Full Text of HB3663 101st General Assembly
HB3663 101ST GENERAL ASSEMBLY |
| | 101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020 HB3663 Introduced , by Rep. Carol Ammons SYNOPSIS AS INTRODUCED: |
| New Act | | 805 ILCS 310/22 | from Ch. 32, par. 326 | 815 ILCS 5/3 | from Ch. 121 1/2, par. 137.3 |
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Creates the Limited Cooperative Association Act. Authorizes the organization of a limited cooperative association, as an entity distinct from its members, for any lawful purpose, whether or not for profit. Provides that a limited cooperative association may be a collective worker cooperative in which there is only one class of members consisting of worker-members who manage all of the affairs of the limited cooperative association or a worker cooperative or employment cooperative that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to or other work performed for the limited cooperative association. Contains provisions regarding: findings; formation; articles of organization; organization; bylaws; members; community investors; voting; a board of directors; an assembly; dissolution; conversion; and applicability of securities laws. Amends the Co-operative Act and the Illinois Securities Law of 1953 to make conforming changes. Effective immediately.
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| | A BILL FOR |
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| 1 | | AN ACT concerning business.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 1. Short title. This Act may be cited as the | 5 | | Limited Cooperative Association Act. | 6 | | Section 5. Findings.
The General Assembly finds and | 7 | | declares all of the following:
| 8 | | (1) the cooperative form of doing business provides an | 9 | | efficient and effective method for persons to transact | 10 | | business, offer, and obtain goods and services, and it is | 11 | | in the best interests of the people of the State of | 12 | | Illinois to promote, foster, and encourage the utilization | 13 | | of cooperatives in appropriate instances; | 14 | | (2) the Co-operative Act and Agricultural Co-Operative | 15 | | Act have provided for the promotion, fostering, and | 16 | | encouragement of consumer and producer cooperatives; have | 17 | | made distribution of agricultural products between | 18 | | producer and consumer more efficient; have stabilized the | 19 | | marketing of agricultural products; and have provided for | 20 | | the organization and incorporation of cooperative | 21 | | corporations, all as contemplated at the time of the | 22 | | original adoption; | 23 | | (3) it is in the best interests of the people of the |
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| 1 | | State of Illinois to preserve the provisions of the | 2 | | Co-operative Act as it has been in force and interpreted in | 3 | | the State and to continue the provisions thereof for | 4 | | agriculture, but also to expand the provisions of Illinois | 5 | | cooperative law to provide greater direction and | 6 | | flexibility in its provisions and to enable all types of | 7 | | industries and enterprises to avail themselves of the | 8 | | benefits of the cooperative form of doing business in | 9 | | accordance with the provisions of this Act; | 10 | | (4) a worker cooperative has the purpose of creating | 11 | | and maintaining sustainable jobs and generating wealth in | 12 | | order to improve the quality of life of its worker-members, | 13 | | dignify human work, allow workers' democratic | 14 | | self-management, and promote community and local | 15 | | development in this State; | 16 | | (5) the purpose of this Act is to create a new business | 17 | | entity better suited for worker cooperatives and | 18 | | multi-stakeholder cooperatives, and to create more | 19 | | visibility and financing options for cooperatives. This | 20 | | Act is intended to provide a definition of worker | 21 | | cooperative for purposes of this Act, and not for purposes | 22 | | of other laws. | 23 | | Section 10. Definitions. In this Act: | 24 | | "Collective worker cooperative" means a limited | 25 | | cooperative association that elects to be a worker cooperative |
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| 1 | | in which there is only one class of members consisting of | 2 | | worker-members who manage all of the affairs of the limited | 3 | | cooperative association. | 4 | | "Community investor" means a person who is not a patron | 5 | | member and who holds a share or other proprietary interest in a | 6 | | limited cooperative association. | 7 | | "Distribution" means a transfer of money or other property | 8 | | from a limited cooperative association to a member because of | 9 | | the member's financial rights or to a transferee of a member's | 10 | | financial rights. | 11 | | "Member" means any person who, pursuant to a specific | 12 | | provision of a limited cooperative association's articles or | 13 | | bylaws, has the right to vote for the election of a director or | 14 | | directors, or possesses proprietary interests in the limited | 15 | | cooperative association. | 16 | | "Worker cooperative" or "employment cooperative" means a | 17 | | limited cooperative association formed under this Act that | 18 | | includes a class of worker-members who are natural persons | 19 | | whose patronage consists of labor contributed to or other work | 20 | | performed for the limited cooperative association. Election to | 21 | | be organized as a worker cooperative or an employment | 22 | | cooperative does not create a presumption that workers are | 23 | | employees of the corporation for any purposes. At least 51 | 24 | | percent of the workers shall be worker-members or candidates. | 25 | | "Worker-member" means a member of a worker cooperative who | 26 | | is a natural person and also a patron of a worker cooperative.
