§ 58‑65‑133. Creation and operation of foundation.
(a) Creation. AFoundation shall be created to receive the fair market value of the corporationas provided in G.S. 58‑65‑132(a)(7) when the corporation converts.
(b) Purpose. Thecharitable purpose of the Foundation shall be to promote the health of thepeople of North Carolina. For a period of 10 years from the effective date ofthe conversion, the Foundation may not, without the consent of the AttorneyGeneral, establish or operate any entity licensed pursuant to Chapter 58 of theGeneral Statutes that would compete with the new corporation or any of itssubsidiaries.
(c) Board of Directors. The initial board of directors of the foundation shall consist of 11 membersappointed by the Attorney General from a list of nominees recommended pursuantto subsection (d) of this section. The Attorney General shall stagger the termsof the initial appointees so that six members serve two‑year terms andfive members serve four‑year terms. The board shall fill a vacancy in aninitial term. Their successors shall be chosen by the board of directors of theFoundation in accordance with the bylaws of the Foundation and shall serve four‑yearterms. No member may serve more than two consecutive full terms nor more than10 consecutive years. The Foundation may increase or decrease the size of theboard in accordance with its bylaws, provided that the board shall have nofewer than nine directors and no more than 15 directors and that a decrease insize does not eliminate the then current term of any director.
(d) Advisory Committee. An advisory committee shall be formed to (i) develop, subject to the approvalof the Attorney General, the criteria for selection of the Foundation's initialboard of directors and (ii) nominate candidates for the initial board ofdirectors. The advisory committee shall be comprised of the following 11members: three representatives of the business community selected by the NorthCarolina Chamber, three representatives of the public and private medicalschool community selected by The University of North Carolina Board ofGovernors, three representatives of private foundations and other nonprofitorganizations selected by the North Carolina Center for Nonprofits, arepresentative of NCHA, Inc., and a representative of the North CarolinaMedical Society. After receiving a copy of the proposed plan of conversion, theAttorney General shall immediately notify these organizations, and the advisorycommittee shall be constituted within 45 days thereafter.
The advisory committee'scriteria shall ensure an open recruitment process for the directors. Theadvisory committee shall nominate 22 residents of North Carolina for the 11positions to be filled by the Attorney General. The Attorney General shallretain an independent executive recruiting firm or firms to assist the advisorycommittee in its work.
(e) Foundation and NewCorporation Independent. The Foundation and its directors, officers, andemployees shall be and remain independent of the new corporation and itsaffiliates. No director, officer, or employee of the Foundation shall serve asa director, officer, or employee of the new corporation or any of itsaffiliates. No director, officer, or employee of the new corporation or any ofits affiliates shall serve as a director, officer, or employee of theFoundation. This subsection shall no longer apply after (i) 10 years followingthe effective date of the conversion or (ii) the divestment by the Foundationof at least ninety‑five percent (95%) of the stock of the new corporationreceived pursuant to G.S. 58‑65‑132(a)(7)a. and subsection (a) ofthis section, whichever occurs later.
(f) Voting and StockRegistration Agreement. The Foundation and the new corporation shall operateunder a voting agreement and a stock registration agreement, approved by theCommissioner and the Attorney General, that provides at a minimum for thefollowing:
(1) The Foundation willvote the common stock in the new corporation for directors of the newcorporation nominated by the board of directors of the new corporation to theextent provided by the terms of the voting agreement.
(2) The votingrestrictions will not apply to common stock of the new corporation sold by theFoundation.
(3) The board ofdirectors of the new corporation will determine the timing of any initialpublic offering of the new corporation's common stock, either by the newcorporation or by the Foundation, and the Foundation shall have demandregistration rights and optional "piggy‑back" or "incidental"registration rights in connection with any offerings of the new corporation'scommon stock by the new corporation, on the terms and conditions set forth in astock registration agreement and agreed upon by the new corporation and theFoundation and approved by the Commissioner and the Attorney General.
