Complete Home & Office Legal Guide/Complete Home and Office Legal Guide (Chestnut) (1993).ISO/stat/mbiz/busi7t.asc

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/* Part 7 of 8. */

(d) The corporation shall notify each shareholder, whether or not
entitled to vote, of the proposed shareholders' meeting in
accordance with section 7.05.  The notice must also state that
the purpose, or one of the purposes, of the meeting is to
consider the plan of merger or share exchange and contain or be
accompanied by a copy or summary of the plan.

(e) Unless this Act, the articles of incorporation, or the board
of directors (acting pursuant to subsection (c)) require a
greater vote or a vote by voting groups, the plan of merger or
share exchange to be authorized must be approved by each voting
group entitled to vote separately on the plan by a majority of
all the votes entitled to be cast on the plan by that voting
group.

(f) Separate voting by voting groups is required:

(1) on a plan of merger if the plan contains a provision that, if
contained in a proposed amendment to articles of incorporation
would require action by one or more separate voting groups on the
proposed amendment under section 10.04;

(2) on a plan of share exchange by each class or series of shares
included in the exchange, with each class or series constituting
a separate voting group.

(g) Action by the shareholders of the surviving corporation on a
plan of merger is not required if:

(1) the articles of incorporation of the surviving corporation
will not differ (except for amendments enumerated in section
10.02) from its articles before the merger;

(2) each shareholder of the surviving corporation whose shares
were outstanding immediately before the effective date of the
merger will hold the same number of shares, with identical
designations, preferences, limitations, and relative rights,
immediately after;

(3) the number of voting shares outstanding immediately after the
merger, plus the number of voting shares issuable as a result of
the merger (either by the conversion of securities issued
pursuant to the merger or the exercise of rights and warrants
issued pursuant to the merger), will not exceed by more than 20
percent the total number of voting shares of the surviving
corporation outstanding immediately before the merger; and

(4) the number of participating shares outstanding immediately
after the merger, plus the number of participating shares
issuable as a result of the merger (either by the conversion of
securities issued pursuant to the merger or the exercise of
rights and warrants issued pursuant to the merger), will not
exceed by more than 20 percent the total number of participating

shares outstanding immediately before the merger.

(h) As used in subsection (g):

(1) "Participating shares" means shares that entitle their
holders to participate without limitation in distributions.

(2) "Voting shares" means shares that entitle their holders to
vote unconditionally in elections of directors.

(i) After a merger or share exchange is authorized, and at any
time before articles of merger or share exchange are filed, the
planned merger or share exchange may be abandoned (subject to any
contractual rights), without further shareholder action, in
accordance with the procedure set forth in the plan of merger or
share exchange or, if none is set forth, in the manner determined
by the board of directors.

Official Comment

2. When Surviving Corporation Shareholder Approval is Not
Required

Section 11.03(g) describes when approval by the shareholders of
the surviving corporation is not required. The theory behind this
subsection is that shareholders' votes should be required only if
the transaction fundamentally alters the character of the
enterprise or substantially reduces the shareholders'
participation in voting or profit distribution. It is believed
that the transactions for which shareholder approval is not
required by subsection (g) do not alter the investors prospects
any more than many other management decisions, and thus should
not require a shareholder vote.  In particular, the 20 percent
requirement of subsections (g)(3) and (4) is broadly consistent
with the statutes of several states, including Delaware (20
percent), Michigan (20 percent), and Pennsylvania (15 percent),
and also with the New York Stock Exchange requirement that
shareholders must be consulted if the number of outstanding
shares is to be increased by more than 18.5 percent.

The requirement that shareholders of the surviving corporation in
a statutory merger have a right to vote if the increase in the
number of shares exceeds 20 percent may be avoided by arranging
the transaction in the form of a merger involving a subsidiary of
the acquiring corporation or as a share exchange under section
11.02. This anomaly reflects a compromise among basically
conflicting points of view.

The 20 percent requirement is applicable only if the corporation
has available enough authorized shares to permit it to issue the
shares without amending its articles of incorporation to increase
authorized capital. If it must amend its articles of
incorporation to authorize the shares necessary to complete the
transaction, a shareholder vote on the amendment will be
necessary in all cases.  See section 10.03.

11.04 Merger of Subsidiary

(a) A parent corporation owning at least 90 percent of the
outstanding shares of each class of a subsidiary corporation may
merge the subsidiary into itself without approval of the
shareholders of the parent or subsidiary.