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| 1 | | Section 15. Purpose of limited cooperative association. | 2 | | (a) A limited cooperative association is an entity distinct | 3 | | from its members. | 4 | | (b) A limited cooperative association may be organized for | 5 | | any lawful purpose, whether or not for profit. | 6 | | (c) An association organized under this Act may elect to be | 7 | | a worker cooperative with the State of Illinois. Election to be | 8 | | organized as a worker cooperative or an employment cooperative | 9 | | does not create a presumption that workers are employees of the | 10 | | corporation for any purposes. | 11 | | Section 20. Formation of limited cooperative association. | 12 | | (a) A limited cooperative association must be organized by | 13 | | one or more organizers. | 14 | | (b) To form a limited cooperative association, one or more | 15 | | organizers of the association shall deliver or cause to be | 16 | | delivered articles to the Secretary of State for filing. | 17 | | Section 25. Articles of organization. | 18 | | (a) The articles of organization of a limited cooperative | 19 | | association shall state: | 20 | | (1) the domestic entity name of the limited cooperative | 21 | | association; | 22 | | (2) the purposes for which the limited cooperative | 23 | | association is formed, which may be for any lawful purpose; |
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| 1 | | (3) the registered agent name and registered agent | 2 | | address of the association's initial registered agent; | 3 | | (4) the street address and, if different, mailing | 4 | | address of the association's initial principal office; | 5 | | (5) the true name and street address and, if different, | 6 | | mailing address of each organizer; and | 7 | | (6) if relevant, an election to be classified as a | 8 | | worker cooperative primarily managed by worker-owner | 9 | | members. | 10 | | Section 30. Organization of limited cooperative | 11 | | association. | 12 | | (a) After a limited cooperative association is formed: | 13 | | (1) if initial directors are named in the articles, the | 14 | | initial directors shall hold an organizational meeting to | 15 | | adopt initial bylaws and carry on any other business | 16 | | necessary or proper to complete the organization of the | 17 | | association; or | 18 | | (2) if initial directors are not named in the articles, | 19 | | the organizers shall designate the initial directors and | 20 | | call a meeting of the initial directors to adopt initial | 21 | | bylaws and carry on any other business necessary or proper | 22 | | to complete the organization of the association. | 23 | | (b) Unless the articles otherwise provide, the initial | 24 | | directors may cause the limited cooperative association to | 25 | | accept members, including those necessary for the association |
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| 1 | | to begin business. | 2 | | (c) Initial directors need not be members. | 3 | | (d) An initial director serves until a successor is elected | 4 | | and qualified at a members' meeting or the director is removed, | 5 | | resigns, is adjudged incompetent, or dies. | 6 | | Section 35. Bylaws. | 7 | | (a) Bylaws shall include: | 8 | | (1) a statement of the capital structure of the limited | 9 | | cooperative association; | 10 | | (2) the classes or other types of members' interests | 11 | | and relative rights, preferences, and restrictions granted | 12 | | to or imposed upon each class or other type of member's | 13 | | interest, including: | 14 | | (A) a statement concerning the manner in which | 15 | | profits and losses are allocated and distributions are | 16 | | made among patron members and, if community investors | 17 | | are authorized, the manner in which profits and losses | 18 | | are allocated and how distributions are made among | 19 | | investor members and between patron members and | 20 | | community investors; | 21 | | (B) a statement designating voting and other | 22 | | governance rights of each class or other type of | 23 | | members' interests and, if relevant, community | 24 | | investors, including which members have voting power | 25 | | and any restriction on voting power; |
