CHAPTER 119

An Act to amend the Code of Virginia by adding in Title 18.1 a chapter
numbered 6, consisting of sections numbered 18.1-528 through 18.1-541,
to regulate certain offers to purchase securities of Virginia stock cor-
porations and to provide penalties for violations. rH 681]

Approved March 5, 1968

Be it enacted by the General Assembly of Virginia:
1. That the Code of Virginia be amended by adding in Title 18.1 a Chap-
ter 6, consisting of §§ 13.1-528 through 13.1-541 as follows:

CHAP. 6

TAKE-OVER-BID DISCLOSURE ACT

§ 18.1-528. Short title. This chapter shall be known as the “Take-
Over-Bid Disclosure Act.”

§ 13.1-529. Definitions. As used in this chapter, unless the context
otherwise requires, the term:

(a) “Commission” means the State Corporation Commission.

__ (b) “Exempt offer” means, with respect to any class of equity secu-

rities of the offeree company,

(i) an isolated offer to purchase shares from individual stockholders
and not made to stockholders generally ;
(ii) an offer to purchase shares in accordance with a registration
statement under the Securities Act of 1938;

(ill) an offer made by an issuer to purchase its own shares or shares
of a subsidiary at least two-thirds of the voting stock of which is owned
beneficially by such issuer;

(iv) an offer to purchase shares to be effected by a registered broker-
dealer on a stock exchange or in the over-the-counter market if the broker
performs only the customary broker’ s function, and receives no more than
the customary broker’s commissions, and neither the principal nor the
broker solicits or arranges for the solicitation of orders to sell shares of
the offeree company;

(v) an offer to ‘purchase shares of a class not registered pursuant to
§ 12 of the Securities Exchange Act of 1934;

(vi) an offer which the Commission by order, after notice to the
offeror and to the offeree company, shall exempt from the provisions of
this chapter as not entered into for the purpose of, and not having the
effect of, changing or influencing the control of the offeree company or
otherwise as not comprehended within the purposes of this chapter.

(c) “Offeree’ means a person, whether a stockholder of record or a
beneficial owner, to whom a take-over bid is made.

(d) “Person” means an individual, a partnership, a corporation, an
unincorporated association, or a trust.

(e) “Offeree company” means a corporation incorporated under the
laws of Virginia and doing business in Virginia whose shares are the
subject of a take-over bid.

(f) “Offeror” means a person who makes a take-over bid, and includes
two or more persons,

(i) whose take-over bids are made jointly or in concert, or

(ii) who intend to exercise jointly or in concert any voting rights
attaching to the shares for which a take-over bid is made.

(g) “Offeror’s presently-owned shares” means the aggregate number
of shares of an offeree company (i) beneficially owned, and (ii) subject
to a right of acquisition, directly or indirectly, on the date of a take-over
bid by (1) the offeror and (2) each associate of the offeror.

(h) “Associate of the offeror’ means (i) any corporation or other
organization of which the offeror is an officer, director or partner, or is,
directly or indirectly, the beneficial owner of 10 percent or more of any
class of equity securities,

(ii) any person who is, directly or indirectly, the beneficial owner
of 10 percent or more of any class of equity securities of the offeror,

(ill) any trust or other estate in which the offeror has a substantial
beneficial interest or as to which the offeror serves as trustee or in a
similar fiduciary capacity, and

(iv) any relative or spouse of the offeror or any relative of such
spouse, who has the same home as the offeror.

(i) “Take-over bid” means an offer, other than an exempt offer, made
by an offeror directly or through an agent by advertisement or any other
written or oral communication to offerees to purchase such number of
shares of any class of equity security of the offeree company that, together
with the offeror’s presently-owned shares, will in the aggregate exceed
10 percent of the outstanding shares of such class.

(j) “Securities Act of 1988” and “Securities Exchange Act of 1984”
mean the federal statutes of those names as now or hereafter amended.

§ 13.1-580. Provisions of take-over bids. The following provisions
apply to every take-over bid:

(a) The period of time within which shares may be deposited pur-
suant to a take-over bid shall not be less than twenty-one days nor more
than thirty-five days from the date of the first invitation to deposit shares.
(b) Shares deposited pursuant to a take-over bid may be withdrawn
by an offeree or his attorney-in-fact by demand in writing on the offeror
or the depository at any time within twenty-one days from the date of the
first invitation to deposit shares.

(c) Where a take-over bid is made for less than all the shares of a
class and where a greater number of shares is deposited pursuant thereto
than the offeror is bound or willing to take up and pay for, the shares
taken up by the offeror shall be taken up as nearly as may be pro rata,
disregarding fractions, according to the number of shares deposited.

