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| [ Introduced ] | [ Engrossed ] | [ Senate Amendment 001 ] |
90_HB0613enr
805 ILCS 5/7.85 from Ch. 32, par. 7.85
Amends the Business Corporation Act of 1983 in relation
to the vote required for certain business combinations.
Increases the threshold share ownership level before a
shareholder is considered to be an interested shareholder
from 10% to 15%. Provides that a corporation may elect to
not be subject to the vote requirements by an action of its
board of directors within 90 days after the effective date of
this amendatory Act. Provides that a corporation may in its
articles of incorporation elect to not be subject to the vote
requirements.
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1 AN ACT to amend the Business Corporation Act of 1983 by
2 changing Sections 7.85 and 11.75.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Business Corporation Act of 1983 is
6 amended by changing Sections 7.85 and 11.75 as follows:
7 (805 ILCS 5/7.85) (from Ch. 32, par. 7.85)
8 Sec. 7.85. A. Vote required for certain business
9 combinations.
10 A. This Section shall apply to any domestic corporation
11 that which (i) has any a class of equity securities
12 registered under Section 12 of the Securities Exchange Act of
13 1934 or is subject to Section 15(d) of that Act (a "reporting
14 company") and (or any subsequent provisions replacing such
15 Act), or (ii) any domestic corporation other than one
16 described in (i) that which either specifically adopts this
17 Section 7.85 in its original articles of incorporation or
18 amends its articles of incorporation to specifically adopt
19 this Section 7.85, however, the restrictions contained in
20 this Section shall not apply in the event of any of the
21 following:.
22 (1) In case of a reporting company, the
23 corporation's articles of incorporation immediately prior
24 to the time it becomes a reporting company contains a
25 provision expressly electing not to be governed by this
26 Section.
27 (2) The corporation, by action of its board of
28 directors, adopts an amendment to its by-laws within 90
29 days after the effective date of this amendatory Act of
30 1997 expressly electing not to be governed by this
31 Section, which amendment shall not be further amended by
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1 the board of directors.
2 (3) In the case of a reporting company, the
3 corporation, by action of its shareholders, adopts an
4 amendment to its articles of incorporation or by-laws
5 expressly electing not to be governed by this Section,
6 provided that, in addition to any other vote required by
7 law, such amendment to the articles of incorporation or
8 by-laws must be approved by the affirmative vote of a
9 majority of the voting shares (as defined in paragraph B
10 of this Section 7.85). An amendment adopted under this
11 paragraph shall not be effective until 12 months after
12 the adoption of the amendment and shall not apply to a
13 business combination between the corporation and a person
14 who became an interested shareholder of the corporation
15 at the same time as or before the adoption of the
16 amendment. A by-law amendment adopted under this
17 paragraph shall not be further amended by the board of
18 directors.
19 (4) A shareholder becomes an interested shareholder
20 inadvertently and (i) as soon as practical divests
21 sufficient shares so that the shareholder ceases to be an
22 interested shareholder and (ii) would not, at any time
23 within the 3 year period immediately before a business
24 combination between the corporation and the shareholder,
25 have been an interested shareholder but for the
26 inadvertent acquisition.
27 In the case of circumstances described in subparagraphs
28 (1), (2), and (3) of this paragraph A, the election not to be
29 governed may be in whole or in part, generally, or generally
30 by types, or as to specifically identified or unidentified
31 interested shareholders. Notwithstanding any other provisions
32 of the Articles of Incorporation or the By-Laws of the
33 corporation (and notwithstanding the fact that a lesser
34 percentage may be specified by law, the Articles of
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1 Incorporation or the By-Laws of the corporation), the
2 affirmative vote of (i) the holders of 80% or more of the
3 combined voting power of the then outstanding Voting Shares
4 voting together as a single class, and (ii) a majority of the
5 combined voting power of the then outstanding Voting Shares
6 held by Disinterested Shareholders (as hereinafter defined),
7 voting together as a single class, shall be required to
8 amend, or repeal, or to adopt any provision inconsistent
9 with, any provision in the Articles of Incorporation of the
10 corporation specifically adopting this Section 7.85.
