it has no capital surplus, out of its stated

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capital (but in that event at a price not exceeding the stated capital attributable to the shares

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purchased), for the purpose of:

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      (1) Eliminating fractional shares.

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      (2) Collecting or compromising indebtedness to the corporation.

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      (3) Satisfying the claim of dissenting shareholders entitled to payment for their shares

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under the provisions of this chapter.

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      (4) Effecting, subject to the other provisions of this chapter, the retirement of its

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redeemable shares by redemption or by purchase at an amount not to exceed the consideration

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payable upon redemption.

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      (d) The acquisition by a corporation of its own shares pursuant to a conversion or

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exchange of shares shall not be treated as a purchase of shares subject to the provisions of this

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section.

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      (e) An open end investment company, registered as such under the Federal Investment

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Company Act of 1940 (15 U.S.C. sections 80a-1 -- 80a-64), as amended, may, if its articles of

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incorporation so provide, purchase its own shares out of any unrestricted surplus or out of stated

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capital.

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      (f) No purchase of or payment for its own shares shall be made at a time when the

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corporation is insolvent or when the purchase or payment would make it insolvent.

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     7-1.1-6. Defense of ultra vires. -- No act of a corporation and no conveyance or transfer

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of real or personal property to or by a corporation is invalid because the corporation was without

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capacity or power to do the act or to make or receive the conveyance or transfer, but the lack of

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capacity or power may be asserted:

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      (1) In a proceeding by a shareholder against the corporation to enjoin the doing of any

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act or the transfer of real or personal property by or to the corporation. If the unauthorized act or

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transfer sought to be enjoined is being, or is to be, performed or made pursuant to a contract to

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which the corporation is a party, the court may, if all of the parties to the contract are parties to

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the proceeding and if it deems the same to be equitable, set aside and enjoin the performance of

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the contract, and in so doing may allow to the corporation or to the other parties to the contract, as

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the case may be, compensation for the loss or damage sustained by either of them which may

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result from the action of the court in setting aside and enjoining the performance of the contract,

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but anticipated profits to be derived from the performance of the contract shall not be awarded by

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the court as a loss or damage sustained.

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      (2) In a proceeding by the corporation, whether acting directly or through a receiver,

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trustee, or other legal representative, or through shareholders in a representative suit, against the

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incumbent or former officers or directors of the corporation.

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      (3) In a proceeding by the attorney general, as provided in this chapter, to dissolve the

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corporation, or in a proceeding by the attorney general to enjoin the corporation from the

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transaction of unauthorized business.

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     7-1.1-7. Corporate name. -- (a) The corporate name:

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      (1) Shall contain the word "corporation," "company," "incorporated," or "limited," or

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shall contain an abbreviation of one of the words.

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      (2) Shall not contain any word or phrase which indicates or implies that it is organized

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for any purpose other than one or more of the purposes contained in its articles of incorporation.

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      (3) Shall not be the same as, or deceptively similar to, the name of any domestic

11-11

corporation, whether for profit or not for profit, or limited partnership existing under the laws of

11-12

this state or any foreign corporation, whether for profit or not for profit, or limited partnership

11-13

authorized to transact business in this state, or domestic or foreign limited liability company or a

11-14

name the exclusive right to which is, at the time filed, reserved or registered in the manner

11-15

provided in this chapter, or the name of a corporation or a limited partnership which has in effect

11-16

a registration of its corporate or limited partnership name as provided in this title, subject to the

11-17

following:

11-18

      (i) This provision does not apply if the applicant files with the secretary of state either of

11-19

the following:

11-20

      (A) The written consent of the other corporation, limited partnership, limited liability

11-21

company or holder of a filed, reserved or registered name to use that name or deceptively similar

11-22

name, and one or more words are added to make the name distinguishable from the other name;

11-23

or

11-24

      (B) A certified copy of a final decree of a court of competent jurisdiction establishing the

11-25

prior right of the applicant to the use of the name in this state; and

11-26

      (ii) The name may be the same as, or deceptively similar to, the name of a corporation or

11-27

other association the certificate of incorporation or organization of which has been revoked by the

11-28

secretary of state as permitted by law and the revocation has not been withdrawn within one year

11-29

from the date of the revocation.

11-30

      (b) A corporation with which another corporation, domestic or foreign, is merged, or

11-31

which is formed by the reorganization or consolidation of one or more domestic or foreign

11-32

corporations or upon a sale, lease, or other disposition to, or exchange with, a domestic

11-33

corporation of all or substantially all the assets of another corporation, domestic or foreign,

11-34

including its name, may have the same name as that used in this state by any of the corporations if

12-1

at the time the other corporation was organized under the laws of, or is authorized to transact

12-2

business in, this state.

12-3

     7-1.1-7.1. Fictitious business name. -- (a) Any corporation organized and existing under

12-4

the laws of any state or territory of the United States may transact business in this state under a

12-5

fictitious name, provided that it files a fictitious business name statement in accordance with this

12-6

section prior to the time it commences to transact the business under the fictitious name.

12-7

      (b) The fictitious business name statement shall be filed in duplicate with the secretary of

12-8

state on forms to be furnished by the secretary of state and shall be executed by an officer of the

12-9

corporation and shall state:

12-10

      (1) The fictitious business name to be used;

12-11

      (2) The name of the applicant corporation and the state or territory under the laws of

12-12

which it is incorporated, the date of its incorporation, and a brief statement of the business in

12-13

which it is engaged; and

12-14

      (3) The address of its registered office within the state.

12-15

      (c) The fictitious business name statement expires upon the filing of the statement of

12-16

abandonment of use of a fictitious business name registered in accordance with this section or

12-17

upon the dissolution of the applicant corporation.

12-18

      (d) The statement of abandonment of use of a fictitious business name under this section

12-19

may be filed in duplicate with the secretary of state on forms furnished by the secretary of state

12-20

and shall be executed by an officer of the corporation and shall state:

12-21

      (1) The fictitious business name being abandoned;

12-22

      (2) The date on which the original fictitious business name statement being abandoned

12-23

was filed;

12-24

      (3) The name of the applicant corporation and the state or territory under the laws of

12-25

which it is incorporated; and

12-26

      (4) The address of its registered office within the state.

12-27

      (e) No domestic or foreign corporation transacting business under a fictitious business

12-28

name contrary to the provisions of this section, or its assignee, may maintain any action upon or

12-29

on account of any contract made, or transaction had, in the fictitious business name in any court

12-30

of this state until a fictitious business name statement has been filed in accordance with this

12-31

section.

12-32

      (f) No corporation may be permitted to transact business under a fictitious business name

12-33

pursuant to this section which is the same as or deceptively similar to the name of any domestic

12-34

corporation, any domestic limited partnership or any domestic limited liability company existing

13-1

under the laws of this state, or the name of any foreign corporation, foreign limited partnership or

13-2

foreign limited liability company authorized to transact business in the state, or any corporate

13-3

name filed, reserved or registered under this title.

13-4

      (g) A filing fee of fifty dollars ($50.00) is collected by the secretary of state for each

13-5

statement filed.

13-6

     7-1.1-8. Reserved name. -- (a) The exclusive right to the use of a corporate name may be

13-7

reserved by:

13-8

      (1) Any person intending to organize a corporation under this chapter.

13-9

      (2) Any domestic corporation intending to change its name.

13-10

      (3) Any foreign corporation intending to make application for a certificate of authority to

13-11

transact business in this state.

13-12

      (4) Any foreign corporation authorized to transact business in this state and intending to

13-13

change its name.

13-14

      (5) Any person intending to organize a foreign corporation and intending to have the

13-15

corporation make application for a certificate of authority to transact business in this state.

13-16

      (b) The reservation is made by filing with the secretary of state an application to reserve

13-17

a specified corporate name, executed by the applicant. If the secretary of state finds that the name

13-18

is available for corporate use, he or she shall reserve the name for the exclusive use of the

13-19

applicant for a period of one hundred and twenty (120) days.

13-20

      (c) The right to the exclusive use of a specified corporate name so reserved may be

13-21

transferred to any other person or corporation by filing in the office of the secretary of state a

13-22

notice of the transfer, executed by the applicant for whom the name was reserved, and specifying

13-23

the name and address of the transferee.

13-24

     7-1.1-9. Registered name. -- (a) Any corporation organized and existing under the laws

13-25

of any state or territory of the United States may register its corporate name under this chapter,

13-26

provided its corporate name is not the same as or deceptively similar to, the name of any domestic

13-27

corporation, limited partnership or limited liability company existing under the laws of this state,

13-28

or the name of any foreign corporation, limited partnership or limited liability company

13-29

authorized to transact business in this state, or any corporate name reserved, filed or registered

13-30

under this title.

13-31

      (b) The registration is made by:

13-32

      (1) Filing with the secretary of state:

13-33

      (i) An application for registration executed by an officer of the corporation, stating the

13-34

name of the corporation, the state or territory under the laws of which it is incorporated, the date

14-1

of its incorporation, a statement that it is carrying on or doing business, and a brief statement of

14-2

the business in which it is engaged; and

14-3

      (ii) A certificate stating that the corporation is in good standing under the laws of the

14-4

state or territory wherein it is organized, executed by the secretary of state of the state or territory

14-5

or by any other official that may have custody of the records pertaining to corporations; and

14-6

      (2) Paying to the secretary of state a registration fee of fifty dollars ($50.00).

