H.F. 578 Section 1. Section 490.140, Code 2011, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 21A. “Public corporation” means a 3 corporation that has a class of voting stock that is listed on 4 a national securities exchange or held of record by more than 5 two thousand shareholders. 6 Sec. 2. Section 490.702, subsection 5, unnumbered paragraph 7 1, Code 2011, is amended to read as follows: 8 Notwithstanding subsections 1 through 4, a public 9 corporation which has a class of voting stock that is listed on 10 a national securities exchange, authorized for quotation on the 11 national association of securities dealers automated quotations 12 – national market system, or held of record by more than two 13 thousand shareholders, is required to hold a special meeting 14 only upon the occurrence of either of the following: 15 Sec. 3. Section 490.803, subsections 2 and 3, Code 2011, are 16 amended to read as follows: 17 2. a. The number of directors may be increased or decreased 18 from time to time by amendment to, or in the manner provided 19 in, the articles of incorporation or the bylaws. 20 b. Notwithstanding paragraph “a” , the number of directors of 21 a public corporation subject to section 490.806A, subsection 1, 22 shall be increased or decreased only by the affirmative vote of 23 a majority of its board of directors. 24 3. Directors are elected at the first annual shareholders’ 25 meeting and at each annual meeting thereafter unless their 26 terms are staggered under section 490.806 or 490.806A . 27 Sec. 4. Section 490.805, subsections 2 and 4, Code 2011, are 28 amended to read as follows: 29 2. The terms of all other directors expire at the next 30 annual shareholders’ meeting following their election unless 31 their terms are staggered under section 490.806 or 490.806A . 32 4. The term of a director elected to fill a vacancy expires 33 at the next shareholders’ meeting at which directors are 34 elected , except as provided in section 490.806A . 35 -1- LSB 1496HV (2) 84 da/nh 1/ 6

H.F. 578 Sec. 5. Section 490.806, Code 2011, is amended to read as 1 follows: 2 490.806 Staggered terms for directors. 3 The Except as otherwise provided in section 490.806A, 4 a corporation’s articles of incorporation may provide for 5 staggering the terms of its directors by dividing the total 6 number of directors into two or three groups, with each group 7 containing one-half or one-third of the total, as near as may 8 be. In that event, the terms of directors in the first group 9 expire at the first annual shareholders’ meeting after their 10 election, the terms of the second group expire at the second 11 annual shareholders’ meeting after their election, and the 12 terms of the third group, if any, expire at the third annual 13 shareholders’ meeting after their election. At each annual 14 shareholders’ meeting held thereafter, directors shall be 15 chosen for a term of two years or three years, as the case may 16 be, to succeed those whose terms expire. 17 Sec. 6. NEW SECTION . 490.806A Public corporations —— 18 staggered terms. 19 1. Except as provided in subsection 2, and notwithstanding 20 anything to the contrary in the articles of incorporation or 21 bylaws of a public corporation, the terms of directors of a 22 public corporation shall be staggered by dividing the number 23 of directors into three groups, as nearly equal in number as 24 possible. The first group shall be referred to as “class I 25 directors”, the second group shall be referred to as “class II 26 directors”, and the third group shall be referred to as “class 27 III directors”. 28 a. On or before the date on which a public corporation first 29 convenes an annual shareholders’ meeting following the time 30 the public corporation becomes subject to this subsection, the 31 board of directors of the public corporation shall by majority 32 vote designate from among its members directors to serve as 33 class I directors, class II directors, and class III directors. 34 b. The terms of directors serving in office on the date that 35 -2- LSB 1496HV (2) 84 da/nh 2/ 6

H.F. 578 the public corporation becomes subject to this subsection shall 1 be as follows: 2 (1) Class I directors shall continue in office until the 3 first annual shareholders’ meeting following the date that the 4 public corporation becomes subject to this subsection, and 5 until their successors are elected. The shareholders’ meeting 6 shall be conducted not less than eleven months following the 7 last annual shareholders’ meeting conducted before the public 8 corporation became subject to this subsection. 9 (2) Class II directors shall continue in office until one 10 year following the first annual shareholders’ meeting described 11 in subparagraph (1), and until their successors are elected. 12 (3) Class III directors shall continue in office until 13 two years following the first annual shareholders’ meeting 14 described in subparagraph (1), and until their successors are 15 elected. 16 c. At each annual shareholders’ meeting of a public 17 corporation subject to this subsection, the successors to the 18 class of directors whose term expires at that meeting shall be 19 elected to hold office for a term of three years following such 20 meeting and until their successors are elected. 21 d. The board of directors of a public corporation subject 22 to this subsection shall adopt an amendment to its articles of 23 incorporation as provided in section 490.1005A. 24 e. Notwithstanding this subsection, the articles of 25 incorporation of a public corporation may confer upon the 26 holders of preferred shares the right to elect one or more 27 directors pursuant to section 490.804, who shall serve for such 28 term, and have such voting powers, as shall be stated in the 29 articles of incorporation. 30 2. Every public corporation shall be subject to subsection 31 1, unless it is exempt pursuant to this subsection. 32 a. (1) In order for a public corporation in existence on 33 the effective date of this Act to be exempt from subsection 1, 34 its board of directors must adopt a resolution or take action 35 -3- LSB 1496HV (2) 84 da/nh 3/ 6