11 B. (1) Higher vote for certain business combinations.
12 In addition to any affirmative vote required by law or the
13 articles of incorporation, except as otherwise expressly
14 provided in paragraph C B of this Section 7.85, any business
15 combination:
16 (a) any merger, consolidation or share exchange of the
17 corporation or any Subsidiary (as hereinafter defined) with
18 or involving (1) any Interested Shareholder (as hereinafter
19 defined) or (2) any other corporation (whether or not itself
20 an Interested Shareholder) which is, or after such merger,
21 consolidation or share exchange would be, an Affiliate (as
22 hereinafter defined) or an Associate (as hereinafter defined)
23 of an Interested Shareholder;
24 (b) any sale, lease, exchange, mortgage, pledge,
25 transfer or other disposition (in one transaction or a series
26 of transactions) to or with any Interested Shareholder or any
27 Affiliate or Associate of any Interested Shareholder (other
28 than the corporation or any Subsidiary) of any assets of the
29 corporation or any Subsidiary having an aggregate Fair Market
30 Value (as hereinafter defined) equal to 10% or more of the
31 corporation's consolidated net worth as of its then most
32 recent fiscal year end;
33 (c) the issuance or transfer by the corporation or any
34 Subsidiary (in one transaction or a series of transactions)
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1 of any securities of the corporation or any Subsidiary to any
2 Interested Shareholder or any Affiliate or Associate of any
3 Interested Shareholder;
4 (d) the adoption of any plan or proposal for the
5 liquidation or dissolution of the corporation proposed by, or
6 in which anything other than cash will be received by, an
7 Interested Shareholder or any Affiliate or Associate of an
8 Interested Shareholder; or
9 (e) any reclassification of securities (including any
10 reverse share split), or recapitalization of the corporation,
11 or any merger, consolidation or share exchange of the
12 corporation with or involving any of its Subsidiaries which
13 has the effect, directly or indirectly, of increasing the
14 proportionate share of the outstanding shares of any class of
15 equity or convertible securities of the corporation or any
16 Subsidiary which is directly or indirectly owned by any
17 Interested Shareholder or any Affiliate or Associate of any
18 Interested Shareholder;
19 shall require (i) the affirmative vote of the holders of at
20 least 80% of the combined voting power of the then
21 outstanding shares of all classes and series of the
22 corporation entitled to vote generally in the election of
23 directors (the "Voting Shares"), voting together as a single
24 class (the "voting shares") (it being understood that, for
25 the purposes of this Section 7.85, each voting share shall
26 have the number of votes granted to it pursuant to the
27 corporation's articles of incorporation) and (ii) the
28 affirmative vote of a majority of the combined voting power
29 of the then outstanding voting shares held by disinterested
30 shareholders voting together as a single class.
31 (2) Definition of "Business Combination." The term
32 "business combination" as used in this Section 7.85 shall
33 mean any transaction which is referred to in any one or more
34 of clauses (a) through (e) of subparagraph (1) of this
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1 paragraph A.
2 C B. When higher vote is not required. The provisions
3 of subparagraph (1) of paragraph B A of this Section 7.85
4 shall not be applicable to any particular business
5 combination, and such business combination shall require only
6 such affirmative vote as is required by law and any other
7 provision of the corporation's article of incorporation and
8 any resolutions of the board of directors adopted pursuant to
9 Section 6.10 if all of the conditions specified in either of
10 the following subparagraphs (1) and (2) of this paragraph C B
11 are met:
12 (1) Approval by disinterested directors. The
13 business combination shall have been approved by
14 two-thirds of the disinterested directors (as hereinafter
15 defined).
16 (2) Price and procedure requirements. All of the
17 following conditions shall have been met:
18 (a) The business combination shall provide for
19 consideration to be received by all holders of
20 common shares in exchange for all their shares, and
21 the aggregate amount of the cash and the fair market
22 value as of the date of consummation of the business
23 combination of consideration other than cash to be
24 received per share by holders of common shares in
25 such business combination shall be at least equal
26 to the higher of the following:
27 (i) (1) (if applicable) the highest per
28 share price (including any brokerage
29 commissions, transfer taxes and soliciting
30 dealers' fees) paid by the interested
31 shareholder or any affiliate or associate of
32 the interested shareholder to acquire any
33 common shares beneficially owned by the
34 interested shareholder which were acquired (a)
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1 within the two year period immediately prior to
2 the first public announcement of the proposal
3 of the business combination (the "announcement
4 date") or (b) in the transaction in which it
5 became an interested shareholder, whichever is
6 higher; and
7 (ii) the fair market value per common
8 share on the first trading date after the
9 announcement date or on the first trading date
10 after the date of the first public announcement
11 that the interested shareholder became an
12 interested shareholder (the "Determination
13 Date"), whichever is higher.
14 (b) The business combination shall provide for
15 consideration to be received by all holders of
16 outstanding shares other than common shares in
17 exchange for all such shares, and the aggregate
18 amount of the cash and the fair market value as of
19 the date of the consummation of the business
20 combination of consideration other than cash to be
21 received per share by holders of outstanding shares
22 other than common shares shall be at least equal to
23 the highest of the following (it being intended that
24 the requirements of this subparagraph (2)(b) shall
25 be required to be met with respect to every class
26 and series of outstanding shares other than common
27 shares whether or not the interested shareholder or
28 any affiliate or associate of the interested
29 shareholder has previously acquired any shares of a
30 particular class or series):
31 (i) (1) (if applicable) the highest per
32 share price (including any brokerage
33 commissions, transfer taxes and soliciting
34 dealers' fees) paid by the interested
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1 shareholder or any affiliate or associate of
2 the interested shareholder to acquire any
3 shares of such class or series beneficially
4 owned by the interested shareholder which were
5 acquired (a) within the 2-year period
6 immediately prior to the announcement date or
7 (b) in the transaction in which it became an
8 interested shareholder, whichever is higher;
9 (ii) (2) (if applicable) the highest
10 preferential amount per share to which the
11 holders of shares of such class or series are
12 entitled in the event of any voluntary or
13 involuntary liquidation, dissolution or winding
14 up of the corporation;
15 (iii) (3) the fair market value per share
16 of such class or series on the first trading
17 date after the announcement date or on the
18 determination date, whichever is higher; and
19 (iv) (4) an amount equal to the fair
20 market value per share of such class or series
21 determined pursuant to clause (iii) (3) times
22 the highest value obtained in calculating the
23 following quotient for each class or series of
24 which the interested shareholder has acquired
25 shares within the 2-year period ending on the
26 announcement date: (x) the highest per share
27 price (including any brokerage commissions,
28 transfer taxes and soliciting dealers' fees)
29 paid by the interested shareholder or any
30 affiliate or associate of the interested
31 Shareholder for any shares of such class or
32 series acquired within such 2-year period
33 divided by (y) the market value per share of
34 such class or series on the first day in such
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1 2-year period on which the interested
2 shareholder or any affiliate or associate of
3 the interested shareholder acquired any shares
4 of such class or series.