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| 1 | | (3) a statement of the method for admission of members; | 2 | | (4) a statement that a member's interest is | 3 | | transferable, if it is to be transferable, and a statement | 4 | | of the conditions upon which it may be transferred; | 5 | | (5) a statement concerning: | 6 | | (A) whether persons that are not members but | 7 | | conduct business with the association may be permitted | 8 | | to share in allocations of profits and losses and | 9 | | receive distributions; and | 10 | | (B) the manner in which profits and losses are | 11 | | allocated and distributions are made with respect to | 12 | | those persons; and | 13 | | (6) a statement of the number and terms of directors or | 14 | | the method by which the number and terms are determined; | 15 | | and | 16 | | (7) a statement addressing members' contributions. | 17 | | (b) Bylaws may contain any other provision for managing and | 18 | | regulating the affairs of the association. | 19 | | Section 40. Members. | 20 | | (a) To begin business, a limited cooperative association | 21 | | must have at least 3 patron members unless the sole member is a | 22 | | cooperative. | 23 | | (b) A person becomes a member: | 24 | | (1) as provided in the articles or bylaws; | 25 | | (2) as the result of a merger or conversion under |
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| 1 | | Section 65; or | 2 | | (3) with the consent of all the members. | 3 | | (c) A member, solely by reason of being a member, may not | 4 | | act for or bind the limited cooperative association. | 5 | | (d) Unless the articles provide otherwise, a debt, | 6 | | obligation, or other liability of a limited cooperative | 7 | | association is solely that of the association and is not the | 8 | | debt, obligation, or liability of a member solely by reason of | 9 | | being a member. | 10 | | (e) The total voting membership body shall constitute the | 11 | | assembly of the limited cooperative association. | 12 | | (f) The assembly shall meet annually at a time provided in | 13 | | the articles or bylaws or set by the board of directors not | 14 | | inconsistent with the articles and bylaws. | 15 | | (g) Failure to hold an annual assembly meeting does not | 16 | | affect the validity of any action by the limited cooperative | 17 | | association. | 18 | | (h) A limited cooperative association shall notify each | 19 | | member of the time, date, and place of a members' meeting at | 20 | | least 10 and not more than 60 days before the meeting; except | 21 | | that, if the notice is of a meeting of the members in one or | 22 | | more districts or classes of members, the notice shall be given | 23 | | only to members in those districts or classes. | 24 | | Section 45. Voting. | 25 | | (a) The articles or bylaws may allocate voting power among |
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| 1 | | patron members on the basis of one or a combination of the | 2 | | following: | 3 | | (1) one member, one vote; | 4 | | (2) if a patron member is a cooperative, the number of | 5 | | its patron members; or | 6 | | (3) on the basis of use or patronage unless the | 7 | | cooperative has elected to be a worker cooperative. | 8 | | (b) If the articles or bylaws allocate voting power on the | 9 | | basis of use or patronage and a member would be denied a vote | 10 | | because the member did not use the limited cooperative | 11 | | association or conduct patronage with it during the period on | 12 | | which the allocation of voting power is determined, the | 13 | | articles or bylaws must provide that the member shall | 14 | | nevertheless be allocated a vote equal to at least the minimum | 15 | | voting power allocated to members who used the association or | 16 | | conducted patronage with it during the period. | 17 | | (c) The articles or bylaws may provide for the allocation | 18 | | of patron member voting power by districts or class or any | 19 | | combination thereof. | 20 | | (d) If the articles or bylaws provide for community | 21 | | investors, those members are not entitled to vote unless the | 22 | | articles or bylaws provide otherwise. The articles or bylaws | 23 | | may provide for the allocation of investor member voting power | 24 | | by class, classes, or any combination of classes. | 25 | | (e) At no time shall the patron members have less than a | 26 | | majority of the voting power of the limited cooperative |
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| 1 | | association.
