MISSISSIPPI LEGISLATURE
2004 Regular Session
To: Judiciary A
By: Representative Morris, McBride, Reynolds
AN ACT TO PROVIDE CORPORATE SUCCESSOR LIABILITY IN CONNECTION WITH MERGERS OR CONSOLIDATIONS; TO DEFINE CERTAIN TERMS; TO PROVIDE FOR THE ESTABLISHMENT OF FAIR MARKET VALUE OF TOTAL GROSS ASSETS; TO PROVIDE FOR ADJUSTMENTS; TO AMEND SECTIONS 79-4-11.02, 79-4-11.07 AND 79-25-3, MISSISSIPPI CODE OF 1972, IN CONFORMITY TO THE PROVISIONS OF THIS ACT; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. The following words and phrases shall have the meanings ascribed herein, unless the context clearly indicates otherwise:
(a) "Asbestos claim" means any claim, wherever or whenever made, for damages, losses, indemnification, contribution, or other relief arising out of, based on, or in any way related to asbestos, including:
(i) Property damage caused by the installation, presence or removal of asbestos;
(ii) The health effects of exposure to asbestos, including any claim for:
1. Personal injury or death;
2. Mental or emotional injury;
3. Risk of disease or other injury; or
4. The costs of medical monitoring or surveillance; and
(iii) Any claim made by or on behalf of any person exposed to asbestos, or a representative, spouse, parent, child or other relative of the person.
(b) "Corporation" means a corporation for profit, including:
(i) A domestic corporation organized under the laws of this state; or
(ii) A foreign corporation organized under laws other than the laws of this state.
(c) "Successor asbestos-related liabilities" means any liabilities, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due, that are related in any way to asbestos claims that were assumed or incurred by a corporation as a result of or in connection with a merger or consolidation, or the plan of merger or consolidation related to the merger or consolidation, with or into another corporation or that are related in any way to asbestos claims based on the exercise of control or the ownership of stock of the corporation before the merger or consolidation. The term includes liabilities that, after the time of the merger or consolidation for which the fair market value of total gross assets is determined under Section 4, were or are paid or otherwise discharged, or committed to be paid or otherwise discharged, by or on behalf of the corporation, or by a successor of the corporation, or by or on behalf of a transferor, in connection with settlements, judgments, or other discharges in this state or another jurisdiction.
(d) "Successor" means a corporation that assumes or incurs, or has assumed or incurred, successor asbestos-related liabilities.
(e) "Transferor" means a corporation from which successor asbestos-related liabilities are or were assumed or incurred.
SECTION 2. (1) The limitations in Section 3 of this act shall apply to the following:
(a) A domestic corporation or a foreign corporation that has had a certificate of authority to transact business in this state and who is or has done business in this state that is a successor which became a successor prior to May 13, 1968, or which is any of that successor corporation's successors but in the latter case only to the extent of the limitations of liability applied under Section 3(2) of this act;
(b) All asbestos claims, including asbestos claims that are pending on the effective date of this title, and all litigation involving asbestos claims, including litigation that is pending on the effective date of this title;
(c) Successors of a corporation to which this title applies.
(2) The limitations in Section 3 of this act shall not apply to:
(a) Workers' compensation benefits paid by or on behalf of an employer to an employee under this state's workers' compensation act or a comparable workers' compensation law of another jurisdiction;
(b) Any claim against a corporation that does not constitute a successor asbestos-related liability;
(c) An insurance company, as that term is defined in Section 83-5-5; or
(d) Any obligations under the National Labor Relations Act (29 USCS Section 151 et seq.), as amended, or under any collective bargaining agreement.
SECTION 3. (1) Except as further limited in subsection (2) of this section, the cumulative successor asbestos-related liabilities of a corporation are limited to the fair market value of the total gross assets of the transferor determined as of the time of the merger or consolidation. The corporation does not have any responsibility for successor asbestos-related liabilities in excess of this limitation.
(2) If the transferor had assumed or incurred successor asbestos-related liabilities in connection with a prior merger or consolidation with a prior transferor, then the fair market value of the total assets of the prior transferor, determined as of the time of such earlier merger or consolidation, shall be substituted for the limitation set forth in subsection (1) of this section, for purposes of determining the limitation of liability of a corporation.
SECTION 4. (1) A corporation may establish the fair market value of total gross assets for the purpose of the limitations under Section 3 of this act through any method reasonable under the circumstances, including:
(a) By reference to the going concern value of the assets or to the purchase price attributable to or paid for the assets in an arm's-length transaction; or
(b) In the absence of other readily available information from which fair market value can be determined, by reference to the value of the assets recorded on a balance sheet. A showing by the successor of a reasonable determination of fair market value of total assets if prima facie evidence of the fair market value of those assets.
