KRS 271B.6-400: Distributions to shareholders.

(1) A board of directors may authorize and the corporation may make distributions to

its shareholders subject to restriction by the articles of incorporation and the

limitation in subsection (3) of this section.

(2) If the board of directors does not fix the r ecord date for determining shareholders

entitled to a distribution (other than one involving a purchase, redemption or other

acquisition of the corporation's shares), it shall be the date the board of directors

authorizes the distribution.

(3) No distribution shall be made if, after giving it effect:

(a) The corporation would not be able to pay its debts as they become due in the

usual course of business; or

(b) The corporation's total assets would be less than the sum of its total liabilities

plus (unless the articles of incorporation permit otherwise) the amount that

would be needed, if the corporation were to be dissolved at the time of the

distribution, to satisfy the preferential rights upon dissolution of shareholders

whose preferential rights are superior to those receiving the distribution.

(4) The board of directors may base a determination that a distribution is not prohibited

under subsection (3) of this section either on financial statements prepared on the

basis of accounting practices and principles that are reasonable in the circumstances

or on a fair valuation or other method that is reasonable in the circumstances.

(5) Except as provided in subsection (7) of this section, the effect of a distribution

under subsection (3) of this section shall be measured:

(a) In the case of distribution by purchase, redemption, or other acquisition of the

corporation's shares, as of the earlier of:

1. The date money or other property is transferred or debt incurred by the

corporation; or

2. The date the shareho lder ceases to be a shareholder with respect to the

acquired shares;

(b) In the case of any other distribution of indebtedness, as of the date the

indebtedness is distributed; and

(c) In all other cases, as of:

1. The date the distribution is authorized if the payment occurs within one

hundred twenty (120) days after the date of authorization; or

2. The date the payment is made if it occurs more than one hundred twenty

(120) days after the date of authorization.

(6) A corporation's indebtedness to a shareholder incurred by a reason of a distribution

made in accordance with this section shall be at parity with the corporation's

indebtedness to its general creditors except to the extent subordinated by agreement.

(7) Indebtedness of a corporation, including indebtedness issued as a distribution, shall

not be considered a liability for purposes of determinations under subsection (3) of

this section if its terms provide that payment of principal and interest are made only

if and to the extent that payment of a distribution to shareholders could then be

made under this section. If the indebtedness is issued as a distribution, each

payment of principal or interest shall be treated as a distribution, the effect of which

is measured on the date the payment is actually made.