§37-6-21. Sale, lease or encumbrance of property; offeror's disclosure statement; invitations for competing or alternative proposals; exceptions; effect of violation.

A cooperative may not sell or lease all or any substantial portion of its property, unless such sale or lease is authorized at a duly held meeting of the members thereof by the affirmative vote of not less than two thirds of all the members of the cooperative and unless the notice of such sale or lease shall have been contained in the notice of the meeting. A cooperative acting through its board of trustees may mortgage, by mortgage or deed of trust, pledge or otherwise encumber, to secure any indebtedness of the cooperative, all or any portion of its property, assets and the revenues and income therefrom, from time to time, when authorized by the affirmative vote of a majority of its members at a duly held meeting after proper notice thereof. The board of trustees of a cooperative, without authorization of the members, shall have full power and authority to authorize from time to time the execution and delivery of a mortgage or mortgages or a deed or deeds of trust upon, or the pledging or encumbering of, all or any portion of the property, assets, rights, privileges, licenses, franchises and permits of the cooperative, 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 trustees shall determine, to secure any indebtedness of the cooperative to the United States of America, any instrumentality or agency thereof, to any financing institution organized on a cooperative plan for the purpose of financing its members' programs, projects and undertakings, in which the cooperative holds membership or to any bank or other financial institution lending money or credit to the cooperative. The term "substantial portion" used herein means 10 percent or more of the cooperative's total assets as reflected on its books at the time of a transaction.

Prior to the making of any offer by any person or entity to acquire or lease all or a substantial portion of the assets or property of a cooperative, the person or entity making such offer shall, not less than five business days prior to such offer becoming effective and being communicated to members of the cooperative, file with each member of the board of trustees of the cooperative and with its general manager a disclosure statement as contemplated by Section 14 of the United States Securities Exchange Act of 1934 and rules and regulations promulgated by the United States Securities Commission thereunder on Schedule 14D-1. Comprehensive financial statements on the offeror and all persons who may own five percent or more of the stock or other interests in the offeror shall be included with such schedule. If there is any material change in any of the information set forth in such disclosure statement, the person or entity making the offer shall promptly file an amendment to the disclosure statement with each of the trustees and the general manager of the cooperative. References in Schedule 14D-1 to securities and equity owners shall for the purposes of this section, mean members of the cooperative and their votes.

Within 10 days from the receipt of the disclosure statement or any amendment thereto, the board of trustees of the cooperative shall cause all information concerning the offer and copies of the disclosure statement to be transmitted to every other cooperative that is organized under this Chapter 6 of Title 37 with an invitation inviting them to submit competing or alternative proposals, including proposals to merge or consolidate with the cooperative. Such other cooperatives shall be given at least 90 days from the date they receive the information required by this paragraph to make such proposals and no meeting of members shall be called or noticed to consider any offer until after the expiration of such deadline.

The disclosure statement and other information required to be submitted to the board of trustees of the cooperative shall not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

Compliance with the provisions of this section shall not be required if the sale or lease is to be with one or more other cooperatives which are organized under this chapter and the effect thereof will be essentially the same as if a merger or consolidation were being consummated with one or more other cooperatives. This section shall also not apply if the proposed sale is in the nature of an involuntary sale, such as condemnation, or a sale required or authorized by electric utility territorial legislation now existing or hereafter adopted, or if the property to be sold is no longer used or useful in conducting the business of the cooperative.

Failure to provide the disclosure statement and any and all information required therein shall cause the offer made in violation of the disclosure requirements hereof to be void and unenforceable and shall cause any purchase or transaction taken in pursuance or as a result thereof between the cooperative and the offeror to be ineffective and rescindable within five years after consummation at the option of the cooperative.

(Acts 1939, No. 231, p. 371; Code 1940, T. 18, §51; Acts 1971, 1st Ex. Sess., No. 55, p. 92, §2; Acts 1973, No. 487, p. 701, §3; Acts 1989, No. 89-519, p. 1065, §1; Acts 1989, No. 89-814, p. 1627, §1.)