AN ACT Relating to business and industrial development corporations; amending RCW 31.24.010, 31.24.020, 31.24.030, 31.24.040, 31.24.070, 31.24.080, 31.24.090, 31.24.120, 31.24.130, 31.24.140, 31.24.150, and 31.24.160; reenacting and amending RCW 42.17.310; adding new sections to chapter 31.24 RCW; adding a new section to chapter 82.04 RCW; adding a new section to chapter 82.16 RCW; adding a new section to chapter 48.14 RCW; creating new sections; repealing RCW 31.24.050, 31.24.060, and 31.24.100; and prescribing penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that the unavailability of capital to viable firms that do not meet current commercial bank or venture capital criteria for loans or equity investments can have a devastating impact on the state's economic development efforts. Without reasonable access to financing, talented and aggressive entrepreneurs are cut out of the economic system and the overall economy of the state suffers.

The process of job creation and economic development requires readily available capital for small and young companies that are the major source of innovations and new jobs. To ensure the availability of capital to entrepreneurs in Washington state, the legislature hereby eliminates unnecessary restrictions which have discouraged the formation of industrial development corporations under current law and adds incentives to encourage the formation of business and industrial development corporations.

Sec. 2. Section 1, chapter 162, Laws of 1963 and RCW 31.24.010 are each amended to read as follows:

((~~As used in this chapter, the following words and phrases, unless differently defined or described, shall have the meanings and references as follows~~)) Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter:

(1) Corporation means a Washington business and industrial development corporation created under this chapter.

(2) Financial institution means any banking corporation or trust company, national banking association, savings and loan association, insurance company or related corporation, partnership, foundation, or other institution engaged primarily in lending or investing funds.

(3) ((Member means any financial institution authorized to do business within this state which shall undertake to lend money to a corporation created under this chapter, upon its call, and in accordance with the provisions of this chapter.

~~(4)~~)) Board of directors means the board of directors of the corporation created under this chapter.

((~~(5) Loan limit means for any member, the maximum amount permitted to be outstanding at one time on loans made by such member to the corporation, as determined under the provisions of this chapter.~~))

(4) Business means an individual, proprietorship, joint venture, partnership, trust, business trust, syndicate, association, joint stock company, cooperative, corporation, or any other organization operating in this state, and paying more than fifty percent of its contributions or payments for the purposes of unemployment insurance to this state.

(5) Associate means, if used with respect to a corporation:

(a) A controlling person, director, officer, agent, or advisor of that corporation.

(b) A director, officer, or partner of a person referred to in (a) of this subsection.

(c) A person who controls, is controlled by, or is under common control with a person referred to in (a) of this subsection directly or indirectly through one or more intermediaries.

(d) Any close relative of any person referred to in (a) of this subsection.

(e) A person of which a person referred to in (a) through (d) of this subsection is a director or officer.

(f) A person in which a person referred to in (a) through (d) of this subsection, or any combination of those persons acting in concert, owns or controls, directly or indirectly, a twenty percent or greater equity interest.

For the purposes of this subsection (5)(f), a person who is in a relationship referred to in this subsection within six months before or after a corporation provides financing assistance shall be considered to be in that relationship as of the date that corporation provides that financing assistance.

If a corporation, in order to protect its interests, designates a person to serve as a director of, officer of, or in any capacity in the management of a business to which that corporation provides financing assistance, that person shall not, on that account, be considered to have a relationship with that business. This exception does not apply if the person has, directly or indirectly, any other financial interest in the business or if the person, at any time before the corporation provides the financing assistance, served as a director of, officer of, or in any other capacity in the management of the business for a period of thirty days or more.

(6) Close relative means a parent, child, sibling, spouse, father-in-law, mother-in-law, son-in-law, brother-in-law, daughter-in-law, sister-in-law, grandparent, or grandchild.

(7) Supervisor means the state supervisor of banking.

Sec. 3. Section 2, chapter 162, Laws of 1963 as amended by section 1, chapter 16, Laws of 1974 ex. sess. and RCW 31.24.020 are each amended to read as follows:

((~~Fifteen~~)) Seven or more persons, a majority of whom shall be residents of this state, who may desire to create ((an)) a business and industrial development corporation under the provisions of this chapter, for the purpose of promoting, developing and advancing the prosperity and economic welfare of the state and, to that end, to exercise the powers and privileges hereinafter provided, may be incorporated by filing in the office of the secretary of state, as hereinafter provided, articles of incorporation. The articles of incorporation shall contain:

(1) The name of the corporation, which shall include the words "Business and Industrial Development Corporation of Washington."

(2) The location of the principal office of the corporation, but such corporation may have offices in such other places within the state as may be fixed by the board of directors.

(3) The purposes for which the corporation is founded, which shall be to ((promote, stimulate, develop and advance the business prosperity and economic welfare of Washington and its citizens; to encourage and assist through loans, investments or other business transactions in the location of new business and industry in this state and to rehabilitate and assist existing business and industry; to stimulate and assist in the expansion of all kinds of business activity which will tend to promote the business development and maintain the economic stability of this state, provide maximum opportunities for employment, encourage thrift, and improve the standard of living of citizens of this state; similarly, to cooperate and act in conjunction with other organizations, public or private, in the promotion and advancement of industrial, commercial, agricultural and recreational developments in this state; and to provide financing for the promotion, development, and conduct of all kinds of business activity in this state)) provide moderate risk financing and management assistance to businesses operating primarily in Washington state to increase job opportunities for Washington citizens and the prosperity of the state.

