HB3830 99TH GENERAL ASSEMBLY

LRB099 09561 JLS 29770 b

99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
HB3830

Introduced , by Rep. Will Guzzardi

SYNOPSIS AS INTRODUCED:

New Act
805 ILCS 310/Act rep.

Creates the Illinois Cooperative Act. Repeals the Co-operative Act. Provides for the organization, operation, and regulation of cooperatives. Provides that cooperatives are not-for-profit entities. Sets forth requirements for articles of incorporation, amendments, number of incorporators, and voting rights. Provides for regulation by the Secretary of State. Sets forth requirements for directors. Defines terms. Provides for liquidation, consolidation, and dissolution of cooperatives.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning business.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Illinois Cooperative Act.

Section 5. Definitions.In this Act:

"Association" means any corporation organized under this Act.

"Board" means the board of directors of an association.

"Cooperative" means an association or a foreign association.

"Entity", except as otherwise provided, means a foreign association, a foreign or domestic corporation other than a cooperative, or a foreign or domestic limited liability company.

"Foreign association" means a corporation organized under the cooperative laws of another state or the District of Columbia or a foreign corporation organized under corporation laws of another state, the District of Columbia, or the United States that operates on a cooperative basis.

"Marketing agreement" means an agreement, contract, or other arrangement between a cooperative and a member in which the member agrees to market all or a part of the products or produce produced by the member, or agrees to purchase all or a part of the member's requirements for inputs, services, or supplies.

"Member" means a person who has been qualified and accepted into membership in a cooperative.

"Membership stock" means any class of stock or other equity interest in a cooperative, continuous ownership of which is required for membership in the cooperative.

"Patron" means a person with which a cooperative has made an enforceable agreement to allocate and distribute a per unit retain, patronage dividend, or patronage refund with respect to business conducted by the cooperative with or for the person.

"Patronage stock" means any stock or other equity interest in a cooperative that was originally issued by the cooperative with respect to patronage transactions.

"Person" includes a natural person, partnership, corporation, cooperative, or other entity.

"Producer" means a person engaged in the production of agricultural products for the market.

Section 10. Purposes; deemed not-for-profit.

(a) An association may be organized under this Act for any lawful purpose permitted to corporations by the laws of this State, except any such purpose that is inconsistent with the provisions of this Act, the Business Corporation Act of 1983, or the General Not For Profit Corporation Act of 1986. This Section does not authorize any professional services otherwise prohibited by law.

(b) Associations shall be corporations that are deemed not-for-profit because they are not organized for the purpose of making a profit for themselves as such, or for the purpose of making a profit for their members as such, but for their members as patrons. This Act and not the General Not For Profit Corporation Act of 1986 shall govern associations.

(c) A municipal power agency organized under the Illinois Municipal Code is not an association for the purposes of this Act.

Section 15. Powers of an association. An association incorporated under this Act shall have the following powers:

(1) It may make contracts, incur liabilities, and borrow money; issue capital stock and other equity interests and issue certificates therefor; acquire property; and dispose of, mortgage, pledge, lease, or otherwise use in any manner, any of its property, or any interest in its property, wherever situated.

(2) It may invest its funds, lend money for its purposes, and hold any property as security for repayment.

(3) It may act as the agent or representative of any members or other patrons in any activities authorized by this Act.

(4) It may conduct its business and affairs, have offices, and exercise its power in the United States or in any foreign country.

(5) It may establish reserves and invest these funds.

(6) It may buy, hold, and exercise all privileges of ownership over such real or personal property as is necessary, convenient, or incidental to the conduct of any authorized business of the association.

(7) It may establish, secure, own, and develop patents, trademarks, copyrights, service marks, and other intellectual property.

(8) Notwithstanding the provisions of the Uniform Disposition of Unclaimed Property Act, it may effectuate the forfeiture of any unclaimed stock or other equity interests, dividends, and patronage allocations, for which the owner cannot be found after a period of 3 years. Notice of the existence of unclaimed stock or other equity interests and a request for written acknowledgment from the owner to the association shall be evidence of a bona fide attempt to deliver the unclaimed stock or other equity interests to the owner. If the notice is not acknowledged within 30 days after the notice is sent or within the period specified in the notice, if longer, all such unclaimed stock or other equity interests specified in the notice are forfeited and become the property of the association.

(9) It may make donations for charitable, scientific, educational, community development, or religious purposes, and may use all or part of the funds forfeited to the association under item (8) for these purposes.

(10) It may do everything necessary, suitable, or proper for the accomplishment of any of the purposes enumerated in this Section. In addition it may exercise and possess all powers, rights, and privileges necessary or incidental to the purposes for which the association is organized or to the activities in which it is engaged, and any other powers, rights, and privileges granted to corporations by the laws of this State, except as are inconsistent with the express provisions of this Act.

Section 20. Use of words in name; prohibition.

(a) The name of any association organized under this Act shall include the word or abbreviation "cooperative," "coop," "co-operative", "co-op", "association", "assn.", "company", "co.", "incorporated", "inc.", "corporation", or "corp.".

(b) No corporation or other person organized or applying to do business in this State shall use the word or abbreviation "cooperative," "coop," "co-operative," or "co-op" as a part of its corporate or other business name or title, unless at least one of the following applies:

(1) It is organized under this Act or has converted to an association under this Act.

(2) It is organized and operating on a cooperative basis under the General Not For Profit Corporation Act of 1986 or the Agricultural Co-Operative Act, or it is organized and operating for the purpose of ownership or administration of residential property on a cooperative basis.

(3) It is organized and operating in accordance with the cooperative laws of another state, the District of Columbia, or the United States.

(4) It is a state or federally chartered credit union.

Section 25. Number of incorporators; statutory agent.

(a) Two or more individuals may form an association under this Act.

(b) An association shall have and maintain a statutory agent upon whom any process, notice, or demand against the association may be served. The agent shall be one of the following:

(1) A natural person who is a resident of this State.

(2) A domestic or foreign corporation, not-for-profit corporation, limited liability company, partnership, limited partnership, limited liability partnership, limited partnership association, professional association, business trust, or unincorporated not-for-profit association that has a business address in this State. If the agent is an entity other than a domestic corporation, the agent shall meet the requirements of Illinois law for an entity of the agent's type to transact business or exercise privileges in this State.

(c) Whenever appointment or designation of a statutory agent is required by this Act, the appointment or designation shall be on a form prescribed by the Secretary of State for the administration of this Act.

Section 30. Articles of incorporation.

(a) The articles of incorporation of an association shall set forth all of the following:

(1) The name of the association.

(2) The association's purposes, as permitted by this Act. It is sufficient to state in the articles that the association may engage in any activity within the purposes for which associations may be organized under this Act.

(3) The county and municipal corporation or township where the association's principal place of business will be located which need not be within this State.

(4) The names and addresses of the incorporators.

(5) The number of its directors or a statement that the number of directors shall be as specified in the bylaws.

(6) The names and addresses of those who are to serve as directors until the first meeting of members or until the election and qualification of their successors.

(7) Whether the association is organized with or without capital stock and:

(A) if the association is organized without capital stock, the articles shall set forth the general rules by which the property rights and interests of each member are to be determined; and

(B) if the association is organized with capital stock, the total amount of the stock, the number and par value of the shares, and dividend rights, if any; if there is more than one class of stock, the articles shall set forth a statement of the number of shares in each class and a statement of the designations, preferences, rights, and limitations of the shares in each class.

(b) The articles may include additional provisions, consistent with law, including provisions that are required or permitted to be set forth in the bylaws.

(c) The articles shall be signed by the incorporators and filed with the Secretary of State in accordance with Section 55. The articles shall be accompanied by the appointment of a statutory agent in accordance with Section 25. The legal existence of an association begins upon the filing of the articles and, unless the articles provide otherwise, its period of existence is perpetual.

Section 35. Amendment or restatement of articles.

(a) The articles of incorporation of an association may be altered or amended at any regular meeting of the association or at any special meeting called for that purpose, provided that the text of the proposed change, or a general description of the change, is contained in the notice of the meeting. An amendment shall first be approved by two-thirds of the directors and shall then be adopted by an affirmative vote of 60% of the member votes cast on the amendment or, if the articles provide or permit, by the affirmative vote of a greater majority or by the affirmative vote of a simple majority of all member votes eligible to be cast on the amendment.

(b) Amendments to the articles of incorporation, when so adopted, shall be filed in accordance with Section 55.

(c) The board of an association may adopt a restatement of the articles without a member vote if the restatement merely incorporates amendments previously approved by the board and adopted by the members. An association may, by action taken in the manner required for an amendment, adopt restated articles that contain amendments made at the time of the restatement. Restated articles shall state that they are restated, or restated and amended, if amendments are adopted with the restatement, and shall supersede the existing articles and amendments. Restated articles shall meet the requirements of Section 30, except that the names and addresses of the incorporators and initial directors may be omitted. A restatement of the articles shall be filed in the manner prescribed for an amendment of the articles.