(2) Total gross assets include intangible assets.
(3) Total gross assets include the aggregate coverage under any applicable liability insurance that was issued to the transferor whose assets are being valued for purposes of this title and which insurance has been collected or is collectable to cover successor asbestos-related liabilities (except compensation for liabilities arising from workers' exposure to asbestos solely during the course of their employment by the transferor). A settlement of a dispute concerning such insurance coverage entered into by a transferor or successor with the insurers of the transferor before the enactment of this title shall be determinative of the aggregate coverage of such liability insurance to be included in the calculation of the transferor's total gross assets.
(4) After a successor has established a reasonable determination of the fair market value of total assets under this title, a claimant that disputes that determination of the fair market value has the burden of establishing a different fair market value of those assets.
SECTION 5. (1) Except as provided in subsections (2), (3) and (4) of this section, the fair market value of total gross assets at the time of a merger or consolidation increases annually at a rate equal to the sum of:
(a) The prime rate as listed in the first edition of the Wall Street Journal published for each calendar year since the merger or consolidation, unless the prime rate is not published in that edition of the Wall Street Journal, in which case any reasonable determination of the prime rate on the first business day of the year may be used; and
(b) One percent (1%).
(2) The rate in subsection (1) of this section is not compounded.
(3) The adjustment of fair market value of total gross assets continues as provided under subsection (1) of this section until the date the adjusted value is exceeded by the cumulative amounts of successor asbestos-related liabilities paid or committed to be paid by or on behalf of the corporation or a predecessor, or by or on behalf of a transferor, after the time of the merger or consolidation for which the fair market value of total gross assets is determined.
(4) No adjustment of the fair market value of total gross assets shall be applied to any liability insurance otherwise included in the definition of the total gross assets by Section 4(3) of this act.
SECTION 6. The courts in this state shall apply, to the fullest extent permissible under the United States Constitution, this state's substantive law, including the limitation under this act, to the issue of successor asbestos-related liabilities.
SECTION 7. Section 79-4-11.02, Mississippi Code of 1972, is amended as follows:
79-4-11.02. (a) One or more domestic corporations may merge with a domestic or foreign corporation or other entity pursuant to a plan of merger.
(b) A foreign corporation, or a domestic or foreign other entity, may be a party to the merger, or may be created by the terms of the plan of merger, only if:
(1) The merger is permitted by the laws under which the corporation or other entity is organized or by which it is governed; and
(2) In effecting the merger, the corporation or other entity complies with such laws and with its articles of incorporation or organizational documents.
(c) The plan of merger must include:
(1) The name of each corporation or other entity that will merge and the name of the corporation or other entity that will be the survivor of the merger;
(2) The terms and conditions of the merger;
(3) The manner and basis of converting the shares of each merging corporation and interest of each merging other entity into shares or other securities, interests, obligations, rights to acquire shares or other securities, cash, other property, or any combination of the foregoing;
(4) The articles of incorporation of any corporation, or the organizational documents of any other entity to be created by the merger, or if a new corporation or other entity is not to be created by the merger, any amendments to the survivor's articles of incorporation, or organizational documents; and
(5) Any other provisions required by the laws under which any party to the merger is organized or by which it is governed, or by the articles of incorporation or organizational documents of any such party.
(d) The terms described in subsections (c)(2) and (c)(3) may be made dependent on facts ascertainable outside of the plan of merger, provided that those facts are objectively ascertainable. The term "facts" includes, but is not limited to, the occurrence of any event, including a determination or action by any person or body, including the corporation.
(e) The plan of merger may also include a provision that the plan may be amended prior to filing the articles of merger with the Secretary of State, provided that if the shareholders of a domestic corporation that is a party to the merger are required or permitted to vote on the plan, the plan must provide that subsequent to approval of the plan by such shareholders the plan may not be amended to:
(1) Change the amount or kind of shares or other securities, interests, obligations, rights to acquire shares or other securities, cash, or other property to be received by the shareholders of or owners of interests in any party to the merger upon conversion of their shares or interests under the plan;
(2) Change the articles of incorporation of any corporation or the organizational documents of any other entity, that will survive or be created as a result of the merger, except for changes permitted by Section 79-4-10.05 or by comparable provisions of the laws under which the foreign corporation or other entity is organized or governed; or
(3) Change any of the other terms or conditions of the plan if the change would adversely affect such shareholders in any material respect.
(f) Liability from a merger shall be limited as provided in Sections 1 through 5 of House Bill No. 1517, 2004 Regular Session.