(4) The names and post office addresses of the members of the first board of directors, who, unless otherwise provided by the articles of incorporation or the bylaws, shall hold office for the first year of existence of the corporation or until their successors are elected and have qualified.

(5) Any provision which the incorporators may choose to insert for the regulation of the business and for the conduct of the affairs of the corporation and any provision creating, dividing, limiting and regulating the powers of the corporation, the directors, stockholders or any class of the stockholders, including, but not limited to a list of the officers, and provisions governing the issuance of stock certificates to replace lost or destroyed certificates.

(6) The amount of authorized capital stock and the number of shares into which it is divided, the par value of each share and the amount of capital with which it will commence business and, if there is more than one class of stock, a description of the different classes; the names and post office addresses of the subscribers of stock and the number of shares subscribed by each. The aggregate of the subscription shall be the minimum amount of capital with which the corporation shall commence business which shall not be less than ((~~fifty thousand~~)) one million dollars, except as otherwise provided in this chapter. The articles of incorporation may also contain any provision consistent with the laws of this state for the regulation of the affairs of the corporation.

(7) The articles of incorporation shall be in writing, subscribed by not less than five natural persons competent to contract and acknowledged by each of the subscribers before an officer authorized to take acknowledgments and filed in the office of the secretary of state for approval. A duplicate copy so subscribed and acknowledged may also be filed.

(8) The articles of incorporation shall recite that the corporation is organized under the provisions of this chapter.

The secretary of state shall not approve articles of incorporation for a corporation organized under this chapter until ((a total of at least ten national banks, state banks, savings banks, industrial savings banks, federal savings and loan associations, domestic building and loan associations, or insurance companies authorized to do business within this state, or any combination thereof, have agreed in writing to become members of said corporation; and said written agreement shall be filed with the secretary of state with the articles of incorporation and the filing of same shall be a condition precedent to the approval of the articles of incorporation by the secretary of state)) the state supervisor of banking has certified the corporation as eligible to operate as a business and industrial development corporation under this chapter.

A person transacting business in this state shall not use a name or title which indicates that the person is a business and industrial development corporation including, but not limited to, use of the term "BIDCO," and a person shall not otherwise represent that the person is a business and industrial development corporation until the person has been certified as a business and industrial development corporation.

A corporation shall be certified by the supervisor of banking as eligible to operate under this chapter upon meeting the following conditions:

(a) The corporation has paid a three thousand dollar certification fee to the state supervisor of banking and such other fees or costs as the supervisor establishes by rule;

(b) The corporation has submitted a business plan which includes at least three years of detailed financial projections and other relevant information;

(c) The corporation has provided information about the character and competence of each director and officer of the corporation; and

(d) The supervisor finds that the corporation's officers and directors are capable of running the corporation competently, has a net worth and lendable funds sufficient to provide financing assistance, and that the directors and officers of the corporation have agreed to comply with the terms of this chapter and its intent to facilitate the availability of moderate risk financing to firms in Washington. In making the finding under this subsection, the supervisor of banking shall:

(i) Consult with the director of trade and economic development and the director of community development; and

(ii) Require a minimum net worth of one million dollars and an additional one million dollars in lendable funds or an enforceable pledge for one million dollars in lendable funds, unless the supervisor finds that special circumstances render lesser amounts of net worth or lendable funds adequate for the corporation to meet the intent of this chapter and operate according to its business plan.

Whenever the articles of incorporation shall have been filed in the office of the secretary of state and approved by ((~~him~~)) the secretary and all taxes, fees and charges, have been paid, as required by law, the subscribers, their successors and assigns shall constitute a corporation, and said corporation shall then be authorized to commence business, and stock thereof to the extent herein or hereafter duly authorized may from time to time be issued.

Sec. 4. Section 3, chapter 162, Laws of 1963 as last amended by section 42, chapter 466, Laws of 1985 and RCW 31.24.030 are each amended to read as follows:

The business of a corporation shall be to provide financing and management assistance to businesses operating primarily in Washington state. In furtherance of its ((~~purposes~~)) business and in addition to the powers now or hereafter conferred on business corporations by the provisions of Title 23A RCW, ((~~the~~)) each corporation shall, subject to the restrictions and limitations herein contained, have the following powers:

(1) To elect, appoint and employ officers, agents and employees; to make contracts and incur liabilities for any of the purposes of the corporation((: PROVIDED, That the corporation shall not incur any secondary liability by way of guaranty or endorsement of the obligations of any person, firm, corporation, joint stock company, association or trust, or in any other manner)).

(2) To borrow money ((~~from its members and the small business administration and any other similar federal agency,~~)) for any of the purposes of the corporation; to issue therefor its bonds, debentures, notes or other evidence of indebtedness, whether secured or unsecured, and to secure the same by mortgage, pledge, deed of trust or other lien on its property, franchises, rights and privileges of every kind and nature or any part thereof or interest therein, without securing stockholder ((~~or member~~)) approval((: PROVIDED, That no loan to the corporation shall be secured in any manner unless all outstanding loans to the corporation shall be secured equally and ratably in proportion to the unpaid balance of such loans and in the same manner)).