(d) Except as provided in the articles of incorporation, the board may adopt an amendment to the articles of incorporation without a member vote in any of the following cases:

(1) to change the principal place of business of the association;

(2) to designate and determine the rights and restrictions of a series within a class of capital stock, if permitted by the articles;

(3) to reduce the authorized number of shares of any class or series of capital stock to any number down to and including the number of the shares issued and outstanding, and to assign the authorization for the number of shares so reduced to another class or classes of capital stock previously authorized;

(4) after a merger, consolidation, conversion, division, or occurrence of any other contingent event referred to in the articles of incorporation, to eliminate from the articles any statement or provision pertaining exclusively to the merger, consolidation, conversion, division, or occurrence, and to make other changes required by such elimination, but only after the deleted item has been superseded in accordance with the articles of incorporation or otherwise is no longer in effect.

Section 40. Voting on amendment.

(a)(1) Unless the board provides that division (a)(3) of this Section applies to an amendment to the articles of incorporation, a holder of stock other than membership stock or patronage stock who is affected by a proposed amendment to the articles shall be entitled to cast one vote on the amendment regardless of the par or stated value of the stock, the number of shares, or the number of affected classes of stock held.

(2) A member holding stock affected by a proposed amendment may vote only as a member and shall not be entitled to vote or demand fair cash value as an affected stockholder.

(3) The board may provide that a stockholder otherwise entitled to vote under division (a)(1) of this Section shall instead be entitled to payment of fair cash value of the affected stock held by such stockholder in accordance with Section 170.

(b) For purposes of this Section, a holder of stock is affected as to any class of stock owned by the holder only if an amendment would expressly do any of the following:

(1) decrease the dividends to which that class may be entitled or change the method by which the dividend rate on that class is fixed;

(2) further restrict rights to transfer that class;

(3) give to another existing or any new class of stock or equity interest not previously entitled thereto any preference, as to dividends or upon dissolution, that is higher than preferences of that class;

(4) change the par value of shares of that class or of any other class having the same or higher preferences as to dividends or upon dissolution;

(5) increase the number of authorized shares of any class having a higher preference as to dividends or upon dissolution; or

(6) require or permit an exchange of shares of any class with lower preferences as to dividends or upon dissolution for shares of any other class with higher preferences.

(c) If any proposed amendment will alter or change the powers, preferences, or special rights of one or more series of any class so as to affect them adversely, but shall not so affect the entire class, then only the shares of the series so affected by the amendment shall be considered a separate class for the purposes of subsection (b) of this Section.

(d) If stockholders are entitled to vote on an amendment, the amendment is adopted only if all of the following conditions are met:

(1) notice of the meeting, an exact copy of the proposed amendment, and a ballot on the amendment have been sent to each affected stockholder;

(2) approval by the members under Section 35; and

(3) approval by a simple majority of the affected stockholders present and voting at a meeting of the stockholders.

(c) This Section does not apply to stock issued prior to the effective date of this Act, unless the association adopts an amendment to its articles of incorporation making the stock subject to this Section. As to such stock, an amendment shall first be approved by two-thirds of the directors and shall then be adopted by a vote representing a majority of all the members of the association.

Section 45. Evidence of incorporation.

(a) A copy of the association's articles of incorporation or amended articles filed in the office of the Secretary of State, and certified by the Secretary of State, is conclusive evidence, except as against the State, that the association has been incorporated under the laws of this State; and a copy certified by the Secretary of State of any certificate of amendment or other certificate is prima-facie evidence of such amendment or of the facts stated in the certificate, and of the observance and performance of all antecedent conditions necessary to the action that the certificate purports to evidence.

(b) A copy of amended articles filed in the office of the Secretary of State, and certified by the Secretary of State, shall be accepted in this State and other jurisdictions in lieu of the original articles, amendments to the articles, and prior amended articles.

(c) The original or a copy of the record of minutes of the proceedings of the incorporators of an association, or of the proceedings or meetings of the members or any class of stockholders, or of the directors, or of any committee thereof, including any written consent, waiver, release, or agreement entered in such record or minutes, or the original or a copy of a statement that no specified proceeding was had or that no specified consent, waiver, release, or agreement exists, shall, when certified to be true by the secretary or an assistant secretary of an association, be received in the courts as prima-facie evidence of the facts stated therein. Every meeting referred to in the certified original or copy is considered duly called and held, and all motions and resolutions adopted and proceedings had at the meeting are considered duly adopted and had, and all elections of directors and all elections or appointments of officers chosen at the meeting are considered valid, until the contrary is proved; and whenever a person who is not a member, patron, or stockholder of an association has acted in good faith in reliance upon any such certified original or copy, it is conclusive in that person's favor.

Section 50. Reinstatement of association.

(a) An association whose articles of incorporation have been canceled or an association that has been dissolved in a manner other than for a voluntary dissolution as provided in Section 180, or a judicial dissolution, may be reinstated by filing, on a form prescribed by the Secretary of State for the administration of this Act, an application for reinstatement and the required appointment of a statutory agent, and by paying a filing fee of $10.

(b) Upon reinstatement of an association's articles of incorporation, the rights, privileges, and franchises, including all real or personal property rights and credits and all contract and other rights, of the association existing at the time that its articles were canceled or the dissolution became effective shall continue in effect as if the articles had not been canceled or the dissolution had not occurred; and the association shall again be entitled to exercise the rights, privileges, and franchises authorized by its articles.

Section 55. Filing articles and certificates of amendment.

(a) For filing articles of incorporation or a certificate of amendment of articles or a certificate of merger, consolidation, division, or dissolution, an association organized under this Act shall pay to the Secretary of State the same fees required of corporations organized under the Business Corporation Act of 1983. In the case of a certificate of division, the filing fee shall be the same as for a certificate of merger or consolidation.

(b) When the articles of incorporation, or a certificate of amendment of articles, or a certificate of merger, consolidation, conversion, division, or dissolution is filed with the Secretary of State, the Secretary of State shall, if the articles or certificate complies with this Act, endorse approval thereon, the date of filing, a file number, and make a legible copy thereof by any authorized method. The original or a copy of the articles or certificate, certified by the Secretary of State, shall be returned to the person filing the articles or certificate, who shall within 15 days file such document for record in the office of the recorder of the county in which the registered office of the corporation in this State is situated.

(c) All persons shall have the opportunity to acquire a copy of the articles and other certificates filed and recorded in the office of the Secretary of State, but no person dealing with the association shall be charged with constructive notice of the contents of any such articles or certificates by reason of the filing or recording.

Section 60. Dividends; stock; security interest.

(a) An association may pay dividends annually on its capital stock at a rate not exceeding 8% of its par value for any year, but dividends may be cumulative. The realized net earnings of the cooperative, to the extent attributable to business done with or for its patrons, shall be allocated and distributed among patrons in proportion to their patronage and in such manner and at such time as to constitute patronage dividends within the meaning of federal income tax law.

(b) Notwithstanding subsection (a), the articles or bylaws may provide for any of the following:

(1) that eligibility for patronage dividends is limited to members or to members in good standing;

(2) that the net earnings of the cooperative shall be retained for the capital and development needs of the cooperative and the improvement and extension of its services;

(3) that the number of allocation units of the cooperative shall be limited in any reasonable and equitable manner; or

(4) that patronage-sourced net operating losses of the cooperative shall not be allocated to patrons but shall be carried forward to offset patronage-sourced net earnings of subsequent years.

(c) An association, at any time, may purchase its own common stock at par or book value as determined by the board.

(d) An association shall have a continued perfected security interest in its membership stock and patronage stock to secure payment of any indebtedness or other obligation of the holder or owner to the association. Notwithstanding Articles 8 and 9 of the Uniform Commercial Code, the security interest shall have priority over all other perfected security interests. Unless otherwise provided in the association's articles of incorporation or bylaws, or by contract, a member or other patron has no right to compel an association to offset its membership stock or patronage stock against any indebtedness or obligation owed to the association.

Section 65. Bylaws. An association shall adopt bylaws that are not inconsistent with this Act or the association's articles of incorporation. The bylaws may provide for any of the following:

(1) The time, place, and manner of calling and conducting the association's meetings.

(2) The number of members constituting a quorum. If voting by any method other than personal appearance is used, members represented by a ballot may be counted in computing a quorum only on those matters for which the ballots were submitted.

(3) The right of members to vote by ballot delivered in person, by mail, by electronic or telephonic transmittal, or any combination of these, and the conditions, manner, form, and effect of such votes.

(4) Subject to the provisions of Section 75, a method of voting by members or delegates, and any limitations on voting rights of any group or class of members or delegates.