14-7

      (c) The registration is effective for a period of one year.

14-8

     7-1.1-10. Renewal of registered name. -- A corporation, which has in effect a

14-9

registration of its corporate name, may renew the registration from year to year by annually filing

14-10

an application for renewal stating the facts required to be stated in an original application for

14-11

registration and a certificate of good standing as required for the original registration and by

14-12

paying a fee of fifty dollars ($50.00). A renewal application shall be filed prior to the expiration

14-13

of the one year period from the filing of an original application for registration or its last renewal

14-14

and extends the registration for the following year.

14-15

     7-1.1-11. Registered office and registered agent -- Designation of registered agent

14-16

without authority. -- (a) Each corporation shall have and continuously maintain in this state:

14-17

      (1) A registered office, which may be, but need not be, the same as its place of business.

14-18

      (2) A registered agent, who may be either an individual resident in this state whose

14-19

business office is identical with the registered office, or a domestic corporation, or a foreign

14-20

corporation authorized to transact business in this state, having a business office identical with the

14-21

registered office; provided, however, that in the case where the registered agent of a corporation

14-22

is an attorney, the business address of the agent need not be identical with the registered office,

14-23

but may be the usual business address of the attorney.

14-24

      (b) Any incorporator, officer, agent, or servant of a corporation, who designates a

14-25

registered agent for that corporation without the registered agent's authority, is guilty of a

14-26

misdemeanor and shall, upon conviction, be punished by a fine of not more than one thousand

14-27

dollars ($1,000) or by imprisonment of not more than one year, or both.

14-28

     7-1.1-12. Change of registered office or registered agent. -- (a) A corporation may

14-29

change its registered office or change its registered agent, or both, upon filing in the office of the

14-30

secretary of state a statement stating:

14-31

      (1) The name of the corporation.

14-32

      (2) The address of its then registered office.

14-33

      (3) If the address of its registered office has changed, the new address of the registered

14-34

office.

15-1

      (4) The name of its then registered agent.

15-2

      (5) If its registered agent has changed, the name of its successor registered agent.

15-3

      (6) The address of its registered office and the address of the business office of its

15-4

registered agent, as changed.

15-5

      (7) That the change was authorized by resolution duly adopted by its board of directors.

15-6

      (b) The statement shall be executed by the corporation by its president or a vice

15-7

president, and verified by him or her, and delivered to the secretary of state. If the secretary of

15-8

state finds that the statement conforms to the provisions of this chapter, the secretary shall file the

15-9

statement in his or her office, and upon that filing or upon a later date not more than thirty (30)

15-10

days after the filing, as is set forth in the statement, the change of address of the registered office,

15-11

or the appointment of a new registered agent, or both, as the case may be, shall become effective.

15-12

      (c) Any registered agent of a corporation may resign as an agent upon filing a written

15-13

notice of the resignation, executed in duplicate, with the secretary of state, who shall immediately

15-14

mail a copy of the resignation to the corporation at its registered office. The appointment of the

15-15

agent terminates upon the expiration of thirty (30) days after receipt of the notice by the secretary

15-16

of state.

15-17

      (d) If a registered agent changes his or her or its business address to another place within

15-18

the state, he or she or it may change the address and the address of the registered office of any

15-19

corporations of which he or she or it is a registered agent by filing a statement as required above,

15-20

except that it need be signed only by the registered agent and need not be responsive to

15-21

subsection (a)(5) or (a)(7) and must recite that a copy of the statement has been mailed to each

15-22

corporation.

15-23

     7-1.1-13. Service of process on corporation. -- (a) The registered agent appointed by a

15-24

corporation is an agent of the corporation upon whom any process, notice, or demand required or

15-25

permitted by law to be served upon the corporation may be served.

15-26

      (b) Whenever a corporation fails to appoint or maintain a registered agent in this state, or

15-27

whenever its registered agent cannot with reasonable diligence be found at the registered office,

15-28

then the secretary of state is an agent of the corporation upon whom any process, notice, or

15-29

demand may be served. Service on the secretary of state of any process, notice, or demand is

15-30

made by delivering to and leaving with him or her or with any clerk having charge of the

15-31

corporation department of his or her office, duplicate copies of the process, notice, or demand. In

15-32

the event any process, notice, or demand is served on the secretary of state, he or she shall

15-33

immediately forward one of the copies by certified mail, addressed to the corporation at its

15-34

registered office. Any service upon the secretary of state is returnable in not less than thirty (30)

16-1

days.

16-2

      (c) The secretary of state shall keep a record of all processes, notices, and demands

16-3

served upon him or her under this section, and shall record in the record the time of service and

16-4

his or her action with reference to these.

16-5

      (d) Nothing contained in these provisions limits or affects the right to serve any process,

16-6

notice, or demand required or permitted by law to be served upon a corporation in any other

16-7

manner now or subsequently permitted by law.

16-8

     7-1.1-14. Authorized shares. -- (a) Each corporation has power to create and issue the

16-9

number of shares stated in its articles of incorporation. The shares may be divided into one or

16-10

more classes, any or all of which classes may consist of shares with par value or shares without

16-11

par value, with the designations, preferences, limitations, and relative rights that are stated in the

16-12

articles of incorporation. To the extent not inconsistent with the provisions of this chapter, the

16-13

articles of incorporation may limit or deny the voting rights of any class, or provide special voting

16-14

rights for the shares of any class, including the power to elect one or more directors, or contain

16-15

restrictions on transferability of ownership designed to permit a corporation to qualify as: (1) a

16-16

real estate investment trust under the provisions of the Internal Revenue Code of 1986 [26 U.S.C.

16-17

section 1 et seq.] or regulations adopted pursuant to the Internal Revenue Code; or (2) an

16-18

investment company under the Investment Company Act of 1940 [15 U.S.C. section 80a-1 et

16-19

seq.] or regulations adopted pursuant to the Investment Company Act.

16-20

      (b) Without limiting the authority contained in these provisions, a corporation, when

16-21

provided for in its articles of incorporation, may issue shares of preferred or special classes:

16-22

      (1) Subject to the right of the corporation to redeem any of the shares for the

16-23

consideration fixed by the articles of incorporation for the redemption of the shares.

16-24

      (2) Entitling the holders of the shares to cumulative, noncumulative, or partially

16-25

cumulative dividends.

16-26

      (3) Having preference over any other class or classes of shares as to the payment of

16-27

dividends.

16-28

      (4) Having preference in the assets of the corporation over any other class or classes of

16-29

shares upon the voluntary or involuntary liquidation of the corporation.

16-30

      (5) Convertible into shares of any other class or into shares of any series of the same or

16-31

any other class, except a class having prior or superior rights and preferences as to dividends or

16-32

distribution of assets upon liquidation, but no shares, whether with or without par value, shall be

16-33

converted into shares with par value unless that part of the stated capital of the corporation

16-34

represented by the shares to be converted is, at the time of conversion, at least equal to the

17-1

aggregate par value of the shares into which the shares are to be converted.

17-2

      (c) Notwithstanding the provisions of subsection (a) of this section, the board of

17-3

directors of a corporation that is registered or intends to register as an open-end company under

17-4

the Investment Company Act of 1940 [15 U.S.C. section 80a-1 et seq.] after the registration as an

17-5

open-end company takes effect, may increase or decrease the aggregate number of shares of stock

17-6

or the number of shares of stock of any class that the corporation has authority to issue unless a

17-7

provision has been included in the charter of the corporation after July 1, 2001, prohibiting that

17-8

action by the board of directors to increase or decrease the aggregate number of shares of stock or

17-9

the number of shares of stock of any class that the corporation has authority to issue.

17-10

     7-1.1-15. Issuance of shares of preferred or special classes in series. -- (a) If the

17-11

articles of incorporation so provide, the shares of any preferred or special class may be divided

17-12

into and issued in series, with variations in relative rights and preferences, including variations in

17-13

voting rights, if any, and designations, preferences, and relative, participating, optional or other

17-14

special rights and qualifications, limitations, and restrictions on the shares, as may be desired. If

17-15

the articles of incorporation expressly vest authority in the board of directors, then, to the extent

17-16

that the articles of incorporation have not established series and fixed and determined the

17-17

variations in the relative rights and preferences as between the series, the board of directors has

17-18

authority to divide any or all of the classes into series and, within the limitations, if any, stated in

17-19

the articles of incorporation, to fix and determine the relative rights and preferences of the shares

17-20

of any series established.