(4) The voting agreementmay contain additional terms, including (i) voting and ownership restrictionswith regard to the common stock of the new corporation and (ii) provisions forthe voting or registration for sale of any common stock to be issued to theFoundation by the new corporation.
(g) Costs. Thecorporation shall pay the reasonable expenses of the advisory committee andexecutive search firm and the costs of any consultants, experts, or otherprofessional advisors retained by the Attorney General incident to review underthis section.
(h) Attorney General'sApproval. Before the Commissioner approves a plan of conversion pursuant toG.S. 58‑65‑132, the Attorney General, on behalf of the public andcharitable interests in this State, must approve the determination relating tothe fair market value of the corporation under G.S. 58‑65‑132(a)(7),the articles of incorporation and bylaws of the foundation, and all proposedagreements between the new corporation and the Foundation, including stockvoting or registration agreements. The Attorney General may seek advice onthese matters from consultants, investment bankers, and other professionaladvisors engaged by the Commissioner or Attorney General incident to review ofthe plan. The proposed articles of incorporation of the Foundation shallprovide for all of the following:
(1) State that theFoundation is organized and operated exclusively for charitable purposes andfor the promotion of social welfare.
(2) State that no partof the net earnings of the Foundation shall inure to the benefit of any privateshareholder or individual.
(3) State that theFoundation shall not engage in any political campaign activity or the making ofpolitical contributions.
(4) Prohibit theFoundation from paying or incurring any amount that, if paid by an organizationclassified as a "private foundation" under section 509(a) of theCode, would constitute a "taxable expenditure" as defined by sections4945(d)(1) and (2) of the Code.
(5) Prohibit theFoundation from engaging in any self‑dealing for the benefit of itsdirectors, officers, or employees.
(6) Provide for anongoing community advisory committee to offer broad public input to theFoundation concerning its operations and activities.
(7) Provide that theFoundation, after its first three years of operation, will pay out the lesserof (i) "qualifying distributions" of "distributableamounts," as defined in section 4942 of the Code, as if the Foundationwere classified as a private Foundation subject to the distributionrequirements, but not the taxes imposed, under that section or (ii)substantially all of its income, less qualifying expenses. In no event shallthe Foundation be required to invade its corpus to meet the distributionrequirements under this subdivision.
(8) State thatprovisions in the articles of incorporation that are either required by thissubdivision or designated by the Attorney General cannot be amended without theprior written approval of the Attorney General.
Within 120 days of the end ofits fiscal year, the Foundation shall provide the Attorney General, theCommissioner, the Speaker of the House of Representatives, and the PresidentPro Tempore of the Senate its State and federal tax returns for the precedingfiscal year. The tax returns shall be made available for public inspection. (1998‑3, s. 2; 1998‑217,s. 56; 2009‑570, s. 8(b).)
§ 58‑65‑133. Creation and operation of foundation.
(a) Creation. AFoundation shall be created to receive the fair market value of the corporationas provided in G.S. 58‑65‑132(a)(7) when the corporation converts.
(b) Purpose. Thecharitable purpose of the Foundation shall be to promote the health of thepeople of North Carolina. For a period of 10 years from the effective date ofthe conversion, the Foundation may not, without the consent of the AttorneyGeneral, establish or operate any entity licensed pursuant to Chapter 58 of theGeneral Statutes that would compete with the new corporation or any of itssubsidiaries.
(c) Board of Directors. The initial board of directors of the foundation shall consist of 11 membersappointed by the Attorney General from a list of nominees recommended pursuantto subsection (d) of this section. The Attorney General shall stagger the termsof the initial appointees so that six members serve two‑year terms andfive members serve four‑year terms. The board shall fill a vacancy in aninitial term. Their successors shall be chosen by the board of directors of theFoundation in accordance with the bylaws of the Foundation and shall serve four‑yearterms. No member may serve more than two consecutive full terms nor more than10 consecutive years. The Foundation may increase or decrease the size of theboard in accordance with its bylaws, provided that the board shall have nofewer than nine directors and no more than 15 directors and that a decrease insize does not eliminate the then current term of any director.
