Corporations

  • Holger Spamann (Harvard Law School)
  • Jens Frankenreiter (Washington University in St. Louis School of Law)

We wrote this book as the basis for a first course in corporate law. We provide extensive introductions and explanations to situate the cases and other materials.

We strongly encourage you to read the cases from two related but quite different perspectives. The first is the usual, legal perspective. Almost all the cases in this book are seminal cases familiar to all corporate law practitioners. They “lay down the law.” You can read them for what the law is, for what it could have been, and for how judges chose between the various paths open to them.

The second perspective is less obvious but ultimately even more important. The facts of the cases demonstrate how corporate actors use the building blocks of the corporate form to achieve various goals—they illustrate corporate law’s transactional nature. There are infinite permutations of the various building blocks, so we can’t show all. But we have endeavored to include a good selection of standard transactional scenarios—buy-and sell-side M&A, share reclassifications (Zuckerberg), executive compensation (Disney), dividends (Sinclair), jostling for control of the board (Blasius and others), control conflicts in private corporations (Coster; eBay), etc.—and  moves (voting, written consent, unilateral board action, enlarging the board, issuing new stock, merger, asset sale, etc.). Most court opinions evaluate these maneuvers or some small part of them under equitable principles. But you should also pay attention to the maneuvers themselves. They are what most corporate lawyers do in practice and most maneuvers do not end up in court. This is a fundamental difference from other areas of law where lawyers mostly get involved at the back end, so to speak.

A separate reason to pay great attention to the facts is that much of corporate law consists of broad standards that take on real meaning only in their application. Understanding the law often requires reading the full facts. The judges clearly considered these factual details important, even on appeal, and so should you!

With one exception, all cases in these materials are Delaware or federal cases. Delaware law is the dominant corporate law of the United States. In the U.S., each state has its own corporate law, and the applicable law is the law of the state of incorporation. Corporations are free to incorporate where they want, in return for paying incorporation tax (“franchise tax”) in that jurisdiction. Delaware has attracted more than half of all public corporations and many private corporations in the U.S. (Delaware derives a third of its state revenue from the franchise tax!) Furthermore, Delaware is also the model followed by many other states. As a result, we see no point in teaching you other states’ law. We occasionally use other countries’ laws to expose you to alternative arrangements; the variance between countries is much larger than between U.S. states.

For similar reasons, we teach only corporations proper. We do not cover partnerships, limited liability companies (LLCs), or the many other entity forms now available. These other forms are undoubtedly important in practice. But an introductory course cannot teach the nuanced differences between these forms, many of which lie in tax law. We only give you a brief warning about accidental partnerships in the first class. However, there are substantial commonalities between the various entity forms. If you understand corporate law and the underlying business problems, you will easily learn the other forms when the need arises.

Glossary

Bylaws = a corporation’s secondary governing document (cf. DGCL 109(b)). The charter can provide, and usually does provide, that the board can amend the bylaws without shareholder consent (DGCL 109(a); contrast the charter itself, which can only be amended by board and shareholders jointly, DGCL 242(b)).

Certificate of Incorporation = a corporation’s founding and primary governing document (cf. DGCL 102).

Charter = certificate of incorporation.

Common stock / share: see share.

Debt holders = creditors.

DGCL = Delaware General Corporation Law, i.e., the basic Delaware statute. As a guide to this important statute, you might want to consult simplifiedcodes.com.

Dividends = an official distribution of cash or other assets to all shareholders of one class. Even though dividends are generally the only way shareholders as a group get a return on their investment (individual shareholders can also sell their shares, but that only puts the buyer of the shares into the seller's shoes), dividends are in the board's discretion (DGCL 170(a)).

Equity; equity capital = the excess of assets over liabilities, if any (or equivalently, non-debt financing).

Equity holders = shareholders. The term derives from the fact that roughly speaking, equity is available for distribution to shareholders.

Limited liability = no liability (of shareholders). The expression “limited” comes from the observation that shareholders stand to lose whatever they put into the corporation, as this is available to satisfy the corporations' creditors' claims. However, shareholders have no liability beyond that, absent pathological circumstances.

