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would not be able to pay its debts as they become due in its usual course of business or the
corporation’s total assets would be less than the sum of its total liabilities plus (unless the
Articles of Incorporation permit otherwise) any amounts needed to satisfy the preferential rights
upon dissolution of any shareholders whose preferential rights are superior to those receiving
the distribution.

Except for corporations that make an election under Subchapter S of the Internal Revenue
Code, a corporation is taxed on any earnings before they are passed down to shareholders.
Once received by the shareholders, these distributions are then taxed at the shareholder’s
applicable individual tax rate. Thus, the corporation is subject to what is called “double
taxation.”

3.1.10 Liability of Shareholders

Shareholders of a corporation generally enjoy protection from personal liability for the obligations
of the corporation. Shareholders are under no obligation to the corporation or its creditors to
pay for shares, other than the obligation to pay the corporation any unpaid portion of
consideration for which the shares were originally issued to the shareholder.

Under certain circumstances, usually extraordinary in nature, a court of equity may “pierce the
veil” of a corporation to impose personal liability upon shareholders for the corporation’s
obligations. Among the factors that might lead a court to pierce the veil are the shareholder’s
failure to observe corporate formalities, such as keeping corporate records, electing directors
and officers, holding meetings, and commingling corporate and non-corporate funds and
assets. It is important to observe these formalities of corporate existence, even though the
instances of veil piercing by the courts are unusual.

3.1.11 Extraordinary Transactions
Certain extraordinary transactions involving corporations, including mergers, share exchanges,
conversion to a different form of business organization, sale of all or substantially all assets out
of the ordinary course of business, and voluntary dissolution, require, in addition to board of
director approval, approval of the corporation’s shareholders. In addition, shareholders who
object to such transactions and who do not vote in favor of them may, under certain
circumstances, elect to dissent from the transaction and, by following detailed procedures set
forth in the Florida Business Corporation Act, demand to be paid the fair value of their shares,
as determined by an appraisal. Appraisal rights are not available for holders of any class of
shares which are either traded on a national securities exchange or for a class of shares which
has at least 2,000 shareholders or a market value of at least $10 million (excluding such value
held by subsidiaries, senior executives and directors, and beneficial shareholders owning more
than 10% of such shares) and in cases where the shareholders are required to accept any
consideration other than cash for their shares.

3.1.12 Foreign Corporations

A corporation formed under the laws of another jurisdiction but which conducts business in
Florida is required to obtain a Certificate of Authority to transact business in Florida. To obtain a
Certificate of Authority, the corporation must file a certificate of existence issued from an
authorized officer of the jurisdiction of the corporation’s formation evidencing said incorporation
and translated under oath if in a foreign language.

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