(d) Advisory Committee. An advisory committee shall be formed to (i) develop, subject to the approvalof the Attorney General, the criteria for selection of the Foundation's initialboard of directors and (ii) nominate candidates for the initial board ofdirectors. The advisory committee shall be comprised of the following 11members: three representatives of the business community selected by the NorthCarolina Chamber, three representatives of the public and private medicalschool community selected by The University of North Carolina Board ofGovernors, three representatives of private foundations and other nonprofitorganizations selected by the North Carolina Center for Nonprofits, arepresentative of NCHA, Inc., and a representative of the North CarolinaMedical Society. After receiving a copy of the proposed plan of conversion, theAttorney General shall immediately notify these organizations, and the advisorycommittee shall be constituted within 45 days thereafter.
The advisory committee'scriteria shall ensure an open recruitment process for the directors. Theadvisory committee shall nominate 22 residents of North Carolina for the 11positions to be filled by the Attorney General. The Attorney General shallretain an independent executive recruiting firm or firms to assist the advisorycommittee in its work.
(e) Foundation and NewCorporation Independent. The Foundation and its directors, officers, andemployees shall be and remain independent of the new corporation and itsaffiliates. No director, officer, or employee of the Foundation shall serve asa director, officer, or employee of the new corporation or any of itsaffiliates. No director, officer, or employee of the new corporation or any ofits affiliates shall serve as a director, officer, or employee of theFoundation. This subsection shall no longer apply after (i) 10 years followingthe effective date of the conversion or (ii) the divestment by the Foundationof at least ninety‑five percent (95%) of the stock of the new corporationreceived pursuant to G.S. 58‑65‑132(a)(7)a. and subsection (a) ofthis section, whichever occurs later.
(f) Voting and StockRegistration Agreement. The Foundation and the new corporation shall operateunder a voting agreement and a stock registration agreement, approved by theCommissioner and the Attorney General, that provides at a minimum for thefollowing:
(1) The Foundation willvote the common stock in the new corporation for directors of the newcorporation nominated by the board of directors of the new corporation to theextent provided by the terms of the voting agreement.
(2) The votingrestrictions will not apply to common stock of the new corporation sold by theFoundation.
(3) The board ofdirectors of the new corporation will determine the timing of any initialpublic offering of the new corporation's common stock, either by the newcorporation or by the Foundation, and the Foundation shall have demandregistration rights and optional "piggy‑back" or "incidental"registration rights in connection with any offerings of the new corporation'scommon stock by the new corporation, on the terms and conditions set forth in astock registration agreement and agreed upon by the new corporation and theFoundation and approved by the Commissioner and the Attorney General.
(4) The voting agreementmay contain additional terms, including (i) voting and ownership restrictionswith regard to the common stock of the new corporation and (ii) provisions forthe voting or registration for sale of any common stock to be issued to theFoundation by the new corporation.
(g) Costs. Thecorporation shall pay the reasonable expenses of the advisory committee andexecutive search firm and the costs of any consultants, experts, or otherprofessional advisors retained by the Attorney General incident to review underthis section.
(h) Attorney General'sApproval. Before the Commissioner approves a plan of conversion pursuant toG.S. 58‑65‑132, the Attorney General, on behalf of the public andcharitable interests in this State, must approve the determination relating tothe fair market value of the corporation under G.S. 58‑65‑132(a)(7),the articles of incorporation and bylaws of the foundation, and all proposedagreements between the new corporation and the Foundation, including stockvoting or registration agreements. The Attorney General may seek advice onthese matters from consultants, investment bankers, and other professionaladvisors engaged by the Commissioner or Attorney General incident to review ofthe plan. The proposed articles of incorporation of the Foundation shallprovide for all of the following:
(1) State that theFoundation is organized and operated exclusively for charitable purposes andfor the promotion of social welfare.
(2) State that no partof the net earnings of the Foundation shall inure to the benefit of any privateshareholder or individual.
(3) State that theFoundation shall not engage in any political campaign activity or the making ofpolitical contributions.