(3) To make loans to any person, firm, corporation, joint-stock company, association or trust, and to establish and regulate the terms and conditions with respect to any such loans and the charges for interest and service connected therewith((: PROVIDED, That the corporation shall not approve any application for a loan unless and until the person applying for said loan shall show that he has applied for the loan through ordinary banking channels and that the loan has been refused by at least one bank or other financial institution)).

(4) To purchase, receive, hold, lease, or otherwise acquire, and to sell, convey, transfer, lease or otherwise dispose of real and personal property, together with such rights and privileges as may be incidental and appurtenant thereto and the use thereof, ((~~including, but not restricted to, any~~)) if the real or personal property is for the corporation's use in operating its business, or if the real or personal property is acquired by the corporation from time to time in the satisfaction of debts or enforcement of obligations.

(5) ((To acquire the good will, business, rights, real and personal property, and other assets, or any part thereof, or interest therein, of any persons, firms, corporations, joint-stock companies, associations or trusts, and to assume, undertake, or pay the obligations, debts and liabilities of any such person, firm, corporation, joint-stock company, association or trust; to acquire improved or unimproved real estate for the purpose of constructing industrial plants or other business establishments thereon or for the purpose of disposing of such real estate to others for the construction of industrial plants or other business establishments; and to acquire, construct or reconstruct, alter, repair, maintain, operate, sell, convey, transfer, lease, or otherwise dispose of industrial plants or business establishments.)) To determine the form and the terms and conditions for financing assistance provided by the corporation to a business including, but not limited to forms such as loans; purchase of debt instruments; straight equity investments, such as purchase of common stock or preferred stock; debt with equity features such as warrants to purchase stock, convertible debentures, or receipt of a percent of net income or sales; royalty based financing; guaranteeing of debt; or leasing of property. A corporation may purchase securities of a business either directly or indirectly through an underwriter. A corporation may participate in the program of the small business administration pursuant to section 7(a) of the small business act, (Public Law 85-536, 15 U.S.C. Sec. 636(a)), or any other government program for which the corporation is eligible and which has as its function the provision or facilitation of financing or management assistance to businesses. If a corporation participates in a program referred to in this section, the corporation shall comply with the requirements of that program. Financing assistance provided by a corporation to a business shall be for the business purposes of that business.

(6) ((To acquire, subscribe for, own, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of the stock, shares, bonds, debentures, notes or other securities and evidences of interest in, or indebtedness of, any person, firm, corporation, joint-stock company, association or trust, and while the owner or holder thereof to exercise all the rights, powers and privileges of ownership, including the right to vote thereon.)) To provide management assistance to a business which may encompass both management or technical advice and management or technical services. Management assistance provided by a corporation to a business shall be for the business purposes of that business.

(7) To mortgage, pledge, or otherwise encumber any property, right or things of value, acquired pursuant to the powers contained in subsection((s)) (4)((,)) or (5)((~~, or (6)~~)) of this section, as security for the payment of any part of the purchase price thereof.

(8) To cooperate with and avail itself of the facilities of the United States department of commerce, the department of trade and economic development, the department of community development, and any other similar state or federal governmental agencies; and to cooperate with and assist, and otherwise encourage organizations in the various communities of the state in the promotion, assistance and development of the business prosperity and economic welfare of such communities or of this state or of any part thereof.

(9) To make donations for charitable, educational, research, or similar purposes.

(10) To do all acts and things necessary or convenient to carry out the powers expressly granted in this chapter.

Sec. 5. Section 4, chapter 162, Laws of 1963 and RCW 31.24.040 are each amended to read as follows:

Notwithstanding any rule at common law or any provision of any general or special law or any provision in their respective charters, agreements of association, articles of organization or trust indentures:

((~~(1)~~)) Any person including all domestic corporations organized for the purpose of carrying on business within this state and further including without implied limitation public utility companies and insurance companies, and foreign corporations licensed to do business within this state, and all financial institutions as defined herein, and all trustees, are hereby authorized to acquire, purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of any bonds, securities or other evidences of indebtedness created by, or the shares of the capital stock of, the corporation, and while owners of said stock to exercise all the rights, powers and privileges of ownership, including the right to vote thereon, all without the approval of any regulatory authority of the state except as otherwise provided in this chapter((~~: PROVIDED, That a financial institution which does not become a member of the corporation shall not be permitted to acquire any shares of the capital stock of the corporation;~~

~~(2) All financial institutions are hereby authorized to become members of the corporation and to make loans to the corporation as provided herein; and~~

(3) Each financial institution which becomes a member of the corporation is hereby authorized to acquire, purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of, any bonds, securities or other evidences of indebtedness created by, or the shares of the capital stock of, the corporation, and while owners of said stock, to exercise all the rights, powers and privileges of ownership, including the right to vote thereon, all without the approval of any regulatory authority of the state: PROVIDED, That the amount of the capital stock of the corporation which may be acquired by any member pursuant to the authority granted herein shall not exceed ten percent of the loan limit of such member)).

