TITLE 7
Corporations, Associations, and Partnerships

CHAPTER 7-5.2
Business Combination Act

SECTION 7-5.2-3


§ 7-5.2-3 Definitions.

As used in this section, unless the context requires otherwise, the term:

(1) "Affiliate" means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, a specified person.

(2) "Announcement date", when used in reference to any business combination, means the date of the first public announcement of the final, definitive proposal for the business combination.

(3) "Associate", when used to indicate a relationship with any person, means:

(i) Any corporation or organization of which the person is a director, officer, or partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of voting stock,

(ii) Any trust or other estate in which the person has a substantial beneficial interest or as to which the person serves as trustee or in a similar fiduciary capacity, and

(iii) Any relative or spouse of the person, or any relative of the spouse, who has the same residence as the person.

(4) "Beneficial owner", when used with respect to any stock means a person that:

(i) Individually or with or through any of its affiliates or associates, beneficially owns the stock, directly or indirectly; or

(ii) Individually or with or through any of its affiliates or associates, has:

(A) The right to acquire the stock, whether the right is exercisable immediately or only after the passage of time, pursuant to any agreement, arrangement, or understanding, whether or not in writing, or upon the exercise of conversion rights, exchange rights, warrants, or options, or otherwise; provided, however, that a person is not deemed the beneficial owner of stock tendered pursuant to a tender or exchange offer made by the person's affiliates or associates until the tendered stock is accepted for purchase or exchange; or

(B) The right to vote the stock pursuant to any agreement, arrangement, or understanding, whether or not in writing; provided, however, that a person is not deemed the beneficial owner of any stock under this item if the agreement, arrangement, or understanding to vote the stock arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made in accordance with the applicable rules and regulations under the Exchange Act, 15 U.S.C. § 78a et seq., and is not then reportable on a Schedule 13D under the Exchange Act, or any comparable or successor report; or

(C) Any agreement, arrangement, or understanding, whether or not in writing for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent as described in item (B) of clause (ii) of this subparagraph), or disposing of the stock with any other person that beneficially owns, or whose affiliate or associates beneficially own, directly or indirectly, the stock.

(5) "Business combination", when used in reference to any resident domestic corporation and any interested shareholder of the resident domestic corporation, means:

(i) Any merger or consolidation of the resident domestic corporation or any subsidiary of the resident domestic corporation with:

(A) The interested shareholder, or

(B) Any other corporation, whether or not itself an interested shareholder of the resident domestic corporation, which is, or after the merger or consolidation would be, an affiliate or associate of the interested shareholder;

(ii) Any sale, lease, exchange, mortgage, pledge, transfer, or other disposition, in one transaction or a series of transactions, except proportionately as a stockholder of the corporation, to or with the interested shareholder or any affiliate or associate of the interested shareholder, whether as a part of a dissolution or otherwise, of assets of the resident domestic corporation or any subsidiary of the resident domestic corporation:

(A) Having an aggregate market value equal to ten percent (10%) or more of the aggregate market value of all the assets, determined on a consolidated basis, of the resident domestic corporation,

(B) Having an aggregate market value equal to ten percent (10%) or more of the aggregate market value of all the outstanding stock of the resident domestic corporation, or

(C) Representing ten percent (10%) or more of the earning power or net income, determined on a consolidated basis, of the resident domestic corporation;

(iii)(A) Any transaction which results in the issuance or transfer by the resident domestic corporation or by any subsidiary of the resident domestic corporation of any stock of the resident domestic corporation or of the subsidiary to the interested shareholder, except:

(I) Pursuant to the exercise, exchange, or conversion of securities exercisable for, exchangeable for, or convertible into stock of the resident domestic corporation or any subsidiary which securities were outstanding prior to the time that the interested shareholder became such,

(II) Pursuant to a dividend or distribution paid or made, or the exercise, exchange, or conversion of securities exercisable for, exchangeable for, or convertible into stock of the resident domestic corporation or any subsidiary which security is distributed, pro rata to all holders of a class or series of stock of the resident domestic corporation subsequent to the time the interested shareholder became such,

(III) Pursuant to an exchange offer by the resident domestic corporation to purchase stock made on the same terms to all holders of the stock, or

(IV) Any issuance or transfer of stock by the resident domestic corporation;

(B) Provided, however, that in no case under subdivisions (5)(iii)(A)(I) – (IV) shall there be an increase in the interested shareholder's proportionate share of the stock of any class or series of the resident domestic corporation or of the voting stock of the resident domestic corporation;

(iv) The adoption of any plan or proposal for the liquidation or dissolution of the resident domestic corporation proposed by, or pursuant to any agreement, arrangement, or understanding, whether or not in writing with the interested shareholder or any affiliate or associate of the interested shareholder;

(v) Any reclassification of securities, including, without limitation, any stock split, stock dividend, or other distribution of stock in respect to stock, any reverse stock split, or recapitalization of the resident domestic corporation, any merger or consolidation of the resident domestic corporation with any subsidiary of the resident domestic corporation, or any other transaction, whether or not with or into or otherwise involving the interested shareholder, proposed by, or pursuant to any agreement, arrangement, or understanding, whether or not in writing, with the interested shareholder or any affiliate or associate of the interested shareholder, which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class or series of voting stock or securities convertible into voting stock of the resident domestic corporation or any subsidiary of the resident domestic corporation which is directly or indirectly owned by the interested shareholder or any affiliate or associate of the interested shareholder, except as a result of immaterial changes due to fractional share adjustments; or

(vi) Any receipt by the interested shareholder or any affiliate or associate of the interested shareholder of the benefit, directly or indirectly, except proportionately as a shareholder of the resident domestic corporation, of any loans, advances, guarantees, pledges, or other financial assistance, benefits, any tax credits, or other tax advantages provided by or through the resident domestic corporation, except as expressly permitted in subdivisions (5)(i) through (5)(vi).