/* A general rule, also applicable to freeze outs that 90%
ownership permits complete control, including to merger without a
vote of the remaining shareholders. */

(b) The board of directors of the parent shall adopt a plan of
merger that sets forth:

(1) the names of the parent and subsidiary; and

(2) the manner and basis of converting the shares of the
subsidiary into shares, obligations. or other securities of the
parent or any other corporation or into cash or other property in
whole or part.

(c) The parent shall mail a copy or summary of the plan of merger
to each shareholder of the subsidiary who does not waive the
mailing requirement in writing.

(d) The parent may not deliver articles of merger to the
secretary of state for filing until at least 30 days after the
date it mailed a copy of the plan of merger to each shareholder
of the subsidiary who did not waive the mailing requirement.

(e) Articles of merger under this section may not contain
amendments to the articles of incorporation of the parent
corporation (except for amendments enumerated in section 10.02).

Official Comment

Section 11.04(a) defines a "parent" corporation as one that owns
at least 90 percent of the outstanding shares of each class of
another corporation, and a "subsidiary" corporation as one whose
shares are so owned.  Section 11.04 permits merger of a
subsidiary into its parent corporation upon adoption of a plan of
merger by the board of directors of the parent alone. Separate
action by the board of directors of the subsidiary is unnecessary
because the share ownership of the parent corporation is normally
sufficient to permit it to elect or remove the subsidiary's board
of directors.

Further, the merger transaction need not be approved by the
shareholders of either corporation.  Approval by the shareholders
of the subsidiary is meaningless because the parent's share
ownership is sufficient to ensure the plan will be approved.
Approval by the parent's shareholders is also unnecessary because
the transaction does not materially change their rights: the
ownership of the parent corporation is being changed only from 90
percent indirect ownership to 100 percent direct ownership of the
same assets, and no significant amendment of the parent's
articles of incorporation is being made. For the same reason,
shareholders of the parent corporation do not have the right to
dissent from the transaction under chapter 13.

Minority shareholders of the subsidiary corporation may receive
shares, obligations, or other securities of the parent or any
other corporation, or cash or other property in whole or in part
in exchange for their shares. These shareholders are entitled to
30 days' notice of the plan of merger before it is effectuated.

Shareholders of the subsidiary corporation have a right to
dissent from the merger transaction under chapter 13.

11.05    Articles of Merger or Share Exchange

(a) After a plan of merger or share exchange is approved by the
shareholders, or adopted by the board of directors if shareholder
approval is not required, the surviving or acquiring corporation
shall deliver to the secretary of state for filing articles of
merger or share exchange setting forth:

(1) the plan of merger or share exchange;

(2) if shareholder approval was not required, a statement to that
effect;

(3) if approval of the shareholders of one or more corporations
party to the merger or share exchange was required:

(i) the designation, number of outstanding shares, and number of
votes entitled to be cast by each voting group entitled to vote
separately on the plan as to each corporation; and

(ii) either the total number of votes cast for and against the
plan by each voting group entitled to vote separately on the plan
or the total number of undisputed votes cast for the plan
separately by each voting group and a statement that the number
cast for the plan by each voting group was sufficient for
approval by that voting group.

(b) A merger or share exchange takes effect upon the effective
date of the articles of merger or share exchange.

11.06    Effect of Merger or Share Exchange

(a) When a merger takes effect:

(1) every other corporation party to the merger merges into the
surviving corporation and the separate existence of every
corporation except the surviving corporation ceases;

(2) the title to all real estate and other property owned by each
corporation party to the merger is vested in the surviving
corporation without reversion or impairment;

(3) the surviving corporation has all liabilities of each
corporation party to the merger;

/* A section that ought to be be in all capital letters. Fairly
important in days of "toxic torts" and liability for pollution
abatement. */

(4) a proceeding pending against any corporation party to the
merger may be continued as if the merger did not occur or the
surviving corporation may be substituted in the proceeding for
the corporation whose existence ceased;

(5) the articles of incorporation of the surviving corporation
are amended to the extent provided in the plan of merger; and

(6) the shares of each corporation party to the merger that are
to be converted into shares, obligations, or other securities of
the surviving or any other corporation or into cash or other
property are converted, and the former holders of the shares are
entitled only to the rights provided in the articles of merger or
to their rights under chapter 13.

(b) When a share exchange takes effect, the shares of each
acquired corporation are exchanged as provided in the plan, and
the former holders of the shares are entitled only to the
exchange rights provided in the articles of share exchange or to
their rights under chapter 13.