The amount of capital stock of the corporation which any ((~~member~~)) financial institution is authorized to acquire pursuant to the authority granted herein is in addition to the amount of capital stock in corporations which such ((~~member~~)) financial institution may otherwise be authorized to acquire.

Sec. 6. Section 7, chapter 162, Laws of 1963 and RCW 31.24.070 are each amended to read as follows:

The stockholders ((~~and the members~~)) of the corporation shall have the following powers of the corporation:

(1) To determine the number of and elect directors as provided in RCW 31.24.090;

(2) To make, amend and repeal bylaws;

(3) To amend this charter as provided in RCW 31.24.080;

(4) To dissolve the corporation as provided in RCW 31.24.150;

(5) To do all things necessary or desirable to secure aid, assistance, loans and other financing from any financial institutions, and from any agency established under the small business investment act of 1958, public law 85-699, 85th congress, or other similar federal laws now or hereafter enacted.

(6) To exercise such other of the powers of the corporation consistent with this chapter as may be conferred on the stockholders ((~~and the members~~)) by the bylaws.

As to all matters requiring action by the stockholders ((~~and the members~~)) of the corporation, said stockholders ((~~and said members~~)) shall vote separately thereon by classes, and, except as otherwise herein provided, such matters shall require the affirmative vote of a majority of the votes to which the stockholders present or represented at the meeting shall be entitled ((~~and the affirmative vote of a majority of the votes to which the members present or represented at the meeting shall be entitled~~)).

((~~Each~~)) Stockholders shall have one vote, in person or by proxy, for each share of capital stock held ((by him, and each member shall have one vote, in person or by proxy, except that any member having a loan limit of more than one thousand dollars shall have one additional vote, in person or by proxy, for each additional one thousand dollars which such member is authorized to have outstanding on loans to the corporation at any one time as determined under subsection (3)(b) of RCW 31.24.050)).

Sec. 7. Section 8, chapter 162, Laws of 1963 and RCW 31.24.080 are each amended to read as follows:

The articles of incorporation may be amended by the votes of the stockholders ((~~and the members of the corporation~~)), voting separately by classes, and such amendments shall require approval by the affirmative vote of two-thirds of the votes to which the stockholders ((~~shall be entitled and two-thirds of the votes to which the members~~)) shall be entitled: PROVIDED, That no amendment of the articles of incorporation which is inconsistent with the general purposes expressed herein or which authorizes any additional class of capital stock to be issued, or which eliminates or curtails the right of the state supervisor of banking to examine the corporation or the obligation of the corporation to make reports as provided in RCW 31.24.120, shall be made((: PROVIDED, FURTHER, That no amendment of the articles of incorporation which increases the obligation of a member to make loans to the corporation, or makes any charge in the principal amount, interest rate, maturity date, or in the security or credit position of an outstanding loan of a member to the corporation, or affects a member's right to withdraw from membership as provided herein, or affects a member's voting rights as provided herein, shall be made without the consent of each membership affected by such amendment)).

Within thirty days after any meeting at which an amendment of the articles of incorporation has been adopted, articles of amendment signed and sworn to by the president, treasurer, and a majority of the directors, setting forth such amendment and due adoption thereof, shall be submitted to the secretary of state, who shall examine them and if ((he)) the secretary finds that they conform to the requirements of this chapter, shall so certify and endorse his or her approval thereon. Thereupon, the articles of amendment shall be filed in the office of the secretary of state and no such amendment shall take effect until such articles of amendment shall have been filed as aforesaid.

Sec. 8. Section 9, chapter 162, Laws of 1963 as amended by section 3, chapter 16, Laws of 1974 ex. sess. and RCW 31.24.090 are each amended to read as follows:

The business and affairs of the corporation shall be managed and conducted by a board of directors, a president, a vice president, a secretary, a treasurer, and such other officers and such agents as the corporation by its bylaws shall authorize. The board of directors shall consist of such number, not less than ((~~eleven~~)) seven nor more than twenty-one, as shall be determined in the first instance by the incorporators and thereafter annually by ((~~the members and~~)) the stockholders of the corporation. The board of directors may exercise all the powers of the corporation except such as are conferred by law or by the bylaws of the corporation upon the stockholders ((~~or members~~)) and shall choose and appoint all the agents and officers of the corporation and fill all vacancies except vacancies in the office of director which shall be filled as hereinafter provided. The board of directors shall be elected in the first instance by the incorporators and thereafter at the annual meeting, the day and month of which shall be established by the bylaws of the corporations, or, if no annual meeting shall be held in the year of incorporation, then within ninety days after the approval of the articles of incorporation at a special meeting as hereinafter provided. ((At each annual meeting, or at each special meeting held as provided in this section, the members of the corporation shall elect two-thirds of the board of directors and the stockholders shall elect the remaining directors.)) The directors shall hold office until the next annual meeting of the corporation or special meeting held in lieu of the annual meeting after the election and until their successors are elected and qualified unless sooner removed in accordance with the provisions of the bylaws. Any vacancy in the office of a director ((~~elected by the members shall be filled by the directors elected by the members, and any vacancy in the office of a director elected by the stockholders~~)) shall be filled by the directors ((~~elected by the stockholders~~)).