| 2 | | Section 50. Board of directors. | 3 | | (a) A limited cooperative association must have a board of | 4 | | directors of at least 3 individuals, unless the limited | 5 | | cooperative association is a collective worker cooperative. | 6 | | Subsections (b) through (e) do not apply to collective worker | 7 | | cooperatives. | 8 | | (b) The affairs of a limited cooperative association must | 9 | | be managed by, or under the direction of, the board of | 10 | | directors unless the board delegates those duties to the | 11 | | assembly of the limited cooperative association. The board may | 12 | | adopt policies and procedures that do not conflict with the | 13 | | articles, bylaws, or this Act. | 14 | | (c) An individual is not an agent for a limited cooperative | 15 | | association solely by being a director. | 16 | | (d) A debt, obligation, or other liability of a limited | 17 | | cooperative association is solely that of the association and | 18 | | is not a debt, obligation, or liability of a director solely by | 19 | | reason of being a director. An individual is not personally | 20 | | liable, directly or indirectly, for an obligation of an | 21 | | association solely by reason of being a director. | 22 | | (e) Directors shall be elected for terms determined by the | 23 | | bylaws by a majority vote of the assembly. | 24 | | Section 55. Assembly. |
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| 1 | | (a) A limited cooperative association must have an assembly | 2 | | as constituted by the body of voting members. | 3 | | (b) An individual is not an agent for a limited cooperative | 4 | | association solely by being a member of the assembly. | 5 | | (c) A debt, obligation, or other liability of a limited | 6 | | cooperative association is solely that of the association and | 7 | | is not a debt, obligation, or liability of a member of the | 8 | | assembly solely by reason of being a voting member. An | 9 | | individual is not personally liable, directly or indirectly, | 10 | | for an obligation of an association solely by reason of being a | 11 | | voting member. | 12 | | Section 60. Dissolution. A limited cooperative association | 13 | | may be dissolved only by either (1) a two-thirds vote of the | 14 | | assembly, or (2) a vote of the assembly of a supermajority | 15 | | threshold stated in the bylaws that is more than two-thirds. | 16 | | The vote shall be in accordance with Section 55, and upon | 17 | | dissolution its business and activities must be wound up in the | 18 | | manner provided under the Limited Liability Company Act for a | 19 | | limited liability company. | 20 | | Section 65. Conversion. A limited cooperative association | 21 | | may convert into any form of entity permitted if the board of | 22 | | directors of the limited cooperative association adopts a plan | 23 | | of conversion and the assembly adopts such a plan by a | 24 | | two-thirds majority vote. |
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| 1 | | Section 70. Exemption from securities laws. Any security, | 2 | | patronage refund, per unit retain certificate, or evidence of | 3 | | membership issued or sold by a cooperative association as an | 4 | | investment in its stock or capital to the members of a | 5 | | cooperative association formed under this Act or a similar law | 6 | | of any other state and authorized to transact business or | 7 | | conduct activities in this State is exempt from the | 8 | | requirements of the Illinois Securities Law of 1953. Such | 9 | | securities, patronage refunds, per unit retain certificates, | 10 | | or evidence of membership may be sold lawfully by the issuer or | 11 | | its members or salaried employees without the necessity of | 12 | | being registered as a broker or dealer under the Illinois | 13 | | Securities Law of 1953. | 14 | | Section 90. The Co-operative Act is amended by changing | 15 | | Section 22 as follows:
| 16 | | (805 ILCS 310/22) (from Ch. 32, par. 326)
| 17 | | Sec. 22. No corporation or association hereafter organized | 18 | | or doing
business for profit in this State shall be entitled to | 19 | | use the term
"Co-operative" as a part of its corporate or other | 20 | | business name or title
unless it has complied with the | 21 | | provisions of this Act, except (1) a corporation
organized | 22 | | under the Business Corporation Act of 1983 for the purpose of | 23 | | ownership or administration of residential property on
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| 1 | | cooperative basis, or (2) a cooperative corporation organized | 2 | | under the General Not For Profit Corporation Act of 1986 or its | 3 | | predecessor or successor statutes , or (3) a limited cooperative | 4 | | association organized under the Limited Cooperative | 5 | | Association Act . Any corporation
or association violating the | 6 | | provision of this Section may be enjoined from
doing business | 7 | | under such name at the instance of any shareholder of any
| 8 | | association or corporation organized under this Act.