17-21

      (b) The holders of preferred or special stock of any class or of any series of that stock are

17-22

entitled to receive dividends at the rates, on the conditions and at the times that are stated and

17-23

expressed in the articles of incorporation, or in any amendment of the articles, or in the vote or

17-24

votes providing for the issue of the stock adopted by the board of directors as previously

17-25

provided, payable in preference to, or in relation to, the dividends, payable on any other class or

17-26

classes of stock, or of any other series of stock, and cumulative, non-cumulative or partially

17-27

cumulative as is stated and expressed. When dividends upon the preferred and special stocks, if

17-28

any, to the extent of the preferences to which the stocks are entitled, have been paid or declared

17-29

and set apart for payment, a dividend on the remaining class or classes or series of stock may then

17-30

be paid out of the remaining assets of the corporation available for dividends.

17-31

      (c) Any preferred or special stock of any class or of any series may be made redeemable

17-32

for cash, property, or rights, including securities of any other corporation, at the option of either

17-33

the holder or the corporation or upon the happening of a specified event, at the time or times, at

17-34

the price or prices, or the rate or rates, and with the adjustments stated and expressed or provided

18-1

for in the articles of incorporation or any amendment of the articles or in the vote or votes

18-2

providing for the issuance of the stock adopted by the board of directors as previously provided.

18-3

      (d) The holders of the preferred or special stock of any class or of any series of that stock

18-4

are entitled to the rights upon the dissolution of, or upon any distribution of the assets or

18-5

liquidation, voluntary or involuntary, of the corporation as are stated and expressed in the articles

18-6

of incorporation or any amendment of the articles, or in the vote or votes providing for the issue

18-7

of the stock adopted by the board of directors as previously provided.

18-8

      (e) Any stock of any class or of any series of the stock may be made convertible into, or

18-9

exchangeable for, shares of any other class or classes or of any other series of the same or any

18-10

other class or classes of stock of the corporation, except a class having prior or superior rights and

18-11

preferences as to dividends or distribution of assets upon liquidation, at the price or prices or at

18-12

the rates of exchange and with the adjustments that are stated and expressed or provided for in the

18-13

articles of incorporation, or in any amendment to the articles, or in the vote or votes providing for

18-14

the issue of the stocks adopted by the board of directors as previously provided, but no shares,

18-15

whether with or without par value, are convertible into shares with par value unless that part of

18-16

the stated capital of the corporation represented by the shares to be converted, is at the time of

18-17

conversion, at least equal to the aggregate par value of the shares into which the shares are to be

18-18

converted.

18-19

      (f) If any corporation is authorized to issue more than one class of stock or more than

18-20

one series of any class, the designation, preferences, and relative, participating, optional, or other

18-21

special rights of each class of stock or series of the stock and the qualifications, limitations, or

18-22

restrictions of the preferences and/or rights shall be stated in full or summarized on the face or

18-23

back of the certificate which the corporation issues to represent the class or series of stock;

18-24

provided, however, that except as otherwise provided in section 6A-8-103, in lieu of the

18-25

foregoing requirements, there may be stated on the face or back of the certificate which the

18-26

corporation issues to represent the class or series of stock, a statement that the corporation will

18-27

furnish without charge to each stockholder who requests, the designations, preferences, and

18-28

relative, participating, optional, or other special rights of each class of stock or series of the stock

18-29

and the qualifications, limitations, or restrictions of the preferences and/or rights.

18-30

      (g) Before any corporation issues any shares of stock of any class or of any series of any

18-31

class of which the voting powers, designations, preferences, and relative, participating, optional,

18-32

or other rights, if any, or the qualifications, limitations, or restrictions of the stock, if any, have

18-33

not been stated in the articles of incorporation or in any amendment to the articles but are

18-34

provided for in a vote or votes adopted by the board of directors pursuant to authority expressly

19-1

vested in it by the provisions of the articles of incorporation or an amendment to the articles, a

19-2

certificate presenting a copy of the vote or votes and the number of shares of stock of the class or

19-3

series shall be made under the seal of the corporation and signed by the president or a vice

19-4

president and by the secretary or an assistant secretary of the corporation and acknowledged by

19-5

the president or vice president before an officer authorized by the laws of Rhode Island to take

19-6

acknowledgments of deeds, and shall be filed and a copy of the certificate shall be filed in the

19-7

same manner as articles of incorporation are required to be filed. Upon the filing the certificate

19-8

constitutes an amendment to the articles of incorporation. Unless otherwise provided in any vote

19-9

or votes, the number of shares of stock of any class or series as stated in the vote or votes may be

19-10

increased or decreased (but not below the number of shares of stock then outstanding) by a

19-11

certificate likewise made, signed, and filed presenting a statement that a specified increase or

19-12

decrease in the number of shares of stock had been authorized and directed by a vote or votes

19-13

likewise adopted by the board of directors. In case the number of shares shall be decreased, the

19-14

number of shares specified in the certificate resume the status which they had prior to the

19-15

adoption of the first resolution or resolutions.

19-16

     7-1.1-16. Subscription for shares. -- (a) A subscription for shares of a corporation to be

19-17

organized is irrevocable for a period of six (6) months, unless otherwise provided by the terms of

19-18

the subscription agreement or unless all of the subscribers consent to the revocation of the

19-19

subscription.

19-20

      (b) Unless otherwise provided in the subscription agreement, subscriptions for shares,

19-21

whether made before or after the organization of a corporation, shall be paid in full at a time, or in

19-22

installments and at times, that are determined by the board of directors. Any call made by the

19-23

board of directors for payment on subscriptions shall be uniform as to all shares of the same class

19-24

or as to all shares of the same series, as the case may be. In case of default in the payment of any

19-25

installment or call when the payment is due, the corporation may proceed to collect the amount

19-26

due in the same manner as any debt due the corporation. The bylaws may prescribe other

19-27

penalties for failure to pay installments or calls that may become due, but no penalty working a

19-28

forfeiture of a subscription, or of the amounts paid on the subscription, shall be declared as

19-29

against any subscriber unless the amount due on the subscription remains unpaid for a period of

19-30

twenty (20) days after written demand has been made for the amount. If mailed, the written

19-31

demand shall be deemed to be made when deposited in the United States mail in a sealed

19-32

envelope addressed to the subscriber at his or her last post office address known to the

19-33

corporation, with postage on the envelope prepaid. In the event of the sale of any shares by reason

19-34

of any forfeiture, the excess of proceeds realized over the amount due and unpaid on the shares

20-1

shall be paid to the delinquent subscriber or to his or her legal representative.

20-2

     7-1.1-17. Consideration for shares. -- (a) Shares having a par value may be issued for

20-3

the consideration expressed in dollars, not less than the par value of the shares, as is fixed from

20-4

time to time by the board of directors.

20-5

      (b) Shares without par value may be issued for the consideration expressed in dollars that

20-6

is fixed from time to time by the board of directors unless the articles of incorporation reserve to

20-7

the shareholders the right to fix the consideration. In the event that the right is reserved as to any

20-8

shares, the shareholders shall, prior to the issuance of the shares, fix the consideration to be

20-9

received for the shares, by a vote of the holders of a majority of all shares entitled to vote on the

20-10

consideration.

20-11

      (c) Treasury shares may be disposed of by the corporation for the consideration

20-12

expressed in dollars that may be fixed from time to time by the board of directors.

20-13

      (d) The part of the surplus of a corporation which is transferred to stated capital upon the

20-14

issuance of shares as a share divided is deemed to be the consideration for the issuance of the

20-15

shares.

20-16

      (e) In the event of the issuance of shares upon the conversion or exchange of

20-17

indebtedness or shares, the consideration for the shares issued shall be:

20-18

      (1) The principal sum of, and accrued interest on, the indebtedness exchanged or

20-19

converted, or the stated capital then represented by the shares exchanged or converted; and

20-20

      (2) That part of surplus, if any, transferred to stated capital upon the issuance of shares

20-21

for the shares exchanged or converted; and

20-22

      (3) Any additional consideration paid to the corporation upon the issuance of shares for

20-23

the indebtedness or shares exchanged or converted.

20-24

     7-1.1-18. Payment for shares. -- (a) The consideration for the issuance of shares may be

20-25

paid, in whole or in part, in money, in other property, tangible or intangible, or in labor or

20-26

services actually performed for the corporation. When payment of the consideration for which

20-27

shares are to be issued has been received by the corporation, the shares are deemed to be fully

20-28

paid and nonassessable.

20-29

      (b) Neither promissory notes nor future services constitute payment or part payment, for

20-30

the issuance of shares of a corporation.

20-31

      (c) In the absence of fraud in the transaction, the judgment of the board of directors or

20-32

the shareholders, as the case may be, as to the value of the consideration received for shares is

20-33

conclusive.

20-34

     7-1.1-18.1. Stock rights and options. -- Subject to any provisions in respect to rights and

21-1

options stated in its articles of incorporation, a corporation may create and issue, whether or not

21-2

in connection with the issuance and sale of any of its shares or other securities, rights or options

21-3

entitling the holders to purchase from the corporation shares of any class or classes. Those rights

21-4

or options shall be evidenced in any manner that the board of directors approves and, subject to

21-5

the provisions of the articles of incorporation, shall state the terms upon which, the time or times

21-6

within which and the price or prices at which the shares may be purchased from the corporation

21-7

upon the exercise of any right or option. In the absence of fraud in the transaction, the judgment

21-8

of the board of directors as to the adequacy of the consideration received for the rights or options

21-9

is conclusive. The price or prices to be received for any shares having a par value, other than

21-10

treasury shares, to be issued upon the exercise of the rights or options shall not be less than the

21-11

par value of those shares.