Directors and officers shall not be responsible for losses unless the same shall have been occasioned by the wilful misconduct of such directors and officers.

NEW SECTION. Sec. 9. A new section is added to chapter 31.24 RCW to read as follows:

(1) A corporation shall transact its business in a safe and sound manner and shall maintain itself in a safe and sound condition. The supervisor of banking shall revoke the certification of a corporation if the supervisor finds that the corporation has failed to operate or maintain itself in a safe and sound manner or has failed to comply with the intent of this chapter, and the corporation may not transact business as a business and industrial development corporation until such time as the supervisor recertifies the corporation consistent with RCW 31.24.020(8). The secretary of state shall remove from the active files the incorporation records of a corporation with its certification revoked until such time as the supervisor of banking has recertified the corporation.

(2) In determining whether a corporation is transacting business in a safe and sound manner or has committed an unsafe or unsound act, the supervisor shall consider the risk of a provision of financing assistance to a business firm, within the context of the anticipated higher risks associated with the purposes of corporations organized under this chapter.

(3) Subsection (2) of this section does not limit the authority of the supervisor to:

(a) Determine that a corporation's financing assistance to a single business or group of affiliated firms is in violation of subsection (1) of this section if the amount of that financing assistance is unduly large in relation to the total assets or the total shareholder's equity of the corporation;

(b) Require that a corporation maintain a reserve in the amount of anticipated losses; and

(c) Require that a corporation have a written financing assistance policy, approved by its board of directors, including credit evaluation and other matters. The supervisor shall not require that a corporation adopt a financing assistance policy that contains standards which prevent the corporation from exercising flexibility in meeting the capital needs of the individual firms.

Sec. 10. Section 12, chapter 162, Laws of 1963 and RCW 31.24.120 are each amended to read as follows:

The corporation shall be examined at least ((~~once annually~~)) every eighteen months by the state supervisor of banking and shall make quarterly reports of its condition ((~~not less than annually~~)) to said state supervisor of banking and more frequently upon call of the state supervisor of banking, who in turn shall make copies of such reports available to the state insurance commissioner and the governor; and the corporation shall also furnish such other information as may from time to time be required by the state supervisor of banking and secretary of state. The corporation shall pay the actual cost of said examinations. The state supervisor of banking shall exercise the same power and authority over corporations organized under this chapter as is now exercised over banks and trust companies by the provisions of the Title 30 RCW, where the provisions of Title 30 RCW are not in conflict with this chapter.

The state supervisor of banking shall publish annually and provide to the senate and house commerce and labor committees and ways and means committees information on the impact of this chapter in promoting economic development in Washington. At the minimum, the information shall include aggregate statistics on each of the following:

(1) The number and locations of corporations operating under this chapter;

(2) The number of instances and dollar amount of financing and management assistance given by corporations operating under this chapter to:

(a) All individual businesses assisted;

(b) Types of businesses classified using the standard industrial classification manual;

(d) Businesses located in distressed areas;

(3) The number of jobs created or retained by:

(a) All individual businesses assisted;

(b) Types of businesses classified using the standard industrial classification manual;

(d) Businesses located in distressed areas; and

(e) The wage rates paid to the employees hired or retained; and

(4) The percentage of each business's total contributions or payments for unemployment insurance made to the state of Washington.

Sec. 11. Section 13, chapter 162, Laws of 1963 and RCW 31.24.130 are each amended to read as follows:

The first meeting of the corporation shall be called by a notice signed by three or more of the incorporators, stating the time, place and purpose of the meeting, a copy of which notice shall be mailed, or delivered, to each incorporator at least five days before the day appointed for the meeting. Said first meeting may be held without such notice upon agreement in writing to that effect signed by all the incorporators. There shall be recorded in the minutes of the meeting a copy of said notice or of such unanimous agreement of the incorporators.

At such first meeting, the incorporators shall organize by the choice, by ballot, of a temporary clerk; by the adoption of bylaws, by the election by ballot of directors; and by action upon such other matters within the powers of the corporation as the incorporators may see fit. The temporary clerk shall be sworn and shall make and attest a record of the proceedings. ((~~Ten~~)) Five of the incorporators shall be a quorum for the transaction of business.

NEW SECTION. Sec. 12. A new section is added to chapter 31.24 RCW to read as follows:

(1) The director of trade and economic development is authorized to provide assistance and advice to persons forming corporations under this chapter.

(2) The director may contract with corporations organized under this chapter. Each contract shall specify that the money received under the contract shall be used to provide management assistance, which may include management and technical advice and services and other technical support, to businesses receiving financing from the contracting corporation. No more than five corporations may contract with the department under this section at any time. No corporation may receive more than a total of two hundred fifty thousand dollars under this section.