Merger = the fusion of two corporations into one (cf. DGCL 251).

Preferred stock / share = stock with special rights (“preferences”), generally with respect to dividends. A standard term is that preferred shares are entitled to a certain dividend per year, payable if and when a dividend will be paid to common stockholders. In return, preferred shares often do not carry voting rights.

Public corporation = a corporation whose stock is publicly traded, usually on a regulated stock exchange such as the New York Stock Exchange.

Share = an interest in the corporation with rights that are defined by the corporation’s charter. Unlike debt, shares do not provide a right to fixed payouts. Rather, the board decides if and when shareholders will receive so-called dividends. The default rule is that each share provides one vote (cf. DGCL 212) and equal dividend rights; such shares are called “common shares” or “common stock.”

Stock = a synonym or collective term for shares (as in “twenty shares of the corporation’s stock”).

18 Appendices 18 Appendices

18.1 Apple Inc.'s Restated Articles of Incorporation 18.1 Apple Inc.'s Restated Articles of Incorporation

I

The name of the corporation is Apple Inc.

II

The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.

III

This corporation is authorized to issue one class of shares designated “Common Stock,” par value $0.00001 per share. The number of shares of Common Stock that this corporation is authorized to issue is 50,400,000,000. As of 5:00 p.m., Pacific Daylight Time, on August 28, 2020, each share of Common Stock outstanding shall be automatically, and with no further action by the holder of such share, split into four shares of Common Stock.

IV

Section 1. Limitation of Directors’ Liability. The liability of the directors of this corporation for monetary damages shall be eliminated to the fullest extent permissible under California law.

Section 2. Indemnification of Corporate Agents. The corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California Corporations Code) through bylaw provisions, agreements with agents, vote of shareholders or disinterested directors or otherwise, in excess of the indemnification otherwise permitted by Section 317 of the California Corporations Code, subject only to the applicable limits set forth in Section 204 of the California Corporations Code with respect to actions for breach of duty to the corporation and its shareholders.

Section 3. Repeal or Modification. Any repeal or modification of the foregoing provisions of this Article IV by the shareholders of this corporation shall not adversely affect any right or protection of an agent of this corporation existing at the time of such repeal or modification.

V

There shall be no right with respect to shares of stock of this corporation to cumulate votes in the election of directors.

18.2 Apple Inc.'s Amended and Restated Bylaws 18.2 Apple Inc.'s Amended and Restated Bylaws

ARTICLE I
CORPORATE OFFICES

1.1          Principal Office

The Board of Directors shall fix the location of the principal executive office of Apple Inc. (the “Corporation”) at any place within or outside the State of California. If the principal executive office is located outside California and the Corporation has one or more business offices in California, then the Board of Directors shall fix and designate a principal business office in California.

1.2         Other Offices

The Board of Directors may at any time establish branch or subordinate offices at any place or places.

ARTICLE II
DIRECTORS

2.1         Powers

Subject to the provisions of the California General Corporation Law (the “Code”), any limitations in the Restated Articles of Incorporation of the Corporation (the “Articles of Incorporation”) and these Amended and Restated Bylaws (these “Bylaws”) relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors. The Board of Directors may delegate the management of the day-to-day operation of the business of the Corporation to a management company or other person provided that the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the Board of Directors.

2.2         Number

The number of directors of the Corporation shall be not less than five (5) nor more than nine (9). The exact number of directors shall be nine (9) until changed within the limits specified above, by a bylaw amending this Section 2.2, duly adopted by the Board of Directors or by the shareholders. The indefinite number of directors may be changed, or a definite number fixed without provision for an indefinite number, by a duly adopted amendment to the Articles of Incorporation or by amendment to these Bylaws duly adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that an amendment reducing the fixed number or the minimum number of directors to a number less than five (5) cannot be adopted if the votes cast against its adoption at a meeting of the shareholders, or the shares not consenting in the case of action by written consent, are equal to more than sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to vote. No amendment may change the stated maximum number of authorized directors to a number greater than two (2) times the stated minimum number of directors minus one (1).

