§ 506. Bonds and security interests.

(a) No corporation shall issue bonds except for money or other
property, tangible or intangible, or labor or services actually received
by or performed for the corporation or for its benefit or in its
formation or reorganization, or a combination thereof. In the absence of
fraud in the transaction, the judgment of the board as to the value of
the consideration received by the corporation shall be conclusive.

(b) A corporation may pay reasonable interest on its bonds, may issue
its bonds at a reasonable discount and may pay a reasonable premium for
the redemption thereof prior to maturity, but the holders of its bonds
shall not be entitled at any time to receive any part of the income or
profit of the corporation nor at maturity to receive more than the
principal sum thereof plus interest due and accrued thereon. In the
absence of fraud in the transaction, the judgment of the board as to the
reasonableness of any such interest, discount or premium shall be
conclusive. However, with respect to bonds not a part of a public
offering, notwithstanding the terms of the instrument, no member of a
corporation shall be entitled to receive, directly or indirectly, as a
holder or beneficiary of such bond, prior to maturity or redemption,
more than simple interest thereon at a rate equal to the higher of (1)
the maximum interest authorized pursuant to section 5-501 of the general
obligations law or (2) one percent over the prime rate of interest
generally prevailing on the interest due date in the Federal Reserve
District of New York, nor at maturity or redemption, more than the
principal sum thereof plus any interest, not exceeding the maximum
interest herein specified, due and accrued thereon.

(c) A corporation may, in its certificate of incorporation or by-laws,
confer upon the holders of any bonds issued or to be issued by the
corporation, rights to inspect the corporate books and records and, upon
default of interest or principal, to vote in the election of directors.
The certificate of incorporation or the by-laws may apportion the number
of votes that may be cast with respect to bonds on the basis of the
amount of bonds held.

(d) The board may authorize any mortgage or pledge of, or the creation
of a security interest in, all or any part of the corporation's personal
property, or any interest therein. Unless the certificate of
incorporation provides otherwise, no vote or consent of the members
shall be required to approve such action by the board.