Exhibit No. 1 Article 13 of the North Carolina Business Corporation Act
Article 13
Dissenters' Rights.
Part 1. Right to Dissent and Obtain Payment for Shares.
55-13-01. Definitions.
In this Article:
(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 G.S. 55-13-02 and who exercises that right when
and in the manner required by G.S. 55-13-20 through 55-13-28.
(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 a rate that is fair and equitable
under all the circumstances, giving due consideration to the rate
currently paid by the corporation on its principal bank loans, if any,
but not less than the rate provided in G.S. 24-1.
(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. (1925, c. 77, s. 1; 1943, c. 270; G.S., s. 55-167; 1955,
c. 1371, s. 1; 1969, c. 751, s. 39; 1973, c. 469, ss. 36, 37; 1989, c.
265, s. 1.)
55-13-02. Right to dissent.
(a) In addition to any rights granted under Article 9, 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 (other than
a parent corporation in a merger whose shares are not affected under
G.S. 55-11-04) is a party unless (i) approval by the shareholders of
that corporation is not required under G.S. 55-11-03(g) or (ii) such
shares are then redeemable by the corporation at a price not greater
than the cash to be received in exchange for such shares;
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater
than the cash to be received in exchange for such shares;
(2a) Consummation of a plan of conversion pursuant to Part 2 of Article 11A
of this Chapter;
(3) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed
in cash 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 an amendment of the
articles of incorporation permitting action without meeting to be
taken by less than all shareholders entitled to vote, without advance
notice, or both, as provided in G.S. 55-7-04; (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 G.S.
55-6-04; or (vi) changes the corporation into a nonprofit corporation
or cooperative organization; 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 Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in
exchange for cash or other property, unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of shareholders to dissent from, or obtain payment of the fair value
of the shares in the event of, the corporate actions set forth in
subdivisions (1), (2), or (3) of subsection (a) of this section if the
affected shares are any class or series which, at the record date fixed to
determine the shareholders entitled to receive notice of and to vote at the
meeting at which the plan of merger or share exchange or the sale or
exchange of property is to be acted on, were (i) listed on a national
securities exchange or designated as a national market system security on
an interdealer quotation system by the National Association of Securities
Dealers, Inc., or (ii) held by at least 2,000 record shareholders. This
subsection does not apply in cases in which either:
(1) The articles of incorporation, bylaws, or a resolution of the board of
directors of the corporation issuing the shares provide otherwise; or
(2) In the case of a plan of merger or share exchange, the holders of the
class or series are required under the plan of merger or share
exchange to accept for the shares anything except:
a. Cash;
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation
which, at the record date fixed to determine the shareholders
entitled to receive notice of and vote at the meeting at which
the plan of merger or share exchange is to be acted on, were
either listed subject to notice of issuance on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc., or held by at least
2,000 record shareholders; or
c. A combination of cash and shares as set forth in sub-subdivisions
a. and b. of this subdivision. (1925, c. 77, s. 1; c. 235; 1929,
c. 269; 1939, c. 279; 1943, c. 270; G.S., ss. 55-26, 55-167;
1955, c. 1371, s. 1; 1959, c. 1316, ss. 30, 31; 1969, c. 751, ss.
36, 39; 1973, c. 469, ss. 36, 37; c. 476, s. 193; 1989, c. 265,
s. 1; 1989 (Reg. Sess., 1990), c. 1024, s. 12.18; 1991, c. 645,
s. 12; 1997-202, s. 1; 1999-141, s. 1; 2001-387, s. 26; 2003-157,
s. 1.)
55-13-03. 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. (1925, c. 77, s. 1; 1943, c. 270; G.S., s. 55-167; 1955,
c. 1371, s. 1; 1969, c. 751, s. 39; 1973, c. 469, ss. 36, 37; 1989, c.
265, s. 1.)
55-13-04 through 55-13-19. Reserved for future
codification purposes.
Part 2. Procedure for Exercise of Dissenters' Rights.
55-13-20. Notice of dissenters' rights.
(a)If proposed corporate action creating dissenters' rights under G.S. 55-13-02
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 Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders or is taken by shareholder action
without meeting under G.S. 55-7-04, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22. A shareholder who consents to
shareholder action taken without meeting under G.S. 55-7-04 approving a
corporate action is not entitled to payment for the shareholder's shares
under this Article with respect to that corporate action.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered
from such failure in a civil action brought in his own name within three
years after the taking of the corporate action creating dissenters' rights
under G.S. 55-13-02 unless he voted for such corporate action. (1925, c.
77, s. 1; c. 235; 1929, c. 269; 1939, c. 5; c. 279; 1943, c. 270; G.S., ss.