2.3         Compensation

Directors and members of committees may receive such compensation, if any, for their services, and may be reimbursed for expenses, as fixed or determined by resolution of the Board of Directors. This Section 2.3 shall not be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation for those services.

2.4         Election and Term of Office

Each director shall be elected to serve until the annual meeting of shareholders held in the following fiscal year and until such director’s successor shall have been duly elected and qualified. Notwithstanding the foregoing, the term of any incumbent director who fails to be elected by “approval of the shareholders” as defined in Section 153 of the Code in an Uncontested Election (as such term is defined below) and who has not earlier resigned will end on the date that is the earlier of (a) ninety (90) days after the date on which the voting results are determined pursuant to Section 707 of the Code and (b) the date on which the Board of Directors selects a person to fill the office held by that director in accordance with the procedures set forth in Section 2.5. For purposes of these Bylaws, an “Uncontested Election” means an election of directors in which, at the expiration of the later of the time fixed for nomination of director candidates pursuant to (x) Section 5.14 regarding advance notice and (y) Section 5.15 regarding proxy access, the number of candidates for election does not exceed the number of directors to be elected by the shareholders at that election.

2.5         Vacancies and Resignations

(a)          A vacancy or vacancies on the Board of Directors shall be deemed to exist (i) in the event of the death, resignation or removal of any director, (ii) if the authorized number of directors is increased, (iii) if the shareholders fail, at any meeting of shareholders at which any director or directors are elected, to elect the full authorized number of directors to be elected at that meeting, (iv) if the Board of Directors declares vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony, or (v) at the end of the term of an incumbent director who fails to be elected by approval of the shareholders as set forth in Section 2.4.

(b)          Except for a vacancy caused by the removal of a director as provided in Section 2.7, a vacancy may be filled by approval of the board, or if the number of directors then in office is less than a quorum by (i) the unanimous written consent of the directors then in office, (ii) the affirmative vote of a majority of the directors then in office, or (iii) a sole remaining director. Vacancies created by the removal of a director shall be filled only by approval of the shareholders, or by the unanimous written consent of all shares entitled to vote.

(c)          The shareholders may elect a director at any time to fill a vacancy or vacancies not filled by the directors, but any such election by written consent, other than to fill a vacancy created by removal, shall require the consent of a majority of the outstanding shares entitled to vote thereon. A director may not be elected by written consent to fill a vacancy created by removal except by unanimous consent of all shares entitled to vote for the election of directors.

(d)          Any director may resign effective upon giving written notice to the Secretary of the Corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation of a director is effective at a future time, the Board of Directors may elect a successor to take office when the resignation becomes effective. A reduction of the authorized number of directors shall not remove any director prior to the expiration of such director’s term of office.

2.6         Chair of the Board and Lead Directors

The Corporation may have at the discretion of the Board of Directors, a Chair of the Board of Directors and/or one or more Lead Directors. The Chair of the Board of Directors, if there is one, or a Lead Director, shall have the power to preside at all meetings of the Board of Directors and shall have such other powers and shall be subject to such other duties as the Board of Directors may from time to time prescribe or as may be prescribed by these Bylaws. If there is more than one Lead Director, the Board of Directors may prescribe different responsibilities to each Lead Director.

2.7         Removal

The entire Board of Directors or any individual director may be removed without cause from office by an affirmative vote of a majority of the outstanding shares entitled to vote; provided that, unless the entire Board of Directors is removed, no director shall be removed when the votes cast against removal, or not consenting in writing to such removal, would be sufficient to elect such director if voted cumulatively (without regard to whether such shares may be voted cumulatively) at an election at which the same total number of votes were cast, or, if such action is taken by written consent, all shares entitled to vote were voted, and either the number of directors elected at the most recent annual meeting of shareholders, or if greater, the number of directors for whom removal is being sought, were then being elected. If any or all directors are so removed, new directors may be elected at the same meeting or at a subsequent meeting. If at any time a class or series of shares is entitled to elect one or more directors under authority granted by the Articles of Incorporation, the provisions of this Section 2.7 shall apply to the vote of that class or series and not to the vote of the outstanding shares as a whole.