SECTION 8. Section 79-4-11.07, Mississippi Code of 1972, is amended as follows:
79-4-11.07. (a) When a merger becomes effective:
(1) The corporation or other entity that is designated in the plan of merger as the survivor continues or comes into existence, as the case may be;
(2) The separate existence of every corporation or other entity that is merged into the survivor ceases;
(3) All property owned by, and every contract right possessed by, each corporation or other entity that merges into the survivor is vested in the survivor without reversion or impairment;
(4) All liabilities of each corporation or other entity that is merged into the survivor are vested in the survivor subject to the limitations as provided in Sections 1 through 5 of House Bill No. 1517, 2004 Regular Session;
(5) The name of the survivor may, but need not be, substituted in any pending proceeding for the name of any party to the merger whose separate existence ceased in the merger;
(6) The articles of incorporation or organizational documents of the survivor are amended to the extent provided in the plan of merger;
(7) The articles of incorporation or organizational documents of a survivor that is created by the merger become effective; and
(8) The shares of each corporation that is a party to the merger, and the interests in an other entity that is a party to a merger, that are to be converted under the plan of merger into shares, interests, obligations, rights to acquire securities, other securities, cash, other property, or any combination of the foregoing, are converted and the former holders of such shares or interests are entitled only to the rights provided to them in the plan of merger or to any rights they may have under Title 79, Chapter 4, Article 13.
(b) When a share exchange becomes effective, the shares of each domestic corporation that are to be exchanged for shares or other securities, interests, obligations, rights to acquire shares or securities, other securities, cash, other property, or any combination of the foregoing, are entitled only to the rights provided to them in the plan of share exchange or to any rights they may have under Title 79, Chapter 4, Article 13.
(c) Any shareholder of a domestic corporation that is a party to a merger or share exchange who, prior to the merger or share exchange, was liable for the liabilities or obligations of such corporation, shall not be released from such liabilities or obligations by reason of the merger or share exchange.
(d) Upon a merger becoming effective, a foreign corporation, or a foreign other entity, that is the survivor of the merger is deemed to:
(1) Appoint the Secretary of State as its agent for service of process in a proceeding to enforce the rights of shareholders of each domestic corporation that is a party to the merger who exercise appraisal rights; and
(2) Agree that it will promptly pay the amount, if any, to which such shareholders are entitled under Title 79, Chapter 4, Article 13.
SECTION 9. Section 79-25-3, Mississippi Code of 1972, is amended as follows:
79-25-3. In Sections 79-25-3 through 79-25-9, the following terms have the meanings ascribed herein:
(a) "Affiliate," including the term "affiliated person," 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.
(b) "Announcement date" means the first general public announcement of the proposal or intention to make a proposal of a business combination or its first communication generally to shareholders of the corporation, whichever is earlier.
(c) "Associate," when used to indicate a relationship with any person, means:
(i) Any corporation or organization (other than the corporation or a subsidiary of the corporation) of which such person is an officer, director or partner, or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities;
(ii) Any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and
(iii) Any relative or spouse of such person, or any relative of such spouse, who has the same home as such person or who is a director or officer of the corporation or any of its affiliates.
(d) "Beneficial owner," when used with respect to any voting stock, means a person:
(i) That, individually or with any of its affiliates or associates, beneficially owns voting stock, directly or indirectly; or
(ii) That, individually or with any of its affiliates or associates, has:
(A) The right to acquire voting stock (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; or
(B) The right to vote voting stock pursuant to any agreement, arrangement or understanding; or
(iii) That has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting, exercising investment power over, or disposing of voting stock with any other person that beneficially owns, or whose affiliates or associates beneficially own, directly or indirectly, such shares of voting stock.
(e) "Business combination" means:
(i) Subject to the limitations provided in House Bill No. 1517, 2004 Regular Session, unless the merger, consolidation or share exchange does not alter the contract rights of the stock as expressly set forth in the certificate of incorporation or change or convert in whole or in part any of the outstanding shares of stock of the corporation, any merger, consolidation, share exchange or similar transaction of the corporation or any subsidiary with any interested shareholder or any other corporation (whether or not itself an interested shareholder) which is, or after the merger, consolidation or share exchange would be, an affiliate of an interested shareholder that was an interested shareholder prior to the transaction; or
(ii) Any sale, lease, transfer or other disposition, other than in the ordinary course of business, in one transaction or a series of transactions, to or with any interested shareholder or any affiliate of any interested shareholder (other than the corporation or any of its subsidiaries) of any assets of the corporation or any subsidiary having, at the time the transactions are approved by the board of directors of the corporation, an aggregate market value of twenty percent (20%) or more of the total market value of the outstanding stock of the corporation or of its assets, all as of the end of its most recently ended fiscal quarter, whichever is lower; or
(iii) The issuance or transfer by the corporation, or any subsidiary (in one transaction or a series of transactions) of any securities of the corporation or any subsidiary which have an aggregate market value of five percent (5%) or more of the total market value of the outstanding stock of the corporation to any interested shareholder or any affiliate of any interested shareholder (other than the corporation or any of its subsidiaries), except pursuant to the exercise of warrants or rights to purchase securities offered pro rata to all holders of the corporation's voting stock or any other method affording substantially equal treatment to the holders of voting stock; or
(iv) The adoption of any plan or proposal for the liquidation, dissolution of or similar transaction involving the corporation in which anything other than cash will be received by an interested shareholder or any affiliate or any interested shareholder; or
(v) Any reclassification of securities (including any reverse stock split), or recapitalization of the corporation, or any merger, consolidation or share exchange of the corporation with any of its subsidiaries which has the effect, directly or indirectly, in one transaction or a series of transactions, of increasing by five percent (5%) or more of the total number of outstanding shares, the proportionate share of the outstanding shares of any class of equity securities of the corporation or any subsidiary which is directly or indirectly owned by any interested shareholder or any affiliate or associate of any interested shareholder, except as a result of immaterial changes due to fractional share adjustments.