| 9 | | (Source: P.A. 95-368, eff. 8-23-07.)
| 10 | | Section 95. The Illinois Securities Law of 1953 is amended | 11 | | by changing Section 3 as follows:
| 12 | | (815 ILCS 5/3) (from Ch. 121 1/2, par. 137.3)
| 13 | | Sec. 3.
The provisions of Sections 2a, 5, 6 and 7 of this | 14 | | Act shall not
apply to any of the following securities:
| 15 | | A. Any security (including a revenue obligation) issued or | 16 | | guaranteed
by the United States, any state, any political | 17 | | subdivision of a
state, or any agency or corporation or other | 18 | | instrumentality
of any one or more of the foregoing, or any | 19 | | certificate of deposit for
any such security.
| 20 | | B. Any security issued or guaranteed by Canada, any | 21 | | Canadian province,
any political subdivision of any such | 22 | | province, any agency or corporation
or other instrumentality of | 23 | | one or more of the foregoing, or any other
foreign government | 24 | | with which the United States then maintains diplomatic
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| 1 | | relations, if the security is recognized as a valid obligation | 2 | | by the issuer
or guarantor.
| 3 | | C. (1) Any security issued by and representing an interest | 4 | | in or a debt of,
or guaranteed by, any bank or savings bank, | 5 | | bank holding company, or credit
union
organized under the laws | 6 | | of
the United States, or any bank, savings bank, savings | 7 | | institution or trust
company organized and supervised under the | 8 | | laws of any state, or any
interest or participation in any | 9 | | common trust fund or similar fund
maintained by any such bank, | 10 | | savings bank, savings institution or trust
company exclusively | 11 | | for the collective investment and reinvestment of
assets | 12 | | contributed thereto by such bank, savings bank, savings | 13 | | institution
or trust company or any affiliate thereof, in its | 14 | | capacity as fiduciary,
trustee, executor, administrator or | 15 | | guardian.
| 16 | | (2) Any security issued or guaranteed to both principal and | 17 | | interest by
an international bank of which the United States is | 18 | | a member.
| 19 | | D. (1) Any security issued by and representing an interest | 20 | | in or a debt
of, or guaranteed by, any federal savings and loan | 21 | | association, or any
savings and loan association or building | 22 | | and loan association organized and
supervised under the laws of | 23 | | any state.
| 24 | | (2) Any security issued or guaranteed by any federal credit
| 25 | | union or any credit union, industrial loan association, or | 26 | | similar organization
organized and supervised under the laws of |
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| 1 | | any state.
| 2 | | E. Any security issued or guaranteed by any railroad, other | 3 | | common
carrier, public utility or holding company where such | 4 | | issuer or guarantor
is subject to the jurisdiction of the | 5 | | Interstate Commerce Commission or
successor entity, or is
a | 6 | | registered holding company under the Public Utility Holding | 7 | | Company Act
of 1935 or a subsidiary of such a company within | 8 | | the meaning of that Act,
or is regulated in respect of its | 9 | | rates and charges by a governmental
authority of the United | 10 | | States or any state, or is regulated in respect of
the issuance | 11 | | or guarantee of the security by a governmental authority of
the | 12 | | United States, any state, Canada, or any Canadian province.