5 (c) The consideration to be received by holders of
6 a particular class or series of outstanding shares shall
7 be in cash or in the same form as the interested
8 shareholder or any affiliate or associate of the
9 interested shareholder has previously paid to acquire
10 shares of such class or series beneficially owned by the
11 interested shareholder. If the interested shareholder
12 and any affiliates or associates of the interested
13 shareholder have paid for shares of any class or series
14 with varying forms of consideration, the form of
15 consideration for such class or series shall be either
16 cash or the form used to acquire the largest number of
17 shares of such class or series beneficially owned by the
18 interested shareholder.
19 (d) After such interested shareholder has become an
20 interested shareholder and prior to the consummation of
21 such business combination: (1) except as approved by
22 two-thirds of the disinterested directors, there shall
23 have been no failure to declare and pay at the regular
24 date therefor any full periodic dividends (whether or not
25 cumulative) on any outstanding shares of the corporation
26 other than the common shares; (2) there shall have been
27 (a) no reduction in the annual rate of dividends paid on
28 the common shares (except as necessary to reflect any
29 subdivision of the common shares), except as approved by
30 two-thirds of the disinterested directors, and (b) an
31 increase in such annual rate of dividends (as necessary
32 to prevent any such reduction) in the event of any
33 reclassification (including any reverse share split),
34 recapitalization, reorganization or any similar
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1 transaction which has the effect of reducing the number
2 of outstanding common shares; and (3) such interested
3 shareholder shall not have become the beneficial owner of
4 any additional Voting Shares except as part of the
5 transaction which results in such interested shareholder
6 becoming an interested shareholder or as a result of
7 action taken by the corporation not caused, directly or
8 indirectly, by such interested shareholder.
9 (e) After such interested shareholder has become an
10 interested shareholder, such interested shareholder shall
11 not have received the benefit, directly or indirectly
12 (except proportionately as a shareholder), of any loans,
13 advances, guarantees, pledges or other financial
14 assistance or any tax credits or other tax advantages
15 provided by the corporation or any Subsidiary, whether in
16 anticipation of or in connection with such business
17 combination or otherwise.
18 (f) A proxy or information statement describing the
19 proposed business combination and complying with the
20 requirements of the Securities Exchange Act of 1934 and
21 the rules and regulations thereunder (or any subsequent
22 provisions replacing such Act, rules or regulations)
23 shall be mailed to public shareholders of the corporation
24 at least 30 days prior to the consummation of such
25 business combination (whether or not such proxy or
26 information statement is required to be mailed pursuant
27 to such Act or subsequent provisions).
28 D. C. Certain definitions. For the purposes of this
29 Section 7.85:
30 (1) A "Person" means an shall mean any individual,
31 firm, corporation, partnership, trust or other entity.
32 (2) "Interested shareholder" means (i) a shall
33 mean any person (other than the corporation and a direct
34 or indirect majority-owned subsidiary of the corporation)
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1 that (a) is the owner of 15% or more of the outstanding
2 voting shares of the corporation or (b) is an affiliate
3 or associate of the corporation and was the owner of 15%
4 or more of the outstanding voting shares of the
5 corporation at any time within the 3 year period
6 immediately before the date on which it is sought to be
7 determined whether the person is an interested
8 shareholder and (ii) the affiliates and associates of
9 that person, provided, however, that the term "interested
10 shareholder" shall not include (x) a person who (A) owned
11 shares in excess of the 15% limitation as of January 1,
12 1997 and either (I) continued to own shares in excess of
13 the 15% limitation or would have but for action by the
14 corporation or (II) is an affiliate or associate of the
15 corporation and so continued (or so would have continued
16 but for action by the corporation) to be the owner of 15%
17 or more of the outstanding voting shares of the
18 corporation at any time within the 3-year period
19 immediately prior to the date on which it is sought to be
20 determined whether such a person is an interested
21 shareholder or (B) acquired the shares from a person
22 described in clause (A) by gift, inheritance, or in a
23 transaction in which no consideration was exchanged or
24 (y) a person whose ownership of shares in excess of the
25 15% limitation is the result of action taken solely by
26 the corporation, provided that the person shall be an
27 interested shareholder if thereafter the person acquires
28 additional shares of the corporation, except as a result
29 of further corporate action not caused, directly or
30 indirectly, by the person or if the person acquires
31 additional shares in transactions approved by the board
32 of directors, which approval shall include a majority of
33 the disinterested directors. For the purpose of
34 determining whether a person is an interested
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1 shareholder, the voting shares of the corporation deemed
2 to be outstanding shall include shares deemed to be owned
3 by the person through application of subparagraph (3) of
4 this paragraph, but shall not include any other unissued
5 shares of the corporation that may be issuable or any
6 Subsidiary) who or which:
7 (a) is the beneficial owner, directly or
8 indirectly, of Voting Shares conveying 10% or more of the
9 combined voting power of the outstanding Voting Shares;