(3) To qualify for a contract under this section, a corporation shall agree that at least one-half of the corporation's loans and investments will be to businesses operating in distressed areas as defined in RCW 82.60.020(3) and that the corporation's loans and investments will be to businesses that have agreed to enter first-source hiring agreements with the employment security department, local private industry councils, local labor unions, or other employment or placement agencies. These agreements shall require the businesses to interview prospective employees from a list of the unemployed supplied by the employment or placement agencies and hire any qualified candidates on the list before hiring any candidates not on the list. The first-source hiring agreements shall require the business to:

(a) Provide a job description for each position;

(b) Provide a description of the skills each position requires; and

The first-source hiring agreements shall require the employment or placement agency to provide a list of candidates who have expressed interest in each available position and who meet the skill requirements of each position. No fees may be charged of the unemployed candidates on the list supplied by the employment or placement agency.

(4) The director of trade and economic development shall adopt rules to carry out this section.

Sec. 13. Section 14, chapter 162, Laws of 1963 and RCW 31.24.140 are each amended to read as follows:

Unless otherwise provided in the articles of incorporation, the period of duration of the corporation shall be perpetual, subject, however, to the right of the stockholders ((~~and the members~~)) to dissolve the corporation prior to the expiration of said period as provided in RCW 31.24.150.

Sec. 14. Section 15, chapter 162, Laws of 1963 as amended by section 52, chapter 3, Laws of 1983 and RCW 31.24.150 are each amended to read as follows:

The corporation may upon the affirmative vote of two-thirds of the votes to which the stockholders shall be entitled ((~~and two-thirds of the votes to which the member shall be entitled~~)) dissolve said corporation as provided by Title 23A RCW, insofar as Title 23A RCW is not in conflict with the provisions of this chapter. Upon any dissolution of the corporation, none of the corporation's assets shall be distributed to the stockholders until all sums due the ((~~members~~)) creditors of the corporation ((~~as creditors thereof~~)) have been paid in full.

NEW SECTION. Sec. 15. A new section is added to chapter 82.04 RCW to read as follows:

(1) A credit is allowed against the tax imposed under this chapter for each of the fiscal years beginning July 1, 1989, and ending June 30, 1994, for amounts invested in each such year in business and industrial development corporations organized under chapter 31.24 RCW. The amount of allowable credit in each such year shall be as follows:

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(2) Applications for credit under this section shall be submitted as prescribed by the department by rule. No credit may be taken under this section until it has been approved by the department.

(3) Credits allowed under this section to any taxpayer shall not exceed the tax otherwise payable under this chapter by the taxpayer for that fiscal year. Any excess credit shall not be carried over to succeeding years.

(4) No credit may be allowed under this section for an investment for which credit has been allowed under section 16 or 17 of this act.

(5) Any taxpayer receiving a credit under this section who withdraws all or part of the investment on which the credit was based within five years shall repay the credit in proportion to the withdrawal as provided in section 18 of this act.

NEW SECTION. Sec. 16. A new section is added to chapter 82.16 RCW to read as follows:

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(2) Applications for credit under this section shall be submitted as prescribed by the department by rule. No credit may be taken under this section until it has been approved by the department.

(4) No credit may be allowed under this section for an investment for which credit has been allowed under section 15 or 17 of this act.

NEW SECTION. Sec. 17. A new section is added to chapter 48.14 RCW to read as follows:

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(2) Applications for credit under this section shall be submitted as prescribed by the department by rule. No credit may be taken under this section until it has been approved by the department.

(4) No credit may be allowed under this section for an investment for which credit has been allowed under section 15 or 16 of this act.

NEW SECTION. Sec. 18. A new section is added to chapter 31.24 RCW to read as follows:

(1) Investors which take advantage of the tax credits allowed under sections 15, 16, and 17 of this act and which withdraw within the first five years of their investment any funds invested in a corporation governed by this chapter shall be obligated to return to the state treasury a portion of the tax credit granted which is equal in proportion to the amount the withdrawn funds represent relative to the total funds invested by the investor.

(2) Any corporation which loses its certification shall be obligated to pay to the state treasurer an amount equal to any tax credits taken by investors in such corporation within three years preceding the loss of certification. Such payment shall be made within eighteen months of the loss of certification unless the corporation is recertified within that time. The obligation to pay the state treasurer created by this section shall be a lien on the assets and capital of a corporation losing its certification and shall have priority over any other liens or security interests.

NEW SECTION. Sec. 19. A new section is added to chapter 31.24 RCW to read as follows:

The department of revenue shall keep a running total of all credits granted under sections 15 through 17 of this act during each fiscal year. The department of revenue shall not allow any credits which would cause the tabulation to exceed four million dollars.

NEW SECTION. Sec. 20. A new section is added to chapter 31.24 RCW to read as follows:

(1) A corporation shall not provide, directly or indirectly, financing assistance to:

(a) An associate of the corporation;

(b) Discharge, or to free other money for use in discharging, in whole or in part, an obligation to an associate of that corporation. This section does not apply to a transaction effected by an associate of a corporation in the normal course of that associate's business involving a line of credit or short-term financing assistance.

(c) A business to which an associate of that corporation provides financing assistance, either contemporaneously with, or within one year before or after, the providing of financing assistance by the corporation, if the terms on which the corporation provides financing assistance are less favorable to the corporation than the terms on which the associate provides financing assistance to the business. If the financing assistance provided by the associate of the corporation is of a different kind from the financing assistance provided by the corporation, the burden shall be on the corporation to prove that the terms on which the corporation provided financing assistance were at least as favorable to the corporation as the terms on which the associate provided financing assistance to the business.