(5) The number of directors constituting a quorum.

(6) The number, qualifications, compensation, duties, and terms of office of directors and officers, and the time of their election and the manner of giving notice of the election.

(7) Penalties for violation of the bylaws.

(8) The amounts of entrance, organization, and membership fees, if any, the manner of collecting them, and the purposes for which they may be used, or the par value and number of shares required for membership, if any.

(9) Any amount that each member is required to pay annually or from time to time to carry on the business of the association; any charge to be paid by each member for services rendered by the association, and the time of payment and the manner of collection of such charge; and any marketing contract between the association and its members that members may be required to sign.

(10) The number and qualifications of members of the association and the conditions of membership or for ownership of membership stock in the association.

(11) The time and manner of permitting members to withdraw or the holders of membership stock to transfer their stock; and the manner of assignment and transfer of membership stock.

(12) The conditions upon which, and the time when, the membership of any member ceases; and the suspension of the rights of a member who ceases to be eligible for membership in the association.

(13) The manner and effect of the expulsion of a member.

(14) In the event of the death or withdrawal of a member or upon the expulsion of a member or the forfeiture of membership, any of the following:

(A) the manner of determining the value of a member's interest;

(B) provision for the purchase of a member's interest by the association; or

(C) at the option of the association, provision for such purchase at a price fixed by appraisal by the board of directors of the association.

(15) Any other provision for any matter relative to the control, regulation, operation, management, or government of the association.

Section 70. Adoption, amendment, or repeal of bylaws.

(a) The initial bylaws may be adopted by the association's directors who are to serve until the first member meeting. After the initial bylaws are adopted, bylaws may be adopted and amended only by the members unless the articles or bylaws provide that the board, by a two-thirds vote of the entire board, may adopt or amend the bylaws or any specified bylaw.

(b) Any bylaw adopted or amended by the board shall be reported at the next member meeting. Any bylaw adopted or amended by the board shall not conflict with the association's articles of incorporation or with this Act. Any bylaw is subject to amendment or repeal by the members at any time.

(c) Unless the bylaws provide otherwise, any bylaw may be adopted, amended, or repealed by a majority of the member votes cast on the adoption, amendment, or repeal.

Section 75. Members or delegates entitled to vote.

(a) A member entitled to vote shall have one vote, except that the articles or bylaws of the association may permit the following:

(1) voting by members in accordance with the amount of business done with or through the association;

(2) voting by delegates, including a voting system that provides any one or a combination of the following:

(A) that a delegate may cast only one vote;

(B) that a delegate may cast one vote for each member represented by the delegate; or

(C) that another form of delegate voting may be used.

(3) Voting by delegates or certain members on matters that are to be submitted to a member vote.

(4) Voting by any combination of the methods set forth in this subsection or any other method of voting set forth in the bylaws, provided the association is controlled by the members.

(b) If the articles or bylaws provide that only delegates or certain members are entitled to vote on matters to be submitted to a member vote, "member" or "members", as used in this Act with respect to the right of a member to vote, voting procedure, the required proportion of member votes, actions that are required or permitted to be taken by members, and the number of members required for a quorum, means the delegates or other members entitled to vote. When voting is based on the amount of business done, provisions of this Act requiring a vote of the members are met if the required membership vote is satisfied based on the voting power of the members.

Section 80. Members; meetings.

(a) An association shall have 2 or more members. However, an association may have one member if that member is a cooperative that has 2 or more members.

(b) An association shall hold an annual meeting of its members. The board may call a special meeting of the members at any time. Any meeting of the members may be held at one time or in a series of meetings at one or more locations.

(c) Twenty per cent of the members entitled to vote may file with the board a petition stating any proper business to be brought before the association and demanding a special meeting at any time for consideration of such business. Upon compliance with this Section, the meeting shall be called by the board.

(d) Notice of every meeting, together with a statement of the purpose of the meeting, shall be sent to each member who is entitled to vote at the meeting and any affected stockholder at the member's or stockholder's current address, as shown in the records of the association, at least 10 days prior to the meeting, in accordance with Section 85. The bylaws may provide that the notice be given by publication in a newspaper or newspapers of general circulation in the trade area of the association if notice to individual members and affected shareholders is impracticable.

Section 85. Methods of giving notice; waiver.

(a) Whenever notice is required by this Act to be given to any person, the notice may be given personally, by mail, or by electronic or telephonic transmittal. If mailed, the notice is given when it is deposited in the United States mail, with postage prepaid, addressed to the person at the person's address as it appears on the records of the association. If notice is sent by electronic or telephonic transmittal, notice is given when an electronic or telephonic confirmation of delivery is received by the association.

(b) A signed waiver is equivalent to personal notice to the person signing. The waiver may be signed at any time.

Section 90. Board of directors.

(a) Except where this Act or an association's articles of incorporation or bylaws require that action be otherwise authorized or taken, all of the authority of an association shall be exercised by or under the direction of the board. The board shall consist of not less than 5 directors, elected by and from the members, unless the number of members is less than 5, in which case, the number of directors may equal the number of members.

(b) The bylaws may provide that the membership of an association be divided into districts or other groupings and that the directors shall be elected according to such districts or groupings. In that case, the bylaws shall specify the number of directors to be elected and the manner of reapportioning or redistricting the membership.

(c) The bylaws may provide that one or more directors may be appointed by the other directors. The appointed directors need not be members of the association, but shall have the same powers, rights, and responsibilities as other directors. The appointed directors shall not number more than 20% of the entire number of directors.

(d) The bylaws may provide for an executive committee and may allot to the executive committee any of the functions and powers of the board, subject to the general direction and control of the board.

(e) The association may provide a fair remuneration for the time actually spent by its officers and directors in its service, and for the services of the members of its executive committee.

(f) Unless the bylaws provide otherwise, when a vacancy on the board occurs other than by expiration of term, the remaining directors on the board, by a majority vote, may elect a director to fill the vacancy. If the bylaws provide for an election of directors by the members in a district or other grouping, the board may call a special meeting of the members in that district or group to fill the vacancy.

Section 95. Indemnification.

(a) Subject to subsections (b) and (c) of this Section, an association may indemnify or agree to indemnify any person that was or is a party, or is threatened to be made a party, to any threatened, pending, or completed civil, criminal, administrative, or investigative action, suit, or proceeding, other than an action or suit by or in the right of the association, because the person is or was a director, officer, employee, agent, or volunteer of the association or is or was serving at the request of the association as a trustee, director, officer, employee, member, manager, agent, or volunteer of another association, entity, partnership, joint venture, trust, or other enterprise. The indemnification described in this subsection shall be for expenses, including attorney's fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by the person in connection with the action, suit, or proceeding described in this subsection.

(b) With respect to any noncriminal action or proceeding, the indemnification described in subsection (a) of this Section shall only be made if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the association as described in subsection (d) of Section 100.

(c) With respect to any criminal action or proceeding, the indemnification described in subsection (a) of this Section shall only be made if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the association as described in subsection (d) of Section 100, and the person had no reasonable cause to believe the conduct was unlawful.

(d) For purposes of subsections (b) and (c) of this Section, the termination of any action, suit, or proceeding by judgment, order, settlement, or conviction or a plea of nolo contendere or its equivalent does not create, of itself, a presumption that the person did not act in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the association or that the person had reasonable cause to believe that the conduct was unlawful.

(e) Subject to subsection (f) of this Section and provided the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the association, an association may indemnify or agree to indemnify any person that was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action or suit by or in the right of the association to procure a judgment in its favor, because the person is or was a director, officer, employee, agent, or volunteer of the association or is or was serving at the request of the association as a trustee, director, officer, employee, member, manager, agent, or volunteer of another association, entity, partnership, joint venture, trust, or other enterprise. The indemnification described in this subsection shall be for expenses, including attorney's fees, actually and reasonably incurred by the person in connection with the defense or settlement of an action or suit described in this subsection.

(f) If a person is adjudged to be liable for negligence or misconduct in the performance of a duty to the association, the indemnification described in subsection (e) of this Section shall be made for any claim, issue, or matter only to the extent that the court in which the action or suit was brought determines, upon application, that despite the adjudication of liability and in view of all the circumstances of the case, the person fairly and reasonably is entitled to indemnity for expenses that the court in which the action or suit was brought considers proper.

(g) Notwithstanding subsections (a), (b), (c), (d), (e), and (f) of this Section, unless limited in the articles of incorporation, to the extent that a person has been successful on the merits in defense of any action, suit, or proceeding described in subsection (a), (b), (c), (d), (e), or (f) of this Section, the person shall be indemnified against expenses, including attorney's fees, actually and reasonably incurred in connection with that action, suit, or proceeding.