10 or
11 (b) is an Affiliate or Associate of the corporation
12 and at any time within the 2-year period immediately
13 prior to the date in question was the beneficial owner,
14 directly or indirectly, of Voting Shares conveying 10% or
15 more of the combined voting power of the then outstanding
16 Voting Shares.
17 (3) A person shall be a "beneficial owner" of any
18 Voting Shares:
19 (a) which such person or any of its Affiliates or
20 Associates beneficially owns, directly or indirectly;
21 (b) which such person or any of its Affiliates or
22 Associates has (1) the right to acquire (whether such
23 right is exercisable immediately or only after the
24 passage of time), pursuant to any agreement, arrangement,
25 or understanding, or upon the exercise of conversion
26 rights, exchange rights, warrants, or options, or
27 otherwise., or (2) the right to vote or direct the vote
28 pursuant to any agreement, arrangement or understanding;
29 or
30 (3) "Owner", including the terms "own" and "owned",
31 when used with respect to shares means a person that
32 individually or with or through (c) which are
33 beneficially owned, directly or indirectly, by any other
34 person which such person or any of its affiliates or
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1 associates: has any agreement, arrangement or
2 understanding for the purpose of acquiring, holding,
3 voting or disposing of any Voting Shares.
4 (4) For the purposes of determining whether a
5 person is an interested shareholder pursuant to
6 subparagraph (2) of this paragraph C, the number of
7 Voting Shares deemed to be outstanding shall include
8 shares deemed owned by such person through application of
9 subparagraph (3) of this paragraph C but shall not
10 include any other Voting Shares which may be issuable to
11 other persons
12 (a) beneficially owns the shares, directly or
13 indirectly; or
14 (b) has (i) the right to acquire the shares
15 (whether the right is exercisable immediately or
16 only after the passage of time) pursuant to any
17 agreement, arrangement, or understanding, or upon
18 exercise of conversion rights, exchange rights,
19 warrants, or options, or otherwise; provided,
20 however, that a person shall not be deemed the owner
21 of shares tendered pursuant to a tender or exchange
22 offer made by the person or any of the person's
23 affiliates or associates until the tendered shares
24 are accepted for purchase or exchange or (ii) the
25 right to vote the shares pursuant to an agreement,
26 arrangement, or understanding; provided, however,
27 that a person shall not be deemed the owner of any
28 shares because of the person's right to vote the
29 shares if the agreement, arrangement, or
30 understanding to vote the shares arises solely from
31 a revocable proxy or consent given in response to a
32 proxy or consent solicitation made to 10 or more
33 persons; or
34 (c) has an agreement, arrangement, or
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1 understanding for the purpose of acquiring, holding,
2 voting (except voting pursuant to a revocable proxy
3 or consent as described in clause (ii) of item (b)
4 of this subparagraph), or disposing of the shares
5 with any other person that beneficially owns, or
6 whose affiliates or associates beneficially own,
7 directly or indirectly, the shares.
8 (4) "Affiliate" means a person that directly, or
9 indirectly through one or more intermediaries, controls,
10 is controlled by, or is under common control with,
11 another person.
12 (5) "Associate", when used to indicate a
13 relationship with a person, means (i) a corporation,
14 partnership, unincorporated association, or other entity
15 of which the person is a director, officer, or partner or
16 is, directly or indirectly, the owner of 20% or more of a
17 class of voting shares, (ii) a trust or other estate in
18 which the person has at least a 20% beneficial interest
19 or as to which the person serves as trustee or in a
20 similar fiduciary capacity, and (iii) a relative or
21 spouse of the person, or a relative of that spouse who
22 has the same residence as the person.
23 (5) "Affiliate" and "Associate" shall have the
24 respective meanings ascribed to such terms in Rule 12b-2
25 of the General Rules and Regulations under the Securities
26 Exchange Act of 1934, as amended from time to time, or
27 any successor provision (or the respective meanings last
28 ascribed thereto if there are no amended or successor
29 provisions).
30 (6) "Subsidiary" means any corporation of which a
31 majority of any class of equity security is owned,
32 directly or indirectly, by the corporation; provided,
33 however, that for the purposes of the definition of
34 interested shareholder set forth in subparagraph (2) of
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1 this paragraph D C, the term "subsidiary" shall mean only
2 a corporation of which a majority of each class or equity
3 security is owned, directly or indirectly, by the
4 corporation.