21-12

     7-1.1-19. Determination of amount of stated capital. -- (a) In the case of the issuance

21-13

by a corporation of shares having a par value, the consideration received for the shares constitutes

21-14

stated capital to the extent of the par value of the shares, or, if the shares have a preference in the

21-15

assets of the corporation in the event of involuntary liquidation which is greater than the par

21-16

value, then to the extent of the preference, and the excess, if any, of the consideration constitutes

21-17

capital surplus.

21-18

      (b) In the case of the issuance by a corporation of shares without par value, the entire

21-19

consideration received for the shares constitutes stated capital unless the corporation determines

21-20

as provided in this section that only a part of the shares is stated capital. Within a period of sixty

21-21

(60) days after the issuance of any shares without par value, the board of directors may allocate to

21-22

capital surplus any portion of the consideration received for the issuance of the shares. No

21-23

allocation shall be made of any portion of the consideration received for shares without par value

21-24

having a preference in the assets of the corporation in the event of involuntary liquidation except

21-25

the amount, if any, of the consideration in excess of the preference.

21-26

      (c) If shares have been or are issued by a corporation in merger or consolidation or in

21-27

acquisition of all or substantially all of the outstanding shares or of the property and assets of

21-28

another corporation, whether domestic or foreign, any amount that would otherwise constitute

21-29

capital surplus under the foregoing provisions of this section may instead be allocated to earned

21-30

surplus by the board of directors of the issuing corporation except that its aggregate earned

21-31

surplus shall not exceed the sum of the earned surpluses as defined in this chapter of the issuing

21-32

corporation and of all other corporations, domestic or foreign, that were merged or consolidated

21-33

or of which the shares or assets were acquired.

21-34

      (d) The stated capital of a corporation may be increased from time to time by resolution

22-1

of the board of directors directing that all or a part of the surplus of the corporation be transferred

22-2

to stated capital. The board of directors may direct that the amount of the surplus transferred is

22-3

deemed to be stated capital in respect of any designated class of shares.

22-4

     7-1.1-20. Expenses of organization, reorganization, and financing. -- The reasonable

22-5

charges and expenses of organization or reorganization of a corporation, and the reasonable

22-6

expenses of and compensation for the sale or underwriting of its shares, may be paid or allowed

22-7

by the corporation out of the consideration received by it in payment for its shares without

22-8

rendering the shares not fully paid or assessable.

22-9

     7-1.1-21. Certificates representing shares. -- (a) The shares of a corporation shall be

22-10

represented by certificates provided that the board of directors of the corporation may provide by

22-11

resolution or resolutions that some or all of any or all classes or series of its stock are

22-12

uncertificated shares. This resolution does apply to shares represented by a certificate until the

22-13

certificate is surrendered to the corporation. Notwithstanding the adoption of the resolution by the

22-14

board of directors, every holder of stock represented by certificates and upon request every holder

22-15

of uncertificated shares is entitled to have a certificate signed by the officer or officers designated

22-16

for the purpose by the bylaws of the corporation, and in absence of any designation, by the

22-17

chairperson or the vice chairperson of the board of directors, or the president or a vice president,

22-18

and by the treasurer or the assistant treasurer, or the secretary or an assistant secretary of the

22-19

corporation, representing the number of shares registered in certificate form and may be sealed

22-20

with the seal of the corporation or a facsimile of the seal. Any or all of the signatures on the

22-21

certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or

22-22

whose facsimile signature has been placed upon the certificate has ceased to be the officer,

22-23

transfer agent, or registrar before the certificate is issued, it may be issued by the corporation with

22-24

the same effect as if he or she were the officer, transfer agent, or registrar at the date of its issue.

22-25

      (b) Every certificate representing shares issued by a corporation which is authorized to

22-26

issue shares of more than one class shall state upon the face or back of the certificate, or shall

22-27

state that the corporation will furnish to any shareholder upon request and without charge, a full

22-28

statement of the designations, preferences, limitations, and relative rights of the shares of each

22-29

class authorized to be issued and, if the corporation is authorized to issue any preferred or special

22-30

class in series, the variations in the relative rights and preferences between the shares of each

22-31

series so far as the series have been fixed and determined and the authority of the board of

22-32

directors to fix and determine the relative rights and preferences of subsequent series.

22-33

      (c) Each certificate representing shares shall state upon the face of the certificate:

22-34

      (1) That the corporation is organized under the laws of this state.

23-1

      (2) The name of the person to whom issued.

23-2

      (3) The number and class of shares, and the designation of the series, if any, which the

23-3

certificate represents.

23-4

      (4) If the shares are without par value, a statement of the fact.

23-5

      (d) No certificate shall be issued for any share until the share is fully paid.

23-6

      (e) Within a reasonable time after the issuance or transfer of uncertificated shares, the

23-7

corporation shall send to the registered owner of the shares a written notice containing the

23-8

information and statements required to be presented or stated on certificates pursuant to

23-9

subsections (b) and (c) and section 7-1.1-21.1(b). Except as otherwise expressly provided by law,

23-10

the rights and obligations of owners of shares are not affected by whether the shares are

23-11

represented by certificates or are uncertificated.

23-12

     7-1.1-21.1. Stock transfer restrictions. -- (a) The shares of a corporation are personal

23-13

property and are transferable in accordance with the provisions of section 6A-8-204, as amended

23-14

from time to time, except as may otherwise be provided in this chapter.

23-15

      (b) The articles of incorporation, bylaws, an agreement among all or less than all of the

23-16

shareholders, or an agreement between all or less than all of the shareholders and the corporation

23-17

may impose restrictions on the transfer or registration of transfer of shares of the corporation. A

23-18

restriction does not affect shares issued before the restriction was adopted unless the holders of

23-19

the shares are parties to the restriction agreement or voted in favor of the restriction.

23-20

      (c) A restriction on the transfer or registration of transfer of shares is valid and

23-21

enforceable against the holder or a transferee of the holder if the restriction is authorized by this

23-22

chapter and its existence is noted conspicuously on the front or back of the certificate or is

23-23

contained in the initial transaction statement required by section 6A-8-204(b). Unless noted, a

23-24

restriction is not enforceable against a person without knowledge of the restriction.

23-25

      (d) A restriction on the transfer or registration of transfer of shares is authorized:

23-26

      (1) To maintain the corporation's status when it is dependent on the number or identity of

23-27

its shareholders;

23-28

      (2) To preserve exemptions under federal or state securities law;

23-29

      (3) For any other reasonable purpose;

23-30

      (e) A restriction on the transfer or registration of transfer of shares may:

23-31

      (1) Obligate the shareholder first to offer the corporation or other persons (separately,

23-32

consecutively, or simultaneously) an opportunity to acquire the restricted shares;

23-33

      (2) Obligate the corporation or other persons (separately, consecutively, or

23-34

simultaneously) to acquire the restricted shares;

24-1

      (3) Require the corporation, the holders of any class of its shares, or another person to

24-2

approve the transfer of the restricted shares, if the requirement is not manifestly unreasonable;

24-3

      (4) Prohibit the transfer of the restricted shares to designated persons or classes of

24-4

persons, if the prohibition is not manifestly unreasonable.

24-5

      (f) For the purposes of this section, "shares" includes a security convertible into or

24-6

carrying a right to subscribe for or acquire shares.

24-7

     7-1.1-22. Fractional shares. -- A corporation may:

24-8

      (1) Issue fractions of a share,

24-9

      (2) Arrange for the disposition of fractional interests by those entitled to those interests,

24-10

      (3) Pay in cash the fair value of fractions of a share as of the time when those entitled to

24-11

receive the fractions are determined, or

24-12

      (4) Issue scrip in registered or bearer form which entitles the holder to receive a

24-13

certificate for a full share upon the surrender of the scrip aggregating a full share.

24-14

      A certificate for a fractional share shall, but scrip shall not, unless it otherwise provides,

24-15

entitle the holder to exercise voting rights, to receive dividends on that share, and to participate in

24-16

any of the assets of the corporation in the event of liquidation. The board of directors may issue

24-17

scrip subject to the condition that it becomes void if not exchanged for certificates representing

24-18

full shares before a specified date, or subject to the condition that the shares for which scrip is

24-19

exchangeable may be sold by the corporation and the proceeds from the sale distributed to the

24-20

holders of scrip, or subject to any other conditions which the board of directors deems advisable.

24-21

     7-1.1-22.1. Bonds -- Facsimile signatures and seals. -- The seal of the corporation and

24-22

any or all signatures of the officers or other agents of the corporation upon a bond and any

24-23

coupon attached to the bond may be facsimiles if the bond is countersigned by an officer or other

24-24

agent of a trustee or other certifying or authenticating authority. In case any officer or other agent

24-25

who has signed or whose facsimile signature has been placed upon the bond or coupon has ceased

24-26

to be the officer or agent before the bond is issued, it may be issued by the corporation with the

24-27

same effect as if he or she were the officer or agent at the date of its issue.

