CA Pub Cont Code Section 10286.1

(a)

For purposes of this part, except as otherwise provided in subdivisions (b) and (c), a state agency shall not enter into any contract with an expatriate corporation or its subsidiaries.

(b)

(1)For purposes of this chapter, an “expatriate corporation” means a foreign incorporated entity that is publicly traded in the United States to which all of the following apply:

(A)

The United States is the principal market for the public trading of the foreign incorporated entity.

(B)

The foreign incorporated entity has no substantial business activities in the place of incorporation.

(C)

Either clause (i) or clause (ii) applies:

(i)

The foreign entity was established in connection with a transaction or series of related transactions pursuant to which (I) the foreign entity directly or indirectly acquired substantially all of the properties held by a domestic corporation or all of the properties constituting a trade or business of a domestic partnership or related foreign partnership, and (II) immediately after the acquisition, more than 50 percent of the publicly traded stock, by vote or value, of the foreign entity is held by former shareholders of the domestic corporation or by former partners of the domestic partnership or related foreign partnership. For purposes of subclause (II), any stock sold in a public offering related to the transaction or a series of transactions is disregarded.

(ii)

The foreign entity was established in connection with a transaction or series of related transactions pursuant to which (I) the foreign entity directly or indirectly acquired substantially all of the properties held by a domestic corporation or all of the properties constituting a trade or business of a domestic partnership or related foreign partnership, and (II) the acquiring foreign entity is more than 50 percent owned, by vote or value, by domestic shareholders or partners. (iii)For purposes of this subparagraph, indirect acquisition of property includes the acquisition of a stock share, or any portion thereof, of the owner of that property.

(2)

For purposes of this chapter, neither of the following are an “expatriate corporation”:

(A)

A foreign incorporated entity that is publicly traded in the United States if all of the following are true:

(i)

The foreign incorporated entity, or any predecessor entity, was originally established in connection with a transaction or series of related transactions between unrelated publicly traded corporations.

(ii)

Immediately after the transaction or series of related transactions, not more than 70 percent of the publicly traded stock, by vote or value, of the foreign incorporated entity is held in the manner described in clause (i) of subparagraph (C) of paragraph (1). (iii)The transaction or series of related transactions that originally established the foreign incorporated entity, or any predecessor entity, was a taxable transaction for any United States shareholders of any domestic corporation that was a party to such transaction.

(iv)

The foreign incorporated entity is both of the following:

(I)

Created or organized under the laws of a foreign country with which the United States has a comprehensive income tax treaty.

(II)

Considered a resident of that foreign country for purposes of that treaty, or any successor treaty with that foreign country meeting the requirements of this paragraph.

(B)

Any successor corporation that meets the requirements of clause (iv) of subparagraph (A) that is a successor corporation resulting from a corporate reorganization as defined in Section 368 of the Internal Revenue Code or from a transaction satisfying the requirements of Section 351 of the Internal Revenue Code.

(3)

Notwithstanding subdivision (a), a state agency may contract with an expatriate corporation, or its subsidiary, if it was an expatriate corporation before January 1, 2004, to which both of the following apply:

(A)

The foreign entity provides, by operation of law, by provisions of its governing documents, by resolution of its board of directors, or in any other manner, at least the following shareholders’ rights:

(i)

Shareholders of the entity have the right to inspect, at a principal place of business in the United States, copies of the entity’s books and records, including, but not limited to, shareholder names, addresses, and shareholdings in accordance with the corporation law, as amended from time to time and as that law is interpreted by the courts, of the United States jurisdiction in which the entity was previously incorporated, or, if the entity was not previously incorporated, in accordance with the terms set forth in the Model Business Corporation Act, as that act may be amended from time to time, provided that, if the corporate law of the United States jurisdiction in which the entity was previously incorporated or the Model Business Corporation Act does not provide access to the shareholder names, addresses, and shareholdings, these books and records are available for inspection by shareholders for purposes properly related to their status as shareholders of the entity.

(ii)

The entity permits its shareholders to bring derivative proceedings on behalf of the entity, provided that these derivative proceedings are brought on a basis and under the terms applicable under the law, as amended from time to time and as interpreted by, or required by, the courts of the United States jurisdiction in which the entity was previously incorporated, or, if the entity was not previously incorporated, on a basis and under the terms set forth in the Model Business Corporations Act as that act may be amended from time to time and as it is interpreted by, or required by, the courts. (iii)Entity transactions in which any director is interested are approved in accordance with the applicable law, as amended from time to time and as interpreted by the courts, of the United States jurisdiction in which the entity was previously incorporated, or, if the entity was not previously incorporated, in accordance with the terms set forth in the Model Business Corporations Act, as may be amended from time to time and as interpreted by the courts.

