1. (a) This section applies only to a contract or transaction between a corporation and:

   1. (1) one or more of the corporation's directors or officers; or

   2. (2) an entity or other organization in which one or more of the corporation's directors or officers:

      1. (A) is a managerial official; or
      2. (B) has a financial interest.

2. (b) An otherwise valid contract or transaction is valid notwithstanding that a director or officer of the corporation is present at or participates in the meeting of the board of directors, or of a committee of the board that authorizes the contract or transaction, or votes to authorize the contract or transaction, if:

   1. (1) the material facts as to the relationship or interest and as to the contract or transaction are disclosed to or known by:

      1. (A) the corporation's board of directors or a committee of the board of directors and the board of directors or committee in good faith authorizes the contract or transaction by the affirmative vote of the majority of the disinterested directors or committee members, regardless of whether the disinterested directors or committee members constitute a quorum; or
      2. (B) the shareholders entitled to vote on the authorization of the contract or transaction, and the contract or transaction is specifically approved in good faith by a vote of the shareholders; or
   2. (2) the contract or transaction is fair to the corporation when the contract or transaction is authorized, approved, or ratified by the board of directors, a committee of the board of directors, or the shareholders.
3. (c) Common or interested directors of a corporation may be included in determining the presence of a quorum at a meeting of the corporation's board of directors, or a committee of the board of directors, that authorizes the contract or transaction.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.