Section 77-5-237 - Disposing of corporate property(1) A corporation may sell, lease, exchange or otherwise dispose of all, or substantially all, of its property only if all of the following conditions are satisfied: (a) The proposed purchaser shall file with the board of directors of the corporation and the Public Service Commission a disclosure statement containing the information required by Schedule 14D-1, as such schedule is described in the United States Securities Exchange Act of 1934, as amended. For purposes of this section, references in Schedule 14D-1 to "tender offer," "bidder," "subject company" and "securities of the subject company" shall be deemed to mean the proposed transaction, the proposed purchaser, the corporation and the property of the corporation, respectively.(b) The proposed purchaser shall file with the board of directors and the Public Service Commission the offer to acquire all, or substantially all, of the property of the corporation, and any amendments thereto, which shall be contained in a written proposal and sets forth completely the terms and conditions of the proposed transaction. The offer shall provide: (i) for the full payment of equity and capital credits to all past and present members of the corporation, on an equitable basis; and (ii) for the payment or assumption of the total debt of the corporation by the purchaser or the payment of the total debt by the board of directors of the corporation, and an agreement to comply with the terms and conditions of any contract or other agreement, other than total debt paid out of the purchase price, to which the corporation is a party or by which the corporation is bound. Should the offer be accepted, the board of directors shall be responsible for assuring that any debts to be paid by the corporation pursuant to the offer of purchase are paid out of the purchase price, and all funds or any other forms of payment are equitably distributed within one hundred twenty (120) days to all past and present members of the corporation according to the amount of interest such members have in such corporation.(c)(i) When the proposed purchase price is at least equal to two-thirds (2/3) of the members' equity plus total debt the board of directors shall be obligated to submit the proposed offer to the membership for a vote, unless action is pending or injunctions issued pursuant to subsection (2). Members' equity shall consist of the appraised value of the assets to be disposed of, less total debt.(ii) When the proposed purchase price is not at least equal to two-thirds (2/3) of the members' equity plus total debt the board of directors shall not submit such offer of purchase unless the board of directors, by a two-thirds (2/3) affirmative vote, determines that good and sufficient reasons exist so that the submission of an offer of lesser value would be in the best interest of the membership. Members' equity shall consist of the appraised value of the assets to be disposed of, less total debt.(d) The board of directors of the corporation and the proposed purchaser shall mutually employ a recognized, qualified impartial firm to make an appraisal of the value of the members' equity in the tangible and intangible assets to be disposed of and a rate study to determine the effect of the proposed transaction on the rates for electricity to be paid by members. Within fifteen (15) days after it has been determined that the purchaser and the corporation cannot mutually agree on an appraiser, the board of directors of the corporation shall submit, to the Public Service Commission, a list of five (5) independent, qualified individuals or firms recognized with experience in the appraisal of electric utility systems. The purchaser shall have ten (10) days after submission to strike up to four (4) of the appraisers submitted. If more than one (1) appraiser remains on the list, the Public Service Commission shall, within ten (10) days of receipt of such list, notify the corporation and the proposed purchaser of the name of the appraiser selected to perform the appraisal and rate study required herein. The proposed purchaser shall place into escrow the sum of Fifty Thousand Dollars ($50,000.00) at the time the offer is made. Such escrowed funds shall be released to pay the incurred costs of such studies, with any remainder being returned to the purchaser.(e)(i) When the conditions set forth in subsections (1)(a) through (1)(d) have been satisfied, and no action is pending or injunction issued pursuant to subsection (2), the corporation shall, within one hundred twenty (120) days, but not sooner than sixty (60) days, call a meeting of the members for purposes of considering and voting on the proposed transaction, upon at least twenty (20) days' notice of such meeting to the members given in accordance with applicable law and the charter of incorporation and bylaws of the corporation. The notice shall set forth the date, time, location and purpose of meeting, a description of the proposed transaction including the results of the studies required by subsection (1)(d), proxy material and any other information required by the bylaws of the corporation.