This subsection (1)(c) does not apply to any of the following:

(i) If the associate is a controlling person of the corporation and is also the only shareholder of the corporation;

(ii) If the associate is a subsidiary of the corporation; or

(iii) A transaction effected by an associate of a corporation in the normal course of that associate's business involving a line of credit or short-term financing assistance.

(2) For the purposes of this section and section 21 of this act:

(a) "Person" means an individual, proprietorship, joint venture, partnership, trust, business trust, syndicate, association, joint stock company, corporation, cooperative, government, agency of a government, or any other organization. If used with respect to acquiring control of or controlling a specified person, person includes a combination of two or more persons acting in concert;

(b) "Control" means, if used with respect to a specified person, the power to direct or cause the direction of, directly or indirectly through one or more intermediaries, the management and policies of that specified person, whether through the ownership of voting securities; by contract, other than a commercial contract for goods or nonmanagement services; or otherwise. A natural person shall not be considered to control a person solely on account of being a director, officer, or employee of that person. A person who, directly or indirectly, owns of record or beneficially holds with power to vote, or holds proxies with discretionary authority to vote, twenty percent or more of the then outstanding voting securities issued by a corporation shall be rebuttably presumed to control that corporation; and

(c) "Controlling person" means, if used with respect to a specified person, a person who controls that specified person, directly or indirectly through one or more intermediaries.

NEW SECTION. Sec. 21. A new section is added to chapter 31.24 RCW to read as follows:

An associate of a corporation shall not receive, directly or indirectly, from a person to whom that corporation provides financing assistance, compensation in connection with the providing of that financing assistance or anything of value for procuring, influencing, or attempting to procure or influence the corporation's action with respect to the providing of the financing assistance. This section does not apply to the receipt of fees by an associate of a corporation for bona fide closing services performed by that associate if all of the following are true:

(1) The associate, with the consent and knowledge of the person to whom the financing assistance is provided, is designated by the corporation to perform the services;

(2) The services are appropriate and necessary in the circumstances;

(3) The fees for the services are approved as reasonable by the corporation; and

(4) The fees for the services are collected by the corporation on behalf of the associate.

Sec. 22. Section 16, chapter 162, Laws of 1963 and RCW 31.24.160 are each amended to read as follows:

Under no circumstances shall the credit of the state of Washington be pledged to any corporation organized under the provisions of this chapter. The state of Washington shall not be subject to or responsible for any claim, debt, obligation, liability, or undertaking arising from the formation, operation, activities, or dissolution of a corporation organized under this chapter, and shall be immune from suit thereon. All debt and equity instruments, including but not limited to bonds, debentures, securities, notes, and shares, issued by corporations organized under this chapter shall indicate on the face of each such document as issued that it does not constitute an obligation of the state of Washington.

NEW SECTION. Sec. 23. A new section is added to chapter 31.24 RCW to read as follows:

The insurance commissioner, the state supervisor of banking, the state supervisor of savings and loan associations, and the utilities and transportation commission shall each adopt such rules as may be necessary to allow those insurers, banks, savings and loan associations, and public service companies subject to regulation by state law to participate as investors in corporations organized under this chapter in a manner consistent with state regulatory requirements and the requirements imposed under this chapter.

Sec. 24. Section 2, chapter 107, Laws of 1987 and section 1, chapter 337, Laws of 1987 and section 16, chapter 370, Laws of 1987 and section 1, chapter 404, Laws of 1987 and section 10, chapter 411, Laws of 1987 and RCW 42.17.310 are each reenacted and amended to read as follows:

(1) The following are exempt from public inspection and copying:

(a) Personal information in any files maintained for students in public schools, patients or clients of public institutions or public health agencies, welfare recipients, prisoners, probationers, or parolees.

(b) Personal information in files maintained for employees, appointees, or elected officials of any public agency to the extent that disclosure would violate their right to privacy.

(c) Information required of any taxpayer in connection with the assessment or collection of any tax if the disclosure of the information to other persons would (i) be prohibited to such persons by RCW 82.32.330 or (ii) violate the taxpayer's right to privacy or result in unfair competitive disadvantage to the taxpayer.

(d) Specific intelligence information and specific investigative records compiled by investigative, law enforcement, and penology agencies, and state agencies vested with the responsibility to discipline members of any profession, the nondisclosure of which is essential to effective law enforcement or for the protection of any person's right to privacy.

(e) Information revealing the identity of persons who file complaints with investigative, law enforcement, or penology agencies, other than the public disclosure commission, if disclosure would endanger any person's life, physical safety, or property: PROVIDED, That if at the time the complaint is filed the complainant indicates a desire for disclosure or nondisclosure, such desire shall govern: PROVIDED, FURTHER, That all complaints filed with the public disclosure commission about any elected official or candidate for public office must be made in writing and signed by the complainant under oath.

(f) Test questions, scoring keys, and other examination data used to administer a license, employment, or academic examination.