Chapter 12

SALE OF ASSETS

12.01 Sale of Assets in Regular Course of Business and Mortgage
of Assets

(a) A corporation may, on the terms and conditions and for the
consideration determined by the board of directors:

(1) sell, lease, exchange, or otherwise dispose of all, or
substantially all, of its property in the usual and regular
course of business;

(2) mortgage, pledge. dedicate to the repayment of indebtedness
(whether with or without recourse), or otherwise encumber any or
all of its property whether or not in the usual and regular
course of business; or

(3) transfer any or all of its property to a corporation all the
shares of which are owned by the corporation.

(b) Unless the articles of incorporation require it, approval by
the shareholders of a transaction described in subsection (a) is
not required.

Official Comment

A sale of "all or substantially all" the corporate assets in the
regular course of business is governed by section 12.01.
Mortgages of all of the corporation's assets or redeployment of
those assets through a wholly owned subsidiary are also covered
by section 12.01. All other sales of "all or substantially all"
the corporate assets are governed by section 12.02. Dispositions
or transfers of property that do not involve "all or
substantially all" the property of the corporation are not
controlled by statute and may be approved by the board of
directors (or authorized corporate officer in the same manner as
any other corporate transaction.

1.  The Meaning of "All or Substantially All"

The phrase "all or substantially all," chosen by the draftsmen of
the Model Act, is intended to mean what it literally says, "all
or substantially all." The phrase "substantially all" is
synonymous with "nearly all" and was added merely to make it
clear that the statutory requirements could not be avoided by
retention of some minimal or nominal residue of the original
assets.  A sale of all the corporate assets other than cash or
cash equivalents is normally the sale of "all or substantially
all" of the corporation's property.  A sale of several distinct
manufacturing lines while retaining one or more lines is normally
not a sale of "all or substantially all" even though the lines
being sold are substantial and include a significant fraction of
the corporation's former business. If the lines retained are
viewed only as a temporary operation or as a pretext to avoid the
"all or substantially all" requirements, however, the statutory
requirements of chapter 12 must be complied with.  Similarly, a
sale of a plant but retention of operating assets (e.g.,
machinery and equipment), accounts receivable, good will, and the
like with a view toward continuing the operation at another
location is not a sale of "all or substantially all" the
corporation's property.

Some court decisions have adopted a narrower construction of
somewhat similar statutory language.  These decisions should be
viewed as resting on the diverse statutory language involved in
those cases and should not be viewed as illustrating the meaning
of "all or substantially all" intended by the draftsmen of the
Model Act.

2. Transfers of "All or Substantially All" of a Corporation's
Assets That Do Not Require Shareholder Approval . .

b. Sales in the Usual and Regular Course of Business

Most transfers of "all or substantially all" the corporate
property as defined above) are, almost by definition, not in the
usual and regular course of business; sales by real estate
corporations and by corporations organized to liquidate a
business are examples of sales that may be included in this part
of section 12.01(a).  Typically, sales falling within the usual
and regular course of business do not involve the sale of the
corporate name or good will.

12.02 Sale of Assets Other Than in Regular Course of Business

(a) A corporation may sell, lease, exchange, or otherwise dispose
of all, or substantially all, of its property (with or without
the good will), otherwise than in the usual and regular course of
business, on the terms and conditions and for the consideration
determined by the corporation's board of directors, if the board
of directors proposes and its shareholders approve the proposed
transaction.

(b) For a transaction to be authorized:

(1) the board of directors must recommend the proposed
transaction to the shareholders unless the board of directors
determines that because of conflict of interest or other special
circumstances it should make no recommendation and communicates
the basis for its determination to the shareholders with the
submission of the proposed transaction; and

(2) the shareholders entitled to vote must approve the
transaction.

(c) The board of directors may condition its submission of the
proposed transaction on any basis.

(d) The corporation shall notify each shareholder, whether or not
entitled to vote, of the proposed shareholders' meeting in
accordance with section 7.05.  The notice must also state that
the purpose, or one of the purposes, of the meeting is to
consider the sale, lease, exchange, or other disposition of all,
or substantially all, the property of the corporation and contain
or be accompanied by a description of the transaction.

(e) Unless the articles of incorporation or the board of
directors (acting pursuant to subsection (c)) require a greater
vote or a vote by voting groups, the transaction to be authorized
must be approved by a majority of all the votes entitled to be
cast on the transaction.

(f) After a sale, lease, exchange, or other disposition of
property is authorized, the transaction may be abandoned (subject
to any contractual rights) without further shareholder action.

(g) A transaction that constitutes a distribution is governed by
section 6.40 and not by this section.