(ii) When the conditions set forth in subsections (1)(a) and (1)(b) of this section have been satisfied, no court action is pending under the provisions of this section and the board of directors of the corporation has not submitted the offer to the members, upon the expiration of one hundred twenty (120) days but not more than two hundred forty (240) days, thirty percent (30%) of the membership of the corporation may petition the board of directors to submit the offer to the members. Upon receipt of such petition, the corporation shall, within one hundred twenty (120) days, but not sooner than sixty (60) days, call a meeting of the members for purposes of considering and voting on the proposed transaction, upon at least twenty (20) days' notice of such meeting to the members given in accordance with applicable law and the charter of incorporation and bylaws of the corporation. The notice shall set forth the date, time, location and purpose of meeting, a description of the proposed transaction including the results of the studies required by subsection (1)(d), proxy material and any other information required by the bylaws of the corporation.(f) The proposed transaction must be approved by the affirmative vote of three-fifths (3/5) of all the members. Voting shall be in person or by proxy. The tabulation of the member vote shall be attested to by an independent accounting firm engaged to perform that accounting function.(2) If the board of directors determines that any of the terms and conditions of the proposed transaction are unreasonable or unfair to the members and if the proposed purchaser is unwilling to amend the offer to make the terms and conditions of the offer reasonable and fair to the members, then the board of directors may institute a proceeding in the chancery court of the county where the corporation's principal office is located to enjoin the proposed transaction. If the court determines that the terms and conditions of the proposed offer are unreasonable or unfair to the members, it shall permanently enjoin the proposed transaction, unless the offer is amended to make the terms and conditions reasonable and fair to the members. If the court determines that the terms and conditions of the offer are reasonable and fair to the members, the court shall order the corporation to submit the proposed transaction to the members for a vote. The court may appoint one or more independent experts to review the terms and conditions of the proposed transaction and make a recommendation to the court. Such independent experts shall have the powers described in the order appointing them, or in any amendment thereto. Nothing in this subsection shall be construed as prohibiting or limiting the rights of the members of the corporation from acting pursuant to subsection (1)(e)(ii) of this section.(3) Any party which, in providing the disclosure information required by subsection (1)(a) above, makes false or misleading statements concerning material facts or omits information which makes the information disclosed misleading shall be liable to the members of the corporation for actual damages.(4) Purchasers, affiliates, cooperatives or agents thereof shall conduct a diligent investigation to secure all material information reasonably available and any purchaser, affiliate, cooperative or agent thereof which, in making any communication with members of the corporation, written or oral, knowingly makes false or misleading statements concerning material facts or omits information which makes the information misleading may be liable to the injured party for damages incurred thereby.(5) It shall be deemed a breach of the fiduciary duty owed by a director of the corporation to the corporation and its members for any director of the corporation, directly or indirectly, to accept any payment, compensation, remuneration or benefit paid by, or on behalf of, any purchaser or affiliate of a purchaser except for the benefits received by all members of the corporation on a nondiscriminatory basis.(6) The board of directors may, without authorization by the members, sell, mortgage, lease or otherwise encumber or dispose of (a) any of its property which, in the judgment of the board, is neither necessary nor useful in operating and maintaining the corporation's system and which in any one (1) year shall not exceed ten percent (10%) in value of all of the property of the corporation, or (b) merchandise. The board of directors of the corporation, without authorization by the members thereof, shall also have full power and authority upon the affirmative vote of two-thirds (2/3) of the members constituting the full board to authorize the execution and delivery of a mortgage or mortgages or a deed or deeds of trust upon, or the pledging or encumbering of, any or all of the property, assets, rights, privileges, licenses, franchises and permits of the corporation, whether acquired or to be acquired, and wherever situated, as well as the revenues and income therefrom, all upon such terms and conditions as the board of directors upon the affirmative vote of two-thirds (2/3) of the members constituting the full board shall determine, to secure any indebtedness of the corporation to the United States of America or any instrumentality or agency thereof, or to a national financing institution, organized on a cooperative plan for the purpose of financing its members' programs, projects and undertakings, in which the corporation holds membership.(7) During the first year of the existence of a corporation its property shall not be sold or leased, wholly or in part, unless the sale or lease shall in addition to any approval required by subsections (1) and (2) of this section be approved by a majority of all persons who have signed customers' survey forms or otherwise signified in writing their intention to become members of the corporation. All such persons shall be deemed to have a beneficial interest in the affairs of the corporation insofar as the sale or lease of the property of the corporation is concerned and the members of the board are hereby declared to be the trustees of such persons with respect thereto.Codes, 1942, § 5476; Laws, 1936, ch. 184; Laws, 1938, ch. 252; Laws, 1970, ch. 423, § 1; Laws, 1989, ch. 454, § 2, eff. 3/24/1989.