ARTICLE III
OFFICERS

3.1         Officers

The officers of the Corporation shall be a Chief Executive Officer, a Secretary and a Chief Financial Officer. The Chief Executive Officer shall be deemed the president of the Corporation for purposes of the Code. The Corporation may also have, at the discretion of the Board of Directors, a Chair of the Board of Directors, one or more Vice Presidents, a Treasurer, one or more Assistant Secretaries and one or more Assistant Treasurers and such officers as may be appointed in accordance with the provisions of Section 3.3. Any number of offices may be held by the same person.

3.2         Appointment of Officers

The officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 3.3, shall be chosen by the Board of Directors and serve at the pleasure of the Board of Directors, subject to the rights, if any, of an officer under any contract of employment.

3.3         Subordinate Officers

[…]

3.4         Term of Office and Compensation

The term of office and salary of each of said officers and the manner and time of the payment of such salaries shall be fixed and determined by the Board of Directors and may be altered by the Board of Directors from time to time at its pleasure, subject to the rights, if any, of an officer under any contract of employment.

3.5         Removal or Resignation

(a)          Subject to the rights, if any, of an officer under any contract of employment, all officers serve at the pleasure of the Board of Directors and any officer may be removed, either with or without cause, by the Board of Directors at any regular or special meeting of the Board of Directors, or, except in the case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors.

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3.6         Vacancies

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3.7         Chief Executive Officer

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3.8         President Pro Tem

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3.9         Vice President

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3.10       Secretary

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3.11       Chief Financial Officer

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3.12       Divisional and Other Officers Appointed by the Chief Executive Officer

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ARTICLE IV
COMMITTEES

4.1         Committees of the Board of Directors

The Board of Directors may, by resolution adopted by a majority of the authorized number of directors, designate one (1) or more committees, each consisting of two (2) or more directors, to serve at the pleasure of the Board of Directors. The Board of Directors may designate one (1) or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. The appointment of members or alternate members of a committee requires the vote of a majority of the authorized number of directors. Any such committee shall have authority to act in a manner and to the extent provided in the resolution of the Board of Directors and may have all the authority of the Board of Directors, except with respect to:

(a)          the approval of any action which, under the Code, also requires shareholders’ approval or approval of the outstanding shares;

(b)          the filling of vacancies on the Board of Directors or in any committee;

(c)          the fixing of compensation of any director or directors for serving on the Board of Directors or on any committee;

(d)          the amendment or repeal of these Bylaws or the adoption of new bylaws;

(e)          the amendment or repeal of any resolution of the Board of Directors which by its express terms is not so amendable or repealable;

(f)          a distribution to the shareholders of the Corporation, except at a rate, in a periodic amount or within a price range set forth in the Articles of Incorporation or determined by the Board of Directors; and

(g)          the appointment or designation of any other committee of the Board of Directors or the members thereof.

ARTICLE V
MEETINGS OF SHAREHOLDERS

5.1         Place of Meetings

(a)          Meetings (whether regular, special, adjourned, or postponed) of the shareholders of the Corporation may be held at the principal executive office for the transaction of business of the Corporation, or at any place within or without the State, in each case as designated by resolution of the Board of Directors or a duly authorized committee thereof.

(b)          At the sole discretion of the Board of Directors, and subject to applicable provisions under the Code and any guidelines and procedures that the Board of Directors may adopt, a meeting of the shareholders may be conducted in whole or in part by electronic transmission by and to the Corporation, electronic video screen communication, conference telephone, or other means of remote communication.

5.2         Annual Meetings

An annual meeting of shareholders shall be held each year on a date and at a time designated by the Board of Directors or a duly authorized committee thereof. The annual meeting shall be held for the purpose of electing directors and for making reports of the affairs of the Corporation. Any other business properly brought before the meeting may be transacted at the annual meeting of shareholders. The Board of Directors may postpone, reschedule, or cancel any previously scheduled annual meeting of shareholders for any reason.