(h) Unless ordered by a court or unless subsection (g) of this Section applies, the association shall make any indemnification under subsections (a), (b), (c), (d), (e), and (f) of this Section only as authorized in the specific case, upon a determination that indemnification of the person is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a), (b), (c), (d), (e), and (f) of this Section. This determination shall be made in any of the following manners:

(1) by a majority vote of a quorum consisting of directors of the indemnifying association that were not and are not parties to or threatened with the action, suit, or proceeding described in subsections (a), (b), (c), (d), (e), and (f) of this Section;

(2) whether or not a quorum as described in paragraph (1) of this subsection is obtainable, and if a majority of a quorum of disinterested directors so directs, in a written opinion by independent legal counsel other than an attorney or a firm of attorneys associated with that attorney, that within the past 5 years has been retained by or has performed services for the association or has performed services for any person to be indemnified; or

(3) by the members.

(i) The association shall pay the expenses, including attorney's fees, incurred by the person in defending the action, suit, or proceeding described in subsection (a), (b), (c), (d), (e), or (f) of this Section, unless either of the following applies:

(1) At the time of a person's act or omission that is the subject of an action, suit, or proceeding described in subsection (a), (b), (c), (d), (e), or (f) of this Section, the articles or bylaws of the association state, by specific reference to subsections (a), (b), (c), (d), (e), and (f) of this Section, that subsections (a), (b), (c), (d), (e), and (f) of this Section do not apply to the association.

(2) The only liability asserted against a person in an action, suit, or proceeding described in subsection (a), (b), (c), (d), (e), or (f) of this Section is pursuant to Section 110. Upon receipt of a request from a person, the association may pay expenses, including attorney's fees, incurred by a person in defending any action, suit, or proceeding described in subsection (a), (b), (c), (d), (e), or (f) of this Section as the expenses are incurred in advance of the final disposition of the action, suit, or proceeding, if the board authorizes this payment in the specific case and upon receipt of an undertaking by or on behalf of the person to repay the amount if it ultimately is determined that the person is not entitled to be indemnified by the association.

(j) Both of the following apply to the indemnification authorized by this Section:

(1) It is not exclusive of and is in addition to any other rights granted to a person seeking indemnification pursuant to the articles or bylaws of the association, any agreement, a vote of members or disinterested directors of the association, or otherwise, for action taken in the person's official capacity and action taken in another capacity while holding their office or position.

(2) It continues as to a person that has ceased to be a director, officer, employee, member, manager, agent, or volunteer and inures to the benefit of the heirs, executors, and administrators of that person.

(k) As used in this Section, "association" includes all constituent associations and entities in a consolidation or merger and the new or surviving association or entity. Any person that is or was a director, officer, employee, agent, or volunteer of a constituent association or is or was serving at the request of a constituent association as a trustee, director, officer, employee, member, manager, agent, or volunteer of another association, entity, partnership, joint venture, trust, or other enterprise stands in the same position under this Section with respect to the new or surviving association or entity as the person would if the person had served the new or surviving association or entity in the same capacity.

(l) An association may purchase and maintain insurance or furnish similar protection, including, but not limited to, trust funds, letters of credit, or self-insurance, for or on behalf of any person that is or was a director, officer, employee, agent, or volunteer of the association or is or was serving at the request of the association as a trustee, director, officer, employee, member, manager, agent, or volunteer of another association, entity, partnership, joint venture, trust, or other enterprise. The insurance or similar protection described in this subsection shall be against any liability asserted against the person and incurred by the person in any such capacity, whether or not the association would have the power to indemnify the person against that liability under this Section.

Insurance described in this subsection may be purchased from or maintained with a person in which the association has a financial interest.

Section 100. Standard of care for directors.

(a) A director shall perform the duties of a director, including duties as a member of any committee of the directors upon which the director serves, in good faith, in a manner the director reasonably believes to be in or not opposed to the best interests of the association, and with the care that an ordinarily prudent person in a like position would use under similar circumstances. In performing these duties, a director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, that are prepared or presented by any of the following:

(1) One or more directors, officers, or employees of the association whom the director reasonably believes are reliable and competent in the matters prepared or presented;

(2) Counsel, public accountants, or other persons as to matters that the director reasonably believes are within the person's professional or expert competence;

(3) A committee of the directors upon which the director does not serve, established in accordance with the association's articles of incorporation or bylaws, as to matters within its designated authority, provided the director reasonably believes the committee merits confidence.

(b) For purposes of subsection (a) of this Section:

(1) A director shall not be found to have failed to perform the duties in accordance with subsection (a) of this Section, unless it is proved, by clear and convincing evidence, in an action brought against the director that the director has not acted in good faith, in a manner reasonably believed to be in or not opposed to the best interests of the association, or with the care that an ordinarily prudent person in a like position would use under similar circumstances. Such an action includes, but is not limited to, an action that involves or affects any of the following:

(A) A change or potential change in control of the association;

(B) A termination or potential termination of the director's service to the association as a director;

(C) Service in any other position or relationship with the association.

(2) A director shall not be considered to be acting in good faith if the director has knowledge concerning the matter in question that would cause reliance on information, opinions, reports, or statements that are prepared or presented by the persons described in subsections (a)(1) through (a)(3) of this Section to be unwarranted.

(3) Subsection (b) of this Section does not limit relief available under Section 105.

(c) (1) Subject to subsections (c)(2) and (c)(3) of this Section, a director is liable in damages for any act that the director takes or fails to take as director only if it is proved, by clear and convincing evidence, in an action brought against the director that the act or omission of the director was undertaken with a deliberate intent to cause injury to the association or was undertaken with a reckless disregard for the best interests of the association.

(2) Subsection (c)(1) of this Section does not affect the liability of a director under Section 110.

(3) Subject to subsection (c)(2) of this Section, subsection (c)(1) of this Section does not apply if, and only to the extent that, at the time of an act or omission of the director, the association's articles of incorporation or bylaws state, by specific reference to subsection (c)(1) of this Section, that its provisions do not apply to the association.

(d) For purposes of this Section and Section 95, in determining what is reasonably believed to be in or not opposed to the best interests of the association, a director shall consider the purposes of the association and may consider any of the following:

(1) the interests of the employees, suppliers, creditors, and customers of the association;

(2) the economy of this State and of the United States;

(3) community, and societal, and environmental matters;

(4) the long-term and short-term best interests of the association;

(5) the interests of the members as patrons of the association.

(e) Subsections (b) and (c) of this Section do not affect the duties of a director who acts in any capacity other than as a director.

Section 105. Effect of self-dealing.

(a) Unless otherwise provided in an association's articles of incorporation or bylaws:

(1) no contract or transaction between an association and one or more of its directors or officers, or between the association and any other person in which one or more of the association's directors or officers are directors or officers, or have a financial or personal interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee that authorizes the contract or transaction, or solely because the director's or officer's votes are counted for such purpose, if the contract or transaction is fair to the association at the time it is authorized or approved, and such authorization or approval is granted in either of the following manners:

(A) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the board or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even if the disinterested directors constitute less than a quorum of the board or the committee; or

(B) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the members entitled to vote on the contract or transaction, and the contract or transaction is specifically approved at a meeting of the members.

(2) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board, or of a committee that authorizes the contract or transaction.

(b) Items (1) and (2) of subsection (a) do not limit or otherwise affect the liability of directors under Section 110.

(c) For purposes of subsection (a), a director is not an interested director solely because the subject of a contract or transaction may involve or effect a change in control of the association or continuation in office as a director of the association.

Section 110. Liability of members, directors, and officers.

(a) No member, director, or officer of an association shall be personally liable for any obligation of the association to an amount exceeding the sum remaining unpaid on his membership fee or his subscription to the capital stock, including any unpaid balance on any promissory notes given in payment thereof.

(b) Directors who vote for or assent to any of the following are jointly and severally liable to the association in accordance with this subsection:

(1) a distribution of assets to members, stockholders, or patrons contrary to law, the association's articles of incorporation, or bylaws;

(2) a distribution of assets to persons other than creditors during the winding up of the affairs of the association, on dissolution or otherwise, without the payment of all known obligations of the association, or without making adequate provision for the payment of the obligations; or

(3) the making of loans, other than in the usual conduct of the association's affairs or in accordance with the association's articles or bylaws, to an officer, director, or member of the association.

In cases under item (1) of this subsection, directors are liable up to the amount of the distribution in excess of the amount that could have been distributed without violation of law, the articles of incorporation, or bylaws, but not in excess of the amount that would inure to the benefit of the creditors of the association if it was insolvent at the time of the distribution or there was reasonable ground to believe that by such vote or assent it would be rendered insolvent, or to the benefit of the members or stockholders other than members or stockholders of the class in respect of which the distribution was made.

In cases under item (2) of this subsection, directors are liable to the extent that the obligations, not otherwise barred by statute, are not paid, or for the payment of which adequate provision has not been made.