Official Comment

Certain corporate divisions, often called "spin offs," "split
offs," or "split ups," sometimes involve transactions that may be
formally characterized as sales of "all or substantially all" the
corporate assets when in fact they are only a step in a corporate
division that does not give rise to the problem of a major change
in corporate direction and therefore does not need shareholder
approval.  Section 12.02(g) is designed to make clear that
transactions like this, which actually constitute a distribution,
are not subject to section 12.02.  See Siegal, "When Corporations
Divide: A Statutory and Financial Analysis," 79 Harv.L.Rev. 534
(1966).

Chapter 13

DISSENTERS' RIGHTS

Subchapter A

Right to Dissent and Obtain Payment for Shares

13.01 Definitions

In this chapter:

(1) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving or
acquiring corporation by merger or share exchange of that issuer.

(2) "Dissenter" means a shareholder who is entitled to dissent
from corporate action under section 13.02 and who exercises that
right when and in the manner required by sections 13.20 through
13.28.

(3) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the
corporate action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate
action unless exclusion would be inequitable.

(4) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate
currently paid by the corporation on its principal bank loans or,
if none, at a rate that is fair and equitable under all the
circumstances.

(5) "Record shareholder" means the person in whose name shares
are registered in the records of a corporation or the beneficial
owner of shares to the extent of the rights granted by a nominee
certificate on file with a corporation.

(6) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the
record shareholder.

(7) "Shareholder" means the record shareholder or the beneficial
shareholder.

Official Comment

Section 13.01 contains specialized definitions applicable only to
chapter 13.

(2) The definition of "dissenter" in section 13.01(2) is phrased
in terms of a "shareholder," a term that is itself specially
defined in section 13.01(7).

Under this definition, a shareholder who initially objects but
fails to perform any of these conditions within the times
specified by this chapter loses his status as "dissenter" under
this section.

(3) The definition of "fair value" in section 13.01(3) leaves to
the parties (and ultimately to the courts) the details by which
"fair value" is to be determined within the broad outlines of the
definition. This definition thus leaves untouched the accumulated
case law about market value, value based on prior sales,
capitalized earnings value, and asset value.  It specifically
preserves the former language excluding appreciation and
depreciation in anticipation of the proposed corporate action,
but permits an exception for equitable considerations.  The
purpose of this exception ("unless exclusion would be
inequitable") is to permit consideration of factors similar to
those approved by the Supreme Court of Delaware in Weinberger v.
UOP, Inc., 457 A.2d 701 (Del.1983), a case in which the court
found that the transaction did not involve fair dealing or fair
price: "In our view this includes the elements of recissory
damages if the Chancellor considers them susceptible of proof and
a remedy appropriate to all the issues of fairness before him."
Consideration of appreciation or depreciation which might result
from other corporate actions is permitted; these effects in the
past have often been reflected either in market value or
capitalized earnings value.

"Fair value" is to be determined immediately before the
effectuation of the corporate action, instead of the date of the
shareholder's vote, as is the case under most state statutes that
address the issue. This comports with the plan of this chapter to
preserve the dissenter's prior rights as a shareholder until the
effective date of the corporate action, rather than leaving him
in a twilight zone where he has lost his former rights, but has
not yet gained his new ones.

(4) The definition of "interest" in section 13.01(4) is included
to make interest computations under this chapter more realistic.
The right to receive interest is based on the elementary
consideration that the corporation has the use of the dissenter's
money, and the dissenter has no use of it, from the effective
date of the corporate action until the date of payment. .

13.02 Right to Dissent

(a) A shareholder is entitled to dissent from, and obtain payment
of the fair value of his shares in the event of, any of the
following corporate actions:

(1) consummation of a plan of merger to which the corporation is
a party (i) if shareholder approval is required for the merger by
section 11.03 or the articles of incorporation and the
shareholder is entitled to vote on the merger or (ii) if the
corporation is a subsidiary that is merged with its parent under
section 11.04;

(2) consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan;

(3) consummation of a sale or exchange of all, or substantially
all, of the property of the corporation other than in the usual
and regular course of business, if the shareholder is entitled to
vote on the sale or exchange, including a sale in dissolution,
but not including a sale pursuant to court order or a sale for
cash pursuant to a plan by which all or substantially all of the
net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale;

(4) an amendment of the articles of incorporation that materially
and adversely affects rights in respect of a dissenter's shares
because it:

(i) alters or abolishes a preferential right of the shares;

(ii) creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for
the redemption or repurchase, of the shares;

(iii) alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;

(iv) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar
voting rights; or

(v) reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under section 6.04; or

(5) any corporate action taken pursuant to a shareholder vote to
the extent the articles of incorporation, bylaws, or a resolution
of the board of directors provides that voting or nonvoting
shareholders are entitled to dissent and obtain payment for their
shares.