5 (7) "Disinterested director" means any member of
6 the board of directors of the corporation who: (a) is
7 neither the interested shareholder nor an affiliate or
8 associate of the interested shareholder; (b) was a member
9 of the board of directors prior to the time that the
10 interested shareholder became an interested shareholder
11 or was a director of the corporation before January 1,
12 1997, or was recommended to succeed a disinterested
13 director by a majority of the disinterested directors
14 then in office; and (c) was not nominated for election as
15 a director by the interested shareholder or any affiliate
16 or associate of the interested shareholder.
17 (8) "Fair market value" means: (a) in the case of
18 shares, the highest closing sale price during the 30-day
19 period immediately preceding the date in question of a
20 share on the New York Stock Exchange Composite Tape, or,
21 if such shares are not quoted on the Composite Tape, on
22 the New York Stock Exchange, or, if such shares are not
23 listed on such Exchange, on the principal United States
24 securities exchange registered under the Securities
25 Exchange Act of 1934 on which such shares are listed, or,
26 if such shares are not listed on any such exchange, the
27 highest closing sale price or bid quotation with respect
28 to a share during the 30-day period preceding the date in
29 question on the National Association of Securities
30 Dealers, Inc. Automated Quotations System or any system
31 then in use, or if no such quotations are available, the
32 fair market value on the date in question of a share as
33 determined by a majority of the disinterested directors
34 in good faith; and (b) in the case of property other than
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1 cash or shares, the fair market value of such property on
2 the date in question as determined by a majority of the
3 disinterested directors in good faith.
4 (9) "Disinterested shareholder" shall mean a
5 shareholder of the corporation who is not an interested
6 shareholder or an affiliate or an associate of an
7 interested shareholder.
8 (10) "Business combination" has the meaning set
9 forth in Section 11.75 of this Act (regardless of the
10 case of the word "only" in that Section).
11 (11) (10) In the event of any business combination
12 in which the corporation survives, the phrase "other
13 consideration other than cash to be received" as used in
14 subparagraphs (2)(a) and (2)(b) of paragraph C B of this
15 Section 7.85 shall include the common shares and the
16 shares of any other class or series retained by the
17 holders of such shares.
18 (12) "Shares" means, with respect to any
19 corporation, capital stock and, with respect to any other
20 entity, any equity interest.
21 (13) "Voting shares" means, with respect to any
22 corporation, shares of any class or series entitled to
23 vote generally in the election of directors and, with
24 respect to any entity that is not a corporation, any
25 equity interest entitled to vote generally in its
26 election of the governing body of the entity.
27 E. (11) Determinations by disinterested directors. A
28 majority of the disinterested directors shall have the power
29 to determine, for the purposes of this Section 7.85, (a)
30 whether a person is an interested shareholder, (b) the number
31 of voting shares beneficially owned by any person, (c)
32 whether a person is an affiliate or associate of another, and
33 (d) whether the transaction is the subject of any business
34 combination. assets which are the subject of any Business
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1 Combination have an aggregate fair market value equal to 10%
2 or more of the corporation's consolidated net worth as of its
3 then most recent fiscal year end.
4 D. No Effect on Fiduciary Obligations of interested
5 shareholder. Nothing contained in this Section 7.85 shall be
6 construed to relieve any interested shareholder from any
7 fiduciary obligation imposed by law.
8 (Source: P.A. 84-204.)
9 (805 ILCS 5/11.75) (from Ch. 32, par. 11.75)
10 Sec. 11.75. Business combinations with interested
11 shareholders. (a) Notwithstanding any other provisions of
12 this Act, a corporation (as defined in this Section 11.75)
13 shall not engage in any business combination with any
14 interested shareholder for a period of 3 years following the
15 time date that such shareholder became an interested
16 shareholder, unless (1) prior to such time date the board of
17 directors of the corporation approved either the business
18 combination or the transaction which resulted in the
19 shareholder becoming an interested shareholder, or (2) upon
20 consummation of the transaction which resulted in the
21 shareholder becoming an interested shareholder, the
22 interested shareholder owned at least 85% of the voting
23 shares of the corporation outstanding at the time the
24 transaction commenced, excluding for purposes of determining
25 the number of shares outstanding those shares owned (i) by
26 persons who are directors and also officers and (ii) employee
27 stock plans in which employee participants do not have the
28 right to determine confidentially whether shares held subject
29 to the plan will be tendered in a tender or exchange offer,
30 or (3) at on or subsequent to such time date the business
31 combination is approved by the board of directors and
32 authorized at an annual or special meeting of shareholders,
33 and not by written consent, by the affirmative vote of at
34 least 66 2/3% of the outstanding voting shares which are not
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1 owned by the interested shareholder.