24-28

     7-1.1-23. Liability of subscribers and shareholders. -- (a) A holder of or subscriber to

24-29

shares of a corporation is under no obligation to the corporation or its creditors with respect to the

24-30

shares other than the obligation to pay to the corporation the unpaid portion of the consideration

24-31

for which the shares were issued or to be issued, which in no event shall be less than the amount

24-32

of the consideration for which the shares could be lawfully issued.

24-33

      (b) Any person becoming an assignee or transferee of shares or of a subscription for

24-34

shares in good faith and without knowledge or notice that the full consideration for the shares has

25-1

not been paid is not personally liable to the corporation or its creditors for any unpaid portion of

25-2

the consideration. An executor, administrator, conservator, guardian, trustee, assignee for the

25-3

benefit of creditors, or receiver is not personally liable to the corporation as a holder of or

25-4

subscriber to shares of a corporation but the estate and funds in his or her hands is so liable.

25-5

      (c) No pledgee or other holder of shares as collateral security is personally liable as a

25-6

shareholder.

25-7

     7-1.1-24. Shareholders' preemptive rights. -- (a) Except to the extent limited or denied

25-8

by this section or by the articles of incorporation, shareholders have a preemptive right to acquire

25-9

unissued or treasury shares or securities convertible into shares or carrying a right to subscribe to

25-10

or acquire shares.

25-11

      (b) Unless otherwise provided in the articles of incorporation:

25-12

      (1) No preemptive right exists:

25-13

      (i) To acquire any shares issued to directors, officers, or employees pursuant to approval

25-14

by the affirmative vote of the holders of a majority of the shares entitled to vote on the acquisition

25-15

or when authorized by and consistent with a plan previously approved by a vote of shareholders;

25-16

or

25-17

      (ii) To acquire any shares sold other than for money.

25-18

      (2) Holders of shares of any class that is preferred or limited as to dividends or assets are

25-19

not entitled to any preemptive right.

25-20

      (3) Holders of shares of common stock are not entitled to any preemptive right to shares

25-21

of any class that is preferred or limited as to dividends or assets or to any obligations, unless

25-22

convertible into shares of common stock or carrying a right to subscribe to or acquire shares of

25-23

common stock.

25-24

      (4) Holders of common stock without voting power have no preemptive right to shares

25-25

of common stock with voting power.

25-26

      (5) The preemptive right is only an opportunity to acquire shares or other securities

25-27

under terms and conditions that the board of directors may fix for the purpose of providing a fair

25-28

and reasonable opportunity for the exercise of the right.

25-29

     7-1.1-25. Bylaws. -- The bylaws may contain any provisions for the regulation and

25-30

management of the affairs of the corporation not inconsistent with law or the articles of

25-31

incorporation. The initial bylaws of a corporation shall be adopted by its incorporators or by its

25-32

board of directors at its organization meeting. Subsequently, the bylaws may be amended by the

25-33

shareholders, or, unless otherwise provided in the articles of incorporation or bylaws, by the

25-34

board of directors, but any amendment to the bylaws by the board of directors may be changed by

26-1

the shareholders.

26-2

     7-1.1-25.1. Bylaws and other powers in emergency. -- (a) The board of directors of any

26-3

corporation may adopt emergency bylaws, subject to repeal or change by action of the

26-4

shareholders, which are, notwithstanding any different provision elsewhere in this chapter or in

26-5

the articles of incorporation or bylaws, operative during any emergency in the conduct of the

26-6

business of the corporation resulting from an attack on the United States or any nuclear or atomic

26-7

disaster. The emergency bylaws may make any provision that may be practical and necessary for

26-8

the circumstances of the emergency, including provisions that:

26-9

      (1) A meeting of the board of directors may be called by any officer or director in any

26-10

manner and under conditions prescribed in the emergency bylaws;

26-11

      (2) The director or directors in attendance at the meeting, or any greater number fixed by

26-12

the emergency bylaws, constitutes a quorum; and

26-13

      (3) The officers or other persons designated on a list approved by the board of directors

26-14

before the emergency, all in the order of priority and subject to the conditions, and for a period of

26-15

time (not longer than reasonably necessary after the termination of the emergency) that may be

26-16

provided in the emergency bylaws or in the resolution approving the list, are, to the extent

26-17

required to provide a quorum at any meeting of the board of directors, deemed directors for the

26-18

meeting.

26-19

      (b) The board of directors, either before or during any emergency, may provide, and

26-20

from time to time modify, lines of succession in the event that during an emergency any or all

26-21

officers or agents of the corporation are for any reason rendered incapable of discharging their

26-22

duties.

26-23

      (c) The board of directors, either before or during any emergency, may, effective in the

26-24

emergency, change the head office or designate several alternative head offices or regional

26-25

offices, or authorize the officers so to do.

26-26

      (d) To the extent not inconsistent with any adopted emergency bylaws, the bylaws of the

26-27

corporation remain in effect during any emergency, and upon its termination the emergency

26-28

byaws cease to be operative.

26-29

      (e) Unless otherwise provided in emergency bylaws, notice of any meeting of the board

26-30

of directors during any emergency may be given only to those directors that it may be feasible to

26-31

reach at the time and by any means that may be feasible at the time, including publication or

26-32

radio.

26-33

      (f) To the extent required to constitute a quorum at any meeting of the board of directors

26-34

during any emergency, the officers of the corporation who are present are, unless otherwise

27-1

provided in emergency bylaws, deemed, in order of rank and within the same rank in order of

27-2

seniority, directors for the meeting.

27-3

      (g) No officer, director, or employee acting in accordance with any emergency bylaws is

27-4

liable except for willful misconduct. No officer, director, or employee is liable for any action

27-5

taken by him or her in good faith in an emergency in furtherance of the ordinary business affairs

27-6

of the corporation even though not authorized by the bylaws then in effect.

27-7

     7-1.1-26. Meetings of shareholders. -- (a) Meetings of shareholders may be held at any

27-8

place, either within or without this state, that may be stated in or fixed in accordance with the

27-9

bylaws. If no other place is stated or fixed, all meetings shall be held at the registered office of the

27-10

corporation. An annual meeting of shareholders shall be held at any time that may be stated or

27-11

fixed in accordance with the bylaws. Failure to hold the annual meeting at the designated time

27-12

does not work a forfeiture or dissolution of the corporation. If the annual meeting is not held

27-13

within any thirteen (13) month period the superior court may, in its discretion, on the application

27-14

of any shareholder, summarily order a meeting to be held.

27-15

      (b) Special meetings of the shareholders may be called by the board of directors, or by a

27-16

person or persons that may be authorized by the articles of incorporation or by the bylaws.

27-17

      (c) Upon the application of any shareholder, director, or person aggrieved, the superior

27-18

court for the county where the principal office of the corporation is located, shall immediately

27-19

hear and determine the validity of any election or appointment of any director or officer of a

27-20

corporation and the right of any person to hold the office, and, if any office is claimed by more

27-21

than one person, determine the person entitled to the office, and to that end shall determine the

27-22

voting and other rights of persons claiming those rights in respect of the election or appointment,

27-23

and confirm the election or appointment, order a new election, or direct s any other relief that

27-24

may be just and proper.

27-25

     7-1.1-27. Notice of shareholders' meetings. -- Written notice stating the place, day, and

27-26

hour of the meeting and, in case of a special meeting, the purpose or purposes for which the

27-27

meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before

27-28

the date of the meeting, either personally or by mail, by or at the direction of the president, the

27-29

secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to

27-30

vote at the meeting. If mailed, the notice is deemed to be delivered when deposited in the United

27-31

States mail addressed to the shareholder at his or her address as it appears on the stock transfer

27-32

books of the corporation, with prepaid postage on the mail. In the case of any corporation which

27-33

has fifty (50) or more shareholders of record, if two (2) successive notices, reports, or other

27-34

communications addressed to a shareholder of the corporation at the address of the shareholder

28-1

appearing on the books of the corporation have been returned to the corporation by the United

28-2

States postal service marked to indicate that the United States postal service is unable to deliver

28-3

the notices, reports, or other communications to the shareholder at the address, all future notices,

28-4

reports, or other communications are deemed to have been given without further mailing if they

28-5

are available for the shareholder upon written demand of the shareholder at the principal

28-6

executive office of the corporation for a period of one year from the date of the giving of the

28-7

notice, report, or other communication to other shareholders.