| 13 | | F. Equipment trust certificates in respect of equipment | 14 | | leased or
conditionally sold to a person, if securities issued | 15 | | by such person
would be exempt under subsection E of this | 16 | | Section.
| 17 | | G. Any security which at the time of sale
is listed or | 18 | | approved for
listing upon notice of issuance on the New York | 19 | | Stock Exchange, Inc., the
American Stock Exchange, Inc., the | 20 | | Pacific Stock Exchange, Inc., the
Chicago Stock Exchange, Inc., | 21 | | the Chicago Board of Trade, the
Philadelphia
Stock Exchange, | 22 | | Inc., the Chicago Board Options Exchange, Incorporated, the | 23 | | National Market System of the Nasdaq Stock Market, or
any other | 24 | | exchange, automated quotation system or board of trade which | 25 | | the
Secretary of State, by rule or regulation, deems to have | 26 | | substantially
equivalent standards for listing or designation |
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| 1 | | as required by any such
exchange, automated quotation system or | 2 | | board of trade; and securities
senior or of substantially equal | 3 | | rank, both as to dividends or interest and
upon liquidation, to | 4 | | securities so listed or designated; and warrants and
rights to | 5 | | purchase any of the foregoing; provided, however, that this
| 6 | | subsection G shall not apply to investment fund shares or | 7 | | securities of
like character, which are being continually | 8 | | offered at a price or prices
determined in accordance with a | 9 | | prescribed formula.
| 10 | | The Secretary of State may, after notice and opportunity | 11 | | for hearing,
revoke the exemption afforded by this
subparagraph | 12 | | with respect to any securities by issuing an order
if the | 13 | | Secretary of State finds that the further sale of the
| 14 | | securities in this State would work or tend to work a fraud on | 15 | | purchasers of
the securities.
| 16 | | H. Any security issued by a person organized and operated | 17 | | not for
pecuniary profit and exclusively for religious, | 18 | | educational, benevolent,
fraternal, agricultural, charitable, | 19 | | athletic, professional, trade, social
or reformatory purposes, | 20 | | or as a chamber of commerce or local industrial
development | 21 | | corporation, or for more than one of said purposes and no part
| 22 | | of the net earnings of which inures to the benefit of any | 23 | | private
stockholder or member.
| 24 | | I. Instruments evidencing indebtedness under an agreement | 25 | | for the
acquisition of property under contract of conditional | 26 | | sale.
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| 1 | | J. A note secured by a first mortgage upon tangible | 2 | | personal or real
property when such mortgage is made, assigned, | 3 | | sold, transferred and
delivered with such note or other written | 4 | | obligation secured by such
mortgage, either to or for the | 5 | | benefit of the purchaser or lender; or
bonds or notes not more | 6 | | than 10 in number secured by a first mortgage
upon the title in | 7 | | fee simple to real property if the aggregate principal
amount | 8 | | secured by such mortgage does not exceed $500,000 and also does | 9 | | not
exceed 75% of the fair market value of such real property.
| 10 | | K. A note or notes not more than 10 in number secured by a | 11 | | junior
mortgage lien if the aggregate principal amount of the | 12 | | indebtedness
represented thereby does not exceed 50% of the | 13 | | amount of the then
outstanding prior lien indebtedness and | 14 | | provided that the total amount
of the indebtedness (including | 15 | | the indebtedness represented by the
subject junior mortgage | 16 | | note or notes) shall not exceed 90% of the fair
market value of | 17 | | the property securing such indebtedness; and provided
further | 18 | | that each such note or notes shall bear across the face thereof
| 19 | | the following legend in letters at least as large as 12 point
| 20 | | type: "THIS NOTE IS SECURED BY A JUNIOR MORTGAGE".
