KRS 271B.7-400: Procedure in derivative proceedings -- Shareholders of a public

benefit corporation.

(1) A person shall not commence a proceeding in the right of a domestic or foreign

corporation unless he was a shareholder of the corporation when the

transaction complained of occurred or unless he became a shareholder

through transfer by operation of law from one who was a shareholder at that

time. The derivative proceeding shall not be maintained if it appears that the

person commencing the proceeding does not fairly and adequately represent

the interests of the shareholders in enforcing the right of the corporation.

(2) A complaint in a proceeding brought in the right of a corporation shall be

verified and allege with particularity the demand made, if any, to obtain action

by the board of directors and either that the demand was refused or ignored or

why he did not make the demand. Whether or not a demand for action was

made, if the corporation commences an investigation of the charges made in

the demand or complaint, the court may stay any proceeding until the

investigation is completed.

(3) A proceeding commenced under this section may not be discontinued or

settled without the court's approval. If the court determines that a proposed

discontinuance or settlement will substantially affect the interest of the

corporation's shareholders or a class of shareholders, the court shall direct that

notice be given the shareholders affected.

(4) On termination of the proceeding the court may require the plaintiff to pay any

defendant's reasonable expenses, including counsel fees, incurred in

defending the proceeding if it finds that the proceeding was commenced

without reasonable cause.

(5) For purposes of this section, "shareholder" includes a beneficial owner whose

shares are held in a voting trust or held by a nominee on his behalf.

(6) In any derivative proceedings in the right of a foreign corporation, the matters

covered by this section shall be governed by the laws of the jurisdiction of

incorporation.

(7) The articles of incorporation of the corporation may provide that proper venue

for a derivative action or an action to compel the production of books and

records is in or only is in the appropriate court.

(8) Shareholders of a public benefit corporation owning individually or collectively,

as of the date of instituting a derivative proceeding, at least two percent (2%) of

the corporation's outstanding shares or, in the case of a corporation with

shares listed on a national securities exchange, the lesser of that percentage

or shares of at least two million dollars ($2,000,000) in market value, may

maintain a derivative proceeding to enforce the requirements set forth in KRS

271B.8-300(8).