In cases under item (3) of this subsection, directors are liable for the amount of the loan with interest thereon at the rate of 6% per year until the amount has been paid.

A director is not liable under item (1) or (2) of this subsection if, in determining the amount available for any such distribution, the director in good faith relied on a financial statement of the association prepared by an officer or employee of the association in charge of its accounts or by a certified public accountant or firm of certified public accountants, or in good faith considered the assets to be of their book value, or followed what the director believed to be sound accounting and business practice.

(c) A director who is present at a meeting of the board or a committee of the board at which action on any matter is authorized or taken and who has not voted for or against such action shall be presumed to have voted for the action unless the director dissents from the action during the meeting and the dissent is noted in the minutes of the proceedings of the meeting, or a written dissent is filed either during the meeting or within a reasonable time after the adjournment of the meeting.

(d) A member, stockholder, or patron who receives any distribution made contrary to law, the association's articles of incorporation, or bylaws is liable to the association for the amount received that is in excess of the amount that could have been distributed.

(e) A director against whom a claim is asserted under or pursuant to this Section and who is held liable on the claim is entitled to contribution, on equitable principles, from other directors who also are liable. In addition, any director against whom a claim is asserted under or pursuant to this Section, or who is held liable, has a right of contribution from the member, stockholder, or patron who received any distribution made contrary to law, the articles of incorporation, or bylaws, and such persons as among themselves also are entitled to contribution in proportion to the amounts received by them respectively.

(f) No action shall be brought by or on behalf of an association, upon any cause of action arising under item (1) or (2) of subsection (b), at any time after 2 years from the day on which the violation occurs; provided that no such action is barred by this subsection if it is commenced prior to the effective date of this Act.

Section 115. Officers.

(a) The officers of an association shall consist of a president, a secretary, a treasurer, and, if desired, a chairperson and one or more vice-chairpersons of the board, one or more vice-presidents, and other officers and assistant officers as necessary. The officers shall be elected by the board. The chairperson and any vice-chairperson of the board shall be a director. Unless the association's articles of incorporation or bylaws provide otherwise, none of the other officers need be a director. Any 2 or more offices may be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity if the instrument is required by law or by the articles or bylaws to be executed, acknowledged, or verified by 2 or more officers. Unless the articles or the bylaws provide otherwise, all officers shall be elected annually.

(b) All officers have the authority to perform, and shall perform, the duties as the bylaws provide, or as the board may determine in accordance with the bylaws.

Section 120. Surety bonds. If required by the association's bylaws, every officer, employee, and agent handling funds, negotiable instruments, or other property of or for an association shall execute and deliver adequate bonds for the faithful performance of the officer's, employee's, or agent's duties and obligations.

Section 125. Removal of officers or directors.

(a) Unless the bylaws provide otherwise, a director may be removed, with or without cause, by a majority vote of all members at an annual or special meeting.

(b) If the bylaws provide for election of directors by the members in a district or other grouping, then the members residing in that district or belonging to the group may, by a majority vote at an annual or special meeting, remove the director representing such district or group.

(c) Any director or officer facing possible removal shall be given fair notice of the proposed action in writing prior to a meeting and shall have an opportunity at the meeting to be heard in person or in writing.

Section 130. Books and records; examination by member.

(a) An association shall keep correct and complete books and records of account, and shall also keep minutes of the proceedings of meetings of its members, board, and delegates. The association shall keep at its principal office records of the names and addresses of all members and stockholders with the amount of ownership interests and stock held by each.

(b) At any reasonable time, any member, upon written notice that states, with specificity, a proper purpose for an examination of books and records and that is delivered or sent to the association at least one week in advance, may examine those books and records pertinent to the purpose in the notice. The board may deny a request of a member to examine the books and records if the purpose is not proper because the purpose is not directly related to the person's interest as a member and is contrary to the best interests of the association.

(c) At any reasonable time, a stockholder who is not a member, upon written notice that states, with specificity, a proper purpose for an examination of books and records and that is delivered or sent to the association at least one week in advance, may examine those books and records that are pertinent to the purpose in the notice. The board may deny a request of a stockholder to examine the books and records if the purpose is not proper because the purpose is not directly related to the person's interest as a stockholder and is contrary to the best interest of the association.

Section 135. Merger or consolidation with associations.

(a) An association may merge or consolidate with one or more associations under this Act. Before an association may merge or consolidate with any other association, a written agreement of merger or consolidation shall be approved by the board of each constituent association and by the members of each constituent association. The agreement shall set forth the terms of the merger or consolidation, including any provisions for amendment or abandonment of the agreement. In the case of a consolidation, the agreement also shall contain the articles of incorporation of the new association.

(b) If the agreement of merger or consolidation provides that a holder of stock other than membership stock or patronage stock in a constituent association will be affected, all of the following apply:

(1) Unless the board of the constituent association provides that item (2) of this subsection applies, the affected stockholder shall be entitled to cast one vote on the agreement regardless of the par or stated value, the number of shares, or the number of affected classes of the stock held.

(2) The board of a constituent association may provide that a stockholder otherwise entitled to vote under item (1) of this subsection shall instead be entitled to payment of fair cash value of the affected stock held by the stockholder in accordance with Section 170.

(3) A member holding stock affected by a proposed agreement of merger or consolidation may vote only as a member and shall not be entitled to vote or demand fair cash value as an affected stockholder.

(c) For purposes of this Section, a holder of stock is affected as to any class of stock owned by the holder only if the agreement of merger or consolidation does any of the following:

(1) decreases the dividends to which that class may be entitled or changes the method by which the dividend rate on that class is fixed;

(2) provides for additional restriction of rights to transfer shares of that class;

(3) gives to another existing or any new class of stock or equity interest not previously entitled thereto any preference, as to dividends or upon dissolution, that is higher than preferences of that class;

(4) changes the par value of shares of that class or of any other class having the same or higher preferences as to dividends or upon dissolution;

(5) increases the number of authorized shares of any other class having the same or higher preferences as to dividends or upon dissolution beyond the aggregate authorizations for such classes in the constituent associations; or

(6) requires or permits an exchange of shares of any class with lower preferences as to dividends or upon dissolution for shares of any other class with higher preferences.

(d) The agreement is approved if both of the following conditions are met with respect to each constituent association:

(1) Notice of the meeting to vote on the agreement, the agreement, and a description of the method of voting have been sent to all members, and to all affected stockholders entitled either to vote on the agreement or to receive payment of fair cash value under subsection (b);

(2) 60% of the member votes cast approve the agreement, and a simple majority of the votes cast by the affected stockholders entitled to vote under subsection (b) approve the agreement.

(e) Notwithstanding subsection (d), no vote of the members or stockholders of a constituent association shall be necessary to approve a merger of a wholly owned subsidiary association with and into its parent cooperative or a merger or a consolidation of 2 or more subsidiary associations that are wholly owned by a cooperative.

(f) After approval of an agreement under this Section, but before the merger or consolidation is effective, the agreement may be amended in accordance with any provision for amendment set forth in the agreement, provided that an amendment made subsequent to adoption of the agreement by the members of any constituent association shall not do any of the following:

(1) change the membership rights, or the amount or kind of stock, securities, cash, property, or other rights to be received, exchanged, or converted in the merger or consolidation;

(2) change the articles of incorporation or bylaws of the surviving or new association as provided for in the agreement;

(3) change any provision of the agreement with respect to the rights of members or the manner of voting in the surviving or new association.

(g) After approval of an agreement under this Section, but before the merger or consolidation is effective, the merger or consolidation may be abandoned in accordance with any provision for abandonment set forth in the agreement.

(h) The merger or consolidation shall take effect in accordance with Sections 145 and 150.

Section 140. Association may merge or consolidate with other entities.

(a) An association may merge or consolidate with one or more entities, if such merger or consolidation is permitted by the laws under which each constituent entity exists and the association complies with this Section.

(b) Each constituent association shall comply with Section 135 with respect to form and approval of an agreement of merger or consolidation, and each constituent entity shall comply with the applicable provisions of the laws under which it exists, except that the agreement of merger or consolidation, by whatever name designated, shall comply with subsections (c) and (d) of this Section.

(c) The agreement of merger or consolidation shall set forth all of the following:

(1) The names of the states and the laws under which each constituent entity exists.

(2) All statements and matters required to be set forth in agreements of merger or consolidation by the laws under which any constituent entity exists.

(3) A statement that the surviving or new entity is to be an association, a foreign association, a corporation other than a cooperative, or a limited liability company.

(4) If the surviving or new entity is to be a foreign entity:

(A) the place where the principal office of the surviving or new entity is to be located in the state in which the surviving or new entity is to exist;

(B) the consent by the surviving or new entity that it may be sued and served with process in this State in any proceeding for the enforcement of any obligation of any constituent association or domestic entity;

(C) the consent by the surviving or new entity that it shall be subject to the applicable provisions of the Business Corporation Act of 1983 if it is a foreign corporation or foreign association or to the Limited Liability Company Act if it is a foreign limited liability company; and

(D) if it is desired that the surviving or new entity exercise its corporate privileges in this State as a foreign entity.