55-26, 55-165, 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39; 1973, c.
469, ss. 36, 37; 1989, c. 265, s. 1; 2002-58, s. 2.)
55-13-21. Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, a shareholder
who wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, 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 Article. (1925, c. 77, s.
1; 1943, c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39;
1973, c. 469, ss. 36, 37; 1989, c. 265, s. 1.)
55-13-22. Dissenters' notice.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is approved at a shareholders' meeting, the corporation shall mail
by registered or certified mail, return receipt requested, a written
dissenters' notice to all shareholders who satisfied the requirements of
G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after shareholder
approval, or if no shareholder approval is required, after the approval of
the board of directors, of the corporate action creating dissenters' rights
under G.S. 55-13-02, 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;
(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 mailed; and
(5) Be accompanied by a copy of this Article. (1925, c. 77, s. 1; 1943, c.
270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39; 1973,
c. 469, ss. 36, 37; 1989, c. 265, s. 1; 1997-485, s. 4; 2001-387, s.
27; 2002-58, s. 3.)
55-13-23. Duty to demand payment.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the
terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (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 Article. (1925, c. 77, s. 1;
1943, c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39;
1973, c. 469, ss. 36, 37; 1989, c. 265, s. 1.)
55-13-24. 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 G.S. 55-13-26.
(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.
(1925, c. 77, s. 1; 1943, c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1;
1969, c. 751, s. 39; 1973, c. 469, ss. 36, 37; 1989, c. 265, s. 1.)
55-13-25. Payment.
(a) As soon as the proposed corporate action is taken, or within 30 days after
receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the
fair value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available 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 cash flows
for that year, and the latest available interim financial statements,
if any;
(2) An explanation of how the corporation estimated 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 G.S.
55-13-28; and
(5) A copy of this Article. (1925, c. 77, s. 1; 1943, c. 270; G.S., s.
55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39; 1973, c. 469, ss.
36, 37; 1989, c. 265, s. 1; c. 770, s. 69; 1997-202, s. 2.)
55-13-26. 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 G.S. 55-13-22 and repeat the payment demand
procedure. (1925, c. 77, s. 1; 1943, c. 270; G.S., s. 55-167; 1955, c.
1371, s. 1; 1969, c. 751, s. 39; 1973, c. 469, ss. 36, 37; 1989, c. 265, s.
1.)
55-13-27. Reserved for future codification purposes.
55-13-28. Procedure if shareholder dissatisfied with
corporation's payment or failure to perform.
(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 the amount in excess of the payment by the corporation under G.S.
55-13-25 for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 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 G.S. 55-13-25; 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 (i) under subdivision
(a)(1) within 30 days after the corporation made payment for his shares or
(ii) under subdivisions (a)(2) and (a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify
the corporation of his demand under subsection (a) within such 30-day
period shall be deemed to have withdrawn his dissent and demand for
payment. (1925, c. 77, s. 1; 1943, c. 270; G.S., s. 55-167; 1955, c. 1371,
s. 1; 1969, c. 751, s. 39; 1973, c. 469, ss. 36, 37; 1989, c. 265, s. 1;
1997-202, s. 3.)
55-13-29. Reserved for future codification purposes.
Part 3. Judicial Appraisal of Shares.
55-13-30. Court action.
(a) If a demand for payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i)
the date payment is made under G.S. 55-13-25, or (ii) the date of the
dissenter's payment demand under G.S. 55-13-28 by filing a complaint with
the Superior Court Division of the General Court of Justice to determine
the fair value of the shares and accrued interest. A dissenter who takes no
action within the 60-day period shall be deemed to have withdrawn his
dissent and demand for payment. (a1)Repealed by Session Laws 1997-202, s.
4.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to 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 complaint. Nonresidents may be served by
registered or certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is commenced
under subsection (a) 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 parties are entitled
to the same discovery rights as parties in other civil proceedings. The
proceeding shall be tried as in other civil actions. However, in a
proceeding by a dissenter in a corporation that was a public corporation
immediately prior to consummation of the corporate action giving rise to
the right of dissent under G.S. 55-13-02, there is no right to a trial by
jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment 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. (1925, c. 77, s.
1; 1943, c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39;
1973, c. 469, ss. 36, 37; 1989, c. 265, s. 1; 1997-202, s. 4; 1997-485, ss.
5, 5.1.)
55-13-31. Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30 shall
determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall
assess the costs as it finds equitable.
(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 G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either or
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 Article.
(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. (1925, c. 77, s. 1;
1943, c. 270; G.S., s. 55-167; 1955, c. 1371, s. 1; 1969, c. 751, s. 39;
1973, c. 469, ss. 36, 37; 1989, c. 265, s. 1.)