voting common stock and 10,000 shares of authorized, issued, and outstanding nonvoting

5% cumulative, nonparticipating preferred stock with a face amount of $100 per share. In

Year 14, Drain's officers and directors intentionally allowed pollutants to be discharged by

Drain's processing plant. These actions resulted in Drain's payment of penalties. Solely as a

result of the penalties, no dividends were declared for the years ended December 31, Year

15, and December 31, Year 16. The total amount Drain paid in penalties was $1 million. In

Year 16, Drain was able to recover the full amount of the penalties from an insurance

company that had issued Drain a business liability policy. Drain's directors refused to use

this money to declare a dividend and decided to hold the $1 million in a special fund to pay

future bonuses to officers and directors.

Select from the option list provided the answer that best completes each statement below.

Each choice may be used once, more than once, or not a

Select an option below

Statement

O Available for distribution as a dividend

1. The actions by Drain's officers and

directors in allowing pollutants to be

discharged generally are considered a

violation of the

O Fiduciary duty to prevent lossegm

O Cash dividend

O Fiduciary duty of care

2. A shareholder's derivative suit, if.

successful, probably will result in the officers

and directors being

O Fiduciary duty of loyalty

3. A shareholder's derivative suit, if

successful, probably will result in the $1

million being considered

4. If the $1 million had been distributed to

the shareholders in Year 16, the distribution

would be characterized as a

5. If the $1 million had been distributed