| 21 | | L. Any negotiable promissory note or draft, bill of | 22 | | exchange or
bankers' acceptance which arises out of a current | 23 | | transaction or the
proceeds of which have been or are to be | 24 | | used for current transactions, and
which evidences an | 25 | | obligation to pay cash within 9 months of the date of
issuance | 26 | | exclusive of days of grace, or any renewal of such note, draft,
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| 1 | | bill or acceptance which is likewise limited, or any guarantee | 2 | | of such
note, draft, bill or acceptance or of any such renewal, | 3 | | provided that the
note, draft, bill, or acceptance is a | 4 | | negotiable security eligible for
discounting by banks that are | 5 | | members of the Federal Reserve System. Any
instrument
exempted | 6 | | under this subsection from the requirement of Sections 5, 6, | 7 | | and 7
of this Act shall bear across the face thereof the | 8 | | following
legend in letters at least as large as 12 point type: | 9 | | "THIS INSTRUMENT
IS NEITHER GUARANTEED, NOR IS THE ISSUANCE | 10 | | THEREOF REGULATED BY ANY AGENCY
OR DEPARTMENT OF THE STATE OF | 11 | | ILLINOIS OR THE UNITED STATES.". However,
the foregoing legend | 12 | | shall not be required with respect to any such instrument:
| 13 | | (i) sold to a person described in subsection C or H of | 14 | | Section 4 of
this Act;
| 15 | | (ii) sold to a "Qualified Institutional Buyer" as that | 16 | | term is defined
in Rule 144a adopted under the Securities | 17 | | Act of 1933;
| 18 | | (iii) where the minimum initial subscription for the | 19 | | purchase of such
instrument is $100,000 or more; or
| 20 | | (iv) issued by an issuer that has any class of | 21 | | securities registered
under Section 12 of the Securities | 22 | | Exchange Act of 1934 or has any
outstanding class of | 23 | | indebtedness rated in one of the 3 highest categories
by a | 24 | | rating agency designated by the Department;
| 25 | | M. Any security issued by and representing an interest in | 26 | | or a debt of,
or guaranteed by, any insurance company organized |
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| 1 | | under the laws of any
state.
| 2 | | N. Any security issued pursuant to (i) a written | 3 | | compensatory benefit plan
(including without limitation, any | 4 | | purchase, savings, option, bonus, stock
appreciation, profit | 5 | | sharing, thrift, incentive, pension, or similar plan) and
| 6 | | interests in such plans established by one or more of the | 7 | | issuers thereof or
its parents or majority-owned subsidiaries | 8 | | for the participation of their
employees, directors, general | 9 | | partners, trustees (where the issuer is a
business trust), | 10 | | officers, or consultants or advisers of such issuers or its
| 11 | | parents or majority-owned subsidiaries, provided that bona | 12 | | fide services are
rendered by consultants or advisers and those | 13 | | services are not in
connection with the offer and sale of | 14 | | securities in a capital-raising
transaction or (ii) a written | 15 | | contract relating to the compensation of any
such person.
| 16 | | O. Any option, put, call, spread or straddle issued by a | 17 | | clearing
agency registered as such under the Federal 1934 Act, | 18 | | if the security,
currency, commodity, or other interest | 19 | | underlying the option, put, call,
spread or straddle is not | 20 | | required to be registered under Section 5.
| 21 | | P. Any security which meets all of the following | 22 | | conditions:
| 23 | | (1) If the issuer is not organized under the laws of | 24 | | the United States
or a state, it has appointed a duly | 25 | | authorized agent in the United States
for service of | 26 | | process and has set forth the name and address of the agent
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| 1 | | in its prospectus.
| 2 | | (2) A class of the issuer's securities is required to | 3 | | be and is registered
under Section 12 of the Federal 1934 | 4 | | Act, and has been so registered for
the three years | 5 | | immediately preceding the offering date.
