SHAREHOLDERS FILING SUIT.

DIRECT- Injury to the SH and to him individually and not the corporation; the remedy would be monetary damages to the SH DERIVATIVEinjury to the corporation and the remedy would be distributed to the group of SHs A stockholder filing a derivative lawsuit must allege that 1) Allege that the BOD rejected his pre-suit demand to ASSERT THE CORP CLAIM OR 2) Allege with particularity that demand would have been futile and thus why no attempt was made to OBTAIN BOARD ACTION WHEN DEMAND IS MADE 1. A SH who makes a Demand is entitled to know promptly of the BOD decision. If the BOD rejects the SH demand then the BOD is entitled to the presumption of the BJR (there a presumption that the BOD is in the best position to make decisions on and INDEPENDENT, INFORMED, and IN GOOD FAITH. AFTER DEMAND IS MADE AND REFUSE a BOD decision to dismiss a derivative lawsuit will be respected unless it was wrongful and THUS terminates a SH legal ability to initiate a derivative action (by making demand a SH waives his right to contest the independence of the BOD UNLESS the SH can allege with particularity that the BOD should not be given that reasonable doubt. WHEN DEMAND IS FUTILE A ground for alleging with particularity that demand would be futile is that a REASONABLE DOUBT EXISTS that the BOD is capable of making an INDEPENDENT DECISION TO ASSERT THE CLAIM IF DEMAND IS MADE: BASIS OF CLAIM EXCUSAL WOULD BE: 1. DELAWARE APPROACH: GRIMES TEST MMU 1. MAJORITY OF THE BOARD HAVE A MATERIAL FINANCIAL OR FAMILIAL INTEREST 2. MAJORITY OF THE BOARD IS INCAPABLE OF ACTING INDEPENDENTLY FOR SOME OTHER REASON (DOMINANCE OR CONTROL) 3. OR UNDERLYING TRANSACTION IS NOT THE PRODUCT OF A VALID BUSINESS JUDGMENT

2.UNIVERSAL APPROACHrequires demand in all cases and written demand has been made and 90 days have expired from the time demand was made. (or if demand was rejected earliar)

a. UNLESS irreparable injury 2 the Corp. would result by waiting for the 90 day expiration pd. 3.NY APPROACH (MARX) MDC: 1. MAJORITY OF DIRECTORS INTERESTED 2. DIRECTORS FAILED TO INFORM THEMSELVES 3. CHALLENGED TRANSACTION COULDNT HAVE BEEN THE PRODUCT OF SOUND BUSINESS JUDGEMENT NOW: IF DEMAND IS EXCUSED, SH SUIT IS ALLOWED the BOD may use a SLC to get the court to dismiss NOW: IF DEMAND IS NOT EXCUSED: DEMAND MADE? NOsuit dismissed/stayed until demand made Yes- Demand refused? NO-BOD takes control of suit YES-Refusal wrongful? (BJR applied to decision to refuse demand) YES-suit allowed. NO-suit dismissed NOTE: In inattention and OVERSIGHT cases there was NO DECISION MADE so these do not apply. SO INSTEAD APPLY: A court must determine: 1) Whether or not the particular factual allegations of a derivative SH complaint creates a reasonable doubt that as of the time of the complaint is filed could have properly exercises its INDEPENDENT and DISINTERESTED BUSINESS JUDGMENT in responding to a demand.