(f) "Common stock" means any stock other than preferred or preference stock.
(g) "Continuing director" means any member of the board of directors of the corporation, while such person is a member of the board of directors, who is not an affiliate or associate or representative of the interested shareholder and was a member of the board of directors prior to the time that the interested shareholder became an interested shareholder, and any successor of a continuing director, while such successor is a member of the board of directors, who is not an affiliate or associate or representative of the interested shareholder and is recommended or elected to succeed the continuing director by a majority of continuing directors.
(h) "Control," including the terms "controlling," "controlled by" and "under common control with," means the possession, directly, indirectly or beneficially, of the power, directly or indirectly, to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise. The beneficial ownership of ten percent (10%) or more of the votes entitled to be cast by a corporation's voting stock creates a presumption of control.
(i) "Corporation," means any domestic corporation, as defined in Section 79-3-3(a), Mississippi Code of 1972, which corporation's principal place of business is located in Mississippi or which corporation has substantial assets in Mississippi, provided that such corporation has securities listed on a securities exchange registered under the Securities Exchange Act of 1934.
A corporation shall not include:
(i) Any state or national bank or any bank holding company or any affiliate thereof authorized by the appropriate regulatory authority to be owned by any of the above; or
(ii) Any state or federal savings and loan association, savings bank or similar savings institution, and any holding company or other affiliate of any state or federal savings and loan association, savings bank or similar savings institution.
(j) "Determination date" means the date on which an interested shareholder first became an interested shareholder.
(k) "Equity security" or "security" means:
(i) Any stock or similar security, certificate of interest, or participation in any profit sharing agreement, voting trust certificate, or certificate of deposit for an equity security;
(ii) Any security convertible, with or without consideration, into an equity security, or any warrant or other security carrying any right to subscribe to or purchase an equity security; or
(iii) Any put, call, straddle or other option or privilege of buying an equity security from or selling an equity security to another without being bound to do so.
(l) "Interested shareholder" means any person or associated group of persons acting in concert (other than the corporation and/or any subsidiaries) that:
(i) Is the beneficial owner, directly or indirectly, of twenty percent (20%) or more of the voting power of the outstanding voting stock of the corporation; or
(ii) Is an affiliate of the corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of twenty percent (20%) or more of the voting power of the then outstanding voting stock of the corporation.
For the purpose of determining whether a person or group of persons is an interested shareholder, the number of shares of voting stock deemed to be outstanding shall include shares deemed owned by the person or group of persons through application of paragraph (d) of this subsection.
(m) "Market value" means:
(i) In the case of stock, the highest closing sale price during the thirty-day period immediately preceding the date in question of a share of such stock on the composite tape for New York Exchange listed stocks, or, if such stock is not quoted on the composite tape, on the New York Stock Exchange, or if such stock is not listed on such exchange, on the principal United States Securities Exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the thirty-day period preceding the date in question on the National Association of Securities Dealers, Inc., automated quotations system or any system then in use.
(ii) In the case of property other than cash or stock, the fair market value of such property on the date in question as determined by a majority of the continuing directors of the corporation in good faith.
(n) "Subsidiary" means any corporation of which voting stock having a majority of the voting stock is owned, directly or indirectly, by the corporation.
(o) "Valuation date" means:
(i) For a business combination voted upon or consented to by shareholders, the latter of the day prior to the date of the shareholders vote or consent or the day twenty (20) days prior to the consummation of the business combination; and
(ii) For a business combination not voted upon or consented to by shareholders, the date of the consummation of the business combination.
(p) "Voting stock" means shares of capital stock of the corporation entitled to vote generally in the election of directors.
SECTION 10. This act shall take effect and be in force from and after its passage.