(d) The agreement also may set forth other provisions permitted by the laws of any state in which any constituent entity exists.

(e) If the surviving or new entity is an association, the merger or consolidation shall take effect in accordance with Sections 145 and 150.

(f) If the surviving or new entity is an entity other than an association, the merger or consolidation shall take effect in accordance with the applicable provisions of the laws under which it exists.

Section 145. Effective date of merger or consolidation.

(a) Unless a later date is specified in the agreement, a merger or consolidation under Sections 135 and 140 is effective when the certificate of merger or consolidation is filed in accordance with Section 150. If, after filing the certificate but before the merger or consolidation is effective, the merger or consolidation is amended or abandoned, as provided in subsections (f) and (g) of Section 135, an authorized officer of each constituent association shall sign a certificate of amendment or abandonment stating that the agreement of merger or consolidation has been amended or abandoned and the date of such action, and shall file the certificate in the same manner as the certificate of merger or consolidation. Any certificate of amendment or abandonment shall be filed prior to the date the merger or consolidation would otherwise be effective.

(b) In the case of a merger, the surviving association or entity is the one designated in the agreement. In the case of a consolidation, the new association or entity is the one designated in the agreement. The separate existence of all constituent associations or entities in the agreement, except the surviving or new association or entity, ceases upon the effective date of the merger or consolidation.

(c) The surviving or new association or entity possesses all the rights and all the property of each constituent association or entity, and is responsible for all their obligations. Title to any property is vested in the surviving or new association or entity with no reversion or impairment of the property caused by the merger or consolidation. A merger or consolidation shall not be considered an assignment. No right of any creditor shall be impaired by the merger or consolidation without the creditor's consent.

(d) If the surviving organization is an association, the articles of incorporation are amended to the extent provided in the agreement of merger.

Section 150. Certificate of merger or consolidation; filing; recording.

(a) Upon adoption of an agreement of merger or consolidation under Section 135 or 140, a certificate, signed by any authorized officer or representative of each constituent association or entity, shall be filed with the Secretary of State on a form prescribed by the Secretary of State that sets forth the following:

(1) the name and form of each constituent association or entity and the State law under which each constituent entity exists;

(2) a statement that each constituent association or entity has adopted the agreement of merger or consolidation, the manner of adoption, and that the agreement was adopted in compliance with the laws applicable to each constituent association or entity;

(3) the effective date of the merger or consolidation, which date may be on or after the date of filing of the certificate;

(4) in the case of a merger, a statement that one or more specified constituent associations or entities will be merged into a specified surviving association or entity or, in the case of a consolidation, a statement that the constituent associations or entities will be consolidated into a new association or entity; and

(5) the name and address of the statutory agent upon whom any process, notice, or demand against any constituent association or entity, or the surviving or new association or entity, may be served.

In the case of a merger into an association or domestic entity, any amendments to the articles of incorporation or the articles of organization of the surviving association or entity shall be filed with the certificate.

In the case of a consolidation to form a new domestic association or entity, the articles of incorporation or the articles of organization of the new association or entity shall be filed with the certificate.

If the surviving or new entity is a foreign entity that desires to transact business in this State as a foreign entity, the certificate shall be accompanied by the information required for qualification of a foreign entity in this State by the Business Corporation Act of 1983 in the case of a foreign corporation or foreign cooperative, or by the Limited Liability Company Act in the case of a foreign limited liability company.

(b) A copy of the certificate of merger or consolidation, certified by the Secretary of State, may be filed for record in the office of the county recorder of any county in this State. For such recording, the county recorder shall charge and collect the same fee as in the case of deeds. The certified copy of the certificate of merger or consolidation shall be recorded in the official records of the county recorder.

(c) For purposes of this Section, "domestic entity" means a corporation other than an association or a limited liability company organized under the laws of this State.

Section 155. Plan of division.

(a) An association may divide itself into 2 or more associations. A written plan of division shall be approved by the association's board. Such plan shall set forth all the terms of the division and the proposed effect of the division on all members and stockholders of the association. The plan also shall contain the articles of incorporation and bylaws of each association resulting from the division, which articles and bylaws shall conform to the requirements for associations organized under this Act.

(b) If the plan of division provides that a holder of stock other than membership stock or patronage stock will be affected, the following apply:

(1) Unless the board provides that item (2) of this subsection applies, the affected stockholder shall be entitled to cast one vote on the plan of division regardless of the par or stated value, the number of shares, or the number of affected classes of the stock held.

(2) The board may provide that a stockholder otherwise entitled to vote under item (1) of this subsection shall instead be entitled to payment of fair cash value of the affected stock held by the stockholder in accordance with Section 170.

(3) A member holding stock affected by a proposed plan of division may vote only as a member and shall not be entitled to vote or demand fair cash value as an affected stockholder.

(c) For purposes of this Section, a holder of stock is affected as to any class of stock owned by the holder only if the plan of division does any of the following:

(1) Decreases the dividends to which that class may be entitled or changes the method by which the dividend rate on that class is fixed.

(2) Provides any additional restriction on rights to transfer shares of that class.

(3) Gives to another existing or any new class of stock or equity interest not previously entitled thereto any preference, as to dividends or upon dissolution, that is higher than preferences of that class in a resulting association.

(4) Changes the par value of shares of that class or of any other class having the same or higher preferences as to dividends or upon dissolution.

(5) Increases the aggregate number of authorized shares of any other class having the same or higher preferences as to dividends or upon dissolution in the resulting associations beyond the authorization for such classes in the original association.

(6) Requires or permits an exchange of shares of any class with lower preferences as to dividends or upon dissolution in the original association for shares of any other class with higher preferences in a resulting association.

(d) The plan of division is approved if both of the following conditions are met:

(1) Notice of the meeting to vote on the plan, the plan of division, and a description of the method of voting have been sent to all members and to all affected stockholders entitled either to vote on the plan or to receive payment of fair cash value under subsection (b);

(2) 60% of the member votes cast approve the plan, and a simple majority of the votes cast by the affected stockholders entitled to vote under subsection (b) approve the plan.

(e) After approval of a plan of division under this Section, but before the division is effective, the plan may be amended or abandoned in accordance with a provision for amendment or abandonment set forth in the plan, provided that an amendment made subsequent to approval of the plan by the members shall not do any of the following:

(1) Change the membership rights, or the amount or kind of stock, securities, cash, property, or other rights to be received, exchanged, or converted in the division.

(2) Change the articles of incorporation or bylaws of the resulting associations as provided for in the plan.

(3) Change any provision of the plan with respect to the rights of members or the manner of voting in the resulting associations.

(f) Upon approval of a plan of division, a certificate, signed by any authorized officer of the original association, shall be filed with the Secretary of State on a form prescribed by the Secretary of State setting forth the following:

(1) The name of the original association and the name of each resulting association.

(2) A statement that the original association has adopted the plan of division, the manner of adoption, and that the plan was adopted in compliance with this Section;

(3) The effective date of the division, which date may be on or after the date of filing of the certificate.

(4) A statement that the original association will be divided into specified resulting associations.

(5) The name and address of the statutory agent upon whom any process, notice, or demand against the original association may be served, and the name and address of a statutory agent for each resulting association upon whom process, notice, or demand against that resulting association may be served.

(g) The articles of incorporation of each of the resulting associations shall be filed with the certificate.

Section 160. Conversions.

(a) A domestic corporation that is not an association may convert itself into an association by adopting an amendment to its articles of incorporation in which it elects to become subject to this Act, together with any changes in its articles of incorporation and bylaws required by this Act and any other desirable changes permitted by this Act. The amendment shall be adopted, filed, and recorded in the manner provided by the law under which the corporation exists.

(b) An association may convert itself to a domestic corporation that is not an association by adopting an amendment to its articles of incorporation in which it elects to become subject to the Business Corporation Act of 1983, if so permitted by such Act, together with any changes in its articles of incorporation and bylaws required by such Act and any other desirable changes permitted by such Act. The amendment shall be adopted, filed, and recorded under this Act in the same manner as an amendment of the articles of incorporation under Sections 35 and 40.

Section 165. Setting aside reorganizations. An action to set aside a merger, consolidation, division, or conversion of an association, on the ground that any law has not been complied with, shall be brought within 90 days after the effective date of the merger, consolidation, division, or conversion, or such action shall be forever barred.

Section 170. Written demand for payment of fair cash value of stock.