2 (b) The restrictions contained in this Section shall not
3 apply if:
4 (1) the corporation's original articles of
5 incorporation contains a provision expressly electing not
6 to be governed by this Section;
7 (2) the corporation, by action of its board of
8 directors, adopts an amendment to its by-laws within 90
9 days of the effective date of this amendatory Act of
10 1989, expressly electing not to be governed by this
11 Section, which amendment shall not be further amended by
12 the board of directors;
13 (3) the corporation, by action of its shareholders,
14 adopts an amendment to its articles of incorporation or
15 by-laws expressly electing not to be governed by this
16 Section, provided that, in addition to any other vote
17 required by law, such amendment to the articles of
18 incorporation or by-laws must be approved by the
19 affirmative vote of a majority of the shares entitled to
20 vote. An amendment adopted pursuant to this paragraph
21 shall be effective immediately in the case of a
22 corporation that both (i) has never had a class of voting
23 shares that falls within any of the categories set out in
24 paragraph (4) of this subsection (b) and (ii) has not
25 elected by a provision in its original articles of
26 incorporation or any amendment thereto to be governed by
27 this Section. In all other cases, an amendment adopted
28 pursuant to this paragraph shall not be effective until
29 12 months after the adoption of such amendment and shall
30 not apply to any business combination between such
31 corporation and any person who became an interested
32 shareholder of such corporation on or prior to such
33 adoption. A by-law amendment adopted pursuant to this
34 paragraph shall not be further amended by the board of
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1 directors;
2 (4) the he corporation does not have a class of
3 voting shares that is (i) listed on a national securities
4 exchange, (ii) authorized for quotation on the NASDAQ
5 Stock Market an inter-dealer quotation system of a
6 registered national securities association or (iii) held
7 of record by more than 2,000 shareholders, unless any of
8 the foregoing results from action taken, directly or
9 indirectly, by an interested shareholder or from a
10 transaction in which a person becomes an interested
11 shareholder;
12 (5) a shareholder becomes an interested shareholder
13 inadvertently and (i) as soon as practicable divests
14 itself of ownership of sufficient shares so that the
15 shareholder ceases to be an interested shareholder and
16 (ii) would not, at any time within the 3 year period
17 immediately prior to a business combination between the
18 corporation and such shareholder, have been an interested
19 shareholder but for the inadvertent acquisition of
20 ownership; or
21 (6) the business combination is proposed prior to
22 the consummation or abandonment of and subsequent to the
23 earlier of the public announcement or the notice required
24 hereunder of a proposed transaction which (i) constitutes
25 one of the transactions described in the second sentence
26 of this paragraph; (ii) is with or by a person who either
27 was not an interested shareholder during the previous 3
28 years or who became an interested shareholder with the
29 approval of the corporation's board of directors or
30 during the period described in paragraph (7) of this
31 subsection (b); and (iii) is approved or not opposed by a
32 majority of the members of the board of directors then in
33 office (but not less than 1) who were directors prior to
34 any person becoming an interested shareholder during the
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1 previous 3 years or were recommended for election or
2 elected to succeed such directors by a majority of such
3 directors. The proposed transactions referred to in the
4 preceding sentence are limited to (x) a merger or
5 consolidation of the corporation (except for a merger in
6 respect of which, pursuant to subsection (c) of Section
7 11.20 of this Act, no vote of the shareholders of the
8 corporation is required); (y) a sale, lease, exchange,
9 mortgage, pledge, transfer or other disposition (in one
10 transaction or a series of transactions), whether as part
11 of a dissolution or otherwise, of assets of the
12 corporation or of any direct or indirect majority-owned
13 subsidiary of the corporation (other than to any direct
14 or indirect wholly-owned subsidiary or to the
15 corporation) having an aggregate market value equal to
16 50% or more of either the aggregate market value of all
17 of the assets of the corporation determined on a
18 consolidated basis or the aggregate market value of all
19 the outstanding shares of the corporation; or (z) a
20 proposed tender or exchange offer for 50% or more of the
21 outstanding voting shares of the corporation. The
22 corporation shall give not less than 20 days notice to
23 all interested shareholders prior to the consummation of
24 any of the transactions described in clauses (x) or (y)
25 of the second sentence of this paragraph; or
26 (7) The business combination is with an interested
27 shareholder who became an interested shareholder at a
28 time when the restrictions contained in this Section did
29 not apply by reason of any of the paragraphs (1) through
30 (4) of this subsection (b), provided, however, that this
31 paragraph (7) shall not apply if, at the time the
32 interested shareholder became an interested shareholder,
33 the corporation's articles of incorporation contained a
34 provision authorized by the last sentence of this
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1 subsection (b). Notwithstanding paragraphs (1), (2), (3)
2 and (4) of this subsection and subparagraph (A) of
3 paragraph (5) of subsection (c), any domestic corporation
4 may elect by a provision of its original articles of
5 incorporation or any amendment thereto to be governed by
6 this Section, provided that any such amendment to the
7 articles of incorporation shall not apply to restrict a
8 business combination between the corporation and an
9 interested shareholder of the corporation if the
10 interested shareholder became such prior to the effective
11 date of the amendment.
12 (c) As used in this Section 11.75 only, the term:
13 (1) "Affiliate" means a person that directly, or
14 indirectly through one or more intermediaries, controls,
15 or is controlled by, or is under common control with,
16 another person.
17 (2) "Associate" when used to indicate a
18 relationship with any person, means (i) any corporation,
19 partnership, unincorporated association, or other entity
20 or organization of which such person is a director,
21 officer or partner or is, directly or indirectly, the
22 owner of 20% or more of any class of voting shares, (ii)
23 any trust or other estate in which such person has at
24 least a 20% beneficial interest or as to which such
25 person serves as trustee or in a similar fiduciary
26 capacity, and (iii) any relative or spouse of such
27 person, or any relative of such spouse, who has the same
28 residence as such person.