28-8

     7-1.1-28. Closing of transfer books and fixing record date. -- For the purpose of

28-9

determining shareholders entitled to notice of or to vote at any meeting of shareholders or any

28-10

adjournment of a meeting of shareholders, or entitled to receive payment of any dividend, or in

28-11

order to make a determination of shareholders for any other proper purpose, the board of directors

28-12

of a corporation may provide that stock transfer books are closed for a stated period, not less than

28-13

that specified in any applicable bylaw and not more than sixty (60) days. In lieu of closing the

28-14

stock transfer books, the bylaws, or in the absence of an applicable bylaw the board of directors,

28-15

may fix in advance a date as the record date for any determination of shareholders, the date in any

28-16

case to be not more than sixty (60) days prior to the date on which the particular action, requiring

28-17

the determination of shareholders, is to be taken. If the stock transfer books are not closed and no

28-18

record date is fixed for the determination of shareholders entitled to notice of or to vote at a

28-19

meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on

28-20

which notice of the meeting is mailed or the date on which the resolution of the board of directors

28-21

declaring the dividend is adopted, as the case may be, is the record date for the determination of

28-22

shareholders. When a determination of shareholders entitled to vote at any meeting of

28-23

shareholders has been made as provided in this section, the determination applies to any

28-24

adjournment, of the meeting.

28-25

     7-1.1-29. Voting list. -- A list of shareholders as of the record date, certified by the

28-26

corporate officer responsible for its preparation or by a transfer agent, shall be made available to

28-27

the inspectors of election, or person presiding at a meeting of stockholders, at any meeting of

28-28

shareholders upon the request of any shareholder at the meeting or prior to the meeting. The

28-29

persons who appear from the list to be shareholders entitled to vote at the meeting may vote at the

28-30

meeting. If the right to vote at any meeting is challenged, the inspectors of election, or the person

28-31

presiding at the meeting, shall rely on the list to determine the right of the challenged person to

28-32

vote.

28-33

     7-1.1-30. Quorum of shareholders required for shareholders' action. -- Unless

28-34

otherwise provided in the articles of incorporation or bylaws, a majority of the shares entitled to

29-1

vote, represented in person or by proxy, constitutes a quorum at a meeting of shareholders, but in

29-2

no event does a quorum consist of less than one-third ( 1/3) of the shares entitled to vote at the

29-3

meeting. If a quorum is present, the affirmative vote of the majority of the shares represented at

29-4

the meeting and entitled to vote on the subject matter is the act of the shareholders, unless the

29-5

vote of a greater number or voting by classes is required by this chapter or the articles of

29-6

incorporation or bylaws. No amendment to the bylaws made by the board of directors pursuant to

29-7

section 7-1.1-25 shall require a greater number or voting by classes.

29-8

     7-1.1-30.1. Greater voting requirements. -- Whenever, with respect to any action to be

29-9

taken by the shareholders of a corporation, the articles of incorporation require the vote or

29-10

concurrence of the holders of a greater proportion of the shares, or of any class or series of the

29-11

shares, than required by this chapter with respect to the action, the provisions of the articles of

29-12

incorporation control. An amendment of the articles of incorporation which changes or deletes a

29-13

provision is authorized by the same vote as would be required to take action under the provision.

29-14

     7-1.1-30.2. Waiver of notice. -- Whenever any notice is required to be given any person

29-15

under the provisions of this chapter or under the provisions of the articles of incorporation or

29-16

bylaws of the corporation, a waiver of the notice in writing signed by the person or persons

29-17

entitled to notice, whether before or after the time stated in the writing, is equivalent to the giving

29-18

of notice. Attendance of a person at a meeting constitutes a waiver of notice of the meeting,

29-19

except when the person attends a meeting for the express purpose of objecting to the transactions

29-20

of any business because the meeting is not lawfully called or convened. Neither the business to be

29-21

transacted at, nor the purpose of, any meeting of the shareholders or members of a committee of

29-22

the corporation need be specified in any written waiver of notice unless required by the by-laws.

29-23

     7-1.1-30.3. Action by shareholders without a meeting. -- (a) Any action required or

29-24

permitted to be taken at a meeting of shareholders by this chapter or the certificate of

29-25

incorporation or bylaws of a corporation, may be taken without a meeting if all the shareholders

29-26

entitled to vote on the action consent to the action in writing.

29-27

      (b) (1) Except for actions pursuant to section 7-1.1-67, section 7-1.1-70.1, or section 7-

29-28

1.1-72, any action required or permitted to be taken at a meeting of shareholders by this chapter

29-29

or the certificate of incorporation or bylaws of a corporation, may be taken without a meeting

29-30

upon the written consent of less than all the shareholders entitled to vote on the action, if:

29-31

      (i) shareholders who consent would be entitled to cast at least the minimum number of

29-32

votes which would be required to take the action at a meeting at which all shareholders entitled to

29-33

vote on the action are present; and

29-34

      (ii) Action pursuant to this section is authorized by the articles of incorporation.

30-1

      (2) Prompt notice of the action shall be given to all shareholders who would have been

30-2

entitled to vote upon the action if the meeting were held.

30-3

      (c) Whenever action is taken pursuant to this section, the written consents of the

30-4

shareholders consenting to the action shall be filed with the minutes of proceedings of

30-5

shareholders.

30-6

      (d) Any action taken pursuant to this section has the same effect for all purposes as if the

30-7

action had been taken at a meeting of the shareholders.

30-8

      (e) If any other provision of this chapter requires the filing of a certificate upon the

30-9

taking of an action by shareholders, and action is taken in the manner authorized by this section,

30-10

the certificate shall state that the action was taken without a meeting pursuant to the written

30-11

consents of the shareholders and shall state the number of shares represented by the consents.

30-12

      (f) The record date for determining shareholders entitled to express consent in writing

30-13

without a meeting, when no notice of the meeting is mailed, is the day on which the first written

30-14

consent is expressed.

30-15

     7-1.1-31. Voting of shares. -- (a) Each outstanding share, regardless of class, is entitled

30-16

to one vote on each matter submitted to a vote at a meeting of shareholders, except to the extent

30-17

that the voting rights of the shares of any class or classes are limited, enlarged, or denied by the

30-18

articles of incorporation as permitted by this chapter. If the articles of incorporation provide for

30-19

more or less than one vote for any share, on any matter, every reference in this chapter to a

30-20

majority or other proportion of shares shall refer to a majority or other proportion of votes entitled

30-21

to be cast.

30-22

      (b) Neither treasury shares, nor shares held, directly or indirectly, by another corporation

30-23

if a majority of the shares entitled to vote for the election of directors of the other corporation is

30-24

held by the corporation, shall be voted at any meeting or counted in determining the total number

30-25

of outstanding shares at any given time. Nothing contained in these provisions is construed as

30-26

limiting the right of any corporation to vote stock, including, but not limited to, its own stock,

30-27

held in a fiduciary capacity.

30-28

      (c) Every shareholder entitled to vote at a meeting of shareholders or to express consent

30-29

without a meeting may authorize another person or persons to act for him or her by proxy,

30-30

executed, in writing, by the shareholder or by his or her duly authorized attorney in fact. No

30-31

proxy is valid after eleven (11) months from the date of its execution, unless otherwise provided

30-32

in the proxy.

30-33

      (1) Without limiting the manner in which a stockholder may authorize another person or

30-34

persons to act for him or her as proxy pursuant to subsection (c), the following constitutes a valid

31-1

means by which a stockholder may grant that authority:

31-2

      (i) A stockholder may execute a writing authorizing another person or persons to act for

31-3

him or her as proxy. Execution may be accomplished by the stockholder or his or her authorized

31-4

officer, director, employee or agent signing the writing or causing his or her signature to be

31-5

affixed to the writing by any reasonable means including, but not limited to, facsimile signature.

31-6

      (ii) A stockholder may authorize another person or persons to act for him or her as proxy

31-7

by transmitting or authorizing the transmission of a telegram, cablegram, or other means of

31-8

electronic transmission, including Internet and telephonic transmissions, to the person who will

31-9

be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or an

31-10

agent authorized by the person who will be the holder of the proxy to receive the transmission,

31-11

provided that the telegram, cablegram or other means of electronic transmission must either state

31-12

or be submitted or communicated with information from which it can be determined that the

31-13

telegram, cablegram or other electronic transmission, including Internet and telephonic

31-14

transmissions, was authorized by the stockholder. If it is determined that the telegrams,

31-15

cablegrams or other electronic transmissions, including Internet and telephonic transmissions, are

31-16

valid, the inspectors or, if there are no inspectors, the other persons making that determination

31-17

shall specify the information upon which they relied.

31-18

      (2) Any copy, facsimile telecommunication or other reliable reproduction of the writing

31-19

or transmission created pursuant to this section may be substituted or used in lieu of the original

31-20

writing or transmission for any and all purposes for which the original writing or transmission

31-21

could be used, provided that the copy, facsimile telecommunication or other reproduction is a

31-22

complete reproduction of the entire original writing or transmission.

31-23

      (d) The articles of incorporation may provide that at each election of directors, or at

31-24

elections held under specified circumstances, every shareholder entitled to vote at the election has

31-25

the right to vote, in person or by proxy, the number of shares owned by him or her for as many

31-26

persons as there are directors to be elected and for whose election he or she has a right to vote, or

31-27

to cumulate his or her votes by giving one candidate as many votes as the number of directors

31-28

multiplied by the number of his or her shares shall equal, or by distributing the votes on the same

31-29

principle among any number of the candidates.

31-30

      (e) Shares standing in the name of another corporation, domestic or foreign, may be

31-31

voted by any officer, agent, or proxy that the bylaws of the corporation may prescribe, or, in the

31-32

absence of a provision, as the board of directors of the corporation may determine.