(a) In order to obtain payment of the fair cash value, a stockholder entitled to payment of the fair cash value of stock under Section 40, 135, 140, or 155 shall deliver a written demand for payment of the fair cash value of the stock to the association no later than 15 days after notice is sent to members and stockholders in accordance with Section 40, 135, 140, or 155, as the case may be. The written demand shall state the name and address of the stockholder, the number and class of the stock for which fair cash value is demanded, and the amount claimed by the stockholder to be the fair cash value of the stock. Delivery of written demand for payment of fair cash value of stock in accordance with this Section is sufficient if delivered to the association or to the surviving or new association or entity resulting from the merger, consolidation, division, or conversion, whether the demand is delivered before, on, or after the effective date of the action. If written demand is not timely delivered in conformity with this Section, the stockholder's right to payment of fair cash value with respect to the amendment to the articles of incorporation, agreement of merger or consolidation, plan of division, or conversion shall be barred.

(b) If a timely demand is delivered in accordance with this Section, fair cash value of the stock shall be determined and paid to the stockholder in accordance with the following procedures:

(1) The association or the surviving, new, or resulting association or entity shall send a written acknowledgment of receipt of the demand for fair cash value to the address specified in the demand no later than 15 days after receipt of the demand. If the board of the association or the surviving, new, or resulting association or entity believes that the demand has failed to comply with the requirements of this Section, the acknowledgment shall state any such defects. The acknowledgment also shall state what the board believes to be the fair cash value of the stock that is the subject of the demand. If the articles of incorporation of the constituent or original association provide a value for the stock upon redemption, the fair cash value of the stock presumptively shall be the lesser of the redemption value or the fair market value of the stock immediately prior to the merger, consolidation, division, or conversion.

(2) The stockholder shall not transfer, encumber, pledge, or otherwise dispose of the stock that is the subject of the demand for fair cash value, or any certificate representing the stock, until the demand is finally resolved by agreement, withdrawal, or final judicial determination.

(3) If the association's articles of incorporation or bylaws provide a reasonable basis for determining and paying the fair cash value of the stock that is the subject of the demand for fair cash value, or if the association or the surviving, new, or resulting association or entity and the demanding stockholder reach an agreement on the fair cash value of the stock within 3 months after delivery of the demand for fair cash value, the fair cash value of the stock shall be determined in accordance with the constituent or original association's articles of incorporation or bylaws or as agreed upon, as the case may be. The association shall thereupon tender payment of the fair cash value so determined to the stockholder within 30 days of delivery of any certificates representing the stock or the stockholder's written waiver and release of claim to all rights to the stock to the association or the surviving, new, or resulting association or entity. Without precluding other possible reasonable bases for determining fair cash value of stock under this Section, a provision in the constituent or original association's articles of incorporation or bylaws that fair cash value shall be determined by mediation or final and binding arbitration, or that fair cash value shall be the lesser of par value, book value, or fair market value, shall be considered a reasonable basis for determining and paying the fair cash value of stock.

(c) The right of a demanding stockholder to receive the fair cash value of stock as to which the stockholder seeks relief and the obligation of the association or the surviving, new, or resulting association or entity to furnish the fair cash value for those interests terminate if any of the following applies:

(1) The demanding stockholder fails to comply with this Section.

(2) The association abandons the amendment of articles, merger, consolidation, division, or conversion or is finally enjoined or prevented from taking such action.

(3) The demanding stockholder withdraws the demand for fair cash value with consent of the association.

(4) The demanding stockholder attempts to sell, transfer, or encumber the stock which is the subject of the demand prior to final determination of its fair cash value under this Section or a final judicial determination.

(5) All of the following apply:

(A) the articles of incorporation or bylaws of the association do not provide a reasonable basis for determining and paying fair cash value to an affected stockholder;

(B) the association and the affected stockholder have not agreed upon the fair cash value of the stock which is the subject of the demand;

(C) the affected stockholder does not file a timely complaint for judicial determination.

(d) The fair cash value that is agreed upon by the affected stockholder and the association, or determined using a reasonable basis for determining and paying fair cash value in the association's articles of incorporation or bylaws, or fixed by a court shall be paid within 30 days as follows:

(1) immediately to the holder of uncertificated stock; or

(2) upon and simultaneously with the surrender of certificates representing certificated stock.

Section 175. Disposing of assets of association.

(a) As used in this Section, "substantially all" means more than two-thirds of the association's assets, measured, in the board's discretion, either by value as recorded in the books and records of the association or by fair market value.

(b) Unless the articles of incorporation or the bylaws of an association otherwise provide, a lease, sale, exchange, transfer, or other disposition of any assets of an association may be made upon terms and for consideration which may consist, in whole or in part, of money or other property, including shares or other securities or promissory obligations of any association or entity, as may be authorized by the board. If a lease, sale, exchange, transfer, or other disposition, or a series of such transactions, would dispose of all or substantially all of the assets of the association, then the disposition may be made only upon a written plan of disposition prepared by the board or by a committee selected by the board for that purpose, and adopted in the same manner as provided for the adoption of a resolution of dissolution in Section 180. A plan of disposition shall set forth a general description or summary of the assets subject to disposition; the method of disposition; the intended transferee of the assets, if known to the board; and a general description of any material effect the board believes the disposition will have on the interests of the members and stockholders. Notice of a meeting of the members at which a plan of disposition will be voted on shall be given to all members, whether or not entitled to vote at the meeting. The notice shall be accompanied by a copy or summary of the plan of disposition and a ballot for those members entitled to vote on the plan.

(c) The association, by its board, may abandon a plan of disposition, subject to the contract rights of other persons, if the power of abandonment is conferred upon the board either by the terms of the transaction or in the plan of disposition.

(d) An action to set aside a disposition of assets by an association, on the ground that any law applicable to the lease, sale, exchange, transfer, or other disposition of all or substantially all the assets of the association has not been complied with, shall be brought within 90 days after such transaction, or the action is forever barred.

Section 180. Voluntary dissolution.

(a) An association may be dissolved voluntarily in the manner provided in this Section.

(b) A resolution of dissolution for an association shall state both of the following:

(1) that the association elects to be dissolved; and

(2) any additional provision considered necessary with respect to the proposed dissolution and winding up.

(c) Before subscriptions for membership and any stock or other ownership interest have been received, the incorporators or a majority of the incorporators may adopt, by a writing signed by them, a resolution of dissolution.

(d) The directors may adopt a resolution of dissolution in the following cases:

(1) when the association has been adjudged bankrupt or has made a general assignment for the benefit of creditors;

(2) by leave of the court, when a receiver has been appointed in a general creditors' suit or in any suit in which the affairs of the association are to be wound up;

(3) when substantially all of the assets have been sold at judicial sale or otherwise; or

(4) when the period of existence of the association specified in its articles has expired.

(e) At a meeting held for such purpose, the members may adopt a resolution of dissolution by the affirmative vote of 60% of the member votes cast on the proposal or, if the articles provide or permit, by the affirmative vote of a greater or lesser proportion though not less than a majority, of the voting power, of any particular class as is required by the articles of incorporation. Notice of the meeting of the members shall be given to all members and stockholders whether or not entitled to vote.

(f) Upon the adoption of a resolution of dissolution, a certificate shall be filed with the Secretary of State, on a form prescribed by the Secretary of State.

(g) The certificate described in subsection (f) of this Section shall be signed as follows:

(1) when the resolution of dissolution is adopted by the incorporators, the certificate shall be signed by not less than a majority of the incorporators;

(2) when the resolution is adopted by the directors or by the members, the certificate shall be signed by any authorized officer. However, if no authorized officer executes and files the certificate within 30 days after the adoption of the resolution or upon any date specified in the resolution as the date upon which the certificate is to be filed or upon the expiration of any period specified in the resolution as the period within which the certificate is to be filed, whichever is latest, the certificate of dissolution may be signed by any 3 members, or if there are fewer than 3 members, by all of the members, and shall set forth a statement that the persons signing the certificate are members and are filing the certificate because of the failure of an authorized officer to do so.

(h) Upon the filing of a certificate of dissolution, the association shall be dissolved.

Section 185. Public notice of voluntary dissolution. Following the filing of the certificate of dissolution, the directors, members, or incorporators who filed the certificate, as the case may be, shall cause a notice of voluntary dissolution to be published once a week on the same day of each week for 2 successive weeks, in a newspaper published and of general circulation in the county in which the principal place of business of the association was to be or is located and shall cause written notice of dissolution to be given to all known creditors of, and to all known claimants against, the dissolved association.

Section 190. Action to wind up affairs or obtain restatement of articles.

(a) When an association is dissolved voluntarily, when the articles of incorporation of an association have been canceled, when a final order of a court is made dissolving an association under Section 195, or when the period of existence of the association specified in its articles of incorporation has expired, the association shall cease to carry on business and shall do only such acts as are required to wind up its affairs or to obtain reinstatement of the articles in accordance with Section 50.