5.3         Special Meetings

(a)          Special meetings of shareholders for any purpose may be called at any time only by (i) the Board of Directors, the Chair of the Board of Directors, or the Chief Executive Officer or (ii) one or more holders of shares entitled to cast not less than ten percent (10%) (the “Requisite Percentage”) of the votes on the Requested Record Date (as such term is defined below) if a timely request in proper written form is delivered to the Secretary in compliance with this Section 5.3 (such request, a “Special Meeting Request”). The Board of Directors may postpone, reschedule, or cancel any previously scheduled special meeting of shareholders called pursuant to the foregoing clause (i) for any reason.

[…]

5.4         Notice of Meetings

Notice of any meeting of shareholders shall be given in writing not less than ten (10) nor more than sixty (60) days before the date of the meeting to each shareholder entitled to vote thereat by the Secretary or an Assistant Secretary, or other person charged with that duty, or if there is no such officer or person, or in case of such officer’s or person’s neglect or refusal, by any director or shareholder. […]

5.5         Manner of Giving Notice; Affidavit of Notice

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5.6         Consent to Shareholders’ Meetings

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5.7         Quorum

The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting of shareholders shall constitute a quorum for the transaction of business. Shares shall not be counted to make up a quorum for a meeting if voting of such shares at the meeting has been enjoined or if for any reason they cannot be lawfully voted at the meeting. The shareholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum or, if required by the Code, the vote of a greater number or voting by classes.

5.8         Adjourned Meetings

[…]

5.9         Record Date for Shareholder Notice; Voting; Giving Consents

(a)          In order that the Corporation may determine the shareholders entitled to notice of any meeting or to vote, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days prior to the date of such meeting nor more than sixty (60) days before any other action. Only shareholders of record at the close of business on the record date are entitled to notice of, and to vote at, a meeting of shareholders, notwithstanding any transfer of any shares on the books of the Corporation after the record date, except as otherwise provided in the Articles of Incorporation or the Code. In the absence of any contrary provision in the Articles of Incorporation or in any applicable statute relating to the election of directors or to other particular matters, each such person shall be entitled to one (1) vote for each share.

[…]

5.10       Action by Written Consent

(a)          Any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, shall be provided by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

[…]

5.11       Election of Directors

Approval of the shareholders is required to elect a director in any Uncontested Election of directors. In any other election of directors by the shareholders, the candidates receiving the highest number of affirmative votes of the shares entitled to be voted for them up to the number of directors to be elected by such shares are elected; votes against the directors and votes withheld with respect to the election of the directors shall have no legal effect. Elections of directors need not be by ballot except upon demand made by a shareholder at the meeting and before the voting begins.

5.12       Proxies

[…]

5.13       Inspectors of Elections

[…]

5.14       Advance Notice of Shareholder Business and Nominations

(a)          Annual Meetings of Shareholders.

(i)           Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders only (1) pursuant to the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors or any duly authorized committee thereof, (2) as otherwise properly brought before such annual meeting by or at the direction of the Board of Directors or any duly authorized committee thereof, (3) by any shareholder of the Corporation who was a shareholder of record of the Corporation at the time the notice provided for in this Section 5.14 is delivered to the Secretary and through the time of the annual meeting, who is entitled to vote at the meeting, and who complies with the notice procedures set forth in this Section 5.14, or (4) by one or more Eligible Shareholders (as such term is defined below) pursuant to and in accordance with Section 5.15.

[Eds: Here, we omit ~6pages of rules concerning director nominations and other shareholder proposals at annual meetings and another ~3 pages of rules concerning the nominations/proposals at special meetings.]

5.15       Proxy Access for Director Nominations

(a)          Subject to the terms and conditions of these Bylaws, the Corporation shall include in its proxy materials for an annual meeting of shareholders the name and other Required Information (as such term is defined below) of any Shareholder Nominee (as such term is defined below) nominated for election or reelection to the Board of Directors at such annual meeting of shareholders in accordance with this Section 5.15. Capitalized terms used in this Section 5.15 shall have the meanings indicated in this Section 5.15. This Section 5.15 shall be the exclusive method for shareholders to require that the Corporation include nominees for election as a director in the Corporation’s proxy materials.