31-33

      (f) Shares held by an administrator, executor, guardian, custodian under a gift to minors

31-34

act, or conservator may be voted by him or her, either in person or by proxy, without a transfer of

32-1

the shares into his or her name. Shares standing in the name of a trustee may be voted by him or

32-2

her, either in person or by proxy, but no trustee is entitled to vote shares held by him or her

32-3

without a transfer of the shares into his or her name.

32-4

      (g) Shares held by two (2) or more persons as joint tenants or as tenants in common may

32-5

be voted at any meeting of the shareholders by any one of the persons, unless another joint tenant

32-6

or tenant in common seeks to vote any of the shares in person or by proxy. In the latter event, the

32-7

written agreement, if any, which governs the manner in which the shares are voted, controls if

32-8

presented at the meeting. If there is no agreement presented at the meeting, the majority in

32-9

number of the joint tenants or tenants in common present shall control the manner of voting. If

32-10

there is no majority, or if there are two (2) joint tenants or tenants in common, both of whom seek

32-11

to vote the shares, the shares shall, for the purpose of voting, be divided equally among the joint

32-12

tenants or tenants in common present.

32-13

      (h) Shares standing in the name of a receiver may be voted by the receiver, and shares

32-14

held by or under the control of a receiver may be voted by the receiver without the transfer of

32-15

those shares into his or her name if authority to do so is contained in an appropriate order of the

32-16

court by which the receiver was appointed.

32-17

      (i) A shareholder whose shares are pledged is entitled to vote the shares until the shares

32-18

have been transferred into the name of the pledgee, and thereafter the pledgee is entitled to vote

32-19

the shares so transferred.

32-20

      (j) On and after the date on which written notice of redemption of redeemable shares has

32-21

been mailed to the holders of the shares and a sum sufficient to redeem the shares has been

32-22

deposited with a bank or trust company with irrevocable instruction and authority to pay the

32-23

redemption price to the holders of the shares upon surrender of certificates for the shares, the

32-24

shares shall not be entitled to vote on any matter and shall not be deemed to be outstanding

32-25

shares.

32-26

      (k) (1) An executed proxy is irrevocable if it specifies that it is irrevocable and if, and

32-27

only so long as, it is coupled with an interest sufficient in law to support an irrevocable power

32-28

coupled with it.

32-29

      (2) Without limiting the generality of subsection (a) and subject to that subsection, a

32-30

proxy is coupled with an interest and irrevocable if it is held by any of the following or a nominee

32-31

of any of the following:

32-32

      (i) A pledgee under a valid pledge;

32-33

      (ii) A person who has agreed to purchase the shares under an executory contract of sale;

32-34

      (iii) A creditor or creditors of the corporation who extend or continue credit to the

33-1

corporation in consideration of the proxy if the proxy states that it was given in consideration of

33-2

the extension or continuation of credit, the amount of the credit, and the name of the person

33-3

extending or continuing credit; and

33-4

      (iv) A person who has contracted to perform services for the corporation if a proxy is

33-5

required by the contract of employment, as part of the consideration for the contract of

33-6

employment, if the proxy states that it was given in consideration of the contract of employment,

33-7

the name of the employee, and the period of employment contracted for; provided the proxies

33-8

shall respectively be revocable after the pledge is redeemed, or the executory contract of sale is

33-9

performed, or the debt of the corporation is paid, or the period of employment has terminated.

33-10

      (3) A provision contained in a proxy making it irrevocable is not enforceable against a

33-11

purchaser for value of the shares subject to the provision without actual knowledge of the

33-12

existence of the provision, unless notice of the proxy and its irrevocability appears plainly on the

33-13

certificate or certificates representing the shares.

33-14

     7-1.1-32. Voting trusts and agreements among shareholders. -- (a) Any number of

33-15

shareholders of a corporation may create a voting trust for the purpose of conferring upon a

33-16

trustee or trustees the right to vote or otherwise represent their shares, for a period not to exceed

33-17

ten (10) years, by entering into a written voting trust agreement specifying the terms and

33-18

conditions of the voting trust, by depositing a counterpart of the agreement with the corporation at

33-19

its registered office, and by transferring their shares to the trustee or trustees for the purposes of

33-20

the agreement. The trustee or trustees shall keep a record of the holders of voting trust certificates

33-21

evidencing a beneficial interest in the voting trust, giving the names and addresses of all the

33-22

holders and the number and class of the shares in respect of which the voting trust certificates

33-23

held by each are issued, and shall deposit a copy of the record with the corporation at its

33-24

registered office. The counterpart of the voting trust agreement and the copy of the record

33-25

deposited with the corporation are subject to the same right of examination by a shareholder of

33-26

the corporation, in person or by agent or attorney, as are the books and records of the corporation,

33-27

and the counterpart and the copy of the record is subject to examination by any holder of record

33-28

of voting trust certificates, either in person or by agent or attorney, at any reasonable time for any

33-29

proper purpose. In the trust certificates it shall be stated that they are issued pursuant to the voting

33-30

trust agreement, and that fact shall be stated in the stock ledger of the corporation.

33-31

      (b) Agreements among shareholders regarding the voting of their shares are valid and

33-32

enforceable in accordance with their terms for a period of not to exceed ten (10) years. An

33-33

agreement is not subject to the provision of this section regarding voting trusts unless it is stated

33-34

in the agreement that it is a voting trust.

34-1

      (c) The provisions of this section are construed as permissive and shall not be interpreted

34-2

to invalidate any voting or other agreement among stockholders, or any irrevocable proxy which

34-3

is otherwise not illegal.

34-4

      (d) A voting trust or shareholders agreement may at any time or times be extended for an

34-5

additional period not in excess of ten (10) years, but the extension is binding only with respect to

34-6

those shares owned of record or beneficially by parties to the extension.

34-7

     7-1.1-32.1. Voting and inspection rights of bondholders and debentureholders. --

34-8

The articles of incorporation may, to the extent and in the manner provided in the articles, confer

34-9

on the holders of bonds or other evidences of indebtedness of the corporation rights to vote in the

34-10

election of directors and on any other matters on which shareholders may vote and rights to

34-11

inspect the books and records of the corporation. The articles of incorporation may also, to the

34-12

extent and in the manner provided in the articles, divest the holders of voting shares, in whole or

34-13

in part, of their right to vote on any corporate matter whatsoever, except as set forth in section 7-

34-14

1.1-55.

34-15

     7-1.1-33. Board of directors. -- (a) The business and affairs of a corporation are

34-16

managed by a board of directors. Directors need not be residents of this state or shareholders of

34-17

the corporation unless the articles of incorporation or bylaws require it. The articles of

34-18

incorporation or bylaws may prescribe other qualifications for directors. The board of directors

34-19

has authority to fix the compensation of directors unless otherwise provided in the articles of

34-20

incorporation.

34-21

      (b) A director shall discharge his or her duties as a director, including his or her duties as

34-22

a member of a committee:

34-23

      (1) In good faith;

34-24

      (2) With the care an ordinarily prudent person in a like position would exercise under

34-25

similar circumstances; and

34-26

      (3) In a manner he or she reasonably believes to be in the best interests of the

34-27

corporation.

34-28

      (c) In discharging his or her duties, a director is entitled to rely on information, opinions,

34-29

reports, or statements, including financial statements and other financial data, if prepared or

34-30

presented by:

34-31

      (1) One or more officers or employees of the corporation whom the director reasonably

34-32

believes to be reliable and competent in the matters presented;

34-33

      (2) Legal counsel, public accountants, or other persons as to matters the director

34-34

reasonably believes are within the person's professional or expert competence; or

35-1

      (3) A committee of the board of directors of which he or she is not a member if the

35-2

director reasonably believes the committee merits confidence.

35-3

      (d) A director is not acting in good faith if he or she has knowledge concerning the

35-4

matter in question that makes reliance otherwise permitted by subsection (c) unwarranted.

35-5

      (e) A director is not liable for any action taken as a director, or any failure to take any

35-6

action, if he or she performed the duties of his or her office in compliance with this section.

35-7

      (f) For the purposes of subsections (b) through (e), "corporation" also includes any

35-8

financial institution, insurance company, public utility or other quasi-public corporation having

35-9

purposes enumerated as exceptions to this chapter in section 7-1.1-3 and the provisions of

35-10

subsections (b) through (e) of this section are applicable to the directors of that corporation.