(d) Where an offeror varies the terms of a take-over bid before the
expiration thereof by increasing the consideration offered, the offeror shall
pay the increased consideration to each offeree whose securities are taken
up even if they have been taken up and paid for before the variation of
the take-over bid. —

(e) Where a take-over bid is sent by mail to offerees, it shall be ac-
companied by a copy of the statement filed with the Commission pursuant
to § 13.1-531.

§ 13.1-581. Disclosure. (a) At least ten days prior to the making
of a take-over bid, the offeror shall file with the Commission and with the
registered agent of the offeree company a statement containing the follow-
ing information and such additional information as the Commission may
require as necessary in the public interest or for the protection of investors:

(i) the name, address and business experience of the offeror and each
associate of the offeror;

(ii) the terms and conditions of the take-over bid, which shall include
the applicable provisions of § 13.1-530;

(iii) the source and amount of the funds or other consideration used
or to be used in making the take-over bid, and if any part of such funds
or consideration is represented or is to be represented by funds or other
consideration borrowed or otherwise obtained for the purpose of making
such bid, a description of the transaction and the names of the parties
thereto, except that where a source of funds is a loan or loans made in
the ordinary course of business by a bank or financial institution cus-
tomarily engaged in the business of making loans, it will be sufficient to
so state;

(iv) any plans or proposals that the offeror may have to liquidate
the offeree company, to sell its assets to or merge it with any other person,
or to make any other material change in its business or corporate structure;

(v) the number of offerors’ presently-owned shares;

(vi) information as to any contracts, arrangements, or understand-
ings with any person with respect to any securities of the offeree company,
including but not limited to transfer of any of the securities, joint ventures,
loan or option arrangements, puts or calls, guaranties of loans, guaranties
against loss or guaranties of profits, division of losses or profits, or the
giving or withholding of proxies, naming the persons with whom such
contracts, arrangements, or understandings have been entered into, and
giving the details thereof.

(b) All written soliciting material used by the offeror in connection
with the take-over bid shall be filed with the Commission and the regis-
tered agent of the offeree company not later than the time copies of such
material are first published or sent or given to offerees.

(c) If, pursuant to any arrangement or understanding with the
offeror, any persons are to be elected or designated as directors of the
offeree company, otherwise than at a meeting of security holders, and
the persons so elected or designated will constitute a majority of the direc-
tors of the offeree company, then, prior to the time any such person takes
Office as a director, the offeror shall file with the Commission, and transmit
to all holders of record of securities of the offeree company who would be
entitled to vote at a meeting for election of directors, information sub-
stantially equivalent to the information which would be required by §§ 14
(a) or 14 (c) of the Securities Exchange Act of 1934 to be transmitted
if such person or persons were nominees for election as directors at a
meeting of such security holders. ; ;

§ 13.1-582. Recommendations to accept or reject. Any written
solicitation or recommendation to offerees to accept or reject a take-over
bid shall be filed with the Commission not later than the time copies of
_ solicitation or recommendation are first published or sent or given to
offerees.

§ 13.1-5838. Deceptive practices. It shall be unlawful for any person
to make any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made, in the light
of the circumstances under which they are made, not misleading, or to
engage in any fraudulent, deceptive, or manipulative acts or practices, In
connection with any take-over bid, or any solicitation of offerees in opposi-
tion to or in favor of any such take-over bid.

§ 13.1-534. Investigations. The Commission may make such inves-
tigations within or outside of this State as it deems necessary to determine
whether any person has violated or is about to violate the provisions of this
chapter or any order or injunction of the Commission, and may require
any person subject to the investigation to pay the actual costs of the investi-
gation including fifty dollars per day for the time of the investigator. The
Commission shall have power to issue subpoenas and subpoenas duces
tecum to require the attendance of any person and the production of any
papers for the purposes of such investigation. No person shall be excused
from testifying on the ground that his testimony would tend to incriminate
him, but if, after asserting his claim of the privilege, he is required to
testify, he shall not be prosecuted or penalized on account of any trans-
actions concerning which he does testify.

§ 18.1-585. Injunctions. The Commission shall have all the power
and authority of a court of record as provided in § 156 (c) of the Con-
stitution to issue temporary and permanent injunctions against violations
or attempted violations of this chapter or any order issued pursuant to
this chapter. For the violation of any injunctions or order issued under
this chapter it shall have the same power to punish for contempt as a court
of equity, and the procedure therein shall be as set forth in § 12-21.