[Eds: The provisions governing proxy access span ~9 pages.]

5.16       Conduct of Meeting

[…]

ARTICLE VI
MEETINGS OF DIRECTORS

6.1         Place of Meetings

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6.2         Regular Annual Meeting; Regular Meetings

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6.3         Special Meetings

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6.4         Notice of Special Meetings

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6.5         Quorum

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6.6         Adjournment

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6.7         Waiver and Notice of Consent

[….]

6.8         Action without a Meeting

Any action required or permitted by law to be taken by the Board of Directors may be taken without a meeting, if all members of the Board of Directors shall individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board of Directors. Such action by written consent shall have the same force and effect as the unanimous vote of such directors.

6.9         Committees

The provisions of this Article VI also apply to committees of the Board of Directors and action by such committees, mutatis mutandis.

ARTICLE VII
GENERAL MATTERS

7.1         Record Date for Purposes Other than Notice and Voting

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7.2         Instruments in Writing

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7.3         Shares Held by the Corporation

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7.4         Certificated and Uncertificated Shares

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7.5         Lost Certificates

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7.6         Certification and Inspection of Bylaws

The Corporation shall keep at its principal executive or business office the original or a copy of these Bylaws as amended or otherwise altered to date, which shall be open to inspection by the shareholders at all reasonable times during office hours.

7.7         Interpretation

Reference in these Bylaws to any provision of the Code shall be deemed to include all amendments thereof.

7.8         Construction

Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Code shall govern the construction of these Bylaws. Without limiting the generality of the provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

ARTICLE VIII
CONSTRUCTION OF BYLAWS WITH REFERENCE TO PROVISIONS OF LAW

8.1         Bylaw Provisions Additional and Supplemental to Provisions of Law

All restrictions, limitations, requirements, and other provisions of these Bylaws shall be construed, insofar as possible, as supplemental and additional to all provisions of law applicable to the subject matter thereof and shall be fully complied with in addition to the said provisions of law unless such compliance shall be illegal.

8.2         Bylaw Provisions Contrary to or Inconsistent with Provisions of Law

Any article, section, subsection, subdivision, sentence, clause, or phrase of these Bylaws which, upon being construed in the manner provided in Section 8.1, shall be contrary to or inconsistent with any applicable provision of law, shall not apply so long as said provisions of law shall remain in effect, but such result shall not affect the validity or applicability of any other portions of these Bylaws, it being hereby declared that these Bylaws, and each article, section, subsection, subdivision, sentence, clause, or phrase thereof, would have been adopted irrespective of the fact that any one or more articles, sections, subsections, subdivisions, sentences, clauses or phrases is or are illegal.

8.3         Definitions

Unless the context requires otherwise or as otherwise defined in these Bylaws, the general provisions, rules of construction, and definitions in the Code and Sections 1-21 of the California Corporations Code govern the construction of these Bylaws. Without limiting the generality of the provision, the singular number includes the plural, the plural number includes the singular, the word “including” is not a term of limitation, the terms “approval of the outstanding shares” and “approved by (or approval of) the shareholders” have the meanings set forth in Sections 152 and 153 of the Code, respectively, and the terms “electronic transmission by the corporation” and “electronic transmission to corporation” have the meanings set forth in Sections 20 and 21 of the California Corporations Code, respectively.

ARTICLE IX
ADOPTION, AMENDMENT OR REPEAL OF BYLAWS

9.1         By Shareholders

These Bylaws may be adopted, amended, or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote. Any bylaws specifying or changing a fixed number of directors or the maximum or minimum number or changing from a fixed to a variable board or vice versa may only be adopted by the shareholders; provided, however, that a bylaw or amendment of the Articles of Incorporation reducing the number or the minimum number of directors to a number less than five (5) cannot be adopted if the votes cast against its adoption at a meeting or the shares not consenting in the case of action by written consent are equal to more than sixteen and two-thirds percent (16 2/3%) of the outstanding shares entitled to vote.