29 (3) "Business combination" when used in reference
30 to any corporation and any interested shareholder of such
31 corporation, means:
32 (A) any merger or consolidation of the
33 corporation or any direct or indirect majority-owned
34 subsidiary of the corporation with (i) the
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1 interested shareholder, or (ii) with any other
2 corporation if the merger or consolidation is caused
3 by the interested shareholder and as a result of
4 such merger or consolidation subsection (a) of this
5 Section is not applicable to the surviving
6 corporation;
7 (B) any sale, lease, exchange, mortgage,
8 pledge, transfer or other disposition (in one
9 transaction or a series of transactions), except
10 proportionately as a shareholder of such
11 corporation, to or with the interested shareholder,
12 whether as part of a dissolution or otherwise, of
13 assets of the corporation or of any direct or
14 indirect majority-owned subsidiary of the
15 corporation which assets have an aggregate market
16 value equal to 10% or more of either the aggregate
17 market value of all the assets of the corporation
18 determined on a consolidated basis or the aggregate
19 market value of all the outstanding shares of the
20 corporation;
21 (C) any transaction which results in the
22 issuance or transfer by the corporation or by any
23 direct or indirect majority-owned subsidiary of the
24 corporation of any shares of the corporation or of
25 such subsidiary to the interested shareholder,
26 except (i) pursuant to the exercise, exchange or
27 conversion of securities exercisable for,
28 exchangeable for or convertible into shares of such
29 corporation or any such subsidiary which securities
30 were outstanding prior to the time that the
31 interested shareholder became such, (ii) pursuant to
32 a dividend or distribution paid or made, or the
33 exercise, exchange or conversion of securities
34 exercisable for, exchangeable for or convertible
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1 into shares of such corporation or any such
2 subsidiary which security is distributed, pro rata
3 to all holders of a class or series of shares of
4 such corporation subsequent to the time the
5 interested shareholder became such, (iii) pursuant
6 to an exchange offer by the corporation to purchase
7 shares made on the same terms to all holders of said
8 shares, or (iv) any issuance or transfer of shares
9 by the corporation, provided however, that in no
10 case under clauses (ii), (iii) and (iv) above shall
11 there be an increase in the interested shareholder's
12 proportionate share of the shares of any class or
13 series of the corporation or of the voting shares of
14 the corporation;
15 (D) any transaction involving the corporation
16 or any direct or indirect majority-owned subsidiary
17 of the corporation which has the effect, directly or
18 indirectly, of increasing the proportionate share of
19 the shares of any class or series, or securities
20 convertible into the shares of any class or series,
21 of the corporation or of any such subsidiary which
22 is owned by the interested shareholder, except as a
23 result of immaterial changes due to fractional share
24 adjustments or as a result of any purchase or
25 redemption of any shares of any class or series not
26 caused, directly or indirectly, by the interested
27 shareholder; or
28 (E) any receipt by the interested shareholder
29 of the benefit, directly or indirectly (except
30 proportionately as a shareholder of such
31 corporation) of any loans, advances, guarantees,
32 pledges, or other financial benefits (other than
33 those expressly permitted in subparagraphs (A)
34 through (D) of this paragraph (3)) provided by or
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1 through the corporation or any direct or indirect
2 majority owned subsidiary; or
3 (F) any receipt by the interested shareholder
4 of the benefit, directly or indirectly, (except
5 proportionately as a shareholder of such
6 corporation) of any assets, loans, advances,
7 guarantees, pledges or other financial benefits
8 (other than those expressly permitted in
9 subparagraphs (A) through (D) of this paragraph (3))
10 provided by or through any "defined benefit pension
11 plan" (as defined in Section 3 of the Employee
12 Retirement Income Security Act) of the corporation
13 or any direct or indirect majority owned subsidiary.
14 (4) "Control", including the term "controlling",
15 "controlled by" and "under common control with", means
16 the possession, directly or indirectly, of the power to
17 direct or cause the direction of the management and
18 policies of a person, whether through the ownership of
19 voting shares, by contract or otherwise. A person who is
20 the owner of 20% or more of the a corporation's
21 outstanding voting shares of any corporation,
22 partnership, unincorporated association, or other entity
23 shall be presumed to have control of such entity
24 corporation, in the absence of proof by preponderance of
25 the evidence to the contrary. Notwithstanding the
26 foregoing, a presumption of control shall not apply where
27 such person holds voting shares, in good faith and not
28 for the purpose of circumventing this Section, as an
29 agent, bank, broker, nominee, custodian or trustee for
30 one or more owners who do not individually or as a group
31 have control of such entity corporation.