(g) Except as provided by chapter 8.26 RCW, the contents of real estate appraisals, made for or by any agency relative to the acquisition or sale of property, until the project or prospective sale is abandoned or until such time as all of the property has been acquired or the property to which the sale appraisal relates is sold, but in no event shall disclosure be denied for more than three years after the appraisal.

(h) Valuable formulae, designs, drawings, and research data obtained by any agency within five years of the request for disclosure when disclosure would produce private gain and public loss.

(i) Preliminary drafts, notes, recommendations, and intra-agency memorandums in which opinions are expressed or policies formulated or recommended except that a specific record shall not be exempt when publicly cited by an agency in connection with any agency action.

(j) Records which are relevant to a controversy to which an agency is a party but which records would not be available to another party under the rules of pretrial discovery for causes pending in the superior courts.

(k) Records, maps, or other information identifying the location of archaeological sites in order to avoid the looting or depredation of such sites.

(l) Any library record, the primary purpose of which is to maintain control of library materials, or to gain access to information, which discloses or could be used to disclose the identity of a library user.

(m) Financial information supplied by or on behalf of a person, firm, or corporation for the purpose of qualifying to submit a bid or proposal for (a) a ferry system construction or repair contract as required by RCW 47.60.680 through 47.60.750 or (b) highway construction or improvement as required by RCW 47.28.070.

(n) Railroad company contracts filed with the utilities and transportation commission under RCW 81.34.070, except that the summaries of the contracts are open to public inspection and copying as otherwise provided by this chapter.

(o) Financial and commercial information and records supplied by private persons pertaining to export services provided pursuant to chapter 53.31 RCW.

(p) Financial disclosures filed by private vocational schools under chapter 28C.10 RCW.

(q) Records filed with the utilities and transportation commission or attorney general under RCW 80.04.095 that a court has determined are confidential under RCW 80.04.095.

(r) Financial and commercial information and records supplied by businesses during application for loans or program services provided by chapters 43.31, 43.63A, and 43.168 RCW.

(s) Membership lists or lists of members or owners of interests of units in timeshare projects, subdivisions, camping resorts, condominiums, land developments, or common-interest communities affiliated with such projects, regulated by the department of licensing, in the files or possession of the department.

(t) Except as provided under section 2 of this 1987 act [1987 c 404 § 2], all applications for public employment, including the names of applicants, resumes, and other related materials submitted with respect to an applicant.

(u) The residential addresses and residential telephone numbers of employees or volunteers of a public agency which are held by the agency in personnel records, employment or volunteer rosters, or mailing lists of employees or volunteers.

(v) The residential addresses and residential telephone numbers of the customers of a public utility contained in the records or lists held by the public utility of which they are customers.

(w) Information obtained by the board of pharmacy as provided in RCW 69.45.090.

(x) Financial information, business plans, examination reports, and any information produced or obtained in evaluating or examining a business and industrial development corporation organized or seeking certification under chapter 31.24 RCW.

(2) Except for information described in subsection (1)(c)(i) of this section and confidential income data exempted from public inspection pursuant to RCW 84.40.020, the exemptions of this section are inapplicable to the extent that information, the disclosure of which would violate personal privacy or vital governmental interests, can be deleted from the specific records sought. No exemption may be construed to permit the nondisclosure of statistical information not descriptive of any readily identifiable person or persons.

(3) Inspection or copying of any specific records exempt under the provisions of this section may be permitted if the superior court in the county in which the record is maintained finds, after a hearing with notice thereof to every person in interest and the agency, that the exemption of such records is clearly unnecessary to protect any individual's right of privacy or any vital governmental function.

(4) Agency responses refusing, in whole or in part, inspection of any public record shall include a statement of the specific exemption authorizing the withholding of the record (or part) and a brief explanation of how the exemption applies to the record withheld.

NEW SECTION. Sec. 25. The legislative budget committee shall, by January 1, 1992, conduct analyses of business industrial development corporations. The analyses shall provide information on any costs to the state resulting from the operation of the corporation as well as any employment growth, firm growth, and increased revenue attributable directly or indirectly to their activities.

The analysis shall include a review of: The number of firms; the dollar amount and type of assistance provided to each firm; the types of businesses assisted as classified by the standard industrial classification manual; the size and the age of each firm assisted; the number of minority and women-owned businesses assisted; the number of assisted firms in distressed areas of the state; the number of jobs created or retained in each firm and community as a result of program assistance; the wage rates of jobs retained or new jobs created as a result of the program; the results of client satisfaction surveys completed by communities and firms assisted by the program; and sales volume trends for each firm assisted by the program.

NEW SECTION. Sec. 26. If specific funding for the purposes of this act, referencing this act by bill number, is not provided by June 30, 1989, in the omnibus appropriations act, this act shall be null and void.

NEW SECTION. Sec. 27. The following acts or parts of acts are each repealed:

(1) Section 5, chapter 162, Laws of 1963, section 1, chapter 90, Laws of 1973 1st ex. sess., section 2, chapter 16, Laws of 1974 ex. sess. and RCW 31.24.050;

(2) Section 6, chapter 162, Laws of 1963 and RCW 31.24.060; and

(3) Section 10, chapter 162, Laws of 1963 and RCW 31.24.100.

NEW SECTION. Sec. 28. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.