(6) "Common stock" means any stock other than preferred stock.

(7) "Consummation date", with respect to any business combination, means the date of consummation of the business combination, or, in the case of a business combination as to which a shareholder vote is taken, the later of the business day prior to the vote or twenty (20) days prior to the date of consummation of the business combination.

(8) "Control", including the terms "controlling", "controlled by", and "under common control with", means the possession, directly or indirectly, or the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting stock, by contract, or otherwise. A person's beneficial ownership of ten percent (10%) or more of a corporation's outstanding voting stock creates a presumption that the person has control of the corporation. Notwithstanding what was previously stated, above, a person is not deemed to have control of a corporation if the person holds voting stock, in good faith and not for the purpose of circumventing this section, as an agent, bank, broker, nominee, custodian, or trustee for one or more beneficial owners who do not individually or as a group have control of the corporation.

(9) "Exchange Act" means the Act of Congress known as the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq., as it has been, and may subsequently be, amended.

(10) "Interested shareholder", when used in reference to any resident domestic corporation, means any person, other than the resident domestic corporation or any subsidiary of the resident domestic corporation or any employee benefit plan maintained by resident domestic corporation, that:

(i)(A) Is the beneficial owner, directly or indirectly, of ten percent (10%) or more of the outstanding voting stock of the resident domestic corporation; or

(B) Is an affiliate or associate of the resident domestic corporation and at any time within a five (5) year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of ten percent (10%) or more of the then outstanding voting stock of the resident domestic corporation.

(ii) The term "interested shareholder" does not include:

(A) Any person who:

(I) Owned shares in excess of the ten percent (10%) limitation stated in these provisions as of, or acquired the shares pursuant to a tender offer commenced prior to, July 3, 1990 or pursuant to an exchange offer announced prior to that date and commenced within ninety (90) days subsequently and continued to own shares in excess of the percent limitation or would have but for action taken by the resident domestic corporation, or

(II) Acquired the shares from a person described in (I) by gift, inheritance, or in a transaction in which no consideration was exchanged; or

(B) Any person whose ownership of shares in excess of the ten percent (10%) limitation stated above is the result of action taken solely by the resident domestic corporation However, the person becomes an interested shareholder if he or she subsequently acquires additional shares of voting stock of the resident domestic corporation, except as a result of further corporate action not caused, directly or indirectly, by the person.

(iii) For the purpose of determining whether a person is an interested shareholder, the number of shares of voting stock of the resident domestic corporation deemed outstanding includes shares deemed beneficially owned by the person through application of subdivision (4) of this section but does not include any other unissued shares of voting stock of the resident domestic corporation which are issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants, or options, or otherwise.

(11) "Market value", when used in reference to stock or property of any resident domestic corporation, means:

(i) In the case of stock, the highest closing sale price during the thirty (30) day period immediately preceding the date in question of a share of stock on the composite tape for stocks listed on the New York stock exchange, or, if the stock is not quoted on the composite tape or if the stock is not listed on the exchange, on the principal United States securities exchange registered under the exchange act on which the stock is listed, or, if the stock is not listed on any exchange, the highest closing bid quotation with respect to a share of the stock during the thirty (30) day period preceding the date in question on the national association of securities dealers, inc. automated quotations system or any system then in use, or if no quotations are available, the fair market value on the date in question of a share of the stock as determined in good faith by the board of directors of the resident domestic corporation; and

(ii) In the case of property other than cash or stock, the fair market value of the property on the date in question as determined in good faith by the board of directors of the resident domestic corporation.

(12) "Preferred stock" means any class or series of stock of a resident domestic corporation under which the bylaws or articles of incorporation of the resident domestic corporation is entitled to receive payment of dividends prior to any payment of dividends on some other class or series of stock, or is entitled in the event of any voluntary liquidation, dissolution, or winding up of the resident domestic corporation to receive payment or distribution of a preferential amount before any payments or distributions are received by some other class or series of stock.

(13) "Resident domestic corporation" means an issuer of voting stock which:

(i) Is organized under the laws of this state; and

(ii) Either (A) has its principal executive offices and significant business operations located in this state; or (B) has, alone or in combination with one or more of its subsidiaries, at least two hundred fifty (250) employees or twenty-five percent (25%) of the total number of all employees of itself and the subsidiaries employed primarily within the state; and

(iii) Has at least five percent (5%) of its voting stock owned beneficially by residents of this state or at least five percent (5%) of its shareholders are residents of this state. For purposes of this section, the residence of a partnership, unincorporated association, trust, or similar organization is the principal office of the organization.

(D) No resident domestic corporation, which is organized under the laws of this state, ceases to be a resident domestic corporation by reason of events occurring or actions taken while the resident domestic corporation is subject to the provisions of this section.

(14) "Stock" means:

(i) Any stock or similar security, any certificate of interest, any participation in any profit sharing agreement, any voting trust certificate, or any certificate of deposit for stock; and

(ii) Any security convertible, with or without consideration, into stock, or any warrant, call, or other option or privilege of buying stock without being bound to do so, or any other security carrying any right to acquire, subscribe to, or purchase stock.

(15) "Stock acquisition date", with respect to any person and any resident domestic corporation, means the date that the person first becomes an interested shareholder of the resident domestic corporation.

(16) "Subsidiary" of any person means any other corporation of which a majority of the voting stock is owned, directly or indirectly, by the person.

(17) "Voting stock" means shares of capital stock of a corporation entitled to vote generally in the election of directors.

History of Section.
(P.L. 1990, ch. 138, § 1; P.L. 1991, ch. 442, § 1.)