(b) Any claim existing or action or proceeding pending by or against the association or which would have accrued against it may be prosecuted to judgment, with right of appeal as in other cases, but any proceeding, execution, or process, or the satisfaction or performance of any order, judgment, or decree, may be stayed as provided in Section 195.

(c) Any process, notice, or demand against the association may be served by delivering a copy to an officer, director, liquidator, or person having charge of its assets or, if no such person can be found, to the statutory agent.

(d) The directors of the association or their successors shall act as the board of directors in accordance with the articles of incorporation and bylaws until the affairs of the association are completely wound up. Subject to the orders of courts of this State having jurisdiction over the association, the directors shall proceed as speedily as is practicable to a complete winding up of the affairs of the association and, to the extent necessary or expedient to that end, shall exercise all the authority of the association. Without limiting the generality of such authority, the directors may fill vacancies; elect officers; carry out contracts of the association; make new contracts; borrow money; mortgage or pledge the property of the association as security; sell its assets at public or private sale; make conveyances in the association's name; lease real estate for any term, including 99 years renewable forever; settle or compromise claims in favor of or against the association; appoint or employ one or more persons as liquidators to wind up the affairs of the association with authority as the directors see fit to grant; cause the title to any of the assets of the association to be conveyed to such liquidators for that purpose; apply assets to the payment of obligations; and, after paying or adequately providing for the payment of all known obligations of the association, distribute the remainder of the assets either in cash or in kind among the members, patrons, and stockholders according to their respective rights and interests. In addition, the directors may perform all other acts necessary or expedient to the winding up of the affairs of the association.

(e) The directors, or any liquidator to whom the directors grant such authority, in the course of winding up the association's affairs, shall apply the assets of the association in the following order:

(1) to expenses incidental to winding up the association's affairs;

(2) to all legally enforceable liabilities and obligations of the association due claimants and creditors;

(3) to the stockholders, members, and patrons of the association as provided in the association's articles of incorporation or bylaws.

(f) Without limiting the authority of the directors, any action within the purview of this Section that is authorized or approved at a meeting of the members by 60% of the member votes cast thereon shall be conclusive for all purposes upon all members, patrons, and stockholders of the association.

(g) All deeds and other instruments of the association shall be in the name of the association and shall be executed, acknowledged, and delivered by the officers appointed by the directors.

(h) At any time during the winding up of its affairs, the association by its directors may make application to the court of the county in this State in which the principal place of business of the association is located to have the winding up continued under supervision of the court, as provided in Section 195. However, if the association has no principal place of business in this State, the application described in this Section may be made to a court in the county in this State where the statutory agent resides.

Section 195. Judicial liquidations.

(a) Without limiting the generality of its authority and subject to subsection (b), the court of the county in this State in which is located the principal place of business of a voluntarily dissolved association or of an association whose articles have been canceled or whose period of existence has expired, upon the complaint of the association, or a majority of the directors, or 10% of the members or 20 members, whichever is less, and upon such notice to all the directors and other persons interested as the court considers proper, at any time may order and adjudge any of the following matters:

(1) The presentation and proof of all claims and demands against the association and of all rights, interests, or liens in or on any of its property; the fixing of the time and the manner in which such proof shall be made and the person to whom presentation shall be made; and the barring from participation in any distribution of assets of all persons failing to make and present proofs as required by the order of the court.

(2) The stay of the prosecution of any proceeding against the association or involving any of its property; the requirement that the parties to the proceeding present and prove their claims, demands, rights, interests, or liens at the time and in the manner required of creditors or others; or the grant of leave to bring or maintain an independent proceeding to enforce liens.

(3) The settlement or determination of all claims of every nature against the association or any of its property; the determination of the assets required to be retained to pay or provide for the payment of such claims or any claim; the determination of the assets available for distribution among and rights of members, patrons, and stockholders; and the making of new parties to the proceeding so far as the court considers proper for the determination of all matters.

(4) The presentation and filing of intermediate and final accounts of the directors or of the liquidators and hearings on them; the allowance, disallowance, or settlement of the accounts; and the discharge of the directors, the liquidators, or any of them from their duties and liabilities.

(5) The appointment of a special master commissioner to hear and determine any matters with authority as the court considers proper.

(6) The filling of any vacancies in the number of directors or liquidators when the directors are unable to act on the vacancies for want of a quorum or for any other reason.

(7) The appointment of a receiver, in accordance with the usage of a court in equitable matters, to wind up the affairs of the association, to take custody of any of its property, or for any other purpose.

(8) The issuance or entry of any injunction or any other order that the court considers proper in the administration of the trust involved in the winding up of the affairs of the association and the giving of notice of the entry of injunction or order.

(9) The allowance and payment of compensation to the directors or any of them, to liquidators, to a receiver, to the attorney for the complainant, or to any person properly rendering services beneficial to the association or to those interested in it.

(10) The entry of a judgment or decree that, if it so provides, may operate as the deed or other instrument ordered to be executed, or the appointment of a master to execute such deed or instrument in the name of the association with the same effect as if executed by an authorized officer pursuant to authority conferred by the directors or the members, patrons, and stockholders of the association, whenever there is no officer or agent competent to execute such deed or instrument, whenever the association or its officers do not perform or comply with a judgment or decree of court, or whenever the court considers it proper.

(b) If the association has no principal place of business in this State, without limiting the generality of its authority, the court in the county in this State where the statutory agent resides may order and adjudge the matters described in subsection (a).

(c) A judicial proceeding under this Section concerning the winding up of the affairs of an association is a special proceeding, and final orders in the proceeding may be vacated, modified, or reversed on appeal pursuant to the Code of Civil Procedure.

Section 200. Receiver; winding up affairs of association.

(a) Whenever, after an association is dissolved voluntarily, the articles of an association have been canceled, or the period of existence of an association has expired, a receiver is appointed to wind up the affairs of the association, all the claims, demands, rights, interests, or liens of creditors, claimants, members, patrons, and stockholders shall be determined as of the day on which the receiver was appointed. Unless it is otherwise ordered, such appointment vests in the receiver and successors of the receiver the right to the immediate possession of all the property of the association, which shall, if so ordered, execute and deliver conveyances of such property to the receiver.

(b) Any officer, director, member, or other person, whether a resident of the state or a nonresident and however interested, may be appointed as receiver.

(c) The receiver shall have all the authority vested in the directors and officers of the association, shall exercise such authority subject to such orders as are made by the court, and may be required to qualify by giving bond to the State in such amount as the court fixes, with surety to the satisfaction of the clerk of the court, conditioned for the faithful discharge of duties and for a due accounting for all money or property received.

Section 205. Marketing agreements.

(a) A cooperative and any member may make marketing agreements, whether written separately or contained in the bylaws, in which the member agrees to do any of the following:

(1) sell, market, or deliver all or any specified part of products produced or to be produced either by the member or under the member's control, to or through the cooperative or any facilities furnished by it;

(2) authorize the cooperative or any facilities furnished by it to act for the member in any manner with respect to all or any specified part of products produced or to be produced either by the member or under the member's control and any services to be furnished by the member;

(3) buy or procure all or a specified part of goods or services from or through the cooperative or any facilities furnished by it; or

(4) authorize the cooperative or any facilities furnished by it to act for the member in any manner in the procurement of goods or services for the member.

(b) The term of marketing agreements may not exceed 10 years.

(c) A marketing agreement authorized by subsection (a) may require that liquidated damages be paid by the member in the event of a breach of the marketing agreement. Liquidated damages shall be specific, reasonable sums. Any provisions for liquidated damages shall be enforceable and not regarded as penalties.

(d) If a member breaches or threatens to breach a marketing agreement authorized by this Section, the cooperative shall be entitled to an injunction to prevent the breach or any further breach, and to a decree of specific performance, unless the marketing agreement provides an alternative remedy or damages are more practicable than specific performance under the circumstances.

Section 210. Foreign association. Any foreign association may carry on any proper activities in this State upon compliance with the general regulations applicable to foreign corporations desiring to do business in this State. All contracts that could be made by any association incorporated under this Act and that are made by or with such foreign associations, shall be enforceable in this State with all of the remedies set forth in this Act.

Section 215. Membership in other organizations. An association may organize, form, operate, own, control, have an interest in, own stock of, or be a member of any other cooperative, corporation, or other form of organization.

Section 220. Stock not considered securities. Membership stock and patronage stock of a cooperative are not to be considered securities under the Illinois Securities Law of 1953.

Section 225. Application of laws.

(a) Except as otherwise provided in this Act, this Act applies to all associations, whether organized under this Act prior to the effective date of this Act or on or after that date.

(b) Any law that is in conflict with this Act shall be construed as not applying to associations provided for in this Act.

(805 ILCS 310/Act rep.)

Section 999. The Co-operative Act is repealed.