H.F. 578 under section 490.821 expressly making an election to be exempt 1 from the provisions of subsection 1. Such resolution or action 2 must be adopted or taken within forty days after the effective 3 date of this Act. 4 (2) Upon adopting the resolution or taking board action 5 under section 490.821, the public corporation is no longer 6 subject to subsection 1, effective immediately unless otherwise 7 provided for in the resolution or by the board action. 8 b. If on the effective date of this Act the articles of 9 incorporation of the public corporation already provide for 10 staggering the terms of its directors under section 490.806, 11 the public corporation shall be exempt from the provisions of 12 subsection 1. In such event, no further corporate action is 13 required, and the public corporation is not required to amend 14 or modify any provision of its articles of incorporation or 15 bylaws in order to be exempt from subsection 1. 16 c. A corporation that becomes a public corporation on 17 or after the effective date of this Act is exempt from the 18 provisions of subsection 1. 19 Sec. 7. Section 490.810, Code 2011, is amended by adding the 20 following new subsection: 21 NEW SUBSECTION . 1A. For a public corporation subject 22 to section 490.806A, subsection 1, a vacancy on the board of 23 directors, including but not limited to a vacancy resulting 24 from an increase in the number of directors, shall be filled 25 solely by the affirmative vote of a majority of the remaining 26 directors, even though less than a quorum of the board. 27 Sec. 8. NEW SECTION . 490.1005A Public corporation —— 28 amendment by board of directors. 29 1. The board of directors of a public corporation subject to 30 section 490.806A, subsection 1, shall adopt an amendment to its 31 articles of incorporation which includes all of the following: 32 a. A statement that the public corporation is subject to 33 section 490.806A, subsection 1. 34 b. Any necessary changes to the articles of incorporation 35 -4- LSB 1496HV (2) 84 da/nh 4/ 6

H.F. 578 required to implement the requirements of section 490.806A, 1 subsection 1, including by staggering the terms of the board of 2 directors as described in that subsection. 3 2. Any amendment to the articles of incorporation as 4 provided in subsection 1 of this section shall be made without 5 shareholder approval. 6 Sec. 9. REPEAL. 7 1. This Act is repealed on December 31, 2014. 8 2. However, a public corporation that has amended its 9 articles of incorporation under section 490.1005A prior to 10 the date of repeal shall continue to stagger the terms of its 11 directors as provided in section 490.806A, subsection 1, until 12 such time as the articles of incorporation are specifically 13 amended to remove or modify the staggered terms in accordance 14 with the procedures of chapter 490. 15 Sec. 10. EFFECTIVE UPON ENACTMENT. This Act, being deemed 16 of immediate importance, takes effect upon enactment. 17 EXPLANATION 18 GENERAL. This bill makes special provision for the 19 management of a public corporation by its board of directors. 20 PUBLIC CORPORATION DEFINED. The bill defines a public 21 corporation as either (1) having a class of voting stock listed 22 on a national trading exchange or (2) comprised of more than 23 2,000 shareholders. It deletes a provision referencing the 24 national association of securities dealers automated quotations 25 – national market system to reflect that such system is now a 26 national securities exchange. 27 STAGGERED TERMS FOR BOARD OF DIRECTORS. Currently, the 28 terms of directors for all corporations are for one year 29 (Code section 490.805), unless the terms are staggered by 30 dividing the total number of directors into two groups with 31 the directors serving either one or two years depending upon 32 the group or by dividing directors into three groups with the 33 directors serving one, two, or three years depending upon the 34 group (Code section 490.806). The bill requires that all 35 -5- LSB 1496HV (2) 84 da/nh 5/ 6

H.F. 578 public corporations divide their number of directors into three 1 equal groups (referred to as “classes”) serving staggered 2 three-year terms as designated by the current board. The 3 staggered term requirements apply to directors elected by 4 the public corporation’s holders of common shares and not to 5 directors elected by holders of preferred shares (generally 6 a class of ownership enjoying a higher status when claiming 7 assets or earnings). 8 EXEMPTIONS. A public corporation may be exempted from the 9 new staggered term requirements, regardless of whether it is 10 subject to the one-term requirements in Code section 490.805 11 or the staggered term requirements in Code section 490.806. 12 The exemption applies only if its board makes an election to 13 opt out of the new staggered term requirements in Code section 14 490.806A by a date certain. The opt-out provision applies 15 to a public corporation that existed on the bill’s effective 16 date. A public corporation is automatically exempted from the 17 new staggered term requirements if it is already subject to the 18 staggered term requirements in Code section 490.806. It is 19 not required to amend its articles of incorporation or bylaws. 20 A corporation that becomes a public corporation on or after 21 the effective date of the bill is also exempted from the new 22 staggered term requirements. 23 AMENDMENTS TO ARTICLES OF INCORPORATION. A public 24 corporation that is subject to the new staggered term 25 requirements in Code section 490.806A must amend its articles 26 of incorporation. 27 FUTURE REPEAL. The bill’s provisions are repealed on 28 December 31, 2014. However, a public corporation that has 29 amended its articles of incorporation to provide for staggered 30 terms of directors as provided in the bill shall continue to do 31 so until the articles are amended. 32 EFFECTIVE DATE. The bill takes effect upon enactment. 33 -6- LSB 1496HV (2) 84 da/nh 6/ 6