(b) A shareholder entitled to dissent and obtain payment for his
shares under this chapter may not challenge the corporate action
creating his entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.

Official Comment

1. Transactions Giving Rise to Dissenters' Rights

Section 13.02(a) establishes the scope of a shareholder's right
to dissent (and his resulting right to obtain payment for his
shares) by defining the transactions with respect to which a
right to dissent exists.  These transactions are:

(1) A plan of merger if the shareholder (i) is entitled to vote
on the merger under section 11.03 or pursuant to provisions in
the articles of incorporation, or (ii) is a shareholder of a
subsidiary that is merged with a parent under section 11.04. The
right to vote on a merger under section 11.03 extends to
corporations whose separate existence disappears in the merger
and to the surviving corporations if the number of its
outstanding shares is increased by more than 20 percent as a
result of the merger.

(2) A share exchange under section 11.02 if the corporation is a
party whose shares are being acquired by the plan and the
shareholder is entitled to vote on the exchange.

(3) A sale or exchange of all or substantially all of the
property of the corporation not in the usual course of business
under section 12.02 if the shareholder is entitled to vote on the
sale or exchange.  Section 13.02(a)(3) generally grants
dissenters' rights in connection with sales in the process of
dissolution but excludes them in connection with sales by court
order and sales for cash that require substantially all the
proceeds to be distributed to the shareholders within one year.
The inclusion of sales in dissolution is designed to ensure that
the right to dissent cannot be avoided by characterizing sales as
made in the process of dissolution long before distribution is
made. An exception is provided for sales for cash pursuant to a
plan that provides for distribution within one year. These
transactions are unlikely to be unfair to minority shareholders
since majority and minority are being treated in precisely the
same way and all shareholders will ultimately receive cash for
their shares.  A sale other than for cash gives rise to a right
of dissent since property sometimes cannot be converted into cash
until long after receipt and a minority shareholder should not be
compelled to assume the risk of delays or market declines.
Similarly, a plan that provides for a prompt distribution of the
property received gives rise to the right of dissent since the
minority shareholder should not be compelled to accept for his
shares different securities or other property that may not be
readily marketable.

The exclusion of court-ordered sales from the dissenter's right
is based on the view that court review and approval ensures that
an independent appraisal of the fairness of the transaction has
been made.

(4) Amendments to articles of incorporation that impair the
shareholders rights as shareholders in any of the enumerated
ways.  The reasons for granting a right of dissent in these
situations are similar to those granting such rights in cases of
merger and transfer of assets. The grant of these rights
increases the security of investors by allowing them to escape
when the nature of their investment rights is fundamentally
altered or they are compelled to accept cash for their investment
in an amount established by the corporation. The grant also
enhances the freedom of the majority to make changes. because the
existence of an escape hatch makes fair and reasonable a change
that might be unfair if it forced a fundamental change of rights
upon unwilling investors without giving them a reasonable
alternative.

Generally, only shareholders who are entitled to vote on the
transaction are entitled to assert dissenters' rights with
respect to the transaction. The right to vote may be based on the
articles of incorporation or other provisions of the Model Act.
For example, a class of nonvoting shares may nevertheless be
entitled to vote (either as a separate voting group or as part of
the general voting group) on an amendment to the articles of
incorporation that affects them as provided in one of the ways
set forth in section 10.04; such a class is entitled to assert
dissenters' rights if the transaction also falls within section
13.02.    On the other hand, such a class does not have the right to
vote on a sale of substantially all the corporation's assets not
in the ordinary course of business, and therefore that class is
not entitled to assert dissenters' rights with respect to that
sale.  One exception to this principle is the merger of a
subsidiary into its parent under section 11.04 in which minority
shareholders of the subsidiary have the right to assert
dissenters' rights even though they have no right to vote.