(4) Prohibit theFoundation from paying or incurring any amount that, if paid by an organizationclassified as a "private foundation" under section 509(a) of theCode, would constitute a "taxable expenditure" as defined by sections4945(d)(1) and (2) of the Code.
(5) Prohibit theFoundation from engaging in any self‑dealing for the benefit of itsdirectors, officers, or employees.
(6) Provide for anongoing community advisory committee to offer broad public input to theFoundation concerning its operations and activities.
(7) Provide that theFoundation, after its first three years of operation, will pay out the lesserof (i) "qualifying distributions" of "distributableamounts," as defined in section 4942 of the Code, as if the Foundationwere classified as a private Foundation subject to the distributionrequirements, but not the taxes imposed, under that section or (ii)substantially all of its income, less qualifying expenses. In no event shallthe Foundation be required to invade its corpus to meet the distributionrequirements under this subdivision.
(8) State thatprovisions in the articles of incorporation that are either required by thissubdivision or designated by the Attorney General cannot be amended without theprior written approval of the Attorney General.
Within 120 days of the end ofits fiscal year, the Foundation shall provide the Attorney General, theCommissioner, the Speaker of the House of Representatives, and the PresidentPro Tempore of the Senate its State and federal tax returns for the precedingfiscal year. The tax returns shall be made available for public inspection. (1998‑3, s. 2; 1998‑217,s. 56; 2009‑570, s. 8(b).)
§ 58‑65‑133. Creation and operation of foundation.
(a) Creation. AFoundation shall be created to receive the fair market value of the corporationas provided in G.S. 58‑65‑132(a)(7) when the corporation converts.
(b) Purpose. Thecharitable purpose of the Foundation shall be to promote the health of thepeople of North Carolina. For a period of 10 years from the effective date ofthe conversion, the Foundation may not, without the consent of the AttorneyGeneral, establish or operate any entity licensed pursuant to Chapter 58 of theGeneral Statutes that would compete with the new corporation or any of itssubsidiaries.
(c) Board of Directors. The initial board of directors of the foundation shall consist of 11 membersappointed by the Attorney General from a list of nominees recommended pursuantto subsection (d) of this section. The Attorney General shall stagger the termsof the initial appointees so that six members serve two‑year terms andfive members serve four‑year terms. The board shall fill a vacancy in aninitial term. Their successors shall be chosen by the board of directors of theFoundation in accordance with the bylaws of the Foundation and shall serve four‑yearterms. No member may serve more than two consecutive full terms nor more than10 consecutive years. The Foundation may increase or decrease the size of theboard in accordance with its bylaws, provided that the board shall have nofewer than nine directors and no more than 15 directors and that a decrease insize does not eliminate the then current term of any director.
(d) Advisory Committee. An advisory committee shall be formed to (i) develop, subject to the approvalof the Attorney General, the criteria for selection of the Foundation's initialboard of directors and (ii) nominate candidates for the initial board ofdirectors. The advisory committee shall be comprised of the following 11members: three representatives of the business community selected by the NorthCarolina Chamber, three representatives of the public and private medicalschool community selected by The University of North Carolina Board ofGovernors, three representatives of private foundations and other nonprofitorganizations selected by the North Carolina Center for Nonprofits, arepresentative of NCHA, Inc., and a representative of the North CarolinaMedical Society. After receiving a copy of the proposed plan of conversion, theAttorney General shall immediately notify these organizations, and the advisorycommittee shall be constituted within 45 days thereafter.
The advisory committee'scriteria shall ensure an open recruitment process for the directors. Theadvisory committee shall nominate 22 residents of North Carolina for the 11positions to be filled by the Attorney General. The Attorney General shallretain an independent executive recruiting firm or firms to assist the advisorycommittee in its work.
(e) Foundation and NewCorporation Independent. The Foundation and its directors, officers, andemployees shall be and remain independent of the new corporation and itsaffiliates. No director, officer, or employee of the Foundation shall serve asa director, officer, or employee of the new corporation or any of itsaffiliates. No director, officer, or employee of the new corporation or any ofits affiliates shall serve as a director, officer, or employee of theFoundation. This subsection shall no longer apply after (i) 10 years followingthe effective date of the conversion or (ii) the divestment by the Foundationof at least ninety‑five percent (95%) of the stock of the new corporationreceived pursuant to G.S. 58‑65‑132(a)(7)a. and subsection (a) ofthis section, whichever occurs later.