32 (5) "Corporation" means a domestic corporation
33 that:
34 (A) has any equity securities registered under
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1 Section 12 of the Securities Exchange Act of 1934 or
2 is subject to Section 15(d) of that Act; and
3 (B) either
4 (i) has its principal place of business
5 or its principal executive office located in
6 Illinois; or
7 (ii) owns or controls assets located
8 within Illinois that have a fair market value
9 of at least $1,000,000, and
10 (C) either
11 (i) has more than 10% of its shareholders
12 resident in Illinois;
13 (ii) has more than 10% of its shares
14 owned by Illinois residents; or
15 (iii) has 2,000 shareholders resident in
16 Illinois.
17 The residence of a shareholder is presumed to be the
18 address appearing in the records of the corporation.
19 Shares held by banks (except as trustee, executor or
20 guardian), securities dealers or nominees are disregarded
21 for purposes of calculating the percentages and numbers
22 in this paragraph (5).
23 (6) "Interested shareholder" means any person
24 (other than the corporation and any direct or indirect
25 majority-owned subsidiary of the corporation) that (i) is
26 the owner of 15% or more of the outstanding voting shares
27 of the corporation, or (ii) is an affiliate or associate
28 of the corporation and was the owner of 15% or more of
29 the outstanding voting shares of the corporation at any
30 time within the 3 year period immediately prior to the
31 date on which it is sought to be determined whether such
32 person is an interested shareholder; and the affiliates
33 and associates of such person, provided, however, that
34 the term "interested shareholder" shall not include (x)
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1 any person who (A) owned shares in excess of the 15%
2 limitation set forth herein as of, or acquired such
3 shares pursuant to a tender offer commenced prior to the
4 effective date of this amendatory Act of 1989 or pursuant
5 to an exchange offer announced prior to the aforesaid
6 date and commenced within 90 days thereafter and either
7 (I) and continued to own shares in excess of such 15%
8 limitation or would have but for action by the
9 corporation or (II) is an affiliate or associate of the
10 corporation and so continued (or so would have continued
11 but for action by the corporation) to be the owner of 15%
12 or more of the outstanding voting shares of the
13 corporation at any time within the 3-year period
14 immediately prior to the date on which it is sought to be
15 determined whether such a person is an interested
16 shareholder or (B) acquired said shares from a person
17 described in (A) above by gift, inheritance or in a
18 transaction in which no consideration was exchanged; or
19 (y) any person whose ownership of shares in excess of the
20 15% limitation set forth herein is the result of action
21 taken solely by the corporation, provided that such
22 person shall be an interested shareholder if thereafter
23 such person acquires additional shares of voting shares
24 of the corporation, except as a result of further
25 corporate action not caused, directly or indirectly, by
26 such person. For the purpose of determining whether a
27 person is an interested shareholder, the voting shares of
28 the corporation deemed to be outstanding shall include
29 shares deemed to be owned by the person through
30 application of paragraph (8) of this subsection, but
31 shall not include any other unissued shares of such
32 corporation which may be issuable pursuant to any
33 agreement, arrangement or understanding, or upon exercise
34 of conversion rights, warrants or options, or otherwise.
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1 (7) "Person" means any individual, corporation,
2 partnership, unincorporated association or other entity.
3 (7.5) "Shares" means, with respect to any
4 corporation, capital stock and, with respect to any other
5 entity, any equity interest.
6 (8) "Voting shares" means, with respect to any
7 corporation, shares of any class or series entitled to
8 vote generally in the election of directors and, with
9 respect to any entity that is not a corporation, any
10 equity interest entitled to vote generally in its
11 election of the governing body of the entity.
12 (9) "Owner" including the terms "own" and "owned"
13 when used with respect to any shares means a person that
14 individually or with or through any of its affiliates or
15 associates:
16 (A) beneficially owns such shares, directly or
17 indirectly; or
18 (B) has (i) the right to acquire such shares
19 (whether such right is exercisable immediately or
20 only after the passage of time) pursuant to any
21 agreement, arrangement or understanding, or upon the
22 exercise of conversion rights, exchange rights,
23 warrants or options, or otherwise; provided,
24 however, that a person shall not be deemed the owner
25 of shares tendered pursuant to a tender or exchange
26 offer made by such person or any of such person's
27 affiliates or associates until such tendered shares
28 is accepted for purchase or exchange; or (ii) the
29 right to vote such shares pursuant to any agreement,
30 arrangement or understanding; provided, however,
31 that a person shall not be deemed the owner of any
32 shares because of such person's right to vote such
33 shares if the agreement, arrangement or
34 understanding to vote such shares arises solely from
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1 a revocable proxy or consent given in response to a
2 proxy or consent solicitation made to 10 or more
3 persons; or
4 (C) has any agreement, arrangement or
5 understanding for the purpose of acquiring, holding,
6 voting (except voting pursuant to a revocable proxy
7 or consent as described in clause (ii) of
8 subparagraph (B) of this paragraph), or disposing of
9 such shares with any other person that beneficially
10 owns, or whose affiliates or associates beneficially
11 own, directly or indirectly, such shares.
12 (d) No provision of a certificate of incorporation or
13 by-law shall require, for any vote of shareholders required
14 by this Section a greater vote of shareholders than that
15 specified in this Section.
16 (e) The provisions of this Section 11.75 are severable
17 and any provision held invalid shall not affect or impair any
18 of the remaining provisions of this Section.
19 (Source: P.A. 86-126.)