2. Exclusivity of Dissenters' Rights

Section 13.02(0) basically adopts the New York formula as to
exclusivity of the dissenters' remedy of this chapter. The remedy
is the exclusive remedy unless the transaction is "unlawful" or
"fraudulent." The theory underlying this section is as follows:
when a majority of shareholders has approved a corporate change,
the corporation should be permitted to proceed even if a minority
considers the change unwise or disadvantageous, and persuades a
court that this is correct. Since dissenting shareholders can
obtain the fair value of their shares, they are protected from
pecuniary loss. Thus in general terms an exclusivity principle is
justified.  But the prospect that shareholders may be "paid off"
does not justify the corporation in proceeding unlawfully or
fraudulently.  If the corporation attempts an action in violation
of the corporation law on voting, in violation of clauses in
articles of incorporation prohibiting it, by deception of
shareholders, or in violation of a fiduciary duty -to take some
examples- the court's freedom to intervene should be unaffected
by the presence or absence of dissenters' rights under this
chapter. Because of the variety of situations in which
unlawfulness and fraud may appear, this section makes no attempt
to specify particular illustrations. Rather, it is designed to
recognize and preserve the principles that have developed in the
case law of Delaware, New York and other states with regard to
the effect of dissenters' rights on other remedies of dissident
shareholders. See Weinberger v.  UOP, Inc., 457 A.2d 701
(Del.1983) (appraisal remedy may not be adequate "where fraud,
misrepresentation, self-dealing, deliberate waste of corporate
assets, or gross or palpable overreaching are involved").  See
also Vorenberg, "Exclusiveness of the Dissenting Stockholders'
Appraisal Right," 77 Harv.L.Rev. 1189 (1964).

13.03 Dissent by Nominees and Beneficial Owners

(a) A record shareholder may assert dissenters' rights as to
fewer than all the shares registered in his name only if he
dissents with respect to all shares beneficially owned by any one
person and notifies the corporation in writing of the name and
address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection
are determined as if the shares as to which he dissents and his
other shares were registered in the names of different
shareholders.

(b) A beneficial shareholder may assert dissenters' rights as to
shares held on his behalf only if:

(1) he submits to the corporation the record shareholder's
written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and

(2) he does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the
vote.

Subchapter B

Procedure for Exercise of Dissenters' Rights

13.20 Notice of Dissenters' Rights

(a)If proposed corporate action creating dissenters' rights under
section 13.02 is submitted to a vote at a shareholders' meeting,
the meeting notice must state that shareholders are or may be
entitled to assert dissenters' rights under this chapter and be
accompanied by a copy of this chapter.

(b) If corporate action creating dissenters' rights under section
13.02 is taken without a vote of shareholders, the corporation
shall notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the
dissenters' notice described in section 13.22.

13.21 Notice of Intent to Demand Payment

(a) If proposed corporate action creating dissenters' rights
under section 13.02 is submitted to a vote at a shareholders'
meeting, a shareholder who wishes to assert dissenters' rights
(1) must deliver to the corporation before the vote is taken
written notice of his intent to demand payment for his shares if
the proposed action is effectuated and (2) must not vote his
shares in favor of the proposed action.

(b) A shareholder who does not satisfy the requirements of
subsection (a) is not entitled to payment for his shares under
this chapter.

13.22 Dissenters' Notice

(a) If proposed corporate action creating dissenters' rights
under section 13.02 is authorized at a shareholders' meeting, the
corporation shall deliver a written dissenters' notice to all
shareholders who satisfied the requirements of section 13.21.

(b) The dissenters' notice must be sent no later than 10 days
after the corporate action was taken, and must:

(1) state where the payment demand must be sent and where and
when certificates for certificated shares must be deposited;

(2) inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment
demand is received;

(3) supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the
terms of the proposed corporate action and requires that the
person asserting dissenters' rights certify whether or not he
acquired beneficial ownership of the shares before that date;

(4) set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days
after the date the subsection (a) notice is delivered; and

(5) be accompanied by a copy of this chapter.

13.23 Duty to Demand Payment

(a) A shareholder sent a dissenters' notice described in section
13.22 must demand payment, certify whether he acquired beneficial
ownership of the shares before the date required to be set forth
in the dissenters' notice pursuant to section 13.22(b)(3), and
deposit his certificates in accordance with the terms of the
notice.

(b) The shareholder who demands payment and deposits his share
certificates under section (a) retains all other rights of a
shareholder until these rights are cancelled or modified by the
taking of the proposed corporate action.

(c) A shareholder who does not demand payment or deposit his
share certificates where required, each by the date set in the
dissenters' notice, is not entitled to payment for his shares
under this chapter.

13.24 Share Restrictions

(a) The corporation may restrict the transfer of uncertificated
shares from the date the demand for their payment is received
until the proposed corporate action is taken or the restrictions
released under section 13.26.

(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the
proposed corporate action.

13.25 Payment

(a) Except as provided in section 13.27, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand,
the corporation shall pay each dissenter who complied with
section 13.23 the amount the corporation estimates to be the fair
value of his shares, plus accrued interest.