§ 13.1-5386. Crimes. Any person who shall knowingly make or cause
to be made any false statement with respect to any matter subject to the
provisions of this chapter or exhibit any false paper to the Commission
or who shall commit any act declared unlawful by this chapter and any
offeror who shall make a take-over bid which does not comply with the
provisions of §§ 13.1-5380 and 13.1-531 shall be guilty of a misdemeanor,
and on conviction, be punished by a fine of not less than one hundred nor
more than five thousand dollars, or by confinement in jail for not less than
thirty days nor more than one year, or by both such fine and imprisonment.
Prosecutions under this section shall be instituted within two years from
the date of the offense.

§ 18.1-537. Offenses punishable by the Commission. The Commis-
sion may, by judgment entered after a hearing on notice duly served on
the defendant not less than thirty days before the date of the hearing, if
it be proved that the defendant has knowingly made any misrepresentation
of a material fact for the purpose of inducing the Commission to take any
action or to refrain from taking action, or has violated any provision of
this chapter or any order of the Commission issued pursuant to this chap-
ter, impose a penalty not exceeding five thousand dollars, which shall be
collectible by the process of the Commission as provided by law.

§ 18.1-538. Separate offenses. Each take-over bid made in violation
of the provisions of this chapter shall constitute a separate offense. The
Commission may request the offeror to rescind any such bid and to make
restitution to the offeree, and if the offeror complies with the request no
penalty shall be imposed on him on account of that illegal take-over bid.

§ 18.1-589. Civil liabilities. (a) Any offeror who:

(1) Makes a take-over bid which does not comply with the provisions
of §§ 18.1-530 or 13.1-531, or

(2) Makes a take-over bid by means of an untrue statement of a
materiol fact or any omission to state a material fact necessary in order
to make the statement made, in the light of the circumstances under which
they were made, not misleading (the offeree not knowing of such untruth
or omission), and who shall not sustain the burden of proof that he did
not know, and in the exercise of reasonable care could not have known,
of such untruth or omission, shall be liable to any offeree whose shares
are taken up pursuant to the take-over bid who may sue either at law or
in equity (i) to recover such shares, together with all dividends received
thereon, costs and reasonable attorneys’ fees, upon the tender of the con-
sideration received from the offeror, or (ii) for the substantial equivalent
in damages if the offeror no longer owns such shares.

(b) Every person who materially participates or aids in a take-over
bid made by an offeror liable under subsection (a), or who directly or in-
directly controls any offeror so liable, shall also be liable jointly and sever-
ally with and to the same extent as the offeror so liable, unless the person
who so participates, aids or controls, sustains the burden of proof that he
did not know, and in the exercise of reasonable care could not have known,
of the existence of the facts by reason of which the liability is alleged to
exist. There shall be contribution as in cases of contract among the several
persons so liable.

(c) Any tender specified in this section may be made at any time be-
fore entry of judgment.

(d) No suit shall be maintained to enforce any liability created under
this section unless brought within two years after the transaction upon
which it is based; provided, that if any person liable by reason of sub-
section (a) or (b) makes a written offer, before suit is brought, to return
the shares taken up pursuant to the take-over bid, together with all divi-
dends received thereon, upon the tender of the consideration received from
the offeror, or to pay damages if the offeror no longer owns such shares,
no offeree shall maintain a suit under this section who shall have refused
or failed to accept such offer within thirty days of its receipt.

(e) Any condition, stipulation or provision binding any offeree to
waive compliance with any provision of this chapter or of any rule or order
thereunder shall be void.

(f) The rights and remedies provided by this chapter shall be in ad-
dition to any and all other rights and remedies that may exist at law or
in equity

§ 13.1-540. Consent to service of process. Every nonresident of-
feror who makes a take-over bid shall be deemed to have appointed the
clerk of the Commission as his agent upon whom may be served, in any
matter arising under this chapter, any process, notice, order or demand
except one issued by the Commission. Service may be made on the clerk
or any of his staff at his office. He shall forthwith cause it to be sent by
registered or certified mail addressed to such offeror at his latest address
on file and keep a record thereof. Any process, notice, order or demand
issued by the Commission shall be served by being mailed by the clerk of
the Commission or any of his staff by registered or certified mail addressed
to such offeror at his latest address on file. A foreign corporation that has
complied with § 13.1-111 need not comply with this section.

§ 13.1-541. Severability. If any provision or clause of this chapter
or application thereof to any person or circumstance is held invalid, such
invalidity shall not affect other provisions or applications of this chapter
which can be given effect without the invalid provision or application, and
to this end the provisions of this chapter are declared to be severable.

2. An emergency exists and this act is in force from its passage.