9.2         By the Board of Directors

Subject to the right of shareholders to adopt, amend, or repeal these Bylaws, other than a bylaw or amendment thereof specifying or changing a fixed number of directors or the maximum or minimum number or changing from a fixed to a variable board or vice versa, these Bylaws may be adopted, amended, or repealed by the Board of Directors. A bylaw adopted by the shareholders may restrict or eliminate the power of the Board of Directors to adopt, amend, or repeal these Bylaws.

ARTICLE X
INDEMNIFICATION

10.1       Indemnification of Directors and Officers

The Corporation shall, to the maximum extent and in the manner permitted by the Code, indemnify each of its directors and officers against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent (as defined in Section 317(a) of the Code) of the Corporation. For purposes of this Article X, a “director” or “officer” of the Corporation includes any person (a) who is or was a director or officer of the Corporation, (b) who is or was serving at the request of the Corporation as a director or officer of another foreign or domestic corporation, partnership, limited liability company, joint venture, trust, or other enterprise, or (c) who was a director or officer of a corporation which was a predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation.

10.2       Indemnification of Others

The Corporation shall have the power, to the extent and in the manner permitted by the Code, to indemnify each of its employees and agents (other than directors and officers) against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent (as defined in Section 317(a) of the Code) of the Corporation. For purposes of this Article X, an “employee” or “agent” of the Corporation (other than a director or officer) includes any person (a) who is or was an employee or agent of the Corporation, (b) who is or was serving at the request of the Corporation as an employee or agent of another foreign or domestic corporation, partnership, limited liability company, joint venture, trust, or other enterprise, or (c) who was an employee or agent of a corporation which was a predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation.

10.3       Payment of Expenses in Advance

Expenses incurred in defending any proceeding for which indemnification is required pursuant to Section 10.1, or for which indemnification is permitted pursuant to Section 10.2 following authorization thereof by the Board of Directors, may be advanced by the Corporation prior to the final disposition of the proceeding upon receipt of an undertaking by or on behalf of the indemnified party to repay that amount if it shall be determined ultimately that the indemnified person is not entitled to be indemnified as authorized by this Article X.

10.4       Indemnification not Exclusive

The indemnification provided by this Article X for acts, omissions, or transactions while acting in the capacity of, or while serving as, a director or officer of the Corporation but not involving a breach of duty to the Corporation and its shareholders shall not be deemed exclusive of any other rights to those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise, to the extent the additional rights to indemnification are authorized in the Articles of Incorporation.

10.5       Insurance Indemnification

The Corporation shall have the power to purchase and maintain insurance on behalf of any agent of the Corporation against any liability asserted against or incurred by the agent in that capacity or arising out of that agent’s status as such, whether or not the Corporation would have the power to indemnify the agent against that liability under the provisions of this Article X.

10.6       Conflicts

Subject to the requirements of Section 317 of the Code, no indemnification or advance shall be made under this Article X, except as provided in Section 317(d) or Section 317(e)(4) of the Code, in any circumstance where it appears:

(a)          that it would be inconsistent with a provision of the Articles of Incorporation, these Bylaws, a resolution of the shareholders or an agreement in effect at the time of the accrual of the alleged cause of the action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or

(b)          that it would be inconsistent with any condition expressly imposed by a court in approving a settlement.

ARTICLE XI
EMERGENCY PROVISIONS

11.1        General

The provisions of this Article XI shall be operative only during any emergency as such term is defined in Section 207 of the Code (each, an “emergency”). During an emergency, the provisions of this Article XI shall override all other Bylaws of the Corporation in conflict with any provisions of this Article XI, and shall remain effective during the emergency, and shall not be effective after the emergency ends; provided that all actions taken in good faith pursuant to such provisions shall thereafter remain in full force and effect unless and until revoked by action taken pursuant to the provisions of these Bylaws other than those contained in this Article XI.

11.2       Meetings; Notice of Meetings

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11.3       Unavailable Directors

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11.4       Authorized Number of Directors

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11.5       Quorum

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