(b) The payment must be accompanied by:

(1) the corporation's balance sheet as of the end of a fiscal
year ending not more than 16 months before the date of payment,
an income statement for that year, a statement of changes in
shareholders' equity for that year, and the latest available
interim financial statements, if any;

(2) a statement of the corporation's estimate of the fair value
of the shares;

(3) an explanation of how the interest was calculated;

(4) a statement of the dissenter's right to demand payment under
section 13.28; and

(5) a copy of this chapter.

Official Comment

Section 13.25 changes the relative balance between corporation
and dissenting shareholders by requiring immediate payment by the
corporation upon the completion of the transaction or (if the
transaction did not need shareholder approval and has been
completed) upon receipt of the demand for payment.  The
corporation may not wait for a final agreement on value before
making payment, and the shareholder has the immediate use of the
amount determined by the corporation to represent fair value
without waiting for the conclusion of appraisal proceedings.

This obligation to make immediate payment is based on the view
that since the person's rights as a shareholder are terminated
with the completion of the transaction, he should have immediate
use of the money to which the corporation agrees it has no
further claim.  A difference of opinion over the total amount to
be paid should not delay payment of the amount that is
undisputed.

13.26 Failure to Take Action

(a) If the corporation does not take the proposed action within
60 days after the date set for demanding payment and depositing
share certificates, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on
uncertificated shares.

(b) If after returning deposited certificates and releasing
transfer restrictions, the corporation takes the proposed action,
it must send a new dissenters notice under section 13.22 and
repeat the payment demand procedure.

13.27    After-Acquired Shares

(a) A corporation may elect to withhold payment required by
section 13.25 from a dissenter unless he was the beneficial owner
of the shares before the date set forth in the dissenters' notice
as the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action.

(b) To the extent the corporation elects to withhold payment
under subsection (a), after taking the proposed corporate action,
it shall estimate the fair value of the shares, plus accrued
interest, and shall pay this amount to each dissenter who agrees
to accept it in full satisfaction of his demand. The corporation
shall send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to demand
payment under section 13.28.

13.28    Procedure if Shareholder Dissatisfied With Payment or Offer

(a) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest
due, and demand payment of his estimate (less any payment under
section 13.25), or reject the corporation's offer under section
13.27 and demand payment of the fair value of his shares and
interest due, if:

(1) the dissenter believes that the amount paid under section
13.25 or offered under section 13.27 is less than the fair value
of his shares or that the interest due is incorrectly calculated;

(2) the corporation fails to make payment under section 13.25
within 60 days after the date set for demanding payment; or

(3) the corporation, having failed to take the proposed action,
does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares within 60
days after the date set for demanding payment.

(b) A dissenter waives his right to demand payment under this
section unless he notifies the corporation of his demand in
writing under subsection (a) within 30 days after the corporation
made or offered payment for his shares.

Subchapter C

Judicial Appraisal of Shares

13.30 Court Action

(a) If a demand for payment under section 13.28 remains
unsettled, the corporation shall commence a proceeding within 60
days after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest.  If
the corporation does not commence the proceeding within the
6O-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.

(b)  The corporation shall commence the proceeding in the [name
or describe] court of the county where a corporation's principal
office (or, if none in this state, its registered office) is
located.  If the corporation is a foreign corporation without a
registered office in this state, it shall commence the proceeding
in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by
the foreign corporation was located.

(c) The corporation shall make all dissenters (whether or not
residents of this state) whose demands remain unsettled parties
to the proceeding as in an action against their shares and all
parties must be served with a copy of the petition. Nonresidents
may be served by registered or certified mail or by publication
as provided by law.

(d) The jurisdiction of the court in which the proceeding is
commenced under subsection (I)) is plenary and exclusive.  The
court may appoint one or more persons as appraisers to receive
evidence and recommend decision on the question of fair value.
The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.

(e) Each dissenter made a party to the proceeding is entitled to
judgment (1) for the amount, if any, by which the court finds the
fair value of his shares, plus interest, exceeds the amount paid
by the corporation or (2) for the fair value, plus accrued
interest, of his after-acquired shares for which the corporation
elected to withhold payment under section 13.27.

Official Comment

All demands for payment made under section 13.28 are to be
resolved in a single proceeding brought in the county where the
corporation's principal office is located or, if none, in other
specified counties.  All shareholders making section 13.28
demands must be made parties, with service by publication
authorized if necessary.