(iv)

The entity has consented to the jurisdiction, for any otherwise available cause of action by or on behalf of the entity’s shareholders, including any pendent state causes of action, of all of the following courts:

(I)

The state courts of one or more states.

(II)

The United States federal courts in any state in which the entity consents to the jurisdiction of that state’s courts pursuant to subclause (I).

(v)

The entity has appointed an agent for service of process in the state or states in which the entity has consented to jurisdiction, as described in clause (iv), and the entity meets at least one of the following conditions:

(I)

The entity has unencumbered assets in the United States, which assets may include equity or debt investments in United States companies, with a book value in excess of fifty million dollars ($50,000,000), and the entity delivers to the Secretary of State an opinion of an attorney licensed in the United States that judgments rendered against the entity may be satisfied by using these assets.

(II)

The entity posts a bond or similar security in an amount of at least fifty million dollars ($50,000,000). (III)The entity has directors’ and officers’ insurance in an amount of at least fifty million dollars ($50,000,000).

(vi)

The entity agrees that, in connection with any lawsuit brought against it by its shareholders in any court in which the entity has consented to jurisdiction as described in clause (iv), the entity will provide to the court notice of the manner in which the entity complied with clause (v) and, if the entity complied with that clause in the manner specified in subclause (I) of clause (v), a copy of the opinion described in that subclause. (vii)Shareholder approval is required for any sale of all or substantially all of the entity’s assets in accordance with the law, as amended from time to time and as it is interpreted by the courts, of the United States jurisdiction in which it was previously incorporated, or, if it was not previously incorporated, in accordance with the terms set forth in the Model Business Corporations Act, as it may be amended from time to time. (viii)The directors and officers of the entity occupy a fiduciary relationship with the entity and its shareholders and these directors and officers, in performing their duties, act in good faith in a manner that a director or officer believes to be in the best interests of the entity and its shareholders, as that standard of care is interpreted by the courts.

(ix)

The entity agrees to hold no more than one of every four annual shareholder meetings in a location outside the United States and, in the event that the entity holds an annual meeting outside the United States, the entity agrees to provide access to that meeting through a Web cast or other technology that allows the entity’s shareholders to do both of the following:

(I)

Listen to the meeting, watch the meeting, or both.

(II)

Send questions that will be addressed at the meeting.

(x)

The entity provides a description of the shareholder rights described in clauses (i) to (ix), inclusive, and any subsequent changes to these rights, on the entity’s Web site or in its 10K filings with the United States Securities and Exchange Commission.

(B)

The entity uses worldwide combined reporting to calculate the income on which it pays taxes to the state.

(c)

The chief executive officer of a state agency or his or her designee may waive the prohibition specified in subdivision (a) if the executive officer or his or her designee has made a written finding that the contract is necessary to meet a compelling public interest. For purposes of this section, a “compelling public interest” includes, but is not limited to, ensuring the provision of essential services, ensuring the public health and safety, or an emergency as defined in Section 1102. If a waiver is granted to a vendor pursuant to this subdivision, the requirement to submit a declaration of compliance, as set forth in paragraph (1) of subdivision (d), does not apply to that vendor.

(d)

(1)For purposes of this chapter, “state agency” means every state office, department, division, bureau, board, commission, and the California State University, but does not include the University of California, the Legislature, the courts, or any agency in the judicial branch of government.

(2)

On or after January 1, 2004, all state agencies shall, as a condition of the contract, require any vendor that is offered a contract to do business with the state to submit a declaration stating that the vendor is eligible to contract with the state pursuant to this section.

(3)

A vendor that declares as true any material matter in a declaration described in this subdivision that he or she knows to be false is guilty of a misdemeanor.

(e)

(1)Except as provided in paragraph (2) and subdivision (f), this section applies to contracts that are entered into on or after January 1, 2004.

(2)

With respect to an entity that was an expatriate corporation, as defined in paragraph (1) of subdivision (b), before January 1, 2004, this section applies to contracts that are entered into on or after April 1, 2004.

(f)

(1)The declaration requirement set forth in subdivision (d) does not apply to a credit card purchase of goods of two thousand five hundred dollars ($2,500) or less.

(2)

The total amount of exemption authorized herein shall not exceed seven thousand five hundred dollars ($7,500) per year for each company from which a state agency is purchasing goods by credit card. It shall be the responsibility of each state agency to monitor the use of this exemption and adhere to these restrictions on these purchases.