| 6 | | (3) Neither the issuer nor a significant subsidiary has | 7 | | had a material
default during the last seven years, or for | 8 | | the period of the issuer's
existence if less than seven | 9 | | years, in the payment of (i) principal,
interest, dividend, | 10 | | or sinking fund installment on preferred stock or
| 11 | | indebtedness for borrowed money, or (ii) rentals under | 12 | | leases with terms of
three years or more.
| 13 | | (4) The issuer has had consolidated net income, before | 14 | | extraordinary items
and the cumulative effect of | 15 | | accounting changes, of at least $1,000,000 in
four of its | 16 | | last five fiscal years including its last fiscal year; and | 17 | | if
the offering is of interest bearing securities, has had | 18 | | for its last fiscal
year, net income, before deduction for | 19 | | income taxes and depreciation, of
at least 1-1/2 times the | 20 | | issuer's annual interest expense, giving effect
to the | 21 | | proposed offering and the intended use of the proceeds. For | 22 | | the
purposes of this clause "last fiscal year" means the | 23 | | most recent year for
which audited financial statements are | 24 | | available, provided that such statements
cover a fiscal | 25 | | period ended not more than 15 months from the commencement
| 26 | | of the offering.
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| 1 | | (5) If the offering is of stock or shares other than | 2 | | preferred stock or
shares, the securities have voting | 3 | | rights and the rights include (i) the
right to have at | 4 | | least as many votes per share, and (ii) the right to vote
| 5 | | on at least as many general corporate decisions, as each of | 6 | | the issuer's
outstanding classes of stock or shares, except | 7 | | as otherwise required by law.
| 8 | | (6) If the offering is of stock or shares, other than | 9 | | preferred stock or
shares, the securities are owned | 10 | | beneficially or of record, on any date within
six months | 11 | | prior to the commencement of the offering, by at least | 12 | | 1,200
persons, and on that date there are at least 750,000 | 13 | | such shares outstanding
with an aggregate market value, | 14 | | based on the average bid price for that day, of
at least | 15 | | $3,750,000. In connection with the determination of the | 16 | | number
of persons who are beneficial owners of the stock or | 17 | | shares of an issuer,
the issuer or dealer may rely in good | 18 | | faith for the purposes of this clause
upon written | 19 | | information furnished by the record owners.
| 20 | | (7) The issuer meets the conditions specified in | 21 | | paragraphs (2), (3)
and (4) of this subsection P if either | 22 | | the issuer or the issuer and
the
issuer's predecessor, | 23 | | taken together, meet such conditions and if: (a) the
| 24 | | succession was primarily for the purpose of changing the | 25 | | state of incorporation
of the predecessor or forming a | 26 | | holding company and the assets and liabilities
of the |
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| 1 | | successor at the time of the succession were substantially | 2 | | the same
as those of the predecessor; or (b) all | 3 | | predecessors met such conditions at the
time of succession | 4 | | and the issuer has continued to do so since the succession.
| 5 | | Q. Any security appearing on the List of OTC Margin Stocks
| 6 | | published by
the Board of Governors of the Federal Reserve | 7 | | System
or any security incorporated by reference to the List
of | 8 | | OTC Margin Stocks by the Board of Governors of the
Federal | 9 | | Reserve System; any other securities
of the same issuer which | 10 | | are of senior or substantially equal rank; any
securities | 11 | | called for by subscription rights or warrants so listed or
| 12 | | approved; or any warrants or rights to purchase or subscribe to | 13 | | any of the
foregoing.
| 14 | | R. Any security issued by a bona fide limited cooperative | 15 | | association or by a bona fide agricultural cooperative
| 16 | | operating
in this State that is organized under the laws of | 17 | | this State or as a
foreign cooperative association organized | 18 | | under the law of another state
that has been duly qualified to | 19 | | transact business in this State.
| 20 | | (Source: P.A. 90-70, eff. 7-8-97; 91-809, eff. 1-1-01.)
| 21 | | Section 99. Effective date. This Act takes effect upon | 22 | | becoming law.
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