13.31    Court Costs and Counsel Fees

(a) The court in an appraisal proceeding commenced under section
13.30 shall determine all costs of the proceeding, including the
reasonable compensation and expenses of appraisers appointed by
the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all
or some of the dissenters, in amounts the court finds equitable,
to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under
section 13.28.

(b) The court may also assess the fees and expenses of counsel
and experts for the respective parties, in amounts the court
finds equitable:

(1) against the corporation and in favor of any or all dissenters
if the court finds the corporation did not substantially comply
with the requirements of sections 13.20 through 13.28; or

(2) against either the corporation or a dissenter, in favor of
any other party, if the court finds that the party against whom
the fees and expenses are assessed acted arbitrarily,
vexatiously, or not in good faith with respect to the rights
provided by this chapter.

(c) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services should
not be assessed against the corporation, the court may award to
these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.

Chapter 14

DISSOLUTION

Subchapter A

Voluntary Dissolution

14.01 Dissolution by Incorporators or Initial Directors

A majority of the incorporators or initial directors of a
corporation that has not issued shares or has not commenced
business may dissolve the corporation by delivering to the
secretary of state for filing articles of dissolution that set
forth:

(1) the name of the corporation;

(2) the date of its incorporation;

(3) either {i) that none of the corporation's shares has been
issued or (ii) that the corporation has not commenced business

(4) that no debt of the corporation remains unpaid;

(5) that the net assets of the corporation remaining after
winding up have been distributed to the shareholders, if shares
were issued; and

(6) that a majority of the incorporators or initial directors
authorized the dissolution.

14.02 Dissolution by Board of Directors and Shareholders

(a) A corporation's board of directors may propose dissolution
for submission to the shareholders.

(b) For a proposal to dissolve to be adopted:

(1) the board of directors must recommend dissolution to the
shareholders unless the board of directors determines that
because of conflict of interest or other special circumstances it
should make no recommendation and communicates the basis for its
determination to the shareholders; and

(2) the shareholders entitled to vote must approve the proposal
to dissolve as provided in subsection (e).

(c) The board of directors may condition its submission of the
proposal for dissolution on any basis.

(d) The corporation shall notify each shareholder, whether or not
entitled to vote, of the proposed shareholders' meeting in
accordance with section 7.05.  The notice must also state that
the purpose, or one of the purposes, of the meeting is to
consider dissolving the corporation.

(e) Unless the articles of incorporation or the board of
directors (acting pursuant to subsection (c)) require a greater
vote or a vote by voting groups, the proposal to dissolve to be
adopted must be approved by a majority of all the votes entitled
to be cast on that proposal.

14.03 Articles of Dissolution

(a) At any time after dissolution is authorized, the corporation
may dissolve by delivering to the secretary of state for filing
articles of dissolution setting forth:

(1) the name of the corporation;

(2) the date dissolution was authorized;

(3) if dissolution was approved by the shareholders:

(i) the number of votes entitled to be cast on the proposal to
dissolve; and

(ii) either the total number of votes cast for and against
dissolution or the total number of undisputed votes cast for
dissolution and a statement that the number cast for dissolution
was sufficient for approval.

(4) If voting by voting groups was required, the information
required by subparagraph (3) must be separately provided for each
voting group entitled to vote separately on the plan to dissolve.

(b) A corporation is dissolved upon the effective date of its
articles of dissolution.

14.04    Revocation of Dissolution

(a) A corporation may revoke its dissolution within 120 days of
its effective date.

(b) Revocation of dissolution must be authorized in the same
manner as the dissolution was authorized unless that
authorization permitted revocation by action of the board of
directors alone, in which event the board of directors may revoke
the dissolution without shareholder action.

(c) After the revocation of dissolution is authorized, the
corporation may revoke the dissolution by delivering to the
secretary of state for filing articles of revocation of
dissolution, together with a copy of its articles of dissolution,
that set forth:

(1) the name of the corporation;

(2) the effective date of the dissolution that was revoked;

(3) the date that the revocation of dissolution was authorized;

(4) if the corporation's board of directors (or incorporators)
revoked the dissolution, a statement to that effect;

(5) if the corporation's board of directors revoked a dissolution
authorized by the shareholders, a statement that revocation was
permitted by action by the board of directors alone pursuant to
that authorization; and

(6) if shareholder action was required to revoke the dissolution,
the information required by section 14.03(a)(3) or (4).

(d)  Revocation of dissolution is effective upon the effective
date of the articles of revocation of dissolution.

(e) When the revocation of dissolution is effective, it relates
back to and takes effect as of the effective date of the
dissolution and the corporation resumes carrying on its business
as if dissolution had never occurred.