35-11

     7-1.1-34. Number and election of directors. -- The board of directors of a corporation

35-12

consists of one or more members. The number of directors are fixed by, or in the manner

35-13

provided in, the articles of incorporation or the bylaws except as to the number constituting the

35-14

initial board of directors, which number is fixed by the articles of incorporation. The number of

35-15

directors may be increased or decreased from time to time by amendment to, or in the manner

35-16

provided in, the articles of incorporation or the bylaws, but no decrease has the effect of

35-17

shortening the term of any incumbent director. If the articles of incorporation provide for the

35-18

election of directors in the manner specified in subsection (d) of section 7-1.1-31, the number of

35-19

directors may not be decreased unless approved by the stockholders with less than the number of

35-20

shares previously entitled to elect one director voting against the decrease. In the absence of a

35-21

bylaw fixing the number of directors, the number is the same as that provided for in the articles of

35-22

incorporation. The names and addresses of the members of the first board of directors shall be

35-23

stated in the articles of incorporation. Those persons hold office until the first annual meeting of

35-24

shareholders, and until their successors have been elected and qualified. At the first annual

35-25

meeting of shareholders and at each subsequent annual meeting, the shareholders shall elect

35-26

directors to hold office until the next succeeding annual meeting, except in the case of the

35-27

classification of directors as permitted by this chapter. Each director holds office for the term for

35-28

which he or she is elected and until his or her successor has been elected and qualified.

35-29

     7-1.1-35. Classification of directors. -- When the board of directors consists of nine (9)

35-30

or more members, in lieu of electing the whole number of directors annually, the articles of

35-31

incorporation may provide that the directors be divided into either two (2) or three (3) classes,

35-32

each class to be as nearly equal in number as possible, the term of office of directors of the first

35-33

class to expire at the first annual meeting of shareholders after their election, that of the second

35-34

class to expire at the second annual meeting after their election, and that of the third class, if any,

36-1

to expire at the third annual meeting after their election. At each annual meeting after the

36-2

classification, the number of directors equal to the number of the class whose term expires at the

36-3

time of the meeting shall be elected to hold office until the second succeeding annual meeting, if

36-4

there are two (2) classes, or until the third succeeding annual meeting, if there are three (3)

36-5

classes. No classification of directors is effective prior to the first annual meeting of shareholders.

36-6

The articles of incorporation may confer upon holders of any class or series of stock the right to

36-7

elect one or more directors who serve for any term and have any voting powers stated in the

36-8

articles of incorporation. The terms of office and voting powers of the directors elected in the

36-9

manner provided in the articles of incorporation may be greater than or less than those of any

36-10

other director or class of directors.

36-11

     7-1.1-36. Vacancies. -- Any vacancy occurring in the board of directors may be filled by

36-12

the affirmative vote of a majority of the remaining directors though less than a quorum of the

36-13

board of directors. A director elected to fill a vacancy is elected for the unexpired term of his or

36-14

her predecessor in office. Any directorship to be filled by reason of an increase in the number of

36-15

directors may be filled by the board of directors for a term of office continuing only until the next

36-16

election of directors by the shareholders.

36-17

     7-1.1-36.1. Removal of directors. -- (a) Any or all of the directors may be removed for

36-18

cause by vote of the shareholders. The certificate of incorporation or the specific provisions of a

36-19

bylaw adopted by the shareholders may provide for the removal by action of the board, except in

36-20

the case of any director elected by cumulative voting, or by the holders of the shares of any class

36-21

or series, or holders of bonds, voting as a class, when entitled by the provisions of the articles of

36-22

incorporation.

36-23

      (b) If the articles of incorporation or the bylaws provide, any or all of the directors may

36-24

be removed without cause by vote of the shareholders.

36-25

      (c) The removal of directors, with or without cause, as provided in subsections (a) and

36-26

(b) is subject to the following:

36-27

      (1) In the case of a corporation having cumulative voting, no director may be removed

36-28

when the votes cast against his or her removal would be sufficient to elect him or her if voted

36-29

cumulatively at an election at which the same total number of votes were cast and the entire

36-30

board, or the entire class of directors of which he or she is a member, were then being elected;

36-31

and

36-32

      (2) When by the provisions of the articles of incorporation the holders of the shares of

36-33

any class or series, or holders of bonds, voting as a class, are entitled to elect one or more

36-34

directors, any director so elected may be removed only by the applicable vote of the holders of

37-1

the shares of that class or series or the holders of the bonds, voting as a class.

37-2

      (d) An action to procure a judgment removing a director for cause may be brought by the

37-3

attorney general or by the holders of ten percent (10%) of the outstanding shares, whether or not

37-4

entitled to vote. The court having jurisdiction may bar from reelection any directors so removed

37-5

for a period fixed by the court.

37-6

     7-1.1-37. Quorum of directors. -- A majority of the number of directors fixed by or in

37-7

the manner provided in the bylaws, or by the stockholders or in the absence of a bylaw or

37-8

stockholder action fixing the number of directors, then of the number stated in the articles of

37-9

incorporation, constitutes a quorum for the transaction of business unless a greater number is

37-10

required by the articles of incorporation or the bylaws. The act of the majority of the directors

37-11

present at a meeting at which a quorum is present is the act of the board of directors, unless the

37-12

act of a greater number is required by the articles of incorporation or the bylaws.

37-13

     7-1.1-37.1. Director conflicts of interest. -- (a) No contract or transaction between a

37-14

corporation and one or more of its directors or officers, or between a corporation and any other

37-15

corporation, partnership, association, or other organization in which one or more of its directors

37-16

or officers are directors or officers or have a financial interest, is void or voidable nor are the

37-17

directors or officers liable with respect to the contract or transaction solely for this reason, or

37-18

solely because the director or officer is present at or participates in the meeting of the board or

37-19

committee of the board which authorizes the contract or transaction, or solely because his or her

37-20

or their votes are counted for that purpose, if:

37-21

      (1) The material facts as to his or her or their interest or relationship are disclosed or are

37-22

known to the board of directors or the committee, and the board of directors or committee

37-23

authorizes, approves, or ratifies the contract or transaction by the affirmative votes of a majority

37-24

of the disinterested directors, even though the disinterested directors are less than a quorum; or

37-25

      (2) The material facts as to his or her or their interest or relationship are disclosed or are

37-26

known to the shareholders entitled to vote on the contract or transaction, and the contract or

37-27

transaction is specifically authorized, approved, or ratified by vote of the shareholders; or

37-28

      (3) The contract or transaction is fair and reasonable as to the corporation.

37-29

      (b) Common or interested directors may be counted in determining the presence of a

37-30

quorum at a meeting of the board of directors or of a committee which authorizes the contract or

37-31

transaction.

37-32

     7-1.1-38. Executive and other committees. -- If the articles of incorporation or the

37-33

bylaws provide, the board of directors, by resolution adopted by a majority of the full board of

37-34

directors, may designate from among its members an executive committee and one or more other

38-1

committees each of which, to the extent provided in the resolution or in the articles of

38-2

incorporation or the bylaws of the corporation, have and may exercise all the authority of the

38-3

board of directors, but no committee has the authority of the board of directors in reference to

38-4

amending the articles of incorporation, adopting a plan of merger or consolidation,

38-5

recommending to the shareholders the sale, lease, exchange, or other disposition of all or

38-6

substantially all the property and assets of the corporation other than in the usual and regular

38-7

course of its business, recommending to the shareholders a voluntary dissolution or revocation of

38-8

the corporation, or amending the bylaws of the corporation. The designation of any committee

38-9

and the delegation to the committee of authority does not operate to relieve the board of directors,

38-10

or any member of the board, of any responsibility imposed by law.

38-11

     7-1.1-39. Place, notice, and form of directors' and committee meetings. -- (a)

38-12

Meetings of the board of directors, or any committee designated by the board, regular or special,

38-13

may be held either within or without this state.

38-14

      (b) Regular meetings of the board of directors or any committee designated by the board

38-15

may be held with or without notice as prescribed in the bylaws. Special meetings of the board of

38-16

directors or any committee designated by the board shall be held upon notice that is prescribed in

38-17

the bylaws. Attendance of a director at a meeting constitutes a waiver of notice of the meeting,

38-18

except where a director attends a meeting for the express purpose of objecting to the transaction

38-19

of any business because the meeting is not lawfully called or convened. Neither the business to be

38-20

transacted at, nor the purpose of, any regular or special meeting of the board of directors or any

38-21

committee designated by the board of directors need be specified in the notice or waiver of notice

38-22

of the meeting unless required by the bylaws. Except as may be otherwise restricted by the

38-23

articles of incorporation or bylaws, members of the board of directors or any committee

38-24

designated by the board of directors may participate in a meeting of the board or committee by

38-25

means of a conference telephone or similar communications equipment, by means of which all

38-26

persons participating in the meeting can hear each other at the same time and participation by

38-27

those means constitutes presence in person at a meeting.

38-28

     7-1.1-39.1. Action by directors without a meeting. -- Unless otherwise provided by the

38-29

articles of incorporation or bylaws, any action required by this chapter to be taken at a meeting of

38-30

the directors of a corporation, or any action which may be taken at a meeting of the directors or of

38-31

a committee, may be taken without a meeting if a consent, in writing, stating the action to be

38-32

taken, is signed before or after the action by all of the directors, or all of the members of the

38-33

committee, as the case may be. The consent has the same effect as a unanimous vote for all

38-34

purposes, and that may be stated in any certificate or other document filed with the secretary of

39-1

state.

39-2

     7-1.1-40. Dividends. -- (a) The board of directors of a corporation may, from time to

39-3

time, declare and the corporation may pay dividends on its outstanding shares in cash, property,