(f) Voting and StockRegistration Agreement. The Foundation and the new corporation shall operateunder a voting agreement and a stock registration agreement, approved by theCommissioner and the Attorney General, that provides at a minimum for thefollowing:
(1) The Foundation willvote the common stock in the new corporation for directors of the newcorporation nominated by the board of directors of the new corporation to theextent provided by the terms of the voting agreement.
(2) The votingrestrictions will not apply to common stock of the new corporation sold by theFoundation.
(3) The board ofdirectors of the new corporation will determine the timing of any initialpublic offering of the new corporation's common stock, either by the newcorporation or by the Foundation, and the Foundation shall have demandregistration rights and optional "piggy‑back" or "incidental"registration rights in connection with any offerings of the new corporation'scommon stock by the new corporation, on the terms and conditions set forth in astock registration agreement and agreed upon by the new corporation and theFoundation and approved by the Commissioner and the Attorney General.
(4) The voting agreementmay contain additional terms, including (i) voting and ownership restrictionswith regard to the common stock of the new corporation and (ii) provisions forthe voting or registration for sale of any common stock to be issued to theFoundation by the new corporation.
(g) Costs. Thecorporation shall pay the reasonable expenses of the advisory committee andexecutive search firm and the costs of any consultants, experts, or otherprofessional advisors retained by the Attorney General incident to review underthis section.
(h) Attorney General'sApproval. Before the Commissioner approves a plan of conversion pursuant toG.S. 58‑65‑132, the Attorney General, on behalf of the public andcharitable interests in this State, must approve the determination relating tothe fair market value of the corporation under G.S. 58‑65‑132(a)(7),the articles of incorporation and bylaws of the foundation, and all proposedagreements between the new corporation and the Foundation, including stockvoting or registration agreements. The Attorney General may seek advice onthese matters from consultants, investment bankers, and other professionaladvisors engaged by the Commissioner or Attorney General incident to review ofthe plan. The proposed articles of incorporation of the Foundation shallprovide for all of the following:
(1) State that theFoundation is organized and operated exclusively for charitable purposes andfor the promotion of social welfare.
(2) State that no partof the net earnings of the Foundation shall inure to the benefit of any privateshareholder or individual.
(3) State that theFoundation shall not engage in any political campaign activity or the making ofpolitical contributions.
(4) Prohibit theFoundation from paying or incurring any amount that, if paid by an organizationclassified as a "private foundation" under section 509(a) of theCode, would constitute a "taxable expenditure" as defined by sections4945(d)(1) and (2) of the Code.
(5) Prohibit theFoundation from engaging in any self‑dealing for the benefit of itsdirectors, officers, or employees.
(6) Provide for anongoing community advisory committee to offer broad public input to theFoundation concerning its operations and activities.
(7) Provide that theFoundation, after its first three years of operation, will pay out the lesserof (i) "qualifying distributions" of "distributableamounts," as defined in section 4942 of the Code, as if the Foundationwere classified as a private Foundation subject to the distributionrequirements, but not the taxes imposed, under that section or (ii)substantially all of its income, less qualifying expenses. In no event shallthe Foundation be required to invade its corpus to meet the distributionrequirements under this subdivision.
(8) State thatprovisions in the articles of incorporation that are either required by thissubdivision or designated by the Attorney General cannot be amended without theprior written approval of the Attorney General.
Within 120 days of the end ofits fiscal year, the Foundation shall provide the Attorney General, theCommissioner, the Speaker of the House of Representatives, and the PresidentPro Tempore of the Senate its State and federal tax returns for the precedingfiscal year. The tax returns shall be made available for public inspection. (1998‑3, s. 2; 1998‑217,s. 56; 2009‑570, s. 8(b).)
